Defensive Use of Collateral Estoppel

Dispute Resolution Journal, May-July 2004 | Go to article overview

Defensive Use of Collateral Estoppel


CONSTRUCTION

In a case of first impression, the Arkansas Supreme Court held that a non-party to the arbitration may use the doctrine of collateral estoppel defensively against a party to the arbitration, provided that the party had a full and fair opportunity to present its case in the arbitration.

Riverdale Development entered into a contract with May Construction Co. to build a commercial office building in Little Rock. May was to erect a pre-engineered metal building manufactured by Ruffin Building Systems, a Louisiana company from which May purchased the materials for construction. Disputes arose between May and Riverdale regarding the completion of the project and pursuant to the arbitration clause in their contract, May initiated arbitration. Shortly thereafter, Riverdale sued May in Arkansas state court. One year later, it filed an amended complaint that also named Ruffin as a defendant. The complaint raised claims of negligence, breach of implied warranties, defective product, and fraud and constructive fraud.

The arbitrator ultimately ruled in May's favor. The award found that since there was no material breach on its part, May was excused from further performance by Riverdale's wrongful exclusion of May from the project site. The arbitrator noted that there were conflicts in the testimony but found May's witnesses more credible. Accordingly, the arbitrator denied all of Riverdale's claims and ordered Riverdale to pay May the balance clue on the contract plus attorney's fees.

Just prior to the arbitrator's decision, the state court granted May's motion to dismiss Riverdale's claims based on the doctrines of res judicata and collateral estoppel. After the arbitrator issued a decision, Ruffin also filed a motion in state court for summary judgment alleging that Riverdale's claims were presented and determined in the arbitration and thus were barred by collateral estoppel. …

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