THE SUPREME COURT OF THE
FEDERATED STATES OF MICRONESIA
APPELLATE DIVISION
Cite as Department of Treasury v. FSM Telcomm. Corp.,
9 FSM Intrm. 353 (App. 2000)

[9 FSM Intrm. 353]

DEPARTMENT OF TREASURY AND
ADMINISTRATION OF THE STATE OF POHNPEI,
Appellant,

vs.

FSM TELECOMMUNICATIONS CORPORATION,
Appellee.

APPEAL CASE NO. P1-2000

ORDER DENYING STAY

Richard H. Benson
Associate Justice

Decided:  March 20, 2000

APPEARANCES:
For the Appellant:     James Woodruff, Esq.
                                    Pohnpei Department of Justice
                                    P.O. Box 1555
                                    Kolonia, Pohnpei FM 96941

For the Appellee:      Stephen V. Finnen, Esq.
                                    Law Offices of Saimon & Associates
                                    P.O. Box 1450
                                    Kolonia, Pohnpei FM 96941

*    *    *    *
[9 FSM Intrm. 354]

HEADNOTES
Appeal and Certiorari ) Stay
     When a stay application to the court appealed from is not practicable because the trial justice is unavailable and ill and out of the country for an extended time an appellant may apply for a stay in the appellate division.  Department of Treasury v. FSM Telecomm. Corp., 9 FSM Intrm. 353, 354-55 (App. 2000).

Appeal and Certiorari ) Standard of Review
     The standard of review of a summary judgment on appeal is a de novo determination that there was no genuine issue of material fact and that the prevailing party was entitled to judgment as a matter of law.  Department of Treasury v. FSM Telecomm. Corp., 9 FSM Intrm. 353, 355 (App. 2000).

Appeal and Certiorari ) Stay
     One reason to grant a stay on appeal is if the court is persuaded that the appellant will prevail on the merits of the appeal.  Department of Treasury v. FSM Telecomm. Corp., 9 FSM Intrm. 353, 355 (App. 2000).

Appeal and Certiorari ) Stay
     Generally, there are four factors to weigh before granting a stay pending appeal:  1) whether the appellant has made a strong showing that he is likely to prevail on the merits of the appeal; 2) whether the appellant has shown that without the stay he will be irreparably harmed; 3) whether issuance of the stay would substantially harm other parties interested in the proceedings; and 4) whether the public interest would be served by granting a stay.  Ordinarily, the first factor is the most important, but a stay may be granted upon a lesser showing of a substantial case on the merits when the balance of the equities identified in factors 2, 3, and 4 weighs heavily in favor of granting the stay.  Department of Treasury v. FSM Telecomm. Corp., 9 FSM Intrm. 353, 355 (App. 2000).

Appeal and Certiorari ) Stay
     A stay will be denied when the appellant has not made a strong showing that it is likely to prevail on the merits of its claim that a use tax is permitted under the FSM Constitution and has not shown that its injury is irreparable, even though there might be no harm to the only other party to the appeal, and the public interest favors neither granting nor denying a stay.  Department of Treasury v. FSM Telecomm. Corp., 9 FSM Intrm. 353, 355-56 (App. 2000).

*    *    *    *

COURT'S OPINION
RICHARD H. BENSON, Associate Justice:
     On December 30, 1999, the trial division entered an order granting summary judgment in Civil Action No. 1997-125.  FSM Telecomm. Corp. v. Department of Treasury, 9 FSM Intrm. 292 (Pon. 1999).  On February 4, 2000, the State of Pohnpei filed a Notice of Appeal.  On February 18, 2000, it filed its Motion to Stay Judgment Pending Appeal in the appellate division.  Pohnpei did not first file this application in the trial court on the ground that such an application was not practicable since the trial justice was unavailable and ill and out of the country for an extended time.  The appellee filed its opposition on February 25, 2000, and the appellant replied on March 1, 2000.

[9 FSM Intrm. 355]

     I agree with the appellant's contention that a stay application to the court appealed from is not practicable so that the state may apply for a stay in the appellate division.  FSM App. R. 8(a).  I may therefore entertain the motion.  FSM App. R. 27(c).

     The appellant's motion seeks a stay of that portion of the December 30th summary judgment that declares the Pohnpei use tax unconstitutional and enjoins the State of Pohnpei "from assessing further use taxes under Pohnpei State Law Nos. 4L-35-97 and 4L-92-99 and from accepting or collecting any use taxes assessed but not due and payable under Section 14-7 of the Tax Act as of the date this order is signed."  Order Granting Summary Judgment at 4 (Dec. 30, 1999).  The appellant notes correctly that the standard of review of a summary judgment on appeal is a de novo determination that there was no genuine issue of material fact and that the prevailing party was entitled to judgment as a matter of law.  Taulung v. Kosrae, 8 FSM Intrm. 270, 272 (App. 1998); Tafunsak v. Kosrae, 7 FSM Intrm. 344, 347 (App. 1995).

     One reason that would cause me to grant a stay is if I am persuaded that the appellant will prevail on the merits of the appeal.  In re Raitoun 1 FSM Intrm. 561, 563 (App. 1984).  Generally, there are four factors to weigh before granting a stay pending appeal:  1) whether the appellant has made a strong showing that he is likely to prevail on the merits of the appeal; 2) whether the appellant has shown that without the stay he will be irreparably harmed; 3) whether issuance of the stay would substantially harm other parties interested in the proceedings; and 4) whether the public interest would be served by granting a stay. See, e.g., Ponape Enterprises Co. v. Luzama, 6 FSM Intrm. 274, 277-78 (Pon. 1993); Garcia-Mir v. Meese, 781 F.2d 1450, 1453 (11th Cir. 1986).  The appellant's analysis and arguments use these same four factors.  A related, alternate analysis may be used.  "Ordinarily, the first factor is the most important. . . .  But the movant may also have his motion granted upon a lesser showing of a `substantial case on the merits' when `the balance of the equities [identified in factors 2, 3, and 4] weighs heavily in favor of granting the stay.'"  Garcia-Mir, 781 F.2d at 1453 (citation omitted) (alteration in original).

     The appellant asserts that it is very likely that it will prevail on the merits on appeal and cites in support a number of United States cases holding use tax schemes constitutional.  The appellee's opposition cites FSM cases in which taxes that bear some similarity to those in this case were declared unconstitutional by the FSM Supreme Court.  I am therefore not persuaded that the appellant has made a strong showing that it is likely to prevail on the merits of its claim that a use tax is permitted under the FSM Constitution.  This factor favors denial of a stay.

     The appellant also contends that it will be irreparably injured if no stay is granted because, should the appellate division reinstate the tax scheme, the state would then have great difficulty collecting the tax from taxpayers who have been issued refunds. The trial court's ruling, however, did not apply to any taxpayer whose time to file an appeal under section 10-1 of the Tax Act had expired by the date the order was signed.  Order Granting Summary Judgment at 4 (Dec. 30, 1999).  It thus applies to only a limited number of identified taxpayers and a limited amount, the size of which the state does not inform us.  I therefore cannot say that this constitutes irreparable harm, although it does cause the state some difficulty.  This factor then does not weigh in the appellant's favor.  Although not mentioned in the appellant's motion, the appellee assumes that the state is also claiming irreparable harm from being unable to collect the tax during this appeal's pendency.  The appellant did address this point, where I will also address it, under the public interest factor.

     The appellant further contends that the stay would not harm the only other party in the case because it has already refunded the appellee's use tax payment and states that it does not intend to contest the trial court ruling that the appellee is exempt from the tax anyway.  The appellee responds that, as the appellant has not yet filed any Statement of Issues on Appeal, the appellant may still decide

[9 FSM Intrm. 356]

to contest the appellee's exemption.  While the appellee's point is well-taken, this factor nevertheless weighs in the appellant's favor.

     Lastly, the appellant contends that the public interest would be served by granting a stay because the stay will preserve the status quo and contribute to stability in state government, presumably by assuring a steady flow of use tax revenue to the state government.  Balanced against this is the taxpaying public's interest in not paying a tax, which, if the trial court's ruling that it is unconstitutional is upheld, they have little prospect of ever receiving a refund.  This factor thus favors neither granting nor denying a stay.

     Weighed together, my analysis of these four factors lead me to deny the stay. Nor does the balance of the equities (factors two through four) weigh heavily in favor of the stay so that I could grant the stay if Pohnpei were to make a lesser showing of a substantial case on the merits.

     Accordingly, the appellant's motion for a stay is denied.  The appellant may move for an expedited briefing and hearing schedule if it is so advised.
                                                                                                                                                                                                                                                                                                           
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