In latest edition of The Wright Toolbox:
Does a Statute of Limitations Apply to Arbitration?
The question is whether a statute of limitations applies to arbitration. More specifically, if the arbitration agreement does not have a limitations period, does not incorporate one and the applicable state statute of limitations does not expressly provide that it applies to arbitrations, does the statute of limitations apply to arbitration? I recently came across this issue while researching a different issue in a case and was surprised that the answer is that in Maryland the statute of limitations does not apply to an arbitration unless the arbitration agreement provides otherwise. Nationally, there is a split of authority on this issue, but Maryland is in the majority.
Williston on Contracts states:
Absent any agreement to the contrary, the statute of limitations for civil actions, by its plain terms, does not apply to an arbitration proceeding. Arbitration is not the bringing of an action under the statutes of limitation, and parties are generally free to structure their arbitration agreements as they see fit.
§ 79:115. Statute Of Limitations Applicable To Arbitration Agreements, 31 Williston on Contracts § 79:115 (4th ed.). In the relatively recent case of Park Plus, Inc. v. Palisades of Towson, LLC, 478 Md. 352, 72 A.3d 309 (Md. Sup. Ct. 2022), Maryland’s highest court held that “when the contract is silent on the issue, a petition to compel arbitration . . . is not subject to a defense under CJ § 5-101 [statute of limitations].” The court stated that the statute of limitations “neither extinguishes the substantive contractual right to arbitrate nor the remedy conferred by the [Maryland Uniform Arbitration Act]—an order compelling arbitration—to enforce that right.” The lower Maryland appellate court in Gannett Fleming, Inc. v. Corman Constr., Inc., 243 Md. App. 376, 397, 220 A.3d 411, 424 (2019), earlier reached the same result stating, “[i]n our view, the expiration of a statutory limitations period does not render a demand for arbitration untimely—and, thus, the right to arbitration waived—unless the parties provide for this in their arbitration agreement.” Both Maryland courts noted that the statute of limitations applies to an “action” being filed and observed that “arbitration proceedings are not civil actions at law.” Maryland law defines an “action” to mean “collectively all the steps by which a party seeks to enforce any right in a court.” Both Maryland courts also noted that their holdings were in accord with Maryland’s public policy “favoring enforcement of agreements to arbitrate.”
OTHER JURISDICTIONS – MAJORITY VIEW
The majority of other jurisdictions that have considered the issue have held that in the absence of a specific statutory directive, the general statute of limitations does not apply to arbitration. See, e.g., Egan Jones Ratings Co. v. Pruette, No. CV 16-MC-105, 2017 WL 4883155, at *3 (E.D. Pa. Oct. 30, 2017), aff’d, 765 F. App’x 659 (3d Cir. 2019); Carpenter v. Pomerantz, 36 Mass. App. Ct. 627, 634 N.E.2d 587, 590 (1994) (“As used in statutes of limitation, the word ‘action’ has been consistently construed to pertain to court proceedings.”); Har-Mar, Inc. v. Thorsen & Thorshov, Inc., 300 Minn. 149, 218 N.W.2d 751, 755 (1974) (“Based upon the special nature of arbitration proceedings and both the statutory and common-law meaning of the term ‘action,’ we feel compelled to hold that [the statute of limitations] was not intended to bar arbitration of [the] fee dispute solely because such claim would be barred if asserted in an action in court.”); In re Cameron, 91 N.C. App. 164, 370 S.E.2d 704 (1988) (“[B]y its terms the limitations period … applies only to an ‘action,’ which is a ‘judicial proceeding,’ … and an arbitration is neither an ‘action’ nor a ‘judicial proceeding,’ but a non-judicial, out-of-court proceeding which makes an action or judicial proceeding unnecessary.”); Skidmore, Owings & Merrill v. Connecticut General Life Insurance Co., 25 Conn. Supp. 76, 197 A.2d 83, 87 (1963); Lewiston Firefighters Ass’n v. City of Lewiston, 354 A.2d 154, 167 (Me. 1976); NCR Corp. v. CVS Liquor Control, Inc., 874 F. Supp. 168, 172 (S.D. Ohio 1993); Manhattan Loft, LLC v. Mercury Liquors, Inc., 173 Cal. App. 4th 1040, 1051 (Cal. App. 2d Dist. 2009); Moore v. Ominicare, Inc., 118 P.3d 141, 153 (Idaho 2005); see also Mac Long Homes, LLC v. Olvera Constr., LLC, No. 2022-CA-00938-COA, 2024 WL 2010456, at *5–10 (Miss. Ct. App. May 7, 2024)(concurring opinion discussing issue); Craig P. Miller, The Enforceability and Applicability of a Statute of Limitations in Arbitration, 32 Franchise L.J. 26, 29 n.47, 30 n.54 (Summer 2012).
THE MINORITY VIEW
The Florida Supreme Court held in Raymond James Financial Services, Inc. v. Phillips, 126 So.3d 186 (Fla. 2013) that the statute of limitations does apply to arbitration proceedings. In that case, the two lower courts held that Florida’s statute of limitations was not applicable to arbitration. However, the Florida Supreme Court, had a different interpretation. In considering whether an arbitration constituted a “civil action or proceeding” under the statute of limitations, the court looked to Black’s Law Dictionary for guidance. Black’s law defined a “civil action” as “[a]n action brought to enforce, redress, or protect a private or civil right; a noncriminal litigation.” Black’s Law Dictionary 34 (9th ed. 2009). It further defined a “proceeding” as “[a]ny procedural means for seeking redress from a tribunal or agency.” Id. at 1324. The Raymond James court held that an arbitration was a form of tribunal defined as “[a] court or other adjudicatory body.” The court stated “In addition, an arbitrator would fall under the definition of an adjudicator, which Black’s Law Dictionary defines as ‘[a] person whose job is to render binding decisions.”’ Id. The statute of limitations in Raymond James used the phrase “civil action or proceeding” and while a civil action may be limited to court cases, the court stated that a “proceeding is clearly broader in scope and encompassed arbitrations.
In Nielsen v. Barnett, 440 Mich. 1, 485 N.W.2d 666, 667 (1992), it was argued that the statute of limitations did not apply to arbitration proceedings because the statute used the term “action.” However, the Michigan Supreme Court did not find this persuasive. The court held that the arbitration panel did not exceed its authority by applying the statute of limitations to the claim at issue. Id. at 670.
SPECIFIC STATE STATUTES INCLUDING ARBITRATION IN LIMITATIONS
I have not performed exhaustive research on this, but at least three states have passed laws that expressly apply the statute of limitations to arbitration proceedings. These states are: New York (N.Y. C.P.L.R. § 7502), Georgia (Ga. Code Ann. § 9-9-5 (2016)) and Washington (Wash Rev. Code § 7.04A.090(3)(2016)). New York Civil Practice Law and Rules section 7502(b) provides, “If, at the time that a demand for arbitration was made or a notice of intention to arbitrate was served, the claim sought to be arbitrated would have been barred by limitation of time had it been asserted in a court of the state, a party may assert the limitation as a bar to the arbitration on an application to the court ….” N.Y.C.P.L.R.§ 7502(b) (McKinney 2005).
Georgia Code Annotated section 9-9-5(a) states, “If a claim sought to be arbitrated would be barred by limitation of time had the claim sought to be arbitrated been asserted in court, a party may apply to the court to stay arbitration or to vacate the award, as provided in this part. The court has discretion in deciding whether to apply the bar. A party waives the right to raise limitation of time as a bar to arbitration in an application to stay arbitration by that party’s participation in the arbitration.” Ga. Code Ann. § 9-9-5(a).
Revised Code of Washington section 7.04a.090 provides in pertinent part, “A claim sought to be arbitrated is subject to the same limitations of time for the commencement of actions as if the claim had been asserted in a court.” Wash. Rev. Code Ann. § 7.04a.090 (2013). It should be noted that prior to Washington enacting its statute, the Washington Supreme Court ruled that the state’s statutes of limitations did not apply to arbitrations. Broom v. Morgan Stanley DW Inc., 169 Wash.2d 231, 236 P.3d 182, 188 (2010).
If you have questions regarding the issues discussed in this post, please do not hesitate to contact Michael A. Stover, Esq. (410-659-1321/mstover@wcslaw.com) or any member of the Mediation & Arbitration Practice Group.