IPI: Gray’s requests for sanctions should be denied

Imperial Pacific International (CNMI) LLC argues that the federal court should deny creditor Joshua Gray’s requests for sanctions (including contempt) against the casino investor and its director Howyo Chi, claiming that they have done everything possible to comply with court orders.

Last week, IPI creditor Joshua Gray, through attorney Aaron Halegua, filed a petition to show cause against IPI and Chi asking that U.S. District Court for the NMI Chief Judge Ramona V. Manglona order IPI and its director to show cause why they shouldn’t be held in contempt for failing to comply with a court order pursuant to an ongoing limited receivership.

Specifically, the petition claims that on Oct. 23, 2023, the court issued an order directing IPI to ensure and fund the security of its personal property until it is sold by limited receiver Clear Management and delivered to the buyer.

However, the plaintiff argues that IPI and its management failed to comply with the court’s order in terms of security when it was discovered that liquor had been stolen from the casino.

In a response issued last Tuesday, IPI lawyers Stephen Nutting and Michael Chen claim that although IPI respectfully disagrees with the court’s order to fund the security for the personal property subject to the limited receivership, IPI has done everything possible to comply with that order by borrowing funds to provide security.

“IPI has exhausted all available assets within its control and even borrowed funds in order to comply with the court order, IPI has taken all reasonable steps within its power to comply with the court’s order to fund the security of the subject property. IPI reserves the right to petition the court to order the limited receiver and the plaintiff to reimburse the costs for providing security, which benefits the plaintiff only. The mere possibility that a third party, including the parent company of IPI, its shareholders, officers, and directors may chip in to help IPI financially from time to time is not a ground to find IPI in contempt if IPI is unable to convince such third party to extend a loan to cover certain expenses when IPI itself cannot do so with its own assets,” said IPI’s lawyers.

IPI’s lawyers also argued that there is no ground to hold IPI’s director, Chi, in contempt.

“Mr. Chi is the executive director of IPI. Mr. Chi is not personally liable for the debt of IPI. To the extent IPI has taken all reasonable steps within its power to comply with the court’s order to provide and fund the security of the subject property, there is no ground to hold Mr. Chi personally liable for the alleged contempt,” said the response.

IPI, in its response, also argues that it should not be found in contempt and subjected to compensate the plaintiff for the stolen liquor as it is beyond the scope of the court’s order.

“The cause of the loss of the liquor may never be known, to ask IPI to compensate plaintiff for the loss of the liquor is to ask IPI to be the insurer of the loss, that is beyond the scope of the court order where IPI is asked to provide security only,” said the response.

In addition, IPI claims that the loss of the liquor reported in this case was not due to “inadequate security.”

“Under the order, IPI must ‘perform any other action reasonably requested by the limited receiver.’ For the alleged loss of two bottles of Macallan, based upon the declaration by Mr. Christopher Craney, the loss occurred between Nov. 23, 2023, and Nov. 27, 2023. Clear Management already took possession and exercised exclusive custody over the liquor by removing them from the liquor vault to the casino lobby. Clear Management did not allow IPI’s security guards to get close to the liquor while they were ‘conducting inventory’ and did not coordinate with the security guards on when they will be coming or leaving and when the liquor will be left unattended. Therefore, the alleged loss of the two bottles of Macallan was not caused by the alleged inadequate security provided by IPI, it would make no difference how many security guards were on duty since they are not allowed to interfere with what Clear Management was doing with the liquor,” IPI argues.

“For the alleged loss of Moutai, the case is even stronger. Clear Management exercised exclusive custody over the liquor by replacing the padlock on the door for the liquor storage room. Mr. Craney speculated that the Moutai was stolen by unscrewing the hinge, opening the door, and then replacing the hinge. A more plausible way for the Moutai to be stolen is by someone who has access to the locked storage room with a key to the changed padlock, remove the Moutai one bottle at a time. It remains a mystery how the 17 bottles of Moutai were stolen from the locked storage room where Clear Management has exclusive access to, and the lock was not cut or broken, without establishing the causal link between the alleged loss of the liquor and the alleged inadequate security by IPI with clear and convincing evidences, it is a mere groundless speculation to fix the blame on IPI for the alleged loss of the 17 bottles of Moutai,” IPI further argued.