Manglona dismisses SDLLC’s lawsuit vs CUC over voided PPA

U.S. District Court for the NMI Chief Judge Ramona V. Manglona has ruled that the court abstains from hearing Saipan Development LLC’s lawsuit against the Commonwealth Utilities Corp. over the voided power purchase agreement.

In an order issued on Tuesday, Manglona granted CUC’s motion to dismiss SDLLC’s lawsuit with prejudice. Dismissal with prejudice means SDLLC cannot re-open the case.

SDLLC is the Delaware-based contractor of the controversial $190.8-million PPA that then-governor Benigno R. Fitial and then-attorney general Edward T. Buckingham inked on behalf of CUC.

Manglona said the fact that a lawsuit filed in Superior Court preceded this federal case for over a year; that the CNMI court had already resolved a crucial substantive issue; and that SDLLC received adequate protection through its full participation in the CNMI court action provides sufficient bases and the clearest of justifications to abstain from exercising jurisdiction.

According to court records, in 2012, SDLLC negotiated and entered into a contract with CUC for a new power plant. Fitial and Buckingham signed the contract on behalf of CUC.

That same year, Rep. Janet Maratita (IR-Saipan) and several others brought a taxpayers action in local courts against among others, SDLLC and CUC, seeking to declare the contract invalid.

In January 2013, Buckingham’s successor as AG informed SDLLC that the contract was legally invalid and void from the beginning.

Eleven months later, SDLLC filed its breach of contract lawsuit against CUC in federal court.

CUC, through counsel Deborah E. Fisher, then moved to dismiss SDLLC’s lawsuit.

Fisher argued, among other things, that the decision of Superior Court Associate Judge David A. Wiseman to declare as void from the beginning the PPA should preclude SDLLC’s lawsuit in federal court.

Fisher said the federal court should apply principles of issue preclusion and comity, and consider Wiseman’s order preclusive.

In SDLLC’s opposition to CUC’s motion, SDLLC counsel William Fitzgerald, asserted, among other things, that Fitial’s executive order excuses CUC from complying with procurement regulations and that this means that the PPA was valid.

CUC’s motion to dismiss raises five issues: subject matter jurisdiction, necessary parties, abstention, dismissal for an illegal contract and dismissal for a shotgun pleading.

In granting CUC’s motion to dismiss, Manglona discussed only the first three issues after finding these matter dispositive.

Manglona said if the party involving federal jurisdiction appears to be forum shopping, it is a factor favoring abstention.

In this case, Manglona said, it appears SDLLC is forum shopping.

The judge noted that the Superior Court action had already progressed over a year—and vigorous motion practice undertaken—before SDLLC brought this lawsuit in federal court.

“So it appears that, after undertaking substantial litigation of the issues there, Saipan Development found itself dissatisfied with the Commonwealth court’s course and sought a do-over in federal court,” Manglona said.

To be sure, Manglona said, SDLLC does have a right under the contract to submit disputes to this court.

The judge said to avoid the appearance of forum shopping, it should have exercised this right sooner.

Indeed, she pointed out, it was a full 11 months after the AG said the contract was void—and 15 months after the Superior Court action’s filing—before SDLLC filed this lawsuit in federal court.

“Thus, this factor favors abstaining,” Manglona said.

Manglona said to favor abstention, the state proceeding must be “substantially similar” to this one and must yield “comprehensive disposition of litigation.

“Here it is and it does. The whole dispute here is over a breach of contract. The Commonwealth court has already declared that contract void, thus nullifying any action upon it,” she said.