Arbitration Demand Timely Despite Complicated Backdrop

Consider the project vendor situation:

• August 2010 – project complete
• August 2011 - warranty expires (but is extended by the vendor for a few more months)
• Throughout 2012 – continued problems with the equipment
• July 2013 – parties sign tolling agreement
• July 2014 – owner demands arbitration (the vendor initially agrees, but then doesn’t do anything
• August 2014 – owner seeks initial determination from architect, who declines to decide
• September 2014 – owner gives notice of intent to arbitrate
• February 2016 – owner renews petition to compel arbitration
• April 2016 – vendor claims there is no longer any agreement to arbitrate, as the owner failed to commence arbitration within three years, per Maryland law.

Now to fill in the gaps. The vendor, Park Plus, provided an automated parking system for a new 18-story apartment building in Towson, Maryland. The parking system was supposed to handle up to 409 cars. Per the court decision, the system never really worked properly, and certainly not for an extended period of time. Further, an employee of the apartment complex was tragically killed in 2012 when he attempted to retrieve a car from the system. (Informal research in 2021 suggests that the apartment building has reverted to traditional self-parking.)

The issue for the court was whether the Maryland three-year statute of limitations, to compel arbitration, had passed before the 2016 petition by the owner. The vendor argued that the three-year period started in 2010 (or 2011 at the latest), and the owner argued that the three-year period did not start until the owner sought arbitration in 2014.

The Court of Special Appeals of Maryland has decided that the owner’s petition to compel arbitration was timely.

The arbitration clause had no built-in statute of limitations, which was a critical factor. After an evidentiary hearing, the trial court held that the statute of limitations – if the owner had been pursuing an action in court for breach of contract – would have expired in September 2015. But the trial court held that the Maryland three-year statute of limitations did not apply to bar the petition to compel arbitration, since Park Plus had not refused to arbitrate until 2014, at the earliest. The Court of Special Appeals affirmed.

Further, based on prior court precedent, the appellate court noted:

In our view, the expiration of a statutory limitations period does not render a demand for arbitration untimely—and, thus, the right to arbitration waived—unless the parties provide for this in their arbitration agreement. This accords with the text of CJP § 5-101 when given its ordinary meaning, . . . (emphasis in original)

The combination of an act of breach (refusing to arbitrate) occurring in 2014, plus the absence of any time limitation within the arbitration clause itself, meant that the owner’s petition in 2016 to compel arbitration was still timely.

The case is Park Plus, Inc. v. Palisades of Towson, LLC, 2021 Md. App. LEXIS 107 (Feb. 10, 2021).