In a dispute between Constellium Rolled Products Ravenswood LLC and a labor union, Constellium argued that an arbitrator’s award against Constellium was contrary to a prior court decision involving the same parties and therefore violated the doctrine of res judicata. Despite the existence of an arbitration agreement between the parties, Constellium sued in district court seeking a declaratory judgment that it should prevail in the dispute. The district court denied Constellium’s petition and the parties proceeded to arbitration, which resulted in an award in favor of the union. Constellium appealed to the Fourth Circuit Court of Appeals, arguing that the district court should have determined the preclusive effect of the prior decision in the first instance or, in the alternative, that the appellate court should apply a less deferential standard for reviewing res judicata and collateral estoppel errors than applies to other alleged legal errors in an arbitration.
The Fourth Circuit disagreed, noting that the Supreme Court has identified two categories of threshold questions — procedural questions for the arbitrator, and questions of arbitrability for the court. Questions of arbitrability are “quite limited” and include disputes about the existence and scope of a valid and binding arbitration agreement. “Procedural questions,” on the other hand, grow out of the dispute and bear on its final disposition, and include issues such as the application of statutes of limitations, notice requirements, laches, and estoppel. Such procedural questions do not present any legal challenge to the arbitrator’s underlying power and are the types of questions that the parties would likely expect the arbitrator to determine.
The court found that the preclusive effect of a prior judgment is a “procedural question” for the arbitrator. Similar to laches and estoppel, preclusion is an affirmative defense to the underlying dispute and does not implicate the arbitrator’s power, unlike questions related to the existence or scope of an arbitration agreement. Constellium “highlight[ed] older decisions” holding that courts “have the power to defend their judgments as res judicata, including the power to enjoin or stay subsequent arbitrations,” and argued that the court should exercise “plenary review” of an arbitrator’s preclusion decision rather than applying the typical highly deferential standards for review of an arbitration decision. But the Fourth Circuit found no legal basis for such a distinction in the Federal Arbitration Act or case law. Lacking any legal basis for treating such issues differently, the court declined Constellium’s invitation to expand its review of legal errors in arbitration awards beyond that authorized by the FAA, and affirmed the award against Constellium.
Constellium Rolled Products Ravenswood, LLC v. United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial & Service Workers International Union AFL-CIO/CLC, No. 20-1759 (4th Cir. Nov. 29, 2021).