In Dalton v. Santander Consumer USA, Inc., — P.3d —-, 2014 WL 7463867 (N.M.App. 2015), the New Mexico Court of Appeal found that an arbitration clause an automobile RISC was unconscionable, and that the unconscionability analysis was not preempted by the FAA.
A recent decision of a federal court applying California’s unconscionability doctrine to an arbitration scheme identical to that in this case is in accord with our analysis. See Trompeter v. Ally Fin., Inc., 914 F.Supp.2d 1067 (N.D.Cal.2012). In Trompeter, the court noted that the defendant’s carve-outs for self-help repossession and small claims remedies operated in tandem to allow the defendant the option to forego arbitration during typical disputes with its borrower. Id. at 1073–74. “If the consumer stops paying on the debt,” the court stated, “his or her vehicle will likely be repossessed and the consumer could be held liable for any deficiency after disposition of the repossessed vehicle[.]” Id. at 1073. Meanwhile, the borrower’s likely remedies, such as injunctions or statutory lemon law claims were all subject to the arbitration clause. Id. at 1073–74. This contributed to a finding of unconscionability. Id. The bulk of Defendant’s argument urges us to ignore the self-help carve-out. Defendant contends that “[t]he arbitration provision does not exempt from arbitration [the] right to proceed with self-help repossession. It simply notes the existence of such remedies.” In other words, according to Defendant, the language exempting self-help applies to a non-judicial, non-arbitrable right is thus superfluous and therefore cannot be unconscionable. Even assuming that self-help repossession is necessarily non-arbitrable—which in our view is not entirely clear, see Rivera, 2011–NMSC–033, ¶ 51 (“As a matter of law arbitrators have broad authority and are deemed capable of granting any remedy necessary to resolve a case.”); see also Buffalo Forge Co. v. United Steelworkers of Am., AFL–CIO, 428 U.S. 397, 405–06 (1976) (stating that a court would be permitted to enjoin a self-help labor strike if the strike arose from a dispute that was subject to binding arbitration); Greene v. Alliance Auto., Inc., 435 S.W.3d 646, 653 (Mo.Ct.App.2014) (examining a clause requiring arbitration prior to exercise of a creditor’s self-help repossession remedy), the fact remains that Defendant is a secured creditor that can generally act outside the judicial process to foreclose on its collateral. Including an arbitration clause in a vehicle financing contract would normally subject to mandatory arbitration Defendant’s most important remaining remedies: the ability to sue for a deficiency judgment or the ability to judicially foreclose on the vehicles when self-help repossession cannot be completed without a breach of the peace. In this case, however, Defendant has carved out a small claims exception that encompasses both of these remedies. Thus, Defendant’s small claims carve-out, viewed in the context of Defendant’s self-help right—whether pre-existing or also carved out—renders the agreement to arbitrate unfairly one-sided. While ostensibly bilateral on its face, the practical effect of Defendant’s decision to exempt small claims remedies, much like the “collections” exceptions at issue in our nursing home cases, is to create a choice of forum for its preferred claims, while relegating a borrower’s most likely claims to mandatory arbitration. See Figueroa, 2013–NMCA–077, ¶ 29; Ruppelt, 2013–NMCA–014, ¶ 18. Under these circumstances, we hold that the arbitration clauses in the Cadillac and Pontiac finance agreements are substantively unconscionable as a matter of law.