2007 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit 12-18-2007 

# S B roward H o sp D i s t v

. M edqui s t Inc P r e c e de nt i al or N on-P r e c e de nt i al : N on-P r e c e de nt i al D ocke t N o . 07-2076

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Thi s de c i sion i s br ou ght t o you for f r e e and ope n a c c e s s b y the O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit at V i ll anova U nive r sity S choo l of L a

w Di git al Reposit ory

. It h as be e n a c c ept e d for inclusion in 2007 D e c i sion s b y an authori z e d a dmini s tr at or of V i ll anova U nive r sity S choo l of L a

w Di git al Reposit ory

. F or mor e inform at ion, p le as e c ont a ct Be n j amin . C arl s on@l a

w . vi ll anova . e du . Re c omme nde d C it at ion " S B r owar d H osp Di s t v

. M e dqui s t Inc " (2007). 2007 D e cisio n s . P ape r 43. http://d i git alc ommon s .l a

w . vi ll anova . e du/thir dc ir c uit_2007/43NOT P RE CE DE NT I AL UN I TED STATES CO UR T OF A PP EALS F O R T H E T H IR D C IR C U IT N o. 07- 2076

SO U T H B R O W A R D H O SPITA L D I ST R I C T , doi ng bus i nes s as M E M OR I AL HOS P I T AL WES T , d o i n g b u s i n e s s a s M E M OR I AL HOS P I T AL P E M BR OKE , d o i n g b u s i n e s s a s M E M OR I AL RE G I O N A L H O SPI TA L; CH I LD RE N S H O SPI TA L LO S A N G ELE S; NOR T HB AY HE AL T HC AR E GR OUP , d o i n g b u s i n e s s a s NOR T HB AY M EDI CA L CEN TER, d o i n g b u s i n e s s a s VA CA VA LLEY H OSPI TAL; PA R T N E R S H E A L T H C A R E SY ST E M S, I N C . , doi ng bus i nes s as PARTN ERS HEA LTHC AR E, d o i n g b u s i n e s s a s M ASSACH USETTS GEN ERA L HO SP I TAL, d o i n g b u s i n e s s a s M ASSACH USETTS G E N E R A L PH Y SI C I A N ' S O R G A N I Z A T I O N , doi ng bus i nes s as BR I GHAM AND WOM E N' S HOS P I T AL , d o i n g b u s i n e s s a s S P AUL DI NG REH AB I LI TATI ON HO SP I TAL; d o i n g b u s i n e s s a s NEW TON - W ELLES LEY H O S P IT A L , d o in g b u s in e s s a s N O R T H S H O R E M E D IC A L C E N T E R , IN C ., doi ng bus i nes s as T H E SA L E M H O SPITA L , doi ng bus i nes s as U N I O N H O SPITA L ; R I V E R SI D E H E A L T H C A R E SY ST E M S, L . P. , doi ng b u s i n e s s a s RI VER SI DE C OM M UN I TY H OSPI TAL; W EST HI LLS HOSPI TAL,

i ndi vi dual l yand on beha l f of a l l thos e s i m i l ar l ys i tuat ed d o i n g b u s i n e s s a s W EST HI LLS HOSPI TAL & M EDI CA L CEN TER v. M ED Q U I ST I N C; RO N A LD SCA RPO N E; J O H N SU EN D ER ; BR I A N K EA RN S;

M I CH AE L CL AR K; M E DQUI S T T RA NS CR I P T I ONS , L T D.

M edqui s tI nc. and M edqui s tT r ans cr i pt i ons , L t d, A p p e llan tsH o n o rab le L o u is H . P o ll ak , S en ior U n it ed S tat es D istri ct Ju d g e f o r th e E astern * D i s tr i ctof Penns y l vani a, s i t t i ng bydes i gnat i on. 2 A p p ea l from the U n it ed S tat es D istri ct C o u rt forthe D i s tr i ctof N ew J er s ey ( D . C . C i vi l A ct i on N o. 05- cv- 2206) D istric t Ju d g e : H o n o ra b le J e ro m e B . S im a n d le Subm i t t ed U nderT hi r d C i r cui tL A R 34. 1( a)

D ece m ber13, 2007 B efor e: SL O V I T E R and A M B R O , C i r cui tJ udges

PO L L A K , D i s tr i ctJ udge

* ( O pi ni on fi l ed: D ece m ber18, 2007)

OP I NI ON A M B R O , C i r cui tJ udge M edqui s tI nc, a pr ovi derof tr ans cr i pt i on s ervi ces t o hos pi t al s , appea l s the D i s tr i ct C o u rt ’s de n ial o f it s m o ti o n to co m p el arb itrati o n . A s w e a g ree w ith the D istri ct C o u rt th a tM e d q u i s twa i v e d i t s r i g h tt o c o mp e l a rb i tr a t i o n , we a f f i r m. P l ai nti ffs-appel l ees ar e a pu t at i ve clas s of ho spi t al s. T heyal l ege thatM edq uis t m ani pul at ed i t s bi l l i ng pr act i ces i n a fr audul entm annerthatvi ol at ed the R acke t eer I nfl uence d and C orruptO r gani zat i ons A ct , r es ul t i ng i n var i ous t or tcl ai m s . T hei ract i on, i ni t i al l yfi l ed i n t he C entr al D i s tr i ctof C al i forni a, w as tr ans ferr ed t o the D i s tr i ctof N ew Jer sey . A ft er m oti on pract i ce bef ore that C ou rtand 16 m on ths i nto the case, M edq uis t m oved t o compel arbi tr at i on.3

T h e F e d e ra l A rb itr a tio n A c t, 9 U .S .C . § 1 , et s eq. , es t abl i s hes a pol i cyi n favorof arbi tr at i on thatr equi r es the l i ber al r eadi ng of arbi tr at i on agr eement s and the r es ol ut i on of a n yd o u b ts in f

a v o r o f a rb itr a tio n . Moses H. C on e Mem ’l H osp. v. Mercury C on str. C orp . , 460 U . S. 1, 24- 25 ( 1983) . W ai verof the r i ghtt o compel arbi tr at i on i s nott o be in f e rr e d lig h tly. G r eat

W . Mor t gage C or p. v. P eacoc k , 110 F. 3d 222, 233 ( 3d C i r . 1997) ( ci t i ng P a in e W

e b b e r In c . v. Fa ra g a lli , 6 1 F .3 d 1 0 6 3 , 1 0 6 8 (3 d C ir. 1 9 9 5 )). P re ju d ice is th e to u c h s to n e f

o r e v a lu a tin g a n a s s e rt e d w a iv e r o f th e ri g h t to c o m p e l a rb itr a tio n . E hl ei t erv. G r apetr ee Shor es , I nc. , 482 F. 3d 207, 223 ( 3d C i r . 2007) ( ci t i ng H oxw or th v. B l i nder, R obi ns on, & Co. , 980 F. 2d 912, 925 ( 3d C i r . 1992) ) . I n det erm i ni ng pr ej udi ce, w e cons i derthe fol l ow i ng non- excl us i ve l i s tof fa ct or s : ( 1) the t i m el i nes s orl ack of a m ot i on t o arbi tr at e; ( 2) the degr ee t o w hi ch the partys eeki ng t o compel arbi tr at i on has c o n tes ted th e m e rits o f

its o p p o n e n t’s c laim s; (3 ) w h e th e r th e p a rtyh a s in f o rm e d its adver s aryof the i nt ent i on t o s eek a rbi tr at i on even i f i thas noty etfi l ed a mot i on t o s t ay the D i s tr i ctC our tpr ocee di ngs ; ( 4) the ext entof thatparty ’ s non- m er i t s m ot i on pr act i ce; ( 5) i t s as s entt o t he D i s tr i ctC our t ’ s pr etr i al or der s ; and ( 6) the ext entt o w hi ch the part i es h a v e e n g a g e d in d is c o v e ry. Id . at222 ( ci t i ng H o x w o rth , 980 F. 2d at926- 27) . W ai ver n o rm a llyw ill b e f

o u n d o n ly“ w h e re th e d e m a n d f o r a rb itratio n c a m e lo n g a f ter th e su it comm ence d and w hen both part i es had enga ged i n ext ens i ve di s covery . ” Fa ra g a lli , 61 F. 3d at1068- 69 ( quot i ng G avl i k C ons tr . C o. v. H. F. C am pbel lC o. , 526 F. 2d 777, 783 ( 3d C ir . 1 9 7 5 )).H ow ever , pl ai nt i ffs i ncorr ect l yal l eged i n the i ni t i al compl ai ntthattheyw er e part i es 1 t o contr act s cont ai ni ng arbi tr at i on pr ovi s i ons and thatagr eementt o thos e pr ovi s i ons w as fr audul ent l yi nduced. T hi s err orw as one bas i s fordefe ndant s ’ m ot i on forR ul e 11 s a n c tio n s a g a in s t p la in tif f s a n d th e irc o u n s e l. See M ot i on forSanct i ons 17- 22, C as e N o. C 0 5 -2 2 0 6 J B S (D .N .J ., N o v . 8 , 2 0 0 5 ). 4 T o r epea t , the mot i on t o compel arbi tr at i on befor e us came 16 m onths aft erthe fi l i ng of s ui t . E ven af

t ers ubtr act i ng the fi ve mont hs atthe begi nni ng of the ca s e dur i ng w hi ch no pl ai nt i ffs had bee n named t hatw er e part i es t o contr act s cont ai ni ng arbi tr at i on pr ovi s i ons , the r emai ni ng 11- m onth per i od i s as l ong as the per i od ati s s ue i n H o x w o rth . 1 See 9 8 0 F .2 d a t 9 2 5 ; s ee al s o i d. at926 ( not i ng that“court s have nothes i t at ed t o hol d t hat th e ri g h t to a rb itr a te h a s b e e n w a iv e d u n d e r c ir c u m s ta n c e s s im ila r t o th o s e h e re ” ). A l tho ug h the D i stri ctC ou rtdid not ent ert ai n m oti on s for s um m aryj ud gm ent, M edq uis t tw i ce t es t ed the s uffi ci encyof the pl eadi ngs w i th m ot i ons t o di s m i s s . T he fa ctthatthe p a rties d id n o t en g a g e in d isc o v e ryn o rm a llyp re c lu d e s a f in d in g o f w a iv e r, b u t h e re it i s o u tw eigh ed b yM ed q u ist ’s t ac ti ca l dec isi o n to li ti g ate e x tens ivelyin f ed era l cou rtb ef

o re s e e k in g to c o m p e l a rb itr a tio n . A s d etail ed b ythe D istri ct C o u rt , M ed q u istli ti g ated this case v igo rou slyb ef o re expr es s i ng an i nt entt o for ce a rbi tr at i on. T hi s i s demonstr at ed byi t s m ot i on t o di s m i s s t he s econd a m ended c om pl ai nti n favorof arbi tr at i on ( w hi ch w as fi l ed el even mont hs aft er the begi nni ng of the ca s e, orfi ve mont hs befor e the mot i on t o compel arbi tr at i on) . T hat m o tio n d id n o t in d ica te a n in ten t to m o v e to c o m p e l ar b itratio n in th e f u tu re . In ste a d , it ar gued that“[b] eca us e pl ai nt i ffs have noti ndi cat ed w hethertheyw i l l pur s ue arbi tr at i on,5

and ther e i s no r eques tt o compel arbi tr at i on befor e the C our t , a s t ayw oul d s erve no p u rpo se a n d the a cti o n sh o u ld b e d ism issed . ” In o ther w o rds, M ed q u istatt em p ted to turn t o i t s ow n advant age i t s deci s i on nott o m ove t o compel arbi tr at i on. T he hos pi t al s m ay have de l ay ed s om ew hatthe l i t i gat i on bythei row n conduct , butM edqui s thas not expl ai ned how the ac t i ons of the hos pi t al s s t opped i tfr om m ovi ng t o compel arbi tr at i on at a n e a rl ie r d a te . T h e D istric t C o u rt c o n c lu d e d c o rre c tlyth a t M e d q u ist m a d e a tac tica l d e c isio n to f o rg o m o v in g to c o m p e l arb itratio n p e n d in g lit ig a tio n o f th e m o tio n s to d ism iss . T h is d e c isio n e x p o se d th e h o sp itals to e x ten siv e lit ig a tio n e x p e n se a n d a llo w e d M e d q u ist to pur s ue a t ot al vi ct oryi n fede r al courtw hi l e pr es um i ng t o r es erve anym ot i on t o compel a rb itratio n . N o th in g in th e c a se s c ited b yM e d q u ist e n tit les it t o e x p o se th e h o sp itals to s uch del ay , expens e, and pr ej udi ce a nd then move t o compel arbi tr at i on. M edqui s tm ay have e xpr es s ed i t s pr efe r ence forarbi tr at i on, butthatfac tdoes notr educe the pr ej udi ce ca u sed to the h o sp it als b yit s tacti ca l dec isi o n n o t t o m o v e to c o m p el arb itrati o n . It m o v e d to th e a rb itr a tio n a lte rn a tiv e o n ly w h e n its p re f e rr e d o p tio n p ro v e d u n s u c c e s s f u l. In th is c a s e , it w a s to o la te . W e t hu s affi rm . In doing so, w e do no treach the o ther i ssues r ai sed byM edq uis t in th is a p p e a l b e c a u s e th e yh a v e n o t b e e n c o n s id e re d b yth e D is tr ic t C o u rt .