THI of New Mexico at Hobbs Center, LLC v. Patton Ex Rel. Estate of Patton
2014 U.S. App. LEXIS 1687
| 10th Cir. | 2014Background
- THI operated a New Mexico nursing home; residents (including Mr. Patton) signed an admission agreement with a compulsory arbitration clause covering most disputes but excluding guardianship, collection/eviction actions by THI, and disputes under $2,500.
- After Mr. Patton’s death, his wife (as representative of his estate) sued THI for negligence and misrepresentation; THI sued in federal district court to compel arbitration.
- The district court initially compelled arbitration, but after the New Mexico Court of Appeals in Figueroa held an identical clause unconscionable, the district court granted Rule 60(b)(6) relief and vacated its prior order, relying on Figueroa’s unconscionability rule.
- Figueroa reasoned the clause was unconscionable because it required residents to arbitrate the claims they were most likely to bring while reserving for court THI’s most likely claims (guardianship, collection, eviction), producing a one-sided allocation of forums.
- THI appealed, arguing the Federal Arbitration Act (FAA) preempts any state common-law rule that invalidates arbitration agreements based on the supposed inferiority of arbitration to litigation.
- The Tenth Circuit reversed the district court, holding Figueroa’s rule is preempted by the FAA and ordering reinstatement of the order compelling arbitration.
Issues
| Issue | Patton's Argument | THI's Argument | Held |
|---|---|---|---|
| Whether New Mexico’s unconscionability rule (as applied in Figueroa) is preempted by the FAA | Figueroa rule validly applies general unconscionability principles to invalidate one‑sided arbitration clauses | FAA preempts state rules that single out or treat arbitration as inferior; Figueroa derives its meaning from the fact an arbitration agreement is at issue | FAA preempts Figueroa; the rule is invalid to the extent it rests on arbitration’s alleged inferiority |
| Whether the admission agreement is unconscionable on grounds independent of hostility to arbitration | Arbitration is unfair because residents must arbitrate likely claims while still facing litigation by the nursing home; reservation to NH makes the clause one‑sided | Any alleged unfairness depends on viewing arbitration as inferior; the clause does not permit unilateral forum choice by THI | Court found claimed unfairness ultimately rests on the inferiority-of-arbitration rationale and therefore cannot survive FAA preemption |
| Whether alternative state-law common-law defenses could sustain invalidation after Marmet/Concepcion | State common-law unconscionability can invalidate arbitration clauses even if a state public-policy rule is preempted | Common-law defenses are allowed only if not grounded in policies specific to or hostile to arbitration | Common-law defenses remain available but cannot be based on rules that derive their meaning from the fact an agreement to arbitrate exists; here none survive that constraint |
Key Cases Cited
- Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1 (federal policy favoring arbitration and resolving doubts in favor of arbitration)
- Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (statutory complex claims may be arbitrated; arbitration not inferior)
- Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (arbitration enforces statutory rights; generalized attacks on arbitration disfavored)
- Perry v. Thomas, 482 U.S. 483 (FAA withdraws states’ power to require judicial forum; state rules treating arbitration as inferior preempted)
- Doctor’s Associates, Inc. v. Casarotto, 517 U.S. 681 (state laws singling out arbitration provisions are preempted)
- Southland Corp. v. Keating, 465 U.S. 1 (FAA preemption of state laws requiring judicial forum)
- Allied-Bruce Terminix Co. v. Dobson, 513 U.S. 265 (states may apply general contract defenses but not policies that enforce contracts while disfavoring arbitration clauses)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (state common-law rules that interfere with arbitration’s fundamental attributes are preempted)
- Marmet Health Care Center, Inc. v. Brown, 565 U.S. 530 (state categorical bans on arbitration of certain claims are preempted; remand to consider common-law defenses not specific to arbitration)