Opinion ID: 730825
Heading Depth: 2
Heading Rank: 1

Heading: Arbitration of Issue Preclusion

Text: 10 NGC argues that issue preclusion, like other defenses to arbitrability, is arbitrable, and, because issue preclusion can be arbitrated, it must be arbitrated. We agree. 11 Our analysis begins with the FAA's strong presumption of arbitrability. See, e.g., Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985) (holding that antitrust trust claims are arbitrable); Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985) (holding that securities claims are arbitrable and district court therefore must compel arbitration); Moses H. Cone Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 941-42, 74 L.Ed.2d 765 (FAA establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability). As a result of this presumption, arbitration clauses themselves are to be construed as broadly as possible. Collins & Aikman Prods. Co. v. Building Sys., Inc., 58 F.3d 16, 19 (2d Cir.1995); David L. Threlkeld & Co. v. Metallgesellschaft, Ltd., 923 F.2d 245, 250 (2d Cir.), cert. dismissed, 501 U.S. 1267, 112 S.Ct. 17, 115 L.Ed.2d 1094 (1991). 12 If a party refuses to arbitrate, arbitrability of the dispute hinges only on whether there is an agreement to arbitrate and, if so, whether the dispute falls within that agreement. See 9 U.S.C. § 4; see also National Union Fire Ins. Co. v. Belco Petroleum Corp., 88 F.3d 129, 135 (2d Cir.1996) (Belco ); Deloitte Noraudit A/S v. Deloitte Haskins & Sells, 9 F.3d 1060, 1063 (2d Cir.1993); Progressive Casualty Ins. Co. v. C.A. Reaseguradora Nacional De Venezuela, 991 F.2d 42, 45 (2d Cir.1993); Threlkeld, 923 F.2d at 249; Conticommodity Servs. v. Philipp & Lion, 613 F.2d 1222, 1224-25 (2d Cir.1980). 13 We hold that the dispute in this case is within the agreement to arbitrate, because in order to reach its conclusion that the issues concerning costs of defense were identical, the district court found it necessary to interpret the Wellington Agreement. It found that 14 [t]he arbitrator would interpret the contract language at issue according to the rules of construction set forth in the Wellington Agreement. See Wellington Agr. Appendix B, p 4. Specifically, § XI, p 1 of Wellington provides: [U]nless it expressly provides otherwise, each excess insurance policy ... shall pay allocated expenses [i.e., defense costs]. 15 In re Arbitration Between National Gypsum Co. and United States Fire Ins. Co., 1995 WL 413278 at  5 (S.D.N.Y. July 13, 1995). The court then found this language to be essentially a restatement of the common law rule of contra proferentem--construction of ambiguous language in an insurance policy against the insurer-drafter--which was applied in Gypsum I. Id. However obvious this interpretation might seem and whether or not Wellington restates a well-known standard of construction or provides one of its own, the fact is that the district court had to interpret Wellington in order to rule on the question of issue preclusion. At least one facet of the dispute thus requires interpretation of Wellington, plainly a question for the arbitrator rather than for the district court to decide. 16 Nor is issue preclusion so obscure a question that doubt is cast upon whether the parties intended that it be subject to arbitration. In First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995), the Supreme Court noted that courts should apply a presumption that parties did not agree to arbitrate arbitrability unless there is clear and unmistakable evidence to the contrary. 514 U.S. at ----, 115 S.Ct. at 1924. But once a court finds that there is an agreement to arbitrate some issues, the presumption switches: ambiguity as to whether an issue is within the scope of an arbitration agreement is resolved in favor of arbitrability. Id. First Options involved the issue of whether a court or the arbitrator should decide arbitrability. The Court found the issue of the arbitrability of arbitrability to be so arcane that it inferred that parties who do not express a preference are unlikely to have considered the issue. Not having considered the issue, the parties would, in the Court's view, likely have assumed that the arbitrator would not resolve that issue because of the principle that parties will be subject to arbitration only on issues they have agreed to arbitrate. Id. at ---- - ----, 115 S.Ct. at 1924-25. In the instant matter, the question of who should decide the issue-preclusive effect of a prior judgment is not so arcane because, unlike the arbitrability of arbitrability, it is not a higher-order question. Further, given a valid arbitration agreement with sweeping language and the courts' well-known tendency to find issues arbitrable, the insurers can hardly claim that their reasonable expectations are defeated. 17 We find additional support for the arbitrability of issue preclusion from the fact that the defense of issue preclusion is waivable in a second proceeding. See Sinicropi v. Milone, 915 F.2d 66 (2d Cir.1990) (holding that district court must enforce stipulation under which defendant agreed to withdraw defense of collateral estoppel and stipulation had been approved by court and was not manifestly unjust); see also 18 Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 4405 (1981 & Supp.1996). If one can agree to waive collateral estoppel without consideration, one can agree to arbitrate the issue as part of a contractual scheme. 18 Our decision is consistent with our recent holding that the issue-preclusive effect of a prior arbitration is arbitrable and so must be arbitrated. Belco, 88 F.3d at 135-36. In Belco we rejected the argument that issue preclusion is not related to the merits of an agreement and nonarbitrable, noting that Belco's claim of preclusion is a legal defense to National Union's claim. As such it is itself a component of the dispute on the merits. Belco, 88 F.3d at 135. Although the present case involves the issue-preclusive effect of a prior judgment, Wellington's arbitration clause covers any disputed issues within [its] scope. Thus, a defense based on the issue-preclusive effect of the prior judgment is part of the dispute on the merits. 19 Finally, U.S. Fire and International also argue that, by litigating the issue of property-damage defense costs in Gypsum I, NGC has waived its right to arbitrate the allocation of bodily-injury defense costs. As far as the record discloses, the insurers did not make this argument before the district court. Generally, a court of appeals will not consider an issue raised for the first time on appeal. Singleton v. Wulff, 428 U.S. 106, 120, 96 S.Ct. 2868, 2877, 49 L.Ed.2d 826 (1976); Greene v. United States, 13 F.3d 577, 586 (2d Cir.1994). Nor does this claim present the manifest injustice or the type of purely legal issue that can lead us to disregard the general rule. Greene, 13 F.3d at 586. In particular, we note the presence of a factual dispute over the earliest date on which arbitration could have been started. We therefore do not reach the merits of the insurers' waiver argument. 20 For the foregoing reasons, we reverse the granting of the injunction and order arbitration of the dispute over the allocation of defense costs for bodily-injury claims. The insurers are of course free to raise the defense of issue preclusion before the arbitrator.