Alert: Dismissal of a Complaint Due to an Arbitration Clause Does Not Toll the Statute of Limitations
03.28.19
The Pennsylvania Superior Court, in Morse v. Fisher Asset Management, __ A.3d __, 2019 WL 1219367 (Pa. Super. March 15, 2019), recently determined that dismissal of a complaint based on the existence of an arbitration agreement does not stay an action and toll the statute of limitations.
In 2008, appellant Morse executed a contract with appellee Fisher Asset Management containing an arbitration clause requiring final and binding arbitration before the Judicial Arbitration and Mediation Service (“JAMS”) of “[a]ny dispute, claim or controversy arising out of th[e] Agreement or otherwise between [the parties],” Under the agreement, Morse waived “all rights to seek remedies in court, unless otherwise mandated by federal or state securities laws.”
In 2009, Morse filed a complaint against Fisher and its employees, appellees Stewart Hollingshead and Shawn Weidmann, alleging various tort claims, breach of contract, and violations of the Unfair Trade Practices and Consumer Protection Law. Appellees filed preliminary objections to the complaint, arguing that the parties’ arbitration agreement required submission of the dispute to arbitration. The Court of Common Pleas dismissed the complaint in May of 2010. Morse did not appeal.
Almost six years after the trial court’s decision, Morse filed with JAMS an “Arbitration Statement of Claim” that was nearly identical to her 2009 complaint. Appellees moved to dismiss the arbitration as time barred. The arbitrator dismissed the claim as being untimely. Morse filed a petition to vacate in the Court of Common Pleas, arguing that her claim was not time barred as the 2009 complaint was timely and the 2010 order of dismissal under Pa Rule 1028(a)(6) stayed the action, tolling the statute of limitations.
In affirming the trial court’s denial of Morse’s petition, the Superior Court first held that under Pennsylvania law an arbitrator may decide procedural issues, including those relating the statute of limitations. The Morse court further held that an order under Pennsylvania Rule 1028(a)(6) dismissing a complaint in favor of an arbitration agreement did not stay proceedings and toll the statute of limitations. The Superior Court noted the difference between a party seeking to compel arbitration pursuant to the Uniform Arbitration Act versus moving to dismiss in favor of an arbitration agreement under Rule 1028(a)(6). In the case of the grant of a petition to compel, the Uniform Arbitration Act requires the court to stay judicial proceedings. However, in the case of sustaining a Rule 1028(a)(6) preliminary objection, no authority allows a stay of an action, and the limitations period continues running.
Practitioner’s note
While this case certainly contained bad facts for plaintiff, as she waited 6 years after the trial court sustained preliminary objections to request arbitration, it is a reminder that a plaintiff should not delay in seeking arbitration after a dismissal under Rule 1028(a)(6). Furthermore, a plaintiff must consider where to file and the impact on the statute of limitations. On the other hand, defendants should assess the strategic value in filing a petition to compel arbitration or preliminary objections to an improper complaint.
Contact
If you have any questions or would like to discuss these issues, please call Gaetano Piccirilli at 215.569.3699, gpiccirilli@klehr.com or Monica Clarke Platt at 215.569.3006, mplatt@klehr.com. Mr. Piccirilli is a Partner in the firm’s litigation department and devotes part of his practice to counseling clients in the real estate and construction industries. Ms. Platt is an attorney in the firm’s litigation department who focuses on complex business disputes, financial-services litigation, class actions and First Amendment Claims.
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