AFTER considering the parties’ submissions and oral arguments, Chief Judge Ramona V. Manglona of the District Court for the NMI finds that the civil contempt proceeding over stolen liquor bottles falls outside the automatic bankruptcy stay.
She said, “Imperial Pacific International’s compliance with the order requiring IPI to ensure adequate security over the liquor bottles in question falls under the police or regulatory power exemption to the automatic stay.”
Therefore, she added, “the automatic bankruptcy stay does not apply to these contempt proceedings.”
Joshua Gray has requested the federal court to issue an order to show cause why it should not enter an order holding IPI and its executive director, Howyo Chi, in contempt for not complying with a previous order.
IPI’s former director of operations, Gray successfully sued the casino investor for racial discrimination and wrongful termination.
Represented by attorneys Aaron Halegua and Bruce Berline, Gray was awarded by the federal court a total of $5.68 million in compensatory and punitive damages.
After the court allowed Gray to participate in the receivership proceedings, he applied for a writ of execution, which the court granted.
Gray wants an order to show cause directing IPI to compensate him for the liquor stolen from the casino; imposing a daily fine of $10,000 until IPI complies; incarcerating Chi if IPI’s noncompliance persists; and directing IPI to pay Gray reasonable attorneys’ fees and costs resulting from its disobedience.
In response, IPI, through attorney Michael Chen, told the court that his client has no income and has no funds in its bank accounts. He asked the court to deny Gray’s petition.
Chen also filed a notice of automatic stay in the lawsuit as IPI has filed for Chapter 11 bankruptcy.
But according to Halegua, the court’s order to show cause is not subject to automatic stay.
The judge agrees. In a 22-page order issued on Wednesday, she said “the automatic bankruptcy stay is inapplicable to the contempt proceedings because at the time the bankruptcy petition was filed, the liquor — whose theft is the main impetus for the proceedings — no longer belonged to IPI’s debtor estate.”
Noting previous ruling, Judge Manglona said “the government regulatory exemption applies as the contempt proceedings intend to effectuate the court’s public policy interest in deterring litigation misconduct.”
She added, “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.”
Variety was unable to get a comment from Clear Management LLC, the court-appointed limited receiver.
