Originally from the AAA Yearbook on Arbitration and the Law - 30th Edition

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6.01 Preclusion: Res Judicata and Collateral Estoppel

Ardis v. Anderson, 662 F. App’x 729 (11th Cir. 2016)

A motion to vacate an arbitration award in federal court after an unsuccessful change to the award in state court was dismissed based on res judicata.

Ardis sought to vacate an arbitration award in state court.  When that failed, he tried again in federal court.  This action was dismissed on the basis of res judicata, because: (1) the claims he raises now could have been raised in the prior state or federal court cases; (2) the claims are based on the same underlying facts of previous lawsuits; (3) the defendants were all in privity in the prior state and federal court suits and “thus were identical for purposes of res judicata”; and (4) any new defendants in this action are attempts to avoid res judicata by manufacturing a new suit. The Eleventh Circuit affirmed the district court decision.

Manganella v. Evanston Ins. Co., 700 F.3d 585 (1st Cir. 2012)

Issue preclusion barred the plaintiff from re-litigating in court a substantially identical issue previously determined in arbitration.

The clothing retailer, Jasmine, purchased an insurance policy from Evanston. The policy covered any claim that sought relief for wrongful employment practices. The policy contained a coverage exclusion for claims based on “conduct. . . committed with wanton, willful, reckless or intentional disregard of any law. . . .” Manganella sold Jasmine to Lerner New York, Inc. Lerner kept Manganella as President of Jasmine and $7 million of the purchase price was placed in escrow as security for any major employment breach by Manganella. 

Multiple sexual harassment allegations prompted Lerner to fire Manganella and invoked the arbitration clause to demand the escrow fund. The arbitration panel found that Manganella did not comply with the Lerner’s corporate Code of Conduct on sexual harassment and did so willfully. The panel, however, did not award the escrow funds because Lerner failed to give notice and an opportunity to remedy as required by the purchase agreement.