Piano v. Premier Distributing Co.

• Decision Date: 20 December 2004
• Docket Number: No. 23,907.,23,907.
• Citation: 137 N.M. 57,2005 NMCA 18,107 P.3d 11
• Parties: Vickie PIANO, Plaintiff-Appellee, v. PREMIER DISTRIBUTING CO., a New Mexico corporation, Defendant-Appellant.
• Court: Court of Appeals of New Mexico

107 P.3d 11

137 N.M. 57

2005 NMCA 18

Vickie PIANO, Plaintiff-Appellee, v. PREMIER DISTRIBUTING CO., a New Mexico corporation, Defendant-Appellant.

No. 23,907.

Court of Appeals of New Mexico.

December 20, 2004.

Certiorari Denied February 3, 2005.

Michael D. Armstrong, Albuquerque, for Appellee.

Jim Dines, Gregory P. Williams, Dines, Gross & Esquivel, P.C., Albuquerque, Christopher C. Hoffman, Donna S. Beltran, Fisher & Phillips, LLP, San Diego, CA, for Appellant.

Certiorari Denied, No. 29,022, February 3, 2005.

OPINION

VIGIL, J.

{1} Defendant appeals from a district court order denying its Motion to Compel Arbitration or, in the Alternative, to Dismiss arguing that an Employee Acknowledgment and Agreement (Arbitration Agreement) signed by Plaintiff requires her claims to be submitted to arbitration. We hold that the Arbitration Agreement is illusory and otherwise not supported by consideration. As a result, Plaintiff is not contractually bound to submit her claims to arbitration. We therefore affirm the district court.

BACKGROUND

{2} On October 21, 1986, Plaintiff commenced employment with Defendant, where she worked as an administrative assistant on an at-will employment basis until her involuntary termination on April 11, 2002. During her employment, Plaintiff was presented with the Arbitration Agreement to sign with the understanding that if she did not sign it, she would be fired. Plaintiff signed the Arbitration Agreement on January 7, 1999. In pertinent part, the Arbitration Agreement states:

I understand that this handbook represents the current policies, regulations, and benefits, and that except for employment at-will status and the Arbitration Agreement, any and all policies or practices can be changed at any time by the Company. The Company retains the right to add, change or delete wages, benefits, policies and all other working conditions at any time (except the policy of "at-will employment" and Arbitration Agreement, which may not be changed, altered, revised or modified unless in writing and signed by the Owner of the Company).

I also understand that the Company promotes a voluntary system of alternative dispute resolution which involves binding arbitration to resolve all disputes which may arise out of the employment context. Because of the mutual benefits (such as reduced expense and increased efficiency) which private binding arbitration can provide both the Company and myself, I voluntarily agree that any claim, dispute, and/or controversy (including, but not limited to, any claims of discrimination and harassment, whether they be based on the New Mexico Law Against Discrimination, Title VII of the Civil Rights Act of 1964, as amended, as well as all other state or federal laws or regulations) which would otherwise require, or allow resort to, any court or other governmental dispute resolution forum between myself and the Company (or its owners, directors, officers, managers, employees, agents, and parties affiliated with its employee benefit and health plans) arising from, related to, or having any relationship or connection whatsoever with my seeking employment with, employment by, or other association with the Company, whether based on tort, contract, statutory, or equitable law, or otherwise ... will be submitted to and determined exclusively by binding arbitration under the Federal Arbitration Act, in conformity with the procedures of the New Mexico Statutes Annotated 44-7-01 et seq.

....

I UNDERSTAND THAT BY VOLUNTARILY AGREEING TO THIS BINDING ARBITRATION PROVISION, BOTH I AND THE Company GIVE UP OUR RIGHTS TO TRIAL BY JURY.

{3} Following her involuntary termination, Plaintiff filed complaints with the New Mexico Human Rights Division and the United States Equal Employment Opportunity Commission. When her administrative remedies were exhausted, Plaintiff filed a complaint in the district court alleging she was wrongfully terminated by Defendant. Defendant responded with its Motion to Compel Arbitration or, in the Alternative, to Dismiss, arguing that Plaintiff is required to submit the claims in her complaint to arbitration pursuant to the Arbitration Agreement. The district court denied the motion after considering the written and oral arguments of the parties. Defendant appeals. We have jurisdiction pursuant to NMSA 1978, § 44-7-19(A)(1) (1971) (stating that an appeal may be taken from an order denying a motion to compel arbitration where the existence of an agreement to arbitrate is disputed). Arbitration agreements made on or after July 1, 2001, are governed by the current Uniform Arbitration Act, NMSA 1978, §§ 44-7A-1 to -32 (2001) which contains a similar provision at Section 44-7A-29(a)(1) ("An appeal may be taken from ... an order denying a motion to compel arbitration.").

STANDARD OF REVIEW

{4} We apply a de novo standard of review to a district court's denial of a motion to compel arbitration. Heye v. Am. Golf Corp., 2003-NMCA-138, ¶ 4, 134 N.M. 558, 80 P.3d 495. Similarly, whether the parties have agreed to arbitrate presents a question of law, and we review the applicability and construction of a contractual provision requiring arbitration de novo. Santa Fe Techs., Inc. v. Argus Networks, Inc., 2002-NMCA-030, ¶ 51, 131 N.M. 772, 42 P.3d 1221.

DISCUSSION

A. Enforcement of Arbitration Agreements

{5} In New Mexico, arbitration is a "highly favored" method of resolving disputes in part because "[i]t promotes both judicial efficiency and conservation of resources by all parties." Id. As a result, when parties have agreed to arbitrate, the courts must compel arbitration. Id.; see also NMSA 1978, § 44-7-1 (1971) ("[A] provision in a written contract to submit to arbitration any controversy thereafter arising between the parties is valid, enforceable and irrevocable, save upon such grounds as exist at law or in equity for the revocation of any contract."); 9 U.S.C. § 2 (2000) ("[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."). However, "a legally enforceable contract is a prerequisite to arbitration; without such a contract, parties will not be forced to arbitrate." Heye, 2003-NMCA-138, ¶ 8, 134 N.M. 558, 80 P.3d 495; see also Salazar v. Citadel Communications Corp., 2004-NMSC-013, ¶ 8, 135 N.M. 447, 90 P.3d 466 (interpreting Federal Arbitration Act, 9 U.S.C. § 2). When presented with an arbitration agreement, we interpret its provisions using the rules of contract law. Heye, 2003-NMCA-138, ¶ 9, 134 N.M. 558, 80 P.3d 495; Pueblo of Laguna v. Cillessen & Son, Inc., 101 N.M. 341, 343, 682 P.2d 197, 199 (1984).

B. Consideration for Plaintiff's Promise to Submit to Arbitration

{6} A legally enforceable contract requires evidence supporting the existence of "an offer, an acceptance, consideration, and mutual assent." Heye, 2003-NMCA-138, ¶ 9, 134 N.M. 558, 80 P.3d 495. This case requires us to determine if Defendant provided consideration for the Arbitration Agreement. "Consideration consists of a promise to do something that a party is under no legal obligation to do or to forbear from doing something he has a legal right to do." Id. ¶ 12. Absent evidence of a "bargained-for exchange between the parties," an agreement lacks consideration and is unenforceable. Smith v. Vill. of Ruidoso, 1999-NMCA-151, ¶ 33, 128 N.M. 470, 994 P.2d 50. A promise may be consideration for a promise if it is "lawful, definite and possible." Bd. of Educ. v. James Hamilton Constr. Co., 119 N.M. 415, 419, 891 P.2d 556, 560 (internal quotation marks and citation omitted). However, a promise that "puts no constraints on what a party may do in the future — in other words, when a promise, in reality, promises nothing — it is illusory, and it is not consideration." Heye, 2003-NMCA-138, ¶ 12, 134 N.M. 558, 80 P.3d 495; see also Restatement (Second) of Contracts § 77 cmt. a (1981) (stating "[w]here the apparent assurance of performance is illusory, it is not consideration for a return promise").

{7} Defendant argues that either its continued at-will employment of Plaintiff or its reciprocal promise to submit to arbitration is sufficient consideration to support enforcement of the Arbitration Agreement.

1. Continued At-Will Employment as Consideration

{8} Defendant argues that in exchange for Plaintiff's promise to submit her disputes to binding arbitration it allowed her to retain her job. However, Plaintiff was an at-will employee before she signed the Arbitration Agreement and she remained an at-will employee after she signed the Arbitration Agreement. The implied promise of continued at-will employment placed no constraints on Defendant's future conduct; its decision to continue Plaintiff's at-will employment was entirely discretionary. See Bd. of Educ.,119 N.M. at 420,891 P.2d at 561; see also Heye, 2003-NMCA-138, ¶ 15, 134 N.M. 558, 80 P.3d 495. Therefore, this promise was illusory and not consideration for Plaintiff's promise to submit her claims to arbitration. See id. ¶ 16 (stating continued employment is not consideration for an arbitration agreement); see also Salazar, 2004-NMSC-013, ¶¶ 3, 16, 135 N.M. 447, 90 P.3d 466 (stating that an arbitration agreement, "made `in consideration of continued employment and the mutual agreement to arbitrate claims,'" was illusory); accord Poole v. Incentives Unlimited, Inc., 338 S.C. 271, 525 S.E.2d 898, 900 (Ct.App.1999) ("The promise of continued employment was illusory because even though [the employee] signed the covenant, [the employer] retained the right to discharge her at any time."), aff'd, 345 S.C. 378, 548 S.E.2d 207 (S.C.2001).

{9} Defendant argues that Richards v. Allianz Life Ins. Co., 2003-NMCA-001, ¶ 20, 133 N.M. 229, 62 P.3d 320 supports its argument that Plaintiff's continued at-will...