IPI’s second motion for TRO denied

U.S. District Court for the NMI designated judge David. O. Carter has denied Imperial Pacific International (CNMI) LLC’s second motion for a temporary restraining order to stay the Commonwealth Casino Commission’s revocation proceedings to revoke IPI’s casino gaming license.

Last Friday, Carter issued an order denying IPI’s motion for a TRO against CCC to stay pending revocation proceedings finding that IPI has failed to meet its burden of likelihood of success on the merits for its due process cause of action and has not established that the issuance of a TRO is in the public’s best interest.

In his 12-page order, Carter notes that IPI contends in its motion for TRO that it has a strong likelihood of success on the merits for its due process cause of action because chair Edward Deleon Guerrero and hearing commissioners Rafael Demapan, Ramon Dela Cruz, Mariano Taitano, and Martin Mendiola have a “direct, substantial, arguably personal, pecuniary interest in the outcome of the revocation hearing.”

“IPI supports this contention through stating a number of issues it raised at its revocation hearing including: a force majeure defense, the executive director’s lack of evidence to substantiate a charge against IPI, the unconstitutionality of the regulatory fee statute, and that suspension of its license would excuse payment of the regulatory fee under the CLA. IPI asserts that its due process rights to an impartial and disinterested trier of fact are violated because pursuant to 4 CMC § 2309 (a), the CCC derives all its revenue from the annual regulatory fee that IPI challenges as unconstitutional. The court finds that IPI has failed to meet its burden and denies IPI’s second motion for a TRO,” said the order.

The court further details in its order that to support its due process cause of action, IPI makes a series of contradicting arguments regarding possible incentives and biases the CCC commissioners may have when they are deciding whether or not to revoke IPI’s casino license for IPI’s failure to pay the regulatory fee.

“On one hand, IPI argues that the commissioners that will deliberate and vote as to the revocation of IPI’s casino license are biased because the CCC itself is entirely funded from the annual regulatory fee from IPI and its affiliates. However, IPI admits that it has failed to pay the regulatory fee, along with other fees for a few years. This indicates that the CCC is not funded solely on IPI’s payment of the regulatory fee each year as the CCC has continued to exist without IPI’s payments. IPI then contends that [b]ased upon information and belief, CCC is operating on funds borrowed from the CNMI treasury. IPI does not provide any support for this assertion,” said the order.

Carter also notes in his order that when IPI discusses that public interest is supported by the court issuing a TRO, it argues that the resumption of its business operations will increase CNMI’s tax revenues and allow IPI to pay fees due to the CNMI.

“This indicates that IPI is not presently capable of paying fees due to the CNMI unless it were able to resume operation. The court finds that this contradicts IPI’s assertion that the commissioners would be incentivized to revoke IPI’s casino license as there would not be means for IPI to pay outstanding fees and penalties without resumption of its operation,” said Carter.

It was only last Feb. 27 when Carter denied IPI’s motion for a TRO against CCC, essentially allowing the commission to move forward with proceedings to revoke IPI’s casino gaming license.

Tomorrow, April 9, the CCC is set to deliberate and vote on whether to revoke IPI’s casino gaming license or not.

Because of this, IPI, through lawyers Stephen Nutting and Michael Chen, is again seeking a TRO to stay the proceedings and to preserve the status quo, claiming possible violation of its due process rights, “pursuant to Rule 65 (b) of the Federal Rule of Civil Procedure.”

The temporary restraining order seeks to bar the CCC from proceeding with deliberation and voting for the revocation hearing of IPI’s casino license on April 9.

According to the 28-page memorandum in support of the TRO, IPI argues that its due process rights were violated because four of the five CCC commissioners served as the hearing officers in the revocation proceedings (despite oral motions made by IPI that they be disqualified).

In addition, IPI argues that having these hearing officers violates IPI’s due process rights because these commissioners have significant personal interests in the outcome of the proceedings.

IPI also argues that the CCC, with the five commissioners as the voting members for the revocation hearing, is ill-fitted to adjudicate the complex legal issues for two reasons: potential conflict of interests and institutional incompetency and lack of resources.

Because of this, IPI argues that the decision whether to revoke IPI’s casino gaming license should be made by a court.

In addition, IPI claims that if the deliberation proceedings move forward, with all five commissioners as decisionmakers, the revocation of IPI’s license would be a virtual certainty.

IPI has two pending lawsuits in the U.S. District Court for the NMI, which claims the CCC lacks jurisdiction to adjudicate claims arising from the Casino License Agreement.

According to IPI’s lawsuit, IPI committed in 2014 to a long-term investment of $3.14 billion to the CNMI for the development of a casino and hotel complex after the parent company of IPI, Best Sunshine International Ltd., was awarded an exclusive license to operate a casino in CNMI.

Plaintiff’s commitment was memorialized in the CLA between IPI and CNMI, which was represented by CNMI’s Lottery Commission and its acting attorney general.

Under the CLA, the authority of the Lottery Commission ceased and the Office of the Governor and the Commonwealth Casino Commission became charged with implementing and enforcing the CLA.

Under the CLA, IPI is required to pay an annual license fee of $15 million.

IPI now claims that, despite the significant license fee it already paid, the CNMI went around the CLA and enacted by statute and regulation an annual “regulatory fee” of over $3 million to be paid by IPI above and beyond its annual license fee.