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Price v. Mountain Sleep Diagnostics, Inc.

2020 COA 155. No. 19CA0608. Colorado Revised Uniform Arbitration Act—Vacating Award—Fraud—Due Diligence.

November 5, 2020

Price d/b/a Peak Billing (Price) contracted with Mountain Sleep Diagnostics, Inc. (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 90 days before the renewal date. Disputes under the contract, including any involving inadequate notice of the contract’s termination, were subject to binding arbitration, and the prevailing party in an arbitrated dispute was entitled to attorney fees.

MSD terminated Price’s contract less than 90 days before the renewal date, and Price filed a motion to compel arbitration in district court. The court granted the motion, and 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. The trial court affirmed 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.

On appeal, MSD argued that the arbitrator’s award should be vacated because discoveries MSD made after the arbitration was complete established by clear and convincing evidence that Price procured the arbitration award through fraud, and the district court was required to hold a hearing on the motion to vacate. Though the merits of an arbitration award are generally unreviewable, a court must vacate an arbitration award if it was “procured by corruption, fraud, or other undue means.” A party seeking to vacate an award on these grounds must show by clear and convincing evidence that (1) fraud occurred, (2) the fraud was not discoverable by exercising due diligence before or during the arbitration, and (3) the fraud had a material effect on a dispositive issue in the arbitration. Motions to confirm and vacate arbitration awards should, if possible, be decided only on the written materials submitted. Here, 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. Therefore, the district court appropriately denied its motion to vacate the arbitration award without holding a hearing.

The judgment was affirmed.

Official Colorado Court of Appeals proceedings can be found at the Colorado Court of Appeals website.

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