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A California Appellate Court has held that res judicata does not apply to claims that were not arbitrated.
In Desai v. J. Dreyfuss & Associates, No. B182667, 2006 WL 3438606 (Cal. App.2d Nov. 30, 2006), Narendra and Bela Desai employed Dreyfuss to rebuild the structures on their property after a 1994 earthquake. The Desais brought suit against Dreyfuss for a variety of claims associated with the construction project. Dreyfuss moved to compel arbitration and stay litigation. Its motion was granted.
The arbitrator issued an award in favor of Dreyfuss. However, the arbitrator specifically excluded some of the Desai’s claims from his consideration. A court date was set to proceed with the claims not decided in arbitration. Dreyfuss moved for summary judgment based on res judicata and collateral estoppel. The trial court granted Dreyfuss’s motion. It found that the Desai’s claims were barred by res judicata because all of the claims had been considered. Upon Dreyfuss and other involved parties seeking dismissal of their additional complaints, the trial court proceeded to dismiss the action in its entirety. The Desai’s appealed.
This Court disregarded Dreyfuss’ argument that the matter was barred by res judicata. The judgment resolved only Dreyfuss’ claim against the Desai’s. It did not resolve the Desai’s causes of action against Dreyfuss. The claims to be considered by the court were not considered in the arbitration proceeding. Therefore, they were not barred by res judicata or collateral estoppel.
However, the Court further noted that the Desai’s did not meet their entire burden of showing that the trial court erred. In addition to considerations of the trial court’s err in applying res judicata, the Desai’s were required to demonstrate “that the arbitrator’s findings do not preclude establishment of their causes of action or provide Dreyfuss with a complete defense to the Desai’s causes of action.” As the Desai’s did not meet this burden, the Court upheld the judgment in favor of Dreyfuss.
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