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Bar News - April 19, 2013


NH Supreme Court At-a-Glance: February 2013

By:

Contract Law

Axenics Inc. F/K/A Rentec Corporation v. Turner Construction Company & a
No. 2011-219
March 13, 2013
Affirmed in Part, Reversed in Part, Vacated in Part and Remanded
  • Whether the trial court erred in ruling that the defendants were liable to the plaintiff under the theory of unjust enrichment.
  • Whether the trial court erred in the amount of damages awarded to the plaintiff and in failing to find the defendants liable for breach of contract and New Hampshire Consumer Protection Act claims.
This contract dispute arose out the construction of a biotech facility. Defendant Stryker Biotech operates the facility, and defendant Stryker Sales (collectively Stryker) owns the property where the facility is located in West Lebanon. Defendant Turner Construction (Turner), was hired as the general contractor for the facility’s construction.

Turner entered into a subcontract with the plaintiff, Axenics, for the installation of process pipe at the facility. The terms of the subcontract addressed the possibility of delays and hindrances, as well as changes to the scope of the work and costs. Delays affecting Axenics’ work arose during the facility’s construction, some of which caused Axenics’ employees to work overtime to complete the work on time. Turner also requested changes to the process piping during the project. Axenics submitted eight written change orders to Turner, which ultimately had to be approved by both Turner and Stryker. These change orders increased the contract price from $1.99 million to $2.5 million. Axenics submitted another change order titled "Claim Settlement" for an additional $435,929, which was not paid by the defendants. Axenics later notified Turner of additional change orders related to delays and work alleged to be outside the scope of the contract. Turner agreed with some of Axenics’ requests for additional payment, but provided Stryker with rebuttal to others.

When Stryker refused to pay Axenics the payments requested, Axenics sued Turner, claiming that it had breached the subcontract. Axenics also sued Turner and Stryker for violation of the New Hampshire Consumer Protection Act (CPA) and unjust enrichment, seeking $1.7 million in damages for materials, labor, equipment and services, enhanced damages under the CPA and attorney’s fees.

The defendants filed a counterclaim, asserting breach of contract and violations of the CPA. After an 18-day trial, the trial court found that neither party had abandoned the subcontract and ruled against Axenics on its breach of contract claim. The trial court found in favor of Axenics on its unjust enrichment claim and awarded more than $1 million in restitution damages to Axenics. The trial court ruled against Axenics on its CPA claim and against the defendants on their counterclaims, including their request for attorney’s fees.

The defendants appealed the trial court’s ruling finding them liable on Axenics’ unjust enrichment claim and awarding damages to Axenics. On appeal, the defendants argued that the trial court erred in finding them liable on the unjust enrichment claim because there was a valid, express contract on the exact subject matter of Axenics’ claim and because that contract was neither abandoned nor breached. The defendants also argued that unjust enrichment was not appropriate when they did not receive a benefit outside the terms of the contract and the record contained no evidence of such a benefit. The defendants argued that the trial court erred in admitting evidence of an offer to compromise, in violation of New Hampshire Rule of Evidence 408.

In its cross-appeal, Axenics argued that the trial court should have found that the parties abandoned the subcontract or, alternatively, that the trial court should have found that Turner breached the subcontract. Additionally, Axenics argued that whether the subcontract was breached or violated, that damages should have been $1.7 million, calculated as costs plus reasonable profit. Finally, Axenics argued that the trial court erred in failing to rule that the defendants violated the CPA.

The Court affirmed the trial court’s decision that the parties had not abandoned the subcontract, explaining that the abandonment of a contract is a question of both law and fact. While what qualifies as abandonment is a matter of law, whether there has been an actual abandonment is a question of fact. The numerous change orders did not constitute intent of the parties’ to abandon the subcontract. The Court explained that, despite multiple change orders, the scope of the pipe installation work did not change. Additionally, the subcontract provided for potential changes to the work and costs, as well as for changes to the schedule, delays, hindrances and obstructions.

The Court vacated the trial court’s ruling against Axenics’ breach of contract claim and remanded for a determination of whether Turner breached the subcontract. The Court agreed with Axenics’ argument that the trial court confused the abandonment and breach of contract claims and erroneously concluded that the finding of no abandonment dictated a finding of no breach of contract. The Court explained that abandonment and breach of contract are two separate questions, the former occurring when both parties by mutual consent depart from the contract terms and the latter occurring when there is a failure to perform any promise which forms the whole or part of a contract.

The defendants argued that Axenics waived this argument because its notice of appeal asked, "Did the Superior Court err in determining that the parties had not abandoned the subject Subcontract?" Relying on Supreme Court Rule 16(3)(b), the Court ruled that because of the way the trial court addressed the breach of contract and abandonment claims, the question presented in the notice of appeal fairly encompassed the issue.

The Court reversed the trial court’s decision finding Turner liable to Axenics for unjust enrichment. The Court agreed with the defendants’ argument that the alleged extra work in completing the pipe installation – the subject of Axenics’ claim for unjust enrichment – was specifically covered by the subcontract. The Court explained that unjust enrichment is not an available recovery when there is a valid, express contract covering the subject matter at issue. However, if the benefit received is outside the scope of the contract, then unjust enrichment may be available. Because Axenics’ unjust enrichment claim, which included Turner’s responsibilities for coordinating changes to the work and Axenics’ entitlement to payment for extra work and costs, was covered in the subcontract, the Court found that Axenics could not recover under an unjust enrichment theory.

The Court also reversed the trial court’s decision finding Stryker liable to Axenics for unjust enrichment. In the case of Stryker, the Court found recovery under unjust enrichment to be inappropriate because Stryker, as an owner, had fulfilled its financial obligation to Turner, as the general contractor, because there was no express contractual relationship between Axenics and Stryker and because Stryker received no benefit that would be unconscionable to retain. In light of its decision that the court erred in allowing Axenics to recover under the theory of unjust enrichment, the Court declined to address Axenics’ argument on the proper measure of damages under that theory.

For the first time, the Court also addressed the question of whether an undisclosed internal memorandum revealing an offer in compromise is inadmissible under New Hampshire Rule of Evidence 408. The Court followed the Federal Circuits’ interpretation of the similar Federal Rule of Evidence 408 and concluded that the policy objectives of Rule 408 weigh in favor of exclusion of internal memoranda prepared for the purpose of compromise negotiations. The Court agreed with the defendants that the trial court erred in admitting an internal email composed by Turner, which listed possible settlement contributions from both Turner and Stryker. The trial court had ruled that because the email was never communicated to the other side, it was not a statement made in compromise negotiations that would afford it protection under Rule 408. The trial court used the email in calculating damages. The Court also found that the trial court erred in relying on the email to determine damages.

The Court affirmed the trial court’s ruling that the defendants did not violate the CPA. To determine if commercial actions are covered by the CPA, the Court uses a "rascality" test, which states that "the objectionable conduct must attain a level of rascality that would raise an eyebrow of someone inured to the rough and tumble of the world of commerce." Beckstead v. Nadeau, 155 N.H. 615, 619 (2007). The trial court’s findings that Turner’s attempts to rebut certain payment claims by Axenics for extra work did not constitute behavior rising to the level of rascality on the part of either Stryker or Turner, where Turner had provided documentation to Stryker in support of some of Axenics’ claims for payment. Turner’s failure to inform Axenics of its rebuttal to some of its claims also did not meet the rascality test. Axenics also argued that the defendants’ litigation strategies violated the CPA because they were unfair, designed to delay adjudication and make the litigation prohibitively expensive. Without deciding whether unfair litigation tactics fall within the scope of the CPA, the Court agreed that Axenics failed to demonstrate that the defendants’ litigation tactics in this case were egregious enough to satisfy the rascality test.

David N. Cole, Hanover, for the plaintiff. David A. Anderson and Mark B. Rosen (on the brief), Pierce Atwood, Portsmouth, for the defendants.


Criminal Law

State v. Matthew Blunt, No. 2012-165
March 13, 2013
Vacated and Remanded
  • Whether the trial court erred in imposing class A misdemeanor sentences after the defendant’s convictions of simple assault and resisting arrest.
Following a report of an individual exhibiting odd behavior while walking around the Mountain Club at Loon Mountain and a subsequent altercation with the responding police officer, the state filed two criminal complaints against the defendant, alleging the unprivileged physical contact variant of simple assault as well as resisting arrest. Both of the complaint forms had the box specifying "class A misdemeanor" checked, but the state did not file notice, pursuant to RSA 625:9, IV (c) (2), of its intent to seek class A misdemeanor penalties either before or at the defendant’s arraignment. The state did file a notice of intent to seek enhanced penalties under RSA 651:6, I(g) on the simple assault charge because at the time of the assault, the defendant knew that the responding officer was a law enforcement officer acting in the line of duty.

The district division found the defendant guilty of simple assault and resisting arrest, sentencing him on the simple assault conviction to six months in jail, with all but 30 days deferred for two years upon good behavior, two years probation. On the resisting arrest conviction, he was sentenced to 60 days incarceration, suspended for two years.

The defendant did not challenge the sentences at that time, but appealed to the superior court for a denovo jury trial and, thereafter, waived his right to a jury trial. The Court granted an assented to Motion to remand the cases to the district division. At a hearing before the district division, the defendant argued to strike the class A penalties on the grounds that they were unauthorized because he was convicted of class B misdemeanors. The court requested memoranda of law on the issue from the parties and ultimately denied the defendant’s motion to strike because the complaints indicated the offenses were class A misdemeanors and they recited facts that involved acts of violence. The defendant appealed.

On appeal, the defendant argued that determining that each of the complaints charged was a class A misdemeanor was an error and that the district division should have treated both complaints as alleging class B misdemeanors because (1) neither complaint alleged a crime that involved an act of violence or a threat of violence under RSA 625:9, IV(c)(1) and (2) the State did not file notice of its intent to seek class A penalties on or before the date of his arraignment.

The Court agreed with the defendant’s argument that under RSA 625:9, IV (c)(1), an act of violence must be involved as an element of the offense. The Court concluded that neither the simple assault, which alleged unprivileged contact and not bodily injury, nor the resisting arrest complaint required an act of violence as an element of the offense.

The Court also agreed with the defendant’s argument that checking the box marked class A misdemeanor on the complaint does not comply with the requirement of RSA 625:9, IV(c)(2) that requires the notice of intent to seek class A penalties. The defendant also argued that the state’s notice of intent to seek enhanced penalties under RSA 651:6, I(g) for the simple assault charge did not override RSA 625:9, IV so as to allow the trial court to impose penalties in excess of those for class B misdemeanors.

The Court noted that because RSA 651:6, I(g) applies only to "crimes defined in RSA 631," it is not applicable to the resisting arrest charge found in RSA 642. On the simple assault, the State argued that RSA 651:6, III allows for enhanced penalties for offenses falling within RSA 651:6, I(g) applicable to misdemeanors generally, regardless of whether they are class A or class B. The Court discussed whether the enhanced penalties under RSA 651:6 may be used by a district division judge in sentencing. The Court held that because the notice of intent to seek enhanced penalties authorized a sentence beyond that which the district division had the power to impose that the State’s filing of that notice of intent in the Circuit Court district division was ineffective. The Court also held that the State’s RSA 651:6 notice could not be treated as a "proxy" for the notice requirement of RSA 625:9, IV (c)(2). The Court vacated the sentences imposed and remanded the case to the district division for resentencing.

Michael A. Delaney, attorney general and Nicholas Cort (on the memorandum of law and orally), assistant attorney general, for the State. Thomas Barnard, assistant appellate defender, Concord, for the defendant.


State v. Ryan Martin, No. 2012-195
March 13, 2013
Affirmed
  • Whether the trial court erred in sentencing a defendant to both a stand-committed prison term of one to three years and two years of probation.
In 2011, the defendant pleaded guilty to theft by unauthorized taking, a class B felony, and pleaded true to violating probation after attempting to steal groceries from a Concord supermarket. The defendant was sentenced to one to three years in prison and two years of probation upon release. The defendant argued that imposing probation and a committed state prison sentence was illegal. The trial court disagreed and the defendant appealed.

On appeal, the defendant argued that the trial court did not have authority to impose a stand-committed prison term and a term of probation on the same charge. The defendant also argued that the sentence violated the Separation of Powers Clause of the State Constitution. The Court relied on its precedent interpreting RSA 651:2 and reiterated the proposition that a trial court has discretion under RSA 651:2 to sentence a defendant to both the maximum term of imprisonment and probation and that, within limits, the trial court has statutory authority to impose incarceration, a fine, probation, or a combination of the three.

However, the trial court cannot sentence a defendant to the statutory maximum fine and prison term, if it also imposes probation. Because the defendant was sentenced to one to three years in prison and no fine, when the available maximum fine was $4,000 and the maximum sentence was seven years, the trial court had retained a portion of its sentencing for enforcement purposes and did not err in also imposing probation.

The Court rejected the defendant’s separation of powers argument, finding that the imposition of both a prison term and probation does not constitute one branch of government usurping the essential powers of another. Despite the possible overlap and risk of inconsistency, if the defendant should be subject to the authority of both the executive branch supervising during a period of parole and the judicial branch supervising during a period of probation, the two branches would retain their respective functions. Although the sentence did not constitute a violation of the separation of powers, the Court concluded that the better practice would be to impose a longer maximum period of incarceration rather than a state prison sentence followed by probation to minimize the risk of inconsistency, which could lead to unnecessary friction between the judicial and executive branches.

Michael A. Delaney, attorney general, and Nicholas Cort (on the brief and orally), assistant attorney general, for the State. James B. Reis, assistant appellate defender, Concord, for the defendant.


State v. Robin Lukas, No. 2012-240
March 13, 2013
Affirmed
  • Whether a class B felony theft constitutes a third offense under RSA 637:11, II(b) where the defendant has been convicted twice previously of a class A misdemeanor in another state.
The defendant appealed the trial court’s decision denying her motion to dismiss the indictment against her for theft by unauthorized taking, a class B felony. In interpreting RSA 637:11, II(b), the Court held that a defendant may be charged with a class B felony as a third offense after having been convicted twice previously of a class A misdemeanor theft or felony theft in another state. The Court concluded that the plain language of RSA 637:11, II(b) together with RSA 625:9,III and IV (a), support the intent of the Legislature to include out-of-state theft convictions as predicate offenses so as to allow for sentence enhancement under RSA 637:11, II(b). In doing so, the Court rejected the defendant’s multiple arguments, including her contention that because other statutes specifically referenced out-of-state convictions, the failure to include such language in RSA 637:11 was evidence of its intention to exclude such convictions.

Michael A. Delaney, attorney general, and Susan P. McGinnis (on the brief and orally), senior assistant attorney general, for the State. James B. Reis, assistant appellate defender, Concord, for the defendant.


State v. Kevin Guay, No. 2011-414
March 20, 2013
Affirmed
  • Whether the State may charge a defendant with a misdemeanor under RSA 485-A:37 where the exclusive penalty for a violation of that provision under RSA 485-A:43, IV is a civil forfeiture.
The defendant was convicted by a jury of three misdemeanors, including unlawful operation of solid waste facilities in two locations and unlawful maintenance of a subsurface septic system. The defendant appealed his convictions, arguing that RSA 485-A:37 does not allow the State to charge him with a misdemeanor because the exclusive penalty for violating the statute is a civil forfeiture under RSA 485-A:43, IV. The defendant further argued that nothing in the plain language of the statute authorized any additional penalty beyond what was included in RSA 485-A:43, IV.

The State argued that a violation of RSA 485-A:37 is a misdemeanor under RSA 485:A 43, I and may also result in a civil forfeiture under RSA 485-A:43, IV. The Court agreed with the State’s interpretation of RSA 485-A:37, that in the context of the overall statutory scheme and purpose, violations of this statute may be subject to both criminal and civil penalties.

The defendant also argued for a new trial under the plain error doctrine, asserting that certain evidence regarding witness credibility was erroneously allowed into evidence at trial and discussed in closing argument. The Court noted that the defendant did not object to the admission of this evidence or remarks made during the prosecutor’s closing argument at trial. Plain error may consider errors not raised before the trial court but requires (1) an error, (2) the error must be plain (3) the error must affect substantial rights and (4) the error must seriously affect the fairness, integrity or public reputation of the judicial proceedings.

The State agreed that the prosecutor’s line of questioning requiring a witness to comment on the credibility of other witnesses allowed the defendant to satisfy the first two prongs of the plain error rule. To satisfy the third prong, the defendant must show that the error was prejudicial, affecting the outcome of the proceeding. The Court found that in light of the overwhelming evidence of the defendant’s guilt, the defendant could not satisfy the burden of proving that the errors affected the outcome of the case.

Michael A. Delaney, attorney general, and Lauren J. Noether (on the brief and orally), senior assistant attorney general, for the State. Dorothy E. Graham, assistant appellate defender, Concord, for the defendant.


Family Law-Domestic Violence

In the Matter of S. Rebecca Carmody and Craig T. Carmody, No. 2012-135
March 13, 2013
Reversed and Remanded
  • Whether the trial court erred in denying a request for the return of firearms relinquished six years prior under a domestic violence temporary order, which was subsequently withdrawn by agreement of the parties.
In January 2005, a domestic violence temporary order was issued that required the defendant to relinquish all firearms in his possession. In May 2005, the trial court approved an agreement signed by the parties to withdraw the temporary order. In 2011, the defendant requested the return of the firearms he relinquished in 2005 under the temporary order. The plaintiff did not object. No firearm disqualifiers were reported by the New Hampshire State Police.

At the hearing on the defendant’s request, defendant’s counsel stated that a local police chief had contacted him regarding the defendant’s firearms and inquired about getting them out of the chief’s custody. The trial court denied the defendant’s request ruling that the language of RSA 173-B:5, X did not allow the trial court to grant the motion where the defendant made the request six years after the expiration of the temporary order and not within 15 days prior to the expiration of the order as required by the statute. The trial court denied the defendant’s motion for reconsideration.

On appeal, the defendant argued that the trial court erred in its interpretation of RSA 173-B:5, X. The Court reviewed the trial court’s statutory interpretation de novo. Because the statute states that "Within 15 days prior to the expiration of the protective orders, the defendant may request, by motion to the court, the return of any and all firearms…," the Court agreed with the defendant that the statutory language did not limit him to applying within 15 days of the expiration of the court’s order of protection. The Court explained that nothing in the statute requires a defendant to apply within 15 days of the expiration of the order or otherwise waive the right to request the return of his firearms. The Court reversed and remanded.

S. Rebecca Carmody, self-represented party. Joshua Gordon, Concord, for the defendant.


Professional Responsibility/Public Protection Fund Committee

Appeal of David Stacy, No. 2012-300
March 29, 2013
Affirmed
  • Whether the New Hampshire Bar Association Public Protection Fund Committee erred in denying a claim for reimbursement for attorney’s fees and costs paid by the petitioner and his conservatorship.
The Court previously adopted Supreme Court Rule 55(2) directing the New Hampshire Bar Association to establish the Public Protection Fund Committee (PPFC) as a mechanism to reimburse clients for losses resulting from a lawyer’s embezzlement, conversion or theft of client funds. Clients who have lost money under these situations may petition the PPFC for reimbursement and a hearing may be held on the petition after which the PPFC issues a written decision explaining its reasons for approving or denying a claim. The lawyer must have been suspended or disbarred from practice, dead or judged mentally incompetent before the disciplinary proceedings commenced or concluded for the client to make a reimbursement claim before the PPFC.

The petitioner filed a claim for reimbursement for the fees and costs that he and his conservatorship estate paid to attorney Donald Wyatt. The petitioner’s claim was held in abeyance pending the resolution of Wyatt’s disciplinary proceedings as a result of a complaint filed by the petitioner’s sister and successor conservator alleging that Wyatt had a conflict of interest when simultaneously representing the conservatorship estate and the petitioner.

Prior to the PPFC claim, the petitioner filed suit against the initial conservator’s bond insurance company and settled for $275,000, thereby releasing all claims for attorney’s fees and other legal expense or cost, interest and all claims described in the probate court order finding that the initial conservator breached his fiduciary duties by wasting estate assets on legal fees when the attorney was in a clear conflict of interest position. After the disciplinary proceedings resulted in Wyatt’s suspension for operating under a conflict of interest in representing the conservatorship estate and the petitioner, the PPFC found that the petitioner failed to prove that the funds at issue were lost as a result of the attorney’s embezzlement, conversion or theft and denied the claim. The petitioner appealed.

The standard of review applicable to a decision of the PPFC was an issue of first impression for the Court. Relying on Supreme Court Rule 55(5) and decisions in the context of awarding attorney’s fees, the Court explained that the standard of review is an unsustainable exercise of discretion. The petitioner argued that the PPFC erred in finding that Wyatt did not commit theft or conversion when he collected and retained fees while knowing about the conflict of interest in his simultaneous representation of the conservator and beneficiary of the conservatorship estate.

The Court looked to the ABA Standards for imposing attorney sanctions for guidance. The Court concluded that to obtain reimbursement from the PPFC, a claimant must prove by a preponderance of the evidence that the losses resulted from an attorney’s knowingly dishonest conduct. The Court further explained that Wyatt’s knowledge of a conflict of interest is not the same as knowingly dishonest conduct, and an attorney’s obligation to return the fees based upon a conflict of interest did not compel the PPFC to find that Wyatt’s conduct involved dishonesty within the meaning of Rule 55.

The Court found that the PPFC sustainably exercised its discretion in denying the petitioner’s claim for failing to prove by a preponderance of the evidence that his losses resulted from the conversion or theft of client funds by Wyatt within the meaning of Rule 55.

Steven M. Latici, Gilmanton, for the petitioner. Thomas Quarles, Jr. and Anna B. Peterson (on the brief only), Devine, Millimet & Branch, Manchester, for the respondent.


Sarah E. Lavoie


Sarah E. Lavoie is an attorney at Burns, Bryant, Cox, Rockefeller and Durkin in Dover, NH. She practices general litigation, including personal injury, family law and probate matters.

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