U.S. District Court for the NMI Bankruptcy Division designated judge Robert J. Faris on Wednesday issued an order formally dismissing the NMI Retirement Fund's Chapter 11 bankruptcy petition.
As this developed, two unnamed retirees represented by attorney Bruce Jorgensen filed yesterday in federal court a motion for a temporary restraining order and preliminary injunction to prevent the enforcement of Gov. Benigno R. Fitial's executive order declaring a state of emergency for the financially troubled NMI Retirement Fund.
In a one-page order, Faris only stated that pursuant to a memorandum of decision on motions to dismiss he issued last June 13, the Fund's bankruptcy case is dismissed.
Faris' June 13 memorandum simply reiterated the discussions in his tentative decision dismissing the Fund's bankruptcy case.
Faris ruled that Fund is a “governmental unit” and not eligible for relief under Chapter 11 of the Bankruptcy Code.
Jorgensen and co-counsels Robert M. Hatch, Margery S. Bronster, and Stephen C. Woodruff asserted that their motion for TRO and preliminary injunction seeks to prevent Fitial from “illegally seizing the Fund and assuming dictatorial control over it.”
Last June 7, Fitial issued Executive Order 2012-06 that suspends the power of the Fund's board of trustees and administrator, and transfers this executive power to Finance Secretary Larrisa Larson.
Fitial then stated that Executive Order 2012-06 shall become effective immediately upon the U.S. District Court Bankruptcy Division's filing of its order dismissing the Fund's Chapter 11 bankruptcy petition.
On the dismissal of the bankruptcy case, acting press secretary Teresa Kim yesterday pointed out that since there is an automatic stay for 14 days of the court's dismissal order, the executive order for reorganization of the Fund and the state of emergency declaration will not take effect until the 14 days lapses.
“At this time, the State of Emergency Declaration as well as the Executive Order for the reorganization is being reviewed once again and will likely be amended,” Kim told the media in an email.
Jorgensen, Hatch, and Woodruff in the unnamed two retirees' motion filed in the U.S. District Court for the NMI stated that Fitial now claims the very problem he has helped create is a “disaster emergency” giving him the power to seize the Fund and suspend the operation of all laws and regulations relating to the Fund.
The two unnamed retirees are suing Fitial and the Fund in federal court over alleged non-payment of their retirement benefits.
Jorgensen, Hatch, and Woodruff said the governor's emergency powers are limited to true disasters, not disaster created by the governor's own actions.
The lawyers said the Fund has not been imperiled by a “disaster emergency,” it has been imperiled by laws such as Public Law 15-15 signed by Fitial on June 16, 2006.
P.L. 15-15 suspended the government obligations owing to the Fund for the remainder of Fiscal Years 2006 and 2007.
The lawyers said allowing the governor to seize the Fund and suspend all laws and regulations governing it will irreparably harm their clients and the class by removing the Fund and its assets from the protection of the law and courts.
In fact, the lawyers pointed out, an express purpose of the executive order is to prevent the Fund from seeking to enforce its judgment against the CNMI for failing to pay the contributions required by law.
The lawyers said their clients are likely to succeed on the merits of their claims because the governor's executive order is “blatantly illegal and threatens the very foundations of a society based on law”, and the court should grant their motion for a restraining order on this basis alone.
They asserted that the executive order will cause irreparable harm because it will nullify the Superior Court proceedings and collection of the Superior Court judgment and suspend all laws relating to the Fund.
The lawyers said the public interest will be gravely harmed if Fitial is allowed to simply declare that he is not bound by the law.
“The implications are profound and potentially devastating for the Commonwealth. It is in the public interest to hold the governor to compliance with the law and for this reason the court must enjoin enforcement of Executive Order 2012-06,” the lawyers added.
In a related development, the two unnamed retirees yesterday moved the federal court to lift the court's stay order of their lawsuit that has been in effect since January 25, 2010.
The unnamed retirees also requested the federal court to conduct an expedited hearing in their motion to allow them to lift the existing stay so they can litigate the lawsuit “in the only forum that can now protect their rights.”
The District Court in its June 25, 2010 order determined that a stay was necessary in order to afford proper deference to the state court proceedings.
At the time, the Fund has a pending appeal with the U.S. Court of Appeals for the Ninth Circuit over the federal court's order denying the Fund's motion to dismiss the unnamed retirees' lawsuit.