Ninth Circuit rules vs IPI

The U.S. Court of Appeals for the Ninth Circuit has granted the Commonwealth Casino Commission’s appeal against a U.S. District Court order that prohibits the commission from revoking Imperial Pacific International (CNMI) LLC’s casino-operating license.

In a five-page order yesterday, the Ninth Circuit granted the CCC’s appeal and remanded the matter back to the District Court for the NMI for further proceedings.

“The District Court’s order enjoining the commission from proceeding with license revocation proceedings against IPI and mandating arbitration is reversed, and the matter is remanded to the District Court for proceedings consistent with this disposition,” states the order.

The CCC appealed to the Ninth Circuit last year U.S. District Court for the NMI Chief Judge Ramona V. Manglona’s order granting IPI’s request for a preliminary injunction to prohibit the commission from revoking IPI’s Saipan exclusive casino license. Manglona issued the order to allow IPI to pursue its right to arbitration.

The Ninth Circuit found that in this case, the District Court erred when it agreed with IPI’s argument that, as per the Casino License Agreement, it is entitled to arbitrate its force majeure defense to the commission’s license revocation proceedings.

“The District Court agreed with IPI, concluding that the plain language of the CLA provides IPI with a contractual right to assert a force majeure defense and therefore denying arbitration would deprive IPI of this defense. The district court erred,” states the order, adding that it disagrees with the District Court’s conclusion that the CLA’s force majeure clause would be “effectively nullified” if IPI is unable to submit its force majeure defense to arbitration in a revocation proceeding.

“We disagree with the District Court’s conclusion. The CLA provides several venues in which IPI can raise a force majeure defense. IPI may raise a force majeure defense in a revocation proceeding before the commission, in an arbitration proceeding if the matter involves a covered ‘dispute’ under the CLA, or in a civil proceeding before the Commonwealth Superior Court,” the order states.

According to court documents, Manglona granted IPI’s request last September 2022 to allow arbitration in IPI’s dispute with CCC regarding their CLA and IPI’s force majeure defense.

IPI also requested an order compelling the commission to participate in a non-binding arbitration with the American Arbitration Association as well as a preliminary injunction against the commission from proceeding with revocation proceedings without first going to arbitration.

The court issued its order in favor of IPI and in response, the CCC filed an appeal with the Ninth District.