Subpoena for IPI ‘stalking horse’ purchaser invalid

The attorney for Imperial Pacific International (CNMI) LLC’s proposed “stalking horse bidder” in the ongoing liquidation process of IPI’s hotel-casino has filed a motion asking the U.S. District Court for the NMI to find that the subpoena issued by the CNMI government and creditor Joshua Gray is invalid.

Previously, the CNMI government and Gray, through their respective attorneys, delivered a notice and subpoena to Loi Lam Sit, IPI’s proposed “stalking horse bidder” in its motion to liquidate assets, ordering him to appear for a deposition on Sept. 13 and to produce certain documents.

However, the CNMI government and Gray said Sit failed to comply with the subpoenas.

As a result, the parties petitioned the court to issue an order to show cause why it should not enter an order holding Sit in contempt and compelling Sit to promptly produce the requested documents and appear for a deposition.

In addition, the parties suggested the imposition of a daily fine of $2,000 until Sit complies.

Sit’s attorney, Joey San Nicolas, has filed a motion with the court stating that the deposition notice and subpoenas should be found invalid due to extreme short notice period and failure to notify other parties of the deposition.

First, San Nicolas argues that the deposition notices have only two days’ notice, the notices imposed an undue burden on Sit, and were issued for improper purposes.

“The Deposition Notice from the CNMI government includes a request for production of documents, but only give two days’ notice. Similarly, the Deposition Notice from Joshua Gray, although did not specifically ask for production of documents, it only gave two days’ notice as well,” he said.

In addition, San Nicolas argues that the deposition notice from the CNMI failed to comply with Federal Rules of Procedure 45 (d) (1) and the failure prejudices Sit and the IPI estate.

“Under Federal Rule of Civil Procedure 45(d)(1), if the subpoena commands the production of documents, electronically stored information, or tangible things or the inspection of premises before trial, then before it is served on the person to whom it is directed, a notice and a copy of the subpoena must be served on each party. The subpoena notice issued by CNMI’s attorney failed to comply with that requirement, it commanded the production of documents and was not served on the parties to the action which conceivably includes the Office of the U.S. Trustee and all others who have appeared,” he said.

“Given the extreme brief notice to Mr. Sit, and the procedural failure of CNMI to serve the same notice on other parties, such as IPI, and the Creditor Committee, the Court should find the subpoena invalid,” San Nicolas added.

According to archives, IPI filed for Chapter 11 bankruptcy last April 19, saying it owes creditors over $165.8 million.

Chapter 11 bankruptcy allows a business corporation to restructure its debts and continue operating.

IPI has since decided it wants to proceed with a Chapter 11 liquidation of the hotel-casino property.

Among the IPI creditors with the largest unsecured claims were the CNMI Treasury with $62 million for casino license fees; MCC International, $34.9 million for construction services; Commonwealth Casino Commission, $17.6 million for licensing fees and penalties; the law offices of Hughes Hubbard & Reed, $8.58 million for legal fees; Century Estate Investment Ltd., $8 million for an unpaid loan; CNMI Division of Revenue and Taxation, $7.9 million for unpaid business gross revenue tax; and Joshua Gray, $5.68 million for default judgment.

IPI also owes the Internal Revenue Service $4 million; the U.S. Department of Labor-Wage and Hour Division, $950,000; and the U.S. Department of Justice-Civil Division, $1.46 million.