Prescott v. Northlake Christian School

• Citation: 369 F.3d 491
• Decision Date: 04 May 2004
• Docket Number: No. 03-30201.,03-30201.
• Parties: Pamela L. PRESCOTT, Plaintiff-Appellee, v. NORTHLAKE CHRISTIAN SCHOOL; et al., Defendants, Northlake Christian School, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

369 F.3d 491

Pamela L. PRESCOTT, Plaintiff-Appellee, v. NORTHLAKE CHRISTIAN SCHOOL; et al., Defendants, Northlake Christian School, Defendant-Appellant.

No. 03-30201.

United States Court of Appeals, Fifth Circuit.

May 4, 2004.

Victor Roma Farrugia (argued), New Orleans, LA, for Prescott.

Thomas M. Keiffer (argued), Gill & Keiffer, Covington, LA, for Northlake Christian School.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before GARWOOD, JONES and STEWART, Circuit Judges.

EDITH H. JONES, Circuit Judge:

Northlake Christian School (NCS) attempted to forestall strife with its newly-hired principal Pamela Prescott by entering into an employment contract for "biblically-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. Perfect 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 Whistleblower 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.¹

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 shall be inadmissible in a court of law or for legal discovery." The parties crossed out the "and/or arbitration" language, presumably making such communications admissible in a court of law. Second, on Prescott's initiative, the parties added and initialed a hand-written provision, which stated: "No party waives appeal rights, if any, by signing this agreement."

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.² The arbitrator rendered judgment in favor of Prescott on her breach of contract claim and awarded her $157,856.52 for damage to her reputation and for future loss of income.³ The arbitrator also awarded NCS $786.46 for past due COBRA payments. NCS filed a motion to reconsider with the ICC administrator.⁴ The arbitrator denied the motion.

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 are 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, 286 F.3d 790, 791 (5th Cir.2002). Normally, the district court's review of an arbitration award, under the Federal Arbitration Act ("FAA"), is "extraordinarily narrow." Antwine v. Prudential Bache Securities, Inc., 899 F.2d 410, 413 (5th Cir.1990)(stating that, under the FAA, "courts should defer to the arbitrator's decision when possible") (citations omitted).⁵ The scope of judicial review is equally narrow under the MUAA.⁶ The MUAA also permits modification of an arbitration award under limited circumstances.⁷

In the instant case, we are called upon to determine whether the parties' arbitration agreement expanded the scope of judicial review 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., 3 F.3d 810, 813 (5th Cir.1993); Thrift v. Hubbard, 44 F.3d 348, 357 (5th Cir.1995). If the contract is ambiguous, then "the determination of the parties' intent through the extrinsic evidence is a question of fact." Watkins v. Petro-Search, Inc., 689 F.2d 537, 538 (5th Cir.1982).

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.⁸ Because we are uncertain whether, and if so, to what extent, the arbitration agreement expanded the scope of judicial review, we vacate the district court's judgment and remand for further proceedings.

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, 489 U.S. 468, 478-79, 109 S.Ct. 1248, 1255-56, 103 L.Ed.2d 488 (1989)(finding that the FAA applies to "a written agreement to arbitrate in any contract involving interstate commerce"); 9 U.S.C. § 2 (2000). Thus, the FAA, and the body of federal substantive law interpreting it, would typically govern the resolution of this dispute. Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 941, 74 L.Ed.2d 765 (1983)(recognizing that the FAA "create[s] a body of federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the Act").

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, 286 F.3d at 793 (permitting contractual modification concerning standard of review); Specialty Healthcare Mgmt., Inc. v. St. Mary's Parish Hosp., 220 F.3d 650, 654 (5th Cir.2000)(recognizing that the FAA "does not preempt all state law related to arbitration agreements"). We held in Gateway Technologies, Inc. v. MCI Telecommunications Corp., 64 F.3d 993, 996 (5th Cir.1995), that "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."

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, 813 F.2d 60, 64 n. 5 (5th Cir.1987), this circuit determined that contractual language authorizing arbitration in New York City did not constitute a New York choice-of-law provision. Instead, "the provision merely requires that the procedures that the arbitrators use be in accordance with the laws applicable to New York City." Id. at 65 (emphasis in original). Accordingly, the MUAA controls the procedures attendant to the arbitration, but not the interpretation of the underlying contract.

Louisiana law applies to this...