SW Legal studies in Business

Res Judicata Applies to Matter Decided in Arbitration
Description

Appeals court held that a matter resolved by arbitration has been settled, so the doctrine of res judicata applied. A party that previously submitted the dispute to arbitration for an award cannot later join a class action against the same defendant.

Topic Alternate Dispute Resolution
Key Words

Arbitration; Award; Res Judicata; Investors

C A S E   S U M M A R Y
Facts

The Aucoins had a brokerage account with an investment company. The account contract had a uniform arbitration clause that required disputes to go before the Financial Industry Regulatory Authority (FINRA). After some years, the Aucoins filed for arbitration, claiming negligence and other improprieties in the management of their account. The arbitration panel agreed with the brokerage firm that the account was not improperly handled and noted that no money had been lost. While that was in process, a class action suit was filed against the brokerage firm for improper management of accounts. The Aucoins filed to join the class for that litigation. The request was denied by the court as it held that the decision of the arbitration panel regarding their account was res judicata as to their claim. The Aucoins appealed.

Decision

Affirmed. The doctrine of res judicata applies to arbitration awards with respect to the issues presented to arbitration and decided in arbitration. Although the award in arbitration was not confirmed by a court, the procedures of arbitration were fair and a final award was issued. Judicial confirmation of awards is not required for the matter to have been legally resolved. Since the issue raised in the class litigation raises the same issues raised by the Aucoins in arbitration, they may not join the class as that would allow them a chance to litigate a matter already settled.

Citation

Aucoin v. Gauthier, ---So.3d--- (2010 WL 502793, Ct. App., La., 2010)

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