NTCH-WA, Inc. V. ZTE Corp., No. 17-35833 (9th Cir. 2019)
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When a federal court sitting in diversity confirms an arbitration award, the preclusion law of the state where that court sits determines the preclusive effect of the award. Plaintiff previously arbitrated breach of contract and related claims against ZTE USA, a wholly-owned subsidiary of defendant ZTE Corp. ZTE Corp. was not a party to the arbitration. After the arbitrator denied plaintiff's claims, the district court confirmed the award under the Federal Arbitration Act (FAA) and the Eleventh Circuit affirmed.
In this case, the Ninth Circuit affirmed the district court's dismissal of plaintiff's claim against ZTE Corp., and held that the arbitration award and its confirmation by the district court together barred plaintiff from pursuing its current claims against ZTE Corp under the doctrine of claim preclusion. The panel explained that, because a district court in Florida confirmed the award, Florida law applied. Under Florida law, the court held that claim preclusion barred plaintiff's claims because it sought the same remedy it had previously sought in arbitration. Furthermore, ZTE Corp. is in privity with ZTE USA, and the parties were suing in the same capacity as in the arbitration.
Court Description: Arbitration / Claim Preclusion. The panel affirmed the district court’s judgment in favor of ZTE Corp. because claim preclusion barred plaintiff’s claims in this diversity action. Plaintiff previously arbitrated breach of contract and related claims against ZTE USA, a wholly-owned subsidiary of defendant ZTE Corp. ZTE Corp. was not a party to that arbitration. The arbitrator denied plaintiff’s claims, a federal district court affirmed the award, and the Eleventh Circuit affirmed the district court judgment. The panel held that the arbitration award and its confirmation by a district court together barred plaintiff from pursuing its current claims against ZTE Corp., under the doctrine of claim preclusion. In an issue of first impression in this circuit, the panel held that in a diversity judgment case, the preclusion law of the state where the federal court, confirming an arbitration award, sat determined the preclusive effect of the award. The panel held that Florida law applied because a district court in Florida confirmed the award. The panel held that under Florida law, claim preclusion barred plaintiff’s claims because plaintiff was seeking the same remedy it sought in arbitration, the evidence needed to
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