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Patterson v. Nine Energy Services, LLC

United States District Court, D. New Mexico

November 29, 2018

RYAN PATTERSON, Plaintiff,
v.
NINE ENERGY SERVICE, LLC, Defendant.

          Jack L. Siegel Siegel Law Group, P.L.L.C. Dallas, Texas J. Derek Braziel Travis Andrew Gasper Lee & Braziel, L.L.P. Dallas, Texas Attorneys for the Plaintiff

          Christopher S. Mann Jones Walker, L.L.P. New Orleans, Louisiana Jennifer L. Anderson Jones Walker, L.L.P. Baton Rouge, Louisiana Attorneys for the Defendant

          MEMORANDUM OPINION AND ORDER

         THIS MATTER comes before the Court on the Plaintiff's Reconsideration Motion, filed September 15, 2018 (Doc. 25) (“Reconsideration Motion”). The Court held a hearing on October 25, 2018. The primary issues are: (i) whether the Court committed manifest legal error in its Memorandum Opinion and Order, 330 F.Supp.3d 1280, filed August 30, 2018 (Doc. 21) (“MOO”), where it relied on Padilla v. State Farm Mutual Automobile Insurance Company, 2003-NMSC-011, 68 P.3d 901 (“Padilla”), as well as Cordova v. World Finance Corporation of New Mexico, 2009-NMSC-021, 208 P.3d 901 (“Cordova”), and Rivera v. American General Financial Services, Inc., 2011-NMSC-033, 259 P.3d 803 (“Rivera”), in concluding that, “although the injunctive relief provision in the Confidentiality and Dispute Resolution Agreement at 6, filed December 6, 2017 (Doc. 5-2) (“Arbitration Agreement”) is substantively unconscionable, it is also severable, ” MOO at 20, 330 F.Supp.3d at 1287; and (ii) whether the Court should certify the question of whether the substantively unconscionable provision is severable to the Supreme Court of New Mexico for the Supreme Court of New Mexico's determination. The Court has carefully reconsidered its MOO and concludes that the injunctive relief provision in the Arbitration Agreement is severable, and the Court declines to certify the question to the Supreme Court of New Mexico for its determination.

         FACTUAL BACKGROUND

         The Court recites the factual background as stated in its MOO, as neither party has objected to the Court's recitation of facts in the MOO. The footnotes associated with the quoted text are also quoted in full from the MOO.

Patterson worked for Nine Energy, an oilfield services company, from March to October of 2017. See First Amended Class Action Complaint ¶ 5, at 2, filed November 13, 2017 (Doc. 3) (“Amended Complaint”). His “primary job duty consisted of operating pressure control equipment and tools.” Amended Complaint ¶ 15, at 3. Nine Energy first offered Patterson employment via letter on February 28, 2017. See Letter from Sally Haynes, Human Resources Manager, to Ryan Patterson at 1-2, (dated February 28, 2017), filed January 3, 2018 (Doc. 14-2) (“Offer Letter”). Patterson's Offer Letter states that his employment is contingent upon an enumerated list of items, including drug testing, physical capacity testing, and other things. See Offer Letter at 1. The Offer Letter does not mention arbitration. See Offer Letter at 1-2. Patterson accepted the employment offer by signing the Offer Letter on March 1, 2017. See Offer Letter at 2. Patterson did not begin work at Nine Energy until March 20, 2017. See Supplemental Declaration of Sharon Warren ¶ 7, at 2 (dated January 3, 2018), filed January 3, 2018 (Doc. 14-1).
On March 1, 2017 -- the same day that Patterson signed the Offer Letter -- he also signed the Confidentiality and Dispute Resolution Agreement at 6, filed December 6, 2017 (Doc. 5-2) (“Arbitration Agreement”). The Arbitration Agreement states that “the Company and the Employee agree to submit exclusively to final and binding arbitration any and all Disputes as defined herein in accordance with the following understanding and terms.” Arbitration Agreement at 3. The Arbitration Agreement defines the word “dispute” as all legal and equitable claims, demands, disputes, controversies, issues, and disagreements, of whatever nature or kind, whether in contract, tort, under statute or regulation, or any other law or source of legal obligation, including but not limited to those relating to, concerning, or arising out of this Agreement; the interpretation or subject matter of this Agreement or program . . . wages or other compensation received by or owed to any Employee, including minimum wage and overtime pay.
Arbitration Agreement at 2. The Arbitration Agreement continues:
Each Dispute shall be arbitrated on an individual basis. The parties forego and waive any right to join or consolidate their Disputes or claims with those of any other employee . . . or to assert any Disputes or claims in arbitration as a representative or as a member of a class. . . . Neither the Company nor any employee or applicant for employment may pursue any Dispute or claim on a class action, collective action, or consolidated basis or in a representative capacity on behalf of other individuals, or participate as a class or collective action member in such a proceeding. . . . The Parties waive any right to a jury trial and to pursue or participate in class or collective actions with respect to Disputes that are subject of this Agreement and for which a jury trial, class action, and collective action would otherwise be available.
Arbitration Agreement at 3. The Arbitration Agreement contains several other important provisions. See Arbitration Agreement at 3-4. One states that “arbitration shall be commenced by either Party filing a demand for arbitration with the AAA[1] within 60 days after such Dispute has arisen.” Arbitration Agreement at 3. Another notes:
Notwithstanding the provisions of this Agreement, the Company may bring an action in any court of competent jurisdiction for injunctive relief to enforce the Employee's obligations with respect to the confidentiality and protection of trade secrets and other non-public information belonging to the Company, or with respect to any non-competition, non-solicitation, or any other restrictive covenant provisions in any separate agreement between the Company and the Employee.
Arbitration Agreement at 4. Still another provision states: “The Parties acknowledge and agree that this Agreement and the Parties' employment relationship affect and involve interstate commerce, and that this Agreement is governed by the Federal Arbitration Act.”[2] Arbitration Agreement at 5. Finally, the Arbitration Agreement contains an integration clause, stating:
No agreements or representations, oral or otherwise express or implied, with respect to the subject matter hereof have been made by either Party that are not set forth expressly in this Agreement. . . . This Agreement sets forth the entire agreement of the Parties hereto with respect to the subject matter herein, in particular the Parties' agreement regarding the protection of Confidential Information and the procedural mechanism for the final resolution of Disputes and supersedes all prior understandings, agreements, clauses, provisions, representations, or promises, whether oral or written, of the Parties to the extent they relate to or concern the subject matter herein.
Arbitration Agreement at 5. Patterson now alleges in this class action that Nine Energy failed to pay him and other employees overtime wages in violation of the New Mexico Minimum Wage Act, N.M. Stat. Ann. § 50-4-22(D). See Amended Complaint ¶ 3, at 1.

MOO at 2-3, 330 F.Supp.3d, at 1287-89 (alteration in original).

         PROCEDURAL BACKGROUND

         The Court adopts the procedural background until the filing of MOO, as the MOO recites it. The footnotes associated with the quoted text are also quoted in full from the MOO.

Patterson filed his original Complaint on November 8, 2017. See Original Class Action Complaint, filed November 8, 2017 (Doc. 1) (“Original Complaint”). Patterson subsequently filed the Amended Complaint on November 13, 2017. See Amended Complaint at 1. Nine Energy filed the Motion on December 6, 2017. See Motion at 1.
1. The Motion.
Nine Energy moves the Court to dismiss this case for lack of subject-matter jurisdiction and to compel arbitration. See Motion at 1. Nine Energy first contends that Patterson's claims fall within the Arbitration Agreement's scope, because the Arbitration Agreement's provisions “cover all disputes, claims, or disagreements relating to Plaintiff's employment.” Motion at 5. Nine Energy then argues that the Arbitration Agreement contains adequate consideration, asserting that “the bargained for exchange in this case was Plaintiff's offer of employment with Nine Energy in exchange for signing the Confidentiality and Dispute Resolution Agreement as well as the Parties' mutual agreement to submit all employment disputes to arbitration.” Motion at 6. Turning to the class action allegations, Nine Energy avers that the Arbitration Agreement expressly states that the parties waive any right to participate in a class or collective action regarding any disputes subject to the agreement. See Motion at 7-8. Nine Energy concludes that the Court should grant the Motion and compel Patterson to arbitrate his claims on an individual basis. See Motion at 8.
2. The Response.
Patterson responds. See Response to Defendant's Motion to Dismiss the First Amended Class Action Complaint and Compel Arbitration, filed January 2, 2018 (Doc. 13-1) (“Response”). Patterson first asserts that the Arbitration Agreement is substantively unconscionable. See Response at 4. According to Patterson, the Arbitration Agreement section allowing Nine Energy to bring an action for injunctive relief in court to enforce an employee's confidentiality obligations, such as the protection of trade secrets, represents a unilateral carve-out favoring Nine Energy and is therefore unconscionable. See Response at 4-5. Second, Patterson avers that the Arbitration Agreement contains no consideration and is thus illusory. See Response at 5. According to Patterson “continued at-will employment cannot serve as consideration for an agreement to arbitrate, ” which Patterson asserts is the Arbitration Agreement's purported consideration. Response at 6-7.[3]
2. The Reply.
Nine Energy replies. See Defendant's Reply in Support of Motion to Dismiss the First Amended Class Action Complaint and Compel Arbitration, filed January 3, 2018 (Doc. 14) (“Reply”). Nine Energy first asserts that the Arbitration Agreement's consideration is Patterson's initial offer of employment and not continued at-will employment, because Patterson signed the Arbitration Agreement on the same day he accepted his employment offer and did not begin working for Nine Energy until twenty days later. See Reply at 5. Additionally, Nine Energy contends that “there was separate, valid consideration for the Agreement. In exchange for Plaintiff agreeing to arbitrate his employment-related disputes, Nine Energy promised not only to hire Plaintiff, but also to provide him access to its confidential information and trade secrets.” Reply at 11.
Second, Nine Energy argues that, while part of the Arbitration Agreement may exempt Nine Energy from arbitration, other parts of the agreement contain “exclusions for numerous types of employment-related claims that Plaintiff alone would be able to pursue.” Reply at 9. Nine Energy continues that “the exclusion of which Plaintiff complains relates to one limited form of relief -- injunctive relief -- that only the employer might be able to pursue to protect its confidential information and trade secrets.” Reply at 9. According to Nine Energy, “[i]t is impossible that the Plaintiff would be able to bring such a claim, just as it is impossible that Nine Energy would be able to bring any of the claims excluded for Plaintiff (i.e. EEOC charges, NLRB charges, unemployment claims).” Reply at 9.
Finally, Nine Energy contends that, “[e]ven if the Court were to find this provision unconscionable, the Court can and should modify or sever the provision rather than invalidating the entire Agreement.” Reply at 11. According to Nine Energy, the provision allowing it to bring an action for injunctive relief to protect confidential information “is not relevant or intertwined with the agreement to arbitrate compensation disputes, and severability is in line with the strong federal policy underlying the FAA favoring enforcement of arbitration agreements.” Reply at 11-12.
3. The Surreply.
Patterson filed a surreply. See Surreply in Opposition to Defendant's Motion to Dismiss the Class Action Complaint and Compel Arbitration, filed January 10, 2018 (Doc. 16-1) (“Surreply”).[4] Patterson first asserts that Nine Energy's employment offer was not contingent on signing the Arbitration Agreement, so the employment offer is not consideration for the agreement. See Surreply at 4. According to Patterson, Nine Energy's employment offer cannot be consideration for Patterson agreeing to arbitration, because the Offer Letter provides a list of contingencies, none of which include signing the Arbitration Agreement. See Surreply at 6. Further, according to Patterson, the Arbitration Agreement “contains an explicit merger clause that prevents the Offer Letter -- or any other oral/written agreement -- from being incorporated into the Arbitration Agreement or for serving as the consideration for the Agreement.” Surreply at 6.
Second, Patterson takes issue with Nine Energy's assertion that it promised to provide confidential information and trade secrets to Patterson as consideration for him signing the Arbitration Agreement. See Surreply at 6-7. According to Patterson, the Arbitration Agreement “does not require Defendant to disclose any specific confidential information or trade secrets.” Surreply at 7. Patterson adds that “no New Mexico court has reached the conclusion that an agreement to provide confidential information is adequate consideration for an agreement to arbitrate.” Surreply at 7.
Third, Patterson argues for the first time that the Arbitration Agreement is unconscionable, because “the terms of the agreement prevent Plaintiff from vindicating his statutory rights under the FLSA.”[5] Surreply at 7. Specifically, Patterson contends that the Arbitration Agreement's provision requiring arbitration to commence within 60 days after a dispute arises is unconscionable, because “the FLSA's limitations period may not be shortened by contract.” Surreply at 8. Finally, Patterson avers that the Court should not sever any allegedly unconscionable provisions of the Arbitration Agreement, because the agreement contains no severance clause. See Surreply at 9-10. Patterson instead concludes that the Court should refuse to enforce the entire Arbitration Agreement and deny the Motion. See Surreply at 10.
4. The Hearing.
The Court held a hearing. See Draft Transcript of Motion Hearing at 1:10-11 (taken June 27, 2018) (Court) (“Tr.”).[6] Nine Energy began by asserting that “Mr. Patterson in the briefing concedes that this Court has recognized . . . that an offer of at will employment is sufficient consideration for an arbitration agreement. And that's exactly what we have here.” Tr. at 4:19-24 (Mann). Patterson responded that the Arbitration Agreement's integration clause precludes any outside oral or written agreement -- including Patterson's employment offer -- from being incorporated into the Arbitration Agreement. See Tr. at 10:1-9 (Siegel). Patterson added that the Offer Letter lists several contingencies that Patterson had to meet to accept his employment offer, none of which includes signing the Arbitration Agreement. See Tr. at 13:2-9 (Siegel).
The parties then discussed unconscionability. See Tr. at 17:1-5 (Mann). Nine Energy asserted that Patterson “latches onto a portion of the agreement . . . that reserves to Nine the right to seek injunctive relief to enforce certain aspects of the agreement pertaining to confidential information. . . . What Mr. Patterson chooses to ignore [is] that the same paragraph on which he bases this argument contains multiple carve-outs solely for the . . . plaintiff here.” Tr. at 17:1-14 (Mann). Nine Energy thus contended that the carve-outs in the Arbitration Agreement are bilateral and not unilateral. See Tr. at 18:3-6 (Mann).
Patterson then returned to the podium and asserted that the Arbitration Agreement is substantively unconscionable for the separate reason that it “has effectively shortened the statute of limitations period.” Tr. at 22:15-16 (Siegel). Specifically, Patterson argued that the Arbitration Agreement shortens the limitations period from three years to sixty days. See Tr. at 22:21-24 (Siegel). Nine Energy responded that “the parties cannot limit statute[s] of limitations by contract. So even if that language is contained in the agreement [, were] it be attempted to be enforced it could not.” Tr. at 25:9-13 (Mann).
The Court then asked if Nine Energy contended that, if the Court were to find any provision unconscionable, it should sever the provision rather than not enforcing the entire agreement. See Tr. at 28:25-29:7 (Court, Mann). Nine Energy responded that, if the Court concluded that a provision is unconscionable, then Nine Energy would prefer the rest of the agreement enforced. See Tr. at 29:8-16 (Mann). At the hearing's conclusion, the Court stated that it was inclined to grant the Motion. See Tr. at 35:2 (Court).

MOO at 3-10, 330 F.Supp.3d, at 1289-92 (alterations in original).

         5. The MOO.

         In the MOO, the Court concludes “that the parties have not established diversity jurisdiction, so the Court will order the parties to show cause why the Court should not dismiss this case for lack of subject-matter jurisdiction.” MOO at 1, 330 F.Supp.3d at 1287. The Court also concluded that, “[o]n the merits, if the Court has subject-matter jurisdiction, the Court is inclined to conclude that the Arbitration Agreement contains adequate consideration, and, although the injunctive relief provision is substantively unconscionable, it is also severable.” MOO at 1-2, 330 F.Supp.3d at 1287. The Court stated that it was not inclined to hold the Arbitration Agreement's sixty-day limitations period unconscionable. See MOO at 2, 330 F.Supp.3d at 1287. Finally, the Court stated in the MOO that, if the Court has subject-matter jurisdiction, it is “inclined to stay proceedings in this case, rather than dismissing it.” MOO at 2, 330 F.Supp.3d, at 1287. The Court stated that, if it had subject-matter jurisdiction, it is inclined to grant the Motion in part. See MOO at 2, 330 F.Supp.3d at 1287.

         The Court now summarizes the portions of the Court's MOO that Patterson requests the Court to reconsider -- specifically, the severability analysis of the injunctive relief provision. In the MOO, the Court began its analysis regarding the injunctive relief provision's severability by quoting Cordova: “If a contract or term thereof is unconscionable at the time the contract is made a court may refuse to enforce the contract, or may enforce the remainder of the contract without the unconscionable term.” MOO at 41, 330 F.Supp.3d at 1311 (internal quotation marks omitted) (quoting Cordova, 2009-NMSC-021, ¶ 39, 208 P.3d at 911). The Court also cited to the Supreme Court of New Mexico's opinion in Dalton v. Santander Consumer USA, Inc., for the proposition that “[c]ourts may render a contract or portions of a contract unenforceable under the equitable doctrine of unconscionability when the terms are ‘unreasonably favorable to one party while precluding a meaningful choice of the other party.'” MOO at 41, 330 F.Supp.3d at 1311 (emphasis omitted) (quoting Dalton v. Santander Consumer USA, Inc., 2016-NMSC-035, ¶ 6, 385 P.3d at 621 (internal quotation marks omitted) (quoting Cordova, 2009-NMSC-021, ¶ 21, 208 P.3d at 907)). The Court cited to Padilla for the principle that, if a provision is severable, the agreement that remains after its severance will be a “mutual agreement to binding arbitration.” MOO at 41, 330 F.Supp.3d at 1311 (internal quotation marks omitted) (quoting Padilla, 2003-NMSC-011, ¶ 18, 68 P.3d at 909). The Court concluded that, without the substantively unconscionable injunctive relief provision, the Arbitration Agreement is a mutual agreement to binding arbitration and, furthermore, that it “would make little sense for the Court to trash the entire Arbitration Agreement because of an unconscionable provision unrelated to this case.” MOO at 42, 330 F.Supp.3d at 1311. For these reasons, the Court concluded that the injunctive relief provision is severable. See MOO at 42, 330 F.Supp.3d at 1311.

         The Court also performed a severability analysis for the sixty-day limitations period provision at issue in the Arbitration Agreement. See MOO at 45-46, 330 F.Supp.3d, at 1312-14. The Court compared Rivera, in which the Supreme Court of New Mexico struck an entire arbitration agreement, with Padilla, in which the Supreme Court of New Mexico upheld the agreement and severed only the unconscionable provision. See MOO at 45, 330 F.Supp.3d, at 1313 (discussing Rivera and Padilla). In Rivera, the Court noted, the Supreme Court of New Mexico stated that “it would not rewrite a contract ‘that is laced with unenforceable terms that were central to the original mechanism [] for resolving disputes between the parties.'” MOO at 45, 330 F.Supp.3d, at 1313 (alterations in Rivera) (internal quotations omitted) (quoting Rivera, 2011-NMSC-033, ¶ 56, 259 P.3d at 819 (quoting Cordova, 2009-NMSC-021, ¶ 40, 208 P.3d at 912)). The Court concluded that the sixty-day provision is not central to the Arbitration Agreement and could be “severed without substantially altering the method of dispute resolution contractually agreed on by the parties.” MOO at 46, 330 F.Supp.3d, at 1313 (quoting Rivera, 2011-NMSC-033, ¶ 56, 259 P.3d at 819). The Court stated that severance is “an appropriate remedy, because both federal and New Mexico law reflect a public policy in favor of arbitration agreements.” MOO at 46, 330 F.Supp.3d, at 1313 (citing Metz v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 39 F.3d 1482, 1488-89 (10th Cir. 1994) (“There is a strong federal policy encouraging the expeditious and inexpensive resolution of disputes through arbitration.”); United Tech. & Res., Inc. v. Dar Al Islam, 1993-NMSC-005, ¶ 11, 846 P.2d 307, 309 (“The legislature and the courts of New Mexico ‘have expressed a strong policy preference for resolution of disputes by arbitration.'”)).

         6. The Reconsideration Motion.

         In the Reconsideration Motion, Patterson contends that the Court committed manifest legal error in reaching the MOO's conclusion that, “although the injunctive relief provision in the Arbitration Agreement is substantively unconscionable, it is also severable.” Reconsideration Motion at 1 (quoting MOO at 20, 330 F.Supp.3d at 1305). Patterson agrees with the Court's determination that the injunctive relief provision is a unilateral carve-out benefitting exclusively the stronger party, and therefore substantively unconscionable and unenforceable under New Mexico law. See Reconsideration Motion at 1. Patterson contends that the Court should have followed Cordova, and Rivera, in determining whether the provision could be severed from the Arbitration Agreement, and that the Court's reliance on Padilla, constitutes manifest legal error based on the Supreme Court of New Mexico's decision in Cordova. See Reconsideration Motion at 1-2.

         Patterson contends that the Supreme Court of New Mexico distinguished Padilla in Cordova as follows:

In Padilla, 2003-NMSC-011, ¶¶ 10, 18, 133 N.M. 661, 68 P.3d 901, this Court struck from a contract an invalid post-arbitration appeal provision but left intact the underlying mutual arbitration clause. By contrast, the invalidity in this case involves the arbitration scheme itself, not just the procedures for appeal to the courts after the arbitration phase is over. We are reluctant to try to draft an arbitration agreement the parties did not agree on. This is particularly so in light of the categorization in the agreements of specific kinds of access to the courts World Finance had insisted on for itself. As we concluded in Fiser [v. Dell Comp. Corp.], 2008-NMSC-046, ¶ 24, 144 N.M. 464, 188 P.3d 1215, we must strike down the arbitration clause in its entirety to avoid a type of judicial surgery that would inevitably remove provisions that were central to the original mechanisms for resolving disputes between the parties. As courts in similar situations have found appropriate under these circumstances, we determine that the arbitration agreements are unenforceable in their entirety, and must be severed from the accompanying loan agreements.

Cordova, 2009-NMSC-021, ¶¶ 39-40, 208 P.3d at 911. Patterson contends that the MOO “contravenes Cordova's precedent that unilateral carve-out agreements are non-severable under New Mexico law.” Reconsideration Motion at 2. Patterson argues that Padilla's provision, because it is a post-arbitration provision, presented a different case, and that the Padilla court's analysis, therefore, is inapposite. See Reconsideration Motion at 2. Patterson asks, accordingly, that the Court grant the Reconsideration Motion, deny Nine Energy's Motion to Dismiss, and compel discovery in accordance with Supreme Court of New Mexico precedent. See Reconsideration Motion at 2. Patterson requests, in the alternative, that the Court certify the severability question to the Supreme Court of New Mexico. See Reconsideration Motion at 2-3. Patterson argues that rule 54(b) of the Federal Rules of Civil Procedure permits the Court to freely reconsider the MOO, with no limit or governing standard on its ability to do so, other than that it must do so “before the entry of judgment.” Reconsideration Motion at 3 (quoting Anderson Living Tr. v. WPX Energy Prod., LLC, No. CIV 12-0040 JB/KBM, 2015 WL 9703298 (D.N.M. Dec. 31, 2015) (Browning, J.) (citing Fed.R.Civ.P. 54(b); Been v. O.K. Indus., 495 F.3d 1217, 1225 (10th Cir. 2007)).

         Patterson asserts that, like the arbitration clauses in Rivera and Cordova, the clause at issue here is so central to the Arbitration Agreement that it may not be separated, irrespective of any savings clause. See Reconsideration Motion at 3 (citing Figueroa v. THI of N.M. at Casa Arena Blanca, LLC, 2013-NMCA-077, ¶ 39, 306 P.3d 480, 494). Patterson asserts that the Court correctly determined that the injunctive relief provision at issue is substantively unconscionable by relying on Rivera and Cordova:

In light of the Supreme Court of New Mexico precedent in Rivera v. American General Financial Services, Inc., 2011-NMSC-033, ¶¶ 51-54, 150 N.M. 398, 259 P.3d at 818-19, and Cordova v. World Fin. Corp. of N.M., 2009-NMSC-021, ¶ 20, 146 N.M. 256, 208 P.3d at 907, the Court is inclined to conclude that the Supreme Court of New Mexico would hold that this unilateral carve-out to benefit exclusively the stronger party is substantively unconscionable under New Mexico law and thus unenforceable.

Reconsideration Motion at 4 (quoting MOO at 21, 330 F.Supp.3d, at 1310).

         Patterson argues that, although the Court correctly determined that the injunctive relief provision is substantively unconscionable, the Court's determination that the provision is severable constitutes manifest legal error. See Reconsideration Motion at 5. Patterson contends that the Court should not have relied on Padilla in determining the provision's severability, because Padilla dealt with a “post-arbitration appeal provision that has nothing to do with the unilateral carve out for injunctive relief here.” Reconsideration Motion at 4 (internal quotation marks omitted) (quoting Padilla, 2003-NMSC-011, ¶¶ 10, 18, 68 P.3d at 905, 908-09). Patterson argues that the Supreme Court of New Mexico in Padilla never considered the severability of unilateral carve-out provisions, whereas the Supreme Court of New Mexico considered a unilateral carve-out in Cordova and determined that the unilateral carve-out could not be severed from the arbitration agreement particularly “in light of the categorization in the agreements of specific kinds of access to the courts [defendant] had insisted on for itself.” Reconsideration Motion at 5 (alteration in Reconsideration Motion) (quoting Cordova, 2009-NMSC-021, ¶¶ 39-40, 208 P.3d at 911).

         Patterson argues that the parties never agreed on the arbitration that the Court, by severing the injunctive relief provision, drafted, because the provision that the Court severed involves the arbitration scheme itself. See Reconsideration Motion at 5. Patterson cites to two Court of Appeals of New Mexico cases determining that unreasonably one-sided provisions exempting certain claims from arbitration could not be severed. See Reconsideration Motion at 5-6 (citing Ruppelt v. Laurel Healthcare Providers, LLC, 2013-NMCA-014, ¶¶ 19-21, 293 P.3d 902, 908-09; Abram ex rel. Lopez v. Paloma Blanca Health Care Assocs., L.L.C., No. 31, 850, 2013 WL 4516398, at *1 (N.M. Ct. App. June 17, 2013)). Patterson argues that, because the Arbitration Agreement lacks a savings or severance clause manifesting the parties' intent to save the contract if a provision is rendered unenforceable, and, under New Mexico law, the parties' manifested intention governs the severability determination, the Court committed manifest legal error in severing the provision despite the parties' lack of manifested intention to save the agreement. See Reconsideration Motion at 7-8 (citing Arrow Gas Co. of Dell City v. Lewis, 1962-NMSC-145, ¶ 24, 377 P.2d 655, 659; Fancher v. Bd. of Comm'rs of Grant Cty., 1921-NMSC-039, ¶ 63, 210 P. 237, 248). Patterson asserts that even if the parties had included a savings clause, the unilateral carve-out would still not be severable under New Mexico Law. See Reconsideration Motion at 8 n.9.

         7. The Reconsideration Response.

         On October 5, 2018, Nine Energy responded to the Reconsideration Motion. See Defendant's Memorandum in Opposition to Plaintiff's Reconsideration Motion, filed October 5, 2018 (Doc. 27) (“Reconsideration Response”). Nine Energy argues that the Court should reject the Reconsideration Motion in its entirety, “because even if the injunctive relief provision in the [Arbitration Agreement] is unconscionable, the Court did not commit clear legal error by severing it, and Plaintiff has not met his burden to demonstrate that certification is proper.” Reconsideration Response at 1. First, Nine Energy argues that the Reconsideration Motion is procedurally deficient, because: (i) it prematurely seeks reconsideration before the Court has dismissed the action or compelled arbitration; and (ii) Patterson does not seek the Court's leave to file what Nine Energy contends is no more than a supplemental briefing, not requiring a response. See Reconsideration Response at 1 n.1.[7]

         Nine Energy argues that Patterson uncritically analyzes Cordova, which confronts “predatory lending agreements.” Reconsideration Response at 1. Nine Energy contends that the Supreme Court of New Mexico has never held that an unconscionable arbitration provision may not be severed as a matter of law and contends that the Supreme Court of New Mexico has never overruled Padilla. See Reconsideration Response at 1-2. First, Nine Energy argues that Cordova and cases like it are distinguishable from the present case. See Reconsideration Response at 2. Nine Energy asserts that the arbitration agreement at issue in Cordova was attached to a loan agreement and permitted the lender to litigate all claims important to it, while prohibiting borrowers from litigating any claims important to them. See Reconsideration Response at 2. Nine Energy contends that Patterson's reliance on Cordova ignores the differences between the Cordova agreement, and the Arbitration Agreement. See Reconsideration Response at 3. Nine Energy contends that the Arbitration Agreement is unlike that in Cordova, because: (i) “the Agreement does not concern a predatory lending or consumer loan agreement, ” Reconsideration Response at 3; (ii) the Agreement permitted Patterson to pursue multiple claims outside of arbitration, and to file complaints with State and Federal administration agencies which could litigate claims against Nine Energy on Patterson's behalf, see Reconsideration Response at 3; and (iii) the injunctive relief provision at issue is narrow in scope and situated in a stand-alone section of the Agreement, Nine Energy “can only seek injunctive relief to enforce Plaintiff's obligations under restrictive covenants, ” and there is a low likelihood that Nine Energy could enforce the restrictive covenants against Patterson, Reconsideration Response at 3. Nine Energy argues, accordingly, that the Arbitration Agreement is less one-sided than the agreement in Cordova, and that the injunctive relief provision that the Court severed in the MOO is not so central to the Arbitration Agreement that it is incapable of severance. See Reconsideration Response at 4.

         Next, Nine Energy argues that Padilla, in which the Supreme Court of New Mexico recognized a court's discretion to sever a provision in an arbitration agreement, is still good law. See Reconsideration Response at 4. Nine Energy argues that even Cordova recognized the remedy of severance:

There are two possible remedial actions we can take to give effect to our holding that the one-sided arbitration provisions separately attached to the loan agreements are unenforceable: We can strike the arbitration provisions in their entirety, or we can attempt to refashion parts of them into a fair and balanced arbitration agreement.

         Reconsideration Response at 5 (emphasis and internal quotation marks omitted) (quoting Cordova, 2009-NMSC-021, ¶ 39, 208 P.3d at 911). Nine Energy argues that the Court should not read Cordova to mean that courts may never sever a provision from an arbitration provision when equity demands. See Reconsideration Response at 5.

         Last, Nine Energy argues that the Court should decline to grant certification. See Reconsideration Response at 6. Nine Energy argues that the Arbitration Agreement's enforceability “is not determinative of the merits of Plaintiff's underlying claims.” Reconsideration Response at 6. Nine Energy also argues that the Reconsideration Motion does not present a “novel, significant, and unsettled issue of law under the New Mexico Constitution, nor does it present an issue of significant public interest.” Reconsideration Response at 6. Nine Energy argues, accordingly, that Patterson has not met his burden to demonstrate that certification is warranted. See Reconsideration Response at 5.

         8. The Reconsideration Reply.

         On October 20, 2018, Patterson replied to Nine Energy. See Reply in Support of Reconsideration Motion, filed October 20, 2018 (Doc. 29) (“Reconsideration Reply”). In the Reconsideration Reply, Patterson asserts:

Defendant was Plaintiff's employer and drafted a form contract without any input or negotiations with Plaintiff. Defendants took advantage of being the stronger party by drafting a one-sided, stand-alone arbitration agreement (“Agreement”) that contains a non-mutual exclusion from the “Agreement” that allows it unilateral access to the courts to obtain injunctive relief to enforce any restrictive covenant in any separate agreement between the parties.

         Reconsideration Reply at 1 (emphasis omitted). Patterson reiterates the arguments from the Reconsideration Motion, see Reply at 1-2, and asserts that the unilateral carve-out provision here contains no language that limits Nine Energy's unilateral ability to seek permanent injunctive relief to enforce Patterson's obligations with respect to any other restrictive covenant in any other agreement between Patterson and Nine Energy in any court of competent jurisdiction, see Reconsideration Reply at 2. Patterson contends, therefore, that the provision at issue here is more unconscionable than the provision at issue in Cordova, because, here, Nine Energy can take advantage of its employees by having them sign separate agreements with restrictive covenants and then enforce those agreements at will. See Reconsideration Reply at 2-3.

         Patterson argues that courts of other jurisdictions agree with the Supreme Court of New Mexico that unfairly one-sided contract provisions are unconscionable and non-severable. See Reconsideration Reply at 3-4 (citing Taylor v. Butler, 142 S.W.3d 277, 280 (Tenn. 2004); Batory v. Sears, Roebuck & Co., 456 F.Supp.2d 1137 (D. Ariz. 2006)). Patterson next addresses Nine Energy's distinction between the unilateral judicial relief mechanism at issue and the lender-borrower provisions in Cordova and like cases. See Reconsideration Reply at 4. Patterson argues that the Supreme Court of New Mexico rejected this distinction, explaining that an employer may not reserve the unilateral right to grant the same relief as a court. See Reconsideration Reply at 4. Patterson argues that Nine Energy poses more of a threat to Patterson as an employer than Nine Energy would pose if it were a lender, because the “Defendant has made it pertinently clear that it intends to use the unilateral provision to its employees' disadvantage in regards to ‘any other restrictive covenant provisions in any separate agreement between the Company and the Employee.'” Reconsideration Reply at 4 (quoting Arbitration Agreement ¶ H, at 4). Patterson contends that the provision at issue is more unconscionable than the provision at issue in Rivera, because Patterson cannot identify the subject matter which the Arbitration Agreement controls. See Reconsideration Reply at 4.

         Patterson next argues that California courts faced with similar issues, and to which Patterson contends the Supreme Court of New Mexico often cites, do not sever similar agreements. See Reconsideration Reply at 5. Patterson requests that the Court follow the guidance of the United States Court of Appeals for the Ninth Circuit and decline to sever the provision. See Reconsideration Reply at 5-6. Patterson argues that, under United States Court of Appeals for the Tenth Circuit precedent, the Court should strictly construe the Arbitration Agreement against Nine Energy as the drafter. See Reconsideration Reply at 6 & n.3 (citing Dumais v. Am. Golf Corp., 299 F.3d 1216, 1219 (10th Cir. 2002)).

         Next, Patterson cites to decisions by the Honorable Karen B. Molzen, United States Magistrate Judge for the District of New Mexico, and by the Honorable Gregory B. Wormuth, United States Magistrate Judge for the District of New Mexico, in which Judge Molzen and Judge Wormuth determined that the Court's task in deciding a provision's severability is to determine “whether the arbitration clause must be struck in its entirety or can be reformed into a ‘fair and balanced' agreement.” Reconsideration Reply at 9 (citing Clark v. UnitedHealth Grp., Inc., No. CIV 13-0372 MV/CG, 2018 WL 2932735 (D.N.M. June 12, 2018) (Molzen, J.)) (quoting Gorman v. S/W Tax Loans, Inc., No. CIV 14-0089 GBW/KK, 2015 WL 12751710, at *8 (D.N.M. March 17, 2015) (Wormuth, M.J.)). Patterson contends that the most important question in an arbitration provision is what claims must be resolved in arbitration -- the question that the unilateral carve-out provision at issue addresses. See Reconsideration Reply at 10.

         Patterson likens this case to several other New Mexico cases which have held that unilateral carve-outs favoring the stronger party are unenforceable and not severable. See Reconsideration Reply at 10-11 (citing Ruppelt v. Laurel Healthcare Providers, LLC, 2013-NMCA-014, 293 P.3d 902; Figueroa v. THI of N.M. at Casa Arena Blanca, LLC, 2013-NMCA-077, 306 P.3d 480; Rivera v. Am. Gen. Fin. Servs., Inc., 2011-NMSC-033, 259 P.3d 803; Cordova, Dalton v. Santander Consumer U.S.A., Inc., 2015-NMCA-030, 345 P.3d 1086, rev'd on other grounds, 2016-NMSC-035, 385 P.3d 619; Pool v. DriveTime Car Sales Co., LLC, No. 33, 894, 2016 WL 3416372, at *6 (N.M. Ct. App. May 10, 2016)).

         9. The Notice of Supplemental Authorities.

         On October 25, 2018, Patterson filed a Notice of Supplemental Authorities. See Notice of Supplemental Authorities, filed October 25, 2018 (Doc. 30) (“Reconsideration Notice”). In the Reconsideration Notice, Patterson asserts that, since the time he filed his Reconsideration Reply, he has become aware of a District of New Mexico case supporting his position, which Patterson requests the Court consider. See Reconsideration Notice at 1. Patterson cites to Tatum v. ProBuild Co., LLC, No. CIV 12-1060 LH/LFG, 2013 WL 12329840, at *10 (D.N.M. July 17, 2013) (Hansen, J.), and contends that the Honorable Leroy Hansen, United States Senior District Judge for the District of New Mexico, concludes in Tatum v. ProBuild Co., LLC that a nearly mutual injunctive relief clause for the enforcement of restrictive covenants rendered the entire arbitration agreement at issue unenforceable. See Reconsideration Notice at 1. Patterson provides the Court with a copy of Judge Hansen's opinion in Tatum v. ProBuild Co., LLC. See Tatum v. ProBuild Co., LLC Opinion, filed October 25, 2018 (Doc. 30-1).

         10. The Hearing.

         The Court held a hearing on October 25, 2018. See Draft Transcript of Reconsideration Motion Hearing at 1 (taken Oct. 25, 2018) (Court) (“Oct. 25 Tr.”).[8] Patterson began by asserting that the Court's decision in the MOO is contrary to Supreme Court of New Mexico precedent, which, Patterson contended, dictates that the provision at issue “renders the agreement unenforceable, and severance is not proper because the provision is central to the agreement.” Oct. 25 Tr. at 2:20-22 (Siegel). Patterson asserted that, while the Court based its substantive unconscionability determination in the MOO on Rivera and Cordova, it cited to neither Cordova nor Rivera in its analysis of the appropriateness of severance of the provision at issue. See Oct. 25 Tr. at 2:23-25 (Siegel); id. at 3:7-10 (Siegel). Patterson contends that the Court instead relied on Padilla, which Patterson alleges was “improper, ” because Padilla, unlike the present case, concerns an appeals provision that came into effect only after arbitration was over. Oct. 25 Tr. at 3:10-17 (Siegel). Patterson argues that, in Clay v. New Mexico Title Loans, Inc., 2012-NMCA-102, ¶ 40, 288 P.3d 888, 900, the Court of Appeals of New Mexico concluded that an escape hatch appeals clause in an arbitration agreement was severable by citing to Padilla for the proposition that an appeal provision was severable because it governed only a post-award proceeding. See Oct. 25 Tr. at 3:16-23 (Siegel).

         Patterson asserted: “This all boils down to whether the unilateral carve-out for judicial relief is central to the agreement or collateral.” Oct. 25 Tr. at 3:23-4:2 (Siegel). Patterson contended that the carve-out provision at issue in the Arbitration Agreement is central to the Arbitration Agreement, and therefore, the entire Arbitration Agreement is unenforceable if it is unconscionable. See Oct. 25 Tr. at 4:2-12 (Siegel). Patterson argues that the key is that the provision at issue is not merely a unilateral carve-out, but a unilateral carve-out for judicial relief. See Oct. 25 Tr. at 4:18-21 (Siegel). Patterson argues that, although the Court in its MOO and Nine Energy in its briefing pointed to provisions in the Arbitration Agreement allowing Patterson to bring unemployment or workers compensation claims outside of the arbitration context, many courts have found that these provisions are not carve-outs for judicial relief, because they have their own adjudicatory frameworks. See Oct. 25 Tr. at 4:2-5:3 (Siegel). Patterson asserted that the provision at issue is entirely one-sided. See Oct. 25 Tr. at 5:6-8 (Siegel).

         The night before the hearing, Patterson discovered Tatum v. ProBuild Co., LLC., and filed the Notice of Supplemental Authorities to inform the Court of that case. See Oct. 25 Tr. at 5:9 (Siegel). See also Tatum v. ProBuild Co., LLC Opinion at 1. Patterson contended that the most important claim he might raise against Defendant is for injunctive relief. See Oct. 25 Tr. at 6:4-6 (Siegel). Patterson contended that in the Arbitration Agreement, Nine Energy is the only person that has the unilateral right to go to court and enforce the provisions for injunctive relief. See Oct. 25 Tr. at 7:8-10 (Siegel).

         Nine Energy then argued that Senior Judge Hansen did not discuss severability at all in Tatum v. ProBuild Co., LLC. See Oct. 25 Tr. at 9:7-11 (Mann). Nine Energy noted that, in several of the cases which Patterson cites, the courts opted to sever the provisions at issue. See Oct. 25 Tr. at 9:10-14 (Mann). Nine Energy argued that the “key, as the Court noticed, is whether the substantive unconscionability clause is essential to the agreement as a whole.” Oct. 25 Tr. at 9:14-16 (Mann). Nine Energy noted that the provision at issue in the Arbitration Agreement contains eleven paragraphs, addressing eleven separate points, but that the Court opted to strike only one sentence in one paragraph out of eleven, so that the remaining agreement requires both parties to submit all disputes to arbitration. See Oct. 25 Tr. at 9:20-25 (Mann). Nine Energy argued that the Court found a justifiable way to sever and quoted from the MOO: “Further, it would make little sense for the Court to trash the entire Arbitration Agreement because of an unconscionable provision unrelated to this case.” Oct. 25 Tr. at 10:12-15 (Mann) (quoting MOO at 42, 330 F.Supp.3d, at 1311).

         Patterson then argued that the provision at issue pertains to the most likely actions that Nine Energy might bring against its employees. See Oct. 25 Tr. at 11:3-5 (Siegel). Patterson reiterated that no case in New Mexico has allowed the severance of an arbitration agreement provision that is a unilateral carve-out for judicial relief. See Oct. 25 Tr. at 11:5-8 (Siegel). Patterson argues that Nine Energy imposed the Arbitration Agreement on Patterson without ...


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