Gandydancer, LLC v. Rock House CGM, LLC

• Decision Date: 14 November 2019
• Docket Number: NO. S-1-SC-37201,S-1-SC-37201
• Citation: 453 P.3d 434
• Parties: GANDYDANCER, LLC, Plaintiff-Respondent, v. ROCK HOUSE CGM, LLC, and Karl G. Pergola, Defendants-Petitioners.
• Court: New Mexico Supreme Court

453 P.3d 434

GANDYDANCER, LLC, Plaintiff-Respondent,

v.ROCK HOUSE CGM, LLC, and Karl G. Pergola, Defendants-Petitioners.

NO. S-1-SC-37201

Supreme Court of New Mexico.

Filing Date: November 14, 2019

Butt, Thornton & Baehr, P.C., Michael P. Clemens, Rodney L. Schlagel, Rheba Rutkowski, Albuquerque, NM, for Petitioners

The New Mexico Law Group, P.C., Robert Neil Singer, Albuquerque, NM, Adams Corporate Law, Inc., Addison K. Adams, Santa Ana, CA, for Respondent

THOMSON, Justice.

{1} The district court certified for interlocutory review whether the New Mexico Unfair Practices Act (UPA), NMSA 1978, §§ 57-12-1 to -26 (1967, as amended 2019), supports a cause of action for competitive injury. The Court of Appeals accepted interlocutory review and held that a business may sue for competitive injury based on a plain reading of the UPA. Gandydancer, LLC v. Rock House CGM, LLC , 2018-NMCA-064, ¶ 1, 429 P.3d 338. We reverse because the Legislature excluded competitive injury from the causes of action permitted under that statute. We further observe that Gandydancer relied upon dicta in Page & Wirtz Construction Co. v. Solomon , 1990-NMSC-063, ¶ 22, 110 N.M. 206, 794 P.2d 349. Therefore, we formally disavow reliance on Page & Wirtz or prior New Mexico case law that conflicts with this opinion.

I. BACKGROUND

{2} GandyDancer, LLC, and Rock House CGM, LLC, are business competitors, and both provide railway construction and repair services to BNSF Railway Company. BNSF awarded contracts to Rock House to provide goods and services in New Mexico.

{3} GandyDancer filed a complaint with the New Mexico Construction Industries Division (CID) in 2015 that alleged Rock House violated the Construction Industries Licensing Act (CILA), NMSA 1978, §§ 60-13-1 to -59 (1967, as amended through 2013), by performing unlicensed construction work in New Mexico. CID is the state agency charged with investigating violations and prosecuting actions to enforce CILA. See § 60-13-9(G) (providing that CID "shall ... employ such personnel as the division deems necessary for the exclusive purpose of investigating violations of [CILA]"). CID and Rock House entered into a stipulated settlement agreement resolving the alleged licensing violations.

{4} GandyDancer thereafter filed a complaint in district court against Rock House. The complaint alleges theories of competitive injury, including a claim that Rock House engaged in unfair methods of competition to obtain contracts with BNSF contrary to the UPA. GandyDancer alleges that Rock House’s acts amount to an "unfair or deceptive trade practice" under Section 57-12-2(D) of the UPA, because:

[Rock House] knowingly made false and misleading statements to GandyDancer employees that [Rock House] solicited and to BNSF by failing to disclose that: (i) [Rock House] did not have the necessary experience or licenses to provide railroad contracting services; (ii) [Rock House was] not authorized by the State of New Mexico to provide such services; (iii) [Rock House was] able to provide lower bids and non-bid time and material rates because they failed to comply with New Mexico’s contractor licensing laws, Department of Transportation registration and tax regulations, Federal Rail Safety Administration safety regulations, and other violations set forth above and to be proved at trial and, thus did not incur any expenses related to such compliance; and (iv) [Rock House was] at risk of being enjoined by the State of New Mexico for contracting without a license and that such an injunction would cause work at BNSF’s project to stop.

GandyDancer seeks damages under the UPA on a theory that had Rock House disclosed its licensure status, BNSF would have awarded GandyDancer the contracts. We note that BNSF is the consumer of services in this case but is not a party and has not asserted any claims in this action.

{5} Rock House filed a motion to dismiss the complaint, arguing in part that the UPA did not provide a competitor standing to sue. In other words, Rock House argued that the UPA does not create a cause of action for competitive injury. The district court denied Rock House’s motion to dismiss the UPA claim and certified the question, "whether the [UPA] affords private-party standing to business competitors who are both sellers of services, or only to buyers of goods and services," for interlocutory review. The Court of Appeals accepted review, affirmed the district court, and held that "a business may sue a competitor under the UPA only if the conduct alleged involves consumer protection concerns or trade practices addressed to the market generally." Gandydancer , 2018-NMCA-064, ¶ 1, 429 P.3d 338.

II. DISCUSSION

A. Standard of Review

{6} This Court reviews de novo whether a plaintiff has a cause of action or standing to sue under the UPA. See San Juan Agric. Water Users Ass’n v. KNME-TV , 2011-NMSC-011, ¶ 8, 150 N.M. 64, 257 P.3d 884 (observing that a cause of action or standing created by statute is a question of law).

B. The Legislature Limited the Right to Pursue a Cause of Action Under the UPA

{7} In general, standing in New Mexico courts "is not derived from the state constitution, and is not jurisdictional." Deutsche Bank Nat’l Trust Co. v. Johnston , 2016-NMSC-013, ¶ 11, 369 P.3d 1046 (internal quotation marks and citation omitted). However, "[w]here the Legislature has granted specific persons a cause of action by statute, the statute governs who has standing to sue." San Juan Agric. Water Users , 2011-NMSC-011, ¶ 8, 150 N.M. 64, 257 P.3d 884 (citing ACLU of N.M. v. City of Albuquerque , 2008-NMSC-045, ¶ 9 n.1, 144 N.M. 471, 188 P.3d 1222 ). "Standing then becomes a jurisdictional prerequisite to an action" because standing is interwoven with subject matter jurisdiction. Deutsche Bank , 2016-NMSC-013, ¶ 11, 369 P.3d 1046 (internal quotation marks and citation omitted).

{8} GandyDancer and Rock House argue over whether the UPA contemplates competitor standing . However, a more precise framing of the issue is whether the UPA creates a cause of action to recover lost profits damages from a competitor. "A cause of action is defined as an ‘aggregate of operative facts which give rise to a right enforceable in the courts.’ " Key v. Chrysler Motors Corp. , 1996-NMSC-038, ¶ 11, 121 N.M. 764, 918 P.2d 350 (citation omitted). This Court has determined that there is no significant difference between having standing to sue and having a cause of action under the UPA. Id. ¶¶ 10-12. So whether this Court discusses it as a cause of action or standing, "both doctrines allow plaintiffs to enforce a right in the courts." Id. ¶ 11. A plaintiff must demonstrate that "the interest sought to be protected by the complainant is arguably within the zone of interests to be protected or regulated by the statute." Id. (internal quotation marks and citation omitted).

{9} GandyDancer argues that the cause of action created by the UPA should be broadly construed because there is no explicit "statement of legislative purpose" in the UPA, and therefore that the Legislature intended the UPA to police the marketplace against unfair trade practices generally, not only for the protection of consumers. GandyDancer further argues that this Court should overrule all precedent construing the purpose of the UPA to be the protection of innocent consumers, because "we don’t need to protect a consumer" so long as the UPA protects the market.

{10} Although the Court of Appeals did not go as far as GandyDancer urged, it nonetheless construed the UPA to permit competitor standing so long as the competitor alleges a loss of money or property resultant from any unlawful act "involv[ing] consumer protection concerns or trade practices addressed to the market generally." Gandydancer , 2018-NMCA-064, ¶ 20, 429 P.3d 338. We respectfully disagree. The historical amendments to the UPA limited the zone of interest protected. Harmonizing the UPA with its foundational principle and existing law allows only one conclusion: Currently, the UPA does not provide a cause of action for competitive injury claims.

1. The statutory text and a preliminary construction

{11} The Legislature created a private cause, for "[a]ny person who suffers any loss of money or property ... as a result of any employment by another person of a method, act or practice declared unlawful by the [UPA, to] bring an action to recover actual damages ...." Section 57-12-10(B). Concerning the specific acts prohibited, the UPA declares that "[u]nfair or deceptive trade practices and unconscionable trade practices in the conduct of any trade or commerce are unlawful." Section 57-12-3. The UPA defines an "unfair or deceptive trade practice" as

an act specifically declared unlawful pursuant to the Unfair Practices Act, a false or misleading oral or written statement, visual description or other representation of any kind knowingly made in connection with the sale, lease, rental or loan of goods or services or in the extension of credit or in the collection of debts by a person in the regular course of the person’s trade or commerce, that may, tends to or does deceive or mislead any person ...."

Section 57-12-2(D). The definition of unfair or deceptive trade practices includes a nonexhaustive list of nineteen such acts. See id.

{12} "[P]erson" is defined as "natural persons, corporations, trusts, partnerships, associations, cooperative associations, clubs, companies, firms, joint ventures or syndicates[.]" Section 57-12-2(A). The Court of Appeals focused on the fact that GandyDancer fits the UPA definition of a person and concluded that under the broad language of the subsection establishing private remedies, GandyDancer could bring an action to recover any loss it experienced resultant from any unlawful method, act, or practice. See Gandydancer , 2018-NMCA-064, ¶ 20, 429 P.3d 338 ; see also § 57-12-10(B).

{13} Although a court begins its analysis "by looking at the language of the statute itself[,]" courts must "exercise...