U.S.A. Fanter Corp. v. Imperial Pac. Int'l (CNMI)

• Decision Date: 27 October 2022
• Docket Number: CIVIL 1:20-cv-00003
• Parties: U.S.A. FANTER CORPORATION, LTD., Plaintiff, v. IMPERIAL PACIFIC INTERNATIONAL (CNMI), LLC, Defendant.
• Court: U.S. District Court — Northern Mariana Islands

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U.S.A. FANTER CORPORATION, LTD., Plaintiff, v. IMPERIAL PACIFIC INTERNATIONAL (CNMI), LLC, Defendant.

CIVIL No. 1:20-cv-00003

United States District Court, Northern Mariana Islands

October 27, 2022

MEMORANDUM DECISION DENYING STIPULATION TO STAY RECEIVERSHIP

RAMONA V. MANGLONA CHIEF JUDGE

Before the Court is a Stipulated Motion to Stay Limited Receivership on Shortened Time Pursuant to Local Rule 7.1(f) (ECF No. 298) filed by Defendant Imperial Pacific International (CNMI), LLC (“IPI”), Plaintiffs in Wang et al. v Imperial Pacific International (CNMI), LLC, Civil Case No. 1:18-cv-00030, Plaintiffs in Genc et al. v. Imperial Pacific International (CNMI), LLC, Civil Case No 1:21-cv-00031, and Commonwealth Superior Court judgment creditor N15 Architecture Company Inc. (see Order Granting N15 Architecture Company's Mot. to Participate in Receivership, ECF No. 294). The Court held a hearing on shortened time the day after the stipulation was filed, at which time the Receiver Clear Management, Ltd. (“Receiver” or “Clear Management”) objected to the stipulation. (Min., ECF No. 299.) After reviewing the parties' arguments and the Ninth Circuit's decision in WB Music Corp. v. Royce International Broadcasting Corp., 47 F.4th 944 (9th Cir. 2022), the Court DENIED the stipulation and allowed the Receiver to conduct the auction sale scheduled for the next day. (Min., ECF No. 299.) The Court now issues this memorandum decision memorializing its reasoning.

I. PROCEDURAL BACKGROUND^[1]

A. Post-Judgment: Plaintiff USA Fanter

Efforts to satisfy judgment began with the original Plaintiff in this matter, U.S.A. Fanter Corporation, Ltd. (“USA Fanter”). Judgment was issued for approximately $2.089 million in May 2021. (Am. J., ECF No. 107.) After receiving a writ of execution on IPI's property (Order Granting Application for Issuance of Writ of Execution, ECF No. 110) and three months after judgment was entered, USA Fanter moved the Court to grant a limited receivership on IPI's gaming equipment. (Mot. for Limited Appointment of Receiver in Aid of Execution, ECF No. 112.) IPI did not oppose, and the Court therefore granted USA Fanter's motion and appointed Tim Shepherd of Clear Management Limited as receiver. (Min., ECF No. 119.)

USA Fanter then sought a second receivership on IPI's real property. (ECF Nos. 121-123.) Over a month after USA Fanter filed its motion for a second receivership, and just two days before the hearing was scheduled to take place on October 14, 2021 (see Docket Entry 9/10/2021), IPI's current off-island attorneys were admitted pro hac vice (ECF Nos. 134, 135) and filed their opposition to the limited receivership of real property on behalf of Defendant IPI (ECF No. 136).

At the October 14 hearing on USA Fanter's motion for a receivership on IPI's real property, IPI informed the Court that it noticed 30 of its creditors of USA Fanter's second motion for a limited receivership, many of whom appeared at the hearing. (Min., ECF No. 158.) These included creditors who have had judgment rendered in the District Court or the Commonwealth Superior Court, as well as potential creditors who are still in the pre-judgment phase of litigation. Post-judgment District Court creditors who filed notices of appearance included, for example, Plaintiff James Whang, dba South Pacific Lumber Co. in Civil Case No. 1:21-cv-00027, who stated his intent to participate in the receivership as a creditor of IPI.^[2] (ECF No. 162.) Post-judgment Commonwealth Superior Court creditors include Plaintiffs Atkins Kroll (Saipan), Inc. and G4S Secure Solutions (CNMI), Inc., both of whom are owed judgments against IPI totaling $78,000. (Notice of Appearance, ECF No. 165.) In these plaintiffs' notice of appearance, they expressly state: “The aforementioned claimants intend to participate in any receivership established by the Court as a creditor of IPI. Claimants further request notice of, and the opportunity to be heard at, all further proceedings [in] this case.” (Id. at 2.) Also from the Commonwealth Superior Court are pre-judgment creditors such as Plaintiff Glenn Patrick Bell, who alleges over $365,000 for services rendered to IPI and state that “if a receiver is appointed to collect and sell off the assets of IPI and/or entities to IPI . . . Patrick Bell intends to participate in the receivership as a creditor of IPI.” (Notice of Appearance, ECF No. 154.) In sum, more than twenty current and potential creditors came forth and filed their entries of appearance in the hopes of seeking relief from Defendant IPI. (See e.g., ECF Nos. 124-130, 137, 138,140, 143-157, 160-165.)

Although the Court denied USA Fanter's motion for a limited receivership on real property, the Court reiterated its grant of the receivership on IPI's gaming equipment.^[3] (Min., ECF No. 158.) In its discussion with IPI and the various creditors on the gaming equipment receivership, the Court acknowledged that the receivership would function like a bankruptcy with the intent of satisfying judgment for the various creditors. (See Tr. 66, ECF No. 250 (“[T]hat's why I keep talking about the receivership[, it] is intended to give everybody something. It's basically like a bankruptcy, but in equity here. Some-but not everybody is going to get 100 percent.”).) It went on to state that all judgments- from smallest to biggest-would need to be satisfied. (Id. at 73.) The Court further determined that the claimants who had filed their notices of appearance could participate in the receivership by receiving notice of the filings in the matter. (Id. at 82 (“I've already given notice, and these additional claimants can participate by receiving the filings in this proceeding because this apparently is going to be the lead case in this receivership.”).)

The Court subsequently issued its Memorandum Decision Granting Plaintiff's Motion to Appoint Limited Receiver and Setting Terms of Receivership (“Receivership Order”) (ECF No. 166). The Receivership Order indicated that the first auction was to be held on November 30, 2021 with subsequent auctions taking place every 30 days thereafter to satisfy USA Fanter's judgment. (Id. at 17 ¶ (C)(2).)

IPI was eventually able to secure stays of the limited receivership by reaching agreements with the various creditors to post a supersedeas bond and thereby stay any enforcement of judgment pending IPI's appeal to the Ninth Circuit. (Min., ECF No. 197.) On December 13, 2021, IPI noticed the Court that it posted the supersedeas bond to secure USA Fanter's judgment. (ECF Nos. 205, 206.) The Court ultimately approved IPI's supersedeas bond. (Decision and Order, ECF No. 222.)

B. Wang et al. & Ping Shun Plaintiffs

Although USA Fanter's judgment was secured by a supersedeas bond, the plaintiffs in Wang and Ping Shun v. Imperial Pacific International (CNMI), LLC, Civil Case No. 1:20-cv-00012, still needed their own judgments satisfied.^[4] Thus, in December 2021, the Wang and Ping Shun Plaintiffs moved to amend the limited receivership to continue authorizing the Receiver to liquidate IPI's gaming equipment until their judgments were satisfied. (Mot. to Am. Order Concerning Limited Receivership, ECF No. 204.) In addition, these plaintiffs sought “to make explicit that any Judgment Creditor [i.e., the Wang and Ping Shun Plaintiffs] who has not been adequately secured by IPI may effectively step into the shoes of Fanter and pursue the Receivership under the same terms and conditions as set forth in the Order.” (Id. at 4.)

However, two months after the motion to amend the limited receivership was filed, the Wang Plaintiffs^[5] and IPI entered into an agreement to stay enforcement of the Wang Plaintiff's judgments, based on an agreement that IPI would post a supersedeas bond in monthly installments. (Agreement to Stay Enforcement 2 ¶ 2, ECF No. 501 in 18-cv-00030.) The agreement also permitted the appointment of a limited receiver to liquidate IPI's personal property in the event of a default. (Id. at 4-5 ¶ 16(b).) In addition, IPI agreed that the Wang Plaintiffs could take over the limited receivership “to sell the gaming equipment and assume all rights previously held by U.S.A. Fanter, but that upon approval of this Agreement by the Court, the Parties agree to stay any action by the receiver for a set period of time and agree that the stay will be further extended so long as IPI performs all of its obligations under this Agreement.” (Id. at 6 ¶ 22.) “In the event that any creditor of IPI or other person seeks to take any action that may implicate the Limited Receivership for the gaming equipment or any of IPI's Personal Property, IPI agrees to immediately notify Plaintiffs and to oppose at IPI's own cost any such request or action to the fullest extent possible.” (Id. ¶ 23.) The Court approved the Stay Agreement in its entirety and retained jurisdiction over enforcement of the Stay Agreement. (ECF No. 505.) All appendices were also approved in its entirety, including the Stipulation on Appointing a Limited Receiver for the Sale of IPI's Personal Property (ECF No. 501-5).^[6] (See Order Granting Stipulation to Stay Enforcement Pending Appeal, ECF No. 505.)

Following the Wang Plaintiffs and IPI's agreement, IPI defaulted thereby prompting the Wang Plaintiffs to move for a lift of the stay on the receivership. (See Order Declaring IPI in Default of the Stay Agreement, ECF No. 541 in 18-cv-00030.) The stay on the receivership was eventually extended several times for the parties to address a nuanced legal issue on the sale of gaming machines and the implications in applying a Commonwealth statutory provision. (Id.; see Min., ECF No. 554.) In the end, the Court ultimately lifted the stay. (Min., ECF No. 582; Order Lifting the Stay on the Limited Receivership, ...