The New Mexico Supreme Court revisited the issue of the enforceability of nursing home arbitration agreements following the United States Supreme Court‘s decision in Marmet Health Care Center, Inc. v. Brown. We discussed the Marmet case and how it would affect the New Mexico Court of Appeals‘ decision in earlier posts which are set out below in related readings.
In short, the New Mexico Supreme Court overturned the Court of Appeals‘ decision which had been a very favorable decision for nursing home patients and their families.
Rather than rehash the Court of Appeals‘ opinion, we will address the Supreme Court‘s decision and its rationale.
Unconscionability is an Affirmative Defense
To begin, the court stated that arbitration contracts are contracts and should be treated like other contracts. Under New Mexico contract law, the burden is on the party seeking to enforce the contract to prove the existence of the contract. The burden to prove affirmative defenses is on the party asserting those defenses.
The Court held that unconscionability is an affirmative defense. In this case, the plaintiff asserted that the arbitration provision was unconscionable and therefore unenforceable. The plaintiff argued that unconscionability made the contract void from its inception. The Court of Appeals agreed shifting the burden to the defendant since the very existence of the contract was called into question.
The Federal Arbitration Act
The Court made clear that New Mexico nursing home arbitration agreements are governed by the Federal Arbitration Act. Moreover, the Court found that nursing home arbitration contracts should be treated just the same as any other mandatory arbitration agreement.
The Court held consistent with Marmet that nursing home arbitration agreements could not be singled out for special treatment. However, it is also clear that arbitration agreements would not be given any special advantage over any other contracts.
As a result, nursing home arbitration agreements in New Mexico, including the one at hand here, would be analyzed according to basic contract law principals. Though the burden shifted to the plaintiff, unconscionability remains a defense.
Unconscionability of Nursing Home Contracts
Like any other contract, the arbitration provision must not be unconscionable. The Court reiterated long-standing New Mexico law on the standard for a finding of unconscionability.
The Court stated the standard as follows:
“To evaluate whether a contractual provision is procedurally unconscionable, a court considers the “factual circumstances surrounding the formation of the contract, including the relative bargaining strength, sophistication of the parties, and the extent to which either party felt free to accept or decline terms demanded by the other.”
It seems that a nursing home arbitration provision would almost by definition fail on each of these fronts. However, in light of Marmet, it would appear that the Court had no room to hold as such.
Plaintiffs may still show unconscionability. However, the burden will be on them. In light of the Marmet decision and the decision here, this hurdle has been made much more difficult.
In short, DO NOT SIGN A NURSING HOME ARBITRATION AGREEMENT! Chances are you will be held to its terms.
Nursing Home Mandatory Arbitration Provisions – Sign at Your Peril!
Nursing Home Arbitration Provisions Must Not be “Unfairly” One-Sided in New Mexico
Mandatory Arbitration Ruling is Victory for Victims of Nursing Home Negligence and Abuse