Arbitration proceeding not res judicata to later claim outside the scope of reference.

In re Shelburne Supermarket, Inc. (2009-181) (09-Apr-2010) 2010 VT 30 (Reiber, C.J. )
Parents Harry Clayton and Lucille Clayton appeal from the trial court’s order in this long-running family dispute over stock shares. An arbitrator concluded in 2002 that son Steven Clayton, rather than parents, owned certain disputed shares. The trial court confirmed this decision on appeal. Following additional proceedings, the trial court also concluded that son was entitled to $514,964.26 in past dividends paid on these shares. Parents argue that the court erred in awarding son this sum.

We affirm. As the trial court found, son was not “splitting his claim” because the issue of dividend payments was not within the scope of the agreed-upon arbitration. The requirements of res judicata are plainly not satisfied here.

It is true that “an arbitration is in the nature of a judicial inquiry, and thus has the same force and effect of an adjudication in terms of precluding the same parties from relitigating the same subject.” Unlike a judicial proceeding, however, the scope of an arbitration is a creature of contract.

Thus, as the trial court stated, the parties are free to arbitrate some parts of their dispute while setting other matters aside, regardless of the legal implications that would attach if the issue had been litigated rather than arbitrated. See also Restatement (Second) of Judgments, § 84, cmt. d. (1982) (“A preliminary question in giving res judicata effect to an arbitration award is whether the claim or issue was within the scope of the reference to arbitration.”). In this case, the parties did not agree to arbitrate the issue of payment for the shares and recovery of dividends.