The Supreme Court of New Mexico (“New Mexico Supreme Court”) held in its opinion dated April 6, 2020 that “an arbitration agreement is facially one-sided when it excludes the drafting party’s likeliest claim from arbitration, but requires the non-drafting party to arbitrate its likeliest claims.”
The New Mexico nursing home arbitration agreement provided, in part, “This Arbitration Agreement shall not apply to either the Facility or the Resident in any disputes pertaining to collections or discharge of residents.” The New Mexico Supreme Court stated, “Arbitration agreements are substantively unconscionable when they are unfairly and unreasonably one-sided … New Mexico conscionability case law has consistently found arbitration agreements to be unfairly and unreasonably one-sided when they unjustifiably require the non-drafting party to arbitrate its likeliest claims, while allowing the drafting party to pursue its likeliest claims through litigation … A one-sided arbitration agreement is not substantively unconscionable merely by way of its one-sidedness. Rather, our substantive unconscionability law requires a determination that the one-sidedness of an arbitration agreement is unfair and unreasonable.”
The New Mexico Supreme Court stated, “We conclude that 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. This presumption stems from the lack of mutuality that correlates with overly one-sided contracts … this presumption may be overcome by an evidentiary showing that justifies the one-sidedness of the arbitration agreement. In other words, a defendant drafter may offer evidence showing that an arbitration agreement’s exceptions are reasonable and fair, such that enforcement of the agreement is not substantively unconscionable.”
The New Mexico Supreme Court discussed the two-step analysis a court should apply when confronted with the substantive conscionability of an arbitration agreement. First, the court should analyze the arbitration agreement on its face. The court should look to the face of the arbitration agreement to determine the legality and fairness of the contract terms themselves. An arbitration arbitration agreement is facially one-sided when it excludes the drafting party’s likeliest claim from arbitration, but requires the non-drafting party to arbitrate its likeliest claims. 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. The evidence need not show that the agreement is not one-sided, but rather must justify that the agreement’s exceptions are fair and reasonable.
In the case it was deciding, the New Mexico Supreme Court stated “[t]he evidence fails to justify why only collections actions, as opposed to any low-value claim, are excepted from the Agreement … if we allowed the Facility to unjustifiably circumvent arbitrating high-value collection claims, we would be upholding a contract that disfavors arbitration.”
The New Mexico Supreme Court concluded: “We hold the Agreement is facially one-sided in that it excludes the Facility’s likeliest claim from mandatory arbitration, but requires its residents to arbitrate their likeliest claims. We conclude that Defendants did not justify this one-sidedness because they did not present evidence showing that the Agreement’s collections exception was reasonable and fair. We therefore hold that the Agreement is substantively unconscionable.”
Source Peavy v. Skilled Healthcare Group, Inc., No. S-1-SC-37370.
If you or a loved one suffered injuries (or worse) while a resident of a nursing home in New Mexico or in another U.S. state due to a nursing home fall, nursing home aspiration, nursing home neglect, nursing home negligence, nursing home abuse, nursing home under-staffing, or the nursing home failing to properly care for a vulnerable adult, you should promptly find a nursing home claim lawyer in New Mexico or in your state who may investigate your nursing home claim for you and file a nursing home claim on your behalf or behalf of your loved one, if appropriate.
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