Texas’ Fifth COA Holds Doctrine of Res Judicata Bars Case Decided by Kentucky Arbitration

Texas’ Fifth District Court of Appeals in Dallas has affirmed a grant of summary judgment in a case that was previously submitted to binding arbitration and confirmed by a trial court in another state.  In Wall v. Orr, No. 05-12-00369-CV, (Tex.App. – Dallas, July 30, 2013), Orr in his capacity as trustee, Wall, and a number of family members became engaged in multiple lawsuits related to at least two pieces of partitioned real property and other assets in Kentucky.  During court-ordered mediation, the parties agreed to submit the dispute to binding arbitration.

While arbitration was ongoing, Orr tendered a check for more than $63,000 to the arbitrators in an effort to satisfy his obligation as trustee to Wall.  The arbitrators agreed to hold the sum until Wall signed a mutual release that was required pursuant to one of the arbitral orders.  After issuing 28 orders, the arbitrators made a final award regarding the matter.

Following arbitration, Orr and others filed a motion to confirm the numerous arbitration orders in a Kentucky court.   Despite that the case was still pending, Orr distributed trust assets to the other beneficiaries and filed the appropriate tax documents.  Wall then filed a motion demanding payment of approximately $63,000 from Orr.  The Kentucky trial court, however, denied her motion because the case was referred to binding arbitration.

Next, Wall filed a breach of fiduciary duty lawsuit against Orr in Collin County, Texas.   Meanwhile, the Kentucky court confirmed the arbitral award, denied Wall’s motion to vacate portions of the arbitrators’ decision, and stated the judgment was final and appealable.  Orr then filed a motion for summary judgment in Texas.  The Collin County court granted Orr’s motion and Wall appealed to the Fifth District of Texas.

The Dallas appeals court stated,

The doctrine of res judicata is formed by two subparts: (1) claim preclusion and (2) issue preclusion. Id. Claim preclusion bars a party from re-litigating a previously adjudicated cause of action and entirely bars a new lawsuit on the same cause of action. Id. Issue preclusion bars the parties from re-litigating any issue actually litigated and finally decided in an earlier action. Id.

With regard to claim preclusion, the Fifth District found “The identity of the parties and decision on the merits elements are not strongly contested in the case.”  After that, the appellate court turned to issue preclusion and examined the “identity of the causes of action.”  The court examined each of Wall’s arguments in turn and said,

The summary judgment record is clear that Wall’s claims in the present litigation arise out of the same transactional nucleus of facts—the mediation memorandum and agreed order— as the arbitration proceeding. Once we look beyond Wall’s legal theories of debt and breach of fiduciary duty, we find the factual bases of her claims are coterminous with the mediation memorandum, the agreed order, and the Kentucky arbitration and confirmation proceedings.

Because the Texas lawsuit was barred by the doctrine of res judicata, Texas’ Fifth District Court of Appeals affirmed the lower court’s decision.