AMENDED MEMORANDUM OPINION AND ORDER
THIS MATTER comes before the Court on the Defendants’ Motion to Compel Arbitration, filed March 31, 2016 (Doc. 3)(“Motion”). The Court held a hearing on July 26, 2016. The primary issues are: (i) whether Plaintiff La Frontera Center, Inc. entered a binding arbitration agreement with Defendants United Behavioral Health, Inc., United Healthcare Insurance Company, Inc., Optumhealth New Mexico d/b/a United Behavioral Health, Inc., and Black and- White Corporations (collectively “United Health”); (ii) whether the arbitration agreement applies to all claims that La Frontera asserts against United Health; and (iii) whether the Court should stay these proceedings pending the resolution of arbitration. The Court concludes: (i) that La Frontera entered an enforceable arbitration agreement with United Behavioral Health; and (ii) that La Front-era’s claims against each of the United Health Defendants are subject to mandatory arbitration. Accordingly, the Court grants the Motion and stays proceedings over La Frontera’s claims.
FACTUAL BACKGROUND
This case arises from a complaint that La Frontera filed on February 9, 2016, in the Second Judicial District Court, County of Bernalillo, State of New Mexico, alleging various state law tort, contract, and
1. United Health’s Statewide Contract to Provide State and Federally-Funded Behavioral Health and Substance Abuse Services in , New Mexico.
The State of -New Mexico, Human Services Department (“HSD”) and its sixteen-member Inter-Agency Behavioral Health Purchasing Collaborative (“Collaborative”)
Under the Statewide Entity contract, United Health “agreed to implement and manage New Mexico’s Medicaid and State funded programs to deliver services and
ensure that quality behavioral- health services,-including services funded-by Medicaid and various State funding sources, are provided to Medicaid and non-Medicaid consumers; provider network and out-of-network providers are reimbursed timely and accurately; and that services'would be delivered to promote prevention, recovery, resilience, and the efficient, use of available resources.
First Aménded Complaint ¶ 26, at 7. The Statewide Entity contract'recognized “that United would deliver services'through'subcontracted providers,” but United Health undertook responsibility to fulfill all of the contract’s performance requirements. First Amended Complaint ¶ 31, at 8. HSD, on the Collaborative’s behalf, paid United Health approximately $370 million annually to perform as New Mexico’s Statewide Entity, - See First Amended Complaint 1Í13, at 4. HSD paid United Health on the first Friday of every month based on the total number of Enrollees with United Health. See First Amended Complaint ¶ 34, at 9.
United Health , had problems with its subcontractors. See First Amended Complaint ¶¶ 35-49, at 10-12. Within six months of executing the Statewide Entity contract, “the Collaborative-fined'United $i million for not timely paying its subcontracted providers for the services they rendered' to United’s Enrollees.” First Amended Complaint ¶ 35, at 10. Moreover, in 2012, United Health learned, of suspected billing errors, but United Health did not notify its subcontracted providers of these suspected billing, errors. See First Amended Complaint. ¶ 37, at 10. Nor did United Health notify the Collaborative that it had detected certain billing errors until September or October 2012. See First Amended- Complaint ¶ 37, at 10. In December 2012, and January 2013, United Health investigated several of its subcontracted behavioral health and substance abuse providers, and identified,-in a pre-audit investigation, “what • United called billing errors by its subcontracted providers during United’s entire tenure as New Mexico’s Statewide Entity.” First Amended Complaint ¶ 38, at 10-11.
United Health gave' the Collaborative the results of this pre-audit investigation in January 2013, and the Collaborative contracted with the Public Consulting Group, Inc. (“PCG”) to conduct a confidential audit of fifteen of United Health’s subcontracted providers. See First Amended Complaint ¶¶ 38-39, at 10-11. The PCG audit concluded that United Health overpaid fifteen of its subcontracted providers $37.3 million over a three-and-a-half year period. See First Amended Complaint ¶ 40, at 11. “On June 24, 2013, it was publically announced that New Mexico received ‘credible allegations’ that 15 of United’s contracted non-profit providers of behavioral health service had defrauded the program out of $36 million over a three-year period.” First Amended Complaint ¶ 40, at 11. United Health’s fraud, waste, and abuse detection and prevention system did not detect such fraud and abuse in 2009, 2010, 2011, or most of 2012, see First Amended Complaint ¶37, at 10, despite United Health’s promise under the contract to “monitor its subcontracted providers and, when necessary, use corrective
United Health attempted to correct course by replacing its then-existing subcontractors with Arizona-based providers. See First Amended Complaint ¶¶ 42-49, at 12-13. First, United Health sought and received, effective September 4, 2012, a six-month extension of its Statewide Entity contract with the Collaborative,' extending the contract’s terms through December 31, 2013. See First Arhended Complaint ¶44, at 12. Next,’ in October 2012, United Health represented to the Collaborative that it could “solve the institutional fraud problem” by terminating its existing subcontractors' and “substituting Arizona providers to assume wholesale management of New Mexico’s behavioral health services.” First Amended Complaint ¶ 45, at 12. HSD characterized this period as a “Behavioral Health Emergency.” First Amended Complaint ¶ 47, at 13. .
2. United Health and La Frontera Execute Several Participation Provider Agreements.
In November 2012 and January 2013, United Health’s Chief Executive Officer, Andy Sekel, contacted La Frontera to discuss a potential replacement of one of United Health’s then-existing statewide subcontractors. See First Amended Complaint ¶ 51, at 14. Also, in January 2013, the HSD Director of Behavioral Health Services and the Collaborative’s CEO, Diana McWilliams, contacted La Frontera to gauge La Frontera’s “interest in helping New Mexico salvage its behavioral health and substance abuse delivery programs that were nearing collapse.” First Amended Complaint ¶ 52, at 14. In February 2013, representatives from United Health, HSD, and PCG met with La Frontera in Tucson, Arizona, to discuss La Frontera’s bringing its behavioral health operations expertise to. New Mexico. See First Amended Complaint ¶ 53, at 14. La Front-era expressed concerns about expanding its operations into New Mexico, see First Amended Complaint ¶ 54, at 14-15, but “United claimed that its management expertise as the Statewide Entity and its implementation of New Mexico’s fully operational statewide program would provide a seamless transition for La Frontera to assume operations of United’s existing operating facilities,” First Amended Complaint at ¶ 56,15. Moreover, “McWilliams expressed concern that the delivery of behavioral health and substance abuse services for New Mexico’s most vulnerable substance abuse population of enrollees could be disrupted if La Frontera and other Arizona' providers did not help out during the Emergency.” Response at 2. La Frontera agreed to assist the Collaborative and United Health to provide care to United Enrollees, and La Frontera formed, at its own expense, a team to organize and implement a transition into New Mexico. See First Amended Complaint ¶¶ 57-58, at,.15. At this point — January or February 2013 — “neither HSD nor United/Optum had presented any proposed contract or discussed any terms or conditions of potential agreements, other than that La Frontera would take over for one or more New Mexico providers and would be paid New Mexico Medicaid rates for its services.” Response at 3 (citing Affidavit of Daniel J. Ranieri, Ph.D ¶ 9, at 3 (sworn May 6, 2016), filed May 9, 2016 (Doc. 13)(“Ranieri Aff.”)). '
On June 27, 2013, HSD and La Frontera executed, “an emergency, no-bid procurement Human Service Department Professional Services Contract for La Frontera
During negotiations regarding the formation of a provider agreement between United Health and La Frontera, United Health represented to La Frontera that, when La Frontera replaced United Health’s then-existing subcontractors, the transition would be seamless, because
(i) United’s claims and encounter processing system would easily link to La Frontera’s system to ensure lower administrative costs and timely payment; (ii) there would be onsite readily available Enrollee information; (iii) Enrollee medical records would be easily accessible onsite; and (iv) to complete the “turnkey” transition, each site would be staffed with experienced employees and fully licensed and credentialed professionals.
First Amended Complaint ¶72, at 19. United Health also directed La Frontera to retain existing employees for terminated providers for at least ninety days and to ensure that all existing employees were re-credentialed, “even though the employees had already been recently credentialed by United under the terms of the Provider Manual.” First Amended Complaint ¶ 74, at 19.
At the time La Frontera assumed responsibility to deliver services for each terminated United Health subcontractor, United Health directed La Frontera to execute several “Participation Provider Agreements.” See First Amended Complaint ¶¶ 62-63, at 16. See United Behavioral Health Facility Participating Provider Agreement §§ 2.1-9.17, at 1-15 (dated July 8, 2013), filed March 21, 2016 (Doc. 3-l)(“Participating Provider Agreement”). United Health presented La Frontera with the Participating Provider Agreements on a take-it-or-leave it basis, “for the purpose of paying La Frontera for its services negotiated by HSD.” Response at 3-4 (citing Ranieri Aff. ¶ 14, at 3^1). La Frontera had to execute a Participating Provider Agreement as “a condition of payment per the HSD/La Frontera non-procurement contract.” Response at 4. Further, when United Health first presented La Frontera with a Participating Provider Agreement, La Frontera “was only days away from taking over facilities in New Mexico and needed the $1 million authorized by HSD for transition.” Response at 4. United Health and La Frontera executed the first Participating Provider Agreement on July 8, 2013. Response at 4 (citing Ranieri Aff. ¶15, at 4). La Frontera executed subsequent Participation Provider Agreements during the period beginning in July, 2013, and spanning through October 30, 2013, See First Amended Complaint ¶ 62, at 16. Under these agreements, La Frontera promised to assume responsibility for delivering services at various New Mexico facilities that HSD assigned through Unit
The Participating Provider Agreement that United Behavioral Health and La Frontera executed and made effective on July 8, 2013, contains an arbitration clause. See Motion at 2; Participating Provider Agreement § 7.1, at 11-12. The arbitration clause provides:
It is agreed that prior to any other remedy available to the parties, UBH, Payor, and/or Provider [La Frontera] shall provide written notice of any disputes or claims arising out of their business relationship (the “Dispute”) to the other party within thirty (30) days .of the final decision date, action, omission or cause from which the Dispute arose, whichever is later (the “Dispute Date”) .... If the parties are unable to resolve the Dispute within thirty (30) days following receipt of the notice of Dispute ... then said party shall issue a notice of arbitration to the other parties.... Any arbitration proceeding under this Agreement shall be submitted to binding arbitration in accordance with the rules of the American Arbitration Association (“AAA”) .... The parties acknowledge that because this Agreement affects interstate commerce the Federal Arbitration Act applies.
Motion at 2-3 (first, third, and fourth alterations in original, second alteration add-edXquoting Participating Provider Agreement § 7.1, at 11-12).
3. La Frontera Incurs Losses as a United Subcontractor from June 27, 2013, through December 31, 2013.
La Frontera encountered several difficulties in working as a United Health subcontractor from June 27, 2013, through December 31, 2013. First, when La Front-era’s transition team initiated operations in Las Cruces, New Mexico, it discovered that United Health’s representations regarding its processing system, information available onsite, and credentialing were false. See First Amended Complaint ¶ 73, at 19; Motion at 2 (“With regard to the formation of the Agreement, [La Frontera] alleges that [United Health] made numerous fraudulent and negligent misrepresentations to [La Frontera] for the purpose of inducing [La Frontera] to enter into the Agreement.”)(alterations added). These misrepresentations caused La Frontera increased expenses, and “added at least three months of additional structure and implementation work by La Frontera to effectuate the transition.” First Amended Complaint ¶ 76, at 20. Second, United Health did not disclose that La Frontera “would have to utilize the same facilities as the terminated providers by first renegotiating facility leases at unfavorable terms.... ” First Amended Complaint ¶78, at 20. Third, “United’s claims processing system would not accept La Front-era’s claims,” First Amended Complaint ¶ 75, at 20, and United Health had failed to disclose its “claim payment system was not capable of paying La' Frontera’s claims without significant technical modifications that United subsequently claimed were not possible,” First Amended Complaint ¶ 78, at 20. To overcome some of these difficulties, from July through December 2013, “the Collaborative and La Frontera worked together to try to ensure that the transition process did not disrupt or delay services to United’s Enrollees.” First Amended Complaint ¶ 79, at 20.
“La Frontera lost money every month it operated in New Mexico.” First Amended Complaint ¶ 80, at 21. Lá Frontera submit
La Frontera submitted all of its unpaid claims to United Health, arid United Health received all of La Frontera’s unpaid claims “no later than January 2014.” First Amended Complaint ¶ 84, at 22. In March, 2014, United Health asked La Frontera to resubmit all of its' unpaid claims; La Frontera resubmitted all 30,-000 of its unpaid claims. See First Amended Complaint ¶ 86, at 22. United Health’s claims payment system rejected all of La Frontera’s claims. See First Amended Complaint ¶ 86, at 22. United Health again asked La Frontera to resubmit its unpaid claims over a ten-day time period, but without submitting more than 5,000 unpaid claims per day. See First Amended Complaint ¶ 87, at 22. La Frontera edited 30,-000 claims to conform to United Health’s edits, but United Health rejected all of La Frontera’s unpaid claims as untimely submitted. See First Amended Complaint ¶ 87, at 22. La Frontera was not paid $3.9 million plus interest that United Health owes La Frontera for services delivered to United Health’s Enrollees during the time that La Frontera provided services from June 27, 2013, through December 31, 2013, pursuant to the HSD emergency, no-bid procurement agreement. See First Amended Complaint ¶ 87, at 22. From June through December 2013, United. Health either underpaid or failed to pay its Arizona-based providers for services rendered to United Health’s Enrollees. See First Amended Complaint ¶-47, at 13.
“In December 2013, La Frontera was desperately low on funds.” Response at 4. La Frontera sought payment from United Health, and, “[a]s a condition of payment (obligation already owed by United to Lá Frontera)[,] La- Frontera was forced to sign a Settlement Agreement and Release with [United Health].” Response at 4. See Settlement- Agreement and Release By and Between United Behavioral Health and La Frontera, Inc. at 22-25 (dated December 19, 2013), filed May 9, 2016 (Doc. 13)(“Settlement Agreement”). The Settlement Agreement contains a broad release that ostensibly applies to claims for payment that La Frontera incurred between July ⅜ 2013, and December 31, 2013. Settlement Agreement ¶¶ 1-3, at 22-23. Anticipating arbitration of La Front-era’s claims, United Health plans to rely on the Settlement Agreement to argue that its release “bars most, if not all, of the payment claims that [La Frontera] is now pursuing.” Reply at 2 n.l. The Settlement Agreement itself contains a separate arbitration provision. See Response at 3; Settlement Agreement at ¶ 8, 24. The Settlement Agreement’s arbitration provision provides:
Any controversy or claim arising out of or relating to this Settlement Agreement or the Subject Matter shall be resolved by confidential arbitration administered by the American Arbitration Association under its Commercial Arbitration rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.
Settlement Agreement ¶ 8, at 24.
Despite the Settlement Agreement, .La Frontera continued to seek payment from
PROCEDURAL BACKGROUND
On March 14, 2016, La Frontera filed a First Amended Complaint in state court, alleging nine separate state law tort, contract, statutory, and restitutionary claims against United. See First Amended Complaint ¶¶ 89-165, at 22-36. These claims arise from the circumstances surrounding the formation and performance of several provider- agreements .that United Health -and La Frontera executed. See First Amended. Complaint ¶¶ 89-165, at 22-36. Also, on March 14, 2016, United Health filed a Notice of Removal, removing La Frontera’s action to federal court, based on diversity jurisdiction. See Notice of Removal ¶¶ 5-6, at 1-2, One week later, on March 21, 2016, United Health filed the Motion.
1. United Health’s Motion.
United Health moves the Court, pursuant to the Federal Arbitration Act, 9 U.S.C. §§ 1-16 (“FAA”), the New Mexico Uniform Arbitration Act, N.M. Stat, Ann., §§ 44-7a-l to 44-7a~32 (“NMUAA”), and the Participating Provider Agreement into which La Frontera entered with United, to compel arbitration and to stay this action pending resolution of the arbitration. See Motion at 1. United Health points to the Participating Provider Agreement, indicating that the agreement requires that disputes, “arising out of [United Health and La Frontera’s] business relationships’’ be submitted to arbitration. Motion at 1, 3 (citing Participating Provider Agreement § 7,1, at ll). United Health contends that, because “all of [La Frontera’s] claims relate to either the formation or performance of the [Participating Provider Agreement], La Frontera’s claims necessarily ‘aris[e] out of their business relationship.’ ” Motion at 3 (first and second alterations added, third alteration in original)(quoting Participating Provider Agreement § 7.1, at 11). Consequently, United Health asserts that La Frontera’s claims “must be submitted to binding arbitration.” Motion at 3.
United . Health asserts that, “[u]nder controlling federal and New Mexico law, arbitration is mandatory upon demand in cases, like this one, where the claims fall within the scope of the arbitration agreement.” Motion at 3 (citing 9 U.S.C. § 2; N.M. Stat.' Ann. § 44-7A-7). United Health relies on the proposition from Parrish v. Valero Retail Holdings, Inc.,
United Health additionally argues that arbitration provisions which require arbitration of disputes arising from the parties’ business relationships are construed broadly. See Motion at 4 (internal citations omitted). In support of this thesis, United Health asserts that arbitration provisions “have been held to govern claims arising from the contract, those that did not arise from the contract, such as statutory claims, and claims that arose prior to the execution of the contract.” Motion at 4 (citing Aztec Med. Servs. v. Burger,
2. La Frontera’s Response.
La Frontera responds in opposition to United Health’s Motion, asserting that “[t]here is no valid, enforceable agreement to arbitrate.” Response at 1. La Frontera states that “whether a valid agreement to arbitration exists” is a threshold question, Response at 5 (citing 9 U.S.C. § 2), and further contends that, “[w]hile there is a presumption in favor of arbitration, that presumption disappears when the parties dispute the existence of a valid arbitration agreement,” Response at 5 (alteration added)(citing Dumais v. Am. Golf Corp.,
First, La Frontera argues that the Participating Provider Agreement’s arbitration clause does not bind the parties. See Response at 6-8. La Frontera asserts that the Participating Provider Agreement is not controlling, because it “was executed solely for the money to flow from HSD through United to La Frontera.” Response at 7. La Frontera contends that the con
La Frontera agreed (i) to timely and appropriately assume responsibility for delivering services at various New Mexico facilities assigned by HSD through United to La Frontera; and (ii) to meet the.service delivery needs of United’s Enrollees. For its part, United promised HSD that United would pay La Front-era for delivering these services during the Emergency. -
Response at 7. According to La Frontera, its agreement with HSD is controlling. See Response at 7.
Second, La Frontera contends that the Participating Provider Agreement is unconscionable and, hence, unenforceable. See Response at 7-10. La Frontera concedes that New Mexico law does not require a showing of both procedural and substantive unconscionability to invalidate a contract. See Response at 8 (citing Cordova v. World Finance Corp.,
Regarding substantive unconscionability, La Frontera asserts that “an unconscionable agreement is one ‘that is unreasonably favorable to one party while precluding á meaningful choice of the other party.’” Response at 8 (quoting Cordova v. World Finance Corp.,
La Frontera also stresses that the Participating Provider Agreement contains a provision which marks a significant departure from New Mexico’s six-year statute of limitations for actions arising from written contracts. See Response at 9 (citing N.M. Stat. Ann. § 37-l-3(A)). Participating Provider Agreement § 7.1 states that “the parties knowingly and voluntarily waive any right to a Dispute if arbitration is not initiated within one year after the Dispute Date,” where “Dispute Date” is .defined as “the final decision date, action, omission, or cause from which the Dispute arose, whichever is later.” Participating Provider Agreement § 7.1, at 11. La Frontera argues that this arbitration agreement’s- provision severely limits La Frontera’s rights. See Response at 9.
La Frontera next states that, “[w]hen looking at procedural unconscionability, the Court ‘exataines the particular factual circumstances surrounding the formation
It is fundamentally unfair to bind La Frontera to the arbitration term in the [Participating Provider Agreement], which was executed solely as a condition of payment for services promised by La Frontera to HSD.... La Frontera had no choice but to execute the [Participating Provider Agreement] if La Frontera was to be paid.
Response at 8. As a result, -La Frontera contends that the arbitration agreement is procedurally unconscionable and therefore unenforceable. See Response at 8.
Third, La Frontera asserts that the Court should not compel arbitration of all of La Frontera’s-claims, because not all of the- claims that La Frontera asserts in its First Amended Complaint arise from the Participating Provider Agreement, See Response at 10-12. La Frontera maintains its argument 'that its claims arise, not under the Participating Provider Agreement, but rather under a contract it entered with HSD before executing the Participating Provider Agreement. La Frontera explains that
the essence of [its] claims is that there were . multiple agreements among the parties, but the only properly negotiated terms and conditions were for La Front-era to take over provision of behavioral health services from one or more, of [United Health’s],New Mexico providers and for. [United Health] to pay La Frontera for the services at 100% of New Mexico’s Medicaid rates.
Response at 10. La Frontera further argues that one of its claims “is based on its status as a third party beneficiary of [United Health’s] Statewide Contract with the Collaborative.” Response at 10 (citing First Amended Complaint ¶¶ 130-142, at 31-33). La Frontera relatedly argues that the Court should not .compel arbitration of its promissory estoppel and quantum me-ruit/unjust enrichment claims, because those claims “are not based on any written agreements with [United Health].” Response at 11. See First Amended Complaint ¶¶ 165-66, at 35-36. La Frontera further .contends that “[t]he facts underpinning La Frontera’s claims do not require performance or interpretation.of the [Participating. Provider Agreement],” nor arise out of that agreement. Thus, La Frontera concludes that the Court should not compel arbitration of all or certain of its claims. Response at 12. See id. at 11 (citing CardioNet, Inc. v. Cigna Health Corp.,
Last, La Frontera states that a stay is unnecessary. See Response at 12. La Frontera argues that United .Health “made no showing of a need for,.a stay.” Response at 12. Further, La Frontera explains that, “[e]ven where there is a combination of arbitrable and nonarbitrable claims, litigation can proceed in piecemeal fashion and the entire action does not need to stay pending arbitration.” Response at 12 (citing Coors Brewing Co. v. Molson Breweries,
3. United Health’s Reply.
United replies in support of its Motion, arguing that La Frontera’s attempts to circumvent the Participating Provider Agreement’s arbitration clause fail. See Reply at 1-12. United Health begins by reiterating its view that the arbitration agreement, which became effective on July 8, 2013, is legally binding/ See Reply at 2-3. United Health also reiterates its view that the Participating Provider Agreement’s arbitration clause “applies to all disputes and claims between the parties, regardless whether the claims are based on the terms of the Agreement.” Reply4 at 3 (emphasis in original). United Health restates both the FAA’s and New Mexico’s “strong policy favoring arbitration.” Reply at 3. United Health then turns to its overarching reply that La Frontera’s “sole argument to invalidate the arbitration provision (as being unconscionable) fails, and all of [La Frontera’s] claims fall within the broad scope of the arbitration provision.” Reply at 4.
United Health replies to La Frontera’s unconscionability arguments. See Reply at 4-9. United Health notes that La Frontera has the burden to prove that the arbitration agreement is unconscionable. See Reply at 4 (citing Strausberg v. Laurel Healthcare Providers, LLC,
With respect to' La Frontera’s procedural unconscionability argument, United Health argues that La Frontera offers no evidente of procedural unconscionability. See Reply at 5-7. United Health contends that “[c]ourts1 applying New Mexico law have routinely rejected [that defense] where the party seeking to- avoid an arbitration provision ,.. argues merely that it had no choice but to sign the contract.” Reply at 5 (citing Guthmann v. LaVida Llena,
In reply to La Frontera’s substantive unconscionability defense, United first states that the defense “analyzes whether the particular terms of the contract are unfairly and unreasonably one-sided in favor of the drafter.” Reply at 7 (citing
United Health also replies to La Front-era’s argument that the arbitration provision is effectively one-sided, because, according to La Frontera, United Health is unlikely to pursue a claim against La Frontera. See Reply at 8. United Health attacks La Frontera’s premise, arguing that, in fact, United Health
could initiate a variety of claims against [La Frontera] through arbitration, including ... (i) the recovery of overpay-ments made to [La Frontera] by mistake or due to inaccurate or fraudulent billing submissions ... and (ii) declaratory relief to establish [United Health’s] right to terminate the Agreement as a result of a breach by [La Frontera].
Reply at 8 (alterations added). United Health contends that, because the Participating Provider Agreement’s arbitration clause requires it to submit these claims to arbitration, the clause is not unfairly one-sided and, hence, not substantively unconscionable. See Reply at 8. United Health additionally argues that substantive uncon-scionability occurs where an arbitration agreement “except[s] the drafting party from the requirement to arbitrate certain types of claims.” Reply at 8 (emphasis in original)(citing Figueroa v. THI of New Mexico at Casa Arena Blanca, LLC,
United Health additionally replies to La Frontera’s argument that the Participating Provider Agreement’s arbitration clause does not apply to all of La Frontera’s claims. See Reply at 9-11. United Health clarifies that La Frontera “bears the burden of proving that its claims do not fall within the scope of the arbitration provision .... ” Reply at 9 (citing AT & T Techs, Inc. v. Commc’ns Workers of Am.,
In reply to La Frontera’s assertion that certain of La Frontera’s claims are .not based on the Participating Provider Agreement’s terms, United contends that “the law is clear that [La Frontera’s] claims need not be based on the terms of the Agreement in order to fall within the broad scope of the arbitration provision.” Reply at 9 (citing Zink v. Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Last, United Health clarifies that it requests a stay pursuant to FAA § 3, which, in its entirety, provides:
If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, 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 in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.
9 U.S.C. § 3. United Health argues that it is not “seeking to prevent any non-arbitra-ble claims from going forward,” because, in United Health’s view, “all of [La Front-era’s] claims are subject to arbitration.” Reply at 12 (alteration added). Consequently, United Health argues that the Court should enter an order compelling La Frontera to submit its claims to binding arbitration and stay the proceedings pending resolution of the arbitration. See Reply at 12.
4. The Hearing.
On July 26, 2016, the Court held a hearing on United Health’s Motion. See Draft Transcript of Hearing at 1:1-2, taken July 26, 2016 (Court)(“Tr.”).
The Court then asked Mr. Park, who had entered an appearance for “United,” whom he represents. See Tr. at' 1:22-23 (Park); Tr. at 2:7-8 (Court). Mr. Park stated that he represents all defendants in the case. See. Tr. at 2:9-10 (Park). Mr. Park explained that La Frontera has a business relationship with all the United Health Defendants and that the arbitration agreement governs all La .Frontera’s claims against United Health arising from their business relationship. See Tr, at. 7:19-8:2 (Park).
The Court then inquired into the corporate relationship ■ between Defendants United Behavioral Health and United Healthcare Insurance Company. See Tr. at 8:3-8 (Court). Mr. Park explained that the corporate relationship between those companies was a parent-subsidiary relationship, but acknowledged that “it could be a sister corp relationship.” Tr. at 8:9-15 (Park). The Court again inquired whether Mr. Park represents all Defendants, and Mr. Park confirmed that he did. See Tr.-at 9:1-3 (Court, Park). After recognizing that, in New Mexico, Optumhealth does business as United Behavioral Health, the Court then asked whether the arbitration agreement at issue was between (i) United Behavioral Health and La Frontera; (ii) United Healthcare Insurance Company and La Frontera; or (iii) both United Behavioral Health and United Healthcare Insurance Company and La Frontera. - See Tr. at 9:13-20 (Court). The Court also inquired whether there is at issue one or two agreements between United Health and La Frontera. See Tr. at 9:13-20 (Court). Mr. Park clarified his understanding that there was one arbitration agreement between La Frontera, and all of the United Health parent, subsidiary, and sister corporations. See Tr. at 9:21-10:3 (Park).
•Upon the Court’s invitation, La Front-era ■ indicated its view that “the United Behavioral Health, Inc., is a corporation, United . Healthcare . Insurance Company, Inc., is a corporation. And they do business in.New Mexico as Optumhealth.” Tr. at 10:20-23 (kolsrud). The Court then looked to the July 8, 2013, Participating Provider Agreement, which indicates the contracting parties as United Behavioral Health and La Frontera. See Tr. at 11:24-12:4 (Court). See also Participating Provider Agreement at 16. The Court asked La Frontera whether there is “a contract between La Frontera and United Healthcare Insurance Company, Inc.” Tr. at 11:24-12:4 (Court). La Frontera indicated that there was not a contract between these two entities, See Tr. at 12:5 (Kolsrud). The
Mr. Park again attempted to shed light on the corporate relationship between the United Health entities, explaining that “Optumhealth New Mexico is a joint venture between United Behavioral and United Healthcare.” Tr. at 22:23-24 (Park). Mr. Park stated that United Behavioral Health and United Healthcare Insurance Company came together to create Optumhealth New Mexico, and, in New Mexico, United Behavioral Health does business as Op-tumhealth New Mexico. See Tr. at 23:1-5. The Court then reiterated-its concern that, looking at the Participating Provider Agreement’s face, it is “not' seeing an arbitration agreement with United Healthcare.” Tr. at 23:19-21 (Court). The Court explained its concern “that La Frontera has sued United Healthcare Insurance, and there is no arbitration agreement that covers them, and so if there is no arbitration agreement I guess I’m concerned about my ability to compel that portion of the dispute to arbitration.” Tr. at 24:12-16 (Court). Mr. Park attempted to assuage the Court’s concern, contending that La Frontera has
sued United Healthcare Insurance Company for obligations arising ... out of this business relationship, Your Honor. And the only part of this business relationship that has anything to do with United Healthcare Insurance Company is its affiliation, with United Behavioral Health, which has the d/b/a of Optum-health New Mexico. And so ... if United Healthcare Insurance doesn’t have access to the arbitration, provision, they can’t also have reciprocal obligations underneath the agreement....
Tr. at 24:20-25:9 (Park). The Court then expressed its reservations that Mr. Park’s argument raised a merits issue that the Court should not determine ht the present juncture. See Tr. at 25:10-14 (Court). Mr. Park offered United Health’s view that an arbitrator could determine, that “this third defendant [i.e., United Healthcare Insurance Company] shouldn’t even be a part of this suit.” Tr. at 25:19-20 (Park).
” To this point, the Court asked La Front-era:
If I find that there is a valid" motion to compel as to Lá Frontera and the dispute with United Behavioral Healthcare and the Optumhealth group but I decide I can’t make this arbitration agreement cover United Healthcare, do you want a split suit? Do you want me to compel arbitration on the dispute involving United Behavioral Healthcare but leave your dispute as to United Healthcare Insurance?
Tr. at 28:4-11 (Court).
Regarding the possibility of a split suit, La Frontera stated that, “[i]f it has to be, yes.” Tr. at 28:16 (Kolsrud). The Court then indicated its view that a split suit would entail a stay pending arbitration and again asked La Frontera whether, “under those circumstances[,] you’d want to leave” the claims that La Frontera asserted against United Healthcare Insurance Company in federal court. Tr. at 28:23-25 (Court). La Frontera responded that “there is no basis for arbitration” of its third-party beneficiary claim “based on the statewide entity contract,” which did not include an arbitration clause. Tr. at 29:5-8 (Kolsrud). The Court then inquired into
Then, upon the Court’s invitation, United Health argued
that ... the arbitration agreement covers any claim arising out of the business relationship between the parties, any claim that arises out of the business relationship whether it’s within the July 2013 agreement or within this third party agreement that my clients aren’t a party to, that they say that they have with the state and that they’re a third party intended beneficiary....
Tr. at 25:16-23 (Park). United Health again asserted that the Participating Provider Agreement’s arbitration clause covers all of La Frontera’s claims, because they arise out of a business relationship with United Health. See Tr. at 31:1-10 (Park). United Health also opposed the Court’s splitting La Frontera’s suit by compelling arbitration of only some of La Frontera’s claims and staying proceedings with respect to the other claims pending the resolution of arbitration. See Tr. at 31:11-32:12 (Park). Advancing its argument against a split suit, United Health contended that
[t]he only relationship that [La Frontera has] with United Healthcare Insurance Company is ... [based on their] relationship with Optumhealth New Mexico, ... which is a subsidiary or a joint venture of United Healthcare Insurance Company, so they don’t have direct claims against United Healthcare Insurance Company, there wouldn’t be anything to keep here.... [T]heir only claims against United Healthcare Insurance Company are derivative of their claims against Optumhealth New Mexico.... So they don’t have any direct contract with United Healthcare Insurance Company. They just have claims that are passed through Optumhealth New Mexico. And they’re suing United Healthcare Insurance Company because it’s a joint venture with ... United Behavioral. So there wouldn’t be anything to leave here....
Tr. at 31:15-32:9 (Park).
The Court also invited La Frontera to address its unconscionability defenses, inquiring whether La Frontera understood its biggest issue to be unconscionability. See Tr. at 12:14-17 (Court). La Frontera replied: “No.... [Its] threshold issue is [that] there is no agreement to arbitrate.” Tr. at 12:18-19 (Kolsrud). La Frontera expressed that its primary agreement was with HSD, not with United Health, and that La Frontera formed an agreement with United Health only for the purposes of payment for the obligations that La Frontera owed to HSD. See Tr. at 13:14-14:14 (Kolsrud). La Frontera explained:
[T]he CEO, Dan Ranieri, of La Frontera cut a deal with Ms. McWilliams of HSD. And the agreement was basically on four points. One, La Frontera would come into New Mexico, take over designated facilities and supply these services and comply with Medicaid laws. The second point was La Frontera would be paid Medicaid rates to do it. The third point was in order to maintain a funding stream, La Frontera would initially receive funds from HSD, but would have to then receive funds that would be fundfed] through [United Health]. And the fourth point is that it was a six month deal. The deal was negotiatedbetween McWilliams and Dan Ranieri. The performance measures!,] the standards of performance that La Frontera owed under the contract were to HSD, not United [Health].... United [Health] wanted the money fund[ed] through them in order for United [Health] to take its percentage of the funds that it believed it was entitled to.... [I]t was only after we had ... signed up with HSD that we had to then sign the agreement that’s the subject[] of this case right now with United in order to get paid. It was a funding stream.
Tr. at 13:14-14:14 (Kolsrud). La Frontera stressed that its “deal [was] with the state,” Tr. at 16:9 (Kolsrud), that it “owed United no performance standards,” Tr. at 17:12-13 (Kolsrud), and that the terms of its agreement with United, apart from the terms relating to funding, were irrelevant, see Tr. at 16:7-14 (Kolsrud). La Frontera also argued that its relationship with United Health did not include “offer and acceptance” and, resultingly, concluded that “there is not an arbitration agreement.” Tr. at 20:7 (Kolsrud); id. at 20:23-24 (Kolsrud)..
La Frontera further expressed its view that the controlling agreements do not contain an arbitration clause. See Tr. at 16:14-19 (Kolsrud). La Frontera indicated that its agreement with HSD did not contain an arbitration clause. See Tr. at 16:14-16 (Kolsrud). La Frontera also pressed its argument that it is a third-party beneficiary to the Statewide Entity agreement between HSD and United Health — an agreement which does not contain an arbitration clause. See Tr. at 16:16-19 (Kolsrud).
In addition to its arguments that its contract With HSD controls and its contract with United Health is illusory, La Frontera also presented its arguments that its agreement with United Health is unconscionable. See Tr. at 17:25-18:2 (Kolsrud). La Frontera maintained that the agreement was procedurally unconscionable, because La Frontera was invited to New Mexico to manage “a huge emergency crisis in the behavioral health system!,]” Tr. at 17:17-18 (Kolsrud), and, at the last minute of contract negotiation, United Health presented La Frontera with the Participating Provider Agreement, see Tr. at 17:3-8 (Kolsrud). La Frontera contended that, because the Participating Provider Agreement’s purpose was to secure a funding stream from HSD to La Frontera through United Health, “[n]obody • talked about any of the provisions in the [Participating Provider Agreement].” Tr. at 17:8-9 (Kolsrud). Therefore, as La Frontera reasons, the agreement is procedurally unconscionable. See Tr. at 17:25-18:10 (Kolsrud). La Frontera also adverted to its substantive unconscionability argument. See Tr. at 18:11-12 (Kolsrud). La Frontera stated: “Substantively, the [Participating Provider Agreement] is unfair, because United basically says well we can pick and choose which terms we wanted enforced in that agreement, even though nobody talked about any of them.” Tr. at 18:11-14 (Kols-rud).
La Frontera also addressed its December 17, 2013, “settlement agreement” with United. Tr. at 33:21-22 (Kolsrud). La Frontera explained the origin of this agreement:
[T]he funding stream for money for Medicaid rates would go to United and then to well, La Frontera. By December [2013], almost at-the end of that six month period on the contract, United [Health] finally started paying La Frontera. But ’[United Health] cut the rates from • Medicaid rates down to something else. And La Frontera at that time was desperate for funds, and United came to them and said here, here’s asettlement agreement and a release. You sign this and we’ll pay you.
Tr. at 33:7-16 (Kolsrud). The Court asked if La Frontera was making any claims on the December 17, 2013, settlement agreement. See Tr. at 34:11-12; 34:19-35:7 (Court). La Frontera responded'that ;,<[i]n the complaint we had an ongoing pattern of what we considered to be fraudulent misrepresentations” and suggested that the December 17, 2013, settlement agreement formed .a part of that pattern. Tr. at 36:1-3 (Kolsrud). . .
The Court acknowledged La Frontera’s argument about the settlement agreement’s import, but stated that “it would seem ... that-the arbitration' agreement that’s governing is the one that’s in what I think everybody calls the agreement [i.e., the Participating Provider Agreement], rather than the settlement agreement.” Tr. at 36:9-11 (Court). Both La Frontera and United Health agreed with the Court’s statement. See Tr. at 36:14-15. (Kols-rud)(“[F]or the purpose of this hearing it certainly is.”); Tr. at 36:26-37:2 (Park)(“I think you’re right. I don’t think [La Front-era] ha[s] any claims arising .out .of that settlement agreement.”).
The Court gave United Health the last word. See Tr. at' 36:21 (Court), United Health used the opportunity to argue that the Court should not split the suit between claims against United Behavioral Health and United Health Insurance, because La Frontera does not have any direct claims against United Healthcare Insurance. See Tr. at 37:15-20 (Park). The Court'then reiterated its concern that only United Behavioral Health and La Frontera executed the Participating Provider Agreement,'See Tr. at 38:4-7 (Court). See also Participating Provider Agreement, at 16. United Health then argued in the alternative that, under the FAA, the Court should stay any claims against United Healthcare Insurance that remain in federal court until .the arbitration’s conclusion. See Tr. at 38:22— 24 (Park).
The Court stated its inclination “to grant the motion at least as to United Behavioral Health .,. and send' all that dispute to arbitration;” Tr. at 39:11-17 (Court). With respect to United Healthcare Insurance and Optumhealth, the Court took United Health’s Motion under advisement. See Tr. at 40:6-15 (Court). The Court thanked the parties-for their presentations. See Tr. at 42:12-14 (Court).
5. United Health’s Supplemental Brief.
On August 5, 2016, United Health filed a supplemental brief in support of its Motion. See United Health’s Supplemental Brief at 1. United Health states that Op-tumHealth is a joint venture which' United Healthcare Insurance and United Behavioral Health formed, and that Optum-Health contracted with La Frontera to provide behavioral health services. See United Health’s Supplemental Brief at 1. United Health argues that United Healthcare Insurance, as a joint venture partner, is not only bound by the terms of the agreement, but also' “has a reciprocal right to benefit from the Agreement and its arbitration clause.” United Health’s Supplemental Brief at 2. United Health contends that, “[d]ue to the ‘joint’ feature of their business arrangement, both [United Behavioral Health] and [United -Healthcare Insurance] are bound by [Optum-Health’s] acts, including its executed agreements.” United Health’s Supplemental Brief at 2 (citing N.M. Stat. Ann. § 54-1A-306; Quirico v. Lopez,
LAW REGARDING ARBITRATION AGREEMENTS
1. Federal law.
“The FAA reflects the fundamental principle that arbitration is a matter of contract.” Rent-A-Center, West, Inc. v. Jackson,
Under § 4 of the FAA, a party “aggrieved” by the failure of another party “to arbitrate under a written agreement for arbitration” may petition a' federal court “for an order directing that such arbitration proceed in the manner provided for in such agreement.” 9 U.S.C.' § 4. If a party is aggrieved by the refusal of another to arbitrate under a written agreement, the district court, upon petition, “shall hear the parties, and upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing. the parties to proceed to arbitration in accordance with the terms of the agreement.” 9 U.S.C. § 4. Section 2, the “primary substantive provision of the Act,” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp.,
Upon a finding that a matter is referable to arbitration, the FAA also indicates that the district court “shall bn application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement.” 9 U.S.C. § 3. Notwithstanding the terms of 9 U.S.C. § 3, however, several Courts of Appeal have concluded that “dismissal is a proper remedy when all of the issues presented in a lawsuit are arbitra-ble.” Choice Hotels Int’l, Inc. v. BSR Tropicana Resort, Inc.,
The Tenth Circuit has cautioned that, when one of the parties petitions the court to stay an action pending compulsory arbitration, 9 U.S.C. § 3’s mandatory language is binding, and it is error for the court to dismiss the action. See Adair Bus Sales, Inc. v. Blue Bird Corp.,
2. New Mexico Law.
The NMUAA provides that an agreement to submit any controversy arising between the parties to arbitration is “valid, enforceable and irrevocable except upon a ground that exists at law or in equity for the revocation of a contract.” N.M. Stat. Ann. § 44-7A-7(a). If the court concludes that there is an enforceable agreement to arbitrate, it shall order the- parties to arbitrate. See N.M. Stat. Ann. § 44-7A-8(a). Where the provision for arbitration is disputed, the court’s function is to determine whether there is an agreement to arbitrate and to order arbitration where an agreement is found. See N.M. Stat. Ann. § 44-7A-8(a).
Similar to the federal courts’ interpretation of the FAA, New Mexico courts have viewed the NMUAA as an expression of a public policy favoring arbitration. See United Tech. & Res., Inc. v. Dar Al Islam,
When a broad and general arbitration clause is used, as- in this case, the court should be very reluctant to interpose itself between the parties and the arbitration upon which they have agreed. When the parties agree to arbitrate any potential claims or disputes arising out of their relationships by contract or otherwise, the arbitration agreement will be , given broad interpretation unless the parties themselves limit arbitration to specific areas or matters. Barring such limiting language, the courts only decide the threshold question of whether there is an agreement to arbitrate. If so, the court should order arbitration. If not, arbitration should be refused.
K.L. House Constr. Co. v. City of Albuquerque,
3. Public Policy Favoring Enforcement of an Arbitration Agreement.
“There is a strong federal policy encouraging the expeditious and inexpensive resolution of disputes through arbitration.” Metz v. Merrill Lynch, Pierce, Fenner & Smith, Inc.,
4. Existence of a Valid Arbitration Agreement.
The Supreme Court of the United States of America has noted that “[a]rbi-tration is simply a matter of contract between parties; it is a way to resolve those disputes — but only those disputes — that the parties have agreed to submit to arbitration.” First Options of Chi., Inc. v. Kaplan,
While, “the presumption in favor of arbitration is properly applied in interpreting the scope of an arbitration agreement, .., this presumption disappears when .the parties dispute the existence of a valid arbitration agreement.” Dumais v. Am. Golf Corp.,
5. Consideration and Illusory Arbitration Agreements.
“To determine whether the agreement to arbitrate is valid, courts look to general state contract law, with the caveat that state laws that are specifically hostile to arbitration agreements are preempted by the FAA.” Salazar v. Citadel Commc’ns Corp.,
“Consideration consists of a promise to do something that a party is under no legal obligation to do or to forbear from doing something he has a legal right to do.” Talbott v. Roswell Hosp. Corp.,
Several cases ’• arising in New Mexico provide examples of illusory agreements to arbitrate. For instance,* in Dumais v. American Golf Corp.,
Additionally, in Heye v. American Golf Corp., the Court of Appeals of New Mexico considered a question similar to the one that the federal court addressed in Dumais v. American Golf Corp. See
Next, in Piano v. Premier Distributing Co., the plaintiff worked as an administrative assistant for the defendant on an at-will employment basis. See Piano v. Premier Distrib. Co.,
In Lumuenemo v. Citigroup, Inc., No. CIV 08-0830,
Plaintiff cites Piano v. Premier Distributing Co., 137 N.M. 57 ,107 P.3d 11 (N.M. Ct. App. 2004), as support for her argument. However, the holding in Piano turned on the fact that the plaintiff was an at-will employee prior to signing the arbitration agreement, and therefore, the implied promise of continued at-will employment did not constitute consideration. Id. at 60 [107 P.3d 11 ]. Piano is distinguishable from the facts before this Court. Here, Defendant’s initial hiring of Plaintiff was conditioned on her consent to the terms of the Arbitration Agreement; thus, there was consideration in the form of employment. Further, Defendant does need Plaintiffs approval — Plaintiff had up to 30 days to contest any changes to the Arbitration Agreement and/or to decide whether to continue employment based on such changes. Moreover, the holding in Piano is not binding on this court.
Lumuenemo v. Citigroup, Inc.,
Further, in Salazar v. Citadel Communications Corp., the Supreme Court of New Mexico held that, because Citadel Communications reserved the right to modify any provision of its employee handbook at any time, including the arbitration agreement contained therein, the agreement to arbitrate was “an unenforceable illusory promise.” Salazar v. Citadel Communications Corp.,
LAW REGARDING CONTRACT INTERPRETATION IN NEW MEXICO
In contract cases, “the role of the court is to give effect to the intention of the contracting parties.” Bogle Farms, Inc. v. Baca,
The question whether an agreement contains an ambiguity is a matter of law. See Mark V., Inc. v. Mellekas,
LAW REGARDING THIRD-PARTY BENEFICIARIES
As a general rule, “one who is not a party to a contract cannot maintain suit upon it.” Fleet Mortgage Corp. v. Schuster
A third-party may have an enforceable right against an actual party to a contract if the third-party is a beneficiary of. the contract. A third-party is a -beneficiary if the actual parties to the contract intended, to benefit the third-party. The intent to benefit the third-party must appear either from the contract itself or from some evidence that the person claiming to be a third party beneficiary is an intended beneficiary..
Callahan v. N.M. Fed’n of Teachers-TVI,
LAW REGARDING NEW MEXICO’S UNCONSCIONABILITY DEFENSE TO CONTRACT ENFORCEMENT
In New Mexico, “unconsciona-bility is an affirmative defense to-contract enforcement,...” Strausberg v. Laurel Healthcare Providers, LLC,
“A contract can be procedurally or substantively unconscionable.” Dalton v. Santander Consumer USA, Inc.,
“ ‘The weight given to procedural and substantive considerations varies with the circumstances of each case.’ ” Fiser v. Dell Computer Corp.,
1. Procedural Unconscionability.
“Procedural unconscionability may be found where there was inequality in the contract formation.” State ex rel. King v. B & B Inv. Grp., Inc.,
“When assessing procedural unconscionability, courts should consider whether the contract is one of adhesion.” Rivera v. Am. Gen. Fin. Servs., Inc.,
For example, in State ex rel. King v. B & B Investment Group, Inc., the Supreme Court of New Mexico decided' whether loan contracts offered by certain payday lenders were unconscionable.
the relative bargaining strength and sophistication of the parties is unequal. Moreover, borrowers are presented with Hobson’s choice: either accept the quadruple-digit interest rates, or walk away from the loan. The substantive terms are ■preprinted on a standard form, which is entirely nonnegotiable. The interest rates are set by drop-down menus in a computer program that precludes any modification of the offered rate. Employees are forbidden from manually overriding the computer to make fee adjustments without written permission from the companies’ owners: manual overrides will be considered in violation ofcompany policy- and could result with ... criminal charges brought against the employee and or termination.
State ex rel. King v. B & B Inv. Grp., Inc.,
By contrast, in Bowlin’s, Inc. v. Ramsey Oil Co., Inc., the Court of Appeals of New Mexico considered whether a clause requiring a retail gas company to notify its supplier of any delivery shortages within two days of taking delivery was unconscionable. See
2. Substantive Unconscionability.
Substantive unconscionability requires courts “to consider ‘whether the contract terms are commercially reasonable and fair, the purpose and effect of the terms, the one-sidedness of the terms, and other similar public policy concerns” to determine “the legality and fairness' of the contract terms themselves.’” Dalton v. Santander Consumer USA, Inc.,
“When its terms are unreasonably favorable to one party, a contract may be held to be substantively unconscionable.” Monette v. Tinsley,
In determining reasonableness or fairness, the primary concern must be with the terms of the contract considered in light of the circumstances existing when the contract was made. The- test is not simple, nor can it be mechanically applied; The terms are to be considered “in the light of the general commercial background and the commercial needs of the particular trade or case.” Corbin suggests the test as being whether the terms are “so extreme as to appear unconscionable according to the mores and business practices of the time and place.”
With respect to arbitration agreements specifically, the Supreme Court of New Mexico has held that arbitration agreements are substantively unconscionable arid thus unenforceable where the arbitration agreement contains a unilateral carve out that explicitly exempts from mandato-' ry arbitration those judicial remedies that a lender is likely to need, while providing no such exemption for the borrower. See Rivera v. American General Financial Services, Inc.,
Next, in Rivera v. American General Financial Services, Inc., the Supreme Court of New Mexico confronted a similar loan contract in which an arbitration agreement required the borrower to arbitrate any claims against the lender while exempting from mandatory arbitration the lender’s “self-help or judicial remedies” concerning the property securing the transaction and any claims that the lender might have “[i]n the event of a default.”
By contrast, in Dalton v. Santander Consumer USA, Inc., the Supreme Court of New Mexico held that an arbitration agreement between a lender and a borrower that included a bilateral exception for small claims less than $10,000.00 was not substantively unconscionable, “even if one party is substantively more likely to bring small claims actions.... ”
ANALYSIS
By executing the Participating Provider Agreement, La Frontera entered an enforceable arbitration agreement with United Behavioral Health. That agreement is neither unconscionable nor illusory. Accordingly, the claims that La Frontera’s asserts against United Behavioral Health in the First Amended Complaint are subject to mandatory arbitration. Although neither United Healthcare Insurance nor Optumhealth is a signatory to the Participating Provider Agreement, La Frontera is estopped from avoiding arbitration of the claims it asserts against those United Health entities in light of (i) La Frontera’s agreement to arbitrate disputes arising from its business relationship with United Behavioral Health; and (ii) the interdependence, if not the indistinguishability, of La Frontera’s claims against United Behavioral Health and La Frontera’s "claims against United Healthcare Insurance and Optumhealth. All of La Frontera’s claims against the United Health" Defendants, therefore, are subject' to mandatory arbi
I. LA FRONTERA’S CLAIMS AGAINST UNITED HEALTH ARE SUBJECT TO ARBITRATION.
In its First Amended Complaint, La Frontera asserts nine claims against United Health. The FAA and the NMUAA contemplate that a “written agreement to arbitrate in any contract ... ‘shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.’ ” Volt Info. Sciences, Inc. v. Bd. of Trs.,
A. LA FRONTERA’S CLAIMS AGAINST UNITED BEHAVIORAL HEALTH ARE SUBJECT TO ARBITRATION.
Under the Participating Provider Agreement, La Frontera’s nine claims against United Behavioral Health are subject to' arbitration. “In deciding if a dispute is arbitrable, a court must initially determine whether the arbitration provisión is broad or narrow.” Newmont U.S.A. Ltd. v. Ins. Co. of N. Am.,
•It is agreed that prior to any other remedy available to the parties, UBH, Payor, and/or Provider shall provide written notice of any disputes or claims arising out of their business relationship (the “Dispute”) to the other party within thirty (30) days of the final decision date, action, omission or cause from which the Dispute arose, whichever is later (the “Dispute Date”).... If the parties are unable to resolve the Dispute within thirty (30) days following receipt of the notice of Dispute, and if either UBH, Provider or Payor desires to pursue formal resolution of the Dispute, then said party shall issue a notice of arbitration to the other parties_ Any arbitration proceeding under this Agreement shall be submitted to binding arbitration in accordance with the rules of the American Arbitration- Association (“AAA”).... The parties acknowledge that because this Agreement affects interstate commerce the Federal Arbitration Act applies.
Participating Provider Agreement § 7.1, at 11-12 (alterations added). The Participating Provider Agreement defines “UBH” as United Behavioral Health and “Provider” as the undersigned facility provider — here, La Frontera. The Participating Provider Agreement-also defines “Payor” as “[t]he
The. Participating Provider Agreement’s arbitration clause broadly encompasses “any disputes or claims arising out of’ the “business relationship” between United Behavioral Health, La Frontera, and any “Payor,” Participating Provider Agreement § 7.1, at 11.' The Participating Provider Agreement’s arbitration agreement creates “a presumption of arbitrability in the sense that ‘[a]n order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.’” AT & T Techs., Inc. v. Commc’ns Workers of Am.,
In its Response, La Frontera argues that its claims against United Health arise not from the Participating Provider Agreement, but from the agreement that La Frontera and HSD executed, and from the Statewide Entity contract that United Health executed with the Collaborative. See Response at 10-11. For example, La Frontera specifically contends that' its third-party beneficiary claim, promissory estoppel, claim, and quantum meruit/unjust enrichment claims do not arise.from the Participating Provider Agreement, or any other written agreement with United Health. See. Response at 11. At the hearing, La Frontera pressed its argument that its third-party beneficiary claim is not subject to arbitration, because that claim does not arise under the Participating Pro
La Frontera’s argument regarding the scope of the Participating Provider Agreement’s arbitration clause is unavailing, because the arbitration clause does not limit its coverage to those grievances arising from the Participating Provider Agreement; rather, .the arbitration clause expressly extends to “any disputes or claims arising out of’ the “business relationship” between United Behavioral Health, La Frontera, and the “Payor.” Participating Provider Agreement § .7.1, at 11. La Frontera does mot advert to any legal authority which generally states that an arbitration clause’s scope is limited to claims or grievances arising from the same contract of which the arbitration clause forms a part. See Response at 10-12. Moreover, La Frontera’s suggestion is unsound. “Arbitration is a matter of contract,” Zink v. Merrill Lynch Pierce Fenner & Smith, Inc.,
Nor does La Frontera rely on any of the Participating Provider Agreement’s language that expressly limits the arbitration’s scope to disputes arising out of .the agreement. See Response at 10-12. For this reason, the Court concludes that La Frontera’s reliance on CardioNet, Inc. v. Cigna Health Corp.,
Each of La Frontera’s. claims asserted in the First Amended Complaint arises out of the business relationship between United Behavioral Health,. La Frontera, and the “Payor.” The same conclusion is true for La Frontera’s third-party, beneficiary claim, which La Frontera specifically argued — both in its papers and at the hearing — was not subject to arbitration. See
Pursuant to the terms of the Statewide Contract, HSD and the Collaborative paid United $178 million from July through December 2013 to, among other things, pay La Frontera’s claims for services. In addition, at the time United terminated payments to 15 of its subcontracted providers, June 24, 2013, United held $18 million designated to pay claims for services already rendered by United’s .terminated providers. United agreed with the Collaborative to use that money to pay the claims for the Arizona providers, including La Frontera was an intended third-party beneficiary of the Collaborative/United agreements. United refused to fulfill its obligation owed to La Frontera.
First Amended Complaint ¶ 139, at 32-33.
In considering United Health’s Motion, the Court does not — and must not — consider the merits of La Frontera’s claims, including its third-party beneficiary claim. See AT & T Techs., Inc. v. Commc’ns Workers of Am.,
B. LA FRONTERA’S CLAIMS AGAINST OPTUMHEALTH AND UNITED HEALTHCARE INSURANCE ARE SUBJECT TO ARBITRATION.
The Court next turns to the issue whether the Participating Provider Agreement’s arbitration clause subjects the claims that La Frontera asserts against United Health Insurance and Optumhealth
At the hearing, the Court sua sponte raised the issue whether United Healthcare Insurance and Optumhealth, as non-signatories, could compel arbitration. See Tr. at 12:6-8 (Court)(asking La Frontera whether it is “disputing that [the July 8, 2013, arbitration agreement] covers or doesn’t cover United Healthcare Insurance Company, Inc”). The Court noted that only United Behavioral Health and La Frontera executed the Participating Provider Agreement, and, therefore, queried (i) whether La Frontera entered into a contract with United Healthcare Insurance; and (ii) whether La Frontera agreed to arbitrate any grievances arising from a business relationship with United Healthcare Insurance. See Tr. at 11:24-12:4 (Court). See also Participating Provider Agreement at 16. The Court did not give an inclined ruling at the hearing regarding these two issues, taking them under 'advisement. See Tr. at 40:6-15 (Court).
State law governs the issue whether a nonsignatory to an -arbitration agreement can be bound by, or compel arbitration under, that agreement. See Arthur Andersen LLP v. Carlisle,
[S]tate law, therefore, is applicable to determine which contracts are binding under § 2 and enforceable under § 3 if that law arose to govern issues concerning the validity, revócability, and enforceability of contracts generally. Because traditional principles of state law allow a contract to be enforced by or against nonparties to the contract through assumption, piercing the corporate veil, alter ego, incorporation by reference, third-party beneficiary theories, waiver and estoppel, the Sixth Circuit’s holding that nonparties to a contract are categorically barred from § 3 relief was error.
Arthur Andersen LLP v. Carlisle,
There exists some disagreement among courts about whether federal common law or state contract law applies to determine whether a party is estopped from denying or has waived an objection to arbitral jurisdiction. Because issues of estoppel and waiver are often pled in the alternative to other related issues relating to formation and assent, the Restatement adopts the view that they are governed by state law.
Restatement (Third) U.S. Law of Int’l Comm. Arb. § 2-3 TD No 4 (2015). Following the Supreme Court and the Tenth Circuit, and informed by the Restatement, the Court concludes that state law applies to whether, under ordinary contract doctrines, including the principle of equitable estoppel, nonsignatories to arbitration agreements can compel a. .signatory to arbitrate. Accordingly, New Mexico doctrines of contract and agency law determine (i) whether an arbitration agreement binds a nonsignatory; and' (ii) whether a nonsignatory can compel a signatory to arbitrate the claims that the signatory asserts against the nonsignatory.
2. New Mexico Contract and Agency Principles Determine Whether a Nonsignatory to an Arbitration Agreement May Be Subject to, or May Compel, Arbitration Under That Agreement.
The Supreme Court of New Mexico is the authority on New Mexico law regarding whether a nonsignatory to an arbitration agreement can be bound by, or compel arbitration under, that agreement. See C.I.R. v. Bosch’s Estate,
The Court of Appeals of New Mexico has stated that, “[generally, third parties who are not signatories to an arbitration agreement are not bound by the agreement and are not subject to, and cannot compel, arbitration.” Horanburg v. Felter,
■ [Njeither the provisions quoted, nor any other clauses in either contract provide for the arbitration of disputes other than those arising between the parties to each contract.... There is thus no privity or agreement to arbitrate between Barber and Cillessen. There is - also no evidence that the parties to each contract subsequently entered into an agreement to consolidate arbitration of disputes with third parties.
The general rule that nonsignatories to arbitration agreements are not subject to, and cannot compel, arbitration is not the complete statement of the law; there are exceptions. The Court concludes that the Supreme Court of New Mexico would likely add a proviso to the general rule that the Court of Appeals of New Mexico announced in Horanburg v. Felter,
Further, the Court concludes that the Supreme Court of New Mexico would recognize this proviso as a matter of New Mexico law, because it is recognized by the Court of Appeals of New Mexico. In Damon v. StrucSure Home Warranty, LLC, the Court of Appeals of New Mexico observed that “there are exceptions to th[ej general rule [that nonparties to an arbitration rule are not subject to, and cannot compel, arbitration], including an exception for equitable estoppel.” Damon v. StrucSure Home Warranty, LLC,
non-signatories may be bound by or entitled to invoke an arbitration agreement to the extent that they may be deemed to have assented to the arbitration agreement under ordinary principles of contract law, as well as other legal doctrines that operate legally to bind parties, particularly parties that share a corporate relationship. A range of theories and doctrines exist under which a non-signatory may be bound by or entitled to invoke an arbitration agreement.
Restatement (Third) U.S. Law of Int’l Comm. Arb. § 2-3 TD No 4 (2015). Accordingly, the Court concludes that the Supreme Court of New Mexico would apply ordinary contract and agency principles to determine if, despite the general rule, a nonsignatory is subject to, or can compel, arbitration.
In sum, the Court believes that the Supreme Court of New Mexico would first apply the general rule that the Court of Appeals of New Mexico announced in Horanburg v. Felter,
3. The Court Estops La Frontera from Avoiding Arbitration of Its Claims Against United Healthcare Insurance and. Optumhealth.
The Court now applies these rules to this case. Neither United Healthcare Insurance nor Optumhealth is a signatory to the Participating Provider Agreement. See Participating Provider Agreement at 16.
The Court holds that La Frontera may not avoid arbitration of the claims it asserts against United Healthcare Insurance and Optumhealth. At the hearing,. United Health argued that, even-though United Healthcare Insurance is a nonsig-natory to the Participating Provider Agreement, La Frontera cannot avoid arbitration of La Frontera’s claims- against United Healthcare Insurance. See Tr. at 24:20-25:9 (Park);- id. at 31:15-32:9 (Park). United Health argued that, “if United Healthcare Insurance doesn’t have access to the arbitration provision, they can’t also have reciprocal obligations underneath the agreement..., ” Tr. at 24:20-25:9 (Park). United Health further argued: “[T]he only relationship that [La Frontera has] with United Healthcare Insurance Company is • [based on their] relationship with Optumhealth New Mexico, ... which is a subsidiary or a joint venture of United Healthcare Insurance Company.... [Tjhey’re suing United Healthcare Insurance Company because it’s a joint venture with ... United ■ Be
Several courts, including this Court, have outlined when a ■ nonsignatory to an arbitration agreement may successfully rely on the doctrine of equitable estoppel to compel arbitration:-
[E]stoppel will permit a non-signatory to compel arbitration in the following two circumstances: (1) when the signatory must rely on the terms of the agreement in asserting its claims against the non-signatory; and (2) where the signatory alleges substantially interdependent and concerted misconduct by both the non-signatory and one-or more of the signatories to the contract.
THI of New Mexico at Vida Encantada, LLC v. Lovato,
Courts estop signatories from evading arbitration with a nonsignatory in the two aforementioned circumstances, because, “[otherwise, ‘the arbitration proceedings [between the two signatories] would be rendered meaningless and the federal policy in favor of arbitration effectively thwarted.’” MS Dealer Serv. Corp. v. Franklin,
The estoppel exception applies in this case. Optumhealth is a joint venture that United Behavioral Health and United Healthcare Insurance operate. See Tr. at 10:20-23 (Kolsrud)(“United Behavioral Health, Inc., is a corporation, United Healthcare Insurance Company, Inc., is a corporation. And they do business in New Mexico as Optumhealth.”); Tr. at 22:23-24 (Park)(“Optumhealth New Mexico is a joint venture between United Behavioral and United Healthcare”).
In sum, the Court concludes that La Frontera' entered an agreement to arbitrate every claim that it asserts in the First Amended Complaint against United Behavioral Health. Accordingly, the arbitration agreement’s scope extends to those claims in the First Amended Complaint that La Frontera asserts against United Behavioral Health. Further, the Court es-tops La Frontera from avoiding arbitration of its claims against United Healthcare Insurance and Optumhealth, because of (i) La Frontera’s agreement to arbitrate disputes arising from its business relationship with United Behavioral Health; and (ii) the interdependence, if not the indistin-guishability, of La Frontera’s claims against United Behavioral Health, and La Frontera’s claims against United Healthcare Insurance and Optumhealth.
II. THE PARTICIPATING PROVIDER AGREEMENT’S ARBITRATION CLAUSE IS ENFORCEABLE, BECAUSE IT IS NEITHER UNCONSCIONABLE NOR ILLUSORY.
The Participating Provider Agreement’s arbitration clause is enforceable, because it is neither unconscionable nor illusory. In its Response and at the hearing, La Front-era argued that the Participating Provider Agreement’s arbitration clause is unenforceable under New Mexico contract law, because it is both procedurally and substantively unconscionable and illusory. See Response at 6-10; Tr. at 22:7-11 (Court, Kolsrud). The arbitration agreement is neither unconscionable nor illusory.
A. THE ARBITRATION AGREEMENT IS NOT PROCEDURALLY UNCONSCIONABLE.
First, the arbitration agreement is not unenforceable as procedurally uncon
In a nutshell, La Frontera’s procedural unconscionability argument is that it had to execute the Participating Provider Agreement to receive payment for its services, because HSD and United Health agreed that the funding stream from HSD to subcontracting providers would run through United Health. See Response at 8-9. La Frontera contends that it was presented with a Hobson’s choice: either it would operate in New Mexico pursuant to a deal in which La Frontera’s funding was channeled from' HSD through United Health pursuant to the terms of a Participating Provider Agreement with United Health or it would not be paid to operate in New Mexico. In other words, United Health presented to La Frontera a “take-it-or-leave-it” deal regarding how La Frontera would be paid for its New Mexico operations. To be sure, under New Mexico contract law, a standardized contract offered by a party with superior bargaining strength to a weaker party on a take-it-or-leave it basis, without opportunity for bargaining, raises judicial scrutiny. Rivera v. Am. Gen. Fin. Servs., Inc., 2011-
La Frontera’s Hobson-choice argument is insufficient to demonstrate that the Participating Provider Agreement is procedurally unconscionable — i.e., that the inequality between United Health and La Frontera with respect to contract formation was so gross that La Frontera effectively had no choice but to execute the agreement. See Guthmann v. LaVida Llena,
La Frpntera is a sophisticated. entity with bargaining power that made a business decision to operate in New Mexico. La Frontera effectuated its choice to. operate in New Mexico by assenting to an arrangement .with United Health- that HSD’s payment for La Frontera’s services would flow from .HSD through United Health. La Frontera’s agreement .with United -Health, emphasized that it contained a mandatory arbitration clause. See Participating Provider Agreement at 16. Accordingly, the.Court concludes .that the
B. THE ARBITRATION AGREEMENT IS NOT SUBSTANTIVELY UNCONSCIONABLE.
Second, the arbitration' agreement is not unenforceable as substantively unconscionable. Substantive unconscionability requires courts “to consider ‘whether the contract terms are commercially reasonable and fair, the purpose and effect of the terms, the one-sidedness of the terms, and other similar public policy concerns” to determine “the legality and fairness of the contract terms themselves.’” Dalton v. Santander Consumer USA, Inc.,
Under New Mexico contract law, an arbitration agreement is substantively unconscionable if it contains a unilateral carve-out that explicitly exempts from mandatory arbitration those judicial remedies that the drafting party with superior bargaining power is likely to need, while providing no such exemption for the non-drafting party with inferior bargaining power. See Rivera v. American General Financial Services, Inc.,
The Participating Provider Agreement’s arbitration clause is wholly bilateral. See Participating Provider Agreement § 7.1, at 11. The arbitration agreement subjects to mandatory arbitration any disputes or claims of either La Frontera .or United Behavioral Health “arising out of their business relationship.” Participating Provider Agreement § 7.1, at 11. La Frontera acknowledges that “the terms of the arbitration provision may look fair and balanced.” Response at 9. Despite conceding the bilateral nature of the arbitration agreement, La Frontera nevertheless argues that the agreement is substantively unconscionable, because “the most likely claim either party would ever file under the agreement would be a claim for damages by La Frontera for [United Health’s] failure to pay.” Response at 9. La Front-era asserts that, in the event of La Front-era’s breach, United Health is unlikely to seek a judicial remedy, because United Health “can simply terminate the agreement and decline to allow La Frontera to continue providing services to Medicaid beneficiaries.” Response at 10. In support of its argument, La Frontera relies on Figueroa v. THI of New Mexico at Casa
La Frontera’s substantive unconsciona-bility argument is unconvincing. To begin, La Frontera’s premise that it is the only party likely to assert claims and, hence, be subject to mandatory arbitration is unsound. United Health could also plausibly assert claims against La Frontera arising out of their business relationship, and these claims would also be subject to mandatory arbitration. It is plausible that United Health could assert claims for “recovery for overpayment” that United Health could make to La Frontera-because of mistake or because of inaccurate or fraudulent billing submissions by La Frontera. See Reply at 8. The Court lacks a basis to speculate whether it is more likely that United Health or La Frontera will assert claims arising from their business relationship; however, without speculating, the Court concludes that either party — not just La Frontera — might assert claims, which would be subject to arbitration under their agreement.
Moreover, La Frontera’s reliance on Figueroa v. THI of New Mexico at Casa Arena Blanca, LLC,
While we agree that arbitration obligations do not have to be completely equal, and that parties may freely enter into reasonable agreements to exempt certain claims from arbitration, we refuse to enforce an agreement where the drafter unreasonably reserved the vast majority of his claims for the courts, while subjecting the weaker party to arbitration on essentially all of the claims that party is likely to bring. Defendant cannot avoid the equitable doctrine of uneonscionability by drafting an agreement that reserves its most likely claims for a judicial forum, and provides some exemptions from arbitration to the resident so that there is some appearance of bilaterality, when that exemption is completely meaningless in practicality because the resident would rarely, if ever, raise that type of claim against the nursing home.
The Court of Appeals of New Mexico’s holding in Figueroa v. THI of New Mexico at Casa Arena Blanca, LLC,
Moreover, Figueroa v. THI of New Mexico at Casa Arena Blanca, LLC,
The rationale for the state unconsciona-bility rule runs counter to Supreme Court precedent. A court may not invalidate an arbitration agreement on the ground that arbitration is an inferior means of dispute resolution. Common-law defenses to an arbitration ’demand' are preempted by the FAA if they “derive their meaning from the fact that an agreement to arbitrate is at issue.” The rule of Figueroa derives its meaning from the fact that the agreement is an arbitration agreement because the heart of thé asserted unfairness is the disparity in what claims must be arbitrated.
THI of New Mexico at Hobbs Ctr., LLC v. Patton,
Not only has the Tenth Circuit held that the FAA preempts the Court of Appeals of New Mexico’s holding in Figueroa v. THI of New Mexico at Casa Arena Blanca, LLC, but also, in Dalton v. Santander Consumer USA, Inc.,
C. THE ARBITRATION AGREEMENT IS NOT ILLUSORY.
The Participating Provider Agreement’s arbitration clause is not illusory. “Under general New Mexico contract law, an agreement that is subject to unilateral modification or revocation is illusory and unenforceable.” Salazar v. Citadel Commc’ns Corp.,
In its Response, La Frontera argues that the Participation Provider Agreement’s arbitration clause was not a contract between itself and United Health, because the arbitration agreement between La Frontera and United Health was “not part of the deal” between La . Front-era and HSD. See Response at 6. At the hearing, however, La Frontera retreated from its illusory argument:
We did raise the illusory argument in our brief. But that: — but that kind of got •lost in the shuffle because the unilateral right that United has to make changes in the provider participation agreement did give us, La Frontera, an out. They didn’t like the change we had 30 days to submit a termination. After reading the eases a second time, I wasn’t as impressed with that argument as I was initially.
Tr. at 21:21-22:4 (Kolsrud). United Health nevertheless contested La Frontera’s illusory argument at the hearing, see Tr. at 26:1-14 (Park), and the Court acknowledged that La Frontera’s illusory argument “is probably not [its] strongest argument ...,” Tr. at 22:9-10 (Court).
In its papers, La Frontera does not provide a developed argument in support of its assertion that the Participating Provider Agreement’s arbitration clause is illusory, see Response at 6; however, a review of the Participating Provider Agreement’s terms regarding termination and amendment belies La Frontera’s contention. The arbitration agreement is not subject to United Health’s unilateral modification or revocation. Regarding amendment, Participating Provider Agreement § 9.1 provides that United Behavioral Health may amend the agreement by sending notice of amendment to La Front-era “at least 30 days prior to its effective date.” Participating Provider Agreement § 9.1, at 13. Further, Participating Provider Agreement § 9.1 allows for a Payor, such as HSD or the Collaborative, to amend the agreement, by providing:
[I]f a Payor that is a governmental entity requires that certain provisions of this Amendment be removed, replaced, amended or that additional provisions be incorporated, such provisions shall be deemed to be removed, replaced, amended or additional provisions incorporated into this Agreement as of the effective date of such Payor requirement for all [Mental Health and Substance Abuse] Services provided which are subject to such Payor requirements without the signature of [La Frontera] being required.
Participating Provider Agreement § 9.1, at 13. Regarding revocation, Participating Provider Agreement § 8.2(d) provides:
This Agreement may be terminated as follows
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(d) by either party, in the event of a material breach of this Agreement by the other party, upon 30 days prior written notice to the other party....
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(f) by [La Frontera] upon 60 days pri- or written to [United Behavioral Health] due to a unilateral amendment made to this Agreement pursuant to § 9.1....
Participating Provider Agreement § 8.2, at 12.
Under Participating Provider Agreement §§ 8.2 and 9.1, United Health could not amend and strike the arbitration agreement, and then immediately assert a claim against La Frontera in a judicial forum. Participating Provider Agreement §§ 8.2 and 9.1, at 12-13. Rather, if United Health sought to strike the arbitration clause, then, pursuant to § 9.1, United Behavioral Health would be required to provide La Frontera notice of amendment thirty days before initiating an amendment, and La Frontera would then have the option to terminate the agreement under § 8.2(f). Participating Provider Agreement §§ 8.2 and 9.1, at 12-13. Accordingly, the Participating Provider Agreement’s arbitration agreement is not subject to United Health’s unilateral modification or revocation. The arbitration agreement is not “subject to unilateral modification or revocation” and, hence, is not “illusory and unenforceable.” Salazar v. Citadel Commc’ns Corp.,
HI- A STAY PENDING ARBITRATION IS APPROPRIATE.
The Court concludes that a stay pending arbitration of La Frontera’s
If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, 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 in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.
9 U.S.C. § 3. See Pre-Paid Legal Servs., Inc. v. Cahill,
For the reasons set forth above, the Court concludes (i) that La Frontera and United Behavioral Health agreed to arbitrate the claims that La Frontera asserts against United Behavioral Health in the First Amended Complaint; (ii) that La Frontera’s and United Behavioral Health’s arbitration agreement is enforceable; and (iii) that La Frontera is estopped from avoiding arbitration of the claims it asserts against United Healthcare Insurance and Optumhealth. FAA § 3, therefore, requires the Court to stay proceedings concerning La Frontera’s claims against the United Health Defendants, because the Court is “satisfied that” those claims are “referable to arbitration” under the Participating Provider Agreement’s arbitration clause. 9 U.S.C. § 3.
IT IS ORDERED that (i) the Defendants’ Motion to Compel Arbitration, filed March 31, 2016 (Doc. 3), is granted; (ii) Plaintiff La Frontera must arbitrate the claims asserted against Defendants United Behavioral Health, Inc., United Healthcare Insurance Company, Inc., Optumhealth New Mexico d/b/a United Behavioral Health, Inc. in the First Amended Complaint, filed March 14, 2016 (Doc. 1-1); and (iii) proceedings over those claims are stayed.
Notes
. The Court issues this Amended Memorandum Opinion and Order to include reference to and analysis of the Defendants United Behavioral Health, Inc., United Healthcare Insurance Company, Inc., Optumhealth New ■ Mexico d/b/a United Behavioral Health, Inc.’s Supplemental Authorities in Support of Motion to Compel Arbitration, filed August 5, 2016 (Doc. 21)("United Health’s Supplemental Brief"). The Court’s inclusion of and reference to United Health’s Supplemental Brief in this Amended Memorandum Opinion and Order makes no material change to the Court’s conclusions and holdings reached in the Memorandum Opinion and Order, filed March 20, 2017 (Doc. 22), which granted the Defendants’ Motion to Compel Arbitration, filed March 31, 2016 (Doc. 3)("Motion”), and stayed proceedings over Plaintiff La Frontera Center, Inc.’s claims.
. The Collaborative is comprised of representatives of several state agencies and divisions, including:
the secretaries of aging and long-term services; Indian affairs; human services; health; corrections; children, youth and families; finance and administration; workforce solutions; public education; and transportation; the directors of the administrative office of the courts; the New Mexico mortgage finance authority; the governor’s commission on disability; the developmental disabilities' planning council; the instructional support and vocational rehabilitation division of the public education- department; and the New Mexico health policy commission; and the governor’s health policy coordinator, or their designees.
N.M. Stat. Ann. § 9-7-6.4(A).
. The Court’s citations to the transcript of the . hearing refer to the court reporter's original, unedited version. Any final transcript may contain slightly different page and/or line numbers.
. The Court observes that, in the Participating Provider Agreement, La Frontera agreed to arbitrate "any disputes or claims arising out of [La Frontera’s] business relationship” with United Behavioral Health and any "Payor.” Participating Provider Agreement § 7.1, at 11. The Participating Provider Agreement defines a "Payor” to be "[t]he entity of person that has the financial responsibility for funding payment” of covered services that La Frontera provided to a United Health enroll-ee, Participating Provider Agreement at 3. In its papers and at the hearing, United Health did not argue that, because United Healthcare Insurance is a "Payor” under the Participating Provider Agreement, La Frontera necessarily agreed to arbitrate its claims against United Healthcare Insurance. Although the Court is aware that it must “resolve any doubts in favor of arbitrability,” Hicks v. Cadle, Co.,
Accordingly, the Court will not conclude that the Participating Provider Agreement's arbitration clause binds La Frontera to arbitrate any claims against United Healthcare Insurance on the theory that United Healthcare Insurance is a “Payor” under the terms of the arbitration agreement. Participating Provider Agreement § 7.1, at 11. United Health did not make this argument before the Court, and the Court is not convinced that "Payor” refers to United Healthcare Insurance or Optumhealth instead of HSD or the Collaborative. Accordingly, the Participating Provider Agreement’s reference to "Payor” does not convince the Court that La Frontera expressly agreed to arbitrate its disputes with United Healthcare Insurance or Optumhealth. Rather, for the reasons stated herein, the Court views United Healthcare Insurance and Optumhealth as nonsignatories to the Participating Provider Agreement.
. In DK Joint Venture 1 v. Weyand, the United States Court of Appeals for the Fifth Circuit refused .to decide whether federal law or state law applies, because both bodies of law lead to the same conclusion; however, the court noted that in Wash. Mut. Fin. Grp., LLC v. Bailey,
. For example, in deciding whether a nonsig-natory to an arbitration agreement may be subject to, or may compel, arbitration, the Supreme Court of New Mexico would likely review the relevant contract terms to determine whether the nonsignatory is a third-party beneficiary of the arbitration agreement. "A third party may be a beneficiary of such contract, and as a beneficiary may have an enforceable right against a party to a contract.” Fleet Mortg. Corp. v. Schuster, 1991— NMSC-046, ¶ 4,
. The Court notes that (i) neither United Healthcare Insurance nor Optumhealth executed'the agreement, see Participating Provider Agreement at 16; (ii) the agreement’s terms do not refer to either'United Healthcare Insurance or Optumhealth, see Participating Provider Agreement at 1-16; (iii) the terms do not suggest that La Frontera, entered an agreement with United Healthcare Insurance or Optumhealth, see Participating Provider Agreement at 1 ("THIS AGREEMENT is between United Behavioral Health (‘UBH’) and the undersigned facility provider [i.e. La Frontera]”); and (iv) the arbitration clause does not expressly indicate that La Frontera agreed to arbitrate claims against United Healthcare Insurance or Optumhealth, see Participating Provider Agreement § 7.1, at 11 (referring to United Behavioral Health- as' a "party” to the agreement, but-not referring to either Optumhealth or United Healthcare Insurance),
. Under New Mexico law, a joint venture "is generally considered-to be a partnership for a single transaction....” Wilger Enterprises, Inc. v. Broadway Vista Partners,