Case Title: M3 Healthcare Solutions v. Family Practice Associates

Citation: 

Docket Number: 138550

State: delaware

Court: Delaware Supreme Court

Date: 2010-05-28T00:00:00Z

Document:
Conte over page
Sane 15,2010

IN THE SUPREME COURT OF THE STATE OF DELAWARE,

M3 HEALTHCARE SOLUTIONS, )

) No. 691, 2009
Respondent Below)
Appellant, ) Court Below: Chancery Court

) of the State of Delaware
v. )
) CA. No. 4488,
FAMILY PRACTICE
ASSOCIATES, P.A.,

Claimant Below
Appellee.

Submitted: April 13,2010
Decided: May 28, 2010

Before STEELE, Chief Justice, HOLLAND and RIDGELY, Justices.
{Upon appeal from the Chancery Court. AFFIRMED.

William J. Catie, 111, and Sarah A, Fruchauf (argued) of Rawle &
Henderson, LLP, Wilmington, Delaware, attomeys for appellant,

Curtis J. Crowther (argued) and Evangelos Kostoulas of Young Conaway
Stargatt & Taylor, LP, attorneys for appellee.

STEELE, Chief Justice:
M3 Healthcare Solutions sought modification, vacation, or correction of an

arbi

 

tion award, in its answer to Family Practice Associates, P.A."s complaint to
confirm that award. The Vice Chancellor held that M3°s answer did not constitute
‘a statutorily required application o contest an award and, in any case, M3 failed to
assert sufficient grounds to alter the award. Although the Vice Chancellor
incorrectly decided that M3 improperly applied for modification, vacation or
‘correction, given that Delaware is a liberal pleading jurisdiction, we agree withthe
remainder of the Vice Chancellor's decision and AFFIRM the judgment,
FACTUAL AND PROCEDURAL HISTORY

FPA, a medical practice, entered into a billing services agreement with M3,
‘a medical billing company. FPA and M3 agreed to arbitrate any dispute that arose
between them,
(On March 13, 2007, FPA filed a demand for arbitration with the American

“Arbitration Association, On March 24, 2009, the arbitrator issued @

 

arbitration award in favor of FPA. The arbitration award required M3 to pay FPA.
(1) the principal amount of $60,457.32; (2) $18,834.93 for interest at an 11.25%
rate from June 30, 2006; (3) post-award interest at the rate of 11.25%; and (4)

$19,103.01 for arbitration costs and expenses.
‘On April 23, 2009, FPA filed @ complaint! to confirm the arbitration award.
(On May 15, M3 filed an answer to FPA’s complaint. M3's answer presented the
following objections: (1) the arbitrator erroneously awarded FPA fees and
‘expenses barred by 10Del. C. § $712; (2) the arbitrator should have awarded
interest to FPA from the date of the arbitration award because FPA caused the
delay in the resolution with excessive unsupported demands, including refusing to
settle the matter for an amount greater than the principle amount awarded; (3) FPA.
did not properly verify its complaint as Court of Chancery Rule 3(aa) requires;
and, (4) the arbitration award should be vacated pursuant to 10 Del C. §
5714(a)(4) because the arbitrator permitted the testimony of a previously
unidentified witness and allowed that witness to offer testimony concerning the

internal working guidelines of an insurance company without requiring the witness

 

to produce the internal working guidelines for eross-examination, M3"s answer
requested that the Vice Chancellor vacate or modify the arbitration award,

On July 31, 2009, FPA filed a motion for summary judgment seeking
confirmation of the arbitration award. In FPA’s opening brief in support of its
‘motion for summary judgment, FPA focused primarily on M3°s failure to file a

timely motion or application to vacate or modify the award within the 90-day
""PPA’s filing on May 15 was actually an amended complaint, but this facts immaterial to this

appeal; ths, we refer tothe partis" lings as complaint and answer, not amended complaint and
answer tothe amended complaint.
period preseribed by 10 Del. C.§§ S714 and 1715. FPA's opening brief also

 

asserted that M3 had failed to assert the statutory bases for vacating or modifying
an arbitration award under 10 Del. C. § 714(a).

On August 25, 2009, M3 filed an answering brief opposing summary
Judgment. FPA’s motion for summary judgment alleged that M3 had applied
‘untimely fora modification and vacation of the arbitration award.

In its reply brief, FPA responded to M3's arguments and also argued that
“even if [M3's] affirmative defenses are deemed timely filed and effective forthe
Purposes of the statutory scheme, such defenses do not fit within the parameters of
the limited statutory grounds for vacating or modifying an arbitration award.” M3
objected to the addtional arguments and asked the Vice Chancellor to strike those
arguments. The Vice Chancellor denied M3's requests.

Following a hearing on October 22, 2009, the Vice Chancellor granted
summary judgment in favor of FPA for two reasons: (1) M3°s answer containing
“affirmative defenses" did not constitute the appropriate action necessary to
preserve its asserted grounds for modifying, vacating, and correcting the arbitration
award under 10 Del. C. §§ $712, S714, and S715; and, (2) even if asserted
Properly, M3°s asserted grounds for modifying, vacating, and correcting the

tion award created no triable issues of fact on the existence of a statutory

 
basis to vacate, modify, or correct the arbitration award, and that summary
judgment in favor of FPA would still be appropriate,
STANDARD OF REVIEW.

We review the Vice Chancellor's grant of summary judgment de novo, both
as to the facts and the law.’ We must evaluate whether the record shows that there
is no genuine issue of material fact, drawing our own inferences in making factual
determinations and in evaluating the legal significance of the evidence.’ We must
view the facts of the record, including any reasonable hypotheses or inferences, in
the light most favorable to the non-moving party (here, M3). On review, we must,
determine whether a Vice Chancellor's decision to strike “from any pleading any
insufficient defense or any redundant, immaterial, impertinent, or scandalous

‘matter was clearly wrong.®

5 watamsv. Geir, 67. 82d 1368, 1375 (Del. 1996).
a,

“i

Fone. R120,

* Wilson v. Division of Family Services, 988 A2d 435, 440 (De. 2010, In re Stevens, 652 A.24
18,23 Del 1998); Levurv. Bouvier, 287 A.24671, 673 (Del. 1972).

5
ANALYSIS.

‘M3 timely notified FPA ofits contention that the arbitration award should
be vacated or modified by raising the issue in its answer an answer filed
within ninety days of the arbitration award.

 

‘The Vice Chancellor concluded that M3"s “affirmative defenses” did not

 

constitute an “application” within the meaning of 10 Del. C. §§ $713, $714(b), and
5715(a) and the Court of Chancery Rules. The Uniform Arbitration Act instructs a
court (© confirm an arbitration award upon complaint made within one year of its

delivery to the party “unless within the time limits hereit

  

fer imposed grounds are
urged for vacating or modifying or correcting the award ...."7 The UAA requires
8 party urging the court to vacate, modify or correct an arbitration award to file a
‘complaint or application with the court within 90 days after delivery of a copy of
the award." Although the UAA does not define “complaint or application,”
Delaware's liberal pleading standard permits a party to timely move, answer, or

otherwise responsively plead to a complaint.

 

l0Del. € § 5713,

* 10 Det. C. § $714(a) (Upon complaint or application of a partyin an existing case, the Court
shall vacate an award where. ."), 10 Del: § $714(b) ("An application under this section
Stall be made within 90 days ater detivery ofa copy ofthe award, .."), 10 Del C. §$715(a)
(CUpon complaint or application in an existing case made within 90 days afer delivery ofa copy
‘of the award tothe applicant, the Court shall may or corect the award where...)

 

6
‘The UAA specifies that the “law or rule of Court in any civil action” shall
govem actions described in § $701.” Thus, Court of Chancery Rule $6, which
allows a party to present a defense in “pleadings, depositions, answers to
interrogatories and admissions on file,” establishes the notice pleading standard
The initial question here is whether the undefined “application” must be by

‘complaint of motion, or can the

 

;pplication” be raised in an answer toa complaint
to confirm an award ~ as any “subsequent pleading.”

We hold thatthe application may be raised in an answer to a complaint to
confirm an award. M3 met this requirement by answering FPA’s complaint to
confirm the arbitration award, and listing “affirmative defenses” that requested
‘modification, vacation or corection of errors in the arbitration award. This answer
constitutes a pleading, under Chancery Rule $6, M3"s “affirmative defenses” gave
FPA and the Court adequate notice of M3"s application for relief and FPA received
that notice within the requisite, 90-day period. Although M3 may not ultimately
prevail, the mere fact that it did not raise its objections o confirmation by a formal,
separate “motion” does not entitle FPA to summary judgment

2. M3 fails ro assert grounds for modification, vacation, or correction.

 

In addressing the merits of M3’s answer to FPA’s complaint, the Vice

Chancellor did not abuse his discretion when he denied M3°s request to strike parts

*10Del. C5 5714
of FPA's reply brief, and correctly concluded that M3 failed to assert sufficient
grounds to modify, vacate, or corret the arbitration award,

Under Delaware law, a party’s failure to raise a legal issue in the text of an
‘opening brief constitutes a waiver of that claim in the matter under submission to
the cour." In addition, a moving party must “provide adequate factual and legal
support for their positions in their moving papers in order to put opposing parties,
And the Court on notice of the issues to be decided."

In FPA’s opening brief in support of its motion for summary judgment,
FPA’s arguments focused primarily on M3"s failure to file a timely motion or
application within the 90-day period prescribed in 10 Del. C.§§ 5714 and 1715.
FPA’s opening brief also succinctly stated that “none of the five statutory grounds
for vacating the arbitration award are even asserted” and “[M3] has not even
alleged the existence of any of the five statutory grounds for vacating an arbitration
award under 10 Del. C. § $714(a)."

FPA's gives shallow treatment to the substantive issues surrounding M3's
asserted grounds for modification or vacation. But, while shallow and somewhat
incomplete, FPA’s opening brief sufficiently addresses the issues underlying the

Vice Chancellor's denial of M3’s motion to strike.

 

" Murphy v. State, 632 A 2d 1150, 1152 (Del. 1993) (citing Supr. CXR. 14).
"ture Asbestos Litg, 2007 WL. 2410879, t *$ (Del. Super. Ct, August 27, 2007).
M3 argues that the arbitrator allowed an undisclosed witness to testify about
intemal working guidelines without requiring the witness 10 produce those
guidelines for purposes of cross-examination; and the Vice Chancellor should have
modified the arbitration award to award fees and expenses to M3 because it is the
Ave prevailing party.

M3 claims that the arbitration award should be vacated pursuant to 10
Del. C.§ 5714(a)G4), because the arbitrator permitted the testimony of a previously
‘unidentified witness and allowed that witness to offer testimony conceming the
intemal working guidelines ofan insurance company without requiring the witness
to produce the internal working guidelines for cross-examination, Pursuant to 10
Del. C, § 3714(a)(4), a court must vacate an arbitration award ifthe arbitrator: (1)
“refused to postpone the hearing upon sufficient cause being shown therefor" (2)
“refused to hear evidence material to the controversy:” (3) “otherwise conducted
the hearing contrary to the provisions of § 5706;" or (4) “failed to follow the
procedures set forth in this chapter, o as to prejudice substantially the rights of a
party, unless the party applying to vacate the award continued with the arbitration
with notice ofthe defect.""?

In this case, M3°s argument fails to meet any of the provisions of section

'5716(a)(4). First, M3 never sought to adjourn the arbitration so that the witness

" 1oDel. C § S7IA{ays).
‘could produce the internal working guidelines. Second, the arbitrator did not refuse
10 postpone the hearing ~ rather M3 failed to request postponement. Finally, there
is no basis to conclude that proceeding after the objection substantially prejudiced
MB.

M3 also argues that the Vice Chancellor should have modified the
arbitration award to award fees and expenses to M3, as the prevailing party.
Because FPA only received 36% of the amount it intially sought, M3 argues that
FPA did not prevail.

Pursuant to 10 Del, C. § $712, a court “may reduce or allow any fee or
expense which it finds excessive, or may allocate it as justice requires.” M3 has
pointed to no abuse of discretion on the part of the arbitrator and no evidence that
‘would require, in the interests of justice, modifying the allocation of the expenses
and fees award to M3, While FPA may have only received a portion of what it
originally sought, the arbitrator still found in their favor, and as the prevailing
party, FPA is entitled to the arbitrator's award of fees,

CONCLUSION
For the foregoing reasons, we AFFIRM the judgment of the Court of

Chancery.