FSM SUPREME COURT APPELLATE DIVISION
Cite as FSM Dev. Bank v. Yinug
12 FSM Intrm. 450 (App. 2004)

[12 FSM Intrm. 450]

FSM DEVELOPMENT BANK,
Petitioner,
 
vs.
 
HONORABLE MARTIN YINUG,
Respondent,
 
YVETTE ETSCHEIT ADAMS d/b/a POHNPEI ACE
HARDWARE, ADAMS BROTHERS CORPORATION,
ISLAND HOMES CONSTRUCTION, INC., and
PAULUS PERMAN,
Real Parties in Interest/Respondents.
 
APPEAL CASE NO. P10-2002
 
ORDER DENYING RULE 38 ATTORNEY’S FEES
 
Decided: April 15, 2004

BEFORE:

Hon. Andon L. Amaraich, Chief Justice, FSM Supreme Court
Hon. Dennis K. Yamase, Associate Justice, FSM Supreme Court

APPEARANCES:

For the Petitioner:                         James Woodruff, Esq.
                                                       FSM Development Bank Legal Counsel
                                                       P.O. Box M
                                                       Kolonia, Pohnpei FM 96941
 
For the Respondents:                  Craig D. Reffner, Esq.
(Adams & Adams Bros. Corp.)   Law Office of Frederick L. Ramp
                                                      P.O. Box 1480
                                                      Kolonia, Pohnpei FM 96941

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HEADNOTES

Appellate Review
     When the language of an FSM appellate rule is nearly identical to its counterpart United States rule, the court may choose to look to United States court decisions for guidance in interpreting the rule, but it is not required to do so. FSM Dev. Bank v. Yinug, 12 FSM Intrm. 450, 452 (App. 2004).

[12 FSM Intrm. 451]

Appellate Review
     The determination of whether to award Rule 38 damages is a two step process. First, it must be determined that the appeal was frivolous and second, it must be determined that sanctions are appropriate. FSM Dev. Bank v. Yinug, 12 FSM Intrm. 450, 452 (App. 2004).
 
Appellate Review
     An appeal is frivolous when the result is obvious to the court or when the appellant’s arguments are wholly without merit or groundless or when the court has previously ruled on the question on appeal. FSM Dev. Bank v. Yinug, 12 FSM Intrm. 450, 452 (App. 2004).
 
Appellate Review; Mandamus and Prohibition
     Rule 38 damages may be awarded when a mandamus petition is frivolous. FSM Dev. Bank v. Yinug, 12 FSM Intrm. 450, 452 (App. 2004).
 
Appellate Review ) Decisions Reviewable
     A Rule 11 attorney sanction order is immediately appealable, but only if the sanctioned attorney proceeds under his or her own name, as the real party in interest. FSM Dev. Bank v. Yinug, 12 FSM Intrm. 450, 453 (App. 2004).
 
Appellate Review
     When a petition was not wholly without merit or groundless, or when the petition was not frivolous since the issues raised had not previously been ruled upon when they were raised in the petition and when there was also some question raised as to how appellate review of the issues could be sought, whether by writ of mandamus or by an interlocutory appeal, the petition is not frivolous and Rule 38 damages will not be awarded. FSM Dev. Bank v. Yinug, 12 FSM Intrm. 450, 453 (App. 2004).
 
Appellate Review
     Rule 38 damages are determined in the appellate court and not remanded to the trial court for determination. Rule 38 gives the appellate court discretion in the damage amount awarded, which can be up to double the amount of actual expenses, and unlike other awards that may include attorney’s fees, Rule 38 awards are uniquely the province of the appellate court based on its determination of the frivolous nature of the appeal. A trial court does not have jurisdiction to impose Appellate Rule 38 sanctions. FSM Dev. Bank v. Yinug, 12 FSM Intrm. 450, 453 (App. 2004).

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COURT’S OPINION

PER CURIAM:

     On June 27, 2003, the Real Parties in Interest/Respondents Yvette Etscheit Adams d/b/a Pohnpei Ace Hardware and Adams Brothers Corporation (collectively, "the Real Parties in Interest") concurrently filed motions for FSM Appellate Rule 38 attorney’s fees for this appeal and App. Nos. P5-2002 and P8-2002,1 along with motions to consolidate these appeals so that the Rule 38 attorney’s fees issues could be addressed all at once. Due to the different procedural postures in these cases, we denied the Real Parties in Interest’s motion to consolidate in our order of July 11, 2003 in App. No. P5-2002.

[12 FSM Intrm. 452]

     On March 24, 2003, the remaining Article XI, Section 3 justices, acting as the appellate division, were of the opinion that the writ clearly should not be granted and denied the petition. FSM Dev. Bank v. Yinug, 11 FSM Intrm. 437, 442 (App. 2003).

     We now rule on the Real Parties in Interest’s motion for an award of attorney’s fees under FSM Appellate Rule 38. Rule 38 applies to damages for delay and provides that: "If the Supreme Court appellate division shall determine that an appeal is frivolous, it may award just damages and single or double costs, including attorney’s fees, to the appellee."

     The Real Parties in Interest contend that this action for a writ of mandamus with respect to the discovery sanctions issued by the trial court judge in Adams v. Island Homes Construction, Civ. No. 2000-012 ("case below") was frivolous and done to cause delay and inflict unnecessary expenses on the Real Parties in Interest for their pursuit of the case below. The Petitioner FSM Development Bank ("Petitioner"), maintained that the trial court judge had imposed discovery sanctions against Petitioner without notice and an opportunity to be heard and that this justified action for the writ.

     In order to award attorney’s fees as damages under Rule 38, we must determine that this appeal was frivolous. When the language of an FSM appellate rule is nearly identical to its counterpart United States rule, this court may choose to look to United States court decisions for guidance in interpreting the rule, but it is not required to do so. Bualuay v. Rano, 11 FSM Intrm. 139, 146 n.1 (App. 2002); Santos v. Bank of Hawaii, 9 FSM Intrm. 306, 308 n.1 (App. 2000); Iriarte v. Etscheit, 8 FSM Intrm. 231, 235 (App. 1998); Jano v. King, 5 FSM Intrm. 326, 329 (App. 1992). While the language of Rule 38 and its United States counterpart are not exactly the same, the rule’s general content is similar2 The main differences between FSM Rule 38 and its United States counterpart were added in amendments to the U. S. rule which were made on December 1, 1994. These amendments reflected the basic principle set forth in Roadway Express, Inc. v. Piper, 447 U.S. 752, 767, 100 S. Ct. 2455, 2465, 65, L. Ed. 488, 502 (1980), that notice and an opportunity to respond must precede the imposition of sanctions under Rule 38. A separately filed motion requesting sanctions would constitute notice, while a statement inserted into a party’s brief that the party moves for sanctions would not. If no specific motion is filed, then the court must provide notice. The form of such notice and the opportunity to comment are left to the court’s discretion. The main difference is the United States federal rule also contains specific requirements that before a court of appeals may impose sanctions, the person to be sanctioned must have notice and a reasonable opportunity to respond. Due process requires this even when not specifically stated in a rule.

     To determine whether to award Rule 38 damages we adopt a two step process. First, it must be determined that the appeal was frivolous and second, it must be determined that sanctions are appropriate. Etter v. J. Pease Const. Co., 963 F.2d 1005, 1012 (7th Cir. 1992). An appeal is frivolous when the result is obvious to the court or when the appellant’s arguments are wholly without merit or groundless. In re Britton, 950 F.2d 602, 607 (9th Cir. 1991). An appeal may also be considered frivolous when the court has previously ruled on the question on appeal. Paulson v. United States, 758 F.2d 61, 62 (2d Cir.1985); Nunley v. Commissioner, 758 F.2d 372, 373 (9th Cir. 1985). Rule 38 damages may be awarded when a mandamus petition is frivolous. See, e.g., In re Cajun Elec. Coop., Inc., 791 F.2d 353, 366 (5th Cir. 1986).

[12 FSM Intrm. 453]

     In this case, Petitioner sought a writ of mandamus from this court. Pursuant to Appellate Rule 21(b) the remaining Article XI, Section 3 justices were of the opinion that the writ should not be granted and denied the petition. We found that the exceptional circumstances that would justify the issuance of the extraordinary writ of mandamus necessitating review before a final judgment below were absent. We also recognized that a notice of appeal was filed on November 19, 2003, prior to the petition for a writ of mandamus and that issuance of a writ of mandamus would only serve as a substitute for the pending appeal. Additionally, we distinguished this set of circumstances from those found in In re Sanction of Michelsen, 8 FSM Intrm. 108 (App. 1997). Michelsen held that a FSM Civil Procedure Rule 11 attorney sanction order is immediately appealable, but only if the sanctioned attorney proceeds under his or her own name, as the real party in interest. In this case, there was no attorney being sanctioned under his or her own name and as the real party in interest. FSM Dev. Bank, 11 FSM Intrm. at 442.

     We recognize that this petition was filed originally as an amended petition to the one filed in FSM Dev. Bank v. Yinug, 11 FSM Intrm. 405 (App. 2003) and that the amended petition was partly based upon the same issues regarding the existence of a business and financial privacy right under Article IV, Section 5 of the Constitution and that no previous decisions from this court had dealt specifically with this issue. Since these issues were rendered moot by the trial court’s November 12, 2002 order [Adams v. Island Homes Constr., Inc., 11 FSM Intrm. 218 (Pon. 2002)], we only addressed the remaining issues pertaining to notice and hearing requirements for the sanctions imposed by the trial court’s November 12, 2002 order in deciding whether or not to deny the petition.

     We do not find that the petition was wholly without merit or groundless, or that the petition was frivolous because the issues raised had previously been ruled upon. They had not yet been ruled upon when they were raised in this petition. There was also some question raised as to how the issues to be appealed could be raised in the appellate division, either by writ of mandamus or an interlocutory appeal. The decision in this case and in FSM Dev. Bank v. Yinug, 11 FSM Intrm. 405 (App. 2003) should provide future guidance in this area.

     If we had determined that this was an appropriate case in which to award Rule 38 damages, those damages would have been determined in this court and not remanded to the trial court for determination. Rule 38 gives the appellate court discretion in the damage amount awarded, which can be up to double the amount of actual expenses. Unlike other awards that may include attorney’s fees, Rule 38 awards are uniquely the province of the appellate court based on its determination of the frivolous nature of the appeal. A trial court does not have jurisdiction to impose Appellate Rule 38 sanctions. See Flipside Prods., Inc. v. Jam Prods. Ltd., 843 F.2d 1024, 1037 (7th Cir. 1988).

     Since we determine that the petition was not frivolous we need not determine whether sanctions are appropriate. In light of our determinations, we hereby deny the Real Parties in Interest’s motion for an award of attorney’s fees under FSM Appellate Rule 38.

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________________________________

Footnotes:

1. App. No. P8-2002 was consolidated with FSM Development Bank v. Yvette Etscheit Adams d/b/a Pohnpei Ace Hardware et al., App. No. P3-2003 by Order of May 16, 2003.

2. Rule 38 of the Federal Rules of Appellate Procedure states: "Rule 38. Damages and Costs for Frivolous Appeals. If a court of appeals determines that an appeal is frivolous, it may, after a separately filed motion or notice from the court and reasonable opportunity to respond, award just damages and single or double costs to the appellee."

The main differences between FSM Rule 38 and its United States counterpart were added in amendments to the U. S. rule which were made on December 1, 1994. These amendments reflected the basic principle set forth in Roadway Express, Inc. v. Piper, 447 U.S. 752, 767, 100 S. Ct. 2455, 2465, 65, L. Ed. 488, 502 (1980), that notice and an opportunity to respond must precede the imposition of sanctions under Rule 38. A separately filed motion requesting sanctions would constitute notice, while a statement inserted into a party’s brief that the party moves for sanctions would not. If no specific motion is filed, then the court must provide notice. The form of such notice and the opportunity to comment are left to the court’s discretion.