Where arbitration demand was filed later than a lawsuit could have been filed, the defendant asked the court to dismiss the arbitration as untimely filed. Court held that the Maryland statute of limitations applied only to actions filed in courts and that because the contract between the parties didn’t specify a deadline for filing arbitration, the court had no jurisdiction to impose a statute of limitations period on the action. Park Plus, Inc. v. Palisades of Towson, LLC, Maryland Court of Appeals (2021).
In this important decision by the highest appellate court in Maryland, the court held that the statute of limitations statute did not apply to arbitration proceedings. According to a lengthy court decision analyzing the history and purpose of the state statute, the court explained that the statute applied only to set legal deadlines for filing case in court.
In this particular case, the contract between the real estate developer and its contractor called for arbitration but did not specify American Arbitration Association (AAA) arbitration. No procedures were established for filing the arbitration or for conducting arbitration. The parties therefore had to depend upon each other to cooperate in the efforts to arbitrate.
The developer sought to arbitrate but the contractor, although initially agreeing to arbitrate, subsequently stalled and stalled. A little over three years after the cause of action arose, the developer finally filed suit asking the court to mandate that the parties arbitrate. At some point, even as the contractor argued that the statute of limitations had lapsed, the parties went forward with arbitration. The arbitrator awarded over $3 million to the developer.
The contractor then filed another action in court asking the court to throw out the arbitration decision based on the supposed lapse in the statute of limitations period. Both the trial and appellate courts found that the courts could not dismiss the arbitration decision. The appellate court explained the limited role of courts to review and reverse arbitration decisions. It then explained that the Maryland statute of limitations on its face didn’t apply to arbitration proceedings.
According to the court, the only way in Maryland to limit how long a party has to file a demand for arbitration is to specify that time limit in the contract itself. The courts in Maryland honor the contractual intent identified by the parties. Where no limitation is stated, the courts will not create one.
About the author: Article written by J. Kent Holland, Jr., a construction lawyer located in Tysons Corner, Virginia, with a national practice (formerly with Wickwire Gavin, P.C. and now with ConstructionRisk Counsel, PLLC) representing design professionals, contractors and project owners. He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects. He is publisher of ConstructionRisk Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932. This article is published in ConstructionRisk Report, Vol. 24, No. 7 (August 2022).
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