FSM SUPREME COURT TRIAL DIVISION

CIVIL ACTION NO. 2005-004

GORDON SMITH,
Plaintiff,

vs.

FABIAN NIMEA, individually and d/b/a FSN FINANCIAL GROUP, INC., d/b/a FFGI CONSULTING GROUP,
Defendants.
__________________________________________ )

DECISION AND ORDER; MEMORANDUM

Martin G. Yinug
Chief Justice

Trial: March 17-18, 2011
Decided: October 5, 2011

APPEARANCES:

For the Plaintiff: Mary Berman, Esq.
P.O. Box 163
Kolonia, Pohnpei FM 96941

For the Defendants: Stephen V. Finnen, Esq.
P.O. Box 1450
Kolonia, Pohnpei FM 96941

* * * *

HEADNOTES

Contracts - Formation
Duress takes two forms: physical and economic. Physical duress negates assent ab initio; economic duress makes a formed contract voidable. A contract is voidable for economic duress if: 1) a party's manifestation of assent is induced by an improper threat by the other party that leaves the victim no reasonable alternative; or 2) a party's manifestation of assent is induced by one who is not a party to the transaction, unless the other party to the transaction in good faith and without reason to know of the duress either gives value or relies materially on the transaction. Smith v. Nimea, 18 FSM Intrm. 36, 41-42 (Pon. 2011).

Contracts - Formation
When no evidence suggests that the defendant was responsible for any physical duress against the plaintiff; when the evidence shows that the plaintiff was desperate to get the work, but suggests that the situation is one largely of his own creation, or at least not the defendant's creation; when the plaintiff has not shown that the defendant made any threat, proper or improper, or did any act that left the plaintiff with no reasonable alternative, none of this evidence gives rise to the sort of improper threat and absence of reasonable alternatives upon which the court can find economic duress. Smith v. Nimea, 18 FSM Intrm. 36, 42 (Pon. 2011).

Contracts - Damages
When the contract term that prorates compensation based on proportions of time applies to the plaintiff's breach of contract claim and absent complete figures for individual hours worked on each phase of the revenue subject to apportionment and absent an independent basis for determining the relative values of the actual hours worked by both the plaintiff and another, a comparison of the amount of rework the other had to perform is an equitable basis upon which to determine the appropriate proportions of hours the plaintiff and the other worked and therefore the amount due the plaintiff. Smith v. Nimea, 18 FSM Intrm. 36, 43-44 (Pon. 2011).

Torts - Interference with Prospective Business Opportunity
Generally, a plaintiff in a cause of action for interference with business opportunities must prove: 1) the plaintiff's existing or reasonable expectation of economic benefit or advantage; 2) the defendant's knowledge of that expectancy; 3) the defendant's wrongful intentional interference with that expectancy; 4) reasonable probability that the plaintiff would have received anticipated economic benefit in absence of interference; and 5) damages resulting from interference. This cause of action requires a showing of damages. Smith v. Nimea, 18 FSM Intrm. 36, 45 (Pon. 2011).

Foreign Investment Laws
Public hearings are a standard part of the foreign investment permit application process. Smith v. Nimea, 18 FSM Intrm. 36, 45 (Pon. 2011).

Torts - Interference with Prospective Business Opportunity
A plaintiff has not met the burden of producing the preponderance of evidence required to show that the defendant interfered with his expectancy when he failed to show by a preponderance of the evidence that he would have received the anticipated economic benefit in the absence of the defendant's letter because the letter objected to the plaintiff's application on the grounds of his alleged technical shortcomings and his contentious nature but the Foreign Investment Board's denial cited the plaintiff's inadequate funds, not technical capabilities. Smith v. Nimea, 18 FSM Intrm. 36, 45 (Pon. 2011).

Torts - Interference with Prospective Business Opportunity; Torts - Defamation
Tort claims, including claims for tortious interference with contractual relationships, defamation, and interference with prospective business opportunities, are causes of action which arise under state law. Smith v. Nimea, 18 FSM Intrm. 36, 45 (Pon. 2011).

Torts - Defamation
The history of the law of defamation defies brief restatement. Smith v. Nimea, 18 FSM Intrm. 36, 45 (Pon. 2011).

Torts - Defamation
Libel is a subset of defamation, and as a cause of action is not well defined but FSM case law has at least once defined libel as a false and unprivileged publication by writing or other fixed representation to the eye which exposes any person to hatred, contempt, ridicule, or obloquy or which causes him to be shunned or avoided or which has a tendency to injure him in his occupation. Smith v. Nimea, 18 FSM Intrm. 36, 46 (Pon. 2011).

Constitutional Law - Freedom of Expression; Torts - Defamation
Considerations of constitutional law and free speech sometimes apply to defamation cases, as when the action involves a public official, a public figure, or a matter of substantial public controversy. In such cases, beyond the other elements of defamation, the plaintiff must show that the defendant knew that the defamatory statement was false, or acted with malice or a reckless disregard for the truth. Smith v. Nimea, 18 FSM Intrm. 36, 46 (Pon. 2011).

Constitutional Law - Freedom of Expression; Torts - Defamation
Although falsity is included in the FSM's definition of defamation, falsity is not a traditional element of a plaintiff's prima facie case; rather, truth is an affirmative defense. Even so, a court must distinguish between statements of fact and assertions of opinion, because opinions, false or not, libelous or not, are constitutionally protected and may not be the subject of private damage actions, provided that the facts supporting the opinions are set forth. Smith v. Nimea, 18 FSM Intrm. 36, 46 (Pon. 2011).

Torts - Defamation
An allegedly defamatory statement was published when it was set forth in ink in the defendant's letter to the Foreign Investment Board. Smith v. Nimea, 18 FSM Intrm. 36, 46 (Pon. 2011).

Torts - Defamation
Libel and defamation in general consider whether the allegedly defamatory statement exposes the plaintiff to (public) hatred, contempt, ridicule, or obloquy (shame or disgrace); causes people to shun or avoid the plaintiff; or has a tendency to injure the plaintiff in his occupation or adversely affect the plaintiff's trade or business. Smith v. Nimea, 18 FSM Intrm. 36, 47 (Pon. 2011).

Torts - Defamation
A letter to the Foreign Investment Board which was not released to the public did not expose the plaintiff to hatred, contempt, ridicule, or obloquy, because if people could not learn of the letter, they could not derive from the letter a reason to shun or avoid him; nor could the letter have injured the plaintiff's occupation since he was no longer employed at the time of the defendant's letter; and nor did it harm his trade or business because his proposed software business was not in existence at the time of the letter and because the Foreign Investment Board's denial of his application was based not on the concerns raised in the letter, but on problems with capitalization. Smith v. Nimea, 18 FSM Intrm. 36, 47 (Pon. 2011).

Torts - Defamation
Opinions, even if objectionable, are not actionable as defamation. Were the court to recognize opinions as actionable defamation, the judiciary would be flooded with civil actions based on little more than the equivalent of schoolyard taunts. Smith v. Nimea, 18 FSM Intrm. 36, 47 (Pon. 2011).

Torts - Defamation
A court, in considering the context of the alleged defamatory statements, cannot ignore that the alleged defamatory letter came as a response to a public solicitation for comments initiated by the Foreign Investment Board and that the FIB's role as an administrative and investigatory agency strongly attenuates what minimal defamatory effect the letter may otherwise have had. Smith v. Nimea, 18 FSM Intrm. 36, 47 (Pon. 2011).

Torts - Defamation
A cause of action for business libel must fail when the defendant did no more than respond to a solicitation for public comment by a government agency in a matter of public interest. Smith v. Nimea, 18 FSM Intrm. 36, 48 (Pon. 2011).

* * * *

COURT'S OPINION

MARTIN G. YINUG, Chief Justice:

This matter came to trial before this court on March 17-18, 2011, on the causes of action of unpaid commissions, interference with business opportunities, and business libel. For the following reasons, the Court finds in favor of the plaintiff, Gordon Smith ("Smith") on the first cause of action, and in favor of the defendant, Fabian Nimea ("Nimea"), on the second and third causes of action.

I. Background

This matter ultimately stems from the working relationship between Smith and Nimea. Smith and Nimea met at a social gathering late in 2003, and as they talked story, each discovered skills he lacked in the other-Smith had experience programming software, and Nimea had experience running a business. At that time or soon thereafter, they began discussing a business relationship. They finalized their agreement in an Employment Contract executed April 5, 2004 ("Contract"). The contract included an addendum governing compensation by commission. Addendum "A" ("Addendum"). Commission is particularly governed under Paragraph 1 of the Addendum ("Paragraph 1"), whose two clauses, "a" and "b," address the computation of that compensation.

During their working relationship, Smith and Nimea worked primarily on two major projects: a loan management system for Mesenieng Credit Union ("MCU") worth $7,500.00; and an Integrated School Information Management System ("ISIMS") for the Pohnpei State Department of Education ("DOE") worth $50,000.00. However, as their relationship progressed, problems began to manifest themselves. By July, Smith and Nimea were no longer getting along. Nimea felt that Smith did not have the skills necessary to completing the ISIMS project, and began looking for another person to finish the job. Nimea contacted Arnold Canete ("Canete"), a software programmer from the Philippines, who ended up working on both the MCU and ISIMS projects. On November 1, 2004, Nimea entered into a short-term contract with Canete to complete the ISIMS project, and at the same time or soon thereafter, Nimea sent Canete Smith's code from the ISIMS project.

On November 9, 2004, Smith applied for a foreign investment permit with the Foreign Investment Board ("FIB"). On November 15, 2004, Nimea issued a 3-page notice of termination to Smith, detailing Smith's perceived violations of the Contract, including his pursuit of a foreign investment permit. On November 22, 2004, Nimea submitted a letter to the FIB ("Nimea's letter") in response to a public hearing which the FIB had called as a standard part of the application process. On December 6, 2004, the FIB sent a letter to the DOE to inquire after allegations in Nimea's letter regarding Smith's qualifications. No response came from the DOE. On December 13, 2004, the FIB rejected Smith's application.

Canete began working on the ISIMS project in December, after receiving Smith's code from Nimea. He completed the coding in January, at which point he entered into a 2-year contract with Nimea. He was later responsible for testing and installing the ISIMS project when he arrived in the FSM.

Smith made efforts to obtain relief throughout 2005, taking a multi-prong approach. The details of his efforts are outlined in various orders this court has issued; the latest summary can be found in this court's February 14, 2011 Order Denying Fifth and Fourth Motions to Reconsider and Motion to Reconsider Exclusion Order. [Smith v. Nimea, 17 FSM Intrm. 333 (Pon. 2011).] Smith initiated this matter on February 18, 2005. On June 22, 2005, Nimea took Smith's testimony at deposition ("Smith Deposition"). On March 17-18, 2011, this court tried the remaining issues.

II. Findings of Fact and Conclusions of Law

A. Findings of Fact

The court makes the following findings of fact:

 1. Smith was under no physical or economic duress when he entered into the Contract with Nimea.

 2. Smith was not the only employee whose services were required on the MCU project.

 3. Nimea paid Smith $4,087.52 on the MCU project.

 4. Smith was not the only employee whose services were required on the ISIMS project.

 5. Canete reused 15% of Smith's code.

 6. Canete worked 85 hours for every 100 hours Smith worked.

 7. Smith did not prove that he worked 40 hours every week.

 8. Project management is an administrative cost.

 9. The total taxes and overhead costs of the ISIMS project was $29,305.95.

 10. The net proceeds on the ISIMS project contract was $20,694.05.

 11. Smith worked 54% of the total hours worked by all employees on the ISIMS project.

 12. Smith was entitled to $11,174.79 for the ISIMS project under Paragraph 1.

 13. Nimea paid Smith $2,500.00 on the ISIMS project.

 14. Smith had an existing or reasonable expectation of economic benefit or advantage in his application for a foreign investment permit.

 15. Nimea was aware of Smith's expectation of economic benefit or advantage.

 16. The FIB is a government agency.

 17. The FIB called a public hearing in the matter of Smith's application for a foreign investment permit.

 18. Nimea addressed his letter to the FIB in response to the public hearing.

 19. The FIB rejected Smith's application based on insufficient capital.

 20. Smith would not have received the anticipated economic benefit in absence of Nimea's letter.

 21. The Nimea letter contained only true facts and opinions drawn from true facts.

 22. Smith was no longer Nimea's employee at the time of Nimea's letter.

B. Conclusions of Law

The court makes the following conclusions of law:

 1. The Contract was valid and enforceable.

 2. Clause "b" was the appropriate application of Paragraph 1 to determining the appropriate commission compensation in the MCU project.

 3. Clause "b" was the appropriate application of Paragraph 2 to determining the appropriate commission compensation in the ISIMS project.

 4. The basis for calculating commission compensation under clause "b" is the amount of time Smith worked as a proportion of total hours all employees worked on the project.

 5. Where neither party has produced evidence of actual time spent on a project for which commission compensation is to be calculated based on time spent, but where the court has made a finding of fact as to relative amount of work done, the relative amount of work done is an appropriately equitable basis for determining the proper apportionment of compensation.

 6. Nimea is liable to Smith for $8,674.79 in unpaid commissions.

 7. The FIB solicited Nimea's opinions as part of its administrative investigation of Smith's qualifications.

 8. Nimea did not wrongfully or intentionally interfere with Smith's expectation.

III. Analysis

A. Unpaid Commissions

The court resolves the first cause of action by interpreting the Contract, particularly Paragraph 1, which is incorporated by Section 6 of the Contract.

1. Enforceability of the employment contract

Although the parties agree that the Contract is valid, Smith has suggested, both in his deposition and in his closing argument, that the contract may be unenforceable. Specifically, Smith argued that he had signed the contract under economic duress. Smith suggested this in deposition when he testified that he had not wanted to sign the Contract because it was for a period of two years, but signed it because he "had no option," and did not tell Nimea about his reservations because he "was just too desperate to get the work." Dep. of Smith at 21-22.

Duress takes two forms: physical and economic. Physical duress negates assent ab initio; economic duress makes a formed contract voidable. Restatement (Second) of Contracts intro. topic prec. § 174, at 473 (1981). A contract is voidable for economic duress if: (1) a party's manifestation of assent is induced by an improper threat by the other party that leaves the victim no reasonable alternative; or (2) a party's manifestation of assent is induced by one who is not a party to the transaction, unless the other party to the transaction in good faith and without reason to know of the duress either gives value or relies materially on the transaction. Id.

Nothing in the evidence suggests that Nimea was responsible for any physical duress against Smith. The evidence shows that Smith was desperate to get the work, but suggests that the situation is one largely of Smith's own creation, or at least not of Nimea's creation. Further, Smith has not shown that Nimea made any threat, proper or improper, and Smith has not shown that any act on Nimea's part left Smith with no reasonable alternative. Indeed, the fact that Smith had been contemplating applying for a Foreign Investment Permit on his own, even before he signed on with Nimea, is evidence of a reasonable alternative. In Smith's own telling, he initially abandoned his "original plan . . . to get a FIB License" because he had found persuasive Nimea's advice that the process was very expensive and time-consuming. Dep. of Smith at 16. Moreover, Smith's decision to approach Nimea at the party was, to begin with, based on his feeling that he was not a businessman, whereas Nimea was. Dep. of Smith at 14. None of this evidence gives rise to the sort of improper threat and absence of reasonable alternatives upon which this court can find economic duress.

The court finds therefore that no economic duress existed, and that the contract as signed was valid and enforceable.

2. Terms of the employment contract

Paragraph 1 envisions two situations in which payment of commission is appropriate: (a) when the client contract "requires only the Employee to do the specific tasks," the rate of commission shall be seventy percent of the client contract, "after all applicable taxes and normal overhead costs relating to the implementation of the job have been deducted;" and (b) when the client contract requires more than one person, compensation is to be based on an allocation formula prorating the amount of time required from each team member as assessed against the client contract, "after all applicable taxes and overhead costs relating to the implementation of the job have been deducted." Stipulated Ex. A at 4.

During his employment with Nimea, Smith's work primarily revolved around two projects: the MCU and DOE projects.

a. MCU Project. The MCU project was valued at $7,500.00. Pl.'s Ex. 9-A(2). Nimea was able to secure the contract for the project due to his experience in the banking industry: he had been an executive for Information Technology at Bank of the FSM, where he and other bank officers had rolled out a software system before 2004 which the bank still used; and he had worked at FSM Development Bank. The MCU project was for a loan management system, which Smith claims he designed. However, Albert Johnny, a manager at MCU, testified that he never saw Smith. Although FFGI did complete the program, Canete, not Smith, installed the system. (Smith testified that the MCU project was not complete when he ceased to work for Nimea. Dep. of Smith at 47. Further, the system as installed included no work by Smith: Canete testified that there had simply been no loan management program when he arrived in the FSM,1 and that he had to throw out everything Smith had written and develop the entire program on his own, because in his view, Smith's code had nothing to do with MCU's needs as envisioned by the project agreement. Ultimately, MCU found that the program Canete installed was too slow, although it did what it was supposed to do. MCU switched vendors, and is satisfied with Microbanker, its current vendor.

Nimea paid Smith $4,087.52 on the project, Stipulated Ex. F at 5, which comes out to 54.5% of the total value of the contract.

The evidence is clear that Smith was not the only one who worked on the project. Therefore, by the plain meaning of Paragraph 1, clause "b" applies, not clause "a." Under clause "b," the allocation formula prorates compensation based on proportions of time, "after all applicable taxes and overhead costs relating to the implementation of the job have been deducted." Neither party provided evidence as to what proportion of time was contributed by Smith and Canete. Nor did either party provide evidence as to the "applicable taxes and overhead costs relating to the implementation of the job." Since Canete had to develop the entire loan management program anew, the court cannot find that Smith has met his burden of proof that he was entitled to more than the $4,087.52 Nimea actually paid him for the MCU project.

b. ISIMS Project. According to the ISIMS Project Cost Breakdown, Def.'s Ex. B, Nimea ultimately paid Smith $2,500.00 on the ISIMS project. The parties agree the value of the project was $50,000.00. Had Smith been the only employee required for the specific tasks contemplated by the project, clause "a" would have been applicable, and he would have been entitled to 70%, or $35,000.00, "after all applicable taxes and normal overhead costs relating to the implementation of the job have been deducted." However, testimony clearly shows that, as with the MCU project, the ISIMS project required Canete's assistance for completion. Therefore, clause "b" applies.

The costs, as presented by Nimea, are as follow:

Item Description	
Cost	

Hardware and software for ISIMS (computers, network items, communications equipment, etc.)	
$8,870.95	

Information gathering and designing for ISIMS	

Fabian Nimea	
2,000.00	

Gordon Smith	
500.00	

Database programming and interface design	

Gordon Smith	
2,000.00	

Arnold Canete	
15,000.00	

ISIMS testing	
2,500.00	

Installation and network configuration	
500.00	

Training	
2,150.00	

Office rent (for 7 months covering project duration, implementation, and training)	
3,500.00	

Taxes	
5,992.00	

Project management (reporting, management/administrative, accounting, etc.)	
7,500.00	

Communications and internet	
1,938.00	

Office supplies (7 months)	
350.00	

Utilities (7 months)	
1,155.00	

	

Total	
$53,955.95	

Def.'s Ex. B. These items reflect taxes, costs and overhead, and the contracted-for services, which comprise essentially of planning, development, and delivery. Although Nimea's separation of different phases of the project may be appropriate for accounting purposes, Paragraph 1 is not so precise, and contemplates simply skilled labor applied toward the contracted-for services. For the DOE project, these include: information gathering and design (planning); database programming and interface design (development); ISIMS testing (development); installation and network configuration (delivery); and training (delivery).2 Although training was not an explicit part of the DOE contract,3 it was understood to be included. Thus, training, along with testing and installation and configuration, are not costs or administrative overhead. Excluding these items, then, the court finds that "overhead costs" within the meaning of clause "b" for the DOE project come to a total of $29,305.95,4 leaving a net value of $20,694.05.

Smith at one point during trial argued that he was entitled to two-thirds, or 66.7%, of the net from the contract, because he had spent 4 months working on the DOE project, and Canete had spent just 2 months. The court rejects this as a basis of apportioning the income from the DOE project. At trial, Smith argued that because he was a full-time employee, he must have worked 8 hours a day. However, on his direct examination of Nimea as a hostile witness, he began by asking what hours the contract required him to work. Nimea answered that because Smith's was a high-skill job, he was not required to work 8 hours a day. Smith did not object to the testimony, nor did he ask the court to strike Nimea's answer. The court declines to presume that an individual designated as a full-time worker must have worked 8 hours a day. Smith failed to prove that he worked 8 hours a day.

Absent complete figures for individual hours worked on each phase of the revenue subject to apportionment, and absent an independent basis for determining the relative values of the actual hours worked by both Smith and Canete, the court believes that a comparison of the amount of rework Canete had to perform is an equitable basis upon which to determine the appropriate proportions of hours Smith and Canete worked. Canete testified, credibly, that he kept just 15% of the code he received in November-Smith's code. This means he had to rework 85% of the code-i.e., for every 100 hours Smith worked, Canete worked 85 hours. As a proportion of 185 hours, 100 hours represents 54%, a number reminiscent of the MCU project. Although other individuals worked some hours-Nimea's work in information gathering and planning; Canete's work in testing and installing the system; and the time Nimea, Press, and Okamuro put into training the DOE staff-the court accepts, for the purpose of computing proportions, that these hours are insignificant compared to the hours Smith and Canete worked.

The court finds that 54% of the $20,694.05 in net proceeds on the DOE contract is $11,174.79. Nimea paid Smith only $2,500 for this project. The court finds that Nimea is liable for a further $8,674.79.

B. Interference with Business Opportunities

Generally, a plaintiff in a cause of action for interference with business opportunities must prove four elements: (1) plaintiff's existing or reasonable expectation of economic benefit or advantage; (2) defendant's knowledge of that expectancy; (3) defendant's wrongful intentional interference with that expectancy; (4) reasonable probability that the plaintiff would have received anticipated economic benefit in absence of interference; and (5) damages resulting from interference. See, e.g., Jano v. Fujita, 16 FSM Intrm. 323, 327 (Pon. 2009); Ehsa v. Kinkatsuyo, 16 FSM Intrm. 450, 457 (Pon. 2009). As the Jano court noted, this cause of action requires a showing of damages.

The interference at question revolves around Nimea's letter. Nimea testified that he had written the letter in response to the public hearing called by the FIB in the matter of Smith's application for a foreign investment permit. Quirino Loyola, Executive Director of the FIB, testified that these public hearings are a standard part of the application process. Thus, Smith had an existing or reasonable expectation of economic benefit or advantage, and that Nimea knew of that expectancy. The remaining issues are whether or not Nimea wrongfully and intentionally interfered with the expectancy, and if he did, what the reasonable probability was that Smith would have received the anticipated economic benefit in absence of that interference and what damages resulted from that interference.

The most challenging issue is whether or not Nimea wrongfully and intentionally interfered with the expectancy. Whereas the existence of Nimea's letter to the FIB is sufficient evidence to show an intentional act on the part of Nimea, it is not sufficient to settle whether this act was either wrongful or an interference. The fact that Nimea wrote the letter in response to the public hearing called as a matter of course by the FIB suggests that Nimea's response was eminently lawful, and therefore not wrongful.

Even if Nimea's letter were wrongful, Smith did not meet the burden of producing the preponderance of evidence required to show that it interfered with his expectancy. This failure is related to Smith's failure to show by a preponderance of the evidence that he would have received the anticipated economic benefit in the absence of Nimea's letter. The letter objected to Smith's application on the grounds of Smith's alleged technical shortcomings and on the contentious nature of Smith's employment by Nimea. Director Loyola seemed to follow this up in his letter of December 6, 2004, to the DOE inquiring after Smith's technical competence. Pl.'s Ex. 12. Nevertheless, Loyola testified that he could not recall receiving a response from the DOE, and Smith has not produced evidence of any such response. Finally, the letter of denial from the FIB, dated December 13, 2004, signed by Carlos Villazon, and addressed to Smith, cited inadequate funds, not technical capabilities.

Based on the evidence, therefore, this court concludes that Nimea did not interfere with Smith's business opportunities.

C. Business Libel

Tort claims, including claims for tortious interference with contractual relationships, defamation, and interference with prospective business opportunities, are causes of action which arise under state law. SeeFoods Pacific, Ltd. v. H.J. Heinz Co. Australia, 10 FSM Intrm. 200, 203 (Pon. 2001); Edward v. Pohnpei, 3 FSM Intrm. 350 (Pon. 1988).

"The history of the law of defamation defies brief restatement." James A. Henderson, Jr. & Richard N. Pearson, The Torts Process 1039 n.1 (3d ed. 1988). The State of Ohio interprets the common law of defamation as "a false publication causing injury to a person's reputation or exposing him to public hatred, contempt, ridicule, shame or disgrace, or affecting him adversely in his trade or business." Rogers v. Buckel, 615 N.E.2d 669, 672-73 (Ohio Ct. App. 1992) (quoting Matalka v. Lagermann, 486 N.E.2d 1220, 1222 (Ohio Ct. App. 1985). Libel is a subset of defamation, and as a cause of action is not well defined; as with defamation in general, different jurisdictions have had different interpretations of the cause of action for libel. FSM case law has attempted a definition at least once, however, calling libel "a false and unprivileged publication by writing . . . or other fixed representation to the eye which exposes any person to hatred, contempt, ridicule, or obloquy or which causes him to be shunned or avoided or which has a tendency to injure him in his occupation." Pohl v. Chuuk Pub. Utility Corp., 13 FSM Intrm. 550 (Chk. 2005) (quoting 50 Am. Jur. 2dLibel and Slander§ 7 (rev. ed. 1995)). Thus, the FSM echoes the State of Ohio's interpretation of the common law of defamation.

Considerations of constitutional law and free speech sometimes apply, as when the action involves a public official, a public figure, or a matter of substantial public controversy. Pohl, 13 FSM Intrm. at 557. In such cases, beyond the other elements of defamation, the plaintiff must show that the defendant knew that the defamatory statement was false, or acted with malice or a reckless disregard for the truth. Id.; see alsoProsser and Keeton on the Law of Torts§§ 113-15 at 805-08, 815-16, 820-23 (W. Page Keeton et al. eds., 5th ed. 1984).

This court applies these rules to the contents of Nimea's letter, which states, inter alia, that Smith misrepresented information about himself around the time Nimea hired him, and that Nimea terminated Smith's employment on certain grounds which the letter proceeds to enumerate and explain.

1. False statements

Although both Ohio and FSM case law include falsity as part of the definition, falsity is not a traditional element of a plaintiff's prima facie case; rather, truth is an affirmative defense. SeeHenderson & Pearson, supra, at 1040. Even so, a court must distinguish between statements of fact and assertions of opinion, because "[o]pinions, false or not, libelous or not, are constitutionally protected and may not be the subject of private damage actions, provided that the facts supporting the opinions are set forth." Kuan Sing Enters. Inc. v. T.W. Wang, Inc., 446 N.Y.S.2d 76, 77 (N.Y. App. Div. 1982).

The grounds which Nimea's letter cites for the termination of employment include "theft, fraud, unusually strange, violent and potentially dangerous behavior, personal objectives not in line with those of FFGI, lack [of] necessary computer skills contrary to representation in employment application, making malicious statement [sic] about FFGI and its officers, seeking outside employment and business opportunities . . . while contract [is] still in force, and other improper conduct . . . ." Nimea's Letter at 1. These assertions include not only statements of fact, but also statements of what amount to legal opinions, viz., asserting that Smith had been involved in theft, fraud, and other improper conduct. Had Nimea's letter made only these bare assertions, the court could see some justification for treating them as statements of fact. However, Nimea supported these particular assertions of opinion by further explanation and other statements of fact contained in the letter.

Therefore, the court cannot conclude that the allegedly defamatory statements are false. The court further concludes that the allegedly defamatory statements include both non-actionable statements of opinion, as well as demonstrably truthful statements of fact.

2. Publication

The evidence before the court is unambiguous that the allegedly defamatory statement was published within the meaning of this element-it was set forth in ink in Nimea's letter.
3. Damage

Libel and defamation in general consider whether the allegedly defamatory statement: exposes the plaintiff to (public) hatred, contempt, ridicule or obloquy (shame or disgrace); causes people to shun or avoid the plaintiff; or has a tendency to injure the plaintiff in his occupation or adversely affect the plaintiff's trade or business. Of these types of damage, Smith contemplated only the last, in styling this cause of action as "business libel."

Nimea's letter was addressed to the FIB, and Smith has not argued or provided evidence that the letter was released to the public. The fact that the letter remained internal to the FIB is powerful evidence that the letter did not expose Smith to hatred, contempt, ridicule or obloquy. Indeed, this fact also obviates the second type of damage, because if people could not learn of the letter, they could not derive from the letter a reason to shun or avoid Smith. That is, if people did in fact shun or avoid Smith, they did so not because they read the letter, but for other reasons.

The third type of possible damage, injury to the plaintiff's occupation or adverse affect on the plaintiff's trade or business, is more germane here. The evidence shows the following sequence of events in November 2004: on November 9, Smith filed his application for a foreign investment permit; on November 15, Nimea terminated Smith's employment; and on November 22, Nimea sent his letter to the FIB. The court finds from this evidence that Smith was no longer employed at the time of Nimea's letter, and concludes therefore that the letter could not have injured Smith's occupation.

As to Smith's trade or business, the evidence shows, first, that Smith's proposed software business was not in existence at the time of Nimea's letter, and second, that the FIB's denial of Smith's application was based not on the concerns raised in the letter, but on problems with capitalization, as discussed above under "Interference with Business Opportunities."

4. Constitutional considerations

Finally, not only has Smith failed to establish all the elements of business libel, but other considerations remain which work against him. First, as the court discussed above, opinions-even if objectionable-are not actionable as defamation. Were the court to recognize opinions as actionable defamation, the judiciary would be flooded with civil actions based on little more than the equivalent of schoolyard taunts.

Second, in considering the context of the alleged defamatory statements, the court cannot ignore that Nimea's letter came as a response to a public solicitation for comments initiated by the FIB. Indeed, the FIB's role as an administrative and investigatory agency here strongly attenuates what minimal defamatory effect the letter may otherwise have had. In at least one foreign jurisdiction, a publication is privileged if made in "a communication, without malice, to a person interested therein, (1) by one who is also interested, or (2) by one who stands in such a relation to the person interested as to afford a reasonable ground for supposing the motive for the communication to be innocent, or (3) who is requested by the person interested to give the information." Cal. Civ. Code § 47(c).5 This not only encapsulates the "public issues" analysis in defamation cases, but also the common sense of authorizing-even requiring-an administrative agency to solicit the public for comments and opinions before issuing a permit that impacts the public welfare. While Smith's interest in the success of his application for a foreign investment permit is certainly personal, the application process itself is a matter of public interest, just as surely as is an application by an FSM citizen for a business license in his state of residence.

Thus, the court concludes that not only has Smith failed to prove up the elements of the business libel cause of action, but this cause of action must fail because Nimea did no more than respond to a solicitation for public comment by a government agency in a matter of public interest.

IV. Conclusion

For the reasons set out in this memorandum, the court finds in favor of Smith in the cause of action for unpaid commissions in the amount of $8,674.79; finds in favor of Nimea in the cause of action for interference with business opportunities; and finds in favor of Nimea in the cause of action for business libel. Therefore the court hereby orders Nimea to pay to Smith the sum of $8,674.79. The court shall issue a judgment forthwith for entry by the clerk.

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