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State v. Oppenheimer & Co., Inc.

Court of Appeals of New Mexico

May 30, 2019

STATE OF NEW MEXICO and COUNTY OF BERNALILLO, Plaintiffs-Appellees,
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. and FRANK FOY and JOHN CASEY, Qui Tam Plaintiffs-Appellants,

          APPEAL FROM THE DISTRICT COURT OF BERNALILLO COUNTY Victor S. Lopez, District Judge

          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

          OPINION

          J. MILES HANISEE, JUDGE

         {¶1} Qui tarn plaintiffs Frank Foy and John Casey (Qui Tarn 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 Tarn 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 Tarn Plaintiffs filed a qui tarn action[1] 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 Tarn 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 Tarn 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 tarn] 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 Tarn 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 Tarn 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 Tarn 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 tarn 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 tarn 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 Tarn Plaintiffs do not challenge the district court's finding that the "elements of the alleged false or fraudulent claims presented in [Qui Tarn 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 Tarn Plaintiffs'] Complaint was filed." Instead, Qui Tarn 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 Tarn Plaintiffs argue provides a possible award to a qui tarn plaintiff whose action is based primarily on information that has been publicly disclosed. While not entirely clear, Qui Tarn Plaintiffs ...


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