Imagine you received a request for records from a medical malpractice attorney.
Not a good start to your day. But, the clock is ticking. The statute of limitations is about to run. If the clock runs out, you’re home free. (Actually, not always the case, since the statute of limitations is an affirmative defense. You can make the argument, but there are exceptions. Still, assume the clock running out is a good thing.)
You are now one month BEYOND the statute of limitations.
Then, you get a notice demanding arbitration.
You remember your patients sign arbitration agreements.
Arbitration is often a great solution to address medical malpractice claims. The venue is private. The verdict cannot be appealed. It is fast and less expensive than conventional litigation.
Now imagine, to your great surprise, your helpful arbitration agreement just neutralized the statute of limitations. You thought the clock had run. But, because you were using an arbitration agreement, the clock never expired.
If the arbitration agreement is silent on how to address the statute of limitations, many courts will view that as one of the rules that is lost when deciding to arbitrate.
In NCR Corp. v. CVS Liquor Control, Inc., 874 F. Supp. 168, 172 (S.D. Ohio 1993), the court ruled found the statute of limitations did not apply to arbitration claims. It concluded the “statute of limitations is to bar an action at law, not arbitration.” Other analogous decisions on this issue prompted the court to say an arbitration is not an “action.” The opinion noted the parties could have included a provision in the arbitration clause limiting the time to bring an arbitration proceeding, but did not do so.
Not all states have reached the same conclusion. For example, the Florida Supreme Court has ruled the term “action” in the statute of limitations includes arbitration because arbitration is considered a “civil action or proceeding.”
Other courts in other states have ruled as Ohio has, nixing the statute of limitations bookend. These include California, Connecticut, Idaho, Indiana, Maine, Massachusetts, Michigan, Minnesota, and North Carolina.
To round out our list, these states have passed statutes which DO apply the statute of limitations to arbitration agreements. Georgia, New York, and Washington.
What to do?
The simplest way to avoid the ambiguity is to be explicit within the arbitration agreement itself.
Perhaps something like the following:
“Any demand for arbitration triggered by this Agreement must be made before the statute of limitations applicable to such a claim has run or will be considered void.”
You get the point.
If you have committed to a path of arbitration, the last thing you want is a surprise.
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