Judge: BoS should shoulder Fennell’s legal defense cost

Superior Court judge Juan T. Lizama yesterday granted the request of former Bank of Saipan receiver Randall Fennell to have the bank pick up the tab for his legal defense, in connection with an appeal that the bank’s directors have taken to the Supreme Court.

In that appeal, the bank’s directors appealed retired Superior Court presiding judge Edward Manibusan’s decision that gave Fennell blanket immunity from future lawsuits that might arise and that the bank indemnify Fennell in case such legal actions are resorted to.

Lizama ordered that an accounting of fees and costs for which Fennell seeks payment, including an estimate of future fees and costs, if any, be completed within 60 days.

The judge set a 30-day deadline to entertain the filing of any objection to the amount of fees determined after accounting, from the time the fee statement is served on the parties.

Lizama noted that even current bank receiver Antonio Muna approved payment of Fennell’s fees.

“Mr. Muna notes that he himself might be in a position of having an order involving him appealed by the directors, for example an order approving payment of his fees,” Lizama narrated. “In such a case, he argues, he should not be required to pay to defend that order out of his own pocket.”

“It is easy to imagine a scenario where such an appeal might arise after Mr. Muna has been discharged. He might then be left without protection. This possibility [is] a serious threat to the independence of the receiver,” the judge said.

Lizama approved Fennell’s request for the bank to pay costs incurred in his legal defense as an assurance to the current receiver and future receivers who might be appointed that they would not shoulder the costs of defending court orders relating to the receivership.

Lizama’s ruling came out despite the objection of the bank’s board, which argued that Manibusan’s exoneration order in favor of Fennell remains pending on appeal before the Supreme Court. The board reportedly argued that the bank should not be required to pay Fennell’s costs in defending an order, the validity of which it is assailing before the High Court.

The court noted the board’s argument that the appropriate time to determine the propriety of payment of fees requested by Fennell is when the appeal has concluded. “The directors argue that it is sensible to wait for the matter to be resolved because of the difficulty of recovering any fees ‘prepaid’ against the possibility that Mr. Fennell will prevail.”

The court, however, favored Fennell, who cited public policy on the need to indemnify receivers to allow them to perform their tasks. As receiver, Fennell reportedly argued that a lawsuit against him would be likely.

The court also noted Fennell’s argument that he was being sued in connection with his official actions as bank receiver.

Besides appealing Fennell’s exoneration, the bank’s board has also sued the former receiver at the Superior Court, accusing him and his attorneys of breaching their fiduciary duties to the bank. During his receivership tenure, Fennell pushed for the liquidation of the bank’s assets to pay off depositors, instead of rehabilitating the financial institution.