Arbitration – Arbitrator to decide the preclusive effect of prior court judgment

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Where there is no agreement to the contrary, an arbitrator, and not the court, decides the preclusive effect of a prior court judgment.

Background

The crux of this case is the court’s standard for reviewing arbitration awards. The district court held that the preclusive effect of a prior judgment of this court was a question for the arbitrator in this case to decide, that the “manifest disregard” standard applied to the court’s review of the arbitrator’s determination and that the arbitrator did not manifestly disregard the law or exceed his authority in issuing the underlying award.

Preclusive effect

Constellium contends that, despite its agreement to arbitrate unsettled grievances, the district court should have decided the preclusive effect of a prior decision of this court on this dispute. The court disagrees.

Absent an agreement to the contrary, the preclusive effect of a prior court judgment is for the arbitrator to decide. Like estoppel and laches, preclusion is an affirmative defense to the claims in the underlying dispute. It does not implicate the arbitrator’s power. Rather, it is “an ‘aspect of the controversy which called the grievance procedures into play.’” It is clear that unless an arbitration agreement stipulates otherwise, a court is empowered only to decide limited questions of arbitrability and “res judicata [is] for the arbitrator to decide in the first instance.”

Standard

Constellium urges the court to apply a standard less deferential than manifest disregard or that set by the Federal Arbitration Act, or FAA, to review arbitral decisions about the preclusive effect of prior judgments. Under Constellium’s “plenary review” standard, a court would determine the correct application of preclusion principles to the case at hand and then weigh the arbitrator’s decision accordingly. Doing so, however, would subject an arbitrator’s award to more searching judicial scrutiny than authorized by the FAA or this court’s precedent, without any legal authority. Out of regard for the FAA, this court must decline to expand its review of legal errors in arbitral awards beyond review for manifest disregard of the law.

Merits

The arbitrator did not manifestly disregard the law of res judicata or collateral estoppel. Even if Constellium were right about the meaning of this court’s prior decision and the proper application of preclusion principles to this case, at worst it has  shown “a misinterpretation of law, faulty legal reasoning[,] or erroneous legal conclusion,” all of which fall short of manifest disregard.

Affirmed.

Constellium Rolled Products Ravenswood LLC v. United Steel Paper and Forestry Rubber Manufacturing Energy Allied Industrial and Service Workers International Union (Lawyers Weekly No. 001-193-21, 13 pp.) (Allison Jones Rushing, J.) Case No. 20-1759. Nov. 29, 2021. From S.D. W.Va. at Charleston (Thomas E. Johnston, C.J.) Ancil Glenn Ramey for Appellant. Maneesh Sharma for Appellees.