May 9—A legal dispute between former state House Speaker Brian Egolf, his wife, Kelly Egolf, and a group of high-profile investors will be resolved through arbitration rather than in the court, a state district judge ruled Thursday.

The decision by District Judge Francis Mathew is a win for the Egolfs, who filed motions in which they argued an agreement between Kelly Egolf and former partners in her juice business, New Mexico Fresh Foods, called for any dispute to be resolved through arbitration.

"We have been clear from the beginning this case never should have been filed in court, and we are glad Judge Mathew confirmed that today," said Brian Egolf's attorney, Mark Baker, after the hearing.

Clifford Atkinson, an attorney for the plaintiffs, said they are considering their options for an appeal, but he declined to comment further.

The plaintiffs include Vladem Contemporary museum namesake and businessman Bob Vladem and his wife, Ellen Vladem; real estate mogul Ed Berman; oil and gas attorney Dan Perry; philanthropist Gail "Peaches" Gilbert; restaurateur Charles Dale; Jessie Groothuis; and Steven Lustig.

They accuse the Egolfs of secretly planning to cut them out of New Mexico Fresh Foods and its Verde juice brand by organizing a bank sale of its assets last year to Invictus, a company they allege the Egolfs created to defraud them out of their more than $3 million investment.

Attorneys for the Egolfs have argued the investors intentionally blocked Kelly Egolf's attempt to raise additional funds when New Mexico Fresh Foods was struggling financially, so Brian Egolf created Invictus to ensure all was not lost.

In addition to the investors' money, New Mexico Fresh Foods received about $700,000 in public funding and was the beneficiary of government-sanctioned tax breaks on equipment purchases. It also obtained a $375,000 loan from the Santa Fe Community Foundation.

The Egolfs' motions to compel arbitration in the civil case — filed by attorney Jennifer Noya on behalf of Kelly Egolf and by Baker on behalf of both Brian Egolf and Invictus — also asked the court to dismiss the lawsuit or postpone the case while arbitration was pending.

The Egolfs' attorneys argued in court Thursday the New Mexico Fresh Food partners knew investing in a startup could be risky and knew the repercussions of agreeing in writing to have any disputes resolved in arbitration.

"This isn't a dispute involving an arbitration agreement that's buried in some sort of consumer contract or nursing home admission documents," Noya told the court. "Rather, this is a case filed by multiple sophisticated investor groups."

She added it was "notable" the plaintiffs invested in New Mexico Fresh Foods through companies or trusts.

While Mathew granted the motion to move the dispute to arbitration — and halted subpoenas the plaintiffs had filed seeking evidence — he did not dismiss the case outright.

That means whatever resolution an arbitrator makes will be entered as a final judgment in the case and will be public record, Baker said after the hearing.

"At the conclusion of this case, just as if it were tried in front of a jury, the public will know the outcome," he said.

Baker said New Mexico Fresh Foods' public funds have been accounted for in public documents, and any decision made in arbitration would only concern money invested by private parties.

The public money New Mexico Fresh Foods received includes a $500,000 federal Community Development Block Grant, $150,000 for job creation through the state's Local Economic Development Act and $78,000 "for the reimbursement costs of training 12 employees in 2021 and 2022" through the state's Job Training Incentives Program, an Economic Development Department spokesman said in a statement.

The company had been approved for $750,000 through the Local Economic Development Act — known by its acronym LEDA. The funding agreement called for New Mexico Fresh Foods to create 74 jobs over five years, Economic Development Department spokesman Bruce Krasnow wrote in a February statement.

The agreement was a "post-performance agreement," which means the company didn't receive the funds up front but became eligible to have the money released in phases as it grew and met performance goals, Krasnow said.

After analyzing the growth and net fiscal impact of New Mexico Fresh Foods, the statement said, the state determined in 2022 the company "had achieved a benefit in excess of $150,000 to the taxpayers" and authorized the release of $150,000 at Kelly Egolf's request.

Krasnow said Thursday the state knew when it released the funds the company was behind on its job creation goals — something he said was common before and during the coronavirus pandemic — but didn't know the company was having financial trouble.

"None of that came to our attention," Krasnow said. "Those aren't conversations we normally have with companies. They had met their initial benchmarks. They were making some progress. ... That's the information we had."

The new company, Invictus, is still operating and has assumed New Mexico Fresh Foods' obligations under an industrial revenue bond received from Bernalillo County, where it has a processing facility. The bond includes tax breaks but not direct funding. "We wanted to honor our obligations and promises," Brian Egolf said in an interview Thursday.

Egolf said Invictus has no plans to seek disbursement of any more of the $750,000 in LEDA funding New Mexico Fresh Foods had qualified for.