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THE ARBITRATION RULING THAT THE CONTRACT WAS TERMINATED UNDER A “FRUSTRATION OF PURPOSE” THEORY PRECLUDED, UNDER THE DOCTRINE OF RES JUDICATA, ANY CONSIDERATION OF THE BREACH OF CONTRACT CAUSES OF ACTION THAT AROSE FROM THE SAME FACTS (FIRST DEPT).

The First Department, in a detailed full-fledged opinion by Justice Oing, determined the arbitration-ruling that a multi-million dollar contract for construction and operation of a liquid-natural-gas-related facility was terminated under a “frustration of purpose” theory precluded consideration of the breach of contract causes of action (res judicata). New technology for the extraction of natural gas from shale had rendered the liquid natural gas facility obsolete. The opinion is much too detailed to fairly summarize here. In simple terms, the arbitration ruling precluded the breach of contract causes of action under the doctrine of res judicata because all arose from the same facts:

Under the transactional analysis, the test is to determine whether a claim should be precluded by viewing a claim or cause of action as conterminous with the transaction, regardless of the number of substantive theories or variant forms of relief available to a litigant … . The analysis embraces a broadened view of the scope of a claim in order to limit the number of possible actions arising out of a single controversy … . The application of this test means that a final judgment on the merits of a claim or claims will bar future claims or causes of action arising from “all or any part of the transaction, or series of connected transactions, out of which the [prior] action arose” … . The question for us to resolve is whether the [breach of contract causes of action] arise from “all or any part of the transaction, or series of connected transactions” out of which the prior arbitration arose. We hold they do. Gulf LNG Energy, LLC v Eni S.p.A., 2024 NY Slip Op 04517, First Dept 9-24-24

Practice Point: Here an arbitration ruling that the contract was terminated for “frustration of purpose” precluded, under the doctrine of res judicata, any consideration of the breach of contract causes of action that arose from the same facts.

 

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