A narrowly-divided Washington State Supreme Court has held that an arbitration panel cannot apply the state statutes of limitations to bar a claim, unless the parties have contractually agreed to allow the arbitrators to do so. According to the Court, a general reference in an arbitration clause to forum rules will not suffice and can be grounds for vacating an arbitration panel’s dismissal of claims on the state statute of limitations.
In Broom v. Morgan Stanley DW Inc., an arbitration panel dismissed the plaintiffs’ common law and statutory securities claims against a broker on the grounds that the claims were barred by the state and federal statutes of limitations. The plaintiffs sought to vacate the decision, which the superior court granted on the grounds that the award contained a facial legal error because statutes of limitations do not apply to arbitrations. The Court of Appeals and State Supreme Court both agreed, although the latter’s decision was on a 5-4 vote.
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