                                                                           FILED
                           NOT FOR PUBLICATION                              JUL 17 2013

                                                                        MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                       U.S. COURT OF APPEALS



                            FOR THE NINTH CIRCUIT


HYDRA-PRO DUTCH HARBOR INC.,                     No. 12-35199

              Plaintiff - Appellant,             D.C. No. 2:08-cv-01695-RAJ

  v.
                                                 MEMORANDUM*
SCANMAR AS,

              Defendant - Appellee.


                    Appeal from the United States District Court
                      for the Western District of Washington
                    Richard A. Jones, District Judge, Presiding

                        Argued and Submitted July 8, 2013
                              Seattle, Washington

Before: KLEINFELD, M. SMITH, and N.R. SMITH, Circuit Judges.

       The district court erred when it granted summary judgment for Scanmar on

Scanmar’s counterclaims (the “Counterclaims”) based on the outcome of the




        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
Norwegian arbitration proceeding (the “Arbitration”).1 Washington law controls

whether the Arbitration has preclusive effect. See Jacobs v. CBS Broad., Inc., 291

F.3d 1173, 1177 (9th Cir. 2002). Under Washington law, issue

preclusion—commonly called collateral estoppel—requires the party seeking

preclusion to establish that:

      (1) the issue decided in the earlier proceeding was identical to the issue
      presented in the later proceeding, (2) the earlier proceeding ended in a
      judgment on the merits, (3) the party against whom collateral estoppel
      is asserted was a party to, or in privity with a party to, the earlier
      proceeding, and (4) application of collateral estoppel does not work an
      injustice on the party against whom it is applied.

Christensen v. Grant Cnty. Hosp. Dist. No. 1, 96 P.3d 957, 961 (Wash. 2004).

Here, the parties do not dispute that the Arbitration resulted in a judgment on the

merits. However, Scanmar fails to demonstrate the remaining three elements.

      First, Scanmar cannot show that the Arbitration decision addressed issues

identical to those raised by the Counterclaims. See Regan v. McLachlan, 257 P.3d

1122, 1127 (Wash. Ct. App. 2011). Further, we reject Scanmar’s argument that the



      1
         We reject Hydra-Pro Dutch Harbor, Inc.’s argument that the district court
erred by granting summary judgment sua sponte without reasonable notice under
Federal Rule of Civil Procedure 56(f). The district court specifically ordered the
parties to brief the issue preclusion question at least twice. Accordingly, the
parties had “a fair opportunity to contest the issues decided” as required by Rule
56. See United States v. 14.02 Acres of Land More or Less in Fresno Cnty., 547
F.3d 943, 955 (9th Cir. 2008).
                                          2
Arbitration decision’s factual findings establish the Counterclaims, regardless of

whether the legal issues were identical. Even if factual findings were to preclude

further litigation of those facts under Washington law, see id., despite the privity

and “works injustice” issues discussed below, the Arbitration findings do not prove

each element of the Counterclaims under Washington law, see Leingang v. Pierce

Cnty. Med. Bureau, Inc., 930 P.2d 288, 300 (Wash. 1997) (reciting the elements of

tortious interference with business expectancy). Similarly, we reject Scanmar’s

argument that HPDH admitted statements of fact from the district court’s

September 20, 2010 order and that those facts establish the Arbitration’s preclusive

effect. The document that Scanmar argues is evidence of the “admissions” does

not show HPDH’s agreement with any specific facts, and the record nowhere else

supports Scanmar’s argument.

      Second, HPDH was not a party, or in privity with a party, to the Arbitration.

While a related company, HPSEA, was a party to the Arbitration, HPDH was not

in privity with HPSEA. Washington courts will find privity “only when the

nonparty participated in the former adjudication, for instance as a witness, and

when there is evidence that the subsequent action ‘was the product of some

manipulation or tactical maneuvering.’” Stevens Cnty. v. Futurewise, 192 P.3d 1, 9

(Wash. Ct. App. 2008) (quoting Garcia v. Wilson, 820 P.2d 964, 967 (Wash. Ct.


                                           3
App. 1991)). Here, nothing suggests that HPDH (as distinct from officers of

HPDH) participated in the Arbitration. Further, HPDH has not engaged in tactical

maneuvering to defend against the Counterclaims in the instant suit rather than the

Arbitration. Indeed, it was Scanmar that successfully opposed HPDH’s attempt to

intervene in the Arbitration.

      Third, Scanmar’s claim that preclusion does not work injustice to HPDH is

unwarranted. Exclusion from the Arbitration deprived HPDH of “an

unencumbered, full and fair opportunity to litigate [its] [defenses] in a neutral

forum . . . .” Nielson ex rel. Nielson v. Spanaway Gen. Med. Clinic, Inc., 931 P.2d

931, 935 (Wash. Ct. App. 1997) (internal quotation marks omitted). As such, it

would be unjust to saddle HPDH with the outcome of the Arbitration where

Scanmar actively blocked HPDH’s participation in the proceeding.

      REVERSED and REMANDED.




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