Morgan Keegan & Company, Inc. v. William Hamilton Smythe, III

IN THE SUPREME COURT OF TENNESSEE
AT JACKSON
November 8, 2012 Session at Memphis

MORGAN KEEGAN & COMPANY, INC. v. WILLIAM HAMILTON
SMYTHE III ET AL.

Appeal by Permission from the Court of Appeals, Western Section
Chancery Court for Shelby County
No. CH092353 Walter L. Evans, Chancellor

No. W2010-01339-SC-R11-CV - Filed April 25, 2013

This case requires us to decide whether Tennessee’s appellate courts possess subject matter
jurisdiction to review a trial court’s order that vacates an arbitration award and remands the
dispute to a new arbitration panel without expressly declining to confirm the award. An
investor pursued a claim against an investment company over losses he incurred due to the
failure of some of the company’s bond funds. After a Financial Industry Regulatory
Authority arbitration panel ruled in the investor’s favor, the investment company petitioned
the Chancery Court for Shelby County to vacate the award based on its belief that two
members of the arbitration panel were biased. The trial court, without expressly declining
to confirm the award, vacated the award and remanded the case for a second arbitration
before a new panel. The investor appealed. The Court of Appeals, on its own motion,
dismissed the appeal on the ground that it lacked subject matter jurisdiction. Morgan Keegan
& Co. v. Smythe, No. W2010-01339-COA-R3-CV, 2011 WL 5517036, at *8 (Tenn. Ct. App.
Nov. 14, 2011). We granted the investor’s application for permission to appeal and now
reverse the judgment of the Court of Appeals because the trial court’s order is, in fact, an
appealable order “denying confirmation of an award” under Tenn. Code Ann. § 29-5-
319(a)(3) (2012).

Tenn. R. App. P. 11 Appeal by Permission; Judgment of the Court of Appeals
Reversed and Remanded

W ILLIAM C. K OCH, J R., J., delivered the opinion of the Court, in which G ARY R. W ADE, C.J.,
C ORNELIA A. C LARK, and S HARON G. L EE, JJ., joined. J ANICE M. H OLDER, J., not
participating.

Jef Feibelman, David E. Goodman, Jr., and Mary C. Hamm; Christopher S. Campbell, and
Laura S. Martin, Memphis, Tennessee; Dale Ledbetter, Fort Lauderdale, Florida, for the
appellants, William Hamilton Smythe III, William H. Smythe IV Trust, and Smythe
Children’s Trust.

John S. Golwen, William G. Whitman, and Annie T. Christoff, Memphis, Tennessee, for the
appellee, Morgan Keegan & Company, Inc.

OPINION

I.

The sole issue in this case focuses on the subject matter jurisdiction of the Court of
Appeals. Even though we are not concerned with the merits of the underlying substantive
dispute between the parties, we provide the following facts in order to frame the
jurisdictional discussion.

William Smythe III owned various investment accounts at Morgan Keegan &
Company, Inc. (“Morgan Keegan”), including several accounts for which he served as trustee
for other members of his family. The documents creating these accounts contained
provisions requiring that disputes between Mr. Smythe and Morgan Keegan be resolved
using arbitration procedures established by the Financial Industry Regulatory Authority
(“FINRA”).1

A portion of Mr. Smythe’s portfolio included investments in Morgan Keegan’s
“Regions Morgan Keegan” (“RMK”) family of funds. These funds invested in “junk bonds”
– below investment grade securities that offered the potential of high rates of return but with
a higher degree of risk. According to expert testimony presented during the arbitration
proceeding, these funds “collapsed spectacularly in 2007,” thus living up to their name and
costing investors billions of dollars. The failure of its RMK funds has generated a substantial
amount of litigation for Morgan Keegan.2

On April 30, 2008, Mr. Smythe initiated a FINRA arbitration proceeding against
Morgan Keegan. This procedure was conducted in accordance with FINRA’s Code of

1
FINRA is an independent, non-governmental organization established by the securities industry to
self-regulate securities firms doing business in the United States. See FINRA, About the Financial Industry
Regulatory Authority, FINRA.ORG, http://www.finra.org/AboutFINRA (last visited Apr. 9, 2013).
2
To date, there have been over 170 FINRA arbitrations concerning Morgan Keegan’s RMK funds.
See FINRA, FINRA Arbitration Awards Online, FINRA.ORG, http://finraawardsonline.finra.org/search.aspx
(search “RMK” and accept terms of use) (last visited Apr. 9, 2013).

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Arbitration Procedure for Customer Disputes (“FINRA Code”).3 A crucial step in the
process was the selection of the members of the arbitration panel.4 For disputes exceeding
$100,000, the panel is composed of three members: a “non-public” arbitrator, a public
arbitrator, and a chairperson who is an experienced public arbitrator.5 Non-public arbitrators
are industry insiders with professional experience in securities, commodities, or futures.6
Public arbitrators are persons who lack recent professional experience in the investments
industry and who have no immediate family members in that industry.7

FINRA supplies each party with a list of ten randomly generated arbitrators for each
position on the panel.8 Each party may strike up to four potential arbitrators from each list,
and each party must rank the remaining arbitrators in order of preference.9 FINRA then
combines the ranked arbitrator lists and populates the panel with the highest-ranked available
arbitrator from the combined list.10

In order to assist the parties in their decisions regarding the exclusion of potential
arbitrators and in ranking the remaining arbiters, the FINRA Code requires disclosure of
biographical information for each potential arbitrator, including potential conflicts of interest
and other relevant disclosures.11 The dispute in this case centers on the alleged failure of two

3
See FINRA Code of Arbitration Procedure for Customer Disputes, FINRA.ORG,
http://www.finra.org/ArbitrationAndMediation/Arbitration/Rules/CodeofArbitrationProcedure/index.htm
(last visited Apr. 9, 2013).
4
See FINRA Code §§ 12400-12410.
5
See FINRA Code §§ 12401(c), 12403.
6
See FINRA Code § 12100(p).
7
See FINRA Code § 12100(u).
8
See FINRA Code § 12403(c).
9
See FINRA Code § 12403(c)(3).
10
See FINRA Code § 12403(c)(4) & (5).
11
See FINRA Code § 12405. The FINRA Code provides that before arbitrators are appointed to a
panel, FINRA alerts them to the nature of the dispute and the identities of the parties. Potential arbitrators
have a duty to investigate and disclose to FINRA “any circumstances which might preclude the arbitrator
from rendering an objective and impartial determination.” Such circumstances include, among other things,
any financial or personal interest in the dispute, and any current or past relationship with any party, any
party’s representative, or any potential witness in the proceeding. FINRA Code § 12405(a). This obligation
to disclose “interests, relationships, or circumstances” that might taint the arbitrator’s objectivity is a
(continued...)

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arbitrators to disclose potential conflicts of interest under FINRA Code § 12405(a) and to
recuse themselves under FINRA Code § 12406 or FINRA’s failure to remove them under
FINRA Code § 12407.

After Mr. Smythe filed his arbitration claim against Morgan Keegan, both parties
participated in the arbitration selection procedure. A three-arbitrator panel was assembled
on October 2, 2008; however, FINRA replaced the chairperson of the panel on February 19,
2009. On August 10, 2009, the non-public member of the panel supplemented his disclosure
report to Mr. Smythe and Morgan Keegan. This information enabled Morgan Keegan to
discover that this panel member was a broker for a firm that was also suing Morgan Keegan
over the RMK funds and that the firm was being represented by the same lawyer who was
representing Mr. Smythe.

In October 2009, Morgan Keegan requested that the non-public arbitrator recuse
himself and alternatively asked FINRA’s director to remove this arbitrator from the panel.
By this time, the non-public arbitrator had served on two other FINRA arbitration panels
involving Morgan Keegan’s RMK funds that had awarded damages against Morgan Keegan.
In both of these proceedings, the non-public arbitrator had heard expert testimony to the
effect that the RMK funds were fundamentally flawed and unfit for any investor. Thus, by
the time Mr. Smythe’s claim was ready to be heard, the non-public arbitrator had already
received damaging information about the RMK funds in two previous arbitrations and had
ruled against Morgan Keegan in both. Morgan Keegan’s requests for recusal and removal
of the non-public arbitrator were denied.

Morgan Keegan also objected to the panel’s chairperson. The chairperson had
previously chaired an arbitration proceeding involving RMK funds in which the panel made
the rare move of imposing punitive damages against Morgan Keegan. This was the only
arbitration involving RMK funds that resulted in a punitive damages award. Morgan
Keegan’s request for the removal of the chairperson was also denied.

The FINRA arbitration regarding Mr. Smythe’s complaint against Morgan Keegan
was conducted from November 2 through November 6, 2009. On November 11, 2009, the
arbitration panel awarded Mr. Smythe $697,000 in compensatory damages, as well as
$195,160 in attorneys’ fees and $20,000 in witness fees.

11
(...continued)
“continuing duty” that requires arbitrators to disclose to FINRA any potential conflicts that come to light
after the arbitrator is assigned to the panel. FINRA Code § 12405(b). FINRA then shares the disclosed
information with the parties. FINRA Code § 12405(c).

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 On November 25, 2009, Morgan Keegan filed a petition in the Chancery Court for
Shelby County, asserting that the arbitration award to Mr. Smythe should be vacated because
of the “evident partiality” of the non-public arbitrator and the chairperson of the arbitration
panel.12 Mr. Smythe did not file a petition to confirm the award, as permitted by Tenn. Code
Ann. § 29-5-312 (2012). However, on February 11, 2010, he filed a written response to
Morgan Keegan’s petition in which he requested not only that the trial court deny Morgan
Keegan’s petition, but also “that the Award, rendered on November 11, 2009, by FINRA
Dispute Resolution be confirmed in accordance with Tenn. Code Ann. § 29-5-313(a).” 13
During oral argument before the trial court on February 25, 2010, Mr. Smythe’s attorney
again urged that the “award for the Smythes . . . should be upheld.”

The trial court ruled from the bench at the conclusion of the February 25, 2010
hearing. The trial court concluded that the non-public arbitrator was “draped with the cloak
of bias and prejudice” against Morgan Keegan and that “a reasonable person” would
conclude that the panel’s chairperson and the non-public arbitrator would be unfairly
“predisposed to view any acts in the light most damaging to [Morgan Keegan] because of
their previous hearing and conclusions [in] other matters involving Morgan Keegan.” Thus,
the trial court held that “the process should be replayed.”

The trial court confirmed its bench ruling in a written order filed on March 16, 2010.
The order, drafted by Morgan Keegan’s lawyer and approved by Mr. Smythe’s counsel,
found that “there was evident partiality” by the non-public arbitrator and the chairperson of
the panel and that the award in Mr. Smythe’s favor “should be and is vacated and is
remanded back to FINRA for a new hearing for all of those specific reasons that [Morgan
Keegan] raised as constituting bias and prejudice, all of which this Court hereby finds and
adopts.”

Mr. Smythe appealed. On March 24, 2011, the Court of Appeals, on its own motion
and apparently without additional briefing, filed an opinion dismissing the appeal on the
ground that the court lacked subject matter jurisdiction under the Tennessee Uniform

12
9 U.S.C.A. § 10(a)(2) (West 2009) and Tenn. Code Ann. § 29-5-313(a)(1)(B) (2012) authorize the
court to vacate an arbitration award upon proof of the “evident partiality” of the arbitrator.
13
Mr. Smythe’s reference to Tenn. Code Ann. § 29-5-313(a) as authority to confirm his arbitration
award is abstruse. Tenn. Code Ann. § 29-5-313 governs the vacatur of awards. Confirmation of arbitration
awards is governed by Tenn. Code Ann. § 29-5-312 (2012).

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Arbitration Act14 to adjudicate Mr. Smythe’s appeal.15 Mr. Smythe filed a petition for
rehearing, arguing that the appeal provisions of the Federal Arbitration Act16 preempted
inconsistent appeal provisions in the Tennessee Uniform Arbitration Act and that the Federal
Arbitration Act provided a broader basis for jurisdiction than the Tennessee Uniform
Arbitration Act. The Court of Appeals withdrew its original opinion on May 19, 2011, and
accepted additional briefs from both parties on the jurisdictional issue.

In a second opinion issued on November 14, 2011, the Court of Appeals again decided
that it lacked subject matter jurisdiction over Mr. Smythe’s appeal. Morgan Keegan & Co.
v. Smythe, No. W2010-01339-COA-R3-CV, 2011 WL 5517036 (Tenn. Ct. App. Nov. 14,
2011). The court first decided that it lacked jurisdiction under Tenn. Code Ann. § 29-5-
319(a)(3)17 because the trial court’s March 16, 2010 order did not expressly confirm or deny
the arbitration award. Morgan Keegan & Co. v. Smythe, 2011 WL 5517036, at *8. The court
also decided that it lacked jurisdiction under Tenn. Code Ann. § 29-5-319(a)(5)18 because the
trial court ordered a rehearing of the arbitration. Morgan Keegan & Co. v. Smythe, 2011 WL
5517036, at *9-10.

In addition to these statutory grounds, the Court of Appeals decided that the Federal
Arbitration Act applied to the proceeding because the underlying transaction involved
interstate commerce. The court also held that the appeal provisions in the Tennessee
Uniform Arbitration Act were not preempted by the Federal Arbitration Act because they
were procedural rather than substantive. Morgan Keegan & Co. v. Smythe, 2011 WL
5517036, at *11-17. The court also declined to find the trial court’s order appealable on the
basis of Tenn. R. App. P. 2’s “good cause” provision. Morgan Keegan & Co. v. Smythe,
2011 WL 5517036, at *18. The parties have not joined issue with regard to this final holding
in this appeal.

We accepted Mr. Smythe’s appeal. Because we determine that Tenn. Code Ann. § 29-
5-319(a)(3) confers appellate jurisdiction on the Court of Appeals in this case, we reverse the

14
Tenn. Code Ann. §§ 29-5-301 to -320 (2012).
15
Courts have the responsibility to address their own subject matter jurisdiction, even when the
parties have not raised the issue. Tenn. R. App. P. 13(b).
16
9 U.S.C.A. §§ 1-16 (West 2009).
17
Tenn. Code Ann. § 29-5-319(a)(3) authorizes appeals from orders “confirming or denying
confirmation of an award.”
18
Tenn. Code Ann. § 29-5-319(a)(5) authorizes appeals from orders “vacating an award without
directing a re-hearing.”

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decision of the Court of Appeals and remand the case to the Court of Appeals to address the
substantive merits of the issues properly raised by the parties.

II.

Whether a court has subject matter jurisdiction over a case is a question of law that
we review de novo with no presumption of correctness. Word v. Metro Air Servs., Inc., 377
S.W.3d 671, 674 (Tenn. 2012) (citing Northland Ins. Co. v. State, 33 S.W.3d 727, 729 (Tenn.
2000)). Likewise, whether a state statute or common-law cause of action is preempted by
federal law is a question of law that we review de novo. Leggett v. Duke Energy Corp., 308
S.W.3d 843, 851 (Tenn. 2010).

The appellate courts’ subject matter jurisdiction over this appeal is governed by a
statute, and

our role in construing a statute is to ascertain and give effect to
the legislative intent without unduly restricting or expanding a
statute’s coverage beyond its intended scope. To do this, we
focus initially on the statute’s words, giving these words their
natural and ordinary meaning in light of their statutory context.
We avoid any forced or subtle construction that would limit or
extend the meaning of the language. Every word in a statute is
presumed to have meaning and purpose. If the statutory
language is clear and unambiguous, we apply the statute’s plain
language in its normal and accepted use. We need look no
further than the statute itself, enforcing it just as it is written.

Keen v. State, No. W2011-00789-SC-R11-PD, __ S.W.3d __, __, 2012 WL 6631245, at *12
(Tenn. Dec. 20, 2012) (internal citations and quotation marks omitted); see also Eastman
Chem. Co. v. Johnson, 151 S.W.3d 503, 507 (Tenn. 2004). When a statute is ambiguous,
however, we may refer to the broader statutory scheme, the history of the legislation, or other
sources to discern its meaning. Leggett v. Duke Energy Corp., 308 S.W.3d at 851-52 (citing
Colonial Pipeline Co. v. Morgan, 263 S.W.3d 827, 836 (Tenn. 2008)).

III.

Until relatively recent times, American courts have been reluctant to recognize the
validity of arbitration agreements in private contracts. See Buraczynski v. Eyring, 919
S.W.2d 314, 317 (Tenn. 1996); Cavalier Ins. Corp. v. Osment, 538 S.W.2d 399, 403 (Tenn.
1976). However, this Court has now acknowledged that both the Federal Arbitration Act and
the Tennessee Uniform Arbitration Act were adopted (1) “to promote private settlement of

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disputes,” Pugh’s Lawn Landscape Co. v. Jaycon Dev. Corp., 320 S.W.3d 252, 257 (Tenn.
2010) (quoting Arnold v. Morgan Keegan & Co., 914 S.W.2d 445, 448 n.2 (Tenn. 1996)),
and (2) to ensure the enforceability of private agreements to arbitrate. Taylor v. Butler, 142
S.W.3d 277, 281 (Tenn. 2004). Accordingly, arbitration agreements in private contracts are
now favored in Tennessee both by statute and existing caselaw. Benton v. Vanderbilt Univ.,
137 S.W.3d 614, 617 (Tenn. 2004).

Because arbitration agreements in private contracts are favored, the courts “play only
a limited role in reviewing the decisions of arbitrators.” Williams Holding Co. v. Willis, 166
S.W.3d 707, 710 (Tenn. 2005) (quoting Arnold v. Morgan Keegan & Co., 914 S.W.2d at
448). The purpose of the Tennessee Uniform Arbitration Act, like the Federal Arbitration
Act, is to “make the arbitration process effective, provide necessary safeguards, and provide
an efficient procedure when judicial assistance is necessary.” Uniform Arbitration Act
(1956), Prefatory Note, 7 U.L.A. 100 (2009).19

Both the Federal Arbitration Act and the Tennessee Uniform Arbitration Act contain
provisions governing the judicial review of arbitration awards. More particularly, they
contain provisions with regard to the manner in which the parties to an arbitration may obtain
appellate review of a trial court’s order either confirming or vacating an arbitration award.
The differences in the language of the Federal Arbitration Act and the Tennessee Uniform
Arbitration Act regarding appellate review of a trial court’s order have given rise to the
current dispute between Mr. Smythe and Morgan Keegan.

The Federal Arbitration Act contains a list of appealable trial court orders, as well as
a list of unappealable orders. Among the orders appealable under the Federal Arbitration Act
are orders “confirming or denying confirmation of an award or partial award” and orders
“modifying, correcting, or vacating an award.” See 9 U.S.C.A. § 16(a)(1)(D), (E).20 In
contrast, the appeal provision in the Tennessee Uniform Arbitration Act provides that:

19
The Tennessee Uniform Arbitration Act, which was enacted in 1983, is based on the version of the
Uniform Arbitration Act adopted in 1956. See Merrimack Mut. Fire Ins. Co. v. Batts, 59 S.W.3d 142, 149
(Tenn. Ct. App. 2001). In 2000, the National Conference of Commissioners on Uniform State Laws
published the Revised Uniform Arbitration Act. Tennessee has not adopted the revised act.
20
The original Federal Arbitration Act lacked an appeal provision. See Act of July 30, 1947, Pub.
L. No. 80-282, 61 Stat. 669. Section 16, originally designated as Section 15, was added as part of the Judicial
Improvements and Access to Justice Act of 1988. Pub. L. No. 100-702, § 1019, 102 Stat. 4642, 4670-71
(1988). In 1990, Congress renumbered this provision from Section 15 to Section 16. Judicial Improvements
Act of 1990, Pub. L. No. 101-650, § 325(a)(1), 104 Stat. 5089, 5120 (1990). Thus, while the Federal
Arbitration Act predates the Uniform Arbitration Act, the appeal provisions of the Uniform Arbitration Act
(and the Tennessee Uniform Arbitration Act) actually predate the more artfully drafted appeal provisions in
the Federal Arbitration Act.

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 (a) An appeal may be taken from:
(1) An order denying an application to compel arbitration
made under § 29-5-303;
(2) An order granting an application to stay arbitration
made under § 29-5-303(b);
(3) An order confirming or denying confirmation of an
award;
(4) An order modifying or correcting an award;
(5) An order vacating an award without directing a
re-hearing; and
(6) A judgment or decree entered pursuant to this part.
(b) The appeal shall be taken in the manner and to the same
extent as from orders or judgments in a civil action.

Tenn. Code Ann. § 29-5-319 (2012).

In the case before us, the trial court’s March 16, 2010 order vacated the arbitration
award and remanded the dispute for a new arbitration proceeding without expressly “denying
confirmation.” This order would clearly be appealable under the Federal Arbitration Act
because Section 16(a)(1)(E) of the Act provides than an appeal may be taken from an order
“modifying, correcting, or vacating an award.”

The appealability of the March 16, 2010 order under the Tennessee Uniform
Arbitration Act is another question. While the Tennessee Uniform Arbitration Act permits
appellate review of a trial court’s order vacating an arbitration award, Tenn. Code Ann. § 29-
5-319(a)(5) limits appellate review to orders “vacating an award without directing a re-
hearing.” The March 16, 2010 order directed a rehearing.

Accordingly, we are confronted with two questions. First, we must decide whether
the appeal in this case is governed by Tenn. Code Ann. § 29-5-319 or by Section 16 of the
Federal Arbitration Act. If we determine that the appeal is governed by Tenn. Code Ann. §
29-5-319, then we must determine whether the March 16, 2010 order qualifies as an
appealable order under Tenn. Code Ann. § 29-5-319.

IV.

We turn now to the question regarding the application of the Federal Arbitration Act
and the Tennessee Uniform Arbitration Act to this case. We find that the Federal Arbitration
Act is applicable to this dispute. However, we also find that the subject matter jurisdiction
of the appellate courts to review the orders of a trial court reviewing an arbitration award is
governed by Tenn. Code Ann. § 29-5-319.

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 A.

Morgan Keegan now suggests that we ought not consider the Federal Arbitration Act
because Mr. Smythe failed to demonstrate that his investments in its RMK funds are
transactions “involving [interstate] commerce” for the purpose of 9 U.S.C.A. § 2. We find
no merit in this argument.

Most courts that have confronted this question have held that every securities contract
is “a contract evidencing a transaction involving commerce” for the purpose of 9 U.S.C.A.
§ 2. The United States Supreme Court has held that the term “involving commerce,” like the
phrase “affecting commerce,” encompasses “the broadest permissible exercise of Congress’
Commerce Clause power.” Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 56 (2003) (per
curiam). This power “may be exercised in individual cases without showing any specific
effect upon interstate commerce if in the aggregate the economic activity in question would
represent a general practice . . . subject to federal control.” Citizens Bank v. Alafabco, Inc.,
539 U.S. at 56-57 (internal quotation marks omitted). As one court aptly explained, it is now
“axiomatic that the purchase and sale of securities relates to interstate commerce.”
Prudential Sec. Inc. v. Hornsby, 865 F. Supp. 447, 449 (N.D. Ill. 1994); see also
Wattenbarger v. A.G. Edwards & Sons, Inc., 246 P.3d 961, 968-69 (Idaho 2010).

Furthermore, as Morgan Keegan itself noted in its original brief to the Court of
Appeals, the Federal Arbitration Act is “applicable here because this matter involves an
arbitration proceeding in which the underlying transactions involved interstate commerce,”
and that “[s]ecurities transactions involve interstate commerce.” Comparing the two
arguments, Morgan Keegan had it right the first time.

B.

Because this is a FINRA securities case being heard in Tennessee courts, both the
Federal Arbitration Act and the Tennessee Uniform Arbitration Act apply. The fact that both
state and federal law apply in this case implicates the doctrine of preemption under the
Supremacy Clause of the United States Constitution.

Article VI, Clause 2 of the United States Constitution states:

This Constitution, and the Laws of the United States which shall
be made in Pursuance thereof; and all Treaties made, or which
shall be made, under the Authority of the United States, shall be
the supreme Law of the Land; and the Judges in every State
shall be bound thereby, any Thing in the Constitution or Laws
of any State to the Contrary notwithstanding.

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As “the supreme law of the land,” federal law sometimes preempts, or supplants, otherwise
permissible state laws, rendering them inert and ineffectual. The scope of this preemption
is a federal question, and thus the boundaries of the preemption doctrine are prescribed by
United States Supreme Court precedent. Leggett v. Duke Energy Corp., 308 S.W.3d at 852-
54.

Courts recognize both “express preemption” and “implied preemption.” Express
preemption occurs when Congress explicitly defines the extent to which its enactments
preempt state law. Implied preemption typically falls into one of three categories: direct
conflict preemption; “purposes and objectives” conflict preemption; and field preemption.
Conflict preemption is based on the principle that state law is preempted to the extent that
it actually conflicts with federal law. Leggett v. Duke Energy Corp., 308 S.W.3d at 853.
Even when there is no direct contradiction, state law may be preempted by federal law when
it “stands as an obstacle to the accomplishment and execution of the full purposes and
objectives of Congress.” Leggett v. Duke Energy Corp., 308 S.W.3d at 853-54 (quoting
Hines v. Davidowitz, 312 U.S. 52, 67 (1941)).

In analyzing whether federal law preempts a state statute, the courts should never
assume that Congress has derogated state regulation. Instead, courts should start with the
presumption that Congress does not intend to supplant state law and that the historic police
powers of the states are not superseded by the federal act unless preemption was the clear and
manifest purpose of Congress. New York State Conference of Blue Cross & Blue Shield
Plans v. Travelers Ins. Co., 514 U.S. 645, 654-55 (1995); see also Altria Grp., Inc. v. Good,
555 U.S. 70, 77 (2008). This anti-preemption presumption erects a “high threshold;” implied
preemption analysis requires much more than a “freewheeling judicial inquiry into whether
a state statute is in tension with federal objectives.” Chamber of Commerce of U.S. v.
Whiting, 563 U.S. ___, ___, 131 S. Ct. 1968, 1985 (2011) (quoting Gade v. National Solid
Wastes Mgmt. Ass’n, 505 U.S. 88, 111 (1992) (Kennedy, J., concurring in part and
concurring in judgment)).

The United States Supreme Court has observed that “[t]here is no federal policy
favoring arbitration under a certain set of procedural rules” and that “the federal policy is
simply to ensure the enforceability . . . of private agreements to arbitrate.” Volt Info.
Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 476
(1989). Noting that the Federal Arbitration Act contains no express preemption provision,
the Court has also recognized that Congress did not intend to preempt the entire field of
arbitration when it enacted the Federal Arbitration Act. Volt, 489 U.S. at 477.

The Federal Arbitration Act contains federal substantive law requiring the parties and
the courts to honor arbitration agreements. See Southland Corp. v. Keating, 465 U.S. 1, 15
n.9 (1984). However, the Act does not prevent “the enforcement of agreements to arbitrate

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under different rules than those set forth in the Act itself.” Volt, 489 U.S. at 479. State
arbitration rules may nevertheless be preempted to the extent that they “stand[] as an obstacle
to the accomplishment and execution of the full purposes and objectives of Congress.” Volt,
489 U.S. at 477 (quoting Hines v. Davidowitz, 312 U.S. at 67).

Most courts that have addressed this issue have held that the Federal Arbitration Act’s
appeal provisions do not preempt state appeal provisions consistent with the Uniform
Arbitration Act. These courts generally reason (1) that the Uniform Arbitration Act’s appeal
provisions are procedural rather than substantive, (2) that procedural provisions should not
be preempted unless they stand as an obstacle to the full purposes and objectives of
Congress, and (3) that the Uniform Arbitration Act’s appeal provisions do not impede the
Federal Arbitration Act’s stated objective of ensuring the enforceability of arbitration
agreements in private contracts. See, e.g., Southern Cal. Edison Co. v. Peabody W. Coal Co.,
977 P.2d 769, 774-75 (Ariz. 1999); Cronus Invs., Inc. v. Concierge Servs., 107 P.3d 217, 226
(Cal. 2005); American Gen. Fin. Servs. v. Vereen, 639 S.E.2d 598, 601 (Ga. Ct. App. 2006);
Saavedra v. Dealmaker Devs., LLC, 2008-1239, p. 5 (La. App. 4 Cir. 3/18/09); 8 So. 3d 758,
762; Wells v. Chevy Chase Bank, F.S.B., 768 A.2d 620, 628-29 (Md. 2001); Weston Sec.
Corp. v. Aykanian, 703 N.E.2d 1185, 1188-89 (Mass. App. Ct. 1998); Whitney v. Alltel
Commc’ns, Inc., 173 S.W.3d 300, 306-07 (Mo. Ct. App. 2005); Kremer v. Rural Cmty. Ins.
Co., 788 N.W.2d 538, 545-47 (Neb. 2010); Toler’s Cove Homeowners Ass’n v. Trident
Constr. Co., 586 S.E.2d 581, 584 (S.C. 2003); Batton v. Green, 801 S.W.2d 923, 927-28
(Tex. App. 1990); see also Hubert v. Turnberry Homes, LLC, No. M2005-00955-COA-R3-
CV, 2006 WL 2843449, at *3-4 (Tenn. Ct. App. Oct. 4, 2006) (No Tenn. R. App. P. 11
application filed) (noting that, while 9 U.S.C. § 16 “establishes procedures for interlocutory
appeals of federal court orders,” the Tennessee Uniform Arbitration Act was enacted “to
provide procedures for the enforcement of arbitration agreements in state court”).21

Morgan Keegan points out that these cases involve appeals from trial court orders that
preceded an arbitration hearing. While that observation is correct, Morgan Keegan has not
explained why pre-arbitration appeals should be treated differently than post-arbitration
appeals. We have determined that the statutes governing post-arbitration appeals are equally
procedural in nature and, therefore, that the same analysis applies to the rules governing post-
arbitration appeals as applies to pre-arbitration appeals.

21
In contrast, some states have applied the Federal Arbitration Act’s appeal provisions without any
discussion of the corresponding state law. See Pre-Paid Legal Servs., Inc. v. Anderson, 2004-CA-01293-SCT
(¶ 1), 918 So. 2d 634, 634 (Miss. 2005); Carpenter v. Brooks, 534 S.E.2d 641, 645 (N.C. Ct. App. 2000);
Dakota Wesleyan Univ. v. HPG Int’l, Inc., 1997 SD 30, ¶¶ 6-12, 560 N.W.2d 921, 922-24.

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 We agree with the Court of Appeals that the majority view on this point is correct.
As the Court of Appeals noted, the purpose of the Federal Arbitration Act is to overrule the
judiciary’s long-standing refusal to enforce arbitration agreements according to their terms,
and to place arbitration agreements on “the same footing as other contracts.” Morgan
Keegan & Co. v. Smythe, 2011 WL 5517036, at *16 (quoting Volt, 489 U.S. at 478). More
specifically, the purpose of the Federal Arbitration Act’s appeal provision is “to promote
appeals from orders barring arbitration and limit appeals from orders directing arbitration.”
Morgan Keegan & Co. v. Smythe, 2011 WL 5517036, at *16 (quoting Spell v. Labelle, No.
W2003-00821-COA-R3-CV, 2004 WL 892534, at *2 (Tenn. Ct. App. Apr. 22, 2004) (No
Tenn. R. App. P. 11 application filed)). Although some cases may exist in which a trial court
order would be appealable under the Federal Arbitration Act but not the Tennessee Uniform
Arbitration Act, this hypothetical difference does not undermine the Federal Arbitration
Act’s objectives so seriously that it warrants preemption. Thus, if Tennessee’s appellate
courts have subject matter jurisdiction to hear appeals from orders such as the trial court’s
March 16, 2010 order, the grant of jurisdiction must be found in the Tennessee Uniform
Arbitration Act, not the Federal Arbitration Act.

V.

We now address whether the trial court’s March 16, 2010 order vacating Mr.
Smythe’s arbitration award qualifies as an appealable order under Tenn. Code Ann. § 29-5-
319(a). We hold that the order is an appealable order under Tenn. Code Ann. § 29-5-
319(a)(3). To hold otherwise would be to elevate form over substance and would enable trial
courts to shield their orders vacating arbitration awards from timely appellate review.
Neither of these results is required by the Tennessee Uniform Arbitration Act.

A.

At the outset, we will address the necessity of filing a separate petition to confirm an
arbitration award when another party has already filed a petition to vacate the same award.
While Tenn. Code Ann. § 29-5-312 authorizes a party to apply for an order confirming an
arbitration award, it does not necessarily require such an application. Mr. Smythe did not file
a separate petition to confirm the arbitration award in this case. However, in both his written
response to Morgan Keegan’s petition to vacate the award and his arguments to the court, he
requested that the trial court confirm the award.

No provision of the Tennessee Uniform Arbitration Act requires parties to file
competing petitions. To the contrary, Tenn. Code Ann. section 29-5-312 indicates that
separate petitions need not be filed. The procedure under the statute is analogous to that
specified in Tenn. R. App. P. 13. Once one party has perfected an appeal or has filed an
application for permission to appeal, the other party or parties in the case are not required to

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file cross-appeals, separate appeals, or separate applications for permission to appeal. Tenn.
R. App. P. 13(a). The parties who have not perfected an appeal or filed a Tenn. R. App. P.
11 application may raise additional issues and seek relief on their own. Tenn. R. App. P.
27(b); Hodge v. Craig, 382 S.W.3d 325, 335 (Tenn. 2012).

Thus, when the party dissatisfied with the arbitration award acts first by petitioning
to vacate the award in accordance with Tenn. Code Ann. § 29-5-313, we do not construe the
Tennessee Uniform Arbitration Act to require the party who prevailed in the arbitration to
file a separate petition to confirm. In this scenario, it is entirely appropriate for the prevailing
party to include its request to confirm the award in its response to the dissatisfied party’s
petition to vacate. This is precisely what Mr. Smythe did in this case.

B.

We turn next to the significance, if any, of the fact that the trial court’s March 16,
2010 order does not explicitly deny confirmation of the arbitration award. Morgan Keegan
insists that the lack of explicit language denying confirmation of the award necessarily means
that the order cannot be considered “an order . . . denying confirmation of an award” for the
purpose of Tenn. Code Ann. § 29-5-319(a)(3). This interpretation not only elevates form
over substance, it throws a monkey wrench into the traditional principles of appealability.

Trial courts, as a general matter, speak through their orders and judgments. In re
Adoption of E.N.R., 42 S.W.3d 26, 31 (Tenn. 2001). Like other written instruments, orders
and judgments should be interpreted and enforced according to their plain meaning.
Konvalinka v. Chattanooga-Hamilton Cnty. Hosp. Auth., 249 S.W.3d 346, 359 (Tenn. 2008).
When an order or judgment permits more than one interpretation, it should be construed with
reference to the issues it was meant to decide, In re Langenfeld, 993 A.2d 232, 236 (N.H.
2010), and should be interpreted in light of the context in which it was entered, as well as the
other parts of the record, including the pleadings, motions, issues before the court, and
arguments of counsel. Kiefer v. Rust-Oleum Corp., 916 N.E.2d 22, 29 (Ill. App. Ct. 2009);
see also Los Angeles Local Joint Exec. Bd. of Culinary Workers v. Stan’s Drive-Ins, Inc., 288
P.2d 286, 290 (Cal. Ct. App. 1955) (“The rule with respect to orders and judgments is that
the entire record may be examined to determine their scope and effect. . . .”).

Court orders and judgments, like other documents, often speak as clearly through
implication as they do through express statements. Accordingly, when construing orders and
judgments, effect must be given to that which is clearly implied, as well as to that which is
expressly stated. Sosin v. Sosin, 14 A.3d 307, 316 (Conn. 2011); Dairyland, Inc. v. Jenison,
207 N.W.2d 753, 754 (Iowa 1973); State ex rel. State Farm Mut. Auto. Ins. Co. v. Bedell, 719
S.E.2d 722, 737 (W. Va. 2011). Here, there can be no doubt that the trial court’s March 16,

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2010 order necessarily denied Mr. Smythe’s request for confirmation when it granted
Morgan Keegan’s petition to vacate the award.

This conclusion is buttressed by Tenn. Code Ann. § 29-5-313(d), which states that
“[i]f the application to vacate is denied . . . the court shall confirm the award.” We see no
reason to conclude that Tenn. Code Ann. § 29-5-313(d) operates only when the party who
prevailed in the arbitration separately cross-petitions for confirmation. See Hogue v. Popham
Haik Schnobrich & Kaufman Ltd., 753 A.2d 1014, 1017-18 (D.C. 2000) (explaining that,
under the Uniform Arbitration Act, “the denial of a motion to vacate the award is the
functional equivalent of an entry of the judgment,” even when the trial court’s order does not
explicitly confirm the award). If a denial of vacatur automatically results in confirmation of
the award, the converse must also be true – a grant of vacatur necessarily results in a denial
of confirmation.

Furthermore, we are not persuaded that when the General Assembly enacted Tenn.
Code Ann. § 29-5-319, it intended to enable trial judges to shield their orders from appellate
review. Were we to adopt Morgan Keegan’s proposed interpretation, a trial court could
frustrate appellate review of its order vacating an arbitration award and directing a rehearing
under Tenn. Code Ann. § 29-5-319(a)(3) simply by omitting any mention that it has denied
the prevailing party’s request to confirm the award. See East Tex. Salt Water Disposal Co.
v. Werline, 307 S.W.3d 267, 282 (Tex. 2010) (Jefferson, C.J., dissenting) (“Appellate
jurisdiction should not hinge on whether the trial court, in conjunction with an order vacating
an award and directing rehearing, denies rather than dismisses as moot a motion to
confirm.”).

C.

We turn next to the relationship between appeals under Tenn. Code Ann. § 29-5-
319(a)(3) and appeals under Tenn. Code Ann. § 29-5-319(a)(5). Morgan Keegan, arguing
for a narrow construction of Tenn. Code Ann. § 29-5-319(a), insists that Tenn. Code Ann.
§ 29-5-319(a)(5) effectively trumps Tenn. Code Ann. § 29-5-319(a)(3) when an order
denying confirmation of an award also vacates the award and directs a rehearing. We decline
to construe the six subsections of Tenn. Code Ann. § 29-5-319(a) in a way that gives one
subsection priority over another. Even if an order is not appealable under one subsection,
it may be appealable under another. Thus, the fact that the trial court’s March 16, 2010 order
may not be appealable under Tenn. Code Ann. § 29-5-319(a)(5) does not mean that it is not
appealable under Tenn. Code Ann. § 29-5-319(a)(3).

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 D.

As a final matter, we address the parties’ contentions that their construction of Tenn.
Code Ann. § 29-5-319 is more consistent with the policies underlying the Federal Arbitration
Act and the Uniform Arbitration Act than their adversary’s. In his Practice Commentary on
the Federal Arbitration Act, Professor David Siegel explains that 9 U.S.C.A. § 16, which
governs appellate review of trial court orders reviewing arbitration proceedings, is

a pro-arbitration statute designed to prevent the appellate aspect
of the litigation process from impeding the expeditious
disposition of an arbitration. Its inherent acknowledgment is
that arbitration is a form of dispute resolution designed to save
the parties time, money, and effort by substituting for the
litigation process the advantages of speed, simplicity, and
economy associated with arbitration. Its theme is that judicial
involvement in the process should be kept to the barest
minimum to avoid undermining those goals.

David D. Siegel, Practice Commentary: Appeals from Arbitrability Determinations, 9
U.S.C.A. § 16, at 747. These observations also apply to the Tennessee Uniform Arbitration
Act. See Arnold v. Morgan Keegan & Co., 914 S.W.2d at 448 n.2 (“[T]he purpose of the
Federal and Uniform Arbitration Act is the same: to promote private settlement of disputes,
thereby bypassing the courts.”).

Morgan Keegan asserts that had this dispute proceeded to the second arbitration panel
as ordered by the trial court, the matter would have been resolved quickly and inexpensively
and the delay and expense of this appeal would have been avoided. For his part, Mr. Smythe
insists that Morgan Keegan would have been unable to participate expeditiously in a second
arbitration because the company’s lawyers were overburdened by the tidal wave of RMK
fund arbitrations. Mr. Smythe also points out that a second arbitration would have delayed
appellate review of the trial court’s order vacating the first arbitration decision, and that the
second arbitration proceeding could ultimately prove to be a waste of time and resources
should an appellate court ultimately find that the trial court’s March 16, 2010 order was
erroneous.22

In our view, neither party’s arguments decisively advance the interests of “speed,
simplicity, and economy” more than the other’s. In addition to these interests, we are
concerned about the uncertainty regarding Mr. Smythe’s ability to seek appellate review of

22
See East Tex. Salt Water Disposal Co. v. Werline, 307 S.W.3d at 275-76 (Willett, J., concurring)
(describing the possible expense and delay of a do-over arbitration).

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the trial court’s March 16, 2010 order were this appeal denied and a second arbitration held.
Significant questions arise. Should Mr. Smythe obtain a smaller award following the second
arbitration, may he petition a court to vacate the second award? If so, could he also challenge
the trial court’s March 16, 2010 order and move to reinstate the original award? Would these
motions be heard by the same trial judge who entered the March 16, 2010 order? If Mr.
Smythe lost at the second arbitration, could he appeal and seek review of the March 16, 2010
order as part of his petition to vacate the second arbitration award? These procedural
scenarios would launch this case into uncharted waters that the Tennessee Uniform
Arbitration Act simply does not contemplate.

Our interpretation of Tenn. Code Ann. § 29-5-319(a) permits Mr. Smythe to appeal
prior to a second arbitration proceeding. It charts a more appropriate course that avoids the
possibility that an erroneous decision to vacate an arbitration award and order a do-over
arbitration will evade appellate review entirely or will be reviewed and set aside only after
the parties have invested time and resources in a second arbitration proceeding.

We note that our interpretation of Tenn. Code Ann. § 29-5-319(a) is consistent with
an earlier decision by the Court of Appeals in which the appellate court reviewed a trial court
order that vacated an arbitration award and ordered a second arbitration. Boyle v. Thomas,
No. 02A01-9601-CV-00022, 1997 WL 710912 (Tenn. Ct. App. Nov. 17, 1997) (No Tenn.
R. App. P. 11 application filed).23 Without explicitly addressing the issue of subject matter
jurisdiction, the Court of Appeals reversed the trial court and confirmed the arbitrator’s
award. Boyle v. Thomas, 1997 WL 710912, at *4. We also note that our interpretation of
Tenn. Code Ann. § 29-5-319(a) places the appeal provisions of the Tennessee Uniform
Arbitration Act in harmony with the appeal provisions in the Federal Arbitration Act.

Mindful that Tenn. Code Ann. § 29-5-320 (2012) prompts us to interpret the
Tennessee Uniform Arbitration Act in a manner consistent with the other states that have
adopted the Uniform Arbitration Act, we have compared our construction of Tenn. Code
Ann. § 29-5-319 with similar appeal provisions in other states. In a case raising many of the
same issues presented in this case, the Texas Supreme Court recently held that its counterpart
to Tenn. Code Ann. § 29-5-319(a)(3)24 permitted an appeal from an order vacating an

23
In that case, Mr. Boyle moved to vacate the arbitration decision, while Mr. Thomas moved to
confirm it. Boyle v. Thomas, 1997 WL 710912, at *2. We have already held in this case that even though
Mr. Smythe did not file a separate petition to confirm the arbitration, he appropriately requested confirmation
in his response to Morgan Keegan’s petition to vacate the arbitration award. Thus, the fact that Mr. Thomas
separately requested confirmation while Mr. Smythe did not does not provide a basis for distinguishing Boyle
v. Thomas from this case.
24
See Tex. Civ. Prac. & Rem. Code Ann. § 171.098(a)(3) (West 2011). In this regard, we place no
(continued...)

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arbitration award and ordering a second arbitration before a new arbitrator. East Tex. Salt
Water Disposal Co v. Werline, 307 S.W.3d at 274.25 In its decision, the Texas Supreme
Court held, as we have, that Texas’s counterpart to Tenn. Code Ann. § 29-5-319(a)(5) is not
an exception to its counterpart to Tenn. Code Ann. § 29-5-319(a)(3). East Tex. Salt Water
Disposal Co. v. Werline, 307 S.W.3d at 270-71.

In addition, the Texas Supreme Court squarely addressed the argument being made
by Morgan Keegan in this case that a trial court’s order vacating an arbitration award and
ordering a second arbitration should not be appealable for the same reasons that a trial court’s
decision to grant a new trial is not appealable. The Texas Supreme Court found this analogy
inapt because, in the context of appeals from arbitration awards under the Uniform
Arbitration Act, trial courts are acting as appellate courts. East Tex. Salt Water Disposal Co.
v. Werline, 307 S.W.3d at 271-72.

We concur with this conclusion. While trial courts retain broad discretion with regard
to granting new trials, see Ali v. Fisher, 145 S.W.3d 557, 564-65 (Tenn. 2004), the discretion
of a trial court reviewing an arbitration award is severely circumscribed by statute. Parties
who agree to arbitrate relinquish their right to obtain a judicial decision on the merits of their
claim, and an arbitration award may be set aside only on the “very unusual circumstances”
that fit within Tenn. Code Ann. § 29-5-313(a). Arnold v. Morgan Keegan & Co., 914
S.W.2d at 448 (quoting First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 942 (1995)).
Because a trial court reviewing an arbitration award functions more like an appellate body
subject to an extremely narrow standard of review, we decline to equate an order vacating
an arbitration award and ordering a new arbitration to an order granting a new trial.

We are mindful that our construction of Tenn. Code Ann. § 29-5-319(a), like the
Texas Supreme Court’s construction of Tex. Civ. Prac. & Rem. Code Ann. § 171.098(a)(3),
may be a minority position. Compare East Tex. Salt Water Disposal Co. v. Werline, 307
S.W.3d at 272-74 (concluding that the decisions in other relevant jurisdictions “appear about
evenly divided on the issue”), with East Tex. Salt Water Disposal Co. v. Werline, 307 S.W.3d
at 277-80 (Jefferson, C.J., dissenting) (“[I]t is accurate to say that the majority of states . . .
have concluded that there is no appeal from an order that vacates an award, directs a
rehearing, and denies confirmation.”). We do not construe Tenn. Code Ann. § 29-5-320 as

24
(...continued)
legal significance on the fact that the Texas statute uses “or” to connect each appealable order, while Tenn.
Code Ann. § 29-5-319(a) uses “and.”
25
In that case, Mr. Werline, like Mr. Thomas in Boyle v. Thomas, expressly petitioned the trial court
to confirm the award. As we did with regard to Boyle v. Thomas, we do not find the fact that Mr. Werline
filed a separate petition to confirm the award while Mr. Smythe included his request for confirmation in his
response to Morgan Keegan’s petition to vacate the arbitration award to be legally significant.

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an inexorable command to make up a scorecard of the states that have accepted and rejected
a particular interpretation of a provision of the Uniform Arbitration Act and then to follow
the majority view without further discussion or analysis.

Rather, we have carefully considered the controlling statute in this case – Tenn. Code
Ann. § 29-5-319(a)(3). We have determined that the plain language of this statute confers
on Tennessee’s appellate courts the subject matter jurisdiction over appeals such as this. An
order that vacates an arbitration award and orders a second arbitration is an order “denying
confirmation of an award” for the purposes of Tenn. Code Ann. § 29-5-319(a)(3), regardless
of whether the party opposing the petition to vacate the award filed a separate cross-petition
for confirmation under Tenn. Code Ann. § 29-5-312 or whether the trial court has expressly
denied confirmation in its written order.

VI.

Accordingly, we reverse the judgment of the Court of Appeals and find that the trial
court’s March 16, 2010 order is an appealable order “denying confirmation” of an arbitration
award under Tenn. Code Ann. § 29-5-319(a)(3). We, therefore, remand the case to the Court
of Appeals to consider the substantive merits of the issues properly raised by the parties. We
tax the costs of this appeal to Morgan Keegan & Co., Inc., for which execution, if necessary,
may issue.

______________________________
WILLIAM C. KOCH, JR., JUSTICE

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