Strausberg v. Laurel Healthcare Providers, LLC, No. 33,331.

Docket NºNo. 33,331.
Citation304 P.3d 409
Case DateJune 27, 2013
CourtSupreme Court of New Mexico

304 P.3d 409

Nina R. STRAUSBERG, Plaintiff–Respondent,
v.
LAUREL HEALTHCARE PROVIDERS, LLC, Arbor Brook, LLC d/b/a Arbor Brook Healthcare, Lisa S. Noya Burnett, M.D., and The Four Humours Healthcare, LLC, Defendants–Petitioners.

No. 33,331.

Supreme Court of New Mexico.

June 27, 2013.


[304 P.3d 411]


Keleher & McLeod, P.A., Thomas C. Bird, Mary Moran Behm, Hari–Amrit Khalsa, Neil R. Bell, Albuquerque, NM, for Petitioners.

Harvey Law Firm, LLC, Dusti D. Harvey, Jennifer J. Foote, Albuquerque, NM, for Respondent.


Doerr & Knudson, P.A., Randy J. Knudson, Portales, NM, Kelly Bagby, Washington, D.C., for Amicus Curiae AARP.

[304 P.3d 412]



OPINION

VIGIL, Justice.
I. INTRODUCTION

{1} In this case we address which party has the burden to prove that a contract is unconscionable and, therefore, unenforceable. Plaintiff Nina Strausberg signed an arbitration agreement as a mandatory condition of her admission to the Arbor Brook Healthcare nursing home. Despite having signed the arbitration agreement, Plaintiff subsequently sued Arbor Brook and several other defendants for alleged negligent care. Defendants moved the district court to compel arbitration and to dismiss Plaintiff's case. In response, Plaintiff argued that the arbitration agreement was unconscionable. The district court found that Plaintiff had failed to prove unconscionability and, therefore, granted Defendants' motion to compel arbitration.

{2} The Court of Appeals reversed, concluding that the district court erred by putting the burden on Plaintiff to prove unconscionability. Strausberg v. Laurel Healthcare Providers, LLC, 2012–NMCA–006, ¶¶ 21, 23–24, 269 P.3d 914. The Court of Appeals held that “when a nursing home relies upon an arbitration agreement signed by a patient as a condition for admission to the nursing home, and the patient contends that the arbitration agreement is unconscionable, the nursing home has the burden of proving that the arbitration agreement is not unconscionable.” Id. ¶ 20.

{3} We disagree and hold that Plaintiff has the burden to prove that the arbitration agreement is unconscionable because unconscionability is an affirmative defense to contract enforcement, and under settled principles of New Mexico law, the party asserting an affirmative defense has the burden of proof. We also hold that the Court of Appeals' holding is preempted by federal law because it treats nursing home arbitration agreements differently than other contracts. Accordingly, we reverse and remand this case to the Court of Appeals to determine whether the district court erred by granting Defendants' motion to compel arbitration.

II. BACKGROUND

{4} Plaintiff underwent spinal fusion surgery on April 5, 2007, at the age of forty-eight. Plaintiff required rehabilitation following surgery, and on April 11, 2007, she was admitted to the Arbor Brook nursing home in Albuquerque, New Mexico, where she resided until April 23, 2007.

{5} Prior to Plaintiff's transfer from the hospital to Arbor Brook, Deborah McCullough, a nurse liaison from Arbor Brook, met with Plaintiff at the hospital to evaluate Plaintiff and to facilitate Plaintiff's transfer. One of McCullough's duties as nurse liaison was to give Arbor Brook's mandatory arbitration agreement to hospital patients and ask them to sign the agreement before they were admitted to the nursing home. On April 10, 2007, McCullough presented the arbitration agreement to Plaintiff, and both Plaintiff and McCullough signed the agreement. The arbitration agreement provides, in part, that:

[b]y signing this Arbitration Agreement, the Facility and the Resident relinquish their right to have any and all disputes associated with ... the provision of services under the [Arbitration] Agreement (including, without limitation, class action or similar proceedings; claim for negligent care or any other claims of inadequate care provide [sic] by the Facility ... ), resolved through a lawsuit, namely by a judge, jury or appellate court, except to the extent that New Mexico law provides for judicial action in arbitration proceedings. This Arbitration Agreement shall not apply to either the Facility or Resident in any disputes pertaining to collections or discharge of residents.

BY SIGNING THIS AGREEMENT, THE FACILITY AND THE RESIDENT UNDERSTAND THAT THEY ARE GIVING UP THEIR CONSTITUTIONAL RIGHT TO A TRIAL IN COURT BY A JUDGE OR JURY, AND THE RIGHT TO APPEAL CONCERNING ANY DISPUTES.

{6} In June 2008, over one year after her discharge from Arbor Brook, Plaintiff sued Arbor Brook, LLC, d/b/a Arbor Brook

[304 P.3d 413]

Healthcare; Laurel Healthcare Providers, LLC, as Arbor Brook's owner, operator, or manager; a doctor who has since been dismissed from the case; and The Four Humours Healthcare, LLC, the doctor's employer. Plaintiff alleged, among other things, that negligent care at the facility caused her to suffer painful, preventable decubitus ulcers at the site of her surgical wound, a staph infection, hospitalization, and other medical complications.

{7} Defendants moved the district court to dismiss Plaintiff's case and to compel arbitration, arguing that all of Plaintiff's claims arose from her residency at Arbor Brook and they are covered by the arbitration agreement. Plaintiff responded that the district court should deny the motion to compel arbitration because the arbitration agreement is both substantively and procedurally unconscionable. Regarding substantive unconscionability, Plaintiff argued that the terms of the agreement are unfair because the agreement covers only claims that would be brought by the resident, but it excludes the claims that would be initiated by the nursing home. Plaintiff asserted that the arbitration agreement is also procedurally unconscionable due to the facts and circumstances surrounding the contract's formation, including that Plaintiff had limited time to review the agreement before signing it and that she was under the influence of pain medication when she signed the agreement. Additionally, Plaintiff contended that the arbitration agreement is invalid because it is illusory and lacked consideration and mutuality of obligation. Finally, Plaintiff argued that McCullough lacked authority to enter into the contract on behalf of Defendants.

{8} At a hearing on September 2, 2008, the district court found that all of Plaintiff's arguments lacked merit except for Plaintiff's procedural unconscionability claim. The district court explained that it could not evaluate procedural unconscionability without holding an evidentiary hearing. Thus, on October 28, 2008, the district court held an evidentiary hearing on procedural unconscionability during which Plaintiff and McCullough testified.

{9} On November 4, 2008, the district court issued a letter decision, concluding that the arbitration agreement is not procedurally unconscionable and outlining the court's reasoning. The district court noted that Plaintiff's testimony at the hearing demonstrated her confusion regarding the circumstances surrounding the signing of the arbitration agreement. Plaintiff testified that a male presented the agreement to her at Arbor Brook on April 11, 2007, after her discharge from the hospital, along with nearly forty pages of admission paperwork. Plaintiff testified that the paperwork was not explained to her, that she was given ten minutes to review and sign the paperwork, that she did not have her reading glasses with her, and that she felt “sleepy ... groggy ... [and] in a fog.”

{10} The district court found that, contrary to her testimony, Plaintiff had signed the arbitration agreement when McCullough presented it to her at the hospital on April 10, 2007, the day before Plaintiff was transferred to the nursing home. The district court observed that Plaintiff did not testify about how she felt on April 10, 2007, the day she actually signed the agreement. However, based on Plaintiff's medical records from April 10, 2007, the district court found that Plaintiff's confusion could be attributed to the pain medication she had taken that day, which included at least two doses of Percocet.

{11} McCullough, Defendants' only witness, testified that she had no recollection of either Plaintiff or the arbitration agreement that she and Plaintiff had signed on April 10, 2007. The district court found that McCullough's inability to recall Plaintiff was caused by the large number of patients with whom McCullough interacted in her capacity as nurse liaison. McCullough testified about her usual practice in obtaining signatures on arbitration agreements and explained that each patient was required to sign the agreement as a precondition to nursing home admission.

{12} In considering whether the evidence at the hearing demonstrated procedural unconscionability, the district court relied on Fiser v. Dell Computer Corp., 2008–NMSC–046, 144 N.M. 464, 188 P.3d 1215, and

[304 P.3d 414]

Guthmann v. La Vida Llena, 103 N.M. 506, 709 P.2d 675 (1985), overruled in part by Cordova v. World Finance Corp. of N.M., 2009–NMSC–021, ¶ 31, 146 N.M. 256, 208 P.3d 901. The district court found that the considerations referenced in Fiser and Guthmann were evenly balanced in this case, with some factors weighing in favor of contract enforcement and some weighing against it.

{13} One factor weighing against enforcement was Defendants' bargaining position, which the district court found to be vastly superior to Plaintiff's because Arbor Brook drafted the form arbitration agreement and offered it to Plaintiff as a precondition of nursing home admission on a take-it-or-leave-it basis. Additionally, the district court expressed concern regarding Defendants' tactic of obtaining contract signatures from patients who are hospitalized and medicated. Finally, the district court noted that “Plaintiff believed that her only option was to be discharged from the hospital to Defendant's care, but did not testify whether she looked into other placement options.”

{14} Ultimately,...

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    • United States
    • United States District Courts. 10th Circuit. District of New Mexico
    • November 8, 2017
    ...is an affirmative defense to contract enforcement ...." Strausberg v. Laurel Healthcare Providers, LLC, 2013-NMSC-032, ¶ 3, 304 P.3d 409, 412. Consequently, "[c]ourts may render a contract or portions of a contract unenforceable under the equitable doctrine of unconscionability when the ter......
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    • United States
    • United States District Courts. 10th Circuit. District of New Mexico
    • August 30, 2018
    ..."unconscionability is an affirmative defense to contract enforcement." Strausberg v. Laurel Healthcare Providers, LLC, 2013-NMSC-032, ¶ 3, 304 P.3d 409, 412. Consequently, "[c]ourts may render a contract or portions of a contract unenforceable under the equitable doctrine of unconscionabili......
  • Patterson v. Nine Energy Serv., LLC, No. CIV 17-1116 JB/GBW
    • United States
    • United States District Courts. 10th Circuit. District of New Mexico
    • November 29, 2018
    ..."unconscionability is an affirmative defense to contract enforcement." Strausberg v. Laurel Healthcare Providers, LLC, 2013-NMSC-032, ¶ 3, 304 P.3d 409, 412. Consequently, "[c]ourts may render a contract or portions of a contract unenforceable under the equitable doctrine of unconscionabili......
  • Patterson v. Nine Energy Serv., LLC, No. CIV 17-1116 JB\GBW
    • United States
    • United States District Courts. 10th Circuit. District of New Mexico
    • November 29, 2018
    ..."unconscionability is an affirmative defense to contract enforcement." Strausberg v. Laurel Healthcare Providers, LLC, 2013-NMSC-032, ¶ 3, 304 P.3d 409, 412. Consequently, "[c]ourts may render a contract or portions of a contract unenforceable under the equitable doctrine of unconscionabili......
  • Request a trial to view additional results
52 cases
  • Laurich v. Red Lobster Rests., LLC, No. CIV 17–0150 JB/KRS
    • United States
    • United States District Courts. 10th Circuit. District of New Mexico
    • November 8, 2017
    ...is an affirmative defense to contract enforcement ...." Strausberg v. Laurel Healthcare Providers, LLC, 2013-NMSC-032, ¶ 3, 304 P.3d 409, 412. Consequently, "[c]ourts may render a contract or portions of a contract unenforceable under the equitable doctrine of unconscionability when the ter......
  • Patterson v. Nine Energy Serv., LLC, No. CIV 17-1116 JB/GBW
    • United States
    • United States District Courts. 10th Circuit. District of New Mexico
    • August 30, 2018
    ..."unconscionability is an affirmative defense to contract enforcement." Strausberg v. Laurel Healthcare Providers, LLC, 2013-NMSC-032, ¶ 3, 304 P.3d 409, 412. Consequently, "[c]ourts may render a contract or portions of a contract unenforceable under the equitable doctrine of unconscionabili......
  • Patterson v. Nine Energy Serv., LLC, No. CIV 17-1116 JB/GBW
    • United States
    • United States District Courts. 10th Circuit. District of New Mexico
    • November 29, 2018
    ..."unconscionability is an affirmative defense to contract enforcement." Strausberg v. Laurel Healthcare Providers, LLC, 2013-NMSC-032, ¶ 3, 304 P.3d 409, 412. Consequently, "[c]ourts may render a contract or portions of a contract unenforceable under the equitable doctrine of unconscionabili......
  • Patterson v. Nine Energy Serv., LLC, No. CIV 17-1116 JB\GBW
    • United States
    • United States District Courts. 10th Circuit. District of New Mexico
    • November 29, 2018
    ..."unconscionability is an affirmative defense to contract enforcement." Strausberg v. Laurel Healthcare Providers, LLC, 2013-NMSC-032, ¶ 3, 304 P.3d 409, 412. Consequently, "[c]ourts may render a contract or portions of a contract unenforceable under the equitable doctrine of unconscionabili......
  • Request a trial to view additional results

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