Opinion ID: 783938
Heading Depth: 4
Heading Rank: 1

Heading: Storey's Waiver of his res judicata argument

Text: 95 As mentioned above, the district court sanctioned Cello for its assertion that Storey `voluntarily participated' in the arbitration proceedings to such an extent that he should be deemed to have waived his res judicata defense. Storey, 182 F.Supp.2d at 367. Notwithstanding that this argument was not in Cello's answer, and that Cello therefore did not receive proper notice concerning potential sanctions based on this argument, this argument is closely related to other arguments that have been actively litigated in the federal courts over the last two years. Cello argued that because the UDRP proceedings were akin to traditional arbitration proceedings, Storey's decision to file a response in the proceeding, rather than immediately challenge the authority of the arbitration panel, affected Storey's right to argue his case in the federal courts. Cf. Halley Optical Corp., 752 F.Supp. at 639 (Under 9 U.S.C. § 4, the proper procedure for a party to challenge whether it is subject to an arbitration agreement is to move the district court for a stay of arbitration.) (citations omitted). Since Cello filed its answer, a district court issued an opinion addressing at length whether the Federal Arbitration Act (FAA) restrictions on judicial review of arbitration awards were applicable to UDRP Paragraph 4 proceedings, see Parisi, 139 F.Supp.2d at 749-53, and the Third Circuit reversed a district court which had held that the FAA did apply to judicial review of UDRP proceedings, see Dluhos, 321 F.3d at 369-73. Although we concluded above that Cello's arguments do not comport with the UDRP's textual provision for an independent resolution of the dispute, the legal principles structuring review of a UDRP panel decision, and their relationship to the law of binding arbitration, were sufficiently unsettled at the time that Cello filed its answer so as to render the district court's decision to sanction the argument an abuse of discretion. This conclusion is further supported by district court's misunderstanding of the relationship between a UDRP proceeding and a registrant's cause of action under § 1114(2)(D)(v) insofar as it held that res judicata barred Cello from submitting its complaint to a UDRP panel. 96