Weirton Medical Center, Inc. v. QHR Intensive Resources, LLC
682 F. App'x 227
4th Cir.2017Background
- QHR Intensive Resources, LLC (QIR) contracted to provide hospital management services to Weirton Medical Center; Weirton terminated the contract within two years and QIR initiated arbitration.
- QIR selected four interim officers who testified at the arbitration; after the hearing, Weirton learned these witnesses had separate compensation agreements with QIR.
- Weirton moved to vacate the $1,486,903.11 arbitration award, alleging the award was procured by undue means/fraud due to the witnesses’ undisclosed compensation arrangements and allegedly misleading testimony.
- The district court denied Weirton’s vacatur motion, confirmed the award, and dismissed the complaint; Weirton appealed.
- The Fourth Circuit reviewed de novo, applying the narrow federal standard for vacating arbitration awards and the three-part test for undue means (discoverability, materiality, clear and convincing evidence).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the arbitration award was procured by undue means (fraud/corruption) under 9 U.S.C. § 10(a)(1) | The undisclosed compensation agreements and allegedly false/misleading testimony by QIR-selected witnesses amount to fraud/undue means warranting vacatur | The testimony did not constitute clear and convincing proof of fraud; Weirton had the opportunity to probe witness relationships at the hearing | Court held no vacatur: testimony did not meet the clear-and-convincing undue-means standard |
| Whether the alleged fraud was discoverable with due diligence before or during arbitration | The compensation arrangements were actively concealed and thus not discoverable pre-arbitration | Weirton failed to question witnesses at the hearing about compensation; thus it could have discovered the arrangements with due diligence | Court held Weirton could not claim concealment when it did not inquire at the hearing; discovery requirement not met |
| Whether the undisclosed relationships were materially related to issues decided in arbitration | Weirton asserted the undisclosed ties undermined witness credibility and could have changed contractual interpretation and outcome | QIR argued witness compensation did not relate materially to the unambiguous contractual provision the arbitrator relied on | Court held Weirton failed to show a causal connection or material impact on the arbitrator’s unambiguous findings |
| Standard of review and burden of proof for vacatur | Weirton argued errors warranted review and vacatur | QIR invoked the narrow, deferential standard and § 10 grounds for vacatur requiring clear and convincing proof | Court applied de novo review of denial of vacatur but reiterated the narrow statutory grounds and required clear-and-convincing proof; affirmed denial |
Key Cases Cited
- Brown & Pipkins, LLC v. Serv. Emps. Int’l Union, 846 F.3d 716 (4th Cir. 2017) (denial of motion to vacate arbitration award reviewed de novo)
- Jones v. Dancel, 792 F.3d 395 (4th Cir. 2015) (judicial review of arbitration awards is narrowly circumscribed)
- MCI Constructors, LLC v. City of Greensboro, 610 F.3d 849 (4th Cir. 2010) (elements for vacatur based on undue means: discoverability, material relation, and clear and convincing proof)