May 14, 2009 – Randy Stansell, Kenneth Nutt, and Chris Canning, Individually and On Behalf of Others Similarly Situated v. The New Mexico Lottery, Nos. 28,241 and 28,505

IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
Opinion Number: __________
Filing Date: 	May 14, 2009
NO. 28,241
RANDY STANSELL, KENNETH NUTT,
AND CHRIS CANNING, Individually,
And On Behalf of Others, Similarly Situated,
Plaintiffs-Appellants,
v.
THE NEW MEXICO LOTTERY,
Defendant-Appellee.
Consolidated with
NO. 28,505
RANDY STANSELL, KENNETH NUTT,
AND CHRIS CANNING, Individually,
And On Behalf of Others, Similarly Situated,
Plaintiffs-Appellees,
v.
THE NEW MEXICO LOTTERY,
Defendant-Appellant.

APPEAL FROM THE DISTRICT COURT OF BERNALILLO COUNTY
Nan G. Nash, District Judge
Warren F. Frost, P.C.
Warren F. Frost
Logan, NM
for Appellants/Appellees
Conklin, Jenke, Woodcock & Ziegler, P.C.
Robert C. Conklin
Jacqueline M. Woodcock
John K. Ziegler
Albuquerque, NM
for Appellee/Appellant

OPINION
WECHSLER, Judge.
{1} 	Plaintiffs Randy Stansell, Kenneth Nutt, and Chris Canning appeal the district
court order dismissing their Unfair Practices Act claims, and the New Mexico Lottery
(the Lottery) appeals the district court order denying its motion for attorney fees. We
conclude that the Lottery is not a “person” under the Unfair Practices Act (UPA),
NMSA 1978, §§ 57-12-1 to -26 (1967, as amended through 2007). 	We further
conclude that Plaintiffs’ complaint was not groundless or frivolous. We affirm on
both appeals.
BACKGROUND
{2} 	The Lottery is a governmental instrumentality established by the passage of the
New Mexico Lottery Act (NMLA), NMSA 1978, §§ 6-24-1 to -34 (1995, as amended
through 2007), to provide entertainment for the public and raise funds for tuition. See
§§ 6-24-3, 6-24-5, 6-24-23. Plaintiffs filed a complaint with the district court, arguing
that the “Lottery established a practice of prematurely pulling games from the market
that still had substantial cash prizes available.” 	Only one issue from Plaintiffs’
complaint remains: 	whether the Lottery engaged in unfair and deceptive trade
practices under the UPA. Plaintiffs argue that the Lottery is a “person” as defined by
the UPA because, although it is a “governmental instrumentality” under Section 6-24-

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5(A), it operates in such a unique fashion that it should be deemed a corporation or
company.
{3} 	The Lottery filed a motion to dismiss for failure to state a claim, arguing that
the UPA does not apply to the Lottery because it is not a “person” as defined therein.
See Rule 1-012(B)(6) NMRA. Rather than file a response, Plaintiffs filed a motion
to hold the motion to dismiss in abeyance pending discovery. The Lottery then filed
a motion to dismiss based on Plaintiffs’ failure to respond. 	See Rule 1-007.1(D)
NMRA. The district court granted the Lottery’s motion to dismiss for failure to state
a claim, finding that the plain language of the UPA precluded suit against the Lottery;
denied Plaintiffs’ motion to hold dismissal in abeyance; and denied the Lottery’s
motion to dismiss for failure to respond. Thereafter, the Lottery filed a motion for
attorney fees, arguing that Plaintiffs’ suit was groundless and frivolous. The district
court denied this motion. Plaintiffs appeal from the district court order dismissing the
case, and the Lottery appeals from the district court order denying attorney fees. We
consolidated the appeals on our own motion.
RULE 1-012(B)(6) MOTION TO DISMISS
{4} 	We review a Rule 1-012(B)(6) motion to dismiss de novo and determine the
legal sufficiency of a plaintiff’s complaint. Henderson v. City of Tucumcari, 2005-

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NMCA-077, ¶ 7, 137 N.M. 709, 114 P.3d 389. We accept all well-pleaded factual
allegations as true and determine whether the plaintiff could “prevail under any state
of facts provable under the claim.” Saylor v. Valles, 2003-NMCA-037, ¶ 6, 133 N.M.
432, 63 P.3d 1152. 	“Dismissal is warranted when the law does not support a
plaintiff’s claim under any set of facts subject to proof.” Henderson, 2005-NMCA-
077, ¶ 7.
{5} 	Plaintiffs allege that the Lottery “began a practice of prematurely pulling
scratch off games from the market while they had substantial cash prizes still
available,” which they claim is a prohibited practice under the UPA. See § 57-12-3.
The Lottery’s motion to dismiss states that, because the Lottery is not a “person” as
defined by the UPA, Plaintiffs’ claims should be dismissed. Section 57-12-2(A) of
the UPA defines a “person” to include “natural persons, corporations, trusts,
partnerships, associations, cooperative associations, clubs, companies, firms, joint
ventures or syndicates.” Plaintiffs contend that the Lottery is a “person” under the
UPA because it operates as a corporation or company. Specifically, Plaintiffs point
to portions of the NMLA in which the Legislature assigned corporate-like functions
to the Lottery, such as (1) organizing the Lottery as a “business enterprise separate
from state government, without need for state revenues or resources,” Section 6-24-

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2(C); (2) establishing duties of the Lottery’s board of directors with a “private-sector
perspective of a large marketing enterprise[, which] shall make every effort to exercise
sound and prudent business judgment in its management and promotion of the
[L]ottery,” Section 6-24-7; and (3) requiring that the Lottery be “self-sustaining and
self-funded,” such that no state funds are used by the Lottery, Section 6-24-25. 	{6}
Plaintiffs further rely on an unpublished decision, Lucero v. N.M. Lottery, No.
CIV 	07-499 	JCH/RLP 	(D.N.M. 	July 	7, 	2008), 	available 	at
http://www.nmcourt.fed.us/web/DCDOCS/dcindex.htm1 	(follow 	“Opinions”
hyperlink; then search “Case Number” for “CV 07-499”; then follow “view”
hyperlink for #126), in which the United States District Court of New Mexico
expounded upon the autonomy of the Lottery. Plaintiffs conclude that “[t]here can be
little question from a review of the [NMLA] and [the Lucero] analysis, that the
Lottery is in all aspects set up to be an ongoing commercial business enterprise
designed to maximize profits like any other corporation or company.” We disagree.
{7} 	We interpret applicable statutes de novo and seek to effectuate legislative intent.
See Moongate Water Co. v. Doña Ana Mut. Domestic Water Consumers Ass’n
(Moongate), 2008-NMCA-143, ¶¶ 4, 32, 145 N.M. 140, 194 P.3d 755. “We must give
a statute its literal reading if the words used are plain and unambiguous, provided such

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a 	construction 	would 	not 	lead 	to 	an 	injustice, 	absurdity 	or 	contradiction.”
Albuquerque Redi-Mix, Inc. v. Scottsdale Ins. Co., 2007-NMSC-051, ¶ 6, 142 N.M.
527, 168 P.3d 99 (internal quotation marks and citation omitted). “However, all parts
of a statute must be read together to ascertain legislative intent. We are to read the
statute in its entirety and construe each part in connection with every other part to
produce a harmonious whole.” 	Key v. Chrysler Motors Corp., 121 N.M. 764, 769,
918 P.2d 350, 355 (1996) (citation omitted).
{8} 	Although the Legislature granted the Lottery a variety of attributes that are
corporate in nature, the Legislature nonetheless established the Lottery as “a public
body, politic and corporate, separate and apart from the state, constituting a
governmental instrumentality.” 	Section 6-24-5(A). 	In addition, the Legislature
assigned many public or state functions to the Lottery, including: (1) the Lottery’s
purpose is public—to establish and conduct a state lottery in order to provide
entertainment for New Mexico citizens and maximize revenues for the “lottery tuition
fund” without increasing taxes or using other state revenue, see §§ 6-24-3, 6-24-23;
(2) the Lottery’s board is “appointed by the governor with the advice and consent of
the senate,” Section 6-24-5(B); (3) the Lottery’s operations are subject to the
legislative finance committee’s oversight, Section 6-24-9(A); and (4) the Lottery’s

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chief executive officer must report revenues and expenses quarterly to the governor
and the legislative finance committee, Section 6-24-10(B)(8).
{9} 	Further, a review of the NMLA reveals that there are numerous corporate
activities that the Legislature refrained from assigning to the Lottery. 	Among the
many differences that can be found between the Lottery and corporations, we note that
the Lottery was not formed under bylaws and articles of incorporation, it is not owned
by shareholders and cannot be sold, it does not pay taxes, its activities and purpose
have been assigned by the Legislature, and it must return all profits to the public
tuition fund. See generally §§ 6-24-6 to -12.
{10} 	The Legislature made its intent clear that the Lottery is a governmental
instrumentality, 	empowered 	with 	the 	authority 	to 	maneuver 	in 	a 	corporate
environment to accomplish its public purpose—financing the tuition fund. See §§ 6-
24-3, 6-24-5(A), 6-24-23. 	Moreover, the Legislature identified a desire that the
Lottery provide funds without drawing on other state assets. See §§ 6-24-2(C), 6-24-
3(B). As explicitly stated in the NMLA, “the most desirable, efficient and effective
mechanism for operation of a state lottery is an independent lottery authority
organized as a business enterprise separate from state government, without need for
state revenues or resources and subject to oversight, audit and accountability by public

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officials and agencies.” Section 6-24-2(C). The NMLA directs the Lottery to operate
as a business enterprise so as not to draw on other public resources, furthering the
Legislature’s intent that the tuition fund be financed with the least strain on the state’s
budget. 	See id. 	This intent does not, however, establish the Lottery as an actual
corporation.
{11} 	We also consider it significant that the Legislature defined the Lottery as “a
public body, politic and corporate” in Section 6-24-5(A). In Moongate, this Court
considered whether an association organized under the Sanitary Projects Act (SPA),
NMSA 1978, §§ 3-29-1 to -21 (1965, as amended through 2006), was a corporate
entity or a special function governmental unit so as to be immune from damage
liability under the New Mexico Antitrust Act, NMSA 1978, §§ 57-1-1 to -19 (1891,
as amended through 1995). Moongate, 2008-NMCA-143, ¶ 1. This Court interpreted
the phrase “public body corporate” in the SPA as establishing legislative intent that
the entities described are units of government and not corporations or businesses. See
id. ¶ 23 (internal quotation marks omitted). As in Moongate, the legislative reference
to the Lottery in the NMLA as a “public body, politic and corporate” further
demonstrates the Legislature’s intent that the Lottery be an “instrumentalit[y] of the
government.” See id. Reading all parts of the NMLA together to ascertain legislative

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intent “and constru[ing] each part in connection with every other part to produce a
harmonious whole,” we must conclude that the Legislature intended to create a
“governmental instrumentality,” albeit one with the authority to function in a
corporate environment. Key, 121 N.M. at 769, 918 P.2d at 355.
{12} 	Further, although the UPA’s definition of “person” does not explicitly exclude
any state entity, it also does not include one. See § 57-12-2(A). Our Supreme Court
has stated that “[w]hen the [L]egislature has wanted to include . . . governmental
bodies in its statutes, it has known how to do so.” 	S. Union Gas Co. v. N.M. Pub.
Serv. Comm’n, 82 N.M. 405, 406, 482 P.2d 913, 914 (1971) (citing numerous statutes
that have explicitly included a governmental body), overruled on other grounds by De
Vargas Sav. & Loan Ass’n v. Campbell, 87 N.M. 469, 535 P.2d 1320 (1975); see, e.g.,
§ 57-1-1.2 (defining “person” to include “governmental or other legal entity”). Since
the Legislature did not include any governmental body or the Lottery within the
UPA’s definition of “person,” the Lottery is not subject to the UPA.
{13} 	Finally, Plaintiffs’ reliance on Lucero is misplaced. Lucero decided whether
the Lottery is an “arm of the state” or a political subdivision for purposes of 42 U.S.C.
§ 1983 (1996). Lucero, No. CIV 07-499, at 1. At the end of a lengthy discussion on
the Lottery’s autonomy, in which the court defined the Lottery as “an independent

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agency” with a “private-sector perspective of a large marketing enterprise,” the court
concluded that the Lottery is an “independent political subdivision” of the state. See
id. at 6, 8, 12 (internal quotation marks and citation omitted). Although the analysis
in Lucero removed the Lottery from the purview of § 1983 claims in that case, see
Lucero, No. CIV 07-499, at 12, it does not follow that the Lottery, even with a
“private-sector 	perspective,” 	is 	a 	corporate 	entity 	and 	not 	a 	governmental
instrumentality or political subdivision.
ATTORNEY FEES
{14} 	We next address whether the district court properly denied the Lottery’s motion
for attorney fees based on the Lottery’s assertion that Plaintiffs’ claims were
groundless. 	We review a denial of an “award of attorney fees for an abuse of
discretion.” See N.M. Right to Choose/NARAL v. Johnson, 1999-NMSC-028, ¶ 6, 127
N.M. 654, 986 P.2d 450 (internal quotation marks and citation omitted). “A trial court
abuses its discretion when its decision is contrary to logic and reason.” Roselli v. Rio
Cmtys. Serv. Station, Inc., 109 N.M. 509, 512, 787 P.2d 428, 431 (1990).
{15} 	The Lottery asserts that its motion for attorney fees was filed “[b]ased on the
dismissal of the UPA claims” and that Plaintiffs’ claims “were groundless based on
the plain language of the UPA and case law interpreting similar statutory provisions.”

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The Lottery further argues that Plaintiffs’ arguments were made in bad faith because
Plaintiffs did not perform “further research concerning the case or statute to determine
if their argument has legal support”—which the Lottery claims is required by In re
Richards, 1999-NMSC-030, ¶¶ 9-12, 127 N.M. 716, 986 P.2d 1117—resulting in
Plaintiffs selectively referencing portions of the NMLA and failing to present case law
in support of their argument. The Lottery also asserts that Plaintiffs made their claims
in bad faith because they ignored black letter law that states, “absent express words
to the contrary, neither the state nor its subdivisions are included within general words
of a statute.” Lucero v. Richardson & Richardson, Inc., 2002-NMCA-013, ¶ 11, 131
N.M. 522, 39 P.3d 739. Finally, the Lottery argues that Plaintiffs’ referring to the
Lottery as “an agency of the State of New Mexico” in their complaint and issuing their
summons and complaint on the State of New Mexico refute their own claims. We are
not persuaded.
{16} 	Section 57-12-10(C) states that “[t]he court shall award attorney fees and costs
to the party charged with an unfair or deceptive trade practice . . . if it finds that the
party complaining of such trade practice brought an action that was groundless.” This
Court interpreted Section 57-12-10(C) in G.E.W. Mechanical Contractors, Inc. v.
Johnston Co., 115 N.M. 727, 733, 858 P.2d 103, 109 (Ct. App. 1993), and stated that

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“we do not read the statute to authorize an award of attorney[] fees to [the d]efendants
merely because they successfully prevailed against the claims asserted by [the
p]laintiff.” 	Rather, this Court held that the defendants needed to show that “there
[was] no arguable basis in law or fact to support the cause of action and the claim
[was] not supported by a good-faith argument for the extension, modification, or
reversal of existing law.” Id.
{17} 	In reviewing the cases presented by the Lottery, we discern sufficient
differences between the case law from other states and the situation in New Mexico
to allow for plausible arguments, even if we do not ultimately agree with those
arguments. See, e.g., Janis v. Cal. State Lottery Comm’n, 80 Cal. Rptr. 2d 549, 553
(Ct. App. 1998) (holding that the lottery commission was not a “person” under the
unfair practices act); Cal. Gov’t Code § 8880.2 (West 2008) (referring to the lottery
as a “state-operated lottery”); see also Bretton v. State Lottery Comm’n, 673 N.E.2d
76, 78 (Mass. App. Ct. 1996) (holding that the lottery commission, as part of the
commonwealth, is not liable under the unfair practices act). Further, as demonstrated
in our discussion above, even though the Lottery prevailed in its motion to dismiss,
the issue of whether the Lottery is considered a “person” under the UPA is not as
apparent in New Mexico as the Lottery indicates. 	See G.E.W. Mech. Contractors,

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Inc., 115 N.M. at 733, 858 P.2d at 109 (declining to award attorney fees on the sole
grounds that the plaintiff’s claims were defeated). Additionally, although Plaintiffs
do not address in their answer brief the Lottery’s argument that Plaintiffs defining the
Lottery as a state agency refutes Plaintiffs’ claims, their counsel did state at the district
court hearing on this issue that, although they used the word “agency” in the
complaint—and “should have said instrumentality or used some other language”—it
did not affect the validity of Plaintiffs’ argument. 	As to service on the state,
Plaintiffs’ counsel explained that he was merely “covering all of [his] bases” because
he did not know if the Lottery was “going to argue that [it was] part of the [s]tate or
. . . something different.” Plaintiffs further explain that the Lottery’s “unique statutory
makeup” combined with the way it conducts business should qualify it as a “person”
under the UPA because it is “certainly a business enterprise, albeit one created by the
state.”
{18} 	Although the Lottery is not subject to the UPA, there was an “arguable basis
in law or fact to support the cause of action[,] and the claim [was] supported by a
good-faith argument for the extension, modification, or reversal of existing law.” See
G.E.W. Mech. Contractors, Inc., 115 N.M. at 733, 858 P.2d at 109. 	The district
court’s decision is not contrary to logic and reason, and it, therefore, did not abuse its

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discretion in denying the Lottery’s motion for attorney fees.
CONCLUSION
{19} 	We affirm the district court’s orders dismissing the action for failure to state a
claim and denying the Lottery’s motion for attorney fees.
{20} 	IT IS SO ORDERED.
_______________________________
JAMES J. WECHSLER, Judge
WE CONCUR:
_____________________________
CYNTHIA A. FRY, Chief Judge
_____________________________
JONATHAN B. SUTIN, Judge