According to a federal bankruptcy court in Washington State, an arbitration award which is not reduced to a judgment under Washington statute has no collateral estoppel effect in bankruptcy court proceedings.

In In re Erickson, No. 05-17598, 2008 WL 423415 (Bankr. W.D. Wash. Feb. 13, 2008), Erickson had been employed as a tool repair technician by Swift. After allegedly discovering that Erickson had been diverting customers from Swift, Swift brought suit against Erickson for violations of a covenant not to compete. The matter was referred to arbitration by the trial court. The arbitrator entered an award in favor of Swift. Erickson did not appear at the arbitration proceeding, but instead filed for bankruptcy.

Later, as part of Erickson's bankruptcy proceedings, Swift sought to recover on the prior award. Swift maintained that it was entitled to the entire amount of the award because the award had res judicata or collateral estoppel effect as would any judgment entered by a state court.

The Bankruptcy Court acknowledged dicta in Dougherty v. Nationwide Ins. Co., 795 P.2d 166, 168 (Wash. Ct. App. 1990), which suggested that an arbitration award is akin to and has the same effect as a final judgment entered by a Washington state court. But, it instead adopted, without further comment, the reasoning in Channel v. Channel, 810 P.2d 67, 69 (Wash. Ct. App. 1991), that an arbitration award not reduced to judgment does not have collateral estoppel effect.

The Channel court had reached the conclusion that arbitration awards were not equivalent to a final court judgment "because Washington's statutory scheme for arbitration, Rev. Code. Wash. § 7.04.010 et seq., provides a rather elaborate process for the confirmation, vacation, correction or modification of an arbitration award in court…." From the plain reading of the statutes, it was clear to the Channel court that "it would have been unnecessary to provide a process to reduce the award to judgment" had the Legislature considered an award equivalent to a judgment. The Channel court instead considered an unreduced award "more akin to a jury verdict or a trial court's memorandum opinion or oral decision," not a judgment.