Kumar v. Dhanda

EYLER, DEBORAH S., J. In the Circuit Court for Montgomery County, Shailendra Kumar, M.D., P.A. (“Dr. Kumar”), the appellant, sued Anand M. Dhanda, M.D., the appellee, in two counts, for breach of contract and breach of a covenant not to compete contained in the same contract. The pertinent contract included a mandatory non-binding arbitration clause. Dr. Dhanda moved to dismiss the complaint on the ground that the claims were barred by the applicable statute of limitations.

Dr. Kumar opposed the motion, asserting that his causes of action did not accrue until the parties completed arbitration. The circuit court granted the motion. On appeal, Dr. Kumar asks wheth ³⁴⁰ er the circuit court erred in doing so. For the following reasons, we conclude that it did not, and shall affirm the judgment.

FACTS AND PROCEEDINGS Dr. Kumar and Dr. Dhanda are urologists. On August 31, 2001, they entered into a written employment contract (“Agreement”) whereby Dr. Dhanda agreed to work for Dr. Kumar’s practice. The term of the Agreement was from September 4, 2001, through August 31, 2002. The Agreement, which was drafted by Dr. Kumar without counsel, included the following mandatory non-binding arbitration clause: All disputes arising out of this Agreement [with an exception not applicable here], shall be resolved pursuant to arbitration conducted in accordance with the Maryland Uniform Arbitration Act, in Baltimore, Maryland.

Both parties can go to court if not satisfied by the decision of the Maryland Uniform Arbitration Act. The Agreement also included a non-competition clause that prohibited Dr. Dhanda from engaging in the practice of urology within specified miles of certain offices of Dr. Kumar and from seeking or accepting previous patients of Dr. Kumar for three years after his (Dr. Dhanda’s) termination (voluntary or involuntary) from employment. The working relationship between Dr. Kumar and Dr. Dhanda did not go well and ended on August 31, 2002. Soon thereafter, in the Circuit Court for Anne Arundel County, Dr. Dhanda sued Dr. Kumar for breach of the Agreement.

Dr. Kumar filed a motion to compel arbitration and to dismiss, which was granted on April 3, 2003. Nothing happened for a little more than two years. Then, on April 29, 2005, in the Circuit Court for Baltimore City, Dr. Kumar sued Dr. Dhanda in three counts. In count 1, he petitioned to compel arbitration.

In count 2, he alleged breach of the Agreement, generally, and in count 3 he alleged breach of the non-competition provision of the Agreement. ³⁴¹ There followed a period of delay in serving Dr. Dhanda. Upon being served and answering, Dr. Dhanda moved to dismiss counts 2 and 3 for improper venue. By agreement, Dr. Kumar withdrew those counts, without prejudice. On November 20, 2006, after a bench trial on count 1, the court granted the petition to compel arbitration and appointed an arbitrator.

The arbitration was held on March 28, 2008. The contract claims by Dr. Kumar and a cross-claim by Dr. Dhanda were presented. On June 20, 2008, the arbitrator issued his award. He denied all relief to Dr. Kumar and granted Dr. Dhanda an award of $868 for unpaid disability insurance premiums.

On March 16, 2009, Dr. Kumar filed the lawsuit in the case at bar for, as stated above, breach of the Agreement and breach of the non-competition clause in the Agreement. On September 10, 2009, Dr. Dhanda filed a motion to dismiss, asserting that the claims were barred by the three-year general limitations period in Md.Code (2006), section 5-101 of the Courts and Judicial Proceedings Article (“CJP”). After a hearing and receiving supplementary briefing from the parties, the court granted the motion to dismiss. This timely appeal followed. 1 STANDARD OF REVIEW A party may move to dismiss a complaint pursuant to Rule 2-322(b)(2) when the well-pleaded facts and all reasonable inferences that they support do not state a claim upon which relief may be granted as a matter of law.

In the case at bar, Dr. Dhanda raised the affirmative defense of limitations and further asserted that, on the facts alleged in the complaint, Dr. Kumar’s claims were time-barred, as a matter of ³⁴² law. We review the court’s decision to grant the motion to dismiss for legal correctness. See Shah v. HealthPlus, Inc., 116 Md.App. 327, 332-33 , 696 A.2d 473 (1997). DISCUSSION The general statute of limitations for a civil action in Maryland is three years.

It is set forth in CJP section 5-101, which states: A civil action at law shall be filed within three years from the date it accrues unless another provision of the Code provides a different period of time within which an action shall be commenced. (Emphasis added.) Dr. Kumar contends the language of the Agreement precluded him from bringing any action in court until the parties had completed non-binding arbitration. Therefore, his causes of action against Dr. Dhanda did not come into existence, and hence did not “accrue” within the meaning of CJP section 5-101, until arbitration was completed on June 20, 2008. At that point, limitations started to run.

Accordingly, he had until June 20, 2011, to bring suit against Dr. Dhanda, and he filed suit well within that time. For that reason, the circuit court erred in granting the motion to dismiss. Dr. Dhanda responds that Dr. Kumar’s causes of action for breach of contract “accrued,” within the meaning of CJP section 5-101, when the alleged breaches occurred. Therefore, the latest possible accrual date for the “regular” breach of contract claim was August 31, 2002, and the latest possible accrual date for the non-competition clause breach of contract claim was August 31, 2005 (as the clause remained in effect post-termination, until August 31, 2005).

Within the latter time frame, the non-binding arbitration already had been concluded. In any event, the three-year limitations period for both claims had expired before March 16, 2009, when the present suit was filed. Therefore, the circuit court properly granted the motion to dismiss. ³⁴³ “Ordinarily, our [general three-year] statute of limitations begins to ‘accrue’ on the date of the wrong.” Murphy v. Merzbacher, 346 Md. 525, 532 , 697 A.2d 861 (1997). In a breach of contract action, that date ordinarily is the date the contract was breached.

See Hariri v. Dahne, 412 Md. 674 , 688 n. 8, 990 A.2d 1037 (2010). There is no dispute that the alleged breaches of contract by Dr. Dhanda took place more than three years before suit was filed in this case, and that Dr. Kumar knew of the alleged breaches when they took place. 2 Relying upon cases such as James v. Weisheit, 279 Md. 41 , 367 A.2d 482 (1977), Henry’s Drive-In, Inc. v. Pappas, 264 Md. 422 , 287 A.2d 35 (1972), and W., B. & A Electric RR Co. v. Moss, 130 Md. 198 , 100 A. 86 (1917), Dr. Kumar asserts that the proper test for when a cause of action accrues is when the plaintiff “could have first ... maintained his action to a successful result,” Moss, 130 Md. at 205 , 100 A. 86 ; and pursuant to the language of the Agreement he could not have maintained his breach of contract claims to successful results until an arbitrator had decided the disputes between the parties. We disagree with Dr. Kumar’s analysis of the meaning of “accrual,” and his use of the cases cited above to support it. In these cases, the primary question was whether all the elements of the causes of action in question had arisen, as until that had happened, the causes of action could not have accrued.

In James , a seller conveyed real property to a buyer, taking back a second mortgage, which was to be junior to the buyer’s $90,000 purchase money mortgage. Instead of recording a $90,000 first mortgage, the buyer recorded a $250,000 first mortgage. Soon after the sale, the seller learned that the ³⁴⁴ buyer had done so. Nine years later, the seller sued the buyer for fraud.

The buyer maintained that the fraud claim was time-barred. The seller argued that it was not, because all of the elements of a cause of action for fraud had not arisen more than three years before suit was filed. Specifically, the seller asserted that he had not suffered a compensable injury (one element of fraud) when the $250,000 first mortgage was recorded. The Court of Appeals disagreed.

It held that the seller had been injured when the $250,000 first mortgage was recorded, and therefore all the elements of a cause of action for fraud could have been proven at that time. The cause of action thus had accrued at that time, and limitations had started to run. By the time suit was filed, the three-year limitations period had expired. Similarly, in Henry’s Drive-In, an action alleging that a tenant had breached its lease by not paying real property taxes on the premises, the question was whether the cause of action did not arise until the lessor made a demand for payment, because until such time there was no obligation to pay.

The Court of Appeals held that demand was not necessary to give rise to a cause of action because the lessee’s obligation to pay was clear from the lease itself and the lessor thus could have acted without making a demand. The cause of action therefore accrued for each year upon the nonpayment of the taxes due for that year, and the lessor’s claims for unpaid taxes more than three years before suit was filed were time-barred. Finally, in Moss, the plaintiff in a quantum meruit suit took the position that he had not completed the services for which he was seeking compensation until less than three years before he brought suit, and therefore his claim was not barred by limitations. Acknowledging that that was the central issue in determining whether the claim was time-barred, the Court agreed with the trial court that disputes of fact made that issue a jury question.

If the jury found that the services were completed more than three years before suit was filed, the claim would be time-barred; if it did not, the claim would be viable. ³⁴⁵ In the case at bar, unlike in the cases Dr. Kumar relies upon, there is no dispute that all the elements of his causes of action for breach of contract (contractual obligation, breach, and damages) existed, if at all, no later than August 31, 2002, for the “regular” breach of contract claim and no later than August 31, 2005, for the breach of the non-competition clause claim. Therefore, by those times at the very latest, Dr. Kumar “could have maintained his [causes of] action to a successful result,” under the holdings of James, Henry’s Drive-In, and Moss, so his causes of action had “accrued.” The fact that Dr. Kumar and Dr. Dhanda had contracted, pursuant to the Agreement, to engage in non-binding arbitration as a condition precedent to bringing suit in circuit court did not mean that Dr. Kumar’s causes of action (or Dr. Dhanda’s causes of action) did not accrue under CJP section 5-101 when all of their elements had arisen. (Indeed, both parties’ causes of action necessarily had to have accrued even before arbitration was undertaken; otherwise the arbitrator would not have had the claims before him to resolve.) It meant only that the parties, and each of them, had to take timely steps to engage in arbitration before limitations expired; enter into a further agreement to toll limitations; or file suit and request a stay pending arbitration. 3 ³⁴⁶ Accordingly, Dr. Kumar’s causes of action under the Agreement accrued more than three years before suit was filed, and therefore were time-barred when suit was filed. Only if the limitations period was suspended after it started to run — ie., limitations was tolled either by statute or by the doctrine of judicial tolling — would the outcome be otherwise.

See Turner v. Kight, 406 Md. 167, 177, 182 , 957 A.2d 984 (2008) (explaining that “tolling” of a statute of limitations means that the limitations period is suspended and does not run; and the days remaining in the limitations period will begin to be counted after the tolling ceases). 4 As there is no statutory tolling provision applicable in this case, 5 limitations only would have been tolled if a judicially recognized tolling exception applied. In Philip Morris v. ³⁴⁷ Christensen, 394 Md. 227 , 905 A.2d 340 (2006), the Court of Appeals commented that it has been loathe to recognize tolling exceptions and only has done so “when the tolling exception was consistent with the purposes of statutes of limitations.” Id. at 237 , 905 A.2d 340 . In Christensen, the decedent died of lung cancer in January 2001. In 1999, he had participated in a pending class action tort case that had been filed in Baltimore City in 1996 against certain cigarette manufacturers and distributers.

He had not been named as a plaintiff in that suit, but had given a de bene esse deposition and otherwise had taken part in activities connected to the case. The class action was certified by the circuit court. Ultimately, in an appeal in a mandamus action, the Court of Appeals directed the circuit court to vacate the certification order. Philip Morris v. Angeletti, 358 Md. 689 , 752 A.2d 200 (2000).

In August 2001, the decedent’s wife, individually and as personal representative of his estate, brought a wrongful death action and a survival claim against the same cigarette makers and distributors (plus an additional distributor). The circuit court granted summary judgment in favor of the defendants on limitations, concluding that the decedent had been on inquiry notice of his claims by the spring of 1998. The primary question before the Court of Appeals was whether “class action tolling” applied to toll the period of limitations for the decedent’s claims. That is, whether by judicial exception the limitations period for the decedent’s claims was suspended for the period of time in which the class action suit was pending.

The Court of Appeals held that the decedent’s claims indeed were tolled from the time they accrued (which everyone agreed did not happen before the class action suit was brought), until the date of the mandate of the Court of Appeals in Angeletti that effectively decertified the class. Therefore, the survival claim was not time-barred, as the decedent’s claims had not been time-barred. (The Court also held that the wrongful death claim was not time-barred because it was filed within three years of the death and the decedent’s claims were not time-barred before then.) ³⁴⁸ In holding that “class action tolling,” as adopted in American Pipe & Construction Co. v. Utah, 414 U.S. 538 , 94 S.Ct. 756 , 38 L.Ed.2d 713 (1974), and as extended in Crown, Cork & Seal Co., Inc. v. Parker, 462 U.S. 345 , 103 S.Ct. 2392 , 76 L.Ed.2d 628 (1983), applied, the Christensen Court explained that it will recognize exceptions to statutes of limitations sparingly, and only in limited situations, so as not to encroach on the province of the legislature. It discussed Bertonazzi v. Hillman, 241 Md. 361 , 216 A.2d 723 (1966), in which it had recognized a tolling exception.

There, a claimant had failed to file in the correct jurisdiction a claim against a decedent’s estate within the time-frame permitted by statute. The claimant had timely filed such a claim, but in the wrong jurisdiction. By the time he filed the claim in the proper jurisdiction, the limitations period had expired. Citing two reasons, the Bertonazzi Court held in that situation that the limitations period was tolled for the period of