Flemma v. Halliburton Energy Services, Inc., 303 P.3d 814

Background

Halliburton hired Flemma in 1982; last worked as district manager in Farmington, NM, until 2008 termination.
Flemma opposed a consolidated Troy King facility location due to public-safety concerns; company preferred Troy King for tax incentives.
In 2006–2007, supervisors warned Flemma to “keep your mouth shut” about Troy King; he continued to express concerns.
Halliburton argued Flemma accepted the DRP arbitration terms by continuing employment, supported by four mailings notifying acceptance via continued service.
District court denied motion to compel arbitration, citing illusory nature of Halliburton’s promise and public-policy concerns; TX law questioned for public-policy conflict.
Court of Appeals reversed; NM Court reversed again to apply NM law, holding the DRP was illusory and unenforceable under NM law due to lack of consideration.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Is the Texas arbitration agreement enforceable under NM public policy?	Flemma argues NM public policy voids TX-law enforcement due to illusory promise.	Halliburton argues TX law governs and should enforce the agreement.	No; NM public policy voids the TX-arbitration, making it unenforceable.
Does NM choice-of-law apply to determine validity of the arbitration agreement?	NM law should apply due to public-policy exception.	TX-law should apply as place of contracting.	NM law applies due to public policy; TX-law would offend NM public policy.
Is Halliburton’s promise to arbitrate valid consideration under NM law?	Promise lacks consideration because Halliburton may unilaterally amend/withdraw.	The mutuality of promise constitutes consideration.	No valid agreement under NM law; the promise is illusory due to unilateral amendment right.
Did a valid agreement to arbitrate form under NM law given the facts?	There was a contract to arbitrate supported by consideration.	The unilateral amendment right destroys mutual assent/consideration.	No; NM law finds no valid agreement to arbitrate.

Key Cases Cited

Rivera v. Am. Gen. Fin. Servs., Inc., 2011-NMSC-033, 150 N.M. 398, 259 P.3d 803 (NM Sup. Ct. 2011) (unconscionability and contract defenses to arbitration)
Cordova v. World Fin. Corp. of N.M., 2009-NMSC-021, 146 N.M. 256, 208 P.3d 901 (NM Sup. Ct. 2009) (arbitration provisions can be unconscionable when lender-favorable)
Salazar v. Citadel Commc’ns Corp., 2004-NMSC-013, 135 N.M. 447, 90 P.3d 466 (NM Sup. Ct. 2004) (unilateral amendment/right to terminate arbitration renders agreement unenforceable)
Sisneros v. Citadel Broad. Co., 2006-NMCA-102, 140 N.M. 266, 142 P.3d 34 (NM Ct. App. 2006) (post-claim amendment rule; timing of amendment matters)
DeArmond v. Halliburton Energy Servs., Inc., 2003-NMCA-148, 134 N.M. 630, 81 P.3d 573 (NM Ct. App. 2003) (actual knowledge requirement to form contract; proof of assent)
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (Sup. Ct. 1985) (existence of an arbitration agreement prerequisite to compelling arbitration)
First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (Sup. Ct. 1995) (contract-law basis for determination of what constitutes an agreement to arbitrate)
Salazar v. Citadel Commc’ns Corp., 2004-NMSC-013, 135 N.M. 447, 90 P.3d 466 (NM Sup. Ct. 2004) (illusory promise and unilateral modification)
Heye v. Am. Golf Corp., 2003-NMCA-138, 134 N.M. 558, 80 P.3d 45 (NM Ct. App. 2003) (illustrates illusory promise concerns)
DeArmond , Walter E. Heller & Co. of Cal. v. Stephens, 79 N.M. 74, 439 P.2d 723 (NM Sup. Ct. 1968) (place-of-contract and formation)
Strata Prod. Co. v. Mercury Exploration Co., 1996-NMSC-016, 121 N.M. 622, 916 P.2d 822 (NM Sup. Ct. 1996) (unilateral contract formation)
Wilkes v. Saylor, 613 S.E.2d 922 (W. Va. 2005) (unilateral amendment/termination concerns in arbitration)