Galloway v. N.M. Office of Superintendent of Ins.

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MONICA GALLOWAY, SHAWNA MAESTAS, and JOLENE GONZALES, Plaintiffs-Appellants, v. NEW MEXICO OFFICE OF THE SUPERINTENDENT OF INSURANCE, Defendant-Appellee.

No. A-1-CA-38974

Court of Appeals of New Mexico

July 14, 2022

Corrections to this opinion/decision not affecting the outcome, at the Court's discretion, can occur up to the time of publication with NM Compilation Commission. The Court will ensure that the electronic version of this opinion/decision is updated accordingly in Odyssey.

APPEAL FROM THE DISTRICT COURT OF SANTA FE COUNTY Francis J. Mathew District Judge

Egolf + Ferlic + Martinez + Harwood, LLC Kate Ferlic Kristina Martinez Mark Cox Santa Fe, NM for Appellants

Todd S. Baran Santa Fe, NM for Appellee

MEMORANDUM OPINION

KRISTINA BOGARDUS, JUDGE

{¶1} Monica Galloway, Shawna Maestas, and Jolene Gonzales (collectively, Plaintiffs) appeal the district court's judgment in favor of Defendant New Mexico Office of the Superintendent of Insurance (OSI). Plaintiffs filed a complaint for declaratory judgment seeking release of funds recovered by OSI after it held administrative proceedings delegated to it following the voluntary dismissal of a qui tam action brought by Plaintiffs against Presbyterian Health Plan (PHP) pursuant to the Fraud Against Taxpayer Act (FATA), NMSA 1978, §§ 44-9-1 to -14 (2007, as amended through 2015). The district court dismissed the complaint with prejudice. Plaintiffs argue the district court erred in dismissing the complaint and thus improperly denied them a share of the funds recovered by OSI. Plaintiffs contend (1) they are entitled to a percentage of the funds recovered by OSI pursuant to their agreement with the Attorney General (AG); and (2) the district court misapplied FATA and ignored substantial evidence to deprive them of their rightful share of those funds. We affirm.

BACKGROUND

{¶2} Plaintiffs, employees of OSI, brought a qui tam action against PHP, pursuant to FATA, alleging that PHP unlawfully underpaid taxes on insurance premiums by claiming improper credits and deductions from 2000 through 2014. Later, the AG intervened in Plaintiffs' qui tam action and added Presbyterian Network, Inc. (PNI) and Presbyterian Insurance Company (PIC) as defendants. The AG Presbyterian,^[1] and Plaintiffs ultimately reached a settlement agreement (the Settlement Agreement).

{¶3} The terms of the Settlement Agreement contemplated recovery in two parts. First, Presbyterian agreed to pay $18.5 million immediately for a two-year period, 2003-2004, of unlawfully claimed tax deductions concerning Medicaid. Second, "the remaining claims would be pursued through . . . OSI administrative proceedings." Plaintiffs and the AG separately reached an agreement that Plaintiffs' share of recovery from the $18.5 million Settlement Agreement "shall be 20 [percent] of total recovery pursuant to . . . [Section] 44-9-7(A)(1)" of FATA, and that Plaintiffs retained their right "to a share of the proceeds under [Section] 44-9-7(A)" of FATA in the remaining claims that would be pursued through the OSI administrative proceedings. In this separate agreement (the AG Agreement), Plaintiffs and the AG also agreed that the latter part of the Settlement Agreement functioned as a delegation of the pursuit of recovery from the AG to OSI-an "alternate remedy" as that term is used in Section 44-9-6(H) of FATA. Pursuant to the terms of the Settlement Agreement, Plaintiffs and Presbyterian stipulated to dismissal of the qui tam action with prejudice, and Plaintiffs received 20 percent of Presbyterian's $18.5 million payment.

{¶4} Plaintiffs' remaining qui tam claims were pursued through OSI administrative proceedings, which resulted in OSI ordering PHP and PIC to pay an additional, total sum of $15,594,169, based on PHP and PIC's erroneous application of overpayment credits as well as credits related to the Medical Insurance Pool (MIP). The OSI orders were based on the findings of an audit conducted by an accounting firm, Examination Resources (ER), which presented OSI with its findings in a final report (the ER Report). PHP and PIC paid the amount ordered by OSI, and OSI set aside 20 percent of this amount-reflecting Plaintiffs' potential share-in a suspense fund but did not release this money to Plaintiffs. Plaintiffs filed a complaint for declaratory judgment against OSI, requesting that the district court enter an order directing OSI to release their share of $15,594,169 recovered by OSI pursuant to the OSI administrative proceedings.

{¶5} Following a bench trial, the district court dismissed Plaintiffs' complaint against OSI with prejudice, entering findings of fact and conclusions of law. The district court concluded that the AG Agreement "is a valid and enforceable contract between the State and . . . Plaintiffs" and that this agreement "provide[d] for the possibility of further recoveries related to the ER Report, deeming such proceedings an alternate remedy." Ultimately, however, the district court concluded that the AG Agreement did not entitle Plaintiffs to a share of the $15,594,169 recovered as a result of the OSI administrative proceedings. In so concluding, the district court found that Plaintiffs' qui tam action did not include a claim relating to MIP credits. Plaintiffs appealed the dismissal of their complaint against OSI.

{¶6} Upon review, this Court remanded the case to the district court to enter additional findings of fact and conclusions of law. The district court did so, finding, in relevant part, that there was "no overlap" between Plaintiffs' qui tam suit and the administrative proceedings with respect to MIP credits.

I. The AG Agreement Does Not Entitle Plaintiffs to 20 Percent of the Funds Recovered as a Result of the OSI Administrative Proceedings

{¶7} Plaintiffs argue the AG Agreement constitutes a contract entitling them to 20 percent of the funds recovered as a result of the OSI administrative proceedings. "We review a district court's interpretation of an unambiguous contract de novo." Benz v. Town Ctr. Land, LLC, 2013-NMCA-111, ¶ 31, 314 P.3d 688 (internal quotations marks and citation omitted). We look to the language of a contract to understand the parties' intent and the contract's purpose and meaning. See Rivera v. Am. Gen. Fin. Servs., Inc., 2011-NMSC-033, ¶ 27, 150 N.M. 398, 259 P.3d 803. Contractual language that is unambiguous is conclusive. See id.

{¶8} The AG Agreement, signed by Plaintiffs and representatives of the AG, reads as follows:

AGREEMENT BETWEEN [PLAINTIFFS] AND NEW MEXICO [AG]

[Plaintiffs] share of recovery in [qui tam lawsuit] shall be 20 percent of total recovery pursuant to [Section] 44-9-7(A)(1).

The pursuit of recoveries by OSI related to the ER Report or related findings by Office of State Auditor, which is hereby delegated by the AG to OSI, is deemed an alternate remedy as defined in [Section] 44-9-6(H), and encompass[es] [Plaintiffs'] right to a share of the proceeds under [Section] 44-9-7(A).

{¶9} The district court concluded that the AG Agreement is "a valid and enforceable contract between the State and . . . Plaintiffs." The parties do not dispute this conclusion, and neither party claims that the terms of the contract are ambiguous. At issue, then, are the terms of the contract and the district court's interpretation of those terms. Namely, Plaintiffs argue the contract entitles them to a per se award of 20 percent of the amount recovered as a result of the OSI administrative proceedings. OSI disagrees and contends the AG Agreement confers upon Plaintiffs "whatever rights they would have in an alternate remedy proceeding under . . . FATA."

{¶10} While Plaintiffs make much of the phrase "total recovery" as used in the first sentence of the AG Agreement, we do not read this to confer any right upon Plaintiffs other than that already received: 20 percent of the funds collected in their qui tam suit, which were recovered as a result of the Settlement Agreement. Indeed, the first sentence of the AG Agreement unequivocally applies only to the qui tam suit, which was dismissed by stipulation of Plaintiffs and Presbyterian as a result of the Settlement Agreement. We read the second sentence of the AG Agreement as granting Plaintiffs the rights afforded them pursuant to FATA in the OSI administrative proceedings. Having interpreted the terms of the AG Agreement, we turn now to determining what rights Plaintiffs were afforded in the OSI administrative proceedings pursuant to FATA.

II. The District Court Did Not Err in Concluding Plaintiffs Were Not Entitled to a Percentage of the Funds Recovered as a Result of the OSI Administrative Proceedings

{¶11} Plaintiffs contend the district court erred in concluding they were not entitled under FATA to a percentage of the funds recovered as a result of the OSI administrative proceedings. Plaintiffs also challenge certain factual findings entered by the district court.

{¶12} We review mixed questions of fact and law for substantial evidence to support factual findings and conduct a de novo review of the application of those facts to conclusions of law. See Ponder v. State Farm Mut. Auto. Ins. Co., 2000-NMSC-033, ¶ 7, 129 N.M. 698, 12 P.3d 960. To the extent Plaintiffs' appeal requires us to interpret FATA's provisions, our review is de novo. See Cates v. Mosher Enters., Inc., 2017-NMCA-063, ¶ 14, 403 P.3d 687 ("We review interpretation of statutory provisions de novo."). "We find the cases construing FATA's federal analogue, the False Claims Act [FCA], helpful in understanding the context and purpose of FATA." State ex rel. Foy v. Austin Cap. Mgmt., Ltd., 2015-NMSC-025, ¶ 16, 355 P.3d 1; see id. ¶ 25 ("FATA closely tracks the longstanding federal [FCA].").

{¶13} When a private person brings an action under...