lien foreclosure graphic with gaming machines photo

Seeking over $2.1 million, a contractor in the Northern Mariana Islands (NMI) has sued an international gaming business over two years of nonpayment for a casino construction project.

In 2019, USA Fanter Corp., Ltd. — a “business supply service” according to social media — was hired by Imperial Pacific International LLC (IPI) to perform construction work on a casino located in the NMI.

After completing their work, Fanter filed a mechanics lien against IPI over nonpayment of roughly $2.3 million for labor and materials. IPI allegedly paid out $300,000 of this, leaving an additional $2 million left unpaid.

With the disputed amount still unpaid over two years later, Fanter filed a legal action, requesting a federal court appoint a limited receiver to oversee the auction of IPI’s assets. And with this gaming business’ history of legal disputes and financial concerns, this dispute could far from over.

Though the mechanics lien — or construction lien — is a common tool for contractors seeking payment, according to Fanter’s attorney Colin Thompson, the use of mechanics liens is relatively uncommon in the NMI, and there is little legal guidance for the proper administration of them.

However, since the NMI is under the jurisdiction of the United States, Fanter is able to make use of the US Federal Courts to enforce the mechanics lien, otherwise known as foreclosing on a lien.

What Is “Enforcing” a Mechanics Lien?

After factoring in nearly $100,000 in accumulated interest, Fanter is seeking $2.1 million from IPI.

According to the receiver’s assessment, IPI’s assets include a number of high-end gaming equipment such as slot machines and tables that are worth an estimated $2.25 million.

IPI is fighting the legal action — and has offered, if the auction is called off, to put $2 million in a restricted account while their appeal is dealt with. The funds would then be transferred to Fanter or returned to IPI if the court ruled in their favor.

The gaming business has had a number of regulatory and financial difficulties in recent years, which could spell trouble for their ability to repay Fanter.

In March of 2020, the Imperial Palace Saipan casino closed due to the COVID-19 pandemic. The company reported a loss of $367 million for the 2020 financial year.

Around the same time, IPI had five separate complaints filed against it and failed to comply with a number of regulatory requirements. Among other things, IPI had allegedly failed to pay $19.6 million in licensing and regulatory fees, and incurred a $6.6 million fine as a result.

In 2021, the Commonwealth Casino Commission of the NMI indefinitely suspended IPI’s casino license, giving them six months to repay its debts or face having their licence revoked entirely. IPI has filed a judicial review to dispute the suspension.

On top of this, Fanter is suing IPI for an additional $200,000 for unpaid property rent, materials, and heavy equipment rentals in a second lawsuit filed in October of this year. IPI has denied these allegations and asked the courts to dismiss the case.

Had IPI been able to secure a bond for the casino construction work, they likely would have been able to fight Fanter’s mechanics lien without risking foreclosure of their physical property.

That being said, Fanter’s use of a mechanics lien in this situation has essentially forced IPI to auction off its assets in order to pay its debts, and demonstrates just how powerful a tool mechanics liens can be.

“The deeper pockets in construction disputes have extreme advantages,” according to Matt Viator, senior Legal Associate at Levelset, but “mechanics lien laws can level the playing field. Forcing foreclosure is a damning prospect and forces an owner or developer to resolve disputes.”

Do You Need an Attorney to Foreclose on a Mechanics Lien?