THE Carlsmith law firm and one of its members yesterday filed separate but similar lawsuit against the CNMI government, Deputy Attorney General Ramona V. Manglona and a law firm for allegedly threatening to sue them if they would not pay $5.5 million over their involvement in the Larry Hillblom estate probate.
Carlsmith Ball LLP, a Hawaii-based law firm that has a Saipan branch, and a member in California, Donald C. Williams, alleged in their complaint that the CNMI government’s demands and threatened litigation purportedly arise out of Carlsmith’s brief representation of Bank of Saipan as then executor in 1995 and early 1996 in the Hillblom probate.
The plaintiffs named Manglona as among the defendants for her alleged participation in the demands and threatened actions against Carlsmith, and in retaining the California-based co-defendant law firm of Walsworth, Franklin, Bevins & McCall.
Variety tried to reach Manglona yesterday for comment, but a staff at the Attorney General’s Office said she was off-island.
Attorney Jesus C. Borja, on behalf of the plaintiffs, asked the U.S. District Court to issue a judgment declaring that the demands and threatened enforcement actions of the CNMI unconstitutionally attempt to penalize Carlsmith for the exercise of its constitutional rights and protected activities in connection with the enactment of Public Law 10-10.
Borja sought injunctions enjoining the CNMI and the Walsworth law firm from taking any actions to enforce its demands.
The plaintiffs want a court order declaring that such demands and threatened lawsuit unconstitutionally attempt to impose responsibility and damages upon Carlsmith relating to an estate tax that could not legally be applied retroactively.
“This action arises out of the unconstitutional attempt by the government of the CNMI to force Carlsmith to foot the bill for the CNMI’s declining economic circumstances,” said Borja, who is a former associate justice and lt. governor.
Borja said on March 26, 2002, or more than six years after Carlsmith represented Bank of Saipan as Hillblom estate executor, Walsworth, on behalf of the CNMI, sent a letter to Carlsmith stating that the government would file a petition against the law firm unless it took certain actions.
The first count in the petition, Borja said, alleges that Carlsmith’s actions “caused the probate court and petitioner to suffer damages including the cost of unnecessary court hearings and administration, loss of tax revenues because of diminished estate tax revenues due to diminishment of the estate’s tax basis and increased governmental costs.”
Borja said the second count alleges that the CNMI was damaged because Carlsmith failed to draft the estate tax provisions of P.L. 10-10 competently or intentionally left it to others with less experience to draft these provisions.
Borja said that last April 22, Walsworth sent another letter to Carlsmith that demanded payment of $5.5 million.
Three days later, Borja said, Walsworth provided another letter that threatened his client to obtain a judgment exceeding $100 million if the law firm and its former insurer failed to satisfy the CNMI’s demand.
According to the CNMI government, Carlsmith “covertly manipulated the legislative process” and caused the Legislature to pass P.L. 10-10.
“The CNMI’s demand and threatened enforcement actions would violate numerous rights and privileges guaranteed by the U.S. Constitution,” Borja said. He said Carlsmith did not draft and had no involvement in the adoption of the estate tax provision of P.L. 10-10.
He said P. L. 10-10, which became effective in 1996, did provide for retroactive application of certain provisions, but did not provide for retroactive application of the estate tax provisions.
Borja said Hillblom died before the passage of P.L. 10-10’s estate tax provision. As a result, P.L. 10-10 could not, consistent with the due process clause, be applied to the Hillblom estate.
“In as much as the CNMI seeks to collect from Carlsmith the estate taxes it could constitutionally collect from the Hillblom estate it seeks to impose responsibility for an unconstitutional estate tax on Carlsmith,” he added.
