State ex rel. Foy v. Austin Capital Mgmt., Ltd.

STATE OF NEW MEXICO, ex rel. FRANK C. FOY AND SUZANNE B. FOY, Qui Tam Plaintiffs-Appellants, v. 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 GROUP HOLDINGS, INC.; OPPENHEIMER FUNDS, INC.; GARY BLAND; DAVID CONTARINO; BRUCE MALOTT; MEYNERS AND CO.; MARC CORRERA; ANTHONY CORRERA; SANDIA ASSET MANAGEMENT; ALFRED JACKSON; DAVIS HAMILTON AND JACKSON; GUY RIORDAN; JUNIPER CAPITAL; EILEEN 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 GROUP; ALDUS EQUITY; SAUL MEYER; MARCELLUS 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; CLAYTON DUBILIER AND RICE; INTERMEDIA; LEO HINDERY; WILLIAM R. HOWELL; CABRERA CAPITAL; MARTIN CABRERA; CRESTLINE INVESTORS; TREMONT PARTNERS, INC.; TREMONT CAPITAL MANAGEMENT, INC.; JOHN DOE #1; and JOHN DOES #3 through #50, Defendants-Appellees.

Opinion Number: 2013-NMCA-043

Docket No. 31,421

COURT OF APPEALS OF THE STATE OF NEW MEXICO

Filing Date: December 26, 2012

Certiorari Granted, March 15, 2013, No. 34,013

APPEAL FROM THE DISTRICT COURT OF SANTA FE COUNTY

John W. Pope, District Judge

Victor R. Marshall & Associates, P.C.

Victor R. Marshall

Albuquerque, NM

for Appellants

Bowles & Crow

B.J. Crow

Albuquerque, NM

for Appellee Sandia Asset Management

Modrall, Sperling, Roehl, Harris & Sisk PA

Brian K. Nichols

Albuquerque, NM

for Appellees Darlene Collins, Jeffrey Krauss, Psilos Group, Albert Waxman,

Dan Weinstein, and Stephen Krupa

Comeau, Maldegen, Templeman & Indall LLP

Marshall G. Martin

Santa Fe, NM

for Appellees Leo Hindery, Intermedia

Modrall, Sperling, Roehl, Harris & Sisk, PA

Kenneth L. Harrigan

Albuquerque, NM

for Appellees Crosscore Management, Paul A. Cross, Jeffrey Krauss, Darlene

Collins, Psilos Group, Ares Management, Albert Waxman, David Eichler,

Stephen Krupa, Crestline Investors, Dan Weinstein, Inroads Group, Wetherly

Capital Group

Modrall, Sperling, Roehl, Harris & Sisk P.A.

John R. Cooney

Albuquerque, NM

for Appellee Quadrangle Group

Van Amberg, Rogers, Yepa, Abeita & Gomez, LLP

Ronald J. Van Amberg

Santa Fe, NM

for Appellees Darius Anderson, Kirk Anderson, and Gold Bridge Capital

Michael L. Danoff & Associates PC

Michael L. Danoff

Albuquerque, NM

for Appellees Carlyle Group and Carlyle Mezzanine Partners

Modrall Sperling Roehl Harris & Sisk, PA

Paul M. Fish

Albuquerque, NM

for Appellees Tremont Group Holdings, Tremont Capital Management,

Oppenheimer Funds, Tremont Partners

Scheuer Yost & Patterson, PC

Mel E. Yost

Santa Fe, NM

for Appellees Marvin Rosen and Diamond Edge Capital

Montgomery & Andrews, PA

Stephen S. Hamilton

Santa Fe, NM

for Appellees Austin Capital Management GP Corp., Dudley Brown, BereanCapital, Keycorp, Will Jason Rottinger, David E. Friedman, Riley Brent,

Charles Riley, Austin Capital Management, Victory Capital, Gary Bland,

Davis Hamilton, Juniper Capital, Alfred Jackson, Anthony Correra, and Marc

Correra

Brennan & Sullivan PA

Michael W. Brennan

Santa Fe, NM

for Appellees Park Hill Group, Dan Hevesi, Henry Morris, and Dan Prendergast

Simone, Roberts & Weiss, PA

Stephen M. Simone

Norman F. Weiss

Albuquerque, NM

for Appellee David Contarino

Arland & Associates LLC

William J. Arland III

Santa Fe, NM

for Appellees Marcellus Taylor, Saul Meyer, Richard Ellman, Matthew O'Reilly,

and Aldus Equity

French & Associates, PC

Stephen G. French

Albuquerque, NM

for Appellee Guy Riordan

Butt, Thornton & Baehr, PC

Rodney Schlagel

Albuquerque, NM

for Appellee William R. Howell

Silva, Saucedo & Gonzales, PC

Benjamin Silva, Jr.

Albuquerque, NM

for Appellee HFV

Law Office of George "Dave" Giddens, P.C.

George Dave Giddens

Albuquerque, NM

for Appellees Catterton Partners, Camden Partners, SDN Investors, Vicky Schiff,

TAG, Ajax Investments, and Barrett Wissman

Rodey, Dickason, Sloan, Akin & Robb, P.A.

Andrew G. Schultz

Albuquerque, NM

for Appellees DB Investment Managers, Topiary Trust, Deutsche Bank

Basham & Basham, P.C.

Katherine A. Basham

Martin R. Esquivel

Santa Fe, NM

for Appellee Bruce Malott

Robles, Rael & Anaya, PC

Luis E. Robles

Albuquerque, NM

for Appellee Meyners and Company

Gregg Vance Fallick

Albuquerque, NM

for Appellee Bruce Malott

Rubin, Katz, Ahern, Herdman & MacGillivray, P.A.

Frank T. Herdman

Santa Fe, NM

for Appellee Clayton Dubilier and Rice

Madison & Mroz, PA

Michael J. Dekleva

Albuquerque, NM

for Appellee Julio Ramirez

Robert Becker & Associates

Robert W. Becker

Albuquerque, NM

for Appellee Guy Riordan

Keleher & McLeod, P.A.

Sean Olivas

Albuquerque, NM

for Appellee Martin Cabrera and Cabrera Capital

Debevoise & Plimpton, LLP

Mark P. Goodman

Amanda Ulrich

Lisa Howley

New York, NY

for Appellee Victory Capital and Clayton Dubilier and Rice

Fried, Frank, Harris, Shriver & Jacobson, LLP

Peter L. Simmons

New York, NY

for Appellees DB Investment Managers, Topiary Trust, and Will Jason Rottinger

OPINION

CASTILLO, Chief Judge.

{1} New Mexico's Fraud Against Taxpayers Act, NMSA 1978, §§ 44-9-1 to -14 (2007) (FATA or the Act) was passed in 2007. The next year, Plaintiffs filed a qui tam action under the Act alleging violations that occurred as early as 2003. Although these alleged acts predate the effective date of FATA, they fall within the period provided for in FATA's retroactivity provision, Section 44-9-12(A) (applying the Act to violations occurring from 1987 forward). Defendants argued that FATA's retroactivity provision violates the federal and state Ex Post Facto Clauses and is therefore unconstitutional. The district court agreed and dismissed that portion of the complaint containing allegations of acts that occurred before the effective date of FATA. We granted leave to file an interlocutory appeal, and we now affirm.

I. BACKGROUND

{2} Before beginning our discussion of the constitutional question, we provide a short background. This action is linked to a companion lawsuit, State ex rel. Foy v. Vanderbilt Capital Advisors, LLC, D-101-CV-2008-1895 (Vanderbilt), with similar allegations fromthe same plaintiffs, Frank and Suzanne Foy (Plaintiffs) along with the State of New Mexico (the State). Plaintiffs allege that Defendants—who include Wall Street firms and investment advisors, as well as high-ranking state officials—executed fraudulent schemes that led to the loss of hundreds of millions of dollars at the expense of the State Investment Council (SIC) and the New Mexico Educational Retirement Board (ERB). Plaintiffs also allege that Defendants misrepresented their investment products and services and paid kickbacks and bribes to get business from the SIC and ERB. The complaint alleges that some state officers, including the heads of the SIC and ERB, conspired with their co-defendants to steer state investment funds to firms that were willing to pay kickbacks. Some of the acts are alleged to have occurred as early as 2003, which predates implementation of the Act but falls within its retroactivity provision.

{3} The district court in Vanderbilt zeroed in on the issue of FATA's retroactivity provision and ruled that it was an unconstitutional violation of the federal and state Ex Post Facto clauses. The district court in this action eventually adopted the reasoning of the Vanderbilt court and severed the retroactivity clause while allowing the rest of the action covering conduct that occurred on July 1, 2007 or later, to continue prospectively. We granted leave for interlocutory appeal to consider the constitutionality of the retroactivity clause. We also allowed parties, in their briefs, to raise the question of whether the case should be dismissed for lack of subject matter jurisdiction. We briefly touch on the question of subject matter jurisdiction and then proceed with our analysis of the constitutionality of FATA's retroactivity provision.

II. DISCUSSION

A. Subject Matter Jurisdiction

{4} As a preliminary matter, we address the question of subject matter jurisdiction. Defendants ask us to dismiss the complaint for lack of subject matter jurisdiction for two reasons: (1) they say Plaintiffs failed to exhaust their administrative remedies, and (2) they claim that Plaintiffs are barred from bringing an action against state officials. See § 44-9-9(B) ("No court shall have jurisdiction over an action . . . against an elected or appointed state official . . . if the action is based on evidence or information known to the state agency to which the false claim was made or to the attorney general when the action was filed."). The district court tentatively denied Defendants' motions to dismiss based on lack of subject matter jurisdiction under both arguments, and the court invited the parties to brief the issue and advance their arguments.

{5} We conclude that both arguments would benefit from factual developments and legal arguments to the court below, and we decline to address the issue of subject matter jurisdiction at this time. Cf. City of Las Cruces v. El Paso Elec. Co., 1998-NMSC-006, ¶ 24, 124 N.M. 640, 954 P.2d 72 (determining that a lower court "is in the best position to resolve, in the first instance, the facts necessary for a determination of the constitutionality" of a given statute); Schlieter v. Carlos, 108 N.M. 507, 510, 775 P.2d 709, 712 (1989) (concludingthat an appellate court "should exercise its discretion to decide the certified questions only with a full record before it, so that any decision on the constitutionality of [a statute] would not be based upon anecdotal and speculative argument").

B. Standard of Review

{6} "We review issues of...