Saturday, May 5, 2012

Kumar v. Dhanda (Ct. of Appeals)

Filed May 2, 2012
Opinion By Judge Clayton Greene, Jr.

Held:
While nonbinding arbitration, mandated by the contract, may have constituted a condition precedent to litigation, pursuing arbitration neither postponed the accrual of the underlying breach of contract claims nor otherwise tolled the statute of limitations applicable to maintaining an action in court.

Facts:
Petitioner and Respondent entered into an employment agreement on August 28, 2001. The contract contained a non-compete clause which prohibited Respondent from practicing within a specified radius of Petitioner’s multiple offices or soliciting or accepting Petitioner’s patients for three years following the expiration of the contract, or through August of 2005. The contract also included a standard mandatory, non-binding arbitration clause.

The agreement was not renewed upon termination on August 31, 2002. Soon thereafter, Respondent filed an initial suit for breach of contract against Petitioner in the Circuit Court for Anne Arundel County seeking damages for a breach of contract based on Petitioner’s refusal to grant Respondent partner status and the withholding of certain monies.

Four months later, on February 26, 2003, Petitioner filed a motion to compel arbitration and to dismiss the action. The judge presiding in Anne Arundel County dismissed the action without prejudice on April 24, 2003, stating that the “claims are subject to mandatory arbitration,” but noting that “[t]he case may be reopened to enforce the arbitration.”

On April 29, 2005 Petitioner filed, in the Circuit Court for Baltimore City, a petition to compel arbitration and to appoint an arbitrator. The petition also included separate counts concerning the substantive claims for breach of contract and breach of the non-compete provision. On March 9, 2006, Respondent filed both a response to Petitioner’s petition to compel arbitration and his own motion to dismiss the substantive counts for improper venue and as claims subject to mandatory arbitration. Petitioner then filed a response to the motion to dismiss, offering to withdraw the substantive counts if the Circuit Court would compel arbitration in order to resolve the issues. The court dismissed the substantive counts on April 28, 2006, but did not order arbitration. On August 25, 2006, Petitioner filed a motion for summary judgment, urging the Circuit Court for Baltimore City to grant the earlier petition to compel arbitration. Following a bench trial on November 20, 2006 the  judge granted the petition to compel arbitration.

Petitioner submitted the matter to the arbitrator in March of 2008. The arbitrator denied all relief to Petitioner and also denied relief to Respondent, save for an award of $868.00 as reimbursement for certain disability insurance premiums.

Finally, on March 16, 2009, almost a year after the arbitration award was issued, Petitioner filed the instant action in the Circuit Court for Montgomery County. The complaint stated that “[t]he Agreement requires arbitration as a requirement before Plaintiff can pursue a remedy in court . . . [t]he matter went to arbitration, and a decision in favor of the Defendant was rendered in June of 2008. This matter is brought de novo.” Respondent filed a motion to dismiss, arguing that the applicable three-year statute of limitations barred the action because the alleged breaches of contract occurred between 2002 and 2005. Petitioner filed in opposition, contending that, because completion of arbitration was a condition precedent to filing a claim, the statute of limitations had not begun to run until the arbitration decision of June 20, 2008. After a hearing and supplemental briefing by the parties, Judge McGann, of the Circuit Court for Montgomery County dismissed the action with prejudice.

Analysis:
The applicable statute of limitations is encompassed in § 5-101 of the Courts and Judicial Proceedings Article, which states: “[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.” In the context of the statute of limitations, “[t]he law is concerned with accrual in the sense of testing whether all of the elements of a cause of action have occurred so that it is complete.” St. Paul Travelers v. Millstone, 412 Md. 424, 432 (2010). In the instant case, although not specifying the particular dates, both parties agree that the alleged breaches of contract occurred more than three years prior to the filing of the complaint in the Circuit Court for Montgomery County.

The cases Petitioner cites in order to assert that the statute of limitations does not begin to run until a plaintiff can “maintain his action to a successful result” all concerned whether the necessary elements of a cause of action had arisen under the facts that were presented. In the instant case, neither party disputes that all of the elements of Petitioner’s breach of contract claims existed, at the very latest, as of the dates upon which the applicable contractual provisions terminated.  Like the situation in Arroyo v. Board of Educ. of Howard County, 381 Md. 646 (2004), while resolution of the legal action must wait until the satisfaction of the condition precedent, the court’s jurisdiction may be maintained and the claim properly stayed prior to that time.

The court could find no applicable exception to § 5-101, or language within the Maryland Uniform Arbitration Act, §§ 3-201 to 3-234, that would toll the statute of limitations in this case. In Philip Morris v. Christensen, the court explicated for the first time two factors that continue to guide  consideration of whether to apply a judicial tolling exception in a particular case. In order for an exception to be applied the court must find that: “there is persuasive authority or persuasive policy considerations supporting the recognition of the tolling exception, and, recognizing the tolling exception is consistent with the generally recognized purposes for the enactment of statutes of limitations.” Philip Morris, 394 Md. at 238 (2006).  While, to be sure, arbitrating parties are on notice of any possible claims against them, thereby guarding them from stale claims, another purpose of the statute of limitations would be threatened by tolling in this situation. The court has repeatedly touted the value of statutes of limitations as not only ensuring fairness between the parties, but also as essential to judicial economy and the pursuit of diligence in litigation. Petitioner’s pursuit of his legal claims was not vigilant.

The full opinion is available in PDF.

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