Strausberg v. Laurel Healthcare Providers, LLC , 2012 NMCA 6 ( 2011 )

I attest to the accuracy and
integrity of this document
New Mexico Compilation
Commission, Santa Fe, NM
'00'05- 14:40:45 2012.11.16
Certiorari Granted January 6, 2012, No. 33,331
IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
Opinion Number: 2012-NMCA-006Filing Date: November 4, 2011
Docket No. 29,238
NINA R. STRAUSBERG,
Plaintiff-Appellant,
v.
LAUREL HEALTHCARE PROVIDERS,
LLC, and ARBOR BROOK, LLC, d/b/a
ARBOR BROOK HEALTHCARE,
Defendants-Appellees.
APPEAL FROM THE DISTRICT COURT OF BERNALILLO COUNTY
Clay P. Campbell, District Judge
Harvey Law Firm, LLC
Dusti D. Harvey
Jennifer J. Foote
Albuquerque, NM
for Appellant
Keleher & McLeod, P.A.
Mary Behm
Hari-Amrit Khalsa
Albuquerque, NM
for Appellees
OPINION
VIGIL, Judge.
{1} A party who seeks to compel arbitration has the burden to prove the existence of a
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valid agreement to arbitrate. In this case, however, the district court shifted the burden to
Plaintiff to prove that the agreement is invalid, and granted Defendants’ motion to compel
arbitration under a nursing home mandatory arbitration agreement. We reverse and remand.
BACKGROUND
{2} Plaintiff was required to sign an arbitration agreement in order to be admitted into
a nursing home, Arbor Brook Healthcare (Arbor Brook) to rehabilitate from back surgery.
Notwithstanding the agreement to arbitrate, Plaintiff filed a complaint for damages in the
district court against the operator of Arbor Brook, Arbor Brook LLC, d/b/a Arbor Brook
Healthcare, and Laurel Healthcare Providers, LLC as its owner, operator, or manager
(Defendants). Plaintiff alleged that during her stay at Arbor Brook, she developed painful
and preventable decubitus ulcers at or near her surgical wound; that her surgical wound
became infected; that the infection was ignored or not properly treated, leading to a staph
infection; and that her care was negligent in several other respects.
{3} Defendants responded by filing a motion to dismiss the complaint and compel
arbitration, alleging that under the arbitration agreement between Plaintiff and Arbor Brook,
all of Plaintiff’s claims are subject to arbitration. Plaintiff replied that the arbitration
agreement is invalid because it is unconscionable. The district court first ruled that the
arbitration agreement is not substantively unconscionable and then held an evidentiary
hearing to determine whether the arbitration agreement is procedurally unconscionable. At
the hearing, Plaintiff and the nurse liaison who obtained Plaintiff’s signature to the
arbitration agreement testified what they recalled about the circumstances under which
Plaintiff signed the arbitration agreement.
{4} The district court then issued a letter decision setting forth its ruling and reasoning.
The district court said,
the issue presented was difficult because of the credibility of the witnesses,
not in the sense of their truthfulness, but in the sense of their ability to recall
the events surrounding the signing of the contract. Only two witnesses
testified, one for the Plaintiff and one for Defendant. Ultimately, however,
it was Plaintiff’s burden to establish the contract she signed is unenforceable.
The district court specifically noted that Plaintiff’s testimony demonstrated she was confused
about signing the arbitration agreement and attributed her confusion to the pain medication
she was under at the time. The district court also ruled that the factors considered to
determine the validity of the arbitration agreement “generally are evenly balanced[.]” One
of the factors it considered was whether Plaintiff had the option of going to another nursing
home facility. As to this factor, the district court found, “Plaintiff believed that her only
option was to be discharged from the hospital to Defendant[s’] care, but did not testify
whether she looked into other placement options, and it was her burden to prove the contract
at issue is unenforceable.” Ultimately, the district court ruled that the arbitration agreement
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was not procedurally unconscionable. A formal order was filed granting Defendants’ motion
to dismiss and to compel arbitration, and Plaintiff appeals.
{5} To place our holding in context, we first address our standard of review, followed by
a discussion of: (1) the enforcement of a valid arbitration agreement; (2) the elements of
substantive unconscionability in an arbitration agreement; and (3) the elements of procedural
unconscionability in an arbitration agreement. Within this context we then address: (4)
which party has the burden of proof when one party seeks dismissal of a suit to compel
arbitration under an arbitration agreement, and the other party asserts it is unconscionable;
and (5) whether shifting the burden of proof resulted in reversible error.
DISCUSSION
Standard of Review
{6} “Whether a contract provision is unconscionable and unenforceable is a question of
law that we review de novo.” Rivera v. Am. Gen. Fin. Servs., Inc., 2011-NMSC-033, ¶ 42,
150 N.M. 398, 259 P.3d 803. Our review of a district court order granting or denying a
motion to compel arbitration is also de novo. Piano v. Premier Distrib. Co., 2005-NMCA-
018, ¶ 4, 137 N.M. 57, 107 P.3d 11; Heye v. Am. Golf Corp., Inc., 2003-NMCA-138, ¶ 4,
134 N.M. 558, 80 P.3d 495. Finally, our review of whether the district court applied the
correct evidentiary rule or legal standard in deciding the claim before it is likewise de novo.
See Mayeux v. Winder, 2006-NMCA-028, ¶ 14, 139 N.M. 235, 131 P.3d 85 (stating that the
plaintiff’s argument that the district court erred in applying the wrong legal standard to their
breach of fiduciary claim is reviewed de novo); see also State v. Torres, 1999-NMSC-010,
¶ 28, 127 N.M. 20, 976 P.2d 20 (“[T]he threshold question of whether the trial court applied
the correct evidentiary rule or standard is subject to de novo review on appeal.”).
The Enforcement of Arbitration Agreements
{7} Arbitration agreements are enforced under both New Mexico and federal law. See
Piano, 2005-NMCA-018, ¶ 5; see also NMSA 1978, § 44-7A-7(a) (2001) (“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.”); 9 U.S.C. § 2 (2006)
(“[A] contract evidencing a transaction involving commerce to settle by arbitration a
controversy thereafter arising out of such contract or transaction . . . shall be valid,
irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the
revocation of any contract.”).
{8} However, unconscionability is an equitable doctrine rooted in public policy under
which an arbitration agreement may be deemed unenforceable. Rivera, 2011-NMSC-033,
¶ 43; Cordova v. World Fin. Corp. of N.M., 2009-NMSC-021, ¶ 21, 146 N.M. 256, 208 P.3d
901. New Mexico recognizes both substantive unconscionability and procedural
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unconscionability under the doctrine of contractual unconscionability. Rivera, 2011-NMSC-
033, ¶ 43; Cordova, 2009-NMSC-021, ¶ 21. While a mandatory arbitration clause may be
invalidated for unconscionability when both substantive and procedural unconscionability
are present, “there is no absolute requirement in our law that both must be present to the
same degree or that they both be present at all.” Cordova, 2009-NMSC-021, ¶ 24.
{9} When a contractual term is deemed to be unconscionable, two possible remedial
actions can be taken.
If a contract or term thereof is unconscionable at the time the contract is
made a court may refuse to enforce the contract, or may enforce the
remainder of the contract without the unconscionable term, or may so limit
the application of any unconscionable term as to avoid any unconscionable
result.
Id. ¶ 39 (internal quotation marks and citation omitted); see also Smith v. Price’s
Creameries, 98 N.M. 541, 545, 650 P.2d 825, 829 (1982) (setting forth the same options
under Article II of the Uniform Commercial Code).
Substantive Unconscionability
{10} Contract terms themselves determine whether they are illegal, contrary to public
policy, or grossly unfair, and therefore, substantively unconscionable. Rivera, 2011-NMSC-
033, ¶ 45 (“Substantive unconscionability concerns the legality and fairness of the contract
terms themselves.” (quoting Cordova, 2009-NMSC-021, ¶ 22)); Fiser v. Dell Computer
Corp., 2008-NMSC-046, ¶ 20, 144 N.M. 464, 188 P.3d 1215 (“Substantive
unconscionability relates to the content of the contract terms and whether they are illegal,
contrary to public policy, or grossly unfair.”); Guthmann v. La Vida Llena, 103 N.M. 506,
510, 709 P.2d 675, 679 (1985) (“Substantive unconscionability is concerned with contract
terms that are illegal, contrary to public policy, or grossly unfair.”); State ex rel. State
Highway & Transp. Dep’t v. Garley, 111 N.M. 383, 390, 806 P.2d 32, 39 (1991) (stating that
the touchstone for substantive unconscionability is gross unfairness). In determining
whether a contract suffers substantive unconscionability, the “analysis focuses on such issues
as whether the contract terms are commercially reasonable and fair, the purpose and effect
of the terms, the one-sidedness of the terms, and other similar public policy concerns.”
Rivera, 2011-NMSC-033, ¶ 45 (quoting Cordova, 2009-NMSC-021, ¶ 22).
{11} In New Mexico, a contract provision that unreasonably benefits one party over
another is substantively unconscionable. Rivera, 2011-NMSC-033, ¶ 46; Cordova, 2009-
NMSC-021, ¶ 25; Guthmann, 103 N.M. at 511, 709 P.2d at 680; Monette v. Tinsley, 1999-
NMCA-040, ¶ 19, 126 N.M. 748, 975 P.2d 361. In making this determination, a New
Mexico court no longer needs to find that the terms must be “‘such as no man in his senses
and not under delusion would make on the one hand, and as no honest and fair man would
accept on the other.”’ Cordova, 2009-NMSC-021, ¶ 31 (quoting Hume v. United States, 132
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U.S. 406, 411 (1889) (quoting Earl of Chesterfield v. Janssen, 2 Ves. Sen. 125, 155, 28 Eng.
Rep. 82, 100 (Ch. 1750)). “It is sufficient if the provision is grossly unreasonable and
against our public policy under the circumstances.” Id.Procedural Unconscionability
{12} A contract or provision therein is procedurally unconscionable where there is such
gross inequality in bargaining power between the parties that one party’s choice is
effectively non-existent. Guthmann, 103 N.M. at 510, 709 P.2d at 679.
{13} While not a prerequisite, a contract of adhesion may result in a procedurally
unconscionable agreement. Rivera, 2011-NMSC-033, ¶ 44. But see Cordova, 2009-NMSC-
021, ¶ 34 (noting that a contract of adhesion may result in substantive unconscionability) ;
Fiser, 2008-NMSC-046, ¶ 22 (same). To determine whether an adhesion contract exists, the
court inquires into three factors: “(1) whether it was prepared entirely by one party for the
acceptance of the other; (2) whether the party proffering the contract enjoyed superior
bargaining power because the weaker party could not avoid doing business under the
particular terms; and [(3)] whether the contract was offered to the weaker party without an
opportunity for bargaining on a take-it-or-leave-it basis.” Fiser, 2008-NMCA-046, ¶ 22;
Guthmann, 103 N.M. at 509, 709 P.2d at 678; Rivera v. Am. Gen. Fin. Servs., Inc., 2010-
NMCA-046, ¶ 15, 148 N.M. 784, 242 P.3d 351, rev’d by 2011-NMSC-033. Accordingly,
a contract of adhesion may result if all the competitors of the dominate party use essentially
the same contract terms or when that dominate party has a monopoly on the relevant
geographic market. Guthmann, 103 N.M. at 509, 709 P.2d at 678.
{14} Thus, to determine if a contractual provision has the stigma of procedural
unconscionability, the circumstances surrounding the formation of the contract must be
examined. Cordova, 2009-NMSC-021, ¶ 23; Fiser, 2008-NMSC-046, ¶ 20; Guthmann, 103
N.M. at 510, 709 P.2d at 679. Circumstances in the contract formation to be examined
include whether sharp practices or high pressure tactics were used, the relative
sophistication, education, and wealth of the parties, a particular party’s ability to understand
the terms of the contract, the relative bargaining power of the parties, the relative scarcity
of the subject matter of the contract, and the extent to which either party felt free to accept
or decline the terms demanded by the other. Cordova, 2009-NMSC-021, ¶ 23; Guthmann,
103 N.M. at 510, 709 P.2d at 679.
Who Has the Burden of Proof
{15} A legally enforceable contract is a prerequisite to arbitration under the New Mexico
Uniform Arbitration Act, and without such a contract, the parties will not be forced to
arbitrate. Piano, 2005-NMCA-018, ¶ 5; Heye, 2003-NMCA-138, ¶ 8; DeArmond v.
Halliburton Energy Servs., Inc., 2003-NMCA-148, ¶ 9, 134 N.M. 630, 81 P.3d 573. The
party who seeks to compel arbitration has the burden of proof to establish the existence of
a valid agreement to arbitrate. See Corum v. Roswell Senior Living, LLC, 2010-NMCA-105,
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¶¶ 3, 16, 149 N.M. 287, 248 P.3d 329 (stating that the party attempting to compel arbitration
has the burden to demonstrate a valid agreement to arbitrate), cert. denied, 2010-NMCERT-
010, 149 N.M. 64, 243 P.3d 1146; DeArmond, 2003-NMCA-148, ¶ 9 (stating that party
relying on a contract has the burden to prove it is legally valid and enforceable). Moreover,
when the parties dispute the existence of a valid arbitration agreement, any presumption in
favor of arbitration disappears. See DeArmond, 2003-NMCA-148, ¶ 8; see also Dumais v.
Am. Golf Corp., 299 F.3d 1216, 1220 (10th Cir. 2002) (“The presumption in favor of
arbitration . . . disappears when the parties dispute the existence of a valid arbitration
agreement.”).
{16} The foregoing rules are well embedded in New Mexico jurisprudence. For example,
in Shaw v. Kuhnel & Associates, Inc., 102 N.M. 607, 608, 698 P.2d 880, 881 (1985),
superceded by statute as stated in Aguilera v. Palm Harbor Homes, Inc., 2002-NMSC-029,
¶ 6, 132 N.M. 715, 54 P.3d 993, our Supreme Court repeats that parties are generally bound
to resolve disputes by arbitration when they have contractually agreed to do so. “However,
a motion to compel arbitration is essentially a suit for specific performance of an agreement
to arbitrate.” Id. Clearly, a party seeking specific performance has the burden of proving
grounds for such relief. In this case, it is the existence of a legally valid and enforceable
contractual agreement to arbitrate.
{17} We acknowledge and recognize that most courts that have considered the question,
place the burden on the party seeking to set aside an arbitration agreement on
unconscionability grounds.1 However, these cases all deal with commercial transactions, and
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See, e.g., Rogers v. Royal Caribbean Cruise Line, 547 F.3d 1148, 1158 (9th Cir.
2008) (holding that employees challenging the arbitration agreement in their employment
contract failed to meet “their burden of establishing that the arbitration clause at issue in this
case is unconscionable”); Faber v. Menard, Inc., 367 F.3d 1048, 1053 (8th Cir. 2004)
(noting that “[u]nder Iowa law, the burden of proof that a particular provision or contract is
unconscionable rests on the party claiming it is unconscionable” and concluding that the
employee failed to meet his burden of proving that the arbitrator’s fees made the agreement
unconscionable due to their prohibitive cost); Parilla v. IAP Worldwide Servs. VI, Inc., 368
F.3d 269, 277 (3d Cir. 2004) (stating that “the burden of proving such unconscionability lies
with the party challenging the contract provision” in a case addressing whether the
arbitration agreement in an employment contract is unconscionable) (citing E. Allen
Farnsworth, Farnsworth on Contracts § 4.28 & n.14 (3d ed. 1999)); Bess v. Check Express,
294 F.3d 1298, 1306-07 (11th Cir. 2002) (stating that “[u]nder Alabama law,
unconscionability is an affirmative defense to the enforcement of a contract, and the party
asserting that defense bears the burden of proving it by substantial evidence” in a class
action case for alleged violations of state and federal law arising out of “cash advances” or
deferred payment transactions between the plaintiffs and the defendants); Harris v. Green
Tree Fin. Corp., 183 F.3d 173, 181 (3d Cir. 1999) (applying Pennsylvania law in a suit
where the plaintiffs claimed to be victims of a fraudulent home improvement scheme that
the “party challenging a contract provision as unconscionable generally bears the burden of
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we conclude that they are distinguishable and unpersuasive in the context before us.
{18} The case before us is not a mere commercial transaction. When individuals are
dealing with admission into a nursing home, the health issue making nursing home care a
necessity is often so grave, critical, or severe, that the only focus is on getting proper
treatment, with everything else being secondary. In a nutshell, such individuals are often at
their most vulnerable, emotionally or physically, or both. And this often includes immediate
family members. Moreover, the context does not usually allow for measured consideration
of what nursing homes are available, the terms required for admission, and the like. Thus,
we have already noted that admission agreements and other admission-related documents
such as mandatory arbitration agreements are often presented to aging and infirmed
individuals and their families “when they are at their most vulnerable, in need of quick
assistance, and potentially can easily be taken advantage of.” Barron v. The Evangelical
Lutheran Good Samaritan Soc’y, 2011-NMCA-094, ¶ 41, 150 N.M. 669, 265 P.3d 720.
{19} In recognition of these realities, the West Virginia Supreme Court has declared that
all mandatory arbitration clauses in nursing home admission agreements are unconscionable
and unenforceable. Brown v. Genesis Healthcare Corp., No. 35494, 2011 WL 2611327 (W.
Va. 2011). We have not been asked to, and therefore decline to adopt the holding of Brown.
Nevertheless, we consider the following expressed reasons for treating nursing home
contracts with mandatory arbitration agreements differently from mere commercial contracts
very persuasive:
Because of illness, incapacitation, or physical or mental impairment,
people being admitted to a nursing home are usually quite vulnerable . . . .
....
[I]n the 1980s, the government changed the way hospitals were paid
for their Medicare patients; since the change, discharge planning occurs
“quicker and sicker.” The weakened physical and emotional condition of a
person from an acute illness is one of the most significant factors that
compels a decision to seek post-hospital nursing home placement.
Compounding the dangers of this decision-making time, not only is the
person being discharged “quicker and sicker,” but the hospital treatment
itself often further debilitates the person. A person’s “decision” to enter a
nursing home is, therefore, often made when the person’s decision-making
abilities are seriously impaired.
Unlike the situation that exists when a consumer signs a contract for
a product or service, people entering a nursing home have to sign admissions
contracts in the midst of a crisis, without time to comparison shop or to
proving unconscionability”).
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negotiate the best service and price combination. Put simply, there is usually
little time to investigate options or to wait for an opening at a nursing home
of choice. Time pressure during the hospital discharge process significantly
impairs people’s ability to seek and carefully consider alternatives.
....
Ultimately, people being admitted to long-term care facilities and
their families have to sign admission contracts without time to comparison
shop or to negotiate the best service and price combination. The pressures of
deciding placement at such a time, coupled with physical and/or mental
infirmities, facing discharge from the hospital, financial limitations, and/or
lack of knowledge about long-term care options make consumers vulnerable
and dependent on full disclosure by facilities.
(internal quotation marks and footnotes omitted).
{20} We therefore hold that 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.
Shifting The Burden of Proof Resulted in Reversible Error
{21} Defendants had the burden of proving that the arbitration agreement is not
unconscionable. However, the district court shifted the burden to Plaintiff to prove that the
arbitration agreement is not unconscionable. We conclude this was reversible error.
{22} We have demonstrated that many factual issues must be decided by a district court
in determining whether an arbitration agreement is unconscionable. In determining whether
the contract is procedurally unconscionable, the district court said the issues were difficult
to decide because neither Plaintiff nor the nurse who obtained her signature on the arbitration
agreement had clear recollections of the factual circumstances, and that the factors it
considered to determine whether the arbitration agreement is unconscionable “generally are
evenly balanced[.]” The district court said that the “deciding factor” in its mind was
Plaintiff’s understanding of the arbitration agreement at the time she signed it. However, we
have no way of assessing what weight the court would have given this evidence, or whether
the district court would have come to the same conclusion if the burden of proof had been
properly allocated to Defendants. In addition, we have no way of determining whether the
district court applied the correct burden of proof in ruling that the mandatory arbitration
agreement is not substantively unconscionable. Moreover, when the issue of substantive
unconscionability was first considered, the parties and the district court did not have the
benefit of our Supreme Court’s opinion in Rivera, 2011-NMSC-033. We therefore reverse
the order of the district court. See State v. Fernandez, 128 N.M. 111, ¶ 36, 990 P.2d 224 (Ct.
App. 1999) (reversing and remanding for a new suppression hearing where trial court
8
applied incorrect standard in reviewing alleged falsehoods and omissions in a search warrant
affidavit); see also State v. Young, 117 N.M. 688, 692, 875 P.2d 1119, 1123 (Ct. App. 1994)
(remanding because the district court applied the wrong legal standard in deciding whether
voluntary intoxication was relevant to a waiver of Miranda rights).
{23} On remand, we encourage the district court to enter findings of fact and conclusions
of law pursuant to Rule 1-052 NMRA to facilitate appellate review of its factual
determinations relating to unconscionability and its legal ruling on whether the arbitration
is legally unconscionable.
CONCLUSION
{24} We reverse and remand for further proceedings in accordance with this Opinion.
{25} IT IS SO ORDERED.
____________________________________
MICHAEL E. VIGIL, Judge
I CONCUR:
____________________________________
MICHAEL D. BUSTAMANTE, Judge
JAMES J. WECHSLER, Judge (dissenting).
WECHSLER, Judge (dissenting).
{26} Our Supreme Court has stated the “fundamental principle that arbitration is a matter
of contract.” Rivera, 2011-NMSC-033, ¶ 16 (internal quotation marks and citation omitted).
To this end, “courts must place arbitration agreements on an equal footing with other
contracts[.]” Id. (internal quotation marks and citation omitted). I therefore do not agree
with shifting the burden to the party seeking to enforce an arbitration agreement to prove that
an arbitration agreement is not unconscionable, because this position does not have a basis
in well-established contract law. As a result, I respectfully dissent.
{27} The majority correctly states that “[t]he party who seeks to compel arbitration has
the burden of proof to establish the existence of a valid agreement to arbitration.” Majority
Opinion ¶ 15. However, the cases cited by the majority indicate that this burden applies to
contract formation issues, not to defenses by a party seeking to stop the enforcement of an
otherwise valid contract. For example, in DeArmond, 2003-NMCA-148, ¶¶ 11-14, the issues
addressed by this Court were whether a party to an arbitration agreement had knowledge of
a change in his employment contract that included a mandatory arbitration clause and
therefore accepted the modification and, alternatively, whether mutuality existed to form a
binding contract. Corum, 2010-NMCA-105, ¶ 16, similarly addresses contract formation
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issues. In particular, the issue in Corum was whether the individual who entered into an
arbitration agreement on behalf of a nursing home patient had statutory authority to enter
into the agreement. Id.{28} Unconscionability, on the other hand, is an equitable doctrine that is a defense or
“exception” to enforcing an otherwise valid contract. See Montano v. N.M. Real Estate
Appraiser’s Bd., 2009-NMCA-009, ¶ 12, 145 N.M. 494, 200 P.3d 544 (“We will allow
equity to interfere with enforcing clear contractual obligations only when well-defined
equitable exceptions, such as unconscionability, mistake, fraud, or illegality justify deviation
from the parties’ contract.” (internal quotation marks and citation omitted)); see also Fidelity
Nat’l Bank v. Tommy L. Goff, Inc., 92 N.M. 106, 107, 583 P.2d 470, 471 (1978) (stating that
the answer to a complaint contained the “affirmative defense” of unconscionability).
Generally, a party seeking to set aside enforcement of a contract based on a defense or
exception, such as unconscionability, has the burden of proof. See Mason v. Salomon, 62
N.M. 425, 429, 311 P.2d 652, 654 (1957) (holding that the party seeking to set a contract
aside for fraud has the burden of proof); see also W. Commerce Bank v. Gillespie, 108 N.M.
535, 538, 775 P.2d 737, 740 (1989) (declining to shift the burden of persuasion to the party
challenging a contract because the action was “a simple contract issue” requiring the court
to determine whether the “making of the contract” satisfied the “condition[s] precedent” as
opposed to an action seeking to set aside a contract on a ground such as fraud, mistake,
misrepresentation, or undue influence). Similarly, Farmington Police Officers Ass’n
Commc’n Workers of Am. Local 7911 v. City of Farmington, 2006-NMCA-077, ¶ 16, 139
N.M. 750, 137 P.3d 1204, addressed the burden of proof in an arbitration case and concluded
that the party seeking to enforce an arbitration clause in a collective bargaining agreement
had the burden of persuasion as to whether the clause applied to the dispute. In Farmington
Police Officers Ass’n, this Court stated that
we believe that where the meaning of a material contract term is in dispute
a party seeking affirmative relief based upon its interpretation necessarily
bears the burden of establishing that its interpretation controls. This
approach is consistent with the general default rule allocating the burden of
persuasion in civil cases to the party who invokes the authority of a court to
alter the extrajudicial status quo.
Id. (citation omitted).
{29} As the majority acknowledges, most courts that have addressed the issue have placed
the burden on the party seeking to set aside an arbitration agreement on unconscionability
grounds. Majority Opinion ¶ 17 n.1. Consistent with these other courts, this Court has
recently clarified that the party challenging a provision of an arbitration agreement that
banned class action claims on unconscionability grounds has the burden of proof. See Felts
v. CLK Mgmt., Inc., 2011-NMCA-062, ¶¶ 34, 37, 149 N.M. 681, 254 P.3d 124, cert. granted,
2011-NMCERT-006, 150 N.M. 763, 266 P.3d 632 (Nos. 33,011 and 33,013, June 8, 2011).
{30} The majority distinguishes Felts and cases from other jurisdictions because the cases
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involve “commercial transactions.” Majority Opinion ¶ 17. However, even cases in other
jurisdictions specifically involving challenges to arbitration agreements in nursing home
admission documents impose the burden of proof upon the party challenging the agreement.
See, e.g., Briarcliff Nursing Home, Inc. v. Turcotte, 894 So. 2d 661, 665 (Ala. 2004) (“The
burden of proving unconscionability of an arbitration agreement rests with the party
challenging the agreement.” (internal quotation marks and citation omitted)); Estate of Perez
v. Life Care Ctrs. of Am. Inc., 23 So. 3d 741, 742 (Fla. Dist. Ct. App. 2009) (“The party
seeking to avoid the arbitration provision has the burden to establish unconscionability.”);
Hayes v. Oakridge Home, 122 Ohio St. 3d 63, 2009-Ohio-2054, 908 N.E.2d 408, at ¶ 20
(“The party asserting unconscionability of a contract bears the burden of proving that the
agreement is both procedurally and substantively unconscionable.”).
{31} I also note that in Brown, 2011 WL 2611327, the West Virginia Supreme Court
stated the policy considerations quoted in Paragraph 19 of the majority opinion as
background to establish the context of the agreements in the case, rather than as the basis for
its holding that mandatory arbitration clauses in nursing home admission documents adopted
prior to the negligent incident at issue are unconscionable. West Virginia recognizes, as a
matter of public policy, a “public service” exception to the enforcement of pre-injury
contracts that either absolves a public service provider of liability for personal injuries or
wrongful death or that allows a public service provider to escape public scrutiny in the
courtroom. Id. Brown invalidated the arbitration agreements based on the public service
exception because a nursing home is a public service provider and the arbitration agreements
prevented the nursing homes from “courtroom scrutiny of their negligent conduct that caused
a personal injury or wrongful death[.]” Id.{32} Although I share the majority’s concern that “individuals are often at their most
vulnerable, emotionally or physically, or both” when seeking admission to a nursing home,
I do not believe this concern justifies a sweeping exception to well-established law for
nursing home patients that the majority creates. Majority Opinion ¶ 18. I would therefore
treat an arbitration agreement signed by a patient as a condition for nursing home admission
the same as any other arbitration agreement and would hold that, generally, a party seeking
to set aside the arbitration agreement has the burden of proving that the arbitration agreement
is unconscionable. A party’s vulnerability is a fact for the court to consider in determining
the issue of procedural unconscionability.
{33} Moreover, even assuming that there may be appropriate cases for a district court to
shift the burden of proof to a party seeking to set aside an arbitration agreement when the
facts of the case indicate that the party seeking to enforce the arbitration agreement would
be in a better position to prove whether an arbitration agreement is unconscionable, this is
not such a case. The district court found that upon admission to the nursing home on April
11, 2007, Plaintiff was confused as the result of pain medication, that she had ten minutes
to complete forty minutes of paperwork during the admission process, and that she did not
have her glasses. However, the district court further found that Plaintiff signed the arbitration
agreement on April 10, 2007, before the transfer to the nursing home; and Plaintiff presented
no testimony regarding her state of mind or condition on that date. Additionally, the district
11
court stated that the “deciding factor” in determining that the arbitration agreement was not
unconscionable was Plaintiff’s understanding of the agreement at the time she signed it.
Importantly, Plaintiff admitted that she understood that the arbitration agreement
“significantly limited her rights,” even though she was medicated. Under these
circumstances, the district court did not err in determining that Plaintiff had the burden to
prove that the arbitration agreement was unconscionable, and I respectfully dissent.
____________________________________
JAMES J. WECHSLER, Judge
Topic Index for Strausberg v. Laurel Healthcare Providers, LLC, No. 29,238
AE APPEAL AND ERROR
AE-FE Fundamental Error
AE-SR Standard of Review
CP CIVIL PROCEDURE
CP-BP Burden of Proof
CP-DC Discovery
CN CONTRACTS
CN-UC Unconscionable
RE REMEDIES
RE-AN Arbitration
TR TORTS
TR-MG Malpractice, General
TR-MM Medical Malpractice
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