Reinsurance Focus

An architectural firm contracted to provide architectural, engineering and design services for a state veterans home for a “not to exceed fee” of $61,500, which was calculated as a percentage of overall expected construction costs. When there were changes to the scope of the construction, the construction costs increased, and the firm sought an additional fee. The request was denied, an administrative appeal was rejected and suit was filed. The parties stipulated to a stay of the lawsuit pending a statutory arbitration procedure. The arbitration was resolved adversely to the claimant, with the arbitrator declaring that he was not deciding any equitable claims the claimant may have had which were not asserted in the arbitration. The arbitration award was confirmed by agreement and no appeal was filed. The claimant then filed a petition to compel a second arbitration of equitable claims. The court denied the petition, holding that the proposed equitable claims were barred by the doctrine of res judicata.

The Rhode Island Supreme Court agreed, holding that the claimant could have asserted the equitable claims in the first arbitration, and that the scope of precluded claims was determined using the transaction test, i.e., whether the claims arose out of the same transaction or series of connected transactions. Finding that the equitable claims arose out of the same transactions as the previously arbitrated claims, and finding no applicable exception to the preclusion doctrine, the Supreme Court ruled that the unasserted equitable claims were barred by the final judgment confirming the award in the first arbitration. Torrado Architects v. Rhode Island Dept. of Human Services, No. 2013-274 (R.I. Nov. 25, 2014).

This post written by Rollie Goss.

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