Opinion ID: 1715028
Heading Depth: 1
Heading Rank: 3

Heading: Preclusive Effect of the Arbitration Proceeding

Text: Saad Construction argues that the trial court erred in entering the summary judgments for DPF, Turberville, Mueller, Capes, Capes Engineering, Kerr, and Yonge & Associates (hereinafter referred to collectively as the appellees) because none of the appellees were parties to the arbitration proceeding and because the claims made by Saad Construction in the arbitration proceeding are not identical to the claims made by Saad Construction in its action against the appellees. The appellees argue that the summary judgments in their favor are proper because, they argue, Saad Construction's claims were barred by the doctrines of collateral estoppel and/or res judicata because they were decided in the arbitration proceeding. Both collateral estoppel and res judicata are affirmative defenses; thus, the party raising the defense has the burden of proving each element. Rule 8(c), Ala. R. Civ. P.; Wal-Mart Stores, Inc. v. Smitherman, 743 So.2d 442, 448 (Ala. 1999); Ex parte Aratex Servs., Inc., 622 So.2d 367, 368 (Ala.1993). In Alabama, the `doctrines of [ res judicata and collateral estoppel] apply as well to awards in arbitration as they do to adjudications in judicial proceedings.' Old Republic Ins. Co. v. Lanier, 790 So.2d 922, 928 (Ala.2000) (quoting American Ins. Co. v. Messinger, 43 N.Y.2d 184, 189-90, 371 N.E.2d 798, 801, 401 N.Y.S.2d 36, 39 (1977)). See also Ex parte Messer, 797 So.2d 1079, 1085 (Ala.2001).
Res judicata and collateral estoppel are two closely related, judicially created doctrines that preclude the relitigation of matters that have been previously adjudicated or, in the case of res judicata, that could have been adjudicated in a prior action. The doctrine of res judicata, while actually embodying two basic concepts, usually refers to what commentators label `claim preclusion,' while collateral estoppel... refers to `issue preclusion,' which is a subset of the broader res judicata doctrine. Little v. Pizza Wagon, Inc., 432 So.2d 1269, 1272 (Ala.1983) (Jones, J., concurring specially). See also McNeely v. Spry Funeral Home of Athens, Inc., 724 So.2d 534, 537 n. 1 (Ala.Civ.App.1998). In Hughes v. Martin, 533 So.2d 188 (Ala.1988), this Court explained the rationale behind the doctrine of res judicata: Res judicata is a broad, judicially developed doctrine, which rests upon the ground that public policy, and the interest of the litigants alike, mandate that there be an end to litigation; that those who have contested an issue shall be bound by the ruling of the court; and that issues once tried shall be considered forever settled between those same parties and their privies. 533 So.2d at 190. The elements of res judicata are (1) a prior judgment on the merits, (2) rendered by a court of competent jurisdiction, (3) with substantial identity of the parties, and (4) with the same cause of action presented in both actions. Equity Res. Mgmt., Inc. v. Vinson, 723 So.2d 634, 636 (Ala.1998). If those four elements are present, then any claim that was, or that could have been, adjudicated in the prior action is barred from further litigation. 723 So.2d at 636. Res judicata, therefore, bars a party from asserting in a subsequent action a claim that it has already had an opportunity to litigate in a previous action. The corollary to the above-stated rationale is that the doctrine of res judicata will not be applied to bar a claim that could not have been brought in a prior action. Old Republic, supra, 790 So.2d at 928. See also United States v. Maxwell, 189 F.Supp.2d 395, 406 (E.D.Va.2002); Restatement (Second) of Judgments, § 26(1)(c) (1982), [4] Restatement (Second) of Judgments, § 51(1)(a). [5] In order for a judgment between the same parties to be res judicata, it must, among other things,... involve a question that could have been litigated in the former cause or proceeding. Stephenson v. Bird, 168 Ala. 363, 366, 53 So. 92, 93 (1910). See also Dekle v. Vann, 284 Ala. 142, 223 So.2d 30 (1969), in which this Court held that a prior judgment in equity ordering the defendants to open a wall adjacent to the plaintiff's land was not res judicata in a subsequent action seeking damages for trespass, because the equity court lacked jurisdiction to award punitive damages. When deciding whether an arbitrator's award is res judicata as to a subsequent claim, we must also consider whether the claim was within the scope of the submission to the arbitrator. Old Republic, 790 So.2d at 929; Restatement (Second) of Judgments, § 26(1)(c); Restatement (Second) of Judgments, § 84, comment d. (A preliminary question in giving res judicata effect to an arbitration award is whether the claim or issue was within the scope of the reference to arbitration.). Because an arbitrator's jurisdiction is limited to the scope of the submission, claims not within the scope of the submission are not barred by the doctrine of res judicata in a subsequent action. Old Republic, 790 So.2d at 929-30; Restatement (Second) of Judgments, § 26(1)(c). In Old Republic, we held that a prior arbitration award on claims alleging fraud and breach of contract was res judicata as to two claims against the same defendant for tortious interference with a subagency contract. We held that the plaintiff's tortious-interference claims, albeit labeled differently in the subsequent civil action, arose from the same nucleus of operative facts as did the fraud and breach-of-contract claims. 790 So.2d at 933. However, we also held that the tortious-interference claims were `within the scope of the submission' to arbitration. 790 So.2d at 929 (quoting Fink v. Golenbock, 238 Conn. 183, 196, 680 A.2d 1243, 1252 (1996)). This holding was critical to the result in Old Republic, because had those claims not been within the scope of the submission, the arbitrator would have lacked subject-matter jurisdiction over those claims and the arbitrator's decision, therefore, would not have been res judicata as to those claims. ([T]he issue in this case is ... whether the claims Lanier litigated `were within the scope of the submission' to arbitration.) 790 So.2d at 929. See also Restatement (Second) of Judgments, § 26(1)(c); Restatement (Second) of Judgments, § 84, comment d. Saad Construction's tort claims were not within the scope of the submission to arbitration. The trial court ordered arbitration to the extent set out in [paragraph 44 of the Board/Saad Construction] contract. The arbitration clause provided for arbitration of any dispute, claim or question concerning the meaning of contract documents, or concerning a breach of the contract. The director explained that in the arbitration proceeding he would determine whether work directed by an owner or design professional is for the account of the contractor or the owner. It is also instructive that the Board, the other party to the contract containing the arbitration provision at issue, objected to Saad Construction's motion to compel arbitration, arguing that Saad Construction's tort claims are beyond the scope of the provisions of paragraph 44 and any `arbitration' of this matter pursuant to paragraph 44 will still require the Court to resolve the tort issues between the parties. (Emphasis in Board's objection.) A party to a contract can be forced to arbitrate only those issues he or she specifically agrees to submit to arbitration. Ryan Warranty Servs., Inc. v. Welch, 694 So.2d 1271, 1273 (Ala.1997). Whether the parties agreed to submit certain claims to arbitration requires a determination of the intent of the parties. Id. General rules of contract interpretation require that the intent of the parties be derived from the words of the contract, unless an ambiguity exists. 694 So.2d at 1273. The arbitration clause in Saad Construction's contract with the Board was unambiguously limited to matters concerning interpretation of the contract or a breach of the contract. The limiting language of the arbitration clause did not encompass Saad Construction's tort claims against the appellees; thus, those claims were not within the scope of submission to arbitration. Additionally, the appellees presented no evidence indicating that the director possessed the authority to award Saad Construction all the damages it now seeks. Res judicata will not apply to bar a subsequent action for a remedy that was not available in a prior action. Dekle, supra, 284 Ala. at 144, 223 So.2d at 31; Restatement (Second) of Judgments, § 26(1)(c). Because the director lacked subject-matter jurisdiction over Saad Construction's tort claims and could not award punitive damages, res judicata does not bar Saad Construction from asserting those claims in a subsequent action. Old Republic, 790 So.2d at 929-30; Restatement (Second) of Judgments, § 26. Moreover, the appellees offered no evidence indicating that Saad Construction could have asserted in the arbitration the claims it now asserts against them. The Board and Saad Construction were the only signatories to the contract containing the arbitration provision, and the Board and Saad Construction were the only parties that actually participated in the arbitration. The arbitration provision explicitly stated that the director's decision shall be final, binding and conclusive on the parties to the contract. (Emphasis added.) [T]he doctrine of estoppel operates to prevent a signatory to an arbitration agreement from frustrating arbitration of a related claim against a nonsignatory where the nonsignatory seeks arbitration. Ex parte Tony's Towing, Inc., 825 So.2d 96, 98 (Ala.2002). There is no evidence in the record indicating that DPF, Turberville, Mueller, Capes, Capes Engineering, Yonge & Associates, or Kerr sought to join the arbitration or that they were even willing to participate in the arbitration of Saad Construction's claims against them. DPF, Turberville, and Mueller argue that they did not seek to intervene in the arbitration because, they said, Saad Construction had already indicated that it did not intend to arbitrate its claims against them. However, there is no factual basis in the record for the implication by those appellees that, in the absence of Saad Construction's objections, they would have sought to intervene. For all that appears, the Boarda signatory to the arbitration clauseor the arbitrator would have objected to the joinder of any of the appellees in the arbitration. The appellees had the burden of proving that Saad Construction could have arbitrated its tort claims against them. Rule 8(c), Ala. R. Civ. P.; Smitherman, supra, 743 So.2d at 448. Saad Construction could not have done so without the appellees' cooperation. Because the appellees did not satisfy their burden of proving that Saad Construction could have arbitrated its tort claims against them, res judicata does not apply to bar Saad Construction from subsequently asserting its tort claims against the appellees. As this Court has previously recognized: `[T]he relevant federal law requires piecemeal resolution when necessary to give effect to an arbitration agreement. Under the Arbitration Act, an arbitration agreement must be enforced notwithstanding the presence of other persons who are parties to the underlying dispute but not to the arbitration agreement.' Terminix Int'l Co. v. Jackson, 669 So.2d 893, 897 (Ala.1995) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 20, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983) (footnote omitted; emphasis in Moses H. Cone )). Because we hold that the appellees have not met their burden of proving that Saad Construction could have brought its tort claims against them in the arbitration, we need not determine whether the other elements necessary for the application of res judicata are present.
Although Saad Construction could not have asserted its tort claims against the appellees before the director, collateral estoppel might still apply to prevent Saad Construction from relitigating factual issues common to its claims against the appellees that have already been determined by the director if the elements of collateral estoppel are satisfied. Abramson v. Pennwood Inv. Corp., 392 F.2d 759, 762 (2d Cir.1968); Cream Top Creamery v. Dean Milk Co., 383 F.2d 358, 362-63 (6th Cir. 1967); Restatement (Second) of Judgments, § 26, Reporter's Note to comment c(1). [6] After holding that the doctrine of res judicata did not bar federal claims over which the state court in the prior action lacked jurisdiction, the United States Court of Appeals for the Second Circuit in Abramson further held: Of course, where both the state and federal suits are based on the same transactions, collateral estoppel would apply with regard to the facts determined in the state action. 392 F.2d at 762. Thus, although the prior adjudication in the arbitral forum would not, under the doctrine of res judicata, bar Saad Construction's claims against the appellees, the doctrine of collateral estoppel might nonetheless apply if the requirements for that doctrine are satisfied. For the doctrine of collateral estoppel to apply, the following elements must be established: `(1) that an issue in a prior action was identical to the issue litigated in the present action; (2) that the issue was actually litigated in the prior action; (3) that resolution of the issue was necessary to the prior judgment; and (4) that the same parties are involved in the two actions.'  Smith v. Union Bank & Trust Co., 653 So.2d 933, 934 (Ala.1995). `Where these elements are present, the parties are barred from relitigating issues actually litigated in a prior [action].' Smith, 653 So.2d at 934 (quoting Lott v. Toomey, 477 So.2d 316, 319 (Ala.1985)). Biles v. Sullivan, 793 So.2d 708, 712 (Ala. 2000). Only issues actually decided in a former action are subject to collateral estoppel. Leverette ex rel. Gilmore v. Leverette, 479 So.2d 1229, 1237 (Ala.1985) (emphasis added). The burden is on the party asserting collateral estoppel to prove that the issue it is seeking to bar was determined in the prior adjudication. See Adams v. Sanders, 811 So.2d 542, 545 (Ala.Civ.App.2001) (Because we have no transcript of the trial in the district court, the burden is on Sanders to show that the district court determined that he was not negligent.). See also United States v. Cala, 521 F.2d 605, 608 (2d Cir.1975) (The burden ... is on [the one asserting collateral estoppel] to establish that the issue he seeks to foreclose from litigation in the present prosecution was necessarily decided in his favor by the prior verdict.). The appellees have not satisfied their burdens of proof as to their affirmative defense of collateral estoppel. As previously noted, one who claims the defense of collateral estoppel must prove, among other things, that the issue was actually decided, Leverette, 479 So.2d at 1237, and that resolution of the issue was necessary to the prior judgment, Biles, 793 So.2d at 712. Moreover, because we are reviewing a summary judgment, we must review the record in a light most favorable to the nonmovant and must resolve all reasonable doubts against the movant. Hobson, supra, 690 So.2d at 344. The director did not explain the rationale for his arbitration decisions, and he made no specific findings of fact. Instead, he merely entered the words Award or No Award next to each of the claims made by Saad Construction and the Board. The mere entries of No Award on Saad Construction's claims against the Board, which included allegations of misconduct by the appellees, does not necessitate a finding that the arbitrator resolved against Saad Construction its arguments concerning the appellees' alleged misconduct. The appellees have not met their burden of proving that the arbitrator actually decided that the appellees were not responsible for Saad Construction's damage or that resolution of the issue was necessary to the prior judgment. Biles, 793 So.2d at 712. Because we hold that the appellees did not satisfy their burden of proving that the director actually decided that the appellees did not commit the wrongful acts Saad Construction alleged, we need not consider whether the appellees satisfied their burdens of proof as to the other elements of collateral estoppel.
The appellees also argue that the summary judgments should be affirmed because Saad Construction was awarded judgments by the director and those judgments have been satisfied. Although the trial court entered the summary judgments based upon its conclusion that all issues are or were covered by arbitration, our review is not limited to that reasoning, and we may affirm the summary judgments if they are proper for any reason supported by the record. Smith v. Equifax Servs., Inc., 537 So.2d 463 (Ala.1988). It has long been the law in Alabama that a person can sue any number of parties, obtain a judgment against any one, or several of them, but can gain but one satisfaction. Mobile Ins., Inc. v. Smith, 441 So.2d 894, 896 (Ala.1983). Once the judgment has been satisfied for a single injury, no other suits by the plaintiff against any tort-feasor are permitted in regard to the same injury. Ex parte Rudolph, 515 So.2d 704, 708 (Ala.1987). Moreover, a judgment awarding damages to an injured person in one proceeding acts as a limitation on the amount of damages that might be recovered in a subsequent proceeding against others responsible for the injury. Restatement (Second) of Judgments, § 51(2)(a). However, if [t]here were limitations on the competence of the forum in the first action preventing him from obtaining the full measure of his damages, as stated in § 26(1)(c), [ Restatement (Second) of Judgments ], then the injured party may still be entitled to seek those damages unavailable to him in the first action. [7] Id. In count two of its cross-claim/ third-party complaint, Saad Construction alleged that DPF, Mueller, Turberville, and Yonge & Associates knew or should have known that the written specifications for the Spanish Fort project called for electrical service connections to be installed overhead while the drawings referred to underground installation, but that they nevertheless permitted and/or affirmatively instructed Saad Construction to install the connections overhead. In its submission to the director, Saad Construction argued that DPF permitted Saad Construction to complete the electrical service connections overhead. Saad Construction also argued that Yonge & Associates directed Saad Construction's subcontractor to install the electrical service connections overhead. Saad Construction argued that only after the connections were completed did DPF insist that the electrical service connections should be installed underground. Saad Construction argued that DPF either failed to inspect or concealed its findings about the overhead system.... Saad Construction further argued that either the failure or the concealment was attributable to the Board. In count three, Saad Construction alleged that DPF, Turberville, Mueller, and Yonge & Associates knew or should have known that Saad Construction's contract with the Board required the installation of fire dampers, but that the plans and specifications for the project did not call for fire dampers. Saad Construction further alleged that DPF, Turberville, and Yonge & Associates remained silent and allowed [Saad Construction] to act to its detriment by performing certain construction on the Spanish Fort Project without installing dampers. On both of those claims, Saad Construction sought economic damages, including and not limited to, delay in the work, increased overhead, increased cost of performance, interruption of work progress, damage to Saad Construction's reputation, unnecessary disruption of the work of subcontractors and other damages. Saad Construction also sought punitive damages. In the arbitration, the director awarded Saad Construction $11,211 and a 10-day extension for the completion of the project on its claims related to changes in the electrical service connections. The director also awarded Saad Construction $3,022 and a 14-day extension for the completion of the project on Saad Construction's claims related to the fire dampers. It is uncontroverted that the Board satisfied the director's awards to Saad Construction. However, as the director explained the scope of his decisions: The Director does not determine a correct or acceptable remedy to an alleged or proven deficiency, but will determine whether work directed by an owner or design professional is for the account of the contractor or the owner. Certain damages were unavailable to Saad Construction in the arbitration. Thus, Saad Construction is not foreclosed from seeking in its subsequent action against the appellees those damages it could not have recovered in the arbitration. Restatement (Second) of Judgments, § 51(2)(a); see also Dekle, supra, 284 Ala. at 144, 223 So.2d at 31.