Cite as FSM Dev. Bank v. Yinug,12 FSM Intrm. 437 (App. 2004)

[12 FSM Intrm. 437]

APPEAL CASE NO. P5-2002

Decided: April 13, 2004

BEFORE:

Hon. Andon L. Amaraich, Chief Justice, FSM Supreme Court
Hon. Dennis K. Yamase, Associate Justice, FSM Supreme Court
Hon. Keske S. Marar, Temporary Justice, FSM Supreme Court*

*Associate Justice, Chuuk State Supreme Court, Weno, Chuuk

APPEARANCES:

HEADNOTES

Appellate Review

When the language of an FSM appellate rule is nearly identical to its counterpart United States rule,

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the court may choose to look to United States court decisions for guidance in interpreting the rule, but is not required to do so. FSM Dev. Bank v. Yinug, 12 FSM Intrm. 437, 439 (App. 2004).

Appellate Review

The determination of whether to award Rule 38 damages is a two step process. First, it must be determined that the appeal was frivolous and second, it must be determined that sanctions are appropriate. FSM Dev. Bank v. Yinug, 12 FSM Intrm. 437, 440 (App. 2004).

Appellate Review

An appeal is frivolous when the result is obvious to the court or when the appellant's arguments are wholly without merit or groundless or when the court has previously ruled on the question on appeal. FSM Dev. Bank v. Yinug, 12 FSM Intrm. 437, 440 (App. 2004).

Appellate Review ; Mandamus and Prohibition

Rule 38 damages may be awarded when a mandamus petition is frivolous. FSM Dev. Bank v. Yinug, 12 FSM Intrm. 437, 440 (App. 2004).

Appellate Review ; Mandamus and Prohibition

When the court refused to allow the original petition for a writ of mandamus to be amended and provided that the amended petition would be considered a separate petition involving the same parties, the petitioners' pursuit of the petition after the order denying amendment did not made the original petition frivolous. FSM Dev. Bank v. Yinug, 12 FSM Intrm. 437, 440 (App. 2004).

Appellate Review ; Mandamus and Prohibition

Merely being a case of first impression does not automatically make a petition not frivolous. FSM Dev. Bank v. Yinug, 12 FSM Intrm. 437, 440-41 (App. 2004).

Appellate Review ; Mandamus and Prohibition

Rule 38 sanctions will not be awarded when the petition was not wholly without merit or was frivolous since the constitutional issues relating to a privacy right had not been previously ruled upon. FSM Dev. Bank v. Yinug, 12 FSM Intrm. 437, 441 (App. 2004).

Appellate Review

In all cases in which an appellee seeks Rule 38 damages, an appellee shall file a separate written motion at least seven days before the date scheduled for oral argument in order to give the appellant time to respond to the motion. The appellee's motion gives the appellant the notice it is due, and its opportunity to be heard may be through filing a written response. If a written response is filed, the court, in its discretion, may allow inclusion of the issue in the oral argument on the merits; otherwise it will be decided on the papers. FSM Dev. Bank v. Yinug, 12 FSM Intrm. 437, 441 (App. 2004).

Appellate Review

Rule 38 damages are determined in the appellate court and not remanded to the trial court for determination. Rule 38 gives the appellate court discretion in the damage amount awarded, which can be up to double the amount of actual expenses, and unlike other awards that may include attorney's fees, Rule 38 awards are uniquely the province of the appellate court based on its determination of the frivolous nature of the appeal. A trial court does not have jurisdiction to impose Appellate Rule 38 sanctions. FSM Dev. Bank v. Yinug, 12 FSM Intrm. 437, 441 (App. 2004).

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COURT'S OPINION

DENNIS K. YAMASE, Associate Justice:

On August 21, 2003, the Real Parties in Interest/Respondents Yvette Etscheit Adams d/b/a Pohnpei Ace Hardware and Adams Brothers Corporation (collectively, "the Real Parties in Interest") filed a request for revised mandate and request for attorney's fees under FSM Appellate Rule 38.

On June 27, 2003 the Real Parties in Interest concurrently filed motions for Rule 38 attorney's fees for this appeal and App. Nos. P8-2002¹ and P10-2002, along with motions to consolidate these appeals so that the Rule 38 attorney's fees issues could be addressed all at once. Due to the different procedural postures in these cases,² we denied the Real Parties in Interest's motion to consolidate in our order of July 11, 2003. On March 7, 2003, this court held that the issues relating to the discovery of the non-party borrower records were rendered moot by virtue of a November 12, 2002 trial court order and accordingly, we denied the petition for a writ of mandamus. FSM Dev. Bank v. Yinug, 11 FSM Intrm. 405, 410 (App. 2003). The mandate issued on April 25, 2003.

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

The Real Parties in Interest contend that this action for a writ of mandamus with respect to resisting discovery of certain financial documents in Adams v. Island Homes Construction, Civ. No. 2000-012 ("case below") was frivolous and done for no purpose other than to cause delay and inflict unnecessary expenses on the Real Parties in Interest for their pursuit of the case below. The Petitioner FSM Development Bank ("Petitioner"), maintained that legitimate issues based on a business and financial privacy right under Article IV, Section 5 of the Constitution³ existed and justified this action for the writ.

In order to award attorney's fees as damages under Rule 38, we must determine that this appeal was frivolous. No earlier FSM Supreme Court case has examined what might constitute a frivolous appeal under Rule 38. When the language of an FSM appellate rule is nearly identical to its counterpart United States rule, this court may choose to look to United States court decisions for guidance in interpreting the rule, but is not required to do so. Bualuay v. Rano, 11 FSM Intrm. 139, 146 n.1 (App. 2002); Santos v. Bank of Hawaii, 9 FSM Intrm. 306, 308 n.1 (App. 2000); Iriarte v. Etscheit, 8 FSM Intrm. 231, 235 (App. 1998); Jano v. King, 5 FSM Intrm. 326, 329 (App. 1992). While the language of Rule 38 and its United States counterpart are not exactly the same, the rule's general content is

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similar.⁴ The main differences between FSM Rule 38 and its United States counterpart were added in amendments to the U. S. rule which were made on December 1, 1994. These amendments reflected the basic principle set forth in Roadway Express, Inc. v. Piper, 447 U.S. 752, 767, 100 S. Ct. 2455, 2465, 65, L. Ed. 488, 502 (1980), that notice and an opportunity to respond must precede the imposition of sanctions under Rule 38. A separately filed motion requesting sanctions would constitute notice, while a statement inserted into a party's brief that the party moves for sanctions would not. If no specific motion is filed, then the court must provide notice. The form of such notice and the opportunity to comment are left to the court's discretion. The main difference is the United States federal rule also contains specific requirements that before a court of appeals may impose sanctions, the person to be sanctioned must have notice and a reasonable opportunity to respond. Due process requires this even when not specifically stated in a rule.

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

In this case, Petitioner sought a writ of mandamus from this court. Pursuant to Appellate Rule 21(b) the court ordered that an answer be filed. This was done and oral arguments were heard on January 22, 2003. On March 7, 2003, we held that the issues relating to the discovery of the non-party borrower records were rendered moot by virtue of the trial court's November 12, 2002 order, and the petition was denied. FSM Dev. Bank, 11 FSM Intrm. at 410.

The Real Parties in Interest did raise the issue of why Petitioners persisted in their petition after the issuance of the trial court's November 12, 2002 order. While Petitioners could have withdrawn their petition at this stage of the appellate proceedings, they instead filed an amended petition. The court refused to allow the original petition to be amended and provided that the amended petition would be considered a separate petition for a writ of mandamus involving the same parties as in this case.⁵ Under the circumstances, we do not find that Petitioners' pursuit of the petition after the November 12, 2002 order made the petition frivolous.

We recognize that the Petitioner made arguments based on its belief in the existence of a business and financial privacy right under Article IV, Section 5 of the Constitution and that no previous decisions from this court had dealt specifically with this issue. Although merely being a case of first

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impression does not automatically make a petition not frivolous, we do not find that the petition was wholly without merit or groundless, or that the petition was frivolous because the constitutional issues relating to a privacy right had previously been ruled upon.

After being confronted with the Rule 38 issues for the first time, we are of the opinion that guidance for future appellate litigants would be helpful. We therefore hold that in all future cases in which an appellee seeks Rule 38 damages, an appellee shall file a separate written motion at least seven days before the date scheduled for oral argument in order to give the appellant time to respond to the motion. FSM App. R. 27(a). The appellee's motion gives the appellant the notice it is due, and its opportunity to be heard may be through filing a written response. If a written response is filed, the court, in its discretion, may allow inclusion of the issue in the oral argument on the merits; otherwise it will be decided on the papers. This process may have the beneficial effect of causing an appellant to reevaluate its position and determine whether it is suitable to pursue the appeal to a decision on the merits.

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

Since we determine that this petition was not frivolous we need not determine whether sanctions are appropriate. In light of our determinations, we hereby deny the Real Parties in Interest's request to revise the mandate issued on April 25, 2003 and deny the request for an award of attorney's fees under FSM Appellate Rule 38.

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

² One, App. No. P8-2002 was an interlocutory appeal without Appellate Rule 5(a) permission, the other two, App. Nos. P5-2002 and P10-2002, were filed in the appellate division as original actions – petitions for writs of mandamus.

³ Article IV, Section 5 of the Constitution states: "The right of the people to be secure in their persons, houses, papers, and other possessions against unreasonable search, seizure, or invasion of privacy may not be violated. . . ."

⁴ Rule 38 of the Federal Rules of Appellate Procedure states: "Rule 38. Damages and Costs for Frivolous Appeals. If a court of appeals determines that an appeal is frivolous, it may, after a separately filed motion or notice from the court and reasonable opportunity to respond, award just damages and single or double costs to the appellee."

⁵ The amended petition was separately numbered as Appeal Case No. P10-2002. An order and memorandum denying the petition for a writ of mandamus in this case was entered on March 24, 2003. FSM Dev. Bank v. Yinug, 11 FSM Intrm. 437, 442 & n. 6 (App. 2003). The remaining Article XI, Section 3 justices ruled that the necessary requirements for an extraordinary writ of mandamus were not present and that the writ should not be granted.