Opinion ID: 797106
Heading Depth: 2
Heading Rank: 2

Heading: District Court's Denial of Partial Summary Judgment to Dadeland

Text: 64 Dadeland also challenges the district court's denial of partial summary judgment on the issue of whether St. Paul should be collaterally estopped from re-raising the same defenses that it raised in the arbitration action. In the arbitration, St. Paul raised two relevant defenses: first, that Dadeland failed to comply with the terms of the performance bond, in that it did not give proper notice to St. Paul; and second, that St. Paul was discharged from liability under the bond to the extent Dadeland had made payments to Walbridge for the work performed. The arbitration panel, which awarded Dadeland damages for the construction defects, expressly stated in its decision that St. Paul was bound to this award and that  its defenses [were] denied.  R2-71, Exh. 23 at 5 (emphasis added). Dadeland's motion for partial summary judgment argued that, in rejecting St. Paul's defenses, the arbitration panel had fully disposed of them, and that St. Paul should be collaterally estopped from re-raising them in the current proceeding. In response to Dadeland's collateral estoppel argument, St. Paul argued that Dadeland's bad-faith refusal-to-settle claim was separate and distinct from the breach of contract claim that had been at issue in the arbitration, and that therefore collateral estoppel did not apply. 65 The district court was unclear as to whether the arbitration panel's decision— which the court viewed as akin to a breach of contract dispute—would have the effect of collaterally estopping St. Paul from raising the same defenses in a subsequent bad-faith refusal-to-settle action. The court concluded that the issue was largely moot, however, based on its earlier determination that res judicata barred Dadeland's action in its entirety. Accordingly, the court denied Dadeland's motion for partial summary judgment. 66 On appeal, we concluded that it was uncertain whether an arbitrator's disposition of a party's defenses in a breach of contract action would subsequently bar that party from raising them again in a separate bad-faith refusal-to-settle action, brought under § 624.155. Thus we certified this question to the Florida Supreme Court: 67 WILL AN ARBITRATOR'S DENIAL OF THE DEFENDANT'S AFFIRMATIVE DEFENSES IN A BREACH OF CONTRACT CLAIM COLLATERALLY ESTOP THE SAME DEFENDANTS FROM RAISING THE SAME DEFENSES IN A SUBSEQUENT BAD-FAITH REFUSAL-TO-SETTLE CLAIM AGAINST THE SAME PLAINTIFF? 68 Dadeland, 383 F.3d at 1279. 69 The Florida Supreme Court's response was two-fold. First, the court concluded that the merits of St. Paul's two defenses had been fully considered and rejected by the arbitration panel, and that, consequently, it was now precluded from reasserting those defenses in its action against Dadeland. Thus, the court agreed with Dadeland that collateral estoppel precluded St. Paul from re-raising the same defenses that it raised in the arbitration proceeding. 70 Second, however, the court indicated that St. Paul was not precluded from demonstrating the factual basis for its belief that the defenses it raised in the arbitration proceeding were valid. The court observed that St. Paul could seek to defend against the current bad faith claim by arguing that it reasonably and in good faith believed that the previously rejected affirmative defenses were valid at the time it raised them in the arbitration, Dadeland, 945 So.2d at 1236, and that the factual basis for that belief, if reasonable, could feasibly assist St. Paul in defending against Dadeland's current § 624.155(1)(b)(1) action. 12 Thus, while St. Paul could not re-raise the same defenses in the current action, the court stated that St. Paul could seek to show a factual basis as to why it believed those defenses were reasonable, so as to undermine Dadeland's contention that it had engaged in a bad-faith refusal-to-settle. 71 Having received the response of the Florida Supreme Court, however, it is clear that St. Paul is collaterally estopped from raising against Dadeland the same defenses that were raised and rejected in the earlier arbitration proceeding. Because collateral estoppel applies to those defenses, the district court should have granted partial summary judgment for Dadeland on that issue. Its failure to grant partial summary judgment on this question was in error.