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The Seventh Circuit Court of Appeals relied on a provision in the applicable rules of arbitration in holding that the three-month statute of limitations for challenging an award under the Federal Arbitration Act (FAA) started to run when the award was placed in the mail and not when the aggrieved party received the award.
In Webster v. A.T. Kearney, Inc., No. 06-3094, 2007 WL 3225367 (7th Cir. Nov. 2, 2007), Webster filed an arbitration claim against A.T. Kearney (ATK), his former employer, alleging age discrimination and breach of contract. Webster filed the claim with the American Arbitration Association (AAA) because the arbitration agreement in his employment contract designated the AAA as the arbitration administrator.
On January 4, 2006, the arbitrator issued an award in favor of ATK. That day, the AAA mailed and emailed a copy of the award to Webster’s attorney. Webster’s attorney did not open the email until the following day.
On April 3, 2006, Webster filed a motion to vacate the award, arguing that the arbitrator exceeded his powers. Webster did not serve notice of the motion on ATK until April 5. In opposing the motion, ATK argued that the motion was untimely under section 12 of the FAA because the three-month statute of limitations started to run on January 4, when the award was mailed, and continued to run until April 5, when it received notice of the motion. The district court agreed and denied the motion as untimely.
There were two issues on appeal: (1) when did the 90-day statute of limitations start to run; and (2) did the statute of limitations continue to run until Webster served notice of the motion to vacate on ATK.
Regarding the second issue, Webster argued that the statute of limitations stopped running when he filed the motion to vacate, not when he served notice of the motion to vacate. In support of this argument, Webster cited Rule 3 of the Federal Rules of Civil Procedure, which provides that an action is commenced when the complaint is filed with the court.
The Court found that Webster’s reliance on the Federal Rules of Civil Procedure was misplaced based on Seventh Circuit precedent holding that section 6 of the FAA “‘preempts the applicability of the Federal Rules’ in favor of the rules governing motion practice.” Accordingly, the Court limited its inquiry to the plain language of section 12 and thus held that “service of a motion to vacate is the act that stops the three-month statute of limitations.”
Regarding the first issue, ATK argued that the statute of limitations started to run when the award was placed in the mail, while Webster argued that it did not start to run until he received the award in the mail. The Court relied on the rules of arbitration – specifically, Rule 34(f) of the AAA’s National Rules for the Resolution of Employment Disputes – in holding that the statute of limitations started to run when the award was placed in the mail. Rule 34(f) provides that “[t]he parties shall accept as legal delivery of the award the placing of the award or a true copy thereof in the mail.”
Given its holding that the statute of limitations started to run when the award was placed in the mail, it was unnecessary for the Court to reach the issue of whether and when email delivery triggered the statute of limitations. Nevertheless, the Court made two observations on this issue.
First, the Court indicated that if email is an acceptable form of delivery, the statute should begin to run when the email is sent, not when it is opened, because otherwise a party could “postpone the statute of limitations indefinitely simply by ignoring his correspondence.” Second, the Court indicated that email is not an acceptable form of delivery unless the rules or agreement expressly authorize it, and the arbitration rules in this case allowed electronic delivery only with the parties’ consent.
Since the three-month statute of limitations started to run on January 4 and continued to run until ATK received notice of the motion to vacate, Webster’s motion to vacate was untimely. Accordingly, the Court affirmed the order entering judgment on the award.
As the Court noted, the D.C. Circuit Court of Appeals has held that the date of receipt, not the date of mailing, triggers the FAA’s three-month statute of limitations. See Sargent v. Paine Webber Jackson & Curtis, Inc., 882 F.2d 529 (D.C. Cir. 1989). In that case, the court found that it would “hopelessly twist[ ] the ordinary meaning of the word ‘delivered’” to treat the act of mailing as the time of delivery. In this case, the Court agreed that the interpretation is “not intuitive” but deferred to the AAA rule equating “delivery” with placement in the mail.
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