FEDERATED STATES OF MICRONESIA
SUPREME COURT TRIAL DIVISION

Cite as Udot Municipality v. FSM,
10 FSM Intrm. 354 (Chk. 2001)

UDOT MUNICIPALITY,
Plaintiff,

vs.

FEDERATED STATES OF MICRONESIA,
DEPARTMENT OF FINANCE AND ADMINISTRATION
FOR THE FEDERATED STATES OF MICRONESIA,
MAYOR LIWIS OS, in his capacity as Mayor of Polle Municipality,
TOLENSOM AUTHORITY,
JAMES FRITZ, in his capacity as Executive Director of
Chuuk State Committee on Improvement Projects,
Defendants.

CIVIL ACTION NO. 2000-1018

DECLARATORY JUDGMENT AND MEMORANDUM OF DECISION

Richard H. Benson
Associate Justice

Hearing: July 18, 2001
Decided: July 27, 2001

APPEARANCES:

For the Plaintiff:
Stephen V. Finnen, Esq.
Law Offices of Saimon & Associates
P.O. Box 1450
Kolonia, Pohnpei FM 96941

For the Defendants (FSM & Finance Dep't):
Kim E. Greene, Esq.
Assistant Attorney General
FSM Department of Justice
P.O. Box PS-105
Palikir, Pohnpei FM 96941

For the Defendants (Os, Tolensom & Fritz):
Wesley Simina, Esq.
P.O. Box 94
Weno, Chuuk FM 96942

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HEADNOTES

Constitutional Law ; Executive Powers; Constitutional Law ; Legislative Powers
The Constitution gives Congress the authority to appropriate public funds, but the Executive Branch is expressly delegated the power to faithfully execute and implement all national laws and a public law that appropriates public funds is a national law. Udot Municipality v. FSM, 10 FSM Intrm. 354, 357 (Chk. 2001).

Civil Procedure ; Injunctions; Separation of Powers
Specific powers are given to each branch of the government and a public law that abridges the executive's power to execute and implement national laws may be enjoined. Udot Municipality v. FSM, 10 FSM Intrm. 354, 357 (Chk. 2001).

Constitutional Law ; Case or Dispute ; Standing
A contention that a plaintiff is not singled out and thus suffers no irreparable harm peculiar to itself because it is one of eight in the same boat, does not indicate a lack of standing on the plaintiff's part, but rather that any of the eight would also have had standing to sue if it so chose. Udot Municipality v. FSM, 10 FSM Intrm. 354, 358 (Chk. 2001).

Constitutional Law ; Case or Dispute ; Mootness; Constitutional Law ; Case or Dispute ; Standing
Earmarking $50,000 of a prior appropriation to be spent in the plaintiff municipality does not take away the municipality's standing by making its claim moot when the appropriation still has an undifferentiated category called "other needs," and when the municipality's past inability to apply for funds already spent, and the likelihood that the situation would arise again, but be incapable of review, all favor a finding of continuing standing. Udot Municipality v. FSM, 10 FSM Intrm. 354, 358 (Chk. 2001).

Constitutional Law ; Case or Dispute ; Mootness; Constitutional Law ; Case or Dispute ; Standing
An argument that a party once had standing but no longer does is an argument that the case is now moot. One exception to the mootness doctrine is that the court retains jurisdiction when the problem will arise again, and would otherwise be incapable of review. Udot Municipality v. FSM, 10 FSM Intrm. 354, 358 (Chk. 2001).

Civil Procedure ; Declaratory Relief; Constitutional Law ; Case or Dispute
It is settled law in the FSM that the FSM Supreme Court has the ability to issue declaratory judgments so long as there is a case or dispute within the meaning of article XI, sections 6(a) or 6(b). Udot Municipality v. FSM, 10 FSM Intrm. 354, 358 (Chk. 2001).

Civil Procedure ; Injunctions; Sovereign Immunity
National government sovereign immunity is waived for claims for injunction arising out of alleged improper administration of FSM statutory laws, or any regulations issued pursuant to such statutory laws. Udot Municipality v. FSM, 10 FSM Intrm. 354, 359 (Chk. 2001).

Civil Procedure ; Injunctions; Separation of Powers
Because Congress has the statutory authority to name allottees other than the President or his designee, the court will deny a request for an order prohibiting defendants from ever again being allottees of FSM money. Udot Municipality v. FSM, 10 FSM Intrm. 354, 359 (Chk. 2001).

Separation of Powers
The constitutional principle of separation of powers is still violated when the public law only requires that those seeking funds for improvement projects must consult with the relevant congressman before the funds are obligated instead of requiring consultation and approval by the congressman. Udot Municipality v. FSM, 10 FSM Intrm. 354, 359 (Chk. 2001).

Constitutional Law ; Legislative Powers; Separation of Powers
Congress can give as much guidance as it wishes in the appropriation legislation about which projects will be funded, and much of this guidance will, no doubt, be the product of individual congressmen's consultation with their constituents. But this consultation takes place before the appropriation bill becomes law, not afterwards. After the appropriation bill has become law, it is the duty of those who execute the law and administer the funds to follow the guidance Congress has given them by consulting the language Congress put in the public law, and any applicable regulations, not by consulting individual congressmen. Udot Municipality v. FSM, 10 FSM Intrm. 354, 359-60 (Chk. 2001).

Civil Procedure ; Injunctions
Courts rarely grant mandatory injunctions because courts are ill-equipped to involve themselves in day-to-day administration and because of the difficulty of enforcing such injunctions. Courts generally enter prohibitory injunctions ; an injunction forbidding some act. Udot Municipality v. FSM, 10 FSM Intrm. 354, 360 (Chk. 2001).

Separation of Powers
Fund categories that were formulated as the result of an unconstitutional "consultation" process with congressmen may effectively be disregarded whenever a new process is implemented to determine in a constitutionally proper manner where, how, and what to spend the improvement project money on. Udot Municipality v. FSM, 10 FSM Intrm. 354, 360 (Chk. 2001).

Civil Procedure ; Injunctions
When a party has standing, a court may order an accounting of public funds because the financial management act requires that public funds be properly accounted. Udot Municipality v. FSM, 10 FSM Intrm. 354, 361 (Chk. 2001).

Attorney, Trial Counselor and Client ; Fees
The "private attorney general" theory has never been judicially applied in the FSM, nor has it been judicially prohibited. Udot Municipality v. FSM, 10 FSM Intrm. 354, 361 (Chk. 2001).

Attorney, Trial Counselor and Client ; Fees
When the prevailing party has vindicated and enforced an important right affecting the public interest that will potentially benefit the general public and a large number of people, which required private enforcement, and which was of societal importance and the cost to prevailing party appears to outweigh the potential benefits it achieved, the case is a suitable one for the equitable application of the "private attorney general" doctrine and it is proper to adopt the principle. Udot Municipality v. FSM, 10 FSM Intrm. 354, 361-62 (Chk. 2001).

Costs
Costs are generally allowed as of course to the prevailing party. Udot Municipality v. FSM, 10 FSM Intrm. 354, 362 (Chk. 2001).

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COURT'S OPINION

RICHARD H. BENSON, Associate Justice:

On June 12, 2001, the plaintiff, Udot Municipality, filed its Motion for Summary Judgment. Defendants Federated States of Micronesia and its Department of Finance and Administration filed their opposition on June 26, 2001. Defendants Mayor Liwis Os, Tolensom Authority, and James Fritz filed their opposition and their Cross-Motion for Summary Judgment and a Motion to Dissolve Injunction on July 2, 2001. Udot filed its opposition to the cross motion and its reply to the opposition on July 11, 2001. The motions were heard on July 18, 2001, with the parties represented by counsel, and counsel for defendants Mayor Liwis Os, Tolensom Authority, and James Fritz appearing by telephone.

I. Background

In early 2000, Udot Municipality learned of Public Law No. 11-27. On April 27, 2000, the Mayor of Udot wrote to the Executive Director of the Chuuk State Committee on Improvement Projects asking for an accounting of funds already spent and for forms in order to seek disbursement. The Executive Director responded that he was not obligated to give an accounting and told him to ask Congress or the FSM Secretary of Finance and Administration for an accounting because he is required to report to those instrumentalities. As for asking for disbursement, the Executive Director said to ask the Senator representing Election District No. 4 (Faichuk). The Executive Director testified that that Senator tells him what projects are approved. The Director testified that the system and the procedure is that you apply to the Senator representing Faichuk, the Senator decides, and then he carries out the Senator's decisions.

This procedure violated the Constitution. The Constitution gives Congress the authority to appropriate public funds, FSM Const. art. IX, § 3(a), and Public Law No. 11-27 appropriates public funds. But under our constitution the Executive Branch is expressly delegated the power "to faithfully execute and implement . . . all national laws." FSM Const. art. X, § 2(a). Public Law No. 11-27 is a national law. Congress, not the executive, was thus executing and implementing Public Law No. 11-27, a power expressly delegated to the executive branch. For that reason, Public Law No. 11-27, as applied, violated the FSM Constitution. Specific powers are given to each branch of the government and Public Law No. 11-27 abridged the executive's power to execute and implement national laws. Because of that conclusion, a preliminary injunction issued that barred the FSM and the Department of Finance and Administration, during the pendency of this action, from disbursing any unobligated funds appropriated for Chuuk Election District No. 4 remaining under Public Law No. 11-27 and the Executive Director of the Chuuk State Commission on Improvement Projects and the Chuuk State Commission on Improvements Projects itself, during the pendency of this case, were enjoined from approving any further obligations against funds appropriated by Congress under Public Law 11-27 for Chuuk Election District 4. Udot Municipality v. FSM, 9 FSM Intrm. 418, 421 (Chk. 2000).

II. Udot's Summary Judgment Motion

The plaintiff, Udot Municipality, seeks summary judgment on its causes of action. Udot seeks a declaratory judgment that the current method for disbursing development funds in Congressional Election District Four, Faichuk, is unconstitutional; that allottees Liwis Os and Tolensom Authority violated the Financial Management Act and that the FSM Department of Finance and Administration failed to properly monitor the allottees; that the final judgment include the language from the preliminary injunction concerning the unconstitutionality of the legislated disbursement method and that even as amended by Public law No. 11-65 the method is still unconstitutional; and that the categories as set up for disbursing the funds are unconstitutional. Udot also asks that the court order that allottees Liwis Os and Tolensom Authority be stricken from the government's list of eligible allottees; the establishment of a fair and transparent application process with respect to Faichuk improvement project funds; and that those funds appropriated by Public Law Nos. 10-120, 10-126, and 10-69, as amended by 11-29, be audited and accounted for using generally accepted accounting principles. In addition, Udot seeks an award for its attorney's fees.

Defendants Liwis Os, Tolensom Authority, and James Fritz, who are all allottees of the appropriated funds in question, oppose Udot's motion in its entirety and also, once again, question whether Udot has the standing to seek any of the relief it requests and oppose all of the relief Udot requests. Unlike the allottee defendants, the FSM defendants, the Federated States of Micronesia and its Department of Finance and Administration, oppose only Udot's request that the court strike Os and Tolensom Authority as allottees and Udot's request for attorney's fee award. The FSM does not contest Udot's position as to the unconstitutionality of the legislated disbursement methods.

A. Udot's Standing to Sue

The allottee defendants again raise the issue of the plaintiff's standing to sue. The court has previously considered this issue and found that Udot did have standing. Udot Municipality v. FSM, 9 FSM Intrm. 560, 562 (Chk. 2000). The allottee defendants present two new arguments. First, they contend that since all eight municipalities in Faichuk are in the same boat, Udot is not singled out and thus suffers no irreparable harm peculiar to itself. This, however, would not indicate a lack of standing on Udot's part, but rather that any of the eight municipalities of Faichuk would also have had standing to sue if it so chose.

Second, the allottee defendants contend that matters are changed because Public Law No. 11-65, § 1(5)(a)(iii) specifically earmarked $50,000 of the Faichuk appropriation for Udot, thus taking away whatever standing Udot had by making its claim moot. Udot retorts that this sum was spent on a meeting house on Udot without the municipality's, or its mayor's, knowledge or involvement. The allottee defendants' argument is not convincing. Although Public Law No. 11-65 amends Public Law No. 11-29 by making the Faichuk appropriations more specific, it still has an undifferentiated category called "other needs," Pub. L. No. 11-65, § 1(5)(k). The "other needs" category, Udot's past inability to apply for funds already spent, and the likelihood that the situation would arise again, but be incapable of review, all favor a finding of continuing standing. An argument that a party once had standing but no longer does is an argument that the case is now moot. One exception to the mootness doctrine is that the court retains jurisdiction when the problem will arise again, and would otherwise be incapable of review. FSM v. Louis, 9 FSM Intrm. 474, 483 (App. 2000) ("The most notable exception [to the mootness doctrine] . . . is a situation in which an otherwise moot case may have a continuing effect on future events, including future litigation.")

B. Declaratory Judgment

1. Compliance with the Financial Management Act

Udot's summary judgment motion asks for a declaratory judgment in its favor. At oral argument, the allottee defendants questioned the propriety of a declaratory judgment. It is settled law in the FSM that the FSM Supreme Court has the ability to issue declaratory judgments so long as there is a case or dispute within the meaning of article XI, sections 6(a) or 6(b). See, e.g., Dorval Tankship Pty. Ltd. v. Department of Finance, 8 FSM Intrm. 111, 115 (Chk. 1997); Ponape Chamber of Commerce v. Nett, 1 FSM Intrm. 389, 400 (Pon. 1984); FSM Civ. R. 57. Because Udot has standing to bring this suit and because there is an actual case or dispute, the court may properly consider declaratory relief.

Udot seeks a declaratory judgment that, regarding the expenditures already made under Public Laws Nos. 10-120, 10-126, and 10-69, as amended by 11-29, allottee defendants Os and the Tolensom Authority violated the FSM Financial Management Act, 55 F.S.M.C. 201 et seq., and that the FSM failed to properly monitor those allottees. The allottee defendants contend that since when they were acting as allottees they were acting as agents of the national government that they are entitled to same sovereign immunity protection from private suit as other national government officials. They also contend that if Os and Tolensom Authority committed any wrongdoing, those wrongs are public wrongs or crimes, and, in such case, it should be the sovereign ; the national government ; that should prosecute or sue for non-compliance.

Udot is not suing Os and Tolensom Authority for damages. It is suing for declaratory and injunctive relief. Even assuming that Os and Tolensom Authority are cloaked with the immunity they suggest, any national government sovereign immunity is waived for "[c]laims for . . . injunction . . . arising out of alleged improper administration of statutory laws of the Federated States of Micronesia, or any regulations issued pursuant to such statutory laws." 6 F.S.M.C. 702(2). Sovereign immunity is thus not a defense to Udot's claims.

The documentary evidence obtained through discovery amply shows that neither Os nor the Tolensom Authority complied with the Financial Management Act. Udot is entitled to a declaratory judgment to that effect. It is also apparent that their noncompliance with the Financial Management Act could not have gone on as long as it did if the FSM had not failed to properly monitor the allottees and had required compliance before doling out any further disbursements. Udot is entitled to a declaratory judgment to that effect.

Udot also asks the court for an order striking Liwis Os and the Tolensom Authority from the list of those eligible to be allottees. The FSM defendants, as well as the allottee defendants, oppose this on the ground that this would impinge of Congress's power to name allottees. Under the Financial Management Act, with certain exceptions that do not apply here, the President or his designee is the allottee of appropriated funds unless Congress has specifically required by law that the allottee be someone else. 55 F.S.M.C. 217(A). Congress has the statutory authority to name allottees other than the President or his designee. Udot's request for an order prohibiting Os and the Tolensom Authority from ever being allottees of FSM money is therefore denied. Based on past performance, it may seem unwise to again make Os or the Tolensom Authority an allottee, but that is a determination for Congress to make, not the court.

2. Unconstitutional Method of Disbursement

Udot asks that the final judgment in this matter include language in it similar to that in the preliminary injunction, Udot, 9 FSM Intrm. at 420, holding that the method the funds are disbursed is unconstitutional. The allottee defendants contend that the preliminary injunction was in error. They contend that any constitutional defect is cured because the current law only requires that those seeking funds for improvement projects are only required to consult with the Faichuk congressman before the funds are obligated. See Pub. L. No. 11-27, § 5 (as amended by Pub. L. No. 11-65, § 3). They contend that mere consultation, instead of consultation and approval, does not violate constitutionally-mandated separation of powers. The allottee defendants further contend that there are not enough facts for the court to conclude that requiring consultation with the congressman is not constitutionally within the Executive Director's discretion.

Involvement by the "relevant" congressman in the administration and execution of the appropriation laws in this manner still violates the constitutional principle of separation of powers. The time for consultation with a Congressman concerning which projects should be funded is before Congress has voted the appropriation, so that it can be put in the appropriation bill for Congress to consider and vote upon and for the President to approve or veto. If Congress wishes to appropriate money for projects without designating by legislation the projects to be funded, it must then leave the administrative and executive decision-making as to which projects to fund to those whose duty it is to faithfully administer and execute the laws. Congress can give as much guidance as it wishes in the appropriation legislation about which projects will be funded, and much of this guidance will, no doubt, be the product of individual congressmen's consultation with their constituents. But this consultation takes place before the appropriation bill becomes law, not afterwards. After the appropriation bill has become law, it is the duty of those who execute the law and administer the funds to follow the guidance Congress has given them by consulting the language Congress put in the public law, and any applicable regulations, not by consulting individual congressmen. Congress may appropriate funds for specific improvement projects, or it may legislate rules for determining which projects are appropriate, or a combination of the two. What Congress, or individual congressmen, may not do is involve themselves in the administrative and executive process of determining which projects are to be funded after the money has already been appropriated.

As it relates to the Faichuk congressional district, a permanent injunction shall issue banning the requirement that the relevant congressman be consulted before improvement projects are approved, and the relevant sections of the public laws that require such consultation will be struck down as unconstitutional.

3. Fair and Transparent Application Process

Udot asks that the court order the Director of the Chuuk State Committee on Improvement Projects to establish a fair and transparent application process for the remaining unexpended portion of the appropriation that was enjoined by the preliminary injunction, and for future appropriations, subject to judicial review for non-compliance and subject to the guidelines of appropriate legislation. Udot has supplied the court with language it thinks would be proper for such an injunction and the application process. The FSM does not oppose this or the suggested language for the application process. The allottee defendants took no position on the suggested language.

What Udot seeks is in the nature of a mandatory injunction. Courts rarely grant mandatory injunctions because courts are ill-equipped to involve themselves in day-to-day administration and because of the difficulty of enforcing such injunctions. Courts generally enter prohibitory injunctions ; an injunction forbidding some act. That seems a salutary principle to follow in this case as well.

The court will therefore issue an injunction prohibiting the expenditure of the unspent funds currently subject to the preliminary injunction and future funds appropriated for improvement projects in Faichuk until such time as either Congress has legislated rules for a fair and transparent application process for improvement funds for Faichuk, or rules and regulations for a fair and transparent application process for improvement funds for Faichuk have been properly promulgated and implemented by the appropriate agency. That process may be similar to that proposed by Udot, or it may be some other fair and transparent application process.

4. Unconstitutional Categories

Udot also asks that the eighteen categories already established and listed as having funds approved but not yet spent be abolished as constitutionally suspect. The allottee defendants oppose because they claim it is uncertain whether those funds had been obligated prior to the preliminary injunction.

The allottee defendants miss the point. Funds that were previously legally obligated were not covered by the preliminary injunction, nor would they be covered by any final injunction. The categories were, however, formulated as the result of an unconstitutional "consultation" process. Whenever a new process is implemented to determine in a constitutionally proper manner where, how, and what to spend the improvement project money on, those implementing the process may proportion the funds into whatever categories they determine, which may or may not include some of the same categories previously used. The court therefore does not need to "abolish" the categories as they may be effectively disregarded in the future.

5. Accounting

Udot also asks that the court order an accounting of the funds already expended using generally accepted accounting principles. The allottee defendants contend that most of these funds have been spent and accounted for and that the accounting for public funds differs from the accounting of corporate funds. The allottee defendants also contend that accounting should not be ordered at the request of an entity which does not have the standing to request such accounting.

The standing issue has already been decided, above. The financial management act requires that public funds be properly accounted. 55 F.S.M.C. 205(2). Those papers should be filed with the Department of Finance and Administration and should be public documents. The court sees no sound reason why an accounting should not be ordered. The defendants FSM and the Department of Finance and Administration shall provide a proper accounting of the past expenditures involved. It seems futile to order defendants Os and the Tolensom Authority to provide any accounting because of the disarray, disorder, and sketchiness of the records available from them. It also seems unnecessary to order the Chuuk State Committee on Improvement Projects to provider an accounting as Udot has acknowledged that Committee's records appear in good order and it can be ascertained from them where the funds it handled went.

6. Permanent Injunction

Udot has asked for a permanent injunction. It is entitled to such on the issues it raised above and on which it prevailed in conformity with this memorandum. The injunction shall Issue.

C. Allottee Defendants' Cross Motion and Motion to Dissolve

The allottee defendants also brought a Cross-Motion for Summary Judgment and a Motion to Dissolve Injunction. Those motions are denied to the extent that Udot's summary judgment is granted, and for the reasons, discussed above, that Udot's motion was granted.

III. Udot's Attorney's Fees

Udot has asked that the court award it its attorney's fees on what is generally called "a private attorney general" theory. That theory has never been judicially applied in the FSM, Damarlane v. United States, 8 FSM Intrm. 45, 55 (App. 1997); nor has it been judicially prohibited. If this were a case where such an award were obviously inappropriate, the analysis could end here. This case, on its face, appears to be one where it would be proper to consider the application of the principle. There are differing but similar descriptions of the elements that must be satisfied for such an attorney's fee award. In the United States, such awards are proper to a successful or prevailing party when either a statute allows it and the action 1) enforces an important right affecting the public interest and 2) confers a significant benefit upon the general public or a large class of persons, if 3) the necessity and cost to plaintiff in bringing its private enforcement action outweighs its stake in the action, Damarlane, 8 FSM Intrm. at 55 (citing Kaufman & Broad-South Bay v. Unisys Corp., 822 F. Supp. 1468 (N.D. Cal. 1993) (relying on Cal. Civ. Proc. Code § 1021.5)), or as an equitable rule which permits courts in their discretion to award attorney's fees to a party who has vindicated a right that 1) benefits a large number of people, 2) requires private enforcement, and 3) is of societal importance, id. (citing Yslava v. Hughes Aircraft Co., 845 F. Supp. 705 (D. Ariz. 1993)).

There is no FSM statute providing for this right. It therefore must be considered as whether it is proper under equity and whether such an equitable rule would be suitable for adoption in the Federated States of Micronesia. In this case, Udot, the prevailing party, has vindicated and enforced an important right affecting the public interest that will potentially benefit the general public and a large number of people, which required private enforcement, and which was of societal importance. Furthermore, the cost to Udot appears to outweigh the potential benefits it achieved. This case is a suitable one for the equitable application of the "private attorney general" doctrine and it is proper to adopt the principle.

Udot's motion for attorney's fees is hereby granted. Reasonable attorney's fees will be awarded. Costs are generally allowed as of course to the prevailing party. Damarlane, 8 FSM Intrm. at 54; FSM Civ. R. 54(d). Udot shall therefore submit, by September 15, 2001, its statement of fees and costs incurred. The defendants shall have ten days after service to respond.

IV. Conclusion

Udot's motion for summary judgment is granted in part in and a permanent injunction shall issue. Defendants Liwis Os and Tolensom Authority violated the Financial Management Act and the FSM and the Department of Finance and Administration failed to properly monitor them. Udot's request to bar Os and Tolensom Authority from ever again being allottees is denied. The involvement of congressmen (either consultation or approval) in deciding which projects are to be funded after Congress has already appropriated the money is unconstitutional and is permanently enjoined. The undisbursed and unobligated funds and future appropriations are enjoined from being disbursed until a fair and transparent application process and procedure is implemented. That process may disregard the categories currently used for improvement projects. The FSM and its Department of Finance and Administration shall conduct an accounting of the funds already disbursed. Udot is awarded its reasonable attorney's fees and costs.

The allottee defendants' Cross-Motion for Summary Judgment and Motion to Dissolve Injunction are denied.

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