Griego v. St. John Healthcare & Rehabilitation Center, LLC ( 2014 )

1 IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
2 MARGARET GRIEGO, DECEASED, BY THE
3 CO-PERSONAL REPRESENTATIVES OF HER
4 PROBATE ESTATE, CELESTINO GRIEGO, JR.
5 AND DANNY I. GRIEGO,
6 Plaintiffs-Appellees,
7 v. NO. 31,777
8 ST. JOHN HEALTHCARE & REHABILITATION
9 CENTER, L.L.C., SKILLED HEALTHCARE
10 GROUP, INC., SKILLED HEALTHCARE, L.L.C.,
11 and ADMINISTRATOR T.J. HICKS, JR.,
12 Defendants-Appellants.
13 APPEAL FROM THE DISTRICT COURT OF BERNALILLO COUNTY
14 Clay P. Campbell, District Judge
15 Harvey Law Firm, L.L.C.
16 Jennifer J. Foote
17 Dusti D. Harvey
18 Albuquerque, NM
19 for Appellees
20 Rodey, Dickason, Sloan, Akin & Robb, P.A.
21 Sandra L. Beerle
22 Robert W. Lasater, Jr.
23 Jocelyn Drennan
24 Albuquerque, NM
25 for Appellants
1 MEMORANDUM OPINION
2 ZAMORA, Judge.
3 {1} This case comes to us on remand from our Supreme Court in Griego v. St. John
4 Healthcare & Rehabilitation Center, L.L.C., No. 34,158, for further consideration in
5 light of Strausberg v. Laurel Healthcare Providers, LLC, 2013-NMSC-032, 304 P.3d
6 409 (Strausberg II). In this Court’s memorandum opinion filed in the present case on
7 April 22, 2013, we affirmed the district court’s denial of Defendants’ motion to
8 dismiss the complaint and compel arbitration based on the substantive
9 unconscionability of the arbitration agreement. We address on remand whether
10 Strausberg II changes our conclusion in the memorandum opinion that the arbitration
11 agreement is void for substantive unconscionability as a matter of law. We find it does
12 not.
13 BACKGROUND
14 {2} Because the parties are familiar with the facts of the case, we do not recite those
15 facts here but include some of them in our analysis below. We briefly note the
16 procedural history that led to this memorandum opinion.
17 {3} After the death of Margaret Griego, who had been attacked by another resident
18 at Defendants’ nursing home, Plaintiffs in January 2011 filed a complaint alleging
19 negligence, misrepresentation, and a violation of the New Mexico Unfair Practices
20 Act, NMSA 1978, Sections 57-12-1 to -26 (1967, as amended through 2009), related
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1 to the terms of the admission contract’s arbitration agreement (the Agreement).
2 Defendants responded in February 2011 with a motion to dismiss or stay litigation and
3 compel arbitration. In response to Defendants’ motion, Plaintiffs raised the affirmative
4 defense of unconscionability.
5 {4} The district court held hearings in May and September 2011. The parties were
6 invited, before and after the September hearing, to submit proposed findings of fact
7 and conclusions of law that examined the issue of substantive unconscionability, and
8 each party also briefed that issue after the hearing. On November 8, 2011, the district
9 court issued its findings of fact, conclusions of law, and an order denying the motion
10 to compel arbitration. An appeal to this Court followed.
11 {5} In our memorandum opinion in this case filed April 22, 2013, this Court
12 affirmed the district court’s denial of Defendants’ motion to compel arbitration.
13 Griego v. St. John Healthcare & Rehab. Ctr., L.L.C., No. 31,777, mem. op. ¶ 34
14 (N.M. Ct. App. Apr. 22, 2013) (non-precedential) (Griego I). The district court ruled
15 that the arbitration agreement at issue in this case, which required arbitration of all
16 disputes except those pertaining to “collections or discharges of residents,” was
17 substantively unconscionable. Id. ¶¶ 1, 6, 33. We relied on our Supreme Court cases
18 of Rivera v. Am. Gen. Fin. Servs., Inc., 2011-NMSC-033, 150 N.M. 398, 259 P.3d
19 803; Cordova v. World Fin. Corp. of N.M., 2009-NMSC-021, 146 N.M. 256, 208 P.3d
20 901; and our recent cases that interpreted arbitration agreements that contained the
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1 same or similar arbitration provisions as presented in this case: Figueroa v. THI of
2 N.M., 2013-NMCA-077, 306 P.3d 480, cert. denied, 2012-NMCERT-010, 297 P.3d
3 332; Ruppelt v. Laurel Healthcare Providers, LLC, 2013-NMCA-014, 293 P.3d 902,
4 cert. denied, 2012-NMCERT-012, 299 P.3d 423; Bargman v. Skilled Healthcare
5 Group, Inc., 2013-NMCA-006, 292 P.3d 1, cert. granted, 2012-NMCERT-012, 299
6 P.3d 423; and Strausberg v. Laurel Healthcare Providers, LLC, 2012-NMCA-006,
7 269 P.3d 914 (Strausberg I), rev’d, 2013-NMSC-032 (Strausberg II).
8 {6} Our Supreme Court granted certiorari in this case. It subsequently decided
9 Strausberg II, reversing this Court’s decision in Strausberg I, holding that the party
10 asserting unconscionability as an affirmative defense to contract enforcement has the
11 burden of proving that the contract should not be enforced based on unconscionability.
12 Strausberg II, 2013-NMSC-032, ¶¶ 3, 36, 39, 43, 48. The Court then remanded this
13 case for further consideration in light of its opinion in Strausberg II.
14 Application of Strausberg II to Griego I
15 {7} In Strausberg II, our Supreme Court held that the defendants, as the parties
16 seeking to compel arbitration, have the initial burden of proving the existence of a
17 valid contract. 2013-NMSC-032, ¶ 42. It is not until after the defendants have satisfied
18 that burden that the burden shifts to the plaintiff to prove unconscionability as an
19 affirmative defense to the enforcement of a contract. Id. ¶ 43.
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1 {8} In this case, the district court’s decision relied on this Court’s opinion in
2 Strausberg I, and determined that Defendants bore the burden of proof as to the
3 conscionability of the arbitration clause. This Court’s affirmance of the district court
4 was also based in part on our decision in Strausberg I.
5 {9} The litigation in the district court on the issue of unconscionability occurred
6 before our opinion in Strausberg I was filed. The parties conducted the evidentiary
7 hearing with the perception that Plaintiffs had the burden of proving that the
8 arbitration agreement was unconscionable. The parties also submitted their proposed
9 findings and conclusions, and their post-hearing briefs based on this burden of proof.
10 Although Plaintiffs seemed to argue at the hearing that the district court should shift
11 the burden to Defendants to establish that the agreement was not unconscionable, the
12 district court declined to adopt that argument at the hearing. However, the district
13 court’s subsequent decision did in fact shift the burden of proof to the defendants.
14 Hence, our Supreme Court’s reversal of Strausberg I simply restored the burden of
15 proof under which the parties in this case had proceeded in the district court.
16 {10} On appeal in Griego I, we were guided by our decision in Strausberg I and,
17 consequently, we rejected Defendants’ suggestion that they had been unable to meet
18 the new burden imposed on them in Strausberg I. See Griego I, No. 31,777, mem. op.
19 ¶¶ 11-13. We then proceeded to assess the evidence relevant to the issue of
20 unconscionability and concluded that the agreement was substantively
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1 unconscionable. Id. ¶¶ 28-33. Given the fact that our Supreme Court in Strausberg II,
2 imposed the burden on plaintiffs to establish unconscionability and given the fact that
3 the parties in the present case litigated the issue in accordance with that burden, our
4 determination of the unconscionability of the arbitration agreement remains
5 unchanged.
6 CONCLUSION
7 {11} For the foregoing reasons, we affirm our ruling in Griego I, and we remand for
8 proceedings consistent with this Opinion.
9 {12} IT IS SO ORDERED.
10 __________________________________
11 M. MONICA ZAMORA, Judge
12 WE CONCUR:
13 __________________________________
14 MICHAEL D. BUSTAMANTE, Judge
15 __________________________________
16 CYNTHIA A. FRY, Judge
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