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An arbitration decision in a case between an Owner/developer and its construction contractor did not create collateral estoppel that would bar the developer from seeking to recover damages from its architectural firm in a separate, later action in court.  Arbitration was mandated in the contract between the owner and contractor, but did not include claims by or against the Architect, whose contract specified litigation for resolving disputes between them.  As explained by the court, the doctrine of collateral estoppel precludes a party from relitigating in a subsequent action or proceeding an issue clearly raised in a prior action or proceeding that was decided against that party regardless of whether the tribunals or causes of action are the same.

Only if the issue is actually litigated and squarely addressed, however, will the doctrine apply.  Where the contract between the owner and architects was separate from the contract with the construction contractor, and different duties and obligations existed, the court found the owner failed to establish that the issues of breach of contract and professional malpractice had actually been litigated and squarely addressed in the prior arbitration proceeding.  Crystal Clear Development v. Devon Architects, 949 NYS 2d 398 (2012).

Comment:  This case is a good reminder of the importance of having consistency in how disputes on a project will be resolved.  Either all by arbitration or all by litigation may be preferred in order that related issues between related parties can all be resolved at one time in a single forum and have a binding effect on all concerned.  The contracts can be further refined to state that there will be “joinder” and “consolidation” of parties and issues into a single resolution process.

 

About the author: Article written by J. Kent Holland, Jr.,  a construction lawyer located in Tysons Corner, Virginia,  with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners.  He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects.  He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932.  This article is published in ConstructionRisk.com Report, Vol. 15, No. 6 (June 2013).

Copyright 2013, ConstructionRisk, LLC