## Facts

- Richard Brook was hired by Peak International, Ltd. as president and chief operating officer under an employment agreement effective January 1, 1998, and was terminated less than a year later.
- A severance dispute arose, and the employment agreement required arbitration administered through the American Arbitration Association (AAA) but specified a detailed, party-driven arbitrator-selection method (including a Peak-provided list of five arbitrators from which Brook would choose).
- Brook demanded AAA arbitration in May 1999 alleging Peak breached the agreement.
- The AAA initiated its own selection method by circulating an initial list of nine arbitrators and later a second “supplemental” list, rather than following the contract’s specific selection steps.
- Brook participated in the AAA selection process (including strikes and correspondence) and proceeded through the arbitration hearing.
- The arbitrator selected through the AAA-administered process ruled for Peak.
- After losing, Brook moved in federal district court to vacate the award under the Federal Arbitration Act (FAA), arguing the arbitrator lacked authority because the AAA did not follow the contract’s selection procedure.
- The district court vacated the award under 9 U.S.C. § 10(a)(4), finding the arbitrator lacked power due to the improper selection process; Peak appealed.

## Issues

1. Whether an arbitration award may be vacated under 9 U.S.C. § 10(a)(4) when the administering organization deviates from the contractually specified arbitrator-selection procedure.
2. Whether a party waives an objection to arbitrator selection by participating in the selection process and arbitration without timely raising the contractual noncompliance.

## Decision

- The Fifth Circuit reversed the order vacating the award.
- The court agreed the AAA substantially deviated from the contract’s arbitrator-selection procedure and characterized the deviation as serious error.
- The court held Brook waived any objection to the selection defect because he did not timely and specifically object while the selection process and arbitration were ongoing.
- Because the objection was waived, the award in Peak’s favor remained enforceable notwithstanding the selection irregularity.

## Legal Principles

- Arbitration authority derives from the parties’ contract; agreed arbitrator-selection procedures are part of the parties’ bargain.
- FAA vacatur under 9 U.S.C. § 10(a)(4) is limited and applies when an arbitrator exceeds powers granted by the agreement; courts owe strong deference to arbitral awards.
- A party that knows or should know of an irregularity in arbitrator selection and proceeds without timely objection waives the right to seek vacatur on that ground.
- Post-award challenges based on known procedural defects are barred where the complaining party participated without protest and raised the issue only after an adverse result.

## Conclusion

The Fifth Circuit held that although the AAA failed to follow the employment agreement’s arbitrator-selection procedure, Brook’s participation without a timely objection waived the challenge, requiring reversal of the district court’s vacatur and leaving the arbitration award for Peak in place.


Brook v. Peak Int'l, Ltd., 294 F.3d 668 (5th Cir. 2002)