State ex rel. Balderas v. ITT Educ. Servs., Inc., NO. A-1-CA-35204

• Docket Nº: NO. A-1-CA-35204
• Citation: 421 P.3d 849
• Case Date: April 24, 2018
• Court: Court of Appeals of New Mexico

421 P.3d 849

STATE of New Mexico EX REL. Hector BALDERAS, Attorney General, Plaintiff-Appellee,
v.
ITT EDUCATIONAL SERVICES, INC., Defendant-Appellant.

NO. A-1-CA-35204

Court of Appeals of New Mexico.

Filing Date: April 24, 2018

Hector H. Balderas, Attorney General, Joseph Yar, Assistant Attorney General, Nicholas M. Sydow, Assistant Attorney General, P. Cholla Khoury, Assistant Attorney General, Santa Fe, NM, for Appellee.

Sutin, Thayer & Browne, A.P.C., Stevan Douglas Looney, Albuquerque, NM, Bardacke Allison LLP, Paul G. Bardacke, Santa Fe, NM, Thompson Coburn LLP, William R. Bay, Jeffrey R. Fink, St. Louis, MO, for Appellant.

Richard John Rubin, Assistant Attorney General, Santa Fe, NM, for Amici Curiae.

VARGAS, Judge.

421 P.3d 851

{1} In this consolidated appeal, ITT Educational Services, Inc., d/b/a ITT Technical Institute (ITT) appeals the district court’s order denying its motion to compel arbitration, as well as its order compelling compliance with subpoenas served on counsel for ITT students by the Attorney General. On appeal, ITT claims that the Attorney General is bound by provisions in student enrollment agreements requiring that any dispute related to a student’s enrollment be arbitrated and further requiring that any information related to the arbitration remain confidential. We conclude that under the specific circumstances of this case, enforcement of the agreement to arbitrate and accompanying confidentiality clause against the Attorney General is contrary to public policy and we affirm.

BACKGROUND

{2} The State of New Mexico, through its Attorney General (State) filed suit against ITT, claiming violations of the New Mexico Unfair Practices Act (UPA) arising out of alleged misrepresentations to students about ITT’s nursing program and its financial aid process. ITT filed a motion to compel arbitration, asking the district court to order the State to arbitrate individually for each student, "all claims seeking restitution or other relief on behalf of any ITT students in accordance with the arbitration provision in the students’ enrollment agreements with ITT[.]" ITT’s enrollment agreement requires that "any dispute arising out of or in any way related" to the agreement, "including without limitation, any statutory, tort, contract or equity claim" be resolved by binding arbitration. ITT argued that, notwithstanding that the State was not a party to the enrollment agreement, it was required to arbitrate because its claims were derivative of student claims or alternatively, were brought in a representative capacity on behalf of students. Following a hearing, the district court denied ITT’s motion to compel arbitration. ITT appealed the district court’s denial pursuant to the New Mexico Uniform Arbitration Act, allowing for an appeal from an order denying a motion to compel arbitration. NMSA 1978, § 44–7A–29(a)(1) (2001).

{3} During discovery, the State served subpoenas duces tecum on two private attorneys (attorneys) who had each represented ITT students in prior arbitration proceedings against ITT conducted in accordance with the requirements of the enrollment agreements. The subpoenas served on the attorneys required that, for any proceeding against ITT in which they were counsel for an ITT student, they produce the following material:

1. All pleadings, decisions, or verdicts, filed, entered or issued in any arbitration proceeding involving [ITT] and ITT students in New Mexico;

2. All written discovery, including but not limited to, answers to interrogatories, and admissions and accompanying requests for admissions, produced or provided by [ITT] during arbitration between ITT and ITT students;

3. All testamentary evidence gathered or produced during arbitration proceedings between [ITT] and [ITT] students ... including but not limited to, transcripts of depositions, transcripts of hearings or the contact information of any court reporter transcribing any hearings if the transcripts were not delivered or provided to you, affidavits, and written statements;

4. All documents produced or provided by [ITT];

5. All documents produced or provided by your clients[.]

ITT objected to the subpoenas pursuant to Rule 1–045(C) NMRA, asserting that disclosure of the requested materials would violate the confidentiality clauses of the enrollment agreements, requiring that "[a]ll aspects of the arbitration proceeding, and any ruling, decision or award by the arbitrator, will be strictly confidential." ITT instructed the attorneys to refrain from disclosing the materials listed in the subpoenas absent a court order.

{4} The State filed a motion to compel the production of the documents requested by the subpoenas, arguing that, as an investigative agency, it is entitled to discover information

421 P.3d 852

relating to the arbitration proceedings that could constitute impeachment or pattern or practice evidence, notwithstanding the confidentiality clause.

{5} ITT raised two objections to the release of the information. First, ITT asserted that allowing discovery of materials arising from the arbitration could lead to a violation of its students’ right to privacy. Further, ITT claimed that the informal nature of arbitration rendered parties less guarded than those engaged in litigation, creating a public interest in keeping arbitration proceedings confidential. In considering ITT’s concerns at the hearing on the State’s motion to compel, the district court acknowledged the importance of student privacy, but noted, "I understand confidentiality agreements. I understand arbitration agreements between parties. ... I don’t have a problem with the concept of the confidentiality agreement, but I do have a problem with using it as a shield." When ITT was unable to provide authority supporting the district court’s power to enforce a confidentiality clause to deprive an investigative or enforcement agency like the Attorney General of discovery that may be relevant to a claim brought pursuant to its statutory authority, the district court granted the State’s motion to compel.

{6} The parties stipulated to the entry of a protective order, protecting information related to ITT’s students and staff, trade secrets, and sensitive commercial, proprietary, or financial information. The order established extensive measures to safeguard the integrity and confidentiality of the information disclosed through discovery, requiring that all confidential materials be labeled and protected from disclosure to anyone not intimately involved in the case. ITT obtained the district court’s certification for an interlocutory appeal of its order compelling discovery and timely sought relief in this Court. Alternatively, ITT sought review through a writ of error.

{7} This Court initially granted ITT’s writ of error. A writ of error is the procedural vehicle used to invoke the collateral order doctrine in New Mexico. See Carrillo v. Rostro , 1992-NMSC-054, ¶ 25, 114 N.M. 607, 845 P.2d 130. The collateral order doctrine is generally disfavored, and as a result, courts have limited its application in an attempt to avert piecemeal appeals. See Williams v. Rio Rancho Pub. Schs. , 2008-NMCA-150, ¶ 7, 145 N.M. 214, 195 P.3d 879. Pretrial orders concerning discovery, particularly orders compelling discovery, are not collateral orders warranting review under a Rule 12–503 NMRA writ of error. King v. Allstate Ins. Co. , 2004-NMCA-031, ¶ 19, 135 N.M. 206, 86 P.3d 631. Because this matter is more properly raised by interlocutory appeal, we now quash the writ of error, grant ITT’s application for interlocutory appeal, and affirm the district court.

DISCUSSION

Standard of Review

{8} ITT’s appeal requires us to consider the enforceability of the arbitration provision and accompanying confidentiality clause in its student enrollment agreement with respect to the State’s UPA claims. We review the interpretation of any relevant contract terms de novo. Shah v. Devasthali , 2016-NMCA-053, ¶ 10, 371 P.3d 1080. Further, "[w]hether a contract is against public policy is a question of law for the court to determine from all the circumstances of each case," considering both statutory and...