Michelsen v Federated States of Micronesia [1991] FMSC 31; 5 FSM Intrm. 249 (App. 1992) (30 December 1991)

[1991] FMSC 31; 5 FSM Intrm 249 (App 1992)

FEDERATED STATES OF MICRONESIA
SUPREME COURT APPELLATE DIVISION

FSM APPEAL CASE NO. P5-1990

R. BARRIE MICHELSEN
Appellant

V

FEDERATED STATES OF MICRONESIA
Appellee

OPINION: Argued: October 8, 1991 - Decided: December 30, 1991

BEFORE: Honorable Edward C. King, Chief Justice, FSM Supreme Court;
Honorable Richard H. Benson, Associate Justice, FSM Supreme Court;
Honorable Jose S. Dela Cruz, Temporary Justice, FSM Supreme Court*;
*Chief Justice, Supreme Court of the Commonwealth of the Northern Mariana Islands

APPEARANCES: For the Appellant: R. Barrie Michelsen, Esq., Attorney at Law; For the Appellee: Douglas J. Juergens, Esq., Office of the Attorney General, Federated States of Micronesia

HEADNOTES

Foreign Investment Laws
A foreign investment permit applicant aggrieved by a final permit decision may appeal the decision to the FSM Supreme Court. 32 F.S.M.C. 215. Michelsen v. FSM, [1991] FMSC 31; 5 FSM Intrm. 249, 252-53 (App. 1991).

Administrative Law - Administrative Procedures Act
Decision by Secretary denying applicant a permit to practice law in Yap is an agency decision within the provisions of the Administrative Procedures Act. Michelsen v. FSM, [1991] FMSC 31; 5 FSM Intrm. 249, 253 (App. 1991).

Administrative Law - Judicial Review; Foreign Investment Laws
The Foreign Investment Act does not explicitly limit judicial review therefore an aggrieved person affected by an agency decision may seek review under the Administrative Procedures Act. Michelsen v. FSM, [1991] FMSC 31; 5 FSM Intrm. 249, 254 (App. 1991).

Administrative Law - Administrative Procedures Act; - Judicial Review
The standard of review of an agency decision is to determine whether the action was lawful. Michelsen v. FSM, [1991] FMSC 31; 5 FSM Intrm. 249, 254 (App. 1991).

Foreign Investment Laws
By statute the practice of law is specifically included in businesses engaged in by noncitizens requiring a foreign investment permit. 32 F.S.M.C. 203. Michelsen v. FSM, [1991] FMSC 31; 5 FSM Intrm. 249, 254 (App. 1991).

Foreign Investment Laws
When considering an application for a foreign investment permit the Secretary of Resources and Development must consider "the extent to which the activity will contribute to the constitutional policy of making education, health care, and legal services available to the people of the Federated States of Micronesia." 32 F.S.M.C. 210(8). Michelsen v. FSM, [1991] FMSC 31; 5 FSM Intrm. 249, 254 (App. 1991).

Administrative Law - Administrative Procedures Act
When the Secretary denied an application for a foreign investment permit without delivering notice of his action, made no statement of the reasons in support of his denial, and failed to report to the President, the decision was made without substantial compliance with the procedures required by law and was therefore unlawful. Michelsen v. FSM, [1991] FMSC 31; 5 FSM Intrm. 249, 254-55 (App. 1991).

Administrative Law - Administrative Procedures Act
Since the denial of the application resulted in a decrease in the availability of legal services in Yap and since the Secretary did not properly weigh the extent to which the application would contribute to the constitutional policy of making legal services available to the people of the Federated States of Micronesia, the denial of the foreign investment permit to practice law in Yap was unwarranted by the facts in the record and therefore unlawful. Michelsen v. FSM, [1991] FMSC 31; 5 FSM Intrm. 249, 256 (App. 1991).

COURT'S OPINION

RICHARD H. BENSON, Associate Justice:

ISSUE AND HOLDING
STANDARD OF REVIEW

The issue presented is whether a final administrative decision denying a resident expatriate lawyer the right to practice in a state in which he earlier had that right, decided because the governor of that state recommended against approval, made without any written decision setting forth reasons and not submitted to the President, and which fails to address the issue of availability of legal services is unlawful. We conclude that it is. The issue presents a question of law.

FACTUAL BACKGROUND

The appellant here, R. Barrie Michelsen, was an appellant in Carlos v. FSM, 4 FSM Intrm. 17 (App. 1989). In that case the issue as to Mr. Michelsen was his right as a partner of Ramp and Michelsen to practice law in Chuuk. As set forth in Carlos, at 22, Ramp and Michelsen did have a foreign investment permit allowing the practice of law in Pohnpei, Yap, and Kosrae which was issued on October 10, 1988. It had a term of 10 years.

The case before us now involves the right of R. Barrie Michelsen to practice law in Yap.

In late 1989 the law firm of Ramp and Michelsen was dissolved and Fredrick Ramp and R. Barrie Michelsen began practicing independently.

On January 31, 1990, the appellant applied for a foreign investment permit for himself to practice law in all states of the FSM. The letter transmitting the application also enclosed copies of permit 0057-88 covering Pohnpei, Yap and Kosrae, and of permit 8-89 which gave Ramp and Michelsen the right to practice in Chuuk. The only change the appellant was seeking was one to reflect his independent practice.

Appellant's former partner, Mr. Ramp, had sent a like application 2 months earlier. The permit was issued to Mr. Ramp as to Yap, the only state at issue in this case.

The Secretary of Resources and Development asked Yap State for its views on the application. 32 F.S.M.C. 209. The Governor recommended against approval, although recognizing appellant's good character and his competence as an attorney. The Governor stated that because of the law offices already in Yap or being planned for Yap, no additional offices are needed beyond that of Mr. Ramp. He was against transforming Yap "too quickly into a highly litigious society as a result of having too many [lawyers]." The Governor noted that there are presently Yapese students studying law and the government wishes to protect these against expatriate competitors and make the situation such that they would return to Yap to practice.

The Governor attached letters from the Yap State Director of Resources and Development and from the Chief of the Division of Commerce and Industry to his response to the Secretary.

The appellant learned of this letter and submitted a detailed reply to the Secretary.

The parties have submitted the case to us on the premise that the Secretary's action was based alone on the recommendation of the Governor of Yap.

PROCEDURAL HISTORY

The appellant submitted an application for a foreign investment permit to practice in the four states of the Federated States of Micronesia, based on the permits the partnership of Ramp and Michelsen then held. The application was made because the partnership was dissolved.

The Secretary of Resources and Development issued a permit allowing the practice of law by the appellant in Kosrae, Pohnpei, and Chuuk. No written decision disapproving the permit for Yap exists and the record is silent as to whether the President was notified of the disapproval. Both are required by statute. 32 F.S.M.C. 212. In any event the parties, we think correctly, consider the issuance of the permit as a final decision of the highest administrative officer adverse to the appellant as to the practice of law in Yap. The appellant has appealed this decision to this court.

REASONING

A. STANDARD OF REVIEW

The direct appeal is pursuant to the agreement of the parties and because there is no additional evidence to be admitted or considered. Cf. Semes v. FSM, 4 FSM Intrm. 66, 71 (App. 1989).

This is the third appeal before us to review the action of an administrative agency. In Olter v. National Election Commissioner, [1987] FMSC 16; 3 FSM Intrm. 123 (App. 1987) we reviewed the decision of the Commissioner which denied a recount. In Semes v. FSM, 4 FSM Intrm. 66 (App. 1989) we reviewed the termination of an FSM employee.

As we did in those cases we consider first the standard of review.^[1]

The Foreign Investment Act provides for review as follows:

“An applicant [for a foreign investment permit] or State authority aggrieved by a final permit decision may appeal the decision by filing a notice of appeal within thirty days of receipt of notice of the decision with the Supreme Court of the Federated States of Micronesia...”

32 F.S.M.C. 215.

The Administrative Procedure Act provides for judicial review of agency actions. As this term is defined in the act, 17 F.S.M.C. 101(2), agency action embraces the final decision of the Secretary which denied the appellant a permit to practice law in Yap, and brings the decision of the Secretary within the provisions of the Administrative Procedures Act.

The Act provides for judicial review as follows:

Section 111. Judicial review of contested cases

(1) This section applies, according to the provisions hereof, except to the extent that statutes enacted by the Congress of the Federated of Micronesia explicitly limit judicial review.

(2) A person adversely affected or aggrieved by agency action is entitled to judicial review thereof in the Supreme Court of the Federated States of Micronesia, and prior to its organization, in the Trial Division of the High Court. The Court shall conduct a de novo trial of the matter and may receive in evidence any or all of the record from the administrative hearing that is stipulated to by the parties.

(3) To the extent necessary to decision and when presented, the reviewing Court shall decide all relevant questions of law and fact, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action. The reviewing Court shall:

(a) compel agency action unlawfully withheld or unreasonably delayed; and

(b) hold unlawful and set aside agency actions and decisions found to be:

(i) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;

(ii) contrary to constitutional right, power, privilege, or immunity;

(iii) in excess of statutory, jurisdiction, authority, or limitations, or a denial of legal rights;

(iv) without substantial compliance with the procedures required by law; or

(v) unwarranted by the facts.

17 F.S.M.C. 111

Two conclusions may be reached from an examination of this section. First, the section governs in this case since the Foreign Investment Act does not "explicitly limit judicial review." 17 F.S.M.C. 111(1). As quoted above the act only states that one "aggrieved by a final permit decision may appeal..." 32 F.S.M.C. 215.

The second conclusion is that the review is to determine whether the action was lawful.

B. LEGAL ANALYSIS

Carlos v. FSM, 4 FSM Intrm. 17 (App. 1989) has been referred to above. In that case we held (1) that the Foreign Investment Act had no application to the lawyer appellants, and (2) that any national government action that impinges upon the availability of legal services must consider the constitutional standard that the government "take every step reasonable and necessary to provide such services." FSM Const. art. XIII, § 1.

In response to the Carlos decision Congress enacted and the President approved the Act which was designated Public Law 5-134. Public Law 5-134 amended the Foreign Investment Act to state specifically that the practice of law was included in businesses engaged in by noncitizens requiring a foreign investment permit. 32 F.S.M.C. 203. Public Law 5-134 also added a new factor that must be considered by the Secretary of Resources and Development in deciding whether to issue a permit. This factor reads "(8) the extent to which the activity will contribute to the constitutional policy of making education, health care, and legal services available to the people of the Federated States of Micronesia." 32 F.S.M.C. 210 (8).

We now turn to the Foreign Investment Act, as amended, to determine whether the decision of the Secretary conformed with its requirements. 32 F.S.M.C. 215 states, "The Board shall deliver notice of the action it takes on the permit application, together with a statement of reasons in support of the action taken, to the President as soon as the permit is granted or denied." The Secretary, so far as the record reveals or the knowledge of the parties extends, delivered no notice, made no statement of the reasons in support of his denial, and failed to report to the President. We find that the decision was made "without substantial compliance with the procedures required by law. 17 F.S.M.C. 111 (3)(b)(iv). We therefore hold that it is unlawful. 17 F.S.M.C. 111 (3)(b).

As stated above, the parties submitted the case to us on this factual basis: the permit was denied by the Secretary because of the letter of the Governor of Yap. His letter said that Yap doesn't need any more law offices. The question that is thus presented is whether the record supports this conclusion of the Governor.

The Governor notes that there are citizens practicing law in Yap now. This refers to one firm, a husband and wife, that had, at the time of the Governor's letter, a contract to render legal services part time to the Yap State Government. This contract limits the range of clients the firm can handle.

The husband now is a senator in the Yap State Legislature, so the range of clients the firm can take continues to be limited.

The Yap State Chief of Commerce and Industry notes Yapese students then in law school. Two were in school at that time; one of the two has since discontinued his studies. The other is partially supported by Micronesian Legal Services Corporation and we assume he must fulfill a period of service to MLSC after graduation before he could enter private practice.

The Chief of Commerce and Industry also notes that three more will be enrolling shortly. We find this so speculative as to render the comment of no value as to availability of legal services.

The Governor noted his approval of the application of Mr. Ramp. Based on the record before us we find this of little value in considering the availability of legal services in Yap because of Mr. Ramp's lack of contact with Yap. In the past five years he has not gone to Yap. Any clients of Ramp and Michelsen in Yap are represented by appellant since the partnership dissolution.

The appellant has one case in Yap presently pending before the trial division of this court in Yap. He has made an average of one trip per year for the last five years to represent clients. Among his clients are those who otherwise cannot obtain a lawyer in Yap because MLSC and the citizen law firm have a conflict.

He is also on retainer of the College of Micronesia and other interstate organizations. This has required him to go to Yap on three occasions. These trips are included in the frequency noted above of an average of one per year.

The appellant is a resident of Pohnpei; he does not intend to establish an office in Yap and reside there.

We note that there has been no increase in lawyers in Yap since 1988 when the Ramp and Michelsen permit was issued. Both were entitled to go there; only one went. Thus a denial of appellant's application results in a decrease in the availability of legal services.

The Governor reached his conclusion of disapproval by considering the permit issued to Mr. Ramp, the presence of a citizen law firm, and the expectation of law students returning to Yap. Viewed in the light of the appellant's present practice in Yap, the record does not show that the Secretary properly weighed the extent to which the application would "contribute to the constitutional policy of making... legal services available to the people of the Federated States of Micronesia," 32 F.S.M.C. 210(8). Carlos, supra at 30. The denial thus was unwarranted by the facts in the record. 17 F.S.M.C. 111(3)(b)(v).

CONCLUSION

For the reasons stated we find the Secretary's decision was arrived at without substantial compliance with required procedures, and that it is unwarranted by the facts in the record. We therefore hold the denial was unlawful. Based on this holding we must compel the issuance of the permit. 17 F.S.M.C. 111 (3)(a).

MANDATE

The decision of the FSM Secretary of Resources and Development denying the appellant a foreign investment permit for Yap is reversed, and the Secretary is directed to issue the permit on the same terms as that issued to the appellant for Kosrae, Pohnpei and Chuuk.

ENDNOTE:

¹This question was not reached in Carlos v. FSM, 4 FSM 17 (App. 1989) because of our holding in that case that the Foreign Investment Act did not apply to lawyers.

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^[1]This question was not reached in Carlos v. FSM, 4 FSM 17 (App. 1989) because of our holding in that case that the Foreign Investment Act did not apply to lawyers.