Judge: Settlement Fund claims vs CUC not resolved

U.S. District Court for the NMI designated Judge Frances M. Tydingco-Gatewood has ruled that the NMI Settlement Fund’s claims against the Commonwealth Utilities Corp. to recover unpaid obligations in a Superior Court case were not resolved by the settlement deal in Betty Johnson’s class action.

In the same order issued Thursday last week, Tydingco-Gatewood prevented the trustee of the NMI Settlement Fund from prosecuting the Superior Court case against the CNMI government to recover the unpaid pension liabilities of CUC.

In granting the Settlement Fund’s motion to enforce final judgment approving Johnson’s class action, Tydingco-Gatewood ruled that, under the terms of the settlement agreement, the Settlement Fund, in place of the NMI Retirement Fund, is permitted to continue to prosecute the Superior Court case against CUC to recover unpaid obligations owed by CUC.

The judge said CUC is an autonomous agency separate and distinct from the Commonwealth, with its own capacity to sue and be sued.

Based on the language of the Johnson settlement agreement, Tydingco-Gatewood determined that it is clear and unambiguous that the parties did not agree to release the NMI Retirement Fund’s claims against CUC for unpaid employer contributions.

Instead, Tydingco-Gatewood said, these claims against CUC were assigned and transferred to the Settlement Fun as “assets of the CNMI Fund.”

She said Johnson’s settlement agreement specifically excluded the NMI Retirement Fund’s claims against CUC from settlement, and unlike the claims against all other autonomous agencies, these claims were not assigned to the Commonwealth.

By carving out the exception with respect to the “rights and liabilities related to the Superior Court action,” Tydingco-Gatewood finds that the parties agreed that the Settlement Fund would retain the right to collect the unpaid employer contributions from CUC in the Superior Court case, consistent with the settlement agreement.

In granting the CNMI government’s motion to enforce the settlement agreement, Tydingco-Gatewood said it is clear from the explicit language of two paragraphs in the settlement agreement and the settlement agreement as a whole, that any claim against the Commonwealth, “whether known or unknown, suspected or unsuspected which plaintiff, the settlement class or the [NMI Retirement Fund] asserted or could have asserted in the Johnson’s class action prior to the date of final approval,” was released and any suit to assert such claim is barred.

This prohibition, the judge said, includes the Settlement Fund’s claims in the complaint against the Commonwealth in the Superior Court’s action but does not include the claims asserted against CUC.

According to court records, the NMI Retirement Fund sued CUC in 2011 in Superior Court to collect unpaid wages contributions. The NMI Retirement Fund sought a judgment in the total amount of $4.4 million, calculated as of April 2011.

In 2013, the District Court gave final approval to the global settlement agreement in Johnson’s class action against the CNMI government and the NMI Retirement Fund.

With the final approval, all Retirement Fund assets were transferred to the Settlement Fund, which is administered by a court-appointed trustee, the law firm of Civille and Tang PLLC.

In 2017, the Retirement Fund, CUC, the CNMI, and Settlement Fund agreed to the substitution of the Settlement Fund as the plaintiff in the Superior Court lawsuit, pursuant to the Johnson’s settlement deal.

In April 2019, the Settlement Fund filed its first amended complaint in Superior Court and added the CNMI as CUC’s co-defendant.

The Settlement Fund’s amended complaint charged the Commonwealth with breach of contract, violating the Commonwealth Constitution, violating a CNMI statute, and violating the federal contracts clause—all for not paying its pension obligations— and for “void assignment of debt.”

CUC moved to dismiss the lawsuit, asserting that the CNMI government absorbed all liabilities owed the NMI Settlement Fund as of Aug. 6, 2013, through the Johnson settlement agreement.

Gov. Ralph DLG Torres and the CNMI government also requested the District Court to prevent the Settlement Fund from prosecuting any further action against the Commonwealth in the Superior Court.

Deputy attorney general Lillian A. Tenorio, counsel for Torres and the CNMI government, said the Settlement Fund disregarded the settlement agreement when it re-alleged these settled claims against the Commonwealth in its Superior Court lawsuit.

Tenorio said the settlement agreement settled all liabilities of the Commonwealth and its agencies to the CNMI Retirement Fund as of Aug. 3, 2013.

Tenorio noted that the parties agreed to a judgment in the sum of $779 million, or the equivalent of the actuarial present value of the settlement class members’ benefits.

Tenorio said that allowing the Settlement Fund to pursue claims against the Commonwealth for additional contributions constitutes double recovery.

The NMI Settlement Fund, through counsel Nicole M. Torres-Ripple, opposed the CNMI’s motion to enforce Johnson’s settlement agreement.

Torres-Ripple said the CNMI’s disavowing the settlement agreement in Johnson’s class action it made and refusing to recognize the Settlement Fund’s right to proceed on these claims against the government to recover unpaid employer contributions is tantamount to bad faith.