Interdiction of Wright

75 So. 3d 893, 2011 La. LEXIS 2590, 2011 WL 5832333
CourtSupreme Court of Louisiana
DecidedOctober 25, 2011
DocketNo. 2010-CC-1826
StatusPublished
Cited by6 cases

This text of 75 So. 3d 893 (Interdiction of Wright) is published on Counsel Stack Legal Research, covering Supreme Court of Louisiana primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Interdiction of Wright, 75 So. 3d 893, 2011 La. LEXIS 2590, 2011 WL 5832333 (La. 2011).

Opinions

CLARK, Justice.

_JjWe granted certiorari to determine whether the court of appeal erred in reversing the trial court’s denial of the defendant’s exception of res judicata. For the reasons that follow, we find an unconfirmed arbitration award does not have a preclusive effect. Accordingly, we reverse the court of appeal’s ruling and remand the matter to the trial court for proceedings consistent with this holding.

FACTS AND PROCEDURAL HISTORY

Harold Otis Wright was paralyzed and incapacitated by a medical accident in 1973. He received damages totaling approximately $1.7 million as a result of ensuing litigation. Wright v. United States, 507 F.Supp. 147 (E.D.La.1981). Thereafter, his wife, Audrey Wright, filed a Petition for Interdiction in the 21st Judicial District Court. The court declared Mr. Wright an interdict and appointed Mrs. Wright as his euratrix. In conjunction with the interdiction proceeding, the court issued an order (“the 1982 order”) which allowed the euratrix to invest the money from the judgment in long-term bonds. Additionally, the court ordered all interest income be deposited and channeled through a Custodian Account, with the provision “that no portion of the interdict’s capital estate be withdrawn from any of the said long range investment accounts, without further and specific orders of this court.” With permission of the court, Mrs. Wright established an account with A.G. Edwards & Sons, Inc. (“A.G. | ¡.Edwards”) through one of its investment bankers, Ed[895]*895win Reardon. Both Mr. Reardon and A.G. Edwards received a certified copy of the court’s order which authorized disbursement.

On December 23, 2002, Mrs. Wright filed a Petition for Damages in the 21st Judicial District Court against several defendants, including Mr. Reardon and A.G. Edwards, alleging breach of fiduciary and contractual duties, including violations of securities law. Particularly, Mrs. Wright argued Mr. Reardon misappropriated the entire $1.7 million and disbursed the principal from the account, thereby violating the court’s 1982 order. Additionally, Mrs. Wright alleged further violation of the court’s order when Mr. Reardon left A.G. Edwards, went to work for Morgan Stanley Dean Witter, Inc. (“Morgan Stanley”), and took the remaining principal of the account ($700,000) with him to Morgan Stanley. Also, she contended A.G. Edwards failed to supervise Mr. Reardon’s management of the account.

In response to the defendants’ Exception of Prematurity and in light of the arbitration clause in the account agreement, the court issued an order, staying the action pending arbitration before the National Association of Securities Dealers (“NASD”). Mrs. Wright consented to the arbitration. While the arbitration was still pending, Mr. Wright died, thereby terminating the interdiction proceeding. Harold Asher was appointed as the decedent’s succession representative and was substituted for Mrs. Wright in the arbitration. On July 31, 2006, the NASD arbitration panel issued a $150,000 award in favor of the succession against A.G. Edwards.1

On June 18, 2008, Mr. Asher filed a Motion for Contempt of Court against |SA.G. Edwards under La.Code Civ.P. art. 36112 for violating the 1982 court order.3 A.G. Edwards filed several exceptions, including an exception of res judicata, wherein it contended the NASD arbitration proceeding was between the same parties, based on the same alleged wrongful conduct, and awarded the same damages sought in the Motion for Contempt of Court. The trial court denied the exception of res judicata. On July 21, 2010, the Louisiana First Circuit Court of Appeal granted the writ, reversing the trial court’s ruling and dismissing Mr. Asher’s claims as res judicata. Interdiction of Harold Wright, 10-449 (La.App. 1 Cir. 7/22/10). Particularly, the court of appeal stated:

The trial court erred in denying A.G. Edwards and Sons, Inc.’s Exception of Res Judicata. The arbitration proceeding was between the same parties, based on the same alleged wrongful conduct, and awarded the same damages sought in Harold Asher’s Motion for Contempt (which we find to be a misnamed peti[896]*896tion for damages, given that there was no injunction issued). Therefore, the arbitration award, albeit unconfirmed, is res judicata and precludes Mr. Asher’s suit. See Aucoin v. Gauthier [35 So.3d 326], 2010 WL 502793 (La.App. 1st Cir.2/12/10), writ granted, (La.6/18/10) 38 So.3d 312. Accordingly, the exception is hereby granted, dismissing the claims of Harold Asher against A.G. Edwards and Sons, Inc.

This court granted Mr. Asher’s writ application for certiorari to determine whether an arbitration award that is not confirmed in accordance with La. R.S. 9:4209 can have a preclusive effect on subsequent proceedings that involve the same parties, [4are based on the same wrongful conduct, and seek the same damages.4 Assuming an unconfirmed award does have a preclu-sive effect, we then must determine whether Mr. Asher’s Motion for Contempt of Court involves the same parties, wrongful conduct, and damages as the Petition for Damages, which was the basis for the arbitration award. Interdiction of Harold Otis Wright, 10-1826 (La.11/12/10), 49 So.3d 875.

DISCUSSION

Mr. Asher contends the unconfirmed arbitration award in this case cannot have a res judicata effect because it is not a judgment by a court vested with judicial power. On the other hand, A.G. Edwards argues the arbitration award, though unconfirmed, has a preclusive effect and bars the plaintiffs suit because the award was between the same parties, based on the same conduct, and awarded the same damages as the instant litigation. For the reasons that follow, we agree with Mr. Asher’s assertion that res judicata does not apply to an unconfirmed arbitration award.

Louisiana’s res judicata statute is codified in La. R.S. 13:4231:

Except as otherwise provided by law, a valid and final judgment is conclusive between the same parties, except on appeal or other direct review, to the following extent:
(1) If the judgment is in favor of the plaintiff, all causes of action existing at the time of final judgment arising out of the transaction or occurrence that is the subject matter of the litigation are extinguished and merged in the judgment.
(2) If the judgment is in favor of the defendant, all causes of action existing at the time of final judgment arising out of the transaction or occurrence that is the subject matter of the litigation are extinguished and the judgment bars a subsequent action on those causes of action.
|fi(3) A judgment in favor of either the plaintiff or the defendant is conclusive, in any subsequent action between them, with respect to any issue actually litigated and determined if its determination was essential to that judgment. (Emphasis added).

The statute applies only when there is a “valid and final judgment” between the parties. Comment (d) to the statute further explains the requirement of a “valid and final judgment”:

To have any preclusive effect a judgment must be valid, that is, it must have been rendered by a court

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Bluebook (online)
75 So. 3d 893, 2011 La. LEXIS 2590, 2011 WL 5832333, Counsel Stack Legal Research, https://law.counselstack.com/opinion/interdiction-of-wright-la-2011.