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HEADNOTES

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COURT'S OPINION

MARTIN G. YINUG, Chief Justice:

On October 15, 2012, the court held a joint hearing¹ on the defendant's motions to dismiss both of the above-captioned cases; on the plaintiffs' motion to consolidate the two cases; and on the plaintiffs' motions in both cases for a preliminary injunction. The motions to dismiss were denied from the bench; the motion to consolidate was, without opposition, granted; and, by this order, the preliminary injunction motions are granted. The reasons follow.

I. BACKGROUND

Since "in granting or refusing interlocutory injunctions the court shall . . . set forth the findings of fact and conclusions of law which constitute the grounds of its action," FSM Civ. R. 52(a), the court finds the following facts, most of which are undisputed.

On January 21, 2009, the Pohnpei Utilities Corporation ("PUC") Board of Directors informed Governor John Ehsa that an emergency situation existed in PUC's power generation capacity and asked that Pohnpei buy a standby generator. In June 2009, PUC and Governor Ehsa executed a memorandum of understanding which, among other things, provided that the public bidding requirement could be waived; that the Governor's office would make efforts to obtain help in acquiring one or more generators for PUC although Pohnpei had to obtain PUC's prior approval before creating a payment obligation for PUC.

On June 26, 2012, PUC issued a Request for Proposal ("RFP") to increase PUC's power generation capacity by 10 MW. Bid proposals were due August 31, 2012. Six companies submitted bids.

Governor Ehsa submitted a nine-page bill to the Pohnpei Legislature to reform PUC. The bill's preamble included a statement that its intent was "to enable swift and vigorous action by . . . [e]nabling the Governor to institute new leadership at the Pohnpei Utilities Corporation that can immediately take effective action to solve the power situation." Id. § 1(b). On August 10, 2012, the Legislature's own 23-page bill became Pohnpei State Law No. 8L-09-12. It amended chapter 1 (and repealed chapter 2) of Title 34 of the Pohnpei Code. Its preamble also stated that the law's intent was "to enable swift and vigorous action," Pon. S.L. No. 8L-09-12, § 1, but did not include the language about the Governor being enabled to institute new leadership for immediate action.

On August 14, 2012, the PUC Board met with the Governor in his office and the Governor asked the Board to resign, otherwise he would start to terminate the board members beginning with those whose PUC accounts were delinquent. He also asked the Board to terminate PUC General Manager Feliciano Perman. Two Board members later resigned.

[18 FSM R. 436]

On September 3, 2012, Governor Ehsa, relying on Pon. Const. art. 13, § 9(1),² issued his Emergency Executive Order 01-12, which dissolved PUC's Board of Directors; terminated PUC General Manager Perman; suspended the bidding requirements and the 34 Pon. C. § 1-106 provision that required the Legislature's advice and consent; and vested the powers of PUC's Board and management in the Governor himself and a task force he would nominate. On the same day, Governor Ehsa ordered Robert Hadley to evaluate the bids that had been opened on August 31, 2012. Hadley started on September 3, and worked through the next two days to finish his evaluation. He picked Energy Infrastructure Global, Inc. ("EIG") as the lowest responsible bidder with Balance Utility Solution ranked second and FSM Petroleum Corporation third. An MOU with EIG was signed.

On September 9, 2012, the Pohnpei Legislature, exercising its power under Pon. Const. art. 13, § 9(3),³ revoked Emergency Executive Order 01-12 in its entirety and retroactive to September 3, 2012, because the situation stated in the Emergency Executive Order did not rise to the level of an emergency as defined in the Pohnpei Constitution Article 13, § 9(1).⁴ Pon. Legis. Res. No. 28-12 (8th Pon. Legis., 6th Spec. Sess.). Emergency Executive Order 01-12 and all later acts done pursuant to it thus became nullities.

On September 10, 2012, Governor Ehsa sent letters to PUC Board members Francisco Mendiola and Wilbur Walter stating that he proposed to remove them from the PUC Board because they had violated 34 Pon. C. § 1-106(5)⁵ by having PUC accounts over three months delinquent.

Then, on September 11, 2012, a Pohnpei state holiday,⁶ Governor Ehsa, now relying on Pon. Const. art. 9, §§ 1⁷ and 7⁸ and on 34 Pon. C. § 1-118,⁹ issued Executive Order 01-12. In it he stated that PUC had selected a responsible low bidder and asserted that, since two Board members had resigned and two others had been suspended for delinquent PUC accounts, the PUC Board lacked a

[18 FSM R. 437]

quorum¹⁰ and therefore was unable to transact business. The Governor, assuming the Board's powers, suspended General Manager Perman, who might later be reinstated retroactively by a new Board. Executive Order 01-12 further provided that the Governor would appoint an acting General Manager who "shall enter into an MOU with the company it has selected . . . under the PUC RFP." Gov'r Exec. Order 01-12, at 2, ¶ 3 (Sept. 11, 2012).

On the morning of September 12, 2012, PUC acting General Manager Robert Hadley convened a newly-formed, six-person Bid Evaluation Committee who were told to independently evaluate the six RFP bidders and to complete their evaluation by noon that day. They did not finish their evaluation until about 4:30 p.m. Combining their results, the committee chose Balance Utility Solution as the winning bidder with EIG ranked second and FSM Petroleum Corporation ranked third. Hadley took the committee's top three and ranked them against his earlier review and determined that, when the two results were combined, EIG came first and should be awarded the project. This was done by about 6:00 p.m. that day. An MOU was executed with EIG at about 7:00 p.m. that evening.

On September 16, 2012, Governor Ehsa informed Board members Mendiola and Walter that he had decided to terminate them. Mendiola had, by then, paid up his delinquent PUC account and Walter had asserted that his PUC account had not been over three months' delinquent.

On September 20, 2012, Perman, Mendiola, and Walter filed suit against Governor Ehsa seeking a declaratory judgment that they had been wrongfully terminated without due process and injunctive relief. And on September 27, 2012, FSM Petroleum Corporation filed suit against Governor Ehsa seeking a declaratory judgment that the bid review process and the contract award process mandated by Governor Ehsa's executive order were unfair and violated due process and injunctive relief barring further proceeding under the Governor's executive order with respect to the bid selection.

Under Pohnpei State Law No. 8L-09-12, § 3(2) (to be codified at 34 Pon. C. § 1-106(2)), the terms of all PUC Board members expire the first Monday of November 2012 (November 5, 2012) with a whole new board with staggered terms to take its place. The Governor has already submitted his nominations for all seven seats on the new Board to the Pohnpei Legislature.

II. GOVERNOR EHSA'S MOTIONS TO DISMISS

The defendant in both cases, Governor John Ehsa, is being sued in his official capacity for certain acts he took as Governor. Ehsa based his motions to dismiss on the Pohnpei Government Liability Act of 1991 provision that "[n]o action arising out of an act or omission within the scope of his or her public duties or employment may be brought against any employee, either in his or her official capacity or as an individual, unless the state is named as a party . . . ." 58 Pon. C. § 2-108(1). The plaintiffs contended that they did not need to name the state as a defendant because Governor Ehsa's acts were, in their view, not done within the scope of his public duties. The court, however, concluded that the Pohnpei Government Liability Act of 1991 covered those acts since Governor Ehsa asserted that he did what he did because he, as Governor, he had the authority to.

When it applies, the court must defer to a state statute. The Pohnpei statute does not provide that immediate dismissal is explicitly required if a plaintiff fails to name Pohnpei as a defendant. Furthermore, since a suit against a person in his or her official capacity is treated as a suit against the entity that employs that officer, Marsolo v. Esa, 18 FSM Intrm. 59, 66 (Chk. 2011); Herman v. Bisalen, 16 FSM Intrm. 293, 296 (Chk. 2009), Pohnpei is, in effect, already a party-defendant because its

[18 FSM R. 438]

Governor was sued in his official capacity. Therefore the court, from the bench, denied the motions to dismiss PROVIDED that the plaintiffs, who were given leave to do so, amend, by October 26, 2012, their complaints to name the State of Pohnpei as a defendant. The court will grant, without prejudice, Governor Ehsa's motions to dismiss only if the plaintiffs fail to amend their complaints to name the State of Pohnpei as a party-defendant.

III. PLAINTIFFS' PRELIMINARY INJUNCTION MOTIONS

The plaintiffs ask the court to enjoin the Governor 1) from removing Francisco Mendiola and Wilbur Walter from the PUC Board of Directors; 2) from terminating or suspending Feliciano Perman as PUC General Manager; and 3) from ordering the PUC acting General Manager (or anyone else) to enter into an agreement or a memorandum of understanding with a bidder who was not chosen through a fair bidding evaluation and whose contract is not first approved by the Board. The court, in exercising its discretion in considering whether to grant a preliminary injunction, must weigh four factors: 1) the likelihood of success on the merits of the party seeking injunctive relief, 2) the possibility of irreparable injury to the movant, 3) the balance of possible injuries or inconvenience between the parties that would flow from granting or denying the relief, and 4) any impact on the public interest. FSM v. GMP Hawaii, Inc., 17 FSM Intrm. 555, 593 (Pon. 2011).

A. Likelihood of Success on the Merits

The plaintiffs' likelihood of success on the merits is greater than that of the Governor. Only the PUC Board of Directors can terminate PUC's general manager. 34 Pon. C. § 1-109. The Governor has no such power under any circumstance. If the PUC Board lacks a quorum, the Governor's power extends only to nominating new Board members who, if confirmed, would allow the Board to have a quorum and thus to transact business. The Governor cannot, by failing to appoint Board members or by otherwise taking advantage of Board vacancies, claim that he then must be able to exercise the Board's powers. "All powers vested in [PUC] shall be exercised by the Board, which shall consist of seven members, called directors, who shall be appointed by the Governor with the advice and consent of the Pohnpei Legislature." Pon. S.L. No. 8L-09-12, § 3(1) (to be codified at 34 Pon. C. § 1-106(1)). The Pohnpei Governor has neither the power nor the authority to exercise any of the powers vested exclusively in the PUC Board.

The Governor argues that he did not remove PUC General Manager Perman, he only suspended him without pay pending an investigation, and that Perman may be reinstated with retroactive pay depending on the investigation's outcome. This is a distinction without a difference. Since only the Board has the power to remove a general manager, 34 Pon. C. § 1-109, it follows that only the Board has the power to suspend, with or without pay, a general manager. The Board's appointment power would be meaningless if a Governor could suspend a PUC general manager appointed by the PUC Board thus overriding the Board's choice and requiring the Board to appoint another general manager while its prior appointee is "suspended." Title 34 does not permit the Governor to suspend the PUC general manager. Since the Governor could not "terminate" (Emergency Executive Order 01-12) or "suspend" (Executive Order 01-12) General Manager Perman and since the Governor has no authority to order a PUC general manager to do anything, the Governor's directive to "acting" General Manager Hadley and Hadley's actions in compliance with the Governor's orders will not stand legal scrutiny. The likelihood that the plaintiffs will prevail on this issue is great.

Furthermore, since the Governor cannot exercise the PUC Board's powers under any circumstance, the plaintiffs' likelihood of success on the bid evaluation process and the conclusion of an MOU with EIG is great. An MOU with EIG, to be valid, would have to be approved by the PUC

[18 FSM R. 439]

Board.¹¹ It was not. And whether the September 12, 2012 bid evaluation committee was lawful is doubtful.

The one power, other than nominating Board members, that the Governor does have over PUC is that he (or the Board by a two-thirds vote) can remove a Board member for good cause and "good cause" includes "delinquency in the payment of public utilities bills for a period greater than three months." Pon. S.L. No. 8L-09-12, § 3(5) (to be codified at 34 Pon. C. § 1-106(5)). Governor Ehsa's September 10, 2012 letters to Directors Mendiola and Walter stated that they were suspended for fifteen days and proposed their removal from office. But when the Governor removed them both on September 16, 2012, Mendiola had brought his delinquent account up-to-date and Walter had supplied evidence that he had not been delinquent for over three months. While Mendiola's and Walter's likelihood of success is not as great as that of the other plaintiffs, their chances are still substantial and not frivolous. Walter's evidence tends to show that there was no good cause to remove him, which if true, would have left him on the Board and left the Board with a quorum. Mendiola was delinquent on September 10, 2012, but the notice to him (and to Walter) was worded as a proposal to remove, not as a removal, and he was only removed after he had eliminated his delinquency, thus eliminating good cause, before the September 16, 2012 date on which he was removed. Mendiola may thus have a viable estoppel theory for relief.

Accordingly, the likelihood of success factor strongly favors the plaintiffs.

B. Irreparable Injury

In order for a party to obtain injunctive relief, it must be faced with the threat of irreparable harm before the litigation is concluded. GMP Hawaii, Inc., 17 FSM Intrm. at 593. Irreparable harm is harm that cannot be fully compensated by money damages. Id.

In Pohnpei Port Authority v. Pohnpei, 15 FSM Intrm. 541, 544 (Pon. 2008), the court held that the Pohnpei Port Authority ("PPA") had demonstrated irreparable injury by showing that the Pohnpei Governor's executive order required PPA to act inconsistently with the applicable state statutes because the order purported to assert authority that only PPA, acting through its general manager, could assert and it also potentially impaired PPA's general counsel's contract by unilaterally terminating it and because which attorneys PPA employed was a decision that clearly lay with the PPA and that choice could not be imposed by an executive order inconsistent with applicable state law. Similarly in this case, irreparable harm exists since the Governor is exercising, through an executive order, power that applicable state law firmly vests in the PUC Board and in the PUC General Manager that the Board hires and supervises. Money damages cannot remedy these harms. The irreparable harm factor thus weighs in the plaintiffs' favor.

C. Balance of Possible Injuries

The possible injury to the Governor is slight because, since he does not have the power to appoint a general manager or to order that PUC enter into a contract or a memorandum of understanding, the Governor is not injured by an injunction prohibiting him from doing either. The Governor may remove Board members for good cause but since the terms of Board members Mendiola and Walter end soon and since the Governor has already nominated replacements for them, any harm to the Governor in them staying until their terms end is also slight.

[18 FSM R. 440]

On the other hand, the harm to the plaintiffs is much greater because General Manager Perman has been prevented from exercising, as required under the applicable state law, the duties and responsibilities of his office, as have Board members Mendiola and Walter. FSM Petroleum has been denied an opportunity to have its bid proposal appropriately evaluated.

The court is conscious that if it issues a preliminary injunction barring the removal of Mendiola and Walter from the Board that this state of affairs will not or cannot last very long. Under Pohnpei State Law No. 8L-09-12, § 3(2) (to be codified at 34 Pon. C. § 1-106(2)), the terms of the PUC Board members expire the first Monday of November 2012 (November 5, 2012) although they may continue to hold office until their successor directors have taken office but no longer than 30 days after November 5, 2012 (December 5, 2012). Their terms will end December 5, 2012 if not earlier in November.

The balance-of-injuries factor thus favors the plaintiffs.

D. Impact on the Public Interest

The public interest factor favors the plaintiffs since the public interest should favor a fair and thorough, but not rushed, evaluation of the power generation bids which ends with the PUC Board of Directors approving a contract with the bidder with the best plan because the PUC RFP involves proposals for a long-term improvement of PUC's power generation capacity and the expenditure of a large sum. The public interest should also favor adherence to the Pohnpei statutes that govern an independent public corporation – PUC, in this case – rather than a blatant disregard of PUC's independent nature. PUC is not part of the executive branch of the Pohnpei state government or part of either of the other two branches. It is an independent agency not subject to or under any of the three branches of government. It is in the public interest that it remain that way.

E. Bond

When asked at the October 15, 2012 hearing about a bond, the plaintiffs offered to provide a bond for the preliminary injunction in whatever amount the court deemed necessary. The defendant did not ask for bond or specify any certain amount or even comment on the point. A bond will be required, FSM Civ. R. 65(c), but because of the injunction's preliminary nature and because much of the injunction may become obsolete once a new PUC Board takes office and starts to exercise its functions, the court will require a bond of $1,000 to be tendered within ten days of entry of this order.

F. Issuance

Since all of the four factors weigh in the plaintiffs' favor, a preliminary injunction will issue barring the removal of (that is, reinstating) General Manager Perman and Board members Mendiola and Walter and barring the implementation of the EIG MOU and of any MOU or agreement that the PUC Board has not approved. Any contract approved by the PUC Board should only come after an appropriate bid evaluation process in which the Governor is not involved.

IV. CONCLUSION

Accordingly, the defendant's motions to dismiss were denied and the plaintiffs' motions for preliminary injunctions are granted. The plaintiffs shall remit to the court, within ten days of this order, an injunction bond of $1,000 to be deposited in an interest-bearing account until further order of the court. The preliminary injunction issues herewith and shall take effect immediately

Footnotes:

¹ "When actions involving a common question of law or fact are pending before the court, it may order a joint hearing . . . ." FSM Civ. R. 42(a).

² "The Governor may declare a state of emergency and issue appropriate decrees, to preserve the public peace, health, or safety, at a time of extreme emergency caused by civil disturbance, epidemic, natural disaster, or immediate threat of war." Pon. Const. art. 13, § 9(1).

³ "The Legislature may amend or revoke a declaration of emergency at any time by resolution. Unless the declaration expires earlier, the Legislature shall convene within thirty days to consider the declaration of emergency. . . ." Pon. Const. art. 13, § 9(3).

⁴ See supra note 2 for the definition.

⁵ "Members of the Board of Directors may be removed for good cause either by the Governor or by two-thirds vote of the remaining members of the Board. Good cause shall include delinquency in the payment of public utilities bills for a period greater than three months." Pon. S.L. No. 8L-09-12, § 3(5) (to be codified at 34 Pon. C. § 1-106(5)).

⁶ Pohnpei Liberation Day.

⁷ "The executive power of the Government of Pohnpei is vested in the Governor who shall be elected by the qualified voters of Pohnpei." Pon. Const. art. 9, § 1.

⁸ "The Governor is responsible for the faithful execution of the provisions of this Constitution and of all laws of Pohnpei." Pon. Const. art. 9, § 7.

⁹ 34 Pon. C. § 1-118 permits PUC to receive government assistance "consistent with the laws."

¹⁰ A quorum for the PUC Board is four (out of a total of seven) members. 34 Pon. C. § 1-108.

¹¹ All work "by independent contractors, when the expenditure exceeds $25,000, shall be by contract, let to the lowest responsible bidder. The Board may reject any and all bids . . . ." 34 Pon. C. § 1-112.