May 16th, 2016

Hospital Loses DQ Bid In Arbitration Row Over Witness Pay

New York (May 13, 2016) — A West Virginia federal judge refused Thursday to disqualify an attorney for his role in allegedly paying witnesses for their testimony in connection to a $1.5 million arbitration award that a hospital is challenging, while also confirming the award and dismissing the suit.

U.S. District Judge Frederick P. Stamp Jr. issued an order denying a slew of requests by Weirton Medical Center Inc. in its suit against administrative services provider QHR Intensive Resources LLC, including its attempt to disqualify Ellis R. Lesemann because of the hospital’s plans to call him as a witness concerning, in part, his knowledge of payments he and his client made to arbitration witnesses.

“WMC seeks to disqualify Lesemann as counsel for [QHR] because it seeks to depose him regarding the witness compensation agreements. Because this court denies WMC’s motion for limited discovery, WMC’s motion to disqualify Lesemann must also be denied,” Judge Stamp said.

The dispute dates back to 2009, when Weirton found itself in financial distress and, concluding that internal changes wouldn’t help, looked for outside solutions. It eventually entered into a turnaround agreement with QHR in which the company agreed to provide administrative services to the hospital.

After continued unimpressive financial performance, Weirton terminated its agreement with QHR and refused to pay its invoices, prompting QHR in January 2012 to bring the dispute to arbitration. In August 2015, an arbitrator entered an award in QHR’s favor. Weirton sued in federal court in October to vacate the award.

The hospital called for Lesemann’s disqualification in November, arguing that he will be required to testify regarding compensation and reimbursement of expenses incurred by witnesses during arbitration. Weirton alleged that the witnesses were paid tens of thousands of dollars by either Lesemann or QHR in what basically amounted to bribes in exchange for “biased” and “false” testimony, which led the arbitrator to draw an improper conclusion.

QHR fought back in December, arguing that the payments were “reasonable compensation” for the three witnesses’ time and expenses and that Weirton’s motion failed to pass the required three-part Smithson test — where one party seeks disqualification of opposing counsel because it may want to call him or her as a witness — and lacked any factual basis. QHR added that the case is a summary proceeding that doesn’t involve a trial or require witness testimony.

Judge Stamp denied Weirton’s motion Thursday in an opinion ruling on a number of orders, including opposing motions to vacate and confirm the arbitration award.

Weirton had challenged the arbitration award on several grounds, but Judge Stamp was unpersuaded by the hospital’s arguments and granted QHR’s motion to confirm the arbitration award.

The judge found that the arbitrator didn’t exceed his powers by adopting QHR’s proposed findings of fact and conclusions of law, that the arbitrator didn’t manifestly disregard the law, and that Weirton didn’t show “by clear and convincing evidence” that the witnesses were paid for their testimony.

“Even if the witness compensation arrangements did constitute fraud, corruption or undue means, WMC had an opportunity to discover them before the arbitration award became final,” Judge Stamp added.

He denied Weirton’s motion, supplemental motion and renewed motion to vacate the arbitration award as well as its motions to supplement the record and take discovery, and to disqualify counsel. After confirming the arbitration award, the judge entered judgment in its favor and dismissed the case.

A representative for QHR declined to comment Friday, while representatives for Weirton didn’t immediately respond to a request for comment.

Weirton is represented by Patrick S. Casey and Sandra M. Chapman of Casey & Chapman PLLC. QHR is represented by Ellis R. Lesemann of Lesemann & Associates and Athanasios Basdekis of Bailey & Glasser LLP. The case is Weirton Medical Center Inc. v. QHR Intensive Resources LLC, case number 5:15-cv-00131, in the U.S. District Court for the Northern District of West Virginia.

By Dani Meyer

Additional reporting by John Kennedy. Editing by Bruce Goldman.

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Founded by Ben Bailey and Brian Glasser in 1999 in Charleston, West Virginia, Bailey & Glasser LLP has grown to include nearly 50 lawyers, with offices in seven states and the District of Columbia. The firm’s complex litigation practice focuses on high-stakes commercial litigation; contract disputes; class actions for consumers, insureds, investors, and retirement plan participants; catastrophic injury and defective product cases; antitrust; and whistleblower lawsuits.  The firm has extensive experience in product liability law, and its lawyers routinely handle legal matters for injured individuals and consumers economically harmed by defective products.