National Wine & Spirits, Inc., National Wine & Spirits Corporation, NWS, Inc., NWS Michigan, Inc., and NWS, LLC v. Ernst & Young, LLP
2012 Ind. LEXIS 867
| Ind. | 2012Background
- NWS hired Ernst & Young (E&Y) for auditing 1998–2001 under a binding arbitration clause for disputes arising from the services.
- During the period, NWS’s employee Diane Woodrum committed fraud causing about $4.2 million in losses.
- Arbitration panel found E&Y negligent and NWS comparatively negligent (40%); E&Y paid about $2.25 million to NWS.
- NWS later sued E&Y for deception, alleging that cell notes and other documents produced at arbitration were false or scrubbed.
- Trial court granted E&Y summary judgment on the deception claim after a second summary-judgment motion; the issue on appeal is whether collateral estoppel bars the deception claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether issue preclusion bars the deception claim | NWS argues deception issues were not necessarily decided | E&Y contends arbitration resolved the veracity issue and collateral estoppel applies | Yes; collateral estoppel applies to bar the deception claim. |
| Whether final arbitration merits preclude relitigation even without formal confirmation | NWS asserts no final, confirmable judgment exists | E&Y argues final merits determination exists despite non-confirmation | Yes; final merits determination from arbitration binds. |
| Whether the deception issue identity requirement was met | NWS says veracity of documents wasn’t expressly adjudicated | E&Y shows the documents influenced the arbitrators’ fault apportionment | Yes; identity of issues satisfied. |
| Whether NWS had a full and fair opportunity to litigate the issue | NWS lacked discovery due to arbitration rules | NWS chose to proceed and did not seek a continuance | Yes; full and fair opportunity existed. |
| Whether applying collateral estoppel would be unfair under the circumstances | Applying estoppel denies independent deception claim | Estoppel promotes judicial economy and final resolution | No; applying collateral estoppel would be appropriate. |
Key Cases Cited
- Hayworth v. Schilli Leasing, Inc., 669 N.E.2d 165 (Ind. 1996) (defensive collateral estoppel requirements)
- Tofany v. NBS Imaging Sys., Inc., 616 N.E.2d 1034 (Ind. 1993) (identity of issues as litmus for collateral estoppel)
- Brougher Agency, Inc. v. United Home Life Ins. Co., 622 N.E.2d 1013 (Ind. Ct. App. 1993) (arbitration final judgment treated as binding for estoppel)
- Small v. Centocor, Inc., 731 N.E.2d 22 (Ind. Ct. App. 2000) (defensive collateral estoppel in arbitration context)
- Jacobson v. Fireman’s Fund Ins. Co., 111 F.3d 261 (2d Cir. 1997) (arbitration award with preclusive effect despite lack of formal confirmation)
- PSI Energy, Inc. v. AMAX, Inc., 644 N.E.2d 96 (Ind. 1994) (broad arbitration clauses and liberal view of arbitrability)