Title: Waterfront Marine Constr. v. North End 49ers
Citation: N/A
Docket Number: 951218
State: Virginia
Issuer: Virginia Supreme Court
Date: April 19, 1996

Present:  All the Justices 
 
WATERFRONT MARINE CONSTRUCTION, INC. 
 
v.   Record No. 951218 
OPINION BY JUSTICE ELIZABETH B. LACY 
                                        April 19, 1996 
NORTH END 49ERS SANDBRIDGE BULKHEAD 
GROUPS A, B AND C 
 
 
FROM THE CIRCUIT COURT OF THE CITY OF VIRGINIA BEACH 
 
Thomas S. Shadrick, Judge 
 
 
In this appeal we consider whether the trial court's 
confirmation of an arbitration award was erroneous because the 
claims in the demand for arbitration either were not arbitrable 
or were barred by the doctrine of res judicata. 
 
North End 49ers Sandbridge Bulkhead Groups A, B, and C 
(49ers) is an unincorporated association of 22 landowners in 
the Sandbridge section of Virginia Beach.  In 1988, the 49ers 
sought bids for the construction of a bulkhead along their 
property.  Waterfront Marine Construction, Inc. (WMC) presented 
a bid to construct sheet steel bulkheads with tiebacks rather 
than the wooden bulkheads previously used in the Sandbridge 
area.  The 49ers accepted WMC's bid and entered into an 
agreement with WMC for the construction of the bulkhead at a 
price of $850,740.00.
1  The construction contract included a 
provision providing for arbitration of any controversy or claim 
"arising out of or relating to the Contract or the breach 
thereof." 
 
In 1989, the 49ers hired an engineering firm to inspect 
the bulkhead WMC had installed after a bulkhead of similar 
                     
     
1 The agreement was contained in three separate contracts 
which were identical in content but executed separately by the 
landowners in Group A, B, or C respectively.  For purposes of 
this appeal, the three contracts are considered as a single 
contract.  
design had failed during a storm.  At that point, the 49ers' 
bulkhead had not been completely backfilled.  The inspection 
report concluded that the bulkhead design and construction were 
defective.  Following the receipt of this report, the 49ers 
filed a demand for arbitration with the American Arbitration 
Association (AAA).  The 49ers sought damages of $1,212,282.00, 
based on bids they received for work they contended was 
necessary to correct deficiencies in the bulkhead.  WMC also 
filed a demand with the AAA seeking to recover $127,382.44 -- 
the unpaid balance of the construction price, plus interest and 
arbitration costs.  
 
An arbitration panel comprised of three engineers was 
appointed by the AAA.  Following a hearing, the panel entered 
an award on March 7, 1991, denying the 49ers' claim and 
granting WMC's claim.  The arbitrators also ordered WMC to 
perform certain work relating to the tie rod connections and 
anchor piles within 60 days.  According to the terms of the 
award, the work had to be performed to the satisfaction of an 
independent engineer jointly hired and paid by the 49ers and 
WMC.  The award required WMC to guarantee the work done for one 
year from the date the independent engineer determined that the 
work was completed.  
 
Despite numerous attempts, WMC and the 49ers could not 
agree on the independent engineer and, consequently, WMC did 
not perform the work required under the first arbitration 
award.  During this time, the spring and summer of 1991, the 
parties engaged in settlement discussions.  On October 31, 
1991, an unusually strong northeaster hit the 49ers' property, 
but the bulkhead did not collapse.  A second storm hit five 
days later, damaging approximately 600 feet of the 2,340-foot 
bulkhead.  
 
On January 16, 1992, the 49ers filed a second demand for 
arbitration with the AAA, characterizing it as "a continuation" 
of the previous arbitration case, and requesting that the same 
panel be assembled to hear the demand.  They also sought 
punitive damages.  The AAA determined, however, that the matter 
was "filed as a new matter" and that reconvening the members of 
the original arbitration panel required agreement of the 
parties.  The AAA also noted that WMC had raised an issue of 
"arbitrability" and stated "[a]s a nonjudicial body, the 
Association cannot determine whether or not an issue is 
arbitrable.  Therefore, we will proceed with further 
administration of this case, unless otherwise requested by both 
parties, or unless the moving party is stayed by court order."  
 
WMC filed a motion in the trial court seeking a temporary 
injunction to stay the pending arbitration proceeding.  In its 
pleadings, WMC also sought a declaratory judgment that the 
49ers' second arbitration demand was barred by collateral 
estoppel and res judicata.  The trial court entered an ex parte 
order on September 4, 1992, enjoining the arbitration 
proceedings.  Following a hearing on March 18, 1993, the trial 
court ruled from the bench that the first arbitration award was 
final, that it could be "recognized in the form of a judgment," 
and that it could be enforced.  The court found that there was 
no agreement to "arbitrate the arbitration award."  
 
The 49ers filed a motion to reconsider and, after further 
consideration of memoranda and argument of counsel, the trial 
court reversed its prior position and vacated its September 4 
order enjoining further arbitration proceedings.  The court 
entered an order on September 30, 1993, referring the following 
matters to arbitration:  1) whether the dispute involving the 
first arbitration award was arbitrable; 2) whether res judicata 
was applicable to the claim; and 3) whether the 49ers were 
entitled to punitive damages. 
 
The arbitration panel determined that the dispute 
centering on enforcement of the first arbitration award was 
arbitrable.  After a two-day hearing, the panel issued a second 
arbitration award on July 8, 1994.  That award required the 
49ers to pay WMC the balance due from the first arbitration 
award and required WMC to pay a total of $491,795.00 to the 
49ers for repair and replacement of the bulkhead and tie-back 
system, pre-arbitration costs, and property damage.  
 
Pursuant to Code § 8.01-581.09, the 49ers filed a motion 
in the trial court to confirm the second arbitration award.  
WMC filed a motion seeking to vacate the award pursuant to Code 
§ 8.01-581.10 based on allegations, inter alia, that the 
arbitrators exceeded their authority by addressing issues that 
should have been resolved by the court and resolving issues 
that were not arbitrable.  WMC also sought a modification of 
the award pursuant to Code § 8.01-581.011.  After considering 
memoranda and argument of counsel, the trial court entered an 
order on March 30, 1995, denying WMC's motion to vacate, 
granting WMC's motion to modify by removing approximately 
$17,000 in pre-arbitration costs from the amount owed to the 
49ers, and confirming the award as modified.  We awarded WMC an 
appeal. 
 
WMC raises a number of issues in its challenge to the 
trial court's action confirming the second arbitration award.  
These issues include whether the trial court's reference of the 
second demand for arbitration to the arbitration panel was 
erroneous because the claims in the demand either were not 
arbitrable or were barred by the doctrine of res judicata, 
whether the trial court used the proper standard of review in 
confirming the second arbitration award, and whether compulsory 
arbitration is available to current members of the 49ers who 
were not signatories to the 1988 contract which contained the 
arbitration agreement.  We begin by considering a threshold 
issue raised by WMC:  whether the trial court erred in its 
determination that the arbitration panel should decide the 
arbitrability of the claims contained in the 49ers' second 
demand for arbitration. 
 
I.  DECIDING ARBITRABILITY 
 
WMC argues that the court, not the arbitrators, should 
determine whether a dispute is arbitrable.  Therefore, it 
contends, the trial court erred when it referred to the 
arbitration panel the issue whether the compliance dispute was 
arbitrable.  The 49ers maintain that Code § 8.01-581.02(B) 
restricts the trial court's role to considering only whether 
there is an agreement to arbitrate and that, in the absence of 
a specific agreement to the contrary, the arbitrators have the 
authority to resolve the issue of arbitrability.  Because the 
existence of an arbitration agreement is not contested here, 
the 49ers conclude that the trial court properly referred the 
issue whether a dispute over the enforcement of the first award 
was arbitrable to the arbitration panel for resolution. 
 
A.  THE STATUTE 
 
Contrary to the 49ers' assertion, Code § 8.01-581.02(B) 
authorizes the court to determine issues of arbitrability.  
That subsection provides in pertinent part: 
 
On application, the court may stay an arbitration 
proceeding commenced or threatened on a showing that 
there is no agreement to arbitrate.  Such an issue, 
when in substantial and bona fide dispute, shall be 
forthwith and summarily tried and the stay ordered if 
found for the moving party.  
 
(Emphasis added).  The 49ers contend that the phrase "agreement 
to arbitrate" in the subsection means that once a party shows 
that there is a valid contract between the parties and that the 
contract provides for arbitration of disputes, the court must 
order arbitration, leaving to the arbitrators issues of 
specific claim arbitrability.  The statute, however, has not 
been applied to limit the trial court's authority in the manner 
suggested.   
 
In two recent cases subject to the Uniform Arbitration 
Act, Code §§ 8.01-581.01 through -581.016, we have recognized 
the power of trial courts to resolve issues of arbitrability.  
In Trustees v. Taylor & Parrish, 249 Va. 144, 452 S.E.2d 847 
(1995), the trial court ruled that the arbitration clause in 
the parties' contract encompassed a dispute over a change order 
and that the issues in an amended demand for arbitration were 
arbitrable.  Id. at 148-49, 452 S.E.2d at 849-50.  Likewise, in 
McMullin v. Union Land & Management Co., 242 Va. 337, 410 
S.E.2d 636 (1991), the trial court ruled that a disputed claim 
for compensation was outside the scope of the arbitration 
clause.  Id. at 341, 410 S.E.2d at 638.  While this Court 
reversed the trial courts' conclusions, the reversals were not 
based on the trial courts' lack of jurisdiction to decide the 
arbitrability issues.  Rather, in those cases, the trial courts 
erred in their conclusions regarding arbitrability.  Trustees, 
249 Va. at 155, 452 S.E.2d at 853; McMullin, 242 Va. at 342, 
410 S.E.2d at 639.  Thus, we state explicitly what was implicit 
in those cases:  Code § 8.01-581.02(B) authorizes the court to 
determine whether there is an agreement to arbitrate the 
specific controversy before the court, that is, to decide 
questions of arbitrability. 
 
Although the trial court is authorized by statute to 
resolve issues of arbitrability, the parties by their contract 
can agree that those issues be decided by the arbitrator.  
Thus, we must look to the parties' contract to see if such an 
agreement exists in the present case. 
 
B.  THE CONTRACT 
 
The arbitration provision in the parties' contract in this 
case does not address the specific issue of who--the court or 
the arbitrator--shall determine arbitrability.  In Doyle & 
Russell, Inc. v. Roanoke Hospital Ass'n, 213 Va. 489, 193 
S.E.2d 662 (1973), we concluded that "it is the province of the 
courts to determine the threshold question of arbitrability, 
given the terms of the contract between the parties."  Id. at 
494, 193 S.E.2d at 666.  See also United Paperworkers v. Chase 
Bag Co., 222 Va. 324, 327 n.1, 281 S.E.2d 807, 809 n.1 (1981). 
 We have also held that an arbitration clause which encompasses 
all controversies "arising out of" or "related to" the contract 
is very broad in its coverage.  McMullin, 242 Va. at 341, 410 
S.E.2d at 639.  This case, however, presents an issue of first 
impression:  whether the absence of specific language 
addressing who decides arbitrability reflects the parties' 
intent to include or exclude arbitrability determinations from 
the arbitrator's authority. 
 
The 49ers assert that the general policy favoring 
arbitration reflected in AT&T Technologies v. Communications 
Workers of America, 475 U.S. 643, 650 (1986), and Moses H. Cone 
Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 
24-25 (1983), supports the conclusion that, in the absence of 
any clear expression in an arbitration agreement to the 
contrary, the issue of arbitrability is itself arbitrable and 
to be resolved by the arbitrators. 
 
In a recent case concerning the application of the Federal 
Arbitration Act, 9 U.S.C. §§ 1 through 14 (1982), however, the 
United States Supreme Court held that in deciding who 
determines questions of arbitrability, contractual silence or 
ambiguity is considered insufficient to give that authority to 
the arbitrators.  First Options of Chicago, Inc. v. Kaplan, ___ 
U.S. ___, ___, 115 S.Ct. 1920, 1924-25 (1995).  As the Supreme 
Court pointed out, when entering into an agreement to 
arbitrate, the parties surrender the right to have a court 
determine the merits of a controversy.  Id. at ___, 115 S.Ct. 
at 1923.  Although a court may review the arbitration award 
when confirmation, modification, or vacation is sought, the 
grounds for such relief are limited and do not include the 
merits of the award itself.  Thus, whether the court or the 
arbitrator decides the question of arbitrability of a dispute 
"makes a critical difference" to the parties.  Id.  
Furthermore, the Supreme Court observed that the parties to the 
contract "likely gave at least some thought to the scope of 
arbitration," id. at 1924, but may not have focused on either 
the "rather arcane" question of who would make that decision or 
the "significance of having arbitrators decide the scope of 
their own powers," id. at 1925.  In light of these 
considerations, and because parties cannot be compelled to 
arbitrate those issues which they did not agree to submit to 
arbitration, the Supreme Court concluded that, in the absence 
of a clear agreement, parties should not be forced to submit 
matters to arbitration which they may have contemplated would 
be decided by a court.  Id.
 
We agree with the Supreme Court's rationale and conclusion 
in this regard.  Furthermore, it is consistent with the 
principle enunciated in Doyle & Russell that a party "cannot be 
compelled to arbitrate a question which, under his agreement is 
not arbitrable."  213 Va. at 494, 193 S.E.2d at 666.  Thus we 
hold that, in the absence of a clear agreement showing that the 
parties intended that the arbitrator decide questions of 
arbitrability, that question is to be resolved by the court.  
Accordingly, the trial court erred in declining to resolve the 
controversy relating to the arbitrability of the 49ers' second 
arbitration demand and in referring that matter to the 
arbitration panel for resolution.
2
                     
     
2 Relying on statements made by the trial court at the May 
7, 1993 hearing and in the letter opinion of the court 
 
Although the trial court erred, WMC suggests that this 
Court need not remand the case to the trial court to make a 
determination on arbitrability.  Rather, it contends, and we 
agree, that we can determine this issue on the record before 
us.  Both parties agree that the issue was briefed and argued 
before the trial court and the arbitration panel.  The record 
before us includes all necessary arbitration and trial court 
proceedings.  The issue has also been fully briefed in this 
appeal.  Accordingly, we will proceed to determine whether the 
claims contained in the 49ers' second demand for arbitration 
are arbitrable. 
 
II.  THE SECOND ARBITRATION DEMAND 
 
In their second demand for arbitration, the 49ers 
described the nature of the dispute as follows: 
 
 
Cost of repair necessary to bring the bulkhead 
to the condition demanded by the arbitrators in its 
Award dated February 12, 1991. 
 
 
Respondent performed none of the work, nor 
supplied the Bond required by the Arbitrators . . .  
 
 
On November 11, 1991, sections of the bulkhead 
collapsed. 
 
 
Failure to perform is breach of the contract 
containing an arbitration clause, breach of 
contractual warranty and breach of the guarantee in 
the Award.  
 
                                                                
referring to that hearing, the 49ers maintain that the trial 
court did decide the issue of arbitrability.  However, a court 
speaks through its orders and we presume that the orders 
accurately reflect what transpired.  Stamper v. Commonwealth, 
220 Va. 260, 280-81, 257 S.E.2d 808, 822 (1979), cert. denied, 
445 U.S. 972 (1980).  The order of the trial court entered on 
September 20, 1993, specifically stated that "the issue of a 
failure to comply with the arbitration award is a matter for 
the arbitrators who will determine the arbitrability of that 
issue."  Moreover, in submitting language to the court for 
inclusion in its order, WMC was not "inviting error" as the 
49ers assert.  WMC only sought to have the trial court's ruling 
accurately portrayed in the order.  The trial court 
subsequently chose this language as its holding. 
The 49ers sought to recover the cost of repair "to bring the 
structure in compliance" with the previous arbitration award, 
the cost of emergency repair, property damage, and attorneys' 
fees.  Elaborating on their demand, the 49ers claim that WMC 
breached Paragraph 3.5.1 of the construction contract which 
contains the contractor's warranties against defective 
construction and design of the bulkhead.  The 49ers also claim 
that WMC's failure to comply with the first arbitration award 
breached the guarantee contained in the award and was "in and 
of itself, a breach of the Contract, which required the parties 
to submit their disputes to arbitration."  We begin with the 
consideration of the 49ers' claims regarding the breach of the 
first arbitration award based on WMC's failure to comply with 
its terms.  
 
A.  FAILURE TO COMPLY 
 
Although the parties could have agreed that disputes over 
the compliance with a final arbitration award would be subject 
to arbitration, the contract does not expressly address the 
arbitrability of such controversies.  See Menorah Ins. Co. v. 
INX Reinsurance Corp., 72 F.3d 218, 222 (1st Cir. 1995).  
Nevertheless, the contract does describe certain attributes of 
the award itself.  According to the terms of the contract, the 
parties agreed that the award was to be "final," and that 
judgment "may be entered" on the award by a court.  By allowing 
a judgment to be entered on the award, it is reasonable to 
assume that the parties were aware of the statutory provisions 
regarding court confirmation of the award, Code § 8.01-581.09, 
and providing that the court's order confirming the award can 
be enforced as "any other judgment or decree," Code § 8.01-
581.012.
3  Additionally, the parties presumably knew that an 
arbitrator has no power to enforce the award rendered.  The 
statute provides a limited time within which the parties may 
ask the arbitrator to reconsider or modify the award.  Code 
§ 8.01-581.08.  After that time, the arbitrator has no further 
authority over the award and, in absence of agreement of the 
parties, the arbitrator becomes functus officio.  Home Oil Co. 
of Hot Springs, Virginia v. Home Oil Co., 240 Va. 5, 8-9, 393 
S.E.2d 188, 189-90 (1990). 
 
We do not dispute the 49ers' assertion that ambiguity in 
the scope of an arbitrability clause should be resolved in 
favor of arbitrating the claim.  Considering the above factors, 
however, we conclude that the contract reflects the parties' 
understanding that the arbitration process would end with the 
arbitration award.  Any further consideration of the award or 
action regarding compliance with it would be undertaken in a 
different forum. 
 
The 49ers also argue that the failure to comply with the 
first arbitration award is a breach of the construction 
contract because the parties agreed that an arbitration award 
would be binding.  We reject this argument.  We agree that the 
purpose of compulsory arbitration is that, in lieu of taking 
the matter to court, the parties will accept the arbitrators' 
award as a final resolution of the controversy.  That 
understanding, however, does not anticipate that the only 
                     
     
3 While the first arbitration award at issue here was not 
confirmed by a court, that fact is irrelevant to the parties' 
intent at the time the contract was executed. 
action a party may take is to comply with the award.  The Act 
clearly contemplates that a party who disagrees with an award 
can file a pleading with a court to have it vacated or 
modified, albeit that the grounds for doing so are limited.  
Under the 49ers' reasoning, such a pleading would be a breach 
of the contract because by it the parties would be seeking to 
escape a binding award.  
 
We also reject the 49ers' assertion that we should 
interpret the clause, "claim or controversy arising out of or 
related to" broadly as we did in McMullin, and hold that the 
noncompliance with the award qualifies as a "claim or 
controversy" under the contract in this case.  We do not 
retreat from our prior statements that an arbitration clause 
like the one in issue here is very broad; however, such clauses 
are not unlimited.  In McMullin, we determined that the 
controversy proposed for arbitration was "related to" the 
agreement, and therefore arbitrable, because the litigants had 
to refer to a provision of the contract to resolve the 
controversy.  242 Va. at 342, 410 S.E.2d at 639.  
 
McMullin, however, is distinguishable from the instant 
case.  Here, the controversy regarding WMC's noncompliance 
relates solely to the terms of the first arbitration award; no 
provision of the construction contract need be construed or 
applied to resolve the controversy over noncompliance.  Thus, 
we decline to adopt the construction of the phrase "arising out 
of or related to" urged by the 49ers because such a 
construction is far broader than any we have previously applied 
to the clause. 
 
The 49ers' claim in their second demand for arbitration, 
based on WMC's failure to comply with the terms of the first 
arbitration award, is nothing more than an action seeking 
compliance with the first arbitration award and damages for the 
failure to comply with that award.  We conclude that such an 
action was not contemplated as an arbitrable controversy in the 
agreement between the parties. 
 
B.  BREACH OF WARRANTY 
 
In their second demand for arbitration, the 49ers also 
claim that WMC breached the warranties contained in Paragraph 
3.5.1 of the contract.  In that provision, the contractor 
warrants that the material and equipment furnished will be of 
good quality, that the work will be free from defects, and that 
the work will conform to the requirements of the contract 
documents.  WMC does not dispute the arbitrability of this 
claim; however, WMC asserts that further arbitration of this 
claim is barred by the principle of res judicata because the 
49ers made the same claim in their first demand for arbitration 
which was denied by the arbitrators. 
 
Res judicata is a judicially developed doctrine designed 
to end litigation and to protect the litigants from harassment. 
 A plea of res judicata will be sustained if the prior 
adjudication was between the same parties or their privies and 
a valid final judgment was entered which resolved the claim on 
its merits.  Bates v. Devers, 214 Va. 667, 670-71, 202 S.E.2d 
917, 920-21 (1974).  When parties choose to resolve their 
disputes by arbitration rather than litigation, even though the 
resolution reached in that process does not require the 
application of legal principles, courts have applied the 
doctrine of res judicata to preclude subsequent litigation on 
issues resolved by validly issued arbitration awards.  1 
Gabriel M. Wilner, Domke on Commercial Arbitration § 31:02, at 
452-53 (1984 & Supp. 1995); Restatement (Second) of Judgments 
§ 84 cmt. b (1982). 
 
While we have not specifically addressed the applicability 
of the doctrine of res judicata to an arbitration award, this 
Court reviewed a trial court's dismissal of a garnishment 
action based on the res judicata bar of a confirmed arbitration 
award in Virginia Builders' Supply v. Brooks & Co., 250 Va. 
209, 212, 462 S.E.2d 85, 87 (1995).  On appeal, this Court 
reversed, not because res judicata did not attach to such 
awards, but because the parties to the arbitration agreement 
and award were not the same parties in the garnishment 
proceeding and, therefore, the elements of res judicata were 
not satisfied.  Id. at 213-14, 462 S.E.2d at 88. 
 
The lack of any challenge to the trial court's ability to 
bar subsequent litigation by applying the doctrine of res 
judicata based on a prior confirmed arbitration award is 
readily understandable.  Code § 8.01-581.012 provides that a 
judgment confirming an arbitration award is to be treated like 
any other judgment.  Such treatment would include the 
application of res judicata. 
 
While res judicata may operate to bar subsequent judicial 
proceedings based on a prior confirmed arbitration award, here 
WMC seeks to bar a subsequent arbitration proceeding based on 
the res judicata effect of an unconfirmed arbitration award.  
These factual differences do not preclude application of the 
res judicata plea in this case, however.  The parties have made 
no distinction between a confirmed and unconfirmed award.  
Therefore, we will assume, without deciding, that an 
unconfirmed arbitration award is treated in the same manner as 
a confirmed award for purposes of res judicata analysis.
4   
 
The parties also do not contest the power of res judicata 
to bar a subsequent arbitration proceeding.  The 49ers, 
however, maintain that, in the absence of a specific agreement 
to the contrary, whether a prior award is given res judicata 
effect on a subsequent request for arbitration is itself 
arbitrable, and therefore, the trial court was correct in 
referring this issue to the arbitration panel.   
 
1.  Arbitrability of Res Judicata Plea 
 
The 49ers rely heavily on a labor arbitration case, Little 
                     
     
4 A number of jurisdictions apparently do not distinguish 
between confirmed and unconfirmed awards for purposes of res 
judicata.  See, e.g., Wellons, Inc. v. T.E. Ibberson Co., 869 
F.2d 1166, 1169 (8th Cir. 1989); Behrens v. Skelly, 173 F.2d 
715, 720 (3rd Cir.), cert. denied, 338 U.S. 821 (1949); In re 
Drexel Burnham Lambert Group, Inc. v. DBL Liquidating Trust, 
161 B.R. 902, 907 (Bankr. S.D.N.Y. 1993); Monmouth Pub. Sch. v. 
Pullen, 489 N.E.2d 1100, 1105 (Ill. App. Ct. 1985); Hurley v. 
Fox, 587 So. 2d 1, 2 (La. Ct. App. 1991); Protocom Devices, 
Inc. v. Figueroa, 545 N.Y.S.2d 527, 528 (N.Y. Sup. Ct. 1989), 
aff'd, 569 N.Y.S.2d 80 (N.Y. App. Div. 1991).  But see Gruntal 
& Co. v. Steinberg, 854 F. Supp. 324, 337-38 (D.N.J.) 
(unconfirmed arbitration award under Maryland statute has no 
preclusive effect), aff'd, 46 F.3d 1116 (3d Cir. 1994); Larsen 
v. Farmers Ins. Co., 909 P.2d 935, 940 (Wash. Ct. App. 1996) 
(unconfirmed arbitration award under Oregon law not equivalent 
to final judgment for collateral estoppel purposes).  Even 
though the applicable statutes specifically provide that an 
arbitration award is only a separate contract between the 
parties until confirmed, at least two courts have afforded an 
unconfirmed award res judicata effect in a subsequent action.  
Pollock v. Marx, 171 B.R. 218, 221-23 (Bankr. N.D. Tex. 1994); 
Thibodeau v. Crum, 6 Cal. Rptr.2d 27, 33-34 (Cal. Ct. App. 
1992). 
Six Corp. v. United Mine Workers of America, 701 F.2d 26, 29 
(4th Cir. 1983), for their contention that the applicability of 
res judicata to a particular award is an arbitrable issue.
5  
Our review indicates, however, that other jurisdictions have 
concluded that a plea of res judicata is not subject to 
arbitration and the court, not the arbitration panel, 
determines whether a previous arbitration award operates as res 
judicata or collateral estoppel on a subsequent action or 
demand for arbitration.  See, e.g., Clark v. Bear Stearns & 
Co., 966 F.2d 1318, 1321 (9th Cir. 1992); Greenblatt v. Drexel 
Burnham Lambert, Inc., 763 F.2d 1352, 1360-61 (11th Cir. 1985); 
Monmouth Pub. Sch. v. Pullen, 489 N.E.2d 1100, 1105 (Ill. App. 
Ct. 1985); Chattin v. Cape May Greene, Inc., 524 A.2d 841, 848 
(N.J. Sup. Ct. App. Div.), cert. denied, 526 A.2d 209 (N.J. 
1987); Rembrandt Indus., Inc. v. Hodges Int'l, Inc., 344 N.E.2d 
383, 384 (N.Y. 1976); C & O Dev. Co. v. American Arbitration 
Ass'n, 269 S.E.2d 685, 687 (N.C. App. Ct. 1980), review denied, 
274 S.E.2d 227 (N.C. 1981).  We believe these jurisdictions 
reached the correct conclusion. 
 
First we note that arbitration is proper in this case only 
for controversies "arising from" or "relating to" the contract 
between the parties.  The dispute over WMC's plea of res 
judicata arises from, or is related to, satisfying the elements 
of this common law doctrine; it does not arise from the terms 
                     
     
5 Hotel Ass'n of Washington, D.C. v. Hotel & Restaurant 
Employees Union, 963 F.2d 388 (D.C. Cir. 1992), also relied on 
by the 49ers, did not involve the preclusive effect of a prior 
 labor arbitration award on a subsequent arbitration but 
involved whether the decision rendered in the first arbitration 
was binding on a second arbitration involving a different 
employee.  Id. at 389.   
of the contract.  Thus, it is not arbitrable. 
 
More importantly, an arbitration panel is not generally 
bound by legal principles, does not have to explain or justify 
its decision, and the decision is not reviewed for legal 
errors.  Rather, the arbitrators are entitled to make their 
decision based on what they deem to be just and equitable 
within the scope of the parties' agreement.  AAA Construction 
Industry Arbitration Rule 43 (1993); G. Richard Shell, Res 
Judicata and Collateral Estoppel Effects of Commercial 
Arbitration, 35 UCLA L. Rev. 623, 633-37 (1988).  Consequently, 
when considering a plea of res judicata, an arbitration panel 
could determine that the issues resolved in a prior arbitration 
should be revisited, regardless of whether the legal elements 
required for sustaining the plea were met.  Allowing a plea of 
res judicata to be resolved by arbitration defeats the purpose 
of the judicially created doctrine -- to bring an end to the 
substantive controversy and to protect the parties from re-
litigating previously decided matters. 
 
Accordingly, we conclude that, in the absence of a clear 
agreement to the contrary, a plea of res judicata is not 
arbitrable.  Therefore, the trial court erred in directing the 
arbitration panel to determine whether res judicata barred 
WMC's claim for breach of contractual warranty.  However, we 
will not remand this issue for determination by the trial court 
because, like the issue of arbitrability discussed above, the 
record before us is sufficient to resolve the issue here. 
 
2.  Application of Res Judicata to 
 
Breach of Warranty Claim 
 
 
The original arbitration demand filed by the 49ers 
described the dispute as a breach of contract.  The alleged 
breach, as explained by the 49ers' arbitration counsel, 
consisted of specific design and construction defects.  
 
The 49ers assert that the second demand claiming breach of 
warranty as a result of the damaged bulkhead was not identical 
to the first, and could not have been, because the bulkhead had 
not failed at the time of the first demand.  Relying on Allstar 
Towing, Inc. v. City of Alexandria, 231 Va. 421, 344 S.E.2d 903 
(1986), the 49ers argue that, for res judicata purposes, a 
cause of action is "an assertion of particular legal rights 
which have arisen out of a definable factual transaction."  Id. 
at 425, 344 S.E.2d at 906.  Thus, they assert, since the event 
giving rise to the cause of action, i.e., the partial collapse 
of the bulkhead, had not occurred at the time of the first 
arbitration, the claims could not have been the same.   
 
The 49ers misapply Allstar Towing.  In that case the city 
of Alexandria rejected the towing company's initial bid to 
provide services because the company was not a registered 
corporation and, therefore, was ineligible for award of the 
contract.  The company unsuccessfully challenged that decision. 
 Id. at 422-23, 344 S.E.2d at 904-05. 
 
Thereafter, the company submitted a bid in response to the 
city's second invitation to bid.  The city awarded the contract 
to another towing enterprise.  The company filed a second 
protest asserting that it met the bid requirements, but the 
company receiving the contract did not.  The Court in Allstar 
Towing held that the company's second action was not subject to 
a res judicata bar because the legal rights asserted by the 
company arose from the second transaction.  The second action 
was not related to the first transaction in which the company's 
bid was rejected because it was an unresponsive bidder.  Id.
 
In this case, the legal rights asserted by the 49ers in 
the first arbitration action were based on its contractual 
right to construction of a bulkhead free of design or 
construction defects.  The storm damage to the bulkhead after 
the first arbitration did not increase or alter the contractual 
rights the 49ers acquired at the time the contract was 
executed.  Furthermore, no plans were altered and no work was 
performed on the bulkhead between the filing of the first and 
second demands for arbitration.  The damages suffered as a 
result of the alleged defects may have increased when the 
bulkhead collapsed, but any defects in construction and design 
which existed at the time of the first arbitration had not 
changed at the time of the second demand for arbitration. 
 
Furthermore, even though the first demand described only 
specific defects, the doctrine of res judicata applies to all 
claims which could have been brought, thereby preventing a 
party from splitting his cause of action.  Flora, Flora & 
Montague, Inc. v. Saunders, 235 Va. 306, 310-11, 367 S.E.2d 
493, 495 (1988); Bates, 214 Va. at 670-71, 202 S.E.2d at 920-
21.  Here, the 49ers had engaged an engineer to evaluate the 
bulkhead prior to filing its first demand for arbitration.  
Their engineer reported that the design and construction of the 
bulkhead was deficient.  In the first arbitration, the 49ers 
chose to limit the items of alleged deficient construction and 
design.  Having made that choice, they are not entitled to 
bring forward additional items at a later date, particularly 
when, as set out above, there had been no further construction 
or design activity on the bulkhead between the two arbitration 
demands. 
 
The claim for breach of warranty asserted by the 49ers in 
their second arbitration demand was no different than the claim 
for breach of contract asserted in the first arbitration 
demand.  Labeling the claim a breach of warranty rather than a 
breach of contract does not alter the nature of the claim.  
That label is a distinction without a difference.  As pointed 
out by WMC, a breach of the warranty is a breach of the 
construction contract.  Werner Sabo, Legal Guide to AIA 
Documents § 418, at 199 (3rd ed. 1989).   
 
The record demonstrates that the first arbitration was 
between the 49ers and WMC, and, as a result of that proceeding, 
a valid final arbitration award was entered rejecting the 
49ers' claim for breach of contract due to defective design and 
construction of the bulkhead.  Thus, we conclude that WMC met 
its burden of proof to sustain its plea of res judicata.  The 
49ers' demand for arbitration of their breach of warranty claim 
is barred by the first arbitration award under principles of 
res judicata. 
 
III.  CONCLUSION 
 
In summary, the contract between the parties in this case 
did not specifically provide that questions of arbitrability 
and res judicata be submitted to arbitration.  Therefore, the 
trial court erred in failing to resolve those issues and in 
referring them to the arbitration panel.  Furthermore, the 
49ers' claims in their second demand for arbitration relating 
to noncompliance with the first arbitration award are not 
arbitrable and their claim for breach of warranty is barred by 
res judicata.  Accordingly, we will reverse the judgment of the 
trial court confirming the second arbitration award and enter 
judgment in favor of WMC.
6  The judgment will be without 
prejudice to the parties' rights in connection with the first 
arbitration award. 
 
Reversed and final judgment.
                     
     
6 In light of this disposition, we need not address WMC's 
other assignments of error or the 49ers' assignment of cross- 
error.