Court Opinion

ID: 4585232
Source: CourtListenerOpinion
Date Created: 2020-11-10 19:02:20.607389+00
Date Added: 2024-06-11T13:42:44.333855
License: Public Domain

The summaries of the Colorado Court of Appeals published opinions
  constitute no part of the opinion of the division but have been prepared by
  the division for the convenience of the reader. The summaries may not be
    cited or relied upon as they are not the official language of the division.
  Any discrepancy between the language in the summary and in the opinion
           should be resolved in favor of the language in the opinion.

                                                                SUMMARY
                                                           November 5, 2020

                               2020COA155

No. 19CA0608, Peak Billing v. Mountain Sleep Diagnostics —

ADR – Arbitration – Colorado Uniform Arbitration Act –

Vacating Award

     A division of the court of appeals considers when an

arbitration award should be vacated because it was procured by

fraud, corruption, or undue means, per section 13–22–223(1)(a),

C.R.S. 2020, of the Colorado Revised Uniform Arbitration Act. The

division adopts a three-part test widely used in federal and other

state courts to determine when such an award should be vacated

and holds that in this case the award should stand.
COLORADO COURT OF APPEALS                                        2020COA155

Court of Appeals No. 19CA0608
Adams County District Court No. 18CV30091
Honorable Edward C. Moss, Judge

Tara Price, d/b/a Peak Billing,

Plaintiff-Appellee,

v.

Mountain Sleep Diagnostics, Inc.,

Defendant-Appellant.

                            JUDGMENT AFFIRMED

                                 Division III
                         Opinion by JUDGE GROVE
                       Furman and Berger, JJ., concur

                        Announced November 5, 2020

Messner Reeves LLP, Kendra Beckwith, Darren D. Alberti, Denver, Colorado,
for Plaintiff-Appellee

Fairfield and Woods, P.C., Cecil E. Morris Jr., Denver, Colorado, for Defendant-
Appellant
¶1    Mountain Sleep Diagnostics, Inc. (MSD), appeals the trial

 court’s judgment confirming an arbitration award against it and in

 favor of Tara Price doing business as Peak Billing (Price). Applying

 section 13–22–223(1)(a), C.R.S. 2020, of the Colorado Revised

 Uniform Arbitration Act (CRUAA), which allows a court to vacate an

 arbitration award procured by fraud, corruption, or undue means,

 we adopt the test developed by federal courts under an analogous

 provision of the Federal Arbitration Act (FAA) and conclude that

 MSD’s motion failed to make an adequate showing that MSD was

 entitled to relief. Because the district court correctly denied MSD’s

 motion without holding a hearing, we affirm its judgment.

                           I.    Background

¶2    Price contracted with MSD to provide billing services for MSD

 and its patients. The contract automatically renewed every year

 unless one party notified the other of its intent to terminate at least

 ninety days before the renewal date. Disputes under the contract

 — including any involving inadequate notice of the contract’s

 termination — were subject to binding arbitration. The arbitration

 clause also provided that the prevailing party in any arbitrated

 dispute was entitled to an award of attorney fees.

                                    1
¶3    After MSD terminated the contract less than ninety days

 before the renewal date, Price, asserting that the untimely notice

 was a breach, filed a motion to compel arbitration in the district

 court. The court granted the motion, and the parties reached a

 stipulation and agreement to arbitrate.

¶4    After a two-day arbitration hearing, the arbitrator awarded

 Price $124,224 for MSD’s breach of the contract plus $24,600 in

 attorney fees. Price then filed a motion in district court to confirm

 the award. MSD moved to vacate the award, alleging that, while

 performing billing services for MSD, Price had committed fraud by

 misappropriating more than $60,000 in payments meant for MSD.

 The trial court issued an order denying MSD’s motion to vacate and

 granting Price’s motion to confirm.

¶5    MSD now appeals that order, arguing that the arbitrator’s

 award should be vacated because discoveries it made after the

 arbitration was complete establish by clear and convincing evidence

 that Price procured the arbitration award through fraud.1

 1MSD first argues that the trial court erred by denying its motion to
 vacate as untimely. But the trial court denied MSD’s motion on the
 merits; it did not question its timeliness. We therefore do not
 address this argument.

                                   2
                                  II.   Analysis

                        A.        Standard of Review

¶6    We review de novo a district court’s legal conclusions on a

 motion to confirm or vacate an arbitration award. Pacitto v.

 Prignano, 2017 COA 101, ¶ 7. In the absence of statutory grounds

 to vacate an arbitration award, we must affirm the award without

 reviewing its merits. PFW, Inc. v. Residences at Little Nell Dev., LLC,

 2012 COA 137, ¶ 37.

                             B.     Applicable Law

¶7    Under the CRUAA, courts can reject arbitration awards “only

 in limited circumstances.” Barrett v. Inv. Mgmt. Consultants, Ltd.,

 190 P.3d 800, 802 (Colo. App. 2008). These limited circumstances,

 listed in section 13–22–223(1), involve “specific instances of

 outrageous [arbitral] conduct” and “egregious departures from the

 parties’ agreed-upon arbitration.” Treadwell v. Vill. Homes of Colo.,

 Inc., 222 P.3d 398, 401 (Colo. App. 2009) (quoting Hall St. Assocs.,

 L.L.C. v. Mattel, Inc., 552 U.S. 576, 586 (2008)).

¶8    Though the merits of an arbitration award are generally

 unreviewable, a court “shall” vacate an arbitration award if, as

 relevant here, it was “procured by corruption, fraud, or other undue

                                        3
  means.” § 13–22–223(1)(a). What exactly constitutes corruption,

  fraud, or undue means, however, is largely unsettled in Colorado.

                     C.    MSD’s Motion to Vacate

¶9     Affidavits attached to MSD’s motion to vacate the arbitration

  award alleged that after the arbitration was complete, MSD’s Chief

  Operating Officer discovered suspicious activity in MSD’s billing

  software system, and that further examination of that system

  revealed more than $60,000 in misappropriated payments. MSD

  argues that by “concealing and failing to disclose that she had been

  misappropriating funds” — and “by testifying falsely on several

  related issues” — Price procured the arbitration award by fraud.2

¶ 10   The district court did not decide whether Price in fact

  misappropriated the funds in question. Instead, it ruled that MSD’s

  motion failed to establish that MSD could not have discovered the

  alleged misappropriation sooner. The undisputed facts showed that

  MSD had “locked out” Price’s access to the billing software system

  on the same day that it terminated the contract, and that a full

  fourteen months elapsed between that termination and the date of

  2MSD did not allege any impropriety on the part of the arbitrator or
  corruption in the arbitration process.

                                    4
  the arbitration award. Yet, despite having ample time to review its

  books, MSD never raised the issue in the arbitration even though it

  had asserted the defense of unclean hands. Because “[w]rongful

  conduct by [Price] was part of [MSD’s] case,” and because

  “[i]nformation concerning [Price’s] wrongful conduct was in [MSD’s]

  possession prior to the arbitration hearing,” the district court ruled

  that it was too late for MSD to assert Price’s alleged

  misappropriation as a basis for vacating the award.

                   D.     Colorado Appellate Decisions

¶ 11   Only a handful of Colorado appellate cases have considered

  motions to vacate arbitration awards due to fraud under the

  CRUAA, and none has addressed the specific situation here. In the

  absence of binding precedent, the district court looked in large part

  to cases interpreting the FAA. While analogous federal law can be

  persuasive, see Ingold v. AIMCO/Bluffs, L.L.C. Apartments, 159 P.3d

  116, 120 (Colo. 2007), we first discuss the potentially relevant

  Colorado cases to determine if they provide us with a useful

  decisional framework.

¶ 12   In Nasca v. State Farm Mutual Automobile Insurance Co., 12

  P.3d 346, 348 (Colo. App. 2000), the plaintiff, Nasca, moved to

                                     5
  vacate an arbitration award after discovering that one of the three

  assigned arbitrators had been on State Farm’s payroll as an expert

  in an unrelated matter while his arbitration was pending, and that

  the arbitrator’s law partner had been a paid expert witness for State

  Farm on at least ten other occasions. Because it did not disclose

  this relationship, Nasca argued, State Farm procured the outcome

  of the arbitration by undue means. A division of this court agreed

  that the phrase “undue means” was broad enough to encompass

  the “type of impropriety in the arbitration process” that Nasca

  alleged, and that, as a consequence, State Farm should have

  disclosed the nature of its relationship with the arbitrator. Id. at

  350. But the division nonetheless affirmed the district court’s order

  denying the motion to vacate because Nasca failed to carry his

  burden of establishing “a causal relation between the improper

  conduct and the arbitration award.” Id. at 349.

¶ 13   Superior Construction Company, Inc. v. Bentley, 104 P.3d 331

  (Colo. App. 2004), involved a dispute between a homeowner and a

  remodeling contractor. After prevailing in the arbitration, the

  contractor moved for confirmation of the arbitration award in the

  district court. Id. at 332. In response, the homeowner filed a

                                     6
  motion to vacate the award, alleging that the contractor “had

  submitted fraudulently altered evidence in the arbitration.” Id. The

  trial court conducted an evidentiary hearing and, after finding that

  the arbitration award had been procured in part through the use of

  fraudulent evidence, reduced it. Id. A division of this court,

  however, concluding that “no discrete part of the award can be

  identified and severed,” vacated the arbitrator’s award in its

  entirety. Id. at 333.

¶ 14   The parties raised similar arguments in BFN-Greeley, LLC v.

  Adair Group, Inc., 141 P.3d 937 (Colo. App. 2006). There, in

  another construction dispute, Adair’s owner falsely testified that his

  company had never been terminated from a contract, when in fact

  that precise issue was being litigated in a separate arbitration. Id.

  at 941. Adair prevailed, but BFN argued that the award should

  have been overturned because the owner’s testimony was

  fraudulent. Id. A division of this court affirmed the district court’s

  conclusion that the fraudulent testimony did not procure the award

  “because the fact of Adair’s termination on the other project was

  brought to the attention of the arbitrators well before they issued”

  the award. Id. Though the timing of the revelation was at issue in

                                     7
  BFN, the holding suggests that the fraudulent nature of the

  testimony could have, in line with the holding in Bentley, served as

  a basis for vacating the award.

¶ 15   The most recent Colorado case addressing “corruption, fraud,

  or other undue means” in the arbitration context is PFW, 2012 COA

  137, ¶ 38. In that case, a real estate purchaser arbitrated a

  contract dispute with a developer, resulting in an award in the

  developer’s favor. Id. at ¶ 5. The purchaser moved to vacate the

  award, arguing that the developer had fraudulently concealed its

  failure to register with the Colorado Division of Real Estate when it

  executed the agreement containing the arbitration provision (which

  could have made the purchase contract voidable by the purchaser

  and unenforceable by the developer). Id. at ¶ 40. Noting the public

  availability of the information the buyer claimed was fraudulently

  concealed, a division of this court held that it was “incumbent upon

  [the buyer] to raise in the arbitration proceeding any claims to void

  the purchase agreement based on [the developer’s] registration

  status.” Id. at ¶ 42.

¶ 16   As relevant to the issue central to this appeal, we glean three

  concepts from these cases. First, there must be a nexus between

                                    8
  the improper conduct and the arbitration award. Nasca, 12 P.3d at

  349; see also § 13–22–223(1)(a) (contemplating vacatur of an award

  “procured by” fraud). Second, “fraud” as a ground for vacating an

  arbitration award under section 13–22–223(1)(a) is not limited to

  process fouls (such as State Farm’s failure, in Nasca, to disclose

  that it had selected an arbitrator who was on its payroll), but can

  also — so long as it relates to a material issue in the case —

  encompass perjury or the presentation of false evidence by a party

  during the arbitration itself. BFN, 141 P.3d at 941; Bentley, 104

  P.3d at 332. And third, when it comes to unearthing and alleging

  fraud, both timing and diligence matter. A party who knows or

  should know of fraudulent conduct should promptly bring it to the

  arbitrator’s attention, rather than trying to unwind the award by

  raising the issue for the first time via a motion to vacate filed in the

  district court. PFW, ¶ 42.

             E.    Other Federal and State Court Decisions

¶ 17   Like section 13–22–223(1)(a) of the CRUAA, the FAA permits a

  reviewing court to vacate an arbitration award “where the award

  was procured by corruption, fraud, or undue means.” 9 U.S.C.

  § 10(a)(1). When considering a motion to vacate an arbitration

                                     9
  award under this provision, most federal circuit courts require the

  movant to

            establish the fraud;

            show that the fraud was not discoverable by exercising

              due diligence prior to or during the arbitration; and

            demonstrate that the fraud had a material effect on a

              dispositive issue in the arbitration.

  See, e.g., MCI Constructors, LLC v. City of Greensboro, 610 F.3d 849,

  858 (4th Cir. 2010); Int’l Brotherhood of Teamsters, Local 519 v.

  United Parcel Serv., Inc., 335 F.3d 497, 503 (6th Cir. 2003).

  Likening an arbitration award to a judgment or order of a district

  court, which can only be vacated by a party’s motion for relief under

  Fed. R. Civ. P. 60(b), federal courts require a party moving to vacate

  an award under 9 U.S.C. § 10(a)(1) to establish the fraud by clear

  and convincing evidence. See, e.g., MCI Constructors, 610 F.3d at

  858.

¶ 18     States that have adopted the Uniform Arbitration Act generally

  apply the same three-part test and evidentiary standard. See Low

  v. Minichino, 267 P.3d 683, 690–91, 691 n.5 (Haw. Ct. App. 2011)

  (collecting cases); Health Plan of Nev., Inc. v. Rainbow Med., LLC,

                                     10
  100 P.3d 172, 176 n.4 (Nev. 2004) (collecting cases). “In the

  absence of a prima facie showing with respect to these factors, the

  court is not empowered to assess evidence, much less new evidence

  that was not timely submitted to the arbitrators, in responding to a

  request for vacatur.” Seattle Packaging Corp. v. Barnard, 972 P.2d

  577, 579 (Wash. Ct. App. 1999).

                          F.    The Federal Test

¶ 19   While none of the Colorado cases that we have discussed

  explicitly adopted the federal approach, they have, collectively,

  either explicitly or implicitly applied each of its elements to motions

  filed under section 13–22–223(1)(a). See Nasca, 12 P.3d at 349

  (requiring moving party to establish the improper conduct and show

  nexus); PFW, ¶ 42 (requiring moving party to have exercised

  diligence).3 Thus, the federal test is entirely consistent with existing

  Colorado case law.

  3 Similarly, the district court focused on whether “failing to disclose
  adverse facts” was enough to vacate the award, and whether it
  could vacate the award when “the information was available prior to
  the arbitration proceeding.” This language tracks closely with each
  of the federal test’s elements.

                                    11
¶ 20    Likewise, the evidentiary standard that courts apply under the

  FAA — clear and convincing evidence — finds its roots in the

  standard applicable to motions for relief under Fed. R. Civ. P. 60(b).

  MCI Constructors, 610 F.3d at 858. Given the similarities between

  the federal and state versions of Rule 60, and taking into

  consideration the fact that a motion to confirm an arbitration award

  triggers a special statutory proceeding, and is not a “civil action”

  within the meaning of section 13–25–127(1), C.R.S. 2020, see

  Estate of Guido v. Exempla, Inc., 2012 COA 48, ¶ 12, we conclude

  that a party seeking to vacate an arbitration award must satisfy the

  evidentiary standard that applies to a motion for a new trial under

  C.R.C.P. 60(b)(2), see Sharma v. Vigil, 967 P.2d 197, 199 (Colo. App.

  1998) (holding, under C.R.C.P. 60(b)(2), that moving party carries

  the burden of “clear, strong, and satisfactory proof” that it is

  entitled to relief).

¶ 21    MSD urges us to reject the federal test, arguing that, due to

  differences between the CRUAA and the FAA with respect to the

  limitations period for filing a motion to vacate, “federal decisions do

  not provide guidance.” In particular, MSD maintains that there is

  no due diligence requirement under the CRUAA, and that the only

                                     12
  reason the FAA requires a showing that the fraud was not

  discoverable by exercising due diligence prior to or during the

  arbitration is because it “does not separately address the time for

  motions to vacate” predicated on that ground. Under section 13–

  22–223(2), on the other hand, a party in MSD’s position must seek

  relief

                within ninety-one days after the movant
                receives notice of the award . . . unless the
                movant alleges that the award was procured
                by corruption, fraud, or undue means, in
                which case the motion must be made within
                ninety-one days after either the ground is
                known or by the exercise of reasonable care
                should have been known by the movant.

¶ 22       As we understand the argument, MSD maintains that this

  provision of the CRUAA relieved it from having to bring Price’s

  alleged fraud to the arbitrator’s attention during the proceedings.

  Rather, MSD’s theory is that, so long as it filed its motion to vacate

  within ninety-days after it received notice of the award, it does not

  matter when it discovered (or should have discovered) the alleged

  fraud that led to that award.

¶ 23       This position runs headlong into the division’s holding in PFW,

  which held unequivocally that it was “incumbent upon” a party who

                                      13
  knew or should have known of corruption, fraud, or undue means

  during the arbitration process to raise those concerns with the

  arbitrator. PFW, ¶ 42. We agree with PFW on this point, and we

  consequently are not persuaded that the limitation on the time to

  challenge an arbitration award on the grounds of corruption, fraud,

  or undue means in section 13–22–223(2) meaningfully

  distinguishes the CRUAA from the FAA.

¶ 24   Accordingly, we agree with Price that the federal cases

  addressing claims of corruption, fraud, or undue means under the

  FAA, as well as similar state cases arising under the Uniform

  Arbitration Act, provide appropriate guidelines for resolving similar

  arguments under section 13–22–223(1)(a). The three-part test laid

  out above engages the court in the appropriate inquiries to resolve

  this issue, and we therefore apply it here.

                            III.   Application

                       A.    Standard for Hearing

¶ 25   At the threshold, to the extent that MSD contends that the

  district court was required to hold a hearing on its motion to vacate,

  we disagree.

                                    14
¶ 26   According to section 13–22–205(1), C.R.S. 2020, “an

  application for judicial relief” from an arbitration award “must be

  made by motion to the court and heard in the manner provided by

  law or court rule for making and hearing motions.” Thus, a motion

  to vacate an arbitration award should be treated by the district

  court like a motion in a typical civil case.4

¶ 27   C.R.C.P. 121, section 1–15(4) governs trial court motions

  practice. The rule encourages the disposition of motions “upon the

  written motion and briefs submitted.” BFN, 141 P.3d at 942. And

  because written motions practice generally affords parties adequate

  notice and a reasonable opportunity to be heard, see Blood v. Qwest

  Servs. Corp., 224 P.3d 301, 318 (Colo. App. 2009), aff’d, 252 P.3d

  1071 (Colo. 2011), hearings need not be granted as a matter of

  course. That is particularly true in the arbitration context because

  “[i]t would defeat the purpose of arbitration if a reviewing court were

  obligated to give the parties all the due process owed under the

  4 Similarly, a motion to vacate an arbitration award under the FAA,
  9 U.S.C. § 6, is treated procedurally in the manner of motions. See
  Health Servs. Mgmt. Corp. v. Hughes, 975 F.2d 1253, 1258 (7th Cir.
  1992); BFN-Greeley, LLC v. Adair Grp., Inc., 141 P.3d 937, 942
  (Colo. App. 2006).

                                     15
  rules of civil procedure.” BFN, 141 P.3d at 942; see also Karppinen

  v. Karl Kiefer Mach. Co., 187 F.2d 32, 35 (2d Cir. 1951) (“It is

  unnecessary for us to lay down any general rule as to when or how

  far oral hearings on questions of alleged perjured testimony before

  arbitrators should be allowed. It is enough to say that even if

  perjury be ‘fraud’ within the meaning of the Arbitration Act, such

  hearings should only be granted with reluctance . . . .”); In re

  Marriage of Eggert, 53 P.3d 794, 796 (Colo. App. 2002).

¶ 28   Here, because MSD’s motion and supporting affidavits did not

  make a threshold showing that it acted with due diligence to

  discover the misappropriation before the arbitration was over, the

  district court did not deem it necessary to hold a hearing on the

  issues presented. Because, as we discuss in detail below, MSD’s

  submission did not demonstrate due diligence, and because

  motions to confirm and vacate arbitration awards should, if

  possible, be decided only on the written materials submitted, we

  agree that no hearing was required. See Seattle Packaging, 972

  P.2d at 579. We therefore turn next to the merits of the district

  court’s order.

                                    16
                               B.    Merits

¶ 29   The test that we apply today is framed in the conjunctive,

  meaning that the party seeking to vacate an award on the grounds

  that it was procured by corruption, fraud, or undue means must

  show by clear and convincing evidence that (1) fraud occurred; (2)

  the fraud was not discoverable by exercising due diligence prior to

  or during the arbitration; and (3) the fraud had a material effect on

  a dispositive issue in the arbitration. A failure to establish any of

  these elements at this stage of the proceedings will doom the effort.

  See id. We therefore only briefly consider the first and third prongs

  of the test before turning to the dispositive issue — whether MSD

  made an adequate showing that it could not have discovered the

  fraud earlier by exercising due diligence.

                   1.    Whether the Fraud Occurred

¶ 30   The affidavits that MSD submitted with its motion to vacate

  the arbitration award made out a case of fraud in the form of

  perjured testimony from Price concerning, among other things, the

  income that she had realized from her contract with MSD. And as

  we have already noted, “fraud” under section 13–22–223(1)(a) can

                                    17
  encompass a witness’s perjury during the arbitration proceeding.

  BFN, 141 P.3d at 941; Bentley, 104 P.3d at 332.

                                2.    Nexus

¶ 31   The third prong of the test, which requires the movant to

  establish “a causal relation between the improper conduct and the

  arbitration award,” Nasca, 12 P.3d at 349, presents a closer

  question, but because we reject MSD’s contentions on another

  ground, it is one that we need not reach. On one hand, federal

  courts recognize that “[t]he requisite nexus may exist where fraud

  prevents the [arbitrator] from considering a significant issue to

  which it does not otherwise enjoy access.” Forsythe Int’l, S.A. v.

  Gibbs Oil Co. of Tex., 915 F.2d 1017, 1022 (5th Cir. 1990). And

  Price’s alleged misdeeds, if proven, could have directly related to the

  potentially dispositive question of which party breached the

  contract first. See Coors v. Sec. Life of Denver Ins. Co., 112 P.3d 59,

  64 (Colo. 2005) (“Under contract law, a party to a contract cannot

  claim its benefit where he is the first to violate its terms.”). That is,

  if Price committed fraud, then she breached the contract first. And

  if she breached the contract first and then lied about it on the

                                     18
  stand, then the fact that she did so would likely have been a

  significant issue in the arbitration.

¶ 32   On the other hand, courts have typically been reluctant to

  vacate arbitration awards in cases where the perjured testimony

  does not bear directly on the issues in the case. See, e.g., Int’l

  Brotherhood of Teamsters, Local 519, 335 F.3d at 503–04

  (considering whether the alleged fraud was “clearly connected to an

  issue material to the arbitration”); Newark Stereotypers’ Union No.

  18 v. Newark Morning Ledger Co., 397 F.2d 594, 600 (3d Cir. 1968)

  (“[E]ven if perjury is proven and constitutes fraud under § 10(a) of

  the [FAA], it will not justify the vacation of an award if it concerns

  an issue remote from the question to be decided.”); Karppinen, 187

  F.2d at 35 (same). In this case, the arbitration was about whether

  MSD timely terminated its contract with Price. No one claimed that

  Price’s alleged misappropriations prompted MSD to terminate the

  contract — or, for that matter, that MSD was even aware of any

  irregularities when it did so. Price’s alleged misconduct, and any

  concealment of that alleged misconduct, were therefore unrelated to

  the disagreement that led to the arbitration.

                                     19
¶ 33   Whether there is a sufficient nexus between the arbitration

  award and any perjury on Price’s part is thus a thorny question,

  but because the test that we adopt today is framed in the

  conjunctive, we ultimately need not decide it. Instead, as we

  explain next, we affirm the district court’s ruling because it is clear

  from the record that MSD did not exercise due diligence with

  respect to Price’s alleged fraud.

                            3.   Due Diligence

¶ 34   Requiring due diligence prevents the movant from taking a

  “second bite at the apple” if the fraud could have been discovered

  before the arbitration was over. A.G. Edwards & Sons, Inc. v.

  McCollough, 967 F.2d 1401, 1404 (9th Cir. 1992). If the movant

  could have rebutted the adversary’s claims or evidence before the

  arbitrator, the scales will tip in favor of preserving the award’s

  finality. Karppinen, 187 F.2d at 35.

¶ 35   MSD contends that it “could not reasonably have discovered”

  Price’s misappropriations before the end of the arbitration

  proceedings due to

             the size and complexity of its practice,
             including the large number of patients,
             multiple locations, and sources of payment,

                                      20
             including various insurers; the elaborate
             scheme used by Price/Peak Billing to conceal
             her misappropriations; and her efforts to
             prevent MSD from gaining access to its
             practice management software system, called
             Kareo.

¶ 36   Price responds that these hardships are insufficient to prove

  that MSD could not have discovered the alleged fraud earlier. The

  district court likewise ruled that MSD’s argument was conclusory

  and that there was “no evidence to conclude that the

  misappropriation could not have been discovered” before the award

  was entered.

¶ 37   To be sure, MSD offered some explanation, both in the district

  court and in its briefing before us, as to why it was not easy to

  discover the alleged misappropriations. But what it did not do is

  describe what actions it took, if any, to promptly investigate its

  suspicions about Price’s conduct. We assume that MSD asserted

  its unclean hands defense in good faith, and it seems probable that

  it would have made efforts to bolster that defense by thoroughly

  reviewing Price’s performance under the contract during the

  fourteen months that the two parties were engaged in arbitration

  against one another. Yet despite the fact that MSD gained control

                                    21
  over the billing system shortly after it terminated Price’s contract,

  an affidavit from MSD’s Chief Operations Officer avers that she

  discovered Price’s alleged misconduct after the arbitration hearing

  was over, when she noticed an “anomaly in one of the patient

  records” while performing back billing. This discovery triggered a

  substantial inquiry into Price’s billing practices, but the entire effort

  came after the arbitrator had issued the award.

¶ 38   To satisfy the due diligence prong, MSD had to do more than

  simply allege that it was difficult to discover Price’s alleged

  misappropriations. MSD also needed to show that it had “follow[ed]

  up on possessed or reasonably available information or resources,”

  Owens v. Tergeson, 2015 COA 164, ¶ 45, such as the billing system

  that it assumed control of when it terminated the contract. But

  MSD did not describe what investigative steps it took, if any, before

  or during the arbitration, or how any efforts to investigate Price’s

  alleged misconduct were thwarted. Thus, as the district court

  concluded, the briefing and affidavits that MSD submitted did not

  show that Price’s alleged scheme was not reasonably discoverable

  before the arbitration ended, nor did they demonstrate that MSD

                                     22
  acted with due diligence to uncover fraud on Price’s part while the

  arbitration proceedings were ongoing.

¶ 39   Because MSD did not make an adequate showing that it acted

  with due diligence to discover Price’s alleged misconduct, we

  conclude that the district court appropriately denied its motion to

  vacate the arbitration award.

                            IV.   Conclusion

¶ 40   The district court’s judgment is affirmed.

       JUDGE FURMAN and JUDGE BERGER concur.

                                   23