As an arbitrator, I get frustrated by and critical of New Mexico case law from time to time. Well, I guess it shows. See Arbitration in NM not in Line with US Supreme Court Decisions, NM Arbitration--State Supreme Court Bucks National Trends; but see Arbitration Clauses in NM--Agreement at the Extreme End.
As I've written elsewhere, and repeatedly, in Rent-a-Center, West, Inc. v. Jackson, 130 S.Ct. 2772 (2010), the U.S Supreme Court has
rejected claims that the courts should decide whether an arbitration agreement was unenforceable as unconscionable, and reiterated the already well-established principle that if an agreement to arbitrate includes an agreement that the arbitrator will determine the enforceability of the agreement in the first instance, the district court only hears challenges to the enforceability of that “gateway” or “delegation” clause, and the arbitrator continues to hear challenges to the enforceability of the overall agreement.
Id. at 2776-81.
Recently, while reviewing a couple of recent NM decisions on arbitration, I truly felt like I'd fallen through the rabbit hole.
In Strausberg v. Laurel Healthcare Providers, LLC, 2012-NMCA-006, another unconscionability case, the Court of Appeals placed the burden of proof on the party seeking to compel arbitration. The Court blithely "acknowledge[d] and recognize[d] that most courts that have considered the question, place the burden on the party seeking to set aside and arbitration agreement on unconscionability grounds." However, it crafted a sweeping exception for nursing home cases due to the "grave" necessity for nursing home accommodations and the emotional and/or physical vulnerability of the plaintiffs.
There was an outstanding dissent by Judge Wechsler, who noted that Rivera v. Am. Gen. Fin. Servs., Inc., 2011-NMSC-033, requires courts to "place arbitration agreements on an equal footing with other contracts." Wechsler notes that it is true that the party seeking to compel arbitration has the burden to establish the existence of a valid agreement to arbitration. However, he points out that all the state cases cited by the majority on this point concerned challenges to original formation--such as questions of acceptance, authority. In contrast, it is well settled that equitable defenses such as unconscionability go to the enforceability, not formation, and the party seking to set aside enforcement based on a defense or exception such as unconscionability bears to burden of proof. Wechsler also observes that the language quoted extensively from a West Virginia, while emotionally moving, had no bearing on the actual decision in that case.
In Flemma v. Halliburton Energy Services, Inc., 2012-NMCA-009, a wrongful termination case, it is again the Court of Appeals that redeems New Mexico's legal reputation, by compelling enforcement of the arbitration agreement--and under Texas law no less. In Flemma, the employee worked and lived in Texas, and the employer mailed multiple employment agreements with notices of arbitration provisions, or notices of changes, to the employee's residence and office. The lower and appellate court concluded the contract was formed in Texas. Although employee did not recall receiving them he did not affirmatively deny receipt either, and admitted signing an agreement incorporating them by reference. Under Texas law, there is a presumption of receipt generally; in New Mexico that general presumption does not apply in the context of changes to an at-will employment agreement.
The Court reversed the District Court, which concluded that New Mexico's "public policy exception" prevented the application of Texas Law. Under New Mexico case law, an agreement to arbitrate is illusory if the employer retains unfettered discretion to modify the agreement. However, it is supported by adequate consideration if the right to amend or terminate the agreement is restricted one the employee's claim has accrued. Here, the right to amend was restricted once the claim was filed, rather than when it accrued. In contrast, Texas law will enforce the contract provided there is some restriction on the right to amend or terminate the agreement.
The Court of Appeals unexpectedly concludes by citing Justice Thomas, concurring, in AT&T Mobility LLC v. Concepcion, No. 09-893 (Apr. 27, 2011), for the proposition that "the FAA [Federal Arbitration Act] does not contemplate public policy as a defense to the validity and enforcement of an arbitration agreement."
To me, Flemma demonstrates that recently it is the Court of Appeals that can be counted on to do the "worker bee" job of accurately applying dull law to dry facts. In contrast, the Supreme Court of late has tended to get caught up in and moved by the righteous emotions and sympathetic appeal of cases challenging an arbitration agreement.
In either case, however, I wonder if parties and advocates are left wondering what exactly New Mexico courts will do in their own case...
In either case, however, I wonder if parties and advocates are left wondering what exactly New Mexico courts will do in their own case...
If you are interested in sound, sober and steady arbitration services, please contact Pilar Vaile, P.C. at (505) 247-0802 or info@pilarvailepc.com.
