DMC Rating Category: Developed

Case note contributed by Brian Tretter, an attorney with Healy & Baillie, LLP, in New York. Healy & Baillie are the International Contributors to the website for the USA

Discussion
The defendant, Northlake Christian School ("NCS"), entered into an employment contract with the plaintiff to be the principal of its elementary school. The employment contract contained an addendum clause calling for biblically based mediation and/or arbitration under the rules and procedures of the Institute for Christian Conciliation ("ICC"), which calls for the application of the Montana Uniform Arbitration Act ("MUAA"), as the sole remedy for any controversy. The arbitration agreement also provided that the parties waived their respective rights to file a lawsuit against one another in any civil court for disputes arising under the contract, except to enforce a legally binding arbitration award. The parties inserted a handwritten provision stating that neither party waived its right to appeal, "if any", by signing the arbitration agreement.

In the spring of 2000, NCS informed the plaintiff that her contract would not be renewed for the following school year. The plaintiff filed suit in the Eastern District of Louisiana alleging, amongst others, gender discrimination, breach of contract, and wrongful termination. The District Court, on NCS’s motion, stayed the suit pending mediation and arbitration. After mediation failed, an arbitrator issued an award in favor of the plaintiff pursuant to ICC rules, citing various biblical passages in support of the award.

NCS moved to vacate (set aside) the award on substantive grounds arguing that the handwritten amendments to the arbitration agreement expanded the federal court’s scope of review of the award. The district court held that the "if any" language merely preserved the parties’ statutory appellate rights under the MUAA, which are very narrow.

Judgment
On appeal, the Fifth Circuit held that the clause of the arbitration agreement calling for the application of the MUAA was not a choice of law provision, and therefore Louisiana law applied to the interpretation of the arbitration agreement. Applying Louisiana law, the Fifth Circuit held that further factual development was necessary to determine whether the parties had intended to expand the scope of judicial review. The Fifth Circuit pointed to the handwritten "if any" language as potential evidence of the parties’ intention to expand the scope of judicial review. Based on this ambiguity, the Fifth Circuit remanded the case ordering the District Court to take "further evidence on and contractually interpret" the circumstances surrounding the making of the handwritten provision to determine if, and to what extent, the parties intended to expand the court’s scope of review.

Comment
This decision suggests that it should be possible, upon proper wording in the arbitration clause, to modify and expand the court’s otherwise very limited right to review an arbitration award. As always, however, careful drafting of the arbitration clause is important to ensure that the parties’ intentions can be easily and clearly construed from the contract.