Recently, the U.S. Court of Appeals for the Sixth Circuit
allowed a subcontractor's lawsuit against design professionals to proceed even
though all parties had previously participated in a consolidated arbitration
proceeding over the same issues. W.J. O'Neil Co. v. Shepley, Bulfinch, Richardson & Abbott, Inc., No. 12-2320, 2014 U.S. App. LEXIS 16607 (6thCir. Aug. 28, 2014). The design professionals were brought into the arbitration
via indemnification claims by the owner, and there was no arbitration agreement
between the subcontractor and the design professionals. Given this, the court
found that the subcontractor's claims against the designers were not a part of
the arbitration and not barred byres judicata. The court applied a technical
approach to res judicata based on the principle that a party cannot be forced
to arbitrate a claim against another party with whom it has not agreed to
arbitrate.
The O'Neil decision is potentially significant for any
consolidated construction arbitrations involving additional parties added
through indemnification claims. Whether a contractor, project manager, or
design professional, O'Neil holds that arbitration is binding and final only as
to the parties who agreed to arbitrate the claims that are subject to
arbitration. The result highlights the fact that the same claims may have to be
relitigated in their entirety in a second proceeding—depriving everyone of a sense
of finality. The risk of multiple proceedings and increased costs should be
considered in determining how to proceed in a consolidated arbitration
proceeding and how to draft arbitration clauses to minimize the risk of
repeatedly litigating the same claims.
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