Adams v Island Homes Construction Inc [2003] FMSC 38; 11 FSM Intrm. 445 (Pon. 2003) (26 March 2003)

FSM SUPREME COURT TRIAL DIVISION
Cite as Adams v. Island Homes Constr., Inc.
[2003] FMSC 38; 11 FSM Intrm. 445 (Pon. 2003)

[2003] FMSC 38; [11 FSM Intrm. 445]

YVETTE ETSCHEIT ADAMS, d/b/a POHNPEI
ACE HARDWARE, and ADAMS BROTHERS
CORPORATION,
Plaintiffs,

vs.

ISLAND HOMES CONSTRUCTION, INC., JOE
FELIX d/b/a ISLAND HOMES CONSTRUCTION,
FSM DEVELOPMENT BANK, PAULUS PERMAN
and LORENZA PERMAN,
Defendants.

CIVIL ACTION NO. 2000-012

ORDER AND MEMORANDUM

Martin Yinug
Associate Justice

Decided: March 26, 2003

APPEARANCES:

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

For the Defendant: James Woodruff, Esq.
(FSM Dev. Bank) Bank’s Legal Counsel
P.O. Box M
Kolonia, Pohnpei FM 96941

For the Defendants: Matt Mix, Esq.
(the Permans) P.O. Box 143
Kolonia, Pohnpei FM 96941

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HEADNOTES

Civil Procedure - Discovery; Civil Procedure - Sanctions
When a party’s record of discovery obduracy speaks for itself, the court may award attorney’s fees and expenses as reasonable under all the facts and circumstances. Adams v. Island Homes Constr., Inc., [2003] FMSC 38; 11 FSM Intrm. 445, 447 (Pon. 2003).
[11 FSM Intrm. 446]

Civil Procedure - Discovery; Civil Procedure - Sanctions
When, given the scope and depth of the discovery disputes generated by a party’s conduct, the court, in awarding fees to opposing counsel, will not find several billing entries showing work by both attorneys working together to be inordinate. Adams v. Island Homes Constr., Inc., [2003] FMSC 38; 11 FSM Intrm. 445, 448 (Pon. 2003).

Civil Procedure - Discovery; Civil Procedure - Sanctions
In order to achieve the end of discouraging obstructionist discovery conduct, the "expenses," that are imposed as a sanction for failure to comply with discovery is to be given a more expansive meaning than the "costs" that are awarded as part of a civil rights judgment. Adams v. Island Homes Constr., Inc., [2003] FMSC 38; 11 FSM Intrm. 445, 448 (Pon. 2003).

Civil Procedure - Discovery; Civil Procedure - Sanctions
When a party’s actions necessitated discovery sanction attorney fee awards, that party cannot complain about being held to account for them under Rule 37(a)(4). Such awards are not limited to the 15% generally awarded in collection cases. Adams v. Island Homes Constr., Inc., [2003] FMSC 38; 11 FSM Intrm. 445, 448 (Pon. 2003).

Civil Procedure - Pleadings
Our rules of pleading are informal and flexible, and a pleading need only set forth a short and plain statement of the wrong alleged based on the facts asserted. Even if a legal theory is advanced, it does not have to be the correct one and a claimant does not have to set out in detail the facts on which the claim for relief is based, but must provide a statement sufficient to put the opposing party on notice of the claim. Adams v. Island Homes Constr., Inc., [2003] FMSC 38; 11 FSM Intrm. 445, 449 (Pon. 2003).

Contracts -Indemnification
Indemnification arises out of an express or implied contract by which a party held liable shifts the entire loss to another in order to prevent an unjust or unsatisfactory result. Adams v. Island Homes Constr., Inc., [2003] FMSC 38; 11 FSM Intrm. 445, 449 (Pon. 2003).

Civil Procedure - Dismissal; Civil Procedure - Pleadings
A cross-claim that sets out a legal conclusion and that does not provide a short and plain statement of the facts on which the legal conclusion rests, lacks sufficient factual allegations and a motion to dismiss it will be granted. Adams v. Island Homes Constr., Inc., [2003] FMSC 38; 11 FSM Intrm. 445, 449 (Pon. 2003).

Civil Procedure - Dismissal; Torts - Negligence
Each of the familiar elements of a cause of action for negligence - duty, breach of duty, proximate cause, and damages - should be alleged, and a negligence counterclaim that does not is deficient and a motion to dismiss it will be granted. Adams v. Island Homes Constr., Inc., [2003] FMSC 38; 11 FSM Intrm. 445, 449 (Pon. 2003).

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COURT’S OPINION

MARTIN YINUG, Associate Justice:

By order of November 12, 2002 [Adams v. Island Homes Constr., Inc., [2002] FMSC 38; 11 FSM Intrm. 218 (Pon. 2002).], this court awarded the plaintiffs their attorney’s fees incurred in the course of various discovery disputes with the defendant FSM Development Bank ("the Bank"), and this order determines

[11 FSM Intrm. 447]

the amount of those fees. Further, this order disposes of the Bank’s motion to dismiss the cross-claim against the Bank, which the defendants Paulus and Lorenza Perman ("the Permans") bring in their answer to the amended complaint, and it also disposes of the plaintiffs’ motion to dismiss the Perman’s counterclaim as to them, which the Permans also bring as part of their answer to the amended complaint. Finally, this order sets this matter for trial.

A. ATTORNEY’S FEES

On December 4, 2002, the plaintiffs submitted their statement of attorney’s fees and expenses in accordance with this court’s order of November 12, 2002. That order awarded the plaintiffs their attorney’s fees and expenses incurred in the course of 1) their May 30, 2001, motion to compel discovery compliance by the Bank; the renewed motion filed on September 10, 2001; and the supplement filed on September 26, 2001; and 2) their motion to quash the Bank’s subpoena directed to Yvette Etscheit Adams. Plaintiffs were also awarded half of their attorney’s fees and expenses in bringing their July 26, 2002, motion to compel discovery compliance by the Bank, as well as half of the fees and expenses incurred in the course of the order to show cause proceedings related to that motion. On January 20, 2003, the Bank filed its response to the plaintiffs’ statement of fees, and on February 4, 2003, the plaintiffs filed their reply.

The Bank’s record of discovery obduracy in this case speaks for itself. Under all the facts and circumstances, the court finds the plaintiffs’ request for attorney’s fees and expenses as set out in their December 4, 2002, statement to be reasonable. The court also finds that the statement of fees and expenses is provided in sufficient detail for the court to make an award. Consequently, the court awards fees and expenses in the amount sought, which is $9,680.07.

The Bank raises various issues with respect to the fees sought. It contends that duplication of time for plaintiffs’ attorneys, Fred Ramp and Craig Reffner, should not be awarded. Of the approximately 58 entries on plaintiffs’ fee statement, five show entries for simultaneous work by attorneys Ramp and Reffner. The first three entries are in pertinent part as follow:

July 23, 2001: Attorney Reffner and Ramp [sic] met to discuss problems in discovery and the filing of a motion to compel discovery

September 5, 2001: Attorney Reffner and Ramp [sic] met to discuss the status of the case

November 23, 2001, and November 30, 2002 [sic]: Attorneys Reffner and Ramp reviewed letter from James Woodruff requesting that case be dismissed and threatening economic damages to Plaintiffs’ businesses by the Development Bank if they continued their pursuit of case; Attorney Reffner and Ramp [sic] prepared a response to James Woodruff’s letter and briefed client re: same

For September 13, 2002, there are two entries. In their entirety they are as follows:

Attorney’s fees: Attorney Reffner and Attorney Ramp met to discuss status of case and discovery sanctions to be imposed against Development Bank and its counsel; Attorney Reffner continued drafting Motion for Discovery Sanctions against Development Bank

Attorney’s fees: Attorney Ramp met with Attorney Reffner to discuss status of case and discovery sanctions to be imposed against Development Bank and its counsel

[11 FSM Intrm. 448]

The first of these latter two entries shows time billed of three and a half hours, while the second entry shows one half hour. While the second entry shows a meeting for the same purpose as the first, the second also shows a separate billing of half an hour. Given the scope and depth of the discovery disputes generated by the Bank’s conduct in this case, the court does not find these two September 13, 2002, entries, or the other entries showing work by both attorneys Reffner and Ramp, to be inordinate.

The Bank also contends, citing Bank of Guam v. O’Sonis, [1999] FMSC 26; 9 FSM Intrm. 106 (Chk. 1999), that plaintiffs’ paralegal time, and charges for photocopying and Westlaw should be disallowed. However, at issue in O’Sonis was 11 F.S.M.C. 701(3), the fee-shifting provision of the FSM civil rights statute, which provides for an award of "costs and reasonable attorney’s fees to the prevailing party" (emphasis added). Here, on the other hand, the issue is one of sanctions, and Rule 37(a)(4) does not speak in terms of "costs," but rather of "expenses." That rule provides in pertinent part that the court "shall," unless there is substantial justification for the resisting party’s conduct, order the payment to the moving party of "the reasonable expenses incurred in obtaining the [discovery] order, including attorney or trial counselor fees" (emphasis added).

The court proceeds on the basis that the term "expenses," as opposed to "costs," was used advisedly by the drafters of the United States Federal Rules of Civil Procedure, on which this court’s rules are modeled. As between attorney’s fees and "costs" imposed under a fee-shifting statute, and attorney’s fees and "expenses" imposed as a sanction for failure to comply with discovery, the latter is to be given a more expansive meaning in order to achieve the end of discouraging obstructionist discovery conduct such as that at issue here. Accordingly, plaintiffs are awarded their paralegal fees, and copying and Westlaw charges. These are expenses reasonably incurred by the plaintiffs in pursuing discovery in the face of the Bank’s intransigence.

The Bank also asserts that "plaintiffs’ counsel included fees and expenses for reviewing related documents prepared by FSMDB, reviewing letters, engaging in internal office communication, meetings and similar matters." Opposition [], Jan. 20, 2003, at 3-4. No specifics are given in this regard. The Bank goes on to state the "FSMDB’s accounting department has prepared the attached proforma [sic] analysis which shows certain of the requested changes to plaintiffs’ fee requests after accounting for the objections raised herein." The foundation for the Bank accounting department’s analysis is also not stated. In any event, the court has reviewed the pro forma along with the plaintiffs’ request for attorney’s fees and expenses, and finds the plaintiffs’ fee requests reasonable.

Lastly the Bank urges that the plaintiffs’ fee request is excessive because under Bank of Hawaii v. Jack, [1990] FMSC 7; 4 FSM Intrm. 216, 220 (Pon. 1990), attorney’s fees in collection cases are generally limited to 15% of the amount sought. The Bank contends that the fees associated with the discovery dispute are roughly 14% of the amount sought to be collected in this case, and on this basis they are excessive. This position ignores the distinction between fees and costs incurred in the course of actual collection efforts, and fees and expenses imposed as sanctions in response the Bank’s abuse of the discovery process. The discovery disputes which generated the fees under discussion were collateral to the main - and this is also to say the legitimate - issues in this case. The fees and expenses flowing from the Bank’s conduct that were awarded under the November 12, 2002, order should never have been incurred in the first place. But since the Bank’s actions necessitated them, the Bank cannot complain about being held to account for them under Rule 37(a)(4) of the FSM Rules of Civil Procedure. Under the Bank’s theory, no matter how much discovery abuse it engaged in, it would be insulated from any fee award that was greater than 15% of the amount sought to be collected. Such a position is untenable.

[11 FSM Intrm. 449]

B. THE MOTIONS TO DISMISS

On November 19, 2002, plaintiffs filed their amended complaint. On January 16, 2003, defendants Paulus Perman and Lorenza Perman ("the Permans") filed their answer. As part of the answer, the Permans have cross-claimed against the other defendants, and have counter-claimed against the plaintiffs. On January 23, 2003, the Bank moved to dismiss the cross-claim directed to it, and on January 27, 2002, the plaintiffs moved to dismiss the counterclaim directed to them.

The cross-claim against the Bank, and the counterclaim against the plaintiffs are respectively and in their entirety as follows:

Paulus and Lorenza Perman cross claim against the FSM Development [sic] any amount that they may be required to pay the plaintiffs.

Paulus Perman and Lorenza Perman counter claim against the plaintiffs for the Plaintiffs’ failure to properly monitor the Island Homes Construction account at Ace Hardware and at Adams Brother Construction.

Our rules of pleading are informal and flexible, and a pleading need only set forth a short and plain statement of the wrong alleged based on the facts asserted. Semwen v. Seaward Holdings, Micronesia, [1995] FMSC 17; 7 FSM Intrm. 111, 113-14 (Chk. 1995). Even if a legal theory is advanced, it does not have to be the correct one. Id. at 114. As Prof. Moore notes, "[a] claimant does not have to set out in detail the facts on which the claim for relief is based, but must provide a statement sufficient to put the opposing party on notice of the claim." 2 JAMES WM. MOORE ET AL., MOORE’S FEDERAL PRACTICE § 8.04[1] at 8-22 (3d ed. 1999) (footnotes omitted).

As to the cross-claim against the Bank, the allegation is sufficient to put the Bank on notice that the Permans are pursuing a claim for indemnification against it. Indemnification arises out of an express or implied contract by which a party held liable shifts the entire loss to another in order to prevent an unjust or unsatisfactory result, In re Poling Transp. Corp., 784 F. Supp. 1045, 1047 (S.D.N.Y. 1992), and this is what the cross-claim seeks. However, at best the cross-claim sets out a legal conclusion, and does not provide "a short and plain statement," FSM Civ. R. 8(a)(2), of the facts on which the legal conclusion rests. The Perman’s response to the Bank’s motion to dismiss makes additional factual allegations, but for purposes of the motion to dismiss the court’s focus is on the allegations of the cross-claim itself. The cross-claim lacks sufficient factual allegations. Accordingly, the motion to dismiss the cross-claim against the Bank is granted.

The counterclaim against the plaintiffs makes the single factual allegation that the plaintiffs "fail[ed] to properly monitor the Island Homes Construction account at Ace Hardware and at Adams Brother Construction." A negligence claim would seem to rest on this allegation. However, each element of a claim should be alleged, 2 MOORE ET AL., supra, § 8.04[1] n.3.2, and in this regard the counterclaim is deficient. The familiar elements of a cause of action for negligence are duty, breach of duty, proximate cause, and damages. Jonah v. Kosrae, [2000] FMKSC 3; 9 FSM Intrm. 335, 341 (Kos. S. Ct. Tr. 2000). While the counterclaim may be read to allege a breach of duty in that the plaintiffs "failed to properly monitor" the accounts at issue, there is no allegation that there was a duty running to the Permans from the plaintiffs to undertake the monitoring in the first instance. Nor are there facts alleged in the counterclaim to support the existence of such a duty. As in the case of the cross-claim against the Bank, the Permans have filed a response to the motion to dismiss in which they make additional factual allegations, but again, for the purposes of the motion to dismiss the court must consider the allegations of the counterclaim itself. Accordingly, the motion to dismiss the counterclaim as to the plaintiffs is granted.

[2003] FMSC 39; [11 FSM Intrm. 450]

C. TRIAL DATE

This matter is set for trial on the amended complaint on Monday, May 12, 2003, at 9:00 a.m. In accordance with this court’s order of November 12, 2002, the only issue to be tried as between the Bank and the plaintiffs will be that of damages. [Adams, 11 FSM Intrm. at 222, 229.]

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