Ponape Transfer and Storage Inc v Pohnpei State Public Lands Authority [1986] FMSC 21; 2 FSM Intrm. 272 (Pon. 1986) (23 December 1986)

THE SUPREME COURT OF THE
FEDERATED STATES OF MICRONESIA

Cite as Ponape Transfer v. Pohnpei State Public Lands
[1986] FMSC 21; 2 FSM Intrm. 272 (Pon. 1986)

[1986] FMSC 21; [2 FSM Intrm. 272]

PONAPE TRANSFER AND STORAGE,
Plaintiff,

vs.

POHNPEI STATE PUBLIC LANDS
AUTHORITY, AND FEDERATED
SHIPPING CO., LTD.,
Defendant.

CIVIL ACTION NO. 1986-085

MEMORANDUM OPINION

Before Edward C. King
Chief Justice
Order Issued December 9, 1986
Memorandum Opinion Issued December 23, 1986

APPEARANCES:

For the Plaintiff: Michael Berman
Attorney-at-Law
P.O. Box 1491
Kolonia, Pohnpei 96941

For the Defendant: Thomas Tarpley
(Pohnpei State Public State Attorney
Lands Authority) Kolonia, Pohnpei 96941

For the Defendant: R. Barrie Michelsen
(Federated Shipping Attorney-at-Law
Co. Ltd.) Ramp & Michelsen
Kolonia, Pohnpei 96941

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HEADNOTES

Civil Procedure-injunctions
FSM Civ. R. 65 providing for issuance of temporary restraining orders

[2 FSM Intrm. 273]

and preliminary injunctions pending final decisions by the Court, is drawn from rule 65 of the United States Federal Rules of Civil Procedure, so decisions of the United States courts under that rule are a legitimate source of guidance as to the meaning of FSM Civ. R. 65. Ponape Transfer & Storage v. Pohnpei State Public Lands Auth., [1986] FMSC 21; 2 FSM Intrm. 272, 275 (Pon. 1986).

Civil Procedure-injunctions
A prerequisite for the granting of injunctive relief is that the party seeking protection must be faced with the threat of irreparable harm before conclusion of the litigation unless the injunction is granted, and if money damages or other relief upon conclusion of the litigation will fully compensate for the threatened interim action, then the preliminary injunction should be denied. Ponape Transfer & Storage v. Pohnpei State Public Lands Auth., [1986] FMSC 21; 2 FSM Intrm. 272, 275 (Pon. 1986).

Civil Procedure-injunctions
In considering motions for temporary restraining order or for preliminary injunction, courts weigh the possibility of irreparable injury to the plaintiff, the balance of possible injuries between the parties, the movant's possibility of success on the merits, and the impact of any requested action upon the public interest. Ponape Transfer & Storage v. Pohnpei State Public Lands Auth., [1986] FMSC 21; 2 FSM Intrm. 272, 275 (Pon. 1986).

Civil Procedure-injunctions
The fact that the party moving for preliminary injunction relief does not appear more likely than not to succeed on the merits is a factor weighing against granting of such relief but it is only one of four factors and is not necessarily determinative when the other factors point toward such relief. Ponape Transfer & Storage v. Pohnpei State Public Lands Auth., [1986] FMSC 21; 2 FSM Intrm. 272, 278 (Pon. 1986).

* * * *

COURT'S OPINION

EDWARD C. KING, Chief Justice:
Plaintiff Ponape Transfer and Storage seeks a temporary restraining order to prevent Federated Shipping Co., Ltd. from imposing sanctions to punish Ponape Transfer for refusing to increase payments to Federated Shipping pursuant to the lease which Ponape Transfer seeks to challenge in this litigation.

The interested parties have filed briefs discussing the issues. Two hearings, one an evidentiary hearing, have been held. The motion is therefore treated as one for preliminary injunction. See 7 J. Moore, Moore's Federal Practice, part 2, 65.05 (2d ed. 1985).1 For the reasons stated in this memorandum opinion, the motion was granted on December 9.

[2 FSM Intrm. 274]

I. Background

This lawsuit was brought by Ponape Transfer to challenge the lease between Federated Shipping and the Pohnpei Public Lands Authority covering the Takatik Island dock facility on Pohnpei Island. The original lease was signed on December 27, 1982. According to Ponape Transfer, signing of the lease followed a bidding procedure carried out by the Public Lands Authority during 1981. Ponape Transfer asserts that it was a qualified and responsible bidder and is aggrieved by the Public Lands Authority's decision to award the lease to Federated Shipping.

Ponape Transfer contends that execution of the lease was illegal and should be set aside because: (1) Federated Shipping was obviously unable to fulfill the necessary leasehold commitments; and (2) the lease was not executed within the time required by Public Lands Authority regulations.

When this litigation was initiated on September 30, 1986, Ponape Transfer immediately moved for a temporary restraining order and preliminary injunction to prevent the Public Lands Authority and Federated Shipping from executing a new lease. That-motion was denied on the grounds that such an action by the defendants would not preclude the Court from granting appropriate relief to Ponape Transfer and therefore did not pose a threat of irreparable harm to Ponape Transfer.

Now however Ponape Transfer asserts that the situation has changed and that unless Federated Shipping is enjoined, its actions will "both cause irreparable injury to the plaintiff and will also destroy the status quo of the controversy before a full hearing can be heard on the merits."

This latest motion was prompted by Federated Shipping's delivery to Ponape Transfer of a letter dated December 1, 1986. The December I letter relates to a July 1981 stevedore agreement called the "Takatik Ocean Terminal Use Agreement," between Federated Shipping and Ponape Transfer. Pursuant to that agreement, Ponape Transfer has been carrying out the stevedore functions at the Takatik dock.

The stevedore agreement calls for Ponape Transfer to pay Federated Shipping a monthly "use fee" at a rate of 40% of the rental paid by Federated Shipping under the Public Lands Authority lease. Federated Shipping's December I letter demands that the Ponape Transfer use fee now be based upon the higher rental provided in the new version of the Public Lands Authority and Federated Shipping lease.

Ponape Transfer denies the validity of the new lease and refuses to pay the higher use fee based upon that lease. Instead, Ponape Transfer has offered to pay the currently accruing disputed amounts, $265.84 per month, into an escrow account pending final decision in this case.

Ponape Transfer's suggestion has been rejected by Federated Shipping. The December 1 letter states that Federated Shipping has "no alternative" but to "terminate" the Ocean Terminal Use Agreement "until the proper amount is

[2 FSM Intrm. 275]

applied and satisfactory arrangements are made with us to clear the remaining balance." The letter goes on to state that Ponape Transfer will not be allowed to perform stevedore functions until the demanded payments are made, and further warns that any equipment of Ponape Transfer must be removed from the warehouse immediately or treated as general cargo subject to the Federated Shipping tariff.

Ponape Transfer's motion seeks to prevent Federated Shipping from implementing the demands made in the December 1, 1986 letter.

II. Legal Analysis

Rule 65 of this Court's Rules of Civil Procedure provides for issuance of temporary restraining orders and preliminary injunctions pending final decisions by the Court. The rule itself does not set forth standards for injunctive relief. FSM Civ. R. 65 is drawn from rule 65 of the United States Federal Rules of Civil Procedure, so decisions of United States courts construing Fed. R. Civ. P. 65 are a legitimate source of guidance as to the meaning of our rule 65. Andohn v. FSM, [1984] FMSC 4; 1 FSM Intrm. 433, 441 (App. 1984).

The law concerning preliminary injunctions and temporary restraining orders has been developing for over one hundred years. The American decisions generally parallel the approach developed by other courts in the English common law system and reflect similar reasoning. J. Leubsdorf, The Standard for Preliminary Injunctions, 91 Harv. L. Rev. 525, 540 (1978) ("[J]udges on both sides of the Atlantic are struggling with the same problem in much the same way.") Neither American, nor English, nor other common law courts have hit upon any one single formula which, rigidly applied, can yield satisfactory results in every case. Id. There are simply too many different situations in which injunctions are sought and too many factors which come into play and affect the determination as to whether an injunction should issue. 11 C. Wright & A. Miller, Federal Practice and Procedure § 2948 (1973).2 The trial court is required to exercise broad discretion and weigh carefully the interests of both sides in arriving at a fair and equitable result. Doran v. Salem Inn, Inc., [1975] USSC 146; 422 U.S. 922, 95 S. Ct. 2561, 45 L. Ed. 2d 648 (1975). 7 Moore's Federal Practice, part 2, 65.04[2].

Nevertheless useful guidelines and standards have been developed and a kind of consensus has been reached as to the proper foci of courts considering the interests of the parties. Generally, courts the possibility of irreparreparable injury to the plaintiff, the balance of possible injuries between the parties, the plaintiff's probability of success on the merits, and the impact of any requested action upon the public interest. 11 Wright & Miller § 2948. Drawing on this experience of other courts facing similar

[2 FSM Intrm. 276]

problems, this Court will address each of these categories.

Irreparable harm - A prerequisite for the granting of injunctive relief is that the party seeking protection must be faced with the threat of irreparable harm before conclusion of the litigation unless the injunction is granted. 11 Wright & Miller § 2948. If money damages or other relief upon conclusion of the litigation will fully compensate for the threatened interim action, then the preliminary injunction should be denied. Id.

In this case, Ponape Transfer seeks to challenge not only the leasehold relationship between Federated Shipping and the Public Lands Authority when this lawsuit was filed but also the right of those parties to initiate a new lease.

Ponape Transfer contends that recognition and enforcement of the new lease document would deprive it of any opportunity to show the Public Lands Authority that Ponape Transfer, rather than Federated Shipping, should be the lessee of the terminal area. Moreover, if Federated Shipping is allowed to prevent Ponape Transfer from performing under its subcontract, this would effectively force dismantling of Ponape Transfer's stevedoring operations. Some 30 to 40 stevedores and several heavy equipment operators would have to be laid off and Ponape Transfer's heavy equipment would lie idle.

The Court finds both of these to be threats of irreparable injury. Thus the prerequisite for granting a preliminary injunction exists here.

Balance of interests - It would make little sense to scurry to protect one party against harm, if the requested preliminary relief would result in a greater disaster to the other party. Courts therefore weigh the respective interests of the parties in deciding whether to grant a preliminary injunction.

The harm threatened to Ponape Transfer if the injunction does not issue far outstrips that which would befall Federated Shipping if the injunction is granted. The irreparable harm facing Ponape Transfer has already been described. On the other side of the ledger, Federated Shipping would lose only the use of some $265.84 per month, plus back payments claimed to be owing.3 There has been no suggestion that the deprivation of such funds until conclusion of this litigation poses a threat of irreparable harm, or even major inconvenience, to Federated Shipping. Full compensation for the loss of funds can be provided through an award of monetary damages.

[2 FSM Intrm. 277]

Risk to Federated Shipping of nonpayment can be minimized by requirement of security pursuant to FSM Civ. R. 65(c). The Court can order Ponape Transfer to pay the disputed amounts of $265.84 per month to the Clerk of Court, or some third person satisfactory to both parties, to be held pending determination of the rights of the parties. In addition the parties have been advised that the Court would consider a motion by Federated Shipping for an order that part or all of the claimed back payments be paid by Ponape Transfer into escrow.

The balance of interests standard points toward issuance of a preliminary injunction in favor of Ponape Transfer.

The public interest - This standard requires consideration of any public interest in the motion. The primary public interest at issue here is maintenance of reliable stevedoring operations. In Pohnpei, general economic development, profitability of individual businesses, and the well being and comfort of citizens are all dependent to some degree upon loading and unloading of ships at the Takatik terminal. The public has an interest in assuring that nothing be done which will retard or hinder the best possible stevedoring services on Pohnpei.

No evidence has been introduced as to the respective capabilities of the vying companies. Federated Shipping opines that it is fully capable of assuming the stevedore functions at once. On the other hand, there is no indication that Ponape Transfer has encountered difficulty in carrying out the stevedore work, and one can infer that the transfer of operations from one company to another would cause some disruption.

The public interest standard provides no conclusive answer but nudges lightly toward maintenance of the status quo, that is, permitting Ponape Transfer to continue performing the stevedore work.

Likelihood of success on the merits - Before granting a request for interim relief, courts typically seek to ascertain whether the party seeking relief is likely to prevail ultimately in the litigation. Obviously, if the position of the movant is frivolous a preliminary injunction in favor of that party could work an injustice.

Up to this point, it has not been made apparent to the Court that Ponape Transfer is more likely than not to prevail in this litigation. One theory espoused by Ponape Transfer is that the Public Lands Authority should have known in 1981 that Federated Shipping was not sufficiently qualified or responsible to carry out the contract which apparently has now been satisfactorily performed for some four or five years.

The second theory is that the Court should set aside the lease between the Public Lands Authority and Federated Shipping because it was not signed within the time required by the Ponape Lands Authority regulations. The passage of time and subsequent events presumably will weigh heavily against both of these arguments.

[2 FSM Intrm. 278]

Ponape Transfer's difficulty is compounded by the fact that Ponape Transfer has for the entire term of the lease been carrying out the stevedore operations called for under the lease. It is difficult to discern just how Ponape Transfer can expect to overcome the strong suggestion implicit in these facts that Ponape Transfer has acquiesced in the actions it now seeks to challenge.

Yet it is legitimate to recall that in attempting now to assess the likelihood of success on the merits, we are still at an early stage of the litigation. No party has yet presented to the Court in any detail its factual or legal posture. Necessarily, the Court's musings now as to the likely ultimate outcome are based principally on perusal of the amended complaint and answer, with only a little supplementation by the parties in connection with this motion.

Ponape Transfer's position appears sufficiently sound to raise serious, nonfrivolous issues. This is true specifically of the claims that the Public Lands Authority violated its own regulations and ignored critically important facts in deciding to award the lease to Federated Shipping. The suggestion that, despite inquiries, Ponape Transfer was never advised by the Public Lands Authority that the lease had been consummated, could also be significant.

Federated Shipping seems more likely to prevail on the merits, but under the circumstances here that is not determinative. 11 Wright & Miller § 2948. Likelihood of success is merely one factor, to be considered along with the others already discussed. Id.

III. Conclusion

Three of the four standards point toward issuance of the preliminary injunction. Particularly important is the fact that Ponape Transfer is faced with immediate and certain irreparable harm if injunctive relief is not granted, while if the preliminary injunction is granted, any harm sustained by Federated Shipping can be compensated fully through an award of monetary damages.

The preliminary injunction was therefore issued on December 9 to prohibit Federated Shipping from taking any of the steps threatened in the December 1 letter. Security is provided for Federated Shipping by requiring that the currently accruing disputed amounts be deposited monthly by Ponape Transfer with the Clerk of Courts for safekeeping.

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ENDNOTES:

1. Hereafter 7 Moore's Federal Practice part 2, 65.05.

2. Hereafter, 11 Wright & Miller § 2948.

3. The parties represent that the new lease document, which has not been
filed with the Court, contains a clause retroactively increasing Federated Shipping's rental obligations to the Public Lands Authority. Federated Shipping in turn asserts that this imposes a retroactive use fee obligation on Ponape Transfer under its subcontract with Federated Shipping. Ponape Transfer represents that the back payments demanded of it through May 1, 1986 are $12,542.