Friday, February 15, 2013

Court Finds that Question of Whether Arbitration Clause Survived Expiration of Underlying Agreement is Arbitrable

In Baltimore Cnty. Fraternal Order of Police Lodge #4 v. Baltimore Cnty., No. 3, 2012 Md. LEXIS 750 (Md. Nov. 19, 2012) the Maryland Court of Appeals issued an opinion on November 19 which addressed two issues relating to arbitration.  The first I when an arbitration agreement can survive the expiration of the underlying agreement of which it is a part.  Resolving this question in the affirmative, the Court went on to address the issue of who, the Court or the arbiter, should determine whether the arbitration agreement had, in fact, survived the expiration of the underlying agreement.  The Court found that the resolution of the first question was governed by Nolde Bros. v. Bakery & Confectionery Workers Union, 430 U.S. 243 (1977) and Litton Fin. Printing Div. v. NLRB, 501 U.. 190 (1991), and held that an arbitration clause can survive the expiration of the underlying agreement when the dispute:

Involves facts and occurrences that arose before expiration of the agreement, (2) where the rights that are the subject of the dispute accrued or vested during the life of the agreement, or (3) where, under normal principles of contract interpretation, the disputed contractual right survives expiration of the remainder of the agreement. 

Having resolved this matter, the Court went on to hold that, under Maryland law, Courts play a leading role only in deciding the arbitrability of a dispute as a threshold matter, and then only to the extent of determining whether a valid arbitration agreement exists.  In situations such as that described above, where the merits and arbitrability of a dispute overlap, the Court held that, because the issue of arbitrability cannot be resolved without considering substantive questions, that the issue should be left for determination by the arbiter in the first instance.

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