Weiss v. Thi of New Mexico At Valle Norte, LLC

• Decision Date: 03 April 2013
• Docket Number: No. 30,296.,30,296.
• Citation: 301 P.3d 875
• Parties: Rochelle WEISS, as Personal Representative for the Wrongful Death Beneficiaries of Florence Zuckerman, deceased, Plaintiff–Appellee, v. THI OF NEW MEXICO AT VALLE NORTE, LLC; THI of New Mexico, LLC; THI of Baltimore, Inc.; Fundamental Administrative Services, LLC; Fundamental Clinical Consulting, LLC; and Jimmy D. Melton, administrator, Defendants–Appellants.
• Court: Court of Appeals of New Mexico

301 P.3d 875

Rochelle WEISS, as Personal Representative for the Wrongful Death Beneficiaries of Florence Zuckerman, deceased, Plaintiff–Appellee,

v.THI OF NEW MEXICO AT VALLE NORTE, LLC; THI of New Mexico, LLC; THI of Baltimore, Inc.; Fundamental Administrative Services, LLC; Fundamental Clinical Consulting, LLC; and Jimmy D. Melton, administrator, Defendants–Appellants.

No. 30,296.

Court of Appeals of New Mexico.

Dec. 26, 2012.

Certiorari Denied, April 3, 2013, No. 34,054.

Harvey Law Firm, Dusti D. Harvey, Jennifer J. Foote, Albuquerque, NM, The Sorey Law Firm, PLLC, R. Daniel Sorey, Longview, TX, for Appellee.

Proctor & Associates, P.C., Lori D. Proctor, Serpe, Jones, Andrews, Callender & Bell, PLLC, John S. Serpe, Randall Jones, Houston, TX, for Appellants.

OPINION

CASTILLO, Chief Judge.

{1} A nursing home and its affiliates and administrator (Defendants) appeal from a district court decision denying their motion to compel arbitration and stay proceedings. The court based its denial on its conclusion that Defendants waived their right to arbitrate and that the arbitration agreement is unconscionable. Defendants also appeal the imposition of $25,000 in sanctions against them. The parties have resolved the underlying issues of waiver and unconscionability, so we do not address them. We affirm the imposition of sanctions.

I. BACKGROUND

{2} Because our sole issue on appeal relates to the imposition of sanctions, we provide only a short background of the events leading up to the hearing at which the sanctions were imposed. Rochelle Weiss (Plaintiff), the personal representative for Florence Zuckerman, sued Defendants over alleged injuries and harm to Mrs. Zuckerman, who died in February 2008 at the THI of New Mexico Valle Norte nursing home. Shortly after filing her complaint, Plaintiff in early March 2009 began serving discovery requests on Defendants. Over the next few months, Plaintiff granted several extensions to Defendants to respond to interrogatories and requests for production, but Defendants produced only a small percentage of the documents requested. In mid-August 2009, Plaintiffs filed a motion to compel discovery.

{3} Between the filing of the motion and the motion hearing, on September 1, 2009, a scheduling conference was held, during which the district court established a time line for trial preparation activities, including deadlines for discovery, and it set a date for a ten-day jury trial beginning in August 2010. Several days later, the parties held a teleconference regarding the production of discovery requested, but no agreement was reached. In early October 2009, the court heard Plaintiff's motion to compel, granted the motion orally, and gave Defendants two weeks, until October 21, to produce the documents. The district court issued a written order requiring the production of discovery by October 21, although the written order was not filed until October 22.

{4} About this time, Defendants discovered the admission agreement signed by Mrs. Zuckerman and also noticed that it contained an arbitration clause. Based on this information, Defendants, on October 29, 2009, filed a motion to compel arbitration and to stay the proceedings under the Federal Arbitration Act (FAA), 9 U.S.C. § 3 (2011). Defendants did provide some discovery on November 2 but thereafter refused to engage in discovery because their position was that the proceedings were automatically stayed upon the filing of their motion to compel arbitration.

{5} Plaintiff filed a motion for discovery sanctions on November 12, 2009. On January 28, 2010, the district court heard Plaintiff's motion for sanctions together with Defendants' motion to compel arbitration and stay the proceedings. Defendants provided some discovery documents the day before and the day of that hearing.

{6} The court denied Defendants' motion to compel, granted Plaintiff's motions for sanctions, imposed a $25,000 fine on Defendants, and ordered Defendants to produce all remaining discovery items within five days. Defendants appealed the district court's order. At oral argument before this Court, the parties explained that they had settled the case except for the matter of the imposition of sanctions. Accordingly, we limit our opinion to the issue of sanctions.

II. DISCUSSION

{7} Defendants make two arguments. First, they argue that sanctions were inappropriate because the sanctions were based in part on litigation activities that occurred after Defendants had filed their motion to compel arbitration. According to Defendants, the filing of the motion should have automatically stayed the proceedings, and they thus were “substantially justified” in resisting discovery and were in compliance with discovery rules because they reasonably believed that the proceedings had been stayed. SeeRule 1–037(B)(2) NMRA. In their second point, Defendants contend that the court provided no basis for the amount of the sanctions at $25,000 and did not base it on any evidence or representation of fees incurred by Plaintiff. We address each argument in turn.

A. Stay of the Proceedings

{8} In their memorandum in support of their motion to compel arbitration, Defendants cited the FAA for their contention that proceedings should be stayed upon such an application. See9 U.S.C. § 3. Defendants reiterated that contention in their response to Plaintiff's motion for sanctions by citing to New Mexico's Uniform Arbitration Act (the Act), NMSA 1978, §§ 44–7A–1 to –32 (2001). See§ 44–7A–8(f). Defendants contend that the district court must automatically stay the proceedings upon receiving a motion to compel arbitration. We disagree with Defendants' reading of the statutes.

{9} Because this involves a matter of statutory interpretation, we are faced with a question of law, and our review is de novo. See Cooper v. Chevron U.S.A., Inc., 2002–NMSC–020, ¶ 16, 132 N.M. 382, 49 P.3d 61. We follow the plain meaning rule, requiring a court to give effect to a statute's language and refrain from further interpretation when the language is clear and unambiguous. See Sims v. Sims, 1996–NMSC–078, ¶ 17, 122 N.M. 618, 930 P.2d 153.

{10} We first address the federal law. The FAA states that “the court ..., upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had.” 9 U.S.C. § 3. Rather than occurring automatically upon a motion to compel arbitration, a stay in the proceedings under the FAA occurs only when the court is satisfied that the issue is referable to arbitration. See United Nuclear Corp. v. Gen. Atomic Co. ( United Nuclear I ), 93 N.M. 105, 123, 597 P.2d 290, 308 (1979) (“Section 3 of the [FAA] provides for a stay of pending court action on application of one of the parties when the [district] court is satisfied that the issue involved is referable to arbitration and that the applicant for the stay of court proceedings is not in default in proceeding with such arbitration.”). That language invokes the discretion of the court and requires either a hearing or a ruling by the court informed by an analysis of the viability of a request for arbitration.

{11} We now turn to the New Mexico statute. The Act states: “If a party makes a motion to the court to order arbitration, the court on just terms shall stay any judicial proceeding that involves a claim alleged to be subject to the arbitration until the court renders a final decision under this section.” Section 44–7A–8(f). Here, too, the stay is not triggered automatically but requires the court, “on just terms,” to assess whether the claim is subject to arbitration. The New Mexico Supreme Court has spoken only once on the meaning of the phrase “just terms” and has concluded that it translates roughly to “reasonable terms.” See Pankey v. Hot Springs Nat'l Bank, 42 N.M. 674, 683, 84 P.2d 649, 654 (1938) (stating that the phrase, in the context of bringing in another party as an appellee, means “such reasonable terms as will save the adverse party harmless in the premises” (internal quotation marks and citation omitted)). In the context of the Act, we conclude that, before staying the proceedings, a district court must utilize its reasonable discretion to determine whether a case is arbitrable.

{12} Adoption of Defendants' assertion that a stay of the proceedings is mandatory and is automatically triggered by a filing of a motion to compel would subvert the court's jurisdiction and lead to the absurd result of giving either party the unilateral power to halt litigation. Defendants overreach in trying to find analogous cases from other jurisdictions to support their theory. For instance, they point to Citibank (South Dakota) NA v. Reikowski, 760 N.W.2d 97 (N.D.2009), for the proposition that a mere motion to compel arbitration automatically triggers a stay in the proceedings. However, that court relied on a South Dakota law with wording that is significantly different from the New Mexico statute. SeeS.D. Codified Laws § 21–25A–7 (2004) (“Any action or proceeding involving an issue subject to arbitration shall be stayed if an order for arbitration or an application therefor has been made....” (emphasis added)). Other state jurisdictions are equally unhelpful to Defendants' argument. And federal case law offers numerous examples of providing discretion to lower courts to determine the merits of a motion for arbitration before requiring a stay of the proceedings. See, e.g., In re Gandy, 299 F.3d 489, 494 (5th Cir.2002) (“A court must stay its proceedings if it is satisfied that an issue before it is arbitrable under the agreement.”); MicroStrategy, Inc. v. Lauricia, 268 F.3d 244, 249 (4th Cir.2001) (“[A] party may demand a stay of federal judicial proceedings pending exercise of a contractual right to have the subject matter of the federal action decided by arbitration,...