Beckley Oncology Associates v. Rami Abumasmah ( 2021 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 19-1751
BECKLEY ONCOLOGY ASSOCIATES, INC.,
Plaintiff − Appellant,
v.
RAMI ABUMASMAH, M.D.,
Defendant – Appellee.
Appeal from the United States District Court for the Southern District of West Virginia, at
Beckley. Irene C. Berger, District Judge. (5:18−cv−01549)
Argued: December 11, 2020 Decided: April 8, 2021
Before GREGORY, Chief Judge, and KING and DIAZ, Circuit Judges.
Appeal dismissed by published opinion. Judge Diaz wrote the opinion, in which Chief
Judge Gregory and Judge King joined.
ARGUED: Justin M. Harrison, JACKSON KELLY, PLLC, Charleston, West Virginia,
for Appellant. Omar Dirar Ahmad, EVES LAW FIRM, PLLC, Huntington, West Virginia,
for Appellee. ON BRIEF: Grace E. Hurney, JACKSON KELLY, PLLC, Charleston,
West Virginia, for Appellant.
DIAZ, Circuit Judge:
Beckley Oncology Associates (“BOA”) appeals from the district court’s dismissal
of its complaint seeking to vacate an arbitration award in favor of Dr. Rami Abumasmah,
an oncologist and former BOA employee. The arbitrator awarded relief to Dr. Abumasmah
in a compensation dispute following BOA’s termination of his employment. The
employment agreement between BOA and Abumasmah purported to waive both judicial
and appellate review of the arbitrator’s decision. Because the waiver of appellate review
is enforceable, we dismiss BOA’s appeal.
I.
A.
BOA provides cancer treatment from its office in Beckley, West Virginia. Early in
2012, BOA recruited Dr. Abumasmah to join the practice as a medical oncologist. After
several months of negotiations, Abumasmah signed an employment agreement with BOA.
Among other things, the agreement provided that the parties would arbitrate
All disputes, controversies and disagreements between the Employer and
Physician connected with, related to or arising out of (i) the employment
relationship between the parties, including its commencement and
termination and all activities throughout; (ii) the execution, delivery,
interpretation or enforcement of this Employment Agreement; (iii)[ ]any
other written or oral agreements between the parties, and (iv) any business
or professional activities between the parties or any other rights, duties, or
responsibilities between the parties arising out of their business or
professional affairs[.]
2
J.A. 30–31. The parties further agreed that the arbitrator’s decision “shall be final and
conclusive and enforceable in any court of competent jurisdiction without any right of
judicial review or appeal.” J.A. 31 (emphasis added).
The two-year employment agreement (which BOA drafted) would automatically
renew for successive one-year terms, unless either party gave 90-days’ notice of
termination, which could be without cause. Abumasmah would be eligible to join the
partnership at the end of the initial two-year employment term, if the current shareholders
approved.
The agreement included the following incentive bonus provision:
Employer may, in its sole and absolute discretion, declare and pay bonuses
to Physician from time to time. This, notwithstanding, Employer agrees to
pay Physician an incentive bonus during the initial two year term of this
agreement as follows: In addition to a base salary of $275,000.00 per year,
the physician shall be entitled to incentive bonus compensation based on
gross collections (receipts) as follows in each year of the initial term of this
agreement: . . . The incentive bonus payment shall be made to Physician
following the completion of the first 12 months of this agreement, and
subsequently following the completion of the second 12 months of the initial
term. The specific terms of this incentive bonus are provided only for the
initial term of this agreement, and are subject to renegotiation in subsequent
renewals of this agreement.
J.A. 24.
Finally, the agreement provided that “[t]he invalidity or unenforceability of any
provision in the Agreement shall not in any way affect the validity or enforceability of any
other provision[,] and this Agreement shall be construed in all respects as if such invalid
or unenforceable provision had never been in the Agreement.” J.A. 31–32.
3
B.
Dr. Abumasmah began working at BOA in July of 2012. During his first six months
at BOA, Abumasmah explored the possibility of joining the partnership but was uncertain
whether he could afford the requisite capital contribution. In 2014, Abumasmah was
invited to join the partnership, but he declined.
Early the following year, Abumasmah told BOA that he planned to leave the country
for at least six months so that he could travel to Amman, Jordan to care for his mother.
Abumasmah’s last day at BOA was June 25, 2015. He arrived in Jordan shortly thereafter,
where he has remained. Before he left, Abumasmah told BOA that he didn’t expect to
receive compensation during his indefinite leave and offered to resign.
BOA terminated Abumasmah’s employment on his last day and sent him a
separation agreement. Abumasmah disagreed with several of the agreement’s terms.
Relevant here is the provision stating that the incentive bonus payment of $72,994, which
he received in June of 2015, was the entire bonus due for 2014–2015.
Abumasmah received annual incentive bonuses of $141,000 and $242,000 in 2012–
13 and 2013–14 respectively. He didn’t receive an accounting of his gross collections for
2014–15, whereas he received such reports for his first two years of employment.
According to BOA, Abumasmah did not receive a report for 2014–15, because he wasn’t
entitled to an incentive bonus for that year. 1
1
It’s unclear then why BOA paid Abumasmah any incentive bonus for 2014–15.
4
Abumasmah generated more revenue during each successive year of his
employment, bringing in $7.1 million in 2014–15. Based on the formula for calculating
his incentive bonus in effect for the first two years of his employment, Abumasmah claimed
that he should have received a $328,070.57 bonus for his 2014–15 collections.
Abumasmah sought arbitration of his claims against BOA. The arbitrator
determined that Abumasmah was entitled to an incentive bonus for his third year of
employment, though not on the same terms as before. Instead, the arbitrator concluded
that Abumasmah’s incentive bonus “shall be determined by the incentive bonus
methodology utilized by [BOA] for its employee physicians.” J.A. 48. If BOA had no
such methodology, or if the result would be “unjust in these circumstances,” then the bonus
would be determined based on the methods “commonly found” for calculating incentive
bonuses for physicians. Id. The arbitrator noted that section 16 of the employment
agreement gave him “the right and duty to give appropriate equitable and legal relief.” Id.
And, said the arbitrator, the parties agreed that West Virginia law—which recognizes the
concept of unjust enrichment—governed the terms of the Employment Agreement. Id.
After additional briefing from the parties on the method for calculating the incentive
bonus, the arbitrator awarded Abumasmah $167,030, 2 2.5% of the gross revenue he
generated. The arbitrator awarded this amount “[t]o prevent the unjust enrichment of
2
This amount appears to include the $72,994 incentive bonus BOA paid Dr.
Abumasmah for 2015, as the arbitrator stated that Abumasmah’s total compensation for
2014–15 would be “$442,030 ($275,000 in base salary plus the $167,030 incentive
bonus).” J.A. 19.
5
[BOA] and to compensate [Dr. Abumasmah] for the extraordinary revenue which he
generated during his third year of employment.” J.A. 18.
BOA filed a complaint in federal district court to vacate the arbitration award. The
district court granted Abumasmah’s motion to dismiss the complaint and confirmed the
award. Beckley Oncology Assocs., Inc. v. Abumasmah, No. 5:18-CV-01549, 2019 WL
2721146, at *1 (S.D. W. Va. June 28, 2019). The court held that the clause prohibiting
judicial review of the arbitration award was unenforceable under the Federal Arbitration
Act (“FAA”) because enforcing such clauses would upset the balance between the FAA’s
mechanisms for enforcing arbitration awards and permitting courts to substantively review
the arbitral process and associated awards. Id. at *4. But the court ultimately upheld the
arbitrator’s award because “[n]othing in the Arbitrator’s rulings suggest[ed] that he refused
to heed a clearly defined legal principle or deliberately disregarded the contract language.”
Id. at *5.
This appeal followed.
II.
While BOA raises several challenges to the arbitrator’s award, the threshold issue
is whether it validly waived “any right of . . . appeal” following the district court’s
confirmation of the award. J.A. 31. The validity of an appellate waiver in an arbitration
agreement under the FAA is a matter of first impression in this circuit. But the Tenth
Circuit has evaluated such a waiver and deemed it enforceable. See MACTEC, Inc. v.
Gorelick, 427 F.3d 821, 830 (10th Cir. 2005). We agree with our sister circuit.
6
The clause at issue in Gorelick provided that “[j]udgment upon the award rendered
by the arbitrator shall be final and nonappealable.” Id. at 827. The agreement did not,
however, purport to foreclose judicial review altogether. Id. at 829–30. The Tenth Circuit
reasoned that a provision prohibiting appellate, but not district court, review is “a
compromise whereby the litigants trade the risk of protracted appellate review for a one-
shot opportunity before the district court.” Id. at 830. Such provisions are consistent with
“the fundamental policy behind the FAA . . . to reduce litigation costs by providing a more
efficient forum.” Id. at 829.
The court also noted that, outside of the arbitration context, the courts of appeals
enforce agreements that waive appellate review of district court decisions. Id. at 830.
Indeed, we routinely enforce appellate waivers in plea agreements, where the stakes,
namely years of lost liberty, are far higher than the monetary award at issue here. See, e.g.,
United States v. Blick, 408 F.3d 162, 168–69 (4th Cir. 2005) (enforcing waiver and
explaining that “a defendant who waives his right to appeal for the purpose of obtaining
concessions from the government may not ignore his part of the bargain” (cleaned up));
United States v. Cohen, 459 F.3d 490, 494–95 (4th Cir. 2006) (same). “If defendants can
waive fundamental constitutional rights such as the right to counsel, or the right to a jury
trial, surely they are not precluded from waiving procedural rights granted by statute.”
United States v. Clark, 865 F.2d 1433, 1437 (4th Cir. 1989).
A party’s right to seek appellate review of a district court’s confirmation of an
arbitration award is wholly a creature of statute. See 9 U.S.C. § 16(a)(1)(D) (“An appeal
may be taken from . . . an order . . . confirming or denying confirmation of an award.”
7
(emphasis added)). Thus, nothing precludes a party from waiving appellate review of that
decision, as BOA expressly did here.
The Ninth Circuit’s decision in In re Wal-Mart Wage & Hour Employment
Practices Litigation, 737 F.3d 1262 (9th Cir. 2013), upon which BOA relies, is not to the
contrary. There, the court held that “[p]ermitting parties to contractually eliminate all
judicial review of arbitration awards would not only run counter to the text of the FAA, but
would also frustrate Congress’s attempt to ensure a minimum level of due process for
parties to an arbitration.” Id. at 1268 (emphases added). “Just as the text of the FAA
compels the conclusion that the grounds for vacatur of an arbitration award may not be
supplemented, it also compels the conclusion that these grounds are not waivable, or
subject to elimination by contract.” Id. at 1267.
Assuming arguendo that the Ninth Circuit’s holding is correct, it doesn’t support
invalidating the appeal waiver in this case. BOA received a “minimum level of due
process” before the district court. Thus, even if the parties couldn’t waive all judicial
review of the arbitration award, they were certainly free to waive appellate review of the
district court’s decision confirming or vacating the award. See Gorelick, 427 F.3d at 829–
30.
BOA’s attempt to distinguish Gorelick is unavailing. BOA argues that, in contrast
to the provision at issue in Gorelick, which waived the right to appeal the district court’s
judgment confirming or vacating an arbitration award, the clause here forecloses only
direct appeal of the arbitrator’s decision to the district court or this court on the merits. But
8
that reading would effectively render the provision a nullity, 3 as the FAA effectively bars
merits review of arbitration decisions.
It’s black letter law that judicial review of an arbitration award in federal court is
“substantially circumscribed.” Patten v. Signator Ins. Agency, Inc., 441 F.3d 230, 234 (4th
Cir. 2006). We have said that the scope of judicial review of an arbitrator’s decision “is
among the narrowest known at law because to allow full scrutiny of such awards would
frustrate the purpose of having arbitration at all—the quick resolution of disputes and the
avoidance of the expense and delay associated with litigation.” Apex Plumbing Supply,
Inc. v. U.S. Supply Co., Inc., 142 F.3d 188, 193 (4th Cir. 1998). “[O]ur province is not to
determine the merits of the dispute between the parties but rather to determine only whether
the arbitrator did his job—not whether he did it well, correctly, or reasonably, but simply
whether he did it.” Interactive Brokers LLC v. Saroop, 969 F.3d 438, 445 (4th Cir. 2020)
(cleaned up). Thus, a contract provision purporting to bar a district or circuit court from
reviewing an arbitrator’s decision on the merits is essentially meaningless, since the FAA
forecloses all but the most limited review.
3
See, e.g., Equinor USA Onshore Props. Inc. v. Pine Res., LLC, 917 F.3d 807, 813
(4th Cir. 2019) (“Reading the contract as a whole, we must be mindful that ‘specific words
or clauses . . . are not to be treated as meaningless, or to be discarded, if any reasonable
meaning can be given them consistent with the whole contract.’”) (quoting Dunbar
Fraternal Order of Police, Lodge No. 119 v. City of Dunbar, 624 S.E.2d 586, 591 (W. Va.
2005) (per curiam)).
9
BOA’s last redoubt is to characterize the provision as “stale” and thus unclear. Stale
or not, the provision purports to waive two things: the right to judicial review and the right
to appellate review of the arbitrator’s decision. It may well be that parties can’t waive all
judicial review of an arbitrator’s decision. 4 But because the employment agreement
contains a severability clause, and because unenforceable provisions in arbitration clauses
are severable if they don’t go to the essence of the contract, we need not invalidate the
appeal waiver. See, e.g., In re Cotton Yarn Antitrust Litig., 505 F.3d 274, 292–93 (4th Cir.
2007) (collecting cases finding unenforceable provisions of arbitration agreements
severable and holding that, when some provisions of an arbitration agreement are not
enforceable, “then the court must determine whether the unenforceable provisions are
severable.” (quoting Terminix Int’l Co. v. Palmer Ranch Ltd. P’ship, 432 F.3d 1327, 1331
(11th Cir. 2005)); Barach v. Sinclair Media III, Inc., 392 F. Supp. 3d 645, 655 (S.D. W.
Va. 2019) (relying on our holdings in Cotton Yarn and Hayes v. Delbert Servs. Corp., 811
F.3d 666, 675–76 (4th Cir. 2016) to hold that an unenforceable provision in an arbitration
agreement was severable, because it didn’t go to the essence of the contract).
4
As the district court recognized in rejecting a challenge to its own jurisdiction,
“arbitration awards are not self-enforcing.” Hoeft v. MVL Grp., Inc., 343 F.3d 57, 63 (2d
Cir. 2003), abrogated by Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008). In
Hoeft, the relevant agreement provided that the arbitrator’s decision “shall be binding and
conclusive upon each of the parties hereto and shall not be subject to any type of review or
appeal whatsoever.” Id. The Second Circuit rejected the notion that the clause prevented
the district court from discharging its duty under the FAA to confirm or vacate the award.
But, without any further analysis, the Court went on to consider the merits of the appeal,
and reversed the district court’s decision to vacate the award. With great respect for our
sister circuit, we take a different tack here and choose to hold the parties to their agreement
to waive appellate review.
10
Indeed, we think enforcing the waiver in this context furthers the FAA’s policy
objectives. As another panel of this court recently lamented, “[t]his genre of almost-
reflexive appeal of arbitration awards seems to be an increasingly common course, leading
to arbitration no longer being treated as an alternative to litigation, but as its precursor.”
Tecnocap, LLC v. United Steel, Paper & Forestry, Rubber, Mfg., Energy, Allied Indus. &
Serv. Workers Int'l Union AFL-CIO/CLC, Loc. Union No. 152M, No. 19-1263, 2021 WL
164677, at *4 (4th Cir. Jan. 19, 2021) (unpublished) (per curiam). The reflexive appeal of
an arbitration award is all the more lamentable when the parties have expressly waived that
right.
Finding no cause here to reject the parties’ agreement, we dismiss the appeal.
APPEAL DISMISSED
11