IMPERIAL Pacific International, in an amended complaint filed in federal court, sued the governor and the Commonwealth Casino Commission, both in their official and personal capacities, for, among other things, breach of the Casino License Agreement or CLA.
IPI, which demands a jury trial, named as defendants Gov. Arnold I. Palacios, CCC Chairman Edward C. Deleon Guerrero, Vice Chairman Rafael S. Demapan, Commissioners Mariano Taitano, Martin Mendiola and Ramon M. Dela Cruz as well as Executive Director Andrew Yeom.
Represented by attorneys Stephen Nutting and Micheal Chen, IPI sued the government officials for unconstitutional impairment of contract, violation of the contract clause of the U.S. and CNMI constitutions, violation of the takings clause of the U.S. Constitution, violation of the due process clauses of the U.S. and CNMI Constitutions, and breach of CLA.
The lawsuit wants the court to issue an order stating that “IPI is exempt or excepted from, or not subject to, the terms of the regulatory fee because of the express terms of the CLA entered into by IPI and CNMI prior to the enactment of the annual regulatory fees statute.”
IPI also wants the court to issue an injunction “preventing the enforcement of the regulatory fee statute and the collection of the annual regulatory fee against IPI, or mandating that defendants exempt or except IPI from the annual regulatory fee, given the express terms of the CLA entered into by IPI and the CNMI prior to the enactment of the annual regulatory fee statute.”
IPI said the court should issue a declaration stating that the regulatory fee statute, as applied to IPI, is unconstitutional.
IPI likewise requested that the court rule in its favor and order the defendants to “pay restitution [for] all regulatory fees paid by IPI in the past; and vacate, nullify any and all adverse administrative decisions against IPI that were based upon the annual regulatory fee statute, including the imposition of fees, interests and penalties for failure to pay the annual regulatory fees; as well as the suspension of its license based upon the annual regulatory fee statute, including but not limited to Commission Order 2021-002 and the recent demand for immediate payment of regulatory fees.”
“Acting under color of Commonwealth law,” the lawsuit stated, the “defendants have caused IPI to suffer a substantial deprivation of its contract rights in violation of the federal and Commonwealth constitutions. The regulatory fee statute imposed additional fees for doing business in the CNMI, which constitutes a substantial and unconstitutional impairment of the CLA. IPI was and is still required to pay the $3 million annual regulatory fee as a prerequisite to exercising its existing contractual and property rights set forth explicitly in the CLA, rights for which it already has compensated the CNMI,” the lawsuit added.
“In essence, defendants are double-charging IPI. The annual regulatory fees are substantial, and the impairment to the express and implied terms of the CLA is direct. The later imposed regulatory fees, Commission Order 2021-002, and the most recent demand for immediate payment by defendants, effectively nullify the explicit terms of the CLA and impose completely unexpected and new liabilities and limitations on the operation of IPI,” the lawsuit stated.
In its initial complaint, IPI named CCC as the defendant.
Motion to dismiss
In a 24-page motion to dismiss, Assistant Attorney General Keisha Blaise, who represents the commission, said IPI’s lawsuit should be dismissed for four reasons: (1) this court lacks subject matter jurisdiction over plaintiff’s claims as all its causes of action are barred by the doctrine of res judicata; (2) IPI has failed to properly serve defendant; (3) IPI fails to state a claim for which relief can be granted because its claims are untimely and barred by the statute of limitations; and (4) IPI fails to state a claim for which relief can be granted because the commission lacks the capacity to sue and be sued.
According to Blaise, IPI’s claims are barred by the doctrine of res judicata. “Res judicata, also known as claim preclusion, bars litigation in a subsequent action of any claims that were raised or could have been raised in the prior action.”
Blaise said “IPI seeks to relitigate matters that were previously addressed in prior enforcement actions.”
She noted that the constitutional issues raised by IPI could have been presented as a defense in the initial action before the commission.
But “IPI did not avail [itself] of that opportunity,” she added.
CCC has issued a notice to IPI, setting a revocation hearing for Jan. 31, 2024 at 9 a.m. in the commission’s conference room at Springs Plaza on Middle Road in Gualo Rai.
The revocation hearing will address enforcement actions 2020-002 and 2020-003, pertaining to IPI’s non-payment of the annual exclusive casino license and regulatory fees.
Since the onset of the Covid-19 pandemic in 2020, IPI has failed to pay its obligations to the Commonwealth that have now amounted to over $62 million in annual exclusive casino license fee due to the CNMI government, and over $17.62 million in regulatory fee due to the commission, plus fines and penalties, for a total of $79.63 million.
