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Arbitration clauses not subject to statute of limitations, Md. high court says

“Our objective in construing statues is to understand and implement the General Assembly’s intent,” Judge Steven B. Gould, shown in 2018, wrote for the high court. (The Daily Record/File Photo)

Contractual agreements to resolve legal disputes through arbitration rather than litigation are not subject to the three-year statutory time limit for filing claims that applies to lawsuits, Maryland’s top court has unanimously ruled.

Because the statute of limitations does not apply, circuit court judges may consider and grant petitions to compel arbitration even if filed more than three years after the dispute arose between the parties, the Court of Appeals stated in its 7-0 decision Friday.

The court added that parties may set time limits for filing arbitration claims in their contracts but such contractual provisions would be independent of the statutory deadline.

In its ruling, the Court of Appeals said the three-year time limit provided in Section 5-101 of the state’s Courts and Judicial Proceedings Article applies only to “a civil action at law.”

“Our objective in construing statues is to understand and implement the General Assembly’s intent,” Judge Steven B. Gould wrote for the high court.

“On its plain language, the definition of ‘action’ includes only those activities that take place in court, and therefore does not include arbitration proceedings,” Gould added. “Arbitration proceedings do not take place in Maryland courts.”

The Court of Appeals decision was a victory for Palisades of Towson LLC, an apartment complex owner seeking to preserve a $2.8 million arbitration award in a breach of contract action against Park Plus Inc., a provider of automated parking garage equipment.

Park had argued in vain that the award was invalid because Palisades had not filed its petition to compel arbitration within three years of having discovered the alleged breach.

The high court noted that the underlying contract between Palisades and Park contained no time limit for seeking arbitration.

Park’s attorney James T. Hittinger did not immediately comment Tuesday on the court’s decision. Hittinger is with Kiernan Trebach LLP in Washington.

Palisades’ attorney David G. Sommer did not immediately return a message Tuesday seeking comment on the court’s ruling. Sommer is with Gallagher Evelius & Jones LLP in Baltimore.

The contractual dispute between Palisades and Park arose in September 2011, when Park stated it would begin charging for repairs and maintenance of the parking system it had installed at the apartment complex, in alleged violation of the contract.

Uncorrected problems with the automated parking system allegedly ensued.

These problems allegedly resulted in tenants moving out and in the death of a Palisades employee in February 2012 when he fell two stories in the garage after allegedly being struck by a collapsing portion of the automated parking machine, according to the court’s opinion and news reports.

In September 2014, Palisades sent a written arbitration demand to Park and soon after filed a petition to compel arbitration in Baltimore County Circuit Court. That petition was dismissed because Park was not served, according to the high court’s opinion.

Palisades filed a second petition in February 2016, which the circuit court granted over Park’s objection that it was not filed within the statutorily required three years.

With an appeal by Park pending, the arbitrator awarded Palisades $2,813,122.95. The amount reflected a $3,178,800.64 award to Palisades, less $365,677.69 owed to Park for its maintenance expenses.

The intermediate Court of Special Appeals upheld the arbitration order in February 2021, stating that the “right to arbitration was not time-barred by the statute of limitations … even if (the) demand for arbitration was made more than three years after discovering (the) alleged negligence.”

Park then sought review by the Court of Appeals.

The high court rendered its decision in Park Plus Inc. v. Palisades of Towson LLC et al., No. 7, September Term 2021.