STRAUSBERG V. LAUREL HEALTHCARE PROVIDERS
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NINA R.
STRAUSBERG,
Plaintiff-Appellant,
v.
LAUREL HEALTHCARE
PROVIDERS,
LLC, and ARBOR BROOK, LLC, d/b/a
ARBOR BROOK HEALTHCARE,
Defendants-Appellees,
LISA S. NOYA
BURNETT, M.D. and
THE FOUR HUMOURS HEALTHCARE, LLC,
Defendants.
COURT OF APPEALS OF NEW MEXICO
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
MICHAEL E. VIGIL, Judge. WE CONCUR: JAMES
J. WECHSLER, Judge, MICHAEL D. BUSTAMANTE, Judge
{1} This case is before
us on remand from our Supreme Court to consider “whether the district court
erred by granting Defendants’ motion to compel arbitration and by dismissing
Plaintiff’s case.”
Strausberg v. Laurel Healthcare Providers, LLC
(Strausberg II),
2013-NMSC-032, 59,
304 P.3d 409. Because we conclude that
the arbitration agreement is substantively unconscionable and thus
unenforceable, we reverse and remand.
{2} Despite signing a
mandatory arbitration agreement prior to her admission for treatment, Plaintiff
Nina Strausberg brought suit against Arbor Brook Healthcare nursing home and
others alleging negligence. Defendants moved to compel arbitration and to
dismiss Plaintiff’s case. Plaintiff responded that the arbitration agreement is
unenforceable because it is procedurally and substantively unconscionable. The
district court granted Defendants’ motion and Plaintiff appealed. We reversed,
holding that the district court erroneously shifted the burden to Plaintiff to
prove that the arbitration agreement is unconscionable.
Strausberg v. Laurel
Healthcare Providers, LLC (Strausberg I),
2012-NMCA-006, 20-21,
269 P.3d
914,
rev’d by Strausberg II,
2013-NMSC-032, ¶ 3. Our Supreme Court
reversed, holding that because unconscionability is an affirmative defense and
federal law requires arbitration agreements to be treated the same as other
contracts, the party asserting unconscionability has the burden of proving that
the contract is unenforceable.
Strausberg II,
2013-NMSC-032, 3. On
remand, we now consider whether the district court erred in granting
Defendants’ motion to compel arbitration and to dismiss Plaintiff’s case,
despite Plaintiff’s procedural and substantive unconscionability arguments.
{3} Plaintiff
challenges the enforceability of the arbitration agreement, arguing that
“(1) the circumstances surrounding
[the arbitration agreement’s] signing render it procedurally unconscionable . .
. ; and (2) the arbitration agreement’s reservation of certain types of
disputes renders it substantively unconscionable[.]” Because we conclude that
the substantive unconscionability of the arbitration agreement is apparent on
its face, we do not address Plaintiff’s procedural unconscionability argument. See
Figueroa v. THI of N.M., 2013-NMCA-077, 23, ___ P.3d ___ (“[W]here an
agreement is so one-sided that the substantive unconscionability is apparent on
the face of the contract, analysis of the procedural unconscionability of the
formation of the contract is unnecessary to establish that the contract is
unconscionable.”).
{4} “We review de novo
any grant of a motion to compel arbitration.”
AFSCME v. City of Albuquerque,
2013-NMCA-049, 7,
299 P.3d 441,
cert. granted, 2013-NMCERT-004, 301 P.3d
859. Similarly, “[w]e review whether a contract is unconscionable as a matter
of law.”
Cordova v. World Fin. Corp. of N.M.,
2009-NMSC-021, 11,
146
N.M. 256,
208 P.3d 901.
{5} “Substantive
unconscionability concerns the legality and fairness of the contract terms
themselves. . . . The substantive 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.”
Id. 22. “Contract provisions that unreasonably benefit one
party over another are substantively unconscionable.”
Id. 25.
{6} The arbitration
agreement at issue here requires arbitration of “any and all disputes
associated with this Arbitration Agreement and the relationship created by the
Admission Agreement and/or the provision of services under the Admission
Agreement (including, without limitation, class action or similar proceedings;
claims for negligent care against Facility; claims against Facility or any of
its employees, managers or members).” The arbitration agreement also provides
that “[the] Arbitration Agreement shall not apply to disputes pertaining to
collections or discharge of residents.”
{7} Plaintiff asserts
that “[t]he agreement as written requires that residents give up their rights
to sue in court for the vast majority of suits they could bring, while the
facility retains the right to pursue in court the only types of suit that it
would bring against the resident. As such, it is truly one-sided for the vast
majority of disputes between the parties, and is unenforceable as substantively
unconscionable under
Cordova.”
See id. 32. We recently addressed
a similar substantive unconscionability argument in
Ruppelt v. Laurel
Healthcare Providers LLC,
2013-NMCA-014, 10-18,
293 P.3d 902 and
Figueroa,
2013-NMCA-077, ¶ 30. Defendants respond that the arbitration agreement is not
substantively unconscionable because the language in the arbitration agreement
that creates an exception to the arbitration requirement is applicable to both
parties.
{8} As with
Ruppelt
and
Figueroa, the arbitration agreement here requires arbitration of the
vast majority of claims that would be brought by the patient while excluding
those disputes that would almost exclusively be pursued by the nursing home.
Although the exception language facially appears neutral, it is meaningless in
practice.
See Ruppelt,
2013-NMCA-014, 15 (“Common sense dictates that
claims relating to collection of fees and discharge of residents are the types
of remedies that a nursing home, not its resident, is most likely to pursue.”).
The availability to Defendants of a choice of whether to litigate or arbitrate
their claims where Plaintiff has no such options establishes substantive
unconscionability of the arbitration agreement.
See Figueroa,
2013-NMCA-077, 30 (“While we agree that arbitration obligations do not have to
be completely equal, and that parties may freely enter into reasonable
agreements to exempt certain claims from arbitration, we refuse to enforce an
agreement where the drafter unreasonably reserved the vast majority of his
claims for the courts, while subjecting the weaker party to arbitration on
essentially all of the claims that party is likely to bring.”). As a result, we
conclude that the district court erred in concluding that the arbitration
agreement is enforceable.
{9} The order of the
district court is reversed.
MICHAEL D. BUSTAMANTE, Judge