Settlement agreement in Betty Johnson case finally approved

Settlement class counsel Margery Bronster and Stephen C. Woodruff.

BY ALEXIE VILLEGAS ZOTOMAYOR

Associate Editor

www.mvariety.com

“IT’S OVER. It’s all over,” declared District Court for the NMI designated Judge Frances Tydingco-Gatewood.

This after reading the draft final order approving the settlement agreement in the Betty Johnson case in federal court yesterday.

Beginning with the Oct. 15 payroll, annuitants will start getting pension benefits reduced by 25 percent.

“The District Court finds that the settlement is fair, reasonable, and adequate and in the best interests of plaintiff and all the class members, and, the District Court finally approves the settlement in all respects, and the parties shall perform its terms,” Judge Tydingco-Gatewood said, reading the order that she would sign.

Plaintiff Betty Johnson, who was approved by the court as the class representative and who will be getting a $7,500 service award, thanked Judge Tydingco-Gatewood, Judge Faris, the attorneys, Governor Inos, and all those who worked hard to negotiate the settlement, via teleconference.

“It’s been a long journey. It’s a great day for the CNMI,” said Johnson.

She also said she appreciated the retirees’ support over the four years of the litigation.

As early as Sept. 25, the court indicated its inclination to approve the settlement agreement with its decision to appoint Civille & Tang PLLC as Settlement Trustee with Attorney Joyce C.H. Tang as principal representative of the firm.

“It’s an extraordinary, unprecedented event,” said Settlement Trustee Tang in court yesterday.

In an interview after the fairness hearing and hearing on the final approval of the settlement agreement, Tang acknowledged the hard work of the parties involved, including Governor Eloy S. Inos, the plaintiffs, Judge Tydingco-Gatewood and U.S. Judge Robert J. Faris, among others.

She recognized the work of the Fund staff and the “people behind the scenes who made things happen.”

Tang said they now look forward to working closely with the Inos administration and the Legislature to effectuate the terms of the settlement.

She said, “All the [Fund] employees will be coming over to the Settlement Fund.”

The Fund has 18 employees remaining.

She confirmed that Lilian M. Pangelinan will no longer be discharging the duties of an administrator in an acting capacity; she will be the administrator of the Settlement Fund.

As to the issue regarding her accessibility, Tang said, “I will certainly be accessible.”

Besides, she said, Administrator Lilian M. Pangelinan will be here on Saipan to deal with daily inquiries and to provide the necessary services to the settlement class members.

She said Pangelinan is extremely capable.

“We will continue to provide that level of service. We will have regular meetings. We will do our best to accommodate the retirees’ needs,” Tang said.

She also said that she will set up a meeting with the retirees, lawmakers and Governor Inos.

Assistant Attorney General Reena Patel, for her part, also welcomed the outcome of yesterday’s hearing.

She said their work in the settlement agreement “required a fair amount of compromise.”

“Ultimately, the court decided that the terms are fair,” she said referring to the agreement.

Plaintiff counsel Margery Bronster of Bronster Hoshibata a Law Corporation was elated over the final approval of the settlement agreement.

“I am so happy. I think this is a terrific day. The outcome could not have been better,” said Bronster.

She said the court not only approved the settlement agreement, it also approved the $779 million consent judgment in case the government does not meet its obligations.”

For Bronster, “this a wonderful thing.”

The government is required by the agreement to meet a number of obligations.

“They have to conform the terms of the settlement agreement,” said Bronster.

Otherwise, she said, the consent judgment will be entered against them.

She was also elated with the the transition of assets from the Retirement Fund to the Settlement Fund, which means that the court will have oversight of the assets.

“The money will be there,” she said adding that the federal-court-appointed settlement trustee Joyce C.H. Tang will watch out for it and administer it.

“Although we are not thrilled that, right now, the retirees will receive only 75 percent of their benefits, we are happy with all the protections. And the court recognized that this is in the best in interest of the class,” she said.

Although the attorney fees riled up the community, Bronster was glad that it did not in any way affect the outcome of the settlement agreement as it is a separate issue.

“All of the noise about the attorney fees is something that is not going to affect the beneficiaries’ rights here,” she said.

She also said the fees will be paid by the government which it agreed to in the settlement.

“The settlement is approved and it’s final. I am thrilled,” she said.

With the final approval of the settlement agreement, the Retirement Fund’s assets will now be transferred to the Settlement Fund.

The final approval of the settlement agreement renders moot the 12 pending motions in the Betty Johnson case.

Yesterday, the court also certified the settlement class in compliance with Rule 23(b) of the Federal Rules of Civil Procedure.

All persons who are members of the Defined Benefit Plan of the Northern Mariana Islands Retirement Fund on Aug. 6 or those entitled to survivor’s benefits are members of the settlement class provided there was no execution of a timely election to terminate.

According to the draft final judgment, the court concludes that (1) the settlement class members are so numerous that joinder of all settlement class members is impracticable; (2) there are questions of law and fact common to the settlement class which predominate over any individual questions; (3) plaintiff’s claims are typical of the claims of the settlement class; (4) plaintiff and counsel have fairly and adequately represented and protected the interests of all the settlement class members; (5) class action is superior to other available methods for the fair and efficient adjudication of the controversy.

This, the order said, considered the interests of the members in individually controlling the prosecution of the separate actions; the extent and nature of any litigation concerning the controversy already commenced by the settlement class member; the desirability or undesirability of continuing the litigation in this particular forum; and the difficulties likely to be encountered in the management of the class action.

Based on the final judgment, all assets of the CNMI Retiremnet Fund are assigned, transferred and shall immediately become assets of the Settlement Fund.

Settlement trustee Joyce C.H. Tang

Seamless transition to Settlement Fund

The final approval of the settlement agreement, according to the court, will ensure there is a seamless transition from the Retirement Fund to the Settlement Fund.

Trustee Joyce C.H. Tang said that they have begun the process of transitioning to the Settlement.

Asked how much in Fund assets are being transferred, Tang could not provide a definitive answer.

She said she will update the retirees and the community in the first status hearing tentatively set for November.

Variety earlier cited a declaration in court made by acting Fund Administrator Lilian M. Pangelinan that the Fund would transfer $113 million in assets to the Settlement Fund once the agreement is finally approved.

Yesterday, trustee ad litem Joseph C. Razzano also disclosed that a total of $9.7 million out of the $10 million had been disbursed in P.L. 17-82 mandated refunds to Fund members who elected to terminate their membership.

$44 million in refunds to be disbursed

The settlement agreement is not only a victory for the retirees who will continue to receive their pensions in perpetuity; it also brought hope to the active members who have been waiting to get their contributions refunded.

With the final approval of the settlement agreement coupled with legislative action approving the settlement agreement, the Fund will be distributing the remainder of the P.L. 17-82 refunds.

Earlier the Fund within 20 days of the preliminary approval of the settlement agreement, began refunding withdrawing members’ 23 percent pro rata share of the $10 million authorized by the court to be disbursed pursuant to P.L. 17-82 and P.L. 18-02.

Yesterday in court, trustee ad litem Joseph C. Razzano reported that there remained $44,613,950.13 for distribution.

Razzano, as principal representative of Civille & Tang PLLC, the trustee ad litem, served from Sept. 14, 2012 until yesterday.

Assistant Attorney General Reena Patel

His firm, which the court also selected to serve as Settlement Fund trustee, will continue overseeing the transition of the Retirement Fund to the Settlement Fund.

Earlier, during the nomination process for the appointment of the settlement trustee, Razzano indicated that if his firm were to be appointed, he would decline to serve as trustee.

Retirees, officials, lawmakers attend the hearing

A big contingent of lawmakers, retirees, lawyers, and government officials attended the fairness hearing and hearing on the final approval of the settlement agreement yesterday.

Present yesterday in court were Fund trustee ad litem Joseph C. Razzano, his counsel Braddock J. Huesman, acting Fund Administrator Lilian M. Pangelinan, Settlement Trustee Joyce C.H. Tang, and counsel Rebecca Wrightson; plaintiff counsels Margery Bronster, Robert Hatch, Stephen C. Woodruff, and Bruce L. Jorgensen [via teleconference]; Assistant Attorneys General Reena Patel, Teresita J. Sablan, Gil Birnbrich, Peter Prestley and Charles E. Brasington; PSS Counsel Kelley Butcher; NMC Counsel Mark Scoggins; Senate President Ralph Torres, Senator Ray Yumul, Rep. Tony Agulto, Rep. Ramon Tebuteb, Rep. Larry Deleon Guerrero, Rep. Christopher Leon Guerrero, Rep. Janet U. Maratita, Rep. Teresita Santos, and Rep. Roman Benavente.

Plaintiff Betty Johnson, her counsel Bruce L. Jorgensen and former counsel Timothy Lord, and retiree David

Price participated via teleconference.

Commonwealth Retirement Association Chairman Larry Cabrera, CRA directors Oscar Camacho and Sapuro Rayphand were present.

Among those who were given an opportunity to speak were Rose Igitol, Joe Pangelinan, CDA economic development analyst Carline B. Sablan, and Jose R. Lizama.

Lawmakers Ray Yumul, Roman Benavente and Christopher Leon Guerrero reiterated that the lawmakers were not part of the negotiations; however, they will support the agreement.

Rota and Tinian retirees and constituents also participated via video teleconference.

A marathon hearing

The hearing that began at 9:30 a.m. yesterday lasted until 2:35 p.m. .

Earlier in the hearing, Judge Tydingco-Gatewood discussed her orders relating to the ex parte motion to lift stay and her appointment of the settlement trustee.

She discussed the ex parte motion to lift stay filed by Janet U. Maratita and Jesus I. Taisague through counsel Ramon K. Quichocho.

She said she issued her order over the weekend in which she found the movants had failed to address the correct legal standard.

She said they failed to discuss whether circumstances had changed such that the court’s reasons for imposing the stay no longer existed or were inappropriate.

She said there was a total lack of changed circumstances that would warrant the lifting of a stay.

She also said the court finds that the granting of the stay pending final approval of settlement agreement reduce the burden of litigation on all the parties.

She said she was unwilling to place over 4,000 retirees at risk.

Judge Tydingco-Gatewood also acknowledged that the situation remains the same: the fund is severely underfunded.

She noted the grave risk that retirees would face in no longer receiving benefits a mere six months from now or in March 2014 if there were to be no settlement.

She found that the settlement agreement does not impair the movants’ constitutional rights; rather it preserves them.

She also noted that the class members agreed to a revision of their benefits, but preserve their constitutional rights to the benefits.

There were various grounds raised to deny the motion such as untimeliness and lack of merit.

The court denied the motion to lift stay and the final fairness hearing proceeded.

As to the appointment of Civille & Tang PLLC, Judge Tydingco-Gatewood said she whittled down the field of seven candidates including former Fund Administrator Richard Villagomez, lawyer Michael Berman, lawyer Joyce C.H. Tang, Bankruptcy Trustee Mark Heath, Attorney Mitchell Thompson, Attorney William Plum, and David J. Sablan.

Ultimately, Judge Tydingco-Gatewood said she chose Tang.

She said she interviewed the nominees with Lilian Pangelinan.

“All of the nominees were given to this court by all parties. The court did speak to all of them,” she said.

She found it unfortunate that some nominees had not been able to read the settlement agreement.

She said she was very disappointed.

She also said the court wanted to make sure the trustee was free from any conflicts of interest or potential conflicts of interest.

She said some nominees did in fact have conflicts of interests.

They were not considered.

Overall, she said, Tang is the best candidate.

Trustee ad litem Joseph C. Razzano

“I wish you the best,” she said as she spoke to Tang in court.

She said the court has found Tang to be very professional, very dignified, very fair, reasonable.

“I am proud to appoint her. I think that she will do fine,” she said.

She also said she would exercise her discretion to allow Jorgensen to file under seal.

The Fund is objecting to the sealing.

She said she would discuss the reasons for the request to have the motion under seal.

She said at some point she may let the other counsels see the document.

But she pointed to the very “personal nature” of the request.

Motion for final approval of class action settlement

Plaintiff counsel Margery Bronster requested the final approval of the class-action settlement and certification of the class.

She said their purpose is to seek certification of the class and seek final approval of the settlement agreement.

She also asked the court to approve the consent judgment that will be available to the members in case of default by the government.

Bronster gave a rundown of the requirements for the certification of the class which she said they met.

When the court issued its preliminary approval order, it required that notices be mailed out.

She reported they sent out 4,399 notices via mail with 330 undeliverable.

She said they made attempts to reach these people.

There were notices in the newspaper as well as an 800 number.

Notices were also posted on government websites.

“As a result of the publication, there were a total of only 16 opt-outs,” she said.

She said they believed the limited number of opt outs in this case indicated that the vast majority of the class members wanted to participate.

She said if the members wanted to opt out, they had the right to do so.

“It was spelled out in the notices,” she said.

Those who opted out, she said, would not be bound by the settlement nor be getting anything from the settlement.

“We had two timely objections,” she said.

She said one objection made by retiree John “Jack” Angello was moot.

She said the other timely objection was made by Lorenzo Larry Cabrera.

She said the class constitutes all persons who on Aug. 6, 2013 were members of the Defined Benefit Plan of

the CNMI Retirement Fund or persons entitled to survivor benefits provided that these persons did not execute and deliver to the Fund a timely election to terminate.

“We sometimes refer to those people as the 17-82 group,” she said.

The class also excludes those who timely opted out of the settlement.

As to the settlement, she said, “It transfers all existing assets from the CNMI Retirement Fund to the Settlement Fund to be overseen by the federal court.”

The settlement agreement provides for a minimum payment of 75 percent of retiree benefits to which they are constitutionally entitled, she said.

She said there are various ways by which this percentage could increase.

“If the government fails to meet its obligation, there is a $779 million consent judgment,” she added.

This $779 million consent judgment, she said, would entitle the retirees to 100 percent of their benefits.

She also said the government has agreed to maintain health benefits to the extent that those benefits are extended to all retirees.

She also said that under the agreement the government would pay for reasonable counsel fees as approved by the court.

“We believe very strongly that the issue of the fees should not have an impact on whether or not this court approves the final settlement,” she said.

Judge Tydingco-Gatewood said she agreed with Bronster: “Because the settlement fund does not pay for counsel’s fees and expenses, the court believes that it would be better to bifurcate this issue.”

Bronster said they believe that overall it is in the best interest of the class and warrants the approval of this court.

She said, without a settlement agreement, further costly litigation would result.

She said rather than letting the Fund become depleted, they now had the opportunity to make sure that every beneficiary in the class would receive a minimum 75 percent of benefits for the rest of their lives.

She said litigation would have been “lengthy,” “protracted,” and “complex.”

She said with the agreement, every retiree is assured of receiving his or her pension check.