Full Faith and Credit to State Arbitrability Orders: Third Circuit Holds Pennsylvania Orders Compelling Arbitration Preclude Duplicative Federal Suits, and Federal Repackaging (RICO/Mail Fraud) Does Not Avoid Claim Preclusion

Introduction

In this non-precedential opinion, the United States Court of Appeals for the Third Circuit affirms the dismissal of a pro se author’s federal lawsuit on res judicata grounds after a Pennsylvania state court had compelled arbitration of the same claims. The case, Jeff Baoliang Zhang, Ph.D. v. Dorrance Publishing Co., et al., addresses whether a litigant who is dissatisfied with a state court’s arbitrability ruling may effectively “change the venue” by filing in federal court and appending federal claims. The panel answers no, invoking the Full Faith and Credit Act to require federal courts to give the same preclusive effect to the state court’s arbitrability decision that Pennsylvania courts would. The court also clarifies that:

Alleged errors in the state court’s arbitrability ruling do not strip it of preclusive force; the remedy lies in the state appellate process, not a duplicative federal suit.
Repackaging the same factual allegations under federal labels such as RICO does not avoid claim preclusion, especially where state courts have concurrent jurisdiction over those claims.
There is no private civil cause of action under the federal mail-fraud statute, 18 U.S.C. § 1341.
Pennsylvania’s broad conception of “finality” supports treating orders compelling arbitration as sufficiently conclusive to trigger preclusion.

Case Background and Key Issues

Dr. Jeff Baoliang Zhang authored a book entitled “Accusing the American Judicial System of Rampant Corruption” and contracted in 2010 with the predecessor to Dorrance Publishing Company to publish it. In 2022, he sued Dorrance and two employees in the Pennsylvania Court of Common Pleas (Allegheny County), alleging failures to keep accurate royalty records and to pay royalties, among other claims sounding in breach of contract and fraud. The defendants moved to compel arbitration under a contractual arbitration clause. After an evidentiary hearing, the state court granted the motion on October 12, 2022 and stayed the civil action pursuant to 42 Pa. Cons. Stat. § 7304(d).

Rather than commence arbitration or pursue state appellate remedies, Zhang filed a new federal action in the Western District of Pennsylvania against the same defendants, asserting the same underlying factual allegations and claims, and adding federal claims labeled as mail fraud (18 U.S.C. § 1341) and RICO. As he put it, he sought to “change the venue.”

The defendants moved to dismiss under Rule 12(b)(6), arguing res judicata/claim preclusion and statutes of limitations. A Magistrate Judge recommended dismissal with prejudice; the District Court adopted the recommendation. On appeal, the Third Circuit reviews de novo and affirms on res judicata grounds.

Summary of the Opinion

The Third Circuit holds that the federal action is barred by res judicata because the prior state court decision compelling arbitration is entitled to preclusive effect under Pennsylvania law and the Full Faith and Credit Act. The court addresses three principal points:

Alleged error in the state court’s arbitrability ruling does not negate preclusion. The proper recourse is through state court appellate channels, not a duplicative federal lawsuit.
Adding federal claims (RICO and a purported § 1341 claim) does not avoid preclusion when they arise from the same nucleus of operative fact. Pennsylvania courts have concurrent jurisdiction over RICO claims, and § 1341 provides no private right of action and is properly construed as a common-law claim.
The state court’s order compelling arbitration is sufficiently conclusive to be treated as a final judgment for purposes of preclusion under Pennsylvania’s broad conception of finality, regardless of any debate about immediate appealability.

Because res judicata resolves the case, the court declines to reach statute-of-limitations issues, while noting that Zhang’s challenges to those rulings were unpersuasive and that even any arguably timely contract allegation (relating to a 2021 request for an accessible copy) is precluded because it was or could have been raised in state court. The panel also rejects any equal protection challenge. The judgment is affirmed; a pending motion is denied as moot.

Analysis

Precedents Cited and How They Shaped the Decision

Full Faith and Credit Act — Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 293 (2005): Federal courts must give state court judgments the same preclusive effect they would receive in the rendering state’s courts. The Third Circuit relies on this bedrock principle to import Pennsylvania preclusion law.
State-court error and preclusion — In re Estate of Tower, 343 A.2d 671, 674–75 (Pa. 1975); Clark v. Payne, 390 F.2d 647 (3d Cir. 1968) (per curiam): Alleged legal errors do not defeat preclusion; the remedy is appeal, not relitigation.
Arbitrability rulings are preclusive — Towers, Perrin, Forster & Crosby, Inc. v. Brown, 732 F.2d 345, 348–49 (3d Cir. 1984): A state court’s decision on arbitrability is conclusive of that issue and can be res judicata even if the wrong law was applied. The opinion quotes this “matter of common sense” limitation against serial challenges to arbitrability.
Claim preclusion under Pennsylvania law — Turner v. Crawford Square Apartments III, L.P., 449 F.3d 542, 548–49 (3d Cir. 2006): Pennsylvania law bars later suits arising from the same factual transaction, even if new legal theories are appended. This principle defeats Zhang’s attempt to add RICO and mail-fraud labels to the same underlying allegations.
Concurrent jurisdiction over RICO; arbitrability of RICO — Drohan v. Sorbus, Inc., 584 A.2d 964, 968 (Pa. Super. Ct. 1990) (citing Tafflin v. Levitt, 493 U.S. 455, 466 (1990)): Pennsylvania courts can hear civil RICO claims, and RICO claims, like other claims, are arbitrable. Thus, Zhang could have asserted RICO in state court and cannot avoid preclusion by moving to federal court later.
No private cause of action under § 1341 — Wisdom v. First Midwest Bank, 167 F.3d 402, 407–08 (8th Cir. 1999): The federal mail-fraud statute does not create a private civil claim; the district court properly treated Zhang’s § 1341 count as a common-law claim.
Finality of arbitrability orders for preclusion — Gen. Acc. Fire & Life Assurance Corp. v. Flamini, 445 A.2d 770, 772–73 (Pa. Super. Ct. 1982): Pennsylvania takes a broad view of “final judgment” for res judicata; orders compelling arbitration may be preclusive even if there are questions about technical finality. The Third Circuit leans on this flexible concept of finality.
Preclusion of arbitrability decisions recognized by Supreme Court — Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 10 (1983): A state court’s judgment on arbitrability can be res judicata in later federal proceedings.
Sister-circuit support — Stifel, Nicolaus & Co. v. Woolsey & Co., 81 F.3d 1540, 1545 (10th Cir. 1996): The preclusive effect of arbitrability rulings turns on what they decided, not strictly on their interlocutory character.
Issue preclusion via interlocutory orders — Greenway Ctr., Inc. v. Essex Ins. Co., 475 F.3d 139, 147–48 (3d Cir. 2007), relying on Shaffer v. Smith, 673 A.2d 872 (Pa. 1996) and Restatement (Second) of Judgments § 13; see also Haber v. Biomet, Inc., 578 F.3d 553, 556–58 (7th Cir. 2009): Even interlocutory arbitrability determinations can be preclusive of the arbitrability issue. The panel notes that it would reach the same outcome under collateral estoppel if necessary.
Appealability of orders compelling arbitration in Pennsylvania — Maleski v. Mutual Fire, Marine & Inland Ins. Co., 633 A.2d 1143, 1145–46 (Pa. 1993) (not immediately appealable as a final order); Chilutti v. Uber Techs., Inc., 300 A.3d 430, 436–39 (Pa. Super. Ct. 2023) (collateral order doctrine; appeal granted, 325 A.3d 446 (Pa. 2024)); Pa. R. App. P. 1311(b) (permission for interlocutory appeals). The court underscores that, appealable or not, the arbitrability ruling here is sufficiently conclusive for preclusion.
Standard of review — LabMD Inc. v. Boback, 47 F.4th 164, 178 n.7 (3d Cir. 2022) (de novo review of Rule 12(b)(6) dismissals); United States v. United States Sugar Corp., 73 F.4th 197, 203 n.2 (3d Cir. 2023) (parties cannot waive the applicable standard of review).

Legal Reasoning and Principles Applied

1) Full Faith and Credit and Pennsylvania Preclusion Law

Under 28 U.S.C. § 1738, federal courts must give a state court judgment the same preclusive effect it would receive in that state. The court therefore applies Pennsylvania’s law of res judicata. Pennsylvania takes a pragmatic approach to finality, permitting preclusion where an order is “sufficiently firm” to be accorded conclusive effect, especially when it definitively resolves a threshold issue like arbitrability.

2) Arbitrability Decisions Are Conclusive

The panel emphasizes that once a court has decided that specific claims are subject to arbitration, a losing party cannot re-litigate that issue by filing anew elsewhere. As Towers, Perrin framed it, there must be a limitation on challenges to arbitrability rulings; they are conclusive of that issue. Even if a litigant believes the state court applied erroneous law or misweighed evidence, such alleged errors do not deprive the decision of preclusive effect; the remedy is appeal within the state system, not a duplicative federal action.

3) Same Transaction, New Labels: Still Precluded

The court applies Pennsylvania’s transactional approach to claim preclusion: a party cannot avoid preclusion by advancing a new legal theory based on the same factual nucleus. Zhang attempted to add federal RICO and § 1341 counts to the identical fact pattern he had presented in state court. That tactic fails for two reasons:

As a matter of jurisdiction, Pennsylvania courts have concurrent jurisdiction over civil RICO claims; he could have brought the RICO theory in state court.
As a matter of substantive law, § 1341 does not create a private cause of action; any such claim collapses into common-law theories already subsumed within the preclusion analysis.

4) Finality and Appealability: A Practical, Not Hypertechnical, Approach

While Pennsylvania law has debated the immediate appealability of orders compelling arbitration (contrast Maleski with Chilutti), the Third Circuit does not make preclusion turn on that procedural nuance here. Instead, it adopts a practical view: the arbitrability ruling is sufficiently conclusive for preclusion, consistent with Pennsylvania authority (Flamini) and supportive federal jurisprudence (Moses H. Cone; Stifel, Nicolaus). The panel further notes that even if claim preclusion were debatable, issue preclusion (collateral estoppel) would independently bar a federal re-litigation of the arbitrability issue.

5) Application to the Record

The court underscores that Zhang expressly admitted he filed the federal case to “change the venue” after losing on arbitrability in state court. That concession reinforces that the federal suit is a duplicative maneuver to avoid the state court’s decision—not a distinct controversy.

6) Statutes of Limitations: Not Reached, But Not Promising

Because preclusion disposes of the case, the court declines to reach limitations. Yet the opinion signals skepticism that any of Zhang’s claims would survive limitations even apart from preclusion, noting only a narrow, hypothetical exception (his 2021 “accessible copy” allegation) which is itself precluded because he raised or could have raised it in state court.

Impact

Although non-precedential, the decision is a clear and practical restatement of doctrine at the intersection of arbitration and preclusion, with several concrete implications:

Forum shopping deterrence. Litigants compelled to arbitrate in state court cannot sidestep that outcome by filing a new federal action arising from the same transaction, even if they rebrand their claims under federal statutes like RICO.
Efficiency and finality. The decision promotes comity and judicial economy, preventing repetitive litigation over arbitrability and channeling disputes into their contractually selected forum: arbitration.
RICO practice. The reminder that RICO claims are both arbitrable and within state courts’ concurrent jurisdiction may curb attempts to federalize disputes solely to evade arbitration provisions or state-court rulings.
Claim drafting discipline. Plaintiffs must present all viable theories (state and federal) when challenging arbitrability in the first forum; withholding federal theories for a second bite in federal court will not succeed.
Appellate strategy in Pennsylvania. Parties opposing orders compelling arbitration should promptly pursue available state appellate relief—whether via the collateral order doctrine or permissive interlocutory appeals under Pa. R. App. P. 1311(b)—because failure to do so will not preserve the right to relitigate arbitrability elsewhere.
Substantive housekeeping. The court reiterates that 18 U.S.C. § 1341 (mail fraud) does not provide a private civil cause of action; mislabeling claims under § 1341 cannot create federal-question jurisdiction or avoid preclusion.

Complex Concepts Simplified

Res judicata (claim preclusion): A doctrine that bars a second lawsuit involving the same parties and the same “cause of action” after a court has already issued a sufficiently final decision. Pennsylvania applies a transactional test: if the claims arise from the same set of facts, new legal labels typically do not avoid preclusion.
Collateral estoppel (issue preclusion): Even if a new lawsuit is not barred in full, specific issues actually decided and essential to a prior judgment cannot be relitigated. Here, the arbitrability determination itself would be precluded from relitigation.
Arbitrability: Whether a dispute must be resolved in arbitration rather than in court. Courts decide arbitrability unless the parties clearly delegate that question to the arbitrator. Once a court decides arbitrability, that issue is generally conclusive going forward.
Full Faith and Credit Act (28 U.S.C. § 1738): Requires federal courts to grant state judgments the same preclusive effect those judgments would receive in that state’s courts.
Concurrent jurisdiction: Some federal causes of action (such as civil RICO) can be heard in either state or federal court. This means a plaintiff must assert such claims when litigating in state court or risk losing them through preclusion.
Collateral order doctrine: A narrow exception to the final judgment rule that sometimes allows immediate appeal of important issues separate from the merits and effectively unreviewable later. Pennsylvania’s use of this doctrine for arbitrability orders is evolving, but the Third Circuit found that question immaterial to preclusion here.
Private right of action under § 1341: The federal mail-fraud statute does not authorize private civil suits; it is a criminal statute. Attempting to sue “under § 1341” fails as a matter of law.
Rule 12(b)(6) dismissal with prejudice: A court may dismiss a complaint for failure to state a claim; when dismissal rests on preclusion, amendment is typically futile, justifying dismissal with prejudice.

Conclusion

The Third Circuit’s decision firmly applies established preclusion principles to arbitration gateway rulings. Once a Pennsylvania court has decided that particular claims must be arbitrated, those parties may not relitigate arbitrability by starting over in federal court—even if they reframe the same facts under federal statutes like RICO or label claims under § 1341. Allegations that the state court erred do not negate preclusion; they must be pursued on appeal in the state system. The court’s reasoning is anchored in the Full Faith and Credit Act, Pennsylvania’s broad view of “finality” for res judicata, and a consistent line of authority treating arbitrability determinations as conclusive.

Practically, the opinion is a clear warning against forum shopping after an unfavorable arbitrability ruling. It encourages litigants to marshal all theories timely in the first forum and to use the proper state appellate routes for review. While non-precedential, the opinion cogently synthesizes federal and Pennsylvania authority and will be persuasive in future disputes over the preclusive effect of state-court orders compelling arbitration, the futility of adding federal statutory labels to avoid preclusion, and the non-existence of a private right under the mail-fraud statute.

Note: The opinion is designated “Not Precedential” under Third Circuit I.O.P. 5.7 and does not bind future panels; nevertheless, it provides a thorough and instructive application of preclusion doctrines in the arbitration context.