14 Cal.App.5th 663
Cal. Ct. App.2017Background
- Cal Sierra (successor to original MOA party) held superior subsurface mining rights in the Yuba Goldfields under a 1992 Mutual Operations Agreement (MOA); Western Aggregates held subordinate surface rights.
- Western Aggregates licensed George Reed, Inc. (Reed) (and Reed’s parent Basic Resources) to place a mobile asphalt plant on the Deep Reserve; Reed selected and installed the plant under the license.
- Cal Sierra altered its dredge route when the dredge would encounter the plant and demanded arbitration under the MOA. Cal Sierra sought damages for breach of contract, trespass, nuisance, and conversion.
- The arbitration panel (2–1) awarded Cal Sierra damages on the breach-of-contract claim but found trespass, nuisance, and conversion were not proven; Western Aggregates paid the award and attorney fees.
- Cal Sierra then sued Reed and Basic Resources for trespass and interference claims. The trial court (after a bifurcated proceeding on preclusion defenses) held claim preclusion (res judicata) barred the suit against Reed/Basic and entered judgment for defendants; Cal Sierra appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether claim preclusion bars Cal Sierra’s suit against Reed/Basic | Cal Sierra: no privity with Western Aggregates; arbitration did not resolve claims against nonparties; interference/trespass claims against Reed are distinct | Defendants: Reed/Basic are in privity (derivative liability/licensor-licensee alignment); arbitration decided the same primary right (interference with mining) | Held: Claim preclusion applies; Reed/Basic in privity with Western Aggregates and the same primary right was adjudicated in arbitration |
| Whether licensor-licensee relationship precludes privity as a matter of law | Cal Sierra: license expressly disclaims agency/principal relationships; privity requires power to bind | Defendants: privity is factual; licensee’s rights depended on Western Aggregates and Western selected site, so interests were identical | Held: Licensor-licensee status does not preclude privity; facts showed identity/community of interest and virtual representation |
| Whether the interference claims are a different ‘‘primary right’’ than trespass adjudicated in arbitration | Cal Sierra: interference and trespass are different duties/rights; continuing trespass continued after arbitration | Defendants: Primary right is freedom from interference with mining; different legal theories do not create distinct primary rights; continuing trespass requires an initial trespass which arbitration rejected | Held: Claims involve same primary right; arbitration’s rejection of trespass/nuisance bars subsequent claims, including continuing trespass theory |
| Whether an arbitration award (not reduced to judgment) can support preclusion against nonparty/privity defendants | Cal Sierra: nonparty cannot assert unconfirmed award; only a confirmed judgment qualifies | Defendants: even an unconfirmed award can have preclusive effect when privity exists and award was satisfied | Held: Preclusion satisfied; award functioned as final adjudication for res judicata purposes (and Western paid the award) |
Key Cases Cited
- DKN Holdings LLC v. Faerber, 61 Cal.4th 813 (2015) (defines claim vs. issue preclusion and privity/derivative-liability principles)
- Mycogen Corp. v. Monsanto Co., 28 Cal.4th 888 (2002) (overview of res judicata and collateral estoppel doctrines)
- Bernhard v. Bank of America, 19 Cal.2d 807 (1942) (classic discussion of party and privy for preclusion purposes)
- Thibodeau v. Crum, 4 Cal.App.4th 749 (1992) (unconfirmed arbitration award may have preclusive effect where privity exists)
- Bucur v. Ahmad, 244 Cal.App.4th 175 (2016) (an unconfirmed arbitral award can be equivalent to a final judgment for res judicata purposes)