A couple of important cases this time – particularly for those involved in either collateral attacks on a final award or questions of litigation waiver. Also, for once there’s something to report on mediation – not a case, but a terrific article on the impediments to settlement.

Arbitration as Collateral Estoppel – Shasha v. Malkin, 2026 U.S. App. LEXIS 3753 (2d Cir. Feb. 6, 2026)(Sack and Perez, CJ; Preska, DJ., sitting by designation)

Res judicata arising from arbitration proceedings bars not only claims actually raised to the arbitrator, but also those that could have been raised. Investors in the Empire State Realty Trust brought an arbitration action, claiming reaches of contract and fiduciary duty, fraud, and violations of the securities laws pursued arbitration claims. They simultaneously filed this lawsuit in order to toll the statute of limitations. After losing in arbitration, Plaintiffs sought to proceed with the litigation as to claims they alleged were not addressed by the arbitration panel. Rejecting this attempt, the Second Circuit holds that the arbitral award constitutes a final judgment on the merits that precludes relitigation of claims that “were, or could have been, raised in the prior action.” Pike v. Freeman, 266 F.3d 78 (2d Cir. 2001)(Emphasis added). The Court of Appeals, in a summary order, and the court below hold that Plaintiffs’ arguments fail on two fronts. First, the panel’s final award explicitly stated it was “in full settlement of all claims and counterclaims submitted to this Arbitration,” with all claims “not expressly granted herein” being “denied.” Second, to the extent that the Plaintiffs here seek equitable relief which they did not ask for in the arbitration, they are wrong, because arbitrators possess “broad and flexible authority to fashion appropriate remedies, including equitable relief.” Benihana, Inc. v. Benihana of Tokyo, LLC, 784 F.3d 887(2d Cir. 2015).

In summary, parties cannot use litigation as a second bite at the apple for claims that should have been brought in arbitration, even when those claims were not asserted or, in general, seek different forms of relief.

Waiver After Morgan

Golden Krust Caribbean Bakery, Inc. v. Sheriff, 2026 U.S. Dist. LEXIS 23729 (S.D.N.Y. Feb. 4, 2026) (Román, J.) – In an important case elaborating on the Morgan doctrine and the Second Circuit’s follow-up case law, Judge Román holds that filing compulsory counterclaims does not waive arbitration rights, at least where the party opposing the waiver claim initiated arbitration before the party arguing for waiver filed suit. Under Morgan v. Sundance, Inc., 596 U.S. 411 (2022), a state may not adopt a waiver rule different from that which it would apply in non-arbitration cases, specifically in that case a requirement of prejudice. Doyle v. UBS Financial Services Inc., 144 F.4th 127 (2d Cir. 2025),resolved a conflict among the Circuit’s district court, holding that waiver requires that a party “knowingly relinquished the right to arbitrate by acting inconsistently with that right.

This case started as an arbitration. Three months into that proceeding Golden Krust brought this action seeking to declare Sheriff’s employment agreement and its attendant arbitration clause null and void. Sherriff filed a five counterclaims. Golden Krust argued that those raising those counterclaims in court waived Sheriff’s he court here holds that there was no inconsistent conduct which manifested that intent. After plaintiffs obtained a preliminary injunction staying the arbitration, Sheriff filed an answer with five counterclaims—breach of contract, promissory estoppel, unjust enrichment, quantum meruit, and breach of the covenant of good faith and fair dealing—expressly reserving her right to arbitrate. Applying Doyle, but also looking to authority outside the Circuit, Judge Román finds no waiver where defendant Sheriff commenced arbitration in October 2024, before plaintiffs Golden Krust filed their declaratory judgment action. He distinguishes Doyle, where defendants sought arbitration only after the district court denied their motion to dismiss. In addition, the court emphasizes that compulsory counterclaims are “required to respond to the litigation or waive the right to bring that claim,” not voluntary expansions of litigation. Schwebke v. United Wholesale Mortgage LLC, 96 F.4th 971, 976 (6th Cir. 2024). Filing a counterclaim within the time frame required by the Federal Rules of Civil Procedure.

This is an important case for lawyers to put in their arbitration law notebook. Judge Román, in what he considers to be a decision of first impression, goes deeply into the law of other jurisdictions, so his decision has value to litigators outside the Second Circuit. This nuanced opinion is an important read.

Collateral Attack on an Award

Center for Excellence in Higher Education., Inc. v. Accreditation Alliance of Career Schools., 2026 U.S. App. LEXIS 3661 (4th Cir. Feb. 5, 2026) (Wynn, J. writing for himself, Diaz,C.J., and Harris, J.) – Complaints which purport to bring independent claims, but actually seek to vacate an arbitration award, must be dismissed as impermissible collateral attacks on the arbitral award. After the Alliance withdrew CEHE’s accreditation and an arbitrator affirmed that decision, CEHE filed both a motion to vacate and a separate complaint alleging due process violations and tortious interference. Joining the Fifth, Sixth, and Tenth Circuits, the Fourth Circuit adopts the rule that “purportedly independent claims are not a basis for a challenge if they are disguised collateral attacks on the arbitration award.” Texas Brine Company., L.L.C. v. American Arbitration Association, Inc., 955 F.3d 482, 487 (5th Cir. 2020). Courts examine “the relationship between the alleged wrongdoing, purported harm, and arbitration award.” Id. at 488. CEHE’s complaint alleged the arbitrator refused to consider evidence of disparate treatment – conduct that the court opines is within the scope of section 10 the FAA, which allows vacatur for “refusing to hear evidence pertinent and material to the controversy.” 9 U.S.C. § 10(a)(3). Its purported harms (loss of students, reputation, and goodwill) all flowed from the loss of accreditation decided by the arbitrator. And the requested relief – a declaration that the withdrawal was arbitrary and capricious, injunctive relief reversing the decision, and damages – was “so intimately connected with the kind of relief one would seek in a Section 10 motion to vacate as to be barred by the impermissible-collateral-attack rule.” In short, litigants cannot evade the FAA’s exclusive remedies by recasting vacatur grounds as independent torts or constitutional claims. So, heads up, counsel, file that application to vacate under the FAA or applicable state law as soon as possible after the award; don’t try an end run around the award.

Waiver of Appeal Rights

Lanesborough 2000, LLC v. Nextres, LLC, 2026 U.S. App. LEXIS 3752 (2d Cir. Feb. 6, 2026) (Park, J., writing for himself, Carney, J., and Robinson, J.) – How can the parties – assuming they would ever want to – carve out the right to take an appeal from an unpleasant District Court decision on an opponent’s motion to confirm? Lanesborough 2000, LLC v. Nextres, LLC, 2026 U.S. App. LEXIS 3752 (2d Cir. Feb. 6, 2026), tells you what does not work, but reserves the question of whether such a waiver is ever possible.

The court holds that a contractual waiver of the “right to appeal” must be clear and unequivocal to foreclose appellate review of a district court’s order confirming an arbitration award. In this case, the parties’ arbitration agreement contained a “Waivers” clause stating: “THE PARTIES HEREBY FREELY WAIVE THE RIGHT TO TRIAL BY JUDGE OR JURY, THE RIGHT TO APPEAL, PRETRIAL DISCOVERY AND APPLICATION OF THE RULES OF EVIDENCE.” After the district court confirmed most of the arbitral award and granted post-award prejudgment interest, Nextres appealed. Lanesborough responded by moving to dismiss, arguing that the quoted portion of the arbitration clause waived any right to seek review beyond the District Court. Finding the waiver provision ambiguous because it “fails to specify what is meant by the ‘right to appeal,'” the Second Circuit proceeds to the merits. Unlike waivers that expressly reference appeals from district court orders confirming or vacating arbitration awards, this clause could plausibly refer to appeals from the arbitration award itself (which do not exist) or appeals from judicial proceedings. Without deciding “whether a clear waiver of the right to appeal a district court’s order confirming, vacating, or otherwise ruling on an arbitration award would be enforceable,” the court leaves that question for another day.

On the merits, the panel affirms the partial confirmation and award post-award prejudgment interest award. However, it reverses the court’s granting of an injunction, as the lower court failed to consider whether its injunction of a state court foreclosure action violated the Anti—Injunction Act.

Parties seeking to waive appellate rights must use precise language that unmistakably references appeals from district court orders, not merely “the right to appeal” in general terms. In light of the rules of several arbitral institutions providing for appeals within that system, they should also be sure that they harmonize their “no appeal” provisions with those rules.

QUICK HITS

Waiver

Crosswhite v. Royal Ent. Events, LLC, 2026 U.S. Dist. LEXIS 24013 (E.D. Va. Feb. 4, 2026) (Payne, S.J.) – The court finds a waiver where defendant, after learning of its right to compel arbitration on October 9, 2025, re-requested a hearing on its motion to dismiss during an October 16 conference call, participated in the October 30 hearing, and obtained a ruling from the court on October 31 – all before filing its motion to compel arbitration on October 20. Re-requesting a hearing, participating in it, and seeking a ruling “are all utterly inconsistent with [defendant’s] right to compel arbitration.” Applying Morgan v. Sundance, Inc., 596 U.S. 411 (2022), defendant must “accept the result of its chosen litigation strategy: waiver of its right to compel arbitration.” Note the difference in timing here compared to that in Gold Krust, above. There, the defendant sought arbitration before it took any judicial action.

Kenneth R. Berman, Column: On Reconsideration: Why Cases Can Be So Hard to Settle, 52 Litigation 55 (Fall 2025)

This thoughtful analysis identifies the structural barriers that make settlement difficult – even when both sides would benefit from resolving their dispute early. Drawing on the prisoners’ dilemma, Berman explains how litigation’s adversarial nature encourages parties to pursue self-interest over common interest, leaving both worse off. Three key obstacles emerge: informational disparities (parties spend heavily to gain factual advantages that shift settlement leverage), resource imbalances (deeper pockets create staying power that reduces settlement incentives), and cognitive biases (each lawyer’s “vision to victory” leads to overconfidence in their own position and undervaluation of the opponent’s offers). Even with perfect information and equal resources, opposing counsel’s competing “visions to victory” create their own settlement impasse. For mediators, the article highlights the challenge of helping parties overcome these ingrained dynamics—lawyers who fall in love with their cases tend to discount mediator assessments, having experienced situations where rejecting settlement advice led to better trial outcomes. Berman advocates a paradigm shift: litigators should see themselves first as problem-solving advisors who explore common interests and creative resolutions before donning their warrior armor. The analysis provides a framework for understanding why parties and their counsel struggle to reach efficient settlements and how mediators can help them reach an agreement.

Enjoy the rest of the week. And a quick reminder – in publishing Highlights, I try to capture the court’s holding. As a working arbitrator, I know that all cases are different. I am not adopting or rejecting the court’s reasoning in any of these blogs.

David A. Reif, FCIArb
Reif ADR
Dreif@reifadr.com