Opinion
Civil Action No: 01-475, Section: "J" (2).
October 29, 2004
ORDER AND REASONS
This case involves an employment dispute submitted to arbitration pursuant to an employment contract. Plaintiff seeks to confirm the arbitrator's award in her favor, and the defendant seeks to vacate the award. Ordinarily there is no right to appeal an arbitration award except on very narrow grounds not present in this case. Although the printed form arbitration agreement did not contain any specific appeal provisions, the parties inserted the handwritten phrase "No party waives appeal rights, if any, by signing this agreement". At issue is whether the parties intended to expand the scope of judicial review.
The Court conducted an evidentiary hearing (as ordered by the Fifth Circuit) to divine the parties' intent. After considering the testimony and documentary evidence submitted during the evidentiary hearing, the Court concludes that when there was finally a meeting of the minds and the final version of the arbitration agreement was signed, the parties intended the added language to insure that both parties preserved and did not waive only the limited appeal rights that otherwise existed under the applicable arbitration statutes. Accordingly, for the reasons previously stated in this Court's earlier opinions, the arbitrator's award must be confirmed.
Prescott v. Northlake Christian School, 369 F.3d 491 (5th Cir. 2004).
Rec. Docs. 34 and 49.
BACKGROUND
Pamela Prescott and Northlake Christian School entered into an employment contract dated May 21, 1999. This contract required all employment related disputes to be submitted to "biblically-based" mediation and arbitration. The arbitration process was to be conducted in accordance with the Rules of Procedure for Christian Conciliation ("ICC Rules"), written by the Institute for Christian Conciliation ("ICC"). The ICC Rules are set forth as Part IV of the Guidelines for Christian Conciliation published by the ICC, which is based in Billings, Montana. The parties agreed that this would be the sole method for resolving claims and disputes between them, and expressly waived the right to file a lawsuit, except to enforce a legally binding arbitration award.
In March, 2000, an employment dispute arose between the parties. Prescott filed the instant lawsuit asserting various claims for breach of contract and employment discrimination under Title VII. The School responded by filing a motion to compel arbitration in accordance with the employment contract. Over Prescott's objection, this Court granted the School's motion, ordered the parties to arbitrate their dispute and stayed the case.
Prescott v. Northlake Christian School, 2001 WL 740506 (E.D.La. 2002).
On March 16, 2002, the parties attempted to mediate their dispute, without success. Per their agreement, the parties then proceeded immediately to arbitration. The arbitration hearing began on March 18, 2002 and lasted six full days. On June 14, 2002, the arbitrator issued his judgment, finding in favor of Prescott on her breach of contract claim and awarding damages in the sum of $157,856.52. The arbitrator also awarded defendant $786.46 for past due COBRA payments owed by Prescott. Prescott filed a motion in this Court to confirm the arbitrator's award. The School moved to vacate and set aside the award. On November 13, 2002, this Court confirmed the arbitration award in favor of Prescott, applying the narrow and limited scope of appellate review provided for in the applicable arbitration statutes.
On appeal, the Fifth Circuit reversed and remanded for a determination by this Court of whether the parties intended to expand the otherwise limited appeal rights under the terms of the arbitration agreement. More specifically, the appellate court found that insertion of the handwritten phrase "No party waives appeal rights, if any, by signing this agreement" into an otherwise printed form agreement made the parties' intention ambiguous. Accordingly, the Fifth Circuit remanded "for the district court to take evidence on and contractually interpret the circumstances surrounding the making of the (handwritten) provision," and then "re-evaluate" the School's motion to vacate under the appropriate standard.
DISCUSSION
On September 10, 2004, this Court conducted an evidentiary hearing to receive extrinsic evidence on the parties' intentions with regard to the scope of appellate review. The Court now makes the following findings of fact and conclusions of law.The original, printed form for the arbitration agreement was prepared and furnished by the Institute for Christian Conciliation, a private entity conducting the mediation and arbitration pursuant to the employment contract between Pamela Prescott and Northlake Christian School. The original form did not expressly provide for any appeal rights whatsoever, although it incorporated by reference the Rules for Christian Conciliation published by the ICC.
Prescott initially resisted submitting her employment dispute to arbitration, but ultimately agreed to participate once the ICC and the School advised that, since she had signed an employment contract requiring her to arbitrate and had been ordered by this Court to arbitrate, the ICC and the School intended to go forward with the arbitration whether she participated or not.
Before the final agreement was signed by both parties on the morning the mediation/arbitration process began, there had been several attempts between the ICC and the parties to reach a mutually acceptable arbitration agreement. Initially, Prescott returned the ICC form with several modifications, including the handwritten sentence "No party waives appeal rights by signing this agreement". Prescott testified that she added this language because she was concerned that the printed document did not expressly allow any appeal rights whatsoever, and she wanted to preserve at least the limited appeal rights provided for in the arbitration statutes. The added language was not acceptable to the School, however. Instead, the School, through its attorney, signed the original printed form with no changes.
The parties agreed to mediate first and, if unsuccessful, to proceed immediately to arbitration.
Subsequently, and still prior to the date of the mediation/arbitration, Prescott's attorney once again submitted a modified version of the printed document. Once again, the same handwritten language ("No party waives appeal rights by signing this agreement") was inserted. Again, this inserted language was not acceptable to the School, which again submitted the original printed form with no changes or insertions. It is clear that there was no meeting of the minds as to the arbitration agreement as of that time. Nonetheless, the ICC case manager decided to go forward with scheduling of a date for the mediation/arbitration to commence.
On the morning that the mediation/arbitration was set to begin, the ICC conciliator met separately with the opposing parties, attempting to get a signed arbitration agreement that was mutually acceptable. Prescott, through her attorneys, once again inserted the handwritten language "No party waives appeal rights by signing this agreement". Prescott and her attorneys then signed the modified document. When the modified document was presented by the conciliator to the opposing side, the School's attorney had the words "if any" inserted within the handwritten language previously added by Prescott. With the School's requested insertion, the handwritten language now read "No party waives appeal rights, if any, by signing this agreement." The final agreement was then signed by board members representing the School and its attorney. The parties proceeded to mediation, and then arbitration under this signed agreement.
This handwritten insertion by the School's attorney resulted in a final handwritten provision drafted jointly by the parties, not unilaterally by Ms. Prescott. Accordingly, there is no basis to construe the provision and any ambiguities therein against Ms. Prescott. In the prior appeal of this case, the appellate court was apparently under the mistaken impression that Ms. Prescott was solely responsible for the inserted language. 369 F.3d 491, 497, n. 10.
At the evidentiary hearing on September 10, 2004, Prescott testified that the conciliator came back and explained that the School's attorney had insisted on adding "if any" because he did not believe there were any appeal rights. On the other hand, board member Boyd Leahy testified at the evidentiary hearing that the School's attorney wanted to add "if any" to make it clear that there would be no appeal rights if the parties were successful in mediation. In other words, the School argues that the inserted language was intended to preserve "all appeal rights" from an arbitration award, but no appeal rights from a successful mediation. The Court finds this explanation makes no sense because it is obvious that a successful mediation would mean there would be no need for an appeal. The only point of including any language regarding appeal rights was to clarify the parties' intention in the event there was an arbitration hearing and decision. The Court finds that Prescott's explanation is more credible and logical. The sequence of events as to how and when the handwritten words were inserted into the final, signed agreement, and at whose insistence, lead the Court to conclude that the intention of the parties was to make clear that only those appeal rights provided in the applicable arbitration rules were not waived.
The Arbitration Agreement states that the agreement is subject to arbitration pursuant to the Montana Arbitration Act, Title 27, Montana Code Annotated. Rec. Doc. 22, Exh. B, p. 2.
The School argues that other extrinsic evidence suggests the parties intended to preserve "all" appeal rights. For example, the printed language provided for confidentiality of anything occurring during the mediation or arbitration process. Prescott and her attorneys deleted this provision insofar as it pertained to arbitration. In addition, Prescott's attorneys retained, at their expense, an official court reporter to record the entire arbitration hearing. And during the hearing, there were several references by both attorneys to a possible appeal. Considering the totality of the evidence, the Court does not find that these matters prove there was an intent to expand the scope of appellate review beyond that otherwise provided in the applicable arbitration rules. Although the scope of appellate review provided for under the Montana statute is limited, it is not non-existent. Under the MUAA an arbitration award must be confirmed unless a party makes a timely application to vacate, modify or correct the arbitration award. Mont. Code Section 27-5-311. Judicial review under the MUAA is strictly limited. A reviewing court is not permitted to review the merits of the controversy. The party seeking to vacate, modify or correct the arbitration award has the burden of alleging and proving that one of the statutory grounds exists. In this case, the School seeks only to vacate the arbitration award, not to modify or correct it. Under the MUAA, a court may vacate an arbitration award if:
Initially, the School argued that the Court's review is governed by the Federal Arbitration Act (FAA), 9 U.S.C. Sec. 1, et. seq. As recognized by the Fifth Circuit, the parties contractually adopted the arbitration procedures set forth in the MUAA. 369 F.3d 491, 496. However, since the FAA and the MUAA contain nearly identical limitations on the scope of judicial review, the result in this case would not be changed by application of the FAA.
(a) the award was procured by corruption, fraud, or other undue means;
(b) there was evident partiality, corruption or misconduct by the arbitrator;
(c) the arbitrator exceeded his powers;
(d) the arbitrator refused to postpone the hearing or refused to hear evidence material to the controversy, or otherwise so conducted the hearing so as to prejudice substantially rights of a party.
These are potential issues that might arise during an arbitration hearing and, in that circumstance, an official record of the proceedings might be useful or necessary in connection with a party's application to vacate or modify the arbitration award pursuant to the MUAA.
Considering the language of the agreement itself and the totality of the extrinsic evidence submitted, and construing the agreement in accordance with Louisiana's principles of contract construction, the Court concludes that, in the final version of the agreement signed by both parties, the handwritten language "No party waives appeal rights, if any, by signing this agreement" was intended only to clarify and make express that neither party waived whatever appeal rights were otherwise provided by the applicable ICC and MUAA arbitration procedures. Under both the MUAA and the ICC rules, there are only limited appeal rights. It is true as the School argues, and as recognized by the Fifth Circuit in the earlier appeal of this case, that under Louisiana law, "[a] provision susceptible of different meanings must be interpreted with the meaning that renders it effective and not with one that renders it ineffective." A court should not neutralize contract terms or treat them as "mere surplusage." But the Court concludes that although perhaps it was not necessary to include the handwritten provision at all, it was not "mere surplusage" from the perspective of a layperson such as Pamela Prescott. Prescott was concerned that the lack of any express statement in the original printed form arbitration agreement might waive even the limited appeal rights under the ICC rules and the MUAA. She wanted a statement inserted to clarify that she did not intend to waive all appeal rights. On the other hand, the School (which did not wish to expand the limited appeal rights otherwise provided) was concerned that Prescott's insertion of "No party waives appeal rights by signing this agreement" was overly broad and might allow Prescott to appeal an adverse decision by the arbitrator on grounds not ordinarily permitted under ICC rules or the MUAA. To make clear its intentions, the School's attorney insisted on inserting "if any" within Prescott's language. The phrase "if any" is simply shorthand for "if there are any" and implies the possibility of "none". In other words, the parties agreed to not waive appeal rights if there are any. This implies an understanding that there may in fact be none, but to the extent appeal rights otherwise exist, they are not waived. The suggestion by the School that it intended the handwritten insertion to mean that there would be no appeal rights from a successful mediation, but full appeal rights from an adverse arbitration award lacks credibility and makes no sense in the context of this case. Obviously neither party would appeal a successful mediation, because their dispute would have been amicably resolved. If the mediation was unsuccessful, then they had agreed to proceed immediately to binding arbitration. So the context of the language regarding appeal rights could only relate to an appeal from an adverse arbitration decision.
LA. CIV. CODE Ann. art. 2049 (West 1987).
Lambert v. Maryland Casualty Co., 418 So. 2d 553, 559-60 (La. 1982) (citations omitted).
It is important to note that Prescott was already contractually bound to arbitrate according to ICC rules, and had been ordered by this Court to arbitrate her employment dispute. The arbitration process could and would have proceeded without regard to whether she signed the new agreement or participated in the proceedings. See: ICC Arbitration Rule 37 (Exhibit 35, Bates page no. 265). The ICC and the School had already advised Prescott that they intended to go forward with or without her. The School had no need or incentive to make any concessions to Prescott relating to the terms or conditions for the arbitration process. If Ms. Prescott refused to sign the arbitration agreement, the ICC was prepared to conduct the arbitration pursuant to its own Arbitration Rules, incorporated by reference in the employment contract Prescott had signed. (Exhibit 22). The ICC panel had already refused two motions by Prescott's attorneys to continue the hearing, stating that it intended to proceed with the arbitration as scheduled on March 18, 2002. (Exhibits 27 and 30).
The School also relies on various unrelated forms or standing orders of this Court or the Fifth Circuit which use the phrase "if any" in different contexts, arguing that the phrase "is not used to limit but to unlimit". For example, paragraph 9 of the RICO Standing Order requires the RICO plaintiff to "Describe what benefits, if any, the alleged enterprise receives from the alleged pattern of racketeering activity." According to the School, this means, "describe all such benefits". But it also implies there may be none. In other words, describe all such benefits, if there are any such benefits. The School's reliance on these various forms and standard orders is misplaced.
Rec. Doc. 85, Exhs. 43-45.
Rec. Doc. 85, Exh. 43.
Rec. Doc. 86, p. 20.
For reasons stated more fully in its previous rulings, the Court finds that Northlake Christian School has failed to carry its burden of showing that the arbitration award should be vacated. Plaintiff's arbitration award must be confirmed.
Prescott v. Northlake Christian School, 244 F.Supp.2d 659 (E.D.La. 2002); Prescott v. Northlake Christian School, 2003 WL 282330 (E.D.La. 2003).
For these reasons,
IT IS HEREBY ORDERED that Plaintiff's Motion to Confirm Arbitration Award (Rec. Doc. 22) is GRANTED. IT IS FURTHER ORDERED that Defendant's Motion to Reopen Court Proceedings and Appeal to Trial Court of Arbitration Award/Motion to Vacate or Modify Arbitration Award (Rec. Doc. 21) is DENIED.