The complaint alleged that World Finance had engaged in unreasonable and tortious debt collection practices, including personal visits and almost daily phone calls that caused Cordova to lose her job, despite her repeated pleas for World Finance to cease contacting her employers and to cease contacting her at work. She claimed damages resulting from lost wages, lost employment benefits, lost time, invasion of privacy, and emotional distress.
In response to the complaint, World Finance filed a motion to compel arbitration, arguing that Cordova was bound by the mandatory arbitration clauses that had been a standard part of all ten of the form loan agreements. The motion argued that the arbitration provisions were enforceable against Cordova pursuant to the Federal Arbitration Act (FAA), 9 U. §§ 1-16 (2006), and the New Mexico Uniform Arbitration Act, NMSA 1978, §§ 44-7A-1 to -32 (2001), and that Cordova was precluded from seeking judicial relief for any resolution of her claims.
Cordova countered with a legal memorandum in opposition, arguing that World Finance’s arbitration online payday ME clause was “so one-sided that it cannot be enforced” by providing that “any claims brought against [World Finance] by a consumer must be submitted to arbitration, but that any claims that it would conceivably want to bring . . . may proceed in court.”
The Court of Appeals affirmed the district court, holding that the conflicting and one-sided arbitration provisions rendered the entire arbitration agreement illusory and unenforceable. Cordova v. World Fin. Corp. of N.M., No. 27,436, slip op. at 3 (N.M. Ct. ). This Court granted World Finance’s petition for writ of certiorari to review that decision.
All issues before us are subject to a de novo standard of review. We apply a de novo standard of review to a district court’s denial of a motion to compel arbitration. See Piano v. Premier Distrib. Co., 2005-NMCA-018, ¶ 4, 137 N.M. 57, 107 P.3d 11. “Similarly, whether the parties have agreed to arbitrate presents a question of law, and we review the applicability and construction of a contractual provision requiring arbitration de novo.” Id. By both statute and case law, we review whether a contract is unconscionable as a matter of law. See NMSA 1978, § 55-2-302 (1961) (providing that courts, as a matter of law, may police against contracts or clauses found unconscionable); Fiser v. Dell Computer Corp., 2008-NMSC-046, ¶ 19, 144 N.M. 464, 188 P.3d 1215 (providing the issue of the unconscionability of a contract “is a matter of law and is reviewed de novo”).
While the primary concern of the courts below was the completely one-sided nature of the arbitration clauses, there is some uncertainty about the legal theories employed in reaching the conclusions of all judges concerned. Cordova’s district court briefing had specifically relied on case law that articulated either “illusory” theories or “unconscionability” theories in striking down one-sided arbitration agreements. In its succinct order denying World Finance’s motion to compel arbitration as “not well taken,” the district court did not specify any particular legal theory underlying its ruling.
In an unpublished memorandum opinion, the Court of Appeals affirmed the district court’s ruling, without specifically mentioning the terms “substantive unconscionability” or “procedural unconscionability,” on the basis of precedents that held particular one-sided arbitration agreements to be “illusory” and therefore unenforceable: “[B]ecause the arbitration agreements attempt to bind Defendant (the Lender) only to arbitrate when it so chooses, but they do not extend the same rights to Plaintiff, the arbitration agreements are illusory and unenforceable.” Cordova, No. 27,436, slip op. at 2, 3.