Shailendra Kumar, P.A. v. Dhanda

¹⁸⁹ Opinion by GREENE, J. Shailendra Kumar, M.D., P.A. (“Dr. Kumar” or “Petitioner”) sued Anand M. Dhanda, M.D. (“Dr. Dhanda” or “Respondent”) in the Circuit Court for Montgomery County alleging breach of contract and the breach of a covenant not to compete. The contract at issue provided for disputes to be initially addressed through mandatory, non-binding arbitration.

Respondent filed a motion to dismiss the action, asserting that the suit was barred by the applicable statute of limitations. Petitioner opposed dismissal, arguing that the complaint was timely because his cause of action had either not “accrued” or that limitations was tolled until the completion of arbitration. The trial court dismissed the action as time-barred and the Court of Special Appeals affirmed. Based on the record before us, we shall affirm the judgment of the Court of Special Appeals and hold that while non-binding arbitration may have been a condition precedent to litigation, it neither affected the accrual of the underlying breach of contract claims, nor otherwise tolled the statute of limitations applicable to maintaining an action in court.

FACTS AND PROCEDURAL HISTORY The complex procedural history essential to our resolution of this case stems from a single contract, prepared without the assistance of counsel. Petitioner and Respondent entered into an employment agreement (“the contract” or “the agreement”) on August 28, 2001, whereby Respondent agreed to work as a doctor in Petitioner’s urology practice through August 31, 2002. The contract contained, inter alia, a non-compete clause which prohibited Respondent from practicing within a specified radius of Petitioner’s multiple offices or soliciting or accepting Petitioner’s patients for three years following the expiration of the contract, or through August of 2005. An addendum to the contract prohibited Dr. Dhanda, during the term of the agreement, from practicing medicine or engaging in other professional activities outside of Dr. Kumar’s practice, unless he obtained the consent of the association.

The con ¹⁹⁰ tract also included the following mandatory, non-binding arbitration clause: D. Arbitration: All disputes arising out of this Agreement [excluding one paragraph], 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 [sic]. As a result of discord between the parties, the employment relationship was not renewed upon termination of the Agreement on August 31, 2002. Soon thereafter, Respondent filed an initial suit for breach of contract against Petitioner in the Circuit Court for Anne Arundel County.

He sought damages for an alleged breach of contract based on Petitioner’s refusal to grant Respondent partner status in the business and the withholding of certain monies. Petitioner filed an Answer and Demand for Jury Trial on October 18, 2002, which noted that “disputes are to be submitted to arbitration pursuant to agreement between the parties.” Four months later, on February 26, 2003, Petitioner filed a motion to compel arbitration and to dismiss the action. The judge presiding in Anne Arundel County dismissed the action without prejudice on April 24, 2003, stating that the “claims are subject to mandatory arbitration,” but noting that “[t]he case may be reopened to enforce the arbitration award, if necessary.” 1 The record is silent with regard to any activity between the parties for over two years following this dismissal. On April 29, 2005, however, Petitioner filed, in the Circuit Court for ¹⁹¹ Baltimore City, a petition to compel arbitration and to appoint an arbitrator.

The petition also included separate counts concerning the substantive claims for breach of contract and breach of the non-compete provision. Following an apparent delay in service, on March 9, 2006, Respondent filed both a response to Petitioner’s petition to compel arbitration and his own motion to dismiss the substantive counts for improper venue and as claims subject to mandatory arbitration. Petitioner then filed a response to the motion to dismiss, offering to withdraw the substantive counts if the Circuit Court would compel arbitration in order to resolve the issues. The court dismissed the substantive counts on April 28, 2006, but did not order arbitration.

Four months later, on August 25, 2006, Petitioner filed a motion for summary judgment, urging the Circuit Court for Baltimore City to grant the earlier petition to compel arbitration. Following a brief bench trial, on November 20, 2006, the presiding judge granted the petition to compel arbitration and appointed J. Snowden Stanley, Jr. as the arbitrator the underlying dispute between the parties. 2 After this apparent victory in securing an order compelling arbitration, Petitioner allowed nearly two more years to pass before actually submitting the matter to the arbitrator in March of 2008. Mr. Stanley issued his award on June 20, 2008. The award denied all relief to Petitioner and also denied relief to Respondent, save for an award of $868.00 as reimbursement for certain disability insurance premiums.

Finally, on March 16, 2009, almost a year after the arbitration award was issued, Petitioner filed the instant action in the Circuit Court for Montgomery County. The complaint stated that “[t]he Agreement requires arbitration as a requirement before Plaintiff can pursue a remedy in court ... [t]he matter went to Arbitration, and a decision in favor of the Defendant was rendered in June of 2008. This matter is brought de novo.” Respondent filed a motion to dismiss, arguing that the applicable three-year statute of limitations barred the action ¹⁹² because the alleged breaches of contract occurred between 2002 and 2005. Petitioner filed in opposition, contending that, because completion of arbitration was a condition precedent to filing a claim, the statute of limitations had not begun to run until the arbitration decision of June 20, 2008.

After a hearing and supplemental briefing by the parties, Judge McGann, of the Circuit Court for Montgomery County dismissed the action with prejudice. Petitioner noted a timely 3 appeal to the Court of Special Appeals, and the intermediate appellate court affirmed the trial court’s judgment of dismissal. Kumar v. Dhanda, 198 Md.App. 337 , 17 A.3d 744 (2011). We granted certiorari in the instant case, Kumar v. Dhanda, 420 Md. 463 , 23 A.3d 895 (2011), to address the following questions presented: 1.

Where a contract specifically requires that the parties submit to non-binding arbitration, and states that the parties may “go to court if not satisfied by the decision of the Maryland Uniform Arbitration Act, [sic]” does the cause of action accrue at the time of the breach or at the time of the non-binding arbitration? 2. When the parties agree not to “go to court” until after a non-binding arbitration, does the statute of limitations begin to run at the time of the breach or at the time a party can “go to court?” We shall affirm the judgment of the Court of Special Appeals and hold that while non-binding arbitration, mandated by the contract, may have constituted a condition precedent to litigation, pursuing arbitration neither postponed the accrual ¹⁹³ of the underlying breach of contract claims, nor otherwise tolled the statute of limitations applicable to maintaining an action in court. STANDARD OF REVIEW We recently reiterated the standard of review applicable to motions to dismiss in Parks v. Alpharma, Inc., 421 Md. 59 , 25 A.3d 200 (2011), stating: On appeal from a dismissal for failure to state a claim, we must assume the truth of, and view in a light most favorable to the non-moving party, all well-pleaded facts and allegations contained in the complaint, as well as all inferences that may reasonably be drawn from them, and order dismissal only if the allegations and permissible inferences, if true, would not afford relief to the plaintiff, i.e., the allegations do not state a cause of action for which relief may be granted. We must confine our review of the universe of facts pertinent to the court’s analysis of the motion to the four corners of the complaint and its incorporated supporting exhibits, if any.

Parks, 421 Md. at 72 , 25 A.3d at 207 (internal quotations omitted). In the instant case, Respondent moved to dismiss based on the affirmative defense of limitations, asserting that Petitioner’s claims regarding the underlying contractual disputes were time barred, as a matter of law. We have held consistently that “the question of accrual in § 5-101 is left to judicial determination.” Frederick Rd. Ltd. P’ship v. Brown & Sturm, 360 Md. 76, 95 , 756 A.2d 963, 973 (2000).

We review the grant of Respondent’s motion in order to “determine whether the court was legally correct.” Parks, 421 Md. at 72 , 25 A.3d at 207 (quotation omitted), accord Doe v. Roe, 419 Md. 687, 693 , 20 A.3d 787, 791 (2011) (“In reviewing the Circuit Court’s grant of a motion to dismiss, our task is confined to determining whether the trial court was legally correct in its decision to dismiss.” (quotations omitted)). ¹⁹⁴ DISCUSSION The applicable statute of limitations is encompassed in Maryland Code (1973, 2006 Repl.Vol.) § 5-101 of the Courts and Judicial Proceedings Article, which states that: “[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.” See Jones v. Hyatt Ins. Agency, Inc., 356 Md. 639 , 647 & n. 5, 741 A.2d 1099 , 1103 & n. 5 (1999) (applying § 5-101 to a breach of contract claim); Baltimore County v. RTKL Assocs., 380 Md. 670, 689 , 846 A.2d 433, 444 (2004) (same); Himelfarb v. American Express Co., 301 Md. 698, 703 , 484 A.2d 1013, 1015 (1984) (same); Millstone v. St. Paul Travelers, 183 Md.App. 505, 515 , 962 A.2d 432, 437 (2008) (holding that a suit filed on a specified date “would have been well within the three year statute of limitations that is generally applicable to contract actions.”), aff'd, 412 Md. 424 , 987 A.2d 116 (2010). Petitioner first contends that because the contract between the parties required the completion of non-binding arbitration as a condition precedent to filing suit, his causes of action had not “accrued” within the meaning of § 5-101 until the arbitration award was issued on June 20, 2008. Therefore, under his argument, Petitioner would have had three years from that date, or until June 20, 2011, to timely file in court.

In support of this theory, he cites case law in which we stated: It is clear that the test to be utilized in fixing the accrual date of a cause of action “is to ascertain the time when plaintiff could have first maintained his action to a successful result. The fact that he might have brought a premature or groundless action is immaterial.” James v. Weisheit, 279 Md. 41, 44 , 367 A.2d 482, 484 (1977) (quoting W., B. & A. Elec. R.R. Co. v. Moss, 130 Md. 198, 205 , 100 A. 86, 89 (1917)); accord Henry’s Drive-In, Inc. v. Pappas, 264 Md. 422, 428 , 287 A.2d 35, 38 (1972) (“[Limitations will run from the time the plaintiff could have acted.... ”). Inserting the language from these precedents into his argu ¹⁹⁵ ment, Petitioner summarizes the instant case in the following manner: Dr. Dhanda filed a premature lawsuit in Anne Arundel County.

That lawsuit was dismissed because the contract between the parties required them to go to arbitration before they could “go to court.” Dr. Dhanda’s suit was premature and could not be pursued to a successful result. The same logic applies to Dr. Shailendra Kumar M.D., P.A.’s suit. The association could not have brought its lawsuit until June 2[0], 2008. By the terms of the contract it was not permitted to “go to court” before that date.

Any suit filed before that date would have been premature and would have been dismissed. Therefore, the cause of action did not accrue until that date. Respondent argues otherwise, asserting that the causes of action for breach of contract accrued for the purpose of the statute of limitations at the time of the alleged breaches. Accordingly, the latest possible date for accrual of the breach of contract cause of action was the contract’s termination date of August 31, 2002, and the latest date for the accrual of the breach of the non-compete clause was August 31, 2005, the date upon which the clause expired by its own terms.

Applying the three-year statute of limitation to these dates makes clear that both claims were time-barred when Petitioner instituted the current suit on March 16, 2009, and were therefore properly dismissed. We agree with Respondent’s assessment of the applicable accrual dates. As our case law makes clear, in the context of the statute of limitations, “[t]he law is concerned with accrual in the sense of testing whether all of the elements of a cause of action have occurred so that it is complete.” St. Paul Travelers v. Millstone, 412 Md. 424, 432 , 987 A.2d 116, 121 (2010) (emphasis added) (quotation omitted). In breach of contract cases, a cause of action typically accrues at the time of the breach.

See Jones v. Hyatt Insurance Agency, Inc., 356 Md. 639, 648 , 741 A.2d 1099, 1104 (1999); Federalsburg v. Allied Con., 275 Md. 151, 157 , 338 A.2d 275, 280 (1975); ¹⁹⁶ Cotham v. Bd. of Cnty. Comm’rs, 260 Md. 556, 562 , 273 A.2d 115, 118 (1971). In the instant case, although not specifying the particular dates, both parties agree that the alleged breaches of contract occurred more than three years prior to the filing of the complaint in the Circuit Court for Montgomery County. 4 The cases Petitioner cites in order to assert that limitations does not begin to run until a plaintiff can “maintain his action to a successful result,” all concerned whether the necessary elements of a cause of action had arisen under the facts that were presented. See James v. Weisheit, 279 Md. 41, 44 , 367 A.2d 482, 484 (1977) (analyzing accrual as the point in time that “the plaintiff could have proved all five of the essential elements of deceit”); Henry’s Drive-In, Inc. v. Pappas, 264 Md. 422 , 287 A.2d 35 (1972) (considering whether a cause of action could arise for breach of lease before the lessor made a demand for payment); W., B. & A. Elec.

R.R. Co. v. Moss, 130 Md. 198 , 100 A. 86 (1917) (evaluating, and ultimately remanding to the jury, whether the plaintiffs claim was barred by limitations in a quantum meruit suit where plaintiff asserted that he had completed the services less than three years prior to filing). In the instant case, neither party disputes that all of the elements of Petitioner’s breach of contract claims ¹⁹⁷ existed, at the very latest, as of the dates upon which the applicable contractual provisions terminated. As the intermediate appellate court aptly noted: 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.

Kumar, 198 Md.App. at 345 , 17 A.3d at 749 (footnote omitted). We agree with this analysis. As we explain, infra, Petitioner was not precluded by the contractual language from filing suit in the proper court and seeking a stay of the action pending arbitration. 5 As the intermediate appellate court noted, “[t]he permissive language, ‘can go to court,’ does not prohibit a party from filing suit prophylactically to guard against the ¹⁹⁸ running of the statute of limitations.” Kumar, 198 Md.App. at 345 n. 3, 17 A.3d at 749 n. 3. Petitioner asserts before this Court, however, that “the specific language of the arbitration clause contradicts [the holding of the Court of Special Appeals].

The clause says that the parties must resolve the matter by arbitration. If not satisfied, the parties can “go to court.” There is no right to bypass the arbitration or make a “prophylactic” filing.” To bolster his point, Petitioner cites the Ninth Circuit case of Wolsey, Ltd. v. Foodmaker, Inc., 144 F.3d 1205 (9th Cir.1998), which explained: Although it defies easy definition, the essence of arbitration, we think, is that, when the parties agree to submit their disputes to it, they have agreed to arbitrate these disputes through to completion, i.e. to an award made by a third-party arbitrator. Arbitration does not occur until the process is completed and the arbitrator makes a decision. Hence, if one party seeks an order compelling arbitration and it is granted, the parties must then arbitrate their dispute to an arbitrators’ decision, and cannot seek recourse to the courts before that time.

Wolsey, Ltd., 144 F.3d at 1208 (quoting Harrison v. Nissan Motor Corp., 111 F.3d 343, 350 (3rd Cir.1997)) (emphasis in original). It is clear to us, however, that the Wolsey Court uses the word “recourse,” to signify litigating for judicial resolution of a case, which is by definition different than filing an action in order to ensure later compliance with the statute of limitations. See Harris v. Bridgford, 153 Md.App. 193, 206 , 835 A.2d 253, 260 (2003) (“Maryland courts have indicated ... that full judicial resolution of the dispute constitutes a waiver [of the right to arbitration], but some limited participation in judicial proceedings does not.” (emphasis added) (citations omitted)). The Wolsey case, therefore, does not lend support to Petitioner’s argument, and is not inconsistent with the fact that Petitioner could have filed a timely action and sought a stay of his substantive claims pending arbitration. ¹⁹⁹ Indeed, the Maryland Uniform Arbitration Act, to which the parties agreed to be bound, 6 specifically allows for stays of court proceedings pending arbitration.

It states: 3-209. Stay of Proceedings. (a) Conditions for stay. — A court shall stay any action or proceeding involving an issue subject to arbitration if: (1) A petition for order to arbitrate has been filed; or (2) An order for arbitration has been made. (b) Severability of issue. — If the issue subject to arbitration is severable, the court may order the stay with respect to this issue only.

(c) Order to include stay. — If a petition to stay has been filed with a court where any action or proceeding concerning arbitration is pending, the court’s order to arbitrate shall include the stay. Md.Code (1973, 2006 Repl.Vol.) § 3-209 of the Courts and Judicial Proceedings Article. In accordance with the statute, this Court and the Court of Special Appeals have recognized the ability of a party to file an action to compel arbitration and seek a stay of claims that are related to arbitrable issues. See Frederick Contractors, Inc. v. Bel Pre Medical Ctr., Inc., 274 Md. 307, 316 , 334 A.2d 526, 531 (1975) (“Because we have a viable precedent in our case law, we have no hesitancy in holding that while Bel Pre, by demanding arbitration, should have been allowed to stay the [mechanic’s lien foreclosure] proceedings in the circuit court, such a stay will remain effective only until arbitration is concluded or Bel Pre’s demand is withdrawn.”); Letke Sec. Contractors, Inc. v. United States Sur.

Co., 191 Md.App. 462, 471 , 991 A.2d 1306, 1311 (2010) (noting that under the Arbitration Act “[n]ot only suits to enforce an arbitrator’s award, but also suits to compel arbitration and suits to stay court action pending arbitration, ²⁰⁰ are now to be viewed as ‘favored’ actions.” (emphasis added) (quotation omitted)); Redemptorists v. Coulthard Servs. 145 Md.App. 116, 151 , 801 A.2d 1104, 1124 (2002) (interpreting § 3-209 to reflect the Legislature’s anticipation “that there may be non-arbitrable issues that are closely related to, and indeed dependent upon, arbitrable issues”). In the instant case, the parties agreed to non-binding arbitration. Although this mode of dispute resolution may not necessarily promote the efficiency, speed, or economy achieved through binding arbitration, it will nevertheless be enforced as a term agreed upon by the parties. See Gold Coast Mall, Inc. v. Larmar Corp., 298 Md. 96, 103 , 468 A.2d 91, 95 (1983) (“Arbitration is a matter of contract which the parties should be allowed to conduct in accordance with their agreement.” (citations omitted)); NRT Mid-Atlantic, Inc., v. Innovative Properties, Inc., 144 Md.App. 263, 278-79 , 797 A.2d 824, 833 (2002) (“Arbitration clauses will be freely en forced when there is an agreement to arbitrate the subject matter of the dispute.” (citation omitted)); United States v. Bankers Ins.

Co., 245 F.3d 315, 322 (4th Cir.2001) (“Although non-binding arbitration may turn out to be a futile exercise ... this does not, as a legal matter, preclude a non-binding arbitration agreement from being enforced.” (citations omitted)). In its non-binding form, arbitration is a condition precedent to litigation, however, the parties are not bound by the decision of the arbitrator and afterwards are free to pursue independent legal claims concerning the same issues pursued in arbitration. See General Accident Ins. Co. v. Scott, 107 Md.App. 603, 618 , 669 A.2d 773, 780 (1996) (“In essence, the non-binding arbitration amounted to a ‘dress rehearsal’ for the upcoming trial on the merits....”); Dow Corning Corp. v. Safety Nat’l Cas.

Corp., 335 F.3d 742, 745 (8th Cir.2003) (“Arbitration usually results in a final determination that is binding on the parties to the underlying dispute, but the parties may instead agree to non-binding arbitration, in which case the arbitrators’ decision is likely to be a precursor to further litigation on the merits of the dispute.”). Therefore, even where all issues are subject to non-binding arbitration, a ²⁰¹ party should be able to seek a stay of the legal claims pending arbitration. 7 ²⁰² By way of comparison, the principle of staying an action involving an issue subject to non-binding arbitration is similar to that specifically approved by this Court in Arroyo v. Board of Educ. of Howard County, 381 Md. 646 , 851 A.2d 576 (2004), with respect to administrative proceedings generally. That case involved an educator’s wrongful termination action, which he filed in court over three years after the final administrative decision upholding his termination. We made clear that, in accordance with the primary administrative remedies available to the plaintiff under Maryland Code (1978, 2001 Repl.Vol., 2003 Supp.) § 6-202(a) of the Education Article, the statute of limitations on Arroyo’s civil cause of action began to run no later than after the final administrative decision, making his tort claim time-barred as a matter of law.

We also explained that: [Wjhere there is both an administrative remedy and an independent judicial remedy (i.e., a specific judicial remedy exists other than judicial review of the administrative decision), where the administrative agency may have primary jurisdiction, and where the plaintiff invokes the judicial remedy prior to exhausting the administrative procedures ... the trial court may retain jurisdiction pending exhaustion of the administrative procedures. Once the administrative procedures are exhausted, the trial court may proceed; the plaintiff whose case is meritorious may be entitled to whatever relief is available under either the independent judicial action or the administrative/judicial review remedy. Arroyo, 381 Md. at 659-60 , 851 A.2d at 584 (quoting Md.-Nat’l Capital Park and Planning Comm’n v. Crawford, 307 Md. 1, 18 , 511 A.2d 1079, 1087-88 (1986)). Accordingly, we empha ²⁰³ sized that in addition to being free to file his legal action immediately after the final administrative decision was issued, the plaintiff could “have filed it even sooner subject to the separate action being stayed during the administrative proceedings.” Arroyo, 381 Md. at 650 , 851 A.2d at 579 .

We said: [WJe perceive that there is no prohibition against filing an independent judicial action while primary administrative proceedings are under way, but, that there is a prohibition against deciding, i.e., adjudicating, the issue in the independent judicial case until a final administrative determination is made. Arroyo, 381 Md. at 660 , 851 A.2d at 584-585 (emphasis added); McCullough v. Wittner, 314 Md. 602, 613 , 552 A.2d 881, 886 (1989) (“[Wjhere a plaintiff has both an administrative remedy and an independent judicial action, and the administrative agency’s jurisdiction is deemed primary, it is