Lead Opinion
Nоrthlake Christian School (NCS) attempted to forestall strife with its newly-hired principal Pamela Prescott by entering into an employment contract for “bib-lically-based mediation” or arbitration under the auspices of the Institute for Christian Conciliation, these methods being prescribed as the “sole remedy” for any controversy. When the school’s relationship with Prescott deteriorated, however, Prescott filed suit. The district court ordered ADR. Mediation occurred, then arbitration; NCS appealed a highly adverse and somewhat dubious award back to the court; NCS appealed to this court; and we are forced to remand for further proceedings. So much for saving money and relationships through alternative dispute resolution. Perfeсt justice is not always found in this world.
I. BACKGROUND
NCS hired Prescott as its elementary/preschool principal for the 1999-2000 school year. In a written employment contract, the parties agreed “in conformity with the biblical injunctions of 1 Corinthians 6:1-8, Matthew 5:23,24, and Matthew 18:15-20 ... that any claim or dispute arising out of, or related to, this agreement or to any aspect of the employment relationship” would be referred to “biblically-based mediation” and, if unsuccessful, binding arbitration. The agreement specified that “the arbitration process shall be conducted in accordance with the current Rules of Procedure for Christian Conciliation of the Institute for Christian Conciliation.” Moreover, the parties waived “their respective rights to file a lawsuit against one another in any civil court for such disputes, except to enforce a legally binding arbitration decision.”
In the spring of 2000, NCS told Prescott her contract would not be renewed for the following year and instructed her to vacate the premises of the school by March 31, 2000. She was placed on administrative leave for the duration of the school year contract and was paid her full salary and benefits throughout the contract term.
In February 2001, Prescott filed suit against NCS, its board of directors, and its chief administrator in federal court. She asserted claims for Title VII gender discrimination, sexual harassment, and retaliation, violation of the Louisiana Whistle-blower Protection Act, La. R.S. § 23:967 (2003), and breach of contract. NCS moved to compel arbitration. The court granted NCS’s motion, stayed Prescott’s suit, and administratively closed the case.
To submit their dispute to arbitration, following the failure of mediation, the parties executed a form mediation/arbitration agreement furnished by the ICC. They agreed to be governed by ICC rules, which included conducting the arbitration pursuant to the Montana Uniform Arbitration Act (“MUAA”). Most important, the parties interlineated the agreement in two places. First, the agreement originally provided that all communications, written or oral, “between the parties during the mediation and/or arbitration process
After an unsuccessful attempt at mediation, the parties proceeded before a single ICC arbitrator. Over a six-day period, the arbitrator heard testimony from a multitude of witnesses and reviewed the evidence and affidavits submitted by the parties. On June 14, 2002, the arbitrator determined that NCS had failed to resolve its conflict with Prescott in accordance with Matthew 18, and other biblical scriptures, which he held were incorporated into the terms of Prescott’s employment contract.
NCS next moved to vacate the arbitration award in federal court, and argued, inter alia, that the handwritten amendments to the arbitration agreement expanded the federal court’s scope of review. Under this expanded scope of review, NCS urged the district court to vacate the arbitration award, as a matter of law, because Prescott was not wrongfully terminated, and she was not entitled to damages. The district court disagreed and concluded that the “if any” language “merely preserves whatever appeal rights arе statutorily granted under the MUAA.” The district court rejected NCS’s substantive claims under the MUAA’s narrow scope of review. NCS now appeals that decision to this court.
II. STANDARD OF REVIEW
On a motion to vacate an arbitration award, we review the district court’s findings of fact for clear error and questions of law de novo. Harris v. Parker College of Chiropractic,
In the instant case, we are called upon to determine whether the parties’ arbitration agreement expanded the scope of judicial reviеw beyond that provided in the MUAA. The district court’s interpretation of a contract, including the initial determination whether the contract is ambiguous, is a conclusion of law. American Totalisator Co., Inc. v. Fair Grounds Corp.,
III. DISCUSSION
NCS offers several arguments on appeal: (1) the arbitration agreement expanded the scope of judicial review; (2) the arbitrator erred, as a matter of law, in ruling that NCS breached its contract with Prescott and that Prescott was entitled to damages; and (3) the arbitrator violated several provisions of the MUAA.
In a broad sense, this dispute is subject to the FAA. See Volt Info. Sciences, Inc. v. Board of Trustees of Leland Stanford Junior University,
The FAA, however, does not bar parties from structuring an arbitration by means of their contractual agreements, nor does it preempt all state laws regarding arbitration. See Harris,
A threshold issue is which state’s law governs the interpretation of the arbitration contract. Prescott’s employment agreement provided that the arbitration “was subject to ... the Montana Arbitration Act, Title 27, Montana Code Annotated.” The district court viewed this as a choice-of-law provision concerning the standards for arbitration. NCS contends, correctly, that the reference to the MUAA is not a choice-of-law provision, and that Louisiana law controls the interpretation of the arbitration agreement as an addendum to the employment contract. In Valero Refining, Inc. v. M/T Lauberhorn,
Louisiana law applies to this dispute between a Louisiana resident and a Louisiana school concerning the proper interpretation of a Louisiana contract.
In a handwritten additional paragraph, NCS and Prescott agreed that “[n]o party waives appeal rights, if any, by signing this [arbitration] agreement.” The district court concluded that this language merely preserved whatever appeal rights the MUAA already granted to the parties. This conclusion is far from self-evident. In Gateway, the arbitration agreement provided that “[t]he arbitration decision shall be final and binding to both parties, except that errors of law shall be subject to appeal.”
Even if the parties intended to affect the scope of judicial review with this language, however, their precise intentions concerning expanded review are ambiguous. We reach this conclusion mindful that “[e]ach provision in a contract must be interpreted
These contractual tidbits strongly suggest that the parties intended judicial review to be available beyond the normal narrow range of the FAA or MUAA. Because they cannot compel a firm decision on the face of the contract, however, we find it ambiguous and must remand for the district court to take evidence on and contractually interpret the circumstances surrounding the making of the provision. The court will then be required to reevaluate under the appropriate standard NCS’s challenges to the arbitration award.
IV. CONCLUSION
For the reasons stated above, we VACATE the district court’s order confirming the arbitration award and REMAND for further proceedings consistent with this opinion.
VACATED and REMANDED.
Notes
. On the eve of arbitration, Prescott voluntarily dismissed with prejudice all claims against the individual defendants. Thus, only NCS and Prescott remain parties to this litigation.
. Curiously, the arbitrator employed the biblical passages that were cited as prefatory principles in the contract in order to supersede the actual contract language, which gave Prescott no right to be employed beyond a one-year term. This result appears incompatible with Louisiana law. See Barbe v. A.A. Harmon & Co.,
. The arbitrator rejected Prescott’s Title VII claims, as well as her claim under the Louisiana Whistleblower Protection Act. Prescott did not appeal the rejection of these claims to the district court.
. NCS also filed other post-arbitration motions with the arbitrator. NCS filed an objection to ex parte communications, a motion for a new hearing, and a motion for disclosure contending that new evidence had been uncovered that demanded a hearing. The arbitrator summarily denied these motions on July 31, 2002.
. Under the FAA, a district court may vacate an award only if: (1) the award was procured by corruption, fraud, or undue means; (2) there is evidence of partiality or corruption among the arbitrators; (3) the arbitrators were guilty of misconduct which prejudiced the rights of one of the parties; or (4) the arbitrators exceeded their powers. 9 U.S.C. § 10(a)(2001); Harris,
. Under MUAA, a court may only vacate an arbitration award if:
(a) the award was procured by corruption, fraud, or other undue means; (b) there was evident partiality by an arbitrator appointed as a neutral or corruption in any of the arbitrators or misconduct prejudicing the rights of any party; (c) the arbitrators exceeded their powers; (d) the arbitrators refused to postpone the hearing upon sufficient cause being shown therefor or refused to hear evidence material to the controversy or otherwise so conducted the hearing, contrary to the provisions of 27-5-213, as to prejudice substantially the rights of a party; or (e) there was no arbitration agreement and the issue was nоt adversely determined in proceedings under 27-5-115 and the party did not participate in the arbitration hearing without raising the objection.
Mont.Code. § 27-5-312(l)(2003).
. An arbitration award may be modified or corrected, under the MUAA, only if:
(a) there was an evident miscalculation of figures or mistake in the description of any person, thing, or property referred to in the award; (b) the arbitrators awarded upon a matter not submitted to him and the award may be corrected without affecting the merits of the decision upon the issues submitted; or (c) the award is imperfect in a matter of form not affecting the merits of the controversy.
MontCode § 27-5-313(l)(2003).
. More specifically, NCS argued, in addition to the scope of review issue, that the arbitrator erred in: (1) finding that NCS breached its contract with Prescott; (2) аwarding damages that were unauthorized under Louisiana law; (3) exceeding his contractually limited authority; and (4) engaging in misconduct by participating in ex parte communications with Prescott's counsel, neglecting material evidence, and refusing to disclose circumstances likely to affect impartiality. The district court found against NCS on all grounds, and NCS has appealed each assignment of error to this court.
. See Coghlan v. Wellcraft Marine Corp.
. Furthermore, the instant case is materially distinct from Action Indus., Inc. v. U.S. Fidelity & Guaranty Co.,
Dissenting Opinion
dissenting:
I respectfully dissent from the panel majority’s conclusion that a clause that provides “No party waives appeal rights, if any, by signing this [arbitration] agreement,” when considered on its face or when read in harmony with the other provisions of the parties’ agreement, is ambiguous regarding the parties’ intent to contract for a more expansive scope of review than that otherwise available pursuant to the FAA or the MUAA. The majority accurately sets forth the facts and procedural history of this case, so I will not repeat them here.
The majority concludes that this clаuse, which speaks only in terms of “appeal rights” and contemplates that none may exist, at least arguably evidences the parties’ intent “to expand the scope of judicial review.” The majority reaches this conclusion even though the clause neither identifies a question for our consideration that would not otherwise be reviewable under the FAA or MUAA nor refers to any particular level of scrutiny pursuant to which such review should be conducted. The majority further finds that certain “contractual tidbits ... strongly suggest that the parties intended judicial review to be available beyond the normal narrow range of the FAA or MUAA.” Finally, notwithstanding its uncertainty regarding whether and to what extent the parties’ agreement expanded the scope оf judicial review, the majority concludes that this ambiguity requires that we remand the case to the district court to adduce evidence of the parties’ intentions and “interpret the circumstances surrounding the making of this provision.” Because I find the majority’s determinations irreconcilable with the terms, context, and purpose of the parties’ arbitration agreement and our recent clarification in Action Industries, Inc. v. United States Fidelity & Guaranty Co.,
According to the majority, our opinion in Valero Refining,
In Valero Refining, we rejected the assertion that a clause stipulating that the “laws of the City of New York” would govern the arbitration proceeding
It is clear under Ford that the MUAA clause sufficed to supercede the FAA’s scope of review, and at least provisionally set forth the grounds for vacatur or modification of the arbitration award in the instant case. See id.; Action Industries,
Like the MUAA clause, the clause at the core of this dispute, “No party waives appeal rights, if any, by signing this agreement,” appears in the submission agreement. On its face, this “no waiver” clause indicates that the parties intended only to retain whatever appeal rights they had at the time they added that clause. The majority, rejecting this view as “not self-evident,” finds that NCS’s argument that such an interpretation renders the “no waiver” clause surplusage is sufficiently compelling to create an ambiguity in the parties’ agreement. The majority is further persuaded by the purported absence of any other “provision concerning an appeal of an award” in the parties’ agreement. I disagree with both aspects of the majority’s rationale and its ultimate conclusion that such an ambiguity exists.
First, the majority’s reading — that the clause does not simply retain the MUAA standards' — renders the language “if any” surplusage, and it is the very inclusion of the phrase “if any” that evidences the parties’ express contemplation that the entire clause may be redundant. As the majority acknowledges, under Louisiana law, an interpretation of a contract that has the effect of rendering a provision superfluous or meaningless must be avoided. See La. Civ.Code Art. 2049. Thus, we cannot, as the majority has done, leave out terms of a contract or render them surplusage and then declare that there is an ambiguity, itself a result of refusing to give effect to the contract’s express provisions.
Second, contrary to the majority’s conclusion, the arbitration agreement at issue contains numerous provisions concerning “appeal rights,” all of which reaffirm the parties’ intent that any arbitration award would be final and binding and not subject to appeal “except as provided by law.” In particular, the parties’ employment agreement provided that the parties “waive their respective rights to file a lawsuit against one another in any civil courts for such disputes, except to enforce a legally binding arbitration decision." (emphasis added). The employment agreement also incorporated by reference the ICC rules, which in turn provided that “[t]he arbitra
Nor do the aptly-labeled “contractual tidbits” cited by the majority compel the contrary conclusion that the parties’ added language intended to expand the scope of judicial review. That the parties’ agreement authorized “a court of law” to review written and oral communications might, as the majority concludes, support the notion that they contemplated an expanded review. However, it is also wholly consistent with an intent to allow consideration of the arbitration award only under the narrow grounds available under the FAA, or, in this case, the MUAA, which, for example, permit vacatur where an arbitrator’s failure to consider relevant evidence has substantially prejudiced a party. See 9 U.S.C. § 10(a)(3); Mont.Code § 27-5-312(l)(d). In the absence of record evidence, or the authorization to review written and oral communications, the reviewing court would encounter great difficulty in assessing an alleged error by the arbitrator based on this ground.
Similarly, Prescott’s insistence that the arbitral proceedings be transcribed do not persuade me to leаn in favor of finding an intent to expand the scope of judicial review. The application of a narrow scope of review (limiting the grounds open for our consideration) or a deferential standard of review (setting forth how hard we must look at such grounds) does not obviate the need for a record. See, e.g., Prestige Ford v. Ford Dealer Computer Servs., Inc.,
Finally, even if I were to agree with the majority that the “no waiver” clause at issue is ambiguous regarding the parties’ intent to expand judicial review, the very existence of ambiguity means that at best this clause may be deemed a failed attempt to аlter the scope of review otherwise available under the MUAA. Our recent decision in Action Industries, 358 F.3d at
As examples of clauses that met the requisite level of exactitude, the Action Industries panel pointed to the clauses in Gateway,
In Harris, we refined Gateway’s, holding by establishing that an agreement that merely reserves the “right to appeal any questions of law,” does not necessarily mean that de novo review applies to all issues on appeal. See Harris,
Wе also found that the canon of contract construction requiring courts to “give effect to all contract provisions so that none will be rendered meaningless” compelled our narrow interpretation of the clause. Id. We noted in Harris that because the arbitrator’s legal conclusions “were intimately bound up with the facts,” none of his findings would be final if we were to review de novo all mixed questions of fact and law. Id. Thus, we reasoned, a broad reading of “questions of law” to encompass mixed questions would render meaningless “the provision that the arbitrator’s award should be binding.” Id. Accordingly, we concluded that “questions of law” had to be construed as referring to only “pure” legal questions in order to give effect to this finality provision. We further pointed out that parties seeking “more extensive review of an arbitrator’s award may do so by specifying the standard of review in the arbitration agreement.” Id. (citing Hughes Training,
In light of our circuit precedent as clarified in Harris and Action Industries, I cannot agree with the majority’s view that a clause which, by the majority’s own admission is at best ambiguous regarding the parties’ intent to expand judicial review, requirеs remanding the matter for further inquiry into the circumstances surrounding its drafting. In Harris and Action Industries, we did not remand the matter for the district court to take evidence on the parties’ intent; rather, we established that the applicable statutory standard would govern to the extent of the deficiency in specificity. See Harris,
. The clause at issue provided: "Any and all differences and disputes of whatsoever nature arising out of this Charter shall be put to arbitration in the City of New York pursuant to the laws relating to arbitration there in force.” Valero Refining,
. The arbitration agreement stated that arbitration of any claim must be settled “in accor
. Unlike Harris, however, in the instant case the parties' employment contract provided that "This contract shall be interpreted under ... Louisiana [law] as if jointly authored, by the parties,” rendering it inappropriate to construe the added "no waiver” language against the drafter of that clause, (emphasis added). Of course, we' only resort to this principle of contractual interpretation where the contested language is ambiguous and, as I have discussed above, I do not agree that any such ambiguity surrounds the "no waiver” clause at issue in this case.
