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Yet more uncertainty in NM business law

Western folklorists still argue about the origin of the term “gandy dancers” to describe the crews that laid and maintained railroad tracks in pick-and-shovel days. The synchronized movements of an entire team of track layers might plausibly be compared to a ponderous dance, but the word “gandy” stumps the etymologists. Tradition says the crews labored with tools manufactured by the Gandy Company, but no one has uncovered evidence that a company by that name ever existed.

Today GandyDancer, with the two words jammed together like freight cars after the coupling fails, is an Albuquerque-based contractor “known by our customers as the one-call solution for railroad, excavation, demolition, and transportation,” according to its website. Recently, GandyDancer became involved in a lawsuit that tested whether New Mexico allows companies to sue each other for unfair competition.

One problem with being a railroad contractor in the twenty-first century is a shortage of customers. So when GandyDancer lost a contract to do work for BNSF, the successor company to the storied Santa Fe, it took a close look at the competitor that beat it out.

The winning bidder, Rock House CGM, is also headquartered in Albuquerque. GandyDancer apparently uncovered evidence that Rock House might have failed to obtain the proper construction license before starting work on the BNSF project. It filed a complaint with the New Mexico Construction Industries Division alleging that Rock House “performed unlicensed construction work,” according to a recent Court of Appeals opinion. The opinion goes on to say that Rock House agreed “to pay administrative penalties,” which implies the allegation had some merit. But administrative penalties did nothing to compensate GandyDancer for the revenues it had hoped to reap from the BNSF contract. So it sued its competitor.

It sued under New Mexico’s Unfair Practices Act, which our courts have repeatedly described as consumer protection legislation. The UPA makes it unlawful for anybody engaged in trade to make a “false or misleading statement” in connection with the sale of goods or services. The statute lists 18 overlapping examples of unfair trade practices, including the failure to reveal material facts. GandyDancer alleged that Rock House failed to reveal the material fact that it wasn’t properly licensed when it bid on the BNSF contract.

The filing of the suit immediately raised the legal question whether companies have the right to sue one another for unfair competition, or whether the right to sue is limited to consumers snookered by a seller’s sharp practices.

GandyDancer and Rock House naturally took opposing positions on the issue. GandyDancer had the plain terms of the UPA on its side. The Act says that “any person” who suffers any loss as a result of prohibited acts “may bring an action.” “Person,” in turn, is specifically defined to include companies. End of story?

Not so fast. Rock House had powerful ammunition on its side, too. In 2005 the Court of Appeals issued an opinion declaring that “the UPA gives standing only to buyers of goods or services.” Because GandyDancer didn’t buy anything from Rock House, under the 2005 decision it lacked standing to bring suit.

Uncertainty in commercial law is a chronic problem for business owners. The rule of law is the basis for our entire free market system, but the rule of law is sometimes just a little wobbly in New Mexico. With its 2005 decision, the Court of Appeals made things worse instead of better, spreading confusion rather than clearing it up. Since 2005, various trial judges have issued conflicting opinions about whether a company may sue its competitor under the UPA.

The GandyDancer case gave the Court of Appeals an opportunity to clean up the mess it made. Forced to give a yes/no answer to an unduckable question, the court this summer said, “Well, yes, maybe, sort of.” First, it limited its 2005 case to its particular facts, the juridical equivalent of sweeping it under the rug. Then it declared that a competitor can indeed bring suit under the UPA, but only if the suit “involves consumer protection concerns or trade practices addressed to the market generally,” a standard it found GandyDancer met.

That’s a lot of new words added to the statute, the exact meaning of which can only be established by future litigation. The court cleared up one source of uncertainty by replacing it with another.

The uncertainty doesn’t stop there. The New Mexico Supreme Court has agreed to review the case and might yet come to a different conclusion. The next column will return to the GandyDancer story because it illustrates with unusual clarity some of the key shortcomings of the New Mexico legal system.

Joel Jacobsen is an author who recently retired from a 29-year legal career. If there are topics you would like to see covered in future columns, please write him at legal.column.tips@gmail.com.

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