Arbitration and the Statute of Limitations

The statute of limitations is at the forefront of consideration when either prosecuting or defending an action.  There is nothing in the various limitations statutes which says a limitation period is conditional upon the form of the proceeding.  The statutes are jurisdictional and strictly applied.  Yet in Washington State there is a wrinkle.

The Washington Supreme Court has held that statutes of limitations do not apply to arbitrations because arbitrations are not “actions” as that term has been defined by the Legislature.  The opinion in Broom v. Morgan Stanley DW Inc., 169 Wn. 2d 231 (2010), holds that if the parties have obligated themselves to arbitrate by a clause in their contract, then unless the clause affirmatively adopts the pertinent statute of limitations, the claim will not be time-barred by any limitations statute.

The Broom case arose in the context of securities litigation against a broker/dealer wherein the brokerage contract contained the standard NASD arbitration language. The Court performed a detailed analysis of legislative language appearing in the statutes of limitations. Sections 4.16.005 and 4.16.130 Revised Code of Washington refer to “actions” only, and not to “arbitrations.” The Court concluded that there was a difference between an action and an arbitration as the term “action” is used in the statutes.  The argument was made that “action” is a very broad term of art. The Court observed however that the terms “arbitration proceedings” and “judicial proceedings” (or “civil actions”) are often juxtaposed, meaning that the Legislature intended a difference.

This is not a widely recognized ruling.  In the absence of legislative recognition that the term “action” is broad enough to encompass arbitrations, the prudent practitioner should alert clients of the need to reference limitations periods in arbitration clauses.