By: Ryan Kennedy  [6/8/22]

Many contracts, whether for consumer or commercial purposes contain an arbitration provision. Arbitration is a way for parties to have their dispute heard outside of the traditional judicial process. There is still an opportunity to present witnesses and exhibits, to cross-examine other witnesses, and to make opening and closing statements. While some controversy exists about the use of arbitration for consumer transactions, many business contracts include arbitration provisions, and for good reason. The process can feel less formal, and may even be quicker and more streamlined than a lawsuit. Typically, a specially trained attorney or retired judge may serve as an arbitrator. Numerous organizations, like the American Arbitration Association, have developed a process for helping parties conduct their arbitration. However, the parties are bound by any decision the arbitrator makes, and there are very limited grounds for appealing an arbitration award.

If a contract contains an arbitration provision, and a party fails to cooperate with arbitration, the other may ask a court to compel arbitration. Maryland Courts first look to Maryland law to decide if state or Federal law applies to a request to compel arbitration. Arbitration is governed by the rules of either the Federal Arbitration Act or similar state laws. Many states have adopted their own arbitration statute and Maryland is no different, having first adopted the Maryland Uniform Arbitration Act (MUAA) in the 1960s. Which set of laws applies to an arbitration proceeding depends on several factors, including the language of the arbitration agreement itself.

Most people know that the phrase “statute of limitations” refers to the deadline for making a complaint about another’s actions. Every lawyer who evaluates a dispute should always consider the applicable statute of limitations, but for arbitration demands under the MUAA, the answer is not so obvious. On March 25, 2022, the Maryland Court of Appeals issued an opinion in the case of Park Plus v. Palisades of Towson, LLC, _ Md. _, (No. 7, Sept. Term, 2021). The Court’s opinion confirms the holding of a previous Maryland Court of Special Appeals ruling, that declined to apply the statute of limitations to a petition to compel arbitration. At first blush, one could conclude that the Court has decided to revive arbitration of long-dead disputes, or created an exception to the statute of limitations itself. However, this is not quite the case.

The Park Plus litigation was born from a warranty claim and a counterclaim for unpaid expenses. Both of these are fairly common legal claims, though in this case, the facts include both a fatality and a prominent project at the heart of recent redevelopment in Towson. In the course of their dispute, the Palisades filed a petition to compel arbitration. On appeal, the Court of Appeals explained that, when considering a request to compel arbitration, the only concern for the Court is the existence of an agreement to arbitrate. Judge Gould wrote for the Court of Appeals that “based on our traditional understanding of statutes of limitations, the expiration of the statute of limitations did not extinguish Palisades’ right to arbitrate.”

The result is not necessarily an open license to litigate, though perhaps some attorneys will file petitions to compel arbitration in the hope of gaining leverage in other disputes. The Park Plus opinion allows questions related to the statute of limitations to still be decided by the arbitrator. Under some circumstances the statutes of limitations can be extended, either because it was “tolled” or because the actual problem wasn’t discovered until much later (i.e., mold growing out of sight, within a wall). Having already gone to Court to compel arbitration it may seem inefficient to have these issues pushed off to a later date and considered in a second forum, Park Plus does not mean any statute of limitations defense is gone.

One of the reasons Park Plus turned out as it did was the absence of any filing deadline in the arbitration agreement itself. Essentially, if the contract does not specify a time limit for requesting arbitration, Maryland judges will not be supplying a default deadline. This is a term that is missing from many arbitration agreements, and one that should be more carefully considered for Maryland businesses reviewing their existing contracts. The Court’s recent decision underscores the importance of having an attorney regularly review your legal documents.

Whether you are involved in an active dispute or concerned about the language of your business contracts, Dunlap Bennett & Ludwig has experience dealing with all aspects of the arbitration process. For more information on how Dunlap Bennett & Ludwig can help you with your legal needs, contact us by calling 800-747-9354 or emailing clientservices@dbllawyers.com.


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Posted in: Litigation & Disputes

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