Articles Posted in Contracts

by
Eileen Dalton purchased two used cars under separate finance contracts which contained provisions that retained self-help remedies for both parties, and that allowed either party to compel arbitration of any claim or dispute arising out of the contracts that exceeded the jurisdiction of a small claims court (which in New Mexico was $10,000). One of the cars was repossessed without judicial action. Dalton sued, alleging fraud, violations of the New Mexico Uniform Commercial Code, unfair trade practices, conversion, breach of contract, breach of the covenant of good faith and fair dealing, and breach of warranty of title. Santander Consumer USA moved to compel arbitration based on the clause contained in the finance contracts. Dalton argued that the arbitration clause was substantively unconscionable on its face, and therefore unenforceable because the self-help and small claims carve-outs were unreasonably one-sided. After review of the provisions at issue here, the Supreme Court held that the arbitration provision in this case was not substantively unconscionable because: (1) lawful self-help remedies were extrajudicial remedies; and (2) the small claims carve-out was facially neutral because either party had to sue in small claims court if its claim was less than $10,000, or arbitrate if its claim exceeds $10,000, thereby neither grossly unfair nor unreasonably one-sided on its face. View "Dalton v. Santander Consumer USA, Inc." on Justia Law

by
In January 2006, two former payday lenders, defendants B&B Investment Group, Inc., and American Cash Loans, LLC, began to market and originate high-cost signature of $50 to $300, primarily to less-educated and financially unsophisticated individuals. The loans were for twelve months, payable biweekly, and carried annual percentage rates ranging from 1,147.14 to 1,500%. The Attorney General’s Office sued Defendants, alleging that the loan products were procedurally and substantively unconscionable under the common law and that they violated the Unfair Practices Act (UPA). The district court found that Defendants’ marketing and loan origination procedures were unconscionable and enjoined certain of its practices in the future, but declined to find the high-cost loans substantively unconscionable, concluding that it is the Legislature’s responsibility to determine limits on interest rates. Both parties appealed. Upon review, the Supreme Court affirmed the district court’s finding of procedural unconscionability. However, the Court reversed the district court’s refusal to find that the loans were substantively unconscionable because under the UPA, courts have the responsibility to determine whether a contract results in a gross disparity between the value received by a person and the price paid. The Supreme Court concluded that the interest rates in this case were substantively unconscionable and violated the UPA. View "New Mexico ex rel. King v. B&B Investment Group, Inc." on Justia Law

Posted in: Consumer Law, Contracts

by
Plaintiff Thomas P. Whelan, Jr.'s decedent father, Thomas P. Whelan, Sr., was in Plaintiff's parked truck when it was hit by a moving vehicle. The collision allegedly resulted in severe injuries and medical costs in excess of $100,000 and ultimately in the decedent's death a few years later. At the time of the accident, occupants of Plaintiff's truck were insureds under the terms of a $50,000 liability policy issued by State Farm, facially providing no UM/UIM coverage. In the Supreme Court's decision in "Jordan v. Allstate Ins. Co.," the effective rejection of an insured's statutory rights to UM/UIM coverage equal to liability limits had to be made in writing and as part of the insurance policy delivered to the insured. Because the result in "Jordan" was foreshadowed by other precedents, the Supreme Court declined to make Jordan applicable only to cases arising in the future, and held that policies that failed to comply with Jordan's rejection requirements would be judicially reformed to provide full statutory coverage. In 2011, following the 2010 issuance of Jordan, Plaintiff made a demand on his insurer State Farm for reformation of his policy that was in effect at the time of the accident. Relying on a clause in the policy that purported to bar UM/UIM claims made more than six years after the date of the underlying accident, State Farm rejected the claim. Plaintiff then instituted a declaratory judgment action against State Farm for reformation of the policy. Upon review of this matter, the Supreme Court held that a limitations clause based solely on the date of the accident without consideration of the actual accrual of the right to make a UM/UIM claim was unreasonable and unenforceable as a matter of law. But addressing the merits of Plaintiff's action, the Court also held that judicial reformation under Jordan did not extend to historical insurance contracts formed before another precedential opinion was issued in 2004. Because the policy in this case was issued before that date, it was not subject to retroactive reformation of its facial lack of UM/UIM coverage. View "Whelan v. State Farm Mutual Auto Ins. Co." on Justia Law

by
In 2006, Joseph and Mary Romero signed a mortgage contract with the Mortgage Electronic Registration Systems (MERS) as nominee for Equity One, Inc. They pledged their home as collateral for the loan. The Romeros alleged that Equity One urged them to refinance their home for access to the home's equity. The terms of the new loan were not an improvement over their then-current loan: the interest rate was higher and the loan amount due was higher. Despite that, the Romeros would receive a net cash payout they planned to use to pay other debts. The Romeros later became delinquent on their increased loan payments. A third party, Bank of New York (BONY), identified itself as a trustee for Popular Financial Services Mortgage, filed suit to foreclose on the Romeros' home. BONY claimed to hold the Romeros' note and mortgage with the right of enforcement. The Romeros defended by arguing that BONY lacked standing to foreclose because nothing in the complaint established how BONY held their note and mortgage, and that the contracts they signed were with Equity One. The district court found that BONY had established itself as holder of the Romeros' mortgage, and that the bank had standing to foreclose. That decision was appealed. Upon review, the Supreme Court concluded the district court erred in finding BONY's evidence demonstrated that it had standing to foreclose. Accordingly, the Court reversed the district court and remanded the case for further proceedings. View "Bank of New York v. Romero" on Justia Law

by
Plaintiff Nina Strausberg signed an arbitration agreement as a mandatory condition of her admission to Defendants' nursing home. Despite having signed the arbitration agreement, Plaintiff sued the home its operators alleging negligent care. The issue before the Supreme Court centered on which party has the burden to prove that a contract is unconscionable and therefore, unenforceable. The district court found that Plaintiff had failed to prove unconscionability and, therefore, granted Defendants’ motion to compel arbitration. The Court of Appeals reversed, concluding the district court erred by placing the burden on Plaintiff to prove unconscionability. The Supreme Court disagreed, and held that Plaintiff had the burden to prove that the agreement was unconscionable because unconscionability is an affirmative defense to contract enforcement, and under settled principles of New Mexico law, the party asserting an affirmative defense has the burden of proof. Furthermore, the Court held that federal law preempted the Court of Appeals' holding because it treats nursing home arbitration agreements differently than other contracts. View "Strausberg v. Laurel Healthcare Providers" on Justia Law

by
Defendant Halliburton Energy Services hired Plaintiff Edward Flemma to work as a cement equipment operator in Houma, Louisiana, in January of 1982. During his twenty-six years of employment with Halliburton, Flemma was promoted several times and worked for the company in Louisiana, Texas, Angola, and New Mexico. The last position he held was as district manager in Farmington, New Mexico, where he worked from 2006 until the time of his termination in 2008.The issue on appeal before the Supreme Court in this case centered on a conflict of laws issue that requires the Court to determine whether enforcement of an arbitration agreement, formed in the State of Texas, would offend New Mexico public policy to overcome our traditional choice of law rule. Upon review, the Court concluded that the agreement formed in Texas would be unconscionable under New Mexico law, and it therefore violated New Mexico public policy. Thus, the Court applied New Mexico law and concluded that no valid agreement to arbitrate existed between the parties because Halliburton's promise to arbitrate was illusory. The Court reversed the Court of Appeals and remanded this case to the district court for further proceedings. View "Flemma v. Halliburton Energy Services, Inc." on Justia Law

by
This appeal concerned the construction of a single word, "sudden," within a pollution exclusion clause in a series of liability insurance policies barring coverage for certain damages unless the events causing those damages were "sudden and accidental" (an issue of first impression in New Mexico). Concluding that "sudden" lacks a single clear meaning, the Supreme Court reversed the Court of Appeals' holding that the word unambiguously signifies "quick, abrupt, or a temporarily short period of time. . . .Under well-established principles of insurance law," the Court construed this ambiguity in favor of the insured, Petitioner United Nuclear Corporation, and interpreted the term "sudden" in the insurance policies at issue in this dispute to mean "unexpected." the case was remanded to the district court for further proceedings. View "United Nuclear Corp. v. Allstate Ins. Co." on Justia Law

by
This case stemmed from a dispute over the proper calculation of royalty payments on state oil and gas leases. Over the years, the Legislature has enacted several versions of the statutory oil and gas lease, and Lessees have entered into “hundreds” of oil and gas leases with the State. Specifically, the New Mexico Legislature enacted statutory oil and gas leases in 1919, 1925, 1927, 1929, 1931, 1945, 1947 and 1984. This appeal concerned the royalty clauses contained in the 1931 and the 1947 statutory lease forms. Both the 1931 lease and 1947 lease specified that the payment of royalty was to be calculated as a percentage of the “net proceeds” resulting from the sale of gas. During 2005 and 2006 Commissioner audited ConocoPhillips Company and Burlington Resources Oil & Gas Company’s royalty payments. Following the Audit, Commissioner notified Lessees that they had been underpaying their royalty obligations and issued them assessments for the underpayment. The Commissioner claimed that pursuant to the terms of the statutory lease forms Lessees could not deduct the post-production costs necessary to prepare the gas for the commercial market when calculating their royalty payments. Commissioner claimed that the improper deductions for post-production costs resulted in ConocoPhillips underpaying royalties by approximately $18.9 million and Burlington underpaying by approximately $5.6 million. In response to Commissioner’s audit and assessments, Lessees filed a complaint in the district court seeking a declaration that Commissioner’s assessment of additional royalty constituted a deprivation of due process, an unconstitutional impairment of contract, and breach of contract. In addition, Lessees claimed that Commissioner had exceeded his constitutional and statutory powers by issuing the assessments and had effectively usurped legislative power by seeking royalty payments under calculation methods not approved by the Legislature. In response, Commissioner alleged a host of counterclaims for breach of contract, breach of the implied covenant of good faith and fair dealing, and breach of the implied covenant to market. This appeal pertained to three orders granting summary judgment on behalf of Lessees and a fourth order denying Commissioner’s motion for reconsideration of the district court’s previous dismissal of his counterclaim for breach of the implied covenant to market. In the first order, the district court granted Lessees’ motion for summary judgment. Upon review of the several orders and claims before the Supreme Court on appeal, the Court affirmed the trial court's grant of summary judgment. View "ConocoPhillips Co. v. Lyons" on Justia Law

by
The Supreme Court granted certiorari to review a Memorandum Opinion of the Court of Appeals and to address four issues stemming from a lawsuit by LensCrafters to enforce a noncompete provision against optometrist Dennis Kehoe after a sublease contract between the two parties ended. After review of the "complex, convoluted, and contentious eleven-year dispute," the Supreme Court held that (1) the district court properly dismissed LensCrafters' breach of contract claim on summary judgment because LensCrafters terminated the parties' contract as a matter of law and, with it, the contract's noncompete provision; (2) the district court did not abuse its discretion when it denied Kehoe's request to supplement his pleadings shortly before trial; and (3) summary judgment dismissing Kehoe's malicious abuse of process and tortious interference with contract counterclaims was proper because Kehoe did not demonstrate genuine issues of material fact. Because we hold that the noncompete provision was not in effect during any relevant time, the Court did not address Kehoe's fourth issue, whether the provision would have been contrary to public policy. Accordingly, the Court affirmed the Memorandum Opinion of the Court of Appeals in part and reversed in part. View "Lenscrafters, Inc. v. Kehoe" on Justia Law