Opinion ID: 1060160
Heading Depth: 3
Heading Rank: 1

Heading: Arbitrability of Res Judicata Plea

Text: The 49ers rely heavily on a labor arbitration case, Little 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, 141 Ill.App.3d 60, 95 Ill.Dec. 372, 377, 489 N.E.2d 1100, 1105 (1985); Chattin v. Cape May Greene, Inc., 216 N.J.Super. 618, 524 A.2d 841, 848, cert. denied, 107 N.J. 148, 526 A.2d 209 (1987); Rembrandt Indus., Inc. v. Hodges Int'l, Inc., 38 N.Y.2d 502, 381 N.Y.S.2d 451, 452, 344 N.E.2d 383, 384 (1976); C & O Dev. Co. v. American Arbitration Ass'n, 48 N.C.App. 548, 269 S.E.2d 685, 687 (1980), review denied, 301 N.C. 719, 274 S.E.2d 227 (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 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.