When an Arbitration Agreement Exposes Your Client to the Threat of Litigation in Perpetuity

IADC Committee Newsletter - Alternative Dispute Resolution

November 5, 2012

Nexsen Pruet attorneys Val Stieglitz and Matt DeAntonio authored an article detailing how a string of State court appellate opinions have turned the predictability of arbitration on its head.

The article was featured in the November 2012 edition of the International Association of Defense Counsel (IADC) Committee Newsletter on Alternative Dispute Resolution.  It begins:

"Many attorneys and clients perceive of arbitration as a way to secure a predictable dispute resolution mechanism, and would be surprised to learn that a string of State court appellate opinions have turned that predictability on its head.  A significant number of courts have held that, under certain circumstances, the statute of limitations does not apply to claims brought in arbitration. This result can indeed be “an unfortunate surprise,” subjecting a client to the threat of litigation in perpetuity. This newsletter surveys the recent jurisprudence on this issue and suggests a statutory approach to provide more certainty to litigants.

There are three circumstances in which courts must determine whether the statute of limitations applies in arbitration:  (1) a State statute expressly addresses whether the statute of limitations applies to arbitration; (2) the parties’ arbitration agreement incorporates a State statute or creates a private statute of limitations; and (3) a State statute is silent as to whether the statute of limitations applies, and the arbitration agreement is silent as well."

 

 Read more from IADC.