FSM SUPREME COURT TRIAL DIVISION
Cite as Carlos Etscheit Soap Co. v. McVey, 22 FSM R. 203 (Pon. 2019)
CARLOS ETSCHEIT SOAP COMPANY,
Plaintiff,
vs.
ERINE McVEY and DO IT BEST HARDWARE,
a business organization, and BOARD OF TRUSTEES
OF THE POHNPEI STATE PUBLIC LANDS TRUST,
Defendants.
CIVIL ACTION NO. 2005-007
ORDER DENYING STAY PENDING APPEAL
Larry Wentworth
Associate Justice
Decided: March 12, 2019
APPEARANCES:
For the Plaintiff:
Stephen V. Finnen, Esq.
P.O. Box 1450
Kolonia, Pohnpei FM 96941
For the Defendants:
Marstella E. Jack, Esq.
P.O. Box 2210
Kolonia, Pohnpei FM 96941
For the Defendants:
Monaliza Abello-Pangelinan, Esq.
(Board of Trustees)
Assistant Attorney General
Pohnpei Department of Justice
P.O. Box 1555
Kolonia, Pohnpei FM 96941
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Generally, a court should weigh four factors before granting a stay pending appeal: 1) whether the appellant has made a strong showing that it is likely to prevail on the appeal's merits; 2) whether the appellant has shown that it will be irreparably harmed without the stay; 3) whether the stay's issuance would substantially harm other parties interested in the proceedings; and 4) whether the public interest would be served by granting a stay, and ordinarily, the most important factor is the first, but a stay may be granted upon a lesser showing of a substantial case on the merits if the balance of the equities in factors 2, 3, and 4 weighs heavily in a stay's favor. Carlos Etscheit Soap Co. v. McVey, 22 FSM R. 203, 206 (Pon. 2019).
One who seeks an injunction pending appeal must show irreparable injury. Carlos Etscheit Soap Co. v. McVey, 22 FSM R. 203, 206 (Pon. 2019).
The standard of judicial review of a Board of Trustees of the Pohnpei State Public Lands Trust decision is a very deferential one, and affirmance of the Board's decision is mandated except when that decision is arbitrary, capricious, an abuse of discretion, unlawful, unsupported by substantial evidence, or the Board has committed prejudicial error (that is, an error that was not harmless error). If a Board decision has a rational basis and was not made through an unlawful procedure or contrary to law, it must be affirmed. That is a high hurdle to clear. Carlos Etscheit Soap Co. v. McVey, 22 FSM R. 203, 206-07 (Pon. 2019).
The law of the case doctrine posits ordinarily an issue of fact or law decided on appeal may not be reexamined either by the trial court on remand or by the appellate court on subsequent appeal. The law of the case proscription applies regardless of whether the issue was decided explicitly or by necessary implication. This reflects the sound policy that, once the court has finally decided an issue, a litigant cannot demand that it be decided again. Carlos Etscheit Soap Co. v. McVey, 22 FSM R. 203,
207 (Pon. 2019).
Three exceptions to the law of the case doctrine permit a court to depart from a prior appellate ruling in the same case: 1) if the evidence at a subsequent trial is substantially different; 2) if there has been an intervening change of law by a controlling authority; and 3) if the earlier decision is clearly erroneous and would work a manifest injustice. Only in extraordinary circumstances may a court sustain a departure from the law of the case doctrine on the ground that a prior decision was clearly erroneous. Carlos Etscheit Soap Co. v. McVey, 22 FSM R. 203, 207 (Pon. 2019).
When an appellant has made a lesser showing of a substantial case on the merits, the court can still grant the requested stay if the balance of equities of the other three factors weighs heavily in the appellant's favor. Carlos Etscheit Soap Co. v. McVey, 22 FSM R. 203, 208 (Pon. 2019).
When claims lurking in the background have not been fully developed, the court, in considering a stay, will not place any weight on them. Carlos Etscheit Soap Co. v. McVey, 22 FSM R. 203, 209 (Pon. 2019).
When an appellant seeks a stay, the factor to consider is whether other interested parties would be substantially harmed, not the "balance-of-harm" factor. Carlos Etscheit Soap Co. v. McVey, 22 FSM R. 203, 209 (Pon. 2019).
A clear legislative directive, that all public lands in a certain cadastral plat should be fully leased in an expeditious manner, is a clear statement of the public interest about that particular public land. Carlos Etscheit Soap Co. v. McVey, 22 FSM R. 203, 210 (Pon. 2019).
When the court is faced with weighing competing public interests, it can conclude that the public interest factor does not weigh heavily in the favor of a stay for the appellant's benefit. Carlos Etscheit Soap Co. v. McVey, 22 FSM R. 203, 210 (Pon. 2019).
When an appellant has not made a strong showing that it is likely to prevail on the merits of its appeal; when it has also not shown that the balance of the equities of the other three factors weigh heavily in favor of a stay; and when it has not shown irreparable harm, the court cannot grant the requested stay. Carlos Etscheit Soap Co. v. McVey, 22 FSM R. 203, 210 (Pon. 2019).
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LARRY WENTWORTH, Associate Justice:
After the court issued its Order Sustaining Determination and Confirming Award and the clerk entered the judgment on January 3, 2019, the plaintiff, the Carlos Etscheit Soap Company ("Soap Company"), filed a notice of appeal on February 8, 2019. The Soap Company then filed, on February 13, 2019, its Motion to Maintain Injunction During Pendency of Appeal. On February 19, 2019, the
court heard testimony from Timothy McVey, who was called as a defendants' witness and argument from the parties about the motion.
Since the time to file responses to the motion had not passed, the court set February 25, 2019, as the due date for written oppositions to the Soap Company's motion and March 6, 2019, for the Soap Company to file its reply to any opposition. Erine McVey filed her written opposition on February 25, 2019, and the Soap Company filed its reply on March 6, 2019. The matter was then considered submitted for decision.
For the reasons that follow, a stay pending appeal is denied.
The Soap Company asks the court to maintain in effect the current injunction or stay until the appellate court has decided the Soap Company's current appeal (and, presumably, has also issued its mandate). The Soap Company contends that since there has been either an injunction or a stay in effect in this case since July 14, 2010,1 it should be a simple matter to continue it in place until its current appeal has been decided as that would be merely maintaining the status quo.
The Soap Company does acknowledge that, if the injunction or stay was continued throughout the current appeal, the current $1,000 bond amount would need to be increased. It suggests that the lease's rental amount would be an appropriate addition to the current bond. During the February 13, 2019 hearing, the Soap Company also acknowledged that its bond could include the bond for appellate costs under Appellate Rule 7, but did not suggest a figure. McVey asserts that her continued expense of $1,000 a month to rent a warehouse to store inventory because her business has not been able to expand onto Lot No. 014-A-08 during this case's pendency must also be considered in setting a bond amount. Beyond that, McVey asserts that the business's inability to expand has, over the years, caused, and will continue to cause, it lost profits.
Generally, a court should weigh four factors before granting a stay pending appeal: 1) whether the appellant has made a strong showing that it is likely to prevail on the appeal's merits; 2) whether the appellant has shown that it will be irreparably harmed without the stay; 3) whether the stay's issuance would substantially harm other parties interested in the proceedings; and 4) whether the public interest would be served by granting a stay, and ordinarily, the most important factor is the first, but a stay may be granted upon a lesser showing of a substantial case on the merits if the balance of the equities in factors 2, 3, and 4 weighs heavily in a stay's favor. Department of Treasury v. FSM Telecomm. Corp., 9 FSM R. 353, 355 (App. 2000); Mori v. Hasiguchi, 17 FSM R. 602, 604 (Chk. 2011). One who seeks an injunction pending appeal must show irreparable injury. Berman v. Pohnpei, 18 FSM R. 418, 421 (App. 2012).
A. Likelihood of Prevailing on the Appeal's Merits
The Soap Company's likelihood of success on appeal appears low. The standard of judicial
review (by both trial and appellate divisions) of a decision by the Board of Trustees of the Pohnpei State Public Lands Trust (the "Board") is, as set out in Pohnpei Code, Title 8, § 3-104, a very deferential one. It mandates affirmance of the Board's decision except when that decision is arbitrary, capricious, an abuse of discretion, unlawful, unsupported by substantial evidence, or the Board has committed prejudicial error (that is, an error that was not harmless error). Essentially, if a Board decision has a rational basis and was not made through an unlawful procedure or contrary to law, it must be affirmed. See International Bridge Corp. v. Yap, 9 FSM R. 390, 396 (Yap 2000) (reviewing court may not overturn a state agency's decision unless the challenger meets the heavy burden of showing that the decision had no rational basis or involved a clear and prejudicial violation of applicable statutes or regulations). That is a high hurdle for the Soap Company to clear.
The Soap Company asks the court to acknowledge that the case has been properly appealed to the appellate division and the relevant issues have been preserved. While that is true, the court also notes that the law of the case doctrine forecloses several issues or lines of argument in the Soap Company's current appeal. "'The law of the case doctrine posits ordinarily "an issue of fact or law decided on appeal may not be reexamined either by the [trial] court on remand or by the appellate court on subsequent appeal."'" Heirs of Henry v. Heirs of Akinaga, 21 FSM R. 310, 313 (App. 2017) (quoting United States v. Lee, 358 F.3d 315, 320 (5th Cir. 2004) (quoting United States v. Matthews, 312 F.3d 652, 657 (5th Cir. 2002))). "The law of the case proscription applies regardless of whether the issue was decided explicitly or by necessary implication." Crowe v. Smith, 261 F.3d 558, 562 (5th Cir. 2001) (cited in Lee, 358 F.3d at 320). This reflects the sound policy "that, once the court has finally decided an issue, a litigant cannot demand that it be decided again." Waguk v. Waguk, 21 FSM R. 60, 68 (App. 2016).
There are three exceptions to the law of the case doctrine that permit a court to depart from a prior appellate ruling in the same case: "'"(1) [t]he evidence at a subsequent trial is substantially different; (2) there has been an intervening change of law by a controlling authority; and (3) the earlier decision is clearly erroneous and would work a manifest injustice."'" Heirs of Henry, 21 FSM R. at 313 (quoting United States v. Hollis, 506 F.3d 415, 421 (5th Cir. 2007) (quoting Lee, 358 F.3d at 320 n.3)).
It does not seem that an argument could be made that any of these exceptions apply to the current appeal. Neither earlier appellate decision (Carlos Etscheit Soap Co. v. McVey, 17 FSM R. 427 (App. 2011) and Carlos Etscheit Soap Co. v. McVey, 21 FSM R. 525 (App. 2018)) is clearly erroneous or works a manifest injustice. Nor has there been an intervening change in the applicable law. There has been just one trial in this matter, and that was only on a collateral issue of damages. The court's other decisions were only judicial reviews of an administrative agency's actions in reaching a decision, not a review of the final result. The earlier proceedings involved the fairness of the administrative process. The current appeal instead involves, for the first time, judicial review of the actual final administrative decision itself, and whether that decision has a rational basis. During the Soap Company's two previous appeals, the issue of which bidder the Board should actually choose to lease Lot No. 014-A-08 was not before the appellate division since that issue was, each time, remanded to the Board for further proceedings while the appellate division considered other points on the appeals before it.
Since "'[o]nly in extraordinary circumstances may [a] court sustain a departure from the "law of the case" doctrine on the ground that a prior decision was clearly erroneous,'" Heirs of Henry, 21 FSM R. at 313 (quoting City Public Serv. Bd. v. General Elec. Co., 935 F.2d 78, 82 (5th Cir. 1991)), the following lines of argument on appeal should be foreclosed.
The court has previously held that, as a matter of law, being the prior lessee did not entitle the
Soap Company to an automatic renewal of its lease upon request, especially when, as here, the lessee has not yet developed the lot. Carlos Etscheit Soap Co. v. McVey, 17 FSM R. 102, 111 (Pon. 2010). The appellate court affirmed the trial court ruling that the Soap Company lease agreement did not entitle the lessee to an automatic right of renewal. Carlos Etscheit Soap Co. v. McVey, 17 FSM R. 427, 438 (App. 2011). The trial court, after remand and trial, then declined to order lease renewal as relief, Findings of Fact & Conclusions of Law at 3-5 (Nov. 10, 2014), which was affirmed by the appellate court, Carlos Etscheit Soap Co. v. McVey, 21 FSM R. 525, 534-35 (App. 2018). The court has held that "[t]he Board in the past has occasionally revoked a lease for failure to develop a lot but has not refused to renew a lease when there was some development. Nevertheless, there is always a first time." Findings of Fact & Conclusions of Law at 4 (Nov. 10, 2014), aff'd, 21 FSM R. at 536 (App. 2018). Thus, that the Board was not required to award the lease to the Soap Company for no reason other than that the Soap Company was the prior lessee, is the law of this case, and likely will not (and probably cannot) be reconsidered in this appeal.
The trial court also found as fact that:
The Soap Company asserts that Lot No. 014-A-08 is integral to, if not the key or indispensable part of its development of the other four lots because the boat motor business it envisions requires that there be land in the lee of its leasehold jetty lot to allow boats to be hauled out of the water on a boat ramp where they would be protected from the prevailing wind and the waves the wind would generate. The court is not convinced that the Soap Company's development project is as dependent on Lot No. 014-A-08 as the Soap Company insists. From the site visit, Lot No. 014-A-08 does not appear to extend all the way to the waterline.
Findings of Fact & Conclusions of Law at 3 (Nov. 10, 2014), aff'd, 21 FSM R. at 532 (App. 2018).
The court thus concludes that the Soap Company has failed to make a strong showing that it is likely to prevail on the appeal's merits. At best, the Soap Company may have made a lesser showing of a substantial case on the merits. If so, and if the balance of equities of the other three factors weigh heavily in the Soap Company's favor, the court could still grant the requested stay.
B. Whether Soap Company Irreparably Harmed Without the Stay
The Soap Company contends that, if no stay is granted, it will be irreparably harmed. It argues that any change to the disputed lot will irreparably harm it because any change to land is, by its nature, irreparable harm. It argues, as it did before, that its retention of Lot No. 014-A-08 is key to its marina development plan for its four adjoining lots which were earlier approved by the Board.
The court is not so sure, as the Soap Company is, that any harm to it will be irreparable. As mentioned above, the court has earlier found that it was "not convinced that the Soap Company's development project is as dependent on Lot No. 014-A-08 as the Soap Company insists." Findings of Fact & Conclusions of Law at 3 (Nov. 10, 2014), aff'd, 21 FSM R. at 532 (App. 2018). Soap Company stated that it needed Lot No. 014-A-08 "to allow boats to be hauled out of the water on a boat ramp where they would be protected from the prevailing wind and the waves the wind would generate." Id. The court found that the Soap Company's stated need for a place to the lee of the jetty or pier that was also leased to the Soap Company could be otherwise accommodated. Furthermore, if McVey does develop Lot No. 014-A-08 by building a warehouse on it and the Soap Company were later awarded the lease for Lot No. 014-A-08, it would seem that a warehouse would be perfectly suitable (new doors facing the water might be needed) as a place to store boats hauled out of the water and protect those boats from the prevailing wind and the waves the wind would generate.
The Soap Company now asserts, for the first time, that McVey wants, not only Lot No. 014-A-08, but to fill in the submerged land next to Lot No. 014-A-08 in order to double its size, which would further hamper Soap Company's ability to create its marina and have a place, leeward of the jetty, to haul out boats. This claim, and McVey's claim that the Soap Company is developing its adjoining lots in a manner incompatible with its proposed future development as a marina, are lurking in the background but have not been fully developed and therefore the court will not, at this time, place any weight on them.
C. Whether Stay Would Substantially Harm Other Parties
The Soap Company contends that the balance-of-harm factor weighs heavily in its favor because it will be irreparably injured if a stay is not granted and that the continuation of the injunction for the brief period that the current appeal is considered will not detrimentally harm any party. But, as discussed above, the court cannot conclude that the Soap Company has shown irreparable harm.
And McVey has shown that a stay would substantially harm her ability to expand her hardware business. She is harmed by being unable to expand her hardware business beyond the lot it now occupies. McVey has had to rent the warehouse across the street from her hardware store to store inventory. The rent for that warehouse is $1,000 a month, Commercial Lease Agreement pt. 4(a) [Ex. A to McVey Suppl. to Opp'n to Mot. to Maintain Stay], and that lease prohibits McVey from conducting any sales from the rented warehouse, id. pt. 5(a)(ix). This harm will continue during the appeal if a stay is issued. McVey also asserts that it has been substantially harmed to date by its inability to expand onto Lot No. 014-A-08 and thus expand its business.
The Soap Company contends that an issue not considered by the Board (and therefore a ground on which it might prevail on appeal) was that McVey was no longer doing business under the Do It Best Hardware name (it uses Pohnpei Hardware) and that this change of business should have been considered by the Board and, presumably, used as a ground not to award the Lot No. 014-A-08 lease to McVey. McVey retorts that this is an example of substantial harm her hardware business has suffered because it lost the right to use the Do It Best Hardware name because it was unable to meet the minimum sales requirement to keep that franchise name (although it continues to acquire much of its inventory from Do It Best Hardware). The court cannot give this much weight as an example of substantial harm since the point was never developed – evidence was not presented to show that McVey would have managed to make the requisite minimum sales number if it had been able to expand. But likewise, the court does not consider this a viable issue that the Soap Company would be likely to prevail upon on appeal. The Board based its decision on the services offered by the McVey hardware business, not on the name it bore.
Thus, if the court were to weigh the balance of harms to the parties, this factor would not favor the Soap Company, even if there were doubts it favored McVey. Moreover, this factor is not quite the same balance-of-harm factor as the Soap Company represents it to be. The factor to consider is whether other interested parties would be substantially harmed. The court concludes that the continuance of an injunction or the issuance of a stay would, under the present circumstances, substantially harm McVey. Her hardware business would still be unable to expand and it would still bear the warehouse rental expense. The Soap Company relies on a court order issued when the court was considering a stay during a previous appeal that concluded that, at that time (July 2010), "there is no significant harm to others interested in the litigation." Carlos Etscheit Soap Co. v. McVey, 17 FSM R. 176, 179 (Pon. 2010) (Order Denying Stay Without Prejudice). But that was nine years ago, and, as mentioned above, during that appeal, the determination of who would lease Lot No. 014-A-08 had been vacated and remanded to the Board for further proceedings and was not before the appellate court. Events since then have shown that were a stay to remain in place during this appeal, the McVey
hardware business would incur substantial harm.
D. Whether the Public Interest Would Be Served
The Soap Company contends that the public interest factor favors it because the public interest favors a bidding process that is fair and transparent and that makes the Board adhere to its public land lease regulations and its decisions. But, as the court has noted before, the Pohnpei Legislature, in 1998,
made a clear statement of the public interest in this particular public land – it directed that public lands in Cadastral Plat No. 014-A-00, of which Lot. No. 014-A-08 is a part, be leased "in an expeditious manner," with the intent that all public land within that plat should "be fully leased." Pon. S.L. No. 4L-79-98, § 2 (codified at 42 Pon. Code § 10-136(2)). In face of that clear legislative directive, the court cannot say that the public interest favors a stay, particularly in the form sought.
Carlos Etscheit Soap Co. v. McVey, 17 FSM R. 176, 180 (Pon. 2010). The public interest thus also favors the immediate leasing and development of Lot No. 014-A-08, instead of further delay. Weighing these competing public interests, the court can only conclude that this factor does not weigh heavily in the favor of a stay for the Soap Company's benefit.
E. Summary
The Soap Company has not made a strong showing that it is likely to prevail on the merits of its appeal. It also has not shown that the balance of the equities of the other three factors weigh heavily in favor of the stay's issuance. Nor has irreparable harm been shown. The court therefore cannot grant the stay requested.
Accordingly, the Carlos Etscheit Soap Company's Motion to Maintain Injunction During Pendency of Appeal is denied. Nevertheless, the current injunction is extended for twenty-one days – until April 2, 2019 – after which time it will automatically dissolve. The parties may submit their views on the disposition of the $1,000 bond.
_____________________________________Footnotes:
1 The preliminary injunctions that barred either party from occupying or developing Lot No. 014-A-08, was issued October 18, 2006, but there were earlier restraining orders to the same effect that extend back to April 2005. See Carlos Etscheit Soap Co. v. McVey, 17 FSM R. 176, 179 & n.3 (Pon. 2010). The bond has been in place since at least early 2006.
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