Res Judicata Effect of Prior Award is For Arbitrator, Not Court, to Decide

On October 2, 2017, Justice Ramos of the New York County Commercial Division issued a decision in Gibbs v. Holland & Knight, LLP, 2017 NY Slip Op. 32075(U), holding that the res judicata effect of an award in an earlier arbitration was for the arbitrator, not the court, to decide, explaining:

As to H&K's claim that the Gibbs Arbitration is barred by res judicata, H&K argues, at the outset, that this is a threshold issue and is a matter for the Court to decide and not for an arbitrator. H&K asserts that Gibbs had a full and fair opportunity to litigate his compensation claims in the H&K Arbitration, and that his failure to fully plead and litigate his claims during the proceeding results in a waiver. H&K maintains that the H&K Arbitration and the Gibbs Arbitration involve claims that are inextricably part of the same underlying controversy, which Gibbs should have raised in the H&K Arbitration. Further, H&K alleges that Gibbs' repeated set-off arguments in the H&K Arbitration precludes him from now bringing the Gibbs Arbitration to address the same claims.

In opposition, Gibbs argues that first and foremost, the res judicata effect, if any, of a prior arbitration award is a matter for the arbitrator to decide. Moreover, Gibbs maintains that res judicata is inapplicable because the H&K Arbitration only addressed H&K's claim to guardian ad litem fees, while the Gibbs Arbitration addresses Gibb's claim to more than $1.5 million of unpaid compensation. Gibbs also argues that issue preclusion does not bar the Gibbs Arbitration because the claims at issue were not pled or litigated in the H&K Arbitration.

Recent case law demonstrates that the Court lacks the authority to determine whether the Gibbs Arbitration is barred by the doctrines of res judicata and collateral estoppel. On a motion to stay an arbitration, this Court's "gatekeeper" role is limited to determining whether there was a valid arbitration agreement, whether the parties complied with the agreement, and whether the claim to be arbitrated is barred by the statute of limitations.

Here, as discussed below, it has already been decided that the timing of the Gibbs Arbitration was not in breach of the Partnership Agreement. The parties have not raised any statute of limitations arguments. Accordingly, the Court's further involvement is unnecessary and unwarranted.

(Internal citations omitted).