Unless Confirmed by Court, Arbitration Award Cannot Preclude Future Litigation

Author: Wilton E. Bland, IV

Louisiana’s First Circuit Court of Appeals recently addressed the application of res judicata in the context of an unconfirmed arbitration award.  A dispute arose between homeowners and the construction company contracted to build their home.  Pursuant to the construction contract, the contractor eventually filed an arbitration demand for an unpaid balance.  The homeowners filed a counterclaim in arbitration alleging construction defects.  The arbitation resulted in awards to both parties.  The homeowners requested modification of the award against them, but did not question the merits of the award.  The parties did not otherwise appeal the awards or request confirmation from a court.

Three years later, the homeowners discovered additional construction defects in the home and filed a lawsuit against the contractor in a Louisiana district court.  In response, the contractor filed an exception of res judicata, arguing that the dispute was resolved by the earlier arbitration.  The court sustained the exception and the homeowners appealed.

The First Circuit examined Louisiana’s res judicata statute and a recent Louisiana Supreme Court decision.  The court determined that for res judicata to apply, there must have been a “valid and final judgment” between the parties, which was “signed by the trial court.” While the First Circuit opined that the parties likely intended the arbitration award to be final, recent Supreme Court precedent requires that the parties seek judicial confirmation of the arbitration award to be truly finalized.  Because the parties had never confirmed the arbitration award with a trial court, it was not final for purposes of res judicata and the First Circuit was bound to reverse the contractor’s exception.

Greer v. Town Construction Company, Inc., (La. App. 1st Cir. 3/23/012); 2012 WL 982414.