Cal Sierra Development v. George Reed, Inc.

Filed 8/22/17
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
THIRD APPELLATE DISTRICT
(Yuba)
----
CAL SIERRA DEVELOPMENT, INC., C080397
Plaintiff and Appellant, (Super. Ct. No.
CVCV110000630)
v.
GEORGE REED, INC., et al.,
Defendants and Respondents;
WESTERN AGGREGATES LLC,
Cross-defendant and Respondent.
APPEAL from a judgment of the Superior Court of Yuba County, Stephen W.
Berrier, Judge. Affirmed.
Radoslovich Parker Turner, Frank M. Radoslovich, Port J. Parker, Joseph F. Klatt
and Myles G. Taylor for Plaintiff and Appellant.
Stoel Rives, Ryan C. Wood and Bao M. Vu for Defendants and Respondents.
Jeffer Mangels Butler & Mitchell, Joseph N. Demko, Kerry Shapiro and
Matthew J. Sanders for Cross-defendant and Respondent.
1
This case arose from competing claims to a portion of the Yuba Goldfields. At
issue is whether an arbitration award resolving a dispute between plaintiff Cal Sierra
Development, Inc. (Cal Sierra), and Western Aggregates, Inc., serves as res judicata to
bar Cal Sierra’s lawsuit against Western Aggregates’ licensee George Reed, Inc., and the
licensee’s parent Basic Resources, Inc. We conclude the answer is yes.
Plaintiff Cal Sierra’s predecessor and Western Aggregates entered into a Mutual
Operations Agreement (MOA) for the Yuba Goldfields. (In this context, an MOA is a
mechanism to allow two mining companies to operate on the same property.) Pursuant to
the MOA and accompanying deeds, Cal Sierra had the superior right to mine for precious
metals, subject to certain exceptions; Western Aggregates had the subordinate right to the
surface estate. Western Aggregates entered into a license agreement with George Reed,
Inc. (Reed), permitting Reed to locate a mobile asphalt plant on the portion of the Yuba
Goldfields known as the Deep Reserve. A dispute arose when Cal Sierra’s gold mining
dredge was on course to collide with the asphalt plant. Cal Sierra altered the dredge
course and demanded arbitration to settle the dispute. The arbitration panel found for Cal
Sierra on its claim of breach of contract, but found Cal Sierra failed to prove its tort
claims of trespass, nuisance, and conversion.
After the arbitration was complete, Cal Sierra proceeded with its lawsuit against
Reed and Basic Resources for trespass, intentional inference with contract, and negligent
interference with economic relations. After a trial on the affirmative defenses of res
judicata (claim preclusion) and collateral estoppel (issue preclusion), the court found res
judicata applied and entered judgment for defendants. Cal Sierra appeals, contending
defendants failed to establish the elements of res judicata and that the application of res
judicata in this case is inequitable.
FACTUAL AND PROCEDURAL BACKGROUND
The Yuba Goldfields is a 10,000-acre valley on both sides of the Yuba River near
Marysville. Cal Sierra mines for gold in the Yuba Goldfields using a dredge. The dredge
2
is part ship and part machine and the length of a football field; it moves along the surface
of the water at three to six miles an hour, digging up the material in front of it to a depth
of 100 feet. The material is sorted and tailings or aggregate are ejected behind the
dredge. The path of the dredge is planned well in advance.
In 1992, Cal Sierra’s predecessor entered into the MOA with Western Aggregates
governing operations on the Yuba Goldfields. Under the MOA and associated deeds, Cal
Sierra had the priority right to mine for precious metals and, subject to that priority right,
Western Aggregates had the rights to the surface. There were certain exceptions to Cal
Sierra’s priority mining rights.
In 2009, Western Aggregates entered into a license agreement with Reed, an
asphalt paving contractor. Pursuant to the license agreement, Reed installed an asphalt
plant on the property known as the Deep Reserve on a site selected by Western
Aggregates. The plant was mobile and not affixed to a solid foundation; it moved from
location to location at great expense. The plant processed aggregate provided by Western
Aggregates. The original license was temporary, only long enough for Reed to complete
its contract to resurface Highway 99. A second agreement extended the license. Both
license agreements contained a provision setting forth the relationship between Western
Aggregates and Reed, stating: “Nothing contained in this Agreement shall be deemed or
construed by the parties or by any third person to create the relationship of principal and
agent or of partnership or of joint venture or of any association between Licensor and
Licensee, and no provision contained in this Agreement or any act of the parties shall be
deemed to create any relationship between Licensor and Licensee, other than the
relationship of licensor and licensee.”
In late 2009, it became clear that the path of Cal Sierra’s dredge would eventually
encounter Reed’s asphalt plant. In a series of correspondence, the parties disputed
whether the site of the asphalt plant had been excluded from Cal Sierra’s priority mining
rights. The dispute was not resolved, but Cal Sierra altered the path of the dredge to
3
avoid the asphalt plant and demanded arbitration under the provisions of the MOA. Reed
wanted to participate in the arbitration but pulled out due to a scheduling conflict.
In the arbitration, Cal Sierra claimed “that its gold operation within the Yuba
County Goldfields [] has been severely damaged as a result of the unauthorized presence
of a George Reed, Inc. [] asphalt plant upon an area (rich with provable gold reserves)
where Cal Sierra has predominant rights to mine.” Cal Sierra sought damages under
theories of breach of contract, trespass, nuisance, and conversion.
The scope of the arbitration was limited to “the parties’ respective rights and
obligations related to the current location of the [Reed] asphalt plant.” The arbitration
was conducted in two phases, merits and attorney fees. Due to time constraints, the
arbitration panel did not produce a decision on the first phase, only a “check-the-box”
form, similar to a special verdict. The three-member panel, with one dissent, found for
Cal Sierra on breach of contract and awarded $6,209,781 in lost profits and $644,052 in
mitigation costs (related to changing the dredge course). The panel found Cal Sierra had
not proven trespass, nuisance, or conversion. In the second phase of the arbitration, the
panel awarded Cal Sierra $991,119 in attorney fees and costs. Western Aggregates
promptly paid the award.
Shortly after the demand for arbitration, Cal Sierra filed a complaint against Reed,
its parent Basic Resources, and Western Aggregates’ parent Eagle Materials, Inc. An
amended complaint added Western Aggregates as a party. The trial court granted the
motion to dismiss Western Aggregates and its parent on the basis of res judicata.
Cal Sierra filed a second amended complaint, the operative pleading at issue here,
against Reed and Basic Resources, with claims for trespass, intentional interference with
contract, and negligent interference with economic relations. The second amended
complaint alleged that Reed was the alter ego of Basic Resources. It further alleged that
at least one executive of Basic Resources knew of and acknowledged the superior mining
4
rights of Cal Sierra to the Deep Reserve. Notwithstanding this knowledge, Reed installed
a portable asphalt plant within the Deep Reserve and refused to remove it.
Reed and Basic Resources filed a cross-complaint against Western Aggregates for
breach of contract, negligent misrepresentation, and implied equitable indemnity. The
cross-complaint alleged that Reed had inquired whether Cal Sierra’s mining operations
would interfere with the asphalt plant; Western Aggregates said no and that Reed “had
nothing to worry about.”
The trial court bifurcated the trial and in the first phase addressed defendants’
affirmative defenses of res judicata and collateral estoppel. Over Cal Sierra’s objection,
Western Aggregates participated in the trial. Cal Sierra introduced evidence that Western
Aggregates and Reed were separate companies. Western Aggregates did not receive
revenue from the asphalt plant and did not provide insurance, workers compensation
insurance, or trucking services for Reed; the two companies had separate entrances to the
property.1 Western Aggregates had no say over Reed’s contracts and its personnel never
operated the asphalt plant. Reed did not pay any portion of the arbitration award already
paid by Western Aggregates.
The trial court ruled that res judicata (claim preclusion) applied to bar the action.
It found the same claim (trespass) was involved in both the arbitration and the lawsuit;
thus the final arbitration award served as a final judgment. The court found the same
party or privity requirement (which we discuss post) applied only to the party against
whom the defense of res judicata was asserted--in this case, Cal Sierra. As to the
interference claims, which had not been raised in the arbitration, the court found the case
involved derivative liability based on a single act--locating the asphalt plant--which had
been addressed in the arbitration.
1 The separate entrances were necessary because Western Aggregates was a union
company and Reed was not.
5
After the trial had ended, the California Supreme Court clarified that for the claim
preclusion aspect of res judicata, a complete identity of parties was required; the
requirement of the same party or its privy applies to both the party asserting the defense
and the party against whom the defense is asserted. (DKN Holdings LLC v. Faerber
(2015) 61 Cal.4th 813, 824-825 (DKN Holdings).) Based on this clarification in the law,
Cal Sierra moved for judgment notwithstanding the verdict, a new trial, and to vacate the
judgment, contending privity had not been established. The trial court found the license
agreement between Western Aggregates and Reed was sufficient to establish privity. The
court reiterated that the case was one of derivative liability.
Cal Sierra appealed. Both Western Aggregates and Reed filed respondents’ briefs.
DISCUSSION
I
Res Judicata
“ ‘Res judicata’ describes the preclusive effect of a final judgment on the merits.
Res judicata, or claim preclusion, prevents relitigation of the same cause of action in a
second suit between the same parties or parties in privity with them. Collateral estoppel,
or issue preclusion, ‘precludes relitigation of issues argued and decided in prior
proceedings.’ [Citation.] Under the doctrine of res judicata, if a plaintiff prevails in an
action, the cause is merged into the judgment and may not be asserted in a subsequent
lawsuit; a judgment for the defendant serves as a bar to further litigation of the same
cause of action.” (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal.4th 888, 896-897.)
Courts have at times used “res judicata” as an umbrella term, encompassing both
the primary aspect of claim preclusion and the secondary aspect of issue preclusion. We
will follow the current practice to use the term “claim preclusion” to describe the primary
aspect of the res judicata doctrine and the term “issue preclusion” to denote collateral
estoppel. (See DKN Holdings, supra, 61 Cal.4th at pp. 823-824.) The two types of
preclusion have different requirements. (Id. at p. 824.)
6
“Claim preclusion ‘prevents relitigation of the same cause of action in a second
suit between the same parties or parties in privity with them.’ [Citation.] Claim
preclusion arises if a second suit involves (1) the same cause of action (2) between the
same parties (3) after a final judgment on the merits in the first suit. [Citations.] If claim
preclusion is established, it operates to bar relitigation of the claim altogether. [¶] Issue
preclusion prohibits the relitigation of issues argued and decided in a previous case, even
if the second suit raises different causes of action. [Citation.] Under issue preclusion, the
prior judgment conclusively resolves an issue actually litigated and determined in the first
action. [Citation.] There is a limit to the reach of issue preclusion, however. In
accordance with due process, it can be asserted only against a party to the first lawsuit, or
one in privity with a party. [Citation.]” (DKN Holdings, supra, 61 Cal.4th at p. 824.)
Here we are concerned only with claim preclusion; we next examine whether
defendants established each of the requirements to assert it as a bar to the instant action.
II
Privity
A. The Law
“Since [claim preclusion] bars a subsequent action on the same claim between, not
only parties to the first action, but also their privies, we must determine who qualifies as a
privy to a prior action. In Bernhard v. Bank of America (1942) 19 Cal.2d 807, Justice
Traynor stated: ‘Under the requirement of privity, only parties to the former judgment or
their privies may take advantage of or be bound by it. [Citation.] A party in this
connection is one who is “directly interested in the subject matter, and had a right to
make defense, or to control the proceeding, and to appeal from the judgment.”
[Citations.] A privy is one who, after rendition of the judgment, has acquired an interest
in the subject matter affected by the judgment through or under one of the parties, as by
7
inheritance, succession, or purchase. [Citations.]’ (Id. at p. 811.)”2 (Rice v. Crow (2000)
81 Cal.App.4th 725, 735.)
“[T]o maintain the stability of judgments, insure expeditious trials,” prevent
vexatious litigation, and “to serve the ends of justice,” courts are expanding the concept
of privity beyond the classical definition to relationships “sufficiently close to afford
application of the principle of preclusion.” (People v. One 1964 Chevrolet Corvette
Convertible (1969) 274 Cal.App.2d 720, 731.) “As applied to questions of preclusion,
privity requires the sharing of ‘an identity or community of interest,’ with ‘adequate
representation’ of that interest in the first suit, and circumstances such that the nonparty
‘should reasonably have expected to be bound’ by the first suit. [Citation.] A nonparty
alleged to be in privity must have an interest so similar to the party’s interest that the
party acted as the nonparty’s ‘ “ ‘virtual representative’ ” ’ in the first action. [Citation.]”
(DKN Holdings, supra, 61 Cal.4th at p. 826.)
“ ‘This requirement of identity of parties or privity is a requirement of due process
of law.’ [Citation.] ‘Due process requires that the nonparty have had an identity or
community of interest with, and adequate representation by, the losing party in the first
action. [Citations.] The circumstances must also have been such that the nonparty
should reasonably have expected to be bound by the prior adjudication. . . . [¶] A
nonparty should reasonably be expected to be bound if he had in reality contested the
prior action even if he did not make a formal appearance,’ for example, by controlling it.
[Citations.] Furthermore, privity appertains ‘against one who did not actually appear in
the prior action . . . where the unsuccessful party in the first action might fairly be treated
as acting in a representative capacity for a nonparty.’ [Citation.]” (Victa v. Merle
Norman Cosmetics, Inc. (1993) 19 Cal.App.4th 454, 464.) Because privity is a legal
2 Cal Sierra incorrectly quotes Rice’s definition of a party as the definition of a privy.
8
question involving due process, we review the trial court’s determination of privity de
novo. (Ibid.)
DKN Holdings explained that derivative liability establishes privity. “When a
defendant’s liability is entirely derivative from that of a party in an earlier action, claim
preclusion bars the second action because the second defendant stands in privity with the
earlier one. [Citations.] The nature of derivative liability so closely aligns the separate
defendants’ interests that they are treated as identical parties. [Citation.] Derivative
liability supporting preclusion has been found between a corporation and its employees
[citations], a general contractor and subcontractors [citation], an association of securities
dealers and member agents [citation], and among alleged coconspirators [citation].”
(DKN Holdings, supra, 61 Cal.4th at pp. 827-828.)
B. Analysis
Cal Sierra first contends there is no privity between Western Aggregates on the
one hand and Reed and Basic Resources on the other because the latter two corporations
are completely separate companies from Western Aggregates, as shown by the evidence
at trial. Cal Sierra next contends the license agreements expressly preclude a finding of
privity, because both agreements limited the relationship to that of licensor and licensee,
disclaiming any other relationship. Cal Sierra argues privity requires the power to bind
the other, such as principal and agent, and that power is missing in a licensor-licensee
relationship.
First, the licensor-licensee relationship does not preclude a finding of privity. The
parties have not cited to, and we have not found, any California case addressing privity
for purposes of claim preclusion between a licensee and a licensor.3 Federal courts have
3 Respondents cite to Kerr Land & Timber Co. v. Emerson (1965) 233 Cal.App.2d 200,
225, in which the court found a license established privity between the licensor and
9
indicated a licensor-licensee relationship may establish privity for purposes of claim
preclusion, although it does not as a matter of law. (See, e.g. Erbamont, Inc. v. Cetus
Corp. (D.Del. 1989) 720 F.Supp. 387, 394-395 [stating in dicta, that there is a “strong
possibility” that the relationship between licensor and licensee satisfies the definition of
privity]; Butterfield v. Oculus Contact Lens Co. (N.D.Ill. 1971) 332 F.Supp. 750, 762
[“There certainly can be factual situations in which a licensor and licensee may be in
privity but it does not follow that they always are”].)
That defendants Reed and its parent Basic Resources are separate companies from
Western Aggregates is not determinative of the issue of privity. “ ‘Privity’ as used in the
context of res judicata or collateral estoppel, does not embrace relationships between
persons or entities, but rather it deals with a person’s relationship to the subject matter of
the litigation. [Citation.]” (Manning v. South Carolina Dep’t of Highway & Public
Transp. (4th Cir. 1990) 914 F.2d 44, 48, italics added.) The subject matter of the
litigation here was the same as that at the center of the arbitration dispute: the placement
of the asphalt plant and whether it infringed on Cal Sierra’s mining rights. As to this
issue, Western Aggregates and Reed (and Basic Resources) had an identical interest; all
were adversely and similarly impacted by the propriety (or impropriety) of the plant’s
location.4 Reed’s right to occupy the property was solely dependent on its license
agreement; Reed acted with Western Aggregates’ consent and Western Aggregates
selected the exact location. Moreover, Reed did consider the arbitration binding on
establishing the plant’s permissible location. Edward Berlier, Reed’s vice-president and
licensee. That case, however, did not involve claim preclusion or any aspect of res
judicata.
4 The identity of interest between Western Aggregates and Reed in the dispute with Cal
Sierra and Western Aggregates’ virtual representation of Reed in the arbitration is further
illustrated by the fact that Western Aggregates filed a brief in support of Reed’s interests
in this appeal and asserts nearly identical arguments.
10
general manager, testified that Reed would have moved the plant if the arbitration panel
had ordered it.
The trial court found this case involved derivative liability and DKN Holdings
teaches that derivative liability is a form of privity. (DKN Holdings, supra, 61 Cal.4th at
pp. 827-828.) Cal Sierra challenges that finding, contending derivative liability
establishes privity for claim preclusion only where the first action was against the direct
actor. Cal Sierra contends defendants’ liability is not entirely derivative of Western
Aggregates’ liability; rather, Reed and Basic Resources independently infringed on Cal
Sierra’s property rights by installing the asphalt plant, refusing to move it, and causing
materials incident to the product of asphalt to occupy the area.
The cases cited by DKN Holdings in its discussion of derivative liability do not
support Cal Sierra’s position that claim preclusion applies only where the first action is
against the direct actor. For example, in Lippert v. Bailey (1966) 241 Cal.App.2d 376,
382, the plaintiff was precluded from suing insurance agents--the actual actors--after he
settled with the insurance company for the same loss. In Thibodeau v. Crum (1992) 4
Cal.App.4th 749, 757, an arbitration award against the general contractor precluded a
lawsuit against the subcontractors for their work. Here, Reed’s liability (and that of its
parent) is derivative of that of Western Aggregates because Reed acted only pursuant to
the license agreement with Western Aggregates in installing the asphalt plant. Indeed, it
was Western Aggregates who selected the site for the plant.
To the extent Cal Sierra is arguing that Reed committed independent torts outside
the scope of the license agreement such that its liability is not derivative, we next
consider that argument in the context of the requirement that the claims be identical.
11
II
Identity of Claim
A. Primary Right
“Whenever a judgment in one action is raised as a bar to a later action under
[claim preclusion], the key issue is whether the same cause of action is involved in both
suits. California law approaches the issue by focusing on the ‘primary right’ at stake: if
two actions involve the same injury to the plaintiff and the same wrong by the defendant
then the same primary right is at stake even if in the second suit the plaintiff pleads
different theories of recovery, seeks different forms of relief and/or adds new facts
supporting recovery.” (Eichman v. Fotomat Corp. (1983) 147 Cal.App.3d 1170, 1174.)
Under the “primary rights” theory adhered to in California, there is only a single
cause of action for the invasion of one primary right and the harm suffered is the
significant factor. (Agarwal v. Johnson (1979) 25 Cal.3d 932, 954, disapproved on
another point by White v. Ultramar, Inc. (1999) 21 Cal.4th 563, 574, fn. 4.) A primary
right is the right to be free of a particular injury. (See Slater v. Blackwood (1975) 15
Cal.3d 791, 795.) “The cause of action is the right to obtain redress for a harm suffered,
regardless of the specific remedy sought or the legal theory (common law or statutory)
advanced.” (Boeken v. Philip Morris USA, Inc. (2010) 48 Cal.4th 788, 798.)
The arbitration panel found that Cal Sierra’s claims of trespass and nuisance were
not proven. Nuisance and trespass address the same legal wrong and injury--interference
with unimpaired ownership and undisturbed enjoyment of property--and thus were
simply alternative legal theories for the invasion of a single primary right. (Rancho
Viejo v. Tres Amigos Viejos (2002) 100 Cal.App.4th 550, 562, fn. 6.) Here, the primary
right--adjudicated in the arbitration by the panel’s finding that trespass and nuisance were
not proved--was Cal Sierra’s superior right to mine in the Deep Reserve without
interference and Western Aggregates’ duty not to interfere with that right.
12
B. Trespass
Cal Sierra contends a different primary right is involved in this case. “Cal Sierra
had the right to not have its contractual rights or publically recorded property interests in
the Deep Reserve interfered with or wrongly occupied by [Reed and Basic Resources].”
Cal Sierra contends more “complex mutual duties” were involved in the arbitration, and
defendants had “separate duties” not to interfere with Cal Sierra’s contractual and
property rights. Cal Sierra contends Reed had a separate duty not to interfere with Cal
Sierra’s mining rights because it was a stranger to the MOA. Our affirmance of the trial
court’s finding of privity refutes Cal Sierra’s argument that Reed was a stranger to the
relationship between Cal Sierra and Western Aggregates. Reed’s alleged interference by
installing and operating the asphalt plant was undertaken pursuant to a license agreement
with Western Aggregates. This installation and operation of the asphalt plant was the
same interference alleged in Cal Sierra’s trespass claim against Western Aggregates, a
claim rejected by the arbitration panel. Cal Sierra has failed to show how its rights or
defendants’ duties differed from those resolved in the arbitration.
Cal Sierra next contends a different primary right is involved because defendants’
trespass was a continuing trespass that continued after the arbitration. A continuing
trespass, however, requires an initial trespass. “The ‘continuing nuisance’ or ‘continuing
trespass’ theory states that the injury caused by an abatable nuisance or trespass takes
place at every continuation of the nuisance or trespass, each of which gives rise to a
separate claim for damages.” (Chevron U.S.A. Inc. v. Superior Court (1994) 44
Cal.App.4th 1009, 1017.) Because Cal Sierra cannot establish the necessary predicate of
an initial trespass, its claim of continuing trespass is also barred.
Further, the issue of a continuing trespass was raised and resolved in the
arbitration. In its demand for arbitration, Cal Sierra described the nature of the dispute, in
part, as Western Aggregates’ “permitting and/or continuing a trespass on [Cal Sierra’s]
subsurface rights.” An attorney who represented Western Aggregates at the arbitration
13
testified Cal Sierra made a claim in the arbitration for continuing trespass because the
asphalt plant was still in the disputed location.
C. Interference Claims
The second amended complaint alleged Reed and Basic Resources knew of Cal
Sierra’s contractual relationship with Western Aggregates relating to Cal Sierra’s
precious metal rights, and that defendants intended to disrupt Western Aggregates’ full
performance of its contractual obligations by inducing Western Aggregates to
intentionally breach the agreement by allowing the asphalt plant. The complaint further
alleged Reed and Basic Resources knew or should have known about Cal Sierra’s
superior right to mine within the Deep Reserve before installing the asphalt plant and
placing asphalt waste within the Deep Reserve. Defendants failed to act with reasonable
care by failing to inspect and analyze Cal Sierra’s recorded precious metal rights and
refusing to remove the asphalt plant and incidental materials, substantially disrupting Cal
Sierra’s contractual relationship with Western Aggregates. We refer to these claims as
the interference claims.
Cal Sierra contends these interference claims are different causes of action than
those resolved in the arbitration. Cal Sierra argues they were not and could not have been
presented to the arbitration panel because Western Aggregates could not interfere with its
own contract. (Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th
503, 514.)
Respondents contend the interference claims involve the same primary right as the
trespass claim. The arbitration resolved whether Cal Sierra’s mining rights were
infringed by the location of the asphalt plant. The arbitration panel concluded Western
Aggregates did not trespass by allowing Reed to install and operate the asphalt plant.
The interference claims were premised on Reed’s purported trespassing by installing and
operating the asphalt plant on that site. Cal Sierra’s same primary right to enjoy its
superior mining rights was at stake in both the trespass and the interference claims. If
14
Western Aggregates was not liable for trespass by allowing Reed to install and operate
the asphalt mine, then Reed could not be liable--even under another theory--for the same
actions: installing and operating the asphalt plant. “The plaintiff’s primary right is the
right to be free from a particular injury, regardless of the legal theory on which liability
for the injury is based.” (Federation of Hillside and Canyon Assns. v. City of Los
Angeles (2004) 126 Cal.App.4th 1180, 1202.) The interference claims were different
theories of recovery, but they were based on the same primary right.
IV
Final Judgment
The third requirement of claim preclusion is a final judgment on the merits in the
first action. (DKN Holdings, supra, 61 Cal.4th at p. 824.) A judgment confirming the
arbitration award constitutes a final judgment on the merits. (Sartor v. Superior Court
(1982) 136 Cal.App.3d 322, 328.) Cal Sierra contends defendants failed to establish this
requirement because there was no final judgment on the arbitration award, only an order
confirming it.5
“For purposes of res judicata, even an unconfirmed arbitral award is the equivalent
to a final judgment.” (Bucur v. Ahmad (2016) 244 Cal.App.4th 175, 186.) Cal Sierra
dismisses Bucur and argues that a non-party to the arbitration can assert claim preclusion
only on an arbitration award that has been reduced to a judgment.
Cal Sierra relies on Kahn v. Pelissetti (1968) 260 Cal.App.2d 832, which declined
to treat an unconfirmed arbitration award as a final judgment for purposes of collateral
estoppel. Kahn was a passenger on a city bus injured in an accident with Pelissetti, an
5 Judgment should have been entered on the order. “An order confirming an award is to
be reduced to a judgment.” (Rubin v. Western Mutual Ins. Co. (1999) 71 Cal.App.4th
1539, 1545.) Code of Civil Procedure section 1287.4 provides: “If an award is
confirmed, judgment shall be entered in conformity therewith.”
15
uninsured motorist. Kahn filed a claim against her own automobile liability insurance
policy under the uninsured motorist provisions. Her insurer disputed her claim, took the
matter to arbitration, and prevailed. The insurer did not seek judicial confirmation of the
award. Kahn then sued Pelissetti. The trial court upheld Pelissetti’s use of the
unconfirmed arbitration award as issue preclusion. The appellate court disagreed,
“holding that an uninsured motorist cannot benefit from an unconfirmed award in favor
of the injured person’s insurance carrier.”6 (Id. at p. 833.)
The Kahn court framed the issue as “whether an unconfirmed award should be
treated as though it were a final judgment.” (Kahn v. Pelissetti, supra, 260 Cal.App.2d at
p. 834.) Noting that an unconfirmed arbitration award has the same force and effect as a
contract between the parties to the litigation, the court found Pelissetti was not a party to
such contract, nor was he a third party beneficiary. (Id. at pp. 834-835.)
In Thibodeau v. Crum, supra, 4 Cal.App.4th 749, the appellate court distinguished
Kahn and held an unconfirmed arbitration award could serve as the basis for issue
preclusion. In Thibodeau, a homeowner arbitrated numerous construction deficiencies
with the general contractor, failed to confirm the award, and then sued the subcontractor
for cracks in the driveway. (Id. at pp. 753-754.) The Thibodeau court found Kahn was
not controlling on the issue of whether issue preclusion could apply where the arbitration
award had not been confirmed. “[T]he Kahn court did not hold that an unconfirmed
arbitration award can never have a res judicata effect but only that it would not have such
an effect under the particular circumstances of that case. We conclude that, under the
particular circumstances of this case, the unconfirmed arbitration award should have a res
judicata effect.” (Id. at p. 761.) The circumstances were different because the general
6 The Legislature subsequently codified this holding in Insurance Code section 11580.5.
16
construction contract anticipated the involvement of third parties and the subcontract was
subject to the general construction contract. (Ibid.)
The difference between Kahn and Thibodeau is that in Thibodeau the party
asserting the unconfirmed arbitration as issue preclusion was in privity, based on
derivative liability, with a party to the arbitration. (DKN Holdings, supra, 61 Cal.4th at
p. 828.) Here, as we have explained, Reed was in privity with Western Aggregates, a
party to the arbitration. Just as the subcontractor could assert the unconfirmed arbitration
award as issue preclusion in Thibodeau, Reed can assert the confirmed arbitration award
as claim preclusion, even though the award was not reduced to a judgment.
Further, Western Aggregates has satisfied the arbitration award. By accepting the
benefits of the award, Cal Sierra is precluded from challenging its finality. (See
Trollope v. Jeffries (1976) 55 Cal.App.3d 816, 824 [“incongruous to hold that a party can
accept the award and the payment thereunder and then attack the award on appeal”].)
The trial court did not err in finding all the requirements of claim preclusion were
met. Because we determine the trial court correctly applied claim preclusion, we need
not address the alternate argument that the judgment can be affirmed by the application of
issue preclusion.
V
Equities of Applying Claim Preclusion
Cal Sierra contends that claim preclusion is an equitable doctrine and “it will not
be applied so rigidly as to defeat the ends of justice or important considerations of
policy.” (Greenfield v. Mather (1948) 32 Cal.2d 23, 35.) Cal Sierra argues it is
inequitable to apply claim preclusion here because it never had the opportunity to litigate
its claims against Reed and Basic Resources. Cal Sierra could not bring them into the
arbitration, so this lawsuit was the only vehicle to obtain recovery from them.
17
While Greenfield has not been overruled, our Supreme Court has considered it of
“doubtful validity” and has noted “it has been severely criticized.” (Slater v. Blackwood,
supra, 15 Cal.3d at p. 796.)
In any event, we do not find the application of claim preclusion in this case to be
inequitable. The issue of whether the installation and operation of Reed’s asphalt plant
constituted a trespass upon Cal Sierra’s mining rights was arbitrated. There, Cal Sierra
sought to recover the benefits obtained by Reed due to the alleged trespass. Thus, Cal
Sierra had the opportunity and the incentive to fully litigate its claims against Reed in the
arbitration. Cal Sierra insists the arbitration panel did not decide the trespass claim;
however, as we have discussed, this assertion is incorrect. The arbitration award states
that trespass, conversion, and private nuisance “were not proven.”
DISPOSITION
The judgment is affirmed. Respondents shall recover their costs on appeal. (Cal.
Rules of Court, rule 8.278(a).)
/s/
Duarte, J.
We concur:
/s/
Robie, Acting P. J.
/s/
Butz, J.
18