According to the Washington Court of Appeals, statutes of limitations do not apply as a bar to claims in arbitration proceedings conducted under the Washington Arbitration Act (WAA), absent a contrary agreement by the parties or the incorporation of contrary arbitral rules.

In Broom v. Morgan Stanley DW Inc., No. 60115-6-I, 2008 WL 4053440 (Wash. Ct. App. Sept. 2, 2008), Broom filed a demand for arbitration with the National Association of Securities Dealers (NASD), alleging that Morgan Stanley had mismanaged his late father's investment account. Morgan Stanley filed a motion to dismiss, arguing to the NASD arbitration panel that Broom's claims were barred by statutes of limitations. The arbitrators agreed and granted Morgan Stanley's motion to dismiss.

Broom twice moved for reconsideration of the claims, maintaining that the cited statutes of limitations do not apply to NASD arbitration proceedings. Twice the panel rejected this argument, ultimately issuing an award in favor of Morgan Stanley.

Broom then petitioned the trial court to vacate the award, contending that the arbitration panel made an error of law in holding that the statutes of limitations barred his arbitrable claims. The trial court agreed and remanded the matter for new arbitration proceedings.

Upon Morgan Stanley's appeal, the Court considered whether a court could review an arbitrator's decision for "errors of law" under the WAA, and, if so, whether the trial court erred in holding the arbitrators made such an error by applying the statutes of limitations to Broom's arbitral claims.

After refusing to analyze the reviewability of errors of law under the Federal Arbitration Act because the issue was not raised at the trial court, the Court determined that the WAA allows courts to review arbitral decisions for errors of law. It noted several Washington Supreme Court holdings equating review for "errors of law" with the WAA statutory ground of "exceeding of powers." See Boyd v. Davis, 897 P.2d 1239, 1242 (Wash. 1995) (error of law review is the same as review of exceeding of powers under the WAA). See also Fisher v. Allstate Ins. Co., 961 P.2d 350, 357 n.6 (Wash. 1998) (citing Boyd); Davidson v. Henson, 954 P.2d 1327, 1330 (Wash. 1998) (same).

Deciding that the trial court's review for errors of law was proper, the Court agreed with the trial court that statutes of limitations have no application in arbitral proceedings under the WAA. The Court pointed to two Washington Supreme Court decisions holding that statutes of limitations applied only to "actions," and that "actions" contemplated prosecution in a court of law, not in arbitral proceedings. See Auburn v. King County, 788 P.2d 534, 536 (Wash. 1990) (statutes of limitations apply only to "actions for relief" in court, not arbitrations); Thorgaard Plumbing & Heating Co. v. King County, 426 P.2d 828, 832-33 (Wash. 1967) (stating statute of limitations filing requirement does not apply to arbitrations).

While the parties could certainly provide such limitations in their arbitration agreement, the Court noted that neither the Morgan Stanley agreement nor the incorporated NASD rules authorized an arbitrator to apply statutes of limitations to any arbitral claim.

Therefore, the Court affirmed the trial court's order vacating the award in favor of Morgan Stanley and remanding the matter for new arbitral proceedings.