8 FSM Intrm. 345-352

A court should avoid unnecessary constitutional adjudications. When interpreting a statute, courts should, where possible, avoid selecting interpretations of a statute which may bring into doubt the constitutionality of that statute. If construction of a statute by which a serious doubt of constitutionality may be avoided is fairly possible, a court should adopt that construction. Cornelius v. Kosrae, 8 FSM Intrm. 345, 348 (Kos. S. Ct. Tr. 1998).

The wording of the due process clause of the Kosrae Constitution is the same as that of the FSM Constitution, and are equivalent in terms of scope and meaning, and, in turn, because the FSM Declaration of Rights, which contains the due process clause, is patterned after provisions of the United States Constitution, and United States cases were relied on to guide the Constitutional Convention, United States authority may be consulted to understand the meaning of these rights. Cornelius v. Kosrae, 8 FSM Intrm. 345, 349 (Kos. S. Ct. Tr. 1998).

The phrase, "as prescribed by law," describes how the salaries of the senators; governor and lieutenant governor; and state court justices will be set in the first instance. Any subsequent increase or decrease as to the executive or judiciary will be by statute applicable to all state government employees; with respect to senators, any subsequent increase will occur by statute which becomes effective during a future term of office. Cornelius v. Kosrae, 8 FSM Intrm. 345, 350 (Kos. S. Ct. Tr. 1998).

A salient feature of Chapter 5 of Title 5 of the 1985 Code drew a distinction between the employees whose compensation was determined according to specific contract, which the sections anticipate and authorize, and those permanent state employees whose salary was determined according to the base salary schedule contained in § 5.502. Chapter 4 conferred a wide range of rights on permanent employees that contract employees did not enjoy, such as the right given by § 402 to continued employment "during good behavior." Cornelius v. Kosrae, 8 FSM Intrm. 345, 350-51 (Kos. S. Ct. Tr. 1998).

There is a dichotomy between employees whose salaries are set by statute ) "as prescribed by law" ) and those whose salaries are subject to individual contract. Certain individuals or groups are subject to individual contracts, and excluded from the Public Service System. The Public Service System gives substantial rights to permanent employees that are denied contract employees. Cornelius v. Kosrae, 8 FSM Intrm. 345, 351 (Kos. S. Ct. Tr. 1998).

Kosrae law has historically recognized a permanent work force of employees given specified rights whose compensation is statutorily determined; and a second group of employees who do not have the specified rights given permanent employees, who serve for a contract term, and whose compensation is determined by those contracts. It is this former group whose salaries were subject to reduction by S.L. No. 6-132. Cornelius v. Kosrae, 8 FSM Intrm. 345, 352 (Kos. S. Ct. Tr. 1998).

the compensation of State officials and employees." Preamble to L.B. 6-256, L.D. 2, subsequently enacted as Kos. S.L. No. 6-132. The legislature passed the law, which effected salary reductions of 12.5 percent, as a cost savings measure in anticipation of reduced state revenues, and Kos. S.L. No. 6-132 was applied to plaintiff. The law was not applied to certain state employees who have individual contracts with the state.

Plaintiff filed a five count complaint, requesting declaratory and injunctive relief as well as damages. Count one, to which plaintiff's motion for partial summary judgment is directed, alleges that plaintiff's salary reduction contravenes Article VI, Section 5, of the Kosrae Constitution, which provides that the "[c]ompensation of Justices of the Kosrae State Court is prescribed by law. Compensation may not be increased or decreased during their terms of office, except by general law applying to all State Government employees." Plaintiff alleges that in order for his salary to be reduced, the salaries of "all State Government employees" must be reduced, including the salaries of the employees who have contracts with the state. Plaintiff contends that since this did not happen, his salary reduction through the application of Kos. S.L. No. 6-132 was in violation of Article VI, Section 5.

Kosrae's response to plaintiff's contention, as well as the basis for its motion for summary judgment, is that "all State Government employees" as used in Article VI, Section 5 of the Kosrae Constitution does not include the contract employees. The state urges that Kos. S.L. No. 6-132 should not be read to require Kosrae to breach its contracts with individual employees. Such a breach, according to Kosrae, would violate due process under the Kosrae Constitution because it would deprive the contract employees of a property interest ) their contract rights ) without due process of law. The parties agree that issue presented by the cross motions for summary judgment hinges on the interpretation of "all State Government employees." As to count I of the complaint, if this phrase includes the contract employees, plaintiff prevails; if the contract employees are excluded, defendant prevails.

The parties present the issue whether Kos. S.L. No. 6-132 as it was applied to plaintiff contravenes the Kosrae Constitution. In deciding this question, the court first considers Kosrae's contention that interpreting Kos. S.L. No. 6-132 to include within its operation those employees whose compensation is determined by contract would deprive those employees of a property interest without affording them due process under the Kosrae Constitution. The court then examines the phrase "all State Government employees" as it occurs within the Kosrae Constitution and in the light of subsequent legislation. Lastly, the court considers Article XVI, Section 6 in light of plaintiff's contention that the Kosrae Constitution has no impairment of contracts clause.

Ample authority exists in the FSM for the proposition that a court should avoid unnecessary constitutional adjudications. "[W]hen interpreting a statute, courts should try to avoid interpretations which may bring the statute into doubt." Tosie v. Tosie, 1 FSM Intrm, 149, 157 (Kos. 1982). "A fundamental principle of statutory interpretation is that where a statute can be read in two ways, one raising constitutional issues and the other interpreting the language as affecting matters clearly within the constitutional reach of Congress, the latter interpretation should prevail so that the constitutional issue is avoided." FSM v. Boaz (II), 1 FSM Intrm. 28, 32 (Pon. 1981). "Courts should, where possible, avoid selecting interpretations of a statute which may bring into doubt the constitutionality of that statute." In re Otokichy, 1 FSM Intrm. 183, 190 (App. 1982) (footnote omitted). "If construction of a statute by which a serious doubt of constitutionality may be avoided is fairly possible, a court should adopt that construction." Suldan v. FSM (II), 1 FSM Intrm. 339, 357-58 (Pon. 1983).

Kosrae contends that to apply Kos. S.L. No. 6-132 to the contract employees ) i.e., for the state to breach the contracts by unilaterally lowering salaries ) would violate due process under the Kosrae Constitution, since a contract confers a property right which is subject to due process. Noting that there is no FSM case law directed to this point, Kosrae looks to United States case law and cites Lynch v. United States, 292 U.S. 571, 54 S. Ct. 840, 78 L. Ed. 1434 (1934), a case of historical interest which stands for a proposition of continuing vitality. In Lynch, the United States Supreme Court held that valid contract rights are property within the meaning of the Fifth Amendment of the United States Constitution, which provides that "[n]o person shall be . . . deprived of life, liberty or property, without due process of law." The Kosrae Constitution contains this same provision under Article II, Section 1(b), which provides that "[a] person may not be deprived of life, liberty, or property without due process of law." The wording of the due process clause of the Kosrae State Constitution is the same as that of the FSM Constitution, and are equivalent in terms of scope and meaning. Alik v. Kosrae Hotel Corp., 5 FSM Intrm. 294, 297 (Kos. 1992). In turn, "[b]ecause the Declaration of Rights [which contains the due process clause] is patterned after provisions of the United States Constitution, and United States cases were relied on to guide the Constitutional Convention, United States authority may be consulted to understand the meaning of these rights." Afituk v. FSM, 2 FSM Intrm. 260, 263 (Truk 1986). In interpreting the Declaration of Rights as it appears in the FSM Constitution, courts "should emphasize and carefully consider United States Supreme Court interpretations of the Bill of Rights of the United States Constitution." FSM v. Tipen, 1 FSM Intrm. 79, 85 (Pon. 1982). Accordingly, this court may look to United States authority in construing the due process clause of the Kosrae Constitution.

In Lynch, the United States Government had issued War Risk Insurance during the First World War. These policies were for annually renewal term insurance with premiums which the insured paid monthly. During the Great Depression, Congress passed, in an evident effort at fiscal belt tightening, the so-called Economy Act, which repealed "`all laws granting or pertaining to yearly renewable term insurance,'" 292 U.S. at 579, 54 S. Ct. at 843, 78 L. Ed. at 1440, thus cancelling the insurance policies. The United States Supreme Court held that the due process clause prevented the United States from annulling these policies, which were valid contracts with the United States. Id. at 579, 54 S. Ct. at 843, 78 L. Ed. at 1441.

Plaintiff's response to the defendant's due process position is two-pronged. Plaintiff urges that Kosrae's reliance on Lynch is misplaced because the Kosrae Constitution does not contain an impairment of contracts clause; further, plaintiff contends that the contracts at issue have termination clauses, and that instead of modifying the contracts, the state can avoid any due process issue under the Kosrae Constitution by merely terminating all of the contract employees so that there would be, presumably, no contract employees to whom to apply the salary reduction.

Lynch is expressly decided on the basis of due process and does not rest on the contracts clause, U.S. Const. art. I, § 10, cl. 1. Id. at 579, 54 S. Ct. at 843, 78 L. Ed. at 1441 ("[T]he due process clause prohibits the United States from annulling them [the war risk insurance contracts], unless, indeed, the action taken falls within the federal police power or some other paramount power."). Second, according to the discovery that the parties have filed with the court, there are some 45 state employees who are under contract with Kosrae. The termination of these employees simultaneously would have a substantial impact on state government. The court is not persuaded that such a draconian measure is necessary in order to apply Kos. S.L. No. No. 6-132 in accordance with due process.

The phrase "all State Government employees" in relation to salary reductions occurs twice in the Kosrae Constitution. In addition to its occurrence in Article VI, Section 5, which deals with the judiciary, the phrase also occurs in Article V, Section 7, which has to do with the executive branch. The latter provides that "[t]he Governor and Lieutenant Governor receive annual salaries as prescribed by law. The salaries may not be increased or decreased for their terms of office except by general law applying to all State Government employees." Both constitutional provisions provide that the salaries at issue will in the first instance be "prescribed by law," a requirement that also appears in Article IV, Section 9 relative to the salaries of state senators: "Senators receive compensation as prescribed by law. No law increasing compensation may take effect until the end of the term of office for which the Senators voting thereon were elected."

The court gleans guidance as to whether Kos. S.L. No. No. 6-132 should apply to Kosrae's contract employees by considering this second phrase, "as prescribed by law." This phrase describes how the salaries of the senators; governor and lieutenant governor; and state court justices will be set in the first instance. Any subsequent increase or decrease as to the executive or judiciary will be by statute applicable to "all State Government employees"; with respect to senators, any subsequent increase will occur by statute which becomes effective during a future term of office. A sense of statutory give and take exists here with respect to these specific salaries, and this is what has in fact occurred.

As contemplated by the constitution, the legislature acted early on to statutorily prescribe the salaries of its own members; the governor and lieutenant governor; and justices. The 1985 Kosrae State Code addresses these salaries respectively at §§ 4.301, 5.501, 6.1203. There were subsequent amendments to these provisions not germane to the instant discussion, but immediately prior to the enactment of Kos. S.L. No. 6-132, the salaries of senators; the governor and lieutenant governor; and justices were set by Kos. S.L. No. 5-198. State Law No. 6-132 reduced these statutorily set salaries by 12.5 percent by express reference. Kos. S.L. No. 6-132, §§ 2, 3, and 5 respectively (effecting amendments to Kos. C. §§ 4.301, 5.501, and 6.1203 respectively).

But state government does not function exclusively through the officials specifically enumerated in the constitution, and Article V, Section 11 provides that "[a]ll executive and administrative offices, departments and instrumentalities of the State Government and their respective functions, powers, and duties shall be established by law." The first comprehensive legislative approach directed to the state work force appears to have been Chapter 4, entitled "Executive Service," of Title 5 of the 1985 Kosrae State Code, which was subsequently repealed when Title 18, entitled "Public Service System," was enacted by Kos. S.L. No. 1-131. Chapter 5 of Title 5 of the 1985 Code addressed the issue of compensation of the Executive Service. A salient feature of Chapter 5 was that §§ 503 (repealed by Kos. S.L. No. 6-131, § 5); 504 (repealed by Kos. S.L. No. 6-132, § 4); and 505 (repealed by Kos. S.L. No. 6-132, § 4)1 drew a distinction between the employees whose compensation was determined

according to specific contract, which the sections anticipate and authorize, and those permanent state employees whose salary was determined according to the base salary schedule contained in § 5.5022 (repealed by Kos. S.L. No. 6-131, § 5). A second point is that Chapter 4 conferred a wide range of rights on permanent employees that contract employees did not enjoy. Not the least of these rights was the right given by § 402 to continued employment "during good behavior."

A pattern emerges, a definitive feature of which is a dichotomy between employees whose salaries are set by statute ) "as prescribed by law" ) and those whose salaries are subject to individual contract. This distinction is preserved in the present Public Service System established by Title 18 of the Kosrae Code. Section 18.107, subparagraphs (8) and (9), expressly recognizes that certain individuals or groups will be subject to individual contracts, and excludes them from the Public Service System:

(8) Persons or organizations retained by contract when the Branch Head has certified that the service to be performed is special or unique and non permanent and is essential to the public interest, and that because of the degree of expertise or special knowledge required and the nature of the services to be performed, it would not be practical to obtain personnel to perform such services through normal public service recruitment procedures.

Similarly, just as the prior Executive Service gave substantial rights to permanent employees that were denied contract employees, so does the present Public Service System. Section 18.103 provides for the "[j]ust opportunity for competent employees to be promoted within the service" (subparagraph 4); and for "[r]easonable job security for competent employees, including the right of appeal from adverse personnel actions as provided in this Title." Section 18.105 provides that "[e]very regular employee shall be entitled to hold his position during good behavior, subject to suspension, demotion, layoff, or dismissal only as provided in this Title and in any regulations, rules or directive adopted in pursuance

thereof." Permanent, or regular, employees are entitled to grievance procedures, Kos. C. § 18.402; leaves of absence under specified conditions, Kos. C. § 18.405; and to the disciplinary procedures and appeals process provided by Chapter 5 of Title 18. Hence Kosrae law has historically recognized a permanent work force of employees given specified rights whose compensation is statutorily determined; and a second group of employees who do not have the specified rights given permanent employees, who serve for a contract term, and whose compensation is determined by those contracts. It is this former group whose salaries were subject to reduction by Kos. S.L. No. 6-132.

The court concludes that the phrase "all State Government employees" as it appears in Article VI, Section 5, means those employees whose salaries are "prescribed by law." The short of the matter is that only those employees whose salaries are set in the first place by statute are the employees to whom subsequent statutory reductions should apply. Such a reading avoids bringing the constitutionality of Kos. S.L. No. 6-132 into question. It is consistent with the body of Kosrae legislation dealing with the public work force.

Plaintiff rightly notes in his reply to defendant's opposition to plaintiff's motion for summary judgment that the Kosrae Constitution contains no impairment of contracts clause. That does not mean, however, that the constitution is silent in this area. Article XVI, which is the last article of the constitution, and in Section 6 of Article XVI, entitled "Transition," provides that "[e]xcept as otherwise provided by this Constitution, all rights, titles, actions, suits, contracts, liabilities, writs, proceedings, prosecutions, judgments, sentences, orders, decrees, appeals, causes of action, defenses, claims, and demands continue unaffected." Kos. Const. art. XVI, § 6 (emphasis added). It is not to the point here to add to the well-reasoned discussion of this section, and the following Section 7 which is found in Seymour v. Kosrae, 3 FSM Intrm. 537, 541-43 (Kos. S. Ct. Tr. 1988). Suffice it to say that Section 6 the Kosrae Constitution evidences a respect for the integrity of contracts subject to Kosrae law which were extant at the time the constitution was adopted. Nothing urged by plaintiff persuades the court that Kos. S.L. No. 6-132 should be construed to depart from this stance toward Kosrae contracts taken by the drafters. The court is not convinced that in order for Kosrae to apply Kos. S.L. No. 6-132 consistently with the constitution, it must engage in the wholesale breach of contracts which the legislature has authorized. To the court's mind, Article XVI, Section 6 of the Kosrae Constitution states a general principle, ongoing in its operation, that favors a construction of Kos. S.L. No. 6-132 which preserves the integrity of the contracts that Kosrae has with its employees.

For the reasons set out herein, the court finds that Kos. S.L. No. 6-132 as it was applied to plaintiff does not contravene Article VI, Section 5 of the Kosrae Constitution. The phrase "all State Government employees" means employees whose compensation is determined by statute, and does not include those employees who have individual contracts with Kosrae. Further, a reading of the phrase excluding the contract employees from the ambit of the statute is consistent with the spirit of Article XVI, Section 6 of the Kosrae Constitution.

1. Section 5.503 was directed toward citizens having advanced degrees. Those citizens received "the base salary provided in section 5.502" plus an additional amount defined as "thirty-five percent of the market place premium using the United States of America as the relevant labor market." This section did not employ the term "contract," but that the parties would contract on this point was implicit in the section.

2. There have been four statutory versions of the base salary schedule. The first occurred at Kos. C. § 5.502. This provision was subsequently amended ) to provide for a raise for state employees ) by Kos. S.L. No. 5-62, effective October 1, 1992. The amended § 5.502 was then repealed, and was re-enacted in substance and without change as § 18.601 by Kos. S.L. No. 6-131, effective October 1, 1997, to reflect creation of the Public Service System. On the same date, Kos. S.L. No. 6-132 also became effective, and amended § 18.601 to provide for the 12.5% reduction.