FSM SUPREME COURT TRIAL DIVISION

CIVIL ACTION NO. 2013-016

EDGAR SANTOS,			)						
)
Plaintiff,		)
)
vs.				)
)
POHNPEI GOVERNMENT,		)
)
Defendant.		)
___________________________________	)

	FINDINGS OF FACT AND CONCLUSIONS OF LAW

	Beauleen Carl-Worswick
	Associate Justice

	Trial:  September 14-15, 2017
	Submitted:  October 25, 2017
	Decided:  April 13, 2018

APPEARANCES:

For the Plaintiff:	Salomon M. Saimon, Esq.
Directing Attorney
Micronesia Legal Services Corporation
P.O. Box 129
Kolonia, Pohnpei FM 96941

For the Defendant:	Mona Abello-Pangelinan, Esq.
Assistant Attorney General
Pohnpei State Attorney General’s Office
P.O. Box 1555
Kolonia, Pohnpei FM 96941

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	HEADNOTES

Contracts  Reformation; EmployerEmployee; Public Officers and Employees  Pohnpei
When, even though the employment contract was printed with a Pohnpei state government letterhead, the Pohnpei Visitors Bureau’s actual function and operation shows that it is independent of the Pohnpei state government; when the PVB’s funding is provided for under the Compact of Free Association, but is deposited with the Pohnpei Department of Treasury and Administration for custodial purposes and disbursement; and when the PVB’s actual decision-making lies with its Board, the PVB is an entity that operates independent of the state government, and its Board is responsible for its General Manager’s hiring, thus making the state’s non-renewal of the plaintiff’s contract unlawful.  Santos v. Pohnpei, 21 FSM R. 495, 499 (Pon. 2018).

Torts  Interference with a Contractual Relationship; Torts  Interference with Prospective Business Opportunity
Claims of interference with contractual relations and interference with prospective business advantage, are both causes of action that arise under Pohnpei state law.  Santos v. Pohnpei, 21 FSM R. 495, 499 (Pon. 2018).

Torts  Interference with a Contractual Relationship
The causes of action for interference with contract’s specific elements are 1) a valid contract; 2) the defendant’s knowledge of the contract; 3) the defendant’s intentional interference, which induces breach of the contract; 4) absence of justification on the defendant’s part; and 5) resulting damages.  Santos v. Pohnpei, 21 FSM R. 495, 499 (Pon. 2018).

Contracts  Reformation; Public Officers and Employees  Pohnpei
Although the contract in question is a personal services contract which names the State of Pohnpei as the contracting party, because the Pohnpei Visitors Bureau operates and is controlled by its Board, and not by the state government, the agreement is between the plaintiff and the PVB, through its Board of Directors.  Santos v. Pohnpei, 21 FSM R. 495, 499 (Pon. 2018).

Contracts  Formation; Public Officers and Employees  Pohnpei
Since the Pohnpei Visitors Bureau is a non-governmental organization with duly enacted articles of incorporation and bylaws, whose funding is provided for under the Compact of Free Association, the Pohnpei state government had a ministerial duty to certify the plaintiff’s employment contract after the Board’s approval, because the discretion of whether to hire the plaintiff was with the PVB Board. "Ministerial" means of or relating to an act that involves obedience to instructions or laws instead of discretion, judgment, or skill.  Santos v. Pohnpei, 21 FSM R. 495, 500 & n.4 (Pon. 2018).

Torts  Interference with a Contractual Relationship
When no witnesses or evidence supported Pohnpei’s argument that the Pohnpei Visitors Bureau General Manager’s hiring needed the state government’s approval, Pohnpei interfered with the plaintiff’s contractual relationship with the PVB when it did not let him receive any pay although he worked performing services for four or five months.  Santos v. Pohnpei, 21 FSM R. 495, 500 (Pon. 2018).

Civil Rights; Constitutional Law  Due Process
The due process clause may only be invoked through state action.  Santos v. Pohnpei, 21 FSM R. 495, 500 (Pon. 2018).

Civil Rights  Persons Liable; Constitutional Law  Due Process
An autonomous agency cannot be declared to be subject to the due process provisions of the FSM and state constitutions, and must be declared a private entity, and not a "state actor" for due process purposes.  Santos v. Pohnpei, 21 FSM R. 495, 500 (Pon. 2018).

Civil Rights  Remedies and Damages
Chapter 7 of Title 11 of the FSM Code creates a statutory cause of action for individuals whose constitutional rights have been violated.  Santos v. Pohnpei, 21 FSM R. 495, 501 (Pon. 2018).

Civil Rights  Persons Liable
When the court finds that an entity operated independent of the state government, it is not a state actor for due process purposes, and the plaintiff will not prevail on a claim against it for violation of civil rights pursuant to 11 F.S.M.C. 701(3).  Santos v. Pohnpei, 21 FSM R. 495, 501 (Pon. 2018).

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	COURT’S OPINION

BEAULEEN CARL-WORSWICK, Associate Justice:

	I. Background

The Summons and Complaint in this matter were filed by the plaintiff, Edgar Santos (herein "Santos") on May 06, 2013, and an Answer was entered by the defendant, Pohnpei State Government(herein "Pohnpei State"), on May 31, 2013.  Trial in this matter was held on September 14-15, 2017.  During trial, the Court received testimony from the following witnesses:  Edgar Santos, Quirino Loyola, Isaac Artui, Kukulynn Gallen, Richard Adams, and Feliciano Perman.

At the closing of their cases in chief, the Court instructed the parties to submit Closing Arguments and written Findings of Facts and Conclusions of Law.  Closing Arguments for the plaintiff was filed on October 13, 2017, and draft Findings of Fact and Conclusions of Law were filed on October 25, 2017.1

	II.  Findings of Fact

The plaintiff was the General Manager of the Pohnpei Visitors Bureau (herein "PVB").  The PVB’s responsibility is to market and promote the island of Pohnpei as a tourist destination.  Funding for the PVB is provided for through a private sector development grant under the Compact of Free Association between the United States and the Federated States of Micronesia.  Funds for the PVB are deposited and disbursed through the Pohnpei State Department of Treasury and Administration.

The PVB is governed by a Board of Directors (herein "the Board"), and its day to day operation is overseen by the General Manager.  The employment of the General Manager is subject to the terms of a one (1) year contract, renewable on an annual basis, subject to approval and renewal by the Board.

A contract that is executed on behalf of the PVB General Manager is printed on a form titled "State of Pohnpei Personal Services Contract," which is routed through various offices of the Pohnpei State Government for signature and approval.  Testimony at trial also shows that PVB timesheets are submitted to the Pohnpei State Department of Treasury and Administration, who then issue payroll checks to PVB employees.

During the contractual period in question, from October 1, 2011 to March 31, 2012, the Board had approved the plaintiff’s contract, but did not acquire the necessary signatures when the contract was routed to the State offices.  The plaintiff’s complaint, filed on May 6, 2013, sets forth the following causes of action: 1) Interference with a Contractual Relationship, 2) Violation of Due Process, and 3) Violation of Civil Rights.

	III.  Conclusions of Law

The Pohnpei Visitor’s Bureau as a State Actor

The first issue to be determined is whether or not the Pohnpei Visitor’s Bureau is a state actor, as an entity controlled by the Pohnpei State Government.  If so, the action of the defendant in terminating Edgar Santos is justified.  On the other hand, if the PVB is an agency independent from the Pohnpei State Government, then the termination of the plaintiff is unlawful.

Quirino Loyola, Registrar of Corporation for the State of Pohnpei, and Feliciano Perman, Director of Treasury under the Pohnpei State Government, testified that the PVB is a non-profit organization registered under the laws of Pohnpei.  Article VIII (A) of the Articles of Incorporation of the PVB, and Article II § 1 of the articles as amended in 1997, states "All authority, control, management and power over the affairs of this Corporation shall be vested in and shall be exercised by this Corporation’s Board of Directors . . . ."2

The Chuuk State Supreme Court dealt with a similar issue in determining whether or not the Chuuk Coconut Authority was a state actor in Hauk v. Board of Dirs., 11 FSM R. 236 (Chk. S. Ct. Tr. 2002).  In Hauk, the court held

Similar circumstances were presented to the Kosrae Supreme Court, which held, in Livaie v. Micronesia Petroleum Co., 10 FSM Intrm. 659, 666-67 (Kos. S. Ct. Tr. 2002), that a state owned corporation was not a state actor:  When statutory provisions intend and ensure that an entity is run as a corporation with its own management and employees, and not as a state government agency, and when, although the state government remains its sole shareholder, the state government does not assume its debts, does not own its assets, and has no control over its day to day operations, it is not a "state actor" and its termination of an employee is therefore not a "state action."

As created, the Authority cannot be considered an agency of the State of Chuuk.  It has its own Board of Directors, Truk S.L. No.1-1-12, § 1(5), is solely empowered to select its own officers, id. § 1(5)(5), may sue and be sued in its own name and is responsible for its own debts, id. § 1(4)(7), and owns its own assets, id. § 1(4)(2), (3).

[Hauk v. Board of Dirs., 11 FSM R. at 240.]

Here, the PVB operates under the guidance and direction of the Board, subject to enacted Articles of Incorporation and Bylaws.  These article specifically state that the authority, control, management and power of the PVB is governed by the Board of Directors.  Similar to the court’s holding in Livaie v. Micronesia Petroleum Co., 10 FSM R. 659 (Kos. S. Ct. Tr. 2002), the PVB operates as a corporation with its own management and employees.  The PVB receives most, if not all, of its funding from sources outside of the State of Pohnpei, even though the funds are distributed by the Pohnpei State Department of Treasury and Administration.

Although the employment contract is printed with the letterhead of the Pohnpei State Government, the actual function and operation of the PVB shows that it is independent of the Pohnpei State government.  The fact that the plaintiff’s contract is routed through the State offices may be a matter of formality, for financial and budgetary reasons.

Evidence of this is found in the fact that funding for the PVB is provided for under the Compact of Free Association, and is deposited with the Pohnpei State Department of Treasury and Administration for custodial purposes and disbursement.  Actual decision making of the PVB, however, lies with the Board.

Accordingly, the Court finds that because the PVB is an entity that operates independent of the State government, and that the Board is responsible for the hiring of its General Manager, the non-renewal of the plaintiff’s contract was unlawful.

Interference with Contractual Relationship

The plaintiff’s first cause of action in his complaint is a claim for Interference with a Contractual Relationship.  Claims of interference with contractual relations and interference with prospective business advantage, are both causes of action that arise under Pohnpei state law.  Foods Pacific, Ltd. v. H.J. Heinz Co., Australia, 10 FSM R. 200, 203 (Pon. 2001); Jano v. Fujita, 16 FSM R. 323, 326-27 (Pon. 2009).

The specific elements of the causes of action for interference with contract are 1) a valid contract; 2) knowledge by the defendant of the contract; 3) intentional interference by the defendant which induces breach of the contract; 4) absence of justification on the part of the defendant; and 5) resulting damages.  Ehsa v. Kinkatsukyo, 16 FSM R. 450, 457 (Pon. 2009); see also Jano, 16 FSM R. at 327 (citing Saey v. Xerox Corp., 31 F. Supp. 2d 692, 700 (E.D. Mo. 1998)).

In consideration of the elements, there is a valid employment agreement between Edgar Santos and the Pohnpei Visitors Bureau for the services of a General Manager in exchange for compensation.  Although the contract in question is a Personal Services Contract which names the State of Pohnpei as the contracting party, because the PVB operates and is controlled by the Board, and not the State government, the agreement is between Santos and the PVB, through its Board of Directors.3

The defendant had knowledge of the contract because a series of fourteen (14) contracts, from 2006 to 2011, were admitted into evidence during Trial showing that Edgar Santos’s employment as the General Manager of the PVB was renewed on a continuous basis during that period.  The State of Pohnpei also knew of the agreement between PVB and Edgar Santos because the Pohnpei State Department of Treasury and Administration is the custodian and distributor of the funds for the PVB.

The Court finds intentional interference and no justification by the defendant under the third and fourth requirements because former PVB Board member, Richard Adams, testified that the Board had approved the contract extension for the plaintiff, however, the agreement was never ratified by Pohnpei State.  In its Pre-Trial statements filed on February 18, 2015, the defendant argues that PVB’s wish to rehire an employee is conditioned upon the approval of Pohnpei State, regardless of the PVB’s decision.  Def.’s Pre-Trial Statements at 3.

However, as noted above, the decision for renewal of employment for the General Manager is with the Board, not with Pohnpei State.  Because the PVB is an NGO with duly enacted Articles of Incorporation and Bylaws, whose funding is provided for under the Compact of Free Association, the Pohnpei State Government had a ministerial duty to certify Edgar Santos’s employment contract after approval by the Board, because the discretion of whether or not to hire the plaintiff is with the PVB Board.4

Under the final requirement of an interference with contract claim, the resulting damages to the plaintiff is providing the services of a General Manager for the PVB Board without compensation.  At Trial, Edgar Santos testified that he performed the duties of General Manager for four (4) to five (5) months without being paid.  Plaintiff’s evidence admitted as "Exhibit O" is a contract as General Manager to commence on October 1, 2011 and end on March 31, 2012, which supports the plaintiff’s claim of performing services for five (5) months.  The Court will require the plaintiff to provide his exact amount of damages, to factor in the necessary deductions under applicable law.

The defendant did not produce any witnesses or evidence that would support their argument that the hiring of the General Manager of the PVB needs the approval of the Pohnpei State Government.  Therefore, the Court finds that there was an interference of a contractual relationship by the defendant.

Violation of Due Process Rights

The due process clause may only be invoked through state action.  Livaie v. Micronesia Petroleum Co., 10 FSM R. 659, 667 (Kos. S. Ct. Tr. 2002).  As an autonomous agency, the Authority cannot be declared to be subject to the due process provisions of the FSM and State constitutions, and must be declared a private entity, and not a "state actor" for due process purposes.  Hauk v. Board of Dirs., 11 FSM R. at 240-41.

In the present matter, similar to the Coconut Authority in Hauk, the Court has determined that the PVB is not a state actor.  Therefore, the plaintiff may not succeed in a violation of due process claim against the defendant Pohnpei Government.

Violation of Civil Rights

Santos’s final cause of action is for violation of civil rights, pursuant to 11 F.S.M.C. 701(3), which states:

A person who deprives another of any right or privilege protected under this section shall be civilly liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress, without regard to whether a criminal case has been brought or conviction obtained.  In an action brought under this section, the court may award costs and reasonable attorney’s fees to the prevailing party.

Chapter 7 of Title 11 of the FSM Code creates a statutory cause of action for individuals whose constitutional rights have been violated.  It was enacted to safeguard the rights guaranteed to all FSM citizens under Article IV of the FSM Constitution.  Ladore v. Panuel, 17 FSM R. 271, 275 (Pon. 2010).

Because the Court finds that the PVB operated independent of the Pohnpei State Government, and is not a state actor for due process purposes, the plaintiff will not prevail on a claim for violation of civil rights pursuant to 11 F.S.M.C. 701(3).

	IV.  Conclusion

The defendant is liable to the plaintiff for interference of a contractual relationship.  The plaintiff’s claims for due process and violation of civil rights are dismissed.  The defendant is liable to the plaintiff in the bi-weekly amount of $831.20 + COLA for the five (5) month duration of the employment contract.

The plaintiff shall submit his amount of damages for the five (5) month contractual period, including deductions as required by law, within ten (10) days of being served with this Findings of Fact and Conclusions of Law.  The parties shall bear their own costs.

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