Moishe's argues that the Texas State Judgment constitutes valid grounds for altering or amending the Arbitration Decision. Essentially, Moishe's contends that if I had known about the Texas State Judgment prior to making the Arbitration Decision, I would have ruled differently. I agree. Had I known a competent court had already decided the merits of this dispute, I would not have ruled to compel the parties to arbitrate. See Ank Shipping Co. of Greece v. Seychelles Nat'l Commodity Co., Ltd., 596 F. Supp. 1455, 1458-59 (S.D.N.Y. 1984) (holding that a petition to compel arbitration is barred by res judicata where the merits of a claim had already been addressed by a court of competent jurisdiction).
The primary reason for amending the Arbitration decision is that the Texas State Judgment has a res judicata effect on a subsequent arbitration proceeding. Final judgments of a state court are given full faith and credit in federal court under the doctrine of res judicata. 28 U.S.C. § 1738. See Milltex Indus. Corp. v. Jacquard Lace Co., Ltd., 922 F.2d 164, 166 (2d Cir. 1991). In addition, under the Federal Arbitration Act, decisions by arbitrators must be confirmed by a federal court in order for to be enforceable. 9 U.S.C. § 9. Indeed, an arbitrator's decision is not final until it is confirmed. See 9 U.S.C. § 13. See also Morelite Constr. Corp. v. New York City Dist. Council Carpenters Benefit Funds, 748 F.2d 79, 82 (2d Cir. 1984).
The central inquiry, therefore, is whether the Texas State Judgment is final, meriting full faith and credit, and thereby barring any subsequent federal action under the doctrine of res judicata.
See Merrill Lynch. Pierce, Fenner & Smith v. Haydu, 637 F.2d 391, 395 (5th Cir. 1981). Thus, it is necessary to determine whether the Texas Court Judgment has a res judicata effect under Texas law.
The Texas State Judgment is a default judgment under Texas law. Three types of default exist in Texas: (1) where no answer has been filed; (2) where no answer placing the merits of the case in issue is on file (i.e. judgment nihil decit); and (3) where a defendant has answered but fails to appear for trial. Stoner v. Thompson, 578 S.W.2d 679, 683 (Tex. 1979). While some differences exist between the three types of defaults, see Thomas v. Dubovy-Longo, 786 S.W.2d 506, 507 (Tex. App. 1990), it is clear that Texas considers judgments entered against a party who answers a complaint but then fails to appear at trial to be default judgments. See Leblanc v. Leblanc, 778 S.W.2d 865, 865 (Tex. 1989).
The dispositive issue, therefore, is whether this post-answer default has a res judicata effect on subsequent proceedings. No Texas court has decided this specific issue, but by applying the logic of prior Texas rulings to the case at hand, I must conclude that a post answer default does have a res judicata effect. Under Texas law, the "doctrine of res judicata holds that an existing final judgment rendered upon the merits by a court of competent jurisdiction is conclusive of causes of action and of facts or issues thereby litigated, as to the parties and their privies." Jack v. Jack, 796 S.W.2d 543, 546-47 (Tex. App. 1990), citing Abbott Laboratories v. Gravis, 470 S.W.2d 639, 642 (Tex. 1971).
No-answer default judgments have a res judicata effect under Texas law. Jones v. First Nat'l Bank of Anson, 846 S.W.2d 107, 109-10 (Tex. App. 1992). See also American Acceptance Corp. v. Reynolds, 104 S.W.2d 123, 124 (Tex. App. 1937) (ruling that res judicata applies even "when a party passes by his opportunity, [as] the law will not aid them."). By analogy, post-answer defaults then also have a res judicata effect. Indeed, the differences between post-answer defaults and no-answer defaults provide further support that the Texas State Judgment has res judicata effect. For instance, no answer defaults are not presumed to be final judgments. Houston Health Clubs, Inc. v. First Court of Appeals, 722 S.W.2d 692, 693 (Tex. 1986). Post-answer defaults, on the other hand, are presumed to be final in Texas. Dubovy-Longo, 786 S.W.2d at 608. More importantly, the Supreme Court of Texas has ruled that:
[a] post-answer 'default' constitutes neither an abandonment of defendant's answer nor an implied confession of any issues thus joined by the defendant's answer. Judgment cannot be entered on the pleadings, but the plaintiff in such a case must offer evidence and prove his case as in a judgment upon trial.
Stoner, 578 S.W.2d at 682 (emphasis added). Therefore, in order to have obtained the Texas State Judgment, Moishe's must have put forth evidence that convinced the trial judge of the merits of its claims. Indeed, the trial judge specifically found that:
the plaintiff's case was submitted to the Court and the Court, having read the pleadings and having heard the testimony and considered the evidence, is of the opinion that Plaintiff is not liable to Defendant, HATZLACHH SUPPLY, INC., that Plaintiff should recover judgment against Defendant, HATZLACHH SUPPLY, INC.