Jury Orders Zia Credit Union To Pay Former Employee $1.5 Million

Los Alamos Daily Post

Zia Credit Union will pay $1.5 million to a former 20-year employee under a verdict handed down by a Santa Fe jury in a case involving a 1.3-acre piece of property in Pojoaque.

The case was originally filed in 2015 by Edwin Ortiz against Zia alleging wrongful discharge and defamation. Ortiz was hired by Zia in 1990 and worked his way up to senior vice president. He inherited the Pojoaque property from his parents.

The lawsuit alleged that beginning in 2005, Zia management and board of directors considered expanding the field of membership into Pojoaque Valley and opening a branch location there. In 2007, the board approved changes to the credit union bylaws to allow expansion into Pojoaque Valley and two months later directed senior management to immediately secure property there for a new branch office.

Ortiz was approached about his property by Del Norte Credit Union but declined to pursue negotiations because he didn’t want to sell his land to a Zia competitor, according to the suit. The lawsuit said that as senior management Ortiz believed he had an obligation to report the Del Norte inquiry about his land to his employer, so he told then Zia President/CEO Larry Mortenson who passed the information on to the board.

The board told Mortenson to ask Ortiz if he was interested in selling the property and if so, to suggest a price. Ortiz told Mortenson that because it was family land, he would rather lease than sell but would consider selling if Zia would pay $1.62 million. Mortenson talked to the board members who agreed that the figure was reasonable and directed senior management to pursue the deal. 

Over the next several years, the lawsuit said Zia pursued the sale and requisite regulatory requirements, site preparation and zoning approval. 

In 2009 a lease-purchase agreement was executed by Ortiz and Zia, which guaranteed Ortiz $1.625 million contingent on regulatory approvals. Ortiz was to be paid $6,000 per month for seven years and a lump sum of $954,000 after seven years. Zia began making payments in 2009 and continued to pay until April 2012. They assumed leasehold of the property and demolished a four-apartment building and Ortiz’s mother’s home and other improvements on the property.

In 2012, Mortenson resigned from Zia and was replaced by Larry Knoll. The lawsuit said Knoll accused Ortiz of deceiving the board about his ownership of the property and its appraised value. Without warning Knoll terminated Ortiz from his employment citing “a dishonest act”.

Ortiz claimed Zia fired him without cause and based on false information. He claimed Zia made public statements that he failed to disclose his interest in the property, concealed other relevant information, declared he was dishonest and that he breached his fiduciary duty to the credit union. 

He claimed Zia’s defamation of him damaged his reputation in the eyes of managers, colleagues and the industry and affected his income, professional opportunities, his earnings, benefits and more. 

In April 2012, Zia also ceased payment on the lease-purchase agreement and was put on notice that they were breaching the contract with Ortiz.

In response to the lawsuit, Zia claimed it had full authority to terminate Ortiz because he was an at-will employee. Zia also claimed it could terminate the lease-purchase agreement should its regulatory entities, particularly the National Credit Union Administration or the New Mexico Financial Institutions Division not approve the transaction. It claimed complications in obtaining that approval occurred after the execution of the agreement and that consequently Zia terminated the agreement.

Zia claimed Ortiz’s employment was terminated because of his behavior that resulted in the lack of regulatory approval and made Zia question his integrity and honesty as a corporate officer. It claimed its actions were made and decisions were made for “legitimate, non-retaliatory business reasons”.

Zia alleged the Ortiz property appraised in 2007 at $750,000 with improvements and $715,000 without but that Ortiz did not disclose a 2008 appraisal of $500,000 with improvements and $490,000 to Zia and its board of directors. Zia claimed Ortiz misrepresented the terms of the agreement and that the terms were not “appropriately disclosed” to them.

After many months of depositions and hearings, the case went before a 12-person jury in First Judicial District Judge Francis J. Mathew’s courtroom in December. The jury was issued a special verdict form requiring answers to specific detailed questions.

Juror responses indicated they did not find that Zia breached the contract with Ortiz but did breach the contractual covenant of good faith and fair dealing in the contract to purchase real estate from him by terminating the contract. They found that Ortiz did not improperly induce Zia to enter into the lease-purchase agreement by either failing to disclose a material fact or fraudulently misrepresenting any fact to Zia.

Jurors also found that Ortiz did not use undue influence to persuade Zia to enter into the agreement and that it was not impossible or unreasonable for Zia to perform the contract with him because of circumstances beyond Zia’s control.

The jurors found that Zia caused damages to Ortiz in the amount of $800,000 and that Zia’s acts were either malicious, reckless, wanton or oppressive so that they awarded Ortiz an additional $700,000 in punitive damages. They found that Ortiz did not breach his fiduciary duty to Zia, negligently misrepresent a material fact to Zia or defraud Zia with respect to the contract. 

Current Zia President/CEO David Woodruff told the Los Alamos Daily Post Wednesday that Zia disagrees with the jury’s verdict and is pursuing the appropriate remedies. He pointed out that the jury did not find that Zia breached the contract with Ortiz.
Woodruff said Zia acknowledged the credit union’s liability for the verdict amount on its books at the end of 2017 and while the legal proceedings continue, Zia will keep that amount in reserve.

“Otherwise Zia Credit Union members should see no change in their services and plans for products,” Woodruff said.