Aircraft Braking Systems Corporation V. Local 856 International Union United Automobile Aerospace And Agricultural Implement Workers Uaw, United States Court of Appeals,Sixth Circuit, No. 95-3774, October 2, 1996

Before: MARTIN, Chief Judge; DAUGHTREY, Circuit Judge; BECKWITH, District Judge.* Edward C. Kaminski (briefed), Buckingham, Doolittle & Burroughs, Akron, OH, Carol MacKenzie, Pearl & MacKenzie (argued and briefed), Syosset, NY, for Plaintiff-Appellant. David Roloff, Goldstein & Roloff (argued and briefed), Cleveland, OH, for Defendant-Appellee.

[...]

Because the district court concluded that Aircraft Braking Systems was collaterally estopped from litigating the issue whether an interim agreement existed between the parties, we conduct a de novo review of the district court's decision to vacate the arbitrator's award. See John Morrell & Co. v. Local Union 304A of the United Food and Commercial Workers, AFL-CIO, 913 F.2d 544, 559 (8th Cir.1990); cf. Black v. Ryder/P.I.E. Nationwide, 15 F.3d 573, 582 (6th Cir.1994). As a preliminary issue, we first address whether an arbitrator is bound by res judicata or collateral estoppel when deciding a matter previously litigated in federal court between the same parties. The district court answered this question affirmatively. This Court has not addressed this precise issue, but those other circuits confronting the problem have held uniformly that arbitrators are bound by prior federal court decisions under the doctrines of collateral estoppel and/or res judicata. See John Morrell & Co., 913 F.2d at 562-63 (vacating arbitration award involving an interpretation of a no-strike clause in the parties' agreement contrary to a previous jury determination of the same issue in litigation between the same parties on the ground that consideration of the issue was barred by collateral estoppel principles); Miller Brewing Co. v. Fort Worth Distrib. Co., 781 F.2d 494, 499 (5th Cir.1986) (reasoning that parties should be barred from seeking relief from an arbitration panel if res judicata principles would bar relief in federal court because an arbitration award involves the entry of judgment by a court); Telephone Workers Union of New Jersey, Local 827, International Brotherhood of Electrical Workers v. New Jersey Bell Tel. Co., 584 F.2d 31, 33 (3d Cir.1978) (refusing to confirm an arbitration award on res judicata and collateral estoppel grounds where arbitrator's determination on the arbitrability of an issue was contrary to a previous judicial decision on the same issue). We agree with the reasoning of these cases. Arbitrators are not free to ignore the preclusive effect of prior judgments under the doctrines of res judicata and collateral estoppel, although they generally are entitled to determine in the first instance whether to give the prior judicial determination preclusive effect. See Trailways Lines, Inc. v. Trailways, Inc. Joint Council, 807 F.2d 1416, 1425 (8th Cir.1986). However, Aircraft Braking Systems does not argue here that arbitrators are free to ignore prior judicial decisions if the doctrines of collateral estoppel or res judicata apply. Rather, Aircraft Braking Systems claims that the parties submitted the question of arbitrability of the grievance to the arbitrator, or alternatively, that collateral estoppel is not applicable on the facts of this case.

Relying on the Supreme Court's decision in First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995), Aircraft Braking Systems claims that the parties submitted the issue of the arbitrability of their dispute to the arbitrator. In First Options, the Supreme Court explained that “[c]ourts should not assume that parties have agreed to arbitrate arbitrability without ‘clear and unmistakable’ evidence that they have done so,” id. at ----, 115 S.Ct. at 1924 (1995) (citations omitted), also stating that “merely arguing the arbitrability issue to an arbitrator does not indicate a clear willingness to arbitrate that issue, i.e., a willingness to be effectively bound by the arbitrator's decision on that point,” id. at ----, 115 S.Ct. at 1925. In First Options, the defendant Kaplan claimed that he was not a party to the contract at issue, and therefore was not required to submit to arbitration of a dispute arising out of the contract. At issue before the Supreme Court was whether a federal court or the arbitrator should determine if a valid agreement to arbitrate existed between the parties. After explaining that courts should apply ordinary contract principles to determine whether the parties intended to submit the arbitrability issue to the arbitrator, it cautioned that courts normally should decide whether a valid agreement to arbitrate exists between the parties absent “clear and unmistakable” evidence that the parties submitted the issue to the arbitrator. Id. at ----, 115 S.Ct. at 1924. Because the defendant Kaplan had vehemently protested the arbitrator's authority to decide the dispute in First Options, it was held that Kaplan did not clearly and unmistakably submit the arbitrability issue to the arbitrator. Id.

Here, Aircraft Braking Systems protested against the arbitrator's authority to hear the dispute on the ground that there was no agreement on which the arbitrator could base its decision. Aircraft Braking Systems stated at the outset of the proceedings that:

[W]e want to be on record that we are protesting. We have no choice but to be here so as to avoid contempt of court, but there is going-there can't be a dispute of a violation of an agreement that doesn't exist.

The Union's representative also indicated his belief that “Judge Bell [has] ruled that we do have an interim contract.”

Aircraft Braking Systems now argues that, although it did not embrace the idea of proceeding to arbitration, it did agree to proceed and submit the issue of arbitrability to the arbitrator. While this argument is meritless, the statement is true. It has been Aircraft Braking Systems' position all along that no interim agreement containing an arbitration clause exists, period. Indeed, that is precisely why it sought to enjoin the arbitration proceedings in this case, and why it sought to enjoin arbitration in Aircraft Braking Systems I. It did not succeed in Aircraft Braking Systems I, and did not succeed in the present case, but was instead forced to go to arbitration. It had absolutely nothing to lose by arguing the interim agreement issue in arbitration; perhaps it could receive a favorable ruling there, contrary to the prior court rulings on the issue. That is precisely what Aircraft Braking Systems received. No doubt, had the arbitrator's ruling been otherwise, Aircraft Braking Systems would be before this Court seeking to have the award vacated on the ground that the parties did not submit the issue of arbitrability to the arbitrator, and instead sought to have that issue decided in district court.

In any event, we do not believe the parties submitted the arbitrability issue to the arbitrator in this case. The “arbitrability” dispute at issue here is not a dispute concerning the scope of an arbitration clause in an otherwise valid agreement, but rather is a dispute as to whether a valid agreement to arbitrate exists at all. This question traditionally has been answered by the courts. See National Union Fire Ins. Co. v. Belco Petroleum Corp., 88 F.3d 129, 135 (2d Cir.1996); Three Valleys Municipal Water District v. E.F. Hutton & Co., 925 F.2d 1136, 1140-41 (9th Cir.1991). This question was also the disputed issue in First Options, and the Supreme Court held that courts should not assume that the parties have agreed to arbitrate the question whether there is a valid agreement to arbitrate without “clear and unmistakable” evidence that the parties so intended. First Options, 514 U.S. at ----, 115 S.Ct. at 1924 (citation omitted).

Here, the parties clearly and unmistakably submitted the arbitrability issue to the district court in Aircraft Braking Systems I. The district court held that the parties had an interim collective bargaining agreement, and refused to enjoin arbitration proceedings under that agreement. The court's holding that an agreement exists was affirmed by this Court. Aircraft Braking Systems' claim in the present arbitration proceeding that the parties did not have an interim agreement was contrary to the district court's holding in Aircraft Braking Systems I, and the arbitrator's decision to decide that issue was in excess of his authority and in disregard of the law. See John Morrell & Co., 913 F.2d at 563. Indeed, the arbitrator simply stated that he did not believe that he was “bound” by the district court's holding, and did not even discuss whether res judicata or collateral estoppel was applicable to the facts before him.

The only real difference between this case and First Options is that the party strongly protesting the arbitrator's authority to decide the dispute (Aircraft Braking Systems) won in arbitration. In First Options, because Kaplan lost at arbitration on his argument that there was no agreement to arbitrate, he maintained consistently on appeal that he did not submit the issue of arbitration to the arbitrator. Here, Aircraft Braking Systems had the good fortune to win its argument that no agreement existed, and is now claiming that it happily submitted the issue of arbitrability to the arbitrator. Aircraft Braking Systems cannot have it both ways. Taking a passage from the Supreme Court in First Options, we note that, “[I]nsofar as [Aircraft Braking Systems was] forcefully objecting to the arbitrator deciding [its] dispute ․ one naturally would think that [it] did not want the arbitrator to have binding authority over [it].” First Options, 514 U.S. at ----, 115 S.Ct. at 1925. Accordingly, we hold that the parties did not submit the issue of arbitrability to the arbitrator.

We also believe that the arbitrator was collaterally estopped from deciding whether an interim agreement existed between the parties.2 Collateral estoppel provides that “a right, question or fact distinctly put in issue and directly determined by a court of competent jurisdiction ․ cannot be disputed in a subsequent suit between the same parties or their privies.” Montana v. United States, 440 U.S. 147, 153, 99 S.Ct. 970, 973, 59 L.Ed.2d 210 (1979). Put another way, the doctrine dictates that “once a court has decided an issue of fact or law necessary to its judgment, that decision may preclude relitigation of the issue in a suit on a different cause of action involving a party to the first case.” Allen v. McCurry, 449 U.S. 90, 94, 101 S.Ct. 411, 414, 66 L.Ed.2d 308 (1980). This Court has established a four-part test for determining whether and when collateral estoppel bars relitigation of an issue:


N.A.A.C.P. v. Detroit Police Officers Ass'n, 821 F.2d 328, 330 (6th Cir.1987). Aircraft Braking Systems' primary argument against the application of collateral estoppel is that there have been material changes in fact which render the application of collateral estoppel inappropriate. See Montana, 440 U.S. at 159, 99 S.Ct. at 976. Specifically, Aircraft Braking Systems bemoans the fact that the hearing before Judge Bell in Aircraft Braking Systems I lasted little more than two hours, whereas the instant arbitration hearing lasted four days, during which Aircraft Braking Systems presented much more evidence on the issue whether an interim agreement existed. However, this claim is not a claim that material facts changed between the time of Judge Bell's decision and the present arbitration proceeding. Rather, as the district court noted, this is a claim that Judge Bell's decision was based on an incomplete record. There are at least two responses to this argument. First, this Court has already held that Aircraft Braking Systems had a full and fair opportunity to litigate this issue. See Aircraft Braking Systems I, 1995 WL 236678 at *9-10. Second, assuming that the presentation of the facts to Judge Bell was deficient, “a fact, question or right distinctly adjudged in the original action cannot be disputed in a subsequent action, even though the determination was reached upon an erroneous view.” Montana, 440 U.S. at 162, 99 S.Ct. at 978 (quoting United States v. Moser, 266 U.S. 236, 242, 45 S.Ct. 66, 67, 69 L.Ed. 262 (1924)). Accordingly, this argument must fail.

[...]