AI Generated Opinion Summaries

This summary was computer-generated without any editorial revision. It is not official, has not been checked for accuracy, and is NOT citable.

Facts

• Atlas Electrical Construction, Inc. (Plaintiff) entered into a subcontract with Flintco, LLC (Defendant) to perform electrical work on the Albuquerque International Sunport renovations. The subcontract included a binding arbitration provision, granting Defendant the sole discretion to decide disputes through arbitration or litigation. Plaintiff later filed a breach of contract action against Defendant, who moved to compel arbitration based on the subcontract's provision (paras 2-3).

Procedural History

• District Court of Bernalillo County: Granted Defendant Flintco, LLC’s motion to compel arbitration and stay proceedings in Plaintiff’s claim for breach of contract (para 1).

Parties' Submissions

• Plaintiff: Argued that the arbitration agreement provision in the subcontract is substantively unconscionable and should not be enforced because it is facially one-sided, granting Defendant the sole discretion to decide the dispute resolution method (para 3).
• Defendant: Maintained that the arbitration provision is enforceable, arguing it is commercially fair and reasonable. Alternatively, argued that New Mexico’s jurisprudence on unconscionability as applied to arbitration agreements violates the Federal Arbitration Act (FAA) (para 5).

Legal Issues

• Whether the arbitration provision in the subcontract between Plaintiff and Defendant is substantively unconscionable and therefore unenforceable (para 5).
• Whether New Mexico’s jurisprudence on unconscionability as applied to arbitration agreements is preempted by the Federal Arbitration Act (FAA) (para 17).

Disposition

• The Court of Appeals of the State of New Mexico reversed the district court’s order compelling arbitration and remanded for further proceedings, finding the arbitration provision substantively unconscionable and unenforceable (para 20).

Reasons

• The Court, per Judge Henderson, with Judges Wray and Bustamante concurring, found the arbitration provision substantively unconscionable due to its one-sided nature, granting Defendant sole discretion to choose the dispute resolution method. The Court applied a two-step analysis from Peavy, determining that Defendant failed to present sufficient evidence to justify the fairness and reasonableness of the provision. The Court also addressed Defendant’s argument regarding FAA preemption, concluding that New Mexico’s unconscionability jurisprudence, as applied to arbitration agreements, is not preempted by the FAA because it involves generally applicable contract defenses. The Court emphasized that arbitration agreements can be invalidated by generally applicable contract defenses such as unconscionability (paras 4-19).