FSM SUPREME COURT TRIAL DIVISION
Cite as Seasco Co. v. Ikitsuki, 24 FSM R. 568 (Chk. 2024)
SEASCO COMPANY, LTD.,
Plaintiff,
vs.
IKITSUKI, a vessel registered and now doing
business as NARIK MATAW, presently in the
possession and operation of Congressional Election
District (ED #5), with its hull, keel, engines, gears,
GPS, life jackets, air conditioning and cooling
systems, and furnishings,
In rem Defendant,
FSM DEPARTMENT OF FINANCE, FSM
GOVERNMENT, and CHUUK CONGRESSIONAL
ELECTION DISTRICT FIVE (ED #5),
In Personam Defendants.
CIVIL ACTION NO. 2021-1012
ORDER DENYING MOTIONS TO DISMISS, FOR SUMMARY JUDGMENT, AND FOR AN ARREST WARRANT
Larry Wentworth
Associate Justice
Hearing: May 8, 2024
Decided: August 23, 2024
APPEARANCES:
For the Plaintiff:
Sabino S. Asor, Esq.
213 Raven Way
Dededo, Guam 96929
For the Defendant:
Josef Rold, Esq.
Assistant Attorney General
FSM Department of Justice
P.O. Box PS-105
Palikir, Pohnpei FM 96941
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The duress defense to a contract takes two forms – physical and economic, and physical duress negates assent to a contract ab initio, while economic duress makes a formed contract voidable. Seasco Co. v. Ikitsuki, 24 FSM R. 568, 574 (Chk. 2024).
A contract is voidable for economic duress if a party's manifestation of assent is induced by the other party's improper threat that leaves the victim no reasonable alternative; or if a party's manifestation of assent is induced by one who is not a party to the transaction, unless the other party to the transaction in good faith and without reason to know of the duress either gives value or relies materially on the transaction. Seasco Co. v. Ikitsuki, 24 FSM R. 568, 574 (Chk. 2024).
The requirements for a showing of duress by threat can be grouped under four headings: 1) there must be a threat; 2) the threat must be improper; 3) the threat must induce the victim's manifestation of assent; and 4) it must be sufficiently grave to justify the victim's assent. Seasco Co. v. Ikitsuki, 24 FSM R. 568, 574 (Chk. 2024).
Wrongful acts or threats constituting duress may be categorized into four principal classes: 1) violence or threats of violence [not economic duress]; 2) imprisonment or threats of imprisonment [also not economic duress]; 3) wrongful seizing or withholding, or threats to wrongfully seize or withhold, goods or lands; and 4) other wrongful acts. Seasco Co. v. Ikitsuki, 24 FSM R. 568, 574 (Chk. 2024).
Absent a wrongful threat, the driving of a hard bargain is not duress. This is true even if one party benefits from the other's financial distress, but to be wrongful or improper the act or threat does not have to be unlawful. Seasco Co. v. Ikitsuki, 24 FSM R. 568, 574 (Chk. 2024).
The general rule is that any wrongful act or threat which overcomes a party's free will constitutes duress. This simple statement of law, however, conceals a number of questions, particularly as to the meaning of "free will" and "wrongful." Seasco Co. v. Ikitsuki, 24 FSM R. 568, 574 (Chk. 2024).
An element of economic duress is that the plaintiff must show that the other party by wrongful acts or threats, intentionally caused him to involuntarily enter into a particular transaction. "Wrongfulness" depends on each case's particular facts and may be satisfied where the alleged wrongdoer's conduct is criminal or tortious but an act or threat may also be considered wrongful if it is wrongful in the moral sense. In many cases, a threat to breach a contract or withhold payment of an admitted debt has constituted a wrongful act, but implicit in such cases is the additional requirement that the threat to breach the contract or withhold payment is done in bad faith. Seasco Co. v. Ikitsuki, 24 FSM R. 568, 575 (Chk. 2024).
Economic duress does not occur simply because a party has been the victim of a wrongful act. That party must also have no choice but to agree to the other party's terms or face serious financial hardship, and that there is no reasonable alternative to agreeing to the other party's terms because there is no adequate remedy if the threat were to be carried out. Seasco Co. v. Ikitsuki, 24 FSM R. 568, 575 (Chk. 2024).
The affirmative defense of economic duress, although a good defense to a breach-of-contract claim, is not the easiest defense to prove. Seasco Co. v. Ikitsuki, 24 FSM R. 568, 575 (Chk. 2024).
It is not clear whether the burden of proof to prove economic duress to void a contract is by a preponderance of the evidence, or by the higher clear and convincing evidence standard. Seasco Co. v. Ikitsuki, 24 FSM R. 568, 575 (Chk. 2024).
A summary judgment movant has the burden of showing that it is entitled to judgment as a matter of law as to elements over which it has the burden of proof as well as on the affirmative defenses. Seasco Co. v. Ikitsuki, 24 FSM R. 568, 575 (Chk. 2024).
The National Maritime Act (Title 19) prohibits maritime liens and proceedings in rem against any government vessel engaged in noncommercial services. "Government" means the FSM national government, or a state government, or any agency or instrumentality of either, and a "government vessel" is a vessel that: belongs to or is chartered and controlled by the government; or is held by any person on the government's behalf or for the its benefit. Seasco Co. v. Ikitsuki, 24 FSM R. 568, 576 (Chk. 2024).
A resolution of whether an apparent government vessel is engaged in a commercial purpose such that the lien exclusion does not apply would be a precondition to the issuance of an arrest warrant if the other requirements for the warrant's issuance. Seasco Co. v. Ikitsuki, 24 FSM R. 568, 576 (Chk. 2024).
A maritime lien is an essential predicate for the arrest of a vessel in a private in rem action. Seasco Co. v. Ikitsuki, 24 FSM R. 568, 576 (Chk. 2024).
A government vessel engaged in noncommercial services cannot be subject to a proceeding in rem against it. Seasco Co. v. Ikitsuki, 24 FSM R. 568, 576 (Chk. 2024).
No arrest warrant can issue for a vessel unless the existence of a maritime lien can be shown. Seasco Co. v. Ikitsuki, 24 FSM R. 568, 577 (Chk. 2024).
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LARRY WENTWORTH, Associate Justice:
On May 8, 2024, the court heard: 1) the Defendants FSM Department of Finance and FSM Government's Motion to Dismiss Based on Settlement of Contract, filed September 14, 2023; 2) the Plaintiff's Opposition to Defendants FSM Department of Finance and FSM Government's Motion to Dismiss, filed September 18, 2023; 3) the Plaintiff's Renewed Motion for Partial Summary Judgment on Costs and Damage and for Specific Performance on Payment, filed February 5, 2024; 4) Plaintiff Seasco's Opposition to FSM Department of Finance's 9/14/2023 Motion to Dismiss, filed April 19, 2024; 5) the Plaintiff's Renewed Motion for Summary Judgment on Liability for Damages and for Garnishment and Attachment, filed April 19, 2024; and 6) the FSM defendants' Opposition to Plaintiff's Motion for Summary Judgment, filed May 7, 2024. The plaintiff's pending motions predating those listed above were subsumed in the plaintiff's renewed motions heard on May 8, 2024.
All pending motions are hereby denied without prejudice. The reasons follow.
A. Vessel Acquisition
This case arises from the purchase of a sea-going passenger and cargo vessel for Congressional Election District #5 (Hall and Northwestern Islands) to improve transportation within that distinct and between that district and the Chuuk state center (Weno). In 2020, Congress appropriated $1.3 million for the purchase of a suitable vessel.1 On August 21, 2020, the President waived the competitive bidding requirement for this purchase due to the covid-19 pandemic and the Chuuk northwest region's urgent and pressing transportation needs.
The Northwest Election District #5 Development Authority ("ED#5") is an entity created by Chuuk state law. On September 14, 2020, ED#5, through the FSM Department of Transportation Communication & Infrastructure ("TC&I") contracted with Seasco Company, Ltd. ("Seasco"), a foreign-owned corporation based on Chuuk, to act as its vessel procuring agent. Under the contract, Seasco received a $500,000 advance payment. A $400,000 payment was due when the vessel's crew was ready to depart to Japan to sail the vessel to Chuuk. Seasco was to assist with sending a crew to Japan and would receive the last $400,000 once the vessel arrived in Chuuk. The contract specified that the vessel to be purchased was a particular 499-ton steel Japanese Fisheries Patrol Vessel of the JG Coastal Class, built in 1997, and identified elsewhere as the M/V Miura. This contract was signed by, among others, the FSM Secretary of Finance, the TC&I Secretary, ED#5, and Seasco. It also contained an August 4, 2020 certification of the availability of funds.
Seasco contracted with Rush Company, in Japan, to buy the M/V Miura for ¥75 million (or $700,000). This contract required a down payment of $70,000, with full payment to be made within 35-60 calendar days. Because of e-mails it received that later turned out to be bogus or a scam, Seasco mistakenly sent a down payment by wire transfer to a Lloyd Bank of London account from where the money disappeared. Because of this, the M/V Miura purchase was never completed.
The FSM Department of Justice became suspicious when it learned that Seasco had sent national government funds given to Seasco to buy a vessel to someone other than the seller. The FSM then opened a money-laundering criminal investigation into Seasco and its president, and had the court seize and put Seasco's $500,000 advance payment into an escrow account. It later filed criminal charges.
With ED#5's approval, but apparently not with the FSM's specific approval, Seasco looked for another vessel. On December 28, 2020, ED#5 gave Seasco a power of attorney to buy the M/V Ikitsuki, which was also a 499-ton former Japanese Fisheries Patrol Vessel, but built in 1998. On February 4, 2021, Seasco contracted with the Alpha International Corporation ("Alpha"), another Japanese company, to buy the M/V Ikitsuki for ¥70 million. Seasco made a prompt $34,000 down payment on this vessel. Seasco tried to recover the $500,000 the FSM had seized before a $550,000 payment was due Alpha, but was unable to. Instead, Seasco used its own funds. It paid Alpha a total of $739,000 for the M/V Ikitsuki by July 15, 2021.2
On May 18, 2021, TC&I issued a provisional Certificate of Registry (No. JTC-010-21) for the M/V Ikitsuki as an FSM vessel named the MS Narik Mataw, owned by the Northwest Development Authority, Weno, Chuuk. Seasco accepted delivery of the M/V Ikitsuki on July 3, 2020, in Nagasaki, Japan. It arrived in Chuuk Lagoon on August 24, 2021. On October 7, 2021, Seasco and ED#5 executed a bill of sale from Seasco to ED#5 for the MS Narik Mataw, with a price of $1.3 million. TC&I inspected the vessel on October 24, 2021, and, on October 26, 2021, issued a permanent Certificate of Registry for the MS Narik Mataw, Registration No. VR0178.
B. Subsequent Events
Since it had not been paid, Seasco, on December 2, 2021, filed this lawsuit, alleging breach of contract, interference with business contract, unjust enrichment, trespass to chattels, false light, and malicious prosecution. Seasco asked the court to declare that Seasco has a "full maritime lien" in the MS Narik Mataw; to award Seasco compensatory ($1.3 million) and punitive damages; to "garnish" the unpaid funds from the Department of Finance; to issue an arrest warrant for the MS Narik Mataw and have it arrested, but left under the defendants' control;3 and, if Seasco was not promptly paid in full, to order the MS Narik Mataw sold with the proceeds going towards what Seasco was owed, plus its costs and attorney's fees.
The FSM and its Department of Finance ("FSM defendants") filed their answer on December 22, 2021. They raised a laundry list of affirmative defenses, notably including sovereign immunity, waiver, limitation of liability, and unenforceable contract. The ED#5 has not filed an answer or otherwise appeared.
Seasco still was not paid. In May 2022, it made an agreement with ED#5 for ED#5 to pay Seasco $25,000 monthly "until the FSM will be able to process and make the payment for the vessel to Seasco" with the ED#5 payments to then offset. ED#5 made one $25,000 payment, but thereafter refused to make any more.
The allottee (the Secretary of TC&I), Seasco, and ED#5 signed a "ratification" agreement, but the Secretary of Finance did not sign, although there was a place for his signature.4 This agreement recited that Congress had appropriated $1.3 million for the purchase of a vessel for ED#5, ratified Seasco's purchase of the MS Narik Mataw, acknowledged that ED#5 owned the vessel, and had an endorsement certifying the availability of funds in the amount of $800,000. Seasco expected to receive $1.3 million under this agreement, but was not paid anything.
Then, on April 13, 2023, Seasco and the FSM entered into a "Contract on the Purchase of Narik Mataw Vessel." This "purchase" agreement provided that the "reimbursement payment for the purchase of Narik Mataw Vessel" was set at $800,000, which included the vessel's price, its refitting in Japan, the fuel and provisions to bring the vessel to Chuuk, and the crew's travel to Nagasaki. It also provided that Seasco had no recourse to withhold delivery. The contract further provided that Seasco would dismiss its [this] pending case against the FSM and its agencies and agents, and that the FSM would seek to dismiss the criminal case against Seasco and its principal, Pyung Soo Gong, on the basis of the plea agreement, with the $500,000 in escrow to be returned to the FSM government. And the contract provided that either party could recover any and all damages attributed to the other party's breach of that contract, including all costs and expenses, and reasonable attorney fees. Lastly, the contract recited that it contained the parties' entire agreement and superseded all the parties' previous agreements and understandings, written or oral, concerning the MS Narik Mataw transaction, and it specifically rescinded the September 14, 2020 purchase agreement and the November/December 2022 ratification agreement. Under the signature for Seasco at the end of the contract was the handwritten notation "(under protest)."
The FSM then paid, and Seasco accepted, the $800,000. The $500,000 in escrow had already been released to the government. The criminal case against Seasco was resolved. The FSM national police had earlier certified that their searches found no evidence of money-laundering in the records seized with a search warrant. The money laundering charges were dismissed as part of a plea bargain of guilty to unrelated immigration offenses on January 5, 20245 (with sentencing on February 22, 2024). But Seasco did not dismiss the present civil action.
C. The Motions
Instead, Seasco filed the Plaintiff's Renewed Motion for Partial Summary Judgment on Costs and Damage and for Specific Performance on Payment.6 The FSM defendants then moved to dismiss this case based on the April 13, 2023 settlement agreement. Seasco opposed that motion. It argued that it was still owed $500,000 since it was entitled to the full $1.3 million because it had signed the settlement agreement under protest and because the original $1.3 million purchase agreement was not illegal and was not voidable; and because laws, including the $1.3 million appropriation, should be enforced as written.
Seasco moves for summary judgment on its claim for the $500,000. Seasco asserts that the April 13, 2023 settlement agreement is void or voidable because Seasco signed it "under protest" and because Seasco's consent to it was induced by economic duress since Seasco had received no payment for two years and was no longer in a position to refuse an $800,000 payment. Seasco further asserts that the settlement agreement is unconscionable and thus voidable because it was very one-sided, drafted by the government and then presented to Seasco at the last minute on a take-it-or-leave-it basis, knowing that Seasco was in need of funds, and that it was unfair to deny Seasco a maritime lien on the MS Narik Mataw until Seasco was paid in full or to force Seasco to give up all rights to the escrowed $500,000. Seasco's April 19, 2024 opposition to the FSM defendants' motion to dismiss and its April 19, 2024 renewed summary judgment motion repeat these same arguments.
The FSM defendants oppose summary judgment. They rely not only on the April 13, 2023 settlement agreement but also argue that Seasco's contracts are unenforceable because cost-reimbursement for purchase required competitive proposals under the financial management regulations, which was not done, and that the Presidential waiver became obsolete through the seizure of the $500,000 cash and related court orders. They contend that Seasco waived its right to the $500,000 of its own free will.
A. Amount at Issue
Seasco is now suing for $500,000, the amount it believes it is owed for the MS Narik Mataw purchase, plus attorney's fees and costs.7 But since Seasco has received (and retained) $800,000 from the FSM Department of Finance (after the April 13, 2023 settlement agreement) and $25,000 from ED#5, as reimbursement for the Seasco's purchase of the MS Narik Mataw, only $475,000 remains unpaid, if Seasco is entitled to the full $1.3 million.
Seasco's claim for attorney's fees is another matter. It does not assert a basis for this claim. Neither of the two contracts (the original M/V Miura purchase agreement and the later M/V Ikitsuki "ratification agreement"), on which Seasco relies for the $1.3 million price, contains a clause authorizing an attorney's fees award. No other recognized basis for a fee award – either authorization by a statute or an opposing party's vexatious or frivolous litigation behavior – is asserted.
B. Economic Duress
The FSM defendants assert that Seasco has breached their April 13, 2023 settlement agreement by not dismissing this case. Seasco argues that it can void that agreement because its consent was obtained only through economic duress, and that, once the settlement agreement is voided, the original September 14, 2020 purchase agreement and the later ratification agreement are both revived, thus entitling Seasco to the full $1.3 million.
The duress defense to a contract takes two forms – physical and economic, and physical duress negates assent to a contract ab initio. Smith v. Nimea, 18 FSM R. 36, 41 (Pon. 2011) (citing RESTATEMENT (SECOND) OF CONTRACTS intro. topic prec. § 174, at 473 (1981)). But
[e]conomic duress makes a formed contract voidable. A contract is voidable for economic duress if: (1) a party's manifestation of assent is induced by an improper threat by the other party that leaves the victim no reasonable alternative; or (2) a party's manifestation of assent is induced by one who is not a party to the transaction, unless the other party to the transaction in good faith and without reason to know of the duress either gives value or relies materially on the transaction.
Smith, 18 FSM R. at 41-42. Seasco alleges that the FSM defendants improperly induced its assent to the April 2023 Contract on the Purchase of Narik Mataw Vessel. The economic duress analysis will therefore proceed under alternative (1).
"The requirements for a showing of duress by threat can be grouped under four headings. First, there must be a threat. Second, the threat must be improper. Third, the threat must induce the victim's manifestation of assent. Fourth, it must be sufficiently grave to justify the victim's assent." E. ALLAN FARNSWORTH, CONTRACTS § 4.16, at 257 (1982).
Wrongful acts or threats "may be categorized into four principal classes. 1. Violence or threats of violence [not economic duress]. 2. Imprisonment or threats of imprisonment [also not economic duress]. 3. Wrongful seizing or withholding, or threats to wrongfully seize or withhold, goods or lands. 4. Other wrongful acts." JOSEPH M. PERILLO, CALAMARI AND PERILLO ON CONTRACTS § 9.3, at 318-19 (5th ed. 2003) (footnote omitted). But, "absent a wrongful threat, the driving of a hard bargain is not duress. This is true even if one party benefits from the financial distress of the other." Id. at 320 (emphasis in original). To be wrongful or improper the act or threat does not have to be unlawful. Id. at 319; FARNSWORTH, supra, § 4.17, at 259. And, "[i]f a party's assent has been induced by the duress of a third person, rather than that of the other party to the contract, the contract is nonetheless voidable by the victim." RESTATEMENT (SECOND) OF CONTRACTS § 175 cmt. e (1981) (but exception if other party gives value in good faith and without reason to know of duress).
FSM Telecomm. Cable Corp. v. FSM Telecomm. Corp., 23 FSM R. 667, 685 (Pon. 2022) (footnote omitted) (alterations in original). "Today the general rule is that any wrongful act or threat which overcomes the free will of a party constitutes duress. This simple statement of law, however, conceals a number of questions, particularly as to the meaning of 'free will' and 'wrongful.'" JOSEPH M. PERILLO, CALAMARI AND PERILLO ON CONTRACTS § 9.2, at 316 (5th ed. 2003) (footnote omitted).
"[O]ne essential element of economic duress is that the plaintiff must show that the other party by wrongful acts or threats, intentionally caused him to involuntarily enter into a particular transaction." Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Serv. Co., 584 P.2d 15, 22, 9 A.L.R.4th 928, 936 (Alaska 1978). "Wrongfulness" depends on each case's particular facts and "may be satisfied where the alleged wrongdoer's conduct is criminal or tortious but an act or threat may also be considered wrongful if it is wrongful in the moral sense." Id. at 22, 9 A.L.R.4th at 936-37. "In many cases, a threat to breach a contract or withhold payment of an admitted debt has constituted a wrongful act," but "[i]mplicit in such cases is the additional requirement that the threat to breach the contract or withhold payment is done in bad faith." Id. at 22, 9 A.L.R.4th at 937 (citations omitted).
Economic duress does not occur simply because a party has been the victim of a wrongful act. Id. That party must also "have no choice but to agree to the other party's terms or face serious financial hardship," and that there is "no reasonable alternative to agreeing to the other party's terms" because there is "no adequate remedy if the threat were to be carried out." Id.
C. Applied to the Motions for Summary Judgment and to Dismiss
The court cannot grant the FSM defendants' motion to dismiss based on the settlement agreement if Seasco can void or rescind that agreement on the basis of economic duress. Nor can the court grant Seasco's summary judgment motion if a genuine issue of material fact is present.
Seasco has alleged facts, which if proven true, could be a basis for a viable economic duress defense, allowing it to void the April 13, 2023 settlement agreement. However, unlike Totem Marine Tug & Barge where, if the plaintiff was not paid soon, it would have to file for bankruptcy and the other party had been informed of this, there is no actual admissible evidence, such as affidavits on personal knowledge, before the court (as opposed to counsel's assertion) of Seasco's financial status in April 2023 and whether the FSM defendants were aware of it. Nevertheless, Seasco has produced enough circumstantial evidence through the undisputed factual chronology of events to show that, subject to proof, it may have a viable economic duress defense to the settlement agreement. The court therefore cannot grant the FSM defendants' motion to dismiss based on that agreement. The motion is denied without prejudice since Seasco may be unable to meet its burden of proof on its economic duress defense.
The affirmative defense of economic duress, although a good defense to a breach-of-contract claim, is not the easiest defense to prove. FSM Telecomm. Cable Corp. v. FSM Telecomm. Corp., 23 FSM R. 360, 363 (Pon. 2021). And, it is not clear whether the burden of proof to prove economic duress to void a contract is by a preponderance of the evidence, e.g., Vanguard Packing, Inc. v. Midland Bank, 871 F. Supp. 348, 352 (W.D. Mo. 1994), or by the higher clear and convincing evidence standard, e.g., Wurtz v. Fleischman, 278 N.W.2d 266, 270 (Wis. 1979); Exum v. Washington Fire & Ins. Co., 297 S.W.2d 805, 809 (Tenn. Ct. App. 1955).
Nor can the court grant Seasco's summary judgment motion based on breach of contract. First, Seasco must prevail on its economic duress defense. And, second, summary judgment movant has the burden of showing that it is entitled to judgment as a matter of law as to elements over which it has the burden of proof as well as on the affirmative defenses. Carl v. FSM Dev. Bank, 23 FSM R. 525, 533 (App. 2022). Seasco's motion does not address any of the affirmative defenses raised in the FSM defendants' answer.
The FSM defendants, in their opposition, rely on their defense that Seasco's contracts are unenforceable. They point to the financial management regulations. The court notes related problems with those contracts. The original September 14, 2020 contract was for the purchase of the M/V Miura, not the M/V Ikitsuki, and the ratification agreement was not signed by the Secretary of Finance and had an endorsement certifying the availability of funds only up to $800,000, which amount was afterward paid as a result of the later, now disputed settlement agreement. The court therefore denies Seasco's summary judgment motion without prejudice.
Based on the above, it appears that the parties may wish or need to gather more evidence or to conduct further discovery to support their positions. Or an evidentiary hearing may be needed.
Seasco also asks that the court rule that Seasco has a maritime lien in the MS Narik Mataw for the balance of the amount owed Seasco and that the court issue an arrest warrant for the vessel based on this lien.
The usual impetus for arresting a vessel, other than to bring the vessel under the court's jurisdiction, is the reasonable fear and great likelihood that vessel may soon depart the jurisdiction, leaving the plaintiff without recourse. That does not seem to be the case here where the vessel's owner is local and, more importantly, where the vessel is being used only to sail between points within the jurisdiction and nowhere else. Furthermore, the MS Narik Mataw's owner, ED#5, or the Northwest Development Authority, appears to be government agency or instrumentality.
That may prevent Seasco from asserting a maritime lien even if it is successful in voiding the April 13, 2023 settlement agreement and claiming the full $1.3 million. Or, it may present a high hurdle for Seasco to overcome. That is because the National Maritime Act (Title 19) provides that "[n]othing in this title shall permit any lien or authorize proceedings in rem against any Government Vessel engaged in noncommercial services." 19 F.S.M.C. 102(2). For Title 19 purposes, "Government" means the FSM national government, "or a state government, or any agency or instrumentality of either," 19 F.S.M.C. 106(8), and a "Government Vessel" is "a vessel . . . that: (a) belongs to or is chartered and controlled by the Government; or (b) is held by any person on behalf of, or for the benefit of, the Government," 19 F.S.M.C. 106(9). Seasco itself has asserted in its filings that the MS Narik Mataw is being operated by the FSM and ED#5, which would make it a government vessel.
A resolution of whether the MS Narik Mataw is engaged in a commercial purpose such that the subsection 102(2) lien exclusion does not apply, "would be a precondition to the issuance of an arrest warrant if the other requirements for the issuance of the warrant were met." Meninzor v. M/V Caroline Voyager, 15 FSM R. 97, 100 (Pon. 2007); See also Meninzor v. M/V Caroline Voyager, 15 FSM R. 540a, 540c (Pon. 2008) (request for arrest warrant for vessel denied when vessel chartered by state government for voyage not for profit; vessel thus fell within the 19 F.S.M.C. 102(2) exception and was "not subject either to a maritime lien or to arrest as part of an in rem proceeding"). No such showing has yet been made or attempted.
The court therefore must conclude that there is no maritime lien on the MS Narik Mataw unless it is shown that the MS Narik Mataw is either not a government vessel or is a government vessel but it is not engaged in noncommercial services. "A maritime lien is an essential predicate for the arrest of a vessel in a private in rem action." Amstar Corp. v. S/S Alexandros T., 664 F.2d 904, 908 (4th Cir. 1981). Seasco will thus need to establish that the MS Narik Mataw (which Seasco has asserted is being operated by the FSM and ED#5), is either not a government vessel (unlikely) or is a government vessel that is not engaged in noncommercial services before Seasco can seek the vessel's arrest. Seasco has not done either.
If the MS Narik Mataw is a government vessel engaged in noncommercial services, it cannot be subject to a proceeding in rem against it, 19 F.S.M.C. 102(2), and thus probably cannot even be an in rem party defendant in this action. Seasco and the FSM defendants may, no later than October 1, 2024, submit whatever motions or briefs they deem advisable concerning the MS Narik Mataw's status, whether the MS Narik Mataw may remain as an in rem defendant in this action, and whether a maritime lien may be asserted against it.
Accordingly, no arrest warrant can issue for the MS Narik Mataw unless the existence of a maritime lien can be shown. The FSM defendants' motion to dismiss and Seasco's motions for summary judgment are denied because whether Seasco entered into the April 13, 2023 settlement agreement as a result of economic duress is a matter genuinely in dispute and is the point on which these motions turn.
_______________________________Footnotes:
1 Public Law No. 21-147, § 9(12)(f) appropriated $800,000 for this purpose and Public Law No. 21-165, § 2(6)(a), appropriated a $500,000, also for this purpose. Total equals $1.3 million.
2 Seasco paid $34,000 on February 9, 2021; $550,000 on May 10, 2021; $35.000 on May 12, 2021; and $120,000 on July 15, 2021. The $120,000 on July 15, 2021, was, pursuant to an addendum agreement between Seasco and Alpha, for fuel and lubricating oil, food and water provisions for the nine-member crew, and a statement of account for earlier expenses. Seasco also paid a $20,000 "MV-Ikitsuki broker service fee" to Ebenezer Inc. on May 26, 2021.
3 Possibly an advantage to Seasco since Seasco would not have to incur the usual up-front expenses of security for the costs of ship keepers. See FSM Mar. R. E(2)(b).
4 Both Seasco and ED#5 signed on November 9, 2022, the FSM AG signed on December 7, 2022, and the TC&I Secretary signed on January 3, 2023. The Secretary of Finance did not sign although the TC&I Secretary urged him to.
5 This would have been heard on October 6, (or earlier in September or July) 2023, except that defendant Pyung Soo Gong was in Korea for needed medical treatment.
6 Since this August 23, 2023 motion was subsumed in Seasco's motion of the same name filed on February 5, 2024, the court does not need to discuss its contents separately.
7 Seasco's complaint also seeks punitive damages, but the general rule is that punitive damages cannot be had against a governmental entity. Fuji Enterprises v. Amor, 23 FSM R. 130, 139 (Pon. 2021) (as a matter of public policy, governments are not liable for punitive damages; FSM's waiver of sovereign immunity does not include a waiver permitting punitive damages); Herman v. Municipality of Patta, 12 FSM R. 130, 138 (Chk. 2003). "No punitive damages are possible against the FSM or its officers or agencies." Fuji Enterprises, 23 FSM R. at 139. Nor are punitive damages available as a contract remedy, because only compensatory damages are usually allowed for breach of contract. Kelly v. Lee, 11 FSM R. 116, 117 (Chk. 2002). Punitive damages are therefore not available to Seasco.
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