Luen Thai Fishing Venture, Ltd. v State of Pohnpei [2013] FMSC 9; 18 FSM Intrm. 563 (Pon. 2013) (8 February 2013)

FSM SUPREME COURT TRIAL DIVISION

CIVIL ACTION NO. 2013-001

LUEN THAI FISHING VENTURE, LTD. and LIANCHENG OVERSEAS FISHERY (FSM) ) CO., LTD.,
Plaintiffs,

vs.

STATE OF POHNPEI, JOHN EHSA in his capacity as Governor, OFFICE OF FISHERIES AND AQUACULTURE, and MIJU MULSAN COMPANY, LTD.,
Defendants.
__________________________________________

ORDER MEMORIALIZING GRANT OF PRELIMINARY INJUNCTION

Martin G. Yinug
Chief Justice

Hearing: February 4, 2013
Decided: February 5, 2013
Order Entered: February 8, 2013
Amended: February 18, 2013

APPEARANCES:

For the Plaintiffs: Stephen V. Finnen, Esq.

P.O. Box 1450

Kolonia, Pohnpei FM 96941

For the Defendants: Judah G. Johnny

(Pohnpei, Ehsa, & Pohnpei Attorney General

Office of Fisheries Pohnpei Department of Justice

& Aquaculture) P.O. Box 1555

Kolonia, Pohnpei FM 96941

For the Defendant: Joseph S. Phillip, Esq.

(Miju Mulsan Co.) P.O. Box 464

Kolonia, Pohnpei FM 96941

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HEADNOTES

Civil Procedure - Injunctions
In granting or refusing interlocutory injunctions the court must set forth the findings of fact and conclusions of law which constitute the grounds of its action. Luen Thai Fishing Venture, Ltd. v. Pohnpei, [2013] FMSC 9; 18 FSM Intrm. 563, 566 (Pon. 2013).

Civil Procedure - Injunctions
In exercising its broad discretion in considering whether to grant a preliminary injunction, a court considers four factors: 1) the likelihood of success on the merits of the party seeking injunctive relief, 2) the possibility of irreparable injury to the movant, 3) the balance of possible injuries or inconvenience to the parties that would flow from granting or denying the relief, and 4) any impact on the public interest. Luen Thai Fishing Venture, Ltd. v. Pohnpei, [2013] FMSC 9; 18 FSM Intrm. 563, 567 (Pon. 2013).

Civil Procedure - Injunctions
To support a preliminary injunction, a movant must show that there is a reasonable probability of success on the merits and that irreparable injury will occur unless injunctive relief is granted to maintain the status quo until a final adjudication on the merits. Luen Thai Fishing Venture, Ltd. v. Pohnpei, [2013] FMSC 9; 18 FSM Intrm. 563, 567 (Pon. 2013).

Civil Procedure - Injunctions - Irreparable Harm
Irreparable harm is the single most dispositive factor in determining whether injunctive relief should be granted. Irreparable harm is harm that cannot be remedied in any way except by the rather drastic measure of injunctive relief, that is, irreparable injury is a harm for which there is no adequate alternative remedy. Luen Thai Fishing Venture, Ltd. v. Pohnpei, [2013] FMSC 9; 18 FSM Intrm. 563, 567 (Pon. 2013).

Civil Procedure - Injunctions - Irreparable Harm
The threat of irreparable harm before the litigation's conclusion is a prerequisite to preliminary injunctive relief, but if money damages will fully compensate for the threatened interim action, there is no irreparable harm and a preliminary injunction should be denied. Luen Thai Fishing Venture, Ltd. v. Pohnpei, [2013] FMSC 9; 18 FSM Intrm. 563, 567 (Pon. 2013).

Civil Procedure - Injunctions - Irreparable Harm
A plaintiff will be irreparably harmed when the disruption to its business by having to vacate the site in February 2013 will cause it the loss of goodwill and loss of customers and potential customers, for which monetary damages are extremely difficult to measure and it will also be irreparably harmed if not given the time (90-120 days) to relocate its business and its movable assets and inventory to another suitable location, which currently cannot be found on Pohnpei. Luen Thai Fishing Venture, Ltd. v. Pohnpei, [2013] FMSC 9; 18 FSM Intrm. 563, 567 (Pon. 2013).

Civil Procedure - Injunctions - Irreparable Harm
If an injunction is not issued, a plaintiff will suffer irreparable harm because if another company moves onto the site it will be very difficult to then remove that company and move onto the site and because it would then also be difficult to get the business running quickly on that site if the current tenant's movable assets are no longer there. Luen Thai Fishing Venture, Ltd. v. Pohnpei, [2013] FMSC 9; 18 FSM Intrm. 563, 567 (Pon. 2013).

Civil Procedure - Injunctions - Likelihood of Success; Contracts
A plaintiff has a good chance of success on the merits when its contract with the State provided for "the first right to negotiate," and "mandatory and binding arbitration," since these clauses would be meaningless if they were not enforceable after the contract's expiration date. Luen Thai Fishing Venture, Ltd. v. Pohnpei, [2013] FMSC 9; 18 FSM Intrm. 563, 567 (Pon. 2013).

Contracts - Specific Performance
Specific performance is a contract remedy that is available only when the usual measures of damages, expectancy, restitution, or reliance money damages, are inadequate compensation or cannot be computed or when a substitute cannot be purchased. Luen Thai Fishing Venture, Ltd. v. Pohnpei, [2013] FMSC 9; 18 FSM Intrm. 563, 567 (Pon. 2013).

Civil Procedure - Injunctions - Likelihood of Success
The plaintiffs have a good likelihood of success on the merits when for the one plaintiff seeking specific performance money damages would be very difficult to calculate and when for the other plaintiff the process used to recommend another as the only qualified bidder was questionable and its bid to lease the site was clearly separate from its additional, optional proposal for a lease of a different site. Luen Thai Fishing Venture, Ltd. v. Pohnpei, [2013] FMSC 9; 18 FSM Intrm. 563, 567 (Pon. 2013).

Civil Procedure - Injunctions - Balance of Injuries
In evaluating the balance-of-possible-injuries factor, a court compares the threatened harm to each party if the requested injunctive relief is granted or if it is denied. Luen Thai Fishing Venture, Ltd. v. Pohnpei, [2013] FMSC 9; 18 FSM Intrm. 563, 567 (Pon. 2013).

Civil Procedure - Injunctions Balance of Injuries
The balance-of-harms factor favors the plaintiffs when a defendant has hired a few local employees and readied a container for shipment to Pohnpei and is not irreparably harmed because it apparently can use an alternate site; when the defendant State is not harmed if as long as there is a tenant on the site running the fish processing facilities using local employees; and when the plaintiffs will be irreparably harmed and they also employ 110 local hires. Luen Thai Fishing Venture, Ltd. v. Pohnpei, [2013] FMSC 9; 18 FSM Intrm. 563, 567-68 (Pon. 2013).

Civil Procedure - Injunctions - Public Interest; Public Contracts
The public interest favors a bidding process that is fair and transparent. It also favors that foreign investors be seen to be treated fairly and thus encouraged to invest in Pohnpei to the State's benefit. Luen Thai Fishing Venture, Ltd. v. Pohnpei, [2013] FMSC 9; 18 FSM Intrm. 563, 568 (Pon. 2013).

Civil Procedure - Injunctions - Public Interest; Public Contracts
A declaratory judgment and an injunction are the only adequate means of protecting the public interest, the integrity of the competitive bidding process, and the individual bidder's rights to challenge a contract award under the public bidding statutes. Luen Thai Fishing Venture, Ltd. v. Pohnpei, [2013] FMSC 9; 18 FSM Intrm. 563, 568 (Pon. 2013).

Civil Procedure - Injunctions
When the court has weighed the four factors and found them to favor the issuance of a preliminary injunction to maintain the status quo, it may announce from the bench that the preliminary injunction will issue. Luen Thai Fishing Venture, Ltd. v. Pohnpei, [2013] FMSC 9; 18 FSM Intrm. 563, 568 (Pon. 2013).

Civil Procedure - Injunctions - Bond
Under Civil Procedure Rule 65(c), no preliminary injunction can issue except upon the the applicant giving of security, in such sum, if any, as the court deems proper, for the payment of such costs and damages as are incurred or suffered by any party who is found to have been wrongfully enjoined or restrained. Luen Thai Fishing Venture, Ltd. v. Pohnpei, [2013] FMSC 9; 18 FSM Intrm. 563, 568 (Pon. 2013).

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COURT'S OPINION

MARTIN G. YINUG, Chief Justice:

On February 4, 2013, the court heard the plaintiffs' application for a preliminary injunction. This written order memorializes the oral order granting the preliminary injunction from the bench on Tuesday, February 5, 2013.

I.

Since in granting or refusing interlocutory injunctions the court must set forth the findings of fact and conclusions of law which constitute the grounds of its action, FSM Civ. R. 52(a), the court makes the following factual findings. These material facts are for the most part undisputed.

Luen Thai Fishing Venture, Ltd. ("Luen Thai") had a contract with the State of Pohnpei to lease the former Pohnpei Fisheries Corporation ("PFC") site to run a fish processing business there. It took six months to put the equipment there in working order. Luen Thai invested over $3 million in the PFC site. After Luen Thai's five-year lease expired and after several short-term extensions of the lease, the State, as it was entitled to, put the lease up for bid. There were two bidders - Liancheng Overseas Fishery (FSM) Co., Ltd. ("Liancheng") and Miju Mulsan Company, Ltd. The current lessee, Luen Thai, did not submit a bid. Miju Mulsan is a South Korean fish processing company. Liancheng is the wholly owned subsidiary of Liancheng Overseas Fishery Co., Ltd., a Chinese company closely-related to Luen Thai since both companies are part of Tan Holdings. Liancheng intended to take over Luen Thai's movable assets on the PFC site if it were awarded the lease and that way keep the fish processing operation going without any interruption. Luen Thai has about 110 local employees in its fish processing business. These would presumably become Liancheng's employees if Liancheng were awarded the lease.

Liancheng's bid was for an annual rental about 11% higher. Liancheng's was recommended by a bid review committee. A fisheries consultant working for the Governor and the acting administrator of the Pohnpei Office of Fisheries and Aquaculture ("OFA") recommended Miju Mulsan after disqualifying Liancheng's bid as non-conforming because it included a further proposal, not asked for, for expansion on to another site (the Pohnpei Economic Development Authority ("EDA") site), if that site was available. Only the consultant signed the recommendation. The Governor then awarded the PFC site lease to Miju Mulsan. Liancheng challenged the bid award.

After being informed that Liancheng's bid was disqualified, Luen Thai, on January 16, 2013, sought to exercise its rights under certain clauses in its lease contract, which was still in effect because of lease extensions. Those clauses allowed Luen Thai to retain "the first right to negotiate," Amended Lease Agreement § 27(A) (June 6, 2 and for eior either party to exercise the right to submit "[a]ny legal dispute relating to the lease Agreement . . . to mary andininding arbitarbitra" id.§ 25. Luen Thai and the Shad had andd and still have a legal dispute over whether Luen Thai can exercise its " righnegotiate" if Luen Thai did not also submit a bida bid on i on its own behalf. Luen Thai's request to exercise those contract rights was refused. The State also refused to discuss whether Luen Thai could relocate to the EDA site because the State said that Miju Mulsan would also be using that site. On January 16, 2013, Miju Mulsan and the State signed a lease for the former PFC site. Luen Thai could not find another available suitable site on Pohnpei. Luen Thai could possibly find a suitable site on Kosrae and relocate its operation to Kosrae with some difficulty. Luen Thai also asserted that another contract provision entitled it to six months to vacate the PFC site but that the State told it that it must leave February 6, 2013.

II.

In exercising its broad discretion in considering whether to grant a preliminary injunction, a court considers four factors: 1) the likelihood of success on the merits of the party seeking injunctive relief, 2) the possibility of irreparable injury to the movant, 3) the balance of possible injuries or inconvenience to the parties that would flow from granting or denying the relief, and 4) any impact on the public interest. FSM v. GMP Hawaii, Inc., [2011] FMSC 27; 17 FSM Intrm. 555, 593 (Pon. 2011). To support a preliminary injunction, a movant must show that there is a reasonable probability of success on the merits and that irreparable injury will occur unless injunctive relief is granted to maintain the status quo until a final adjudication on the merits. Setik v. Pacific Int'l, Inc., [2010] FMSC 40; 17 FSM Intrm. 277, 279 (Chk. 2010).

Irreparable harm is the single most dispositive factor in determining whether injunctive relief should be granted. GE Seaco Servs., Ltd. v. Federated Shipping Co., [2006] FMSC 10; 14 FSM Intrm. 159, 162 (Pon. 2006). Irreparable harm is harm that cannot be remedied in any way except by the rather drastic measure of injunctive relief, that is, irreparable injury is a harm for which there is no adequate alternative remedy. Id. The threat of irreparable harm before the litigation's conclusion is a prerequisite to preliminary injunctive relief, but if money damages will fully compensate for the threatened interim action, there is no irreparable harm and a preliminary injunction should be denied. GMP Hawaii, Inc., 17 FSM Intrm. at 593; Ponape Transfer & Storage v. Pohnpei State Public Lands Auth., [1986] FMSC 21; 2 FSM Intrm. 272, 276 (Pon. 1986).

If an injunction does not issue, Luen Thai will be irreparably harmed because the disruption to its business by having to vacate the PFC site in February 2013 will cause Luen Thai the loss of goodwill and loss of customers and potential customers, for which monetary damages are extremely difficult to measure. FSM Dev. Bank v. Abello, [2012] FMSC 46; 18 FSM Intrm. 192, 196 (Pon. 2012); Continental Micronesia, Inc. v. Chuuk, [2010] FMSC 24; 17 FSM Intrm. 152, 162 (Chk. 2010); Yang v. Western Sales Trading Co., [2003] FMSC 83; 11 FSM Intrm. 607, 616 (Pon. 2003); Foods Pacific, Ltd. v. H.J. Heinz Co. Australia, [2001] FMSC 70; 10 FSM Intrm. 409, 417 (Pon. 2001). If an injunction is not issued, Liancheng will suffer irreparable harm because if Miju Mulsan moves onto the PFC site it will be very difficult to then remove Miju Mulsan and move onto the PFC site and because it would then also be difficult to get the business running quickly on the PFC site if the Luen Thai movable assets are no longer there. Luen Thai would also be irreparably harmed if not given the time (90-120 days) to relocate its business and its movable assets and inventory to another suitable location, which currently cannot be found on Pohnpei.

Luen Thai has a good chance of success on the merits because its contract with the State provided for "the first right to negotiate," Amended Lease Agreement § 27(A) (June 6,), and "mandamandatory and binding arbitration," id.§ 25. These clauses would be meaningless if they were not enforceable after the contract's expiration date. Luen Thai seeks specific performance of these contraauses. Specific performance is a contract remedy that is available only when the usual meas measures of damages, expectancy, restitution, or reliance money damages, are inadequate compensation or cannot be computed or when a substitute cannot be purchased. GMP Hawaii, Inc., 16 FSM Intrm. at 606. As noted above, money damages would be very difficult to calculate for Luen Thai if it is forced to immediately vacate the PFC site. Liancheng has a good likelihood of success on the merits because the process used to recommend Miju Mulsan as the only qualified bidder was questionable and because Liancheng's bid to lease the PFC site was clearly separate from its additional, optional proposal for a lease of the EDA site.

In evaluating the balance-of-possible-injuries factor, a court compares the threatened harm to each party if the requested injunctive relief is granted or if it is denied. GE Seaco Servs., Ltd., 14 FSM Intrm. at 163; Carlos Etscheit Soap Co. v. Epina, [1997] FMSC 5; 8 FSM Intrm. 155, 162 (Pon. 1997). The balance of harms favor the plaintiffs. Miju Mulsan has hired a few local employees and readied a container for shipment to Pohnpei. If the preliminary injunction is granted and Miju Mulsan cannot move onto the PFC site, Miju Mulsan is not irreparably harmed. The State has apparently also offered it the EDA site for lease, which Miju Mulsan could use as an alternate site, if necessary. The State does not appear to be harmed if the injunction is granted as long as there is a tenant on the PFC site running the fish processing facilities using local employees. If a preliminary injunction is denied, then Luen Thai's harm and Liancheng's harm are greater. This should be evident from the court's discussion of their irreparable harm. Also, they currently employ 110 local hires.

The public interest favors a bidding process that is fair and transparent. It also favors that foreign investors be seen to be treated fairly and thus encouraged to invest in Pohnpei to the State's benefit. A declaratory judgment and an injunction are the only adequate means of protecting the public interest, the integrity of the competitive bidding process, and the individual bidder's rights to challenge a contract award under the public bidding statutes. International Bridge Corp. v. Yap, [2000] FMSC 34; 9 FSM Intrm. 390, 394 (Yap 2000).

III.

The court, having weighed the four factors and having found them to favor the issuance of a preliminary injunction to maintain the status quo, therefore issued from the bench the following injunction:

That defendants State of Pohnpei, John Ehsa in his capacity as Governor, the Office of Fisheries and Aquaculture, and Miju Mulsan Company, Ltd. and their agents, successors, employees, attorneys, assigns, and all persons acting in concert or in cooperation with either of them or at their direction, are enjoined and restrained, pursuant to Rule 65 of the FSM Supreme Court Rules of Civil Procedure, from evicting plaintiff Luen Thai Fishing Venture, Ltd. from the land it currently occupies, formerly known as the Pohnpei Fisheries Corporation land, and from moving or allowing defendant Miju Mulsan Company, Ltd. to move on to the site. And it is further ordered that this preliminary injunction will last six months unless extended or shortened by court order. Since, under Civil Procedure Rule 65(c), no preliminary injunction can issue except upon the giving of security by the applicant, in such sum, if any, as the court deems proper, for the payment of such costs and damages as are incurred or suffered by any party who is found to have been wrongfully enjoined or restrained, Continental Micronesia, Inc., 17 FSM Intrm. at 162, the plaintiffs were also ordered to post with the court, no later than February 15, 2013, a bond of $5,000, which would be placed in an interest-bearing account. The preliminary injunction with the bond requirement were later memorialized.

IV.

The court further expects that the next step in this action is that Luen Thai's ability to compel specific performance of sections 25 and 27(A) of its contract with the State will be determined. The parties are accordingly invited to file and serve, no later than March 1, 2013, whatever motions they deem appropriate in the situation.

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