Opinion ID: 1277672
Heading Depth: 2
Heading Rank: 1

Heading: Judgment Based Upon An Arbitration Award Is A Final Judgment Which Can Have Collateral Estoppel Effect.

Text: On appeal, Dorrance essentially maintains that the circuit court improperly relied upon the Arbitration Award as a basis for applying collateral estoppel. Lee, on the other hand, asserts that Dorrance is collaterally estopped from relitigating the apportionment of liability as set forth in the Arbitration Award, which was subsequently reduced to a final judgment. Before we consider whether collateral estoppel acts as a bar to relitigating the arbitrator's apportionment of liability, we first examine whether an arbitration award that has been reduced to judgment is a final judgment for purposes of collateral estoppel. We answer in the affirmative. HAR Rule 21 states: If, after twenty (20) days after the award is served upon the parties, no party has filed a written Notice of Appeal and Request for Trial De Novo, the clerk of the court shall, upon notification by the Arbitration Administrator, enter the arbitration award as a final judgment of the court. This period may be extended by written stipulation, filed within twenty (20) days after service of the award upon the parties, to a period no more than forty (40) days after the award is served upon the parties. Said award shall have the same force and effect as a final judgment of the court in the civil action, but may not be appealed. (Emphases added). Thus, based on its plain and unambiguous terms, HAR Rule 21 clearly contemplates that after an arbitration award has matured into a final judgment and is entered accordingly by a circuit courtthat judgment is entitled to be treated in all respects as any other judgment. In the present case, the parties in the Cintron Action did not appeal Arbitration Award, and, accordingly, on April 7, 998, the circuit court entered final judgment on the award. The California Court of Appeals has interpreted a statute virtually identical to HAR Rule 21 in the context of an arbitration program substantially similar to the CAAP. In State Farm Mutual Automobile Insurance Co. v. Superior Court, 211 Cal.App.3d 5, 259 Cal.Rptr. 50 (1989), the California Court of Appeals held that an arbitration award, once final, is a judicial determination that can have collateral estoppel effect. The court reasoned: In order to hold that a judgment entered upon an arbitration award did not judicially conclude those issues necessarily resolved by the arbitrator's decision, we would have to ignore the express language of Code of Civil Procedure section 1141.23. [2] Had State Farm desired that the award given to plaintiffs by the judicial arbitrator not ripen into a formal civil judgment, with all of its attendant consequences, it needed only to cause its insureds, to whom it was providing a defense, to make a timely request for a trial de novo (Code Civ. Proc., § 1141.20). This, State Farm did not do. It should not now be heard, in the face of an express statutory declaration to the contrary, to argue that the resulting judgment is somehow entitled to less force and effect than the one which would have obtained had State Farm's insureds timely sought such relief and proceeded to trial before a jury. State Farm, 259 Cal.Rptr. at 53 (emphasis added). Based on the plain language of HAR Rule 21 and the reasoning in State Farm, we hold that a judgment based upon an arbitration proceeding is a final judgment for collateral estoppel purposes. Cf. Sartor v. Superior Court, 136 Cal.App.3d 322, 187 Cal.Rptr. 247, 250 (1982) (holding that judgment confirming arbitration award constitutes final judgment on the merits for purposes of collateral estoppel); Dale v. Guaranty Nat'l Ins. Co., 948 P.2d 545, 549 (Colo.1997) (Collateral estoppel and res judicata have been applied to arbitration proceedings.); Western Indus. and Envtl. Servs., Inc. v. Kaldveer Assoc., Inc., 126 Idaho 541, 887 P.2d 1048, 1051 (1994) (applying a statute, which provided that, [u]pon the granting of an order confirming, modifying or correcting an [arbitration] award, judgment ... shall be entered in conformity therewith and be enforced as any other judgment or decree[,] and holding that, based on a plain reading of the statute, once a judgment is entered by the court after an arbitration proceeding, it is given collateral estoppel effect); Taylor v. Peoples Gas Light & Coke Co., 275 Ill. App.3d 655, 211 Ill.Dec. 942, 656 N.E.2d 134, 139 (1995) (As a general rule, arbitration awards have the same res judicata and collateral estoppel effect as court judgments[.]), appeal denied, 165 Ill.2d 566, 214 Ill.Dec. 866, 662 N.E.2d 432 (1996); Bojrab v. John Carr Agency, 597 N.E.2d 376, 378 (Ind.Ct.App.1992) (recognizing the general rule that a final judgment arising from an arbitration proceeding is given collateral estoppel effect); Aufderhar v. Data Dispatch, Inc., 452 N.W.2d 648, 652 (Minn.1990) (holding that when personal injury damages were previously determined in an arbitration proceeding where the claimant has been afforded a full opportunity to litigate the issue, the claimant may be estopped from relitigating the issue in a later action against a different defendant). The policy goals embodied in the CAAP support such a holding. This court, in Richardson v. Sport Shinko (Waikiki Corp.), 76 Hawai`i 494, 880 P.2d 169 (1994), stated: In recent years, with the increase of civil litigation, escalating costs to the parties, and the strain on already scarce judicial resources, there is a dire need for prompt, equitable, and cost-efficient resolution of civil disputes before trial. A recent study entitled Assessment of Civil Legal Needs of Low- and Moderate-Income People in Hawaii, prepared for the Hawai`i Commission on Access to Justice by The Spangenberg Group of West Newton, Massachusetts, has determined that there has been and is a serious level of unmet legal needs among such families in Hawai`i because they simply cannot afford market-rate legal services. It is well-established that, in most instances, the longer a case is in litigation, the more expensive it is for the parties. Thus, we have recognized time and again that the proclaimed public policy of our legislature is to encourage arbitration as a means of settling differences and thereby avoid litigation. Leeward Bus Co. v. City & County of Honolulu, 58 Haw. 64, 71, 564 P.2d 445, 449 (1977) (citation omitted). Further, courts have realized that, [b]y expediting the adversary process, arbitration promotes quicker settlement of cases thereby speeding up access to the courts[.] Firelock Incorporated v. The District Court In and For the 20th Judicial District, 776 P.2d 1090, 1099 (Colo.1989) (citations omitted). Id. at 510, 880 P.2d at 185. Accordingly, by giving collateral estoppel effect to an arbitration award, this court would be reinforcing the CAAP policies of promoting judicial economy and finality. Arguments to the contrary are not persuasive. For example, in Flynn v. Gorton, 207 Cal.App.3d 1550, 255 Cal.Rptr. 768, 770 (1989), the California Court of Appeals held that arbitration awards should not be accorded collateral estoppel effect. Id. at 772. The court reasoned, in pertinent part: The doctrine of collateral estoppel is based on the premise that a thorough fact-finding process was completed in the first proceeding (Shell, Res Judicata and Collateral Estoppel Effects of Commercial Arbitration (1988) 35 UCLA L.Rev. 623, 648.) However, in judicial arbitration, the low monetary amount in controversy and the option of trial de novo can leave parties without a serious incentive to litigate. Because the stakes involved are low, the parties may be willing to accept a compromise position without much of a fight. (See Mahon v. Safeco Title Ins. Co. (1988) 199 Cal.App.3d 616, 622, 245 Cal.Rptr. 103.) Moreover, it is unlikely parties would expect a judicial arbitration award to have collateral estoppel effect in other proceedings where the stakes may be higher than they were in the arbitration proceeding. If they did, the result might be intensified litigation, delays and costs, as well as an increased rate of trial de novo election. Such a development would be directly contrary to the purposes underlying judicial arbitration legislation. Id. (emphasis added). We reject the Flynn court's rationale. First, unlike the arbitration scheme in Flynn, the HAR impose a duty upon the parties to participate in the arbitration hearing in a meaningful manner. HAR Rule 28 (1998) (authorizing sanctions for failure to meaningfully participate in arbitration hearing). Second, the consequences of a failure to seek a trial de novo are clearly set forth in HAR Rule 21. See HAR Rule 21 (Said award shall have the same force and effect as a final judgment of the court in the civil action[.]). Third, the HAR provide adequate disincentives to requesting trial de novo and thus ensures that the parties take arbitration proceedings seriously and defend their rights accordingly. See HAR Rule 26 (1998); Richardson, 76 Hawai`i at 511, 880 P.2d at 186 ([T]he vital objectives of the CAAP cannot be met if participants invariably treat arbitration as a routine or pro forma step along the path to trial de novo by rejecting reasonable arbitration decisions[.]). For example, if a party requesting trial de novo does not prevail, he or she may be liable, in the trial court's discretion, for significant costs and fees. HAR Rule 26. Moreover, the California Court of Appeals in State Farm explicitly rejected the Flynn rationale. See State Farm, 259 Cal.Rptr. at 54. Accordingly, we hold that an arbitration award that has been reduced to a judgment is a final judgment for purposes of collateral estoppel. We now turn to the issue whether collateral estoppel bars Dorrance from relitigating the apportionment of liability as set forth in the Arbitration Award.