In 2004, the AQ Chicken restaurant in Bentonville, Arkansas , was destroyed by a fire; Bradley Ventures suffered property damage, loss of income, and other consequential damages. Joseph James Trybulec, Jr., was charged with arson. The Benton County prosecutor negotiated a plea agreement in exchange for a reduction from the charge of arson; Trybulec pled guilty to reckless burning. At the time of the fire, Trybulec lived with his parents who held a homeowners policy with Farm Bureau that carried a $100,000 personal liability limit. The policy excluded coverage for bodily injury or property damage caused by intentional acts or arising from activities involving illegal purposes.

Bradley Ventures filed a lawsuit against Trybulec and Farm Bureau filed for a declaratory judgment that it had no duty to defend or pay benefits under the homeowners' policy for: (1) the intentional acts; (2) activities involving an illegal purpose; or (3) punitive-damage claims. The insurer claimed that there were no material issues of fact in dispute and asked for a judgment based upon the plea of guilty to reckless burning. Farm Bureau argued that because these actions were intentional it owed no duty to defend and indemnify Trybulec under the homeowners' policy. The circuit court ruled in favor of Farm Bureau.

On appeal to the Arkansas Supreme Court, Bradley Ventures argued that a genuine issue of material fact still remained as to whether Trybulec intentionally started the fire or whether the fire was caused by activity involving an illegal purpose. The argument was that those issues were not “actually litigated” simply because a plea agreement was reached; the contention was that even though Trybulec pleaded guilty to a lesser crime, the elements of his intent and his purpose were not litigated.