(a) An agreement contained in a record to submit to arbitration any existing or subsequent controversy arising between the parties to the agreement is valid, enforceable and irrevocable except upon a ground that exists at law or in equity for the revocation of a contract.
(b) The court shall decide whether an agreement to arbitrate exists or a controversy is subject to an agreement to arbitrate.
(c) An arbitrator shall decide whether a condition precedent to arbitrability has been fulfilled and whether a contract containing a valid agreement to arbitrate is enforceable.
(d) If a party to a judicial proceeding challenges the existence of, or claims that a controversy is not subject to an agreement to arbitrate, the arbitration proceeding may continue pending final resolution of the issue by the court, unless the court otherwise orders.
History: Laws 2001, ch. 227, § 7.
ANNOTATIONSCompiler's note. — Laws 2002, ch. 227, § 33 repealed the former Uniform Arbitration Act, Sections 44-7-1 to 44-7-22 NMSA 1978, enacted by Laws 1971, ch. 168, §23. The Uniform Arbitration Act compiled as 44-7A-1 to 44-7A-32 NMSA 1978 was enacted effective July 1, 2001.
Unconscionability. — Unconscionability is an affirmative defense to contract enforcement. It is an equitable doctrine, rooted in public policy, which allows courts to render unenforceable an agreement that is unreasonably favorable to one party while precluding a meaningful choice of the other party. Peavy v. Skilled Healthcare Group, Inc., 2020-NMSC-010, aff'g No. A-1-CA-35494, mem. op. (N.M. Ct. App. Oct. 22, 2018) (non-precedential).
Procedural and substantive unconscionability. — Procedural unconscionability considers the factual circumstances of a contract's formation. Substantive unconscionability concerns the legality and fairness of the contract terms themselves. Peavy v. Skilled Healthcare Group, Inc., 2020-NMSC-010, aff'g No. A-1-CA-35494, mem. op. (N.M. Ct. App. Oct. 22, 2018) (non-precedential).
Substantive unconscionability of an arbitration agreement. — Under New Mexico conscionability law, a presumption of unfair and unreasonable one-sidedness arises when a drafting party excludes its likeliest claims from arbitration, while mandating the other party arbitrate its likeliest claims. The presumption may be overcome by an evidentiary showing that justifies the one-sidedness of the arbitration agreement. Peavy v. Skilled Healthcare Group, Inc., 2020-NMSC-010, aff'g No. A-1-CA-35494, mem. op. (N.M. Ct. App. Oct. 22, 2018) (non-precedential).
Analysis in determining substantive conscionability of an arbitration agreement. — When confronted with the substantive conscionability of an arbitration agreement, a court should first analyze the arbitration agreement on its face to determine the legality and fairness of the contract terms themselves, and second, if the court determines the arbitration agreement is facially one-sided, the court should allow the drafting party to present evidence that justifies the agreement is fair and reasonable, such that enforcement of the agreement would not be substantively unconscionable. Peavy v. Skilled Healthcare Group, Inc., 2020-NMSC-010, aff'g No. A-1-CA-35494, mem. op. (N.M. Ct. App. Oct. 22, 2018) (non-precedential).
Arbitration agreements are substantively unconscionable when they are unfairly and unreasonably one-sided. — Where the estate of decedent filed a wrongful death lawsuit against defendant, a skilled nursing facility where decedent was a resident, and where, in response, defendant filed a motion to compel arbitration, citing an arbitration agreement that was attendant to decedent's admission agreement to the nursing facility, and where the arbitration agreement provided an exception stating that the agreement did not apply to either the facility or the resident in any disputes pertaining to collections, the district court did not err in denying defendant's motion to compel arbitration because the arbitration agreement was facially one-sided in that it excluded defendant's likeliest claim from mandatory arbitration, but required its residents to arbitrate their likeliest claims, and defendant failed to show that the arbitration agreement's collections exception was reasonable and fair. Peavy v. Skilled Healthcare Group, Inc., 2020-NMSC-010, aff'g No. A-1-CA-35494, mem. op. (N.M. Ct. App. Oct. 22, 2018) (non-precedential).
Determination of unconscionability of exceptions in arbitration agreement. — There is no bright-line, fixed, and inflexible rule that excepting from arbitration any claims most likely to be pursued by the defendant drafter will void the arbitration agreement as substantively unconscionable because the exception is unreasonably or unfairly one-sided and against New Mexico public policy. The issue is to be analyzed on a case-by-case basis based on evidence presented on the issues of unreasonableness, unfairness, one-sidedness, and public policy. Bargman v. Skilled Healthcare Grp., Inc., 2013-NMCA-006, 292 P.3d 1, cert. granted, 2012-NMCERT-012.
Where plaintiff, who was a patient in defendant's inpatient rehabilitation facility, signed an arbitration agreement that excluded disputes pertaining to collections; plaintiff sued defendant for damages arising out of the plaintiff's care at defendant's facility; the district court ruled that plaintiff did not have to arbitrate plaintiff's claims because the arbitration agreement was substantively unconscionable; and defendant argued that the collections exclusion was not unreasonable or unfair because collections disputes are not complex and involve small sums, that it is faster and cheaper for a patient and defendant to litigate collection claims rather than to arbitrate them, that under the arbitration agreement, defendant would have to pay the fees for three arbitrators to arbitrate the sums involved in collections which would not be cost effective and deprive defendant of a remedy when a patient failed to pay for services rendered, defendant should be permitted to present evidence tending to show that the collections exclusion is not unreasonably or unfairly one-sided such that enforcement of the collections exclusion is substantively unconscionable. Bargman v. Skilled Healthcare Grp., Inc., 2013-NMCA-006, 292 P.3d 1, cert. granted, 2012-NMCERT-012.
Arbitration provision not substantively unconscionable. — Where plaintiff purchased two used cars under separate finance contracts which contained provisions that retained self-help remedies for both parties, and that allowed either party to compel arbitration of any claim or dispute arising out of the contracts that exceeded $10,000, the district court erred in determining that the arbitration clause was unenforceable on the ground that it was substantively unconscionable under New Mexico law, because the arbitration provision and its carve-outs do not unreasonably benefit one party over another, and the carve-out provision's reservation of self-help remedies is irrelevant to the question of substantive unconscionability because they are private and nonadjudicatory by their very nature. Dalton v. Santander Consumer USA, Inc., 2016-NMSC-035, rev'g 2015-NMCA-030, 345 P.3d 1086.
Practical effect of agreement a factor in determining unconscionability. — Where an arbitration agreement contains provisions that unreasonably benefit one party over another, whether the one-sidedness is evident on the face of the agreement or whether its practical effect unreasonably favors one side, the arbitration provision is substantively unconscionable and unenforceable. Dalton v. Santander Consumer USA, Inc., 2015-NMCA-030, cert. granted, 2015-NMCERT-003.
Where plaintiff signed vehicle finance contracts that included arbitration agreements which contained facially neutral small claims court exemptions from arbitration, but where the practical effect of the exemptions preserved defendant's access to the courts to assert its most important claims, such as repossession, sale of the vehicle, and civil suits for deficiency judgments, while severely limiting plaintiff's access to the courts for consumer claims such as fraud and misrepresentation, the exemption provisions were unfairly and unreasonably one-sided in favor of defendant, and thus render the agreement to arbitrate substantively unconscionable. Dalton v. Santander Consumer USA, Inc., 2015-NMCA-030, cert. granted, 2015-NMCERT-003.
Contractual prohibition of class actions or arbitration. — Contractual provision which prohibited proceeding on a class-wide basis either in litigation or arbitration, as applied to claims that would be economically inefficient to bring on an individual basis, is contrary to the fundamental public policy of New Mexico to provide a forum for the resolution of all consumer claims and is unenforceable in New Mexico. Fiser v. Dell Computer Corp., 2008-NMSC-046, 144 N.M. 464, 188 P.3d 1215.
Arbitration agreement was not unconscionable. — Where a title loan agreement contained an arbitration provision which provided that all claims and disputes were subject to arbitration at the request of either party, except the lender's self-help or judicial remedies, including repossession or foreclosure, and that in the event of a default, the lender could exercise its rights in court and the debtor could not require the lender's action be arbitrated, the arbitration provision was substantively unconscionable and unenforceable. Rivera v. American Gen. Fin. Servs., Inc., 2010-NMCA-046, 148 N.M. 784, 242 P.3d 351, rev'd, 2011-NMSC-033, 150 N.M. 398, 255 P.3d 803.
Where a title loan agreement contained an arbitration provision which provided that all claims and disputes were subject to arbitration at the request of either party except the lender's self-help or judicial remedies, including repossession or foreclosure with respect to the vehicle that secured the loan, and that in the event of a default, the lender could exercise any other rights it had at law or equity or under the loan note or any instrument securing the loan note, including suing the borrower for amounts owed or repossessing any property given as security, the arbitration provision was not substantively unconscionable because the arbitration provision allowed the borrower to compel arbitration of disputes about the loan note itself and restored to the lender its statutory protections as a secured creditor or procedurally unconscionable as a contract of adhesion because there was no evidence that the lender had a monopoly on title loans in New Mexico or that the borrower would not be able to get a title loan under different terms through a different lender. Rivera v. American Gen. Fin. Servs., Inc., 2010-NMCA-046, 148 N.M. 784, 242 P.3d 351, rev'd, 2011-NMSC-033, 150 N.M. 398, 259 P.3d 803.
Arbitration agreement was supported by consideration. — Where a title loan agreement contained an arbitration provision which provided that all claims and disputes were subject to arbitration at the request of either party except the lender's judicial and extra-judicial remedies with respect to collateral; and the agreement did not allow the lender to alter the agreement to arbitrate claims that the lender brings against the borrower, the arbitration agreement was supported by consideration. Rivera v. American Gen. Fin. Servs., Inc., 2010-NMCA-046, 148 N.M. 784, 242 P.3d 351, rev'd, 2011-NMSC-033, 150 N.M. 398, 259 P.3d 803.
Unconscionable arbitration contract. — The provisions of a small loan company's arbitration form that limited a borrower to mandatory arbitration as a forum to settle all disputes whatsoever, while reserving for the lender the exclusive option of access to the courts for all remedies the lender was most likely to pursue against a borrower, are substantively unconscionable and unenforceable. Cordova v. World Fin. Corp. of N.M., 2009-NMSC-021, 146 N.M. 256, 208 P.3d 901.
Arbitration agreement was substantively unconscionable. — Where a nursing home admission agreement contained an arbitration agreement which provided that all disputes between the parties were subject to arbitration, but excepted guardianship proceedings, collection, and eviction actions initiated by the nursing home and disputes involving less than $2,500 from binding arbitration and provided that the excepted proceedings and actions were subject to litigation in court; and the most likely claims a nursing home would have against a resident relate to the collection of fees through guardianship proceedings and collection actions and the termination of services through eviction, the arbitration agreement was substantively unconscionable and unenforceable because the agreement exempted from arbitration the most likely claims that the nursing home would have against a resident, while subjecting the resident's most likely claims to arbitration. Figueroa v. THI of New Mexico, 2013-NMCA-077, cert. denied, 2012-NMCERT-010.
Savings clause in unconscionable arbitration agreement could not be applied. — Where a nursing home admission agreement contained an arbitration agreement that was unconscionable because it exempted from arbitration the most likely claims that the nursing home would have against a resident, while subjecting the resident's most likely claims to arbitration, the exemption of certain claims from arbitration was so central to the agreement that, irrespective of the savings clause in the agreement, the exemption clause was incapable of separation from the agreement to arbitrate and severing the exemption clause and requiring the resident to arbitrate a claim that was unlikely to be litigated by the nursing home would perpetuate the unfairness for which the equitable unconscionablity defense is imposed. Figueroa v. THI of N.M., 2013-NMCA-077, cert. denied, 2012-NMCERT-010.
Where the terms of an arbitration agreement that plaintiff signed upon plaintiff's admission to defendants' nursing home required the parties to arbitrate all disputes associated with the agreement and the relationship created by the admission agreement, except disputes pertaining to collections or discharge of residents, the arbitration agreement was substantively unconscionable and unenforceable because the arbitration agreement permitted the nursing home to litigate its most likely and beneficial claims while excluding access to the courts for claims regarding negligent care, the most likely claims to be pursued by a resident. Ruppelt v. Laurel Healthcare Providers, LLC, 2013-NMCA-014, 293 P.3d 902, cert. denied, 2012-NMCERT-012.
Federal Artibration Act not applicable to unconscionable arbitration contract. — The court's ruling that the provisions of a small loan company's arbitration form that limited a borrower to mandatory arbitration as a forum to settle all disputes whatsoever, while reserving for the lender the exclusive option of access to the courts for all remedies the lender was most likely to pursue against a borrower are substantively unconscionable and unenforceable is not inconsistent with the dictates of the Federal Arbitration Act, 9 U.S.C. § 2. Cordova v. World Fin. Corp. of N.M., 2009-NMSC-021, 146 N.M. 256, 208 P.3d 901.
Unconscionability analysis does not violate the Federal Arbitration Act. — The unconscionability analysis of arbitration agreements does not violate the Federal Arbitration Act, 9 U.S.C. §§ 1-6, because under New Mexico law, the unconscionability analysis is applied on an equal basis for all contracts to determine whether the terms of a contract are so unfairly unequal as to prevent enforcement of the contract. Figueroa v. THI of N.M., 2013-NMCA-077, cert. denied, 2012-NMCERT-010.
Where the membership of a member of the National Association of Securities Dealers has lapsed, the lapsed member cannot compel arbitration with a customer under the NASD rules after the lapse of the member's NASD membership. Medina v. Holguin, 2008-NMCA-161, 145 N.M. 303, 197 P.3d 1085.
Terms of arbitration agreement delivered with shipment of goods. — A customer who purchases goods over the telephone or the internet; who is informed of the terms and conditions of the sale, including an arbitration agreement when the product is delivered; and who is given a specific number of days in which to return the product, is deemed to have accepted the terms and conditions, including the arbitration agreement, unless the product is returned within the specified time period. Fiser v. Dell Computer Corp., 2007-NMCA-087, 142 N.M. 331 165 P.3d 328, rev'd on other grounds, 2008-NMSC-046, 144 N.M. 464, 188 P.3d 1215.
Arbitration agreement was illusory and lacked consideration. — An employer's arbitration agreement which permitted the employer to unilaterally amend or revoke the arbitration agreement at any time after a claim had accrued, but before an arbitration proceeding had been initiated, was invalid because the employer's promise to arbitrate was illusory and lacked consideration. Flemma v. Halliburton Energy Servs. Inc., 2013-NMSC-022, rev'g 2012-NMCA-009, 269 P.3d 931.
Arbitration agreement valid under Texas law that is unconscionable under New Mexico law is not enforceable in New Mexico under Texas law. — Where an arbitration agreement between plaintiff and defendant was formed while plaintiff was working for defendant in Texas; the arbitration agreement was enforceable under Texas law; while plaintiff was working for defendant in New Mexico, defendant terminated plaintiff; and the arbitration agreement permitted defendant to unilaterally amend or revoke the agreement at any time after a claim had accrued, but before an arbitration proceeding had been initiated, the arbitration agreement was not enforceable in New Mexico under Texas law because, under New Mexico law, the arbitration agreement was unconscionable and enforcing the arbitration agreement under Texas law would violate New Mexico public policy. Flemma v. Halliburton Energy Servs. Inc., 2013-NMSC-022, rev'g 2012-NMCA-009, 269 P.3d 931.
Arbitration agreement was not illusory. — Where the defendant's dispute resolution program included binding arbitration of all employment-related disputes; the program provided that defendant reserved the right to amend or terminate the program at any time by giving at least ten days notice to current employees and that no amendment or termination would apply to a dispute for which a proceeding had been initiated; defendant fired plaintiff; and plaintiff sued defendant for wrongful retaliatory discharge and claimed that the arbitration agreement was not binding because it was illusory, the arbitration agreement was not illusory because defendant's right to amend any aspect of the dispute resolution program ended the moment plaintiff was fired, because plaintiff's status as a continuing employee was severed at that time. Flemma v. Halliburton Energy Services, Inc., 2012-NMCA-009, 269 P.3d 931, cert. granted, 2012-NMCERT-001.
No procedural unconscionability. — Where the resident was admitted to a resident health care facility; the resident designated an agent to complete the admission paperwork; the admission agreement included a form that required the resident to either reject or accept arbitration as the method of resolving disputes; the director of the facility reviewed the admission agreement with the agent, instructed the agent to read the dispute resolution form, and explained to the agent that if the agent wanted to reject arbitration, the agent had to mark and initial the appropriate box; the dispute resolution form stated that a resident's agreement to arbitrate was not a condition to admission and explained the consequences of choosing arbitration; the agent read the admission agreement at the facility and at the agent's home; and the agent chose arbitration, the circumstances surrounding the formation of the arbitration agreement did not render the agreement void for procedural unconscionable. Barron v. Evangelical Lutheran Good Samaritan Soc'y, 2011-NMCA-094, 150 N.M. 669, 265 P.3d 720.
No substantative unconscionability. — An arbitration agreement that requires a buyer to arbitrate its claims against the seller, but does not require the seller to arbitrate its claims against the buyer, is not substantively unconscionable where the parties have provided each other with consideration beyond the promise to arbitrate. Fiser v. Dell Computer Corp., 2007-NMCA-087, 142 N.M. 331 165 P.3d 328, rev'd on other grounds, 2008-NMSC-046, 144 N.M. 464, 188 P.3d 1215.
Arbitration provision was substantively unconscionable. — Where an arbitration provision in a loan agreement provided that the arbitrator's decision was final and binding, and that if the claim exceeded $100,000 or granted or denied injunctive relief, either party could appeal the award to a three-arbitrator panel; and the practical effect of the appeals provision was that small claims, over which the lender was unlikely to initiate proceedings, were required to be arbitrated, the lender was more likely to appeal claims that met the threshold for appealable claims, and the borrower's claims are more likely to fall below the threshold and be subject to arbitration only, the appeals provision was substantively unconscionable and unenforceable because it constituted an "escape hatch" clause that benefited the lender more than the borrower. Clay v. N.M. Title Loans, Inc., 2012-NMCA-102, 288 P.3d 888, cert. denied, 2012-NMCERT-009.
Agreement to arbitrate legal malpractice requires client's informed consent. — Where an arbitration provision in an attorney-client contingency fee agreement provided that any dispute be submitted to arbitration, the arbitration provision was unenforceable absent the attorney informing his client that arbitration will constitute a waiver of important rights, including the right to a jury trial, because if an attorney is going to require his client, within the context of their relationship of trust, to waive the right to a jury trial for a future malpractice dispute, such a waiver should be made knowingly with the client's informed consent. For the purposes of obtaining informed consent, adequate communication will ordinarily include disclosure of the facts and circumstances giving rise to the situation, any explanation reasonably necessary to inform the client or other person of the material advantages and disadvantages of the proposed course of conduct and a discussion of the client's or other person's options and alternatives. Castillo v. Arrieta, 2016-NMCA-040, cert. denied.
An arbitration clause is not unconscionable because it precludes class actions. Fiser v. Dell Computer Corp., 2007-NMCA-087, 142 N.M. 331 165 P.3d 328, cert. granted, 2007-NMCERT-006, rev'd, 2008-NMSC-046, 144 N.M. 464, 188 P.3d 1215.
Denial of trial by jury. — A purchaser who is compelled to arbitrate based not on a statute, but on an arbitration agreement that is voluntarily entered into by the parties, is not denied the constitutional right to trial by jury. Fiser v. Dell Computer Corp., 2007-NMCA-087, 142 N.M. 331 165 P.3d 328, rev'd on other grounds, 2008-NMSC-046, 144 N.M. 464, 188 P.3d 1215.
Legally enforceable contract required. Under either the Federal Arbitration Act, 9 U.S.C. §§ 1-16, or the New Mexico Uniform Arbitration Act, a legally enforceable contract is a prerequisite to arbitration; without such a contract, parties will not be forced to arbitrate. Heye v. Am. Golf Corp., Inc., 2003-NMCA-138, 134 N.M. 558, 80 P.3d 495.
Authority of agent to agree to arbitration. — Where the resident, who was mentally competent, alert and oriented, was admitted to a resident health care facility; the resident declined to complete the admission paperwork and told the director of the facility that the principal's grandchild would complete the paperwork; the grandchild told the director that the grandchild was assuming responsibility for the resident's care; the paperwork included a form that required the resident to either reject or accept arbitration as the method of resolving disputes; and the grandchild completed the paperwork and accepted arbitration, the grandchild had actual authority, which was not limited by the resident, and apparent authority to decide whether to reject or accept the arbitration clause in the admission agreement that was signed as part of the admission process and the grandchild's decision to accept arbitration was binding on the principal. Barron v. Evangelical Lutheran Good Samaritan Soc'y, 2011-NMCA-094, 150 N.M. 669, 265 P.3d 720.
Under Federal Arbitration Act, whether valid contract to arbitrate exists is question of state contract law. DeArmond v. Halliburton Energy Servs., Inc., 2003-NMCA-148, 134 N.M. 630, 81 P.3d 573, cert. denied, 2003-NMCERT-003, 135 N.M. 51, 84 P.3d 668.
Determination of existence of arbitration agreement. — A court may not delegate to the arbitrator the court's obligation to decide the threshold issue of the existence of a binding arbitration agreement. Edward Family Ltd. P'ship v. Brown, 2006-NMCA-083, 140 N.M. 104, 140 P.3d 525, cert. denied, 2006-NMCERT-005, 139 N.M. 567, 136 P.3d 568.
Burden of proof of unconscionability. — Unconscionability is an affirmative contract defense and the party alleging unconscionability has the burden to prove that the contract is unenforceable on that basis. Strausberg v. Laurel Healthcare Providers, LLC, 2013-NMSC-032, rev'g 2012-NMCA-006, 269 P.3d 914.
Burdens of proof. — The party seeking to compel arbitration bears the initial burden to prove that a valid contract exists, by generally showing that the contract is factually supported by an offer, an acceptance, consideration and mutual assent. Once the party who seeks to compel arbitration has satisfied the initial burden of proving the formation of a valid contract, the burden shifts to the party opposing arbitration to demonstrate that an affirmative defense, such as unconscionability, renders the contract unenforceable. Strausberg v. Laurel Healthcare Providers, LLC, 2013-NMSC-032, rev'g 2012-NMCA-006, 269 P.3d 914.
Burden of proof of validity. — When a nursing home relies upon an arbitration agreement signed by a patient as a condition for admission to the nursing home, and the patient contends that the arbitration agreement is unconscionable, the nursing home has the burden of proving that the arbitration agreement is not unconscionable. Strausberg v. Laurel Healthcare Providers, LLC, 2012-NMCA-006, 269 P.3d 914, cert. granted, 2012-NMCERT-001, rev'd, 2013-NMSC-032.
District court did not shift burden of proving unconscionability. — The proponent of the affirmative defense of unconscionability bears the burden of proof, and where a party fails to adequately rebut an argument that an exemption from arbitration provision is unreasonably one-sided, the district court's agreement with the argument does not impermissibly shift the burden of proof. Dalton v. Santander Consumer USA, Inc., 2015-NMCA-030, rev'd on other grounds, 2016-NMSA-035.
Rule preempted by the Federal Arbitration Act. — The rule that a nursing home seeking to compel arbitration has the burden of proving that the arbitration agreement is not unconscionable is preempted by the Federal Arbitration Act, 9 U.S.C. §§ 1-16, because the rule singles out arbitration agreements for special treatment by presuming that all nursing home arbitration agreements are unconscionable. Strausberg v. Laurel Healthcare Providers, LLC, 2013-NMSC-032, rev'g 2012-NMCA-006, 269 P.3d 914.
The Federal Arbitration Act does not preempt the application of New Mexico's unconscionability doctrine to arbitration exemptions. — The New Mexico supreme court has consistently upheld the application of New Mexico's generally applicable unconscionability doctrine to one-sided arbitration agreements, consistent with the savings clause of the Federal Arbitration Act, 9 U.S.C. § 2, which permits state courts to invalidate agreements to arbitrate via generally applicable contract defenses, such as fraud, duress or unconscionability, but not by defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue. Dalton v. Santander Consumer USA, Inc., rev'd on other grounds, 2016-NMSA-035.
The employer failed to prove the elements of acceptance and mutual assent to an arbitration agreement contained in materials mailed to the employee's home which provided that continued employment would constitute acceptance of the agreement where there was no evidence that the employee actually read the agreement and the employer did not provide an agreement or acknowledgment form for the employee to sign; the court would not equate presumed receipt with actual knowledge. DeArmond v. Halliburton Energy Servs., Inc., 2003-NMCA-148, 134 N.M. 630, 81 P.3d 573, cert. denied, 2003-NMCERT-003, 135 N.M. 51, 84 P.3d 668.
Arbitration agreement to be interpreted by rules of contract law. — A valid arbitration contract must possess mutuality of obligation; mutuality means both sides must provide consideration. Heye v. Am. Golf Corp., Inc., 2003-NMCA-138, 134 N.M. 558, 80 P.3d 495.
Where an employment arbitration agreement was a preprinted form contract and there was no suggestion that the employer sought or received any input from the employee in connection with the drafting of the language, the agreement would be construed against the employer-drafter where it contained conflicting provisions. Heye v. Am. Golf Corp., Inc., 2003-NMCA-138, 134 N.M. 558, 80 P.3d 495.
An employment arbitration agreement which contained conflicting provisions as to whether it was binding on the employer, construed against the employer, gave the employer unfettered discretion to terminate arbitration at any time; the promise, therefore, was illusory and did not provide the consideration necessary to enforce the arbitration agreement. Heye v. Am. Golf Corp., Inc., 2003-NMCA-138, 134 N.M. 558, 80 P.3d 495.
The terms of the arbitration agreement are to be interpreted by the rules of contract law. Christmas v. Cimarron Realty Co., 1982-NMSC-079, 98 N.M. 330, 648 P.2d 788.
Arbitrator must initially determine scope of arbitration. — Where an employee agreed to arbitrate the employee's grievances; the arbitration agreement provided that the arbitration would resolve all matters raised in the employee's complaint and that the arbitrator had exclusive authority to resolve disputes relating to the scope of the arbitration agreement; there was a dispute between the employer and the employee as to the scope of the arbitration; the employee agreed with the employer to narrow the scope of the arbitration, while unilaterally reserving the right to litigate other issues; the employee did not raise the scope-of-arbitration issues with the arbitrator; the arbitrator ruled in favor of the employee; and the employee subsequently filed a lawsuit in which the employee alleged more expansive claims arising out of the same subject matter as the arbitration agreement, the employee was obligated to obtain a scope-of-arbitration ruling first from the arbitrator, and because the employee never obtained a ruling, the district court correctly dismissed the lawsuit. Home v. Los Alamos Nat'l Sec., L.L.C., 2013-NMSC-004, 296 P.3d 478.
Unforeseeable conduct is not within the scope of an arbitration provision. — Claims based on conduct that is unforeseeable to the parties at the time of entering into an agreement, including an arbitration provision, are not within the scope of the arbitration provision as a matter of law. Clay v. N.M. Title Loans, Inc., 2012-NMCA-102, 288 P.3d 888, cert. denied, 2012-NMCERT-009.
Tort claim was not within scope of arbitration provision in loan agreement. — Where borrower signed a loan agreement with lender and used borrower's truck to secure the loan; the arbitration clause in the loan agreement required arbitration of any claim between borrower and lender that arose from or related to the agreement or the borrower's truck; borrower failed to repay the loan; when borrower resisted the attempt by employees of a repossession business to repossess the truck for lender, one of the employees shot borrower; and borrower sued lender alleging tort claims arising out of the shooting, borrower's tort claims were not within the scope of the arbitration provision because illegal or negligent conduct during repossession was outside the scope of the loan agreement and the arbitration provision. Clay v. N.M. Title Loans, Inc., 2012-NMCA-102, 288 P.3d 888, cert. denied, 2012-NMCERT-009.
Arbitration agreement valid under Texas contract law was enforceable in New Mexico. — Where, during the course of plaintiff's twenty-six years of employment with defendant, defendant on four separate mailings notified plaintiff that continued employment with defendant constituted plaintiff's acceptance of the terms of defendant's dispute resolution program, which included binding arbitration of all employment-related disputes; when plaintiff was assigned to work for defendant's international organization, plaintiff signed an agreement that plaintiff would remain employed by defendant and the terms of defendant's dispute resolution program would apply to plaintiff; while plaintiff was working for defendant in New Mexico, plaintiff sued defendant for wrongful and retaliatory discharge; under Texas law, plaintiff was presumed to have received the mailings and plaintiff's continued employment with defendant constituted acceptance of defendant's dispute resolution program; under New Mexico law, an employer is required to prove that an employee had actual notice of an offer and actual acknowledgement that continued employment constituted acceptance of the offer; and the only difference between Texas and New Mexico law was the evidentiary requirements of contract formation, the mere difference between Texas and New Mexico in terms of the evidentiary requirements of contract formation were insufficient to overcome the place-of-formation rule on public policy grounds, the arbitration agreement was enforceable under Texas law, and plaintiff was bound to arbitration. Flemma v. Halliburton Energy Services, Inc., 2012-NMCA-009, 269 P.3d 931, cert. granted, 2012-NMCERT-001.
Test to determine whether a court may designate an arbitration provider. — If the parties' designation of a particular arbitration provider was integral to the parties' agreement to arbitrate, then the court cannot appoint a substitute arbitrator if the designated arbitrator is not available. If the parties' designation of an arbitration provider was an ancillary logistical concern, a court can appoint a substitute provider. An arbitration provider is an ancillary logistical concern where the arbitration provisions do not specifically designate a provider or give the parties a choice of providers. The express designation of a single arbitration provider; the designation of the rules of a specific arbitration provider; and mandatory, as opposed to permissive, contractual language are factors that indicate that a particular provider is integral to the parties' agreement to arbitrate. Rivera v. Am. Gen. Fin. Servs., Inc., 2011-NMSC-033, 150 N.M. 398, 259 P.3d 803, rev'g 2010-NMCA-046, 148 N.M. 784, 242 P.3d 351.
Arbitration agreement was unenforceable. — Where the arbitration provision in a title loan agreement named the National Arbitration Forum exclusively throughout the provisions of the agreement, provided that the arbitration would be conducted under the rules and procedures of the National Arbitration Forum, required the parties to use the forms prescribed by the National Arbitration Forum, required the National Arbitration Forum to provide a list of potential arbitrators, provided that the National Arbitration Forum would determine the costs each party would pay; and the National Arbitration Forum was precluded from arbitrating consumer disputes, the arbitration provision was unenforceable because arbitration before the National Arbitration Forum was integral to the agreement to arbitrate, precluding a court from appointing a substitute arbitrator. Rivera v. Am. Gen. Fin. Servs., Inc., 2011-NMSC-033, 150 N.M. 398, 259 P.3d 803, rev'g 2010-NMCA-046, 148 N.M. 784, 242 P.3d 351.
Agreement defines scope of jurisdiction of arbitration. — Parties contracting to resolve disputes by arbitration are bound by their agreement. The terms of the agreement define the scope of the jurisdiction, conditions, limitations and restrictions on the matters to be arbitrated. Christmas v. Cimarron Realty Co., 1982-NMSC-079, 98 N.M. 330, 648 P.2d 788.
Claim not within the scope of arbitration provision. — Where the focus of the arbitration provision contained in a warranty package for new homes was on the warranty against defects and the repair and replacement of covered defects in the new homes, and even though the arbitration provision included claims of breach of contract and negligent or intentional misrepresentation, the arbitration provision did not apply to representations made to prospective purchasers that the land adjacent to the new homes would remain open space. Campos v. Homes by Joe Boyden, LLC, 2006-NMCA-086, 140 N.M. 122, 140 P.3d 543, cert. denied, 2006-NMCERT-007, 140 N.M. 279, 142 P.3d 360.
Waiver of exclusive authority of arbitrator to decide arbitrability. — Where the terms of an arbitration agreement that plaintiff signed upon plaintiff's admission to defendants' nursing home required the parties to arbitrate all disputes associated with the agreement and the relationship created by the admission agreement, except disputes pertaining to collections or discharge of residents; plaintiff challenged the enforceability of the entire arbitration agreement; and defendants voluntarily addressed the enforceability of the arbitration agreement in district court and never suggested that the district court did not have authority to address the issue, defendants waived their argument that the arbitrator had exclusive authority to decide arbitrability. Ruppelt v. Laurel Healthcare Providers, LLC, 2013-NMCA-014, 293 P.3d 902, cert. denied, 2012-NMCERT-012.
Where arbitration agreement was not supported by consideration, no contract was formed. Piano v. Premier Distrib. Co., 2005-NMCA-018, 137 N.M. 57, 107 P.3d 11, cert. denied, 2005-NMCERT-003, 137 N.M. 290, 110 P.3d 73.
Continued at-will employment is an illusory promise that cannot be consideration for an arbitration agreement. Piano v. Premier Distrib. Co., 2005-NMCA-018, 137 N.M. 57, 107 P.3d 11, cert. denied, 2005-NMCERT-003, 137 N.M. 290, 110 P.3d 73.
Arbitration agreement will be given broad interpretation. — When the parties agree to arbitrate any potential claims or disputes arising out of their relationships by contract or otherwise, the arbitration agreement will be given broad interpretation, unless the parties themselves limit arbitration to specific areas or matters. Barring such limiting language, the courts only decide the threshold question of whether there is an agreement to arbitrate. K.L. House Constr. Co. v. City of Albuquerque, 1978-NMSC-025, 91 N.M. 492, 576 P.2d 752.
Ability to unilaterally change agreement. — One party's promise to arbitrate is illusory where it retained the ability to unilaterally change the arbitration agreement. Piano v. Premier Distrib. Co., 2005-NMCA-018, 137 N.M. 57, 107 P.3d 11, cert. denied, 2005-NMCERT-003, 137 N.M. 290, 110 P.3d 73.
Forum for resolution of disputed interpretation. — Where a complaint for declaratory judgment raises questions of law arising from the disputed interpretation of an arbitration contract, the proper forum for resolution of such questions is the trial court. Guaranty Nat'l Ins. Co. v. Valdez, 1988-NMSC-090, 107 N.M. 764, 764 P.2d 1322.
Arbitration not binding. — To the extent that, pursuant to contract, arbitration is not binding, there exists no arbitration agreement to be bound by an arbitrator's award, and, therefore, a party with a contractual right to an appeal de novo, as well as an aggrieved party under Section 66-5-303 NMSA 1978, the de novo trial provision of the uninsured motorist insurance law, has a right to seek a de novo trial in district court. Allstate Ins. Co. v. Perea, 2000-NMCA-070, 129 N.M. 364, 8 P.3d 166, overruled by Padilla v. State Farm Mut. Auto. Ins. Co., 2003-NMSC-011, 133 N.M. 661, 68 P.3d 901.
When trial court determines force of disputed contract. — When a petition is filed to compel arbitration pursuant to a contract's arbitration clause and the responding party denies the existence or validity of the contract, the trial court must determine whether the contract is still in force to compel the requested arbitration. Gonzales v. United S.W. Nat'l Bank, 1979-NMSC-086, 93 N.M. 522, 602 P.2d 619.
Arbitration provision providing for limited de novo appeal substantively unconscionable. — The limited de novo appeal provision in an insurance contract, providing for mandatory arbitration which would be binding on both parties for any award of damages not exceeding the limits of the Mandatory Financial Responsibility Act but providing for de novo appeal by either party of awards over that amount, violates public policy and is void as substantively unconscionable. Padilla v. State Farm Mut. Auto. Ins. Co., 2003-NMSC-011, 133 N.M. 661, 68 P.3d 901.
Question of arbitrability is for the court to decide. — Where plaintiff filed a class action to challenge the validity of an online loan agreement; the loan agreement contained an arbitration provision in which the parties delegated questions of arbitrability to the arbitrator; plaintiff did not specifically challenge the validity of the delegation clause in the complaint; and when defendants filed motions to compel arbitration, plaintiff raised specific challenges to the validity of the delegation clause that were distinct from the challenges to the loan agreement, the court, not the arbitrator, had jurisdiction to determine the question of the validity of the arbitration provision. Felts v. CLK Mgmt., Inc., 2011-NMCA-062, 149 N.M. 681, 254 P.3d 124, cert. granted, 2011-NMCERT-006, 150 N.M. 764, 266 P.3d 633.
Court had jurisdiction to determine the scope of arbitration provision. — Where an arbitration provision in a loan agreement contained a "delegation provision" which defined an arbitrable "claim" to include disputes about the validity, enforceability, arbitrability, or scope of the arbitration provision, and the borrower specifically challenged the delegation provision by arguing that there was fraud in the inducement based on an alleged misrepresentation by the lender of the neutrality of the two organizations identified to administer the arbitration proceedings, and the fact that both organizations had stopped administrating arbitration of collections and that borrower justifiably relied on the representation of neutrality, the court had jurisdiction to determine the scope of the arbitration provision. Clay v. N.M. Title Loans, Inc., 2012-NMCA-102, 288 P.3d 888, cert. denied, 2012-NMCERT-009.
Ban on class-wide arbitration was unconscionable. — Where a loan agreement contained an arbitration provision that banned class-wide arbitration and substantial evidence showed that the likelihood that plaintiff's costs in bringing an individual claim would exceed plaintiff's damages was reasonably certain and that a meaningful remedy for plaintiff's claims was only available through class action relief, the class action ban in the arbitration provision was substantively unconscionable and unenforceable. Felts v. CLK Mgmt., Inc., 2011-NMCA-062, 149 N.M. 681, 254 P.3d 124, cert. granted, 2011-NMCERT-006, 150 N.M. 764, 266 P.3d 633.
Ban on class-wide arbitration was not severable from arbitration provision. — Where a loan agreement contained an arbitration provision that banned class-wide arbitration; the class action ban was a key limitation to the means by which the parties could resolve their disputes under the loan agreement; the class action ban was substantively unconscionable and unenforceable; and the class action ban was not severable from the remainder of the arbitration provision, the entire arbitration provision was unenforceable. Felts v. CLK Mgmt., Inc., 2011-NMCA-062, 149 N.M. 681, 254 P.3d 124, cert. granted, 2011-NMCERT-006, 150 N.M. 764, 266 P.3d 633.
Am. Jur. 2d, A.L.R. and C.J.S. references. — 4 Am. Jur. 2d Alternative Dispute Resolution § 70 et seq.
Validity and effect, and remedy in respect, of contractual stipulation to submit disputes to arbitration in another jurisdiction, 12 A.L.R.3d 892.
Validity and construction of provision for arbitration of disputes as to alimony or support payments, or child visitation or custody matters, 38 A.L.R.5th 69.
Validity and enforceability of provision for binding arbitration, and waiver thereof, 24 A.L.R.3d 1325.
Validity and construction of agreement between attorney and client to arbitrate disputes arising between them, 26 A.L.R.5th 107.
Participation in arbitration proceedings as waiver to objections to arbitrability under state law, 56 A.L.R.5th 757.
Validity and effect under state law of arbitration agreement provision for laternative method of appointment of arbitrator where one party fails or refuses to follow appointment procedure specified in agreement, 75 A.L.R.5th 595.
Validity and effect under Federal Arbitration Act (9 U.S.C.A. § 1 et seq.) of arbitration agreement provision for alternative method of appointment of arbitrator where one party fails or refuses to follow appointment procedure specified in agreement, 159 A.L.R. Fed. 1
6 C.J.S. Arbitration § 14.