January 19, 2012 Articles

When Is an Arbitration Award Final for Purposes of Collateral Estoppel?

By Alexander O. Canizares

Federal and state courts have repeatedly applied the doctrine of collateral estoppel, also known as issue preclusion, to prevent the re-litigation of issues that have been finally decided in a prior arbitration between the same parties. However, applying issue preclusion to arbitration has proven difficult and unpredictable, complicated in part by perceived differences between arbitration and litigation. This article focuses on recent cases in which courts have examined whether an arbitration award is a "final" judgment entitled to preclusive effect, with different and sometimes inconsistent results that have turned, for example, on whether the award was confirmed by a court. Practitioners are well advised to be aware of the various approaches taken by courts and to consider them when drafting and negotiating arbitration agreements.

The Doctrine of Issue Preclusion and Arbitration
Issue preclusion is a branch of the doctrine of res judicata, also known as claim preclusion, which bars re-litigation of the same claims by the same parties (or persons in privity with those parties) that were decided in a prior judgment. Both doctrines are grounded in notions of finality, judicial economy, and the protection of litigants against vexatious litigation. Generally, issues decided in a prior adjudication have preclusive effect if (1) the issue to be litigated is identical to the one already decided; (2) the issue was actually litigated in the prior case and was necessary to the judgment; (3) the issue was finally decided on the merits; (4) the party sought to be estopped was either a party or in privity with a party to the prior action; and (5) the party sought had a full and fair opportunity to be heard on the issue. See 8B Wright, Miller & Cooper, Federal Practice & Procedure § 4417; Allen v. McCurry, 449 U.S. 90, 93–95 (1980).

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