Contributor: Stephen P. Kelly
In Broom v. Morgan Stanley DW, Inc., the Washington State Supreme Court held that state statute of limitations did not apply to a contractual arbitration. The arbitrators of an investment-related dispute had dismissed certain claims because plaintiffs failed to bring them before the applicable statutes of limitations lapsed. Analyzing the Washington statute of limitations and arbitration statutes, the court found that the legislature didn’t intend the term “action” in the statute of limitations – to include arbitration. Because of this, the court reasoned, the arbitrators weren’t authorized to apply the state statute of limitations to plaintiffs’ claims. The court made clear, though, that people can agree, by contract, to apply a state statute of limitations to arbitration provisions.
Construction and design contracts as well as many other types of contracts commonly specify arbitration as the exclusive forum for disputes, and commonly select what laws apply to the contract. This decision could affect a variety of construction-related disputes including construction defect and payment claims and the full impact of the decision remains to be seen. In the meantime, for a construction contract in Washington where arbitration is the forum for disputes, parties that want the Washington statutes of limitations to apply to the arbitration should make this clear.