Brook v. Peak International, Ltd.

Brook (plaintiff) was employed by Peak International, Ltd. (Peak) (defendant). Brook’s employment contract contained an arbitration clause stating that any disputes between the parties would be subject to arbitration. The arbitration clause provided that in the event of a dispute, the American Arbitration Association (AAA) was to provide the parties with a list of nine potential arbitrators. Each party was to be given the opportunity to strike one arbitrator from the list until only one potential arbitrator remained. This arbitrator was to be granted the power to arbitrate the dispute. Brooks was terminated less than a year after beginning his employment with Peak. A dispute arose over the amount of severance payments due to Brook. Brook and Peak agreed to submit their dispute to arbitration pursuant to the arbitration clause in Brook’s employment agreement. The AAA did not follow the arbitrator selection procedures outlined in Brook’s contract. Rather, the AAA initially submitted a list of nine potential arbitrators and instructed the parties to strike any names they wished from the list. At the request of Brook and Peak, AAA submitted a second list of six new arbitrators and requested the parties to strike names from the list. Brook submitted a strike, but Peak did not. On July 26, 1999, AAA informed Brook and Peak that it had selected Professor David Sokolow as arbitrator. Peak immediately protested this selection and requested AAA comply with the terms of its employment agreement with Brook. Brook made no objection to the selection of Professor David Sokolow. On August 11, 1999, AAA withdrew its selection of Sokolow, and appointed Judge Chuck Miller as arbitrator. On August 13th, Brook objected on the ground that the AAA did not follow typical AAA rules and procedures for appointing an arbitrator. At no point did Brook reference the arbitration selection procedures outlined in his employment agreement. Brook also requested AAA reinstate “the properly appointed individual, Professor David Sokolow,” as arbitrator. AAA denied this request. Before arbitration commenced, Judge Miller asked if either party had any objections to the arbitration process. Brook raised no objections, and Judge Miller entered an arbitration award favorable to Peak. Brook filed suit in federal district court seeking to vacate the arbitration award on the ground that AAA violated its own arbitrator selection rules. On January 17, 2001, a magistrate heard oral argument and noted that AAA’s failure to follow the terms of arbitrator selection outlined in Brook’s employment agreement could constitute grounds for vacating the arbitration award. Brook then raised this issue in a subsequent “Supplement to Motion to Vacate Arbitration Award” in the district court. The district court vacated the arbitration award, and Peak appealed.