Weirton Medical Center, Inc. v. Community Health Systems, Inc. et al

Filing 93

MEMORANDUM OPINION AND ORDER DENYING PLAINTIFF'S 30 MOTION TO VACATE ARBITRATION AWARD, GRANTING DEFENDANTS' 87 MOTION TO CONFIRM ARBITRATION AWARD AND FOR ENTRY OF FINAL JUDGMENT, CONFIRMING ARBITRATION AWARD, DENYING PLAINTIFF� 39;S 81 MOTION TO EXPEDITE RULING ON PENDING MOTION TO VACATE ARBITRATION AWARD AS MOOT AND DISMISSING DEFENDANTS' 13 MOTION TO DISMISS AS MOOT. The Clerk is DIRECTED to enter judgment on this matter as to defendants Quorum Health Resou rces, LLC, Stephen Miller, Michael Rolph, Robert Lovell, Robert Vento, Daniel Hamman, and John Waltko, and award defendants the amount of administrative costs, to be paid by Weirton, in the amount of Eight Thousand Seven Hundred Three Dollars and Seventy-Five Cents ($8,703.75). Signed by Senior Judge Frederick P. Stamp, Jr. on 12/12/17. (counsel via CM/ECF) (lmm)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
WEIRTON MEDICAL CENTER, INC.,
Plaintiff,
v.

Civil Action No. 5:15CV132
(STAMP)

COMMUNITY HEALTH SYSTEMS, INC.,
QUORUM HEALTH RESOURCES, LLC,
STEPHEN MILLER, MICHAEL ROLPH,
ROBERT LOVELL, ROBERT VENTO,
DANIEL HAMMAN and JOHN WALTKO,
Defendants.
MEMORANDUM OPINION AND ORDER
DENYING PLAINTIFF’S MOTION TO VACATE ARBITRATION AWARD,
GRANTING DEFENDANTS’ MOTION TO CONFIRM ARBITRATION AWARD
AND FOR ENTRY OF FINAL JUDGMENT,
CONFIRMING ARBITRATION AWARD,
DENYING PLAINTIFF’S MOTION TO EXPEDITE RULING ON
PENDING MOTION TO VACATE ARBITRATION AWARD AS MOOT AND
DISMISSING DEFENDANTS’ MOTION TO DISMISS AS MOOT
The plaintiff, Weirton Medical Center, Inc. (“Weirton”), asks
this Court to vacate an arbitration award under § 10 of the Federal
Arbitration Act (“FAA”), 9 U.S.C. §§ 1-16.

Previously, this Court

granted the defendants’ motion to compel arbitration and stayed
this civil action pending the arbitration.

The arbitrator issued

an award dismissing all of Weirton’s claims.

Weirton then filed

this motion to vacate the arbitration award on the grounds that the
arbitrator

exceeded

applicable law.
vacate

is

his

powers

and

manifestly

disregarded

For the following reasons, Weirton’s motion to

denied

and

the

arbitration

award

is

confirmed.

Plaintiff’s motion to expedite ruling on pending motion to vacate

arbitration award (ECF No. 81) is denied as moot.

Defendants’

motion to dismiss for failure to state a claim (ECF No. 13) is
dismissed as moot.
I.
Weirton

Medical

Background

Center

is

a

hospital

in

Weirton,

West

Virginia. It entered into two related contracts for administrative
services intended to assist Weirton in a financial turnaround.
First, in November 2009, Weirton entered into an Interim Support
Services Agreement (“the Interim CFO Agreement”) with Quorum Health
Resources, LLC (“Quorum”) in which Quorum provided Weirton with an
Interim Chief Financial Officer (“CFO”), Stephen Miller.
May

2010,

Weirton

entered

into

an

Agreement

Then in

for

Hospital

Administrative Services (“the Turnaround Agreement”) with Quorum
Intensive

Resources,

LLC

(“QIR”).

The

Turnaround

Agreement

provided that QIR would provide an Interim Chief Financial Officer
(“CFO”) and an Interim Chief Operating Officer (“COO”) and would
provide Weirton various administrative services.
Before the engagement term was to end, Weirton terminated the
agreement

and

refused

to

pay

QIR’s

invoices.

QIR

forced

arbitration in accordance with the Turnaround Agreement, arguing
that Weirton breached the Turnaround Agreement by failing to pay
the invoices (“the First Arbitration”).

Weirton then asserted

counterclaims for breach of various provisions of the agreement,
negligence, breach of fiduciary duties, and corporate waste. After

2

three years of discovery and a full evidentiary hearing, the
arbitrator entered an award in favor of QIR on all claims (“the
First Award”).

Weirton then filed suit in this Court along with a

motion to vacate the First Award.
the award.

QIR filed a motion to confirm

This Court denied Weirton’s motion to vacate and

granted QIR’s motion to confirm the First Award.

Weirton appealed

to the United States Court of Appeals for the Fourth Circuit, and
on March 29, 2017, the Fourth Circuit affirmed this Court’s ruling
by per curiam opinion.
In October 2015, two days after filing its motion to vacate
the First Award, Weirton filed this civil action against Community
Health Systems, Inc. (“CHSI”), Quorum, Stephen Miller, Michael
Rolph, Robert Lovell, Robert Vento, Daniel Hamman, and John Waltko.
Each of the individual defendants were either employees of Quorum
or QIR or served as interim employees of Weirton under the Interim
CFO Agreement or the Turnaround Agreement.

Weirton alleged claims

for fraud and misrepresentation, promissory estoppel, breach of
fiduciary duties, aiding and abetting the breach of fiduciary
duties,

the

tort

of

outrage,

negligence,

negligent

misrepresentation, and civil conspiracy. Quorum and the individual
defendants filed a joint motion to compel arbitration under the
arbitration agreements contained in the Interim CFO Agreement and
the Turnaround Agreement.

This Court granted that motion and

stayed this civil action pending the arbitration.

3

In March 2016, Weirton filed its arbitration demand with the
American Arbitration Association (“AAA”) stating its claims against
CHSI,

Quorum,

and

the

individual

defendants

(“the

Second

Arbitration”). Weirton filed a detailed statement of its claims in
July

2016.

disposition.

The

defendants

then

filed

motions

for

summary

The arbitrator issued an award granting summary

disposition in favor of CHSI, Quorum, and the individual defendants
(“the Second Award”).

The arbitrator concluded: (1) that CHSI was

not a proper respondent to the action and that Weirton failed to
state claims against CHSI; (2) that all of Weirton’s claims, except
for the breach-of-contract claim against Quorum, were barred by res
judicata or collateral estoppel; (3) that Weirton’s breach-ofcontract claim against Quorum was time-barred under the applicable
Tennessee statute of limitations; (4) that Weirton’s tort claims
were alternatively barred by the gist-of-the-action doctrine; and
(5) that Weirton’s unjust enrichment claim is barred because of the
parties’ contracts.
Weirton then filed in this civil action its motion to vacate
the Second Award.

It argues that the arbitrator exceeded his

powers in granting summary disposition and that the arbitrator
manifestly disregarded applicable law.
defendants filed a joint response.

Quorum and the individual

CHSI filed a response in which

it purported to enter a special appearance to challenge whether
this Court may exercise personal jurisdiction over CHSI.

4

This

Court entered a separate memorandum opinion and order dismissing
CHSI from this civil action for lack of personal jurisdiction.
Further, on May 15, 2017, the parties appeared before this Court
for oral argument on the motion to vacate.

Additionally, Weirton

filed a motion to expedite ruling on the pending motion to vacate
arbitration award (ECF No. 81), and the QHR defendants filed a
motion to confirm arbitration award and for entry of final judgment
(ECF No. 87), asserting entitlement to the costs incurred during
arbitration.

These motions have been fully briefed.
II.

Applicable Law

Under the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1-16,
an arbitration award may be vacated on four grounds: “(1) when the
award was procured by corruption, fraud, or undue means; (2) when
there was evident partiality or corruption on the part of an
arbitrator; (3) when an arbitrator was guilty of misconduct in
refusing to postpone the hearing, upon sufficient cause shown, or
in

refusing

to

hear

evidence

pertinent

and

material

to

the

controversy; or any other misbehavior causing prejudice to the
rights of any party; or (4) when an arbitrator exceeded his or her
powers, or so imperfectly executed them that a mutual, final, and
definite award upon the subject matter submitted was not made.”
Jones v. Dancel, 792 F.3d 395, 401 (4th Cir. 2015); see also
9 U.S.C. § 10.

5

Generally, “judicial review of an arbitration award in federal
court is severely circumscribed and among the narrowest known at
law.”

Jones, 792 F.3d at 401 (internal quotation marks omitted).

A court “may not overturn an arbitration award ‘just because it
believes, however strongly, that the arbitrator[] misinterpreted
the applicable law.’”

Id.

Further, “a court must confirm an

arbitration award unless a party to the arbitration demonstrates
that the award should be vacated under one of the above . . .
enumerated

grounds.”

Id.

(internal

quotation

marks

omitted)

(citing Hall St. Assocs., LLC v. Mattel, Inc., 552 U.S. 576, 582
(2008)); see also 9 U.S.C. § 9.
III.

Discussion

Weirton argues that the award should be vacated because the
arbitrator exceeded his powers and because the award is in manifest
disregard of the law.
A.

This Court finds no grounds for vacatur.

Whether the Arbitrator Exceeded His Powers
“By

its

terms,

[§]

10(a)(4)

allows

courts

to

vacate

arbitration awards only when arbitrators ‘exceeded their powers, or
so imperfectly executed them that a mutual, final, and definite
award upon the subject matter submitted was not made.’” Jones, 792
F.3d at 405 (quoting 9 U.S.C. § 10(a)(4)).

“[A] plaintiff seeking

relief under this provision bears the ‘heavy burden’ of showing
that the arbitrator acted outside the scope of the authority
granted by the parties in their contract, by ‘issuing an award that

6

simply reflects his own notions of economic justice.’”

Id.

(quoting Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064, 2068
(2013)).
Weirton argues that the arbitrator exceeded his powers by
granting summary disposition rather than permitting discovery and
holding a hearing.

It argues that the arbitration agreements, the

AAA Rules, and West Virginia and Tennessee’s Rules of Civil
Procedure did not permit summary disposition.

Further, Weirton

argues that summary disposition was premature because no discovery
had been conducted and factual disputes were evident.
Weirton made these same arguments before the arbitrator, and
he rejected them. The arbitrator expressly concluded that the 2009
AAA rules provided him “discretion to hear and grant motions for
summary disposition.”

ECF No. 33-1 at 2.

He concluded that

summary disposition was not premature and that Weirton was not
entitled to discovery because “the asserted claims fail as a matter
of law.”

Id.

The arbitrator also implicitly determined that this

matter was governed by the AAA rules and not the Rules of Civil
Procedure of Tennessee or West Virginia.
It is well settled that an arbitrator has jurisdiction to
“adopt such procedures as are necessary to give effect to the
parties’ agreement” and that “‘procedural’ questions which grow out
of the dispute and bear on its final disposition are presumptively
. . . for an arbitrator[] to decide.”

7

Stolt-Nielsen S.A. v.

AnimalFeeds Int’l Corp., 559 U.S. 662, 685-86 (2010) (internal
quotation marks omitted); see also Dockser v. Schwartzberg, 433
F.3d 421, 426-27 (4th Cir. 2006) (concluding the arbitrators had
jurisdiction to determine the number of arbitrators that would hear
the parties’ dispute).

Thus, an arbitrator is empowered to make a

determination on procedural issues, and courts will not question
that determination so long as it has some reasonable basis in the
parties’ agreement.

See Upshur Coals Corp. v. United Mine Workers

of Am., Dist. 31, 933 F.2d 225, 229 (4th Cir. 1991) (“As long as
the arbitrator is even arguably construing or applying the contract
a court may not vacate the arbitrator’s judgment.”).
To that end, Weirton argues that the arbitration agreements do
not

provide

disposition.

authority

to

dispose

of

the

case

on

summary

Both arbitration agreements contain substantially

identical language.

Each provides for binding arbitration of any

dispute arising out of or relating to the Interim CFO Agreement or
the Turnaround Agreement, both invoke the 2009 AAA rules, both
require a written and reasoned award, and both contain choice of
law

provisions.1

1

The

The arbitration
Agreement provides:

Interim

agreement

CFO

Agreement

contained

in

the

provides

for

Interim

CFO

any controversy or claim arising out of or relating to
this [agreement], or the breach, termination or validity
thereof, shall be determined by binding arbitration in
Brentwood, Williamson County, Tennessee in accordance
with the arbitration rules of the American Arbitration
Association (“AAA”) in effect on the date of this
8

arbitration in Brentwood, Tennessee and for the application of
Tennessee law.
in

Pittsburgh,

The Turnaround Agreement provides for arbitration
Pennsylvania

and

for

the

application

of

West

Virginia law.
First, Weirton argues that, because the arbitration agreements
provide

for

binding

arbitration

at

particular

locations,

the

parties intended to require full discovery and a full evidentiary
hearing. It also argues that the arbitration agreements invoke the
AAA rules and the procedural laws of Tennessee and West Virginia,

[agreement] by a single arbitrator . . . .
The
arbitrator shall base the award on this [agreement], and
applicable law and judicial precedent, and shall
accompany the award with a written explanation of the
reasons for the award. The arbitration shall be governed
by the substantive and procedural laws of the State of
Tennessee applicable to contracts made and to be
performed therein.
ECF No. 33-4 at 6-7.
Similarly, the arbitration
contained in the Turnaround Agreement provides:

agreement

any controversy or claim arising out of or relating to
this Agreement, or the breach, termination or validity
thereof, shall be determined by binding arbitration in
Pittsburgh, PA, in accordance with the provisions of this
Article VII and the arbitration rules of the American
Arbitration Association (“AAA”) in effect on the date of
this Agreement by a single arbitrator . . . .
The
arbitrator shall base the award on this Agreement, and
applicable law and judicial precedent, and shall
accompany the award with a written explanation of the
reasons for the award. The arbitration shall be governed
by the substantive and procedural laws of the State of
West Virginia applicable to contracts made and to be
performed therein.
ECF No. 33-5 at 16-17.
9

none of which allow for summary disposition without an opportunity
for discovery.
Second, Weirton argues that the arbitrator was obligated to
apply West Virginia and Tennessee’s Rules of Civil Procedure,
which, Weirton argues, would not have permitted summary disposition
without adequate discovery.

The arbitrator implicitly concluded

that the AAA rules rather than West Virginia or Tennessee’s Rules
of Civil Procedure applied to determine whether summary disposition
was proper.

This Court finds the arbitrator’s conclusion to have

a reasonable basis in the parties’ agreements.
The

Interim

CFO

agreement

invokes

the

“substantive

and

procedural laws of the State of Tennessee applicable to contracts
made

and

to

be

performed

therein,”

ECF

No.

33-4

at

7,

the

Turnaround Agreement invokes the “substantive and procedural laws
of the State of West Virginia applicable to contracts made and to
be performed therein,” ECF No. 33-5 at 17, and both agreements
invoke

the

“arbitration

rules

of

the

American

Arbitration

Association (“AAA”) in effect on the date of” the agreements.
Nos. 33-4 at 6; 33-5 at 16-17.

ECF

Read as a whole, these agreements

make clear that the AAA rules governed procedural matters in the
arbitration, while Tennessee and West Virginia law governed the
substantive legal issues.2

Although the choice of law provisions

2

As discussed below, the parties’ invocation of the States’
procedural laws applicable to contracts demonstrates the parties’
intent to invoke the States’ statutes of limitations, but not the
10

provide that the states’ procedural law applicable to contracts was
to

be

applied,

application

of

those

States’

Rules

of

Civil

Procedure in an arbitration proceeding would be wrong, especially
in light of the express invocations of the AAA rules.3
these

choice

of

law

and

procedural

rules

At best,

provisions

create

ambiguity as to what procedural law applied, a determination well
within the arbitrator’s jurisdiction. The arbitrator’s decision to
apply

the

AAA

rules

rather

than

the

States’

Rules

of

Civil

Procedure has a reasonable basis in the parties’ agreements. Thus,
the

arbitrator’s

determination

that

summary

disposition

was

procedurally proper is entitled to deference.
Third, Weirton argues that the arbitration agreements required
discovery and full evidentiary hearings because they specified the
locations for such hearings.

However, these designations of sites

for arbitration hearings are not equivalent to express requirements
that the parties conduct discovery and participate in a full
evidentiary hearing on claims that fail as a matter of law.
the

arbitration

agreements

do

not

expressly

permit

While

summary

disposition, they do not expressly prohibit it either.

The

agreements invoke the 2009 AAA rules, which provide a set of

States’ Rules of Civil Procedure.
3

The Supreme Court has noted that public policy favors
arbitration as “an alternative to the complications of litigation”
and a way to “avoid[] the delay and expense of litigation.” Wilko
v. Swan, 346 U.S. 427, 431-32 (1953). Duplication of litigation
procedure in arbitration would hardly serve this purpose.
11

procedural rules including requiring arbitrators to “take such
steps as they may deem necessary or desirable to avoid delay and to
achieve a just, speedy and cost-effective resolution of Large,
Complex Commercial Cases.”

Rule L-4, AAA Commercial Arbitration

Rules and Mediation Procedures (2009 ed.).4

Further, the Rules of

Civil Procedure of Tennessee and West Virginia allow for the
dismissal of or summary judgment on legally insufficient claims.
See Tenn. R. Civ. P. 12.02; 56.01-56.08; W. Va. R. Civ. P. 12; 56.
Thus,

this

Court

determination

finds

that

that

summary

the

arbitrator’s

disposition

was

appropriate

reasonable basis in the parties’ agreements.
arbitrator

did

not

exceed

his

powers

procedural

in

has

a

Accordingly, the
disposing

of

the

arbitration on summary disposition.
B.

Manifest Disregard of the Law
Weirton argues that the arbitrator manifestly disregarded West

Virginia and Tennessee law because he allegedly misapplied the law
or otherwise made factual and legal errors.
Weirton’s

prior

attempt

to

vacate

the

However, just as in

First

Award,

Weirton

misunderstands the manifest disregard standard.

4

This Court notes that under the 2009 AAA rules, the parties’
dispute was considered a “Large, Complex Commercial Dispute”
because Weirton’s claims exceeded “$500,000 exclusive of claimed
interest, arbitration fees and costs.”
Introduction, Large,
Complex Cases, AAA Commercial Arbitration Rules and Mediation
Procedures (2009 ed.).
12

While the Supreme Court’s decision in Hall Street Associates,
L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008), states that § 10(a)
“provide[s] the FAA’s exclusive grounds for expedited vacatur,” id.
at 584, the United States Court of Appeals for the Fourth Circuit
has since confirmed that an award may also be vacated when the
arbitrator

“manifestly

disregards”

the

law

as

“either

[]

an

independent ground for review or as a judicial gloss on the
enumerated grounds for vacatur set forth at 9 U.S.C. § 10.”
Wachovia Secs., LLC v. Brand, 671 F.3d 472, 483 (4th Cir. 2012)
(internal quotation marks omitted).

“A court may vacate an

arbitration award under the manifest disregard standard only when
a plaintiff has shown that: (1) the disputed legal principle is
clearly defined and is not subject to reasonable debate; and (2)
the arbitrator refused to apply that legal principle.”
F.3d at 402.

Jones, 792

This “is not an invitation to review the merits of

the underlying arbitration or to establish that the arbitrator
misconstrued or misinterpreted the applicable law.”

Id. (internal

quotation marks omitted) (citation omitted). Rather, an arbitrator
manifestly disregards the law when he was “aware of the law,
understood it correctly, found it applicable to the case before
[him], and yet chose to ignore it in propounding [his] decision.”
Remmey v. PaineWebber, Inc., 32 F.3d 143, 149-50 (4th Cir. 1994).

13

1.

Summary Disposition

Weirton argues that the arbitrator manifestly disregarded
Tennessee and West Virginia procedural law by granting summary
disposition without discovery and in spite of disputed facts.
Weirton argues that the Interim CFO Agreement and the Turnaround
Agreement required the arbitrator to apply the Rules of Civil
Procedure of Tennessee and West Virginia respectively.

Weirton

argues that the States’ Rules of Civil Procedure preclude summary
judgment where a genuine issue of material fact exists and where
adequate discovery has not been had.
disputes

existed

regarding

the

It argues that factual

relationship

between

CHSI

and

Quorum, the defendants’ roles in the alleged conspiracy to defraud
Weirton, and the parties’ actions in performing the agreements.
Thus, Weirton argues that the arbitrator manifestly disregarded the
States’ Rules of Civil Procedure by granting summary disposition.
As discussed above, the arbitrator implicitly concluded that
the AAA rules rather than the States’ Rules of Civil Procedure
applied to the arbitration.

This was a procedural matter to be

determined by the arbitrator, and this Court will defer to that
ruling because it has some reasonable basis in the parties’
agreements. See Stolt-Nielsen, 559 U.S. at 685-86 . Thus, because
Tennessee and West Virginia’s Rules of Civil Procedure did not
apply to the issue of whether summary disposition was proper, the
arbitrator did not manifestly disregard those laws.

14

2.

Res Judicata and Collateral Estoppel

Weirton argues that the arbitrator manifestly disregarded West
Virginia law in concluding that all claims, except the breach-ofcontract claim against Quorum, were barred by res judicata or
collateral

estoppel.

Specifically,

Weirton

argues

that

the

arbitrator misapplied the doctrine of res judicata and disregarded
West Virginia precedent regarding the finality of judgments.
First, the arbitrator correctly identified and applied West
Virginia’s law regarding res judicata and collateral estoppel. See
ECF No. 33-1 at 3-8.

While Weirton argues that the arbitrator

misapplied the standard in finding that the individual defendants
were in privity with QIR in the First Arbitration, the arbitrator
clearly identified the correct standard and applied it.

Even if

Weirton is correct that the arbitrator made factual and legal
errors in applying the standard, that does not constitute manifest
disregard of the law and is not a ground for vacatur.
Second,

Weirton

argues

that

the

arbitrator

manifestly

disregarded the holdings of the West Virginia Supreme Court of
Appeals in Jordache Enterprises v. National Union Fire Insurance
Company of Pittsburgh, 513 S.E.2d 692 (W. Va. 1998), and Flanagan
v. Gregory & Poole, Inc., 67 S.E.2d 865 (W. Va. 1951), which
Weirton asserts provide that a judgment is not final if it is
pending on appeal.

Weirton argues that this Court’s confirmation

of the First Award was pending on appeal when the arbitrator issued

15

the Second Award and, thus, the judgment was not final.

Weirton

argues that it brought this to the arbitrator’s attention in
briefing, but that the arbitrator disregarded Flanagan and Jordache
Enterprises.

However, West Virginia law does not clearly provide

that a judgment pending on appeal is not a “final judgment.”
The West Virginia Supreme Court of Appeals has never directly
considered the issue.

In Flanagan, the defendant argued that the

plaintiff should be estopped from alleging a claim it had recovered
on in a prior action, which was pending on appeal.
972-73.

67 S.E.2d at

The court noted, without deciding, that if “the first

action is still pending on a writ of error . . . the judgment in
the first action has no finality and would not estop plaintiffs.”
Id.

In Jordache Enterprises, the court concluded that it must

apply New York law regarding the res judicata affect of a New York
judgment in a West Virginia case.

513 S.E.2d at 703.

In doing so,

the court noted that there appeared to be a conflict between New
York and West Virginia law on the issue of whether a pending appeal
is a “final judgment” because New York law provides that it is,
while the court’s dicta in Flanagan indicates that West Virginia
might not treat a pending appeal as a final judgment.

Id.

However, the court mentioned Flanagan only in passing and did not
actually rule on the issue.

Thus, the court’s statements in

Flanagan and Jordache Enterprises regarding finality are both
dicta. Further, the West Virginia Supreme Court has also concluded

16

that “[a]n erroneous ruling of [a] court will not prevent the
matter from being res judicata,” which seems to contradict the
court’s dicta in Flanagan and Jordache Enterprises.

State ex rel.

Richey v. Hill, 603 S.E.2d 177, 183 (W. Va. 2004). Accordingly, it
is unclear whether West Virginia law provides that a pending appeal
is not a final judgment for res judicata purposes.

Because this

legal principal is not “clearly defined” and is “subject to
reasonable debate,” the arbitrator did not manifestly disregard the
law.
3.

Statute of Limitations

Weirton argues that the arbitrator manifestly disregarded
Tennessee law by concluding that Weirton’s breach-of-contract claim
against Quorum was time-barred.

First, Weirton argues that the

arbitrator incorrectly concluded that the Tennessee statute of
limitations applied to the arbitration. It argues that statutes of
limitations do not apply to an arbitration unless expressly invoked
in the arbitration agreement and that the arbitration agreement in
the Interim CFO Agreement did not do so.
First,

Weirton

argues

that

the

Tennessee

statute

of

limitations does not apply to arbitration because it applies only
to

“actions,”

which,

Weirton

litigation before a court.
28-1-101.

argues,

are

plainly

limited

to

Tenn. Code § 28-3-109; 28-3-101;

However, nothing in the Tennessee Code or relevant case

law limits application of the statute of limitations to litigation

17

rather than arbitration.
“actions”

does

arbitration.

not

The statute’s use of the broad term

indicate

a

legislative

intent

to

exclude

Further, there is nothing in the statute precluding

parties from contractually invoking its application in arbitration.
Second, Weirton argues that statutes of limitations generally
do not apply to arbitration unless the parties expressly contract
for their application, and that the parties did not do so here.
However, the arbitration agreement contained in the Interim CFO
Agreement did invoke Tennessee’s statute of limitations.

The

arbitration

and

agreement

expressly

invoked

the

“substantive

procedural laws of the State of Tennessee applicable to contracts
made and to be performed therein.”
statute

of

limitations

on

ECF No. 33-4 at 7.

breach

of

contract

Tennessee’s

actions

is

a

procedural law applicable to contracts made and to be performed in
Tennessee.5
invoked

Thus, the parties’ arbitration agreement expressly

Tennessee’s

statute

of

limitation.

The

arbitrator’s

decision has a sound basis in the parties’ agreement and was not in
manifest disregard of applicable law.
Third,

Weirton

argues

that

the

arbitrator

manifestly

disregarded Tennessee law by concluding that the limitations period
was not tolled.

Weirton argues that Stephen Miller did not

complete his service as Interim CFO until December 2010, and that

5

In choice of law analysis, statutes
procedural rather than substantive.
18

of

limitations

are

Weirton did not learn of QIR’s breach of the Interim CFO Agreement
until May 2012, when it claims to have discovered QIR and Quorum’s
alleged fraudulent scheme to steer Weirton into the Turnaround
Agreement.

Thus, Weirton argues that the limitations period began

to run at the earliest in December 2010 and at the latest in May
2012.

Weirton argues that it filed this civil action within six

years of both of those dates, tolling the limitations period.

It

argues that the arbitrator’s failure to properly apply Tennessee’s
statute of limitations was a manifest disregard of the law.
However,

the

arbitrator

correctly

identified

that

under

Tennessee law, the statute of limitations for breach-of-contract
actions is six years, and that the limitations period begins to run
when “a contracting party first knows or should know that the
contract will not be performed.”

ECF No. 33-1 at 9 (internal

quotation marks omitted) (quoting Coleman Mgmt., Inc. v. Meyer, 304
S.W.3d

340,

349

§ 28-3-109).

(Tenn.

Ct.

App.

2009))

(citing

Tenn.

Code

Even if Weirton is correct that the arbitrator

erroneously applied the tolling provision and made factual errors
regarding when Weirton knew or should have known of the breach, the
arbitrator did not manifestly disregard the law.

This Court may

not vacate the award simply because the arbitrator made legal or
factual errors.

19

4.

Gist-of-the-Action Doctrine

The arbitrator concluded that Weirton’s tort-based claims were
barred by res judicata.

He alternatively concluded that those

claims were barred by the gist-of-the-action doctrine.

Weirton

argues that the arbitrator manifestly disregarded West Virginia law
by applying the gist-of-the-action doctrine. Specifically, Weirton
argues that its tort-based claims were plead in the alternative to
its breach of contract claims and should not have been dismissed,
that application of the doctrine was premature, and that the
doctrine did not bar its claims for fraud, misrepresentation,
aiding and abetting, or civil conspiracy because those claims were
based on breaches of “societal duties [that] exist independent of
any contractual obligations.”
First,

the

arbitrator

ECF No. 31 at 23.
correctly

stated

the

standard

for

applying the gist-of-the-action doctrine under West Virginia law.
See ECF No. 31-1 at 9 (citing Gaddy Eng’g Co. v. Bowles Rice
McDavid Graff & Love, LLP, 746 S.E.2d 568, 577 (W. Va. 2013)).
Second, the arbitrator applied the gist-of-the-action doctrine
after also concluding that the parties’ rights and obligations were
defined by contract.

See ECF No. 33-1 at 9-10.

Third, while

Weirton claims that under West Virginia law there is an exception
to the gist-of-the-action doctrine for fraud and other deceptive
practices, the West Virginia Supreme Court of Appeals has not
recognized a blanket exception.

In Gaddy Engineering Company v.

20

Bowles Rice McDavid Graff & Love, LLP, 746 S.E.2d 568 (W. Va.
2013), the West Virginia Supreme Court of Appeals held that a fraud
claim was barred under the gist-of-the-action doctrine because the
fraud claims involved simply claimed that affirmative promises of
a contractual nature were made and not followed through on where
the

parties

subsequently

relationship.

entered

Id. at 576-77.

into

a

formal

contractual

In that regard, the arbitrator

expressly concluded that Weirton’s fraud claims did not include
“material

allegations

that

framework of the parties.”

fall

outside

ECF No. 10.

of

the

contractual

Thus, the arbitrator

correctly identified that the gist-of-the-action doctrine bars
fraud claims that simply restate breach-of-contract claims and he
applied that doctrine, rightly or wrongly, to Weirton’s fraud
claims.

Accordingly, the arbitrator did not manifestly disregard

West Virginia law.
IV.

Conclusion

This Court finds no basis under 9 U.S.C. § 10 to vacate the
arbitration award.

Accordingly, Weirton Medical Center, Inc.’s

motion to vacate (ECF No. 30) is DENIED.

Defendants’ motion to

confirm arbitration award and for entry of final judgment (ECF No.
87) is GRANTED, and the Court finds defendants are entitled to the
amount of administrative costs incurred by the QHR defendants that
the Arbitrator has required Weirton to bear, in the amount of Eight
Thousand

Seven

Hundred

Three

Dollars

21

and

Seventy-Five

Cents

($8,703.75).6
judgment

be

Pursuant to 9 U.S.C. § 9, it is ORDERED that a
entered

in

favor

of

the

defendants

against

the

plaintiff dismissing WITH PREJUDICE all of the plaintiff’s claims
asserted

in

the

arbitration

against

defendants

Quorum

Health

Resources, LLC, Stephen Miller, Michael Rolph, Robert Lovell,
Robert Vento, Daniel Hamman, and John Waltko.

Plaintiff’s motion

to expedite ruling on pending motion to vacate arbitration award
(ECF No. 81) is DENIED AS MOOT.
IT IS SO ORDERED.7
The Clerk is DIRECTED to transmit a copy of this memorandum
opinion and order to counsel of record herein. Pursuant to Federal
Rule of Civil Procedure 58, the Clerk is DIRECTED to enter judgment
on this matter as to defendants Quorum Health Resources, LLC,
Stephen Miller, Michael Rolph, Robert Lovell, Robert Vento, Daniel
Hamman, and John Waltko, and award defendants the amount of
administrative costs, to be paid by Weirton, in the amount of Eight
Thousand

Seven

Hundred

Three

Dollars

and

Seventy-Five

Cents

($8,703.75).

6

The $8,703.75 fee amount is not disputed by Weirton. In its
response to defendants’ motion, Weirton states: “The QHR Defendants
are correct that the Arbitrator has the authority under the
applicable AAA rules to allocate among the parties the costs of the
arbitration. Since Arbitrator Curphy [sic] gave the QHR Defendants
a complete victory, he apparently thought it proper for WMC to pay
all of the costs of arbitration.” ECF No. 90 at 18.
7

The Court also dismisses ECF No. 13 as moot.
22

DATED:

December 12, 2017

/s/ Frederick P. Stamp, Jr.
FREDERICK P. STAMP, JR.
UNITED STATES DISTRICT JUDGE

23