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In a case where the aggrieved party first challenged an arbitration award in federal court, the Kentucky Court of Appeals held that under Kentucky's saving statute, dismissal of the federal action for lack of jurisdiction tolled the 90-day deadline for challenging the award in state court.
In Fischer v. MBNA America Bank, N.A., No. 2006-CA-000525-MR, 2007 WL 779295 (Ky. Ct. App. Mar. 16, 2007), MBNA filed an arbitration claim against Fischer, seeking to collect the balance allegedly owing on an MBNA credit card. Fischer filed a response objecting to arbitration on the ground that the parties had no written agreement to arbitrate.
Despite Fischer's objection, the arbitration proceeded, and on August 12, 2004, the arbitrator issued an award in MBNA's favor. On September 3, 2004, Fischer filed a motion to vacate the award in federal court. The federal court dismissed the action for lack of jurisdiction.
Following dismissal by the federal court, MBNA filed a motion to confirm the award in state court. In response, Fischer filed a motion to vacate the award, arguing that there was no written agreement to arbitrate. In confirming the award, the trial court ruled that Fischer could not challenge the award because the 90-day deadline for challenging an award had passed several months before Fischer filed her motion to vacate.
On appeal, the Court pointed out that the record contained no evidence of a written arbitration agreement. Accordingly, the key issue was whether the 90-day deadline set forth in the Kentucky Uniform Arbitration Act (KUAA) precluded Fischer from challenging the award.
As the Court noted, once the award was issued, Fischer immediately challenged the award in federal court. By operation of Kentucky's savings statute, which tolls the statute of limitations where a case is dismissed for lack of jurisdiction, Fischer retained her right to challenge the award in state court even though the 90-day deadline had already passed. Accordingly, the Court remanded the case with instructions to determine the existence of a written arbitration agreement.
The Court's opinion contains dicta stating that once Fischer objected to the arbitration, section 417.060(1) of the KUAA required MBNA to obtain a court order for arbitration. Though Fischer's exercise of due diligence plainly entitles her to a fair opportunity to challenge the award, the Court's construction of section 417.060 is somewhat curious.
According to the Court, paragraph 1 of that section required MBNA to obtain a court order for arbitration once Fischer objected to arbitration. However, paragraph 1 applies only if a party objects to arbitration and the other party seeks an order for arbitration.
Moreover, paragraph 2 of the section expressly provides that "[o]n application, the court may stay an arbitration proceeding commenced or threatened on a showing that there is no agreement to arbitrate." Paragraph 2 is superfluous if the party seeking arbitration must apply for a court order upon objection to the arbitration.
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