Bryan County v. Yates Paving & Grading Co.

BRYAN COUNTY v. YATES PAVING & GRADING COMPANY, INC. Et Al.

638 S.E.2d 302, 281 Ga. 361, 2006 Fulton County D. Rep. 3702, 2006 Ga. LEXIS 1033 • 2006-11-30

Citation638 S.E.2d 302, 281 Ga. 361, 2006 Fulton County D. Rep. 3702, 2006 Ga. LEXIS 1033

Date Filed2006-11-30

DocketS06G0119

JudgeMelton, Sears, Hunstein, Benham

Cited18 times

StatusPublished

Attorneys

McCorkle, Pedigo & Johnson, David H. Johnson, Crown, Rountree & Stewart, Charles H. Brown, for appellant., Leonard W. Childs, Jr., Brannen, Searcy & Smith, David R. Smith, Joseph Y. Rahimi II, for appellees.

Full Opinion (html_with_citations)

Melton, Justice.

We granted certiorari in this case to determine whether the Court of Appeals erred by holding that an arbitrator, rather than a court, should determine the res judicata effect of a previous arbitration on a subsequent arbitration. Yates Paving & Grading Co. v. Bryan County, 275 Ga. App. 347 (620 SE2d 606) (2005). Because the application of res judicata involves a matter that the parties did not expressly intend to be resolved only by an arbitrator, we reverse the Court of Appeals.

*362The underlying dispute in this case arises from a public works contract between Bryan County and Yates Paving & Grading Company, Inc. (‘Yates”). Pursuant to the contract, Yates agreed to construct and make improvements to public roads within a Bryan County subdivision. The County thereafter ordered Yates to halt construction and hired a third party to complete the project. Yates filed a demand for arbitration and, after a full hearing, won an award of monetary damages, which was confirmed by the trial court and affirmed on appeal.1 See OCGA § 9-9-12; Bryan County v. Yates Paving & Grading Co., 251 Ga. App. 441 (554 SE2d 584) (2001).

Three years later, Yates filed another demand for arbitration under the contract, claiming the County’s wrongful conduct rendered Yates unable to bid on other government contracts. Bryan County answered and asserted in a cross-claim that the new claims for damages were barred by the doctrine of res judicata because they were not raised in the first arbitration. Bryan County filed a motion for summary judgment on its claim that res judicata barred the demand for arbitration and, following a hearing, the trial court granted summary judgment to Bryan County and denied Yates’ motion to compel arbitration. The Court of Appeals reversed, holding that because the res judicata effect of the first arbitration award fell within the scope of the parties’ agreement to arbitrate, the arbitrator, not the court, should have decided whether the arbitration was barred by res judicata. Yates Paving & Grading Co. v. Bryan County, supra, 275 Ga. App. 347.

Despite the existence of a valid arbitration agreement, a trial court must determine whether the claims covered by the agreement are actually arbitrable before submitting them to an arbitrator. AT&T Technologies v. Communications Workers of America, 475 U. S. 643, 649 (II) (106 SC 1415, 89 LE2d 648) (1986) (“[T]he question of arbitrability... is undeniably an issue for judicial determination ... [u]nless the parties clearly and unmistakably provide otherwise.”). In fulfilling this gatekeeping duty, the trial court “shall not consider whether the claim with respect to which arbitration is sought is tenable nor otherwise pass upon the merits of the dispute.” OCGA § 9-9-4 (d). This does not mean, however, that a trial court is prohibited 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. See OCGA§ 9-9-5 (a) (trial court has discretion *363to determine whether “a claim sought to be arbitrated would be barred by limitation of time had the claim sought to be arbitrated been asserted in court.”).

Res judicata acts as a procedural bar to claims that were raised or could have been raised in a prior action. Walker v. Penn, 271 Ga. 609 (1) (523 SE2d 325) (1999); OCGA § 9-12-40. As a procedural bar, res judicata operates to eliminate substantive claims, but it does not do so by reaching the merits of those claims. See OCGA § 9-12-40. Indeed, the merits have already been or should have been resolved in the prior lawsuit. Thus, the trial court here was not passing on the merits of appellee’s underlying arbitration claims by applying res judicata. It was merely fulfilling its gatekeeping role to determine whether any arbitrable claim had been presented in the current action. Where the claims presented are barred by res judicata, no arbitrable claims remain to be submitted to an arbitrator.

The language in the arbitration agreement providing that “[a] 11 claims, disputes and other matters in question between [the parties] arising out of, or relating to the Contract Documents . . . will be decided by arbitration,” does not indicate that the parties expressly intended only for an arbitrator to resolve the issue of res judicata, which is a principle of law that does not arise out of the contract documents. See Waterfront Marine Constr. v. North End 49ers Sand-bridge Bulkhead Groups A, B and C, 251 Va. 417, 425-426 (I) (B) (468 SE2d 894) (1996). Res judicata is not a claim “arising out of or relating to” the parties’ contractual arrangement, but a procedural bar to claims that have already arisen and been resolved by prior arbitration. Id. at 432-433 (II) (B) (1). As noted above, when res judicata applies to procedurally bar a claim, the trial court does not even reach the merits or lack thereof of the substantive claim that a party has attempted to raise. Because arbitration has already taken place on the issues that were previously raised, there is nothing left for an arbitrator to resolve relating to those same issues.2

Moreover, the purpose of arbitration is to provide a swift and inexpensive means for parties to resolve their disputes. See Greene v. *364Hundley, 266 Ga. 592, 597 (3) (468 SE2d 350) (1996). That goal was accomplished once the parties took their claims to arbitration the first time. The arbitration agreement itself even emphasizes that “[t]he award rendered by the arbitrators will be final.” Extending the process further by requiring that the trial court send the procedural matter of res judicata to arbitration in this case, absent the parties’ express agreement that the matter be submitted to arbitration, defeats that purpose. The trial court properly fulfilled its gatekeeping role, and further served the overall purpose of Georgia’s Arbitration Code, in considering whether appellee’s claims were procedurally barred by res judicata without referring the matter to an arbitrator. We therefore reverse the judgment of the Court of Appeals requiring that the matter of res judicata be resolved by additional arbitration in this case.3

Judgment reversed.

All the Justices concur, except Sears, C. J., Hunstein, P. J., and Benham, J., who dissent.

In a second appeal, the Court of Appeals reversed the trial court, finding that Yates was entitled to further arbitration to determine attorney fees and costs resulting from the County’s appeal. Yates Paving & Grading Co. v. Bryan County, 265 Ga. App. 578 (594 SE2d 756) (2004).

Howsam v. Dean Witter Reynolds, Inc., 537 U. S. 79 (123 SC 588, 154 LE2d 491) (2002), does not compel a different result. Howsam deals specifically with a six-year time bar under rules promulgated by the National Association of Securities Dealers (NASD). The parties in Howsam expressly agreed to have their dispute arbitrated before the NASD, and the United States Supreme Court accordingly held that “the NASD arbitrators, comparatively more expert about the meaning of their own rule [than the courts], [were] comparatively better able to interpret and to apply it.” Id. at 85 (II). Here, there is no presumption that an arbitrator is in a better position than a court to apply a legal doctrine such as res judicata; the parties did not expressly reserve the issue for arbitration; and there is no presumption under Georgia law that the application of a procedural bar such as res judicata is a matter to be determined exclusively by an arbitrator. See, e.g., OCGA § 9-9-5 (a).

The dissent asserts that this Court has “ignore [d] the arbitration scheme established by the legislature, the policy favoring arbitration of disputes, and the language of the parties’ arbitration agreement [in holding that] a claim of res judicata raised in defense to a dispute under the contract is not an arbitrable issue.” This assertion is untrue. As has been addressed in our opinion, the legislature has made clear that only those claims covered by an arbitration agreement are arbitrable; the policy of Georgia’s Arbitration Code is not served, but undermined, by forcing trial courts to submit procedurally barred matters to arbitration that fall outside the scope of the parties’ agreement; and res judicata is not an arbitrable issue under the language of the agreement in this case. We do not hold, nor do we imply in our opinion, that res judicata can never be an issue for arbitration.