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 Cor poration (“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; an d that PEC timely

cal led for arbitration of the original dispute and appointed its

arbitrator.1 Alth ough 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 This appeal involves further disputes over (1) whethe r GMC

waived its right to appoint its arbitrator by its failure to name

him within the period allowed by the arbitration clause so that

arb itration 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 pa nel 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

provi sions of this lease or if any dispute

should arise between them regarding the

performance or nonperformance by either of

them of any of the t erms, 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 a ny of

such events, the matter in dispute, whether

the same be the performance of an a ct, the

forbearance of an act, or the payment of

money, shall be submitted to arbitration. . .

.3

Sectio n 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 n otified PEC that it intended to

term inate the lease effective August 31, 1995. Thereafter, the

parties had a n 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 unknown4

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 do ne 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 a ppointment 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.”5

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 Arbit rators

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

a lso found that GMC had waived its right to judicial review of

Kupperman’s decision by not expr essly 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 grante d GMC’s motion to stay

the arbitration pending disposition of this appeal.6 II. STANDARD OF REVIEW

A court of appeals ’ review of a district court decision

u pholding 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 p articular 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 bo th parties have an opportunity to be heard.

Rodolphe J.A. de Seife, Practice Guide § 3.02, in G ABRIEL M. W ILNER

,

2 D OMKE O N C OMMERCIAL A RBITRATION (Rev. ed. 1997) (citin g B LACK ’ S L AW

D ICTIONARY (5th ed. 1979); T HE P LAIN L ANGUAGE L AW D ICTIONARY (Rothenberg,

ed. 1981); D ICTIONARY OF L AW (Coughlin, ed. 1982); Britton, T HE

A RBITRATION G UIDE

, (1982)). S ee also La. Civ. Code art. 3099.

Parties may agree to the submission to arbitration of existing

controversies wit hout any previous contract to do so. E xecutone

Info. Sys., Inc. v. Davis, 2 6 F.3d 1314, 1323 (5th Cir. 1994).

Parties may also may agree upon the use of a rbitration at the

commen cement of a contractual relationship to settle future7

disputes by including an arbitration clause in their contract. 1

D OMKE

, 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. P iggly 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. I d. 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 arbit rator(s) and by explicitly giving the

arbitrator(s) authority to act. Id.

When the parties to a disagreement have not entered a predispute arbitration contract, in order for arbitr ation 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 D OMKE

, supra § 1.01, at 1-2; T OM

CARBONNEAU

, CASES AND MATERIALS ON COMMERCIAL ARBITRA TION 1 7 (1997).

Consequently, voluntary arbitration cannot occur, regardless of

whether the parties hav e 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 583.8

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. U nited 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 dis pute to arbitration if the

arbitration contract requires him to do so. D ean 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 c ourts, unless the

parties have clearly and unmistakably agreed that even that issue

shall be submitted to binding arbitration. P iggly Wiggly, 611 F.2d

at 583 -84 (citing W arrior & Gulf, 363 U.S. at 583 n.7). As the

Supreme Court , in First Options of Chicago, Inc. v. Kaplan, 5 14

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.” I d. 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 am biguity 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 944-45.9 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, co mposed 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 da ys late because PEC did not give GMC

adequa te 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 u nder such

circumstances. S ee, 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. Kaise r Int’l Corp., 6 16 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 tha t 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

a rbitration panel. Accordingly, PEC contended, GMC was bound by10

Kup perman’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 h olding that similar arbitration

contract clauses should be enforced as written to require

forfeiture of a party’s arbitrator appointment for untimeline ss.

See, e.g., Universal Reinsurance Corp. v. Allstate Ins. Co., 1 6

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”

K upperman’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 ess entially the same

arguments that th ey 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 that11

arbitration must proceed before a two-member panel consis ting of

Kupperman and his selected umpire; and, if not, (2) whether that

d ispute should be decided on the merits by the courts or is,

instead, a dispute, separate from the original disp ute, 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 t hat the parties

agreed to submit the question of the scope of the arbitrator’s own

authority to that arbitrator unle ss 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, 4 75 U.S. 643

(1986); United Steelworkers v. Warrior & Gulf Navigation Co., 363

U.S. 574 (1960). F irst Options was a case in which the parties to

the pertinent dispute had not entered a cont ract to arbitrate

future contro versies, whereas in A T&T and Warrior & Gulf the12

parties had confected pre-dispute arbitration agreements. From the

salient features of the cases, and the C ourt’s observations, we

conclude that the “clear and unmistakable evidence” s tandard

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 predispute 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 ther e is ‘clea[r] and

unmistakabl[e]’ evidence that they did so.” 514 U.S. at 944

(citing AT&T

, 475 U.S. at 649; Warr ior & 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. I d.

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 pr esumption 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

c an be forced to arbitrate only those issues

it specifically has agreed to submit to13 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 b e 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

cla imant 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 parties14

agr eed 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 arbitr ator and the composition of the

arbitration panel, thus granting Kupperman authority to determine

the scope of his own arbitral powers. The arbitration clause in

t he lease contract does not clearly and unmistakably gran t

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, wh ich 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 rec ognize the selection by GM of Judge

Bashara a s 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 m eet the

notice requirements of the Lease, and because there has

been no palpable prejudice suffered by PE.15 Respectfully submitted,

Andrew S. Conway

Further, PEC po ints 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 G MC’s appointment of Bashara. Kupperman also

admitted that he always ass umed that GMC would be opposed to his

serving as the sole arbitrator of their dispute.

None of GMC’s corr espondence actually states that it agreed

for Kupperman to act as a single arbi t rator 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 th e 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 bound16

by the arbitrator’s decision on that point.” F irst 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 interpr eted 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 o f GMC’s

a greement 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 th at 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 agreem ent to arbitrate arbitral authority or, in other words,

the First Options requir ement that such agreements be proved by

clear and unmista kable 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 brief ing schedule with17

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.

T he G eorge Day case is not an appropriate precedent for use in

deciding the present case for several reasons. In G eorge 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 w ere fully

addressed by the parties during the arbitration proceeding and, at

its conclusion, the enti re controversy was submitted to the

arbitrator for decision.” I d. at 1475. G eorg e Day was decided18

before First Options clearly articulated the principle that an

a greement to submit the question of arbitral authority to the

arbitrator must be demonstrated by “clear and unmistakable

evidence.” Because G eorge 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 submi t the arbitral

authority issue to the arbitrator was much stronger a nd 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 immediatel y 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 arbi tration 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,19

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 par t, that if any dispute should arise between the

parti es 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

t he basis of the contract entered into by the parties. C ommerce

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. M ar-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 presumption2 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. C ompare

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 is heavy: “[A]rbitration should not be denied ‘unless it can be

said with positive assurance that an arbitration clause is not

s usceptible of an interpretation that could cover the dispute at

issue.’” I d. at 636 (quoting Wick v. Atlantic Marine, Inc., 6 05

F.2d 166, 168 (5th Cir. 1979)).

Applying thes e 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 arbitr al powers. 2 S ee, 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 po licy favoring arbitration. Because

the new arbitrators will not be called upon to decide the scope of21

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 autho rizes 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 g iven an opportunity to institute an

independent, new arbitrat ion 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 involv ing 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.