700 F. App'x 484
6th Cir.2017Background
- University of Michigan commissioned a $200M+ Cardiovascular Center; SBRA was architect of record and retained SSR for MEP design; Barton Marlow Company (BMC) was construction manager.
- W.J. O’Neil Co. (WJO) won the mechanical subcontract (~$23M) and contracted with BMC, not with SBRA or SSR; contract with BMC required mediation then arbitration for disputes.
- WJO sued in state court raising contract claims against BMC and professional negligence against SBRA (and later SSR); BMC’s motion compelled arbitration of WJO’s contract claims and WJO’s claims against SBRA/SSR were stayed/dismissed without prejudice.
- BMC v. WJO and BMC v. UM arbitrations were consolidated; WJO participated and sought ~$19.4M (about $7M direct, $12M consequential). The arbitration panel awarded WJO contract damages (~$2.14M) but denied all consequential/lost-profit damages as speculative and barred by contract waiver.
- WJO then sued SBRA and SSR in federal court asserting negligence, innocent misrepresentation, and tortious interference seeking tort damages; defendants moved for summary judgment based on res judicata/collateral estoppel and other grounds.
- The district court granted summary judgment on collateral estoppel; the Sixth Circuit affirms, holding issue preclusion bars WJO’s relitigation of damages because the arbitration actually and necessarily decided WJO’s consequential damages and WJO had a full and fair opportunity to litigate them.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether prior arbitration precludes WJO's tort claims under law of the case | Prior Sixth Circuit ruling precluded preclusion here; arbitration could not bind non-arbitrated tort claims | Law of the case does not bar reexamination; prior panel only held arbitration couldn’t preclude claims WJO never agreed to arbitrate | Law of the case did not apply; district court did not abuse discretion |
| Whether issue preclusion (collateral estoppel) bars relitigation of damages | WJO: tort damages differ from contract/consequential damages; arbitration did not decide tort entitlement | Defs: arbitration expressly rejected consequential/lost-profit damages and WJO sought the same recovery there | Applied collateral estoppel: arbitration actually litigated and decided damages issue; bars relitigation |
| Whether WJO had a full and fair opportunity to litigate damages in arbitration | WJO: did not litigate tort claims before panel; so no full/fair opportunity on tort damages | Defs: WJO participated fully, presented experts and voluminous evidence on damages | Court: WJO had full and fair opportunity; extensive evidence and testimony were presented |
| Whether mutuality of estoppel prevents preclusion given arbitration was unconfirmed | WJO: exception should apply to unconfirmed arbitration awards; mutuality required | Defs: mutuality not required when preclusion is asserted defensively and plaintiff had full/fair chance | Court: mutuality not required defensively under Michigan law; no persuasive distinction for unconfirmed arbitration; defensive estoppel allowed |
Key Cases Cited
- W.J. O’Neil Co. v. Shepley, Bulfinch, Richardson & Abbott, Inc., 765 F.3d 625 (6th Cir. 2014) (prior panel held claim preclusion not appropriate where plaintiff never agreed to arbitrate tort claims)
- Monat v. State Farm Ins. Co., 677 N.W.2d 843 (Mich. 2004) (elements for collateral estoppel under Michigan law)
- McDonald v. City of West Branch, Mich., 466 U.S. 284 (1984) (arbitration awards are not "judicial proceedings" for purposes of Full Faith and Credit statute)
- Blonder-Tongue Labs., Inc. v. Univ. of Illinois Found., 402 U.S. 313 (1971) (considerations in determining whether party had full and fair opportunity to litigate)
- Georgia-Pacific Consumer Prod. LP v. Four-U-Packaging, Inc., 701 F.3d 1093 (6th Cir. 2012) (mutuality not required for defensive collateral estoppel)
- Senior Accountants, Analysts & Appraisers Ass’n v. City of Detroit, 249 N.W.2d 121 (Mich. 1976) (issue preclusion requires issue actually litigated and essential to judgment)