Argued: January 27, 2016
Hodes, P.A., of Manchester (Jamie N. Hage on the brief), and
Cohan Rasnick Myerson Plaut LLP, of Boston, Massachusetts
(Robert D. Cohan on the brief and orally), for the plaintiff.
Middleton, Professional Association, of Manchester (Wilbur A.
Glahn, III, Michael A. Delaney, and Nicholas F. Casolaro on
the brief, and Mr. Glahn orally), for the defendants.
plaintiff, Alice Finn, appeals an order of the Superior Court
(McNamara, J.) denying her motion to affirm and
granting the motion of the defendants, Ballentine Partners,
LLC (BPLLC), Ballentine & Company, Inc., Roy C.
Ballentine, Kyle Schaffer, Claudia Shilo, Andrew McMorrow,
and Gregory Peterson, to vacate a final arbitration award in
part pursuant to RSA 542:8 (2007). Because we conclude that
the trial court did not err in ruling that RSA 542:8 is not
preempted by the Federal Arbitration Act (FAA), see
9 U.S.C. §§ 2, 9-11 (2012), and in ruling, pursuant
to RSA 542:8, that the arbitration panel committed a plain
mistake of law by concluding that res judicata did not bar
Finn's claim, we affirm.
record supports the following facts. Ballentine and Finn
founded Ballentine Finn & Company, Inc. (BFI), a New
Hampshire subchapter S corporation, in 1997. Each owned one
half of the company's stock, and Finn served as the Chief
Executive Officer. Later, four other individuals became
shareholders of BFI. In 2008, Ballentine and the other
shareholders forced Finn out of the corporation and
terminated her employment. BFI asserted that the termination
was for cause, and exercised its right to purchase Finn's
shares at the price assigned to "for cause"
terminations pursuant to the Shareholder Agreement
(Agreement). At the time of her termination, Finn held 37.5%
of the shares of BFI. BFI gave Finn a promissory note in the
amount of $4, 635, 684, which represented 1.4 times earnings
for her shares for the 12 months before her termination. This
amount was below the fair market value of Finn's shares.
to the Agreement, Finn challenged her termination before an
arbitration panel in 2009. This first arbitration panel found that
Finn's termination was unlawful and awarded her $5, 721,
756 for the stock that BFI forced her to sell and $720, 000
in lost wages. The panel recognized that BFI likely did not
have sufficient liquidity to pay the award immediately, so it
authorized BFI to make periodic payments through December 31,
the first panel award, BFI formed BPLLC, contributed all of
its assets and some of its liabilities to BPLLC, and became
its sole member. BFI then changed its name to Ballentine
& Company (Ballentine & Co.). After the
reorganization, Ballentine & Co. sold 4, 000 preferred
units, a 40% membership interest in BPLLC, to Perspecta
Investments, LLC (Perspecta). Perspecta paid $7, 000, 000 to
Ballentine & Co. and made a $280, 000 capital
contribution to BPLLC. The defendants asserted that the
membership interest had to be sold in order to raise funds to
pay the arbitration award to Finn.
2013, Finn filed a complaint and a motion to compel
arbitration in superior court, alleging that she was entitled
to relief under the "Claw Back" provision of the
Agreement. That provision provides, in essence, that if a
founding shareholder of BFI sells shares back to the
corporation and those shares are resold at a higher price
within eight years, the founder is entitled to recover a
portion of the additional price paid for the shares. The
defendants moved to dismiss Finn's complaint, arguing
that it was barred by res judicata. The trial court did not
rule on the motion to dismiss; instead, it stayed the court
proceedings and granted Finn's motion to compel
arbitration, concluding that the issue of res judicata must
be decided by arbitration in the first instance.
second arbitration panel held a five-day hearing to decide
Finn's new claims, which included breach of contract and
unjust enrichment. It ruled that "[t]he findings of the
first panel essentially resolve[d] Finn's contract claim
for 'Claw Back' benefits because the predicate facts
needed to support a contractual 'Claw Back' claim
were found against Finn by that panel." The second panel
concluded, however, that Finn was entitled to an award based
upon her unjust enrichment claim. Although it agreed with the
defendants' argument that a party cannot be awarded
relief under a theory of unjust enrichment when "there
is an available contract remedy identified, " the panel
stated that this "legal principle cannot equitably
pertain where the breaching party has, because of its
wrongdoing, effectively eliminated the opposing party's
contractual remedy, as happened here." Therefore, the
panel concluded that the defendants had been unjustly
enriched by the sale of shares to Perspecta. Using the
"Claw Back" provision in the Agreement as a guide
only, the second panel awarded Finn $600, 000 in equitable
to court, Finn moved to affirm, and the defendants moved to
vacate in part, the second arbitration award. Applying the
plain mistake standard of review found in RSA 542:8, the
trial court ruled that the second panel's award of
additional damages to Finn on her unjust enrichment claim was
barred, under settled principles of res judicata, by the
award of damages she received from the first panel.
moved for reconsideration, arguing that the FAA applied to
this case because the Agreement affected interstate commerce.
Therefore, she argued, the trial court should have applied
the more deferential FAA standard in reviewing the
arbitration award because the FAA preempts state law. The
trial court denied the motion, and this appeal followed.
appeal, Finn asserts that the trial court erred in applying
RSA 542:8 to review the second arbitration panel's award
because state law is preempted by the FAA. Alternatively, she
argues that, even if RSA 542:8 applies, the trial court erred
because it did not afford sufficient deference to the
panel's findings of fact and rulings of law. Finally, she
argues that the trial court misapplied the doctrine of res
judicata to her unjust enrichment claim. We examine her
arguments in turn.
argues that the trial court erred in reviewing the second
panel's award under RSA 542:8 instead of §§ 9
and 10 of the FAA. Relying primarily upon the decision of the
United States Supreme Court in Hall Street Associates,
L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008), she asserts
that RSA 542:8 is impliedly preempted by the FAA because the
Agreement is a contract affecting interstate commerce,
which the FAA applies, and that failing to employ the more
deferential federal standard of judicial review of
arbitration awards "foils the objective Congress seeks
to advance with the FAA." "Because the trial
court's determination of federal preemption is a matter
of law, our review is de novo." N.H.
Attorney Gen. v. Bass Victory Comm., 166 N.H. 796, 801
federal preemption doctrine effectuates the Supremacy Clause
of the United States Constitution. State v. Exxon Mobil
Corp., 168 N.H. 211, 229 (2015). It ensures that federal
law "shall be the supreme law of the land; and the
judges in every state shall be bound thereby, anything in the
Constitution or laws of any state to the contrary
notwithstanding, " U.S. CONST. art. VI, by invalidating
state laws that conflict with federal legislation. Exxon
Mobil Corp., 168 N.H. at 229. Congress may expressly
preempt a state law, or it may implicitly preempt a state law
through "field" preemption or "conflict"
preemption. See id.
Supreme Court has held that "[t]he FAA contains no
express pre-emptive provision, nor does it reflect a
congressional intent to occupy the entire field of
arbitration." Volt Info. Sciences v. Leland Stanford
Jr. U., 489 U.S. 468, 477 (1989). Therefore, Finn
presses conflict preemption, which "arises when
compliance with both federal and state regulations is a
physical impossibility, or when state law stands as an
obstacle to the accomplishment and execution of the full
purposes and objectives of Congress." Exxon Mobil
Corp., 168 N.H. at 229 (quotation omitted).
trial court reviewed the second panel's award pursuant to
RSA 542:8, which creates a procedure for parties to seek
confirmation, modification, or vacatur of an arbitral award:
At any time within one year after the award is made any party
to the arbitration may apply to the superior court for an
order confirming the award, correcting or modifying the award
for plain mistake, or vacating the award for fraud,
corruption, or misconduct by the parties or by the
arbitrators, or on the ground that the arbitrators have
exceeded their powers. Where an award is vacated and the time
within which the agreement required the award to be made has
not expired, the court may in its discretion, direct a
rehearing by the arbitrators or by new arbitrators appointed
by the court.
construed this statute to grant a court the authority to
vacate an award for plain mistake if it "determine[s]
that an arbitrator misapplied the law to the facts."
Sherman v. Graciano, 152 N.H. 119, 120 (2005).
Similarly, the FAA creates "mechanisms for enforcing
arbitration awards: a judicial decree confirming an award, an
order vacating it, or an order modifying or correcting
it." Hall Street, 552 U.S. at 582.
Section 2 of the FAA provides:
A written provision in . . . a contract evidencing a
transaction involving commerce to settle by arbitration a
controversy thereafter arising out of such contract or
transaction, or the refusal to perform the whole or any part
thereof, or an agreement in writing to submit to arbitration
an existing controversy arising out of such a contract,
transaction, or refusal, shall be valid, irrevocable, and
enforceable, save upon such grounds as exist at law or in
equity for the revocation of any contract.
9 U.S.C. § 2. Thus, the FAA applies to state courts
insofar as § 2 prohibits state courts from refusing to
enforce agreements to arbitrate. Southland Corp. v.
Keating, 465 U.S. 1, 14-16 (1984).
argument relies upon §§ 9,  10 and 11 of the FAA. In
Hall Street, the Supreme Court held that
the listed grounds for vacation, correction or modification
of an arbitral award by a federal court, as set forth in
§§ 10 and 11 of the FAA, may not be supplemented by
the terms of the arbitration agreement entered into by the
parties. Hall Street, 552 U.S. at 590. These
provisions provide much more limited grounds for review of an
arbitration award than does "plain mistake" review
under RSA 542:8.
not agree with Finn's first argument that the FAA is the
exclusive method by which to review the second panel's
award because we conclude that §§ 9-11 of the FAA
apply only to arbitration review proceedings commenced in
federal courts. As we have already noted, the FAA creates
some substantive rules that apply to arbitration agreements
in both federal and state courts when the contract to
arbitrate affects commerce. Southland Corp., 465
U.S. at 14-16. Section 2 of the act applies in state courts
to prevent anti-arbitration laws from invalidating otherwise
lawful arbitration agreements. Allied-Bruce Terminix Cos.
v. Dobson, 513 U.S. 265, 281 (1995). However, it does
not follow that the FAA applies to state courts in its
entirety. In fact, the Supreme Court has suggested that some
of the statute's provisions apply only in federal courts.
See Volt, 489 U.S. at 477 n.6. In considering
whether other sections of the FAA apply in state courts, the
Court noted that it has "never held that §§ 3
and 4, which by their terms appear to apply only to
proceedings in federal court, . . . are nonetheless
applicable in state court." Id. This comment
clearly contemplates that the Court considers the application
to the states of each section individually, rather than the
application of the Act as a whole. Therefore, we consider
whether §§ 9-11 of the FAA also use language that
limits their application to federal courts.
sections at issue in Volt made reference to either
"the courts of the United States" or "any
United States district court." Id.; see
Southland Corp., 465 U.S. at 29 n.18 (O'Connor, J.,
dissenting) (explaining that "courts of the United
States" is a term of art designating federal, not state
courts). Likewise, §§ 10 and 11, the sections that
establish the limited grounds upon which arbitration awards
may be upset, reference only the federal courts. 9 U.S.C.
§§ 10, 11. Although § 9 of the FAA could be
read to encompass state courts as well as federal courts, and
to contemplate that state courts reviewing covered
arbitration awards (i.e., those involving contracts
affecting interstate commerce) must utilize exclusively the
standards set forth in §§ 10 and 11, the Court has
not interpreted the FAA in this fashion. In Hall
Street, the Court not only acknowledged the potential
for review of arbitration awards under state law, see
Hall Street, 552 U.S. at 590, but even noted the
possibility of a federal court reviewing an arbitration award
under its "case management authority independent of the
FAA, " id. at 592. If the FAA were, in all
circumstances, the exclusive grounds for review of
arbitration awards subject to the FAA, these possible
alternative paradigms of judicial review that the Court
described would have been completely foreclosed. Indeed, the
Texas Supreme Court has specifically recognized the limited
applicability of the FAA to state courts: "The mere fact
that a contract affects interstate commerce, thus triggering
the FAA, does not preclude enforcement under [state law] as
well." Nafta Traders, Inc. v. Quinn, 339 S.W.3d
84, 98 (Tex. 2011).
the FAA applied to the extent that it required the parties to
arbitrate their dispute, as the trial court noted when it
referred Finn's claim to the second arbitration panel.
That does not mean that all aspects of the FAA are applicable
to this proceeding. Based upon our review of the pertinent
case law, we conclude that neither Hall Street, nor
any other precedents by which we are bound, requires that we
accept plaintiff's position ...