2020 COA 155
Colo. Ct. App.2020Background
- Peak Billing (Price) contracted with Mountain Sleep Diagnostics, Inc. (MSD) for billing services; the contract automatically renewed unless a party gave 90 days’ notice.
- MSD terminated the contract less than 90 days before renewal; disputes (and prevailing-party fees) were subject to binding arbitration.
- Arbitrator awarded Price $124,224 for breach plus $24,600 in attorney fees.
- After the arbitration award, MSD discovered (it alleges) more than $60,000 was misappropriated via Price’s billing work and filed to vacate the award, claiming Price procured it by fraud and perjury.
- The district court denied vacatur, concluding MSD had the opportunity to discover and raise the alleged misconduct during arbitration but failed to exercise due diligence; MSD appealed.
Issues
| Issue | Plaintiff's Argument (Price) | Defendant's Argument (MSD) | Held |
|---|---|---|---|
| Proper legal test for vacatur under CRUAA §13‑22‑223(1)(a) | Apply CRUAA; require statutory grounds | Adopt federal FAA three‑part test? MSD says FAA timing differences make due‑diligence inapplicable | Court adopted the three‑part federal test (fraud; not discoverable with due diligence; material effect) and clear‑and‑convincing standard under Colorado practice |
| Whether MSD showed fraud procured the award | Price: alleged misappropriation was unrelated to arbitration issue; any fraud should have been raised earlier | MSD: Price committed perjury and misappropriated funds that procured the award | Court found MSD’s affidavits plausibly alleged fraud/perjury but did not reach a final nexus decision because MSD failed on due diligence |
| Whether MSD exercised due diligence to discover fraud during arbitration | Price: MSD had access and time and should have investigated and raised issues in arbitration | MSD: complexity, concealment, and blocked access made discovery unreasonable before award | MSD failed to show it exercised due diligence (did not document investigative steps despite 14 months and control of billing system); vacatur denied |
| Whether the district court had to hold an evidentiary hearing | Price: motion could be decided on written submissions | MSD: entitled to a hearing on alleged perjury and fraud | Court held no hearing required where movant fails to make a prima facie showing (written motions practice sufficient); denial without hearing was appropriate |
Key Cases Cited
- Nasca v. State Farm Mut. Auto. Ins. Co., 12 P.3d 346 (Colo. App. 2000) (undue means can include nondisclosure; requires causal nexus between improper conduct and award)
- Superior Constr. Co. v. Bentley, 104 P.3d 331 (Colo. App. 2004) (fraudulent evidence can justify vacatur when award cannot be severed)
- BFN‑Greeley, LLC v. Adair Grp., Inc., 141 P.3d 937 (Colo. App. 2006) (fraudulent testimony may not procure award if issue was disclosed to arbitrators before decision)
- Coors v. Sec. Life of Denver Ins. Co., 112 P.3d 59 (Colo. 2005) (a party who first breaches a contract cannot claim its benefits)
- Hall St. Assocs. v. Mattel, Inc., 552 U.S. 576 (2008) (judicial review of arbitration awards is limited to statutory grounds)
- MCI Constructors, LLC v. City of Greensboro, 610 F.3d 849 (4th Cir. 2010) (adopts three‑part test and clear‑and‑convincing standard under FAA for fraud‑based vacatur)
- Int'l Bhd. of Teamsters v. United Parcel Serv., Inc., 335 F.3d 497 (6th Cir. 2003) (requires material connection between fraud and dispositive arbitration issue)
- Seattle Packaging Corp. v. Barnard, 972 P.2d 577 (Wash. Ct. App. 1999) (absent prima facie showing, courts should not consider new evidence not timely presented to arbitrators)
- Karppinen v. Karl Kiefer Mach. Co., 187 F.2d 32 (2d Cir. 1951) (oral hearings on alleged perjury before arbitrators are disfavored)