McAneny v. Catechis

                                                Office of the Director
                                                 13:44:34 2023.09.13     New Mexico
                                                                         Compilation
                                                               '00'06-   Commission
                                                     2020.005.30514
         IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO

Opinion Number: 

Filing Date: March 30, 2023

No. A-1-CA-38115

BARBARA MCANENY, M.D.; WILLIAM
RITCHIE, M.D.; and WILLIAM LIAKOS,
JR., M.D.,

      Plaintiffs-Appellees,

and

ALBERT KWAN, M.D.,

      Withdrawn Plaintiff,

v.

JENNIFER A. CATECHIS, in her capacity
as New Mexico Interim Superintendent of
Insurance; and the NEW MEXICO OFFICE OF
THE SUPERINTENDENT OF INSURANCE,

      Defendants-Appellants,

and

RADIOLOGICAL ASSOCIATES OF
ALBUQUERQUE, PA; JESSICA WILLIAMS,
M.D.; CRAIG LASTINE, M.D.; THRETHA
REDDY, M.D.; ADAM DELU, M.D.; CRAIG
LANCE, M.D.; and THE DOCTORS
COMPANY,

      Intervenors-Appellants.

APPEAL FROM THE DISTRICT COURT OF SANTA FE COUNTY
David K. Thomson, District Court Judge

Marshall Law, P.C.
Stephen R. Marshall
Albuquerque, NM
Hunt Law Firm
Lee R. Hunt
Cynthia L. Zedalis
Santa Fe, NM

Stephen Durkovich
Santa Fe, NM

for Plaintiffs-Appellees

R. Alfred Walker, Legal Counsel
Richard B. Word, Legal Counsel
Santa Fe, NM

for Defendants-Appellants

Greenberg Traurig, LLP
Jon T. Neumann
Phoenix, AZ

for Intervenors-Appellants

Rodey, Dickason, Sloan, Akin & Robb, P.A.
Charles K. Purcell
Albuquerque, NM

for Amicus Curiae Presbyterian Healthcare Services

                                                  OPINION

BUSTAMANTE, Judge, retired, sitting by designation.

{1}    Plaintiffs filed a declaratory judgment action against the Superintendent of
Insurance 1 and the Office of the Superintendent of Insurance (collectively, OSI)
challenging the process used to allow certain hospitals to attain Qualified Health
Provider (QHP) status under the Medical Malpractice Act (MMA), NMSA 1978, §§ 41-5-
1 to -29 (1976, as amended through 2021). The district court ruled in favor of Plaintiffs,
and OSI appeals. Interestingly, however, OSI does not challenge the substance of the

1John Franchini was the named defendant as the Superintendent of Insurance in the district court
proceedings. However, Franchini’s tenure as Superintendent ended on December 31, 2019, after this
appeal was filed. Jennifer A. Catechis was appointed Interim Superintendent, effective January 21, 2023.
See NMSA 1978, § 59A-2-2.1(F) (2015, amended 2020) (providing for appointment of Interim
Superintendent); see also Denish v. Johnson, 

, ¶ 47, 

, 

(noting officials appointed to fill vacancies “will remain in office with all the powers of that office until the
successor is duly qualified”). Pursuant to Rule 12-301(C)(1) NMRA, Catechis was “automatically
substituted” as Defendant and the proceedings in this matter shall be pursued in her name for the
duration of her tenure as Interim Superintendent.
district court’s judgment. Instead, it argues that events subsequent to entry of the
judgment have rendered the matter moot. OSI asks us to dismiss the appeal, remand,
and vacate the district court’s judgment. OSI also asserts—for the first time—that
Plaintiffs did not have standing to bring the action. In addition, OSI argues that the
district court abused its discretion when it denied its motion to join the hospitals as
necessary parties under Rule 1-019 NMRA.

{2}     We hold that Plaintiffs did have standing and that the district court did not abuse
its discretion in initially refusing to join the hospitals. We disagree that the matter is now
moot.

BACKGROUND

{3}    Plaintiffs are three long-time practicing physicians in New Mexico. Plaintiffs
asserted that they—along with the other doctors in their respective practice groups—
have held QHP status and have been insured under the MMA for over twenty years. As
such, they have been surcharged by OSI and made yearly contributions to the Patient’s
Compensation Fund (the Fund) since they became QHPs. Plaintiffs generally asserted
that they depend on the Fund to pay their portion of the professional liability obligations
that exceed their mandated private insurance coverage, and that the solvency of the
Fund is threatened by the decision of OSI to allow hospitals to qualify as QHPs and
share in the benefits of the Fund.

{4}     Plaintiffs asserted that the Fund experienced an accelerating actuarial deficit in
the years prior to the filing of their complaint which resulted in OSI imposing two
significant surcharges on physician QHPs. Plaintiffs also alleged that the surcharges
imposed on physician QHPs would “dramatically increase” as the Fund “takes
responsibility for the risk and liability” of the hospitals and outpatient care facilities
illegally granted QHP status by OSI.

{5}    Plaintiffs asserted that OSI acted improperly in three ways when it granted the
hospitals and outpatient facilities QHP status. First, they argued that it did not comply
with the Administrative Procedures Act (APA), NMSA 1978, §§ 12-8-1 to -25 (1969, as
amended through 1999). 2 Specifically, they argued that the APA required OSI to
publically propose and adopt rules reflecting how it would carry out its responsibilities
under the MMA with regard to assessing the risks posed by hospitals before they were
allowed to qualify as QHPs. Second, they asserted that OSI failed to comply with NMSA
1978, Section 59A-2-10 (1984) of the New Mexico Insurance Code in that it did not
create and sign an order stating the grounds on which the order is based. See § 59A-2-
10(A), (B). Third, Plaintiffs asserted that OSI violated its common law and statutory
duties as the trustee of the Fund when it failed to act in compliance with the APA and
the Insurance Code.



2OSI was made subject to the APA in 2013. 2013 N.M. Laws, ch. 74, § 13; see NMSA 1978, § 59A-2-8(J)
(2013, amended 2021 as § 59A-2-8(A)(10)).
{6}    After OSI filed its answer, the parties filed cross-motions asking the district court
to decide the matter on the pleadings. The arguments made in the motions mirrored the
assertions in the pleadings, with OSI specifically asserting that the APA and the
Insurance Code did not apply to its duties under the MMA and that its actions in
granting QHP status were merely ministerial. After hearing oral argument on the
motions and taking the matter under advisement, the district court reconvened the
parties and announced its decision orally. The district court agreed with the Plaintiffs’
legal position, rejecting OSI’s arguments that the APA and the Insurance Code did not
apply to its actions under the MMA and that its actions were ministerial. The district
court, however, was not convinced that the Plaintiffs’ requested remedy—declaring all
of OSI’s actions void—was appropriate. Thus, the district court asked for proposed
forms of a dispositive order from the parties. Plaintiffs’ submission in response did not
include a proposed form of order. Rather it simply reiterated Plaintiffs’ assertion that a
blanket order voiding OSI’s actions was necessary. OSI submitted a form of order that
ultimately provided much of the verbiage found in the district court’s judgment.

{7}    At this point in an opinion we would normally delve into the specific provisions of
the judgment appealed. It is not necessary to do so here because, again, OSI has
chosen not to challenge the substance of the judgment’s resolution of the legal issues
presented or the district court’s remedy. Thus, those issues are not before us based on
OSI’s appeal.

{8}     Plaintiffs—appellees herein—ask us to reverse the judgment on a number of
grounds, including: (1) the district court erred in not voiding all of OSI’s actions; (2) the
district erred in drawing a distinction between actions after and before OSI was made
subject to the APA; and (3) the district court erred in considering the effect of its
decision on entities and parties not before it. But Plaintiffs did not file a cross-appeal.
Under Rule 12-201(C) NMRA, absent a cross-appeal an appellee may raise issues for
the purpose of enabling the appellate court to affirm, or raise issues for determination
only if the appellate court may reverse in whole or in part as a result of the direct
appeal. Given that the substance of the judgment was not challenged by OSI on direct
appeal, we will not address Plaintiffs’ arguments for reversal. 3 We now turn to the
issues raised by OSI: standing, joinder, and mootness.


3Plaintiffs filed a notice of appeal from the district court’s judgment on August 13, 2021. Plaintiffs’ Notice
of Appeal, McAneny v. Catechis, D-101-CV-2017-02140 (1st. Jud. Dist. Ct. Aug. 13, 2021). Plaintiffs’
appeal was assigned case number A-1-CA-39904. Plaintiffs had previously filed a motion to dismiss
OSI’s appeal for lack of finality in this case. Plaintiffs’-Appellees’ Motion to Dismiss Appeals, McAneny v.
Catechis, A-1-CA-38115 (N.M. Ct. App. June 6, 2019). This Court denied the motion to dismiss. Order
Granting Motion for Leave to File Reply and Denying Motion to Dismiss, McAneny v. Catechis, A-1-CA-
38115 (N.M. Ct. App. Sept. 3, 2019). Plaintiffs filed two motions asking this Court to reconsider its
decision with regard to finality. Motion for Reconsideration on Plaintiffs-Appellees’ Motion to Dismiss,
McAneny v. Catechis, A-1-CA-38115 (N.M. Ct. App. Sept. 13, 2019); Physicians’ Second Motion for
Reconsideration of Order Denying Motion to Dismiss, McAneny v. Catechis, A-1-CA-38115 (N.M. Ct. App.
Sept. 17, 2020). The second motion for reconsideration was denied by this Court on July 29, 2021. Order
Denying Second Motion to Reconsider and Motion to Intervene or, in the Alternative, For Leave to File
Amicus Curiae, McAneny v. Catechis, A-1-CA-38115 (N.M. Ct. App. July 29, 2021). Plaintiffs’ docketing
Discussion

I.      Standing

{9}    OSI argues for the first time in this litigation that Plaintiffs did not have standing to
bring this case. OSI included a lack-of-standing affirmative defense in its answer, but
did not pursue it in the litigation below. We address the argument because our courts
have chosen to treat lack of standing as a “potential jurisdictional defect, . . . which may
not be waived, and may be raised at any stage of the proceedings.” See Gunaji v.
Macias, 

, 

, 

 (internal quotation marks
and citations omitted). “Whether a party has standing to bring a claim is a question of
law which we review de novo. . . . For purposes of ruling on a motion to dismiss for want
of standing, both trial and reviewing courts must accept as true all material allegations
of the complaint, and must construe the complaint in favor of the complaining party.”
N.M. Gamefowl Ass’n v. State ex rel. King, 

, 

, 

 (internal quotation marks and citations omitted).

{10} New Mexico courts have traditionally looked to the federal standing analysis for
guidance, even though the “constitutional dimensions” of federal standing are absent
from our state jurisprudence. ACLU of N.M. v. City of Albuquerque, 

, 

, 

. As such we examine the complaint to determine
whether it demonstrates “(1) an injury in fact, (2) a causal relationship between the
injury and the challenged conduct, and (3) a likelihood that the injury will be redressed
by a favorable decision.” See Prot. & Advoc. Sys. v. City of Albuquerque, 2008-NMCA-
149, ¶ 18, 

, 

 (internal quotation marks and citation omitted).
OSI’s argument focuses only on the injury in fact aspect of the analysis, and we will
similarly limit our review.

{11} OSI argues that Plaintiffs did not allege an injury in fact to them. We disagree.
The complaint asserted that the actuarial health of the Fund deteriorated significantly in
the year prior to the date it was filed. The complaint attributed a large part of the decline
to the potential costs of meeting the heightened risk of losses from claims against
hospitals. The complaint also alleged that Plaintiffs were assessed significant
surcharges as a result of the actuarial decline of the Fund and that the continuing
deterioration of the Fund will require dramatic increases in the future. These assertions
are sufficient to meet the injury in fact requirement of the standing analysis. While
Plaintiffs did not quantify the dollar amount of the increased surcharges, a reasonable
inference can be made that the number is not de minimis. In any event, the injury in fact
requirement is met “even when the extent of the alleged injury is slight . . . or the
allegation is made by an organization on behalf of its members.” N.M. Right to


statement asserted that this Court’s denial of their motions for reconsideration triggered the time at which
they could appeal the district court’s January 31, 2019 order. Plaintiffs-Appellants’ Docketing Statement,
McAneny v. Catechis, A-1-CA-39904 (N.M. Ct. App. Aug. 18, 2021). Plaintiffs did not raise the issue of
finality in their briefing in this case and we therefore do not address the matter again in this opinion.
Plaintiffs appeal in No. A-1-CA-39904 has been dismissed as untimely contemporaneously with the filing
of this opinion.
Choose/NARAL v. Johnson, 

, 

, 

. OSI’s
argument that these allegations are “conjectural and hypothetical” runs counter to the
obligation to view the complaint in favor of the complaining party. See N.M. Gamefowl
Ass’n, 

.

{12} As a corollary to the argument that Plaintiffs have suffered no personal damage,
OSI asserts that the complaint only alleges damage to the Fund, and notes that
Plaintiffs are not beneficiaries of the Fund. We disagree. It is accurate that Plaintiffs do
not receive payments directly from the Fund. The Fund is used to pay patients injured
by medical malpractice a portion of their damages. Section 41-5-7(E) (1992, amended
2021). But, the Fund is part and parcel of the MMA and the structure created therein to
help maintain a viable system of medical care and claim resolution in New Mexico.
Section 41-5-25(A) (1997, amended 2021); see also Baker v. Hedstrom, 2013-NMSC-
043, ¶ 17, 

 (“To give effect to the purpose of the MMA, the Legislature
created a balanced scheme to encourage health care providers to opt into the [MMA] by
conferring certain benefits to them, which it then balanced with the benefits it provided
to their patients.”). To separate the Fund from the MMA structure is not realistic. OSI
admitted in its answer to the complaint that, “physicians are essential beneficiaries of
the [MMA].” As “essential beneficiaries” of the MMA, Plaintiffs have a strong claim to
standing to challenge actions that threaten its viability, including threats to the Fund.

II.    Joinder

{13} Eleven months after the complaint in this matter was filed, OSI filed a motion to
join necessary parties pursuant to Rule 1-019, or in the alternative to dismiss the case.
OSI argued that at a minimum the hospitals whose inclusion in the Fund was
threatened—if Plaintiffs were successful—should be joined as necessary parties
because the hospitals faced potentially dire consequences if the district court ruled in
Plaintiffs’ favor.

{14} Plaintiffs’ response was multifaceted. They noted that the case as framed by the
complaint presented strictly legal issues concerning the power of OSI to do what it did in
allowing the hospitals to acquire QHP status. They posited that OSI was best able to
defend its authority and actions. Analogizing to State ex rel. Clark v. Johnson, 1995-
NMSC-048, 

, 

, Plaintiffs questioned what the hospitals could
add to the legal arguments surrounding the issue. Plaintiffs also noted that under OSI’s
approach, patients and other providers would also be necessary parties, but they too
would not be able to provide material help in deciding the legal issues presented.
Finally, Plaintiffs noted that the hospitals themselves had not asked to intervene.

{15} The district court denied the motion. Because “[t]he question of indispensability is
a factual question that the district court determines . . . in its discretion,” we apply the
abuse of discretion standard of review. See Srader v. Verant, 

,

, 

.
{16} The district court decided that given the nature of the case—framed as a purely
legal question—complete relief could be accorded among the present parties. Focusing
on Rule 1-019(A)(2)(a), the district court concluded that the disposition of the case in
the absence of the hospitals would not as a practical matter impair their ability to protect
their interests. Noting that the hospitals had not themselves requested intervention, the
district court deduced that they did not think their interests were substantially
threatened. Finally, the district court observed that it was “not convinced the alleged
necessary parties [would] present any substantive argument different from the position
capably and adequately represented by [OSI].”

{17} Notably, the district court did allow the hospitals to file a consolidated amicus
brief. The hospitals did so and filed a brief opposing Plaintiffs’ motion for judgment on
the pleadings and a brief supporting OSI’s suggested form of judgment.

{18} Relevant to the circumstances of this case, Rule 1-019 requires joinder of a
person if:

             (1)    in his absence complete relief cannot be accorded among
       those already parties; or

               (2)    he claims an interest relating to the subject of the action and
       is so situated that the disposition of the action in his absence may:

                      (a)     as a practical matter impair or impede his ability to
       protect that interest.

As this Court has previously noted, the determination whether Rule 1-019 mandates
joinder is a case specific, context-driven inquiry. State ex rel. Blanchard v. City Comm’rs
of Clovis, 

, ¶ 10, 

, 

; id. ¶¶ 10, 11 (holding
that applicants for a city planner position need not be joined in a suit seeking details in
their applications where the city-defendant had not shown that the applicants had
claimed any right to privacy or confidentiality recognized at law, had not shown that the
interests of the applicants would be affected by the judgment of the court, and had not
shown that joinder was needed for a just adjudication of the action).

{19} Two cases from our Supreme Court illustrate the point. In Clark, the petitioners
filed a “writ of mandamus or writ of prohibition and declaratory judgment” challenging
the authority of the governor to enter into tribal gaming compacts with a number of New
Mexico tribes and pueblos. 

, ¶¶ 1, 2. The governor argued that the
tribes and pueblos were indispensable parties given that they were signatories to the
compacts. Id. ¶ 21. Our Supreme Court disagreed, noting:

       In a mandamus case, a party is indispensable if the “performance of an
       act to be compelled by the writ of mandamus is dependent on the will of a
       third party, not before the court.” Chavez v. Baca, [

, ¶ 31,]
       

, . . . 

[]. That is not the case here. Petitioners
       seek a writ of mandamus against the Governor of New Mexico, not
       against any of the tribal officials. Resolution of this case requires only that
       we evaluate the Governor’s authority under New Mexico law to enter into
       the compacts and agreements absent legislative authorization or
       ratification. Such authority cannot derive from the compact and
       agreement; it must derive from state law. This is not an action based on
       breach of contract, and its resolution does not require us to adjudicate the
       rights and obligations of the respective parties to the compact.

Johnson, 

, ¶ 21.

{20} In contrast, our Supreme Court decided that a pueblo was “necessary” to a
lawsuit asserting breach of contract and insurance bad faith claims filed against that
pueblo’s insurer. Gallegos v. Pueblo of Tesuque, 

, 132 N. M.
207, 

. The Court noted that “[t]he propriety or impropriety of [the pueblo’s
insurer]’s performance under the insurance policy is of substantial interest to [the
pueblo], which has paid for the insurance protection in question and on whose behalf
[the pueblo’s insurer] acts.” Id. ¶ 43. The Court also noted that in a liability action, the
pueblo and its insurer would presumably “share an identity of interest in the outcome of
the litigation as [the pueblo’s insurer] has a duty to defend its insured.” Id. ¶ 45.
However, because the plaintiff there was suing the insurer for alleged violations of its
duties to the pueblo, the Court would “not presume that [the pueblo’s insurer] can or will
fully represent the interests of [the pueblo] under the policy, and thus, [the pueblo] is
necessary to the litigation.” Id.

{21} The situation in this case aligns more closely with Clark. First, the complaint here
challenges the authority of OSI to allow the hospitals to acquire QHP status in the
manner it proceeded. The challenge to OSI’s actions and authority did not depend to
any extent on the “will” of the hospitals. See Clark, 

, ¶ 21. Second,
when the complaint was filed there was no apparent conflict or divergence of interests
between OSI and the hospitals. OSI was fully—perhaps uniquely—capable of defending
itself. The district court could be confident that the matter would be properly litigated
without the hospitals’ joinder.

{22} Finally, we see no prejudice to the hospitals from the district court’s order. They
did not move to be joined, yet they were allowed to appear as amici. OSI does not point
to anything the hospitals could or would have done differently had they been joined. In
short, we perceive no abuse of discretion by the district court. Complete relief could be
accorded among the existing parties. And, as a practical matter, nonjoinder did not
impair or impede the hospital’s ability to protect their interests.

III.   Mootness

{23} OSI asks us to dismiss the appeal, arguing that it is moot because the
Legislature addressed the Fund deficit issue by amending the MMA and because OSI
complied with the judgment by promulgating APA compliant rules addressing the
process by which it will hereafter qualify hospitals and other outpatient care facilities as
QHPs. Problematically, it also asks that we vacate the judgment below. We disagree
that the appeal is moot.

{24} As a general matter a case is moot when no actual controversy exists and the
court cannot grant relief to the parties. Gunaji, 

; id. ¶¶ 9-11
(holding that the particular election contest at hand was moot because the terms of
office in issue had expired, but addressing the arguments made because the case
presented issues of substantial public interest that were capable of being repeated).

{25} There are a number of ways a case may become moot. Legislative action
specifically addressing an issue in a case is an example. Our Supreme Court held that a
case challenging the authority of a municipality to exercise eminent domain over an
existing utility service was mooted when the Legislature gave the city-defendant specific
authority to proceed. City of Las Cruces v. El Paso Elec. Co., 

, ¶¶ 14-
17, 

, 

. Similarly, this Court decided that a challenge to a
municipal sex offender ordinance was moot after the Legislature passed a statute
prohibiting local public bodies from adopting or amending laws addressing sex offender
registration and notification. ACLU of NM v. City of Albuquerque, 

, 

, 

.

{26} Settlement of all issues in a case by the parties will usually result in mootness.
Cobb v. Gammon, 

, ¶¶ 12, 13, 

. There are some
situations, however, in which our courts have exercised discretion to decide an issue
regardless of the parties’ settlement. See Snow v. Warren Power & Mach. Inc., 2015-
NMSC-026, ¶¶ 11-16, 

.

{27} Compliance with a judgment from which an appeal has been taken may also
result in mootness. See Patterson v. City of Albuquerque, 

, ¶ 9, 

, 

. But compliance will not result in mootness if there are issues
and requests for relief not cured by compliance. Alcantar v. Sanchez, 

,
¶ 12, 

, 

. The analysis is necessarily contextual. See 13B
Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and
Procedure § 3533.2.2, Westlaw (3d ed. database updated April 2022). Compliance that
does not indicate an intent to settle a matter—or in the case of an injunction,
compliance that can be undone—does not support a finding of mootness. As the
Colorado Court of Appeals has observed, the test of whether an appeal is moot is
whether the party acted voluntarily or because of the actual or implied compulsion of
judicial power. FCC Constr., Inc. v. Casino Creek Holdings, Ltd., 

(Colo. App. 1996).

{28} OSI’s arguments on mootness fail on all fronts. It asserts that the 2021 legislative
action addressing the actuarial soundness of the Fund moots all issues related to the
Fund. See § 41-5-25(F). The legislation, however, did not address the applicability of
the APA and the Insurance Code to OSI’s conduct in qualifying entities as QHPs. Id.
Thus, it did not specifically address the legal issues decided by the district court. Issues
other than the method used to bring the Fund to actuarial health were not mooted by the
Legislature’s activity.

{29} OSI also asserts that its promulgation of rules and regulations pursuant to the
APA and the Insurance Code as required by the district court’s judgment moots any
appeal from that portion of the judgment. At oral argument, however, counsel for OSI
conceded that adoption of the rules and regulations was undertaken because “[OSI]
was told to.” Counsel also made clear at oral argument that he did not want to concede
that the district court was correct in any of its legal conclusions concerning the
applicability of the APA and Insurance Code. In the same breath, however, counsel for
OSI conceded that it was seeking no relief as a result of any error by the district court in
that regard.

{30} The conclusion we draw is that OSI’s compliance activities were undertaken
under judicial compulsion rather than voluntarily, and that its decision not to challenge
the legal merits of the judgment was made to provide tactical support for its mootness
argument. To accept OSI’s arguments with regard to mootness and vacatur would result
in destruction of a judgment OSI chose not to challenge on its merits. OSI would
achieve its aim to escape the legal effects of the district court’s judgment without
subjecting its arguments to scrutiny by this Court. Such a strategy rarely results in the
outcome sought.

CONCLUSION

{31} We affirm the district court’s rulings as to standing and Rule 1-019 joinder. We
also conclude that the doctrine of mootness does not apply to the circumstances of this
case. Given that the parties did not provide argument on the merits of OSI’s
responsibilities under the APA and the Insurance Code, we do not address them, and
we dismiss the appeal as to that portion of the district court’s judgment.

{32}   IT IS SO ORDERED.

MICHAEL D. BUSTAMANTE, Judge,
retired, sitting by designation.

WE CONCUR:

J. MILES HANISEE, Judge

KATHERINE A. WRAY, Judge