Prescott v. Northlake Christian School

United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT July 8, 2005
Charles R. Fulbruge III
No. 04-31182 Clerk
Summary Calendar
PAMELA L. PRESCOTT,
Plaintiff - Appellee
versus
NORTHLAKE CHRISTIAN SCHOOL; ET AL,
Defendants
NORTHLAKE CHRISTIAN SCHOOL,
Defendant-Appellant
Appeal from the United States District Court
for the Eastern District of Louisiana
(No. 2:01-CV-475)
Before WIENER, BENAVIDES, and STEWART, Circuit Judges.
PER CURIAM:*
Defendant-Appellant Northlake Christian School (“NCS”) appeals
the district court’s order enforcing an arbitration award against
NCS obtained by its former employee, Plaintiff-Appellee Pamela
Prescott. We affirm the district court’s enforcement order.
I. FACTS AND PROCEEDINGS
NCS’s appeal is the latest chapter in its five-year-old
employment dispute with Prescott; indeed, this is the second time
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
that these parties have come before us regarding the validity of
the arbitrator’s award.1 As we detailed the facts underlying this
dispute in our Prescott I opinion, we shall not repeat them here.
We shall, however, briefly review the background proceedings for
the sake of clarity.
After being fired from her job as principal at NCS, Prescott
brought suit in the district court, alleging Title VII and various
state law claims, including breach of her employment contract.
After NCS moved successfully to compel arbitration, such
proceedings were conducted according to the Rules of Procedure for
Christian Conciliation (“Rules”) of the Institute for Christian
Conciliation (“ICC”). In arbitration, Prescott prevailed on her
breach of contract claim and was awarded approximately $ 150,000 in
damages for reputational harms and loss of future income. In
reaching his decision, the arbitrator determined that NCS had
wrongfully discharged Prescott by failing to follow Biblical
precepts, as required in her employment contract; specifically, the
conflict resolution process described in Matthew 18.2
NCS immediately returned to federal district court, this time
requesting vacatur of the arbitrator’s award. NCS insisted that,
even though the parties’ arbitration agreement specified that
1
See Prescott v. Northlake Christian Sch. , 369 F.3d 491,
493 (5th Cir. 2004) (hereinafter “Prescott I”).
2
All employment contracts at NCS require individuals to
follow this process, as well as other provisions of scripture in
their every-day dealings with students and other employees.
2
proceedings would be conducted under the Rules of the ICC and the
Montana Uniform Arbitration Act (“MUAA”),3 the parties had actually
contracted for plenary judicial review of the arbitration
proceedings when they struck through language in NCS’s form
arbitration agreement, thereby making communications between the
parties confidential and inadmissible in a court of law. The
parties had also inserted a hand-written provision stating that
“[n]o party waives appeal rights, if any, by signing this
agreement.”4 NCS reasoned that, under this expanded scope of
review, the district court had jurisdiction to address and hold
that the arbitrator misconstrued Prescott’s employment contract as
well as applicable Louisiana law. NCS also argued that the
arbitrator exceeded his authority and was impermissibly biased ——
both grounds for vacatur under the MUAA.
The district court ruled against NCS, holding that the parties
had not expanded the scope of judicial review of the arbitration
3
Mont. Code Ann. § 27-5-101 et seq. The parties agreed to
be bound by the Rules of Procedure for Christian Conciliation of
the ICC. In their arbitration agreement, the parties also agreed
to conduct the arbitration proceedings according to the MUAA,
which provides the relevant standard of review and other
procedural requirements not covered by the ICC rules.
4
Although, generally, the Federal Arbitration Act (“FAA”),
9 U.S.C. § 1 et. seq., governs a federal court’s consideration of
matters involving arbitration, parties are free to contract for
expanded judicial review of their arbitration proceedings.
Action Indus. v. U.S. Fid. & Guar. Co., 358 F.3d 337, 340 (5th
Cir. 2004); Harris v. Parker Coll. of Chiropractic, 286 F.3d 790,
793 (5th Cir. 2002); Gateway Technologies, Inc. v. MCI
Telecommunications, Corp., 64 F.3d 993, 996-97 (5th Cir. 1995).
3
proceedings and that NCS had not shown that it was entitled to
vacatur under the MUAA’s narrow standard of judicial review of
proceedings in arbitration. NCS appealed this ruling to us in
Prescott I.
Holding that the parties’ handwritten strike-outs and their
insertion to their arbitration agreement were ambiguous, we vacated
the district court’s order and remanded with instructions for the
district court to hold an evidentiary hearing. In so doing, we
directed the district court to “take evidence on and contractually
interpret the circumstances surrounding the making of the
provision.”5 On remand, the district court held an evidentiary
hearing as instructed, after which it again concluded that the
parties had not contractually expanded the scope of review and
again ordered enforcement of the arbitrator’s award for the reasons
given in its previous opinion.
In the instant appeal, NCS challenges the district court’s
determination that the arbitration agreement did not expand the
parties’ right to judicial review on appeal. In addition, NCS now
contends that it was entitled to a jury trial on the question of
interpretation of the arbitration agreement, not just the making of
that agreement, reiterating the contention that the district court
erred in its earlier order enforcing the arbitration award in favor
of Prescott.
5
369 F.3d at 497-98 (emphasis added).
4
II. DISCUSSION
A. The Ambiguous “Appeal Rights” Clause
1. Standard of Review
We review the district court’s findings of facts for clear
error.6 “The burden of showing that the findings of the district
court are clearly erroneous is heavier if the credibility of
witnesses is a factor in the trial court's decision.”7 “A factual
finding is not clearly erroneous if it is plausible in light of the
record read as a whole.”8
2. The Evidentiary Hearing
On remand from Prescott I, the district court heard testimony
from the parties as to whether, in amending their arbitration
6
Prescott I, 369 F.3d at 494. We erroneously stated in
Prescott I that this provision and any ambiguities therein must
be construed against Prescott, as she had added the language.
Id. at 497 n.10. It is undisputed at this time that NCS added
the language, “if any” to the contract, thus this language should
be construed against NCS. See La. Civ. Code Ann. § 2056 (“In
case of doubt that cannot be otherwise resolved, a provision in a
contract must be interpreted against the party who furnished its
text.”); Lifemark Hosp., Inc. v. Liljeberg Enters., 304 F.3d 410,
440 (5th Cir. 2002)(construing contract language against drafting
party pursuant to Louisiana law). The parties’ employment
contract contained a clause providing that the contract’s
language should be construed according to Louisiana law; although
the arbitration agreement did not contain such a provision, it is
a contract entered into in Louisiana by two Louisiana parties,
and therefore we employ Louisiana law in our analysis of the
contractual language. Prescott I, 369 F.3d at 496.
7
Coury v. Prot, 85 F.3d 244, 254 (5th Cir. 1996)(citation
omitted).
8
United States v. Valencia, 44 F.3d 269, 272 (5th Cir.
1995).
5
agreement, they had intended to expand the scope of any subsequent
judicial review. Prescott testified that she understood at the
time that she had only a limited right of appeal but that she
wanted to confirm in writing that, by signing the arbitration
agreement, she was not waiving or curtailing even this limited
right of review. To that end, she requested that the parties
include a clause stating that “No party waives appeal rights by
signing this agreement.” Prescott testified further that NCS twice
rejected her suggestion but finally agreed to accept her
modification on the condition that the words “if any” be inserted
after “appeal rights.”
Boyd Leahy testified on behalf of NCS that the clause was
added to preserve all appeal rights in the event that there was no
successful mediation. He claimed that the words “if any” were
added to the clause because, if the mediation had been successful,
there would have been no appeal.9
NCS also argued to the district court that the conduct of the
parties demonstrated their belief that they had contracted for
appeal rights beyond those guaranteed by the MUAA. NCS emphasized
that (1) Prescott had hired a court reporter to transcribe the
entire arbitration hearing, (2) during the arbitration proceeding,
the parties discussed possible appeal to the Fifth Circuit, (3)
9
Leahy added, however, that he understood that he agreed to
arbitration with a right of appeal in the case of mistake or
unfair decision, the same right of appeal guaranteed under the
MUAA.
6
Prescott proffered evidence for consideration on appeal, and (4)
she agreed to the arbitrator’s retaining custody of disputed
evidence pending final appeal.
The district court ruled in favor of Prescott, holding that
the phrase “if any” was inserted to preserve appeal rights normally
guaranteed by the MUAA. He interpreted “if any” to mean “if there
are any,” a phrase that implies the possibility of none. “In other
words,” ruled the district court, “the parties agreed to not waive
appeal rights if there are any.” NCS’s insistence on adding the
words “if any” to the contract, the court concluded, demonstrated
its own concern that, without these words, Prescott might be
allowed to appeal the arbitrator’s decision on grounds not
permitted by the MUAA. The court stated that NCS’s explanation that
“if any” referred to the possibility that there would be no appeal
rights if mediation was successful “makes no sense because it is
obvious that a successful mediation would mean there would be no
need for an appeal.” The only reason for including language
regarding appeal rights under these circumstances, reasoned the
court, “was to clarify the parties’ intention in the event there
was an arbitration hearing and decision.”
In contrast, the district court found credible Prescott’s
explanation that she was concerned that the arbitration agreement
stated that “arbitration will be the exclusive remedy for this
dispute and...we may not later litigate these matters in civil
court” without reference to the appeal rights available under the
7
MUAA. And, the court disagreed with NCS’s characterization of the
parties’ conduct, finding that it indicated only that they were
aware that some ground for appeal was available, not necessarily
that they would be entitled to plenary judicial review.
NCS also cites Prescott’s communications with the ICC prior to
the mediation as evidence of her intent to gain plenary appeal
rights, noting that she stated in a letter protesting the ICC’s
jurisdiction that she intended to participate, “reserving every
right to exhaust every appeal.” This proves nothing, however; a
reading of the entire letter shows that Prescott’s primary concern
was her perception that the ICC was biased in favor of NCS. Her
letter makes clear that she felt herself cheated out of a fair
trial and considered the ICC a willing party in “this evil attempt
to permanently damage my professional and personal integrity...
thus becoming a biased party supporting NCS in this action.”
Prescott also referred to the ICC as “a biased party to this
conspiracy to effectively strip away my guaranteed Constitutional
rights....” The MUAA provides for vacatur of awards granted by a
biased arbitrator.10
The district court committed no error in determining that the
parties did not intend to expand the scope of judicial review. The
court’s conclusion —— that Prescott intended only to preserve what
rights she thought she had and that NCS intended to ensure that she
10
Mont Code Ann. § 27-5-312(1)(b).
8
did not gain any appeal rights to which she was not already
entitled —— is plausible. Even if the court had not credited
Prescott’s explanation that she wished only to preserve her rights
under the MUAA and instead had credited NCS’s explanation that
Prescott wanted plenary appeal rights, NCS’s insertion of the words
“if any” effectively nullified any such effort on her part. Thus,
when the words furnished by each party are construed against the
writer,11 and after noting that NCS made the final change to the
language, it is logical to assume that, in the final revised draft
of the arbitration agreement, the parties intended nothing more
than to reiterate that the appeal rights enumerated in the MUAA ——
and only such appeal rights —— would be available to them. We
affirm the district court’s ruling that the parties did not expand
the scope of review available to them under the MUAA.
B. Jury Trial
After we remanded this case in Prescott I for an evidentiary
hearing on the meaning of the contract’s wording, NCS requested a
jury trial on the interpretation of the contract. The district
court denied this request, noting that motions to enforce or vacate
an arbitration award carry no right to a trial by jury. On appeal,
NCS asserts that the FAA permits parties to demand a jury trial to
resolve factual issues surrounding the making of an arbitration
11
See La. Civ. Code Ann. § 2056.
9
agreement,12 and that this right should also apply to interpretation
of an arbitration agreement as well.
Neither the FAA nor the MUAA provide for a jury trial under
these circumstances. Unlike the FAA, the MUAA makes no explicit
guarantee of a trial by jury at any stage of arbitration-related
litigation.13 As for the FAA, its § 4 allows for a jury trial only
to resolve fact issues surrounding “the making of an arbitration
agreement”14 and applies in proceedings to compel arbitration.
Although the “making of an arbitration of an agreement” could be
broadly construed to include any factual issue surrounding the
writing of the arbitration agreement, we have not done so. In
fact, we have explicitly interpreted § 4 to require that a party
make “at least some showing that under prevailing law, he would be
relieved of his contractual obligation to arbitrate if his
allegations proved to be true.”15 The party must put the existence
12
9 U.S.C. § 4.
13
Compare Mont. Code Ann 27-5-115(1), (2) (directing courts
to proceed summarily to the determination whether there is an
agreement to arbitrate as “[s]uch an issue, when in substantial
and bona fide dispute, shall be immediately and summarily
tried.”) with 9 U.S.C. § 4 (“If no jury trial be demanded by the
party alleged to be in default, or if the matter in dispute is
within admiralty jurisdiction, the court shall hear and determine
such issue.”).
14
9 U.S.C. § 4 (emphasis added).
15
Dillard v. Merrill Lynch, Pierce, Fenner & Smith, Inc.,
961 F.2d 1148, 1154 (5th Cir. 1992). “While Section 4, by its
terms, applies to proceedings to compel arbitration, its
provisions have been deemed applicable also in instances when the
proceeding is initiated by the party seeking to avoid
10
of the agreement to arbitrate itself at issue to create a jury-
triable issue.16 NCS is not seeking a jury determination whether
the parties contracted to arbitrate disputes; they clearly did.
NCS seeks a jury determination only as to the meaning of particular
words of the agreement that the parties acknowledge having made.
In contrast, neither § 10 of the FAA (the portion governing
judicial review of an arbitration award) nor any other part of the
FAA explicitly authorizes jury trials on issues of interpretation
of other aspects of an arbitration agreement. Obviously, NCS’s
argument relates to the enforceability of the contract, an issue
that we have expressly held not to be encompassed within § 4's jury
trial provision.17
NCS also contends that it is entitled to trial by jury by
virtue of Federal Rule of Civil Procedure 38. But of course, Rule
38 only preserves the parties’ right to jury trial in cases in
arbitration.” 8 James Wm. Moore et al., Moore's Federal Practice
§ 38.33 (3d ed. 1999).
16
Id. “[I]t is well-established that ‘[a] party to an
arbitration agreement cannot obtain a jury trial merely by
demanding one.’” Am. Heritage Life Ins. Co. v. Orr, 294 F.3d
702, 710 (5th Cir. 2002) (quoting Dillard, 961 F.2d at 1154).
17
See Am. Heritage Life, 294 F.3d at 710 (holding that
party’s argument that an arbitration agreement was
unconscionable, lacked mutuality, and failed to result from a
meeting of the minds did not impact the “making” of the
arbitration agreement, as required by statute, because a party
contesting the “making” of an agreement for purposes of § 4 must
put the very existence of the contractual agreement to arbitrate
at issue).
11
which the right is guaranteed by the Seventh Amendment or is
provided by statute.18 In determining whether a party enjoys a
right to a trial by jury when the statute does not expressly grant
one, we examine (1) the nature of the issues involved, comparing
them to actions brought in 18th century England before the merger
of law and equity, and (2) the nature of the remedy sought, whether
legal or equitable.19 “In the 18th century, an action to set aside
an arbitration award was considered equitable.”20 And, even though
NCS ultimately seeks vacatur of the arbitrator’s award for damages,
it seeks a jury trial only on the issue whether it contracted to
expand the scope of review of the award, not the award itself. NCS
thus seeks only a declaration of its rights, not a legal award of
damages. NCS enjoys neither a Seventh Amendment nor a statutory
right to a trial by jury under these circumstances.
Finally, in our Prescott I remand for an evidentiary hearing,
we only ordered the district court “to take evidence on and
contractually interpret the circumstances surrounding the making of
the [review] provision.”21 We did not order the district court to
conduct a jury trial. The district court did not abuse its
18
Rachal v. Ingram Corp., 795 F.2d 1210, 1214 (5th Cir.
1986); 8 James Wm. Moore et al., Moore’s Federal Practice § 38
(3d ed. 1999).
19
Tull v. United States, 481 U.S. 412, 417-18 (1987).
20
Teamsters v. Terry, 494 U.S. 558, 566 (1990)(citations
omitted).
21
Prescott, 369 F.3d at 498 (emphasis added).
12
discretion by declining NCS’s request for a jury trial.22
C. Motion to Vacate Award
As the district court did not clearly err in its determination
that the parties did not intend to expand their right of judicial
review, we must consider whether the district court properly denied
NCS’s motion to vacate the arbitration award under the narrow
standard of review applicable to such an issue. NCS insists that
the arbitrator’s award must be vacated because (1) he erroneously
concluded that NCS had breached its employment contract with
Prescott and that she was entitled to damages —— conclusions that
NCS contends are in conflict with Louisiana law —— (2) the
arbitrator exceeded his authority, and (3) the arbitrator was
biased against NCS.
1. Standard of Review
We review a district court’s confirmation or vacatur of an
arbitration award de novo.23 The district court’s scope of review
of an award by the arbitrator, however, is extremely limited.
Although the FAA would normally provide the grounds for vacatur, in
this case the parties’ arbitration agreement specifies that “[t]his
22
Becker v. Tidewater, Inc., No. 04-30243, 2005 U.S. App.
LEXIS 5124 at * 4 (5th Cir. Mar. 30, 2005)(holding that district
court did not abuse its discretion by denying party’s request for
jury trial when party had no independent right to jury trial and
court of appeals had remanded case without instructions that
district court provide such a trial).
23
Gateway Technologies, Inc. v. MCI Telecommunications
Corp., 64 F.3d 993, 996 (5th Cir. 1995).
13
agreement is subject to arbitration pursuant to the Montana
Arbitration Act, Title 27, Montana Code Annotated,” which statement
expresses the parties’ binding agreement that Montana’s procedural
rules will govern the entire arbitration process, including the
review of the award.24 And, the Rules of the ICC do not purport to
change the scope of judicial review of its arbitration decisions,
stating that “[t]he arbitration decision is final and cannot be
reconsidered or appealed except as provided by Rule 41 and/or civil
law.”25 As we noted in Prescott I, the MUAA provides substantially
identical grounds to the FAA for vacatur by the district court:26
to wit,
(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;
24
See Hughes Training Inc. v. Cook, 254 F.3d 588, 593 (5th
Cir. 2001)(concluding that, despite provision in arbitration
agreement stating that FAA governed motions to compel or enforce
arbitration, the agreement’s specific provision stating that “the
arbitration process shall be conducted in accordance with the
Employment Problem Resolution Procedures” meant that “[t]he
procedural rules pertained to the entire arbitration process,
which included the review of arbitration awards.”).
25
ICC Rule 42 (emphasis added).
26
369 F.3d at 494-95. The FAA permits only strictly
limited review —— it has been called “the narrowest known to the
law.” ARW Exploration Corp. v. Aguirre, 45 F.3d 1455, 1462 (10th
Cir. 1995)(quoting Litvak Packing Co. v. United Food & Commercial
Workers, 886 F.2d 275, 276 (10th Cir. 1989)).
14
(c) the arbitrators exceeded their powers;27
The MUAA does not allow for judicial review of arbitration awards
on the merits of the controversy.28 (As NCS has not argued that the
arbitrator manifestly disregarded the law, we do not consider this
27
Mont. Code Ann. § 27-5-312. An award may also be vacated
if the arbitrators refused to postpone a hearing despite
sufficient cause being shown or if there was no arbitration
agreement and the party participating in the hearing objected on
this basis. Id.
28
Geissler v. Sanem, 949 P.2d 234, 238 (Mont. 1997)(holding
party unentitled to vacatur of arbitration award as it had not
demonstrated that arbitrator had exceeded his power, “[i]nstead
of presenting evidence to the District Court that the panel
exceeded its power, Geisslers' appeal alleged only that the panel
had arrived at the wrong result.”); May v. First Nat’l Pawn
Brokers, 887 P.2d 185, 187 (Mont. 1994)(“The MUAA clearly does
not authorize judicial review of arbitration awards on the merits
of the controversy.”). The standard is the same under the FAA.
See United Paperworkers Int'l Union v. Misco, Inc., 484 U.S. 29,
38, 98 L. Ed. 2d 286, 108 S. Ct. 364 (1987)(“Courts . . . do not
sit to hear claims of factual or legal error by an arbitrator as
an appellate court does in reviewing decisions of lower
courts.”); Six Flags Over Tex. v. IBEW, 143 F.3d 213, 214 (5th
Cir. 1998)(“The courts have no authority to reconsider the merits
of an award even though the parties may allege that the award
rests on errors of fact or on misinterpretation of the
contract.”); Int’l Bhd of Elec. Workers v. Green Corp., 725 F.2d
264, 268-269 (5th Cir. 1984)(“We refrain from commenting on the
correctness or incorrectness of the arbitrator's factual findings
and legal conclusions. That is not our function. Nor shall we
impress the law of corporations, contracts, evidence, or other
legal rules and concepts upon this situation and then measure the
arbitrator's actions against them. We consider that to be
inconsistent with the national arbitration policy and the many
decisions limiting judicial oversight. What we might have done to
resolve the factual and legal issues were we the deciding body
is of no moment. We are not the trier of fact nor the elucidator
of the bargaining agreement. The arbitrator, by active choice of
the parties, exclusively performs those functions.”).
15
ground for vacatur.29)
2. Mis-interpretation of Louisiana Law
NCS dedicates the bulk of its appellate brief to demonstrating
that the arbitrator misconstrued both Louisiana law and the contract
between the parties. NCS contends that, under Louisiana law, it did
not breach its contract with Prescott and therefore cannot be
liable for damages. Arbitrators have the power to decide issues of
fact and law under the MUAA30 and, as should be obvious, neither the
MUAA nor the FAA permits either the district court or this court to
review the merits of the controversy underlying this arbitration
award.31 We decline to consider NCS’s attacks on the arbitrator’s
interpretation of law or fact.
3. Exceeding the Powers of the Arbitrator
An arbitrator exceeds his powers when he acts outside the
limits of the authority granted to him by the arbitration agreement,
29
Courts reviewing arbitration awards pursuant to the MUAA
or the FAA may also vacate awards if an arbitrator has
demonstrated “manifest disregard” for the law, a non-statutory
court-approved exception to these statutes. Geissler, 949 P.2d
at 237-38 (holding that district courts may vacate arbitration
awards if the arbitrator “is aware of a clearly governing
principle of Montana law, and blatantly refuses to follow it. .
.”); Prestige Ford v. Ford Dealer Computer Servs., 324 F.3d 391,
397 (5th Cir. 2003)(same).
30
Paulson v. Flathead Conservation Dist., 91 P.3d 569, 574
(Mont. 2004).
31
See infra at n. 27.
16
such as deciding issues that have not been submitted to him32 or
acting contrary to express provisions of that agreement.33 As a
general rule, the fact that the remedy ordered by an arbitrator is
inconsistent with state law is not grounds for vacating an award.34
NCS argues that § 27-5-113 of the MUAA exempts employment
agreements from the automatic application of many other portions of
the code, including § 27-5-312(2), which states that the fact that
an arbitrator has awarded damages that a court could or would not
is not grounds for vacatur. Prescott responds that § 27-5-113 of
the Montana Code refers only to labor agreements, as it is titled
“Application to Labor Agreements.”35 Neither party cites any case
law in support of their arguments or stating the converse, that an
arbitrator’s award of damages inconsistent with state law is grounds
for vacatur. As NCS’s argument appears to be in conflict with
32
Nelson v. Livingston Rebuild Ctr., Inc., 981 P.2d 1185,
1187 (Mont. 1999).
33
Paulson, 91 P.3d at 574; Terra W. Townhomes, L.L.C. v.
Stu Henkel Realty, 996 P.2d 866, 871 (Mont. 2000).
34
See Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S.
52, 58 (1995)(holding that, as parties had incorporated
arbitration rules permitting arbitrator to award punitive
damages, such damages were permissible despite New York law
prohibiting award of such damages in arbitration proceedings);
Nelson, 981 P.2d at 1188 (Mont. 1999)(“Without reaching the
merits of whether the damages were correctly awarded in the first
instance, we agree that the arbitrator did not exceed his powers
by awarding them. The fact that the damages might not have been
awarded by a court of law is not grounds for vacating the
award.”)(citing Mont. Code Ann. § 27-5-312(2)).
35
Mont. Code Ann. § 27-5-113.
17
established law, we decline to adopt this expansive construction of
Montana’s statute.36
NCS argues that the arbitrator also exceeded his powers by
awarding on a matter not submitted for resolution and by awarding
damages inconsistent with Louisiana law, despite the employment
contract’s provision requiring that Louisiana law govern the
employment relationship. An award is sustainable against a
challenge that the arbitrator has exceeded his power if the award
can be “rationally inferred” from the contract.37 That we may
disagree with the arbitrator’s interpretation of both law and fact,
including his determination of the kinds of damages allowed by the
contract, is not a grounds for vacatur.38 “To draw its essence from
the contract, an arbitrator's award must have a basis that is at
least rationally inferable, if not obviously drawn, from the letter
and purpose of the agreement. The award must, in some logical way,
be derived from the wording or purpose of the contract.”39
36
See Paulson, 91 P.3d at 574 (holding that awards will be
vacated only if not rationally related to the parties’
agreement); Nelson, 981 P.2d at 1188 (stating that fact that
court could not have awarded same damages as arbitrator was not
grounds for vacatur in employment dispute between individual
employee and company).
37
Terra W. Townhomes, 996 P.2d at 871; Glover v. IBP, Inc.,
334 F.3d 471, 475 (5th Cir. 2003).
38
See id.
39
Glover, 334 F.3d at 475 (quoting Anderman/Smith Operating
Co. v. Tenn. Gas Pipeline Co., 918 F.2d 1215, 1218 (5th Cir.
1990) (internal quotation marks and citations omitted)).
18
First, the statement of issues that the parties submitted to
the ICC for resolution through conciliation included determinations
of, inter alia, (1) whether NCS wrongfully terminated Prescott; (2)
what damages, if any, does NCS owe Prescott; and (3) how and when
should damages be paid. The issues whether NCS breached Prescott’s
employment contract by wrongfully discharging her, as the arbitrator
ultimately found, and what damages should be awarded for that
reason, were plainly placed before the arbitrator by the parties.
Second, the arbitrator’s award of damages is not contrary to
express contractual provisions. In contending that the award is
contrary to the contract, NCS argues that, because the parties
included a Louisiana choice-of-law provision in the employment
contract, they agreed to have their employment relationship governed
by Louisiana law. Therefore, reasons NCS, the arbitrator was
limited to awarding damages that would be available under Louisiana
law.40 The narrow scope of our review limits us to inquiring
40
The Supreme Court has rejected a similar argument in
Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52 (1995).
In Mastrobuono, the parties’ contract included a New York choice
of law provision in addition to an arbitration provision, stating
that arbitration proceedings would be governed by the rules of
the National Association of Securities Dealers (“NASD”). 514 U.S.
at 58-59. Although the NASD rules allowed arbitrators to award
“damages” without reference to punitive damages, New York case
law forbade arbitrators from awarding punitive damages, even
though punitive damages might be awarded by a New York state
court, and the parties’ contract itself was silent on the
subject. Id. at 61. The Court based its decision on an inquiry
into whether the parties intended to exclude or include punitive
damages from arbitration proceedings, eventually concluding that
punitive damages were permissible —— stating that “if contracting
parties agree to include claims for punitive damages within the
19
whether an award is rationally derived from the parties’ contract,
or whether it is contrary to express contractual provisions.41
Thus, we must examine first whether the parties contracted to
restrict arbitration awards to damages ordered by a court of law
applying the substantive law of Louisiana. Neither the employment
contract nor the arbitration agreement specifically mention, or
limit, the kind of damages that may be awarded in the arbitration
proceedings. Both agreements do, however, express the parties’
intention to abide by the Rules of the ICC, which specify that
arbitrators may award
any remedy or relief that they deem scriptural,
just and equitable, and within the scope of the
agreement of the parties, including, but not
limited to, specific performance of a contract.
In making their decisions, the arbitrators
shall consider, but are not limited by, the
remedies requested by the parties.42
issues to be arbitrated, the FAA ensures that their agreement
will be enforced according to its terms even if a rule of state
law would otherwise exclude such claims from arbitration.” Id. at
59, 64. Although this case differs slightly, in that NCS does
not argue that Louisiana law purports to limit the kinds of
damages available in arbitration proceedings, the Court made
clear that the relevant inquiry was whether the parties intended
to exclude punitive damages from consideration in arbitration
proceedings, not whether such damages were available under state
law.
41
Terra W. Townhomes, 996 P.2d at 871.
42
ICC Rule 40(b). Moreover, ICC rule 42 states that
“[s]hould these Rules vary from state or federal arbitration
statutes, these Rules shall control except where the state or
federal rules specifically indicate that they may not be
superseded.” The MUAA contains no restrictions on the amount or
kinds of awards available in arbitration.
20
We hold that the contract’s silence on limitations of damages, when
contrasted with the Rules’ express, broad provision for any manner
of damages the arbitrator deems acceptable, demonstrates that the
arbitrator’s award of damages, even if not available under
substantive Louisiana state law, was not expressly contrary to the
parties’ contract.
The arbitrator’s award is also rationally derived from the
employment agreement. That contract does not state broadly that
Louisiana law will govern every aspect of the employment
relationship between the parties, only that “[t]his contract shall
be interpreted under the laws of the state of Louisiana as if
jointly authored by the parties.”43
More importantly, the employment contract states the
overarching principle that the parties will be governed by biblical
provisions, both in the substantive terms of their employment
relationship and in their arbitration and mediation proceedings.
Specifically, employees are required to affirm that (1) they are
“Born Again” Christians, (2) they have a sense of God’s will and
that their presence at NCS is at God’s direction, (3) they will
43
NCS appears to rely on our language in Prescott I to the
effect that Louisiana law applies to this dispute as support for
its argument that the arbitrator exceeded his powers when he
awarded of damages inconsistent with Louisiana law. See 369 F.3d
at 496. This argument is specious: In Prescott I, we inquired
only “which state’s law governs the interpretation of the
arbitration contract” and decided that, consistent with the
above-cited contractual language, Louisiana law governed the
interpretation of the contract’s language. Id. (emphasis added).
21
manifest the highest Christian virtue and personal decorum in and
out of school, and (4) they will attend and financially support a
local church with fundamental beliefs that are in agreement with the
doctrinal statement of Northlake Christian School. Furthermore,
each employee promised to abide by the precepts of Matthew 18: 15-17
and Galatians 6:1, and to resolve all differences, including those
not submitted to arbitration, according to biblical principles.
This is the provision of the contract that the arbitrator held NCS
to have violated, and this is the violation for which the arbitrator
assessed damages against NCS.44
The parties thus evinced a clear desire to incorporate biblical
provisions into their everyday employment dealings. Whether such
a contract is sustainable under Louisiana law is not a question for
this court: The parties freely and knowingly contracted to have
their relationship governed by specified provisions of the Bible and
the Rules of the ICC, and the arbitrator’s determination that NCS
had not acted according to the dictates of Matthew 18 relates to
that contract. Further, the Rules of the ICC indisputably
contemplate that an arbitrator will have extremely broad discretion
44
Although dicta in Prescott I stated that the arbitrator’s
decision was based on “prefatory language” in the employment
agreement that applied only to the parties’ choice of arbitration
and mediation rules, in fact, such language is also included
within the substantive terms and conditions of employment in the
employment contract. See 369 F.3d at 494 n.2. As that dicta was
not necessary to our decision in Prescott I, it has no binding
effect on our instant review of the district court’s decision on
remand.
22
to fashion an appropriate remedy; and no language in the parties’
contracts expresses their intent to depart from the Rules of the
ICC. We hold that the arbitrator’s award of damages is rationally
derived from Prescott’s employment contract with NCS and not
contrary to any express contractual provisions, either biblical or
secular. Consequently, NCS is not entitled to vacatur of the
arbitrator’s decision on this ground and the district court’s order
enforcing the arbitration award cannot be vacated for the reasons
asserted by NCS.
4. Misconduct by Arbitrator
Finally, NCS asserts that the arbitrator’s award should be
vacated because he participated in ex parte communications with
Prescott’s counsel, neglected to hear material evidence pertinent
to the controversy, and refused to disclose circumstances likely to
affect partiality. NCS contends further that, under either the FAA
or the MUAA, the district court had the power and duty to vacate the
arbitration award because of the arbitrator’s apparent bias.
NCS includes only two sentences on this argument in its brief,
electing instead to direct our attention to documents that it filed
in the district court, which documents NCS purports to adopt by
reference in its brief. But, an appellant must include the
substance of its arguments in the body of its brief: We will not
consider arguments presented only in earlier filings.45 As we do
45
See Yohey v. Collins, 985 F.2d 222, 224-25 (5th Cir.
1993)(holding that appellant had abandoned arguments as “[h]e
23
not consider arguments that are not adequately briefed to us,46 we
decline to entertain NCS’s assertions on this point.
III. CONCLUSION
The district court did not clearly err in deciding to credit
Prescott’s version of events over that of NCS and, accordingly, to
hold that the parties did not expand the scope of judicial review
over the arbitration award. Neither did the district court abuse
its discretion in refusing to order a jury trial to ascertain the
meaning of the party’s hand-written addenda to their arbitration
agreement, because, as a matter of law, NCS was not entitled to
demand a jury trial on this or any other issue, save only the making
of the contract which was not questioned. The district court
correctly determined that NCS had not demonstrated entitlement to
vacatur of the arbitration award on any of the narrow grounds on
which a court of law may vacate such an award. The district court’s
requests, in part, the adoption of previously filed legal and
factual arguments in his objections to the magistrate judge's
report and in various state court pleadings. He specifically
states that he will not repeat such claims. Yohey has abandoned
these arguments by failing to argue them in the body of his
brief.”). In Yohey, we also noted that to permit the appellant
to incorporate arguments from other briefs would lengthen a brief
already at the 50-page limit. Id. NCS’s brief, likewise, is
already quite lengthy at 62 pages.
46
L&A Contracting Co. v. S. Concrete Servs., 17 F.3d 106,
113 (5th Cir. 1994)(holding appeal to be abandoned because
appellant cited no authority in a one-page argument); Fed. R.
App. P. 28(a)(9)(A)(requiring argument to contain “appellant’s
contentions and the reasons for them, with citations to the
authorities and parts of the record on which the appellant
relies”).
24
order enforcing Prescott’s arbitration award is, in all respects,
AFFIRMED.
25