Fraud Proves To Be a Viable Ground for Vacating an Entire Arbitration Award Without Remand or Rehearing

Overturning an arbitration award can be challenging. The Federal Arbitration Act (FAA) imposes a heavy presumption in favor of confirmation, and courts routinely remind litigants that vacatur is reserved for exceptional circumstances. Even so, 2026 has produced a run of awards that have failed to survive judicial review on various grounds. 

The most recent vacatur decision—from the US District Court for the Middle District of Florida—resulted in a particularly notable outcome this past month.² Finding that fraud “infected the entire arbitration proceeding,” the court vacated the entire $48 million award and denied a rehearing. The court’s opinion is significant given the scope of the relief the court ordered and how it reached its decision.

The Dispute: The Unraveling of a Proffered Claim Narrative

The underlying arbitration arose from a December 2013 contract between a pharmacy benefit manager and a prescription drug discount card service provider. The benefit manager agreed to pay a $4.40 commission each time a consumer used the discount card at an in-network pharmacy. Critically, the contract extended the $4.40 commission rate to any similar card programs that the service provider created or acquired in the future. Eight days after the parties executed their contract, the service provider announced it had acquired a competitor’s prescription-discount business. 

The benefit manager grew suspicious of the timing of the acquisition announcement and terminated the parties’ new contract. That led the service provider to commence arbitration in 2016, claiming nearly $350 million in damages. Throughout the arbitration, the service provider maintained that its acquisition agreement was “fully executed” on December 17, 2013, despite an apparent gap in evidence establishing the actual execution date. The arbitrator viewed this testimony with skepticism and even raised the prospect of fraud. The arbitrator nonetheless, in a reasoned 39-page decision, issued a $48,362,033 award.

After arbitration, the benefit manager filed a third-party suit in Colorado federal court. There, a magistrate judge ordered the production of hundreds of previously undisclosed records, including new information inconsistent with testimony from the arbitration.

The benefit manager used that post-arbitration evidence to support vacatur proceedings in Florida federal court.

Applying the Vacatur Standard for Section 10(a)(1) Fraud

One of the greatest challenges for the benefit manager was that merely demonstrating fraud does not alone suffice to vacate an arbitration award under Section 10(a)(1) of the FAA. A party seeking vacatur in the Eleventh Circuit, where Florida courts sit, must make three separate showings: (1) “clear and convincing evidence” of fraud, (2) that the fraud could “not have been discoverable upon the exercise of due diligence prior to or during the arbitration,” and (3) that “the fraud materially related to an issue in the arbitration.” This is not an easy standard to satisfy. Courts gloss it with a “heavy presumption” against vacatur.

The benefit manager still prevailed. The district court’s 43-page opinion explained why.

• First, the district court held that two types of arbitration misconduct can establish Section 10(a)(1) fraud: fraudulent concealment of evidence and perjured testimony. A demonstrative “timeline” supported proof of such misconduct in the case, providing a “side-by-side comparison” of the information presented at arbitration versus the fraudulently concealed evidence.

• Second, the district court concluded that fraud would “not have been discoverable upon the exercise of due diligence prior to or during the arbitration” based on a reasonable investigation during arbitration. That included the benefit manager (1) making repeated demands to the claimant for withheld evidence, (2) filing a motion to compel in the arbitration and (3) issuing a third-party subpoena for the missing information. While the benefit manager could have taken additional action to uncover fraud during the arbitration's discovery process, the “reasonable diligence” standard does not require “perfect” diligence. The court emphasized that “[r]easonable diligence does not require parties to assume the other side is lying,” particularly when concealment and false testimony render fraud “not readily apparent” despite reasonable efforts to obtain relevant information.

• Third, the court tied the claimant’s fraudulent conduct to at least one “key question” in the arbitration to support the conclusion that the claimant’s fraudulent conduct was “material.” That sufficed to satisfy the materiality prong for vacatur. The court noted that the materiality standard does not necessarily require the party seeking vacatur to “show that the arbitrator’s award would have been different but-for the fraud.”

Complete Vacatur Relief and Rehearing Denied

One of the most consequential aspects of the district court’s decision was the punitive relief that the court ordered. It did not simply vacate the $31 million portion of the arbitration award that the concealed evidence directly undermined. The court instead wiped out the entire $48 million award based on its conclusion that fraud “infected the entire arbitration proceeding” and that trying to isolate an untainted dollar amount “would be futile.” The court also declined to remand or order a rehearing, concluding that it would be unfair to make the benefit manager start over when the claimant’s misconduct caused the failure of the arbitration.

Strategic Takeaways

The court’s decision, and its significant outcome, inherently provides key takeaways for parties in arbitration.

First is the importance of undertaking reasonable discovery efforts in the arbitration itself. Obtaining evidence during discovery can, of course, strengthen a party’s case at a final hearing, and an opposing party’s resistance to certain discovery can also influence the arbitrator’s view of a case. In the present matter, the respondent’s discovery activity, including document requests, motions to compel, subpoenas and written objections to deficient productions, also helped it to show reasonable diligence when moving to vacate on Section 10(a)(1) grounds. Parties may not need to turn over every stone in discovery, but they must show that they reasonably pursued the evidence.

Second is the value that third-party litigation may have on arbitral outcomes. A third-party suit, if brought in good faith and with valid purpose, can present another viable resource for obtaining new information and may yield discovery that an arbitrator cannot compel.

A third takeaway is the materiality threshold applicable to vacatur proceedings. Materiality under the FAA does not necessarily contemplate that a party’s fraud led to a different arbitration outcome, although the strongest materiality showing connects the fraud to issues the award itself treated as pivotal, ideally grounded in the arbitrator’s own words. For parties seeking to put guardrails in place to position for arbitration appeals in future cases, it may be critical to request a fully reasoned arbitration award laying out the material issues on which the arbitrator’s award relies.

For prevailing parties, the lesson is equally plain. An award built on intentionally concealed documents and knowingly false testimony may not be final in any practical sense. As the court put it, quoting Sophocles: “Things gained through unjust fraud are never secure.”

1. "The Arbitrator Exceeded Her Authority": Specific Arbitration Agreement Terms Lead to Successful Appeal of Award
2. Case No. 3:23-cv-1308-TJC-PDB (M.D. Fla. Sept. 17, 2026).