In the last of the Court of Appeals’ recent trifecta of arbitration decisions, Lyndoe v. D.R. Horton, Inc. (decided on July 24), we are reminded that separate arbitration cases can be consolidated, at least in some circumstances. The prospect of numerous claims being decided in one proceeding increases the risk to the defendant. Fortunately, however, a simple solution is available – the arbitration agreement can be drafted to prohibit consolidation.
In this case, over 30 homeowners in a Los Lunas subdivision claimed that their homes were damaged by the settling of subsurface soils, and sought damages from the homebuilder, D.R. Horton, Inc.
Each home purchase contract contained an arbitration clause. The plaintiffs demanded arbitration, and asked the District Court to consolidate their separate claims before one arbitrator under a provision in New Mexico’s version of the Uniform Arbitration Act, NMSA 1978, § 44-7A-11, which allows a court to consolidate separate arbitration proceedings if the claims arise from one transaction or a series of related transactions, and if the existence of common factual or legal issues creates a risk of conflicting decisions if the arbitrations are decided separately.
The District Court granted the request, and the Court of Appeals affirmed in a decision by Judge Cynthia Fry, whose opinion is, in my opinion, an uncontroversial application of the law to the facts.
The main thing to take away from Lyndoe is the fact that the consolidation provision exists. While consolidation of separate claims might reduce litigation expenses in some cases, one of its principal effects is to increase the defendant’s financial exposure in the event of an adverse arbitration award. Defendants, however, need not take this risk, because Section 44-7A-11(c) provides that a court cannot consolidate separate claims “if the agreement prohibits consolidation.” Therefore, a business that wants to include an arbitration provision in its customer contracts should carefully consider whether consolidation should be allowed or prohibited.