Semens v Continental Air Lines Inc [1986] FMSC 7; 2 FSM Intrm. 200 (Pon. 1986) (6 June 1986)

THE SUPREME COURT OF THE
FEDERATED STATES OF MICRONESIA

Cite as Semens v. Continental [1986] FMSC 7; 2 FSM Intrm. 200 (Pon. 1986)

[2 FSM Intrm.200]

BENTER SEMENS,
Plaintiff,

vs.

CONTINENTAL AIR LINES, INC.,
AIR MICRONESIA, INC.,
UNITED MICRONESIA DEVELOPMENT
ASSOCIATION, &
MARTIN ENTERPRISES, INC.,
Defendants.

CIVIL NO. 1984-017

Before Edward C. King
Chief Justice
June 6, 1986

APPEARANCES:
For the Plaintiff: James H. Grizzard
Attorney-at-Law
P.O. Box 330 CHRB
Saipan, CNMI 96950

For Defendants: Traylor T. Mercer
(Continental Air Lines, Carlsmith, Wichman, Case,
Inc. and Air Micronesia, Mukai and Ichiki
Inc.) Fourth Floor, Bank of America
Building
P.O. Box BF
Agana, Guam 9,6910

For Defendant: Fredrick L. Ramp
(Martin Enterprises, Attorney-at-Law
Inc.) Ramp & Michelsen
Attorneys-at-Law
P.O. Box 1480
Pohnpei, FSM 96941

* * * *

HEADNOTES

Precedent
A generally recognized principle of the common law is that questions neither brought to the attention of the Court nor ruled upon are not to be considered as having been decided so as to constitute precedents. Semens v. Continental Air Lines, Inc. (II), [1986] FMSC 7; 2 FSM Intrm. 200, 204 (Pon. 1986).

Transition of Authority
Statutes governing procedures or decision-making approaches for Trust Territory courts might not apply to constitutional courts. Semens v. Continental Air Lines, Inc. (II), [1986] FMSC 7; 2 FSM Intrm. 200, 204 (Pon. 1986).

Transition of Authority; Remedies; Civil Procedure
Procedural statute, 6 F.S.M.C. 1018, providing that the court may tax any additional costs incurred in litigation against the losing party other than fees of counsel, applies only to Trust Territory courts and not to courts of the Federated States of Micronesia, and therefore does not preclude the FSM Supreme Court from awarding attorney's fees as costs. Semens v. Continental Air Lines, Inc. (II), [1986] FMSC 7; 2 FSM Intrm. 200, 205 (Pon. 1986).

Attorney, Trial Counselor and Client; Courts; Civil Procedure
The rule that each party to a suit normally must pay its own attorney's fees is the proper foundation upon which the system in the Federated States

[2 FSM Intrm. 201]

of Micronesia should be built. Semens v. Continental Air Lines, Inc. (II), [1986] FMSC 7; 2 FSM Intrm. 200, 208 (Pon. 1986).

Attorney, Trial Counselor and Client; Remedies; Civil Procedure
There is flexibility to modify the normal rule that each party pays its own attorney's fees when justice requires, and thus attorney's fees may be assessed for willful violation of a court order, when a party acts vexatiously or in bad faith, presses frivolous claims, or employs oppressive litigation practices, or when the successful efforts of a party have generated a common fund or extended substantial benefits to a class. Semens v. Continental Air Lines, Inc. (II), [1986] FMSC 7; 2 FSM Intrm. 200, 208 (Pon. 1986).

Attorney, Trial Counselor and Client; Courts; Remedies;
Recognizing that courts in most of the world normally do award attorney's fees to the prevailing party, the rule allowing a prevailing party to obtain an award of attorney's fees should perhaps be applied more liberally in the Federated States of Micronesia than in the United States. Semens v. Continental Air Lines, Inc. (II), [1986] FMSC 7; 2 FSM Intrm. 200, 208 (Pon. 1986).

Civil Procedure--frivolous actions
Although it is ultimately proved that plaintiff has no solid claim or theory against a defendant, plaintiff's action against that defendant is not vexatious or frivolous where 1) plaintiff reasonably believed at the outset of litigation that defendant might be liable, 2) a considerable amount of discovery was required to establish that defendant was not liable, 3) plaintiff did not stubbornly insist on defendant's liability in the face of defendant's motion for summary judgment, and 4) other defendants would presumably have named defendant in the case in any event, so that defendant would have incurred substantial attorney's fees regardless of plaintiff's actions. Semens v. Continental Air Lines, Inc. (II), [1986] FMSC 7; 2 FSM Intrm. 200, 209 (Pon. 1986).

* * * *

COURT'S OPINION

EDWARD C. KING, Chief Justice:

Martin Enterprises, Inc., having been granted summary judgment and dismissed as a defendant in this litigation, now moves for an order requiring plaintiff Benter Semens and defendants Continental Air Lines, Inc. and Air Micronesia, Inc. to reimburse Martin for costs and attorney's fees incurred by Martin in the litigation.¹

[2 FSM Intrm.203]

This lawsuit was initiated by Benter Semens against Martin and several other defendants for injuries sustained while unloading a plane at the Pohnpei airport. The factual background is discussed in Semens v. Continental Air Lines, Inc., [1985] FMSC 3; 2 FSM Intrm. 131 (Pon. 1985).

Soon after the previous opinion was issued, Martin filed this motion for costs and attorney's fees. The remaining parties, defendants Continental and Air Micronesia, and plaintiff Semens, subsequently, filed a stipulation for dismissal. The case was dismissed on April 28. A ruling on Martin's motion is now necessary to close out this litigation.

I. Costs

The motion for costs is made under Rule 54(d) of the FSM Rules of Civil Procedure, which says that "except when express provision therefor is made either in a statute of the Federated States of Micronesia or in these rules, costs shall be allowed as of course to the prevailing party unless the court otherwise directs."

Plainly, Martin is a prevailing party. No reason appears why normal costs should not be awarded.

A. Depositions

Semens, Continental and Air Micronesia all concede the taxability of deposition transcript costs, and I find such an award proper here. The depositions related to various factual issues. It appears fair to allocate those costs, aggregating $745.50, equally among the three parties. Each shall pay $248.50.

B. Off-island research
The request for award of other costs pertaining to off-island research and communications is denied.

II. Attorney's Fees

Martin urges adoption of an attorney's fee rule opposite from the approach employed during Trust Territory days, when each party was required to pay its own attorney's fees. The Trust Territory rule was established by statute, now 6 F.S.M.C. 1018, which says: "The court may allow and tax any additional items of cost or actual disbursement, other than fees of counsel, which it deems just and finds have been necessarily incurred for services which were actually and necessarily performed." Martin seeks a dramatically different rule, that attorney's fees of a prevailing party normally shall be paid by the losing party.

A. The statute
A threshold issue here is whether this Court has power to adopt the rule sought by Martin. The defendants argue that 6 F.S.M.C. 1018 bars an award of

[2 FSM Intrm. 204]

attorney's fees. They point out that 6 F.S.M.C. 1018 was applied by the appellate division in Ray v. Electrical Contracting Corp., 2 FSM Intrm. 21, 25 (App. 1985), and contend that the Court is now bound to follow that precedent.

The Court in Ray simply assumed rather than decided applicability of 6 F.S.M.C. 1018. No party questioned the propriety of applying that section and the opinion reflects no recognition of the possibility that the section might not apply. The Court's attention was directed to whether attorney travel expenses could be awarded as costs, not whether 6 F.S.M.C. 1018 applied. The decision was made on the basis of more general principles, not the language or application of the statute.

A generally recognized principle of the common law is that questions "neither brought to the attention of the Court nor ruled upon, are not to be considered as having been so decided as to constitute precedents." Webster v. Fall, [1925] USSC 23; 266 U.S. 507, 511[1925] USSC 23; , 45 S. Ct. 148, 149[1925] USSC 23; , 69 L. Ed. 411, 413 (1915); Soyka v. Alldredge, [1973] USCA3 511; 481 F.2d 303, 306 (3d Cir. 1973). Ray is not effective precedent for the proposition that 6 F.S.M.C. 1018 applies to this Court.

Interestingly enough though, Ray does furnish guidance. Although the Court did not then perceive that the issue related to 6 F.S.M.C. 1018, the Ray decision recognizes that statutes governing procedures or decisionmaking approaches for Trust Territory courts might not apply to constitutional courts.

Citing Rauzi v. FSM, 2 FSM Intrm. 8 (Pon. 1985), the appellate division found "reason to doubt" that 1 F.S.M.C. 203 binds this Court. Ray, 2 FSM Intrm. at 23 n.1. The reasons given in Rauzi include the following observations. The "restatement provision," 1 F.S.M.C. 203,

was first promulgated by a High Commissioner of the Trust Territory of the Pacific Islands, before establishment of the Congress of Micronesia in 1965. It has never been amended or actively considered by any legislative body within the Trust Territory or the Federated States of Micronesia. The provision remains effective within the Federated States of Micronesia, FSM Const. art. XV, § 1, but there is no indication that it pertains to cases before this Court.

2 FSM Intrm. at 14. These reasons are true of 6 F.S.M.C. 1018 as well.

Section 1018 is an integral part of a single statutory scheme set out in subchapter 1 of title 6 of the Code. The entire subchapter is "replete with references to officials who either do not exist now ... or who no longer carry out the functions with which they are identified in the statute." Ishizawa v. Pohnpei, 2 FSM Intrm. 67, 73 n.5 (Pon. 1985). As in Ishizawa, it would "[a]t best...be awkward for current national and state officials to attempt to fit" the outmoded statutory language" of 6 F.S.M.C. §§ 1011-22 "to the institutions of self-government that function here now." Id. I conclude that 6 F.S.M.C. 1018 applies only to Trust Territory courts.

Finding no statute or other impediment limiting this Court's power to establish the rule requested by Martin, I next consider whether it would be appropriate to do so.

B. Comparison of attorney's fee rules

The Trust Territory prohibition of awards of attorney's fees is an extreme form of the American rule. The standard American approach is that attorney's fees are not awarded as costs, except under special circumstances. Alyeska Pipeline Service Co. v. Wilderness Society, [1977] USCA8 69; 421 U.S. 240, 95 S. Ct. 1612, 44 L. Ed. 2d 141 (1975).

Martin correctly points out that the prevailing rule throughout the world is different. McLaughlin, The Recovery of Attorney's Fees: A New Method of Financing Legal Services, 40 Fordham L. Rev. 761, 782 (1972). In most jurisdictions, courts normally require the losing party to pay the attorney's fees incurred by the winning party. Id. Martin emphasizes that nowhere is it written that this Court must apply the American rule. He reminds the court of our earlier statements that we should not slavishly follow American precedent but instead are charged with the duty of fashioning a jurisprudence best suited for the people of the Federated States of Micronesia. Alaphonso v. FSM, [1982] FMSC 22; 1 FSM Intrm. 209, 212-13 (App. 1982).

He then proceeds to argue that a rule requiring the loser to pay the winner's attorney's fees would be better for Micronesia.

In Martin's view, his proposed rule would: (1) make the prevailing party whole, providing full compensation to prevailing plaintiffs and protecting innocent defendants from bearing the burden of attorney's fees; (2) permit litigation of socially significant issues not involving money claims sufficient to warrant expenditure of attorney's fees; and (3) discourage non-meritorious litigation. These benefits will be analyzed individually.

The rule Martin seeks presumably would produce the first benefit suggested. In a tort or breach of contract case, it does seem more fair that a prevailing plaintiff should receive full compensation for damages, without subtracting attorney's fees from the recovery. Such a result responds to the natural feeling that a blameworthy person who causes injury should be required to restore the innocent party to that person's previous status.

But all cases do not involve blame and innocence. In this case, for instance, much of the attorney effort was focused upon the indemnification clause in the ground handling agreements. The parties disagreed as to the meaning of the clause and one position was upheld. It is difficult to view such a disagreement in terms like good or evil, innocent or blameworthy. All parties needed a ruling as to the meaning of the clause and all received a ruling through the efforts of their respective attorneys. In these circumstances, the argument that the party whose interpretation was rejected should pay the attorney's fees of the prevailing party is far from compelling.

[2 FSM Intrm. 206]

Thus, the first benefit offered by Martin is an attractive one in many cases. Yet this acknowledgement is tempered by the realization that in other cases it seems less important, or even unfair, to require the loser to pay the attorney's fees of the winner.

The second and third benefits which Martin holds out are far less certain than the first. Although Martin says socially significant litigation would be encouraged, some commentators argue to the contrary. Comment, Court Awarded Attorney's Fees and Equal Access to the Courts, 122 Pa. L. Rev. 636, 651 (1974); and McLaughlin, supra at 784. Parties might find it easier to initiate socially significant litigation under Martin's proposed rule if they are sure to win. On closer issues though, the possibility of having to pay the opponent's attorney's fees could weigh heavily against one contemplating litigation.

Moreover, I do not consider it a paramount goal of this new nation to discourage "non-meritorious" litigation. In these early days of constitutional self-government full access to the court system is highly desirable. Litigation may play an important role in providing broader understanding of our jurisprudence and assuring vindication of rights of citizens and responsiveness of government. It is worth noting also that it may be quite difficult for counsel and litigants in a new legal system to determine in advance just what litigation will be deemed meritorious. If "wishful optimism" would necessarily expose the losing party to liability for the other's attorney's fees, important litigation might be aborted. Innocenti v. Wainit, [1986] FMSC 3; 2 FSM Intrm. 173 (App. 1986).

Thus, the rule Martin seeks holds out some promise of moderate benefits. On the other side of the scale, requiring losers in litigation always to pay attorney's fees of the winners could have significant adverse effects.

A system of universal indemnity would, it appears, discourage not only the small claimant and the poor litigant, but also the bringing of suits or the imposition of defenses in new or complex and largely unpredictable areas of law. In an essentially common law country like ours, such a system would frustrate the vitality and continued development of the law.

Comment, supra, at 652.

The fear that persons could "be unjustly discouraged from instituting actions to vindicate their rights if the penalty for losing included the fees of their opponents' counsel," Fleischmann Distilling Corp. v. Maier Brewing Co., [1967] USSC 99; 386 U.S. 714, 718[1967] USSC 99; , 87 S. Ct. 1404, 1407, 18 L. Ed. 2d 475, 478 (1967), has fueled perseverance of the American rule. "It has not been an accident that the American litigant must bear his own cost of counsel and other trial expense save for minimal court costs, but a deliberate choice to ensure that access to the courts be not effectively denied those of moderate means."

[2 FSM Intrm. 207]

Farmer v. Arabian American Oil Co., [1964] USSC 227; 379 U.S. 227, 237[1964] USSC 227; , 85 S. Ct. 411, 417[1964] USSC 227; , 13 L. Ed. 2d 248, 255 (1964) (concurring opinion of Mr. Justice Goldberg) (quoting Smith, J., dissenting from decision reversed in Farmer). See also Conte v. Flota Mercante del Estado[1960] USCA2 146; , 277 F.2d 664, 672 (2d Cir. 1960) ("the American practice of generally not including counsel fees in costs was a deliberate departure from the English practice, stemming initially from the colonies' distrust of lawyers and continued because of a belief that the English system favored the wealthy and unduly penalized the losing party").

In the Federated States of Micronesia, where so many citizens have little monetary wealth, it is especially important to avoid any approach calculated to favor the wealthy and deprive poor persons of access to the courts. This may be a constitutional requirement. See FSM Const. art. XIII, § 1.

There are other reasons why it does not seem wise to adopt the rule suggested by Martin. First, there is greater likelihood that the American rule would be applied correctly. Most practitioners here have been trained in United States law schools. The judges are familiar with a systemic presumption against attorney's fee awards. In addition, most of the materials in our libraries are United States materials, expediting research of issues that may arise in attempts to apply the American rule.

A second reason closely follows from the preceding one. Nationality and training of judges and practitioners and the contents of legal libraries are not mere happenstance. These are characteristics of the legal system, rooted in the history of the Federated States of Micronesia. When the Constitution was adopted, the framers and the people of the Federated States of Micronesia surely anticipated that the judicial system under self-government would be roughly patterned on the American judicial system.

The framers made it clear that this Court is not to accept unquestioningly the decisions of United States or Trust Territory courts as precedent. FSM Const. art. XI, § 11; SCREP No. 34, II J. of Micro. Con. Con. 821-22. We are charged with the duty of developing and shaping a court system to serve the people of the Federated States of Micronesia. At the same time, this should not be interpreted as a mandate for change in the name of change. Stability and predictability are important attributes of a good court system. Where, as here, it is unclear that a new approach would better serve the people, the preferable course for a court system is to preserve continuity. This is especially true in the Federated States of Micronesia, where high value is placed on the importance of upholding custom and tradition. FSM Const. art. V; art. XI, § 11.

Third, Martin here seeks fundamental change. The proposed ruling would affect the parties in practically every case which comes before this Court and could profoundly alter access to the court system. Broad policy questions are involved. This kind of change would more appropriately be accomplished through congressional action rather than court adjudication.

[2 FSM Intrm. 208]

For all of these reasons, I have determined not to adopt Martin's proposed rule that attorney's fees be awarded to the prevailing party in litigation as a normal practice.

C. Selection

Instead, I conclude that the American rule is the proper foundation upon which the system here should be built. We start with a general rule that parties bear their own attorney's fees. Yet there is flexibility to modify the rule when justice requires. Thus, attorney's fees may be assessed for willful violation of a court order, when a party acts vexatiously or in bad faith, presses frivolous claims, or employs oppressive litigation practices, or when the successful efforts of a party have generated a common fund or extended substantial benefits to a class. Alyeska Pipeline Service Co. v. Wilderness Society, [1977] USCA8 69; 421 U.S. 240, 95 S. Ct. 1612, 44 L. Ed. 2d 141 (1975). Recognizing that courts in most of the world normally do award attorney's fees to the prevailing party, our version of the rule here should perhaps be applied more liberally than in the United States. For example, we could consider awarding attorney's fees on a "private attorney general" theory, although that approach was rejected by the United States Supreme Court in Alyeska. See Newman v. Piggie Park Enterprises, Inc., [1968] USSC 51; 390 U.S. 400, 88 S. Ct. 964, 19 L. Ed. 2d 1263 (1968); Cannida v. Central Gulf Steamship Corp., [1971] USCA3 594; 452 F.2d 949 (3d Cir. 1971).

Of course, Congress has provided for awards of attorney's fees in connection with civil rights litigation, 11 F.S.M.C. 701, and could identify additional types of litigation in which attorney's fees should be awarded to the prevailing party.

D. Application in this case

Martin does not claim that attorney's fees could be taxed against Continental and Air Micronesia under the American rule.

Instead, the assertion is that Semens has been exposed as having had no solid claim or theory against Martin. While ultimately this proved to be the case, it does not follow that Semens acted oppressively or vexatiously in naming Martin as a defendant.

Semens sustained substantial injuries performing work for which he had been hired by Martin. Martin's insulation comes only from establishing that other defendants had stripped control of the ground handling operations from Martin.

Had that departure from the terms of the agreement not occurred, then presumably Martin would have remained a defendant up until the conclusion of the litigation. It was reasonable for Semens to believe at the outset that Martin might be liable, and to retain that suspicion until a considerable amount of discovery had been completed. It is significant that on the motion for summary judgment, after the facts had been ascertained, counsel for Semens

[1986] FMSC 6; [2 FSM Intrm. 209]

did not stubbornly insist on Martin's liability in the face of all contradictory evidence. At that time, counsel practically conceded Martin's nonliability.

As already noted, much effort in this litigation was directed to the indemnification clause in the ground handling agreements. Had Semens not named Martin as a defendant, the other parties presumably would have done so, to press their indemnification claims. Martin likely would have incurred substantial attorney's fees regardless of the actions of Semens.

The actions of Semens against Martin were not frivolous or vexatious. Justice does not require an award. The motion is denied.

III. Conclusion

The Clerk is directed to issue an order taxing costs consistent with this opinion.

___________________________________
Endnote:

1. The motion seeks an award against wall defendants and names United Micronesia Development Association, Inc. in the caption as one of the defendants. UMDA was dismissed as a defendant simultaneously with Martin. Moreover, the motion's certificate of service reflects no service of the motion on UMDA. Therefore, this opinion is written under the assumption that the motion was not intended to be against UMDA. If it was intended to be against UMDA, the motion is denied as to all costs and attorney's fees.