277 F. Supp. 3d 1191
D.N.M.2017Background
- Beatrice Moreno, an incapacitated nursing-home resident, was admitted to Good Samaritan on Feb. 27, 2014; the facility’s standard Admission Agreement (signed by temporary guardian SM Gantz) included a broad Arbitration Agreement with a delegation clause assigning arbitrators exclusive authority to decide arbitrability and enforceability.
- The Twelfth Judicial District appointed SM Gantz as Moreno’s temporary guardian; his Letter authorized decisions about medical/psychiatric care, residential placement, safety, and supervision to avoid immediate irreparable harm.
- SM Gantz elected arbitration on Moreno’s behalf; Moreno lived at the facility until her death; her daughter Monica Cruz Hatton was later appointed personal representative and sued the facility in state court for wrongful death and related claims.
- Good Samaritan filed in federal court to compel arbitration and appoint an arbitrator; Hatton opposed, arguing (inter alia) that the delegation clause and the Arbitration Agreement are unenforceable because the guardian lacked authority, failed proper procedures, and the contract is unconscionable.
- The district court held that the Admission Agreement contains clear-and-unmistakable delegation language, Hatton did not specifically challenge that delegation clause, and therefore the FAA requires the court to compel arbitration and stay proceedings; discovery into the guardian’s authority was denied as for the arbitrator to decide.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Who decides arbitrability (court or arbitrator)? | Delegation clause is clear-and-unmistakable; arbitrator decides arbitrability; court should compel selection/appointment. | The arbitration agreement as a whole is unenforceable; court must decide arbitrability because guardian lacked authority and clause is unconscionable. | Court: Delegation clause is clear-and-unmistakable and not specifically challenged; arbitrator decides arbitrability; compel arbitration. |
| Is discovery into guardian SM Gantz’s authority appropriate before compelling arbitration? | Not necessary; arbitrability delegated to arbitrator. | Needed to resolve factual dispute about guardian authority and waiver of jury right. | Court: Denies discovery; stay compelled under FAA §3 and leave authority issues to arbitrator. |
| Is Hatton (non-signatory) bound to arbitrate? | Good Samaritan: resident (Moreno) was intended beneficiary; estate/heirs bound; equitable estoppel applies. | Hatton: She is a party to the contract and/or Moreno cannot be a third-party beneficiary; estoppel inapplicable. | Court: If it reached the issue, it would find Moreno a third-party beneficiary and Hatton bound (and estopped from denying arbitration). |
| Is the Arbitration Agreement unconscionable (procedural or substantive)? | Good Samaritan: Agreement is bilateral, optional, and not shown to be cost-prohibitive; confidentiality and rule-selection are not unconscionable. | Hatton: Clause is one-sided, cost-sharing and confidentiality are prohibitive and unfair; procedural rules vague. | Court: Hatton failed to meet burden; would not find procedural or substantive unconscionability. |
Key Cases Cited
- Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63 (2010) (a specific delegation clause must be challenged specifically or it is enforceable under the FAA)
- Marmet Health Care Ctr., Inc. v. Brown, 565 U.S. 530 (2012) (FAA applies to personal-injury and wrongful-death claims)
- Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967) (arbitrator decides contract-wide validity where delegation exists unless delegation itself is challenged)
- Belnap v. Iasis Healthcare, 844 F.3d 1272 (10th Cir. 2016) (who-decides-arbitrability question precedes arbitrability; clear-and-unmistakable standard explained)
- Kindred Nursing Centers Ltd. P’ship v. Clark, 137 S. Ct. 1421 (2017) (courts may not impose special rules that single out arbitration by requiring special authority to waive jury rights)
- Barron v. Evangelical Lutheran Good Samaritan Soc’y, 150 N.M. 669, 265 P.3d 720 (N.M. Ct. App. 2011) (agent authorized to complete admission paperwork can bind resident to arbitration clause)
- Cordova v. World Finance Corp. of N.M., 146 N.M. 256, 208 P.3d 901 (2009) (arbitration clause substantively unconscionable when it carves out lender’s likely judicial remedies)
- Rivera v. American General Financial Servs., Inc., 150 N.M. 398, 259 P.3d 803 (2011) (unilateral carve-outs for drafter’s preferred judicial remedies render arbitration clause substantively unconscionable)
- Dalton v. Santander Consumer USA, Inc., 385 P.3d 619 (N.M. 2016) (bilateral carve-outs for small-claims do not necessarily render arbitration substantively unconscionable)
- Green Tree Financial Corp.-Ala. v. Randolph, 531 U.S. 79 (2000) (party alleging prohibitive arbitration costs must show likelihood of prohibitive expense to invalidate clause)