‘IPI bankruptcy stay inapplicable in IPI liquor theft case’

U.S. District Court of the NMI Chief Judge Ramona V. Manglona determined that Imperial Pacific International (CNMI) LLC’s automatic bankruptcy stay does not apply to a civil contempt proceeding involving stolen liquor bottles.

In an order released last Wednesday, Manglona said the court’s decision was based on two key factors. Firstly, at the time of the bankruptcy filing, the stolen liquor was no longer part of IPI’s debtor estate as it had been sold to a buyer. Secondly, the contempt proceedings served the public policy interest of deterring litigation misconduct, falling within the exemption of the public policy test.

“The court finds that the automatic bankruptcy stay pursuant to 11 U.S.C. § 362(a) does not apply to the contempt proceedings. The court has a public policy interest in identifying who committed the theft of the sold liquor subject to the court’s receivership order, and ascertaining the veracity of IPI’s defense that it was the limited receiver that either breached the court’s receivership order or worse, committed a fraud on the court,” the ruling stated.

Manglona said the ruling highlights the court’s commitment to upholding public policy and deterring misconduct in litigation, underscoring the importance of regulatory compliance in such cases.

The dispute over the stolen liquor arose from a petition filed by Joshua Gray against IPI and its executive director, Howyo Chi.

Gray, a former director of operations at the Saipan casino, had successfully sued IPI for racial discrimination and wrongful termination and received $5 million in compensation.

His petition sought several measures, including holding IPI and Chi in contempt, compensation for stolen liquor, a daily fine of $10,000 for non-compliance, and attorneys’ fees. Despite IPI’s Chapter 11 bankruptcy filing and assertion of an automatic stay, the court found that the contempt proceedings fell outside the scope of the stay.

The ruling stemmed from events dating back to October 2023 when Clear Management Limited was appointed as the limited receiver for the sale of IPI’s personal property, including liquor inventory. Gray’s petition alleged that IPI failed to ensure adequate security for the liquor, resulting in theft. However, IPI contended that responsibility lay with the limited receiver.