Eighth Circuit Holds Claims Against Parent Company Were Precluded by Prior Arbitration Award and Confirmation Denying the Same Claims Against Company’s Subsidiary

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Cellphone network developer Daredevil Inc. brought an action in a Missouri federal district court against Chinese technology firm ZTE Corp., which manufactured and sold telecommunications infrastructure and cellular network equipment, asserting claims for breach of contract, fraud, unjust enrichment, and tortious interference with contract.

Daredevil’s case against ZTE was stayed pending a Florida arbitration of Daredevil’s claims against a New Jersey-based wholly owned subsidiary of ZTE. The arbitrator ultimately denied Daredevil’s claims against ZTE’s subsidiary, and a Florida federal district court confirmed the arbitration award, which was affirmed by the Eleventh Circuit Court of Appeals. Daredevil then reopened its case against ZTE in the Missouri district court, and ZTE moved for summary judgment on the grounds that Daredevil’s claims were precluded by the prior arbitration award and confirmation.

Agreeing with ZTE that Daredevil’s claims were precluded under Florida law by the arbitration award and confirmation, the Missouri district court granted ZTE’s motion for summary judgment. Daredevil appealed, arguing that the district court erred when it applied Florida law instead of Missouri law to the issue of claim preclusion and that its claims against ZTE were also not barred under Florida law because the parties and causes of action did not meet Florida law’s requirement of “identity” for claim preclusion to apply.

On appeal, the Eighth Circuit Court of Appeals held that Florida law governed the preclusive effect of the arbitration award that took place in Florida and was confirmed by the Florida federal district court. The Eighth Circuit also held that ZTE satisfied Florida’s “identity” requirement for claim preclusion to apply, finding that privity existed between ZTE and its subsidiary, and Daredevil’s claims against ZTE were “so closely related to” Daredevil’s arbitration claims against the subsidiary. As a result, the Eighth Circuit affirmed the Missouri district court’s decision.

Daredevil, Inc. v. ZTE Corp., No. 19-3769 (8th Cir. June 18, 2021).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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