NM Supreme Court issues four decisions in civil cases

Yesterday the New Mexico Supreme Court issued four opinions in civil cases:

1.  Strausberg v. Laurel Healthcare Providers.  In this medical malpractice action, the defendant nursing home moved to compel arbitration. The plaintiff claimed that the agreement was procedurally unconscionable, but the district court rejected this claim because she had understood that the arbitration provision limited her right to go to court.

In an astonishing decision last year, the Court of Appeals reversed , holding that because nursing home residents are typically elderly and in need of medical care when they sign admission agreements, it is the nursing home’s burden to prove that its agreement is neither substantively nor procedurally unconscionable. (The Court of Appeals relied in large part on a West Virginia case that was summarily reversed by the U.S. Supreme Court in Marmet Health Care Center, Inc. v. Brown).

In an opinion by Justice Vigil, the Supreme Court reversed, correctly holding that under New Mexico law, a party who contends that a contract is unconscionable has the burden of proving this affirmative contract defense, and in any event, the Court of Appeals’ holding is preempted by the Federal Arbitration Act because it treats nursing home arbitration agreements differently from all other contracts. The Court remanded to the Court of Appeals with instructions to consider Plaintiff’s claim under the proper standard.

2.  Nettles v. Ticonderoga Owners’ Association, Inc.  Plaintiffs owned land in a subdivision. Originally the restrictive covenants required the homeowners’ association to maintain all “common easements,” which included all roads in the subdivision. Later, the association voted to change the definition of “common easements” so that it was only required to maintain roads that led to common areas. Most of the residents lived along those roads, but Plaintiffs did not. They sued, arguing that the amendments unfairly burdened the minority of landowners for the benefit of the majority.

In an opinion by Justice Bosson, the Court held that amendments to restrictive covenants “are subject to a test of reasonableness,” and that one of the purposes of the test is to ensure that such amendments do not unfairly burden an individual owner or class of owners. Reasonableness is a question of fact, but the Court of Appeals erred by considering it a question of law, so the case was remanded for further consideration.

3.  Palenick v. City of Rio Rancho.  James Palenick was hired as city manager of Rio Rancho in November 2006, but the city council terminated him in December 2006. He asked the City to pay him severance benefits under his contract, which it did, and then took another job.

Later, Palenick asserted that his firing violated the Open Meetings Act. The city council met in November 2007 to ratify its decision terminating him, but Palenick contended that since he hadn’t properly been fired in December 2006, he was entitled to his salary through November 2007, plus the severance benefits he had already received, even though he hadn’t performed any work for the City after December 2006.

In an opinion by Chief Justice Maes, the Court ruled against Palenick under the doctrine of waiver by estoppel. By claiming his severance package in December 2006, and by not objecting to his termination, Palenick waived any right he may have had to claim that he hadn’t really been fired.  He was therefor not entitled for 11 months of salary for performing no work.

The case has received press coverage — Argen Dunca of the Rio Rancho Observer has this report about the decision, and Rosalie Rayburn has this report in the Albuquerque Journal.

4.  In re Owen. In an opinion by Justice Bosson, the Court affirmed discipline against two attorneys who were successively retained to represent owners of a daycare center in a dispute, but took almost no actions to defend their clients’ interests. The clients only found out when one of the attorneys belatedly told them that their business would be evicted in three weeks.

Here’s a protip — if you’re an attorney accused of unprofessional conduct, at a minimum you should respond to the charges, and obey the Supreme Court’s orders relating to the case. Expressing remorse is also a plus. The opinion states that attorney Owen did not acknowledge any wrongdoing, and failed to comply with several court orders. Owen has now been permanently disbarred.

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