E-Alert Case Updates

Mandatory Non-Binding Arbitration Clause Does Not Toll Statute of Limitations

Shailendra Kumar, M.D., P.A. v. Anand M. Dhanda
No. 2934, September Term, 2009 (Md. Ct. Spec. App.)
by Lydia S. Hu, Associate
Semmes, Bowen & Semmes (www.semmes.com)

Two urologists entered into an agreement to work together for a period of less than one year. The doctors drafted an agreement without the advice of counsel that included a mandatory non-binding arbitration clause. The clause read:

All disputes arising out of this agreement…shall be resolved pursuant to arbitration conducted in accordance with the Maryland Uniform Arbitration Act, in Baltimore, Maryland. Both parties can go to court if not satisfied by the decision of the Maryland Uniform Arbitration Act.

The working relationship did not end well. Per the terms of the contract, the doctors broke up their practice on August 31, 2002 and filed suit in the Circuit Court for Anne Arundel County soon thereafter. One of the doctors filed a Motion to Compel Arbitration and to dismiss the case which was ultimately granted on April 3, 2003. For the next two years, nothing happened. On April 29, 2005, a second lawsuit was filed in the Circuit Court for Baltimore City that sought (1) to enforce the arbitration agreement and (2) claimed breach of a noncompete clause in the agreement. By agreement between the parties, the latter two counts were dismissed without prejudice. On November 20, 2006, the Court granted, after a bench trial, the Petition to Compel Arbitration and appointed an arbitrator.

The arbitration was held on March 28, 2008. The arbitrator issued his award and denied all of the relief to the Plaintiff doctor and granted the Defendant doctor an award of $868.00 for unpaid disability insurance premiums.

Unhappy with the arbitrator’s Order, the Plaintiff doctor filed a lawsuit on March 16, 2009, giving rise to the instant appellate opinion. He alleged breach of the agreement and breach of the noncompete clause in the agreement. On September 10, 2009, the Defendant doctor filed a Motion to Dismiss asserting that the claims were blocked by the three-year general statute of limitations, codified in MD. CODE ANN., CTS. & JUD. PROC. § 5-101 (hereinafter “§ 5-101”). The trial court granted the Motion to Dismiss which was appealed to the Court of Special Appeals.

Pursuant to § 5-101, a civil action must be “filed within three years of the date it accrues unless another provision” provides differently. (Emphasis added).

The Plaintiff doctor contends that the language of the agreement required him to complete the non-binding arbitration prior to filing a legal action in a trial court. He argues that his cause of action did not “accrue” within the meaning of § 5-101 until his arbitration was completed on June 20, 2008. It was at that point, he argued, that limitations started to run. Therefore, he argued that he had until June 20, 2011 to file suit against the Defendant doctor. The intermediate appellate court disagreed and explained that a cause of action begins to accrue on the date of the wrong. The fact that the doctors had a contract to engage in non-binding arbitration prior to bringing suit in a trial court did not mean that the cause of action did not accrue as defined under § 5-101 when all the other elements of the case were present. The contract meant that the parties had to take actions to engage in the arbitration prior to the expiration of the statute of limitations. The parties could enter into further agreement to toll the limitations or they could have filed suit and requested a stay pending arbitration.

The Court of Special Appeals affirmed the trial court’s grant of dismissal for failure to file the claim within the limitations period.