State ex rel. Foy v. Vanderbilt Capital Advisors, LLC, 060920 NMCA, A-1-CA-36925

Docket NºA-1-CA-36925
Opinion JudgeMICHAEL D. BUSTAMANTE, Judge Pro Tempore
Party NameSTATE OF NEW MEXICO ex rel. FRANK C. FOY, JOHN CASEY, and SUZANNE FOY, Qui Tam Plaintiffs-Appellants, v. VANDERBILT CAPITAL ADVISORS, LLC; VANDERBILT FINANCIAL, LLC; VANDERBILT FINANCIAL TRUST; OSBERT M. HOOD; RON D. KESSINGER; ROBERT P. NAULT; JAMES R. STERN; PATRICK A. LIVNEY; STEPHEN C. BERNHARDT; KURT W. FLORIAN, JR.; ANTHONY J. KOENIG, JR....
AttorneyVictor R. Marshall & Associates, P.C. Victor R. Marshall Albuquerque, NM for Appellants Hector H. Balderas, Attorney General Joseph M. Dworak, Assistant Attorney General Santa Fe, NM Angelica Anaya Allen, Assistant Attorney General Brian L. Moore, Assistant Attorney General Albuquerque, NM for St...
Judge PanelWE CONCUR: JULIE J. VARGAS, Judge, BRIANA H. ZAMORA, Judge
Case DateJune 09, 2020
CourtCourt of Appeals of New Mexico

STATE OF NEW MEXICO ex rel. FRANK C. FOY, JOHN CASEY, and SUZANNE FOY, Qui Tam Plaintiffs-Appellants,

v.

VANDERBILT CAPITAL ADVISORS, LLC; VANDERBILT FINANCIAL, LLC; VANDERBILT FINANCIAL TRUST; OSBERT M. HOOD; RON D. KESSINGER; ROBERT P. NAULT; JAMES R. STERN; PATRICK A. LIVNEY; STEPHEN C. BERNHARDT; KURT W. FLORIAN, JR.; ANTHONY J. KOENIG, JR.; MARK E. BRADLEY; PIONEER INVESTMENT MANAGEMENT U.S.A., INC.; PIONEER GLOBAL ASSET MANAGEMENT S.P.A.; UNICREDIT S.P.A.; KATTEN MUCHIN ROSENMAN LLP; RICHARDS, LAYTON & FINGER, P.A.; CLIFFORD PRICE WATERHOUSE COOPERS; BRUCE MALOTT; MEYNERS + CO; MARLA WOOD; GARY BLAND; SUSAN O. BLAND; CITIGROUP; CITIGROUP GLOBAL MARKETS INC.; BEAR, STERNS & CO. INC.; JP MORGAN SECURITIES, INC.; UBS INVESTMENT BANK; UBS SECURITIES LLC; CALYON SECURITIES (USA), INC.; CALYON CREDIT AGRICOLE CIB; CREDIT AGRICOLE SA; JEFFERIES CAPITAL MANAGEMENT, INC.; FORTIS SECURITIES LLC; FORTIS NV; ACA MANAGEMENT, L.L.C.; ABN AMRO, INC.; STONECASTLE SECURITIES, L.L.C.; NEPC; ALLAN C. MARTIN; MERRILL LYNCH & CO., INC.; LINDA CONTARINO; CLAUDIA CORRERA; GAETANA CORRERA; JOHN DOE #1; DAVID CONTARINO (JOHN DOE #2); MARC CORRERA (JOHN DOE #3); ANTHONY CORRERA (JOHN DOE #4); and JOHN DOE #5 THROUGH #100, Defendants-Appellees,

and

AUSTIN CAPITAL MANAGEMENT, LTD; AUSTIN CAPITAL MANAGEMENT GP CORP.; CHARLES W. RILEY; BRENT A. MARTIN; DAVID E. FRIEDMAN; WILL JASON ROTTINGER; VICTORY CAPITAL MANAGEMENT, INC.; KEYCORP; BEREAN CAPITAL; DUDLEY BROWN; TREMONT PARTNERS, INC.; TREMONT CAPITAL MANAGEMENT, INC.; TREMONT GROUP HOLDINGS, INC.; OPPENHEIMER FUNDS, INC.; GARY BLAND; DAVID CONTARINO; BRUCE MALOTT; MEYNERS COMPANY; MARC CORRERA; ANTHONY CORRERA; SANDIA ASSET MANAGEMENT; ALFRED JACKSON; DAVIS HAMILTON AND JACKSON; GUY RIORDAN; JUNIPER CAPITAL; ILEEN KOTECKI; DAN HEVESI; HENRY "HANK" MORRIS; JULIO RAMIREZ; PAUL CROSS; CROSSCORE MANAGEMENT; SDN INVESTORS; PSILOS GROUP; ALBERT WAXMAN; JEFFREY KRAUSS; STEPHEN KRUPA; DAVID EICHLER; DARLENE COLLINS; WETHERLY CAPITAL GROUP; DAN WEINSTEIN; VICKY SCHIFF; QUADRANGLE ROUP; ALDUS EQUITY; SAUL MEYER; MERCELLUS TAYLOR; MATTHEW O'REILLY; RICHARD ELLMAN; DEUTSCHE BANK; DIAMOND EDGE CAPITAL; MARVIN ROSEN; CARLYLE MEZZANINE PARTNERS; CARLYLE GROUP; DB INVESTMENT MANAGERS; TOPIARY TRUST; PARK HILL GROUP; DAN PRENDERGAST; CATTERTON PARTNERS; BLACKSTONE GROUP; GOLD BRIDGE CAPITAL; DARIUS ANDERSON; KIRK ANDERSON; ARES MANAGEMENT; INROADS GROUP; CAMDEN PARTNERS; HFV; BARRETT WISSMAN; TAG; AJAX INVESTMENTS; CAYTON DUBILIER AND RICE; INTERMEDIA; LEO HINDERY; WILLIAM R. HOWELL; CABRERA CAPITAL; MARTIN CABRERA; CRESTILNE INVESTORS; JOHN DOE #1; AND JOHN DOE #3 THROUGH #50, Defendants-Appellees.

No. A-1-CA-36925

Court of Appeals of New Mexico

June 9, 2020

APPEAL FROM THE DISTRICT COURT OF SANTA FE COUNTY Louis P. McDonald, District Judge

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

Hector H. Balderas, Attorney General Joseph M. Dworak, Assistant Attorney General Santa Fe, NM Angelica Anaya Allen, Assistant Attorney General Brian L. Moore, Assistant Attorney General Albuquerque, NM for State of New Mexico

Rodey, Dickason, Sloan, Akin & Robb, P.A. Andrew G. Schultz Albuquerque, NM Fried, Frank, Harris, Shriver & Jacobson LLRP Peter L. Simmons New York, NY for Vanderbilt Appellees

Madison Harbour & Mroz, P.A. William C. Madison Albuquerque, NM for Appellee Livney

Esquivel & Howington, LLC Martin R. Esquivel Albuquerque, NM for Appellee Malott

FallickLaw, Ltd. Gregg Vance Fallick Albuquerque, NM for Appellees Malott and Wood

Holland & Hart LLP Mark F. Sheridan Julia Broggi Santa Fe, NM Paul Weiss Rifkind Wharton & Garrison, LLP Richard A. Rosen New York, NY for Appellees Citigroup Inc.; Citigroup Global Markets Inc.; Bear, Stearns & Co., Inc.; JP Morgan Securities Inc.; and ABN AMRO Inc.

Budagher & Associates John A. Budagher III Albuquerque, NM Reed Smith LLP Jordan W. Siev New York, NY Andrew C. Bernasconi Washington, DC for Appellee Calyon Securities (USA) Inc. n/k/a Credit Agricole Securities (USA) Inc.

Keleher & McLeod, P.A. W. Spencer Reid David W. Peterson Albuquerque, NM for Appellee ACA Management, LLC

Miller Stratvert, P.A. Kirk R. Allen Albuquerque, NM Morvillo Abramowitz Grand Iason & Anello P.C. Edward M. Spiro Richard D. Weinberg New York, NY for Appellee Merrill Lynch & Co., Inc.

Modrall, Sperling, Roehl, Harris & Sisk, P.A. Brian K. Nichols Albuquerque, NM Proskauer Rose LLP Dietrich L. Snell New York, NY for Appellees Ares Management, Collins, Eichler, Krauss, Krupa, Psilos Group, and Waxman

Modrall, Sperling, Roehl, Harris & Sisk, P.A. John R. Cooney R.E. Thompson Albuquerque, NM Robbins, Russell, Englert, Orseck, Untereiner & Sauber LLP Richard A. Sauber Washington, DC for Appellee Quadrangle Group LLC

Michael W. Brennan, P.A. Michael W. Brennan Santa Fe, NM for Appellees Blackstone Group, Park Hill Group, and Prendergast

Maldegen, Templeman & Indall LLP Jon J. Indall Santa Fe, NM for Appellees Intermedia and Hindery

Butt Thornton & Baehr PC Rodney L. Schlagel Albuquerque, NM for Appellee Howell

Keleher & McLeod, P.A. Sean Olivas Albuquerque, NM for Appellees Cabrera Capital and Cabrera

OPINION

MICHAEL D. BUSTAMANTE, Judge Pro Tempore

{¶1} A long and winding road has led these cases to our door. Following eight years of litigation at the trial and appellate levels, the district court entered a judgment that dismissed the Qui Tam Plaintiffs' Fraud Against Taxpayers Act (FATA) claims in their entirety. The judgment also approved a settlement negotiated by the Attorney General's Office (AGO) with certain-but not all-defendants. Raising a plethora of issues, Qui Tam Plaintiffs appeal. We affirm.

I. Background and Procedural Posture

{¶2} These two now-consolidated actions were among the first actions filed in New Mexico under the auspices of FATA, NMSA 1978, §§ 44-9-1 to -14 (2007, as amended through 2015). FATA allows private persons to "bring a civil action for a violation of Section 44-9-3 . . . on behalf of the person and the state or political subdivision." Section 44-9-5(A). Cases brought by private parties in like circumstances are commonly known as "qui tam actions." State ex rel. Foy v. Austin Capital Mgmt., Ltd. (Austin II), 2015-NMSC-025, ¶ 3, 355 P.3d 1. And the private persons bringing the actions are generally referred to as qui tam plaintiffs. The qui tam plaintiffs who initiated these actions are Frank C. Foy, Suzanne Foy, and John Casey. We will refer to them as "Qui Tam Plaintiffs."

{¶3} Litigation under FATA has produced five reported opinions, including two involving the case we decide today. Austin II, 2015-NMSC-025, ¶ 1 (holding that FATA's retroactive effect does not violate the Ex Post Facto clauses of the United States and New Mexico Constitutions); State ex rel. Foy v. Oppenheimer & Co., 2019-NMCA-045, ¶¶ 3, 23, 447 P.3d 1159 (affirming dismissal of qui tam action pursuant to Section 44-9-9(D)); N.M. State Inv. Council v. Weinstein, 2016-NMCA-069, ¶ 2, 382 P.3d 923 (affirming approval of settlements over the qui tam plaintiffs' objections); State ex rel. Peterson v. Aramark Corr. Servs., LLC, 2014-NMCA-036, ¶ 3, 321 P.3d 128 (concluding that issue and claim preclusion concepts did not bar the action); State ex rel. Foy v. Austin Capital Mgmt., Ltd.

(Austin I), 2013-NMCA-043, 297 P.3d 357, aff'd in part, reversed in part by Austin II, 2015-NMSC-025. The opinions in these cases do not directly resolve all the issues presented to us here, but they do provide useful history and context to our discussion. Weinstein is particularly apropos.

A. Pre-Consolidation Procedures

{¶4} Qui Tam Plaintiffs Frank and Suzanne Foy filed their first FATA complaint in July 2008. See State ex rel. Foy v. Vanderbilt Capital Advisors, LLC (Vanderbilt), D-101-CV-2008-1895. The Vanderbilt complaint focused on investments made in 2006 by the State Investment Council (SIC) and the New Mexico Educational Retirement Board (ERB) in collateralized debt obligations (CDOs). The complaint alleged that Defendants made numerous false and misleading claims and representations concerning the nature and quality of the investments, the risks involved, and relationship between Defendants. Defendants included apparently all of the individuals, financial institutions, accounting firms, and legal services firms involved in creating, financing, and marketing the CDO instruments.

{¶5} In accordance with Section 44-9-5(B), the complaint was filed under seal. Following some delay, the AGO filed the State's "Notice of Election to Decline Intervention" in December 2008. See § 44-9-6(F). That filing allowed the complaint to be unsealed and for litigation to proceed.

{¶6} Qui Tam Plaintiffs filed their second FATA action in April 2009. See State ex rel. Foy v. Austin Capital Mgmt., Ltd. (Austin), No. D-101-CV-2009-01189. The initial complaint focused on losses suffered in investments made through Austin in the now-infamous funds operated by Bernie Madoff, asserting that those investments-and others-were made as a result of political influence exerted by the executive branch. Less than two months later Qui Tam Plaintiffs filed a first amended complaint adding more than fifty new Defendants and more detailed allegations of "pay-to-play" wrongdoing involving payment of undisclosed and improper third-party placement fees to Mark Correra. The file does not reveal an election not to intervene by the AGO, but the AGO did sign a joint motion to unseal the complaint. The order granting the joint motion makes clear that the AGO did not intend to be actively involved in the case, at least not initially. The two cases were assigned to different district court judges.

{¶7} Consisting primarily of discovery skirmishes, challenges to jurisdiction, and a...

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