August 16, 2012 – Celeste Ruppelt, as Personal Representative of the Wrongful Death Estate of Theodore Lendeen, Deceased v. Laurel Healthcare Providers, LLC, Laurel Meadows, LLC, AT Health Ventures, LLC, A&J Ventures, LLC, Healthcare Management Services, LLC, Belen Meadows Healthcare and Rehabilitation Center, LLC, Skilled Healthcare Group, Inc., LLC, Skilled Healthcare, LLC, M. Scott Athans, Christopher A. Tapia, and Alan Zampini, No. 30,191

IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
Opinion Number: 	__________
Filing Date: August 16, 2012
NO. 30,191
CELESTE RUPPELT, as Personal
Representative of the Wrongful Death
Estate of THEODORE LENDEEN, Deceased,
Plaintiff-Appellee,
v.
LAUREL HEALTHCARE PROVIDERS,
LLC, LAUREL MEADOWS, L.L.C.; AT
HEALTH VENTURES, L.L.C.; A & J
VENTURES, L.L.C.; HEALTHCARE
MANAGEMENT SERVICES, L.L.C.;
BELEN MEADOWS HEALTHCARE AND
REHABILITATION CENTER, L.L.C.;
SKILLED HEALTHCARE GROUP, INC.,
SKILLED HEALTHCARE, L.L.C.; M. SCOTT
ATHANS, CHRISTOPHER A. TAPIA; and
ALAN ZAMPINI,
Defendants-Appellants.
APPEAL FROM THE DISTRICT COURT OF BERNALILLO COUNTY
Beatrice J. Brickhouse, District Judge

Law Office of Scott E. Boehm, P.C.
Scott E. Boehm
Phoenix, AZ
Wilkes & McHugh, P.A.
Mary Ellen Spiece
Phoenix, AZ
for Appellee
Keleher & McLeod, P.A.
Mary Behm
Regina Y. Moss
Albuquerque, NM
for Laurel Appellants
Rodey Dickason, Sloan, Akin & Robb, P.A.
W. Robert Lasater, Jr.
Sandra L. Beerle
Albuquerque, NM
for Belen Appellants

OPINION
GARCIA, Judge.
{1} 	This case requires us to examine the substantive conscionability of an
arbitration agreement that a nursing home requires patients to sign as a condition of
admission to the home. 	Defendants Laurel Healthcare Providers, L.L.C., Laurel
Meadows, L.L.C., AT Health Ventures, L.L.C., A & J Ventures, L.L.C., Healthcare
Management Services, L.L.C., Marion Scott Athans, Christopher A. Tapia and Alan
Zampini 	(collectively, 	Laurel 	Defendants), 	and 	Defendants 	Belen 	Meadows
Healthcare and Rehabilitation Center, L.L.C., Skilled Healthcare, L.L.C., and Skilled
Healthcare Group, Inc. (collectively, Belen Defendants; combined, the Laurel
Defendants and Belen Defendants shall be referred to as Defendants) appeal the
district court’s denial of their respective motions to dismiss and compel arbitration
pursuant to the terms of their arbitration agreement (the Agreement) entered into with
one of their residents, Theodore Lendeen. The district court found the Agreement was
substantively unconscionable under New Mexico law because it was unfairly one-
sided in favor of Defendants. Defendants ask this Court to reverse the district court’s
decision and remand to the district court with instructions to dismiss the complaint
and compel arbitration. We affirm the ruling of the district court in favor of Plaintiff.
BACKGROUND

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{2} 	This appeal arises from a personal injury lawsuit filed by Plaintiff, as personal
representative of the wrongful death estate of her father, Theodore Lendeen.
Plaintiff’s complaint is based on facts that arose out of the care provided to Mr.
Lendeen while he was a resident at a nursing home known as Laurel Meadows
Healthcare (Laurel Meadows) and/or Belen Meadows Healthcare and Rehabilitation
Center (Belen Meadows). Laurel Defendants owned and operated the nursing home
until September 1, 2007, when Belen Defendants thereafter assumed operation of the
nursing home. The Agreement at issue in this case was a separate attachment to the
Laurel Meadows admission agreement (the Admission Agreement) that Plaintiff
signed on behalf of her father in March 2006. 	In September 2007, when Belen
Defendants assumed operation of the nursing home, they assumed all rights and
responsibilities under the Agreement.
{3} 	Under the terms of the Agreement, both parties “relinquish[ed] their right to
have any and all disputes associated with [the Agreement] and the relationship created
by the Admission Agreement . . . resolved through a lawsuit, . . . except to the extent
that New Mexico law provides for judicial action in arbitration proceedings.” The
Agreement made two exceptions to the requirement that the parties resolve all disputes
through arbitration. 	It stated, “[t]his [a]rbitration [a]greement shall not apply to
disputes pertaining to collections or discharge of residents.”
{4} 	Based on the language in the Agreement, Defendants responded to Plaintiff’s

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complaint by filing motions to dismiss and compel arbitration (motions to compel).
Defendants argued that the claims raised in Plaintiff’s complaint were the type of
claims that were to be arbitrated under the terms of the Agreement and that challenges
to the enforceability of the Agreement should be decided by an arbitrator. Plaintiff
opposed the motions to compel alleging, among other things, that the Agreement was
substantively unconscionable.
{5} 	Relying on the New Mexico Supreme Court’s opinion in Cordova v. World
Finance Corp. of N. M., 2009-NMSC-021, 146 N.M. 256, 208 P.3d 901, the district
court ruled that the Agreement was inherently one-sided in favor of Defendants. It
explained that the Agreement required residents like Mr. Lendeen to arbitrate their
most common claims but allowed Defendants to litigate the claims it was most likely
to bring—those relating to collections or discharge of residents. 	As a result, the
district court concluded that the Agreement was substantively unconscionable and
denied Defendants’ motions to compel. In doing so, the district court also rejected
Defendants’ secondary argument that, should the district court find that the arbitration
clause’s exemption provision was unconscionable, it could still achieve the basic
purpose of the Agreement by applying the severance clause to carve out the
unenforceable exemptions to arbitration. 	Defendants filed timely appeals jointly
challenging the district court’s rulings denying their motions to dismiss and compel
arbitration.

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DISCUSSION
A. 	Standard of Review
{6} 	We review de novo a district court’s order denying a motion to compel
arbitration. 	Felts v. CLK Mgm’t, Inc., 2011-NMCA-062, ¶ 14, 149 N.M. 681, 254
P.3d 124, cert. granted, 150 N.M. 764, 266 P.2d 633 (2011); 	Strausberg v. Laurel
Healthcare Providers, LLC, 2012-NMCA-006, ¶ 6, 269 P.3d 914, cert. granted, 2012-
NMCERT-001 (No. 33,331, Jan. 6, 2012). 	The question of whether a contract
provision is unconscionable is a matter of law that we also review de novo. Id. The
party attempting to compel arbitration carries the burden of demonstrating that the
arbitration agreement is valid. Id. ¶ 1; Corum v. Roswell Senior Living, LLC, 2010-
NMCA-105, ¶ 3, 149 N.M. 287, 248 P.3d 329.
B. 	Arbitrability
{7} 	We first review Defendants’ argument that the district court did not have
authority to decide that the Agreement was unconscionable because the terms of the
Agreement delegated this decision to an arbitrator. The arbitrability of a particular
dispute is generally a threshold issue to be decided by the district court. Felts, 2011-
NMCA-062, ¶ 17. However, parties to an arbitration agreement can choose to have
an arbitrator decide the question of arbitrability instead of the district court. Id. ¶ 18.
To validly do so, the parties’ intent to transfer the question of arbitrability exclusively
to an arbitrator must be clearly and unmistakably evidenced by the terms of the

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agreement. Id. Where the parties have validly transferred the question of arbitrability
to an arbitrator, “a district court is precluded from deciding a party’s claim of
unconscionability unless that claim is based on the alleged unconscionability of the
delegation provision itself.” Id. ¶ 20.
{8} 	On appeal, Defendants argue that the Agreement contained a clear delegation
provision that Plaintiff did not challenge and, therefore, it would be improper to
permit the district court to determine arbitrability. We agree that by requiring both
parties to relinquish the right to access a judicial forum for all claims except those
related to collections or discharge of residents, the terms of the Agreement may have
delegated the threshold question of enforceability to the arbitrator. Id. ¶ 23; see Bd.
of Educ. of Carlsbad Mun. Schs. v. Harrell, 118 N.M. 470, 476, 882 P.2d 551, 517
(1994) (“Arbitration required by statute is compulsory; arbitration freely entered into
by contract is voluntary.”). However, Plaintiff did challenge the enforceability of the
entire Agreement. 	In addition, as explained below, we conclude that Defendants
waived their argument that the arbitrator had exclusive authority to decide arbitrability
because they decided to voluntarily address the enforceability of the Agreement in the
district court and never even suggested that the court did not have authority to address
the issue. See Dean Witter Reynolds, Inc. v. Roven, 94 N.M. 273, 275, 609 P.2d 720,
722 (1980) (recognizing the general policy against a waiver of arbitration rights unless
one party’s conduct has given it an undue advantage or resulted in prejudice to

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another); see also State v. Young, 117 N.M. 688, 690, 875 P.2d 1119, 1121 (Ct. App.
1994) (“[T]o allow a defendant to invite error and to subsequently complain about that
very error would subvert the orderly and equitable administration of justice.”). Belen
Defendants waived any delegation argument and expressly agreed and asked the
district court to determine the initial question of arbitrability. 	Counsel for Belen
Defendants argued in the district court that the“initial threshold argument . . . is that
the [district court] must determine initially whether or not there is an enforceable
[Agreement].”
{9} 	Similarly, counsel for Laurel Defendants did not address or even mention the
question of authority to decide arbitrability during arguments to the district court. See
Rule 12-216(A) NMRA (“To preserve a question for review it must appear that a
ruling or decision by the district court was fairly invoked, but formal exceptions are
not required[.]”); State v. Reyes, 2002-NMSC-024, ¶ 41, 132 N.M. 576, 52 P.3d 948
(explaining that parties must object at trial in order to alert the district court of the
perceived error, to allow the court to correct any error, and to provide an adequate
record for appellate review), abrogated on other grounds by Allen v. LeMaster, 2012-
NMSC-001, ¶ 36, 267 P.3d 806. As a result, Defendants’ contention regarding the
proper forum to rule on the delegation clause was either waived or acquiesced to and
conceded in the district court. We need not address the issue in this case and leave
any further development of Felts for another day.

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C. 	Substantive Unconscionability
{10} 	Defendants contend that the district court erred when it ruled that the
Agreement was substantively unconscionable. 	They assert that the Agreement’s
exemption provision is not unreasonably one-sided because it bilaterally allows either
party to pursue claims regarding collections and discharge of residents in a judicial
forum. 	Thus, the key question is whether the type of exemption clause in the
Agreement is sufficiently fair to avoid being substantively unconscionable as a matter
of law.
{11} 	“Unconscionability is an equitable doctrine, rooted in public policy, which
allows courts to render unenforceable an agreement that is unreasonably favorable to
one party while precluding a meaningful choice of the other party.” Cordova, 2009-
NMSC-021, ¶ 21. “Substantive unconscionability concerns the legality and fairness
of the contract terms themselves.” Id. ¶ 22; see Fiser v. Dell Computer Corp., 2008-
NMSC-046, ¶ 20, 144 N.M. 464, 188 P.3d 1215 (“Substantive unconscionability
relates to the content of the contract terms and whether they are illegal, contrary to
public policy, or grossly unfair.”). As a result, this Court will “focus[] on such issues
as 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 whether a contract provision is substantively unconscionable.
Cordova, 2009-NMSC-021, ¶ 22. In New Mexico, this issue is primarily guided by

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two recent Supreme Court decisions that invalidated arbitration provisions as
unreasonably one-sided pursuant to a substantive unconscionability analysis. 	See
Rivera v. Am. Gen. Fin. Servs., Inc., 2011-NMSC-033, ¶ 47, 150 N.M. 398, 259 P.3d
803; Cordova, 2009-NMSC-021, ¶ 32.
{12} 	In this case, the district court relied on Cordova to determine that the
Agreement was substantively unconscionable. In Cordova our Supreme Court voided
an arbitration provision used by a small loan company as inherently one-sided because
it required the borrower to submit its claims to arbitration but allowed the lender the
option of litigating the type of claim it was most likely to seek against the borrower.
Id. ¶¶ 1, 32. Our Supreme Court focused its conscionability analysis exclusively on
the one-sidedness of the agreement’s terms, which the Court described as “egregious.”
Id. ¶¶ 26-27, 32. 	It determined that an arbitration provision, exempting the lender
from arbitration in cases of default, its most likely type of claim, but required the
borrower to arbitrate all of its claims was unfairly one-sided. 	Id. 	The Court
explained:
It is highly unlikely that [the lender] will find itself at odds with the
contractual terms of its own form agreements, or the circumstances of its
lending or collection practices, or claim it was the victim of a fraudulent
consumer scheme, or have any other reason to make a claim against its
borrowers for violation of consumer protection laws.
Id. ¶ 27. Thus, it was highly unlikely that the lender would be limited to arbitration
when seeking its remedies against the borrower. See id. ¶ 26. As a result, the Court

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held that the arbitration agreement was substantively unconscionable and struck the
arbitration agreement in its entirety from the loan agreement. Id. ¶ 40.
{13} 	Two years later, our Supreme Court again concluded that an arbitration
agreement was substantively unconscionable. 	See Rivera, 2011-NMSC-033, ¶ 10.
In Rivera, a form car title loan contract used by the title loan lender contained an
arbitration agreement that encompassed “any and all claims” that the borrower could
conceivably have against the lender. 	Id. ¶ 3. The arbitration agreement, however,
exempted certain claims that the lender might have against the borrower. Id.
{14} 	Although the issue of unconscionability was not necessary to render the
decision in Rivera, our Supreme Court decided that it would specifically address the
issue in order to “correct the Court of Appeals’ overly narrow construction of [the]
holding in Cordova,” which focused on the fact that the arbitration provision was not
completely one-sided. Rivera, 2011-NMSC-033, ¶ 10. The Supreme Court explained
that the arbitration clause at issue was unfairly one-sided because it gave one party the
ability “to seek judicial redress of its likeliest claims while forcing [the other party]
to arbitrate any claim she may have.” Id. ¶ 53. As a result, our Supreme Court held
that it was void under New Mexico law. Id. ¶ 54. Thus, in holding that the arbitration
agreement was substantively unconscionable, our Supreme Court clarified that
substantive unconscionability requires a focus on fairness, not complete one-
sidedness. 	Id. ¶¶ 45, 54. 	As a result, while we agree with Defendants that this

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arbitration provision is not as completely one-sided as the arbitration provision in
Cordova, we are not persuaded by their argument that the Agreement is sufficiently
fair and bilateral because it provides both parties with access to the judicial system for
disputes pertaining to collections and discharge of residents. See Figueroa v. THI of
N. M. at Casa Arena Blanca LLC, 2012-NMCA-__, ¶¶ 28, 30, (No. 30,477, July 18,
2012) (refusing to enforce a nursing home arbitration agreement where the drafter
reserved the majority of its claims while subjecting essentially all the resident’s claims
to arbitration).
{15} 	Although the exemption provision is facially bilateral in the sense that it does
not completely extinguish Plaintiff’s right to access the courts, in effect this
distinction from Cordova and Rivera is illusory. 	This Court recently addressed
similar issues in Figueroa. 2012-NMCA-__ , ¶¶ 28-33. Common sense dictates that
claims relating to collection of fees and discharge of residents are the types of
remedies that a nursing home, not its resident, is most likely to pursue. 	Id. ¶ 31
(noting that it is self-evident that guardianship, collections, and eviction proceedings
would be the most likely claims brought by the nursing home).
{16} 	Defendants did argue that it is not “completely outside of the realm of
possibilities” that a resident may pursue a legal remedy against nursing home with
respect to debt collection or the discharge of a resident, although they did
acknowledge that such situations are rare. Thus, Defendants recognized the practical

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reality of their exemption provision. It provides Defendants with a judicial forum to
litigate its most likely and beneficial claims while totally excluding access to the
judicial system for claims regarding negligent care, the most likely claims to be
pursued by a resident such as Plaintiff. See id. ¶ 32 (stating that the exemption of the
nursing 	home’s 	most 	likely 	claims 	from 	arbitration 	rendered 	the 	agreement
sufficiently one-sided to be deemed unconscionable).
{17} 	Defendants did not provide any factual evidence regarding the one-sided nature
of the claims exempted from arbitration. 	We do not rule out the possibility that
probative evidence could be offered in this type of case. Here, however, Defendants
declined the suggestion made at oral argument that this Court consider remanding the
matter for further factual development regarding the facial one-sidedness of the
exempted 	claims. 	Defendants 	agreed 	that 	further 	factual 	development 	was
unnecessary. As a result, the district court approach regarding the lopsided nature of
the claims removed from mandatory arbitration was proper in this case.
{18} 	While no single, precise definition of substantive unconscionability can be
articulated, substantive unconscionability broadly refers to whether the material terms
of a contract are patently unfair and more beneficially one-sided in favor of the more
powerful party. 	See Rivera, 2011-NMSC-033, ¶¶ 43, 53. 	By excepting disputes
pertaining to collections and discharge of residents from arbitration, Defendants chose
the forum to resolve their disputes that were presumptively deemed to be “most

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likely,” while simultaneously forcing Plaintiff, the weaker party, to arbitrate her most
likely disputes. As a result, although the exemption provision may facially appear to
apply evenhandedly, its practical effect unreasonably favors Defendants, and the
provision’s bilateral appearance is inaccurate. See Fitz v. NCR Corp., 13 Cal. Rptr.
3d 88, 104 (Ct. App. 2004) (explaining that an arbitration agreement lacks bilaterality
where it “compels arbitration of the claims more likely to be brought by the weaker
party but exempts from arbitration the types of claims that are more likely to be
brought by the stronger party”); Iwen v. U.S. West Direct, 1999 MT 63, ¶ 32, 293
Mont. 512, 977 P.2d 989 (explaining that arbitration agreements need not “contain
mutual promises that give the parties identical rights and obligations,” but “the rights
of the contracting parties must not be so one-sided and unreasonably favorable to the
drafter . . . that the agreement becomes unconscionable and oppressive”). As a result,
we conclude that the Agreement is unfair and unreasonably one-sided. Therefore, it
is not necessary for us to consider whether the provision was also procedurally
unconscionable or supported by consideration. See Rivera, 2011-NMSC-033, ¶ 54;
Figueroa, 2012-NMCA-__, ¶¶ 23, 34-35.
D. 	The Arbitration Savings Clause and Severability
{19} 	Defendants next argue that even if the portion of the Agreement exempting
disputes pertaining to collections and discharge of residents is substantively
unconscionable, the Agreement’s savings clause should act to sever the offending

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portion and enforce the remainder of the arbitration agreement. 	The Agreement’s
“savings clause” states: “If any provision of this [a]rbitration [a]greement is found to
be invalid, the other provisions shall remain enforceable.
{20} 	“When [the Court of Appeals] determines that contract provisions are
unenforceable we can either strike the provisions in their entirety or reform the
provisions into a fair and balanced agreement.” 	Rivera, 2011-NMSC-033, ¶ 55
(alteration, internal quotation marks, and citation omitted); see Figueroa, 2012-
NMCA-__, ¶ 38. 	In Cordova and Rivera, the Court concluded that the one-sided
arbitration provisions were central to the overall arbitration scheme and, therefore, the
unconscionable provisions could not be severed from the arbitration provisions so as
to save the parties’ general agreement to arbitrate. 	Rivera, 2011-NMSC-033, ¶ 56;
Cordova, 2009-NMSC-021, ¶ 40. 	The Court stated in Cordova “[w]e must strike
down the arbitration clause in its entirety to avoid a type of judicial surgery that
inevitably would remove provisions that were central to the original mechanisms for
resolving disputes between the parties.” 2009-NMSC-021, ¶ 40.
{21} 	In Figueroa, we directly addressed and rejected the defendants’ savings clause
argument. 2012-NMCA-__, ¶¶ 38-40. Consistent with Figueroa, we shall also follow
Rivera and Cordova, thereby refusing to sever Defendants’ exemption provision from
the remainder of the Agreement. 	Rivera, 2011-NMSC-033, ¶ 56; Cordova, 2009-
NMSC-021, ¶ 40. As a result, for the reasons discussed in Figueroa, we hold that the

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arbitration provision was properly struck from the Agreement in its entirety. 2012-
NMCA-__, ¶¶ 38-40.
CONCLUSION
{22} 	The arbitration provision in the Agreement is unenforceable. For the foregoing
reasons, we affirm the decision of the district court.
{23} 	IT IS SO ORDERED.
__________________________________
TIMOTHY L. GARCIA, Judge
I CONCUR:
_____________________________
CYNTHIA A. FRY, Judge
JONATHAN B. SUTIN, Judge (specially concurring).

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SUTIN, Judge (specially concurring).
{24} 	I concur. 	I ask, has our Supreme Court already decided that an arbitration
clause is substantively unconscionable as unfairly one-sided when the clause excludes
from arbitration one or more claims most likely to be pursued by the healthcare or
loan company, even if the healthcare or loan company might be able to establish that
litigating a claim in court is in the best interests of both parties in terms of economy
and perhaps even speed? 	It would appear so. 	See Rivera, 2011-NMSC-033, ¶ 53
(“[The defendant’s] ability under the arbitration clause to seek judicial redress of its
likeliest claims while forcing [the plaintiff] to arbitrate any claim she may have is
unreasonably one-sided.”). Figueroa also tends in that direction. See Figueroa, 2012-
NMCA-___, ¶ 30. 	If where we are headed is that under no circumstance can a
healthcare facility or nursing home escape unconscionability or unlawful contract
adhesion when its arbitration clause exempts a claim that it is most likely to pursue,
I respectfully suggest that the Supreme Court should clearly lay the matter to rest.
__________________________________
JONATHAN B. SUTIN, Judge