Betty Johnson Files For Approval Of CNMI Fund Settlement

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Counsels say settling litigation ‘an overriding public interest’

By Alexie Villegas Zotomayor

SAIPAN, CNMI (Marianas Variety, Sept. 26, 2013) – Plaintiff Betty Johnson through her counsels yesterday filed a motion for final approval of the Northern Mariana Islands Retirement Fund settlement agreement and argued that the retirees’ only recourse is a federal court judgment.

Through counsels Robert M. Hatch, Margery Bronster, Bruce L. Jorgensen and Stephen C. Woodruff, Johnson asked the court to approve the agreement stating that "final approval is appropriate.

"A court should approve a settlement if the settlement is ‘fair, reasonable, and adequate,’" the counsels said.

They said there is an overriding public interest in settling and quieting litigation which is true for all class actions.

In arguing for the final approval of the settlement agreement, the counsels for Betty Johnson said the determination of whether the settlement agreement should be approved rests on various factors: (1) the strength of the plaintiffs’ case; (2) the risk, expense, complexity, and likely duration of further litigation; (3) the risk of maintaining class action status throughout the trial; (4) the amount offered in settlement; (5) the extent of discovery completed and the stage of the proceedings; (6) the counsel’s experience and views; (7) the presence of a governmental participant; and (8) the reaction of class members to the proposed settlement.

"No single criterion determines whether a class action settlement meets the requirements of Rule 23(e) and the Ninth Circuit has directed district courts to consider a variety of factors without providing an ‘exhaustive list’ or suggesting which factors are most important," the counsels said.

On the strength of the merits of the case, the counsels said, "It is, therefore, obvious that without a federal court judgment and final approval of the settlement, the CNMI will never pay enough to avoid complete depletion of the NMIRF and a cessation of benefit payments."

[PIR editor's note: Meanwhile, Marianas Variety reports that law firm Civille & Tang PLLC has been appointed by the federal court as Settlement Fund Trustee, acting by and through principal representative Joyce C. H. Tang.]

They explained that the litigation was prompted by the CNMI government’s "chronic failure" to pay the minimum amount of contributions required by law to the Fund to enable it to be actuarially sound and to pay the retirement benefits guaranteed by the CNMI Constitution.

"While the CNMI acknowledged its obligation and even allowed entry of a judgment against it in a Commonwealth Superior Court, the CNMI also insisted that it did not have to actually pay that judgment," the counsels said.

The Fund brought action against the CNMI government on Aug. 2, 2006 to collect unremitted contributions and three years later the Superior Court ruled against the government and imposed a $231 judgment in 2009. This ballooned to $336 million by 2011.

For the plaintiff, the Superior Court proceeding never offered "a venue for meaningful relief to the class and served merely as an excuse to delay this class action in federal court which was the only forum in which the class members’ legal rights could be protected."

The plaintiff counsels said the issue has never been whether the government owes money to the class members "but how the class members can actually make sure they get paid."

The counsels cited a previous court judgment on which the Marine Revitalization Corp. (MRC) has yet to collect an estimated $8.5 million.

The counsels argued that because the CNMI courts cannot enforce money judgments as shown in the MRC case, the class members’ only recourse was a federal court judgment.

Despite the reduced retirement benefits as proposed by the settlement agreement, the plaintiff sees that it is still superior to the CNMI’s promise to pay, "if it is willing to pay, because the CNMI is obviously not willing to do so."

The counsels cited the recently passed budget law, P.L. 18-18, that appropriates only $20 million to the Retirement Fund yet members’ annual benefits total more than $60 million.

In fiscal year 2013, total annual pension payments amounted to $73 million.

The counsels said the Fund is underfunded by more than $1 billion due to the government’s failure to make past annual payments.

The counsels said, "the risk, expense, complexity, and likely duration of further litigation is very high."

If there is no settlement, the retirees will be facing a cessation of benefits by June 2014.

The retirees, the counsels said, face "cataclysmic risk."

Further, the counsels said the cost of further litigation is "extremely high" as shown in the last two years.

The counsels said the CNMI government aggressively defended the case while the Retirement Fund sought bankruptcy protection in an effort to stop the case and cut benefits by 58 percent.

"The CNMI government has show that it is willing to marshal all the resources of the Commonwealth to fight the class in this case, and there is no reason to think that will change if the settlement is not finally approved," the counsels said.

They also said "the class lacks the resources to pursue the case and may only do so because class counsel have been, unlike any other lawyers in the CNMI, willing to pursue this case at their own expense on a contingency basis."

Even if the class did so on their own, the counsels said there is still risk of costs and delays in collecting any judgment against the CNMI government.

They also spoke of the risk of maintaining class-action status throughout the trial.

The counsels said the class would benefit if this issue is resolved "expeditiously and economically."

The counsels said the class will be getting a good deal with the settlement as they are assured of a minimum 75 percent of their benefit payments and the class can enforce a $779 million consent judgment if the government fails to make the minimum annual payments.

"The settlement does not, as some critics have said, force a cut of 25 percent on the class members, it insures the class members will get 75 percent instead of nothing," the counsels said.

They also said the settlement provides the class with either 75 percent of the benefits in perpetuity or the maximum judgment they could get if they won the case on the merits.

The counsels also said that the given the case’s well-established evidentiary record, there is no risk that further discovery or litigation will improve the court or class’s ability to analyze the fairness and adequacy of the settlement.

The counsels also touted their experience in class actions, governmental litigation and financial litigation.

The counsels said they support the settlement agreement.

They also said the defendants advocate final approval of the settlement agreement.

They said the preliminarily approved settlement agreement generated good feedback from the class as only 16 out of more than 4,000 members opted out.

The counsels also said that requirements for class certification have been met based on (1) numerosity; (2) commonality of issues; (3) typicality; and (4) adequacy of representation.

They also said that common questions of law and fact predominate.

"The vast majority of class members have elected to secure the protections and economies of time, effort, and expense afforded by class treatment by not requesting exclusion over any marginal benefit they may have perceived could be gained from individual prosecution," the counsels said.

The counsels sought a court order to certify the class.

They said they managed to mail out notices to 4,399 members.

They also stated notices were published in the newspapers and posted on the Fund’s website.

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