Opinion ID: 2570132
Heading Depth: 3
Heading Rank: 2

Heading: Under New Mexico Law, the Class Action Ban is Invalid Because It is Contrary to Public Policy and Therefore Unconscionable

Text: {19} Plaintiff contends that the class action ban is unconscionable. This determination is a matter of law and is reviewed de novo. Bowlin's, Inc. v. Ramsey Oil Co., 99 N.M. 660, 666, 662 P.2d 661, 667 (Ct.App.1983). We agree. {20} The classic articulation of unconscionability is that it is comprised of two prongs: substantive unconscionability and procedural unconscionability. Joseph M. Perillo, 7 Corbin on Contracts § 29.4, at 388 (2002 ed.). Substantive unconscionability relates to the content of the contract terms and whether they are illegal, contrary to public policy, or grossly unfair. Padilla v. State Farm Mut. Auto. Ins. Co., 2003-NMSC-011, ¶ 14, 133 N.M. 661, 68 P.3d 901; Guthmann v. La Vida Llena, 103 N.M. 506, 510, 709 P.2d 675, 679 (1985). Procedural unconscionability is determined by analyzing the circumstances surrounding the contract's formation, such as whether it was an adhesive contract and the relative bargaining power of the parties. Guthmann, 103 N.M. at 510, 709 P.2d at 679 (quoted authority omitted). The weight given to procedural and substantive considerations varies with the circumstances of each case. Id. {21} As set forth above, we concluded in the course of our conflict analysis that the class action ban violates New Mexico public policy. By preventing customers with small claims from attempting class relief and thereby circumscribing their only economically efficient means for redress, Defendant's class action ban exculpates the company from wrongdoing. Denial of a class action in cases where it is appropriate may have the effect of allowing an unscrupulous wrongdoer to retain the benefits of its wrongful conduct. Discover Bank, 30 Cal.Rptr.3d 76, 113 P.3d at 1106 (quoted authority omitted). On these facts, enforcing the class action ban would be tantamount to allowing Defendant to unilaterally exempt itself from New Mexico consumer protection laws. It is not hyperbole or exaggeration to say that it is a fundamental principle of justice in New Mexico that corporations may not tailor the laws that our legislature has enacted in order to shield themselves from the potential claims of consumers. Because it violates public policy by depriving small claims consumers of a meaningful remedy and exculpating Defendant from potential wrongdoing, the class action ban meets the test for substantive unconscionability. {22} In the instant case, the nature of the terms and conditions may or may not rise to the level of an adhesive or procedurally unconscionable contract. When a court makes an analysis into whether a particular contract is adhesive, it typically inquires into three factors: (1) whether it was prepared entirely by one party for the acceptance of the other; (2) whether the party proffering the contract enjoyed superior bargaining power because the weaker party could not avoid doing business under the particular terms; and whether the contract was offered to the weaker party without an opportunity for bargaining on a take-it-or-leave-it basis. Guthmann, 103 N.M. at 509, 709 P.2d at 678. The Court of Appeals held that the terms did not constitute a contract of adhesion because there was no evidence that Plaintiff could not avoid doing business under the particular terms mandated by Defendant. Fiser, 2007-NMCA-087, ¶ 35, 142 N.M. 331, 165 P.3d 328. While we agree that Defendant's terms and conditions may not rise to the level of an adhesive contract, we nevertheless conclude that the terms are unenforceable because there has been such an overwhelming showing of substantive unconscionability. For these reasons, the agreement is unconscionable under New Mexico law and will not be enforced in this state. [2]