U.S. District Court for the NMI’s Bankruptcy Division designated judge Robert J. Faris yesterday upheld his tentative ruling dismissing the NMI Retirement Fund’s Chapter 11 bankruptcy petition.
In a videoconference that lasted over an hour, Faris granted the motions to dismiss filed by the U.S. Trustee’s and several other parties, reiterating his opinion in his tentative ruling that the Fund is a “governmental unit” and not eligible for relief under Chapter 11 of the Bankruptcy Code.
He also ruled that the Fund, which is a part and an instrumentality of the CNMI government, does not qualify as a municipality.
The dismissal of the case, however, does not call for a celebration, Faris said, describing the Fund’s state as a disaster.
“The way the Fund is being treated [by the government] is shameful! The way the beneficiaries are being treated is shameful!” he said.
After Faris gave his decision, attorney Jeremy B. Coffey, one of the Fund’s lawyers, asked the court to delay or stay the order, saying they need to discuss the ruling with the Fund.
Faris told Coffey to instead file a motion as the automatic stay remains while he has yet to issue a written order.
Faris granted the Fund’s request for an order authorizing the retention of the law office of Braddock J. Huesman and the law office of Brown Rodnick LLP as counsels for the Fund.
Coffey argued for nearly an hour in trying to convince Faris not to dismiss the case. He explained, among other things, why the Fund should not be considered a “governmental unit” within the meaning of the Bankruptcy Code. He cited the Fund’s lack of traditional government powers and it being not performing “traditional governmental functions.”
Coffey also cited why the Fund decided to file the Chapter 11 case after a six-year court battle with the CNMI government. “It is obvious that they are not going to pay its obligations,” he said.
Coffey said they believe that the Official Creditors’ Committee is starting to realize the need for this Chapter 11 petition.
In sum, Coffey said the Fund is not controlled by the government and that the only way to keep it alive and functioning is allow it to proceed with its Chapter 11 petition.
After Coffey’s arguments, Faris asked anybody to speak up from the side who wants to keep the bankruptcy case going.
Only Ruth Tighe, a columnist and a retiree, stood up and expressed her support for the Fund’s bankruptcy petition.
Tighe said that Chapter 11 bankruptcy rules—and the unique tools they provide—may not be the perfect solution to the Fund’s dilemma, but they are the only ones she knows that will keep the Fund alive and functioning in a manner conducive to its rehabilitation.
“For the sake of the common good, may I urge that you reconsider your ‘tentative ruling’ and allow the CNMI Retirement Fund’s bankruptcy petition to proceed,” Tighe said.
She noted that the outcome of this case will affect not only the individual members of the Fund—active and retired—but also the local economy of which they are a part.
“Moreover, this case will also have repercussions for the millions of individual creditors, beneficiaries and the like in the U.S. mainland, whose pension plans are also facing financial disaster,” Tighe said.
She also mentioned five distinct benefits that, according to her, are distinct and “are not available elsewhere within the repertoire of existing law.”
In an interview after the hearing, attorney Braddock J. Huesman, one of the Fund counsels, said they are disappointed with the judge’s ruling.
“It’s unfortunate. It’s what he rules so we go from there,” Huesman said.
When asked if the Fund is going to appeal, Huesman replied that they are not going to talk about it right now. Until the judge issues the dismissal order, the stay of the order is in place, he added.
Attorney Ramon Quichocho, counsel for retiree Joaquin Atalig and another retiree, said that Faris’ decision is good for the retirees.
“We agree with Judge Faris that it’s not a victory for anyone because both sides pretty much suffered through this ordeal. But we’re glad it’s over,” Quichocho said.
Attorney Stephen Woodruff, counsel for two unnamed retirees, agreed with Faris’ decision, saying the law is clear from their point of view.
Attorney Robert T. Torres, counsel for the Commonwealth Ports Authority, said the dismissal was appropriate.
Torres said they feel that upon dismissal they will return to Superior Court associate judge Kenneth L. Govendo’s chambers to see about the remedy that the Fund and the government would propose.
“It’s really not about jurisdiction anymore. It’s about what’s the remedy. Are we going to try to rehabilitate in a slow and progressive way? Because the only other option would be to liquidate,” Torres said.
“I don’t believe that anyone wants that option. So the focus now is not for celebration of dismissal but for concern of the remedy of rehabilitation and that’s what we look forward to working together on,” he added.
Attorney Bruce Jorgensen’s group, counsel for two unnamed retirees, first brought up the motion to dismiss on the grounds that the Fund’s structure and statutory existence makes it clear that it is a “governmental unit” of the CNMI. The U.S. Trustee followed the motion to dismiss on the same grounds, quickly followed by two retirees, former Tinian senator Esteven M. King, the CNMI government, and CPA.
In his tentative ruling issued Tuesday, Faris said the Fund’s board of trustees should be praised, not criticized, for commencing the bankruptcy case.
“The trustees find themselves in an intolerable position. The Fund for which they are responsible is caught between an irresistible force—obligations to retirees which it cannot pay—and an immovable object—the government, which has persistently failed to pay its debt to the Fund,” Faris said.
“The trustees’ attempt to find a solution to this dilemma is creative and praiseworthy, even though I am inclined to rule that it cannot succeed, “ the judge added.