Benasra

In this case we are asked to determine whether a claim for breach of duty of loyalty against the claimants’ former attorneys for representing an opposing party in an arbitration should be foreclosed on res judicata grounds where the claimants had previously submitted an unsuccessful motion to disqualify to the arbitration panel. The trial court granted a defense motion for summary judgment, agreeing that the claim preclusion aspect of res judicata applied to the arbitration panel’s denial of the motion to disqualify. We reverse.

Factual and Procedural Background

The Arbitration

There is little dispute about the essential facts in this matter. Appellant Pour Le Bebe, Inc. (PLB) was a licensee of designer Guess? Inc. (Guess), operating numerous stores out of which it sold Guess-branded merchandise. For reasons not pertinent here, the relationship between the parties soured, and on May 21, 1999, Guess initiated an arbitration against PLB before the American Arbitration Association, seeking to terminate the licensing agreement due to the alleged breach. Guess was represented by respondent law firm Mitchell Silberberg & Knupp, LLP.

It is clear that prior to May 1999,…