Citigroup, Inc. v. Abu Dhabi Inv. Auth.

Issue Discussed: Res Judicata / Collateral Estoppel

Submitted by Aluyah I. Imoisili, Jamie E. Sutton*

Date Promulgated: January 14, 2015

Citigroup, Inc. v. Abu Dhabi Inv. Auth., 776 F.3d 126 (2d Cir. 2015)

Court: United States Court of Appeals, Second Circuit

Issues Decided: Whether the All Writs Act, 28 U.S.C. § 1651(a), permits a federal court to enjoin a second arbitration between parties to a contractual arbitration agreement based on what one party asserts is the claim-preclusive effect of a prior federal judgment confirming the result of the parties’ earlier arbitration.

Key Holding

An investor demanded arbitration against a financial services company for fraud, securities fraud, negligent misrepresentation, and breach of contract in connection with the company’s issuance of preferred shares to other investors.  The arbitration panel denied the claims and entered an award in favor of the financial services company, which a district court confirmed.  While that decision was on appeal, the investors brought a new arbitration arising from the same conduct.  The company contended in court that issue preclusion barred the second arbitration and that the All Writs Act, 28 U.S.C. § 1651(a) (which authorizes courts to issue commands that “are necessary to effectuate or prevent the frustration of orders it has previously issued”), allowed the district court to enjoin the arbitration.  The district court refused to enjoin the second arbitration.

The Second Circuit affirmed the district court.  The Second Circuit held that ordinarily arbitrators, not courts, should determine the claim preclusive effect of a federal judgment that confirms an arbitration award.  The court also held that courts are precluded from using the All Writs Act to enjoin a subsequent arbitration of claims when the prior federal judgment confirming an arbitration award did not involve consideration of the merits of the underlying claims.

Key Takeaways

Arbitrators, not the courts, decide the preclusive effect of a prior arbitration that has been confirmed by a federal court, notwithstanding the court’s authority under the All Writs Act.

* Aluyah I. Imoisili is a Partner and Jamie E. Sutton is an Associate at Greenberg Gross LLP, where they specialize in commercial litigation and arbitration.