Law Updates


Maryland Appellate Court Examines Statute of Limitations Defenses Applicable to a Petition to Compel Arbitration

(May 3, 2022) Richard J. Medoff, Associate.

In Park Plus, Inc. v. Palisades of Towson, LLC and Encore Development Corp., No. 7, Sept. Term, 2021, ___A.3d ___, 2022 WL 883679, available here, the Court of Appeals of Maryland held that, without language in an arbitration agreement providing otherwise, a petition to compel arbitration filed under the Maryland Uniform Arbitration Act (“MUAA”), Md. Code Ann., Courts and Judicial Proceedings (“CJ”) §§ 3-201, et seq., is not subject to a statute of limitations defense under CJ § 5-101.

By way of factual background, in March 2009, Park Plus, Inc. (“Park Plus”) and Palisades of Towson, LLC and Encore Development Corp. (collectively, “Palisades”) executed a contract requiring Park Plus to furnish and install an automated electro-mechanical parking system in a luxury apartment building owned by Palisades in Towson, Maryland (the “contract”). The contract included a one (1)-year warranty period and the following arbitration provision:

7.1. Any disputes between the OWNER and the CONTRACTOR relating to the execution or progress of the WORK or the interpretation of the Contract Documents shall be referred initially to the ARCHITECT or ENGINEER. The ARCHITECT’S or ENGINEER’S decision shall be binding upon the parties in matters relating to artistic effect. In all other matters, it shall be binding upon the parties unless a demand for arbitration under Paragraph 7.2, below, is made within 30 days after a decision was rendered.

7.2. Subject to Paragraph 7.1, above, all disputes between parties shall be resolved by arbitration. This agreement to arbitrate shall be specifically enforceable. The award rendered by the arbitrators shall be final and binding on the parties.

Problems with the parking system arose immediately after tenants began using it in October 2010.  After the one (1)-year warranty period, Park Plus disclaimed any duty to resolve the problems and announced it would charge for ongoing repairs and maintenance. Because of the problems with the parking system, tenants began moving out in August 2011, and a fatal accident with the system occurred in February 2012.

After years of various delays and unsuccessful attempts by Palisades to initiate arbitration proceedings, in February 2016, Palisades filed a petition under the MUAA, CJ § 3-207, in the Circuit Court for Baltimore County, seeking an order enforcing the arbitration agreement and compelling arbitration (the “petition”).  Park Plus opposed the petition. The legal fight in the circuit court was mainly over whether a petition to compel arbitration was subject to the three (3)-year statute of limitations period under CJ § 5-101, which provides: “A civil action at law shall be filed within three years from the date it accrues unless another provision of the Code provides a different period of time within which an action shall be commenced.”

Park Plus argued that CJ § 5-101 applied and that the three (3)-year period commenced when the breach of contract claim accrued, and thus, the petition was untimely and should be denied. Palisades argued that there was no deadline in the contract to demand arbitration or petition a court to compel arbitration and that CJ § 5-101 did not apply to such petitions.

The circuit court ultimately treated the refusal to arbitrate as a separate contractual breach that started the limitations period for petitioning the court to compel arbitration, found the petition timely, and granted Palisades’ petition to compel arbitration. On appeal, the Court of Special Appeals affirmed the circuit court’s order compelling arbitration. Relying on its recent decision in Gannett Fleming, Inc. v. Corman Constr., Inc., 243 Md. App. 376, 220 A.3d 411 (2019), the Court of Special Appeals held that, without language in the contract specifying otherwise, CJ § 5-101 does not impose a deadline for petitioning a court to compel arbitration, and thus, the right to arbitration was not time-barred by the limitations period set forth in CJ § 5-101, even if the demand for arbitration was made more than three (3) years after discovering the alleged negligence.

After granting certiorari, the Court of Appeals affirmed. The Court of Appeals noted that the narrow issue before it was whether the circuit court correctly granted the petition to compel arbitration filed under CJ § 3-207. The Court explained that faced with such a petition, the Court’s task under the MUAA was to determine whether an agreement to arbitrate the dispute exists.  And the Court concluded that CJ § 5-101 neither extinguished the substantive contractual right to arbitrate, nor the remedy conferred by the MUAA—an order compelling arbitration—to enforce that right.

Quoting the text of CJ § 5-101, the Court explained that, under this section’s plain language, “the object of the limitations period—that is, the ‘thing’ that must be filed within the proscribed three-year period—is a ‘civil action at law.’” However, the Court held that a petition to compel arbitration under the MUAA is not a “civil action at law,” and thus, without language in the arbitration agreement providing otherwise, a petition to compel arbitration is not subject to a defense under CJ § 5-101. The Court explained that historically a “civil action at law” was filed in a court of law and the remedy was monetary damages, whereas under the MUAA, CJ § 3-201, the court sits as a court of equity.  Construing CJ § 5-101 and the MUAA together, the Court stated it had “no difficulty concluding that the former does not apply to petitions filed under § 3-207 of the latter.” See Ingram v. State, 461 Md. 650, 666, 197 A.3d 14 (2018) (“[W]e must strive to construe harmoniously the statutes to give as full effect to each as possible.”). Therefore, the Court held that when a contract is silent on the issue, a petition to compel arbitration is not subject to CJ § 5-101.

In reaching that holding, the Court also distinguished as inapplicable other Maryland cases that involved contractual time limitations, including provisions that expressly incorporated the statute of limitations, such as Frederick Contractors, Inc. v. Bel Pre Med. Ctr., Inc., 274 Md. 307, 334 A.2d 526 (1975), noting that the arbitration provision in the contract at issue in the case at bar had no such time limitation.

Author Recommendation: In light of the Court’s holding in this case, contracting parties may want to ensure that proposed arbitration agreements or provisions include or incorporate any desired time limitations.

If you have questions about this update, contact Richard Medoff at rmedoff@semmes.com.