## Facts

- Edward R. Flemma worked for Halliburton for decades and served as district manager in Farmington, New Mexico.
- Halliburton pursued consolidation of three local facilities and considered two potential sites: Troy King (within city limits) and Crouch Mesa (outside city limits).
- Flemma opposed the Troy King site and raised public-safety concerns about locating the facility there.
- Flemma alleged he was warned by supervisors to stop speaking negatively about the Troy King property and to remain silent if he “value[d]” his career.
- Flemma continued to document and communicate safety concerns, including in an executive summary comparing the sites.
- Halliburton terminated Flemma’s employment in 2008; he sued for retaliatory wrongful discharge and related claims, alleging he was fired for raising safety objections.
- Halliburton sought to compel arbitration under its Dispute Resolution Program (DRP), asserting the DRP formed an arbitration agreement accepted by continued employment and governed by Texas law.
- The DRP required arbitration of employment disputes but reserved to Halliburton alone the power to modify, discontinue, or replace dispute-resolution procedures, including after a claim accrued and up to the arbitration hearing.

## Issues

1. Whether New Mexico’s lex loci contractus rule required applying Texas law to enforce the DRP arbitration agreement, or whether enforcement would violate New Mexico public policy such that New Mexico law should apply.
2. Whether, under the applicable law, the DRP created a valid and enforceable agreement to arbitrate given Halliburton’s unilateral power to change or terminate the program after a claim accrued.

## Decision

- The Supreme Court of New Mexico reversed the Court of Appeals and remanded for further proceedings in district court.
- The court held that enforcing the Texas-formed DRP arbitration agreement would violate New Mexico public policy because it would be unconscionable under New Mexico law; New Mexico law therefore governed enforceability.
- Applying New Mexico law, the court held there was no valid agreement to arbitrate because Halliburton’s post-accrual power to revoke or modify its arbitration promise made that promise illusory and unsupported by consideration.
- Because the arbitration agreement was unenforceable on these grounds, the court did not need to resolve additional challenges such as whether Flemma received or assented to the DRP.

## Legal Principles

- New Mexico generally applies the law of the place of contracting (lex loci contractus) to contract disputes, including arbitration agreements, but will decline to enforce foreign law when enforcement would violate fundamental New Mexico public policy.
- An arbitration agreement is substantively unconscionable under New Mexico law when it is unreasonably one-sided, including where only the employer retains unilateral authority to alter, discontinue, or replace dispute-resolution terms without reciprocal employee rights.
- A promise is illusory, and thus fails for lack of consideration, when one party retains unilateral authority to revoke or materially modify its promise after the other party’s claim has accrued, leaving no binding commitment.
- An employer’s retained power to modify or terminate an arbitration program after a claim accrues and up to the hearing renders the employer’s promise to arbitrate illusory and the arbitration agreement unenforceable.

## Conclusion

The court refused to compel arbitration because Halliburton’s DRP allowed unilateral post-accrual modification or termination, making the employer’s arbitration promise illusory and the agreement substantively unconscionable under New Mexico law; enforcing it would violate New Mexico public policy, so litigation could proceed in district court.


Flemma v. Halliburton Energy Servs., Inc., 303 P.3d 814 (N.M. 2013)