Under New Mexico law a compulsory-arbitration provision in a contract may be unconscionable, and therefore unenforceable, if it applies only, or primarily, to claims that just one party to the contract is likely to bring. The question before us is whether the Federal Arbitration Act (FAA) preempts this state law for contracts governed by the FAA. We hold that New Mexico law is preempted in this case and the arbitration clause must be enforced.
I. BACKGROUND
THI of New Mexico at Hobbs Center, LLC and THI of New Mexico, LLC (collectively THI) operate a nursing home in Hobbs, New Mexico. When Lillie Mae Patton’s husband was admitted into the home, he entered into an arbitration agreement that requires the parties to arbitrate any dispute arising out of his care at the home except claims relating to guardianship proceedings, collection or eviction actions by THI, or disputes of less than $2,500. 1
After Mr. Patton died, Mrs. Patton, acting for her husband’s estate, sued THI for negligence and misrepresentation. THI then filed a complaint in the United States District Court for the District of New Mexico to compel arbitration of the claims. The district court initially ruled that the arbitration agreement was not unconscionable and ordered arbitration.
See THI of N.M. at Hobbs Center, LLC v. Patton,
No. 11-537 LH/CG,
II. DISCUSSION
“We review a district court’s interpretation of the [FAA] de novo.”
Shell Oil Co. v. CO2 Comm., Inc.,
Congress enacted the FAA in 1925 to overcome judicial hostility to arbitration agreements by putting them on “an equal footing with other contracts.”
AT&T Mobility LLC v. Concepcion,
- U.S. -,
Thirty years ago the Supreme Court expressed in the strongest terms the commitment to arbitration established by the FAA:
Section 2 is a congressional declaration of a liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or procedural policies to the contrary.... The Arbitration Act establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.
Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp.,
In particular, the FAA rejects the view that arbitration is inferior to court proceedings as a method of deciding important rights. In
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.,
*1166
Likewise, in
Gilmer v. Interstate/Johnson Lane Corp.,
Mitsubishi
and
Gilmer
rejected the view that the relevant federal statutes implicitly precluded arbitration mandated by the FAA. The Supreme Court has gone further with respect to state law, holding that the FAA preempts even statutes explicitly disfavoring arbitration. In
Perry v. Thomas,
Particularly relevant here, Perry said that the same constraints apply to state common-law doctrine. Although an arbitration contract can be voided on state-law “grounds ... for the revocation of any contract,” 9 U.S.C. § 2, the ground could not be law that treats arbitration as an inferior means of dispute resolution. In remanding for consideration of whether the arbitration clause was unconscionable, the Court warned:
A state-law principle that takes its meaning precisely from the fact that a contract to arbitrate is at issue does not comport with this requirement of § 2. A court may not ... construe [an arbitration] agreement in a manner different *1167 from that in which it otherwise construes nonarbitration agreements under state law. Nor may a court rely on the uniqueness of an agreement to arbitrate as a basis for a state-law holding that enforcement would be unconscionable, for this would enable the court to effect what we hold today the state legislature cannot.
In other words, just as the FAA preempts a state statute that is predicated on the view that arbitration is an inferior means of vindicating rights, it also preempts state common law — including the law regarding unconscionability — that bars an arbitration agreement because of the same view. The arbitration agreement in Perry could not be voided on the ground that it is unconscionable to require an employee to arbitrate a wage-collection action. Otherwise, a court could “effect what we hold today the state legislature cannot,” id, simply by adopting the statutory rule as a specific application of the common-law principle. Any unconscionability of the arbitration provision must be based on some other feature of the provision — a feature other than its subject matter.
Consumer litigation is not treated differently. All
ied-Bruce Terminix Co. v. Dobson,
States may regulate contracts, including arbitration clauses, under general contract law principles and they may invalidate an arbitration clause “upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2 (emphasis added). What States may not do is decide that a contract is fair enough to enforce all its basic terms (price, service, credit), but not fair enough to enforce its arbitration clause. The Act makes any such state policy unlawful, for that kind of policy would place arbitration clauses on an unequal “footing,” directly contrary to the Act’s language and Congress’ intent.
Id.
at 281,
One of the Court’s most recent decisions,
AT&T Mobility LLC v. Concepcion,
— U.S. -,
The Supreme Court reversed. It declared that when common-law application of general principles “interferes with the fundamental attributes, of arbitration[, it] creates a scheme inconsistent with the FAA.” Id. at 1748. According to the Court, compelling AT & T to submit to class-action arbitration would undermine the informal, streamlined procedures that make arbitration attractive. See id. at 1748-53. In the course of its analysis, the Court made the narrower point that applies specifically to our case, reiterating *1168 Perry’s mandate that “a court may not rely on the uniqueness of an agreement to arbitrate as a basis for a state-law holding that enforcement would be unconscionable, for this would enable the court to effect what the state legislature cannot.” Id. at 1747 (ellipsis and internal quotation marks omitted). Although § 2 “permits agreements to arbitrate to be invalidated by generally applicable contract defenses, such as fraud, duress, or unconscionability,” they cannot be invalidated “by defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue. ” Id. at 1746 (emphasis added) (internal quotation marks omitted).
Recently, the limits imposed by the FAA on common-law defenses were again pointed out by the Court in
Marmet Health Care Center, Inc. v. Brown,
— U.S. -,
With this background in mind, we turn to an examination of the
Figueroa
rule. The New Mexico Court of Appeals held that the agreement in
Figueroa
(which is identical to the agreement here) was unconscionably unfair to nursing home residents because it permitted THI to litigate its most likely claims against the resident — guardianship, collection, and eviction claims — while requiring arbitration of the resident’s most likely claims against the nursing home — personal-injury claims and the like.
See Figueroa,
[W]e 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 unconscionability 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.
Id. at 491 (citation omitted).
We will assume as true (although the point is disputed by THI) the state court’s factual premise that the claims most likely to be brought by residents are the ones that must be arbitrated, while the claims
*1169
most likely to be brought by THI are to be litigated in court. And we are, of course, bound by New Mexico law regarding whether a contract is unconscionable. Nevertheless, the only way the arrangement can be deemed unfair or unconscionable is by assuming the inferiority of arbitration to litigation. After all, the state court spoke of
“subjecting
the weaker party to arbitration,” clearly evincing the view that having to arbitrate a claim is disadvantageous.
Figueroa,
Mrs. Patton argues that there are other grounds for finding the arbitration agreement unfair, but ultimately the grounds are based on a perceived inferiority of arbitration to litigation as a means of vindicating one’s rights. First she claims that the agreement is unfair “because the residents [who must arbitrate the claims they are likely to make] still face the prospect of litigation by the nursing home.” Aplee. Br. at 32. But if residents had to litigate the claims they were most likely to make, they would “still face the prospect of litigation by the nursing home.” Thus, this alleged unfairness boils down to the residents’ having to arbitrate, rather than litigate, the claims they are likely to make. Mrs. Patton’s second argument is that the agreement is unfair to residents “because it reserves to the nursing home the right not to arbitrate its most likely claims.” Id. at 34 (emphasis omitted). But the agreement gives the nursing home no more choice than the residents about which claims must be litigated and which must be arbitrated. Personal-injury claims must be arbitrated; guardianship and collection claims must be litigated. Implicit in Mrs. Patton’s logic is that it is better to litigate one’s claims than to arbitrate them.
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.”
Concepcion,
The view of the New Mexico courts appears to be that so long as they are applying general unconscionability doctrine, the FAA does not limit their reasons for ruling an arbitration agreement unconscionable. This view is illustrated in the New Mexico Supreme Court’s leading decision in
Fiser v. Dell Computer Corp.,
At oral argument Mrs. Patton cited the Fifth Circuit decision in
Iberia Credit Bureau, Inc. v. Cingular Wireless LLC,
Thus, we hold that the FAA preempts the New Mexico law set forth in Figueroa. THI is entitled to compel arbitration of Mrs. Patton’s claim.
III. CONCLUSION
We REVERSE the district court’s grant of Rule 60(b)(6) relief and REMAND the case to the district court with instructions to reinstate its order compelling arbitration.
Notes
. The Arbitration Agreement states in full:
In the event of any controversy or dispute between the parties arising out of or relating to Resident's stay at the Health Care Center, the Health Care Center’s Admission Agreement, or breach thereof, or relating to the provision of care or services to Resident, including but not limited to any alleged tort, personal injury, negligence, contract, consumer protection, claims under the New Mexico Unfair Trade Practices Act, or other claim; or any federal or state statutory or regulatory claim of any kind; or whether or not there has been a violation of any right or rights granted under State law (collectively "Disputes”), and the parties are unable to resolve such through negotiation, then the parties agree that such Dispute(s) shall be resolved by arbitration, as provided by the National Arbitration Forum Code of Procedure or other such association.
The parties agree that guardianship proceedings, collection and eviction actions initiated by the Health Care Center, any dispute where the amount in controversy is less than Two Thousand Five Hundred Dollars ($2,500.00) will be excluded from binding arbitration and may be filed and litigated in any court which may have jurisdiction over the dispute....
RESIDENT/REPRESENTATIVE UNDERSTANDS THAT BY SIGNING THIS ARBITRATION AGREEMENT, HE/SHE IS WAIVING HIS/HER RIGHT TO HAVE CLAIMS, INCLUDING MALPRACTICE CLAIMS, HE/SHE MAY HAVE AGAINST THE HEALTH CARE CENTER (INCLUDING ITS PARENTS, AFFILIATES, AND SUBSIDIARY COMPANIES, OWNERS, OFFICERS, DIRECTORS, MEDICAL DIRECTORS, EMPLOYEES, SUCCESSORS, ASSIGNS, AGENTS, ATTORNEY AND INSURERS) BROUGHT AS A LAWSUIT IN COURT BEFORE A JUDGE OR JURY.
Aplt.App. at 43-44.