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HEADNOTES

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COURT'S OPINION

DENNIS K. YAMASE, Associate Justice:

I. BACKGROUND

This matter involves two separate disputes between the same parties. The Plaintiff Mayleen Ihara (Ihara) is a former employee of the Defendant Pohnpei Transfer & Storage, Inc. (PT & S) and its subsidiary Pohnpei Travel Services (PTS). The Defendant Joseph H. Vitt (Vitt) is the General Manager and Chairman of the Board of PT & S, and was the General Manager of both businesses the entire time Ihara was employed by the Defendants.

The first dispute involves the Plaintiff Ihara's termination of employment from the Defendants PT & S and PTS, due to her two refusals to come into work to issue plane tickets to deal with an emergency medical situation involving a PT & S client on March 21, 2008, a Pohnpei state holiday. The second dispute is over who is liable to pay for four one-way plane tickets from Pohnpei to Charleston, South Carolina and return, issued on credit through the Defendants PT & S and PTS by Ihara for her sister and mother in December, 2007.

Salomon M. Saimon, Esq. of the Micronesian Legal Services Corporation represents the Plaintiff and Counter-Defendant Ihara. Stephen V. Finnen, Esq. represents the Defendants and Counter-Claimants PT & S, PTS, and Vitt (collectively PT & S or Vitt). The trial began on August 30 and was completed on August 31, 2011, both parties were in attendance throughout the trial.

The witnesses for the Plaintiff Ihara were Ihara herself, Ihara's sister Jacqueline Elwise (Elwise), and PT & S Office Manager and Accountant Maria Teresa Legion (Office Manager Legion). The witnesses for the Defendants PT & S were General Manager and Defendant Vitt, PT & S Office Manager and Accountant Legion, and the Secretary to the Board of Directors of PT & S, Yvonne Hawkins.

At the conclusion of trial, the parties agreed to submit written closing arguments and the Plaintiff Ihara submitted her Closing Arguments (and Requested Brief) on September 28, 2011. The Defendants PT & S submitted their Closing Argument of Defendant and Counterclaimants on September 28, 2011. Ihara submitted her Reply to Defendants' and Counterclaimants' Closing Arguments and Brief on October 10, 2011. PT & S submitted their Reply in Support of Closing Argument of Defendants and Counterclaimants on October 10, 2011.

II. FINDINGS OF FACT

1. Pohnpei Transfer & Storage, Inc. was established as a corporation in 1971 with 47 shareholders. During the time of the dispute, PT & S did agency work for shipping lines and fishing vessels and had seven employees. PT & S also engaged in warehousing and movement of cargo.

2. Pohnpei Travel Services was established under and was a wholly owned business and subsidiary

[18 FSM R. 521]

of PT & S, begun in 1986. At the time of the dispute, PTS was a travel agency making airline ticketing arrangements for PT & S clients, government travelers, and private individual travelers.

3. During the time of the dispute, regular office hours for the businesses were Monday to Friday, 8:00 a.m. to 5:00 p.m.

4. As a shipping agent for various vessels PT & S also stored freight and provided household moving and storage.

5. During the time of the dispute, the port was open from 6:00 a.m. to 6:00 p.m., seven days a week, when PT & S must accommodate clients. Mainly due to the servicing of vessels, whose schedules varied widely, employees were expected to work at any time when necessary to assist clients.

6. Mayleen Ihara was hired by PT & S in February, 2006.

7. Ihara was hired to be the only employee of PTS. As the only travel agent, she performed reservations and ticketing for PTS and also did clerical work for PT & S.

8. Within the first week of being hired Ihara was given a copy of the Pohnpei Transfer & Storage, Inc., Employee's Handbook (Employee's Handbook) and was told to read and sign it, which she did.

9. General Manager Vitt was Ihara's supervisor throughout her employment at PT & S and PTS. Vitt had the authority to hire and fire for the businesses.

10. Ihara could sell airline tickets to the FSM Government and certain repeat customers without consulting Vitt, all other customers required Vitt's express preapproval. Ihara was not authorized to approve any credit transactions for the issuance or purchase of plane tickets.

11. Ihara's regular working hours were from 8:00 a.m. to 5:00 p.m., with a one hour break for lunch. Ihara requested to come in late in the mornings so she could take care of her mother-in-law. On some occasions, Ihara was requested by management to work outside of normal working hours. All employees of the businesses knew they were subject to work outside of normal working hours at any time.

12. Often Ihara would be late in the morning or late returning after lunch in order to take care of her mother-in-law.

13. Ihara wanted to make up the time missed by coming in at night or during the weekends. Vitt did not approve of this arrangement, as he was worried that she would clock-in and do nothing.

14. In 2006, Ihara averaged approximately 72 hours of work bi-weekly. In 2007, she averaged approximately 60 hours of work bi-weekly. In 2008, she averaged approximately 58 hours of work bi-weekly. At the time she was terminated Ihara was making $3.75 per hour.

15. Ihara was never formally disciplined while working at PT&S and PTS, however Vitt did speak with her on numerous occasions about her coming to work late and to keep her problems out of the office after she was involved in a confrontation involving pepper spray with a non-PT & S employee while at the work site.

16. On Sunday, December 9, 2007, Ihara called Vitt and told him that she had a family emergency and asked if she could use PTS to issue two airline tickets. According to testimony from Vitt, the request was for tickets from Pohnpei to Guam, one for her mother Keniorihter Elwise and one for her sister

[18 FSM R. 522]

Jacqueline Elwise.

17. Ihara told Vitt that the next week she would go to the bank and get a loan to pay for the tickets.

18. Vitt told her that she could go ahead and issue the tickets.

19. Ihara had booked an airline ticket for a first cousin on credit from PTS in the past and had assumed payment for that ticket from her salary deductions made under an arrangement worked out with Vitt. Vitt's position on this ticket was that Ihara would be responsible for payment if her relative could not pay.

20. Ihara issued two one-way tickets from Pohnpei to Charleston, South Carolina on December 9, 2007 for her mother and sister. The itinerary for the tickets was: Pohnpei to Guam; Guam to Honolulu, Hawaii; Honolulu to Houston, Texas; and Houston to Charleston, South Carolina.

21. Ihara's mother and sister left Pohnpei on Monday, December 10, 2007, at around 1:25 a.m.

22. The total cost of the plane tickets was $3,700.50. The Defendants PT & S were required to pay the airlines for the tickets within 15 days of the issuance of the tickets. The Defendants PT & S paid for these plane tickets.

23. A return flight was not booked and purchased at the same time because the computer system was giving Ihara problems and/or because the travelers did not know when they were going to be returning to Pohnpei.

24. Vitt found out later when reviewing the daily sales report that the tickets issued were from Pohnpei to Charleston, South Carolina and not just Pohnpei to Guam. A Pohnpei Travel Services Daily Sales Report, dated December 9, 2007, lists two separate names, the first Jacqueline Elwise and the second Mayleen Ihara, and include the ticket and invoice numbers, the gross amounts, commission, charges, and itineraries. This Daily Sales Report was signed as prepared by Ihara and signed as approved by Vitt.

25. On December 20, 2007, Ihara issued two one-way tickets for her mother and sister to return from Charleston, South Carolina to Pohnpei. A Pohnpei Travel Services Daily Sales Report, dated December 20, 2007, lists two separate names, the first Mayleen Ihara and the second Jacqueline Elwise, and include the ticket and invoice numbers, the gross amounts, commission, charges, and itineraries. This Daily Sales Report was signed as prepared by Ihara and signed as approved by Vitt.

26. The total cost of the return airline tickets was $3,188.35. If round-trip tickets had been issued instead of one-way tickets the costs for the tickets would have been less. The Defendants PT & S paid for these plane tickets.

27. Vitt was not consulted before the return tickets were issued. Ihara stated that she considered Vitt's initial approval for the issuance of the first set of plane tickets for her mother and sister to be authorization for round-trip tickets, therefore she felt no further authorization was necessary.

28. Ihara nor her sister obtained a loan to pay for the plane tickets.

29. Elwise claimed she signed a promissory note, though no promissory note with PT & S was ever produced at trial regarding the payment of her plane tickets. Vitt stated that a search of the office for the promissory note was conducted and no promissory note was ever found.

[18 FSM R. 523]

30. Ihara made payments on her mother's plane tickets from December, 2007 to April, 2008, totaling $776.40.

31. Ihara's sister, Jacqueline Elwise, made payments on her plane tickets from January, 2008 to May, 2008, totaling $550.00.

32. Elwise had not been approached by any employee from the Defendants PT & S asking her for payment for the tickets.

33. On Thursday, March 20, 2008, a seaman on a PT & S client vessel had a stroke and required urgent medical attention.

34. PT & S was the agent for the vessel and made arrangements to have the seaman taken to the Genesis Hospital on Pohnpei.

35. On Friday, March 21, 2008, a Pohnpei State Good Friday holiday, Ihara had the day off.

36. On Friday morning March 21, 2008, doctors at the Genesis Hospital informed PT & S that the ill seaman who had suffered a stroke was able to fly out of Pohnpei.

37. At approximately 10:00 a.m., PT & S Office Manager and Accountant Maria Teresa Legion, called Ihara at her home and told her that she needed to come to work and issue airline tickets for the stroke victim and a traveling companion. The two would be traveling to Japan for the stroke victim to get further urgent medical treatment there.

38. Ihara told Office Manager Legion that Vitt only wanted her to work on regular working days.

39. Legion told Ihara that it was a medical emergency involving a client and urged Ihara to come in and issue the plane tickets as she was the only person that could issue tickets for PTS.

40. Ihara told Legion to tell Vitt to book and purchase the plane tickets with a credit card directly from Continental Airlines rather than go through the PTS travel agency process. Ihara refused and did not come in to issue the tickets.

41. Vitt called Ihara at approximately 1:00 p.m. at her home. Ihara's daughter answered the phone and Ihara refused to speak to Vitt.

42. Vitt called Ihara back again at approximately 2:00 p.m. and was able to speak to Ihara.

43. Vitt told Ihara that she needed to come in and issue the plane tickets for the ill seaman who had suffered a stroke and his traveling companion.

44. Ihara asked Vitt if she would be paid at the holiday rate and Vitt responded that she would.

45. Ihara asked him why he couldn't purchase the plane tickets himself and Vitt responded by telling her that she is the travel agent for the company and needs to book and arrange for the tickets.

46. Ihara then complained about gas prices and Vitt responded by telling her that she didn't need to worry about gas because you no longer have a job.

47. Ihara did not come in to issue the plane tickets and Vitt booked and purchased the tickets directly

[18 FSM R. 524]

from Continental Airlines with a credit card.

48. On March 27, 2008, Ihara received the official letter, dated March 24, 2008, terminating her employment at PT & S.

49. Since Ihara's termination, PT & S has not employed a travel agent and no longer does travel agency work.

50. In July, 2009 another person was hired at PT & S to assist with an increase in business. Currently there are no positions open at PT & S.

51. Ihara found subsequent employment at Nippon Koei Co., Ltd., from September 21, 2009 to April 30, 2011, with a biweekly pay of $250.00.

III. ANALYSIS

A. Termination of Plaintiff Ihara by Defendant Vitt

It is undisputed that Ihara was a private employee, and private employment is governed by the principles of contract law.¹ Sohl v. FSM, 4 FSM Intrm. 186, 191 (Pon. 1990); Taylor v. Beckham, 178 U.S. 548, 576, 20 S. Ct. 890, 900-01, 44 L. Ed. 1187, 1200 (1900); Mullett v. United States, 150 U.S. 566, 570, 14 S. Ct. 180, 182, 37 L. Ed. 1184, 1186 (1893); Crenshaw v. United States, 134 U.S. 99, 106, 10 S. Ct. 431, 433, 33 L. Ed. 825, 928 (1890). In Ihara's complaint, her cause of action alleges a violation of Subsection F(8) of the Pohnpei Transfer & Storage, Inc., Employee's Handbook (Employee's Handbook).²

Since the court is deciding matters of tort and contract law, the court will apply the substantive law³ of Pohnpei consistent with Edwards v. Pohnpei, 3 FSM Intrm. 350, 360 n.22 (Pon. 1988).

Although the FSM Supreme Court has often decided matters of tort law without stating explicitly that state rather than national law controls, there has been acknowledgment that state law controls in the resolution of contract and tort issues. When the Supreme Court, in the exercise of its jurisdiction, decides a matter of state law, its goal should be to apply the law the same way the highest state court would.

In the court's denial of the Defendants' motion for summary judgment, it was indicated that there might be a unilateral contract between Ihara and the Defendants when Ihara was hired by PT & S.⁴ The basis of this contractual relationship was that the Defendants PT & S made a unilateral offer for

[18 FSM R. 525]

employment in the form of the Employee's Handbook and Ihara accepted this offer through her reading and signing off on the handbook and her continuous employment with PT & S. Reg v. Falan, 14 FSM Intrm. 426, 431-32 (Yap 2006); Pine River State Bank v. Mettile, 333 N.W.2d 622, 627 (Minn. 1983). The facts show that no other written contract of employment was ever signed and executed between the parties.

While in the Reg case, that court did find that an employee Personnel Policies Manual would serve as a contract between the parties, the court notes that this was a case in the public sector and involved government employment. Vitt argued that a distinction should be made on the basis that PT & S is a small private business of only seven employees trying to operate and survive under very different conditions than a government. Vitt argued that any provisions of an employee handbook should be interpreted such that compliance with it would allow a company to operate and which can be reasonably implemented by the company.

The court determines that under the particular facts of this case, where an employee is presented with an employee handbook, instructed to read and understand the handbook, told to sign-off on the handbook, and where the employee does so, the employee handbook will constitute a unilateral contract between the parties. Reg, 14 FSM Intrm. at 426. The court, therefore, examines the terms of the agreement and whether Ihara could be immediately terminated under the court's findings.

At the time Ihara was employed with PT & S it was engaged in providing various services to vessels that come into port in Pohnpei. These vessels dock at various hours during the day and night, as well as on weekends and holidays. Due to the nature of its work, and where emergency situations may arise, as it did here, there is a reasonable expectation for the Defendant's employees to work during normal non-working hours and/or holidays. The PT & S employees were made aware of this and holiday pay is specifically provided for in the Employee's Handbook.

Subsection E2 of the Employees Handbook covers Employee Benefits and Holiday Pay. Subsection 2 on Holiday Pay states: "All permanent full-time employees are entitled to the holidays recognized and published by the Company. If you are required to work on a holiday you will be paid holiday pay. If a holiday falls on a normal workday you will be paid."

The increase in pay for working on a holiday provides extra compensation for having to work on what is supposed to be an employee's day off. During trial, testimony showed that during the phone conversation on March 21, 2008, Ihara had inquired of Vitt if she would receive holiday pay, and he answered affirmatively, consistent with the Employee's Handbook.

In the Employee's Handbook under Employees Responsibilities, Subsection D2 covers the expected Job Performance and conduct of each employee of PT & S. Subsection D2 states, "You are expected to properly perform your job at all times. You are not to leave your work during working hours without the permission of your supervisor. Refusal to obey your supervisor may result in disciplinary action." (emphasis added).

Subsection 5 of the same section covers Obedience and Cooperation, and states, "It is expected that all employees must obey all rules, regulations and instructions by their supervisor. Cooperation between coworkers helps make a smooth running company." (emphasis added.)

Ihara was requested by her supervisors twice on March 21, 2008 to come into work to issue plane tickets to deal with a medical emergency situation of a client and both times refused. The first request was by PT & S Office Manager Legion at around 10:00 a.m. and the second request was by General Manager Vitt at around 2:00 p.m. Ihara's refusals were in violation of Subsections D2 and D5

[18 FSM R. 526]

of the Employee's Handbook. Ihara was therefore twice in breach of these sections in a single day. Vitt additionally asserts that the first time he called Ihara at around 1:00 p.m. she refused to take his call and that this constitutes yet another act of disobedience and insubordination in breach of the Employee's Handbook.

Ihara's position is that her supervisors did not comply with the Employee's Handbook in not providing her with a written warning and then a one day suspension prior to termination as provided for in Subsection F8 of the Employee's Handbook. Ihara claims that this progressive discipline is necessary before her termination could be effectuated.

Vitt asserts that Ihara's three instances of disobedience and insubordination on March 21, 2008, were of such severity that they warranted immediate termination. Additionally, he contends that he had spoken with Ihara numerous times in the past about her conduct at work which would constitute prior notice and part of the progressive discipline called for under Subsection F8 of the Employee's Handbook.

No Pohnpei or FSM case law was provided by either party with regard to this specific issue. The court, therefore, looks for guidance at some case law from the United States (U.S.). Common law decisions from U.S. sources are an appropriate source of guidance for this court for contract and tort issues unresolved by statutes or decisions of constitutional courts within the Federated States of Micronesia (FSM).

Review of decisions of U.S. courts and any other jurisdictions, must proceed against the background of "pertinent aspects of Micronesian society and culture." The FSM Constitution's judicial guidance clause requires that the court's review of U.S. courts' decisions proceed against the background of pertinent aspects of Micronesian society and culture, but where the business activities which give rise to the lawsuit are not of a local or traditional nature, and the work setting and the work itself are of a markedly non-local, international character, the court need not conduct an intense search for applicable customary laws and traditional rules when none have been brought to its attention by the parties and none are apparent. Semens v. Continental Air Lines, Inc., 2 FSM Intrm. 131, 142 (Pon. 1985); Reg v. Falan, 14 FSM Intrm. 426, 430 n.1 (Yap 2006).

Case law in the U.S. has found that an employee handbook can provide contract terms between the employer and employee. Some of the case law has also dealt with the issue of requiring "just cause" for termination rather than strictly following the progressive discipline procedures for termination found in an employee handbook. "Just cause" or "good cause" for termination means a fair and honest cause or reason regulated by good faith on the part of the employer. 82 AM. JUR. 2D Wrongful Discharge § 120, at 805 (1992).

The court recognizes that there are situations which would provide just cause for immediate termination, even if not specifically set forth in an employment handbook. These situations could include severe or multiple instances of disobedience, insubordination, dishonesty, criminal conduct, theft, and actions detrimental to the business. All circumstances constituting just cause for immediate termination cannot be anticipated and listed in an employee handbook.

In this case, "insubordination" is not included in the Employee's Handbook, but severe and/or multiple acts of insubordination can provide just cause for immediate termination. A private sector business cannot be required to retain an employee who acts in a way that actively harms the business interest of the employer.

Vitt's closing arguments asserted that this was a case of insubordination and provided its

[18 FSM R. 527]

definition as "disobedience to constituted authority . . . Refusal to obey some order which a superior officer is entitled to give and have obeyed . . . 'Insubordination' by a servant imports a willful disregard of express or implied directions of the employer and refusal to obey reasonable orders." BLACK'S LAW DICTIONARY 942 (4th Ed. 1968). Vitt provided case law support for the following position: "The fact that a contract of employment authorizes the employer to terminate it for certain specified causes does not ordinarily prevent the employer from discharging the employee for a legal cause not specified." Twentieth Century-Fox Film Corp. v. Lardner, 216 F.2d 844, 859 (1954) (citation omitted).

Vitt argued that due to the severe nature and repeated instances of Ihara's insubordination, her actions should be considered as a separate unlisted offense, and the court can determine, if in this case, immediate termination for just cause is found and appropriate. "It is implied in every contract of employment that the employee will conduct himself with such decency and propriety as not to injure the employer in his business." Lardner, 216 F.2d at 850.

Other U.S. cases ruling on similar issues are discussed below.

In the case of Turner v. Copley, 351 S.W.3d 49 (Mo. Ct. App. 2011), the Missouri Court of Appeals upheld a decision by the St. Charles County Department of Health to terminate the plaintiff Turner based on disruptive behavior in the distribution of medications during the swine flu outbreak. The Missouri appeal court held that some inappropriate behavior is so disruptive, unsafe, or prejudicial, that immediate and severe disciplinary action may be warranted without the use of progressive discipline. Id. at 54.

Here, because of the urgent medical emergency situation on March 21, 2008 and because PTS is directly involved in booking airline tickets for clients, Ihara's actions were prejudicial, disruptive, and unsafe both for PT & S from a business standpoint and for the client seaman who had suffered a stroke from a personal health and safety standpoint.

Similarly, in Hamilton v. Boise Cascade Exp., 280 Fed. App'x 729, 733 (10th Cir. 2008), the U.S. Court of Appeals upheld the company's termination of the plaintiff who violated "a core value of the company" (includes integrity, safety, and quality improvement) as an exception to progressive discipline. In the matter before us, Ihara was made aware that the client had suffered a stroke and needed to urgently depart Pohnpei to seek additional medical attention off-island. Ihara's refusal runs contrary to the company's integrity, safety, and quality improvement objectives in providing needed, expected, and necessary services to its clients, especially when it involved a medical emergency.

The Utah Court of Appeals upheld the termination of the plaintiff in Bhatia v. Department of Employment Sec., 834 P.2d 574 (Utah Ct. App. 1992). The plaintiff Bhatia was employed as a cook at a Pizza Hut restaurant. Id. at 576. During a special promotion, the restaurant was crowded and busy. Id. Bhatia had a history of ill feelings toward another employee, which escalated on that day. Id. The supervisor told Bhatia to cool down and that they would discuss the matter at the end of the shift. Id. At this point Bhatia stormed out of the restaurant using vulgar language that was heard by customers. Id. When he did not return during the shift, he was terminated by the supervisor. Id.

Pizza Hut had a progressive discipline policy, and Bhatia did not receive any formal disciplinary warnings prior to his discharge. Id. On appeal, Bhatia claimed that he was not terminated for "just cause" because: (1) his conduct was an "isolated incident", and (2) Pizza Hut had failed to follow its progressive discipline policy. Id. The court used the following three factors in determining whether there was just cause for immediate termination: (1) culpability, (2) knowledge of expected conduct, and (3) control over the offending conduct. Id.

[18 FSM R. 528]

In analyzing the culpability factor, the Bhatia court quoted Kehl v. Board of Review, 700 P.2d 1129, 1134, (Utah 1985), which held, "The proper emphasis under the culpability requirement should not be upon the number of violations; rather, it should address the problem of whether the discharge was 'necessary to avoid actual or potential harm to the employer's rightful interest.'"

Applying Bhatia and Kehl, PT & S has a legitimate business and financial interest in providing airline booking services to customers, which may include providing these services during holidays as the need arises. Not only does PT & S have holiday pay, but it also offers overtime for its employees because of this need to work outside of normal hours.⁵ Ihara by refusing to come to work twice on March 21, 2008, engaged in conduct that was materially adverse to the financial interest of PT & S in not being able to promptly provide needed airline booking services and related assistance to its client. The urgent medical emergency situation provided an even greater necessity for the flight arrangements to be made at the soonest possible time.

The court in Bhatia discussed Trotta v. Department of Employment Security, 664 P.2d 1195, 1200 (Utah 1983), which stated,

A warning is generally required in single absence cases, where an employee usually has no reason to expect that one unexcused absence will lead to his discharge . . . . No warning, however, need be given when the employee knows, without being warned, that the absence will seriously interrupt the employer's operations.

Ihara's responsibility was to book airline tickets for PT & S clients through PTS. No one else in the company shared this duty. She had been employed since 2006 (a period of around two years), meaning that Ihara knew how the company operated, what was expected of her, and that emergency or other situations may arise where she will be required to work outside of normal working hours and/or on holidays. Because Ihara was the only employee who could book airline tickets, and after being explained the emergency nature and urgency of the situation, she must have known that by her not showing up to work as ordered, a serious interruption of the operations of PT & S would occur which would have possibly endangered the health of one of its clients. Further, Ihara's absence placed unexpected pressure on other employees of PT & S, especially its Office Manager and General Manager, in what was already an emergency situation.

The second factor analyzed by the Bhatia court was the knowledge of conduct expected by the employee. 664 P.2d at 579. The court found that Bhatia walking off the job in the middle of a busy shift, using vulgar language within the hearing of customers, and leaving others to assume his responsibilities was "a flagrant violation of a universal standard of behavior." Id. at 580 (quoting the Utah Code Admin. P. R. 475-5b-102(1)(b)).

In this case, Subsections D2 and D5 of the Employee's Handbook, supra, sets the standard of behavior expected of PT & S employees. Ihara's actions violated these subsections of the Employee's Handbook which are the standards expected of PT & S employees to effectively carry out the objectives of the company, not to mention not to endanger the health and safety of one of its clients. As in the conduct in Bhatia, Ihara's inaction in light of the medical emergency was also arguably a flagrant violation of a universal standard of behavior.

[18 FSM R. 529]

The final element examined by the Bhatia court in finding just cause for termination is an employee's control over his or her conduct, which Bhatia did not challenge as part of his appeal. Here, Ihara did have control over her actions because PT & S called her three times, directly reaching her twice. The first call at around 10:00 a.m. by Office Manager Legion to Ihara, where Ihara was made aware of the medical emergency and requested to come in. Ihara refused to do so. The second call at around 1:00 p.m., where Ihara refused to speak to Vitt. The third call at around 2:00 p.m., where Vitt spoke directly to Ihara and where she was again asked to come in and issue the plane tickets.

Ihara having been twice made aware of the medical emergency situation and her continuing to refuse to come in to work and issue the plane tickets, had control over her actions that day, and her decision not to come into work was not abrupt, nor did she lack adequate time to consider the consequences of her actions.

Based on the aforementioned analysis and Ihara's actions on March 21, 2008, which led to her immediate termination by Vitt, the court finds that Ihara's termination for severe and multiple instances of disobedience and insubordination was justified and for just cause. Ihara's repeated acts of insubordination provided just cause for her immediate termination and did not require the progressive discipline in the Employee's Handbook and therefore the Defendants PT & S, PTS, and Vitt are not liable to her for any wrongful termination.

B. Defendant's Counter-Claim of Conversion or Misappropriation Against Ihara

The Defendants PT&S filed an Answer and Counterclaim in this matter on July 18, 2008 claiming conversion or misappropriation of PT & S funds. The counterclaim for conversion is based on Ihara issuing two one-way plane tickets for her mother and sister from Pohnpei to Charleston, South Carolina on December 9, 2007 and issuing two one-way plane tickets from Charleston, South Carolina to Pohnpei for their return on December 20, 2007.

Prior to these transactions, Ihara had one similar transaction where she issued and had PT & S pay for a ticket for her first cousin. Ihara paid for this ticket through her own salary deductions made under an agreement she arranged with Vitt.

The elements of an action for conversion are: (1) the plaintiffs' ownership and right to possession of the personalty, (2) the defendant's wrongful or unauthorized act of dominion over the plaintiff's property inconsistent with or hostile to the owner's right, and (3) resulting damages. Rudolph v. Louis Family, Inc., 13 FSM Intrm. 118, 128-29 (Chk. 2005); Jonas v. Paulino, 9 FSM Intrm. 519, 521 (Kos. S. Ct. Tr. 2000); Bank of Hawaii v. Air Nauru, 7 FSM Intrm. 651, 653 (Chk. 1996) (citing Gebhardt v. D.A. Davidson & Co., 661 P.2d 855, 858 (Mont. 1983)).

Prior to issuing the first set of plane tickets, Ihara requested authorization from Vitt for issuance and payment of the plane tickets on credit. According to Vitt's testimony, Ihara told him that the tickets would be from Pohnpei to Guam, which he then approved. The court, based on its observation of the witnesses Vitt and Ihara at trial, adopts this version of the facts.

Vitt later found out that the tickets were issued from Pohnpei to Charleston, South Carolina and not Pohnpei to Guam. The Pohnpei to Guam segment was the first leg of the ticket issued and the flight went on to Honolulu, Hawaii to Houston, Texas to Charleston, South Carolina. Since Vitt had authorized plane tickets from Pohnpei to Guam only, the tickets Ihara issued from Pohnpei to Charleston, South Carolina were unauthorized for issuance and payment by PT & S, and were inconsistent with the Defendants' rights of ownership and possession of the company funds used to pay for these tickets.

[18 FSM R. 530]

For the two one-way return plane tickets, Vitt states that there was no request to him at all and therefore no authorization for the return tickets for Ihara's mother and sister from Charleston, South Carolina back to Pohnpei. Since the facts and prior practice established that Vitt's prior approval was required for Ihara to issue and have plane tickets paid for by PT & S, this lack of approval and authorization for the return tickets is inconsistent with the Defendants' rights of ownership and possession of the company funds used to pay for these tickets.

After the four one-way tickets were issued, paid for, and the travel taken, records of the ticket sales revealed that they were from Pohnpei to Charleston, South Carolina and return. Vitt did not uncover this fact until later in reviewing the company's records. Vitt signed off as approved the two Daily Sales Reports that recorded the ticket transactions. Vitt's position on this was that the business needed to mitigate damages, and since the plane tickets had already been paid for, issued, and the travel taken, PT & S needed to collect on the tickets to avoid losses. Additionally, Vitt asserted that his signatures on the two Daily Sales Reports were simply acknowledgment and approval of the reports and not approval of the transactions that were included on the reports.

PT & S has ownership and a right of possession of their funds generated by the company, including the funds used to pay for the four one-way plane tickets issued by Ihara. The act by Ihara of issuing two one-way plane tickets from Pohnpei to Charleston, South Carolina after requesting authorization from Vitt for tickets from Pohnpei to Guam, were without proper notification and authorization since the request did not comport to the actual destination for the travel taken.

The return plane tickets from Charleston, South Carolina to Pohnpei were not requested at all and were not authorized, and thus issuance of both sets of one-way plane tickets resulted in a "wrongful" and "unauthorized" act of dominion over the Defendants PT& S's funds and was inconsistent with or hostile to PT & S's rights as owners of those funds, since Ihara's actions caused the Defendants to pay for the unauthorized tickets using company funds.

Evidence at trial showed that the tickets have not been fully paid for by Ihara and thus there has been damage to the Defendants PT & S. The resulting damages to the Defendants, as a result of the four one-way plane ticket transactions by Ihara, is a loss totaling $6,888.85. The evidence at trial showed that Ihara had made payments on the tickets totaling $776.40 and Elwise had made payments on the tickets totaling $550.00. Therefore $5,562.50 remains unpaid on the four one-way plane tickets issued by Ihara.

Accordingly, we find that all the elements for conversion are present and have been proven, and that Ihara is liable to the Defendants PT & S under the tort of conversion.⁶ Another issue raised by Ihara is the liability for payment as between Ihara and her sister for the plane tickets. Because we have found Ihara liable for conversion on the issuance of the four one-way plane tickets, she is liable for all

[18 FSM R. 531]

of the tickets that were issued by her for her mother and sister from Pohnpei to Charleston, South Carolina and return. Ihara is the counter-defendant and the person who converted the Defendants PT & S's funds and she is the one liable.

Whatever arrangements might have been agreed to between Ihara and her mother and/or sister regarding who would be responsible for the payment of the plane tickets does not affect Ihara's liability for all of the tickets. Even if authorization for the plane tickets had been found, Ihara could not shift liability to another party without the agreement of the Defendants PT & S. In the case of Bank of the FSM v. Hebel, 10 FSM Intrm. 279 (Pon. 2001), the court dealt with a similar issue and stated that:

defendants are free to enter into whatever agreement they choose as to who will be responsible between the two of them to pay back the loan to the bank. However, such an agreement can have no effect on plaintiff's right to seek repayment of the loan from either or both of them.

Id. at 286.

Ihara will be credited for any payments she and her sister made since PT & S is not entitled to double recovery. AHPW, Inc. v. FSM, 12 FSM Intrm. 544, 556 (Pon. 2004).

As to attorneys' fees, a prevailing party is not automatically entitled to attorneys' fees because the court is generally without authority to award such fees in the absence of a specific statute or contractual provision allowing recovery. Western Sales Trading Co. v. Billy, 13 FSM Intrm. 273, 277 n.1 (Chk. 2005). Each party normally bears its own attorneys' fees. This flexible rule allows for the imposition of attorneys' fees where a party acts vexatiously, in bad faith, presses frivolous claims, or employs oppressive litigation practices. Normally, in the absence of a statute to the contrary, a court will proceed on the assumption that the parties will bear their own attorney's fees. Coca-Cola Beverage Co. (Micronesia) v. Edmond, 8 FSM Intrm. 388, 392 (Kos. 1998); Perdue v. Kenny A. ex rel. Winn, 559 U.S. 542, 550, 130 S. Ct. 1662, 1671, 176 L. Ed. 2d 494, 504 (2010); Hensley v. Eckerhart, 461 U.S. 424, 429, 103 S. Ct. 1933, 1937, 76 L. Ed. 2d 40, 47-48 (1983).

In the absence of statutory authority, there is a general presumption against attorney fees awards, and they should not be awarded as standard practice. The court does not find that this case falls within the narrowly drawn exception to the standard practice found in Bank of Hawaii v. Nukuto, 6 FSM Intrm. 615, 616 (Chuuk 1994). Therefore, Vitt's requests for attorneys' fees is HEREBY DENIED.

IV. CONCLUSION

The court determines that under the facts found at trial, through witness testimony, the entered exhibits, and other evidence, and the submissions and arguments of counsel, that the termination of the Plaintiff Ihara by the Defendants PT & S, PTS, and Vitt was based on just cause and the act of immediate termination based on multiple acts of disobedience and insubordination was not a wrongful termination and did not have to proceed through progressive discipline. Having not prevailed on the wrongful termination claim, the Plaintiff Ihara's other claims against the Defendants for pain and suffering, punitive damages, and attorneys' fees are HEREBY DENIED.

The court finds that the Plaintiff Ihara is liable under the tort of conversion for the remaining unpaid balance on the unauthorized airline tickets issued by Ihara and paid for by Defendants PT & S in the amount of $5,562.50, plus interest. One whose property is converted is entitled to interest at the legal rate from the time of conversion. Nukuto, 6 FSM Intrm. at 616.

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THEREFORE, judgment is ENTERED in favor of the Defendants PT & S, PTS, and Vitt as against the Plaintiff Ihara in the amount of $5,562.50, plus statutory interest of 9% from 15 days after December 20, 2007, which is the latest date within which the Defendants PT & S could have paid for the last set of plane tickets.

Footnotes:

¹ The court denied Defendant's Motion for Summary Judgment, filed on April 1, 2011. In this denial, the court did an analysis on public vs. private employment and whether there was a constitutional violation of due process.

² Pohnpei Transfer & Storage Inc., Employee's Handbook at 6. Subsection F8 provides Rules of Employee Conduct for not obeying your supervisor that call for progressive discipline of written warning, one day suspension, and then termination.

³ Substantive law includes "common law" as well as "statutory law."

⁴ Denial of Def.'s Mot. for Summ. J. at 7.

⁵ Subsection B4 of the Employee's Handbook covers Overtime. This subsection states: "Overtime will be worked when necessary as determined and approved by the General Manager. Overtime pay will be based on all hours worked over forty (40) hours in a regular work week."

⁶ The court takes note of the case of Birge v. Fred Meyer, Inc., 872 P.2d 49, 50 (Wash. Ct. App.), review denied, 881 P.2d 253 (Wash. 1994), where the Washington Court of Appeals upheld a ruling by the trial court in granting summary judgment to Defendant Fred Meyer Inc, who terminated Plaintiff Birge for converting company property. Ms. Birge was a manager in the jewelry department of Fred Meyer, Inc., and purchased earrings and wedding bands for her daughter's wedding by billing them to the company, which was against company policy. Id. In a document that was handed out to all employees of Fred Meyer Inc., one of the grounds for immediate termination was "Dishonesty." Id. Here, pursuant to Subsection F9 of the Employee's Handbook, and similar to the provision in Birge, Ihara might have been terminated immediately based on the transaction involving the plane tickets, because Ihara deceived Vitt into believing that the trip was from Pohnpei to Guam, and she did not receive authorization for the return tickets.