FSM SUPREME COURT TRIAL DIVISION

CIVIL ACTION NO. 2009-014

ELIZABETH LEE, RYAN LEE, SEEMA SHAH, MIE BABA, YASUO BABA, and TAYLOR STRONG,
Plaintiffs,

vs.

FEDERATED STATES OF MICRONESIA, through its Chief Public Defender Julius J. Sapelalut,
Defendant.
_____________________________________________

ORDER CONCERNING DAMAGES HEARING AGAINST THE FSM

Dennis K. Yamase
Associate Justice

Decided: February 14, 2013

APPEARANCES:

For the Plaintiffs: Michael J. Sipos, Esq.
P.O. Box 2069
Kolonia, Pohnpei FM 96941

For the Defendant: Tmioci Romanu
Office of the Public Defender
P.O. Box PS-174
Palikir, Pohnpei FM 96941

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HEADNOTES

Civil Procedure - Default and Default Judgments - Entry of Default
An entry of default is similar to a finding of liability but it is not a final judgment. The entry of default does not relieve plaintiffs of their burden of proving the damages that flowed from any liability thus established. Lee v. FSM, 18 FSM Intrm. 558, 560 (Pon. 2013).

Civil Procedure - Default and Default Judgments
A defendant who is in default may participate in a damages hearing if necessary and proper to determine the amount of damages. FSM Civil Procedure Rule 55(b)(2) gives the court that discretion because it provides that if, in order to enable the court to enter judgment or to carry it into effect, it is necessary to take an account or to determine the amount of damages or to establish the truth of any averment by evidence or to make an investigation of any other matter, the court may conduct such hearings or order such references as it deems necessary and proper. Lee v. FSM, 18 FSM Intrm. 558, 560-61 (Pon. 2013).

Civil Procedure - Default and Default Judgments
When defendant contests the amount of the claim, a full hearing may be required on the issue of damages, since a default does not concede the amount demanded. This proceeding is the same as any other trial except that it is limited to the question of damages. Lee v. FSM, 18 FSM Intrm. 558, 561 (Pon. 2013).

Civil Procedure
Although the court must first look to FSM sources of law, when an FSM court has not previously construed an FSM civil procedure rule which is identical or similar to a U.S. counterpart, it may look to U.S. sources for guidance in interpreting the rule. Lee v. FSM, 18 FSM Intrm. 558, 561 n.1 (Pon. 2013).

Civil Procedure - Default and Default Judgments
A default judgment entered after a damages hearing cannot be different in kind from or exceed in amount that prayed for in the demand for judgment. Lee v. FSM, 18 FSM Intrm. 558, 561 (Pon. 2013).

Civil Procedure - Default and Default Judgments
A default judgment cannot be entered against the FSM unless the claimant establishes his claim or right to relief by evidence satisfactory to the court. Rule 55(e) does not bar default judgments against the FSM in all circumstances, it only bars them when the claimant has not established his or her claim by evidence satisfactory to the court. The satisfactory or substantial evidence needed under Rule 55(e) does not have to rise to the same level needed in other cases against the FSM. Lee v. FSM, 18 FSM Intrm. 558, 561 (Pon. 2013).

Civil Procedure - Default and Default Judgments
After an entry of default against the FSM government, the quantum and quality of evidence that might satisfy a court can be less than that normally required. Lee v. FSM, 18 FSM Intrm. 558, 561 (Pon. 2013).

Civil Procedure - Default and Default Judgments
In a default judgment damages hearing against the FSM, it may seem necessary and proper that the court conduct a damages hearing at which the plaintiffs' affidavits and documents may be used but also at which the FSM will have the opportunity to present testimony and other evidence to refute the amount of the plaintiffs' damage claims because, in this case, it is impractical for each of the plaintiffs to appear in person and they should not be required to do so when the FSM has defaulted and the plaintiffs have travel costs from their homes in the mid-western United States that are disproportionate to their claimed possible recovery. Lee v. FSM, 18 FSM Intrm. 558, 561-62 (Pon. 2013).

Civil Procedure
FSM civil procedure rules discourage litigation by ambush. Lee v. FSM, 18 FSM Intrm. 558, 562 (Pon. 2013).

Civil Procedure - Default and Default Judgments
Since FSM civil procedure rules discourage litigation by ambush, the court may order the parties, if they have not already done so, to provide the other side with the documentary evidence that side intends to use at the default judgment damages hearing and a list of the witnesses, if any, which they intend to call along with a short summary of each witness's anticipated testimony. Lee v. FSM, 18 FSM Intrm. 558, 562 (Pon. 2013).

Attorney and Client - Withdrawal of Counsel
The court does not have to permit counsel's withdrawal if the client will be left in a position where the client's interests are impaired or where there is a material adverse effect on him. Lee v. FSM, 18 FSM Intrm. 558, 562 (Pon. 2013).

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COURT'S OPINION

DENNIS K. YAMASE, Associate Justice:

The defendant Federated States of Micronesia's default was entered on April 1, 2009. Since the plaintiffs' damages were based on personal injuries incurred in a vehicular collision, the court realized that the amount of damages would have to be proven at a hearing. FSM Civ. R. 55(b)(2). The court therefore, on April 19, 2012, ordered the parties to submit briefs that would address: 1) the limitation, if any, on a defaulted adverse party's appearance at and participation in a damages hearing; 2) any issues arising from the plaintiffs' [physical] absence in testifying about their damages; 3) the admissibility of the plaintiffs' affidavits in their absence; and 4) the necessity of providing a copy of the affidavits to the defaulting party. The court also suggested that the parties review certain cases. Those briefs were filed on May 4, 2012. Although permitted by the order, neither side responded to the other side's brief. The plaintiffs' brief included a motion by their counsel to withdraw from representing plaintiff Ryan Lee. The motion to withdraw is denied. The court hereby sets its guidelines for the damages hearing.

I. Damages Hearing

An entry of default is similar to a finding of liability but it is not a final judgment. The entry of default does not relieve plaintiffs of their burden of proving the damages that flowed from any liability thus established. George v. Albert, 17 FSM Intrm. 25, 32 (App. 2010); Primo v. Refalopei, 7 FSM Intrm. 423, 428 (Pon. 1996). The plaintiffs now concede that under FSM law a defendant who is in default may participate in a damages hearing if necessary and proper to determine the amount of damages. FSM Civil Procedure Rule 55(b)(2) gives the court that discretion because it provides that:

If, in order to enable the court to enter judgment or to carry it into effect, it is necessary to take an account or to determine the amount of damages or to establish the truth of any averment by evidence or to make an investigation of any other matter, the court may conduct such hearings or order such references as it deems necessary and proper.

"When defendant contests the amount of the claim, a full hearing may be required on the issue of damages, since a default does not concede the amount demanded. This proceeding is the same as any other trial except that it is limited to the question of damages." 10A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure§ 2688, at 67-68 (3d ed. 1998) (footnote omitted).1 Furthermore, the default judgment entered against the Federated States of Micronesia after the damages hearing "shall not be different in kind from or exceed in amount that prayed for in the demand for judgment." FSM Civ. R. 54(c).

A default judgment cannot be entered against the Federated States of Micronesia "unless the claimant establishes his claim or right to relief by evidence satisfactory to the court." FSM Civ. R. 55(e). Rule 55(e) does not bar default judgments against the FSM in all circumstances, it only bars them when the claimant has not established his or her claim "by evidence satisfactory to the court." The satisfactory or substantial evidence needed under Rule 55(e) does not have to rise to the same level needed in other cases against the Federated States of Micronesia. SeeAlameda v. Secretary of Health, Educ. & Welfare, 622 F.2d 1044, 1048 (1st Cir. 1980). "[A]fter entry of default against the government, the quantum and quality of evidence that might satisfy a court can be less than that normally required." Id.

The plaintiffs contend that the court can determine their damages using the affidavits and exhibits that they have submitted. They rely on Transatlantic Marine Claims Agency v. Ace Shipping Corp., 109 F.3d 105, 111 (2d Cir. 1997) (citing Tamarin v. Adam Caterers, Inc., 13 F.3d 51, 54 (2d Cir/ 1993); Action S.A. v. Marc Rich & Co., 951 F.2d 504, 508 (2d Cir. 1991); Fustok v. ContiCommodity Servs., Inc., 873 F.2d 38, 40 (2d Cir. 1989)), in which the appellate court noted that it was not always necessary to hold a damages hearing when detailed affidavits and documentary evidence was available. The FSM counters that the plaintiffs should not be able to rely on affidavits because an affidavit cannot be cross-examined as to its contents. The FSM relies on Hartman v. Chuuk, 8 FSM Intrm. 580, 581 (Chk. S. Ct. Tr. 1998), a Chuuk State Supreme Court case that applied Chuuk Civil Procedure Rule 55(e) and in which the state court gave "both parties the opportunity to present testimony or other evidence to establish or refute the claims or right to relief in issue" although in the end only the plaintiff testified and "[t]he State offered no testimony or other evidence in opposition."

Neither Transatlantic Marine nor the cases it cited involved the application of the similar U.S. Rule 55(e) - none of the defaulting parties was the United States government. In the present case, the defaulting defendant is the FSM national government and Rule 55(e) does apply. It therefore seems necessary and proper that the court conduct a damages hearing at which the plaintiffs' affidavits and documents may be used but also at which the FSM will have the opportunity to present testimony and other evidence to refute the amount of the plaintiffs' damage claims. In this case, it is impractical for each of the plaintiffs to appear in person and they should not be required to do so when the defendant has defaulted and the plaintiffs have travel costs from their homes in the mid-western United States that are disproportionate to their claimed possible recovery.

Since FSM civil procedure rules discourage litigation by ambush, cf.FSM v. GMP Hawaii, Inc., 17 FSM Intrm. 555, 575 (Pon. 2011) (discovery is designed to prevent litigation by ambush), the parties, if they have not already done so, shall, no later than ten days before the scheduled hearing, provide the other side with the documentary evidence that side intends to use at the hearing and a list of the witnesses, if any, which they intend to call along with a short summary of each witness's anticipated testimony.

II. Motion to Withdraw

The plaintiffs' counsel moves to withdraw from representing plaintiff Ryan Lee because he has lost contact with Ryan Lee. Counsel speculates that plaintiff Ryan Lee may have lost interest in the suit since he is no longer married to plaintiff Elizabeth Lee. Counsel is concerned that he may be unable to transfer funds to Ryan Lee once a money judgment is entered and recovery had. Counsel further contends that good cause exists for his withdrawal because Ryan Lee has failed to fulfill his contractual obligations to his counsel by failing to keep counsel advised of his whereabouts and to cooperate as needed and that therefore counsel's withdrawal is permitted under FSM Model Rule of Professional Conduct 1.16(b)(4) and (5).

Counsel's representations indicate that he knows Ryan Lee's location but that, since the Lees' divorce, he has been unable to get Ryan Lee to respond to his communications. The only thing left for plaintiffs' counsel to do on Ryan Lee's behalf is to prove his damages. Counsel has stated that he believes he can do so through Elizabeth Lee's affidavit of Ryan Lee's lost earnings and that, besides that, Ryan Lee has no other damages separate from Elizabeth Lee's damages. Counsel therefore ought to be able to bring Ryan Lee's case to judgment without impairing his rights. Counsel's withdrawal without a substitute counsel would have a material adverse effect on Ryan Lee.

The court does not have to permit counsel's withdrawal if the client will be left in a position where the client's interests are impaired or where there is a material adverse effect on him. FSM MRPC R. 1.16(b). Accordingly, the motion to withdraw is denied.

III. Conclusion

Now therefore it is hereby ordered that, on March 25, 2013, at 2:00 p.m., the court will conduct a hearing on the plaintiffs' damages in order that a default judgment may be entered. Each side shall, no later than March 15, 2013, provide the other side with its documentary evidence and witness list, if any, with a summary of the witnesses' anticipated testimony. And it is further ordered that plaintiffs' counsel's motion to withdraw from representing Ryan Lee is denied.

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