Fifth Circuit Court Cases - Case Law and Opinions from the 5th Circuit Federal Court - Court of Appeals

	ROMINGER LEGAL
		Fifth Circuit Court of Appeals Opinions - 5th Circuit
					Need Legal Help?
					Need Legal Help?
LEGAL RESEARCH CENTER
LEGAL RESEARCH CENTER			LEGAL HEADLINES - CASE LAW - LEGAL FORMS	NOT FINDING WHAT YOU NEED? -CLICK HERE

This opinion or court case is from the Fifth Circuit Court or Appeals. Search our site for more cases - CLICK HERE

LEGAL RESEARCH

COURT REPORTERS

PRIVATE INVESTIGATORS

PROCESS SERVERS

DOCUMENT RETRIEVERS

EXPERT WITNESSES

Find a Private Investigator

Find an Expert Witness

Find a Process Server

Case Law - save on Lexis / WestLaw.

Legal News - Legal Headlines

UNITED STATES COURT OF APPEALS
For the Fifth Circuit
No. 97-30185
GENERAL MOTORS CORPORATION,
Plaintiff-Appellant,
VERSUS
PAMELA EQUITIES CORPORATION,
Defendant-Appellee.
Appeal from the United States District Court
for the Eastern District of Louisiana
July 9, 1998
Before EMILIO M. GARZA, STEWART, and DENNIS, Circuit Judges.
DENNIS, Circuit Judge.
This arbitration-related case arises from an original dispute
over whether General Motors Corporation ("GMC"), as a lessee, owes
its lessor, Pamela Equities Corporation ("PEC"), damages for
failure to return leased premises in good condition. The parties
agree that the original dispute is subject to arbitration under an
arbitration clause in the lease contract; and that PEC timely
called for arbitration of the original dispute and appointed its
arbitrator.

This appeal involves further disputes over (1) whether GMC
waived its right to appoint its arbitrator by its failure to name
him within the period allowed by the arbitration clause so that
arbitration must proceed before PEC's arbitrator and an umpire
selected by him; and (2) whether GMC and PEC agreed to submit that
dispute regarding the appointment of the GMC arbitrator and the
composition of the arbitration panel to PEC's arbitrator for
arbitration.
I. BACKGROUND
This case arises under an arbitration clause in a lease
agreement between appellant-lessee GMC and appellee-lessor PEC.1
Article VIII of the lease, entitled "Arbitration," sets forth
the scope of the parties' agreement to arbitrate:
In case any differences arise between the
Lessor and the Lessee regarding the true
meaning and intent of any of the terms and
provisions of this lease or if any dispute
should arise between them regarding the
performance or nonperformance by either of
them of any of the terms, covenants and
conditions hereof, or if any claim is made by
either of them that the other is in default by
reason of the non-performance of any act
provided for hereunder, then, and in any of
such events, the matter in dispute, whether
the same be the performance of an act, the
forbearance of an act, or the payment of
money, shall be submitted to arbitration. . .
.
1 Although not a party to the original 1955 lease agreement
with GMC, PEC became lessor by assignment from the original lessor,
Massachusetts Mutual Life Insurance Company.
2

Section 8.01 of the arbitration provision establishes the
method of selecting arbitrators:
(a) The party desiring arbitration shall
notify the other party, specifying the dispute
and
appointing
an
individual
as
its
arbitrator. Within fifteen (15) days
thereafter the other party shall appoint an
individual as its arbitrator and shall notify
the original party thereof, and failing to
appoint such an arbitrator, such party shall
be bound by the determination of the
arbitrator appointed by the party demanding
arbitration, both as to the selection of an
umpire and the award to be made in the
arbitration proceedings;
(b) The arbitrators so appointed by each of
the parties, or if the party against whom
arbitration is demanded shall fail to appoint
an arbitrator, then the arbitrator appointed
by the party demanding arbitration, shall
within ten (10) days thereafter appoint a
disinterested individual who shall act as
umpire;
In October 1994, GMC notified PEC that it intended to
terminate the lease effective August 31, 1995. Thereafter, the
parties had an on-going dispute concerning GMC's liability for
alleged damage to the leased premises. On August 28, 1996, in
accordance with the notice requirements of the lease, PEC sent
duplicate certified letters to GMC's unnamed "Executive in Charge
of Real Estate," and to G.E. Gilliken ("Gilliken"), the GMC
property manager who had been negotiating the lease dispute with
PEC. After describing in detail the nature of the dispute (also
required by the terms of the lease), in the last paragraph of the
letter, PEC advised GMC that it was electing to settle the dispute
through arbitration, and that it had selected as its arbitrator
Stephen H. Kupperman ("Kupperman"). On August 30, 1996, an unknown
3

GMC representative signed a return receipt acknowledging receipt of
PEC's arbitration demand letter. However, Gilliken was on vacation
when GMC received the letter, and he did not see the letter until
he returned to work on September 18, 1996.
By letter of September 25, 1996, GMC's attorney, Andrew S.
Conway ("Conway"), notified PEC that GMC had appointed Judge George
N. Bashara, Jr. ("Bashara") as its arbitrator. On October 2, 1996,
PEC's arbitrator, Kupperman, wrote GMC that it had waived its right
to appoint an arbitrator because GMC had not done so within the
requisite fifteen days. Therefore, Kupperman said, he would
appoint an umpire pursuant to the arbitration clause and proceed
with arbitration. In this letter, Kupperman specifically requested
that GMC inform him whether it disagreed with his "understanding"
that GMC had waived its right by not appointing its arbitrator
timely. Kupperman appointed as the "disinterested" umpire Campbell
C. Hutchinson ("Hutchinson"), his own law partner.
On October 24, 1996, by letter to Kupperman, Conway made a
"formal request" that GMC's appointment of Bashara as the second
arbitrator be honored on the grounds that: (1) the nine-day period
of delay was insignificant under the circumstances; (2) PEC's
request for arbitration did not satisfy the lease's notice
requirements; and (3) PEC suffered no palpable prejudice resulting
from the delay. In this letter to PEC's arbitrator, GMC's counsel
"respectfully request[ed] the arbitrator to recognize" the
selection of Bashara, closing the letter with the phrase
"Respectfully submitted."
4

In November 1996, Kupperman advised Conway by letter that he
had reviewed GMC's "submissions" regarding the selection of a
second arbitrator and had concluded that GMC's attempt to appoint
Bashara was untimely, was not permitted under the lease, and that
the arbitration would proceed with Kupperman as the single
arbitrator and Hutchinson as the umpire.
In December 1996, GMC filed a Motion to Appoint Arbitrators
and a Disinterested Umpire pursuant to the pre-arbitration
provisions of the Federal Arbitration Act, 9 U.S.C. �� 4 and 5. In
its motion, GMC asked the district court for an order compelling
the arbitration to proceed in "a fair and impartial manner," and
allowing GMC's arbitrator to serve on the panel, along with a
disinterested umpire to be selected by the two party-appointed
arbitrators. The district court denied GMC's motion, finding that
GMC had impliedly agreed to submit to Kupperman the issue of
whether GMC's appointment of its arbitrator was valid. The court
also found that GMC had waived its right to judicial review of
Kupperman's decision by not expressly reserving this right.
Finally, addressing the merits of Kupperman's decision, the court
concluded that it was reasonable and should not be upset.
Thereafter, the district court granted GMC's motion to stay
the arbitration pending disposition of this appeal.
5

II. STANDARD OF REVIEW
A court of appeals' review of a district court decision
upholding an arbitration decision on the ground that the parties
agreed to submit their dispute to arbitration should proceed like
review of any other district court decision finding an agreement
between parties, i.e., accepting findings of fact that are not
"clearly erroneous" but deciding questions of law de novo. First
Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 947-48 (1995);
F.C. Schaffer & Assocs., Inc. v. Demech Contractors, Ltd., 101 F.3d
40, 43 (5th Cir. 1996).

III. GENERAL PRINCIPLES
Arbitration is the reference of a particular dispute to an
impartial third person chosen by the parties to a dispute who
agree, in advance, to abide by the arbitrator's award issued after
a hearing at which both parties have an opportunity to be heard.
Rodolphe J.A. de Seife, Practice Guide � 3.02, in GABRIEL M. WILNER,
2 DOMKE ON COMMERCIAL ARBITRATION (Rev. ed. 1997) (citing BLACK'S LAW
DICTIONARY (5th ed. 1979); THE PLAIN LANGUAGE LAW DICTIONARY (Rothenberg,
ed. 1981); DICTIONARY OF LAW (Coughlin, ed. 1982); Britton, THE
ARBITRATION GUIDE, (1982)). See also La. Civ. Code art. 3099.
Parties may agree to the submission to arbitration of existing
controversies without any previous contract to do so. Executone
Info. Sys., Inc. v. Davis, 26 F.3d 1314, 1323 (5th Cir. 1994).
Parties may also may agree upon the use of arbitration at the
commencement of a contractual relationship to settle future
6

disputes by including an arbitration clause in their contract. 1
DOMKE, supra � 1:01, at 2.

When the parties have entered a contract to arbitrate future
disputes, the scope of authority of the arbitrator is not always
controlled by that contract alone. Piggly Wiggly Operators'
Warehouse, Inc. v. Piggly Wiggly Operators' Warehouse Independent
Truck Drivers Union, 611 F.2d 580, 583 (5th Cir. 1980). The
arbitration contract is in essence a promise to arbitrate a
category of future disagreements. Id. When such a dispute arises,
in order for arbitration to actually proceed, the parties must
supplement the contract with an agreement defining the issue to be
submitted to the arbitrator(s) and by explicitly giving the
arbitrator(s) authority to act. Id.
When the parties to a disagreement have not entered a pre-
dispute arbitration contract, in order for arbitration to take
place, they must agree to submit their existing controversy to the
arbitrator(s), named by the parties or persons authorized to do so
by them, for binding arbitration. 1 DOMKE, supra � 1.01, at 1-2; TOM
CARBONNEAU, CASES AND MATERIALS ON COMMERCIAL ARBITRATION 17 (1997).
Consequently, voluntary arbitration cannot occur, regardless of
whether the parties have entered a pre-dispute contract to
arbitrate, unless the parties to the dispute enter a post-dispute
agreement to submit the dispute as defined by them to the
particular arbitrator(s) they name or authorize to be designated.
Piggly Wiggly, 611 F.2d at 583.
7

Unless required by statute, a person who is not a party to a
pre-dispute contract to arbitrate cannot be compelled to submit a
dispute to arbitration. United Steelworkers v. Warrior & Gulf
Navigation Co., 363 U.S. 574, 582 (1960). A party to a contract to
arbitrate prospective disputes, however, may be compelled by a
court to submit a post-contract dispute to arbitration if the
arbitration contract requires him to do so. Dean Witter Reynolds,
Inc. v. Byrd, 470 U.S. 213, 218 (1985); Federal Arbitration Act, 9
U.S.C.A. � 4 (West 1970). Whether the contract so requires is a
question of contract interpretation for the courts, unless the
parties have clearly and unmistakably agreed that even that issue
shall be submitted to binding arbitration. Piggly Wiggly, 611 F.2d
at 583-84 (citing Warrior & Gulf, 363 U.S. at 583 n.7). As the
Supreme Court, in First Options of Chicago, Inc. v. Kaplan, 514
U.S. 938 (1995), recently stated: "Courts should not assume that
the parties agreed to arbitrate arbitrability unless there is
`clea[r] and unmistakabl[e]' evidence that they did so." Id. at
944 (quoting AT&T Technologies, Inc. v. Communications Workers, 475
U.S. 643, 649 (1986)). Thus, the Court explained, "the law treats
silence or ambiguity about the question `who (primarily) should
decide arbitrability' differently from the way it treats silence or
ambiguity about the question `whether a particular merits-related
dispute is arbitrable because it is within the scope of a valid
arbitration agreement[.]'" Id. at 944-45.
8

IV. DISCUSSION
In the district court, GMC moved to compel PEC to submit their
original dispute over GMC's alleged breach of the lease contract to
arbitration by a three-member arbitration panel, composed of an
arbitrator named by each party and a disinterested umpire selected
by the arbitrators. In support of its motion, GMC argued, in
effect, that PEC unjustifiably had refused to arbitrate under the
contract by denying the authority of GMC's arbitrator and demanding
that GMC submit the original issue to the PEC arbitrator,
Kupperman, and an umpire named by him. GMC contended that it had
not waived its right under the contract by appointing Judge Bashara
as its arbitrator nine days late because PEC did not give GMC
adequate notice, and GMC's slight delay was inadvertent and not
prejudicial to PEC. GMC relies on court decisions concluding that
one party has not waived its right to a three-member arbitration
panel when a time-specific waiver clause had expired under such
circumstances. See, e.g., Texas E. Transmission Corp. v. Barnard,
285 F.2d 536 (6th Cir. 1960); New England Reinsurance Corp. v.
Tennessee Ins. Co., 780 F. Supp. 73 (D. Mass. 1991); Compania
Portorafti Commerciale, S.A. v. Kaiser Int'l Corp., 616 F. Supp.
236 (S.D.N.Y. 1985); Trade Arbed, Inc. v. S/S Ellispontos, 482 F.
Supp. 991 (S.D. Tex. 1980).
PEC opposed GMC's motion, contending that the parties had
agreed to submit to Kupperman, PEC's arbitrator, their dispute over
the appointment of GMC's arbitrator and the composition of the
arbitration panel. Accordingly, PEC contended, GMC was bound by
9

Kupperman's decisions that GMC had submitted the composition of
arbitration panel issue to him for decision, that GMC had acted
untimely, thereby waiving its right to appoint an arbitrator, and
that the parties must proceed to arbitrate the original breach of
lease dispute before a two-member arbitration panel, i.e.,
Kupperman and the umpire selected by him. In the alternative, PEC
urged the court to decide the merits of the waiver issue in its
favor, relying on court cases holding that similar arbitration
contract clauses should be enforced as written to require
forfeiture of a party's arbitrator appointment for untimeliness.
See, e.g., Universal Reinsurance Corp. v. Allstate Ins. Co., 16
F.3d 125 (7th Cir. 1993); City of Aurora, Colo. v. Classic
Syndicate, Inc., 946 F. Supp. 601 (N.D. Ill. 1996); Evanston Ins.
Co. v. Gerling Global Reinsurance Corp., No. 90 C 3919, 1990 WL
141442 (N.D. Ill. Sept. 24, 1990).
The district court found that the parties had submitted to
Kupperman their dispute over the composition of the arbitration
panel and deferentially upheld as "eminently reasonable"
Kupperman's arbitral decision to proceed with arbitration before
himself and his selected umpire. GMC appealed. The district court
stayed arbitration pending GMC's appeal.
In this court, the parties present essentially the same
arguments that they did in the district court. We conclude that
GMC's appeal raises two questions: (1) whether GMC agreed to
submit to Kupperman, the PEC arbitrator, the question of GMC's
alleged waiver of its right to appoint an arbitrator so that
10

arbitration must proceed before a two-member panel consisting of
Kupperman and his selected umpire; and, if not, (2) whether that
dispute should be decided on the merits by the courts or is,
instead, a dispute, separate from the original dispute, that is
arbitrable under the arbitration contract, so that each party
should be afforded an opportunity to choose whether to have it
submitted to a separate three-member arbitration panel or to waive
the right to arbitrate that issue and submit it to the district
court for decision.
(1)
The question of whether an arbitrator has the power to
arbitrate a dispute depends on whether the parties to the dispute
agreed to submit the question to that arbitrator for decision. If
the dispute includes an issue as to the scope of the arbitrator's
authority, courts should not assume or conclude that the parties
agreed to submit the question of the scope of the arbitrator's own
authority to that arbitrator unless there is "clear and
unmistakable evidence" that they did so.
These principles, including the "clear and unmistakable
evidence" standard, are derived from First Options of Chicago, Inc.
v. Kaplan, 514 U.S. 938, 944 (1995), and its progenitors, viz.,
AT&T Technologies, Inc. v. Communications Workers, 475 U.S. 643
(1986); United Steelworkers v. Warrior & Gulf Navigation Co., 363
U.S. 574 (1960). First Options was a case in which the parties to
the pertinent dispute had not entered a contract to arbitrate
future controversies, whereas in AT&T and Warrior & Gulf the
11

parties had confected pre-dispute arbitration agreements. From the
salient features of the cases, and the Court's observations, we
conclude that the "clear and unmistakable evidence" standard
applies whenever one party to a dispute contends that the other
party agreed to submit to an arbitrator the question of whether
that arbitrator has been authorized to resolve the merits of their
dispute, regardless of whether the parties have entered a pre-
dispute arbitration contract.
For example, in First Options, the Court articulated the basic
principle that "[c]ourts should not assume that the parties agreed
to arbitrate arbitrability unless there is `clea[r] and
unmistakabl[e]' evidence that they did so." 514 U.S. at 944
(citing AT&T, 475 U.S. at 649; Warrior & Gulf, 363 U.S. at 583
n.7). In this respect, the Court indicated, the law creates a
presumption that the parties did not agree to submit any question
as to the arbitrator's own power to that very same arbitrator. Id.
Consequently, any silence, ambiguity or doubts about this question
should be resolved in favor of concluding that the parties did not
agree to submit the issue to the arbitrator. Id. at 944-45.
The Court, in First Options, explained the underlying reasons
for the presumption against an arbitrator having the power to
decide the scope of his own power:
[T]he "who (primarily) should decide
arbitrability" question [] is rather arcane.
A party often might not focus upon that
question or upon the significance of having
arbitrators decide the scope of their own
powers. And, given the principle that a party
can be forced to arbitrate only those issues
it specifically has agreed to submit to
12

arbitration, one can understand why courts
might hesitate to interpret silence or
ambiguity
on
the
"who
should
decide
arbitrability" point as giving the arbitrators
that power, for doing so might too often force
unwilling parties to arbitrate a matter they
reasonably would have thought a judge, not an
arbitrator, would decide.
Id. at 945 (internal citations omitted).
These principles are not new.
[T]he question of arbitrability --
whether a[n] . . . agreement creates a
duty for the parties to arbitrate the
particular grievance -- is undeniably an
issue for judicial determination. Unless
the parties clearly and unmistakably
provide otherwise, the question of
whether the parties agreed to arbitrate
is to be decided by the court, not the
arbitrator.
AT&T, 475 U.S. at 649. In an earlier arbitration decision, the
Supreme Court declared:
[T]he question of arbitrability is for the
courts to decide. Where the assertion by the
claimant is that the parties excluded from
court determination not merely the decision of
the merits of the grievance but also the
question of its arbitrability, vesting power
to make both decisions in the arbitrator, the
claimant must bear the burden of a clear
demonstration of that purpose.
Warrior & Gulf, 363 U.S. at 583 n.7 (internal citation omitted).
The Court's holdings and observations demonstrate that when a
party to a dispute contends that he and the other disputant agreed
to submit to a third person the question of whether that arbitrator
had authority to arbitrate their dispute, that party must bear the
burden of demonstrating clearly and unmistakably that the parties
13

agreed to have the arbitrator decide that threshold question of
arbitrability.
On the record before us, PEC cannot show that GMC clearly and
unmistakably agreed to submit to Kupperman the dispute over GMC's
appointment of its arbitrator and the composition of the
arbitration panel, thus granting Kupperman authority to determine
the scope of his own arbitral powers. The arbitration clause in
the lease contract does not clearly and unmistakably grant
Kupperman the authority to decide the scope of his own powers. PEC
correctly does not so contend but, instead, relies on
correspondence and conduct of the parties to show that they agreed
to submit to Kupperman the questions relating to the arbitrators'
powers. This evidence is filled with doubts, created by silence
and ambiguities, which must be resolved against finding an
agreement by GMC to submit to Kupperman the questions as to the
existence and scope of the arbitrators' powers.
PEC relies primarily on a letter from one of GMC's attorneys
to Kupperman dated October 24, 1996 making a "formal request to
honor the selection by GM to appoint as a second arbitrator, Judge
George N. Bashara, Jr." After stating the facts and contract
provisions that he believed required the recognition of Judge
Bashara as the second arbitrator, the attorney closed as follows:
In conclusion, GM respectfully requests the
arbitrator to recognize the selection by GM of Judge
Bashara as a duly appointed arbitrator in this matter
because the period of the delay is insignificant coupled
with the facts and circumstances surrounding the delay,
because the request for arbitration failed to meet the
notice requirements of the Lease, and because there has
been no palpable prejudice suffered by PE.
14

Respectfully submitted,

Andrew S. Conway
Further, PEC points to the fact that GMC did not expressly state
that it objected to Kupperman deciding the questions bearing on the
authority of the arbitrators and the composition of the panel or
expressly reserve its right to judicial review of Kupperman's
decision.
On the other hand, at the hearing on GMC's motion, Kupperman
admitted that GMC never conceded its right to judicially challenge
Kupperman's assertion of exclusive arbitral powers. In fact,
Kupperman testified that Conway, GMC's counsel, never told him that
GMC agreed to be bound by Kupperman's decision on the question of
the timeliness of GMC's appointment of Bashara. Kupperman also
admitted that he always assumed that GMC would be opposed to his
serving as the sole arbitrator of their dispute.
None of GMC's correspondence actually states that it agreed
for Kupperman to act as a single arbitrator or that it was
submitting the dispute to him. None of GMC's actions and
correspondence clearly and unambiguously indicate an intention to
submit any dispute to Kupperman for arbitration. They reasonably
may be interpreted as GMC's attempt amicably to persuade Kupperman
and PEC, who appointed him, that they should in good faith
recognize Bashara as the second arbitrator to facilitate the
parties' fair and expeditious arbitration of their original dispute
before a three-member panel. "[M]erely arguing the arbitrability
issue to an arbitrator does not indicate a clear willingness to
arbitrate that issue, i.e., a willingness to be effectively bound
15

by the arbitrator's decision on that point." First Options, 514
U.S. at 946.
Conway's use of the terms "arbitrator," "respectfully
submitted" and "formally requests" in correspondence with Kupperman
may reasonably be interpreted to be expressions of courtesy and
respect toward Kupperman as one potential member of a three-member
arbitration panel rather than as language of arbitral submission of
a question to him as the sole arbitrator. The use of such terms
does not constitute clear and unmistakable evidence of GMC's
agreement to grant Kupperman the authority to decide whether GMC
waived its right to appoint an arbitrator and thereby grant
Kupperman the exclusive power to act as arbitrator in selecting an
umpire and arbitrating the original breach of lease dispute.
Accordingly, we conclude that the evidence is insufficient to
support a finding that GMC clearly and unmistakably agreed to
submit to Kupperman the question of the scope of his own power as
arbitrator. Consequently, we set aside Kupperman's decisions and
vacate the district court's ruling insofar as it upholds them.
The district court reached the opposite conclusion because it
did not apply the First Options presumption against the finding of
an agreement to arbitrate arbitral authority or, in other words,
the First Options requirement that such agreements be proved by
clear and unmistakable evidence. The district court, in effect,
reversed the presumption, finding that GMC consented to submit the
issue of timeliness to Kupperman on the basis of merely ambiguous
evidence, viz., Conway's discussion of a briefing schedule with
16

Kupperman, the lack of an express reservation of GMC's right to
seek judicial review of the timeliness issue, the lack of express
objection to Kupperman as a sole arbitrator, and the language and
tone of Conway's October 24 letter, which the court found reflected
deference to Kupperman as a decision maker. Because all of the
evidence as a whole does not clearly and unmistakably demonstrate
an agreement to submit the dispute over arbitral powers to
Kupperman as sole arbitrator, GMC's failure to expressly object or
reserve a right to judicial review is consistent with its lack of
consent to such arbitration in the first place.
The district court may have been misled by its reliance on
George Day Constr. Co. v. United Bhd. of Carpenters and Joiners,
722 F.2d 1471 (9th Cir. 1984), which stands principally for the
proposition that a claimant may not voluntarily submit his claim to
arbitration, await the outcome, and, if the decision is
unfavorable, then challenge the authority of the arbitrator to act.
The George Day case is not an appropriate precedent for use in
deciding the present case for several reasons. In George Day, the
crucial issue was not whether the employer had submitted the
question of arbitral authority to the arbitrator but whether, after
doing so, it had reserved that question for judicial determination.
The George Day court summarily found that "the merits of the
dispute along with the question of jurisdiction were fully
addressed by the parties during the arbitration proceeding and, at
its conclusion, the entire controversy was submitted to the
arbitrator for decision." Id. at 1475. George Day was decided
17

before First Options clearly articulated the principle that an
agreement to submit the question of arbitral authority to the
arbitrator must be demonstrated by "clear and unmistakable
evidence." Because George Day does not set forth in great detail
the evidence from which it concluded that the employer "by conduct
evinced clearly its intent to allow the arbitrator to decide not
only the merits of the dispute but also the question of
arbitrability[,]" id., we cannot determine whether the same result
should have been reached under the First Options "clear and
unmistakable evidence" standard. Evidently, however, the evidence
tending to show George Day's intention to submit the arbitral
authority issue to the arbitrator was much stronger and less
ambiguous than any evidence that GMC intended to do so. In any
event, First Options and not George Day governs the decision of the
present case.
(2)
Although the district court should not have upheld Kupperman's
arbitral decision, this does not necessarily mean that the district
court or this court should immediately proceed to decide whether
GMC's appointment of an arbitrator was timely and whether
arbitration of the original dispute should proceed before a two- or
three-member arbitration panel. The dispute between the parties
involving the authority vel non of GMC's arbitrator and the scope
of authority of PEC's arbitrator is a separate dispute that is
arbitrable under the parties' pre-dispute arbitration contract,
18

provided that no arbitrator is called upon to decide the scope or
existence of his or her own arbitral authority. Because
arbitration is favored by public policy and the courts as a means
of removing disputes from litigation, Hartford Lloyd's Ins. Co. v.
Teachworth, 898 F.2d 1058, 1061 (5th Cir. 1990); Seaboard Coastline
R.R. v. National Rail Passenger Corp., 554 F.2d 657, 660 (5th Cir.
1977), we conclude that the parties should be allowed to either
arbitrate that dispute before a new arbitration panel or waive
their rights to such arbitration and resort to the courts.
The parties' arbitration contract clause provides, in
pertinent part, that if any dispute should arise between the
parties regarding the performance or nonperformance by either of
them of any of the terms, covenants and conditions of the
agreement, or if any claim is made by either of them that the other
is in default by reason of the non-performance of any act provided
for in the agreement, then the matter in dispute shall be submitted
to arbitration.
The question of arbitrability is to be decided by the court on
the basis of the contract entered into by the parties. Commerce
Park at DFW Freeport v. Mardian Constr. Co., 729 F.2d 334, 338 (5th
Cir. 1984). A presumption of arbitrability exists requiring that
whenever the scope of an arbitration clause is fairly debatable or
reasonably in doubt, the court should decide the question of
construction in favor of arbitration. Mar-len of La., Inc. v.
Parsons-Gilbane, 773 F.2d 633, 635-36 (5th Cir. 1985) (citing
Warrior & Gulf, 363 U.S. at 583). The weight of this presumption
19

is heavy: "[A]rbitration should not be denied `unless it can be
said with positive assurance that an arbitration clause is not
susceptible of an interpretation that could cover the dispute at
issue.'" Id. at 636 (quoting Wick v. Atlantic Marine, Inc., 605
F.2d 166, 168 (5th Cir. 1979)).
Applying these principles, we conclude that the parties'
arbitration clause is reasonably susceptible to the interpretation
that their dispute is arbitrable before a separate panel of
arbitrators who are not called upon to decide the existence or
scope of their own arbitral powers.2 See, e.g., Carter v.
Cathedral Ave. Coop., Inc., 658 A.2d 1047, 1050 (D.C. App. 1995)
(holding that the trial court correctly determined that the issue
whether a tenant waived its right to have its rent dispute resolved
before a three-member arbitration panel by failing to name its
arbitrator within the stipulated period is an issue to be resolved
by a panel of three arbitrators). The resolution of this dispute
by a separate three-member arbitration panel is consistent with the
parties' agreement and the policy favoring arbitration. Because
the new arbitrators will not be called upon to decide the scope of
2 The parties' controversy involving the existence or scope of
their arbitrators' authority is a genuine, good faith dispute. It
depends ultimately upon the question of whether an untimely
appointment of an arbitrator under an arbitration contract clause
such as the one in the present case causes the party who acted
tardily to forfeit his right to appoint an arbitrator. This is a
question upon which reasonable judicial minds have reached
conflicting conclusions under varying circumstances. Compare
Universal Reinsurance Corp. v. Allstate Ins. Co., 16 F.3d 125 (7th
Cir. 1993) with Texas E. Transmission Corp. v. Barnard, 285 F.2d
536 (6th Cir. 1960).
20

their own powers, we need not find that the arbitration clause
clearly and unmistakably authorizes arbitration of the dispute
before a separate panel. It is only required that we find, as we
do, that the arbitration clause reasonably encompasses the dispute
and authorizes its submission to a separate panel of arbitrators
appointed in accordance with the parties' contract.
Accordingly, under the terms of the arbitration contract,
each party should be given an opportunity to institute an
independent, new arbitration proceeding to resolve this separate
dispute. On the other hand, if the parties should choose in the
interest of time and efficiency to waive their rights to arbitrate
this separate dispute and submit the questions involving the
authority of GMC's arbitrator and the scope of authority of PEC's
arbitrator to the district court for decision, we see no impediment
to their doing so.
For the reasons assigned, the district court's judgment is
VACATED, but its STAY ORDER IS MAINTAINED staying the arbitration
proceedings pending the district court's further orders. The case
is REMANDED to the district court for further proceedings in
accordance with this opinion.
21