Madden v. Smith

SHANI L. MADDEN, Petitioner-Appellant, v. DOUGLAS M. SMITH, Respondent-Appellee.

No. A-1-CA-37131

COURT OF APPEALS OF THE STATE OF NEW MEXICO

April 13, 2020

This decision of the New Mexico Court of Appeals was not selected for publication in the New Mexico Appellate Reports. Refer to Rule 12-405 NMRA for restrictions on the citation of unpublished decisions. Electronic decisions may contain computer-generated errors or other deviations from the official version filed by the Court of Appeals.

APPEAL FROM THE DISTRICT COURT OF BERNALILLO COUNTY

Victor S. Lopez, District Judge

Stalter Law LLC

Kenneth H. Stalter

Albuquerque, NM

for Appellant

Sutin, Thayer & Browne

A Professional Corporation

Mariposa Padilla Sivage

Lynn E. Mostoller

Christina M. Looney

Albuquerque, NM

for Appellee

MEMORANDUM OPINION

BOGARDUS, Judge.

{1} Shani L. Madden appeals the district court's judgment entering a final decree dissolving her marriage to Douglas M. Smith. We consider whether the court erred by (1) refusing to order the production of confidential records by two non-party companies—records containing data underlying the court-appointed expert's opinion; (2) denying Madden spousal support; (3) denying Madden attorney fees under NMSA 1978, Section 40-4-7 (1997); and (4) failing to disclose what Madden alleges is a conflict of interest. We affirm.

BACKGROUND

{2} Madden and Smith were married for nearly five years before Madden petitioned for divorce. During the marriage, Madden was voluntarily unemployed or underemployed. Smith had been paying her $4,000 per month plus the cost of health insurance for herself and her children and her car insurance. These payments, in that or an increased amount, continued throughout the litigation.

{3} There were no children from the marriage, so the matters litigated pertained to the division of assets and debts and the award of interim support, spousal support, and attorney fees. The case went to trial almost four years after it began. Several of the district court's pre-trial procedural rulings are the subject of this appeal. More detail on those rulings and on this appeal's other issues is provided below as appropriate.

DISCUSSION

{4} Before we address the issues, we set forth some of the overarching principles guiding our review. First, we presume the district court's rulings are correct. See Firstenberg v. Monribot, 2015-NMCA-062, ¶ 57, 350 P.3d 1205. Madden, as the appellant, bears the burden to clearly demonstrate that the district court erred. See id. Second, the district court abuses its discretion "when a ruling is clearly contrary to the logical conclusions demanded by the facts and circumstances of the case." Sims v. Sims, 1996-NMSC-078, ¶ 65, 122 N.M. 618, 930 P.2d 153.

I. Discovery of Confidential Third-Party Records Used by the Court-Appointed Expert

{5} Smith entered the marriage with ownership interests in several companies, including NanoCool, NanoPore, and NanoGroup (collectively, the Nano Companies). Smith acknowledged he was the "operating individual" for the companies.

{6} In her divorce petition, Madden alleged she was entitled to a share of the community property from the marriage, including a portion of Smith's interests in the Nano Companies. Madden contends the district court erred when it refused to allow her access to the QuickBooks files that NanoCool and NanoPore¹ provided to a court-appointed expert.

A. Procedural Background

{7} Recognizing that the disclosure of certain information about the Nano Companies could harm the companies' interests by, among other things, violating their nondisclosure agreements with third parties, the parties agreed to the entry of a stipulated order (the Confidentiality Order) early in the litigation, sealing the record insofar as it revealed the Nano Companies' confidential information. Subsequent to its entry of the Confidentiality Order, the district court appointed an accountant, Henry South, to serve as a Rule 11-706 NMRA expert to determine the value of the community property interest in the Nano Companies. Meanwhile, Madden hired her own accountant, Margi Palmer, as an expert to value the companies.

{8} Madden served subpoenas on NanoCool and NanoPore to produce records relevant to Ms. Palmer's determinations. In response, Smith filed a motion to quash Madden's subpoenas and for a protective order. Following a hearing, the district court concluded that the information Madden sought was relevant to the case and denied Smith's motion to quash the subpoenas. The denial order instructed Madden to re-issue her subpoenas to narrow the evidence sought and to add her request for the companies' QuickBooks files. NanoCool and NanoPore moved to quash the re-issued subpoenas, arguing that the requested material—general ledger detail in QuickBooks format—was "protected and confidential" and that disclosing it would cause it to violate its nondisclosure agreements. NanoCool attached an affidavit to support its claims, while NanoPore did not. Madden responded that production was appropriate because the Confidentiality Order protected NanoCool and NanoPore by preventing any party from disclosing any of the requested information. NanoCool and NanoPore took exception to that contention in their respective replies.

{9} The district court amended its previous order regarding the production of documents related to the Nano Companies, ordering NanoCool and NanoPore to turn over certain records (1) to the court for in camera review; and (2) unless the companies objected, to Mr. South and Madden. The companies complied with the first part of the order, but objected to producing the documents to Mr. South or Madden, arguing that Rule 1-045(C) NMRA protected against production. Madden then requested hearings to determine how Mr. South and the court could review, and she could see a summary of, the records. The companies renewed their objections to the court order.

{10} Without a ruling on the matter, resolution of the discovery dispute stalled. To overcome this predicament, the parties, NanoCool, and NanoPore agreed to a stipulated order (the Stipulated Production Order) providing that the companies would give the records, including the QuickBooks files, to Mr. South only for his review. The Stipulated Production Order further directed that Mr. South was not to disclose the records "to either [Madden] or [Smith] or their counsel" except by court order. Mr. South completed his valuation and determined that the Nano Companies' collective value decreased during the marriage.

{11} Despite agreeing that Mr. South was not to disclose the records absent a court order, Madden tried to access them by deposing Mr. South, instructing that "Mr. South is requested to bring all documents used to produce his valuation of companies . . .,including those documents produced In Camera under the Stipulated [Production] Order." The Nano Companies moved to quash the deposition notice. Madden responded, again arguing that the Confidentiality Order made production proper. Less than three weeks before trial, the district court heard argument on the motion to quash. Notwithstanding Madden's repeated requests that the court order production of the QuickBooks files to her, the court granted the motion and ordered that "Mr. South shall continue to be bound by the . . . [S]tipulated [Production O]rder, and shall not disclose the materials he received . . . to the parties or their counsel."

B. Analysis

{12} Madden argues generally that the district court's ruling was error. We begin by noting that we review the ruling for an abuse of discretion, see Vanderlugt v. Vanderlugt, 2018-NMCA-073, ¶ 30, 429 P.3d 1269, and that "[a]lthough the rules favor allowance of liberal pretrial discovery," a district court may limit discovery. Id. (internal quotation marks and citation omitted). Before turning to the central question of whether the court erred in limiting discovery, we address some of the points Madden makes in support of her allegation.

{13} Madden first argues that the district court erred by finding that production to her "would jeopardize [NanoCool's and NanoPore's] business interests." She specifically claims there is insufficient evidence of the "text, terms, scope, and timing" of what she refers to as the "alleged" nondisclosure agreements for the court to have determined that disclosure of the data she requested would violate the nondisclosure agreements or harm the companies' interests. She points out that only NanoCool, and not NanoPore, supplied an affidavit supporting that conclusion.

{14} There are two related problems with this argument. First, Madden failed to argue below that some of the underlying facts and data she requested were beyond the scope of the agreements, despite having had ample opportunity—in her responses to the companies' objections, for instance—to do so. This is problematic because "we review the case litigated below, not the case that is fleshed out for the first time on appeal." In re T.B., 1996-NMCA-035, ¶ 13, 121 N.M. 465, 913 P.2d 272. Madden's argument to the district court was that production of the QuickBooks files to her was proper because the Confidentiality Order prevented her from revealing information in them, not that such production was proper because the files did not contain information made confidential by the nondisclosure agreements.

{15} Second, Madden's actions below undermine her present insinuation that the agreements did not exist. She repeatedly affirmed the agreements' existence, first by entering into the agreement memorialized by the Confidentiality Order recognizing them. She then acknowledged them in a motion stating, "There is nothing that [] Smith has done for the marital community's income and assets that . . . does not involve nondisclosure agreements with vendors and customers." By affirming the agreements' existence, Madden contributed to what she now perceives as a shortcoming in the district court's ruling; she "should hardly be heard to complain...