2007 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

12-18-2007

S Broward Hosp Dist v. Medquist Inc

Precedential or Non-Precedential: Non-Precedential

Docket No. 07-2076

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Recommended Citation

"S Broward Hosp Dist v. Medquist Inc" (2007). 2007 Decisions. Paper 43.

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NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

 

No. 07-2076

 

SOUTH BROWARD HOSPITAL DISTRICT, doing business as

MEMORIAL HOSPITAL WEST, doing business as MEMORIAL

HOSPITAL PEMBROKE, doing business as MEMORIAL

REGIONAL HOSPITAL; CHILDRENS HOSPITAL LOS ANGELES;

NORTHBAY HEALTHCARE GROUP, doing business as NORTHBAY

MEDICAL CENTER, doing business as VACA VALLEY HOSPITAL;

PARTNERS HEALTHCARE SYSTEMS, INC., doing business as

PARTNERS HEALTHCARE, doing business as MASSACHUSETTS

GENERAL HOSPITAL, doing business as MASSACHUSETTS

GENERAL PHYSICIAN'S ORGANIZATION, doing business as

BRIGHAM AND WOMEN'S HOSPITAL, doing business as SPAULDING

REHABILITATION HOSPITAL; doing business as NEWTON-WELLESLEY

HOSPITAL, doing business as NORTH SHORE MEDICAL CENTER, INC.,

doing business as THE SALEM HOSPITAL, doing business as

UNION HOSPITAL; RIVERSIDE HEALTHCARE SYSTEMS, L.P., doing

business as RIVERSIDE COMMUNITY HOSPITAL; WEST HILLS HOSPITAL,

individually and on behalf of all those similarly situated

doing business as WEST HILLS HOSPITAL & MEDICAL CENTER

v.

MEDQUIST INC; RONALD SCARPONE; JOHN SUENDER; BRIAN KEARNS;

MICHAEL CLARK; MEDQUIST TRANSCRIPTIONS, LTD.

 Medquist Inc. and

 Medquist Transcriptions, Ltd,

 Appellants

 
 Honorable Louis H. Pollak, Senior United States District Judge for the Eastern *

District of Pennsylvania, sitting by designation.

2

Appeal from the United States District Court

for the District of New Jersey

(D.C. Civil Action No. 05-cv-2206)

District Judge: Honorable Jerome B. Simandle

 

Submitted Under Third Circuit LAR 34.1(a)

December 13, 2007

Before: SLOVITER and AMBRO, Circuit Judges

POLLAK, District Judge *

(Opinion filed: December 18, 2007)

 

OPINION

 

AMBRO, Circuit Judge 

Medquist Inc, a provider of transcription services to hospitals, appeals the District

Court’s denial of its motion to compel arbitration. As we agree with the District Court

that Medquist waived its right to compel arbitration, we affirm.

Plaintiffs-appellees are a putative class of hospitals. They allege that Medquist

manipulated its billing practices in a fraudulent manner that violated the Racketeer

Influenced and Corrupt Organizations Act, resulting in various tort claims. Their action,

initially filed in the Central District of California, was transferred to the District of New

Jersey. After motion practice before that Court and 16 months into the case, Medquist

moved to compel arbitration.
3

The Federal Arbitration Act, 9 U.S.C. § 1, et seq., establishes a policy in favor of

arbitration that requires the liberal reading of arbitration agreements and the resolution of

any doubts in favor of arbitration. Moses H. Cone Mem’l Hosp. v. Mercury Constr.

Corp., 460 U.S. 1, 24-25 (1983). Waiver of the right to compel arbitration is not to be

inferred lightly. Great W. Mortgage Corp. v. Peacock, 110 F.3d 222, 233 (3d Cir. 1997)

(citing PaineWebber Inc. v. Faragalli, 61 F.3d 1063, 1068 (3d Cir. 1995)). Prejudice is

the touchstone for evaluating an asserted waiver of the right to compel arbitration. 

Ehleiter v. Grapetree Shores, Inc., 482 F.3d 207, 223 (3d Cir. 2007) (citing Hoxworth v.

Blinder, Robinson, & Co., 980 F.2d 912, 925 (3d Cir. 1992)). In determining prejudice,

we consider the following non-exclusive list of factors: (1) the timeliness or lack of a

motion to arbitrate; (2) the degree to which the party seeking to compel arbitration has

contested the merits of its opponent’s claims; (3) whether the party has informed its

adversary of the intention to seek arbitration even if it has not yet filed a motion to stay

the District Court proceedings; (4) the extent of that party’s non-merits motion practice;

(5) its assent to the District Court’s pretrial orders; and (6) the extent to which the parties

have engaged in discovery. Id. at 222 (citing Hoxworth, 980 F.2d at 926-27). Waiver

normally will be found only “where the demand for arbitration came long after the suit

commenced and when both parties had engaged in extensive discovery.” Faragalli, 61

F.3d at 1068-69 (quoting Gavlik Constr. Co. v. H.F. Campbell Co., 526 F.2d 777, 783 (3d

Cir.1975)).
 However, plaintiffs incorrectly alleged in the initial complaint that they were parties 1

to contracts containing arbitration provisions and that agreement to those provisions was

fraudulently induced. This error was one basis for defendants’ motion for Rule 11

sanctions against plaintiffs and their counsel. See Motion for Sanctions 17-22, Case No.

C 05-2206 JBS (D.N.J., Nov. 8, 2005). 

4

To repeat, the motion to compel arbitration before us came 16 months after the

filing of suit. Even after subtracting the five months at the beginning of the case during

which no plaintiffs had been named that were parties to contracts containing arbitration

provisions, the remaining 11-month period is as long as the period at issue in Hoxworth. 

1

See 980 F.2d at 925; see also id. at 926 (noting that “courts have not hesitated to hold that

the right to arbitrate has been waived under circumstances similar to those here”). 

Although the District Court did not entertain motions for summary judgment, Medquist

twice tested the sufficiency of the pleadings with motions to dismiss. The fact that the

parties did not engage in discovery normally precludes a finding of waiver, but here it is

outweighed by Medquist’s tactical decision to litigate extensively in federal court before

seeking to compel arbitration. 

As detailed by the District Court, Medquist litigated this case vigorously before

expressing an intent to force arbitration. This is demonstrated by its motion to dismiss the

second amended complaint in favor of arbitration (which was filed eleven months after

the beginning of the case, or five months before the motion to compel arbitration). That

motion did not indicate an intent to move to compel arbitration in the future. Instead, it

argued that “[b]ecause plaintiffs have not indicated whether they will pursue arbitration,
5

and there is no request to compel arbitration before the Court, a stay would serve no

purpose and the action should be dismissed.” In other words, Medquist attempted to turn

to its own advantage its decision not to move to compel arbitration. The hospitals may

have delayed somewhat the litigation by their own conduct, but Medquist has not

explained how the actions of the hospitals stopped it from moving to compel arbitration at

an earlier date. 

The District Court concluded correctly that Medquist made a tactical decision to

forgo moving to compel arbitration pending litigation of the motions to dismiss. This

decision exposed the hospitals to extensive litigation expense and allowed Medquist to

pursue a total victory in federal court while presuming to reserve any motion to compel

arbitration. Nothing in the cases cited by Medquist entitles it to expose the hospitals to

such delay, expense, and prejudice and then move to compel arbitration. Medquist may

have expressed its preference for arbitration, but that fact does not reduce the prejudice

caused to the hospitals by its tactical decision not to move to compel arbitration. It

moved to the arbitration alternative only when its preferred option proved unsuccessful. 

In this case, it was too late. 

We thus affirm. In doing so, we do not reach the other issues raised by Medquist

in this appeal because they have not been considered by the District Court.