Covington et al v. Aban Offshore Limited
MEMORANDUM AND ORDER. The Covingtons' Motion for Summary Judgment is granted. Aban is precluded by the doctrine of res judicata from relitigating these causes of action and claims in this court. There remain no material facts in dispute, and the Covingtons are entitled to judgment as a matter of law. Signed by Judge Marcia A. Crone on 11/16/12. (mrp, )
UNITED STATES DISTRICT COURT
ABAN OFFSHORE LIMITED f/k/a ABAN
LOYD CHILES OFFSHORE, LTD.,
GUY COVINGTON and RUSSELL
EASTERN DISTRICT OF TEXAS
CIVIL ACTION NO. 1:10-CV-5
MEMORANDUM AND ORDER
Pending before the court is Defendants Guy Covington and Russell Covington’s (the
“Covingtons”) Motion for Summary Judgment (#52). The Covingtons move for summary
judgment on Plaintiff Aban Offshore Ltd. f/k/a Aban Loyd Chiles Offshores, Ltd.’s (“Aban”)
causes of action based on the affirmative defense of res judicata, asserting that the facts and claims
have already been decided by an arbitration panel in accordance with a contract executed between
Beacon Maritime, Inc. (“Beacon”), the Covingtons’ employer, and Aban.
This case arises from a contractual dispute between Beacon and Aban. On or about
September 13, 2005, Aban entered into a contract (“the Contract”) with Beacon, a marine
construction and engineering corporation headquartered in Orange, Texas, to refurbish a selfelevating offshore drilling rig. At the time the Contract was executed, Russell and Guy were,
respectively, President and Vice-President of Beacon, but neither was a signatory to the Contract.
Subsequently, a dispute arose regarding the cost and quality of Beacon’s work, and on
March 7, 2008, Aban filed a lawsuit against Beacon in the Southern District of Texas. See Aban
Offshore Ltd. v. Beacon Maritime, Inc. (“Beacon litigation”), No. H-08-761 (S.D. Tex.). In that
case, Beacon filed a motion to dismiss Aban’s complaint and to compel arbitration, which United
States District Judge Vanessa D. Gilmore granted on June 20, 2008. On June 5, 2009, Aban
served its first amended arbitration complaint (“arbitration complaint”) on Beacon (“Beacon
arbitration”), naming both Beacon and the Covingtons as Respondents and asserting causes of
action against Beacon, individually, for claims arising under the Contract and against Beacon and
the Covingtons for negligent misrepresentation, common law fraud, and fraud in the inducement.
On November 23, 2009, the Covingtons filed their original petition in the 128th Judicial
District Court of Orange County, Texas, seeking a declaration that they were not required to
arbitrate their dispute with Aban. Aban removed the case to federal court and filed a motion to
compel the Covingtons to arbitrate, which this court granted on March 15, 2010. Ultimately, the
United States Court of Appeals for the Fifth Circuit reversed this court’s decision and determined
that the Covingtons could not be compelled to arbitrate their claims asserted against them by Aban.
On January 22, 2010, Aban filed a counterclaim against the Covingtons, asserting causes of action
for negligent misrepresentation, fraudulent misrepresentation, and fraudulent inducement. In
response, the Covingtons pled the affirmative defense of res judicata. On January 6, 2012, the
court realigned the parties and designated Aban Offshore Limited f/k/a Aban Loyd Chiles
Offshore, Ltd. as Plaintiff and the Covingtons as Defendants.
On June 29, 2012, the arbitration panel issued its ruling (“Beacon Arbitration award”) in
the Beacon arbitration, denying Aban’s negligent misrepresentation and fraud claims. On October
2, 2012, Judge Gilmore confirmed the arbitration award and entered judgment consistent with the
Beacon Arbitration award.
On August 15, 2012, the Covingtons filed the instant motion seeking summary judgment
on Aban’s claims, asserting that the ruling rendered in the Beacon arbitration precludes Aban’s
Summary Judgment Standard
Rule 56(a) of the Federal Rules of Civil Procedure provides that summary judgment shall
be granted “if the movant shows that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.” FED. R. CIV. P. 56(a). The parties seeking
summary judgment bear the initial burden of informing the court of the basis for their motion and
identifying those portions of the pleadings, depositions, answers to interrogatories, admissions on
file, and affidavits, if any, which they believe demonstrate the absence of a genuine issue of
material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); QBE Ins. Corp. v. Brown &
Mitchell, Inc., 591 F.3d 439, 442 (5th Cir. 2009); Warfield v. Byron, 436 F.3d 551, 557 (5th Cir.
2006); Lincoln Gen. Ins. Co. v. Reyna, 401 F.3d 347, 349 (5th Cir. 2005). Where a defendant
moves for summary judgment on the basis of an affirmative defense and, thus, bears the ultimate
burden of persuasion, “evidence must be adduced supporting each element of the defense and
demonstrating the lack of any genuine issue of material fact with regard thereto.” Terrebone
Aban’s response to the Covingtons’ motion argued that summary judgment was premature
because, at the time, Beacon’s motion to confirm the arbitration award was pending before Judge Gilmore.
Judge Gilmore, however, entered Final Judgment confirming the arbitration award shortly after Aban’s
response was filed. Thus, the issues raised by Aban are moot. Aban failed to respond to the substantive
allegations presented in the Covingtons’ motion.
Parish Sch. Bd. v. Mobil Oil Corp., 310 F.3d 870, 877 (5th Cir. 2002); see Exxon Corp. v.
Oxxford Clothes, Inc., 109 F.3d 1070, 1074 (5th Cir.), cert. denied, 522 U.S. 915 (1997);
Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir. 1986). To warrant judgment in its favor,
the movant “‘“must establish beyond peradventure all of the essential elements of the defense.”’”
Martin v. Alamo Cmty. Coll. Dist., 353 F.3d 409, 412 (5th Cir. 2003) (emphasis in original)
(quoting Chaplin v. NationsCredit Corp., 307 F.3d 368, 372 (5th Cir. 2002) (quoting Fontenot,
780 F.2d at 1194)); accord Addicks Servs., Inc. v. GGP-Bridgeland, LP, 596 F.3d 286, 293 (5th
“A fact is material only if its resolution would affect the outcome of the action . . . .”
Wiley v. State Farm Fire & Cas. Co., 585 F.3d 206, 210 (5th Cir. 2009); accord Cooper Tire &
Rubber Co. v. Farese, 423 F.3d 446, 454 (5th Cir. 2005); Harken Exploration Co. v. Sphere
Drake Ins. PLC, 261 F.3d 466, 471 (5th Cir. 2001). “Factual disputes that are irrelevant or
unnecessary will not be counted.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
“An issue is ‘genuine’ if it is real and substantial, as opposed to merely formal, pretended, or a
sham.” Bazan ex rel. Bazan v. Hidalgo Cnty., 246 F.3d 481, 489 (5th Cir. 2001) (emphasis in
original). Thus, a genuine issue of material fact exists “if the evidence is such that a reasonable
jury could return a verdict for the nonmoving party.” Anderson, 477 U.S. at 248; accord Bayle
v. Allstate Ins. Co., 615 F.3d 350, 355 (5th Cir. 2010); Wiley, 585 F.3d at 210; EMCASCO Ins.
Co. v. Am. Int’l Specialty Lines Ins. Co., 438 F.3d 519, 523 (5th Cir. 2006); Cooper Tire &
Rubber Co., 423 F.3d at 454. The moving parties, however, need not negate the elements of the
nonmovant’s case. See Bayle, 615 F.3d at 355; Boudreaux v. Swift Transp. Co., 402 F.3d 536,
540 (5th Cir. 2005) (citing Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994));
Millennium Petrochemicals, Inc. v. Brown & Root Holdings, Inc., 390 F.3d 336, 339 (5th Cir.
Once a proper motion has been made, the nonmoving party may not rest upon mere
allegations or denials in the pleadings but must present affirmative evidence, setting forth specific
facts, to show the existence of a genuine issue for trial. Celotex Corp., 477 U.S. at 322 n.3
(quoting FED. R. CIV. P. 56(e)); Anderson, 477 U.S. at 256; Bayle, 615 F.3d at 355; EMCASCO
Ins. Co., 438 F.3d at 523; Smith ex rel. Estate of Smith v. United States, 391 F.3d 621, 625 (5th
Cir. 2004). “[T]he court must review the record ‘taken as a whole.’” Reeves v. Sanderson
Plumbing Prods., Inc., 530 U.S. 133, 150 (2000) (quoting Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 587 (1986)); see Riverwood Int’l Corp. v. Emp’rs Ins. of Wausau,
420 F.3d 378, 382 (5th Cir. 2005). All the evidence must be construed in the light most favorable
to the nonmoving party, and the court will not weigh the evidence or evaluate its credibility.
Reeves, 530 U.S. at 150; EEOC v. Chevron Phillips Chem. Co., LP, 570 F.3d 606, 615 (5th Cir.
2009); Lincoln Gen. Ins. Co., 401 F.3d at 350; Smith, 391 F.3d at 624; Brown v. City of Houston,
337 F.3d 539, 541 (5th Cir. 2003). The evidence of the nonmovant is to be believed, with all
justifiable inferences drawn and all reasonable doubts resolved in its favor. Groh v. Ramirez, 540
U.S. 551, 562 (2004) (citing Anderson, 477 U.S. at 255); Tradewinds Envtl. Restoration, Inc. v.
St. Tammany Park, LLC, 578 F.3d 255, 258 (5th Cir. 2009); Shields v. Twiss, 389 F.3d 142, 150
(5th Cir. 2004); Martin, 353 F.3d at 412.
Furthermore, “only reasonable inferences in favor of the nonmoving party can be drawn
from the evidence.” Mills v. Warner-Lambert Co., 581 F. Supp. 2d 772, 779 (E.D. Tex. 2008)
(citing Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451, 469 n.14 (1992)). “If
the [nonmoving party’s] theory is . . . senseless, no reasonable jury could find in its favor, and
summary judgment should be granted.” Eastman Kodak Co., 504 U.S. at 468-69; accord Shelter
Mut. Ins. Co. v. Simmons, 543 F. Supp. 2d 582, 584-85 (S.D. Miss.), aff’d, 293 F. App’x 273
(5th Cir. 2008). The nonmovant’s burden is not satisfied by “‘some metaphysical doubt as to the
material facts,’ by ‘conclusory allegations,’ by ‘unsubstantiated assertions,’” by speculation, by
the mere existence of some alleged factual dispute, or “by only a ‘scintilla’ of evidence.” Little,
37 F.3d at 1075 (quoting Lujan v. Nat’l Wildlife Fed’n, 497 U.S. 871, 888 (1990); Matsushita
Elec. Indus. Co., 475 U.S. at 586; Hopper v. Frank, 16 F.3d 92, 97 (5th Cir. 1994); Davis v.
Chevron U.S.A., Inc., 14 F.3d 1082, 1086 (5th Cir. 1994)); accord Thibodeaux v. Vamos Oil &
Gas Co., 487 F.3d 288, 294-95 (5th Cir. 2007); Warfield, 436 F.3d at 557; Boudreaux, 402 F.3d
at 540. “Unsubstantiated assertions, improbable inferences, and unsupported speculation are not
sufficient to defeat a motion for summary judgment.” Brown, 337 F.3d at 541; accord RSR Corp.
v. Int’l Ins. Co., 612 F.3d 851, 857 (5th Cir. 2010); Hugh Symons Grp., plc v. Motorola, Inc.,
292 F.3d 466, 468 (5th Cir.), cert. denied, 537 U.S. 950 (2002); see Hockman v. Westward
Commc’ns, LLC, 407 F.3d 317, 332 (5th Cir. 2004).
Here, Aban, the nonmoving party, has filed no response and has proffered no evidence in
opposition to the Covingtons’ motion. Summary judgment may not be awarded by default,
however, merely because the nonmoving party has failed to respond. See Ford-Evans v. Smith,
206 F. App’x 332, 334 (5th Cir. 2006); United States v. Wilson, 113 F. App’x 17, 18 (5th Cir.
2004); Hibernia Nat’l Bank v. Administracion Cent. Sociedad Anonima, 776 F.2d 1277, 1279 (5th
Cir. 1985); Settlement Capital Corp. v. Pagan, 649 F. Supp. 2d 545, 552 (N.D. Tex. 2009). “‘A
motion for summary judgment cannot be granted simply because there is no opposition, even if
failure to oppose violated a local rule. The movant has the burden of establishing the absence of
a genuine issue of material fact and, unless he has done so, the court may not grant the motion,
regardless of whether any response was filed.’” Hetzel v. Bethlehem Steel Corp., 50 F.3d 360,
362 n.3 (5th Cir. 1995) (quoting Hibernia Nat’l Bank, 776 F.2d at 1279); see Owens v. Town of
Delhi, 469 F. Supp. 2d 403, 405-06 (W.D. La. 2007); Royal Surplus Lines Ins. Co. v. Brownsville
Indep. Sch. Dist., 404 F. Supp. 2d 942, 947-49 (S.D. Tex. 2005).
Nonetheless, the court may grant summary judgment if the movants have made a prima
facie showing that they are entitled to such relief. See FED. R. CIV. P. 56(e); see also Eversley
v. MBank Dallas, 843 F.2d 172, 174 (5th Cir. 1988); Owens, 469 F. Supp. 2d at 405. The
nonmovant is “‘under an obligation to respond . . . in a timely fashion and to place before the
court all materials it wishes to have considered when the court rules on the motion.’” Enplanar,
Inc. v. Marsh, 11 F.3d 1284, 1293 n.11 (5th Cir.) (quoting Cowgill v. Raymark Indus., Inc., 780
F.2d 324, 329 (3d Cir. 1985)), cert. denied, 513 U.S. 926 (1994). The court may also accept as
undisputed the facts set forth in support of the unopposed motion for summary judgment. See
Eversley, 843 F.2d at 174; Lynch v. Jet Ctr. of Dallas, LLC, No. 3:05-CV-2229-L, 2007 WL
211101, at *3 (N.D. Tex. Jan. 26, 2007); Perry Williams, Inc. v. FDIC, 47 F. Supp. 2d 804, 809
(N.D. Tex. 1999); Rayha v. United Parcel Serv., Inc., 940 F. Supp. 1066, 1068 (S.D. Tex.
1996); Local Rule CV-56(c).
Federal courts have traditionally adhered to the related doctrines of res judicata, or claim
preclusion, and collateral estoppel, or issue preclusion, when confronted with prior judgments in
related cases. See Allen v. McCurry, 449 U.S. 90, 94 (1980); Langston v. Ins. Co. of N. Am., 827
F.2d 1044, 1046 (5th Cir. 1987). “Res judicata incorporates the doctrines of merger and bar,
thereby extending the effect of a judgment to the litigation of all issues relevant to the same claim
between the same parties, whether or not those issues were raised at trial.” St. Paul Mercury Ins.
Co. v. Williamson, 224 F.3d 425, 436 (5th Cir. 2000). “Collateral estoppel precludes the
relitigation of issues actually adjudicated, and essential to the judgment, in a prior suit between
the parties on a different cause of action.” Id. The United States Supreme Court and other courts
have recognized that these doctrines “relieve parties of the cost and vexation of multiple lawsuits,
conserve judicial resources, and, by preventing inconsistent decisions, encourage reliance on
adjudication.” Allen, 449 U.S. at 94 (citing Montana v. United States, 440 U.S. 147, 153-54
(1979)); see also Matter of Brady, Tex., Mun. Gas Corp., 936 F.2d 212, 220 (5th Cir.), cert.
denied, 502 U.S. 1013 (1991).
Under the doctrine of res judicata, a final judgment is an absolute bar to a subsequent
lawsuit between the same parties upon the same claims or causes of action. See United States v.
Mendoza, 464 U.S. 154, 158 n.3 (1984); Federated Dep’t Stores, Inc. v. Moitie, 452 U.S. 394,
398 (1981); Peoples State Bank v. Gen. Elec. Capital Corp. (In re Ark-La-Tex Timber Co.), 482
F.3d 319, 330 (5th Cir. 2007); St. Paul Mercury Ins. Co., 224 F.3d at 436 (citing Kaspar Wire
Works v. Leco Eng’g & Mach., Inc., 575 F.2d 530, 535 (5th Cir. 1978)); Nilsen v. City of Moss
Point, 701 F.2d 556, 560 (5th Cir. 1983). “Claim preclusion, or res judicata, bars the litigation
of claims that either have been litigated or should have been raised in an earlier suit.” Test
Masters Educ. Servs., Inc. v. Singh, 428 F.3d 559, 570 n.2 (5th Cir. 2005) (citing Petro-Hunt,
LLC v. United States, 365 F.3d 385, 395 (5th Cir. 2004); In re Southmark Corp., 163 F.3d 925,
934 (5th Cir.), cert. denied, 527 U.S. 1004 (1999)). Res judicata bars all claims that were or
could have been litigated in the prior action, not merely those that were adjudicated. See Rivet v.
Regions Bank, 522 U.S. 470, 476 (1998); Moitie, 452 U.S. at 398; Travelers Ins. Co. v. St. Jude
Hosp., 37 F.3d 193, 195 (5th Cir. 1994), cert. denied, 514 U.S. 1065 (1995); In re Howe, 913
F.2d 1138, 1144 (5th Cir. 1990); Nilsen, 701 F.2d at 560. Thus, “a final judgment on the merits
of an action precludes the parties or their privies from relitigating issues that were or could have
been raised in that action.” Allen, 449 U.S. at 94 (citing Cromwell v. Cnty. of Sac, 94 U.S. 351,
The Fifth Circuit has established a four-prong test for assessing the preclusive effect of
“‘For a prior judgment to bar an action on the basis of res judicata, the parties must
be identical in both suits, the prior judgment must have been rendered by a court
of competent jurisdiction, there must have been a final judgment on the merits and
the same cause of action must be involved in both cases.’”
In re Intelogic Trace, Inc., 200 F.3d 382, 386 (5th Cir. 2000) (quoting Nilsen, 701 F.2d at 559)
(quoting Kemp v. Birmingham News Co., 608 F.2d 1049, 1052 (5th Cir. 1979), overruled on other
grounds by Southmark Props. v. Charles House Corp., 742 F.2d 862, 870 (5th Cir. 1984))); see
Ries v. Paige (In re Paige), 610 F.3d 865, 870 (5th Cir. 2010); Mowbray v. Cameron Cnty., 274
F.3d 269, 282 (5th Cir. 2001); Ellis v. Amex Life Ins. Co., 211 F.3d 935, 937 (5th Cir. 2000).
“If these conditions are satisfied, all claims or defenses arising from a ‘common nucleus of
operative facts’ are merged or extinguished.” Proctor & Gamble Co. v. Amway Corp., 376 F.3d
496, 499 (5th Cir. 2004).
Parties Are Identical or in Privity
Res judicata requires that “the parties are identical or in privity.” Test Masters Educ.
Servs., Inc., 428 F.3d at 571. The Fifth Circuit has noted that parties “for purposes of res
judicata does not mean formal, paper parties only, but also includes parties in interest, that is, that
persons whose interests are properly placed before the court by someone with standing to
represent them are bound by the matters determined in the proceeding.” Latham v. Wells Fargo
Bank, 896 F.2d 979, 983 (5th Cir. 1990) (emphasis in original) (citations omitted); see also Matter
of Baudoin, 981 F.2d 736, 741 (5th Cir. 1993). A non-party is in privity with a party for res
judicata purposes in three instances:
First, if he has succeeded to the party’s interest in property, he is bound by prior
judgments against the party. Second, if he controlled the prior litigation, he is
bound by its result. Third, he is bound if the party adequately represented his
interests in the prior proceeding.
Latham, 896 F.2d at 983 (citing Benson & Ford, Inc. v. Wanda Petroleum Co., 833 F.2d 1172,
1174 (5th Cir. 1987)). “‘A non-party . . . is adequately represented where a party in the prior suit
is so closely aligned to her interests as to be her virtual representative.’” Gulf Island-IV, Inc. v.
Blue Streak-Gulf Is Ops, 24 F.3d 743, 747 (5th Cir. 1994), cert. denied, 513 U.S. 1155 (1995)
(quoting Eubanks v. FDIC, 977 F.2d 166, 170 (5th Cir. 1992)); see Harris Cnty. v. CarMax Auto
Superstores, Inc., 177 F.3d 306, 316-17 (5th Cir. 1999). “This requires more than a showing of
parallel interests—it is not enough that the non-party may be interested in the same questions or
proving the same facts.”
Eubanks, 977 F.2d at 170.
The court has characterized this
determination as “a broad concept, which requires us to look to the surrounding circumstances to
determine whether claim preclusion is justified.” Russell v. SunAmerica Secs., Inc., 962 F.2d
1169, 1173 (5th Cir. 1992).
In addition, the Fifth Circuit has held that employer-employee or principal-agent
relationships may be the basis for a defense of res judicata. See Lubrizol Corp. v. Exxon Corp.,
871 F.2d 1279 (5th Cir. 1989), cert. denied, 506 U.S. 864 (1992). In Lubrizol, the plaintiff filed
a patent infringement suit against Exxon, which subsequently was settled and dismissed. Id. at
1281-82. Thereafter, the plaintiff filed suit against two Exxon employees based on their alleged
actions during the previously filed action. Id. at 1282. The employees moved to dismiss the
claims based on the defense of res judicata. Id. The district court converted the motion into one
for summary judgment and eventually granted it. Id. On appeal, the Fifth Circuit held that the
vicarious liability relationship between the company and its employees justified claim preclusion.
Id. at 1289.
Here, although the Covingtons were not parties to the Beacon arbitration, Russell and Guy
Covington were Beacon’s president and vice president, respectively, and were responsible for
communicating with Aban prior to and during the negotiations of the Contract and during the
performance of the work. Indeed, Venkateswaran Parameswaran (“Venkat”), Aban’s Deputy
Managing Director, confirmed during his deposition that Aban was seeking relief from the
Covingtons based on their statements made in their capacity as officers of the company. Finally,
the Covingtons testified regarding their actions taken on behalf of Beacon during the Beacon
arbitration. Therefore, as in Lubrizol, it is evident that the Covingtons are related by vicarious
liability to Beacon in the prior lawsuit and that res judicata applies.
Court of Competent Jurisdiction
Next, the court must determine if the arbitration panel issuing the Beacon Arbitration
award was a court of competent jurisdiction. It is well settled that both the doctrines of res
judicata and collateral estoppel apply to arbitration awards. See Milliken v. Grigson, 986 F. Supp.
426, 431 (S.D. Tex. 1997), aff’d, 158 F.3d 583 (5th Cir. 1998); Autotrol Corp. v. J-F Equip. Co.,
820 F. Supp. 293, 297 (N.D. Tex. 1993); see also Stoker v. Trimas, Corp., No. 11-41154 , 2012
WL 2505512, at *1 (5th Cir. June 29, 2012); Int’l Transactions Ltd. v. Embotelladora Agral
Regiomontana S.A. de C.V., No. 3:01-CV-1140, 2006 WL 2217478, at *5 n.14 (N.D. Tex. Aug.
3, 2006); Consorcio Rive, S.A. de C.V. v. Briggs of Cancun, Inc., No. Civ. A. 99-2204, 2000
WL 1023420, at *4 (E.D. La. July 24, 2000). Indeed, even without judicial confirmation, “a
foreign arbitral award is res judicata between the parties as to the merits.” Schlumberger Tech.
Corp. v. United States, 195 F.3d 216, 220 (5th Cir. 1999). “Numerous courts have recognized
that arbitration awards can have preclusive effect in subsequent litigation.” Autotrol Corp., 820
F. Supp. at 297 (citing Universal Am. Barge Corp. v. J-Chem, Inc., 946 F.2d 1131, 1136 (5th
Cir. 1991); Pujol v. Shearson/Am. Express, Inc., 829 F.2d 1201, 1206 (1st Cir. 1987); Greenblatt
v. Drexel Burnham Lambert, Inc., 763 F.2d 1352, 1361 (11th Cir. 1985); Davis v. Chevy Chase
Fin. Ltd., 667 F.2d 160, 172 (D.C. Cir. 1981); Gardner v. Shearson, Hammill & Co., 433 F.2d
367, 368 (5th Cir. 1970), cert. denied, 401 U.S. 978 (1971)).
“In Texas, an arbitration award has the same effect as the judgment of a court of last
resort.” Milliken, 986 F. Supp. at 431. “Arbitration awards are favored by the courts to dispose
of pending disputes and every reasonable presumption should be indulged to uphold the arbitration
proceeding.” Id. (citing J.J. Gregory Gourmet Servs., Inc. v. Antone’s Import Co., 927 S.W.2d
31, 33 (Tex. App.—Houston [1st Dist.] 1995, no writ); City of Baytown v. C.L. Winter, Inc., 886
S.W.2d 515, 518 (Tex. App.—Houston [1st Dist.] 1995, writ denied)). “Consistent with Texas
law on res judicata, an arbitration proceeding and award is given preclusive effect in a later suit
if the arbitration involved: (1) an identity of parties; (2) an identity of the cause of action; and (3)
a full and fair opportunity to litigate the matter.” Autotrol Corp., 820 F. Supp. at 297 (citing
Monahan v. Paine Webber Grp., Inc., 724 F. Supp. 224, 226 (S.D.N.Y. 1989)).
Because the court has established that there is an identity of parties and an identity of the
causes of action and there is no dispute that the parties had a full opportunity to litigate the matter,
the Beacon Arbitration award satisfies the second element.
Final Judgment on the Merits
The court must next assess whether the Beacon Arbitration award was a final judgment on
the merits. The arbitration panel conducted a six-day proceeding and rendered a decision stating
that it conducted “a hearing on the merits.” Moreover, the panel’s ruling addressed each issue
raised by Aban against Beacon. Finally, the confirmation of an arbitration award by the district
court serves as a final judgment. See Wilder Corp. of Del. v. Rural Cmty. Ins. Servs., No. 1210036, 2012 WL 5076279, at *2 (5th Cir. Oct. 18, 2012); Jensen v. Flores (In re Flores), Bankr.
No. 07-52684, 2008 WL 2008617, at *2 n.1 (Bankr. W.D. Tex. May 6, 2008) (citing cases
holding that res judicata applies to final judgments confirming an arbitration award). Thus, final
judgment on the merits was entered in the district court in the Southern District of Texas on
October 2, 2012.
Same Cause of Action
To determine whether two suits involve the same claim, the Fifth Circuit has adopted the
transactional test set forth in Section 24 of the Restatement (Second) of Judgments. See In re
Paige, 610 F.3d at 872; Ellis, 211 F.3d at 938; N.Y. Life Ins. Co. v. Gillispie, 203 F.3d 384, 387
(5th Cir. 2000); In re Intelogic Trace, Inc., 200 F.3d at 386; In re Southmark Corp., 163 F.3d
at 934; Travelers Ins. Co., 37 F.3d at 195; Agrilectric Power Partners, Ltd. v. Gen. Elec. Co.,
20 F.3d 663, 665 (5th Cir. 1994). “‘Under this approach, the critical issue is not the relief
requested or the theory asserted but whether the plaintiff bases the two actions on the same nucleus
of operative facts.’” Agrilectric Power Partners, Ltd., 20 F.3d at 665 (quoting In re Howe, 913
F.2d at 1144); accord In re Paige, 610 F.3d at 871. “If the factual scenario of the two actions
parallel, the same cause of action is involved in both. The substantive theories advanced, forms
of relief requested, types of rights asserted, and variation in evidence needed do not inform this
inquiry.” Agrilectric Power Partners, Ltd., 20 F.3d at 665.
“In evaluating the res judicata effect of a prior claim on a subsequent one, the transactional
test does not inquire whether the same evidence has been presented in support of the two claims,
but rather asks whether the same key facts are at issue in both of them.” Gillispie, 203 F.3d at
387 (emphasis in original). “[T]he principal test for comparing causes of action is whether the
primary right and duty or wrong are the same in each action.” Nilsen, 701 F.2d at 559 (citing
Kemp, 608 F.2d at 1052; Stevenson v. Int’l Paper Co., 516 F.2d 103, 109 (5th Cir. 1975)).
“‘When two successive suits seek recovery for the same injury, “a judgment on the merits operates
as a bar to the later suit, even though a different legal theory of recovery is advanced in the second
suit.”’” Id. at 564 (quoting Harrington v. Vandalia-Butler Bd. of Educ., 649 F.2d 434, 437 (6th
Cir. 1981) (quoting Cemer v. Marathon Oil Co., 583 F.2d 830, 832 (6th Cir. 1978))).
Both the Beacon arbitration and the instant action arise from the same set of facts
surrounding the Contract to refurbish Aban’s drilling rig. Furthermore, Aban’s arbitration
complaint is nearly identical to its counterclaim against the Covingtons. Aban asserted the same
claims of negligent misrepresentation, fraud, and fraud in the inducement in both pleadings, but
replaced “Respondents,” as used in the arbitration complaint, with “the Covingtons” in its
allegations listed in the counterclaim. Moreover, Venkat’s testimony that the claims were based
on the Covingtons’ statements made in their official capacity as Beacon employees reveal that the
cases rely on the “same nucleus of operative facts.” Therefore, Aban’s claims against the
Covingtons in this case are the same as those asserted against Beacon in the prior action.
Accordingly, the Covingtons’ Motion for Summary Judgment is GRANTED. Aban is
precluded by the doctrine of res judicata from relitigating these causes of action and claims in this
court. There remain no material facts in dispute, and the Covingtons are entitled to judgment as
a matter .of law.
SIGNED at Beaumont, Texas, this 7th day of September, 2004.
SIGNED at Beaumont, Texas, this 16th day of November, 2012.
MARCIA A. CRONE
UNITED STATES DISTRICT JUDGE
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