GRAND SUMMIT HOTEL CONDOMINIUM UNIT OWNERS' ASSOCIATION v. L.B.O. HOLDING, INC. D/B/A Attitash Mountain Resort

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THE SUPREME COURT OF NEW HAMPSHIRE

___________________________

Carroll
No. 2017-0673

GRAND SUMMIT HOTEL CONDOMINIUM UNIT OWNERS’ ASSOCIATION

v.

L.B.O. HOLDING, INC. d/b/a ATTITASH MOUNTAIN RESORT

Argued: June 27, 2018
Opinion Issued: September 18, 2018

Ramsdell Law Firm, P.L.L.C., of Concord (Michael D. Ramsdell on the
brief and orally), for the plaintiff.

Devine, Millimet & Branch, Professional Association, of Manchester
(Thomas Quarles, Jr. and Brendan P. Mitchell on the brief, and Mr. Mitchell
orally), for the defendant.

BASSETT, J. The plaintiff, the Grand Summit Hotel Condominium Unit
Owners’ Association (Association), filed claims against the defendant, L.B.O.
Holding, Inc. d/b/a Attitash Mountain Resort (Attitash), arising from Attitash’s
alleged failure to maintain a cooling tower at the Grand Summit Hotel and
Conference Center (Condominium) in Bartlett. Attitash moved to dismiss the
Association’s claims, arguing that they were barred by a provision, which
required arbitration of certain disputes, in a management agreement (the
Agreement) between the parties. The Trial Court (Ignatius, J.) denied Attitash’s
motion to dismiss, ruling that the Association’s claims fall outside of the scope
of the provision. The trial court subsequently approved this interlocutory
appeal. See Sup. Ct. R. 8. We affirm and remand.

The following facts are drawn from the interlocutory appeal statement.
The Association is comprised of the residential and commercial owners of the
Condominium. It is responsible for managing, or arranging for the
management of, the Condominium. To fulfill that obligation, the Association
hired Attitash to manage the property under the terms of the Agreement.
Under the Agreement, the Association agreed to pay the “Actual Costs” of
operating the Condominium, which the Agreement defines, in part, as “the total
cost to [the] Manager of operating the Condominium” including “all costs,
charges, and expenses of every kind and description fairly attributable to the
operation, management or maintenance of the Association.” As manager of the
Condominium, Attitash has assumed the responsibility to arrange and
supervise all repairs, replacements, and maintenance, and to “[n]egotiate and
enter into on behalf of the Association such service and maintenance contracts
as may be required . . . including . . . contracts for . . . equipment
maintenance.”

Between 2011 and the spring of 2013, Attitash retained a commercial
heating and cooling contractor to provide maintenance of the Condominium’s
heating and cooling system, including winterizing the cooling tower each fall.
However, Attitash failed to enter into a contract with that contractor — or with
any other contractor — to provide winterizing services in the fall of 2013, and
the cooling tower was not properly winterized for the winter of 2013-2014. In
the spring of 2014, the contractor inspecting the cooling system discovered
that it had been damaged during the winter and was unfit for use.

Shortly thereafter, Attitash informed the Association of the damage and
represented that, although it had entered into a maintenance contract for the
cooling tower that covered the fall of 2013, the contractor had failed to
winterize the cooling tower. Attitash subsequently represented to the
Association that the cooling tower had failed because it had reached the end of
its useful life. During the summer of 2014, Attitash rented a temporary cooling
tower. In anticipation of the summer of 2015, it arranged to have the damaged
cooling tower repaired. Attitash incurred more than $200,000 in costs, which
the Association paid.

In 2016, the Association filed this action asserting claims against
Attitash for breach of contract, breach of the covenant of good faith and fair
dealing, negligence, and violation of the Consumer Protection Act. Attitash
moved to dismiss, arguing that the suit was barred because the Agreement
contains a provision that requires arbitration for disputes over “Actual Costs.”
The disputes provision states:

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 The [Association] shall have thirty (30) days from the rendition of a
statement by [Attitash] for both the Management Fee or of the
Actual Cost within which to protest the nature, amount or method
by which such amount was determined. If the matter cannot be
resolved by the parties within thirty (30) days thereafter, it shall be
rendered to an independent public accountant for a decision,
which decision shall be binding on both parties.

The trial court denied Attitash’s motion, concluding that the provision does not
“require[] mandatory arbitration for all matters leading to the actual costs that
were incurred in this case.” The trial court further ruled that review by an
accountant “would not be appropriate for disputes involving contract
negotiation, representations made by the contracting parties, disputes over the
effective date of a contract, compliance with the terms of a contract, inadequate
work performed by [Attitash], and other assertions made by [the Association].”
This interlocutory appeal followed.

Our standard of review on a motion to dismiss is “whether the allegations
in the plaintiff’s pleadings are reasonably susceptible of a construction that
would permit recovery.” Lamprey v. Britton Constr., 163 N.H. 252, 256 (2012).
We “assume the plaintiff’s allegations to be true and construe all reasonable
inferences in the light most favorable to [the plaintiff].” Id. Our threshold
inquiry involves testing the facts alleged in the pleadings against the applicable
law. Id. Dismissal is appropriate “[i]f the facts pled do not constitute a basis
for legal relief.” Beane v. Dana S. Beane & Co., 160 N.H. 708, 711 (2010)
(quotation omitted). In making our determination, we may also consider
documents attached to the plaintiff’s pleadings, or “documents the authenticity
of which are not disputed by the parties, official public records, or documents
sufficiently referred to in the [complaint].” Ojo v. Lorenzo, 164 N.H. 717, 721
(2013) (quotation and brackets omitted).

As a threshold matter, Attitash argues that this dispute should be
governed by the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1-16 (2012). The
Association disagrees, arguing that this dispute is governed by RSA 542:1
(2007), in part, because the Agreement “expressly provides that it is governed
by New Hampshire law.” We note that, in pleadings filed in advance of the
hearing on the motion to dismiss, Attitash did not argue that the trial court
should apply federal law. To the contrary, Attitash relied exclusively on state
law. The trial court, when ruling on the motion to dismiss, did not rely on
federal law. Only when Attitash requested that the trial court transfer an
interlocutory appeal did it argue — for the first time — that the FAA controls.

We assume, without deciding, that this choice of law issue is properly
before us. However, we need not decide whether federal or state law controls
because, in regard to the issues on appeal, federal and state law are the same.
Indeed, in its brief, Attitash acknowledges that the “New Hampshire

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[a]rbitration [s]tatute [m]irrors the FAA and [r]equires the [s]ame [r]esult.”
(Bolding omitted.) Under both federal and state law, a presumption of
arbitrability applies to arbitration clauses. See John A. Cookson Co. v. N.H.
Ball Bearings, 147 N.H. 352, 355 (2001); Granite Rock Co. v. Teamsters, 561
U.S. 287, 301-02 (2010). That presumption is, however, rebuttable. See N.H.
Ball Bearings, 147 N.H. at 355-56; Granite Rock, 561 U.S. at 301. Further,
under both federal and state law, the presumption of arbitrability “does not
relieve a court of the responsibility of applying traditional principles of contract
interpretation in an effort to ascertain the intention of the contracting parties.”
Appeal of Town of Bedford, 142 N.H. 637, 640 (1998) (quotation omitted); see
also Granite Rock, 561 U.S. at 301-02 (observing that the Court has never held
that the presumption in favor of arbitration “overrides the principle that a court
may submit to arbitration only those disputes [that] the parties have agreed to
submit” (quotation and ellipsis omitted)). Accordingly, because federal and
state law are the same in regard to the issues on appeal, we refer to and rely
upon both bodies of law and do not engage in separate analyses.

Attitash next argues that, because the provision at issue is an arbitration
clause, the presumption in favor of arbitrability applies. See N.H. Ball Bearings,
147 N.H. at 355; Granite Rock, 561 U.S. at 301-02. The Association counters
that, because the provision does not, in fact, provide for a process akin to the
arbitration procedure described in Superior Court Civil Rule 33, it does not
constitute an arbitration clause, and therefore the presumption does not apply.
Alternatively, the Association argues that, even if we deem the provision to be
an arbitration clause, and therefore the presumption is triggered, its claims fall
outside of the scope of the provision. We conclude that, even if the provision is
construed to be an arbitration clause, the Association’s claims are not within
the scope of the provision. Therefore, for the purposes of our analysis, we will
assume without deciding that the provision is an arbitration clause and that the
presumption in favor of arbitrability applies.

Finally, Attitash argues that the Association’s claims come within the
scope of the provision because the Association, by alleging that Attitash should
bear the cost of the damage to the cooling tower, is disputing the “nature” of an
Actual Cost. Attitash asserts that the Association was, therefore, required to
comply with the process set forth in the provision: protest the nature, amount
or method of the Actual Cost within 30 days from the rendition of the
statement and then, if the parties cannot resolve the matter within a
subsequent 30-day period, submit the dispute to an accountant for a binding
decision. Attitash argues that, because the Association did not protest the
costs within the time frame set forth in the disputes provision, the
Association’s claims are now time-barred.

The Association counters that the provision does not apply because its
claims do “not challenge the nature, amount or method” by which the Actual
Costs related to the cooling tower were calculated. Rather, the Association

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argues that its claims arise from Attitash’s misconduct — Attitash’s failure to
properly maintain the cooling tower, and Attitash’s subsequent
misrepresentations to the Association about the cause of the damage — and,
therefore, fall outside the scope of the provision. We agree with the
Association.

Interpretation of the scope of an arbitration agreement presents a
question of law for this court. See N.H. Ball Bearings, 147 N.H. at 355; IOM
Corp. v. Brown Forman Corp., 627 F.3d 440, 450 (1st Cir. 2010). In
interpreting the scope of an arbitration clause, we examine the parties’ intent.
See N.H. Ball Bearings, 147 N.H. at 355 (stating that an arbitration clause
should be interpreted “to make it speak the intention of the parties at the time
it was made bearing in mind its purpose and policy” (quotation omitted)); Stolt-
Nielsen S. A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 682 (2010) (stating that,
when interpreting an arbitration clause, courts “must give effect to the
contractual rights and expectations of the parties” and that “as with any other
contract, the parties’ intentions control” (quotations omitted)). Indeed, parties
are generally free to structure their arbitration agreements as they see fit. See
Stolt-Nielsen, 559 U.S. at 664; Rizzo v. Allstate Insurance Company, 170 N.H.
___, ___, 185 A.3d 836, 841 (2018). We determine the parties’ intent regarding
the scope of an arbitration clause by applying traditional principles of contract
interpretation to the terms of the provision. See Appeal of Town of Bedford,
142 N.H. at 640; Volt Info. Sciences v. Leland Stanford Tr. U., 489 U.S. 468,
475-76 (1989). Further, in determining whether a claim falls within the scope
of an arbitration clause, we focus on the substance of the factual allegations,
not the legal theory asserted. See Dunn & Sons, Inc. v. Paragon Homes of New
Eng., Inc., 110 N.H. 215, 217 (1970); Genesco, Inc. v. T. Kakiuchi & Co., Ltd.,
815 F.2d 840, 846 (2d Cir. 1987).

Attitash argues that the Association’s claims fall within the scope of the
provision because they arise from a dispute about the “nature” of the Actual
Costs incurred due to the cooling tower damage. The Agreement does not
define “nature.” Attitash argues that a dispute about the “nature” of an “Actual
Cost” is a disagreement as to “its essential character or constitution — i.e.,
whether it is . . . fairly attributable to the operation, management or
maintenance” of the Condominium. Attitash asserts that the Association — in
claiming that Attitash should pay for the cost of the cooling tower rental and
repair — is challenging whether the expenses are “fairly attributable” to the
costs of operation, and, therefore, the Association was contractually required to
follow the process outlined in the disputes provision. Although we agree with
Attitash as to the meaning of the term “nature” as used in the Agreement, we
nonetheless conclude that the Association’s claims do not fall within the scope
of the provision.

The Association does not dispute that the expenses incurred because of
the cooling tower damage were, in fact, “Actual Costs.” Instead, the

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Association’s complaint is premised on the following factual allegations: after
Attitash failed to ensure that the cooling tower was properly winterized in the
fall of 2013, the tower was damaged, and Attitash made misrepresentations to
the Association about the cause of the damage. Thus, the Association is not
challenging the “nature” of an Actual Cost — that is whether the cooling tower
expenses were fairly attributable to the operation, management or maintenance
of the Condominium — rather it is claiming that the proper measure of its
damages attributable to Attitash’s alleged wrongdoing is the cost of the tower
rental and repair.

In further support of its argument that the Association’s claims fall
within the scope of the provision, Attitash relies upon the reasoning of the
Second Circuit Court of Appeals in Genesco, which held that “[i]f the
allegations underlying the claims ‘touch matters’ covered by the parties’ . . .
agreements, then those claims must be arbitrated, whatever the legal labels
attached to them.” Genesco, 815 F.2d at 846. Attitash asserts that the
Association’s claims come within the scope of the provision because “the claims
do not just ‘touch matters’ [covered by the provision], but are based on the
‘Actual Costs’ of the cooling tower rental and repair.” We are not persuaded.

Genesco is distinguishable because the arbitration clause at issue in that
case subjected to arbitration all claims and disputes arising out of, or relating
to, the parties’ agreement. See id. at 845 (quoting language of two arbitration
clauses at issue as subjecting to arbitration “[a]ll claims and disputes of
whatever nature arising under this contract” and “[a]ny controversy arising out
of or relating to this contract”). By contrast, the provision here requires only
that those disputes concerning “the nature, amount or method by which such
[Actual Cost] was determined” be resolved by an independent third party. Had
the parties intended the scope of the provision to be more expansive, they
could have so provided. See, e.g., State v. Philip Morris USA, 155 N.H. 598,
604 (2007) (observing that an arbitration clause providing that “any dispute,
controversy or claim arising out of or relating to calculations performed by or
any determinations made by, the Independent Auditor” was “broad” (brackets
omitted)).

Under these circumstances, the presumption in favor of arbitrability does
not override the intention of the parties — as expressed by the Agreement’s
plain language — that the disputes provision be narrow in scope. Given the
language of the provision at issue here, and the fact that the Association does
not dispute the nature of Actual Costs, but, rather, seeks damages caused by
Attitash’s misconduct, we conclude that the Association’s claims fall outside
the scope of the provision.

We note that each party argues that “accountant remedy” cases from
other jurisdictions support its position. An “accountant remedy” provision is
an agreement to submit a limited class of disputes — typically disputes

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regarding calculations required elsewhere in a contract — to an accountant for
resolution. See, e.g., Fit Tech, Inc. v. Bally Total Fitness Holding, 374 F.3d 1,
6, 8 (1st Cir. 2004). Although we do not rely upon the “accountant remedy”
cases to reach our conclusion, we find the cases instructive.

For example, in Fit Tech, the First Circuit Court of Appeals held that an
“accountant remedy” provision in the parties’ asset purchase agreement
subjected to arbitration only those claims arising from the defendant’s
improper calculation of earnings owed to the plaintiffs, and did not require
arbitration of claims premised upon the defendant’s wrongful conduct designed
to reduce the plaintiffs’ earnings. Id. at 4, 8. In reaching that conclusion, the
court relied upon the narrow language of the arbitration clause and the fact
that it referred disputes to an accountant. Id. at 8. The court observed that it
would not make sense to assume that accountants would be entrusted with
certain types of disputes because no one would “expect accountants to have
special competence in deciding whether business misconduct unrelated to
accounting conventions was a breach of contract or any implied duty of fair
dealing.” Id. Other courts have similarly concluded that narrow arbitration
provisions that entrust accountants to resolve accounting disputes do not
require all legal claims to be resolved by arbitration. See Harker’s Distribution
v. Reinhart Foodservice, 597 F. Supp. 2d 926, 935-36, 942 (N.D. Iowa 2009)
(holding under Illinois law that an “accountant remedy” provision required
arbitration of only “accounting” issues and did not reach other legal issues,
such as whether there had been a mutual or unilateral mistake as to certain
contract terms); Powderly v. MetraByte Corp., 866 F. Supp. 39, 43 (D. Mass.
1994) (denying defendants’ motion to compel arbitration where the plaintiff’s
“allegations challenge[d] the defendants’ business practices . . . and not the
integrity of the accounting techniques used”); Parker v. Twentieth Century-Fox
Film Corporation, 173 Cal. Rptr. 639, 643-44 (Ct. App. 1981) (holding that an
arbitration clause that required arbitration by accountant of certain disputes
was “far too narrow” in scope to encompass most of the plaintiffs’ claims).
These cases provide further support for our conclusion that the disputes
provision in the Agreement — which refers disputes about the nature, amount,
or method of determining an Actual Cost to an accountant — does not
encompass the Association’s claims, which are based upon allegations of
misconduct.

We conclude that the trial court properly ruled that the Association’s
claims are outside the scope of the arbitration provision.

Affirmed and remanded.

LYNN, C.J., and HICKS, HANTZ MARCONI, and DONOVAN, JJ.,
concurred.

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