PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

WHEELING HOSPITAL, INCORPORATED, 

a West Virginia not for profit

corporation; BELMONT COMMUNITY

HOSPITAL, INCORPORATED, an Ohio

not for profit corporation,

Plaintiffs - Appellees,

and

WHEELING PEDIATRICS, LLC, an

Ohio limited liability company;

WOMEN’S HEALTH SPECIALISTS OF

WHEELING HOSPITAL, LLC, a West

Virginia limited liability company,  No. 11-1694 on behalf of themselves and all

others similarly situated; MEDICAL

PARK ANESTHESIOLOGISTS,

INCORPORATED, a West Virginia

corporation; KENNETH C. NANNERS,

M.D.; KENNETH S. ALLEN, M.D.;

WILLIAM H. WRIGHT, M.D.; JUDITH

T. ROMANO, M.D.; WAYT HEALTH

CARE PLLC, a West Virginia

professional limited liability

company, on behalf of themselves

and all others similarly situated,

Plaintiffs, 
v. 

THE HEALTH PLAN OF THE UPPER

OHIO VALLEY, INCORPORATED, a

federally qualified and

state-certified not for profit health

maintenance organization,

Defendant - Appellant,

and  OHIO VALLEY HEALTH SERVICES AND

EDUCATION CORPORATION, a West

Virginia not for profit corporation;

OHIO VALLEY MEDICAL CENTER, a

West Virginia not for profit

corporation; EAST OHIO REGIONAL

HOSPITAL, an Ohio not for profit

corporation,

Defendants. 

Appeal from the United States District Court

for the Northern District of West Virginia, at Wheeling.

Frederick P. Stamp, Jr., Senior District Judge.

(5:10-cv-00067-FPS-JES)

Argued: May 15, 2012

Decided: June 27, 2012

Before GREGORY, DUNCAN, and DIAZ, Circuit Judges.

Reversed by published opinion. Judge Duncan wrote the opinion, in which Judge Gregory and Judge Diaz joined.

2 WHEELING HOSPITAL v. HEALTH PLAN
COUNSEL

ARGUED: Allen M. Lopus, THORP, REED & ARMSTRONG, LLP, Pittsburgh, Pennsylvania, for Appellant.

Mark A. Colantonio, FRANKOVITCH, ANETAKIS,

COLANTONIO & SIMON, Weirton, West Virginia, for

Appellees. ON BRIEF: Carl N. Frankovitch, Michael G.

Simon, FRANKOVITCH, ANETAKIS, COLANTONIO &

SIMON, Weirton, West Virginia; Anthony Cillo, COHEN &

GRIGSBY PC, Pittsburgh, Pennsylvania, for Appellees.

OPINION

DUNCAN, Circuit Judge:

Appellees Wheeling Hospital and Belmont Hospital (collectively "the hospital plaintiffs"), along with other medical

providers, commenced this putative class action in West Virginia state court on May 19, 2010, against the Ohio Valley

Health Services and Education Corporation, Ohio Valley

Medical Center and East Ohio Regional Hospital, (collectively, the "OV Health System Parties"), and appellant The

Health Plan of the Upper Ohio Valley, Inc. ("The Health

Plan"). The plaintiffs sued in order to collect amounts allegedly owed to them by employee benefit plans established by

the OV Health System Parties, for which The Health Plan

acted as administrator.

After pretrial activity described in detail below, The Health

Plan moved to dismiss the claims brought against it by the

hospital plaintiffs pursuant to an arbitration agreement

between the parties. The district court denied this motion,

holding that The Health Plan had defaulted on its right to arbitrate. This appeal ensued. After assuring ourselves of appellate jurisdiction, we conclude that the district court erred in its

determination that The Health Plan defaulted on its right to

WHEELING HOSPITAL v. HEALTH PLAN 3
arbitrate. We therefore reverse the district court’s denial of

The Health Plan’s motion to dismiss.

I.

Because this appeal turns on the procedural history of the

case in the district court, we begin there. Counts I and II of

the Complaint set forth breach of contract claims against the

OV Health System Parties. Count III sets forth a separate

breach of contract claim against The Health Plan premised on

its alleged unconditional obligation to pay plaintiffs for the

health care services provided to persons covered by the relevant employee benefit plans.

On June 18, 2010, the defendants removed the case to federal court. On June 21, 2010, the district court issued an order

and notice regarding discovery and scheduling pursuant to

Rules 16(b) and 26(f) of the Federal Rules of Civil Procedure.

On June 23, 2010, The Health Plan filed an answer to the

Complaint.

On June 25, 2010, the OV Health System Parties, but not

The Health Plan, filed a motion to dismiss the claims asserted

against them, or in the alternative for summary judgment.

They advanced three arguments. First, they argued that the

claims should be dismissed pursuant to Rule 12(b)(7) of the

Federal Rules of Civil Procedure because the OVHS&E

Health Benefit Plan, a purported indispensable party, had not

been joined in the action. Second, the OV Health System Parties argued that they did not owe a payment obligation to

plaintiffs under the contracts at issue and, as a result, the

claims should be dismissed pursuant to Rule 12(b)(6) of the

Federal Rules of Civil Procedure. Finally, the OV Health System Parties argued that plaintiffs’ claims should be dismissed

for a purported failure to exhaust administrative remedies set

forth in the OVHS&E Health Benefit Plan. Plaintiffs opposed

the motion to dismiss.

4 WHEELING HOSPITAL v. HEALTH PLAN
While the motion to dismiss was pending, plaintiffs filed a

motion for remand.1 On July 12, 2010, The Health Plan filed

an amended answer that asserted the affirmative defense of

arbitration.

That same day, The Health Plan filed a pleading titled "Response to . . . Motion to Dismiss, or in the Alternative, Motion

to Join in Result." J.A. 141-42. The Health Plan argued that

"[t]o the extent this Court is inclined to grant the [OV Health

System Parties’ motion to dismiss]," The Health Plan "will be

entitled to a dismissal of all claims against it as well." J.A.

141. If the district court concluded that the OVHS&E Health

Benefit Plan was an indispensable party, The Health Plan contended, "the Court will have necessarily determined that the

Court cannot accord complete relief among the existing parties to the action. As a consequence, dismissal would be

appropriate and in fact required as to all defendants, including

The Health Plan." Id. "Similarly," the motion continued,

if the Court is inclined to grant the [OV Health System Parties’ motion] on the basis that Plaintiffs

failed to exhaust [ ] administrative remedies . . . the

Court will have determined that plaintiffs’ claim for

payments cannot proceed at this time. This determination would likewise extend to the Plaintiffs’

claims against the Health Plan since their claims are

for these same payments. As a consequence, The

Health Plan should likewise be dismissed pending

Plaintiffs’ exhaustion of the aforementioned administrative remedies.

Id. at 141-42. Notably, The Health Plan did not seek a dismissal on the merits under Rule 12(b)(6).

1On July 16, 2010, The Health Plan filed an opposition to the motion

to remand. It did not make any reference to arbitration in that opposition.

WHEELING HOSPITAL v. HEALTH PLAN 5
On July 26, 2010, plaintiffs filed a motion to strike The

Health Plan’s response to the motion to dismiss, and an opposition to its alternative motion to join in result. They argued

that The Health Plan’s pleading was a "belated and unsupported motion to dismiss and a premature and unsupported

motion for summary judgment." J.A. 177. Plaintiffs further

contended that The Health Plan’s motion should be denied on

the merits because, even if the district court were to grant the

OV Health System Parties’ motion to dismiss, that grant

would not preclude or limit plaintiffs’ breach of contract

claim against The Health Plan.

On July 30, 2010, the parties filed their Report of Planning

Conference, in which they were required to consider, inter

alia, alternative dispute resolution processes. The Report did

not mention The Health Plan’s intent to compel arbitration of

any of the claims asserted against it. The Report contained

proposed scheduling deadlines, including a proposed November 5, 2011 trial date. On August 2, 2010, the district court

entered a scheduling order setting dates for, among other

things, the close of discovery (August 1, 2011), a pretrial conference (October 17, 2011) and trial (November 1, 2011).

Also on August 2, 2010, The Health Plan filed a response

to plaintiffs’ motion to strike. Therein, it disputed the plaintiffs’ characterization of its motion, and argued that its motion

constituted a "timely response to the Ohio Valley Health System Defendants’ Motion." J.A. 194.

On September 8, 2010, plaintiffs noticed the deposition of

two Health Plan witnesses. On September 14, 2010, plaintiffs

served discovery on The Health Plan in the form of interrogatories and requests for production. They also noticed a

30(b)(6) deposition of The Health Plan.

On December 2, 2010, the district court entered a memorandum opinion and order on outstanding motions. The district court denied the motion for remand. It granted the OV

6 WHEELING HOSPITAL v. HEALTH PLAN
Health System Parties’ motion to dismiss under Rule

12(b)(6): "Because the plaintiffs cannot state a breach of contract action against the OV Health System Parties either

directly or as third-party beneficiaries, this Court must dismiss Count I and II of the plaintiffs’ complaint for failure to

state a claim." J.A. 429. The district court denied the OV

Health System Parties’ motion to dismiss under Rule

12(b)(7), however, concluding that complete relief could be

provided without joining the employee benefit plans because

"[t]he plaintiffs contracted for payment in the [Hospital Service Agreements] with the Health Plan. It is The Health

Plan’s responsibility under the [contract] to pay the plaintiffs

for any health care services provided to participants in the

employee benefit plans." J.A. 430. Turning to The Health

Plan’s response to the OV Health System Parties’ motion, the

district court first denied the plaintiffs’ motion to strike. It

then denied The Health Plan’s alternative motion to join in

result for the same reason it had denied the OV Health System

Parties’ 12(b)(7) motion, holding that under the facts alleged,

The Health Plan was contractually obliged to make payments

to the plaintiffs. Thus, after the district court’s ruling, The

Health Plan was the only remaining defendant in the suit.

On January 10, 2011, plaintiffs filed a motion for leave to

amend their complaint to add additional plaintiffs, which the

district court granted. On January 27, 2011, The Health Plan

filed a motion to dismiss the amended complaint with prejudice. The Health Plan’s memorandum in support of this

motion divides the named plaintiffs in the amended complaint

into three distinct categories: (1) physician practice groups;

(2) individual physicians; and (3) hospitals, i.e., Belmont Hospital and Wheeling Hospital. The Health Plan argued that it

and the hospital plaintiffs had a relationship governed by Hospital Service Agreement contracts. The memorandum contains a "Background" section, which sets forth in detail the

terms of those contracts, including the "Disputes and Arbitration" clause contained therein. At the conclusion of the Background section, the memorandum states, "Hospital Plaintiffs’

WHEELING HOSPITAL v. HEALTH PLAN 7
allegations of breach of contract by the Health Plan by nonpayment is plainly encompassed by this arbitration provision

. . . the Court should compel separate binding arbitrations for

each Hospital Plaintiff’s claims." J.A. 483. Part I.B. of the

memorandum is titled "Pursuant to the Express Terms of the

Contracts, Hospital Plaintiffs’ Claims must be Submitted to

Separate, Binding Arbitrations." J.A. 485. It discusses the

Supreme Court’s case law regarding the enforcement of arbitration agreements, and then argues:

Here, to give full effect to the intentions and terms

of the agreements between each Hospital Plaintiff

and The Health Plan, the Hospital Plaintiffs’ claims

must be submitted to individual arbitration proceedings. These parties have specifically agreed to

resolve their disputes in arbitration . . . [which] must

be enforced by this Court. . . . This agreement must

be upheld on its terms, and individual arbitrations

ordered. To hold otherwise would rewrite the contracts between the parties. As this litigation violates

the Hospital Plaintiffs’ agreement to arbitrate all disputes related to compensation, the Complaint should

be dismissed with prejudice.

J.A. 487-88. Plaintiffs opposed The Health Plan’s motion to

dismiss. They argued, inter alia, that The Health Plan had

defaulted on any right that it may have had to compel arbitration.

On June 6, 2011, the district court denied The Health Plan’s

motion to dismiss. With respect to the portion of The Health

Plan’s motion directed at the claims of the hospital plaintiffs,

the district court found that it constituted a demand for arbitration:

The Federal Arbitration Act ("FAA") requires that a

district court, upon motion by any party, "stay judicial proceedings involving issues covered by written

8 WHEELING HOSPITAL v. HEALTH PLAN
arbitration agreements." Choice Hotels Intern., Inc.

v. BSR Tropicana Resort, Inc., 252 F.3d 707, 709

(4th Cir. 2001); see also 9 U.S.C. § 3. When a party

seeks enforcement of the arbitration clause of an

agreement during proceedings in a district court, a

party sufficiently "invoke[s] the full spectrum of

remedies under the FAA, including a stay under

§ 3." Id. at 710. Accordingly, this Court finds that

The Health Plan’s motion to dismiss because of the

arbitration clause invokes its remedies under the

FAA, and therefore constitutes a demand for arbitration.

J.A. 1534. The district court went on to find, however, that

Health Plan had defaulted on its right to arbitration. After

reciting the applicable standard for default of the right of arbitration, the district court concluded that the hospital plaintiffs

had "met their heavy burden to show that allowing arbitration

at this point in the litigation" would prejudice them. J.A.

1536-37. In support of this conclusion, it found that "The

Health Plan engaged in over six months of litigation between

amending its answer to include the affirmative defense of

arbitration and actually demanding arbitration." Id. at 1537.

During that time, it further found, the hospital plaintiffs "had

to respond to two dispositive motions by The Health Plan on

the merits, forcing the hospital plaintiffs to reveal their legal

strategy in opposing those motions." Id. The district court

observed, "The Health Plan has participated in oral argument

and opposed the hospital plaintiffs’ motions, arguing that this

Court has proper jurisdiction over this civil action. The Health

Plan opposed a motion to compel, which the parties subsequently resolved." Id. The district court also noted that "the

plaintiffs assert by affidavit that they incurred more than

$250,000 in legal fees and expenses," id., but did not adopt

this assertion as a finding of fact.

Based on the above findings of fact, the district court concluded as follows:

WHEELING HOSPITAL v. HEALTH PLAN 9
The Health Plan utilized "the litigation machinery"

in such a way to prejudice the plaintiffs if this Court

dismissed the action to allow arbitration at this stage

in the litigation. Because this Court finds that The

Health Plan has [defaulted on] its right to arbitrate,

it is not necessary for this Court to decide whether

it would be unconscionable to permit The Health

Plan to assert arbitration clauses in this matter.

Accordingly, The Health Plan’s motion for summary

judgment as to the hospital plaintiffs is denied with

prejudice.

Id. This appeal followed.

II.

The Health Plan contends that the district court erred in

holding that it had defaulted on its right to arbitrate. Before

proceeding to the merits of this appeal, however, we must first

assure ourselves that we possess appellate jurisdiction, which

turns on whether The Health Plan properly invoked the FAA

in its motion to dismiss. We first set forth the proper standard

for determining our appellate jurisdiction under the FAA. We

then apply that standard, concluding that we possess appellate

jurisdiction over this appeal.

A.

Federal courts are courts of limited jurisdiction, and we

presume that a cause lies outside this limited jurisdiction. Barbour v. Int’l. Union, 640 F.3d 599, 605 (4th Cir. 2011) (en

banc), abrogated on other grounds by 28 U.S.C.

§ 1446(b)(2)(B). The burden of establishing the contrary rests

upon the party asserting jurisdiction. Id.

"Ordinarily, courts of appeals have jurisdiction only over

‘final decisions’ of district courts." Arthur Andersen LLP v.

Carlisle, 556 U.S. 624, 627 (2009) (quoting 28 U.S.C.

10 WHEELING HOSPITAL v. HEALTH PLAN
§ 1291). The FAA, however, makes an exception to that finality requirement, providing that "[a]n appeal may be taken

from . . . an order":

(A) refusing a stay of any action under section 3 of

this title,

(B) denying a petition under section 4 of this title to

order arbitration to proceed,

(C) denying an application under section 206 of this

title to compel arbitration,

(D) confirming or denying confirmation of an award

or partial award, or

(E) modifying, correcting or vacating an award[.]

9 U.S.C. § 16(a)(1). In Stedor Enter’s., Ltd. v. Armtex, Inc.,

947 F.2d 727 (4th Cir. 1991), we elaborated on the meaning

of § 16:

The broad purpose of section 16 was to implement

Congress’ deliberate determination that appeal rules

should reflect a strong policy favoring arbitration.

Congress sought to effectuate this policy in two

ways. First, an order that favors litigation over arbitration—whether it refuses to stay the litigation in

deference to arbitration; refuses to compel arbitration; denies confirmation to or modifies, corrects, or

vacates an arbitral award; or grants, continues, or

modifies an injunction against arbitration—is immediately appealable, even if interlocutory in nature.

Thus, a party who believes that arbitration is

required by an agreement between the parties need

not suffer the expense and inconvenience of litigation before receiving appellate review of a district

court judgment that arbitration was inappropriate.

WHEELING HOSPITAL v. HEALTH PLAN 11
Id. at 730 (internal quotation marks and citations omitted).

We have not addressed the exact issue presented here,

whether we have appellate jurisdiction to review a denial of

a motion to dismiss that demands arbitration without specifically invoking §§ 3 or 4. However, in Choice Hotels Int’l.,

Inc. v. BSR Tropicana Resort, Inc., 252 F.3d 707 (4th Cir.

2001), we addressed a related question, i.e., whether a party

had "properly invoked" § 3 of the FAA, under which a party

may seek a stay of proceedings pending arbitration, even

though it had styled its motion as a motion to dismiss. Id. at

709. We held that "[n]otwithstanding the terms of § 3, . . . dismissal is a proper remedy when all of the issues presented in

a lawsuit are arbitrable." Id. "Moreover," we added,

a hypertechnical reading of [the defendant’s] pleadings would be inconsistent with the liberal federal

policy favoring arbitration agreements. [The defendant] made it clear during proceedings in the district

court that it was seeking enforcement of the arbitration clause of the Agreement. This is sufficient to

invoke the full spectrum of remedies under the FAA,

including a stay under § 3.

Id. at 709-10 (internal quotation marks and citations omitted).

Notably, Choice Hotels concerned whether dismissal was an

authorized remedy under § 3, and we did not specifically

frame our discussion in the terms of appellate jurisdiction,

presumably because the appellee did not challenge our jurisdiction. Nevertheless, the opinion’s reasoning with respect to

what a defendant must do in order to invoke the full spectrum

of remedies under the FAA is instructive with regard to our

appellate jurisdiction.

Although we have not considered the specific question of

appellate jurisdiction over a motion to dismiss that does not

specifically invoke §§ 3 or 4, several other circuits have done

so. In their analysis, they have adopted an approach similar to

12 WHEELING HOSPITAL v. HEALTH PLAN
the one we articulated in Choice Hotels, focusing on whether

the defendant made it clear that it was seeking enforcement of

the arbitration clause contained within an applicable agreement. In Conrad v. Phone Directories Co., 585 F.3d 1376

(10th Cir. 2009), the Tenth Circuit adopted a two-step process

for determining whether a court of appeals has appellate jurisdiction under § 16(a).

The first, simplest, and surest way to guarantee

appellate jurisdiction under § 16(a) is to caption the

motion in the district court as one brought under

FAA §§ 3 or 4. See Fed.R.Civ.P. 10(a) ("Every

pleading must have a caption with the court’s name,

a title, a file number, and a Rule 7(a) designation.")

(emphasis added). This simple rule should dispose of

the vast majority of cases in this area, and those hoping to avail themselves of the immediate appeal provided for in the FAA would do well to follow it.

Id. at 1385. Although "an approach that looks exclusively to

the caption of a motion may seem tempting," Conrad

observed, "it would be unworkable" because it "would violate

the spirit of notice pleading embodied in our Federal Rules of

Civil Procedure" and "create incentives for litigants to ‘game’

the captions of their motions in an effort to gain an interlocutory appeal where none is warranted." Id. It therefore articulated a second step in the process of determining appellate

jurisdiction:

If a motion denied by the district court is not explicitly styled as a motion under the FAA, or the court

suspects that the motion has been mis-captioned in

an attempt to take advantage of § 16(a), the court

must look beyond the caption to the essential attributes of the motion itself. The goal of this inquiry is

to determine whether it is plainly apparent from the

four corners of the motion that the movant seeks

WHEELING HOSPITAL v. HEALTH PLAN 13
only the relief provided for in the FAA, rather than

any other judicially-provided remedy.

Id. (citations omitted). The Tenth Circuit favored a focus on

"the relief requested in the motion," concluding that "[i]f the

essence of the movant’s request is that the issues presented be

decided exclusively by an arbitrator and not by any court,

then the denial of that motion may be appealed under

§ 16(a)." Id. at 1385-86.

If, on the other hand, the movant in the district court

requests a judicial remedy that is inconsistent with

the position that the issues involved may be decided

only by the arbitrator, the movant is no longer proceeding exclusively under the FAA and has forfeited

their right to interlocutory review under § 16(a).

Id. at 1386. We find this analysis persuasive.

The second step of the Conrad test thus strikes a balance

between form and substance, and is in harmony with the other

circuits to have considered the issue.2 Accordingly, when a

2Even the D.C. Circuit, which has focused on the plain language of

§ 16(a) and construed the provision narrowly, has nevertheless acknowledged that it may construe a motion to dismiss more broadly in some circumstances, particularly if it were based on the FAA’s requirement that

arbitration agreements be strictly enforced. See Bombardier Corp. v. Nat’l

R.R. Passenger Corp., 333 F.3d 250, 254 (D.C. Cir. 2003). On the facts

in Bombardier, the court declined to construe the motion broadly because

it "exhibited no intent to pursue arbitration—indeed, it sought outright dismissal with no guarantee of future arbitration." Id. Similarly, the Second

Circuit dismissed for lack of appellate jurisdiction where a motion to dismiss neither explicitly nor implicitly petitioned the district court to compel

arbitration. Wabtec Corp. v. Faively Transp. Malmo AB, 525 F.3d 135,

140 (2d Cir. 2008). The First Circuit in Fit Tech, Inc. v. Bally Total Fitness Holding Corp., 374 F.3d 1 (1st Cir. 2004), found appellate jurisdiction where the movant clearly argued that the case had to be arbitrated,

and noted that if the movant had wanted a dismissal but no decision by

the arbitrator, then it would have refused to entertain the appeal. Id. at 5-

6. 

14 WHEELING HOSPITAL v. HEALTH PLAN
motion is not styled in a dispositive manner, we hold that our

inquiry into appellate jurisdiction should be based on the principle articulated in Choice Hotels, as well as Conrad. In other

words, we must determine whether The Health Plan made it

clear within the four corners of its motion to dismiss that it

was seeking enforcement of the arbitration agreement.

B.

So viewed, we conclude that The Health Plan clearly stated

in its motion to dismiss that it was seeking to enforce the arbitration agreement. As already noted, The Health Plan’s memorandum, which was incorporated by reference in the motion,

set forth in detail the terms of the "Hospital Service Agreement" contracts between the parties, including the "Disputes

and Arbitration" clause. The memorandum specifically argued

that the court should compel separate binding arbitrations for

each hospital plaintiff’s claims pursuant to the express terms

of the contracts between the parties. Moreover, The Health

Plan did not request a judicial remedy that was inconsistent

with the position that the issues involved may be decided only

by the arbitrator. For these reasons, we are satisfied that we

possess appellate jurisdiction over this appeal.

III.

Turning now to the merits, we must determine whether the

Health Plan defaulted on its right to arbitration. "We review

a district court’s decision as to default of arbitration de novo

but defer to the district court’s underlying factual findings."

Forrester v. Penn Lyon Homes, Inc., 553 F.3d 340, 342 (4th

Cir. 2009). We thus review a district court’s finding of actual

prejudice de novo if it is based on a legal determination, but

we review it for clear error if it is based on a factual determination. See Microstrategy Inc. v. Lauricia, 268 F.3d 244, 252-

53 (4th Cir. 2001).

WHEELING HOSPITAL v. HEALTH PLAN 15
"Under section 3 of the FAA, a party loses its right to a stay

of court proceedings in order to arbitrate if it is ‘in default in

proceeding with such arbitration.’" Forrester, 553 F.3d at 342

(quoting 9 U.S.C. § 3). "Default in this context resembles

waiver, but, due to the strong federal policy favoring arbitration, courts have limited the circumstances that can result in

statutory default." Id.3 "[D]elay and participation in litigation

will not alone constitute default." Id. at 343. "But a party will

default its right to arbitration if it so substantially utilize[s] the

litigation machinery that to subsequently permit arbitration

would prejudice the party opposing the stay." Id. (internal

quotation marks omitted). "The heavy burden of showing

default lies with the party opposing arbitration." Id. (internal

quotation marks omitted).

"Where a party fails to demand arbitration during pretrial

proceedings, and, in the meantime, engages in pretrial activity

inconsistent with an intent to arbitrate, the party later opposing a motion to compel arbitration may more easily show that

its position has been compromised, i.e., prejudiced." Fraser,

817 F.2d at 252 (internal quotation marks omitted). "But,

even in cases where the party seeking arbitration has invoked

the ‘litigation machinery’ to some degree, ‘the dispositive

question is whether the party objecting to arbitration has suffered actual prejudice.’" Microstrategy, 268 F.3d at 249

(quoting Fraser, 817 F.2d at 252); Patten Grading & Paving,

Inc. v. Skanska USA Bldg., Inc., 380 F.3d 200, 205 (4th Cir.

2004) (same)

In determining what constitutes actual prejudice, we have

emphasized that the amount of "delay and the extent of the

moving party’s trial-oriented activity are material factors in

3

In our prior decisions, we have sometimes used the terms "default" and

"waiver" interchangeably. As we emphasized in Forrester, however,

default is distinct from waiver. Accordingly, to achieve uniformity and

prevent confusion, we have substituted the term "default" for the term

"waiver," where appropriate, in our discussion of prior decisions. 

16 WHEELING HOSPITAL v. HEALTH PLAN
assessing a plea of prejudice." Microstrategy, 268 F.3d at 249.

(internal quotation marks omitted). We consider each factor in

turn.

A.

We first consider the amount of delay. In Microstrategy,

we concluded that the appellant’s delay of fewer than six

months in seeking arbitration was relatively short, and that

nothing in the record suggested that "this delay, in and of

itself, caused [the appellee] to suffer actual prejudice." Id. at

250; see also Patten Grading & Paving, Inc. v. Skanska USA

Bldg., Inc., 380 F.3d 200, 205 (4th Cir. 2004) (finding no

prejudice in four-month delay); Maxum Founds., Inc. v. Salus

Corp., 779 F.2d 974, 982 (4th Cir. 1985) (finding no prejudice in three-month delay). Accordingly, we concluded that

"[a]ny delay by [the appellant] in asserting its right to arbitration, therefore, is insufficient to support a finding of

[default]." Microstrategy, 268 F.3d at 250.

Here, too, we have found nothing in the record that supports a finding of prejudice to the hospital plaintiffs based on

that ground. Indeed, during oral argument, the hospital plaintiffs appeared to recognize that a finding of prejudice could

not be based on the delay in this case. Thus, the district court,

to the extent it based its conclusion of prejudice on the delay,

clearly erred in doing so.

B.

"Whether [The Health Plan] [defaulted on] its right to insist

on arbitration by virtue of its litigation activities is a more difficult question." Microstrategy, 268 F.3d at 250. We look to

our precedent for guidance in this regard.

1.

We have held that a party suffered actual prejudice because

it was forced to respond to a number of potentially damaging

WHEELING HOSPITAL v. HEALTH PLAN 17
motions, including a motion for partial summary judgment

and three motions to dismiss. Fraser, 817 F.2d at 252. In Fraser, judgment on several of the claims which the defendant

sought to arbitrate was rendered over two years before the

defendant made the arbitration. Id. Further, the passing of two

trial dates prior to the date for the hearing on the defendant’s

motion to compel arbitration showed that the plaintiff had to

prepare repeatedly for trial rather than arbitration. Id.

Similarly, in Forrester, we found that plaintiffs had suffered actual prejudice where a defendant waited until the eve

of the trial before moving to compel arbitration, and "[b]y that

time [plaintiffs] had engaged in extensive pretrial preparations

including multiple depositions, a motion for summary judgment, motions in limine, and submission of an array of pretrial pleadings." 553 F.3d at 343. "This use of the litigation

process," we held, caused the plaintiffs actual prejudice

because it required them "to expend significant time and

money," permitted the defendant to defeat several of the

plaintiffs’ claims on summary judgment, and forced the plaintiffs to reveal their trial strategy. Id.

By contrast, in Patten, we found that no prejudice arose

from the appellant’s pre-trial activity, reasoning that although

the district court had resolved three motions prior to the

appellant’s attempt to compel arbitration, none were filed by

the appellant and none addressed the merits of any of the

appellee’s claims. 380 F.3d at 206 ("We are unwilling to

include activity that the moving party did not initiate in

assessing that party’s default."). Moreover, we rejected the

argument that prejudice arose from the discovery conducted

between the parties, noting that at the time of the appellant’s

motion to compel arbitration, "the parties’ discovery efforts

were confined to the exchange of interrogatories and requests

for production of documents; significantly, the parties had not

noticed depositions." Id. "The minimal nature of the discovery

conducted in this case," we concluded, "falls well within the

scope of discovery we have previously found insufficient to

18 WHEELING HOSPITAL v. HEALTH PLAN
establish prejudice." Id. at 206-07. Importantly, we observed,

"Further, [the appellee] fails to demonstrate that [the appellant] availed itself of discovery procedures unavailable in

arbitration, or gained a strategic advantage through its discovery requests." Id. at 207. We concluded that the discovery had

not caused prejudice "[b]ecause the written discovery conducted here was limited, the parties had not proceeded with

time-consuming and expensive depositions, and [the appellee]

demonstrates no resulting disadvantage." Id.

Applying the foregoing cases here, we must determine

whether the hospital plaintiffs suffered actual prejudice as a

result of the extent of The Health Plan’s litigation conduct. In

its analysis, the district court took into account the fact that

the hospital plaintiffs had to respond to two dispositive

motions by The Health Plan on the merits, forcing the hospital

plaintiffs to reveal their legal strategy in opposing those

motions. The district court also found it significant that The

Health Plan participated in oral argument and opposed the

hospital plaintiffs’ motions, including their motion to remand,

in which it argued that the district court had jurisdiction over

this civil action. Finally, it noted that plaintiffs had asserted

by affidavit that they incurred more than $250,000 in legal

fees, although it did not adopt this assertion as a finding of

fact. We now examine each of the district court’s findings.

a.

Preliminary, we must reject the district court’s reliance on

The Health Plan’s opposition to motions filed by the hospital

plaintiffs to support a finding of prejudice. As we stated in

Patten, we do not include activity that the moving party did

not initiate in assessing that party’s default. See id. Thus, the

district court could not permissibly conclude that prejudice

resulted from The Health Plan’s responses to plaintiffs’

motions, including The Health Plan’s assertion of the district

court’s jurisdiction.

WHEELING HOSPITAL v. HEALTH PLAN 19
b.

We must likewise reject the district court’s conclusion that

The Health Plan’s dispositive motions4 forced the hospital

plaintiffs to reveal their litigation strategy. Notably, the district court failed to explain what litigation strategy had been

revealed, or otherwise provide any reasoning in support of its

finding. Nor did the hospital plaintiffs elaborate on this assertion before the district court. They simply restated the conclusion, pointing to nothing in the record that supports the

contention that the hospital plaintiffs were forced to reveal

any significant elements of their legal strategy in responding

to a 12(b)(7) motion that essentially argued that if relief were

afforded to other defendants, it should also be afforded to The

Health Plan.5 By its nature, such a motion, although it is

potentially dispositive, does not seek relief on the merits, and

would therefore not appear to require a response from the

opposing party that reveals litigation strategy. In the absence

of evidence showing that The Health Plan has gained some

strategic advantage as a result of the hospital plaintiffs’ pleadings to date, we are constrained to conclude that the hospital

plaintiffs suffered no actual prejudice on that ground.

4The district court stated that the plaintiffs have had to respond to two

dispositive motions by the Health Plan on the merits. It did not specify

those motions. Presumably, it was referring to The Health Plan’s motion

to join in result and to its subsequent motion to dismiss. We agree that the

former may be appropriately characterized as a dispositive motion on the

merits. The latter motion, however, cannot be factored into the analysis,

because it was the very vehicle through which The Health Plan sought

enforcement of the arbitration agreements. 

5By contrast, in In re Mirant, 613 F.3d 584 (5th Cir. 2000), a case on

which the hospital plaintiffs place heavy reliance, the court found that the

three motions to dismiss filed by the party that subsequently sought to

invoke arbitration "gave it a full preview of [the non-movant’s] evidence

and litigation strategy, particularly its arguments and evidence in response

to the [movant’s] affirmative defenses." Id. at 592. 

20 WHEELING HOSPITAL v. HEALTH PLAN
c.

Nor have the hospital plaintiffs demonstrated that they suffered actual prejudice on the ground that they incurred significant expense as a result of litigation activity initiated by The

Health Plan. In Patten, we recognized that expenses incurred

in responding to the moving party’s litigation activities are

relevant in assessing a plea of prejudice, though we noted

"that at least one circuit has concluded that incurring the legal

expenses inherent in litigation is, without more, ‘insufficient

evidence of prejudice to justify finding a [default].’" 380 F.3d

at 208 (quoting PPG Indus., Inc. v. Webster Auto Parts, Inc.,

128 F.3d 103, 107 (2d Cir. 1997)). We concluded that we

need not resolve the issue because "closer scrutiny of" the

legal expenses at issue "indicates that the amount properly

attributable to [the appellant’s] conduct during the delay in

seeking arbitration is, in fact, much smaller." Id. In the

$5862.56 total, the appellant had included state court filing

fees, document reproduction and mailing costs, mediator fees,

and costs attributable to its response to a subpoena from a

nonparty. Id. "Such costs are sums that [the appellee] would

have incurred irrespective of the timing or the fact of [the

appellant’s] motion to compel arbitration," we held, "and [the

appellant] offers no argument to the contrary." Id.

The facts here are very similar to those in Patten, and compel the same conclusion. First, it bears note that the district

court did not adopt the hospital plaintiffs’ assertion regarding

its expenses. Even assuming that it credited the hospital plaintiffs’ assertion, however, it clearly erred in doing so. The hospital plaintiffs’ affidavit failed to specify the portion of that

amount spent by the hospital plaintiffs, as distinguished from

the amount spent by other plaintiffs. Nor did it indicate what

portion of that amount was spent litigating against The Health

Plan, as distinguished from the amount that was spent litigating against the OV Health System Parties. It also made no

effort to indicate what portion of the $250,000 was incurred

as a result of litigation activity initiated by The Health Plan.

WHEELING HOSPITAL v. HEALTH PLAN 21
Notably, to the extent the hospital plaintiffs incurred expenses

engaging in affirmative discovery, such expenses would not

establish prejudice. Patten, 380 F.3d at 208. Similarly, the

hospital plaintiffs cannot be prejudiced by costs that they

would have incurred irrespective of the timing or the fact of

The Health Plan’s motion. The hospital plaintiffs assert that

"[t]hese legal fees were incurred in large part by virtue of having to respond to The Health Plan’s dispositive motion, by

engaging in discovery with The Health Plan, including the

preparation of motions to compel, and by otherwise proceeding on the merits in a case that might have been stayed if The

Health Plan had promptly moved to enforce its arbitration

rights." Appellees’ Br. 37. This conclusory statement does little to cure the deficiencies in their affidavit. It was the plaintiffs’ burden to prove the expenses they suffered as a result of

The Health Plan’s litigation activity. Because their unsupported conclusory assertions about those expenses are insufficient to meet that burden, we cannot weigh that factor in their

favor.

d.

Finally, the crux of the hospital plaintiffs’ claim of prejudice is that The Health Plan’s filing of the equivalent of a

motion for judgment on the pleadings was inherently prejudicial. Having already concluded that this filing did not cause

a substantial delay in the litigation, that there is no proof that

the hospital plaintiffs were forced to reveal their legal strategy

as a result of the filing, nor any evidence that they incurred

significant legal expenses as a result thereof, we must now

determine whether the filing of the motion is sufficient by

itself to give rise to the actual prejudice that is required by our

precedent.

Although some of our sister circuits have held that the nonmoving party is prejudiced when the party seeking to arbitrate

"litigate[s] substantial issues on the merits," Southeastern

Stud & Components, Inc. v. Am. Eagle Design Build Studios,

22 WHEELING HOSPITAL v. HEALTH PLAN
LLC, 588 F.3d 963, 969 (8th Cir. 2009); see also Doctor’s

Assocs., Inc. v. Distajo, 107 F.3d 126, 131 (2d Cir. 1997)

("The ‘prejudice’ that supports a finding of [default] can be

‘substantive prejudice to the legal position of the party opposing arbitration, such as when the party seeking arbitration

loses a motion on the merits and then attempts, in effect, to

relitigate the issue by invoking arbitration" (internal quotation

marks omitted)), we have never adopted that position in a

binding opinion.6

In Fraser, discussed above, we found that the appellee was

prejudiced in part because it "had to respond to a number of

potentially damaging motions, including a motion for partial

summary judgment and three motions to dismiss." 817 F.2d

at 252. We noted that judgment was rendered on several of

appellee’s claims over two years before the appellant

demanded arbitration, and that the passing of two trial dates

showed that the appellee had to prepare repeatedly for trial

rather than for arbitration. Id. Notably, we did not adopt, as

we could have, a bright line rule that a party is always prejudiced by the filing of a dispositive motion. Instead, we took

into account all of the above factors in determining the existence of prejudice.

Our precedent thus counsels against adopting a bright line

rule that the mere filing of a dispositive motion on the merits

is inherently prejudicial.7 We agree that The Health Plan

engaged in some activity inconsistent with the intent to arbitrate, including by filing a motion to join in the other defen6

In an unpublished opinion, we cited Distajo for the proposition that

"[t]he actual prejudice required to support a finding of [default] ‘can be

substantive prejudice to the legal position of the party opposing arbitration." Hasco, Inc. v. Schuyler, Roche & Zwirner, 1998 WL 957454 at *2

(4th Cir. June 4, 1998) 

7As already noted, The Health Plan’s motion sought to join in the OV

Health System Parties’ request for dismissal under Rule 12(b)(7), but it

did not request relief on the merits. Thus, even were we to adopt such a

bright line rule, it is doubtful whether it would be determinative here. 

WHEELING HOSPITAL v. HEALTH PLAN 23
dants’ 12(b)(7) motion, and that such activity lessened the

burden on the hospital plaintiffs to show that their position

has been compromised, i.e., prejudiced. But we reiterate that

they have nonetheless shown no actual prejudice that resulted

therefrom. Notably, The Health Plan’s motion to join in result

does not appear to have delayed the litigation, it did not

require the hospital plaintiffs to incur significant additional

expenses, and nor did it cause them to reveal any litigation

strategy. Thus, although we recognize that prejudice to a

party’s legal position may indeed be sufficient to make the

requisite showing of actual prejudice, and that the filing of a

potentially dispositive motion on the merits is a salient consideration in a plea of prejudice, we are compelled to conclude, on the facts presented, that the hospital plaintiffs have

failed to meet their burden of showing such prejudice.8

IV.

For the foregoing reasons, the judgment of the district court

is

REVERSED.

8We are sympathetic to the principle that the party seeking arbitration,

"having learned that the district court was not receptive to its arguments,

should [not] be allowed a second bite at the apple through arbitration," and

that "[t]o hold otherwise would encourage litigants to delay moving to

compel arbitration until they could ascertain how the case was going in

federal district court." Mirant, 613 F.3d at 590 (quotation marks omitted).

On these facts, however, we believe that the hospital plaintiffs have fallen

short of demonstrating that The Health Plan attempted to "game the system." Id. The Health Plan plausibly asserted at argument that it asserted

an affirmative defense of arbitration in its answer, but chose to wait to

invoke its right to arbitrate given the complicated and uncertain posture of

the litigation during its early stages, which involved multiple plaintiffs and

multiple defendants, only some of whom had entered into arbitration

agreements with each other. Notably, as The Health Plan also informed

the court at argument, it believed that the litigation could be resolved if

the OV Health System Parties were successful in their efforts to make the

hospital plaintiffs whole for the amounts they claim were owed to them.

We are therefore reluctant, solely on the basis of its motion to join in

result, to conclude that The Health Plan engaged in gamesmanship. 

24 WHEELING HOSPITAL v. HEALTH PLAN