M3 Healthcare Solutions v. Family Practice Associates, P.A., No. 691-2009 (Del. Supr. May 28, 2010), read opinion here. The specific issue decided in this case is whether an arbitration award should be modified, vacated or corrected. The Supreme Court determined that the arbitration award should not be modified, and thus affirmed the judgment of the Court of Chancery.
The case began in the trial court when FPA filed a complaint to confirm an arbitration award obtained through the American Arbitration Association. In its answer to the complaint, M3 presented objections that included the following: (1) The arbitrator erroneously awarded fees which were barred by Section 5712 of Title 10 of the Delaware Code; and (2) The arbitration award should be vacated pursuant to Section 5714(a)(4) because the arbitrator permitted the testimony of a previously unidentified witness and allowed the witness to offer testimony concerning the internal working guidelines of an insurance company without requiring the witness to produce the guidelines for cross-examination. In its answer, M3 requested the trial court to vacate or modify the arbitration award.
Section 5701 of Delaware’s version of the Uniform Arbitration Act incorporates the rules of court that apply in any civil action. Court of Chancery Rule 56 allows a party to present a defense in “pleadings, depositions, answer to interrogatories and admissions on file” and establishes the notice pleadings standard. That is, Rule 56(c) allows an adverse party responding to a motion for summary judgment to rely on pleadings, depositions, answers to interrogatories and admissions on file, together with affidavits, to oppose the motion for summary judgment. Thus, the Court reasoned, that the “affirmative defenses” presented in the Answer satisfied the requirement under the UAA that notice be provided within 90 days of an arbitration award of the basis for an argument for modification, vacation or correction of errors in an arbitration award.
However, the Delaware Supreme Court determined that notwithstanding the satisfaction of the deadline, and satisfying the notice provision, the enumerated bases for vacating an arbitration award pursuant to Section 5714(a)(4) were not satisfied in this case. In addition, Section 5712 only allows a Court to reduce a fee or expense awarded by an arbitrator when it is found to be excessive or it may allocate it as justice requires. Moreover, contrary to the argument that the arbitrator was at fault, the Supreme Court reasoned that there was no request that the arbitration be adjourned for the witness to produce the missing documents, and that it was not a matter of the arbitrator refusing to postpone a hearing but rather a failure to request a postponement. Thus, the Court found no prejudice involved.
Lastly, the Supreme Court found no abuse of discretion on the part of the arbitrator and no evidence that would require, in the interest of justice, modifying the allocation of the expenses and the fees awarded.