When do statutes of limitations apply in arbitration?

• Author: Weintraub, David A.

Construction contracts, attorney-client fee agreements, employment agreements, and stock brokerage agreements are examples of contracts that frequently contain arbitration clauses. Some of these contracts are negotiated at arm's length. Others are not. Typically, the arbitration clauses within the contracts identify the forum in which future disputes will be resolved. The National Association of Securities, the New York Stock Exchange, the American Arbitration Association, and JAMS are the major administrators of private arbitrations. While many of these contracts contain choice of law provisions, it is rare for these contracts to contain language specifying which state's statutes of limitations, if any, will apply to the putative dispute. The absence of such clauses, much to the surprise of the parties to such contracts, may lead to an arbitral ruling that statutes of limitations do not apply to the parties' dispute. This often unintended result can be avoided by the simple inclusion of a contractual provision identifying the limitations that will govern any future dispute.

The relevant case law reflects that statutes of limitations generally apply in arbitration only under limited circumstances. Courts generally recognize that significant differences exist between the court process and the arbitration process. The arbitration process requires "expeditious and summary hearing, with only restricted inquiry into factual issues." (1) For many, the purpose of arbitration is to promote speed and efficiency, and arbitrators are not bound by formal rules of procedure and evidence. (2)

Additionally, "arbitrators are not required to sacrifice speed or informality in order to permit a party to introduce every piece of relevant evidence." (3) Although exceptions exist, exist, depositions are generally not permitted in arbitration. (4) The Florida Supreme Court has stated, "[a]rbitration is an alternative to the court system and limited review is necessary to prevent arbitration from becoming merely an added preliminary step to judicial resolution rather than a true alternative." (5) Given the significant differences between the court process and the arbitral process, it should not come as a surprise that differences would extend into issues such as statutes of limitations.

Express Application of Statutes of Limitation

The first circumstance under which statutes of limitation apply is where a state statute expressly provides for their application. Florida has no such statute. These statutes exist, by way of example, in New York and Georgia. (6) The New York and Georgia statutes expressly provide that if a claim would be time barred in court, it would also be time barred in arbitration. Accordingly, assuming that a dispute will be arbitrated in Georgia or New York, and assuming that the procedural law of these states applies, parties can be assured that a claim that would otherwise be barred in court, would also be barred in arbitration. Unless and until a similar statute is enacted in Florida, significant uncertainty will continue to exist in this state.

Implicit Application of Statutes of Limitation

The second circumstance under which a statute of limitations would apply in a private arbitration is where a statute of limitation's application is implicit in the statutory language. F.S. [section] 95.11 is expressly limited to "actions." The issue, accordingly, is whether arbitrations are actions. Let's first look at the law outside Florida.

Numerous courts have concluded that...