Contracts ) Damages; Evidence ) Judicial Notice

Contracts ) Damages

Contracts ) Damages ) Mitigation of

Civil Procedure ) Discovery; Judgments

Torts ) Defamation

Torts ) Defamation

Torts ) Defamation

Civil Procedure ) Default and Default Judgments; Torts ) Defamation

[13 FSM Intrm. 553]

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DENNIS YAMASE, Associate Justice:

      This comes before the court on plaintiff Nicholas Pohl’s Motion for a Default Judgment, filed October 3, 2005. Pohl asks that a judgment be rendered in his favor for damages based upon his first cause of action, breach of contract. He also seeks, under the court’s power of declaratory relief, a determination of his second cause of action (libel) that a January 6, 2004 resolution and the January 9, 2004 termination letter are untruthful regarding his abilities and competence and that the defendant, Chuuk Public Utility Corporation (CPUC), be compelled to withdraw those allegations.

      Pohl was hired by CPUC to be its Chief Executive Officer (CEO). CPUC and Pohl executed a written employment contract on October 11, 2002. The contract term was for October 11, 2002 to October 11, 2004. The parties executed an addendum to the contract on October 18, 2002.

      On January 6, 2004, the CPUC Board of Directors adopted a resolution terminating Pohl’s employment. The reasons given were that CPUC’s extreme financial difficulties made Pohl’s high compensation unaffordable in part because of management’s failure to secure reimbursement of part of those costs from U.S. Interior Department programs and that CPUC’s fuel emergency was due in part to Pohl’s management. On January 9, 2004, CPUC’s Board Chairman sent Pohl a memorandum notice of termination. Both the resolution and the memorandum terminated Pohl’s employment as of January 31, 2004 and ended his CEO’s duties immediately. The Chuuk Governor, Senate President, Speaker of the House, and CPUC’s Assistant CEO were sent copies of both the resolution and memorandum.

      Pohl filed this lawsuit on April 23, 2004. CPUC filed its answer and counterclaim on June 16, 2004. On August 29, 2005, as a sanction for noncompliance with repeated court orders compelling discovery, the court ordered CPUC’s counterclaim stricken and entered CPUC’s default. FSM Civ. R. 37(b)(2)(C). Pohl now asks that a default judgment be entered in his favor.

      When a default judgment is sought against a party that has appeared in the action, that party must be served with written notice of the application for default judgment at least three days before a hearing on the application. FSM Civ. R. 55(b)(2). The motion for a default judgment was served by mail on both CPUC and its counsel of record. The requisite notice was therefore given.

      No response was filed. Failure to oppose a motion is generally deemed a consent to the motion, but even when there is no opposition, the court still needs good grounds before it can grant the motion. Senda v. Mid-Pacific Constr. Co., 6 FSM Intrm. 440, 442 (App. 1994); FSM Civ. R. 6(d). For even an unopposed motion to be granted, it must be well grounded in law and fact. Lee v. Lee, 13 FSM Intrm. 68, 70 (Chk. 2004).

      When the clerk has entered a default, the grant of a default judgment is not automatic, but left to the court’s sound discretion. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980); Pepsi-Co,

 Inc. v. Trifuno-Mex, Inc., 189 F.R.D. 431, 432 (C.D. Cal. 1999). "[T]he party making the request is not entitled to a default judgment as of right." 10A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 2685, at 33 (3d ed. 1998). "If the court determines that defendant is in default, the factual allegations of the complaint, except those relating to the amount of damages, will be taken as true." Id. § 2688, at 58-59. And, it is not always "necessary to present testimony on the liability issue, although liability is not deemed established simply because of default and the court, in its discretion, may require proof of facts that must be established in order to determine liability." Id. at 59-61 (footnotes omitted).

      A determination of Pohl’s damages for this cause of action requires the court to interpret terms in Pohl’s employment contract with CPUC. Interpretations of contract terms are matters of law to be determined by the court. Nanpei v. Kihara, 7 FSM Intrm. 319, 323 (App. 1995).

      (1)  Unpaid Initial Relocation Expenses. Contract paragraph 8(a) entitled Pohl to receive his transportation cost from his point of hire (Florida) to Chuuk. Pohl’s complaint and his affidavit assert that $2,568 of that cost remains unpaid. CPUC’s counsel’s March 5, 2005 letter to Pohl (Ex. E to Complaint) did not deny owing that sum but did request supporting documents for that claim. Pohl shall therefore be awarded that sum once he has supplied the court with documentation supporting this amount. The court expects that such documentation, receipts, etc., would be the same documents that Pohl would have to provide CPUC for it to process and pay his claim.

      (2)  Unpaid Wages First Year of Employment Contract. Pohl contends that $6,000 (the difference between the $52,000 he says he was paid and the $58,000 he says his contract provides) of his salary for the first year of his contract remains unpaid.

      First, the compensation clause of Pohl’s contract provides that his "gross annual salary of $58,000.00, subject to the across-the-board 10% cut applicable to all employees of CPUC, payable on a bi-weekly basis in the gross amount of $2,007.69." Contract ¶ 2(a). Twenty-six (bi-weekly pay periods) times $2,007.69 equals $52,199.94. This is only $199.94 more than Pohl says he was paid for the first year of his contract, and this is the annual pay figure the contract provides for and to which Pohl and CPUC agreed when they executed Pohl’s employment contract.

      Second, through the October 18, 2002 contract addendum, Pohl did

Addendum to CEO Contract (Oct. 18, 2002). Pohl’s complaint alleges that he complied with the contract addendum term to the best of his ability. His affidavit states that the addendum did not go into effect because he did "everything possible to get the requested funding." Pohl Aff. ¶ 9. One of the grounds given by the Board for Pohl’s termination was Pohl’s inability to secure reimbursement of some of his management cost from U.S. Interior Department programs. The only fair inference the court can draw from this is that CPUC did not receive any OMIP funding.

      The contract addendum provision that if OMIP funding was not received Pohl’s salary was to be $55,000 per year, made OMIP funding a condition to the payment of the extra $3,000 in salary. Although conditions to contractual obligations are not favored in the law because they tend to have the effect of creating forfeitures, parties may create a condition to a contract through plain and unambiguous language, through necessary implication manifested by the contract itself, or in some other way that makes their intent to create a condition clear. Adams v. Etscheit, 6 FSM Intrm. 580, 582-83 (App. 1994) (absent some such showing, courts find promises, not conditions). The contract addendum language is plain and unambiguous that the extra $3,000 per year was contingent upon CPUC actually obtaining OMIP funding, not upon Pohl’s trying his best or taking all possible steps to, obtain that funding.

      That being so, Pohl’s base annual pay was $55,000, not $58,000, and $55,000 should be read in contract paragraph 2(a) in place of $58,000. Subjecting the $55,000 figure to the 10% across-the-board cut mandated in paragraph 2(a), Pohl was entitled to annual pay of $49,500. Since Pohl asserts that he was paid $52,000 the first year of his contract, he will recover nothing on this claim.

      (3)  Unpaid Repatriation and (4) Unpaid Shipping Expenses to Saipan. Pohl claims that $5,800 is due him as repatriation costs for his family of four to his point of hire ) Florida. He also asks for $4,630 for unpaid shipping expenses to Saipan. Under contract subparagraphs 8(a)(iv) and (v), Pohl was entitled, after one year of service, to repatriation costs and travel and shipping costs for his personal effects and household goods from Chuuk to his point of hire or to any chosen destination "not farther or costlier than to the point of hire." Pohl’s service was over one year.

      Pohl did not return to Florida, but chose instead to relocate to Saipan. Pohl Aff. ¶ 12. The contract provision for repatriation costs is not an entitlement to be paid the amount it would cost to return to the point of hire, but an obligation for CPUC to pay the actual repatriation costs to the point of hire or to some other chosen less costlier place. Pohl will therefore be awarded as damages the cost of shipping his household goods to Saipan, and the travel costs for him and his family from Chuuk to Saipan.

      Since there is no evidence before the court of what those May, 2004 travel costs actually were, the court will permit Pohl to submit documentation of those costs before entering its judgment. It is expected that this documentation will consist of airline ticket stubs or receipts or credit card receipts or bills. This supplemental filing shall be made no later than February 6, 2006. The court will take judicial notice that the airport departure fee from Chuuk is $15 per person, FSM Evid. R. 201(b)(1) (fact not subject to reasonable dispute generally known within the trial court’s territorial jurisdiction), and that this is included in repatriation travel costs. Pohl shall also submit the proper documentation to support the $4,630 amount for shipping his household goods to Saipan. These shall be the same as he would be required to submit to CPUC for reimbursement from them.

      (5)  Unpaid Annual Leave. Pohl asks for $4,200 for unpaid annual leave (168 hours x $25 per hour). Contract subparagraph 10(c)(ii) provides for a lump sum payment of unused annual leave when the contract is terminated. CPUC’s answer (later stricken) admitted that it owed Pohl for any unused annual leave. As stated above, Pohl was entitled to $49,500 per annum, which would mean an hourly rate of $23.80. Pohl’s motion and affidavit assert that he had 168 hours of unused annual leave. He will therefore be awarded $3,998.40 on this claim.

      (6)  Unpaid Wages Resulting from a Unilateral Reduction in Pay. Pohl claims that CPUC unilaterally reduced his bi-weekly pay by another $548.07 (to $1,459.62) after October, 2003, and that CPUC is liable to him for nine pay periods of this underpayment. As noted above, because of the failure to obtain OMIP funding and CPUC’s 10% across-the-board cut, Pohl’s base salary was $49,500 ($1,903.85 per bi-weekly pay period). Pohl’s biweekly pay was thus short $444.23 (not $548.07) per pay period. Pohl will therefore be awarded $3,998.07 on this claim. CPUC shall deduct the applicable wage and salary taxes before remitting the balance of this sum to Pohl and pay those deductions to the proper authorities. See Ponape Transfer & Storage, Inc. v. Wade, 5 FSM Intrm. 354, 356 (Pon. 1992).

      (7)  Housing Allowance. Pohl asks for four months (February-May, 2004) of housing allowance since he did not leave Chuuk until May because CPUC did not repatriate him. Under paragraph 9(a), Pohl was entitled to housing expenses while employed by CPUC. Termination for cause takes effect not less than 30 days after Pohl received actual notice thereof. Contract ¶ 5(b). Since Pohl was notified on January 9, 2004, the thirty-day period would extend into February. Pohl was therefore entitled to his February, 2004 housing costs. Contract ¶ 5(d) (benefits continue during termination notice period). Under paragraph 5(a), Pohl was entitled to receive severance pay of the equivalent of four pay periods with the applicable taxes deducted because his termination was accelerated to an earlier date ) January 31, 2004. The severance pay provision does not include benefits for those four pay periods. Under the contract’s terms, Pohl is entitled only to his housing costs for February, 2004.

      Pohl contends that he should also receive housing costs for the following three months as a consequence of CPUC’s breach of his contract ) CPUC’s failure to repatriate him in a timely manner. In a breach of contract case, the injured party is expected to take appropriate actions to mitigate, or lessen, his damages. George v. Alik, 13 FSM Intrm. 12, 15 (Kos. S. Ct. Tr. 2004). A court will not compensate an injured party for a loss that he could have avoided by making efforts appropriate, in the eyes of the court, to the circumstances. Panuelo v. Pepsi Cola Bottling Co. of Guam, 5 FSM Intrm. 123, 129 (Pon. 1991). February 29, 2004, was 50 days after Pohl was notified that he was terminated. In the court’s eyes, that should have been sufficient time for Pohl to make arrangements to repatriate himself if CPUC was not going to. The court will therefore not award any housing costs for after February.

      (8)  Previously Awarded Attorney’s Fees. The court has previously awarded Pohl $300 in attorney’s fees as sanctions for CPUC’s repeated non-compliance with the court’s orders compelling discovery. FSM Civ. R. 37(a)(4). This sum will be included in the judgment.

      Pohl shall file and serve, no later than February 6, 2006, his supplemental submission of evidence documenting his additional shipping costs from Florida to Chuuk and his shipping and travel costs from Chuuk to Saipan. Once this has been done, the court will enter a judgment in Pohl’s favor on his breach of contract cause of action for a sum in accordance with what the court has outlined above.

      The motion asserts that enough information has been provided to show that CPUC’s allegations were baseless and asks the court to issue a declaratory judgment that the resolution’s and memorandum’s allegations of Pohl’s incompetence or inability to manage CPUC’s affairs are inaccurate or untruthful. The motion makes no mention of damages for libel. Pohl appears to have abandoned that claim.

      Although no definition of libel has ever been formulated that is sufficiently comprehensive to cover all cases, libel may be defined as "a false and unprivileged publication by writing . . . or other fixed representation to the eye which exposes any person to hatred, contempt, ridicule, or obloquy or which cause him to be shunned or avoided or which has a tendency to injure him in his occupation." 50 Am. Jur. 2d Libel and Slander § 7 (rev. ed. 1995). There are, however, constitutional limitations on defamation actions when the action involves a public official, a public figure, or a matter of substantial public controversy. In such instances, knowledge that the defamatory statement was false, or malice, or a reckless disregard for the truth must be shown in addition to the other elements of libel or slander. See generally Prosser and Keeton on the Law of Torts §§113, 114-15, at 805-08, 815-16, 820-23 (W. Page Keeton et al. eds., 5th ed. 1984); 50 Am. Jur. 2d Libel and Slander §§ 30-46, 67-81, 106-15 (rev. ed. 1995).

      As CEO of CPUC, Pohl was a public figure. CPUC is an instrumentality of the State of Chuuk. Pohl might also be considered a public official. The power situation on Weno is always a matter of substantial public controversy. The resolution and memorandum were part of the CPUC Board of Directors’ and its Chairman’s official duties. The higher public figure standard and the principle of absolute or qualified privilege both apply to the Board’s and Chairman’s official communications as part of official duties. See Barr v. Matteo, 360 U.S. 564, 79 S. Ct. 1335, 3 L. Ed. 2d 1434 (1959) (statements in government office press release explaining office’s actions to the public, although on the "outer perimeter" of the officials’ "line of duty" were absolutely immune from defamation action even though plaintiff alleged malice).

      Pohl’s complaint did not plead that CPUC knew that the allegations were false, or that they were made with malice, or that they were made with a reckless disregard of the truth. Therefore, even taking the facts as pled in Pohl’s complaint as true, the facts alleged are insufficient as a matter of law for the court to find CPUC liable for libel. Moreover, the communications appear to be privileged. Liability for libel is not deemed established merely because CPUC defaulted. 10A Wright, Miller & Kane, supra, § 2688, at 60-61. No judgment for Pohl will be rendered on the libel cause of action.

      Accordingly, judgment for Pohl will be entered on his breach of contract cause of action for a sum to be finally calculated when the evidence requested by the court has been timely received. No judgment for Pohl will be entered for his libel cause of action.