Leon C. Baker, P.C., and Leon C. Baker v. Merrill Lynch, Pierce, Fenner & Smith, Inc.

821 So. 2d 158 (Ala. 2001) · Supreme Court of Alabama · August 31, 2001 · No. 1992139

Summary

The Alabama Supreme Court affirmed a permanent injunction barring Leon C. Baker and Leon C. Baker, P.C. from arbitrating claims against Merrill Lynch before the NASD. The court held that the trial court, rather than the arbitrators, properly decided whether collateral estoppel applied, and that prior Alabama litigation conclusively established that the Merrill Lynch account was Baker’s personal account and that Merrill Lynch was not liable for transferring the assets. The court also rejected arguments that Merrill Lynch waived its collateral-estoppel defense or that dismissal was required on forum non conveniens grounds.

Holdings

  1. The court, not the arbitrator, decides whether a prior judicial determination has collateral-estoppel effect on claims subsequently asserted in arbitration.
  2. Collateral estoppel barred the claims because the dispositive issue—whether the Merrill Lynch account was Baker's personal account—was identical to an issue actually litigated and necessarily decided in the prior Alabama action.
  3. The PC was in privity with Baker and therefore was bound by the prior judgment for collateral-estoppel purposes.
  4. Merrill Lynch did not waive its right to assert collateral estoppel or resist the later arbitration.
  5. Section 6-5-430 did not apply because the cause of action arose in Alabama, where Merrill Lynch disclosed the account to the Jefferson Circuit Court and complied with that court's transfer order.

Questions Presented

  1. Whether a court or an arbitrator must decide the preclusive effect of a prior judicial determination on claims later asserted in arbitration.
  2. Whether collateral estoppel barred Baker's and the PC's NASD arbitration claims based on the prior Alabama judgment.
  3. Whether the PC was in privity with Baker such that it was bound by the prior judgment despite not being a named party.
  4. Whether Merrill Lynch waived its right to resist arbitration by previously moving to compel arbitration in the Florida action.
  5. Whether Alabama Code § 6-5-430 required dismissal on forum non conveniens grounds.

Disposition

affirmed

Cases Cited (36)

  • Baker v. Bennett, 603 So. 2d 928 (Ala. 1992), cert. denied, 507 U.S. 912 (1993)(followed as prior related litigation)
  • State Farm Fire & Cas. Co. v. Owen, 729 So. 2d 834 (Ala. 1998)(overruled prior authority)
  • Baker v. Bennett, 644 So. 2d 901 (Ala. 1994)(followed as prior related litigation)
  • Baker v. Bennett, 660 So. 2d 980 (Ala. 1995)(followed as prior related litigation)
  • Baker v. Bennett, 667 So. 2d 743 (Ala. 1995) (table)(followed as prior related litigation)
  • Baker v. Bennett, 633 So. 2d 91 (Fla. Dist. Ct. App. 1994), review denied, 641 So. 2d 1344 (Fla. 1994), cert. denied, 513 U.S. 1018 (1994)(background)
  • Leon C. Baker, P.C. v. Bennett, 942 F. Supp. 171 (S.D.N.Y. 1996)(background)
  • Wheeler v. First Alabama Bank of Birmingham, 364 So. 2d 1190, 1199 (Ala. 1978)(followed)
  • John Hancock Mut. Life Ins. Co. v. Olick, 151 F.3d 132, 139 (3d Cir. 1998)(persuasive analogy)
  • In re Y & A Group Sec. Litigation, 38 F.3d 380, 382-83 (8th Cir. 1994)(persuasive analogy)

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