Rivera v. American General Financial Services, Inc.
150 N.M. 398
| N.M. | 2011Background
- Rivera obtained a consumer title loan from American General Financial Services on August 15, 2000 for $6,517 in cash plus $1,931 in insurance premiums; collateral was Rivera's 1995 truck valued at about $15,500.
- The three-page form loan contract required arbitration under the National Arbitration Forum (NAF) and stated that arbitration would govern all claims related to the loan.
- The arbitration provisions excluded from arbitration certain lender remedies, notably foreclosure or repossession, for secured property.
- American General obtained creditor-placed insurance through its affiliate American Security after Rivera failed to provide proof of insurance, adding $2,197 to the loan balance.
- Rivera's truck was destroyed in an accident in 2000; claims were not adjusted, and Rivera paid or disputed ongoing bills; in 2004 the truck title was returned to Rivera without explanation.
- In 2006 Rivera filed suit in state court asserting multiple claims; defendants removed to federal court, remanded after she dismissed her federal claim, and in 2008 the district court granted motions to compel arbitration; the Court of Appeals affirmed, leading to certiorari to the New Mexico Supreme Court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Rivera's certiorari petition was timely. | Rivera filed within 30 days of the Court of Appeals' final action. | Argued petition should be treated as untimely. | The petition was timely filed. |
| Whether FAA §5 permits a court to substitute an arbitrator when the designated provider is unavailable. | §5 allows substitution if a designated arbitrator is unavailable. | §5 cannot override the parties' designations when the forum is integral. | §5 cannot substitute where NAF was integral to the agreement; no replacement arbitrator permitted. |
| Whether the arbitration clause is unconscionable under Cordova. | One-sided arbitration forcing all claims to arbitration while lender retains court remedies is unconscionable. | Clauses are enforceable under NM unconscionability standards. | Arbitration provisions are substantively unconscionable and unenforceable. |
| Whether the arbitration provisions must be struck in their entirety. | If integral terms are unenforceable, the clause should be severed. | Severance may salvage the contract. | Arbitration provisions struck in their entirety; contract invalid as a whole. |
Key Cases Cited
- Cordova v. World Finance Corp. of N.M., 146 N.M. 256 (2009-NMSC-021) (unconscionability of one-sided arbitration clause under NM law)
- Summit Props., Inc. v. Pub. Serv. Co. of N.M., 138 N.M. 208 (2005-NMCA-090) (contract interpretation and integration principles in NM context)
- Ranzy v. Tijerina, 393 F. App'x 174 (5th Cir. 2010) (integral vs. ancillary nature of designated arbitrator determines §5 applicability)
- Reddam v. KPMG LLP, 457 F.3d 1054 (9th Cir. 2006) (agency of arbitration provider and contract terms governing forum relevance)
- In re Salomon Inc. Shareholders' Derivative Litigation, 68 F.3d 554 (2d Cir. 1995) (limits on substituting arbitration forum when named provider unavailable)