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Civil Action No. 1995-017

     On March 13th, 1996, the court held a hearing in which substantive and administrative issues were addressed. The Receiver, Barbara Bluemel was present in her representative capacity. Beauleen Carl-Worswick was present as local counsel for the Receiver. John P. Hollinrake of the Law Offices of R. Barrie Michelsen was present on behalf of the following: Gemini Capital Group, Inc.; Industria de Pesca, N.A. Inc.; Robert A. Grant, John Gois, Joseph Gois, David H. White, and Alcantara & Frame, hereinafter "the Respondents in Contempt". Kathleen Burch of the Yap Attorney General's Office was present on behalf of Yap State and Yap Economic Development Authority. For the reasons set forth below,

IT IS HEREBY ORDERED vacating this court's order of February 23, 1996. That February 23rd order in turn vacated the hearing on the Receiver's OSC, which OSC is dated January 29th, 1996.

IT IS FURTHER ORDERED, but subject to further order as set forth below, that Gemini Capital Group, Inc.; Industria de Pesca, N.A. Inc.; Robert A. Grant, John Gois, Joseph Gois, David H. White, and Alcantara & Frame shall file a written response to the Receiver's OSC on or before May 7th, 1996, and the Receiver shall file a reply on or before May 17th, 1996. Hearing on the OSC is herewith set for May 22nd, 1996, at 2:00 p.m.

IT IS FURTHER ORDERED that in the event that the OSC proceeds to an evidentiary hearing, then the Receiver and the Respondents in Contempt shall file with the court, and exchange among themselves, no later than three calendar days before the hearing a separate, as opposed to joint, Pre Hearing Statement, in which they shall set forth:

     1. Uncontested facts deemed material

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2. Facts deemed material, if any, which are likely to be contested.
     3. List of witnesses and a brief summary of each witness expected testimony.

     4. List of exhibits.

The parties at theirs option may combine their pre-hearing statements with the response and reply.

IT IS FURTHER ORDERED admitting John P. Hollinrake to practice before the Yap State Supreme Court for the purpose of representing the Respondents in contempt for purposes of the Receiver's OSC, the application for which is dated January 29, 1996. Although it is the court's usual practice to require any counsel not admitted to practice before the Yap State Supreme Court to associate with local counsel pursuant to the mandatory language of Rule 11(c) of the Rules of the State Bar of Yap, the court may in its discretion waive this requirement, and does so in this instance, since Mr. Hollinrake indicated to the court that he has appeared in this case for purposes of the OSC only.

IT IS FURTHER ORDERED that prospectively the Respondents in Contempt shall copy the State of Yap on all papers filed with the court relative to'the OSC at issue. The issue of notice generally was discussed at the hearing. Any party, beyond the immediately interested parties with respect to any specific aspect of this matter, who wants to be copied on papers filed by a party in this receivership proceeding shall notify that party in writing. Upon receipt of that notice in writing, the party receiving notice shall copy, from the date of the notice forward, all papers filed with the court to the party requesting notice.

SO ORDERED this 15th day of March, 1996.

                    Chief Justice C. Yinug

     The court issues this memorandum even though, based on the faxed communication which this court received from David H. White of the firm of Alcantara & Frame on March 12, 1996, much of what is said here may well be rendered moot, and as a general proposition a court

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should refrain from opining on moot or contingent issues. In that fax; Mr. White indicates that  

our clients [which the court based on the record in this case takes to be Gemini Capital Group, Inc.; Industria de Pesca, N.A. Inc.; Robert A. Grant, John Gois, and Joseph Gois] offer to stay any and all pending affirmative actions against YFC until such time as we can make an appearance on their behalf in the Yap State YFC receivership proceedings, and address that court's state order. We have already done this as to the pending Petition to Arbitrate (copy of pertinent section of our memorandum enclosed) and will do the same as it related to the pending appeal of Judge Kay's Dismissal Order.

The referenced one page section of the memorandum mentions in a footnote that "Petitioner will hold their request for an issuance of an order as to the Receiver in this action in abeyance." Although the court has no specific reason not to rely on the specific representations of Mr. White for purposes of considering whether or not the pending OSC has been rendered moot, the court is somewhat reluctant to dismiss the OSC out of hand on the strength of a footnote reference in a one page memorandum excerpt, and on the representation of future action -- this with respect to the pending appeal. The better practice, to this court's mind, is to dismiss the pending OSC upon this court's receipt of a formal notice or notices of dismissal of the Hawaii proceedings. Hence, pending the receipt of those notices, the court has set a bring schedule and a hearing date.
     The court also addresses substantive issues relative to the instant OSC for contempt. Even though this discussion may be to no immediate point if the OSC is ultimately dismissed, the court does not view this as an empty exercise, since the issues are not moot as of this date. Moreover, there is a paucity of case law relative to contempt in the FSM; only three cases appear to address this issue In re Robert (II), 1 FSM Intrm. 18 (Pon. 1981); In re Iriartea (I) 1 FSM Intrm. 239 (Pon. 1983); and In re Iriarte (Il), 1 FSM Intrm. 255 (Pon.1983), and all three deal with criminal contempt Therefore, the court takes this opportunity to put some observations relative to contempt of record.

     The court first considers the Motion for Reconsideration of Order Vacating Hearing for Order to show Cause filed by counsel for the Respondents in Contempt dated February 27, 1996. The court will assume that but for this court's February 23rd order, the Respondents in Contempt would have appeared in some manner in court on March 13th, 1996, to

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present evidence why they should not be held in contempt. (The Respondents in Contempt appeared by counsel on March 13th, but for purposes of the motion to vacate.) The court notes that Gemini Capital Groups Inc.; Industria de Pesca, N.A. Inc.; Robert A. Grant, John Gois, and Joseph Gois, neither filed any response to the deceivers prior OSC, the application for which is dated October 9,1995, nor did they appear in court for the scheduled hearing which was held on October 25th, 1995. Since the Respondents have indicated that they desire to respond with respect to the second OSC, the court in its discretion has vacated the February 23rd order, and has set a briefing schedule and hearing date. Nevertheless, the basis for the February 23rd order is as follows.

     Rule 7 of the Rules of Civil Procedure for the State Court of Yap is entitled, significantly, Pleadings Allowed; Form of Motions. Section (a) is:

(a) Pleadings. There shall be a complaint and an answer; a reply to a counterclaim denominated as such; an answer to a cross-claim, if the answer contains a cross-claim; a third-party complaint, if a person who was not an original party is summoned under the provisions of Rule 14; and a third-party answer, if a third-party complaint is served. No other pleading shall be allowed, except that the court may order a reply to an answer or a third party answer.

Emphasis commencing "No pleadings . . ." added. Hence, an Order to Show Cause is not a pleading within the meaning of Rule 7(a): Section (b) of the same rule, Rule 7, is entitled Motions and Other Papers" and is:

(1) An application to the court for an order shall be by motion which, unless made during a hearing or trial, shall be made in writing, shall state with particularity the grounds for it, and shall set forth the relief or order sought. The requirement of writing is fulfilled if the motion is stated in a written notice of the hearing of the motion.

Emphasis added.. "An application to the court for an order" describes with precision an order to show cause proceeding, and such an application is specifically designated a "motion" within meaning of the rule. This leads to the conclusion, in the absence of any specific court rule or statutory provision which qualifies or broadens the language of Rule 7(a) and (b)1, that an order to

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show cause is, in the State Court of Yap, a motion. Since it is a motion, then if falls within Rule 6(d); which provides that "[t]he party opposing the motion shall not later than 10 days after the service of the motion upon him, file and serve responsive papers," which responsive papers consist of either a memorandum of points and authorities, or statement of non, opposition. Per Rule 7(C), failure to file the responsive memorandum may constitute consent to the granting of the motion. The court did not in this case grant the motion based on the constructive consent of the Respondents in Contempt; rather, the court looked to Rule 7(B), and treated the OSC, given that the Respondents in Contempt did not respond, as a "motion[] which properly can be disposed of ex parte." The court did not rule on the OSC in the February 23rd order.
     The thrust of the motion to vacate of the Respondents in Contempt, of course, is that by vacating the hearing, the court deprived them of due process. In order to appropriately address this point, the court will digress to consider first a point that was raised by Mr. Hollinrake and Ms. Burch at the March 13th hearing -- i.e, is the instant contempt action civil or criminal? Small wonder that confusion exists on this point, since it has been said in a phrase the echoes a tread worn critique of the law that as to the state of contempt law generally, "the law is a mess."2 The United States Supreme Court considers the law of indirect contempt, i.e, contempt which does not take place in the courtroom, such as a personal insult to the judge, or violent or other inappropriate behavior, in International Union, United Mine Workers of America, v. Bagwell, 114 S.Ct. 2552 (1994). It is worthwhile to summarize the discussion at 114 S.Ct. 2557-58 (at issue in the case at bar is a fine, as opposed to imprisonment -- the Bagwell court discusses both). Indirect contempt is of two kinds, civil and criminal, and

whether a contempt is civil or criminal turns on the "character and purpose" of the sanction involved. Thus, a contempt sanction is considered civil if it "is remedial, and for the benefit of the complainant. But if it is for criminal contempt the sentence is putative, to vindicate the authority of the court." Ibid. [quoting Gompers v. Bucks Stove & Range Co., 31 S. Ct. 492 (1911)]

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     The paradigmatic coercive, civil contempt sanction, as set forth, in Gompers, involves confining a contemnor until he complies with an affirmative command . . . . Imprisonment for a fixed term similarly is coercive when the contemnor is given the option of earlier release if he complies. [citations omitted] In these circumstances, the contemnor is able to purge the contempt and obtain his release by committing an affirmative act, and thus "carries the keys of his prison in his own pocket." [citation  omitted]

*     *
     By contrast, a fixed sentence of imprisonment is punitive and criminal if it is imposed retrospectively for a "completed act of dis9bedience," [citation omitted] such that the contemnor cannot avoid or abbreviate the confinement through later compliance.

*     *
     This dichotomy between coercive and punitive imprisonment has been extended to the fine context. A contempt fine accordingly is considered civil and remedial if it either coerce{s} the defendant into compliance with the court's order, [or] . . .compensate[s] the complainant for losses sustained." [citation omitted] Where a fine is not compensatory, it is civil only if the contemnor is afforded an opportunity to purge. [citation omitted] Thus, a "flat, unconditional fine" totalling even as little as $50 announced after a finding of contempt is criminal if the contemnor has no subsequent opportunity to reduce or avoid the fine through compliance. [citation omitted]

     A close analogy to coercive imprisonment is a per diem fine imposed for each day a contemnor fails to comply with an affirmative court order. Like civil imprisonment, such fines exert a constant coercive pressure, and once the jural command is obeyed, the future, indefinite, daily fines are purged.

The Bagwell court focuses on a coercive, civil fine. A civil contempt sanction may also be imposed to compensate a party for actual losses sustained by the party as a result of the contempt at issue; if the fine is compensatory, it is payable to the party suffering actual loss, while if it is coercive, it is payable to the court. In re Chase & Sanborn Corp., 872 F.2d 397 (11th Cir.1989) .

     The foregoing makes the point that the contempt proceeding at issue is civil and coercive in nature, since the Receiver is seeking a per diem fine until such time as the alleged contempt ceases. This answers the question put to the court during the hearing on March 13th.

     To return, then, to the position taken by counsel for the Respondents in Contempt that the court's vacating of the hearing on the OSC deprived them of due process. The instant OSC is a civil matter, and as a result what constitutes due process is different from that due process which would obtain in a criminal proceeding. The Bagwell court says:

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"Criminal contempt is a crime in the ordinary sense ," [citation omitted] and "criminal penalties may not be imposed on someone who has not been afforded the protections that the Constitution requires of such criminal proceedings."[numerous citations omitted] For "serious" criminal contempts involving imprisonment of more than six month, these protections include the right to jury trial. [citations omitted] In contrast, civil contempt sanctions, or those penalties designed to compel future compliance with a court order, are considered to be coercive and avoidable through obedience, and thus may be imposed in an ordinary civil proceeding upon notice and an opportunity to be heard. Neither a jury trial nor proof beyond a reasonable doubt is required. [footnote omitted]

114 S.Ct. at 2556-57. Notice and an opportunity to be heard, then, are the basic due process requirements for civil contempt, and this is consistent with the language of 4 YSC 156(1), to which the Resppdents draw the court's attention:

(1) Any person accused of committing any civil contempt shall have a right to notice of the charges and an opportunity to present a defense and mitigation . . . .

The Respondents do not assert that they lacked notice; they complain of the fact that the hearing was vacated. The Respondents equate the granting of a hearing with the holding of a hearing. But there is a difference as between these two notions. Significantly, 4 YSC 156(1) provides the alleged contemnor the "opportunity" to present a defense, as opposed to stating categorically that the court "shall hold a hearing." In the instant case, the Respondents were given notice of the OSC, and were granted a hearing, a date for which was set. They waived that hearing, that opportunity to present a defense, in this civil matter, though, when they did not respond as required by the Rules pf Civil Procedure. The court has not been able to locate a case where an alleged civil contemnor waived that right, but the right can be waived in a criminal case, where heightened tdue process obtains. See Yates v. United States, 316 F.2d 718 (10th Cir. 1963). If the right to a hearing can be waived in a criminal contempt proceeding, it can also be waived in the civil setting.

     The foregoing is offered by way of explanation for the court's February 23rd ruling, and for future reference generally for this court's bar, since as previously noted, the issue of civil contempt is largely unaddressed in the FSM reported cases.

DATED: March 15, 1996.

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                              Constantine Yinug, Chief Justice

Filed: 3/15/96

Clerk of Court

Copies sent to:      Receiver; Yap; Beauleen Carl-Worswick; John Hollinrake at (691) 320-5502; and Kathleen at AG's Office.

Sent By:      /s/                          Date: 3/19/96
Doloris Tafanglemar                


1. Where the order to show cause procedure is the subject of a specific statute, 56 Am Jur 2d at Sec. 34 notes:
The order to show cause fills various procedural functions. Under some statutory provisions, it is equivalent to a notice of motion. [footnote omitted] In some circumstances, especially in connection with writs within the original jurisdiction of appellate courts, it constitutes process giving the court personal jurisdiction of the respondent. [footnote-opcutted] (Back to Opinion)

2. Dudley, "Getting Beyond the Civil/Criminal Distinction: A New Approach to Regulation of Indirect Contempts,"79 Va.L.Rev.1025, at.1025. This article is cited by the United States Supreme Court in Bagwell (Back to Opinion)
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