ISSUE PRECLUSION

Hansen v. Musk, 122 F.4th 1162

Hansen was employed by US Security Associates (USSA) as an investigator. Tesla outsourced its security function to USSA and Hansen was assigned to Tesla’s Nevada plant. He purportedly found evidence of narcotics trafficking and the improper awarding of contracts at the plant and reported this to Tesla management. Instead, he claimed that Tesla ordered USSA to remove him from the plant, allegedly at the direct request of Elon Musk. Hansen sued USSA, Tesla, and Musk, asserting violation of the Sarbanes-Oxley Act (SOX), and tortious interference with and breach of contract. The defendants moved to compel arbitration of the contract claims but not of the SOX claim because SOX, by its terms, is not arbitrable. The motion was granted and the SOX claim was stayed. Hansen then added a claim under the Nevada RICO Act and a whistleblower claim under the Dodd-Frank Act. The arbitrator ruled against Hansen on all the claims. The defendants moved to confirm the award and to dismiss the SOX claim because the arbitrator’s rulings precluded the trial of the SOX allegations. The district court granted both motions and Hansen appealed.

The Ninth Circuit affirmed. The FAA contains an express statutory command that a federalcourt judgment confirming an arbitrator's decision be given the same force and effect as any other judgment from a federal court, including the same preclusive effect. And although 18 U.S.C. § 1514A(e) states that SOX claims may not themselves be subject to predispute arbitration agreements, nothing in the statute clearly limits the issue-preclusive force of a confirmed arbitral award's resolution of issues within the arbitrator's jurisdiction. Absent a clear and manifest expression of congressional intent, the court declined to presume that another statute displaced the FAA's requirements.