In a construction dispute, a mechanical contractor won an arbitration award against the project’s construction manager. The arbitration also involved third-party indemnification claims brought by other defendants against two other parties: an architect and designer, but the architect and designer were not held liable for these indemnification claims. In this arbitration, the mechanical contractor never asserted claims directly against the architect and designer.
After the arbitration had ended, the mechanical contractor sued the architect and designer in federal court, and the federal court found that res judicata barred the claims. However, the Sixth Circuit, in a 2-to-1 vote, reversed and held that res judicata did not apply. See W.J. O’Neil Co. v. Shepley, Bulfinch, Richardson & Abbott, Inc., No. 13-2320 (6th Cir. Aug. 28, 2014) (click here to see a copy of the decision).
First, the arbitration award had never been confirmed or reviewed by a court, and the Sixth Circuit recognized that courts are not required under the Full Faith and Credit Act to give res judicata effect to an unappealed arbitration award. Second, the Sixth Circuit found that the mechanical contractor had never agreed to arbitrate its claims against the architect and designer, and thus the arbitration award between the mechanical contractor and construction manager did not bar the contractor’s claims against the architect and designer.
A dissenting judge believed res judicata should apply here. This dissenting judge found that all the parties to the present court action were involved in the underlying arbitration, and the plaintiff contractor could have easily brought the present claims directly against the architect and designer in the arbitration proceeding.