Harris v. Parker College of Chiropractic

• Decision Date: 25 March 2002
• Docket Number: No. 01-10219.,01-10219.
• Parties: Bertha A. HARRIS; et al., Plaintiffs, Bertha A. Harris; Barrie E. Kiger-Nogy; Lee M. Schaffer, Plaintiffs-Appellees, v. PARKER COLLEGE OF CHIROPRACTIC, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

286 F.3d 790

Bertha A. HARRIS; et al., Plaintiffs, Bertha A. Harris; Barrie E. Kiger-Nogy; Lee M. Schaffer, Plaintiffs-Appellees, v. PARKER COLLEGE OF CHIROPRACTIC, Defendant-Appellant.

No. 01-10219.

United States Court of Appeals, Fifth Circuit.

March 25, 2002.

Steven B. Thorpe (argued), Thorpe, Hatcher & Washington, Dallas, TX, for Plaintiffs-Appellees.

Michael Prospero Maslanka (argued), Theresa M. Gegen, Andrews & Kurth Mayor, Day, Caldwell & Keeton, Dallas, TX, for Defendant-Appellant.

Appeal from the United States District Court for the Northern District of Texas.

Before EMILIO M. GARZA, BENAVIDES and STEWART, Circuit Judges.

BENAVIDES, Circuit Judge:

The defendant-appellant, Parker College of Chiropractic ("Parker"), appeals the district court's final judgment, which confirms and adopts the arbitrator's award in favor of the plaintiffs-appellees for violations of Title VII of the Civil Rights Act and the Texas Commission on Human Rights Act.

FACTUAL AND PROCEDURAL BACKGROUND

The plaintiffs-appellees, Bertha A. Harris ("Harris"), Barrie E. Kiger-Nogy ("Kiger-Nogy"), and Lee M. Shaffer ("Shaffer") were employees of the defendant-appellant, Parker. Shaffer was an instructor and one of three department heads within the Center for Chiropractic Sciences at Parker. Harris was the office manager for the Post-Graduate Department at Parker, and Kiger-Nogy worked under the direct supervision of Harris.

In January 1999, Leander Eckard ("Eckard") took charge of the Post-Graduate Department at Parker, becoming Harris' direct supervisor. Starting at that time, and until Eckard voluntarily left the department in April 1999, Harris and Kiger-Nogy allege that Eckard created a sexually and racially hostile environment. In addition, Harris and Kiger-Nogy allege that despite numerous complaints about Eckard's conduct, Parker failed to correct the situation. Harris and Kiger-Nogy eventually resigned. Shaffer, who witnessed Eckard's allegedly harassing behavior, assisted Harris and Kiger-Nogy in their complaints. Shortly after assisting them, Shaffer was informed that his yearly contract to work at Parker had expired and, for the first time in ten years, would not be renewed.

The plaintiffs-appellees filed suit in Texas state court, alleging that Eckard had created and maintained a racially and sexually hostile environment in the workplace, that they had repeatedly reported Eckard's conduct to the administration of Parker without satisfactory results, that Shaffer was terminated from his employment in retaliation because he assisted Harris and Kiger-Nogy in their complaints, and that Harris and Kiger-Nogy were constructively discharged by Parker.

The suit was removed to federal court and later submitted to arbitration under the Texas Arbitration Act, in accordance with an arbitration agreement between Parker and the plaintiffs-appellees. The arbitrator rendered a decision in favor of the plaintiffs-appellees, awarding them damages for lost wages and benefits, and mental anguish, as well as punitive damages. Claims by a fourth plaintiff, Dana Cypret, were denied, as were Kiger-Nogy's and Shaffer's claims for intentional infliction of emotional distress. The award was confirmed by the district court. This appeal ensued.

DISCUSSION

I. Standard of Review

The central question on appeal is what standard of review this Court should employ. This Court reviews a district court's decision refusing to vacate an arbitration award under the same standard as any other district court decision: we accept findings of fact that are not clearly erroneous and decide questions of law de novo. See Hughes Training v. Cook, 254 F.3d 588, 592 (5th Cir.2001). Usually, the district court's "review of an arbitration award is extraordinarily narrow." Antwine v. Prudential Bache Securities, Inc., 899 F.2d 410, 413 (5th Cir.1990). Under the Federal Arbitration Act ("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). An additional ground for vacating an arbitration award is that in making the award the arbitrator acted with "manifest disregard for the law." Williams v. Cigna Fin. Advisors, Inc., 197 F.3d 752, 761 (5th Cir.1999).¹

However, in this case the parties modified the standard of review through a provision in their arbitration agreement. Specifically, the agreement provides that "[t]he Award of the Arbitrator shall be binding on the parties hereto, although each party shall retain his right to appeal any questions of law, and judgment may be entered thereon in any court having jurisdiction." We have previously held that parties may contractually modify the standard of review of an arbitration award. See Gateway Techs., Inc. v. MCI Telecomms. Corp., 64 F.3d 993, 996 (5th Cir.1995) ("Such a contractual modification is acceptable because, as the Supreme Court has emphasized, arbitration is a creature of contract and the FAA's pro-arbitration policy does not operate without regard to the wishes of the contracting parties."). Moreover, we have held that a provision that was substantively identical² to the one at issue here "supplement[ed] the FAA's default standard of review and allow[ed] for de novo review of issues of law embodied in the arbitration award." Id. Thus, in this case, we must apply a de novo standard of review to questions of law.

The difficulty in this case arises from the fact that the parties have not specified the meaning of "questions of law." According to the defendant-appellant, "questions of law" should be interpreted to encompass all of the issues it raises on appeal, including the sufficiency of the evidence to support the arbitrator's findings of hostile work environment and retaliation. The plaintiffs-appellees contend that de novo review should apply only to "pure legal conclusions" and that to allow de novo review of the sufficiency of the evidence will result in retrial of the facts. Moreover, plaintiffs-appellees point out that if "questions of law" is construed to encompass sufficiency of the evidence, then the exception allowing review of questions of law will swallow up the arbitration agreement's rule that "the Award of the Arbitrator shall be binding."

In diversity cases, federal courts apply state law rules of contract construction. Harken Exploration Co. v. Sphere Drake Ins. PLC, 261 F.3d 466, 471 n. 3 (5th Cir.2001). Thus, Texas law applies to the interpretation of the arbitration agreement at issue here. In construing contracts, Texas requires that courts ascertain and give effect to the parties' intentions as expressed in the document. See Lopez v. Munoz, Hockema & Reed, LLP., 22 S.W.3d 857, 861 (Tex.2000). "[W]here an ambiguity exists in a contract, the contract language will be construed strictly against the party who drafted it since the drafter is responsible for the language used." Gonzalez v. Mission American Ins. Co., 795 S.W.2d 734, 737 (Tex.1990) (citation omitted). "Ambiguity does not arise simply because the parties advance conflicting interpretations of the contract; rather, for an ambiguity to exist, both interpretations must be reasonable." Lopez, 22 S.W.3d at 861 (citation omitted).

In the present case, the phrase "questions of law" is ambiguous because the parties have presented at least two reasonable and conflicting interpretations of the phrase.³ The phrase could reasonably be interpreted to encompass solely "pure" questions of law, or it could be read broadly, to encompass mixed questions of law and fact. Given that Parker drafted the agreement, the phrase should be construed against Parker. Thus, "questions of law" should be read narrowly, to encompass only pure questions of law.

The latter interpretation is also compelled by another Texas rule of contract interpretation: "We must ... attempt to give effect to all contract provisions so that none will be rendered meaningless." Kelley-Coppedge, Inc. v. Highlands Ins. Co., 980 S.W.2d 462, 464 (Tex.1998). In the present case, the arbitrator's legal determinations are intimately bound up with the facts, in such a manner that, if all mixed questions of fact and law were reviewed de novo, none of the arbitrator's findings would be final. If the phrase "questions of law" were read broadly, to encompass mixed questions of law and fact, then the provision that the arbitrator's award should be binding would become meaningless. Thus, to give effect to this provision, the phrase "questions of law" must be construed as referring only to "pure" questions of law.

Finally, it is worth mentioning that parties that wish to provide for more extensive review of an arbitrator's award may do so by specifying the standard of review in the arbitration agreement. See Hughes Training, 254 F.3d 588 (holding that the standard of review was contractually modified by a provision in the arbitration agreement that stated...