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A North Carolina Appellate Court held that a shorter statute of limitations bargained for in an arbitration agreement was not unreasonable.
In Morgan v. Lexington Furniture Industries, Inc., No. COA06-1, 2006 WL 3717555 (N.C. Ct. App. Dec. 19, 2006), Donald Morgan was an independent account manager for Lexington. The contract included an arbitration agreement that specified that any claims must be filed within 180 days of the occurrence.
Lexington terminated the contract. Nearly ten months later, Morgan filed a complaint for lost wages and wrongful termination. Lexington moved for summary judgment on the basis that Morgan had failed to file within 180 days. No demand for arbitration was filed. The trial court granted the motion for summary judgment.
The Court rejected Morgan's argument that the contractually bargained for statute of limitations of 180 days was unreasonable. Under North Carolina law, parties are allowed to contractually shorten the statute-of-limitations if the time frame is reasonable. See Badgett v. Fed. Express Corp., 378 F. Supp. 2d 613, 623 (M.D.N.C. 2005).
The test for reasonableness is totality of circumstances and the statute of limitations for breach of employment contract claims in North Carolina is three years. However, there are many six month statutes-of-limitations concerning employment disputes in North Carolina. Further, Morgan had bargaining power as indicated by eliminations and changes he made to the contract; and public policy favors agreements to arbitrate. The Court granted summary judgment in favor of Lexington.
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