New Mex. State Inv. Council v. Weinstein

• Decision Date: 28 April 2016
• Docket Number: 34,077.,34,042,33,787
• Citation: 382 P.3d 923
• Parties: NEW MEXICO STATE INVESTMENT COUNCIL, as Trustee, Administrator, and Custodian of the Land Grant Permanent Fund and the Severance Tax Permanent Fund, Plaintiff–Appellee, and State of New Mexico ex rel. Frank Foy, Suzanne Foy, and John Casey, Plaintiffs–Intervenors–Appellants, v. Daniel WEINSTEIN, Vicky L. Schiff, William Howell, and Marvin Rosen, Defendants–Appellees. and Gary Bland, et al., Defendants. New Mexico State Investment Council, as Trustee, Administrator, and Custodian of the Land Grant Permanent Fund and the Severance Tax Permanent Fund, Plaintiff–Appellee, and State of New Mexico ex rel. Frank Foy, Suzanne Foy, and John Casey, Plaintiffs–Intervenors–Appellants, v. Saul Meyer and Renaissance Private Equity Partners, LP, d/b/a Aldus Equity Partners, LP, Defendants–Appellees, and Gary Bland, et al., Defendants. New Mexico State Investment Council as Trustee, Administrator, and Custodian of the Land Grant Permanent Fund and the Severance Tax Permanent Fund, Plaintiff–Appellee, and State of New Mexico ex rel. Frank Foy, Suzanne Foy, and John Casey, Plaintiffs–Intervenors–Appellants, v. Elliot Broidy, Defendant–Appellee, and Gary Bland, et al., Defendants.
• Court: Court of Appeals of New Mexico

382 P.3d 923

NEW MEXICO STATE INVESTMENT COUNCIL, as Trustee, Administrator, and Custodian of the Land Grant Permanent Fund and the Severance Tax Permanent Fund, Plaintiff–Appellee,

and

State of New Mexico ex rel. Frank Foy, Suzanne Foy, and John Casey, Plaintiffs–Intervenors–Appellants,

v.Daniel WEINSTEIN, Vicky L. Schiff, William Howell, and Marvin Rosen, Defendants–Appellees.andGary Bland, et al., Defendants.

New Mexico State Investment Council, as Trustee, Administrator, and Custodian of the Land Grant Permanent Fund and the Severance Tax Permanent Fund, Plaintiff–Appellee,

and

State of New Mexico ex rel. Frank Foy, Suzanne Foy, and John Casey, Plaintiffs–Intervenors–Appellants,

v.Saul Meyer and Renaissance Private Equity Partners, LP, d/b/a Aldus Equity Partners, LP, Defendants–Appellees,andGary Bland, et al., Defendants.

New Mexico State Investment Council as Trustee, Administrator, and Custodian of the Land Grant Permanent Fund and the Severance Tax Permanent Fund, Plaintiff–Appellee,

and

State of New Mexico ex rel. Frank Foy, Suzanne Foy, and John Casey, Plaintiffs–Intervenors–Appellants,

v.Elliot Broidy, Defendant–Appellee,andGary Bland, et al., Defendants.

33,787

34,042

34,077.

Court of Appeals of New Mexico.

April 28, 2016.

Certiorari Denied, July 20, 2016, No. S-1-SC-35943.

New Mexico State Investment Council, Bruce A. Brown, Special Assistant Attorney General, Santa Fe, NM, Day Pitney LLP, Kenneth W. Ritt, Special Assistant Attorney General, Stamford, CT, for Plaintiff–Appellee.

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

Scheuer Yost & Patterson, Mel E. Yost, Santa Fe, NM, White & Case LLP, Owen C. Pell, Joshua D. Weedman, New York, NY, for Defendant–Appellee Rosen.

Butt Thornton & Baehr PC, Rodney L. Schlagel, Emily A. Franke, Albuquerque, NM, for Defendant–Appellee Howell.

Sommer, Udall, Sutin, Hardwick & Hyatt, PA, Eric M. Sommer, Santa Fe, NM, for Defendants–Appellees Weinstein and Schiff.

Daniel Yohalem, Santa Fe, NM, for Amici Curiae New Mexico Foundation for Open Government and New Mexico Press Association.

OPINION

BUSTAMANTE

, Judge.

{1} Appellants' motion for rehearing is denied. The opinion filed in this case on March 24, 2016, is withdrawn and this Opinion is substituted in its place.

{2} Intervenors Frank Foy, Suzanne Foy, and John Casey (Appellants) appeal the district court's approval of settlements between the New Mexico State Investment Council (NMSIC) and three sets of defendants. Having consolidated the three appeals, we consider whether the district court's approval of the settlements was consistent with the Fraud Against Taxpayers Act and whether NMSIC's Litigation Committee complied with the Open Meetings Act, among other arguments. We affirm the district court's approval of the settlements.

BACKGROUND

{3} Most of the following facts are derived from the district court's findings of fact. Appellants do not specifically challenge any of these findings. “An unchallenged finding of the trial court is binding on appeal.” Seipert v. Johnson, 2003–NMCA–119, ¶ 26, 134 N.M. 394, 77 P.3d 298

; see Rule 12–213(A)(4) NMRA (“The argument shall set forth a specific attack on any finding, or such finding shall be deemed conclusive.”).

A. The Parties

{4} Appellants are qui tam plaintiffs in two actions filed in 2008 and 2009 under the New Mexico Fraud Against Taxpayers Act (FATA), NMSA 1978, §§ 44–9–1

to –14 (2007, as amended through 2015). State ex rel. Frank C. Foy v. Vanderbilt Capital Advisors, LLC, No. D–101–CV–2008–1895 (Vanderbilt );

State ex rel. Frank C. Foy v. Austin Capital Mgmt. Ltd., No. D–101–CV–2009–1189 (Austin ). Foy is the former chief investment officer at New Mexico's Educational Retirement Board (ERB).

{5} NMSIC is a state agency that serves as trustee of, and is responsible for investing, among other funds, the Land Grant Permanent Fund and the Severance Tax Permanent Fund, which are established under the New Mexico Constitution for the benefit of citizens of New Mexico. N.M. Const. art. VIII, § 10

, art. XII, §§ 2, 7 ; NMSA 1978, §§ 6–8–2 to –7 (1957, as amended through 2015); NMSA 1978, § 7–27–3.1 (1983).

{6} The defendants in the present suit are three groups of individuals and entities alleged to have engaged in misconduct related to NMSIC's management of the funds. Each of the three groups is named and discussed in more detail below. For ease of reference we refer to the defendants collectively as Defendants.

B. The Qui Tam Actions

{7} We begin with a discussion of the Appellants' qui tam actions under FATA because they form the backdrop against which we consider the three cases now before us. Section 44–9–5(A) of FATA permits the filing of a “qui tam action,” which is “an action ... that allows a private person to sue for a penalty, part of which the government will receive.” State ex rel. Foy v. Austin Capital Mgmt., Ltd. (Austin II ), 2015–NMSC–025, ¶ 3, 355 P.3d 1

(alterations, internal quotation marks, and citation omitted). A qui tam plaintiff is required to serve the complaint and a disclosure of supporting evidence under seal to the attorney general, who “may intervene and proceed with the action within sixty days after receiving the complaint and the material evidence and information.” Section 44–9–5(C). If the attorney general declines to intervene in the action, the qui tam plaintiff may proceed with the action. Section 44–9–5(D). “Notwithstanding [these] provisions ..., the attorney general or political subdivision may elect to pursue the state's or political subdivision's claim through any alternate remedy available” and “[a] finding of fact or conclusion of law made in the other proceeding that has become final shall be conclusive on all parties to an action under [FATA].” Section 44–9–6(H)

. If the attorney general initiates an alternate proceeding, “the qui tam plaintiff shall have the same rights in such a proceeding as the qui tam plaintiff would have had if the action had continued pursuant to [FATA].” Id. As to the qui tam action, the state or political subdivision may choose to settle the action “notwithstanding any objection by the qui tam plaintiff if the court determines, after a hearing providing the qui tam plaintiff an opportunity to present evidence, that the proposed settlement is fair, adequate[,] and reasonable under all of the circumstances.” Section 44–9–6(C).

{8} In their qui tam actions, Appellants alleged that Vanderbilt Capital Advisors, LLC and Austin Capital Management, Ltd., as well as other defendants, made false claims to the ERB and to NMSIC about the risks associated with, and performance of, certain financial instruments and hedge funds. They also alleged that there was “pay-to-play”¹ at the ERB and NMSIC.

{9} Vanderbilt and Austin were heard by two different judges. Judge Pfeffer, presiding over Vanderbilt, dismissed some of the Appellants' claims on the ground that retroactive application of FATA to conduct occurring before its effective date would violate the ex post facto clauses in both the United States and New Mexico Constitutions. U.S. Const. art. 1, § 10; N.M. Const. art. II, § 19

. Judge Pope entered a similar order in Austin. This Court declined to hear an interlocutory appeal in Vanderbilt, but later allowed an interlocutory appeal of this issue in Austin and affirmed. See

State ex rel. Foy v. Austin Capital Mgmt., Ltd. (Austin I ), 2013–NMCA–043, ¶¶ 1, 3, 297 P.3d 357.

{10} At the time the district court approved the settlements in the cases now before us, the Supreme Court had granted certiorari but had not yet decided the question. In June 2015 the Supreme Court reversed, holding that the treble damages available under FATA “are predominantly compensatory [and] do not violate the ex post facto clause[s] and may be awarded for conduct occurring prior to the effective date of FATA.” Austin II, 2015–NMSC–025, ¶ 44, 355 P.3d 1

. It also held that, as to the civil penalties available under FATA, “[i]t is ... conceivable that the amount awarded in civil penalties could be punitive in effect, particularly if the trial judge awards the maximum [of] $10,000 per violation” and that, consequently, “[i]t is not practical to make that determination without knowing the actual amount assessed with full briefing on appeal addressed to a specific dollar figure.” Id. ¶ 49. Hence, the Supreme Court declined to decide “whether the civil penalties awarded under FATA are punitive and violate ex post facto principles until there is a definitive amount awarded.” Id.

C. NMSIC's Plan and the Present Suit

{11} While the Appellants' qui tam actions were proceeding as just described, 3 NMSIC developed its own plan to recover from those involved in pay-to-play schemes, including some of the defendants in Vanderbilt and Austin. NMSIC is pursuing recovery using theories of liability other than FATA, focusing first on individuals involved in the schemes. Using information gleaned from these individuals, NMSIC plans to pursue the entities involved. NMSIC anticipates greater recoveries from the entities than from individual defendants.

{12} Consistent with this plan, NMSIC took several actions. First, it declined to intervene in Appellants' qui tam suits and moved to dismiss the pay-to-play claims involving NMSIC—but only those claims—from Vanderbilt and Austin. See § 44–9–6(B)

(“The state or political subdivision may seek to dismiss the action for good cause notwithstanding the objections of the qui tam plaintiff if the qui tam plaintiff has been notified of the filing of the motion and the court has provided the qui tam plaintiff with an opportunity to oppose the motion and to present evidence at a hearing.”). The motions to dismiss did not address Appellants' claims regarding nondisclosure of investment risks in Vanderbilt and Austin, nor did they address the claims of pay-to-play at the ERB. NMSIC's motion to dismiss the pay-to-play claims from Vanderbilt were granted. It appears that as of June 2015 the district court...