Brook v. Peak International, Ltd

294 F.3d 668 (5th Cir. 2002)

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Nature of the Case

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Facts

Brook (P) was employed as the President and CEO of Peak (D) in 1998. Less than a year later he was terminated. A dispute arose over severance benefits. P filed a demand for arbitration according to his contract. The AAA submitted a list of nine prospective arbitrators and instructed the parties to follow the procedure outlined in the employment agreement. Since the arbitration was to take place in Austin, both attorneys thought that it would be efficient to get an arbitrator in Austin. P struck one from the original list and D did nothing as it was under the impression that a new list from AAA was being generated. A second list was sent by AAA, but it did not reference the Austin concerns. The new AAA letter instructed the parties to strike the names of the unacceptable and indicate an order of preference for the rest. The AAA letter also gave a deadline and warned the parties that if they did not choose all names submitted would be deemed acceptable. There was no admonition to follow the Employment Agreement. P complied and D did not submit its list of strikes before the deadline. D’s counsel then withdrew and substituted a new counsel. AAA notified the parties on July 26^th that Professor Sokolow had been selected as the arbitrator. D immediately protested citing potential conflicts with counsel and inexperience with employment disputes. D also protested that the process violated the Employment Agreement. The agreement called for a list of nine with the parties alternately removing names from the list until one remained. Sokolow was withdrawn, and Judge Miller was appointed. P then protested the process. D threatened to withdraw unless P agreed to the Judge, but nothing was made of it. Months of discovery and disputes passed, and when the Judge started the eight-day hearing, he announced that he took the arbitration oath and asked if there were any other objections. D got the verdict and P appealed to federal court. P pleads that the ruling was arbitrary and capricious and a manifest disregard of the law, the arbitrator exceeded his authority, was guilty of misconduct and the AAA violated its own selection rules. The motion did not include any issues related to the Employment Agreement and its method of selection. A magistrate, sua sponte, raised the Employment Agreement procedures along with AAA’s failure to follow them. P filed a supplemental motion. The district court agreed with the magistrate and ruled for P. D appealed.