IPI files counterclaims against former contractor

IPI alleges that Pacific Rim hired kitchen helper, delivery man to work as carpenters at casino-resort project

The Imperial Pacific International (CNMI) LLC has filed counterclaims against its former contractor, Pacific Rim Land Development LLC.

IPI, alleging, among other things, that Pacific Rim hired a kitchen helper and a delivery man and made them work in IPI’s casino-resort project in Garapan as carpenters.

IPI, through counsel Cong Nie, brought counterclaims against Pacific Rim for promissory fraud, fraud in the inducement as to the promissory note, violation of Consumer Protection Act, and breach of contract.

IPI asked the U.S. District Court for the NMI to issue an order for rescission of IPI’s contract with Pacific Rim and the promissory note.

IPI also asked the court to hold Pacific Rim liable to pay damages in an amount to be proven at trial; the company wants a jury trial.

Pacific Rim, through counsel Colin Thompson, is suing IPI and five unnamed alleged co-conspirators for breach of contract (construction and promissory note), and unjust enrichment.

Pacific Rim claimed to have substantially completed or completed the agreed-upon work on Sept. 30, 2018 and that IPI owes Pacific Rim $5.65 million, but wants to collect from IPI approximately $10 million in damages that would be proven at trial. Pacific Rim also filed an application for a mechanic’s lien on IPI’s hotel-casino project and on the land that it sits on. A mechanic’s lien refers to a security interest in the title to property for the benefit of those who have supplied labor or materials that improve the property.

According to Nie in IPI’s counterclaims, IPI did not discover Pacific Rim’s fraudulent intent prior to April 16, 2018, and therefore its promissory fraud claim is timely.

Nie said Pacific Rim knowingly misrepresented the trade categories of its employees in its monthly invoices and deliberately omitted to disclose when submitting its monthly invoices that its workforce “did not perform work in a manner as efficient or competent as those of ordinary skill, competency, and standing in the corresponding trades.”

By entering the contract without the intent to perform its promises, Pacific Rim engaged in unfair and deceptive acts in its business operations, Nie said.

The lawyer said in the event that the contract is found to be valid and enforceable, Pacific Rim has breached the contract by failing to perform its promises—promises that include to implement a construction plan to substantially complete all construction on or before May 31, 2019, and assign qualified personnel.

Nie cited the enactment of the Northern Mariana Islands Economic Expansion Act in August 2017, which effectively imposed a ban on CNMI businesses using the CW-1 visa category to hire new construction workers. Since before the NMIEEA became law, there had already been a shortage of qualified construction workers and related personnel in the CNMI, he said, and its passage made it extremely difficult for large-scale construction projects in the CNMI.

At that time, IPI was under a deadline, pursuant to its agreement with the CNMI government, to complete its hotel-casino project in Garapan, and urgently needed a general contractor who could finish the project timely and completely.

In 2017, Pacific Rim proposed to IPI that it could and would act as the general contractor of the project, Nie said. On Feb. 13, 2018, Pacific Rim and IPI executed a written contract for construction of the project. In the contract, Nie noted, Pacific Rim promised to perform the scope of work defined in the contract, including implementing a construction plan to substantially complete all construction on or before May 31, 2019, and supervising other contractors and subcontractors working on that project, as the general contractor.

After executing the contract, Nie said, Pacific Rim started to recruit workers for the project. He cited Pacific Rim’s hiring of a person with the initials P.P. to work on the project. Prior to being hired by Pacific Rim, P.P. was allegedly working as a kitchen helper. Nie said that after hiring P.P., Pacific Rim had him work first as a security guard and then as a carpenter and a mason on the project.

During P.P.’s employment with Pacific Rim, he received no training to perform carpentry or masonry work, Nie said. When the contract was terminated, P.P. was among those first batch of employees that Pacific Rim terminated.

In another example, Nie said, shortly after entering into the contract, Pacific Rim hired an employee with initials E.M. Prior to being hired by Pacific Rim, E.M. was a delivery man.

After hiring E.M., Nie said, Pacific Rim had him do carpentry work involved in installing glass reinforced concrete panels on the exterior of the hotel building of the project as a carpenter.

The lawyer said that during the time period when Pacific Rim performed work under the contract, more than 200 GRC panels were installed at a much slower pace than what it would have been had Pacific Rim hired construction workers and supervisory staff that possessed ordinary skill, competency, and standing in the trades involved.

He said a substantial number, if not most, of the GRC panels installed during the term of the contract were installed incorrectly and had defects, such as improper welding, and the defects had to be corrected.

The lawyer said that after the contract was terminated, the incorrectly installed GRC panels had to be removed and re-installed.

Nie said prior to the filing of this lawsuit by Pacific Rim, IPI has made payments in aggregate over $30 million to Pacific Rim.

He said even putting aside the damages caused by Pacific Rim to IPI, the payments that have been made by IPI to Pacific Rim prior to the filing of this lawsuit were more than enough to cover the fair value of the services and materials furnished by Pacific Rim, and more than enough to provide a significant profit margin to Pacific Rim.

Nie also noted that at least in the invoices for April, May, and June 2018, Pacific Rim listed multiple persons working as equipment mechanics, even though it employed during that period at most one qualified equipment mechanic with the initials M.V.

Pacific Rim is suing IPI for alleged non-payment of $5.65 million in construction services.

U.S. District Court for the NMI Chief Judge Ramona V. Manglona’s recently granted summary judgment in favor of Pacific Rim and against IPI. Manglona found undisputed evidence that IPI defaulted on Nov. 15, 2018 when they failed to pay the full amount owed Pacific Rim.

Thompson said the total interest accrued as of April 16, 2020, is $457,481, while the principal owed on the promissory note is $6,383,462.

Thompson said the total due on the promissory note for interest and principal is $6,840,944 as of April 16, 2020.

At a hearing last April 2, Manglona denied IPI’s motion to dismiss Pacific Rim’s lawsuit. She granted Pacific Rim’s motion for summary judgment as to its claim for breach of promissory note.

The judge ordered Thompson to submit proposal with respect to fees and interest that IPI is liable to pay.

Manglona also stated that she will issue an order on Pacific Rim’s lien application.

Ferdie De La Torre | Reporter
Ferdie Ponce de la Torre is a senior reporter of Saipan Tribune. He has a bachelor’s degree in journalism and has covered all news beats in the CNMI. He is a recipient of the CNMI Supreme Court Justice Award. Contact him at ferdie_delatorre@Saipantribune.com

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