LOREN LYNDOE, PHYLLIS LYNDOE, MANUEL TOLEDO, ISABEL TOLEDO, GLENDA COUNCIL, ROBERT COUNCIL, RON ARMSTRONG, LAURA ARMSTRONG, PATRICIA SANCHEZ, FRANCISCA CABRIALES, JAKE LAMFERS, MARTA LAMFERS, CAL PALMER, VERONICA PALMER, HEATHER JAMES, HAAMID HAKAM, BAXTER BACKER, CAROLYN BACKER, JARED HUNTER, JACQUELINE HUNTER, SILVINO SUAREZ, JOHANNA DUNCAN, RICHARD HOEHNE, ANABEL NAJERA, JEANNETTE PAZ, ROBERT BRUHN, JAKE NUTTALL, DIANE NUTTALL, RON STONE, STELLA STONE, YVONNE BALDONADO, ROBERT ROBLES, TINA ROBLES, JOSEPH CRAIG, ALISA SHTROMBERG, JESSE MAGALLANEZ, PAMELA TAFOYA, ROBERT BONILLA, ALICIA BONILLA, RUBEN VALENZUELA, YVETTE VALENZUELA, IGNACIO SANCHEZ, WENDY SCHMIDT, MARCUS DECLOUETTE, DANIELLE DECLOUETTE, MADELEINE R. MANI, SANJAY CHANDRAN, PATRICK YOKOYAMA, ROSEANNE YOKOYAMA, TREVOR BRASEL, KRISTI BRASEL, JOSE CARTER, EMILY CARTER, CALVIN LUCERO, ERIN GARCIA, аnd LAKANA SANGADEJ, and ELIZABETH FERNANDEZ, GERARDO LOPEZ, JAMES CORWELL, and KERRI CORWELL v. D.R. HORTON, INC., and DRH SOUTHWEST CONSTRUCTION, INC., and CURB SOUTH, LLC
Docket No. 30,663
IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
July 24, 2012
2012-NMCA-103
Certiorari Denied, September 24, 2012, No. 33,771
Plaintiffs-Appellees,
and
ELIZABETH FERNANDEZ, GERARDO LOPEZ,
JAMES CORWELL, and KERRI CORWELL,
Plaintiffs,
v.
D.R. HORTON, INC., and DRH SOUTHWEST CONSTRUCTION, INC.,
Defendants-Appellants,
and
CURB SOUTH, LLC,
Defendant.
APPEAL FROM THE DISTRICT COURT OF VALENCIA COUNTY
JOHN W. POPE, District Judge
Terry R. Guebert
Don Bruckner
Albuquerque, NM
for Appellees
Collins & Collins, P.C.
Alysan Boothe Collins
Albuquerque, NM
for Appellees Lucero & Erin Garcia
Clayton E. Crowley
Albuquerque, NM
for Appellee Lakana Sangedej
Landry & Ludewig, L.L.P.
Stephanie Landry
Margaret C. Ludewig
Albuquerque, NM
Saucedo Chavez PC
Christopher T. Saucedo
Iris L. Marshall
Albuquerque, NM
for Appellants
OPINION
FRY, Judge.
{1} The district court ordered the consolidation of all arbitrations between Defendants D.R. Horton, Inc. and DRH Southwest Construction, Inc. (collectively, Horton) and Plaintiffs, who are owners of homes built and sold by Horton in the Sagebrush Subdivision at Huning Ranch in Los Lunas, New Mexico. We conclude that Plaintiffs satisfied all of the elements required for consolidation by
I. BACKGROUND
{2} In November 2009, Plaintiffs sued Horton and other defendants seeking damages and rescission, аlleging that they had experienced various deficiencies in their Horton-built homes, many of which were caused by the settlement of subsurface soils. Plaintiffs also alleged that their purchase agreements with Horton contained arbitration agreements, and they asked the district court to compel Horton to litigate their claims in a consolidated arbitration in accordance with
{3} In pleadings filed with the court, Horton acknowledged that the parties’ dispute was subject to the purchase agreements’ arbitration clause. However, Horton opposed consolidation of all of the claims into one arbitration and instead proposed a separate arbitration with each household. Consequently, Plaintiffs filed a motion to compel a consolidated arbitration between Horton and Plaintiffs who had signed purchase agreements with Horton. Plaintiffs argued that
(a) Except as otherwise provided in Subsection (c), upon motion of a party to an agreement to arbitrate or to an arbitration proceeding, the court may order consolidation of separate arbitration proceedings as to all or some of the claims if:
(1) therе are separate agreements to arbitrate or separate arbitration proceedings between the same persons or one of them is a party to a separate agreement to arbitrate or a separate arbitration proceeding with a third person;
(2) the claims subject to the agreements to arbitrate arise in substantial part from the same transaction or series of related transаctions;
(3) the existence of a common issue of law or fact creates the possibility of conflicting decisions in the separate arbitration proceedings; and
(4) prejudice resulting from a failure to consolidate is not outweighed by the risk of undue delay or prejudice to the rights of or hardship to parties opposing consolidation.
(b) The court may order consolidation of separate arbitration proceedings as to some claims and allow other claims to be resolved in separate arbitration proceedings.
(c) The court may not order consolidation of the claims of a party to an agreement to arbitrate if the agreement prohibits consolidation.
{4} Plaintiffs argued that all of the statutory elements supporting consolidation existed because the arbitration agreements were entered into with Horton; Plaintiffs’ claims arose from the same series of home sales by Horton in the Sagebrush Subdivision since 2006; all of Plaintiffs’ homes experienced similar problems; and Horton would not be prejudiced by a consolidated arbitration because such a proceeding would likely be more efficient than separate proceedings. Horton responded that Plaintiffs failed to establish (1) the statutory element requiring related
{5} Following a hearing, the district court announced in a letter decision that it would grant Plaintiffs’ motion and order a consolidated arbitration before a single arbitrator. The district court later denied Horton‘s motion for reconsideration, found that the order compelling consolidation was final for purposes of appeal, and stayed the proceedings pending appeal. This appeal followed.
II. DISCUSSION
{6} The parties agree that Plaintiffs’ claims against Horton are subject to arbitration, and the only dispute is whеther the district court properly ordered the consolidated arbitration. Horton challenges the district court‘s order based on three arguments, which we combine into two. First, Horton contends that the district court did not have jurisdiction to order a consolidated arbitration because there were no arbitration proceedings pending at the time of the order. Second, it argues that consolidation was improper beсause Plaintiffs failed to satisfy the statutory factors necessary for consolidation and because permitting consolidation would thwart federally established policy and improperly allow the arbitrator to dictate public policy.
A. Standard of Review
{7} Horton argues that all of its arguments are subject to de novo review. We disagree in part. First, as we clarify below, Horton‘s argument regarding the district court‘s alleged lack of jurisdiction is misplaсed. Horton‘s argument has nothing to do with jurisdiction; instead, Horton‘s contention is that a statutory prerequisite for consolidation of the arbitrations was not met. This involves a question of statutory construction, which we review de novo. Estate of Nauert v. Morgan-Nauert, 2012-NMCA-037, ¶ 8, 274 P.3d 799.
{8} Second, we disagree with Horton‘s contention that the propriety of the district court‘s order requiring consolidated arbitrations is subject to de novo review. The statutory provision permitting consolidation uses language associated with discretion. It provides that a court “may order consolidation of separate arbitration proceedings” under certain circumstances.
B. Jurisdiction to Order Consolidated Arbitration
{9} Horton claims that the consolidation provision of the UAA,
{10} We are not persuaded. Despite the title of
{11} Given our interpretation of
{12} We also clarify that, contrary to Horton‘s argument, satisfaction of the statutory requirements has nothing to do with the district court‘s jurisdiction. Subject matter jurisdiction is defined as the power of a court to hear and determine cases. Mares v. Kool, 51 N.M. 36, 41, 177 P.2d 532, 535 (1946). That power is conferred by the sovereign authority that organizes the courts. Id. The subject matter jurisdiction of New Mexico district courts is established by the New Mexico Constitution.
C. Propriety of Consolidation
1. Statutory Elements Supporting Consolidation
{13}
{14} With respect to the element requiring the same transaction or related transactions, Plaintiffs alleged that all of their claims arise from their purchase of homes built and sold by Horton in the same subdivision since 2006. Horton based the subdivision‘s site development plan on a geotechnical report prepared by Vinyard & Associates, Inc., and, since purchasing their homes, Plaintiffs experienced deficiencies in their residences, many of which appear to be caused by soil settlement as evidenced by reports prepared by Horton‘s expert engineer. Thus, although the underlying cause of the soil settlemеnt is in dispute, Plaintiffs nonetheless have demonstrated that their claims arise out of the series of purchase transactions between themselves and Horton and the series of homes constructed by Horton in reliance on the Vinyard report.
{15} Horton argues that Plaintiffs have not satisfied the related-transaction element because their claims arise from thirteen different form purchase agreements for 37 or 38 home sales that proceeded to closing on
{16} The consolidation statute also requires “a common issue of law or fact” that “creates the possibility of conflicting decisions” if the arbitratiоns proceed separately.
{17} Horton contends that Plaintiffs have failed to satisfy this element because they presented no evidence supporting this element and because Horton‘s engineer opined that some deficiencies were caused by something other than negligent construction. Horton is incorrect. Plaintiffs presented considerable evidence of deficienсies common to their homes, including photographs and engineering reports attributing the deficiencies to soil settlement. While it is true that Plaintiffs did not present an engineering report for every home and that some engineering reports attribute some home deficiencies to over-watering or causes other than negligent construction, these issues do not result in failure to satisfy the common-issue element of
{18} Finally, Plaintiffs have satisfied
{19} Horton argues that “its contractual rights would be compromised with consolidation” because Horton had no expectation when it entered into the arbitration agreements that there was the possibility of а consolidated arbitration. This argument is not persuasive because it was Horton that drafted the arbitration agreements, and it could have easily included a provision prohibiting consolidation.
{20} Horton also argues that Plaintiffs were required to establish the existence of all statutory elements supporting consolidation through the introduction of evidence and that the district court should have entered findings of fact and conclusions of law in support of its order requiring consolidation. We disagree. As previously noted, the question of consolidation is a threshold question answered by the district court based on
{21} In our view, Plaintiffs’ satisfаction of all of the statutory elements supporting consolidation leads to the conclusion that the district court did not abuse its discretion in ordering a single, consolidated arbitration. However, Horton also claims that considerations beyond the statutory elements mandate reversal of the district court‘s decision. We now turn to those arguments.
2. Horton‘s Other Arguments
{22} Horton appears to parse Plaintiffs’ single motion into two separate motions—one to compel arbitration and one to compel a consolidated arbitration. With respect to the motion to compel arbitration, Horton argues that the motion should have been denied as a matter of law because Horton agrees to arbitration. We fail to see how Horton‘s approach would make sense or further the case‘s progress. Because the parties agreed that аrbitration was the appropriate method for resolving Plaintiffs’ claims, it would make no sense to deny the motion to compel arbitration.
{23} As to the order requiring the arbitrations to be consolidated, Horton‘s argument is somewhat difficult to follow. It appears that Horton asserts two reasons—other than Plaintiffs’ alleged failure to satisfy the statutory elements for consolidation—supporting its contention that the order of consolidation was erroneous: (1) federal law regarding class action arbitrations establishes public policy requiring denial of consolidation as a matter of law; and (2) allowing consolidation permits the arbitrator to create public policy.
a. Federal Law Regarding Class Action Arbitrations
{24} Horton argues that the district court, by ordering consolidation, “has created something akin to a class action without subjecting . . . Plaintiffs to the class action standards.” As a result, Horton maintains, “thе district court fundamentally changed the nature of the arbitration to such a degree that it cannot be presumed the parties consented to it.” In support of this argument, Horton relies primarily on Stolt-Nielsen S.A. v. AnimalFeeds Int‘l Corp., 130 S. Ct. 1758, 1775 (2010), which held that “a party may not be compelled under the [Federal Arbitration Act] to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so.” This argument is not persuasive for two reasоns.
{25} First, in Stolt-Nielsen there was no statutory provision governing the availability of class arbitration while in the present case,
{26} Second, we fail to see how a consolidated arbitration involving specific, named parties is the same as a class arbitration. As the Court noted in Stolt-Nielsen, in a class arbitration, the arbitrator‘s award may “adjudicate[] the rights of absent parties” as well as the rights of named parties. Id. at 1776. This cannot occur in the consolidated arbitration ordered in this case by the district court because only named parties with arbitration agreements will participate. In addition, the rules governing class arbitrations, presumably derived from the rules governing class litigation, are quite different from the statutory elements required for consolidated arbitration. For example, prerequisites for class arbitration would include numerosity so great that joinder of all class members is impracticable, common issues of law or fact predominating over issues affecting individual class members, and certification of the class. See generally
b. Risk of Arbitrator Creating Public Policy
{27} Horton argues that “[t]he district court‘s misinterpretation of [the consolidation statute] must be addressed by this Court to prevent the creation of public policy by the arbitrator.” Horton maintains that “allow[ing] consolidation of similarly situated plaintiffs rather than requiring that the arbitration agreements . . . arise from the same transaction or related transaction allows the arbitrator too much discretion” in the resolution of discovery disputes and of questions regarding the consolidation of evidentiary hearings involving more than one home.
{28} We fail to see how an arbitrator‘s сontrol over the procedural aspects of the consolidated arbitration will result in the creation of public policy. Instead, the arbitrator can reasonably orchestrate the arbitration to streamline the process, avoid duplication of effort, and resolve the individual claims in a consistent manner. In our view, consolidation of the individual homeowners’ arbitrations is consistent with the purpose of arbitratiоn, which is “to further judicial economy by providing a quick, informal, and less costly alternative to judicial resolution of disputes.” K.R. Swerdfeger Constr., Inc. v. UNM Bd. of Regents, 2006-NMCA-117, ¶ 26, 140 N.M. 374, 142 P.3d 962 (internal quotation marks and citation omitted). The district court did not abuse its discretion by ordering consolidation of Plaintiffs’ arbitrations.
CONCLUSION
{29} For the foregoing reasons, we affirm the district court‘s order consolidating the arbitrations between Plaintiffs and Horton.
{30} IT IS SO ORDERED.
CYNTHIA A. FRY, Judge
WE CONCUR:
JONATHAN B. SUTIN, Judge
J. MILES HANISEE, Judge
Topic Index for Lyndoe v. D.R. Horton, Inc., No. 30,663
APPEAL AND ERROR
Standard of Review
CIVIL PROCEDURE
Arbitration
Final Order
COMMERCIAL LAW
Uniform Arbitration Act
JURISDICTION
Appellate Jurisdiction
Subject Matter
REMEDIES
Arbitration
STATUTES
Interpretation