SDLLC insists $190.8M power purchase agreement was valid

The executive order that then-governor Benigno R. Fitial signed excuses the Commonwealth Utilities Corp. from complying with CUC’s procurement regulations and this only means that the power purchase agreement the former governor entered with the Saipan Development LLC was valid, according to SDLLC counsel William Fitzgerald.

In SDLLC’s opposition to CUC’s motion to dismiss SDLLC’s lawsuit, Fitzgerald pointed out that CUC’s argument is incorrect that the PPA does not comply with the procurement regulations, which invalidates the PPA.

He said Executive Order 2012-07 excuses CUC from complying with procurement rules because the utilities agency acted through then-governor Fitial—the acting CUC executive director and board of directors—who is vested with authority to engage in sole source and emergency procurement.

“CUC’s argument also fails, because, to the extent the regulations are still operative under Executive Order 2012-07, the CUC regulations clearly authorize sole source and emergency procurement,” Fitzgerald said.

SDLLC, the Delaware-based contractor of the controversial $190.8 million PPA it signed with Fitial, filed a lawsuit in federal court against CUC over the voided PPA.

SDLLC asked the U.S. District Court for the NMI to award the company damages for its reliance on the CUC promise, and the amount incurred while evaluating, negotiating, and preparing to perform under the PPA to build a power plant.

CUC had asked for the suit’s dismissal. CUC legal counsel Deborah Fisher argued that even if Fitial signed the PPA and other contracts with SDLLC as then governor, he was still required to adhere to CNMI procurement rules.

Even if Fitial signed not on behalf of the utility but as the executive under the executive order, he did not have the power to ignore CNMI procurement laws, Fisher added.

In SDLLC’s opposition to the motion, Fitzgerald asserted that Fitial assumed the powers of the CUC’s executive director and board of directors, giving him the authority to enter into the PPA and related documents.

Fitzgerald said any requirements for a written approval of the PPA by the CUC’s executive director or board of directors were satisfied by the various writings by Fitial and between the parties to the PPA.

“Further, contrary to the CUC’s statements, the validity of the Power Plant Development Agreement does not affect the validity of the PPA because it is a separate agreement,” he said.

Fitzgerald also argued that SDLLC is entitled to have its day in federal court, pursuant to Diversity of Citizenship, as well as a forum selection clause through which the parties agreed to have any dispute resolved in the District Court.

“CUC is desperate to deny SDLLC the District Court forum, desperate to keep SDLLC in the local court, and desperate to subject SDLLC to the prejudices that diversity jurisdiction is designed to protect out-of-state litigants from,” he added.

The alleged secretive signing of the no-bid, 25-year PPA was one of the issues that led to the filing of impeachment charges against Fitial, who subsequently resigned as governor.

Fitial and then-attorney general Edward Buckingham signed the PPA on Aug. 3, 2012.

In a letter dated Jan. 4, 2013, sent to SDLLC, Attorney General Joey P. San Nicolas claimed that his predecessor, Buckingham, erred in indicating the PPA and related agreements were sufficient as to form and legal capacity. San Nicolas said the PPA and related agreements were void from the beginning.