Griego v. St. John Healthcare & Rehabilitation Center, LLC

1 IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO 2 MARGARET GRIEGO, DECEASED, BY THE 3 CO-PERSONAL REPRESENTATIVES OF HER 4 PROBATE ESTATE, CELESTINO GRIEGO, JR. 5 AND DANNY I. GRIEGO, 6 Plaintiffs-Appellees, 7 v. NO. 31,777 8 ST. JOHN HEALTHCARE & REHABILITATION 9 CENTER, L.L.C., SKILLED HEALTHCARE 10 GROUP, INC., SKILLED HEALTHCARE, L.L.C., 11 and ADMINISTRATOR T.J. HICKS, JR., 12 Defendants-Appellants. 13 APPEAL FROM THE DISTRICT COURT OF BERNALILLO COUNTY 14 Clay P. Campbell, District Judge 15 Harvey Law Firm, L.L.C. 16 Jennifer J. Foote 17 Dusti D. Harvey 18 Albuquerque, NM 19 for Appellees 20 Rodey, Dickason, Sloan, Akin & Robb, P.A. 21 Sandra L. Beerle 22 Robert W. Lasater, Jr. 23 Jocelyn Drennan 24 Albuquerque, NM 25 for Appellants 1 MEMORANDUM OPINION 2 ZAMORA, Judge. 3 {1} This case comes to us on remand from our Supreme Court in Griego v. St. John 4 Healthcare & Rehabilitation Center, L.L.C., No. 34,158, for further consideration in 5 light of Strausberg v. Laurel Healthcare Providers, LLC, 2013-NMSC-032 , 304 P.3d 6 409 (Strausberg II). In this Court’s memorandum opinion filed in the present case on 7 April 22, 2013, we affirmed the district court’s denial of Defendants’ motion to 8 dismiss the complaint and compel arbitration based on the substantive 9 unconscionability of the arbitration agreement. We address on remand whether 10 Strausberg II changes our conclusion in the memorandum opinion that the arbitration 11 agreement is void for substantive unconscionability as a matter of law. We find it does 12 not. 13 BACKGROUND 14 {2} Because the parties are familiar with the facts of the case, we do not recite those 15 facts here but include some of them in our analysis below. We briefly note the 16 procedural history that led to this memorandum opinion. 17 {3} After the death of Margaret Griego, who had been attacked by another resident 18 at Defendants’ nursing home, Plaintiffs in January 2011 filed a complaint alleging 19 negligence, misrepresentation, and a violation of the New Mexico Unfair Practices 20 Act, NMSA 1978, Sections 57-12-1 to -26 (1967, as amended through 2009), related [2] 1 to the terms of the admission contract’s arbitration agreement (the Agreement). 2 Defendants responded in February 2011 with a motion to dismiss or stay litigation and 3 compel arbitration. In response to Defendants’ motion, Plaintiffs raised the affirmative 4 defense of unconscionability. 5 {4} The district court held hearings in May and September 2011. The parties were 6 invited, before and after the September hearing, to submit proposed findings of fact 7 and conclusions of law that examined the issue of substantive unconscionability, and 8 each party also briefed that issue after the hearing. On November 8, 2011, the district 9 court issued its findings of fact, conclusions of law, and an order denying the motion 10 to compel arbitration. An appeal to this Court followed. 11 {5} In our memorandum opinion in this case filed April 22, 2013, this Court 12 affirmed the district court’s denial of Defendants’ motion to compel arbitration. 13 Griego v. St. John Healthcare & Rehab. Ctr., L.L.C., No. 31,777, mem. op. ¶ 34 14 (N.M. Ct. App. Apr. 22, 2013) (non-precedential) (Griego I). The district court ruled 15 that the arbitration agreement at issue in this case, which required arbitration of all 16 disputes except those pertaining to “collections or discharges of residents,” was 17 substantively unconscionable. Id. ¶¶ 1, 6, 33. We relied on our Supreme Court cases 18 of Rivera v. Am. Gen. Fin. Servs., Inc., 2011-NMSC-033 , 150 N.M. 398 , 259 P.3d 19 803 ; Cordova v. World Fin. Corp. of N.M., 2009-NMSC-021 , 146 N.M. 256 , 208 P.3d 20 901 ; and our recent cases that interpreted arbitration agreements that contained the [3] 1 same or similar arbitration provisions as presented in this case: Figueroa v. THI of 2 N.M., 2013 -NMCA-077, 306 P.3d 480 , cert. denied, 2012-NMCERT-010 , 297 P.3d 3 332; Ruppelt v. Laurel Healthcare Providers, LLC, 2013-NMCA-014 , 293 P.3d 902 , 4 cert. denied, 2012-NMCERT-012 , 299 P.3d 423 ; Bargman v. Skilled Healthcare 5 Group, Inc., 2013-NMCA-006 , 292 P.3d 1 , cert. granted, 2012-NMCERT-012 , 299 6 P.3d 423 ; and Strausberg v. Laurel Healthcare Providers, LLC, 2012-NMCA-006 , [7] 269 P.3d 914 (Strausberg I), rev’d, 2013-NMSC-032 (Strausberg II). 8 {6} Our Supreme Court granted certiorari in this case. It subsequently decided 9 Strausberg II, reversing this Court’s decision in Strausberg I, holding that the party 10 asserting unconscionability as an affirmative defense to contract enforcement has the 11 burden of proving that the contract should not be enforced based on unconscionability. 12 Strausberg II, 2013-NMSC-032, ¶¶ 3, 36, 39, 43, 48 . The Court then remanded this 13 case for further consideration in light of its opinion in Strausberg II. 14 Application of Strausberg II to Griego I 15 {7} In Strausberg II, our Supreme Court held that the defendants, as the parties 16 seeking to compel arbitration, have the initial burden of proving the existence of a 17 valid contract. 2013-NMSC-032 , ¶ 42. It is not until after the defendants have satisfied 18 that burden that the burden shifts to the plaintiff to prove unconscionability as an 19 affirmative defense to the enforcement of a contract. Id. ¶ 43. [4] 1 {8} In this case, the district court’s decision relied on this Court’s opinion in 2 Strausberg I, and determined that Defendants bore the burden of proof as to the 3 conscionability of the arbitration clause. This Court’s affirmance of the district court 4 was also based in part on our decision in Strausberg I. 5 {9} The litigation in the district court on the issue of unconscionability occurred 6 before our opinion in Strausberg I was filed. The parties conducted the evidentiary 7 hearing with the perception that Plaintiffs had the burden of proving that the 8 arbitration agreement was unconscionable. The parties also submitted their proposed 9 findings and conclusions, and their post-hearing briefs based on this burden of proof. 10 Although Plaintiffs seemed to argue at the hearing that the district court should shift 11 the burden to Defendants to establish that the agreement was not unconscionable, the 12 district court declined to adopt that argument at the hearing. However, the district 13 court’s subsequent decision did in fact shift the burden of proof to the defendants. 14 Hence, our Supreme Court’s reversal of Strausberg I simply restored the burden of 15 proof under which the parties in this case had proceeded in the district court. 16 {10} On appeal in Griego I, we were guided by our decision in Strausberg I and, 17 consequently, we rejected Defendants’ suggestion that they had been unable to meet 18 the new burden imposed on them in Strausberg I. See Griego I, No. 31,777, mem. op. 19 ¶¶ 11-13. We then proceeded to assess the evidence relevant to the issue of 20 unconscionability and concluded that the agreement was substantively [5] 1 unconscionable. Id. ¶¶ 28-33. Given the fact that our Supreme Court in Strausberg II, 2 imposed the burden on plaintiffs to establish unconscionability and given the fact that 3 the parties in the present case litigated the issue in accordance with that burden, our 4 determination of the unconscionability of the arbitration agreement remains 5 unchanged. 6 CONCLUSION 7 {11} For the foregoing reasons, we affirm our ruling in Griego I, and we remand for 8 proceedings consistent with this Opinion. 9 {12} IT IS SO ORDERED. 10 __________________________________ 11 M. MONICA ZAMORA, Judge 12 WE CONCUR: 13 __________________________________ 14 MICHAEL D. BUSTAMANTE, Judge 15 __________________________________ 16 CYNTHIA A. FRY, Judge