Park Plus, Inc. v. Palisades of Towson, LLC
| Decision Date | 25 March 2022 |
| Docket Number | 7, Sept. Term, 2021 |
| Citation | 478 Md. 35,272 A.3d 309 |
| Parties | PARK PLUS, INC. v. PALISADES OF TOWSON, LLC and Encore Development Corp. |
| Court | Court of Special Appeals of Maryland |
Argued by Andrew Butz (Jason Engel, Kiernan Trebach LLP, Washington, DC), on brief, for Petitioner
Argued by David G. Sommer (Ward B. Coe, III and Jared S. Dvornicky, Gallagher Evelius & Jones LLP, Baltimore, MD), on brief, for Respondents
Argued before: Getty, C.J., Watts, Hotten, Booth, Biran, Gould, Irma S. Raker (Senior Judge, Specially Assigned), JJ.
Gould, J. Private agreements to arbitrate future disputes are now commonplace. Variations in such agreements are many because, as with other contracts, parties are free to structure an arbitration process to suit their needs. Parties can specify in their agreement how to initiate the arbitration process, the number of arbitrators, the identity of the arbitrators, the scope and extent of discovery, the locale of the proceeding, and whether and how far the rules of evidence apply, among other matters.
As in other voluntary relationships, parties entering contracts tend to focus on the future benefits of the transaction, and not so much on what can go wrong. As a result, they don't always consider or foresee all of the pitfalls of arbitration, not the least of which is that cooperation between the parties—when they are quarrelling—may be necessary to start the arbitration process. Parties, therefore, sometimes omit such details from their agreements.
With the growth of arbitration as a favored dispute resolution alternative, private companies offering turnkey arbitration services have emerged. Such services generally have rules of procedure governing every aspect of the process, including how to file a demand for arbitration, service of the arbitration demand on the adverse party, the pleadings required and allowed, the selection of the arbitrators, motions practice, the scope and extent of discovery, hearing procedures, and the form of award. One advantage of such a service is that no cooperation is needed to commence the arbitration proceeding.
When parties agree to arbitrate a dispute, whether they realize it or not, they are also agreeing to curtail the role that courts may play in resolving their dispute. And because arbitration is favored as a matter of public policy, Maryland has a statute—the Maryland Uniform Arbitration Act ("MUAA")1 —that defines and limits the court's role in arbitrable disputes. One role is to enforce such agreements.
The Court of Special Appeals ("CSA") recently explored this role in Gannett Fleming, Inc. v. Corman Constr., Inc. , 243 Md. App. 376, 220 A.3d 411 (2019). There, the arbitration agreement identified an independent arbitration service—the American Arbitration Association ("AAA")—to administer the arbitration proceeding. Id. at 386, 220 A.3d 411. Needing no cooperation from the other party, the claimant started the proceedings by filing a demand with the AAA in accordance with its rules. Id. at 387, 220 A.3d 411. The respondent petitioned the court under the MUAA to stop the arbitration, as barred by the statute of limitations. Id. at 388, 220 A.3d 411. The trial court denied the petition and ordered the arbitration to proceed. Id . at 388-89, 220 A.3d 411. The CSA affirmed, finding that waiting beyond the three-year statute of limitations period to demand arbitration was not a waiver of the right to arbitrate. Id . at 383, 389, 220 A.3d 411.
The matter before us implicates the same question addressed in Gannett Fleming , although it comes to us from a different direction. Here, the arbitration agreement did not specify an arbitration service. When the respondent withheld cooperation to start the arbitration proceedings, the claimant enlisted the court's assistance by petitioning to compel arbitration. The respondent opposed the petition, arguing that it was barred by the statute of limitations. After holding an evidentiary hearing, the circuit court rejected the respondent's arguments and ordered the parties to arbitrate their dispute. Relying mainly on Gannett Fleming , the CSA affirmed.
For the reasons explained below, so do we.
In March 2009, Park Plus, Inc. ("Park Plus") and Palisades of Towson, LLC and Encore Development Corp.2 (together, "Palisades") executed a contract requiring Park Plus to "furnish and install" an electro-mechanical parking system in a luxury apartment building owned by Palisades in Towson, Maryland (the "contract").3 The contract included a one-year warranty period. The contract also contained the following arbitration provision:
Tenants began using the parking system in October 2010. Problems arose immediately. During the one-year warranty period that expired on July 31, 2011, the parties worked amicably to resolve the problems; indeed, Park Plus kept an employee on-site until September 2011 to "monitor the system and fix problems as they arose," for free. Park Plus then disclaimed any duty to resolve the problems and announced it would charge for ongoing repairs and maintenance. Because of the problems with the parking system, tenants began moving out in August 2011, and a fatal accident with the system occurred in February 2012.
In September 2014, Palisades sent a written arbitration demand to Park Plus. As required by the contract, Palisades then submitted its claims to the project's architect, who declined to participate. Within 30 days of the architect's refusal, Palisades again issued a written arbitration demand to Park Plus. Park Plus showed a willingness to arbitrate, but Palisades filed a petition to compel arbitration in the Circuit Court for Baltimore County. That petition was later dismissed without prejudice for lack of service.
After more delays, the parties agreed to appoint retired Court of Special Appeals Judge James Eyler as their arbitrator.
More delays ensued. Ultimately, when Park Plus failed to "proceed to arbitration as it had agreed to do[,]" in February 2016, Palisades filed its second petition in the Circuit Court for Baltimore County, seeking an order enforcing the arbitration agreement.
Park Plus opposed the petition and cross-moved to stay arbitration. The battle in the circuit court was mainly fought over whether a petition to compel arbitration is subject to the statute of limitations provided under Section 5-101 of the Courts Article. Park Plus maintained that CJ § 5-101 applied, and that the three-year period commenced when the breach of contract claim accrued. Thus, Park Plus argued, Palisades’ petition was untimely and should be denied.4
Palisades argued that there was no deadline in the contract to demand arbitration or petition a court to compel arbitration, and that CJ § 5-101 did not apply to such petitions. Palisades also advanced several arguments on the assumption that CJ § 5-101 did apply. Palisades argued that if the limitations period had commenced when the breach of contract action accrued, then the accrual of the claim was delayed by Park Plus's assurances it would fix the problems, as well as the tolling agreement between the parties.5 In any event, Palisades contended, it demanded in writing that Park Plus arbitrate their dispute within the three years following the accrual of the cause of action, thus, its petition was timely. Palisades also argued that if CJ § 5-101 applied, the three-year limitations period should run from the date Park Plus refused to arbitrate, in which case, Palisades’ demand was timely.
The circuit court held an evidentiary hearing and received extensive briefing from the parties. The court did not, however, have the benefit of Gannett Fleming or any other Maryland reported decision on the applicability of CJ § 5-101 to petitions to compel arbitration. Ultimately, the court treated the refusal to arbitrate as a separate contractual breach that started the limitations period for petitioning the court to compel arbitration, found the petition timely, and granted Palisades’ petition to compel arbitration.
The court made other findings of fact and conclusions of law on the issues raised by the parties, presumably in the interest of judicial economy if later an appellate court disagreed with its analysis. The court found that Palisades’ breach of contract claim accrued in August 2011. But, for statute of limitations purposes, the court found that Park Plus's assurances to remedy the problems and the tolling agreement extended the accrual date to September 19, 2011. Applying the three-year limitations period to that accrual date, the court found that Palisades’ written demand to Park Plus to arbitrate their dispute was timely.
While the appeal was pending, the parties proceeded with the arbitration. On March 5, 2020, the arbitrator awarded $3,178,800.64 to Palisades and $365,677.69 to Park Plus on its counterclaim.6
On April 24, 2020, Palisades petitioned the Circuit Court for Baltimore County to confirm the arbitration award. Park Plus filed a counter-petition requesting a stay of the proceedings pending the result of this appeal. The parties ultimately entered into a Consent Order under which an arbitration award in favor of Palisades in the...
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