Defunct garment firms oppose dismissal of their FICA lawsuit

Eleven defunct garment factories asked the district court yesterday not to dismiss their lawsuit against the U.S. government and asked it instead to set a case management conference. The factories seek to recover millions of dollars of allegedly wrongfully assessed taxes.

Attorneys Gregory J. Koebel and Alexis Fallon, counsel for the defunct garment factories, told the U.S. District Court for the NMI that they have been diligently prosecuting this case off-record ever since it was filed.

Koebel and Fallon said no case management has also been conducted and no scheduling order was ever entered, which would require activity of record in the case. For these reasons, they said the lawsuit should not be dismissed for lack of prosecution.

The 11 former garment factories filed the lawsuit in July 2010. The factories are seeking to recover allegedly wrongfully assessed Social Security and Medicare taxes (collectively called FICA) that were erroneously paid between 2004 and 2007.

Last Dec. 29, U.S. District Court for the NMI Chief Judge Ramona V. Manglona issued an order directing the owners of the 11 defunct garment factories to explain why the court should not dismiss their lawsuit for lack of prosecution. She gave them until yesterday to respond.

The judge noted that the case has been pending for more than a year without any action taken by the parties during that period.

In their reply, Koebel and Fallon admitted that there has been no activity of record on the case since the filing of the U.S. government’s answer on Nov. 17, 2010. However, they said there has also been no requirement for any activity of record to be taken since a case management conference has never occurred.

The lawyers pointed out that the fact that there has been no activity of record does not mean that there has been no activity.

“On the contrary, substantial work has been and continues to be undertaken by plaintiffs that directly advance the prosecution of their suit,” the lawyers said.

The former garment factories are the American Pacific Textile Inc., Grace International Inc., Handsome Textiles (Saipan) Corp., Hansae (Saipan) Inc., Marianas Garment Manufacturing Inc., Michigan Inc., Neo Fashion Inc., Sam Kwang Saipan Corp. Top Fashion Corp., Uno Moda Corp., and U.S. CNMI Development Corp.

Tinian Dynasty Hotel and Casino, as well as the former Concorde Garment Manufacturing Corp. and numerous Chinese nationals formerly employed by Concorde and its affiliated companies, also filed last year separate but similar lawsuits against the U.S. government.