State ex rel. Foy v. Austin Capital Mgmt., Ltd.
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Opinion
1 IN THE SUPREME COURT OF THE STATE OF NEW MEXICO
2 Opinion Number:
3 Filing Date: June 25, 2015
4 NO. 34,013
5 STATE OF NEW MEXICO, Plaintiff, 6 ex rel., FRANK C. FOY and SUZANNE B. FOY, qui tam Plaintiffs,
7 Plaintiffs-Petitioners and 8 Cross-Respondents,
9 v.
10 AUSTIN CAPITAL MANAGEMENT, LTD, 11 AUSTIN CAPITAL MANAGEMENT GP CORPORATION, 12 CHARLES W. RILEY, BRENT A. MARTIN, DAVID E. 13 FRIEDMAN, WILL JASON ROTTINGER, VICTORY 14 CAPITAL MANAGEMENT, INC., KEYCORP, BEREAN 15 CAPITAL, DUDLEY BROWN, TREMONT PARTNERS, INC., 16 TREMONT CAPITAL MANAGEMENT, INC., TREMONT GROUP 17 HOLDINGS, INC., OPPENHEIMER FUNDS, INC., GARY BLAND, 18 DAVID CONTARINO, BRUCE MALOTT, MEYNERS + COMPANY, 19 MARC CORRERA, ANTHONY CORRERA, SANDIA ASSET 20 MANAGEMENT, ALFRED JACKSON, DAVIS HAMILTON AND 21 JACKSON, GUY RIORDAN, JUNIPER CAPITAL, EILEEN KOTECKI, 22 DAN HEVESI, HENRY “HANK” MORRIS, JULIO RAMIREZ, PAUL 23 CROSS, CROSSCORE MANAGEMENT, SDN INVESTORS, PSILOS 24 GROUP, ALBERT WAXMAN, JEFFREY KRAUSS, STEPHEN KRUPA, 25 DAVID EICHLER, DARLENE COLLINS, WETHERLY CAPITAL 26 GROUP, DAN WEINSTEIN, VICKY SCHIFF, QUADRANGLE GROUP, 27 ALDUS EQUITY, SAUL MEYER, MARCELLUS TAYLOR, MATTHEW 28 O’REILLY, RICHARD ELLMAN, DEUTSCHE BANK, DIAMOND EDGE 1 CAPITAL, MARVIN ROSEN, CARLYLE MEZZANINE PARTNERS, 2 CARLYLE GROUP, DB INVESTMENT MANAGERS, TOPIARY TRUST, 3 PARK HILL GROUP, DAN PRENDERGAST, CATTERTON PARTNERS, 4 BLACKSTONE GROUP, GOLD BRIDGE CAPITAL, DARIUS 5 ANDERSON, KIRK ANDERSON, ARES MANAGEMENT, INROADS 6 GROUP, CAMDEN PARTNERS, HFV, BARRETT WISSMAN, TAG, AJAX 7 INVESTMENTS, CLAYTON DUBILIER AND RICE, INTERMEDIA, LEO 8 HINDERY, WILLIAM R. HOWELL, CABRERA CAPITAL, MARTIN 9 CABRERA, CRESTLINE INVESTORS, JOHN DOE #1 and JOHN DOE #3 10 THROUGH #50,
11 Defendants-Respondents and 12 Cross-Petitioners.
13 ORIGINAL PROCEEDINGS ON CERTIORARI 14 John William Pope, District Judge
15 Victor R. Marshall & Associates, P.C. 16 Victor R. Marshall 17 Albuquerque, NM
18 for Petitioners and Cross-Respondents
19 FallickLaw, Ltd. 20 Gregg Vance Fallick 21 Albuquerque, NM
22 Esquivel Law Firm, LLC 23 Martin R. Esquivel 24 Albuquerque, NM
25 Basham & Basham, P.C. 26 Katherine Ann Basham 27 Santa Fe, NM 1 for Respondent and Cross-Petitioner Bruce Malott
2 Rodey, Dickason, Sloan, Akin & Robb, P.A. 3 Andrew G. Shultz 4 Albuquerque, NM
5 Fried, Frank, Harris, Shriver & Jacobson, LLP 6 Peter L. Simmons 7 New York, NY
8 for Respondents and Cross-Petitioners Topiary Trust and DB Investment 9 Managers, Inc.
10 Simone, Roberts & Weiss, P.A. 11 Norman F. Weiss 12 Albuquerque, NM
13 for Respondent and Cross-Petitioner David Contarino
14 Montgomery & Andrews, P.A. 15 Stephen S. Hamilton 16 Santa Fe, NM
17 for Respondent and Cross-Petitioner Gary Bland
18 French & Associates, P.C. 19 Erica Anderson 20 Stephen French 21 Albuquerque, NM
22 for Respondent and Cross-Petitioner Guy Riordan 1 OPINION
2 MAES, Justice.
3 {1} In this case, we address whether the retroactive application of the Fraud
4 Against Taxpayers Act, NMSA 1978, Sections 44-9-1 to -14 (2007) (“FATA” or “the
5 Act”) violates the Ex Post Facto Clauses of the United States and New Mexico
6 Constitutions. See U.S. Const. art 1, § 10, cl. 1; N.M. Const. art. 2, § 19. We hold
7 that FATA is constitutional. The treble damages under FATA are predominantly
8 compensatory and may be applied retroactively to conduct that occurred prior to its
9 effective date. We decline to resolve the issue of whether the civil penalties awarded
10 under FATA are punitive and violate ex post facto principles until there is a definitive
11 amount awarded.
12 BACKGROUND
13 {2} This appeal concerns the second of two qui tam actions filed by former New
14 Mexico Education Retirement Board (“ERB”) Chief Investment Officer Frank Foy
15 and his wife Suzanne Foy (“Foys”), attacking the management of the investment
16 portfolios of the ERB and of the New Mexico State Investment Council (“SIC”). The
17 Foys “allege that Defendants—who include Wall Street firms and investment
18 advisors, as well as high-ranking state officials—executed fraudulent schemes that 1 led to the loss of hundreds of millions of dollars at the expense of the [SIC] and the
2 [ERB]. ” State ex rel. Foy v. Austin Capital Mgmt., Ltd., 2013-NMCA-043, ¶ 2, 297
3 P.3d 357.
4 {3} A qui tam action is “[a]n action brought under a statute that allows a private
5 person to sue for a penalty, part of which the government . . . will receive.” Black’s
6 Law Dictionary 1262 (7th ed. 1999). The Foys filed their first qui tam action, State
7 ex rel. Foy v. Vanderbilt Capital Advisors, LLC, D-101-CV-2008-1895
8 (“Vanderbilt”), pursuant to FATA in the First Judicial District Court on July 14,
9 2008. That complaint included allegations of misconduct dating back to 2003,
10 predating the enactment of FATA in 2007. Section 44-9-12(A) of FATA allows a qui
11 tam plaintiff to bring a civil action for conduct that occurred prior to the effective date
12 of that Act. District Judge Stephen Pfeffer issued a sua sponte order expressing
13 concern “that there may be ex post facto implications arising from the retroactive
14 application of the Act[.]” Following briefing, the district court issued an order
15 dismissing the Foys’ claims, finding that the retroactive application of FATA, as
16 authorized by Section 44-9-12(A), was unconstitutional. The district court
17 specifically pointed to the award of treble damages and concluded that the Act “is
18 punitive in purpose or effect.” In order to save the statute, the district court severed
2 1 the retroactive application language from Section 44-9-12(A), leaving the rest of the
2 statute intact, including treble damages, but inapplicable to anything that occurred
3 prior to 2007, which would exclude from this lawsuit most, if not all, of what
4 allegedly occurred.
5 {4} Three months after the complaint in Vanderbilt was unsealed, the Foys filed a
6 complaint under FATA against Austin Capital Management and several other
7 defendants also in the First Judicial District Court. After a series of recusals,
8 excusals, and administrative assignments, all of the judges of the First Judicial
9 District were excused. This Court appointed Judge John Pope to preside over the
10 case.
11 {5} The Foys raised the retroactivity issue with Judge Pope, seeking a ruling that
12 FATA is constitutional. In response, Defendants Park Hill Group, Blackstone Group,
13 and Prendergast provided Judge Pope with a copy of Judge Pfeffer’s previous ruling
14 that the retroactive application of FATA is unconstitutional and asked for a similar
15 ruling. On July 8, 2011, Judge Pope ruled that the retroactive application of FATA
16 is unconstitutional and explicitly “adopt[ed] and incorporate[d] the reasoning and
17 analysis” contained in Judge Pfeffer’s earlier decision. The Court of Appeals granted
18 leave for the Foys to file an interlocutory appeal. The Court of Appeals affirmed “the
3 1 district court’s legal conclusion that retroactive application of FATA is
2 unconstitutional and the court’s decision to sever the retroactive aspects from the
3 statute.” See Foy, 2013-NMCA-043, ¶ 52. This appeal and cross-appeal follow.
4 DISCUSSION
5 I. The Attorney General’s Prior Knowledge of Incriminating Information 6 Does Not Bar the District Court From Proceeding in Austin Capital
7 {6} Before addressing the issue of the retroactivity of FATA, we first address the
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1 IN THE SUPREME COURT OF THE STATE OF NEW MEXICO
2 Opinion Number:
3 Filing Date: June 25, 2015
4 NO. 34,013
5 STATE OF NEW MEXICO, Plaintiff, 6 ex rel., FRANK C. FOY and SUZANNE B. FOY, qui tam Plaintiffs,
7 Plaintiffs-Petitioners and 8 Cross-Respondents,
9 v.
10 AUSTIN CAPITAL MANAGEMENT, LTD, 11 AUSTIN CAPITAL MANAGEMENT GP CORPORATION, 12 CHARLES W. RILEY, BRENT A. MARTIN, DAVID E. 13 FRIEDMAN, WILL JASON ROTTINGER, VICTORY 14 CAPITAL MANAGEMENT, INC., KEYCORP, BEREAN 15 CAPITAL, DUDLEY BROWN, TREMONT PARTNERS, INC., 16 TREMONT CAPITAL MANAGEMENT, INC., TREMONT GROUP 17 HOLDINGS, INC., OPPENHEIMER FUNDS, INC., GARY BLAND, 18 DAVID CONTARINO, BRUCE MALOTT, MEYNERS + COMPANY, 19 MARC CORRERA, ANTHONY CORRERA, SANDIA ASSET 20 MANAGEMENT, ALFRED JACKSON, DAVIS HAMILTON AND 21 JACKSON, GUY RIORDAN, JUNIPER CAPITAL, EILEEN KOTECKI, 22 DAN HEVESI, HENRY “HANK” MORRIS, JULIO RAMIREZ, PAUL 23 CROSS, CROSSCORE MANAGEMENT, SDN INVESTORS, PSILOS 24 GROUP, ALBERT WAXMAN, JEFFREY KRAUSS, STEPHEN KRUPA, 25 DAVID EICHLER, DARLENE COLLINS, WETHERLY CAPITAL 26 GROUP, DAN WEINSTEIN, VICKY SCHIFF, QUADRANGLE GROUP, 27 ALDUS EQUITY, SAUL MEYER, MARCELLUS TAYLOR, MATTHEW 28 O’REILLY, RICHARD ELLMAN, DEUTSCHE BANK, DIAMOND EDGE 1 CAPITAL, MARVIN ROSEN, CARLYLE MEZZANINE PARTNERS, 2 CARLYLE GROUP, DB INVESTMENT MANAGERS, TOPIARY TRUST, 3 PARK HILL GROUP, DAN PRENDERGAST, CATTERTON PARTNERS, 4 BLACKSTONE GROUP, GOLD BRIDGE CAPITAL, DARIUS 5 ANDERSON, KIRK ANDERSON, ARES MANAGEMENT, INROADS 6 GROUP, CAMDEN PARTNERS, HFV, BARRETT WISSMAN, TAG, AJAX 7 INVESTMENTS, CLAYTON DUBILIER AND RICE, INTERMEDIA, LEO 8 HINDERY, WILLIAM R. HOWELL, CABRERA CAPITAL, MARTIN 9 CABRERA, CRESTLINE INVESTORS, JOHN DOE #1 and JOHN DOE #3 10 THROUGH #50,
11 Defendants-Respondents and 12 Cross-Petitioners.
13 ORIGINAL PROCEEDINGS ON CERTIORARI 14 John William Pope, District Judge
15 Victor R. Marshall & Associates, P.C. 16 Victor R. Marshall 17 Albuquerque, NM
18 for Petitioners and Cross-Respondents
19 FallickLaw, Ltd. 20 Gregg Vance Fallick 21 Albuquerque, NM
22 Esquivel Law Firm, LLC 23 Martin R. Esquivel 24 Albuquerque, NM
25 Basham & Basham, P.C. 26 Katherine Ann Basham 27 Santa Fe, NM 1 for Respondent and Cross-Petitioner Bruce Malott
2 Rodey, Dickason, Sloan, Akin & Robb, P.A. 3 Andrew G. Shultz 4 Albuquerque, NM
5 Fried, Frank, Harris, Shriver & Jacobson, LLP 6 Peter L. Simmons 7 New York, NY
8 for Respondents and Cross-Petitioners Topiary Trust and DB Investment 9 Managers, Inc.
10 Simone, Roberts & Weiss, P.A. 11 Norman F. Weiss 12 Albuquerque, NM
13 for Respondent and Cross-Petitioner David Contarino
14 Montgomery & Andrews, P.A. 15 Stephen S. Hamilton 16 Santa Fe, NM
17 for Respondent and Cross-Petitioner Gary Bland
18 French & Associates, P.C. 19 Erica Anderson 20 Stephen French 21 Albuquerque, NM
22 for Respondent and Cross-Petitioner Guy Riordan 1 OPINION
2 MAES, Justice.
3 {1} In this case, we address whether the retroactive application of the Fraud
4 Against Taxpayers Act, NMSA 1978, Sections 44-9-1 to -14 (2007) (“FATA” or “the
5 Act”) violates the Ex Post Facto Clauses of the United States and New Mexico
6 Constitutions. See U.S. Const. art 1, § 10, cl. 1; N.M. Const. art. 2, § 19. We hold
7 that FATA is constitutional. The treble damages under FATA are predominantly
8 compensatory and may be applied retroactively to conduct that occurred prior to its
9 effective date. We decline to resolve the issue of whether the civil penalties awarded
10 under FATA are punitive and violate ex post facto principles until there is a definitive
11 amount awarded.
12 BACKGROUND
13 {2} This appeal concerns the second of two qui tam actions filed by former New
14 Mexico Education Retirement Board (“ERB”) Chief Investment Officer Frank Foy
15 and his wife Suzanne Foy (“Foys”), attacking the management of the investment
16 portfolios of the ERB and of the New Mexico State Investment Council (“SIC”). The
17 Foys “allege that Defendants—who include Wall Street firms and investment
18 advisors, as well as high-ranking state officials—executed fraudulent schemes that 1 led to the loss of hundreds of millions of dollars at the expense of the [SIC] and the
2 [ERB]. ” State ex rel. Foy v. Austin Capital Mgmt., Ltd., 2013-NMCA-043, ¶ 2, 297
3 P.3d 357.
4 {3} A qui tam action is “[a]n action brought under a statute that allows a private
5 person to sue for a penalty, part of which the government . . . will receive.” Black’s
6 Law Dictionary 1262 (7th ed. 1999). The Foys filed their first qui tam action, State
7 ex rel. Foy v. Vanderbilt Capital Advisors, LLC, D-101-CV-2008-1895
8 (“Vanderbilt”), pursuant to FATA in the First Judicial District Court on July 14,
9 2008. That complaint included allegations of misconduct dating back to 2003,
10 predating the enactment of FATA in 2007. Section 44-9-12(A) of FATA allows a qui
11 tam plaintiff to bring a civil action for conduct that occurred prior to the effective date
12 of that Act. District Judge Stephen Pfeffer issued a sua sponte order expressing
13 concern “that there may be ex post facto implications arising from the retroactive
14 application of the Act[.]” Following briefing, the district court issued an order
15 dismissing the Foys’ claims, finding that the retroactive application of FATA, as
16 authorized by Section 44-9-12(A), was unconstitutional. The district court
17 specifically pointed to the award of treble damages and concluded that the Act “is
18 punitive in purpose or effect.” In order to save the statute, the district court severed
2 1 the retroactive application language from Section 44-9-12(A), leaving the rest of the
2 statute intact, including treble damages, but inapplicable to anything that occurred
3 prior to 2007, which would exclude from this lawsuit most, if not all, of what
4 allegedly occurred.
5 {4} Three months after the complaint in Vanderbilt was unsealed, the Foys filed a
6 complaint under FATA against Austin Capital Management and several other
7 defendants also in the First Judicial District Court. After a series of recusals,
8 excusals, and administrative assignments, all of the judges of the First Judicial
9 District were excused. This Court appointed Judge John Pope to preside over the
10 case.
11 {5} The Foys raised the retroactivity issue with Judge Pope, seeking a ruling that
12 FATA is constitutional. In response, Defendants Park Hill Group, Blackstone Group,
13 and Prendergast provided Judge Pope with a copy of Judge Pfeffer’s previous ruling
14 that the retroactive application of FATA is unconstitutional and asked for a similar
15 ruling. On July 8, 2011, Judge Pope ruled that the retroactive application of FATA
16 is unconstitutional and explicitly “adopt[ed] and incorporate[d] the reasoning and
17 analysis” contained in Judge Pfeffer’s earlier decision. The Court of Appeals granted
18 leave for the Foys to file an interlocutory appeal. The Court of Appeals affirmed “the
3 1 district court’s legal conclusion that retroactive application of FATA is
2 unconstitutional and the court’s decision to sever the retroactive aspects from the
3 statute.” See Foy, 2013-NMCA-043, ¶ 52. This appeal and cross-appeal follow.
4 DISCUSSION
5 I. The Attorney General’s Prior Knowledge of Incriminating Information 6 Does Not Bar the District Court From Proceeding in Austin Capital
7 {6} Before addressing the issue of the retroactivity of FATA, we first address the
8 issue of subject matter jurisdiction raised by Cross-petitioner Bruce Malott. See
9 Wilson v. Denver, 1998-NMSC-016, ¶ 8, 125 N.M. 308, 961 P.2d 153 (“Prior to
10 addressing the substantive issue certified for interlocutory appeal, we raise, sua
11 sponte, the question whether the district court had subject matter jurisdiction over
12 these election contests.”). Malott argues that the district court lacked subject matter
13 jurisdiction over the Foys’ second-filed FATA action, Austin Capital. Malott’s most
14 salient argument is that the district court was barred under FATA from hearing Austin
15 Capital. See § 44-9-9(B) (“No court shall have jurisdiction over an action . . . against
16 an elected or appointed state official . . . if the action is based on evidence or
17 information known to . . . the attorney general when the action was filed.”) The
18 district court tentatively rejected this argument. See Foy, 2013-NMCA-043, ¶ 4. The
4 1 Court of Appeals declined to address the issue of subject matter jurisdiction, holding
2 that “both arguments would benefit from factual developments and legal arguments
3 to the court below.” Id. ¶ 5.
4 {7} In determining whether a court has subject matter jurisdiction, we “ask whether
5 [the matter before the court] falls within the general scope of authority conferred upon
6 such court by the constitution or statute.” State v. Chavarria, 2009-NMSC-020, ¶ 11,
7 146 N.M. 251, 208 P.3d 896 (alteration in original, internal quotation marks and
8 citation omitted). “The source of a district court’s subject matter jurisdiction derives
9 from the New Mexico Constitution.” Lu v. Educ. Trust Bd. of N.M., 2013-NMCA-
10 010, ¶ 9, 293 P.3d 186. Under Article VI, Section 13 of the New Mexico
11 Constitution, “[t]he district court shall have original jurisdiction in all matters and
12 causes not excepted in this constitution, and such jurisdiction of special cases and
13 proceedings as may be conferred by law . . . .” Id. (emphasis added). In other words,
14 “New Mexico district courts are courts of general jurisdiction having the power to
15 hear all matters not excepted by the constitution and those matters conferred by law.”
16 Lyndoe v. D.R. Horton, Inc., 2012-NMCA-103, ¶ 12, 287 P.3d 357; see also Daniels
17 Ins. Agency, Inc. v. Jordan, 1982-NMSC-148, ¶ 8, 99 N.M. 297, 657 P.2d 624 (“[T]he
18 district courts have original jurisdiction over all cases other than those specifically
5 1 excepted by the New Mexico Constitution and such jurisdiction of special cases and
2 proceedings as may be conferred by law . . . .” (internal quotation marks and citation
3 omitted)).
4 {8} Austin Capital falls within the general scope of authority conferred upon the
5 district court by Article VI, Section 13 of the New Mexico Constitution because no
6 provision in the New Mexico Constitution specifically excepts it. The district court
7 had subject matter jurisdiction over this action. The proviso in FATA that an action
8 may not proceed against a State official “if the action is based on evidence or
9 information known to . . . the attorney general when the action was filed,” § 44-9-
10 9(B), is more in the nature of a mandatory precondition that the plaintiff must satisfy
11 to proceed with a qui tam action. Therefore, the question before the Court is not really
12 one of jurisdiction, but rather whether the Foys’ pending qui tam action in Vanderbilt
13 bars litigation in the second-filed qui tam action, Austin Capital, under FATA—based
14 on prior knowledge of the Attorney General. We proceed to that issue.
15 {9} Under FATA, a qui tam plaintiff is required to disclose to the Attorney General
16 “substantially all material evidence and information the qui tam plaintiff possesses”
17 at the time the complaint is filed. See § 44-9-5(C). The purpose of this requirement
18 is to give the Attorney General a chance to intervene in the action. See § 44-9-5(D)
6 1 (giving the Attorney General 60 days to notify the court if it intends to intervene).
2 This disclosure requirement also serves as a basis for the statutory bar found in
3 Section 44-9-9(B) that prevents suit under FATA against an elected or appointed state
4 official “if the action is based on evidence or information known to . . . the attorney
5 general when the action was filed.” Id.
6 {10} Section 44-9-9(B) places a limitation on the district court’s ability to entertain
7 FATA actions against state officials. For an action to be barred under Section 44-9-
8 9(B), the action must (1) be against a state official and (2) be “based on evidence or
9 information known to . . . the attorney general when the action was filed.” See id. As
10 we will explain below, the Foys’ action in Austin Capital meets the first requirement
11 of the statutory bar, but fails to satisfy the second.
12 {11} As a preliminary matter, it is important to note that Section 44-9-9(B) does not
13 affect the Foys’ first filed qui tam action, Vanderbilt, a conclusion conceded by
14 Malott. Second, Section 44-9-9(B) does not apply to any of the private party
15 defendants in Austin Capital. Section 44-9-9(B) only bars actions against public
16 officials such as “an elected or appointed state official, a member of the state
17 legislature or a member of the judiciary.” See id. Therefore, Section 44-9-9(B) can
18 only bar suit against the State official defendants in Austin Capital. The complaints
7 1 in Vanderbilt and Austin Capital name the same state official defendants, including
2 Malott. To determine whether these State official defendants are barred from suit in
3 Austin Capital, we must decide whether Austin Capital is “based on evidence or
4 information known to . . . the attorney general when the action was filed.” See § 44-9-
5 9(B). In making such a determination it is helpful to examine the statute’s historical
6 underpinnings.
7 {12} Section 44-9-9(B) is patterned after an analogous section of the federal False
8 Claims Act which similarly bars certain types of defendants and certain types of
9 claims. See 31 U.S.C. § 3730(e)(2)(A) (2014) (“No court shall have jurisdiction over
10 an action brought . . . against a Member of Congress, a member of the judiciary, or
11 a senior executive branch official if the action is based on evidence or information
12 known to the Government when the action was brought.”). Section 3730(e)(2)(A)
13 “[does] not present an absolute bar to qui tam suits; it simply retained the pre-1986
14 ‘government knowledge’ exception with slightly different language.” See 1 John T.
15 Boese, Civil False Claims and Qui Tam Actions § 4.03(A), at 4-171 (4th ed. 2011).
16 “It was recommended by the [U.S.] Justice Department as an exception for those suits
17 which might be politically motivated.” Id. at 4-172 (internal quotation marks
18 omitted).
8 1 {13} The “government knowledge bar” was enacted in response to the U.S. Supreme
2 Court’s decision in United States ex rel. Marcus v. Hess, 317 U.S. 537 (1943). See
3 Graham Cnty. Soil & Water Conservation Dist. v. United States ex rel. Wilson, 559
4 U.S. 280, 294 (2010) (“This amendment erected what came to be known as a
5 Government knowledge bar.”); see also 1 Boese, supra, § 1.02, at 1-15. In Hess, qui
6 tam plaintiff Marcus alleged a collusive bidding scheme by electrical contractors
7 working on Public Works Administration projects in Pennsylvania. See Hess, 317
8 U.S. at 539. Marcus purportedly discovered the alleged fraud by reading a criminal
9 indictment previously filed against the defendants. See id. at 545. The Justice
10 Department argued that Marcus had not brought any new information to the
11 government’s attention. See id. The U.S. Supreme Court upheld Marcus’s award,
12 pointing out that the statute allowed suit to be brought “by any person” without
13 “exception or qualification.” See id. at 546. The U.S. Supreme Court has since
14 referred to the qui tam action in Hess as a “quintessential parasitic suit.” See Graham
15 Cnty., 559 U.S. at 294 (internal quotation marks and citation omitted).
16 {14} Following Hess, Congress amended the False Claims Act in 1943 to preclude
17 qui tam actions “based upon evidence or information [already] in the possession of
18 the United States, or any agency, officer or employee thereof, at the time such suit
9 1 was brought.” See Graham Cnty., 559 U.S. at 294 (internal quotation marks and
2 citation omitted). Therefore, “[once] the United States learned of a false claim, only
3 the Government could assert its rights under the [False Claims Act] against the false
4 claimant.” See id. (internal quotation marks and citation omitted). This amendment
5 was designed to avoid more “parasitic” suits like Hess. See 1 Boese, supra, §
6 4.02(A), at 4-50. “The barriers set up in the 1943 Amendments led to decreased use
7 of the qui tam provisions.” Id. § 1.02, at 1-15; see also Graham Cnty., 559 U.S. at
8 294 (“In the years that followed the 1943 amendment, the volume and efficacy of qui
9 tam litigation dwindled.”).
10 {15} In 1986, Congress replaced the government knowledge bar with the “public
11 disclosure bar.” See id. at 294-95. Under the public disclosure bar, “[t]he court shall
12 dismiss an action or claim . . . if substantially the same allegations or transactions as
13 alleged in the action or claim were publicly disclosed.” See 31 U.S.C. §
14 3730(e)(4)(A). The purpose of the public disclosure bar is “to strike a balance
15 between encouraging private persons to root out fraud and stifling parasitic lawsuits.”
16 Graham Cnty., 559 U.S. at 295. In other words, “[t]he public disclosure bar
17 is . . . chiefly designed to separate the opportunistic relator [qui tam plaintiff] from
18 the relator [qui tam plaintiff] who has genuine, useful information that the
10 1 government lacks.” Grynberg ex rel. United States v. Exxon, 566 F.3d 956, 961 (10th
2 Cir. 2009). “[T]he point of the public disclosure test is to determine whether the qui
3 tam lawsuit is a parasitic one.” United States ex rel. Grynberg v. Praxair, Inc., 389
4 F.3d 1038, 1049 (10th Cir. 2004) (alteration in original, internal quotation marks and
5 citation omitted). We determine that this overarching concern should guide our
6 determination regarding whether Austin Capital is based upon information known to
7 the Attorney General.
8 {16} We find the cases construing FATA’s federal analogue, the False Claims Act,
9 helpful in understanding the context and purpose of FATA. See Akins v. United Steel
10 Workers of Am., 2010-NMSC-031, ¶ 15, 148 N.M. 442, 237 P.3d 744 (“In developing
11 a body of state common law, we may look to federal law for guidance where it is
12 persuasive and consistent with our state laws and policies.”). Although cases like
13 Graham County, Exxon, and Praxair do not interpret the federal counterpart to
14 Section 44-9-9(B), they interpret the complementary public disclosure bar, which
15 aides in understanding the purpose and context of FATA.
16 {17} These cases indicate a legislative intent to prohibit “parasitic” qui tam plaintiffs
17 while also providing an incentive for meritorious qui tam plaintiffs to pursue their
18 claims. This conclusion is especially true in light of the so-called “first to file” bar.
11 1 See 31 U.S.C. § 3730(b)(5) (“When a person brings an action under this subsection,
2 no person other than the Government may intervene or bring a related action based
3 on the facts underlying the pending action.”); see also § 44-9-5(E) (“When a person
4 brings an action pursuant to this section, no person other than the attorney general on
5 behalf of the state may intervene or bring a related action based on the facts
6 underlying the pending action.”). This bar “functions both to eliminate parasitic
7 plaintiffs who piggyback off the claims of a prior relator, and to encourage legitimate
8 relators to file quickly by protecting the spoils of the first to bring a claim.” See
9 Exxon, 566 F.3d at 961.
10 {18} Applying these principles, we hold that the district court is not barred from
11 hearing the case under FATA. The Foys’ second FATA action, Austin Capital, is not
12 barred under Section 44-9-9(B) because Austin Capital is not a “parasitic” suit like
13 the one in Hess in which the “opportunistic” qui tam plaintiff simply repeated
14 allegations made by someone else in a federal indictment. First, as alleged in the
15 complaint, Mr. Foy as former Chief Investment Officer of the ERB may have
16 “genuine, useful information that the government lacks.” See Exxon, 566 F.3d at 961.
17 He is not simply repeating someone else’s allegations.
18 {19} Second, the statutory bar was designed to prohibit qui tam plaintiffs from
12 1 piggybacking off the claims of a prior relator in an effort to unfairly recover a portion
2 of the prior relator’s damage award. Here, the Foys are the plaintiffs in both cases.
3 It would be an absurd construction of FATA to hold that the Foys are piggybacking
4 off their own prior claims in an effort to unfairly recover a portion of their potential
5 damage award in Vanderbilt. Furthermore, barring Austin Capital might discourage
6 future qui tam plaintiffs from turning up wrongdoing discovered after their case was
7 filed. Finally, the record reflects that the Attorney General did not raise an objection
8 to the filing of Austin Capital and authorized the Foys to proceed, stating that “the
9 best interests of the State of New Mexico are served by uncovering, as soon as
10 possible, all of the facts relating to the matters stated in the complaint.” Therefore,
11 we disagree with Malott and hold that Austin Capital is not barred by being “based
12 on evidence or information known to . . . the attorney general when the action was
13 filed.” See § 44-9-9(B).
14 II. The Case is Not Barred by Claim Splitting
15 {20} Malott argues that in filing Austin Capital, the Foys are engaging in claim
16 splitting. “It is axiomatic that piecemeal litigation is not favored by the courts.”
17 Callaway v. Ryan, 1960-NMSC-088, ¶ 21, 67 N.M. 283, 354 P.2d 999. The rule
18 against claim splitting “is grounded upon public policy designed to avoid a
13 1 multiplicity of suits.” United Nuclear Corp. v. Fort, 1985-NMCA-049, ¶ 22, 102
2 N.M. 756, 700 P.2d 1005. “The rule against splitting a cause of action is an equitable
3 one whose application is left to judicial discretion based on the factual circumstances
4 of individual cases.” 1A C.J.S. Actions § 225 (2015).
5 {21} In arguing against claim splitting, Malott cites primarily to New Mexico cases
6 pertaining to res judicata, or claim preclusion. However, “[t]he rules of res judicata
7 are applicable only when a final judgment is rendered.” See Restatement (Second)
8 of Judgments § 13 (1982). Because a final judgment on the merits has not been
9 rendered in Vanderbilt, res judicata does not apply to Austin Capital. We therefore
10 decline to dismiss Austin Capital on the basis of claim splitting.
11 {22} Nevertheless, Malott has identified a genuine concern regarding the burden on
12 defendants in multiple suits and the additional burden placed on the judicial system
13 by these multiple suits. See Concerned Residents of Santa Fe North, Inc. v. Santa Fe
14 Estates, Inc., 2008-NMCA-042, ¶ 17, 143 N.M. 811, 182 P.3d 794 (“The res judicata
15 doctrine is invoked to protect litigants from the burden of multiple litigation and to
16 promote both judicial economy and the policy favoring reliance on final judgments
17 by minimizing the possibility of inconsistent decisions.”). We recognize that in
18 allowing Austin Capital to proceed, the Foys will have two FATA actions pending
14 1 at the same time in the same judicial district.
2 {23} To promote judicial economy and minimize the possibility of inconsistent
3 decisions, we hold that the Foys’ FATA complaints should be consolidated and heard
4 in a single action. Therefore, pursuant to our power of superintending control, see
5 N.M. Const. art. VI, § 3, we consolidate Austin Capital and Vanderbilt and will
6 appoint a pro-tem judge to oversee the consolidated action. See Maestas v. Hall,
7 2012-NMSC-006, ¶ 9, 274 P.3d 66 (consolidating several redistricting cases and
8 appointing a pro-tem judge to preside over the litigation). Although the Foys have
9 identified additional cases that may be consolidated, we leave that determination to
10 the discretion of the district court. See Rule 1-042(A) NMRA (“When actions
11 involving a common question of law or fact are pending within a judicial district, the
12 court may . . . order all the actions consolidated; and it may make such orders
13 concerning proceedings therein as may tend to avoid unnecessary costs or delay.”).
14 III. The Retroactive Application of FATA is Constitutional
15 {24} The central question before this Court is whether the retroactive application of
16 FATA is unconstitutional.
17 A. FATA
18 {25} FATA prohibits knowingly presenting false or fraudulent claims for payment
15 1 from the State and conspiring to defraud the State. See § 44-9-3(A). FATA was
2 enacted in 2007, but includes a provision that explicitly authorizes retroactive claims.
3 Section 44-9-12(A) states:
4 A civil action pursuant to the Fraud Against Taxpayers Act may be 5 brought for conduct that occurred prior to the effective date of that act, 6 but not for conduct that occurred prior to July 1, 1987.
7 The statutory penalties for violating FATA include:
8 (1) three times the amount of damages sustained by the state because of 9 the violation; 10 (2) a civil penalty of not less than five thousand dollars ($5,000) and not 11 more than ten thousand dollars ($10,000) for each violation; 12 (3) the costs of a civil action brought to recover damages or penalties; 13 and 14 (4) reasonable attorney fees, including the fees of the attorney general 15 or state agency counsel.
16 See § 44-9-3(C). FATA closely tracks the longstanding federal False Claims Act.
17 Compare § 44-9-3, with 31 U.S.C. § 3729 (2014). Like the federal Act, FATA allows
18 the Attorney General or a qui tam plaintiff, on behalf of the State, to bring a civil
19 action for violation of the Act. See §§ 44-9-4(A), 44-9-5. FATA authorizes a qui tam
20 plaintiff to recover up to thirty percent of the damage award as well as reasonable
21 expenses incurred in the action and reasonable attorneys’ fees. See § 44-9-7. This
22 award serves as an incentive to private individuals to act on behalf of the public good
16 1 by bringing the suit. See Vt. Agency of Natural Res. v. United States ex rel. Stevens,
2 529 U.S. 765, 769-70 (2000). The State is entitled to the remainder of the damage
3 award (all proceeds not awarded to the qui tam plaintiff) to fully reimburse the State
4 for the false claim paid. See § 44-9-7(E).
5 B. Retroactive Laws and the Ex Post Facto Clause
6 {26} The United States and New Mexico Constitutions prohibit the Legislature from
7 enacting ex post facto laws. See U.S. Const. art. 1, § 10, cl. 1; N.M. Const. art. 2, §
8 19. “‘The Ex Post Facto Clause flatly prohibits retroactive application of penal
9 legislation.’” State v. Ordunez, 2012-NMSC-024, ¶ 14, 283 P.3d 282 (quoting
10 Landgraf v. USI Film Prods., 511 U.S. 244, 266 (1994)). “The prohibition does not
11 apply to penalties that are considered remedial in nature.” Foy, 2013-NMCA-043,
12 ¶ 11. Defendants bear the burden of proving that FATA is unconstitutional beyond
13 all reasonable doubt. See State v. Druktenis, 2004-NMCA-032, ¶ 15, 135 N.M. 223,
14 86 P.3d 1050. (“In regard to Ex Post Facto Clause . . . constitutional attacks, there
15 exists a presumption of constitutionality, and the party attacking the constitutionality
16 of the statute has the burden of proving the statute is unconstitutional beyond all
17 reasonable doubt.”).
18 {27} In this case, Defendants argue that the sanctions (money damages) authorized
17 1 under FATA are penal in nature. And, therefore, imposing these sanctions for
2 conduct that occurred prior to the effective date of FATA would be retroactive
3 application of penal legislation, a direct violation of the Ex Post Facto Clauses.
4 C. The Legislature Intended FATA to Apply Retroactively
5 {28} To determine whether a sanction is punitive and thus violative of the Ex Post
6 Facto Clause, we first look to the “government’s purpose in enacting the legislation.”
7 City of Albuquerque ex rel. Albuquerque Police Dep’t v. One (1) 1984 White Chevy
8 Ut., 2002-NMSC-014, ¶ 11, 132 N.M. 187, 46 P.3d 94 (internal quotation marks and
9 citation omitted). “In assessing Legislative intent, the reviewing court looks first to
10 the plain language of the statute, giving the words their ordinary meaning, unless the
11 Legislature indicates a different one was intended.” Zhao v. Montoya,
12 2014-NMSC-025, ¶ 18, 329 P.3d 676 (internal quotation marks and citation omitted).
13 However, “we look not only to the language used in the statute, but also to the object
14 sought to be accomplished and the wrong to be remedied.” Starko v. Presbyterian
15 Health Plan, Inc., 2012-NMCA-053, ¶ 20, 276 P.3d 252 (internal quotation marks
16 and citation omitted), rev’d on other grounds by Starko v. N.M. Human Servs. Dep’t,
17 2014-NMSC-033, ¶¶ 2, 42, 333 P.3d 947.
18 {29} The specific legislative designation of FATA proceedings and penalties as
18 1 “civil” indicates that the Legislature intended to craft a civil statute. FATA
2 consistently uses the term “civil action” when referring to the proceedings brought
3 under the statute. See § 44-9-4(A) (allowing the Attorney General to “bring a civil
4 action . . . pursuant to the Fraud Against Taxpayers Act”); § 44-9-4(B) (allowing the
5 Attorney General to “delegate the authority to . . . bring a civil action to the state
6 agency to which a false claim was made”); § 44-9-5(A) (allowing a qui tam plaintiff
7 to “bring a civil action for a violation of Section 3 of the Fraud Against Taxpayers
8 Act on behalf of the person and the state” (internal citation omitted)); § 44-9-12(A)
9 (“A civil action pursuant to the Fraud Against Taxpayers Act may be brought at any
10 time.” (internal citation omitted)). Furthermore, FATA is placed within the section
11 of the New Mexico Statutes Annotated entitled “Miscellaneous Civil Law Matters.”
12 See §§ 44-9-1 to -14; Kansas v. Hendricks, 521 U.S. 346, 361 (1997) (“Kansas’
13 objective to create a civil proceeding is evidenced by its placement of the Act within
14 the Kansas probate code, instead of the criminal code.”). In addition, not a single
15 section of FATA specifies or punishes criminal conduct. See State v. Kirby, 2003-
16 NMCA-074, ¶ 25, 133 N.M. 782, 70 P.3d 772 (finding that the Securities Act has a
17 remedial purpose in part because “only one section specifies criminal conduct”).
18 Finally, the penalties imposed under FATA are designated as “civil.” See §
19 1 44-9-3(C)(2).
2 {30} We recognize that “in New Mexico, the fact that the Legislature . . . chose[] to
3 label a proceeding ‘civil’ or ‘criminal’ is not dispositive of the true nature of that
4 proceeding,” see State v. Nuñez, 2000-NMSC-013, ¶ 46, 129 N.M. 63, 2 P.3d 264,
5 and cannot “be utilized to defeat the applicable protections of constitutional law.”
6 See N.M. Taxation & Revenue Dep’t v. Whitener, 1993-NMCA-161, ¶ 12, 117 N.M.
7 130, 869 P.2d 829 (discussing with approval the holding of United States v. Halper,
8 490 U.S. 435, 447-48 (1989), abrogated by Hudson v. United States, 522 U.S. 93, 95,
9 100–03 (1997)).
10 {31} Looking beyond the “civil” label to the overall purpose of the statute, we
11 determine that the Legislature intended FATA to be remedial in nature. Consistent
12 with other remedial statutes, FATA compensates the State for losses incurred as a
13 result of fraud and encourages qui tam plaintiffs to bring civil actions to root out
14 fraud. See § 44-9-7(B) (entitling qui tam plaintiff to up to thirty percent of the
15 proceeds of the action or settlement), (E) (“The state is entitled to all proceeds
16 collected in an action or settlement not awarded to a qui tam plaintiff.”); see also
17 Quynh Truong v. Allstate Ins. Co., 2010-NMSC-009, ¶ 30, 147 N.M. 583, 227 P.3d
18 73 (stating that the Unfair Practices Act which allows treble damages for persons
20 1 damaged by unfair, deceptive, and unconscionable trade practices “constitutes
2 remedial legislation”); Kirby, 2003-NMCA-074, ¶ 23 (“The Securities Act . . . has
3 remedial purpose. . . . Its . . . provisions are aimed at protecting investors against
4 unfair, deceptive, and fraudulent practices in the sale of securities.”).
5 {32} It is clear that the Legislature intended FATA to be a civil, remedial statute.
6 However, even when “the intention was to enact a regulatory scheme that is civil and
7 nonpunitive, we must further examine whether the statutory scheme is so punitive
8 either in purpose or effect as to negate the State’s intention to deem it civil.” Smith
9 v. Doe, 538 U.S. 84, 92 (2003) (internal quotation marks and citation omitted, internal
10 alteration omitted).
11 [T]he court must determine whether the sanction established by the 12 legislation was sufficiently punitive in its effect that, on balance, the 13 punitive effects outweigh the remedial effect. Although a civil penalty 14 may cause a degree of punishment for the defendant, such a subjective 15 effect cannot override the legislation’s primarily remedial purpose.
16 White Chevy, 2002-NMSC-014, ¶ 11 (internal citations omitted).
17 D. The Civil Remedies under FATA are Predominantly Compensatory
18 {33} The actual sanctions imposed under FATA include liability for the costs of a
19 civil action and reasonable attorneys’ fees for both the State and the qui tam plaintiff;
20 a civil penalty of between five thousand and ten thousand dollars per violation; and
21 1 “three times the amount of damages sustained by the state.” See § 44-9-3(C)(1). With
2 regard to the retroactive effect of an award of the costs of bringing the qui tam action
3 and attorneys’ fees, we agree with the Court of Appeals that both “would fall under
4 the rubric of compensating for government losses.” Foy, 2013-NMCA-043, ¶ 28.
5 We therefore turn to the retroactive effect of FATA’s treble damages and civil
6 penalties. We hold that treble damages under FATA are predominantly compensatory
7 and may be applied retroactively. We hold that the nature of the civil penalties under
8 FATA cannot be determined until after penalties are assessed.
9 1. Treble Damages
10 {34} Historically, New Mexico has followed the seven-factor test set forth in
11 Kennedy v. Mendoza-Martinez, 372 U.S. 144, 168 (1963), to determine whether a
12 statute has a punitive effect. See Druktenis, 2004-NMCA-032, ¶ 30 (“[O]ur New
13 Mexico Supreme Court referred to the Mendoza-Martinez framework as ‘the test’ in
14 determining whether a statute is intended as punitive rather than remedial.” (quoting
15 White Chevy, 2002-NMSC-014, ¶ 11)); see also State v. Block, 2011-NMCA-101,
16 ¶¶ 36-46, 150 N.M. 598, 263 P.3d 940 (analyzing civil penalty under Voter Action
17 Act); Kirby, 2003-NMCA-074, ¶¶ 27-39 (analyzing civil penalty under Securities
18 Act). These factors are:
22 1 1) whether the sanction involves an affirmative disability or restraint; 2 2) whether it has historically been regarded as a punishment; 3 3) whether it comes into play only on a finding of scienter; 4 4) whether its operation will promote the traditional aims of 5 punishment—retribution and deterrence; 6 5) whether the behavior to which it applies is already a crime; 7 6) whether an alternative purpose to which it may rationally be 8 connected is assignable to it; and 9 7) whether it appears excessive in relation to the alternative purpose 10 assigned.
11 Druktenis, 2004-NMCA-032, ¶ 31. While these factors may “provide useful
12 guideposts,” Hudson, 522 U.S. at 99, they are “neither exhaustive nor dispositive,”
13 Smith, 538 U.S. at 97 (internal quotation marks and citation omitted).
14 {35} In regard to the nature of treble damages, recent United States Supreme Court
15 opinions do not refer to the Mendoza-Martinez factors, but simply examine whether
16 such damages are predominantly compensatory or predominantly punitive. See, e.g.
17 Pacificare Health Sys., Inc. v. Book, 538 U.S. 401, 405 (2003) (acknowledging that
18 U.S. Supreme Court cases “have placed different statutory treble damages provisions
19 on different points along the spectrum between purely compensatory and strictly
20 punitive awards”); Cook Cnty. v. United States ex rel. Chandler, 538 U.S. 119, 129-
21 33 (2003) (acknowledging that treble damages under the FCA have compensatory and
22 punitive traits, but concluding that, on balance, such damages are not essentially
23 1 punitive). In doing so, the Court has looked largely at the purpose of the legislation
2 and the purpose of the treble damages. See, e.g., Agency Holding Corp. v. Malley-
3 Duffy & Assocs., Inc., 483 U.S. 143, 151 (1987) (holding that RICO is “designed to
4 remedy economic injury by providing for the recovery of treble damages, costs, and
5 attorney’s fees.”); Am. Soc’y of Mech. Eng’rs, Inc. v. Hydrolevel Corp., 456 U.S. 556,
6 575-76 (1982) (holding that an antitrust private action “was created primarily as a
7 remedy for the victims of antitrust violations . . . ” and that “treble damages serve as
8 a means of deterring antitrust violations and of compensating victims”); Brunswick
9 Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 485 (1977) (holding the treble
10 damages under the Clayton Act “is designed primarily as a remedy”).
11 {36} Given recent U.S. Supreme Court precedent, we believe this restorative
12 approach is more appropriate in determining the retroactive effect of FATA.
13 Therefore, if the primary purpose of treble damages under FATA is punitive, then
14 they should be not be applied retroactively. Cf. Ordunez, 2012-NMSC-024, ¶ 14
15 (“The Ex Post Facto Clause flatly prohibits retroactive application of penal
16 legislation.” (internal quotation marks and citation omitted)). If the primary purpose
17 of treble damages is remedial, then they should be upheld. Cf. Foy, 2013-NMCA-
18 043, ¶ 11 (“The prohibition does not apply to penalties that are considered remedial
24 1 in nature.”).
2 {37} The U.S. Supreme Court has passed upon the nature of treble damages under
3 the analogous federal FCA, see 31 U.S.C. § 3729(a)(1) (holding violators liable for
4 civil penalties “plus 3 times the amount of damages which the Government sustains
5 because of the act of that person”), on at least two occasions. In Vermont Agency of
6 Natural Resources, the Court held that a state was not a “person” for purposes of qui
7 tam liability under the FCA. See 529 U.S. at 787-88. Although this case did not
8 analyze the ex post facto implications of treble damages under the FCA, the Court
9 was required to address whether treble damages are punitive in nature in determining
10 whether states are subject to qui tam liability under the FCA. See id. at 783, 84-85
11 (“Several features of the current statutory scheme . . . support the conclusion that
12 States are not subject to qui tam liability [including treble damages].”). The Court
13 concluded that “the FCA imposes damages that are essentially punitive in nature,
14 which would be inconsistent with state qui tam liability in light of the presumption
15 against imposition of punitive damages on governmental entities.” Id. at 784-85. The
16 Court stated, “‘[t]he very idea of treble damages reveals an intent to punish past, and
17 to deter future, unlawful conduct, not to ameliorate the liability of wrongdoers.’” See
18 id. at 786 (quoting Tex. Indus., Inc. v. Radcliff Materials, Inc., 451 U.S. 630, 639
25 1 (1981)). While these statements indicate that treble damages under FATA may be
2 similarly punitive, the U.S. Supreme Court has since distinguished Vermont Agency
3 of Natural Resources.
4 {38} In Cook County, a unanimous U.S. Supreme Court held that municipal
5 corporations are “persons” for purposes of qui tam liability under the FCA. The
6 municipal defendant argued that it was not subject to liability in part because the FCA
7 imposes damages that are punitive in nature. See 538 U.S. at 129. The Court
8 disagreed, distinguishing its earlier statements from Vermont Agency of Natural
9 Resources.: “While the tipping point between payback and punishment defies general
10 formulation, being dependent on the workings of a particular statute and the course
11 of particular litigation, the facts about the FCA show that the damages multiplier has
12 compensatory traits along with the punitive.” Cook County, 538 U.S. at 130.
13 {39} We hold that the facts about FATA demonstrate that its treble damages feature
14 possesses predominantly compensatory traits. Under FATA, one-third of the treble
15 damages award is allocated to compensate the government for its loss. See § 44-9-
16 7(E)(1) (requiring “proceeds in the amount of the false claim paid” to be returned to
17 the fund from which it came). This portion of the damage award is, by definition,
18 compensatory. See Black’s Law Dictionary 394 (7th ed. 1999) (defining
26 1 “compensatory damages” as “[d]amages sufficient in amount to indemnify the injured
2 person for the loss suffered.”).
3 {40} Up to another thirty percent of the damage award is allocated to reward the qui
4 tam plaintiff for exposing fraud and corruption in state government. See § 44-9-7(B)
5 (entitling qui tam plaintiff to between 25 and 30 percent of the proceeds of the action
6 or settlement if the State does not proceed with an action brought by a qui tam
7 plaintiff and the State prevails in the action). The importance of this potential qui tam
8 award under FATA should not be overlooked. Both this Court and the U.S. Supreme
9 Court have held that a qui tam award as part of a treble damages scheme is remedial
10 in nature. In Denison v. Tocker, 1951-NMSC-022, ¶¶ 11, 17, 55 N.M. 184, 229 P.2d
11 285, we held that the federal Housing and Rent Act, 50 U.S.C. Appendix, 1895 (1947,
12 amended 1949) “is highly remedial, and the plain purpose of . . . authorizing recovery
13 of three times the amount of an overcharge was to enlist the help of tenants by
14 soliciting their aid in filing suits against overcharging landlords.” In Cook County,
15 the U.S. Supreme Court also stressed the importance of a qui tam award within the
16 treble damages scheme of the FCA. According to the Court:
17 The most obvious indication that the treble damages ceiling has a 18 remedial place under this statute is its qui tam feature with its possibility 19 of diverting as much as 30 percent of the Government’s recovery to a
27 1 private relator who began the action. In qui tam cases the rough 2 difference between double and triple damages may well serve not to 3 punish, but to quicken the self-interest of some private plaintiff who can 4 spot violations and start litigating to compensate the Government, while 5 benefiting himself as well. The treble feature thus leaves the remaining 6 double damages to provide elements of make-whole recovery beyond 7 mere recoupment of the fraud.
8 538 U.S. at 131(citation omitted). Therefore, we hold that the qui tam provisions of
9 FATA are compensatory.
10 {41} Having determined that actual damages and a potential qui tam award under
11 FATA are compensatory, it follows that at least two-thirds of the treble damages
12 under FATA are compensatory. See Hess, 317 U.S. at 551-52 (holding that “the chief
13 purpose” of the earlier version of the FCA “was to provide for restitution to the
14 government of money taken from it by fraud, and that the device of double damages
15 plus a specific sum was chosen to make sure that the government would be made
16 completely whole.”). However, as Cook County suggests, the remaining
17 approximately one-third of the treble damages under FATA also serve remedial
18 purposes by encouraging more qui tam plaintiffs to root out fraud. We agree.
19 {42} Our conclusion is further bolstered by the allocation of the remaining damages
20 under FATA. Under FATA, half of the remaining one-third of the damage award is
21 allocated to fund the attorney general’s anti-corruption efforts. See § 44-9-7(E)(3).
28 1 The other half is deposited in the state’s general fund. See id. “There is no question
2 that some liability beyond the amount of the fraud is usually necessary to compensate
3 the Government completely for the costs, delays, and inconveniences occasioned by
4 fraudulent claims.” Cook County, 538 U.S. at 130 (internal quotation marks and
5 citations omitted). Furthermore, the government’s injury includes “not merely the
6 amount of the fraud itself, but also ancillary costs, such as the costs of detection and
7 investigation, that routinely attend the Government’s efforts to root out deceptive
8 practices at the public purse.” Id. at 130-131 (quoting Halper, 490 U.S. at 445
9 (internal quotation marks omitted)). Allocating a portion of the recovery to the
10 attorney general helps to offset these costs. See NMSA 1978, § 44-9-7(E)(3)(a).
11 {43} Finally, when people or businesses commit fraud against the State, it deprives
12 taxpayers of the use of funds for essential government services. The loss of use of
13 money to fraudulent claims are the types of consequential damages not otherwise
14 recoverable under FATA, which justify the conclusion that treble damages under
15 FATA are predominantly compensatory. As noted by the U.S. Supreme Court in
16 Cook County, “[t]he treble damages provision [under the FCA] was, in a way,
17 adopted by Congress as a substitute for consequential damages.” 538 U.S. at 131 n.9.
18 In a similar fashion, allocating a portion of the treble damages award under FATA to
29 1 the general fund helps address consequential damages resulting from fraud. See
2 NMSA 1978, § 44-9-7(E)(3)(b).
3 {44} In conclusion, we hold that treble damages under FATA are predominantly
4 compensatory. As such, treble damages do not violate the ex post facto clause and
5 may be awarded for conduct occurring prior to the effective date of FATA.
6 2. Civil Penalties
7 {45} A person who violates FATA is liable for “a civil penalty of not less than five
8 thousand dollars ($5,000) and not more than ten thousand dollars ($10,000) for each
9 violation.” § 44-9-3(C)(2). Civil penalties are deposited in the current school fund.
10 See § 44-9-7(E)(2). In terms of the retroactive effect of civil penalties, the Court of
11 Appeals concluded that, “in the absence of compensatory purposes, [civil penalties]
12 exhibit the qualities of deterrence and retribution intended to punish the offender.”
13 Foy, 2013-NMCA-043, ¶ 28. Because the civil penalties under FATA possess
14 predominantly compensatory purposes, we disagree.
15 {46} As a general matter, “monetary assessments are traditionally a form of civil
16 remedy.” See Kirby, 2003-NMCA-074, ¶ 31 (internal quotation marks and citation
17 omitted). “[N]either money penalties nor debarment has historically been viewed as
18 punishment.” Hudson, 522 U.S. at 104. However, the imposition of monetary
30 1 penalties has a deterrent purpose. See State ex rel. Schwartz v. Kennedy, 1995-
2 NMSC-069, ¶ 38, 120 N.M. 619, 904 P.2d 1044 (“[M]onetary sanctions, such as fines
3 or forfeitures, are qualitatively different from other types of administrative sanctions
4 because of their distinctly punitive purposes.”); see also Hudson, 522 U.S. at 105
5 (“Finally, we recognize that the imposition of both money penalties and debarment
6 sanctions will deter others from emulating petitioners’ conduct, a traditional goal of
7 criminal punishment.”). Nevertheless, “[a]lthough a civil penalty may cause a degree
8 of punishment for the defendant, such a subjective effect cannot override the
9 legislation’s primarily remedial purpose.” White Chevy, 2002-NMSC-014, ¶ 11. In
10 addition, “[deterrence] may be a valid objective of a regulatory statute,” Id. ¶ 14
11 (internal quotation marks and citation omitted), and “the mere presence of this
12 purpose is insufficient to render a sanction criminal, as deterrence may serve civil as
13 well as criminal goals.” Hudson, 522 U.S. at 105 (internal quotation marks and
14 citation omitted); see also Schwartz, 1995-NMSC-069, ¶ 37 (“[T]he fact that the
15 regulatory scheme has some incidental deterrent effect does not render the sanction
16 punishment . . . .”). Therefore, a monetary sanction has a “deterrent or retributive
17 purpose if it is not designed to compensate the government for its losses.” Id. ¶ 38.
18 {47} The U.S. Supreme Court has found that civil penalties under an earlier version
31 1 of the federal FCA are compensatory. In Hess, the U.S. Supreme Court held that
2 “the chief purpose of the statutes here was to provide for restitution to 3 the government of money taken from it by fraud, and that the device of 4 double damages plus a specific [penalty] sum [$2,000 per claim] was 5 chosen to make sure that the government would be made completely 6 whole.”
7 317 U.S. at 551-52. In Vermont Agency of Natural Resources, however, the U.S.
8 Supreme Court stated that the earlier version of the Fraud Claims Act which imposed
9 a civil penalty of only $2,000 per claim was remedial rather than punitive, while the
10 current version authorizing civil penalties of up to $10,000 per claim is punitive. 529
11 U.S. at 784-85. The Supreme Court was not clear, however, where on the given
12 spectrum ($2,000 to $10,000) the penalty moves from remedial in effect to punitive.
13 {48} The New Mexico appellate courts have found civil penalties in the amount of
14 $5,000 to be predominantly restorative. In Kirby, the New Mexico Securities
15 Division assessed $75,000 in fines against the defendant for violations of the former
16 New Mexico Securities Act. See 2003-NMCA-074, ¶ 5. The former Act authorized
17 that the director of the Securities Division to “issue an order against an applicant,
18 licensed person or other person who violates the act, imposing a civil penalty up to
19 a maximum of five thousand dollars ($5,000) for each violation.” §
20 58–13B–37(B)(4) (1993). The Court of Appeals “conclude[d] that the civil penalty
32 1 imposed upon Defendant in this matter was not sufficiently punitive in its effect that,
2 on balance, the punitive effect outweighed its remedial effect.” Kirby, 2003-NMCA-
3 074, ¶ 39.
4 {49} Turning specifically to FATA, the imposed penalty ranges from $5,000 to
5 $10,000 per violation, leaving the exact award to the discretion of the trial judge. §
6 44-9-3(C)(2). It is, therefore, conceivable that the amount awarded in civil penalties
7 could be punitive in effect, particularly if the trial judge awards the maximum
8 $10,000 per violation. See Vt. Agency of Natural Res., 529 U.S. at 785; see also
9 Hudson, 522 U.S. at 103 (“The Eighth Amendment protects against excessive civil
10 fines, including forfeitures.”). It is equally conceivable that a lesser award would not
11 be considered punitive. It is not practical to make that determination without
12 knowing the actual amount assessed with full briefing on appeal addressed to a
13 specific dollar figure. See Boese, supra, § 3.06(D) (“While a constitutional challenge
14 to disproportionate damages and penalties is a legitimate issue to be raised in many
15 FCA cases, the issue normally cannot be determined until after the trial verdict
16 regarding actual damages.”). We therefore decline to resolve the issue of whether the
17 civil penalties awarded under FATA are punitive and violate ex post facto principles
18 until there is a definitive amount awarded.
33 1 CONCLUSION
2 {50} We hold that FATA is constitutional. The judgment of the district court is
3 affirmed in part and reversed in part. We remand the consolidated matter to the
4 district court for further proceedings consistent with this Opinion.
5 {51} IT IS SO ORDERED.
6 ____________________________________ 7 PETRA JIMENEZ MAES, Justice
8 WE CONCUR:
9 _________________________________ 10 RICHARD C. BOSSON, Justice
11 _________________________________ 12 EDWARD L. CHÁVEZ, Justice
13 _________________________________ 14 CHARLES W. DANIELS, Justice
15 _________________________________ 16 M. MONICA ZAMORA, Judge 17 Sitting by designation
Related
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