In affirming dismissal of a suit brought against an arbitration administrator, a California Court of Appeal found that a pre-award dispute over arbitrator selection is a procedural matter that should be resolved by the arbitration administrator.

In Sampson v. Judicial Arbitration and Mediation Services, Inc., No. A116239, 2008 WL 1892686 (Cal. Ct. App. Apr. 30, 2008), the Sampsons lost money investing in a fund operated by St. Geme. In accordance with their agreement, the parties submitted the investment dispute to arbitration administered by JAMS.

Once the arbitration was initiated, JAMS sent a list of five arbitrator candidates to both parties with a set of instructions for striking and ranking the candidates. A few weeks later, JAMS sent a second list of arbitrator candidates because some of the candidates on the previous list were unable to serve.

The Sampsons failed to return the list by the deadline, and in accordance with the instructions that accompanied the list, JAMS treated this failure as an assent to all arbitrator candidates on the list. JAMS subsequently notified the parties that Judge Legge, a former federal judge, had been selected as the arbitrator.

Over a month later, the Sampsons’ attorney wrote JAMS and objected to the selection of Judge Legge, alleging that he lacked expertise in securities matters and that he had a high reversal rate as federal judge. Their attorney further claimed that his office had "no record of receiving" the strike list and that only recently had he learned of Judge Legge’s selection. In response, JAMS stated that the objection was untimely and that Judge Legge – one of their "most qualified arbitrators" – would remain the arbitrator.

The Sampsons subsequently filed suit, seeking a court order requiring JAMS to remove Judge Legge as arbitrator and restart the selection process. The trial court dismissed the suit on the ground that arbitrator selection is a procedural matter that should be resolved by JAMS pursuant to its rules and procedures.

On appeal, the Sampsons argued for reversal based on the "fair procedure" doctrine – a common law doctrine requiring professional organizations to use fair procedures in processing membership applications. In rejecting this argument, the Court explained that there was no authority for applying the fair procedures doctrine to a private arbitration. Moreover, as the Court noted, any pre-award dispute over arbitrator selection should be resolved by JAMS as required by JAMS rules.

Under the JAMS rules at issue in this case, a party has the right to strike 2 of the 5 arbitrator candidates on the list. The National Arbitration Forum Code of Procedure (the Code) also provides for an arbitral version of the peremptory strike. Courts have referred to this provision of the Code as a "safeguard [of] fairness." Marsh v. First USA Bank, N.A., 103 F.Supp.2d 909, 925 (N.D. Tex. 2000); see also Bank One, N.A. v. Coates, 125 F.Supp.2d 819, 836 (S.D. Miss. 2001).