Kipnis v. Jusbasche

• Decision Date: 01 December 2016
• Docket Number: NO. S-1-SC-35249,S-1-SC-35249
• Citation: 2017 NMSC 006,388 P.3d 654
• Parties: William E. Kipnis and Marci Kipnis, Plaintiffs-Respondents, v. Michael Jusbasche and Rebecca Mark-Jusbasche, Defendants-Petitioners.
• Court: New Mexico Supreme Court

388 P.3d 654

2017 NMSC 006

William E. Kipnis and Marci Kipnis, Plaintiffs-Respondents,

v.Michael Jusbasche and Rebecca Mark-Jusbasche, Defendants-Petitioners.

NO. S-1-SC-35249

Supreme Court of New Mexico.

Filing Date: December 1, 2016

The Simons Firm, L.L.P., Thomas A. Simons, IV, Daniel H. Friedman, Santa Fe, NM.

Rodey, Dickason, Sloan, Akin & Robb, P.A., Edward R. Ricco, Jocelyn C. Drennan, Albuquerque, NM, for Petitioners.

John B. Pound, L.L.C., John Bennett Pound, Santa Fe, NM, for Respondents.

OPINION

DANIELS, Chief Justice.

{1} Rule 11–410 NMRA of the New Mexico Rules of Evidence provides that evidence of a nolo contendere plea made in settlement of a criminal proceeding is not admissible in a civil proceeding against the defendant who made the plea. See Rule 11–410(A)(2). Like the federal counterpart rule from which this rule was taken, the rule is meant to promote the efficient disposition of criminal cases because collateral use of pleas, as admissions of party-opponents under Rule 11–801 NMRA or as other evidentiary implications of guilt, would discourage resolution of criminal proceedings. The only exceptions provided by Rule 11–410 are where "another statement made during the same plea or plea discussions has been introduced, if in fairness both statements ought to be considered together" and "in a criminal proceeding for perjury or false statement." Rule 11–410(B).

{2} In this case, we consider whether evidence of a nolo plea is admissible in a civil case for misrepresentation where the plaintiffs sought to introduce a nineteen-year-old nolo plea of one defendant to support an argument that the defendant fraudulently failed to disclose his nolo plea during the formation of a joint business venture. We hold that evidence of the nolo plea is inadmissible under both the express terms and the underlying purpose of Rule 11–410(A)(2), and we affirm the district court's grant of summary judgment on that basis. We reverse the contrary determination of the Court of Appeals.

I. BACKGROUND

{3} In 2003, Defendants Michael Jusbasche and Rebecca Mark-Jusbasche formed a limited liability corporation (LLC) with Plaintiffs William and Marci Kipnis for the purpose of replacing the Hotel Edelweiss at the Taos Ski Valley with a modern condominium complex. As their part of the initial capital contribution, Plaintiffs deeded the hotel property and transferred the hotel liquor license to the LLC. Defendants contributed an initial capital infusion of $351,000, made loans of several million dollars to the LLC, and retained a fifty-one percent controlling interest. Although it was initially anticipated that the project would generate a three- to four-million-dollar profit, it became clear after a number of setbacks that the venture would not yield a profit, and Defendants, "having a majority share of the voting powers," dissolved the LLC in 2010. Simultaneously, the LLC under Defendants' control transferred several unsold residential units and two commercial units from the condominium development to Defendants for partial loan repayment at dissolution. The lawfulness of those repayment transfers is not before us in this proceeding.

{4} Plaintiffs filed suit for damages against Defendants, alleging fraud, constructive fraud, intentional misrepresentation, and conversion, along with other claims no longer at issue. The thrust of these claims arises from a conversation Plaintiffs claim they had with Defendants prior to forming the LLC. Plaintiffs allege that in 2003 William Kipnis asked Defendants "if there was anything in their personal histories he should know about before going into a business relationship with them," and Defendants answered negatively. For purposes of summary judgment, Defendants conceded that the court could assume the correctness of Plaintiffs' version of that discussion.

{5} In their summary judgment materials, Plaintiffs offered evidence that in 1984 Michael Jusbasche pleaded nolo contendere in a Texas court to theft of trade secrets for purportedly stealing a seismic prospect map from his former employer. Michael Jusbasche was placed in a Texas deferred adjudication program, required to pay a fine, and ordered to serve a five-year probationary period. Because he complied with the terms of the deferred adjudication, he was never convicted of any criminal offense. See State v. Burk , 1984–NMCA–043, ¶¶ 6–7, 101 N.M. 263, 680 P.2d 980 (recognizing that under Texas statute, a deferred adjudication is not deemed a conviction); cf. State v. Harris , 2013–NMCA–031, ¶ 6, 297 P.3d 374 (clarifying that successful completion of a conditional discharge pursuant to NMSA 1978, Section 31–20–13(A) (1994), New Mexico's deferred adjudication procedure, similarly does not result in a conviction). Plaintiffs have claimed throughout the litigation that Defendants committed fraud by failing to disclose Michael Jusbasche's plea of nolo contendere to the theft of trade secrets charge, alleging that had they known of it they would never have agreed to go into business with Defendants.

{6} Defendants filed a motion for summary judgment arguing in relevant part, as a matter of law, that Rule 11–410(A)(2) categorically prohibited the admission of evidence of the nolo plea and surrounding circumstances. In response, Plaintiffs contended that whether Defendants had a duty to disclose the plea was a question of fact for a jury and that Rule 11–410 prohibits the admission of evidence of a nolo plea only when offered as an admission or proof of guilt but not for other purposes. Plaintiffs claimed that they did not seek admission of the plea to prove Michael Jusbasche committed the crime charged. Rather, they claimed that the plea was relevant "because knowledge of the plea itself, had [Plaintiffs] possessed it, would have prevented them from going into business with [Defendants]" and that the question of whether Michael Jusbasche was actually guilty played no role in the suit.

{7} The district court ultimately granted summary judgment to Defendants, concluding "that Rule 11–410 precludes introduction of evidence concerning ... Michael Jusbasche's plea of nolo contendere ... as a matter of law," thereby "leav[ing] Plaintiffs unable to prove a necessary element of their case." Plaintiffs appealed this decision to the Court of Appeals, stating in their docketing statement that "there was one issue in th[e] appeal" and that it was "purely legal in nature":

Where the plaintiff in a civil suit seeks to prove that he was fraudulently deceived into entering into a business relationship by the defendant, and the deception was in the form of failure to respond honestly to a question which would reasonably elicit disclosure of a plea of no contest to a criminal charge of dishonesty in business, does Rule 11–410 bar the evidence of the plea?

{8} The Court of Appeals reversed the district court's grant of summary judgment, holding that Rule 11–410"does not prohibit admission of the plea of nolo contendere and related judgment when they are not offered as proof of guilt." Kipnis v. Jusbasche , 2015–NMCA–071, ¶ 1, 352 P.3d 687. The court agreed with Plaintiffs' theory that the Texas nolo plea was admissible "not as evidence of guilt but as evidence of what Defendants failed to tell" Plaintiffs. Id. ¶ 27.

{9} We granted Defendants' Petition for a Writ of Certiorari to consider the proper interpretation and application of Rule 11–410 and its underlying policies.

II. DISCUSSION

{10} We review de novo a district court's order granting or denying summary judgment. See Potter v. Pierce , 2015–NMSC–002, ¶ 8, 342 P.3d 54. In doing so, this case requires us to interpret a provision of the New Mexico Rules of Evidence, a question of law we also review de novo. Allen v. LeMaster , 2012–NMSC–001, ¶ 11, 267 P.3d 806. "When construing our procedural rules, we use the same rules of construction applicable to the interpretation of statutes." Id.

{11} We begin by "examin[ing] the plain language of the [rule] as well as the context in which it was promulgated, including the history of the [rule] and the object and purpose...." Moses v. Skandera , 2015–NMSC–036, ¶ 15, 367 P.3d 838 (internal quotation marks and citation omitted). To assist in that process, New Mexico courts have concluded that federal interpretations of the Federal Rules of Evidence are instructive when interpreting identical provisions in our rules of evidence. See State v. Torres , 1998–NMSC–052, ¶ 13, 126 N.M. 477, 971 P.2d 1267 (relying on federal case law interpreting Fed. R. Evid. 804(b)(3) in analyzing the analogous New Mexico rule), overruled on other grounds by State v. Alvarez – Lopez , 2004–NMSC–030, 136 N.M. 309, 98 P.3d 699 ; see also State v. Trujillo , 1980-NMSC-004, ¶ 13, 93 N.M. 724, 605 P.2d 232 (recognizing that because New Mexico Rule 11–410"was adopted verbatim from the federal version," the federal legislative history was "illuminating" to an analysis of the New Mexico rule).

A. The Language of Rule 11–410(A)(2) Plainly Prohibits Admissibility of a Nolo Plea Against the Pleader in Subsequent Proceedings

{12} Defendants urge that the Court of Appeals erred in holding evidence of Michael Jusbasche's nolo plea admissible under New Mexico Rule 11–410(A)(2), which provides that "[i]n a civil, criminal, or children's court case, evidence of [a nolo plea] is not admissible against the defendant who made the plea or participated in the plea discussions." See also Rule 5–304(F) NMRA ("Evidence of ... a plea of no contest ... is not admissible in any civil or criminal proceeding against the person who made the plea."). While the rule provides for two limited exceptions pertaining to admissibility of statements made in connections with pleas, neither exception is applicable here. See Rule 11–410(B).

{13} This Court first interpreted Rule 11–410 in State v. Trujillo and held that Rule 11–410 barred admissibility of an incriminating statement made in connection with a plea negotiation to impeach the pleader...