Arbitration, Choice Of Law, Claim Preclusion: 9th Circuit Rules That In Diversity Case, State Law Governs Claim Preclusion As Applied To Confirmed Arbitration Award

An Issue Of First Impression.

    In NTCH-WA, Inc. v. ZTE Corporation, Inc. v. ZTE Corporation, No. 17-35833 (9th Cir.   4/25/19) (Gould, Paez, Pregerson), the Court of Appeals held that an arbitration award and its confirmation by a district court in Florida, barred plaintiff NTCH-WA from pursuing claims against ZTE Corp. under the doctrine of claim preclusion. ZTE Corp.'s subsidiary, ZTE USA, had previously obtained an adverse arbitration award against NTCH-WA and the Florida district court had confirmed the award. Applying principles of claim preclusion taken from Florida state law, the district court concluded that NTCH-WA, Inc., was barred from pursuing the same claims, seeking the same remedies, based on the same evidence, against the parent corporation. The 9th Circuit affirmed.

     Curiously, the issue was one of first impression in the 9th Circuit. The application of state law preclusion principles in a diversity case, where the district court has confirmed the arbitration award, "properly mirrors the rule that applies when a federal court is asked to give preclusive effect to an arbitration award that has been confirmed by a state court." Also, the rule serves to avoid forum shopping between federal and state courts.