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By a 4-3 majority, the Georgia Supreme Court held that a trial court properly decided the res judicata effect of a prior arbitration award in granting summary judgment and disposing of an otherwise arbitrable claim. The dissent viewed the res judicata effect of the prior arbitration award as “an issue of procedural arbitrability for the arbitrator to decide.”
In Bryan County v. Yates Paving & Grading Co., No. S06G0119, 2006 WL 3438073 (Ga. Nov. 30, 2006), Bryan County (the County) and Yates Paving & Grading (Yates) entered into a public works contract containing an arbitration clause. After being replaced on the project, Yates initiated arbitration and obtained an award for monetary damages that was confirmed by the trial court.
Three years later, Yates filed another demand for arbitration under the contract. The County filed a motion for summary judgment with the trial court, arguing that the doctrine of res judicata barred the demand for arbitration.
The trial court granted the County’s motion for summary judgment and denied Yates’ motion to compel arbitration. In reversing the trial court, the court of appeals determined that the arbitrator, not the court, should have decided the effect of res judicata.
The Georgia Supreme Court (the Court) granted certiorari, and a 4-3 majority held that the trial court “properly fulfilled its gatekeeping role” in deciding that res judicata barred Yates’ demand for arbitration. In reaching this holding, the Court reasoned that the Georgia Arbitration Code (GAC) does not preclude a trial court “from considering certain procedural mechanisms that may eliminate substantive claims from consideration by an arbitrator, even though such mechanisms would effectively dispose of the underlying claims on the merits.”
In the dissent’s view, the majority “fail[ed] to explain how courts, with their heavy caseloads and formal evidentiary requirements, are better able than arbitrators to quickly decide issues of res judicata.” The dissent also observed that the GAC expressly precludes a court from considering whether a claim is “tenable” when ruling on a motion to compel arbitration.
As the dissent noted, the Court’s interpretation of the GAC is at odds with the Supreme Court’s interpretation of the Federal Arbitration Act (FAA) in Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002), which established the rule that “‘procedural’ questions which grow out of the dispute and bear on its final disposition are presumptively not for the judge, but for an arbitrator, to decide.” In O’Keefe Architects, Inc. v. CED Construction Partners, Ltd., No. SC05-1417, 2006 WL 2971783 (Fla. Oct. 19, 2006), the Florida Supreme Court relied on Howsam in holding that the statute of limitations raised a procedural question for the arbitrator, rather than a question of arbitrability for the court.
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