A hearing of a contractor’s application for a mechanic’s lien on the Imperial Palace Saipan can have an extremely significant and crippling impact on Imperial Pacific International (CNMI) LLC and the CNMI’s economy, according to IPI’s counsel David G. Banes.
Pacific Rim Land Development LLC 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.
IPI also told Saipan Tribune yesterday that they are paying the CNMI government $15 million in annual license fee, $20 million in annual community benefit fund, an average of $50 million in business gross revenue tax in the past three years, plus millions of developer’s tax, income tax, excise tax, and Commonwealth Casino Commission fees.
Banes said the interests that will be at stake at the Feb. 11, 2020, probable cause hearing in connection with Pacific Rim’s application for mechanic’s lien, and the parties’ mediation, are extraordinary and go far beyond the already significant $5 million-plus being demanded by Pacific Rim.
Banes discussed the impact of Pacific Rim’s mechanic’s lien application in IPI’s motion to continue the probable cause hearing on the application from the currently scheduled Feb. 11 to at least the end of March 2020.
Banes said the continuation will allow enough time for the parties to go forward with their already agreed-upon mediation and for IPI to investigate and prepare the presentation of its counterclaims if mediation fails to resolve the parties’ disputes.
U.S. District Court for the NMI Chief Judge Ramona V. Manglona will hear today, Wednesday, on IPI’s motion to continue the probable cause hearing.
In IPI’s motion, Banes disclosed that the Department of Public Lands secretary has indicated to him that if a mechanic’s lien is placed on IPI’s leasehold interest, DPL’s position is that the lien constitutes a default on the public land lease and DPL would move to terminate the lease.
“This could potentially lead to the shutdown of the casino, with hundreds of workers losing their jobs, and send a far-reaching ripple effect through the entire CNMI economy, which relies almost exclusively on tourism,” the lawyer said.
Banes said there is no doubt that this lien proceeding is being used by Pacific Rim to force IPI into paying off its promissory note, without IPI being able to meaningfully defend itself.
“Pacific Rim knows full well the extremely huge potential effect that a lien can have on IPI’s business (possibly leading to the shutdown of the casino) and the CNMI economy, and it has been soliciting third parties to pressure IPI into submission,” Banes said.
Instead of complying with IPI’s subpoena by Jan. 31, 2020, Pacific Rim chose to move to quash the subpoena and has only selectively and incompletely produced some responsive documents, he added.
In the meantime, he said, Pacific Rim has agreed to mediation, but again, refused to provide documents sought by IPI so that the parties could have meaningful settlement discussions, and insists on not continuing the hearing even if the parties were to conduct mediation after Feb. 11, the current hearing date.
Banes declined to disclose details of IPI’s counterclaims, saying they are in the process of being investigated, but said that one of them relates to the qualifications of workers hired by Pacific Rim and billed to IPI.
However, he said, hundreds of workers were hired by Pacific Rim to work in the IPI project.
Banes said his office has been coordinating with a private investigator on locating and interviewing potential witnesses, but the investigator has reported back that the search turned out to be difficult, and more time is needed.
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 construction work on Sept. 30, 2018.
Thompson said the unpaid amount that is owed Pacific Rim is $5.65 million, but it wants to collect from IPI approximately $10 million in damages that would proven at trial.
The court then consolidated Pacific Rim’s lawsuit and its application for a mechanic’s lien.