Opinion ID: 570048
Heading Depth: 2
Heading Rank: 1

Heading: arbitration and the requirement of full and fair litigation

Text: 12 The fumigators contend on appeal that the district court's grant of summary judgment violated their right to a full and fair hearing on their opposition to Universal's claims because the court enforced against them a decision resulting from arbitration even though they were not party to the arbitration or the agreement mandating arbitration, and did not consent to be bound by the arbitration. Universal cites SCAC Transport (USA), Inc. v. S.S. Danaos, 845 F.2d 1157 (2d Cir.1988) in arguing for preclusion of issues previously litigated in arbitration against a party vouched in to the arbitration who chooses not to defend. 2 We believe that due process may be accorded a party vouched in to an arbitration. 13 [A] right, question, or fact distinctly put in issue and directly determined as a ground of recovery by a court of competent jurisdiction collaterally estops a party ... from relitigating the issue in a subsequent action, if the party had reasonable notice and an opportunity to be heard against the claim. Hardy v. Johns-Manville Sales Corp., 681 F.2d 334, 338 (5th Cir.1982) (footnote omitted). But the due process clause of the United States Constitution protects the right to a full and fair hearing on an issue, and therefore collateral estoppel cannot be applied against a party as to issues not fully and fairly litigated. Blonder-Tongue Lab., Inc. v. University of Illinois Foundation, 402 U.S. 313, 329, 91 S.Ct. 1434, 1443, 28 L.Ed.2d 788 (1971); Parklane Hosiery Co. v. Shore, 439 U.S. 322, 332, 99 S.Ct. 645, 652, 58 L.Ed.2d 552 (1979); Hardy, 681 F.2d at 338. 14 Preclusion of a previously-litigated issue under the doctrine of offensive collateral estoppel requires that the issue under consideration be identical to the issue previously litigated; that the issue was fully and vigorously litigated in the primary proceeding; that the previous determination of the issue was necessary for the judgment in that proceeding; and that no special circumstances exist that would render preclusion inappropriate or unfair. Parklane Hosiery, 439 U.S. at 326-32, 99 S.Ct. at 649-52; In re Lewisville Properties, Inc., 849 F.2d 946, 949 (5th Cir.1988). 15 The fumigators challenge application of offensive collateral estoppel because the primary determination was rendered in an arbitration proceeding, rather than in a court of law. That challenge fails. The United States Supreme Court declined to bar the offensive use of collateral estoppel from arbitration in subsequent federal court litigation, though the Court required consideration of the federal interests warranting protection. Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 223, 105 S.Ct. 1238, 1244, 84 L.Ed.2d 158 (1985). In an arbitrable case not directly involving federal statutory or constitutional rights, 3 courts should use a case-by-case approach to determining the collateral estoppel effects of arbitral findings. See Greenblatt v. Drexel Burnham Lambert, Inc., 763 F.2d 1352, 1361 (11th Cir.1985) (courts should consider, inter alia, the procedural adequacy of the arbitration proceeding). 16 It is true that arbitral findings typically lack the supervisory scrutiny of authoritative review, giving rise to the argument that arbitration risks determinations based on irrelevant or hearsay evidence, or the personal whims of arbitral panel members. Hulbert, Arbitral Procedure and the Preclusive Effect of Awards in International Commercial Arbitration, 7 Int'l Tax & Bus.Law. 156, 195 (1989) [hereinafter Hulbert]. However, arbitration is a widely-used means of resolving maritime disputes. See SCAC Transport, 845 F.2d at 1163 (citing Feinberg, Maritime Arbitration and the Federal Courts, 5 Fordham Int'l L.J. 245 (1982); G. Gilmore & C. Black, The Law of Admiralty 196 (2d ed. 1975)) (arbitration is especially important and has largely supplanted litigation in maritime dispute resolution). And we assume that rational actors fearing future disagreement would not contract for a biased forum to settle their differences. See Shell, Res Judicata and Collateral Estoppel Effects of Commercial Arbitration, 35 U.C.L.A.L.Rev. 623, 663-64 (1988) [hereinafter Shell]. 17 The application of collateral estoppel from arbitral findings is a matter within the broad discretion of the district court, Parklane Hosiery, 439 U.S. at 331, 99 S.Ct. at 651; Lewisville Properties, 849 F.2d at 949; Hauser v. Krupp Steel Producers, Inc., 761 F.2d 204, 207 (5th Cir.1985), and a district court's discretion in deciding whether to give arbitral findings preclusive effect also keeps the risk of prejudice at an acceptable level, at least when the arbitral pleadings state issues clearly, and the arbitrators set out and explain their findings in a detailed written memorandum. Cf. Shell, supra, at 649 (ambiguity of pleadings may require relitigation); Hulbert, supra, at 197 (absence of written findings and reasons makes preclusion impossible unless necessarily implied from the nature of the claim and award).