State of N.M., ex rel Foy v. Austin Capital Mgmt., Ltd.

I attest to the accuracy and
integrity of this document
New Mexico Compilation
Commission, Santa Fe, NM
'00'04- 16:41:54 2013.03.27
Certiorari Granted, March 15, 2013, No. 34,013
IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
Opinion Number: 2013-NMCA-043Filing Date: December 26, 2012
Docket No. 31,421
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;
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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.
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
2
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, Berean
3
Capital, 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.
4
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
5
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 from
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the 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) (concluding
7
that 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 statutory and constitutional interpretation de novo.” State v.
Lucero, 2007-NMSC-041, ¶ 8, 142 N.M. 102, 163 P.3d 489, cert. granted, 2011-NMCERT-
011, 150 N.M. 560, 263 P.3d 902. In doing so, we “give no deference to [a] district court’s
conclusions of law.” Bounds v. State, 2011-NMCA-011, ¶ 33, 149 N.M. 484, 252 P.3d 708(internal quotation marks and citation omitted), certs. granted, 2011-NMCERT-001, 150
N.M. 560, 263 P.3d 902. Legislative enactments are presumed valid, and “we must uphold
such enactments unless we are satisfied beyond all reasonable doubt that the Legislature
went outside the bounds fixed by the Constitution in enacting the challenged legislation.”
Bounds, 2011-NMCA-011, ¶ 34 (internal quotation marks and citation omitted); see State
v. Segotta, 100 N.M. 498, 500, 672 P.2d 1129, 1131 (1983) (noting that “we presume [a]
statute to be constitutional”). We are guided by the “fundamental principle that courts will
not declare a legislative act unconstitutional if there is any reasonable basis upon which it
can be upheld.” Bounds, 2011-NMCA-011, ¶ 34 (internal quotation marks and citation
omitted). “[I]f a statute is susceptible to two constructions, one supporting it and the other
rendering it void, a court should adopt the construction which will uphold its
constitutionality.” Johnson v. N.M. Oil Conservation Comm’n, 1999-NMSC-021, ¶ 17, 127
N.M. 120, 978 P.2d 327 (internal quotation marks and citation omitted).
C. FATA and the False Claims Act
{7} FATA prohibits the acts of knowingly presenting a false claim for payment from the
State, presenting false records to obtain payment from the State, and making false statements
to obtain payment. See § 44-9-3(A). FATA was enacted in 2007 and tracks closely the
longstanding federal False Claims Act (FCA). Compare § 44-9-3, with 31 U.S.C.A. § 3729(2011). See also Pamela Bucy et al., States, Statutes, and Fraud: A Study of Emerging State
Efforts to Combat White Collar Crime, 31 Cardozo L. Rev. 1523, 1535 (2010) (noting that
most states’ false-claims statutes were passed in recent years, spurred by Congress’
“financial incentive for states to pass FCAs that mirror the federal FCA”). The federal act
was signed into law during the height of the Civil War, in 1863, by President Abraham
Lincoln as an effort to protect the Union cause by combating fraud in military supply
contracts. See S. Rep. 99-345, at 8 (1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5273. The
novelty of the original act was that it allowed a private individual, rather than the United
States government itself, to bring a qui tam1 action on behalf of the government. See Vt.
1
Qui tam is short for the British-inspired Latin phrase qui tam pro domino rege quam
pro se ipso in hac parte sequitur, or “who pursues this action on our Lord the King’s behalf
as well as his own.” Vt. Agency of Natural Res. v. United States, ex rel., Stevens, 529 U.S.
8
Agency of Natural Res., 529 U.S. at 769. As an incentive to act on behalf of the public good,
the individual who brings the suit under the FCA is eligible to receive as much as thirty
percent of the damages award or settlement. Id. at 769-70.
{8} Under FATA, any person who violates the statute is liable for “three times the
amount of damages sustained by the state[.]” Section 44-9-3. A qui tam plaintiff may
recover between ten percent and thirty percent of those proceeds. See § 44-9-7(A). The qui
tam plaintiff is entitled to between fifteen and twenty-five percent of the proceeds of a
successful action or settlement “depending upon the extent to which the qui tam plaintiff
substantially contributed to the prosecution of the action[.]” Section 44-9-7(A)(1). The
award shall be reduced to ten percent if “the action was based primarily on disclosures of
specific information, not provided by the qui tam plaintiff,” Section 44-9-7(A)(2); the award
to the qui tam plaintiff shall be raised to between twenty-five and thirty percent “[i]f the state
does not proceed with an action brought by a qui tam plaintiff and the state prevails in the
action[.]” Section 44-9-7(B). A successful qui tam plaintiff also is eligible to recover
attorney fees and court expenses, as is the State. Section 44-9-7(D).
{9} A unique aspect of New Mexico’s Act is that it applies retroactively, covering
conduct that occurred as far back as July 1, 1987. See § 44-9-12(A). Defendants contend
that the damages portion of the Act makes it penal in nature and that applying the statute
retroactively would violate the Ex Post Facto Clause, giving rise to this constitutional
challenge.
D. Ex Post Facto Laws
{10} Ex Post Facto laws are prohibited by the United States and New Mexico
Constitutions. See U.S. Const. art. 1, § 10, cl. 1; N.M. Const. art. 2, § 19; State v. Norush,
97 N.M. 660, 661, 642 P.2d 1119, 1120 (Ct. App. 1982). “The Latin phrase ‘ex post facto’
implicates in its literal meaning any law passed ‘after the fact.’ ” State v. Orduñez, 2012-
NMSC-024, ¶ 14, 283 P.3d 282. The Ex Post Facto Clause (the Clause) is violated when a
statute involving retroactivity is passed that “make[s] criminal a previously innocent act,
increase[s] the punishment, or change[s] the proof necessary to convict the defendant.” Id.“One of the purposes of the ex post facto prohibition is to ensure that the accused individual
receives fair notice of the crime and its punishment.” State v. Adam M., 1998-NMCA-014,
¶ 8, 124 N.M. 505, 953 P.2d 40.
{11} Thus, before a court may allow a statute to be applied retroactively, it must determine
“whether doing so would violate constitutional prohibitions against ex post facto laws.”
State v. Nunez, 2000-NMSC-013, ¶ 112, 129 N.M. 63, 2 P.3d 264. A key inquiry looks at
the nature of the punishment at issue because “the constitutional prohibition on ex post facto
laws applies only to penal statutes which disadvantage the offender affected by them.” Id.
765, 768 n.1 (2000).
9
(internal quotation marks and citation omitted). The prohibition does not apply to penalties
that are considered remedial in nature. See Nunez, 2000-NMSC-013, ¶ 145 (Serna, J.,
dissenting). Accordingly, we evaluate the type of penalties imposed by FATA.
E. Nature of Penalties
{12} Plaintiffs argue that FATA is safe from the reach of the Ex Post Facto Clause because
it is a civil statute and because the Clause applies only to criminal statutes. Noting that the
word “civil” is used nineteen times in the statute, Plaintiffs contend that FATA, as a “purely
civil statute,” imposes no penalties and does not run afoul of the Ex Post Facto Clause.
Plaintiffs appear to focus on the wording of the statute rather than on the nature of the
statute as a whole. Our Supreme Court has provided us with direction: “[I]n New Mexico,
the fact that the Legislature has chosen to label a proceeding ‘civil’ or ‘criminal’ is not
dispositive of the true nature of that proceeding.” Nunez, 2000-NMSC-013, ¶ 46; see State
v. Kirby, 2003-NMCA-074, ¶ 29, 133 N.M. 782, 70 P.3d 772 (disavowing the United States
Supreme Court’s opinions “that place heavy emphasis on the label attached by the legislative
body enacting the penalty”). Rather, it is the character of the statute itself that decides the
issue. “Generally, this means that the constitutional prohibition on ex post facto laws applies
only to penal statutes which disadvantage the offender affected by them.” Nunez, 2000-
NMSC-013, ¶ 112 (internal quotation marks and citation omitted).
{13} To the extent that Plaintiffs rely on cases they contend hold that the Ex Post Facto
Clause applies only to criminal statutes, we are not persuaded. For example, Plaintiffs claim
that the United States Supreme Court in Calder v. Bull, 3 U.S. 386 (1798), held that the
Clause applies only to criminal statutes. Calder was not so limited; it consisted of three
concurring opinions with one opinion concluding that “ex post facto laws . . . extend to penal
statutes” and “to the creation, and, perhaps, enhancement of crimes, pains and penalties.”
Id. at 397 (emphasis added). The United States Supreme Court has long re-established the
principle that the Ex Post Facto Clause applies to statutes that are penal rather than to
statutes that are exclusively criminal. See Trop v. Dulles, 356 U.S. 86, 96 (1958) (discussing
Calder and concluding that “these provisions apply only to statutes imposing penalties” and
reasoning that “[i]f the statute imposes a disability for the purposes of punishment—that is,
to reprimand the wrongdoer, to deter others, etc., it has been considered penal”). Plaintiffs
also quote extensively from Welch v. Henry, 305 U.S. 134 (1938), to support their contention
that courts afford deference to retroactive civil statutes. The Welch Court’s holding is
limited to the proposition that taxation is not considered a penalty and that retroactive
imposition of taxes is constitutionally sound. See id. at 146, 151.
{14} Under New Mexico jurisprudence, Plaintiffs rely on Colbert v. Journal Publishing
Co., 19 N.M. 156, 142 P. 146 (1914), to argue that our Supreme Court held that an award
of punitive damages in a civil case does not constitute punishment for a crime. The question
in Colbert was whether a tort plaintiff could be awarded punitive damages when that tort
also constitutes a crime. See id. at 168, 142 P.2d at 150. Although the Court concluded “that
a wrongful act punishable as an offense does not preclude exemplary damages therefor in
10
a civil act sounding in tort,” the case did not involve the Ex Post Facto Clause, and the Court
did not address the appropriateness of retroactive application of those exemplary damages.
Id. Therefore, Colbert does not provide guidance on the issue before us.
F. The Constitutionality of FATA
{15} Having established that the Ex Post Facto Clause applies to penal statutes, even those
labeled civil, we now turn to the question of whether retroactive application of FATA is
prohibited. In such an inquiry, the threshold question is whether “the intention of the
[L]egislature was to impose punishment.” Smith v. Doe, 538 U.S. 84, 92 (2003). “If,
however, the intention was to enact a regulatory scheme that is civil and nonpunitive, we
must further examine whether the statutory scheme is so punitive either in purpose or effect
as to negate the State’s intention to deem it civil.” Id. (alteration, internal quotation marks,
and citation omitted)). Our Supreme Court has outlined the analysis:
[T]he court must determine whether the sanction established by the
legislation was sufficiently punitive in its effect that, on balance, the punitive
effects outweigh the remedial effect. Although a civil penalty may cause a
degree of punishment for the defendant, such a subjective effect cannot
override the legislation’s primarily remedial purpose.
City of Albuquerque v. One (1) 1984 White Chevy Ut., 2002-NMSC-014, ¶ 11, 132 N.M.
187, 46 P.3d 94 (citations omitted).
{16} We will assume but not decide that the Legislature intended to craft a civil and
nonpunitive statute. We thus turn to the second part of the inquiry and determine whether
a statutory scheme like FATA’s is “punitive either in purpose or effect.” To do so we apply
the seven-factor test (Mendoza-Martinez analysis) set forth in State v. Druktenis, 2004-
NMCA-032, ¶ 30, 135 N.M. 223, 86 P.3d 1050 (adopting the test established in Kennedy v.
Mendoza-Martinez, 372 U.S. 144 (1963)). These factors are:
(1) [w]hether the sanction involves an affirmative disability or restraint[,] (2)
whether it has historically been regarded as a punishment[,] (3) whether it
comes into play only on a finding of scienter[,] (4) whether its operation will
promote the traditional aims of punishment—retribution and deterrence[,] (5)
whether the behavior to which it applies is already a crime[,] (6) whether an
alternative purpose to which it may rationally be connected is assignable for
it[,] and (7) whether it appears excessive in relation to the alternative purpose
assigned.
Kirby, 2003-NMCA-074, ¶ 28 (emphasis, internal quotation marks, and citation omitted).
We take the seven Mendoza-Martinez factors in turn. Before proceeding, we note that the
Vanderbilt court below tracked its reading of the seven factors with the analysis in United
States ex rel. Sanders v. Allison Engine Co., 667 F. Supp. 2d 747 (S.D. Ohio 2009). Since
11
the court’s decision below and after the briefing in this appeal, Allison Engine Co. has been
overturned by the Sixth Circuit, which reversed the federal district court’s finding that the
treble damages provision is punitive in nature and found instead that the sanctions are
remedial in nature. See 2012 WL 5373532, **12-14 (6th Cir. 2012) (unpublished). While
the Allison Engine Co. opinion was used as a guide by the Vanderbilt court below, we do not
rely on it. We instead take a broader view of federal case law and place more emphasis on
New Mexico case law.
1. Affirmative Disability or Restraint
{17} As to the first factor, the civil penalties imposed by FATA do not constitute an
affirmative disability or restraint. We conclude that the monetary damages here do not
“approach[] the infamous punishment of imprisonment” or “carry the stigma of a criminal
conviction.” Kirby, 2003-NMCA-074, ¶ 30 (finding that the Securities Act is more remedial
than punitive under the first factor) (alteration in original) (internal quotation marks and
citation omitted). This factor falls in favor of finding FATA to be remedial in nature.
2. Historically Regarded as Punishment
{18} While we noted in Kirby that “monetary assessments are traditionally a form of civil
remedy,” id. ¶ 31 (internal quotation marks and citation omitted), in the case before us, we
are dealing with treble damages, a unique form of monetary penalty. Our appellate courts
have not squarely decided the issue of whether treble damages are historically regarded as
punishment and we therefore turn to federal law for guidance.
{19} “The very idea of treble damages reveals an intent to punish past, and to deter future,
unlawful conduct, not to ameliorate the liability of wrongdoers.” Texas Indus., Inc. v.
Radcliff Materials, Inc., 451 U.S. 630, 639 (1981); see United States ex rel. Baker v. Cmty.
Health Sys., Inc., 709 F. Supp. 2d 1084, 1112 (D.N.M. 2010) (finding that FCA sanctions,
including treble damages, “have historically been regarded, at least in part, as punitive”);
Louis Vuitton S.A. v. Spencer Handbags Corp., 765 F.2d 966, 970-72 (2d Cir.1985) (stating
that the punitive nature of the treble damages provision in the Trademark Counterfeiting Act
of 1984 could raise ex post facto concerns). By contrast, in areas outside the realm of the
FCA, the United States Supreme Court has found some treble damages provisions to be
remedial in nature. See, e.g., PacifiCare Health Sys., Inc. v. Book, 538 U.S. 401, 406 (2003)
(finding the treble damages in the RICO racketeering statute to be remedial); Shearson/Am.
Express, Inc. v. McMahon, 482 U.S. 220, 240-41 (1987) (same); Brunswick Corp. v. Pueblo
Bowl-O-Mat, Inc., 429 U.S. 477, 485 (1977) (describing Section 4 of the Clayton Act
regulating antitrust behavior to be “in essence a remedial provision”). However, even in the
antitrust realm, where treble damages awards have been a fixture for more than a century,
the Court has stated that “treble damages were designed in part to punish past violations of
the antitrust laws” and “serve as a means of deterring antitrust violations and of
compensating victims.” Am. Soc’y of Mech. Eng’rs, Inc. v. Hydrolevel Corp., 456 U.S. 556,
575-76 (1982) (emphasis added). Even a nearly seventy-year-old case relied on by
12
Plaintiffs, United States ex rel. Marcus v. Hess, 317 U.S. 537, 550 (1943), which found the
old double damages provision of the FCA to be a form of restitution to make the government
whole, suggested that a treble damages award might cross over into the nature of punitive
damages.
{20} We thus focus solely on treble damages provisions under the FCA. Notwithstanding
case law to the contrary, Plaintiffs rely on the United States Supreme Court’s recent
discussion of treble damages, Cook County, Illinois v. United States ex rel. Chandler, 538
U.S. 119 (2003), for the proposition that monetary damages such as those found in the FCA
“have historically and traditionally been treated as civil remedies.” It is notable that
Chandler, while an FCA case, dealt with neither the Ex Post Facto Clause nor the idea of
double jeopardy; instead, its sole question was whether municipalities qualified as “persons”
subject to qui tam actions under the act. Id. at 122. Thus, the Court was not concerned, as
we are here, with weighing the punitive aspects of the FCA against its remedial aspects;
rather, the Chandler Court was focused on whether the statute had any remedial aspects
whatsoever, which would justify upholding the longstanding presumption that municipalities
were subject to the FCA despite amendments made by Congress in 1986. Id. at 133. The
Chandler Court did not disavow its earlier opinion in Vermont Agency of Natural Resources,
which characterized the FCA as punitive; the Court merely noted that “it is important to
realize that treble damages have a compensatory side, serving remedial purposes in addition
to punitive objectives.” Chandler, 538 U.S. at 130 (emphasis added). The Court stated that
“the treble damages ceiling has a remedial place under this statute” and concluded that “the
force of th[e] punitive nature in arguing against municipal liability is not as robust as if it
were a pure penalty in all cases.” Id. at 131-32. Thus, Chandler did not balance the punitive
and remedial qualities of the FCA’s treble damages provision.
{21} Although not binding on this Court, we find persuasive the federal courts that have
concluded that the treble damages provision of the FCA is sufficiently punitive so as to bar
retroactive application of its damages. See, e.g., Cmty. Health Sys., Inc., 709 F. Supp. 2d at
1110; United States ex rel. Burlbaw v. Orenduff, 548 F.3d 931, 956 n.24 (10th Cir. 2008);
United States ex rel. Sikkenga v. Regence Bluecross Blueshield, 472 F.3d 702, 734 (10th Cir.
2006) (Hartz, J., concurring in part, dissenting in part) (“The Act is punitive in two respects.
The availability of treble damages, even though it has a compensatory side, also has a
punitive character[.] In addition, [Section] 3729(a)(7) of the Act provides for a penalty of
$5,000 to $10,000 regardless of actual damages.” (internal quotation marks and citations
omitted)); Massachusetts v. Schering-Plough Corp., 779 F. Supp. 2d 224, 233 (D. Mass.
2011) (same); United States v. Hawley, 812 F. Supp. 2d 949, 958-59 (N.D. Iowa 2011). But
see United States ex rel. Drake v. NSI, Inc., 736 F. Supp. 2d 489, 500 (D. Conn. 2010)
(stating that the FCA’s sanctions have “been primarily viewed as civil” over the years).
{22} New Mexico’s approach to multiplied damages also finds such sanctions to be
punitive in nature, albeit under different statutes and in different contexts. See Hale v. Basin
Motor Co., 110 N.M. 314, 320, 795 P.2d 1006, 1012 (1990) (stating that the
“[m]ultiplication of damages pursuant to statutory authority [such as the Unfair Practices
13
Act] is a form of punitive damages” and barring the award of both statutory treble damages
and common law punitive damages because both are punitive in nature); Blake v. Hoover
Motor Co., 28 N.M. 371, 374, 212 P. 738, 739 (1923) (dismissing as “harsh” the treble
damages provision of the ancient statute of Gloucester punishing a tenant for waste);
Chavarria v. Fleetwood Retail Corp., 2005-NMCA-082, ¶ 45, 137 N.M. 783, 115 P.3d 799(expressing “difficulty discerning any appreciable difference in the levels of proof” between
a treble damages award under the Unfair Practices Act and common law punitive damages),
rev’d in part on other grounds by 2006-NMSC-046, 140 N.M. 478, 143 P.3d 717;
McLelland v. United Wisconsin Life Ins. Co., 1999-NMCA-055, ¶¶ 10, 25, 127 N.M. 303,
980 P.2d 86 (citing Hale for the proposition that the trebling of a damages award “ordered
by the court is a form of punitive damages” and taking note of the argument from one party
that “the only punitive damages that could be awarded under the [Unfair Practices Act] were
the treble damages that could be awarded by the court”); Roberts v. Am. Warranty Corp.,
514 A.2d 1132, 1135 (Del. Super. Ct. 1986) (concluding that “the provision for treble
damages is a form of punitive damages”).
{23} Based on federal court analysis of the FCA and our case law involving statutes with
multiplied damage provisions, we conclude that a treble damages award is mostly punitive
in nature. Accordingly, this factor favors a determination that FATA’s treble damages
provision is penal in nature.
3. Finding of Scienter Required
{24} FATA requires a finding of scienter. Under the statute, a person may not:
“knowingly present, or cause to be presented . . . a false or fraudulent claim for payment or
approval”; “knowingly make or use . . . a false, misleading or fraudulent record or
statement”; “knowingly buy . . . public property from any person that may not lawfully sell
or pledge the property”; “knowingly make or use . . . a false, misleading or fraudulent record
or statement to conceal, avoid or decrease an obligation to pay or transmit money or property
to the state”; or “conspire to defraud the state” or “conspire to make . . . a false, misleading
or fraudulent record.” Section 44-9-3(A) (emphasis added). Accordingly, FATA sanctions
apply only on a finding of scienter, and this factor falls in favor of finding FATA to be penal
in nature.
4. Promote the Traditional Aims of Punishment
{25} Punishment is commonly assumed to include the twin components of deterrence and
retribution. In New Mexico, “[d]eterrence is a way of using the punishment of a defendant
as an example to others who might be tempted to commit the same crime. It is an
announcement to the world of the consequences for those who are caught committing the
prohibited act.” Nunez, 2000-NMSC-013, ¶ 85. A deterrent “must amount to more than
recompense or restitution.” Id. (internal quotation marks and citation omitted). “If it is clear
that the sanction greatly exceeds the quantum of harm, then it is punitive. Id. ¶ 89.
14
{26} As noted above, the United States Supreme Court has concluded that treble damages
represent “an intent to punish past, and to deter future, unlawful conduct.” Texas Indus.,
Inc., 451 U.S. at 639 (emphasis added) (internal quotation marks and citation omitted); see
Am. Soc’y of Mech. Eng’rs, Inc., 456 U.S. at 575 (observing that treble damages were
“designed in part to punish past violations of the antitrust law” and “also designed to deter
future antitrust violations” (emphasis added)); Perma Life Mufflers, Inc. v. Int’l Parts Corp.,
392 U.S. 134, 139 (1968) (stating that “the purposes of the antitrust laws are best served by
insuring that the private action will be an ever-present threat to deter anyone contemplating
business behavior in violation of the antitrust laws” (emphasis added)), overruled on other
grounds by Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (1984).
{27} Those declarations, however, do not end the inquiry because “the fact that the
regulatory scheme has some incidental deterrent effect does not render the sanction
punishment.” State ex rel. Schwartz v. Kennedy, 120 N.M. 619, 633, 904 P.2d 1044, 1058
(1995). “A monetary sanction . . . must be described as having a deterrent or retributive
purpose if it is not designed to compensate the government for its losses.” Id. at 634, 904
P.2d at 1059 (emphasis omitted). More recently, our Supreme Court again cautioned that
civil damages awards, in order to be considered remedial, must be in proportion to the losses
suffered. See Nunez, 2000-NMSC-013, ¶ 87 (“A statute that attempted to, for example,
recompense the government for its investigation and prosecution costs, would devise a fine
that reasonably approximated the dollar amount of the government’s efforts, based upon past
average expenditures.”).
{28} We now look to the damages available to Plaintiffs under FATA to see if the
sanctions exceed the government’s losses and regulatory costs. The statute provides:
A person who violates Subsection A of this section shall be liable for:
(1) three times the amount of damages sustained by the state because
of the violation;
(2) a civil penalty of not less than five thousand dollars ($5,000) and
not more than ten thousand dollars ($10,000) for each violation;
(3) the costs of a civil action brought to recover damages or penalties;
and
(4) reasonable attorney fees, including the fees of the attorney general
or state agency counsel.
Section 44-9-3(C). Before even considering the impact and disbursement of treble damages,
we note that a successful plaintiff is entitled to recover attorney fees and the costs of
bringing a qui tam action, both of which would fall under the rubric of compensating for
government losses. However, we cannot say the same for the treble damages provision or
15
the “civil penalty” of up to $10,000 per violation. Such obvious penalties, in the absence of
compensatory purposes, exhibit the qualities of deterrence and retribution intended to punish
the offender.
{29} As to the treble damages award, one-third goes toward compensating the government
for its loss. Almost, but not all of, another third (up to thirty percent) could go toward
rewarding the qui tam plaintiff. The destination of the final third proves more troublesome.
The United States Supreme Court has suggested that, with respect to the FCA, the final third
could represent compensatory damages and prejudgment interest on the principal amount.
See Chandler, 538 U.S. at 131. We find several problems with that line of reasoning as
applied to the facts before us: (1) it is an amorphous calculation that cannot be established
in general for all cases; (2) FATA separately allows for reimbursement of all costs incurred
in bringing an action, including attorney fees; (3) FATA does not allow damages for
prejudgment interest; (4) even if the final third were purely compensatory in nature, that
would leave the additional fines of up to $10,000 per violation unaccounted for.
{30} In sum, because FATA’s wide-ranging sanctions go beyond merely compensating
the government for its losses and costs of recoupment, a portion of the potential damages
award has a deterrent or retributive purpose. Kennedy, 120 N.M. at 633-34, 904 P.2d at
1058-59. This factor, then, falls in favor of finding FATA to be punitive in nature.
5. Behavior Already a Crime
{31} Our previous cases involving double jeopardy claims suggest that when the behavior
being punished is already a crime it points in favor of finding the statute to be punitive in
nature under the Mendoza-Martinez test. See Druktenis, 2004-NMCA-032, ¶ 32; Kirby,
2003-NMCA-074, ¶ 35. Here, the bringing of a qui tam civil action does not preclude the
state from pursuing a criminal complaint alleging fraud based on the same set of facts. See
§§ 44-9-6(G), (H); -7(C)(2); -9(C); -12(B). Indeed, FATA’s remedies “are not exclusive and
shall be in addition to any other remedies provided for in any other law.” Section 44-9-14.
As Plaintiff admits, FATA prohibits the same actions that give rise to not only the torts of
fraud and reckless misrepresentation but also criminal penalties, such as criminal fraud,
NMSA 1978, § 30-16-6 (2006), and securities fraud, NMSA 1978, § 58-13C-508 (2009).
{32} This factor falls in favor of finding FATA to be punitive in nature.
6. Alternative Purpose
{33} A statute may be considered more remedial than punitive when “[t]he civil penalty
is one of several tools of regulatory and administrative enforcement” and “the legislative
purpose . . . was that the penalty constitute an integral part of an overall remedial regulatory
and administrative scheme to protect the public.” Kirby, 2003-NMCA-074, ¶ 26. In the area
of double jeopardy, a penalty does not create constitutional concerns “so long as the sanction
reasonably serves regulatory goals adopted in the public interest.” Kennedy, 120 N.M. at
16
631, 904 P.2d at 1056; see Nunez, 2000-NMSC-013, ¶ 89 (finding a punitive purpose to a
sanction when it “is unrelated to the cost of ameliorating the harm”); Denison v. Tocker, 55
N.M. 184, 187, 229 P.2d 285, 286 (1951) (finding the federal Housing and Rent Act to
represent a regulatory scheme, making it “clear that [C]ongress thereby intended to create
a remedy rather than impose a penalty” via a treble damages sanction). Thus, we look for
multiple “tools” of enforcement and the presence of a comprehensive regulatory scheme in
FATA that would deem it remedial in nature.
{34} In Kirby, we found an alternative, remedial purpose related to the Securities Act’s
civil penalty, which was given “added substance” by the fact that funds from the civil
penalty were earmarked for public education and training on securities matters.
2003-NMCA-074, ¶ 36. In Kirby, the purpose of the Securities Act was “to regulate” the
financial industry, and we concluded that “[t]he civil penalty, together with the use of
penalty funds for education and training, serve that purpose.” Id. Similarly, in State v.
Block, 2011-NMCA-101, ¶¶ 2, 33-34, 150 N.M. 598, 263 P.3d 940, we found the Voter
Action Act, as part of “our comprehensive Election Code,” to be “a regulatory and
administrative scheme” that was “directed at establishing a public campaign financing
system that is subject to considerable oversight by the office of the secretary of state.” The
statute analyzed in Block provided for the certification of candidates, “management of and
disbursements from the public election fund,” and the oversight of “candidate expenditures
and reporting requirements.” Id. ¶ 33. Similarly, the Securities Act in Kirby, since
recodified as the New Mexico Uniform Securities Act, spans seven sections and includes a
broad range of regulatory provisions, including registration requirements, penalties for fraud
and other liabilities, and administrative enforcement procedures. See NMSA 1978, §§ 58-
13C-101 to -701 (2009). By contrast, FATA is just one section under the umbrella heading
of “Miscellaneous Civil Law Matters.” We do not find in FATA, as we did in Kirby or
Block, “a comprehensive regulatory and administrative legislative scheme.” Kirby,
2003-NMCA-074, ¶ 37. In addition, FATA directs that proceeds from damage awards, fines
and penalties are not to be earmarked for specific purposes relating to false claims, but rather
are to be distributed as follows:
(1) proceeds in the amount of the false claim paid and
attorney fees and costs shall be returned to the fund or funds from which the
money, property or services came;
(2) civil penalties shall be deposited in the current school
fund pursuant to Article 12, Section 4 of the constitution of New Mexico; and
(3) all remaining proceeds shall be deposited as follows:
(a) one-half into a fund for the use of the attorney
general in furtherance of the obligations imposed upon that office by
[FATA] [44-9-1]; and
17
(b) one-half into the general fund.
Section 44-9-7(E). Thus, under FATA, a significant portion of the proceeds after a
successful prosecution of a claim go to either the school fund or the general fund rather than
to the furtherance of a regulatory scheme. Cf. Dep’t of Revenue of Mont. v. Kurth Ranch,
511 U.S. 767, 777 (1994) (noting that “a so-called civil ‘penalty’ may be remedial in
character if it merely reimburses the government for its actual costs arising from the
defendant’s criminal conduct”).
{35} Although some of FATA sanctions clearly have an alternative remedial purpose, we
conclude that those remedial aspects fall short of the comprehensive regulatory scheme
found in the Securities Act in Kirby and the Voters Action Act in Block. Giving Plaintiffs
the benefit of the doubt, however, a limited, literal interpretation of this factor would tilt it
in favor of finding FATA to be remedial in nature; there is some remedial purpose that is
rationally related to the statute’s regulatory function. However, the weakness of this factor
affords it little weight, especially as we proceed to the next factor.
7. Whether the Punishment Is Excessive
{36} The United States Supreme Court cautions that the analysis under this factor “is not
an exercise in determining whether the [L]egislature has made the best choice possible to
address the problem it seeks to remedy. The question is whether the regulatory means
chosen are reasonable in light of the nonpunitive objective.” Smith, 538 U.S. at 105.
{37} We do not look at the actual sanctions at stake in a specific case but rather at the
purposes furthered under the statute in question. See Kennedy, 120 N.M. at 631, 904 P.2d
at 1056 (“In order to ascertain whether these sanctions are punitive[,] we must look at the
purposes that the sanctions actually serve. We make this determination by evaluating the
government’s purpose in enacting the legislation, rather than evaluating the effect of the
sanction on the defendant.” (citation omitted)).
{38} Turning to FATA, as noted in the previous section, the remedial aspects of the Act
are less significant than those aspects in other comprehensive regulatory schemes and,
therefore, a lower bar exists for a punishment to be considered excessive in relation to any
alternative remedial purpose. In previous cases revolving around comprehensive regulatory
schemes, the sanctions were found to have a close and substantial relationship to remedial
purposes. See, e.g., One (1) 1984 White Chevy Ut., 2002-NMSC-014, ¶ 16 (finding a “clear
nexus between” the vehicles seized by the state and the crime of driving while intoxicated);
Kennedy, 120 N.M. at 634, 904 P.2d at 1059 (finding the deterrent (i.e. punitive) aspects of
revoking a driver’s license after a conviction of driving while intoxicated to be “incidental
to the government’s purpose of protecting the public from licensees who are incompetent,
dishonest, or otherwise dangerous”); Block, 2011-NMCA-101, ¶ 34 (“It is . . . apparent that
the Act, as a whole, is directed to a remedial purpose.”). In the case before us, we conclude
that one-third of the treble damages award and the fines of up to $10,000 do not have a clear
18
nexus to any remedial purpose under FATA. This is especially true considering that a
significant portion of the proceeds are not earmarked for a specific remedial purpose, but
rather are to be deposited in the State’s education fund or general fund. As a result, because
a substantial portion of a given damages award serves no remedial purpose, it could be said
that “the sanction greatly exceeds the quantum of harm.” Nunez, 2000-NMSC-013, ¶ 89.
Indeed, with litigation costs and attorney fees also available to a plaintiff, the sanction of up
to $10,000 per violation plus a significant portion of the treble damages equivalent to the
actual harm caused shows that the penalties under FATA, unlike those in One (1) 1984
White Chevy Ut. and Kennedy, outstrip any civil, remedial purpose of the statute, such that
“its scope notably exceeds this purpose.” Smith, 538 U.S. at 116 (Ginsburg, J., dissenting).
We cannot say that FATA’s sanctions provisions entail “an overall remedial regulatory and
administrative scheme to protect the public.” Kirby, 2003-NMCA-074, ¶ 26. On the
contrary, because the treble damages provision and per-violation penalties of up to $10,000
create “a disproportionality between the potential liability of a defendant and the harm to the
government[,]” this factor weighs in favor of finding that the treble damages sanctions are
punitive in nature and effect. NSI, Inc., 736 F. Supp. 2d at 501.
{39} In sum, we find this factor falls in favor of finding FATA to be penal in nature.
8. Summation of the Seven Factors
{40} We conclude that five of the seven factors show FATA to be punitive in nature.
Therefore, “the legislation [is] sufficiently punitive in its effect that, on balance, the punitive
effects outweigh the remedial effect.” One (1) White Chevy Ut., 2002-NMSC-014, ¶ 11.
The treble damages provision has historically been regarded as punishment; a finding of
scienter is an element of the violation; the damages involved promote the traditional aims
of punishment—retribution and deterrence; the behavior being sanctioned is already
considered a crime; and the punishment is excessive when compared with its alternative
regulatory or remedial purpose.
G. New Cause of Action
{41} Plaintiffs’ final argument is that the underlying purpose of the Ex Post Facto Clause
is to preclude the Legislature from declaring to be unlawful acts that were lawful at the time
they were committed. Plaintiffs argue that FATA is not the type of legislation targeted by
the Ex Post Facto Clause because FATA does not create a new cause of action but simply
incorporates the torts of fraud and misrepresentation, which have long been actionable at
common law and under various New Mexico statutes. They contend that Defendants cannot
reasonably argue that their actions were lawful at the time they took place.
{42} In considering whether a statute may be implemented retroactively, the court must
ask “whether the new provision attaches new legal consequences to events completed before
its enactment.” Landgraf, 511 U.S. at 269-70. The United States Supreme Court in Hughes
Aircraft Co., 520 U.S. at 947-48, rejected the premise that a new statute which allows a qui
19
tam plaintiff to pursue already-prohibited behavior does not constitute a new cause of action.
The Court held that an amendment to the jurisdictional provision of the FCA permitting qui
tam suits did create a new cause of action and could not be applied retroactively. Id. at 948-
49. The court stated: “The extension of an FCA cause of action to private parties in
circumstances where the action was previously foreclosed is not insignificant.” Id. at 949.
Qui tam plaintiffs “are motivated primarily by prospects of monetary reward rather than the
public good” and “are thus less likely than is the [g]overnment to forgo an action,” and “[i]n
permitting actions by an expanded universe of plaintiffs with different incentives, the 1986
amendment essentially creates a new cause of action.” Id. at 949-50.
{43} We have the same set of circumstances before us as the Court did in Hughes, and we
adopt the same logic. We therefore conclude that FATA’s qui tam component creates a new
cause of action and thus is subject to the retroactivity prohibitions of the Ex Post Facto
Clause.
H. Severability
{44} Plaintiffs suggest that, even if we conclude that FATA violates the Ex Post Facto
Clause, we rewrite the treble damages provision to a more constitutionally favorable double
damages provision. We decline to do so for two reasons, and we instead find the
retroactivity clause severable.
{45} We show deference to the Legislature when it comes to altering the language of a
statute. See State v. Frawley, 2007-NMSC-057, ¶ 30, 143 N.M. 7, 172 P.3d 144 (“It is a
fundamental principle that we cannot rewrite or add language to a statute in order to make
it constitutional. Thus, the question of how to ultimately fix the constitutional problem . .
. lies with the Legislature.” (citation omitted)), superseded by statute on other grounds as
stated in State v. Consaul, 2012 WL 868811 (Ct. App. 2012) (unpublished opinion). Our
courts have long held “that the fixing of penalties is a legislative function and what
constitutes an adequate punishment is a matter for legislative judgment.” McCutcheon v.
Cox, 71 N.M. 274, 277-78, 377 P.2d 683, 686 (1962). Thus we “avoid a type of judicial
surgery that inevitably would remove provisions that were central to the original
mechanisms” of the statute. Cordova v. World Fin. Corp., 2009-NMSC-021, ¶ 40, 146 N.M.
256, 208 P.3d 901.
{46} The first reason for not rewriting the treble damages section of FATA, as noted
throughout Section E above, is that it is not merely the treble damages award that presents
a problem with applying the statute retrospectively; the fines and penalties of up to $10,000
per violation of the Act also have a punitive aspect to them. Reducing the damage award
from threefold to double the amount in question still would not make the total damage award
compensatory and remedial in nature.
{47} Second, rewriting the treble damages section of FATA would change a key
characteristic of the statute. FATA offers an incentive for violators to cooperate with the
20
State by allowing the State to reduce the treble damages award to double damages. See
Section 44-9-3(D). Altering the statute to change the maximum award from treble damages
to double damages would undermine that incentive built into the Act.
{48} We now look to whether the retroactivity provision may be severed from the statute
to preserve its constitutionality. While it is black-letter law that we are loath to rewrite a
statute,
it is equally fundamental “that a part of a law may be invalid and the
remainder valid, where the invalid part may be separated from the other
portions, without impairing the force and effect of the remaining parts, and
if the legislative purpose as expressed in the valid portion can be given force
and effect, without the invalid part, and, when considering the entire act it
cannot be said that the legislature would not have passed the remaining part
if it had known that the objectionable part was invalid.”
Frawley, 2007-NMSC-057, ¶ 30 (quoting Bradbury & Stamm Constr. Co. v. Bureau of
Revenue, 70 N.M. 226, 230-31, 372 P.2d 808, 811 (1962)).
{49} FATA contains a severability clause that allows the remainder of the statute to
remain in effect if any part of the law is invalidated. See 2007 N.M. Laws, Ch. 40, § 15.
The retroactivity portion of FATA reads:
A civil action pursuant to [FATA] may be brought at any time. A civil action
pursuant to [FATA] may be brought for conduct that occurred prior to the
effective date of that act, but not for conduct that occurred prior to July 1,
1987.
Section 44-9-12(A).
{50} Allowing FATA to be applied prospectively but eliminating the sentence that permits
retroactive application would not “impair[] the force and effect of the remaining parts” of
the statute. Frawley, 2007-NMSC-057, ¶ 30 (internal quotation marks and citation omitted).
All other aspects of FATA, including the treble damages provision, could be applied to
actions that occurred after July 1, 2007, and the entirety of the remaining portions of the Act
could still “be given force and effect” in full. Id. (internal quotation marks and citation
omitted). Finally, the Legislature gave no indication that retroactive application of the Act
was such an indispensable part of FATA that legislators would have shelved the entire action
had retroactivity not been an option. See Prot. & Advocacy Sys. v. City of Albuquerque,
2008-NMCA-149, ¶ 73, 145 N.M. 156, 195 P.3d 1 (stating that “a severability clause raises
a presumption that the legislating body would have enacted the rest of the ordinance without
the void section” (internal quotation marks and citation omitted)).
{51} We therefore conclude that the retroactivity provision of FATA may be severed from
21
FATA, which shall otherwise remain in full force and effect as it is applied prospectively.
III. CONCLUSION
{52} For the foregoing reasons we affirm the district court’s legal conclusion that
retroactive application of FATA is unconstitutional and the court’s decision to sever the
retroactive aspects from the statute, and we remand for further proceedings consistent with
this Opinion. As noted above, as to the question of subject matter jurisdiction, we find the
development of the record inadequate at this point for appellate review.
{53} IT IS SO ORDERED.
____________________________________
CELIA FOY CASTILLO, Chief Judge
WE CONCUR:
__________________________________
CYNTHIA A. FRY, Judge
__________________________________
LINDA M. VANZI, Judge
Topic Index for State ex rel. Foy v. Austin Capital Mgmt., Ltd., No. 31,421
APPEAL AND ERROR
Interlocutory Appeal
Standard of Review
CONSTITUTIONAL LAW
Ex Post Facto
JURISDICTION
Subject Matter
GOVERNMENT
Fraud Against Taxpayers Act
Public Employees
Public Funds
REMEDIES
Punitive Damages
STATUTES
22
Constitutionality
Interpretation
Legislative Intent
Retroactivity
Rules of Construction
Severability
23