Lead Opinion
Opinion
This сase presents two issues. First, we must consider when, if ever, a judicially confirmed award in an arbitration governed by California’s private arbitration law (Code Civ. Proc., § 1280 et seq.) is entitled to collateral estoppel, or “issue preclusion,” effect in favor of a nonparty to the arbitration.
We reach the following conclusions: First, a private arbitration award, even if judicially confirmed, may not have nonmutual collateral estoppel effect under California law unless there was an agreement to that effect in the particular case.
Factual and Procedural Background
The underlying litigation involves damage to a parcel of land that Vandenberg
To prepare the property for sale, Boyd removed three underground waste oil storage tanks. Testing revealed contamination of soils and groundwater underlying the property. Boyd filed an action against Vandenberg, alleging causes of action for breach of contract, breach of the covenant of gpod faith and fair dealing, public and private nuisance, negligence, waste, trespass, strict liability, equitable indemnity, declaratory relief, and injunctive relief. The Boyd complaint alleged Vandenberg had installed and operated the waste oil storage tanks and the tanks were the source of the petroleum contamination.
Vandenberg had obtained CGL insurance from several companies over the years, including Phoenix Assurance Company of New York (Phoenix), the Glens Falls Insurance Company (Glens Falls), Continental Insurance Company (Continental), TIG Insurance Corporation, Centennial Insurance Company (Centennial), and United States Fidelity and Guaranty Company (USF&G) (collectively insurers). The policies provided coverage to Vandenberg for sums he was “legally obligated to pay as damages” because of property damage. However, certain of the policies, including policies issued by USF&G and Centennial, also contained a so-called pollution exclusion, under which property damage caused by a pollutant or contaminant was not covered except for a “sudden and accidental” discharge.
The arbitration between Vandenberg and Boyd took place before a retired federal judge, Raul Ramirez. Formal discovery was conducted, and the transcribed proceedings included representation by counsel, and extensive evidence, briefing, and argument. In a lengthy and detailed decision, the arbitrator ruled for Boyd. Among other things, the arbitrator found that the contamination stemmed primarily from the underground waste oil tanks and was caused in part by Vandenberg’s improper installation, maintenance and use of the tanks. The arbitrator indicated the discharge of contaminants was not sudden and accidental. The arbitrator’s award of over $4 million to Boyd was confirmed by a superior court judgment.
The insurers rejected Vandenberg’s request for indemnification. He then filed the undеrlying action against his insurers, alleging various causes of action arising out of the failure to defend, settle, or indemnify in the Boyd action.
The insurers filed two motions for summary adjudication. In the first motion, Centennial and USF&G argued they had no duty to defend or indemnify because the pollution exclusion in their policies was triggered by
The trial court granted both motions for summary adjudication. As to the first motion, the trial court ruled that relitigation of issues regarding the source and causation of the contamination was precluded by collateral estoppel. The court reviewed the arbitration transcript and concluded the “only reasonable inference is that the leaks or spills were occurring over a considerable period of time.” The court found, under Shell Oil Co. v. Winterthur Swiss Ins. Co. (1993)
After consolidating the cases, the Court of Appeal issued peremptory writs of mandate reversing both summary adjudication orders. The appellate court first held that, absent a contrary agreement by the arbitral parties, a party to private arbitration is not barred from relitigating issues decided by the arbitrator when those issues arise in a different case involving a different adversary and different causes of action. It would not be fair to give a private arbitration decision nonmutual collateral estoppel effect without the arbitral parties’ consent, the Court of Appeal reasoned, because private arbitration lacks significant safeguards of court litigation, particularly the right to full judicial review.
We granted the insurers’ petitions for review to consider the circumstances, if any, in which private contractual arbitration decisions may have collateral estoppel effect in favor of nonparties, and whether CGL policy language indicating coverage for sums the insured becomes “legally obligated to pay as damages” can include losses pled as breach of contract. We consider each issue in turn.
Discussion
I.
Collateral estoppel is one of two aspects of the doctrine of res judicata. In its narrowest form, res judicata “ ‘precludes parties or their privies from relitigating a cause of action [finally resolved in a prior proceeding].’ ” (Teitelbaum Furs, Inc. v. Dominion (1962)
Thus, res judicata does not merely bar relitigation of identical claims or causes of action. Instead, in its collateral estoppel aspect, the doctrine may also preclude a party to prior litigation from redisputing issues therein decided against him, even when those issues bear on different claims raised in a later case. Moreover, because the estoppel need not be mutual, it is not necessary that the earlier and later proceedings involve the identical parties or their privies. Only the party against whom the doctrine is invoked must be bound by the prior proceeding. (Lucido v. Superior Court (1990)
Accordingly, the collateral estoppel doctrine may allow one who was not a party to prior litigation to take advantage, in a later unrelated matter, of
Collateral estoppel (like the narrower “claim preclusion” aspect of res judicata) is intended to preserve the integrity of the judicial system, promote judicial economy, and protect litigants from harassment by vexatious litigation. (Lucido, supra,
Whether collateral estoppel is fair and consistent with public policy in a particular case depends in part upon the character of the forum that first decided the issue later sought to be foreclosed. In this regard, courts consider the judicial nature of the prior forum, i.e., its legal formality, the scope of its jurisdiction, and its procedural safeguards, particularly including the opportunity for judicial review of adverse rulings. (See, e.g., United States v. Utah Constr. Co. (1966)
Moreover, a particular danger of injustice arises when collateral estoppel is invoked by a nonparty to the prior litigation. (See, e.g., Parklane Hosiery Co. v. Shore (1979)
“Title 9 of the Code of Civil Procedure . . . represents a comprehensive statutory scheme regulating private arbitration in this state. (§ 1280 et seq.).” (Moncharsh v. Heily & Blase (1992)
“Through this detailed statutory scheme, the Legislature has expressed a ‘strong public policy in favor of arbitration as a speedy and relatively inexpensive means of dispute resolution.’ [Citations.] Consequently, courts will ‘ “indulge every intendment to give effect to such proceedings.” ’ [Citations.] Indeed, more than 70 years ago, this court explained: ‘The policy of the law in recognizing arbitration agreements and in providing by statute for their enforcement is to encourage persons who wish to avoid delays incident to a civil action to obtain an adjustment of thеir differences by a tribunal of their own choosing.’ [Citation.]” (Moncharsh, supra,
“In cases involving private arbitration, ‘[t]he scope of arbitration is ... a matter of agreement between the parties’ [citation], and ‘ “[t]he powers of an arbitrator are limited and circumscribed by the agreement or stipulation of submission.” ’ [Citations.]” (Moncharsh, supra,
Of course, the parties to a private arbitration need not, and sometimes may not, specify every detail, characteristic, and consequence of the proceeding they contemplate. As indicated above, the California statutes set forth certain basic, common characteristics оf such proceedings, including their general relationship to the judicial system, that will apply even absent the specific agreement of the parties. These include, among others, the limited grounds and procedures for judicial review of a private arbitration award. (Code Civ. Proc., §§ 1286.2, 1286.6; Moncharsh, supra,
Limited judicial review is a well-understood feature of private arbitration, inherent in the nature of the arbitral forum as an informal, expeditious, and efficient alternative means of dispute resolution. By choosing private arbitration, the parties “evince [their] intent to bypass the judicial system and thus avoid potential delays at the trial and appellate levels.” (Moncharsh, supra,
Accordingly, the parties, simply by agreeing to arbitrate, are deemed to accept limited judicial review by implication, particularly where their agreement specified that the award would be “final” and “binding” upon them. (Moncharsh, supra, 3 Cal.4th. 1, 9-10.) In effect, it is appropriate to insulate a private arbitral award from close judicial scrutiny because, given the inherent nature of arbitration, “the parties have agreed that it be so.” (Id., at p. 10, italics in original.)
However, very different considerations affect the issue whether private arbitration awards should have nonmutual collateral estoppel effect. California’s statutory scheme nowhere specifies that, despite the arbitral parties’ failure so to agree, a private arbitration award may be binding in favor of nonparties in litigation involving different causes of action. Moreover, in our view, such a consequence is not an inherent or expected feature of private arbitration that is implicitly accepted by the arbitral parties.
As we recently observed, private arbitration is a process in which parties voluntarily trade the safeguards and formalities of court litigation for an expeditious, sometimes roughshod means of resolving their dispute. The traditional rule is that “ ‘[arbitrators, unless specifically required
But while the informal and imprecise nature of private arbitration, and its insulation from judicial interference, are “ ‘the very advantages the . . . parties [seek] to achieve’ ” in arbitrating their own claims (see, ante, p. 831, quoting Moncharsh, supra,
An agreement to arbitrate particular claims reflects each party’s conclusion that the immediate stakes make it preferable to avoid the delay and expense of court proceedings, and instead to resolve the matter between themselves without resort to the judicial process. Under such circumstances, each рarty is willing to risk that the arbitration will result in a “final” and “binding” defeat with respect to the submitted claims, even though the party would have won in court, and even though the arbitrator’s errors must be accepted without opportunity for review. (See Moncharsh, supra,
On the contrary, common sense weighs against the assumption that parties contemplate such remote and collateral ramifications when they agree to arbitrate controversies between themselves. Logic equally suggests that conscious agreements to give arbitrators’ decisions nonmutual collateral estoppel effect would not be routine. The very fact that arbitration is by nature an informal process, not strictly bound by evidence, law, or judicial oversight, suggests reasonable parties would hesitate to agree that the arbitrator’s findings in their own dispute should thereafter bind them in cases involving different adversaries and claims. Even where, as here, the arbitral
Accordingly, there is little basis to surmise that mere silence implies the arbitral parties’ acceptance of nonmutual collateral estoppel. A general rule that confirmed that private arbitation awards may have such effect would thus violate the fundamental premise that private arbitration is a contractual proceeding whose scope and effect are defined and limited by the parties’ consent. For similar reasons, such a rule would chill, rather than promote, the voluntary use of the arbitral forum as an efficient and informal alternative means of resolving particular controversies.
Under these circumstances, the public policy reasons against applying the collateral estoppel doctrine (see, e.g., Lucido, supra,
As noted above, the primary purposes of collateral estoppel are to “preserv[e] the integrity of the judicial system, promot[e] judicial economy, and protect[] litigants from harassment by vexatious litigation.” (Lucido, supra,
We therefore face a situation in which the policies underlying the doctrine of collateral estoppel must yield to the contractual basis of private arbitration, i.e., the principle that the scope and effect of the arbitration are for the
We realize that some commentators, and most other courts addressing the issue, have taken a contrary approach. The predominant view is that unless the arbitral parties agreed otherwise, a judicially confirmed private arbitration award will have collateral estoppel effect, even in favor of nоnparties to the arbitration, if the arbitrator actually and necessarily decided the .issue sought to be foreclosed and the party against whom estoppel is invoked had full incentive and opportunity to litigate the matter. (E.g., Witkowski v. Welch (3d Cir. 1999)
When justification for these rules is offered, it centers on one or more of three premises. The first is the general policy against relitigation of issues already decided. (E.g., Messinger, supra,
Respectfully, we find these rationales unpersuasive. As our earlier discussion suggests, we believe they give insufficient consideration and weight to the voluntary, contractual, and informal nature of private arbitration, and to the consequent reasonable expectations of the arbitral parties.
In particular, we reject the notion, strongly urged by the concurring and dissenting opinion, that California’s statutory provision giving confirmed privatе arbitration awards the force and effect of civil judgments (see Code Civ. Proc., § 1287.4)
As we have indicated, California’s private arbitration statutes, including Code of Civil Procedure section 1287.4, do not warn parties who choose arbitation over court litigation that the arbitrator’s award may be used against them by third persons to resolve different causes of action. The contractual nature of private arbitration dictates that the scope and effect of an arbitral award must derive from the parties’ consent. Yet the informal nature of arbitration, the usual reasons for its use, the potentially disproportionate consequences of nonmutual collateral estoppel, and the fact that such consequences may not be immediately apparent to the arbitral parties, all suggest that their silence on the subject does not imply consent. Fairness and public policy thus counsel against application of nonmutual collateral estoppel in this setting, unless the parties specifically agree thereto. That California law treats confirmed arbitration awards as judgments does not compel us to conclude otherwise.
This “ad hoc, post hoc” stаndard eliminates a prime benefit of choosing the arbitral over the judicial forum—the right to shape, control, know, and predict at the outset the scope and effect of the arbitrator’s decision. Moreover, the case-by-case approach encourages both the arbitral parties, and the arbitrator himself, to “hedge” against the future possibility that the decision will be deemed binding in different litigation with other parties. “By creating the possibility that some arbitral findings will [have] collateral estoppel [effect], the case-by-case approach puts subtle but strong pressure on the arbitration process to conform its perspective and methods to those of litigation, in order to justify the confidence in its findings that collateral estoppel represents. [A] compelling reason to abandon the case-by-case approach to arbitral collateral estoppel is to ease or eliminate this pressure, in order to maintain arbitration as a useful, distinct alternative to litigation.” (Motomura, supra, 63 Tul. L.Rev. 29, 71.)
Accordingly, we adopt, for California purposes, the rule that a private arbitration award cannot have nonmutual collateral estoppel effect unless the
We note first that neither USF&G nor Centennial was a party to the arbitration between Vandenberg and Boyd.
We find no such agreement. On the contrary, the terms of the three-way settlement among Boyd, Vandenberg, and USF&G strongly suggest the parties’ intent that, while the arbitration would be “binding” between Vandenberg and Boyd, it should not have collateral estoppel effect in favor of Vandenberg’s insurers. Under the express provisions of the settlement, some of Boyd’s causes of action against Vandenberg would be dismissed; the remaining, or “reserved,” claims in the Boyd action would be decided by “binding” arbitration; Boyd and Vandenberg would release certain potential causes of action against USF&G; and USF&G would рrovide Vandenberg a defense in the Boyd action under a “full reservation of rights”; while “all questions regarding ultimate coverage and indemnity obligations between USF&G and . . . Vandenberg . . . [were] reserved for resolution.” (Italics added.)
The clear import of these provisions is that the arbitration would finally resolve the Boyd action, but that ancillary insurance issues between Vandenberg and USF&G, aside from those issues specifically addressed in the settlement, would be unaffected. Under the settlement’s terms, both Vandenberg and USF&G retained the right, in future litigation between them, to address de novo “all questions” pertinent to USF&G’s “coverage and indemnity obligations.”
Though Centennial was not a party to the settlement, there is no basis to infer that the parties intended or agreed the arbitrator’s decision would have
The Court of Appeal therefore correctly reversed the trial court order granting the motion of USF&G and Centennial for summary adjudication.
II.
The CGL insurance policies issued by all the insurers in this case provided coverage for sums Vandenberg was legally obligated to pay as damages because of property damage. We next consider whether this coverage language in a CGL insurance policy necessarily precludes coverage for losses pleaded as contractual damages.
In holding that coverage for property damage losses is not necessarily precluded because they are pled as contractual damages, the Court of Appeal properly focused on the property itself and the nature of the risk causing the injury. Acknowledging the line of decisions espousing a general rule of noncoverage for contractual damages, the Court of Appeal nevertheless concluded “the general rule is not a universal bar to insurance coverage whenever a contract is involved. Rather, the focus of coverage for property damage is the property itself. (Waller v. Truck Ins. Exchange, Inc. [(1995)] 11 Cal.4th [1,] 17 [
The insurers contend CGL insurance policies limiting coverage to amounts the insured is “legally obligated to pay as damages,” or using similar language, refer to tort liability and not contractual liability. A long line of decisions supports their position, holding that any liability arising ex contractu, as opposed to ex delicto, is not covered under such policies.
We disagree. The nature of the damage and the risk involved, in light of particular policy provisions, control coverage. Moreover, we reject the ex contractu/ex delicto distinction, which derives from a misreading of the seminal case, Ritchie v. Anchor Casualty Co. (1955)
In International Surplus, supra,
Insurance policies are contracts construed in accordance with the parties’ mutual intent at the time of contract formation, as inferred from the written рrovisions. (Civ. Code, §§ 1636, 1639; Montrose Chemical Corp. v. Admiral Ins. Co. (1995)
Even if a provision raises doubts as to coverage in the minds of legally trained observers due to a sophisticated legal distinction, courts will not assume the distinction was incorporated into the policy. (See AIU, supra,
Nothing in the respective policies between Vandenberg and any of the insurers suggests any special or legalistic meaning to the phrase “legally obligated to pay as damages.” A reasonable layperson would certainly understand “legally obligated to pay” to refer to any obligation which is binding and enforceable under the law, whether pursuant to contract or tort liability. Further, a reasonable layperson, cognizant that he or she is purchasing a “general liability” insurance policy, would not conclude such coverage term only refers to liability pled in tort, and thus entirely excludes liability pled on a theory of breach of contract. Under general insurance principles, we must interpret the phrase “legally obligated to pay as damages” in accordance with the ordinary and popular sense, not the legalistic, and erroneously premised, interpretation of the language urged by insurers.
Moreover, the arbitrariness of the distinction between contract and tort in the International Surplus line of cases is evident when we consider the same act may constitute both a breach of contract and a tort. (See Eads v. Marks (1952)
Insurance treatises concur with this approach. “[Wjhether a particular claim falls within the coverage afforded by a liability policy is not affеcted by the form of the legal proceeding. Accordingly, the legal theory asserted by the claimant is immaterial to the determination of whether the risk is covered.” (9 Couch, Insurance (3d ed. 1997) § 126:3, p. 126-8.) Insurance commentators explain: “The expression ‘legally obligated’ connotes legal responsibility that is broad in scope. It is directed at civil liability .... [which] can arise from either unintentional (negligent) or intentional tort, under common law, statute, or contract.” (Malecki & Flitner, Commercial General Liability (6th ed. 1997) p. 6, italics added.) “The coverage agreement [which] embraces ‘all sums which the insured shall become legally obligated to pay as damages is intentionally broad enough to include the insured’s obligation to pay damages for breach of contract as well as for tort, within limitations imposed by other terms of the coverage agreement (e.g. bodily injury and property damage as defined, caused by an occurrence) and by the exclusions . . . .” (Tinker, Comprehensive General Liability Insurance—Perspective and Overview (1975) 25 Fed. Ins. Coun. Q. 217, 265.)
We therefore conclude that the International Surplus rationale, distinguishing contract from tort liability for purposes of the CGL insurance coverage phrase “legally obligated to pay as damages,” is incorrect.
The judgment of the Court of Appeal is affirmed.
Mosk, Acting C. J., Kennard, J., and Werdegar, J., concurred.
Notes
Tor reasons that will appear, “issue preclusion” effect in favor of a nonparty is sometimes hereafter referred to as nonmutual collateral estoppel.
Our holding is narrowly circumscribed. Nothing in our decision imposes or implies any limitations on the strict res judicata, or “claim preclusive,” effect of a California law private arbitration award. (See, e.g., Thibodeau v. Crum (1992)
The plaintiffs in the underlying insurance litigation are John B. Vandenberg, Jeanette B. Vandenberg, James A. Keil, Bonnie J. Keil, Vandenberg & Keil, a general partnership, and Vandenberg Motors, Inc. These persons had various interests in the business known as Vandenberg Motors and we shall refer to them collectively as Vandenberg.
The Boyds are not involved in the indemnification litigation, the writ proceedings or in this appeal. Eugene died during the course of the litigation of their complaint. We shall refer to their interests by the singular Boyd.
The settlement agreement does not appear in the record as a signed contract. Instead, the record reflects that the terms of the settlement, including its arbitration provisions, were read in open court by USF&G’s counsеl, after which the court questioned the individual parties to ascertain their understanding and assent. (See Code Civ. Proc., § 664.6.)
Vandenberg sought clarification that the absence of a pollution exclusion in the policies of Continental, Phoenix and Glens Falls prevented their attempted joinder in Centennial’s motion based on collateral estoppel. The trial court did not expressly rule on this request.
At all court levels, the parties have focused on whether fairness permits the collateral estoppel use of confirmed contractual arbitration awards. The briefs do not address what significance should attach to the arbitral parties’ agreement or failure to agree that their arbitration should have nonmutual collateral estoppel effect. In response to a question at oral argument, counsel for USF&G suggested that specific agreement on the issue was irrelevant. But our ruling that contractual arbitration- awards may never have nonmutual collateral estoppel effect unless the arbitral parties so agree can produce no unfair surprise. As noted above, the Court of Appeal reached exactly that conclusion.
Though, as noted above (see fn. 5, ante), the arbitration agreement in this case was formalized in open court, rather than by an executed writing, no party has suggested the agreement is exempt from California’s private contractual arbitration statutes because there was no “written agreement.”
As amended in 1998, section 1287.4 provides: “If [a private arbitration] award is confirmed, judgment shall be entered in conformity therewith. The judgment so entered has the same force and effect as, and is subject to all the provisions of law relating to, a judgment in ' a civil action of the same jurisdictional classification; and it may be enforced like any other judgment of the court in which it is entered, in an action of the same jurisdictional classification.”
The concurring and dissenting opinion asserts that by leaving the nonmutual collateral estoppel effect of a private arbitration award to the agreement of the arbitral parties themselves, we enhance the dangers of inconsistent arbitral and judicial rulings, improperly hinder the arbitration of arbitrable disputes, encourage “procedural gamesmanship” (cone. & dis. opn. of Brown, J., post, at p. 844), and offer arbitral parties unfair “second bite[s] at the apple” {ibid.), particularly in complex cases where arbitrable disputes are closely related to broader litigation that includes arbitral nonparties. But as the concurring and dissenting opinion effectively concedes (and at least where, as here, the arbitration agreement is governed exclusively by California law), this state’s arbitration statutes give courts specific and ample means of assuring that private arbitrations will not impact unfairly on judicial decisionmaking, or on third party rights, when a party to an arbitration agreement is also a litigant against a third person in closely related court proceedings involving “a common issue of law or fact.” (Code Civ. Proc., § 1281.2, subd. (c)) [court may deny arbitration, impose forced joinder of some or all parties or issues in a single proceeding, and use stay power to determine whether arbitration or court litigation will proceed first]; cf. Volt Info. Sciences v. Leland Stanford Jr. U. (1989)
In any event, as we have explained, the fundamental policy of California’s arbitration laws is to ensure that arbitration agreements will be enforced in accordance with their terms. Nothing prevents arbitral parties, aware that their arbitrable dispute bears сlosely on related
Although not a party to the Boyd action, USF&G, in its capacity as Vandenberg’s liability insurer, did participate in the settlement agreement that led to the Boyd/V andenberg arbitration. As part of that agreement, USF&G provided Vandenberg’s legal defense in the arbitration. This does not mean, however, that USF&G was a party to the arbitration itself. USF&G’s legal relationship to the Boyd/V andenberg arbitration was the same as it would have been to a court trial between those parties.
(See Old Republic Ins. Co. v. Superior Court (1998)
The Court of Appeal decisions adhering to the holding of International Surplus are disapproved to the extent they are inconsistent with this opinion. (Old Republic Ins. Co. v. Superior Court, supra,
Concurrence Opinion
Although I agree with part II of the majority opinion, I strongly disagree with its conclusion in part I that judicially confirmed arbitration awards do not have “nonmutual” collateral estoppel effect absent a specific agreement between the arbitral parties.
The majority conveniently disregards the fact that the Legislature has already resolved this question. Section 1287.4 of the Code of Civil Procedure (section 1287.4) establishes that a confirmed arbitration award has “the same force and effect as, and is subject to all the provisions of law relating to, a judgment in a civil action of the same jurisdictional classification . . . .” (Italics added.) This language is clear and unambiguous: confirmed arbitration awards are equivalent in all respects to other court judgments. Thus, a confirmed arbitration award, like any other judgment, may have nonmutual collateral estoppel effect with or without the express or implied consent of the arbitral parties.
In accordance with the well-established tenets of statutory construction, our analysis should begin and end here. (See Lungren v. Deukmejian (1988)
The majority does engage in a lengthy and tortuous discussion in an attempt to justify its ad hoc revisions to section 1287.4. The discussion, however, is riddled with logical inconsistencies. On the one hand, the majority acknowledges that the Legislature enacted a comprehensive statutory scheme governing arbitration. (Maj. opn., ante, at p. 830.) On the other hand, the majority relegates the text of section 1287.4 to a footnote and dismisses it without even addressing its language. (Maj. оpn., ante, at p. 835,
The majority’s use of public policy considerations to circumvent section 1287.4 is just as specious. This case does not present a question of common law policy; it presents a question of statutory interpretation. The court is not at liberty to reject the plain meaning of a statute merely because it believes the statute implements an unwise policy.
In any event, most of the cited public policy considerations actually repudiate the majority’s position. Notwithstanding the majority’s conclusory statements to the contrary, its decision today undermines public confidence in the judicial system. First, denying judicially confirmed arbitration awards collateral estoppel effect creates the risk of inconsistent rulings. (See Lucido v. Superior Court (1990)
Second, leaving the determination of the collateral estoppel effect of a judicially confirmed arbitration to the parties creates the possibility that summary proceedings lacking “judicial character” will have nonmutual collateral estoppel effect. Such a result not only contravenes well-established precedents (see, e.g., People v. Sims (1982)
Denying judicially confirmed arbitrations collateral estoppel effect also undermines judicial economy. The majority correctly recognizes that private arbitrations do not waste judicial resources because they do not involve “the use of a judge and a courtroom.” (Maj. opn., ante, at p. 833.) Indeed, the Legislature enacted the arbitration statutes in order to provide a viable
Finally, in perhaps the greatest irony of all, the majority’s foray into legislative enactment will likely have the very “adverse effects” on arbitrations that it seeks to prevent. (Maj. opn., ante, at p. 836.) As an initial matter, the majority’s conclusion that the pressure to conform the arbitral process to the litigation process will discourage the use of arbitrations is suspect. Even if arbitrations become more like litigation, they still have several inherent advantages, including greater limits on discovery, more flexible hearing and trial dates, limited judicial review and the ability to choose arbitrators with expertise in the type of controversy at issue.
Instead, the majority decision may also make many commercial disputes inarbitrable or encourage procedural gamesmanship. Commercial disputes often involve nonparties to the arbitration agreement. If the majority is correct and tactical considerations weigh against agreements according non-mutual collateral estoppel effect to judicially confirmed arbitration awards, then the guaranteed “possibility of conflicting rulings on a common issue of law or fact” in disputes involving nonparties will lead to two probable outcomes. (Code Civ. Proc., § 1281.2, subd. (c).) Courts will either deny or stay arbitration or order arbitration and stay the action against nonparties to the arbitration agreement. (Ibid.; see also Mercury Ins. Group v. Superior Court (1998)
• Even if arbitral parties avoid these outcomes by agreeing to give the arbitration nonmutual collateral estoppel effect, they, by the majority’s reasoning, will likely insist on the same sort of procedural safeguards that exist in litigation. Thus, the majority’s decision, at best, would have the same effect on arbitrations as the case-by-case approach that it rejects.
Chin, J., concurred.
The petition of real party in interest United States Fidelity and Guaranty Company for a rehearing was denied October 20, 1999. George, C. J., did not participate therein.
For example, Connecticut, Idaho, Nevada and New York all have statutes similar to section 1287.4 and have concluded that final and binding arbitration decisions have nonmutual collateral estoppel effect. (See Bulger v. Lieberman (1995)
The Restatement Second of Judgments provides that: “When arbitration affords opportunity for presentation of evidence and argument substantially similar in form and scope to judicial proceedings, the award should have the same effect on issues necessarily determined as a judgment has. Economies of time and effort are thereby achieved for the prevailing party and for the tribunal in which the issue subsequently arises.” (Rest.2d Judgments, § 84, com. c, p. 290, italics added.)
See, e.g., 18 Wright et al., Federal Practice and Procedure (1981) section 4475, page 771; 1 Raven et al., Business and Commercial Litigation in Federal Courts (1998) Arbitration vs. Litigation: Enforceability and Access to Courts, section 9.6, and footnote 1.