State v. Oppenheimer & Co.

• Citation: 447 P.3d 1159
• Decision Date: 30 May 2019
• Docket Number: No. A-1-CA-35912,A-1-CA-35912
• Parties: STATE of New Mexico and County of Bernalillo, Plaintiffs-Appellees, and Frank Foy and John Casey, Qui Tam Plaintiffs-Appellants, v. OPPENHEIMER & CO., INC.; Bosc, Inc.; Patrick Padilla ; Royce O. Simpson; Thomas Wayne Hayes; John Does 1 through 9; and John Does 10 through 19, Defendants.
• Court: Court of Appeals of New Mexico

447 P.3d 1159

STATE of New Mexico and County of Bernalillo, Plaintiffs-Appellees,andFrank Foy and John Casey, Qui Tam Plaintiffs-Appellants,

v.OPPENHEIMER & CO., INC.; Bosc, Inc.; Patrick Padilla ; Royce O. Simpson; Thomas Wayne Hayes; John Does 1 through 9; and John Does 10 through 19, Defendants.

No. A-1-CA-35912

Court of Appeals of New Mexico.

Filing Date: May 30, 2019

Hector H. Balderas, Attorney General, Joseph M. Dworak, Assistant Attorney General, Sean M. Cunniff, Assistant Attorney General, Santa Fe, NM, for Appellee State of New Mexico

W. Ken Martinez, County Attorney, Albuquerque, NM, for Appellee County of Bernalillo

Victor R. Marshall & Associates, P.C., Victor R. Marshall, Albuquerque, NM, for Appellants

HANISEE, Judge.

{1} Qui tam plaintiffs Frank Foy and John Casey (Qui Tam Plaintiffs) appeal from the district court’s order dismissing their complaint (Complaint) brought pursuant to the Fraud Against Taxpayers Act (FATA), NMSA 1978, §§ 44-9-1 to - 14 (2007, as amended through 2015). Qui Tam Plaintiffs contend that the district court erred in granting the State of New Mexico and County of Bernalillo’s joint motion to dismiss the Complaint. We disagree and affirm.

BACKGROUND

{2} In August 2015 Qui Tam Plaintiffs filed a qui tam action¹ under Section 44-9-5 of FATA against former Bernalillo County Treasurer Patrick Padilla, two investment brokers and the brokerage firms for which they worked, and nineteen unnamed "John Doe" defendants (collectively, "Defendants") alleging that Defendants had "conspired ... to defraud the County." In accordance with FATA’s requirements, Qui Tam Plaintiffs filed their Complaint under seal and served the State and County with a copy on the day it was filed. After requesting and receiving two extensions of time to investigate the Complaint’s allegations, the State and County filed a motion to unseal the case as well as a notice of declination to exercise their statutory right to intervene in the action. Two days later, the State and County jointly moved to dismiss Qui Tam Plaintiffs’ Complaint with prejudice, contending that it was "absolutely barred" under either of two provisions of FATA: (1) Section 44-9-9(C), which provides that actions "based on allegations or transactions that are the subject of a ... civil ... proceeding in which the state or political subdivision is a party" are barred unless the attorney general or political subdivision "determines and certifies in writing that the action is in the interest of the state or political subdivision"; or (2) Section 44-9-9(D), which provides that "[u]pon motion of the attorney general or political subdivision, a court may, in its discretion, dismiss [a qui tam] action ... if the elements of the alleged false or fraudulent claim have been publicly disclosed[.]" According to the State and County, the Complaint was subject to dismissal under Section 44-9-9(C) because the allegations and transactions at issue in the Complaint were already the subject of a lawsuit filed by the County against the same investors and brokerage firms just one month before the Complaint was filed. Alternatively, the State and County argued that the Complaint was subject to dismissal under Section 44-9-9(D) because the alleged fraudulent conduct underlying Qui Tam Plaintiffs’ FATA claims had been publicly disseminated through the media and in a governmental report in November 2014.

{3} The district court granted the State and County’s dismissal motion under Section 44-9-9(D), upon finding that the elements of false or fraudulent claims in the Complaint had been publicly disclosed in news stories and the County’s earlier-filed complaint and that the Complaint’s allegations "mirror" and were "duplicative" of those made by the County in its lawsuit. Qui Tam Plaintiffs appeal from the district court’s order of dismissal.

DISCUSSION

{4} The only issue we address in this case is whether the district court erred in dismissing Qui Tam Plaintiffs’ Complaint under Section 44-9-9(D).

Section 44-9-9(D) provides in full:

Upon motion of the attorney general or political subdivision, a court may, in its discretion, dismiss an action brought pursuant to Section 44-9-5 ... if the elements of the alleged false or fraudulent claim have been publicly disclosed in the news media or in a publicly disseminated governmental report at the time the complaint is filed.

By its plain language, Section 44-9-9(D) allows, but does not require, a district court to dismiss a qui tam action based on a motion brought under that section if (1) the motion is made by the government, and (2) the district court finds that the elements of the qui tam action’s false or fraudulent claims have been publicly disclosed prior to the action being brought. Id. ; cf. § 44-9-9(A)-(C) (providing no limitation as to who may move to bar an action from proceeding); State ex rel. Foy v. Austin Capital Mgmt., Ltd. , 2015-NMSC-025, ¶ 6, 355 P.3d 1 (considering a defendant’s attempt to apply Section 44-9-9(B)’s bar).

{5} Qui Tam Plaintiffs do not challenge the district court’s finding that the "elements of the alleged false or fraudulent claims presented in [Qui Tam Plaintiffs’] Complaint had been publicly disclosed in the news media and in a publicly available governmental report in the [County’s c]omplaint at the time [Qui Tam Plaintiffs’] Complaint was filed." Instead, Qui Tam Plaintiffs argue that the district court erred by (1) interpreting Section 44-9-9(D) as an "absolute bar" to their lawsuit; (2) failing to take into account the best interests of the parties and the public purposes behind FATA; (3) dismissing the action without requiring the State and County to first intervene in the action, show good cause as to why dismissal should be granted, and present evidence to support their motion; and (4) "overlooking" Section 44-9-7, which Qui Tam Plaintiffs argue provides a possible award to a qui tam plaintiff whose action is based primarily on information that has been publicly disclosed. While not entirely clear, Qui Tam Plaintiffs appear to argue that any of the foregoing errors alone, but certainly considered together, constituted an abuse of discretion by the district court, requiring reversal of the district court’s order of dismissal and reinstatement of their Complaint.

Standard of Review

{6} As we have noted, Section 44-9-9(D) allows a district court to dismiss a FATA action "in its discretion" if certain elements are met. We review discretionary decisions for an abuse of discretion. In re N.M. Indirect Purchasers Microsoft Corp. , 2007-NMCA-007, ¶ 6, 140 N.M. 879, 149 P.3d 976. "We cannot say the district court abused its discretion by its ruling unless we can characterize the ruling as clearly untenable or not justified by reason." Valerio v. San Mateo Enters., Inc. , 2017-NMCA-059, ¶ 16, 400 P.3d 275 (alterations, internal quotation marks, and citation omitted). "When reasons both supporting and detracting from a decision exist, there is no abuse of discretion." In re Camino Real Envtl. Ctr., Inc. , 2010-NMCA-057, ¶ 23, 148 N.M. 776, 242 P.3d 343. A district court abuses its discretion "when it applies an incorrect standard, incorrect substantive law, or its discretionary decision is premised on a misapprehension of the law." Aragon v. Brown , 2003-NMCA-126, ¶ 9, 134 N.M. 459, 78 P.3d 913. "[E]ven when we review for an abuse of discretion, our review of the application of the law to the facts is conducted de novo. Accordingly, we may characterize as an abuse of discretion a discretionary decision that is premised on a misapprehension of the law." Harrison v. Bd. of Regents of the Univ. of N.M. , 2013-NMCA-105, ¶ 14, 311 P.3d 1236 (internal quotation marks and citations omitted).

I. Whether the District Court Interpreted Section 44-9-9(D) as an "Absolute Bar" to Qui Tam Plaintiffs’ Lawsuit

{7} Qui Tam Plaintiffs first argue that "[t]he district court construed FATA as an absolute bar to [Qui Tam Plaintiffs’] lawsuit because [their] lawsuit incorporated some facts which had already been publicly reported." We understand Qui Tam Plaintiffs’ argument to be that the district court misapprehended the discretionary aspect of its decision under Section 44-9-9(D) by adopting the arguments advanced by the State and County below, i.e., that Section 44-9-9(D) "preclude[s] the [district c]ourt’s jurisdiction in this case" and "requires dismissal" if the district court found, as it did, that the elements of Qui Tam Plaintiffs’ claims had been publicly disclosed. If, in fact, the district court interpreted Section 44-9-9(D) as an "absolute bar" to Qui Tam Plaintiffs’ Complaint because the elements of fraud contained therein had been publicly disclosed, its dismissal would constitute an abuse of discretion. See Aragon , 2003-NMCA-126, ¶ 9, 134 N.M. 459, 78 P.3d 913 (noting that the district court’s misapprehension of the law constitutes an abuse of discretion). However, for the reasons that follow, we disagree with Qui Tam Plaintiffs’ characterization of the district court’s order.

{8} Qui Tam Plaintiffs contend that the district court "agreed with the [State and County’s] argument that [Qui Tam Plaintiffs’] lawsuit ... is absolutely barred under the applicable provisions of [FATA.]" In support of this assertion, Qui Tam Plaintiffs cite paragraph eleven of the district court’s order. That paragraph merely quotes language from the State and County’s motion to dismiss stating that Qui Tam Plaintiffs’ Complaint "is absolutely barred under [FATA]." Nothing in the district court’s findings and conclusions indicate that the court agreed with the statement or that it applied Section 44-9-9(D) as an absolute bar to Qui Tam Plaintiffs’ suit. Indeed, the district court’s order cites, in full, Section 44-9-9(D), including that portion providing that "a court may, in its discretion, dismiss an action." In our view, this indicates the district court’s awareness that any decision to grant or deny the State and County’s...