This past week, Zachary D. Schorr, of Schorr Law, APC, had an article published in the California Real Property Journal of the State Bar of California –Arbitration: Determining the Collateral Estoppel Effect of a Private Arbitration Award on Non-Parties in Subsequent Litigation
California is one of the few jurisdictions that does not recognize the collateral estoppel effect of a private arbitration award on non-parties to the arbitration in subsequent litigation. Mr. Schorr’s article focuses on the nuances of the res judicata and collateral estoppel effect of private arbitration awards on subsequent litigation.
The importance of this issue is highlighted in many types of form real estate contracts which require arbitration. Often times, these arbitration provisions do not include all parties to the transaction. For example, in a purchase and sale contract which requires arbitration of disputes, the buyer and the seller are the only parties to the contract and thus they are the only parties subject to its arbitration provision. As a result, if a dispute arises involving the buyer/seller and one of the real estate brokers or agents then it is likely that part of the dispute (the buyer – seller dispute) will be resolved via arbitration while the remaining part of the dispute (the dispute with the broker) will be resolved in subsequent litigation. From this article we learn that the result in the arbitration has little effect on the general litigation.