## Facts

- Alice Finn and Roy Ballentine co-founded an S-corporation; Finn later held 37.5% of the shares.
- A shareholder agreement required arbitration and set repurchase pricing for shares upon termination, including different formulas for “for cause” terminations and a “claw back” provision tied to later higher-value resales.
- In 2008, other shareholders terminated Finn and forced a repurchase of her shares at the “for cause” price, issuing a promissory note reflecting that contractual valuation.
- In a first arbitration (2009), a panel found Finn’s termination unlawful and awarded her damages for the forced stock sale and lost wages, payable on a schedule.
- After the first award, the business reorganized by transferring assets to a new LLC and selling a 40% membership interest in that LLC to an investor for $7 million, plus an additional capital contribution.
- In 2013, Finn initiated proceedings and compelled a second arbitration, asserting (i) a contract “claw back” entitlement based on the post-award transaction and (ii) unjust enrichment tied to the restructuring/investment deal.
- The second arbitration panel rejected the contract “claw back” claim but awarded Finn $600,000 in equitable relief for unjust enrichment.
- In court, defendants sought partial vacatur under RSA 542:8, arguing the panel made a plain mistake of law by failing to apply res judicata; Finn argued the Federal Arbitration Act (FAA) preempted RSA 542:8’s review standard.

## Issues

1. Whether the FAA preempted RSA 542:8’s authorization to vacate an arbitration award for a “plain mistake” of law or fact.
2. Whether the unjust-enrichment award from the second arbitration was barred by res judicata such that the panel’s contrary ruling constituted a “plain mistake of law” justifying partial vacatur under RSA 542:8.

## Decision

- The New Hampshire Supreme Court affirmed the superior court’s partial vacatur of the second arbitration award.
- The court held the FAA did not preempt application of RSA 542:8’s “plain mistake” standard in this case.
- The court held res judicata barred Finn’s unjust-enrichment claim because it arose from the same transaction or occurrence addressed in the first arbitration and could have been raised there.
- The unjust-enrichment portion of the second arbitration award was vacated.

## Legal Principles

- The FAA does not necessarily preempt a state arbitration statute that permits vacatur for “plain mistake” where state law governs the review and no controlling conflict requires exclusive FAA standards.
- Under RSA 542:8, a court may vacate or modify an arbitration award when a plain mistake of law is clear on the record.
- Res judicata applies to arbitration and bars not only claims actually litigated, but also claims that could have been litigated earlier between the same parties and that arise from the same transaction or occurrence.
- An arbitrator’s failure to apply res judicata to a claim that is transactionally related to a prior arbitration can constitute a plain mistake of law.

## Conclusion

The court upheld state-law judicial review for plain legal error and concluded that a second arbitration panel could not award unjust-enrichment relief based on a transaction tied to the earlier dispute when the claim should have been brought in the first arbitration and was therefore precluded.


Finn v. Ballentine Partners, LLC, 143 A.3d 859 (N.H. 2016)