Lebehn v Mobil Oil Micronesia Inc [2003] FMSC 3; 11 FSM Intrm. 319 (Pon. 2003) (10 January 2003)

FEDERATED STATES OF MICRONESIA
SUPREME COURT TRIAL DIVISION

Cite as Lebehn v. Mobil Oil Micronesia, Inc.
[2003] FMSC 3; 11 FSM Intrm. 319 (Pon. 2003)

[2003] FMSC 3; [11 FSM Intrm. 319]

CLARK LEBEHN, a minor, through his next friend,
MERLEEN LEBEHN,
Plaintiff,

vs.

MOBIL OIL MICRONESIA, INC., MOBIL OIL
CORPORATION, MOBIL OIL GUAM, INC., and ALEX
PANUELO d/b/a PANUELO’S SERVICE STATION,
Defendants.

CIVIL ACTION NO. 1998-005
ORDER DENYING COSTS

Richard H. Benson
Specially Assigned Justice

Decided: January 10, 2003

APPEARANCES:

For the Plaintiff: Daniel J. Berman, Esq.
P.O. Box 1491
Kolonia, Pohnpei FM 96941

For the Defendants: Fredrick L. Ramp, Esq.
Law Office of Fredrick L. Ramp
P.O. Box 1480
Kolonia, Pohnpei FM 96941

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HEADNOTES

Costs
Generally, unless the court directs otherwise, prevailing parties are entitled to costs. Lebehn v. Mobil Oil Micronesia, Inc., [2003] FMSC 3; 11 FSM Intrm. 319, 321 (Pon. 2003).

Costs
Determination of costs awarded to prevailing parties is generally a matter within the trial court’s discretion, and a trial court has jurisdiction to issue an order assessing costs, even after a notice of appeal has been filed. Lebehn v. Mobil Oil Micronesia, Inc., [2003] FMSC 3; 11 FSM Intrm. 319, 321 (Pon. 2003).

Costs
Rule 54(d) presumes that costs will be allowed to the prevailing party. But this presumption may be overcome. The burden is on the unsuccessful party to show circumstances sufficient to overcome the presumption in favor of allowing costs to the prevailing party. Lebehn v. Mobil Oil Micronesia, Inc.,

[11 FSM Intrm. 320]

[2003] FMSC 3; 11 FSM Intrm. 319, 321 (Pon. 2003).

Civil Procedure
When an FSM court has not previously construed a Civil Procedure Rule that is similar to a U.S. rule, it may look to U.S. sources for guidance in interpreting the FSM rule. Lebehn v. Mobil Oil Micronesia, Inc., [2003] FMSC 3; 11 FSM Intrm. 319, 321 n.1 (Pon. 2003).

Costs
Although a trial court has discretion when awarding costs, the discretion is narrowly confined because of the strong presumption created by Rule 54(d) that the prevailing party will recover costs. Generally, only the prevailing party’s misconduct worthy of a penalty or the losing party’s inability to pay will suffice to justify denying costs. Lebehn v. Mobil Oil Micronesia, Inc., [2003] FMSC 3; 11 FSM Intrm. 319, 321-22 (Pon. 2003).

Costs
The presumption that the prevailing party will recover costs has been overcome and costs denied where there is a wide disparity between the parties’ economic resources, particularly when the non-prevailing party is indigent. Lebehn v. Mobil Oil Micronesia, Inc., [2003] FMSC 3; 11 FSM Intrm. 319, 322 (Pon. 2003).

Constitutional Law - Judicial Guidance Clause; Costs
When the economic disparity between the indigent losing plaintiff and the successful defendants could not be more stark and when the plaintiff pursued his case in good faith and it was not frivolous, the defendants’ motion to tax costs must be denied and no costs allowed. This result is consistent with the social configuration of Micronesia, as mandated by the Constitution’s Judicial Guidance Clause. Lebehn v. Mobil Oil Micronesia, Inc., [2003] FMSC 3; 11 FSM Intrm. 319, 323 (Pon. 2003).

Costs
The principle of not imposing costs on losing indigents may appear to penalize solvency and to encourage other lawsuits against successful businesses because there is no risk of incurring costs if the action fails. However, this principle only applies when the action is pursued in good faith. Costs may be taxed when an indigent plaintiff’s case is frivolous or malicious or when he has raised irrelevant matters and engaged in vexatious procedures. Lebehn v. Mobil Oil Micronesia, Inc., [2003] FMSC 3; 11 FSM Intrm. 319, 323 (Pon. 2003).

Costs
The most common basis for denying costs to prevailing defendants is the indigency of the losing plaintiff, coupled with good faith of the indigent and the non-frivolous nature of the case. Lebehn v. Mobil Oil Micronesia, Inc., [2003] FMSC 3; 11 FSM Intrm. 319, 323 (Pon. 2003).

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COURT’S OPINION

RICHARD H. BENSON, Specially Assigned Justice:

This comes before the court on the Defendants’ Motion to Tax Costs, filed September 4, 2001; the Plaintiff’s Opposition to Tax Costs, filed September 26, 2001; and the Plaintiff’s Supplemental Opposition to Motion to Tax Costs, filed October 19, 2001. The motion was brought pursuant to the court’s July 25, 2001 decision that the defendants were entitled to "judgment in their favor, and their costs," Lebehn v. Mobil Oil Micronesia, Inc., [2001] FMSC 28; 10 FSM Intrm. 348, 353 (Pon. 2001), and the judgment entered the same day.

[11 FSM Intrm. 321]

The plaintiff, Clark Lebehn, appealed that judgment. On February 26, 2002, the court granted Lebehn’s motion to proceed in forma pauperis on appeal. Lebehn v. Mobil Oil Micronesia, Inc., [2002] FMSC 8; 10 FSM Intrm. 515 (Pon. 2002).

I. CONTENTIONS CONCERNING COSTS

The defendants move for the allowance of $321,835.36 in costs. If costs were to be taxed, not all of what the defendants seek would be granted, but clearly tens of thousands of dollars would still be allowed. The defendants ask that the court’s discretion be liberally exercised because of the weakness of the plaintiff’s case, which they contend was apparent from the beginning.

Although, in the end, this was not a close case, triable issues (as determined by the orders resulting from several pretrial motions) did exist. Trial was necessary, and it took substantial expert testimony and scientific evidence to definitively resolve the issues in the defendants’ favor. Lebehn’s action was brought in good faith and was not frivolous in nature.

Lebehn asserts that the costs sought should be reduced or denied because they are unreasonably large given the subject of the litigation. The court does not agree. The defendants incurred large costs in order to present a comprehensive and competent defense based on relevant scientific and technical evidence.

Lebehn also contends that costs should be denied because of the economic disparity between the parties and his poverty.

II. ECONOMIC DISPARITY ARGUMENT

A. Presumption Favoring Taxation of Costs

Generally, unless the court directs otherwise, prevailing parties are entitled to costs. FSM Civ. R. 54(d) ("costs shall be allowed as of course to the prevailing party unless the court otherwise directs"). The defendants are prevailing parties. Determination of costs awarded to prevailing parties is generally a matter within the trial court’s discretion, Ray v. Electrical Contracting Corp., 2 FSM Intrm. 21, 25 (App. 1985), and a trial court has jurisdiction to issue an order assessing costs, even after a notice of appeal has been filed, Damarlane v. United States, [1997] FMSC 31; 8 FSM Intrm. 14, 17 (App. 1997).

Rule 54(d) presumes that costs will be allowed to the prevailing party. But this presumption may be overcome. 10 CHARLES ALAN WRIGHT, ARTHUR R. MILLER & MARY KAY KANE, FEDERAL PRACTICE AND PROCEDURE § 2665, at 200 (3d ed. 1998)^[1] ("[t]he phrase ‘unless the court otherwise directs’ makes the allowance of costs discretionary"). The b is on the unsuccessful party to show circumstances sufficifficient to overcome the presumption in favor of allowing costs to the prevailing party. Id. § 2668, at 232; Coulter wm Newmont Gold Co., 873 F. Supp. 394, 396 (D. Nev. 1994).

Although a [trial] court has discretion when awarding costs, the discretion is "narrowly confined" because of the strresumption created by [Rule[Rule 54(d)] that the prevailing party will recover costs. "Generally, only misconduct by the prevailing party worthy of a

[11 FSM Intrm. 322]

penalty . . . orlosintyRy’s in;s inability to pay will suffice to justify denying costs."

Contrereas v. City of Chicago, [1997] USCA7 755; 119 F.3d 1286, 1295 (7th Ci97) (ng Congregation of the Holy Passion v. Touche,uche, Ross Ross & Co., [1988] USCA7 548; 854 F.2d 219, 221-22 (7th Cir. 1988)) (other citations omitted).
B. The Presumption and Economic Disparity

This presumption has been overcome and costs denied where there is a wide disparity between the parties’ economic resources, particularly when the non-prevailing party is indigent. Lebehn cites Schaulis v. CTB/McGraw-Hill, Inc., 496 F. Supp. 666 (N.D. Cal. 1980) to support this proposition. In Schaulis, the case was disposed of on summary judgment and the prevailing defendant requested $1,400 in costs. The Schaulis court, in denying costs, said that it would be an "undue burden to tax costs against plaintiff. To do so in this context could only chill individual litigants of modest means seeking to vindicate their individual and class rights under the civil rights laws." Id. at 680.

Stanley v. University of S. Cal., 178 F.3d 1069 (9th Cir. 1999) is in a similar vein. In that case, the trial court had granted summary judgment and taxed costs against the plaintiff. The trial court then denied the losing plaintiff’s motion to retax costs. The appellate court found "compelling" the plaintiff’s argument "that payment of the costs would render her indigent." Id. at 1079. It held that "[i]ndigency is a factor that the [trial] court may properly consider in deciding whether to award costs." Id. It concluded that the trial court had abused its discretion in denying the motion to retax costs and ordered the trial court to retax costs in light of the plaintiff’s indigency and the potential chilling effect of a costs award. Id. at 1079-80.

The appellate court in Badillo v. Central Steel & Wire Co., [1983] USCA7 800; 717 F.2d 1160 (7th Cir. 1983), affirmed the trial court’s denial of costs to the prevailing defendant. It held that it was within the trial court’s discretion "to consider a plaintiff’s indigency in denying costs under Rule 54(d)" because "the inability to pay is a proper factor to be considered in granting or denying taxable costs." Id. at 1165. While "[m]indful of the presumption that costs are to be awarded to the prevailing party under [Rule 54(d)]," the Badillo court concluded "that this presumption may be overcome by a showing of indigency." Id.

Some courts have denied awarding any costs when the plaintiff’s suit was in good faith and the prevailing defendant had significantly larger financial resources than the individual plaintiff, even though the losing plaintiff was not indigent and the prevailing defendant was not a major corporation. Reagan v. Bankers Trust Co., 863 F. Supp. 1511, 1521 (D. Utah 1994); Martin v. Frontier Fed. Sav. & Loan Ass’n, 510 F. Supp. 1062, 1069 (W.D. Okla. 1981).

However, in Maldonado v. Parasole, 66 F.R.D. 388, 391-92 (E.D.N.Y. 1975), the court saw no reason why the general rule, awarding costs to the prevailing party, should not be followed since both parties were indigent. But in reaching this result, Judge Weinstein held that, "Indigency is a proper ground for denying costs in some cases where there is a wide disparity of economic resources between the parties." Id. at 390. See also Williams v. Hevi-Duty Elec. Co., 122 F.R.D. 206, 214 (M.D. Tenn. 1988) (no trial court costs taxed against unemployed plaintiff; only $510.55 appellate costs, pursuant to appellate order).

Other courts have reduced the costs taxed to less than all allowable costs when the prevailing party had much greater economic resources. In Braxton v. United Parcel Serv., Inc., 148 F.R.D. 527, 528 (E.D. Pa. 1993), the court found that the requested costs of over $16,800 were "inequitable" and allowed only $5,000 costs against Braxton although he was not indigent. This reasoning was followed in Coulter v. Newmont Gold Co., 873 F. Supp. 394, 397-98 (D. Nev. 1994), when that court reduced

[11 FSM Intrm. 323]

full costs of $7,000 to $4,200. That court held that when there was wide economic disparity between the parties, the losing party "need not be utterly indigent to merit some relief from taxation of costs," and reduced the award since full costs would be a substantial hardship even though Coulter was not indigent. Id. at 397.

III. AS APPLIED TO LEBEHN

Turning to Lebehn, the court has already determined that he is indigent, with no income and no property. Lebehn, 10 FSM Intrm. at 518. Furthermore, evidence adduced at trial shows that he failed to finish high school, has no skills, and has no realistic employment prospects.

On the other hand, the Mobil defendants (especially the parent corporation) are large and successful corporations, with numerous assets. The one individual defendant is a successful businessman, who was added because the kerosene at issue in this case was bought at his gas station.

The economic disparity between the indigent losing plaintiff and the successful defendants thus could not be more stark. Lebehn pursued his case in good faith and it was not frivolous. The court therefore concludes that the defendants’ motion to tax costs must be denied. No costs will be allowed. This result is consistent with the social configuration of Micronesia, as mandated by the Constitution’s Judicial Guidance Clause. FSM Const. art. XI, § p>

This principle ople of not imposing costs on losing indigents may appear to penalize solvency and to encourage other lawsuits against successful businesses because there is no risk of incurring costs if the action fails. However, this principle only applies when the action is pursued in good faith. Costs may be taxed when an indigent plaintiff’s case is frivolous or malicious or when he has raised irrelevant matters and engaged in vexatious procedures. Damarlane v. United States, [1996] FMSC 57; 7 FSM Intrm. 468, 469-70 (Pon. 1995), costs aff’d without comment on indigence issue, Damarlane v. United States, [1997] FMSC 31; 8 FSM Intrm. 14, 16-17 (App. 1997); Damarlane v. United States, [1997] FMSC 33; 8 FSM Intrm. 45, 54-55 (App. 1997). See also Maldonado, 66 F.R.D. at 390.

One commentamentator has concluded that "[t]he most common bases for denying costs to prevailing defendants have been the indigency of the losing plaintiff, coupled with good faith of ndigent and the non-frivoloivolous nature of the case." Laura B. Bartell, Taxation of Costs and Awards of Expenses in Federal Court, 101 F.R.D. 553, 561 (1984) (citations omitted). That sums up this case.

IV. CONCLUSION

For the reasons stated, the Defendants’ Motion to Tax Costs is denied. Each party is to pay its own costs.

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Footnotes:
¹ When an FSM court has not previously construed a Civil Procedure Rule that is similar to a U.S. rule, it may look to U.S. sources for guidance in interpreting the FSM rule. Senda v. Mid-Pacific Constr. Co., [1994] FMSC 20; 6 FSM Intrm. 440, 444 (App. 1994). The court has not previously addressed the general issue of taxing costs against an indigent losing plaintiff.

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