This week, we’ll get to the nitty gritty of a topic that can be extremely relevant to litigators: the law applicable to determine the preclusive effect of an arbitral award.

If something’s been arbitrated, it generally cannot be relitigated. In other words, arbitral awards usually have preclusive effect. There’s not much controversy about this much.

But what law determines the preclusive effect of the arbitral award? At least with respect to awards that have been confirmed by a federal court sitting in diversity, most of the doctrinal ingredients needed to supply an answer have been in place for a while. The Ninth Circuit, though, just put those ingredients together in NTCH-WA, Inc. v. ZTE Corp., 2019 WL 1810776 (April 25, 2019).

First, a court order confirming an award has “the same force and effect” as a final judgment on the merits. FAA § 13. This includes, of course, the preclusive effect of the award. See, e.g., Restatement (Second) of Judgments § 84(1). So far, simple enough.

Second, “[F]ederal common law governs the claim-preclusive effect of” a judgment rendered “by a court sitting in diversity.” Semtek Int’l Inc. v. Lockheed Martin Corp., 531 U.S. 497, 508, (2001). Cool, cool, cool.

Third, federal common law, in these circumstances, looks to the law of the state where the federal district court rendering the judgment sits. A moment’s pause to think through this confirms that it squares with the federalism concerns of Erie. In fact, this is just a variation on the Erie-inspired choice-of-law principle of Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941)). Long and short of it, so long as the state preclusion rules are not incompatible with federal interests, they apply.

Those ingredients all laid out, the Ninth Circuit mixes them altogether:

Because a federal-court order confirming an arbitration award has “the same force and effect” as a final judgment on the merits, 9 U.S.C. § 13, and because we determine the preclusive effect of a prior federal diversity judgment by reference to the law of the state where the rendering court sat, we hold that when a federal court sitting in diversity confirms an arbitration award, the preclusion law of the state where that court sits determines the preclusive effect of the arbitral award.