In this case we are called upon to interpret certain provisions of the Maryland Health Care Malpractice Claims Act, codified at Cts. & Jud.Proc.Art., Title 3, Subtitle 2A, (the Act), and of the BY Rules promulgated to establish the procedure for bringing an action under the Act. We shall hold that appellants’ compliance with the provisions relating to notice of rejection of an award and filing an action to nullify was sufficient to preclude dismissal of their malprac*644tice action against appellee in the Circuit Court for Montgomery County.
Appellants Michael Ott and his parents, James and Charlotte Ott, (the Otts) filed a claim under the Act against six defendants, including Dr. Robert M. Levitt and appellee, Kaiser-Georgetown Community Health Plan, Inc. (Kaiser). The claim charged that Dr. Levitt’s negligence caused delay in Michael’s birth and that the child suffered cerebral palsy as a result. Kaiser, a health care plan in which Mr. and Mrs. Ott were enrolled, was alleged to be Dr. Levitt’s principal, and liable on a respondeat superior theory. Before arbitration four of the defendants were dropped from the case. On 15 October 1985 an arbitration panel rendered a decision in favor of the two remaining defendants, Dr. Levitt and Kaiser. The Otts filed a timely notice of rejection of the arbitration award with the Health Claims Arbitration Board, pursuant to § S-^A-OGia).1 Then, on 29 November 1985, they filed an “Action to Nullify Award” in the Circuit Court for Montgomery County, naming both Dr. Levitt and Kaiser as defendants. This was followed by a complaint in the same court, filed 30 December 1985, naming Dr. Levitt as the sole defendant. On the same day the Otts filed a pleading encaptioned “Line” and reading:
Mr. Clerk:
Plaintiffs herewith file a Complaint pursuant to Maryland Rule BY4 against defendant Robert H. Levitt, M.D. only. There is federal court jurisdiction over defendant Kaiser-Georgetown Community Health Plan, Inc., and plaintiffs have chosen to invoke federal court jurisdiction for the adjudication of their claim against Kaiser-Georgetown Community Health Plan, Inc.
Also on 30 December 1985 the Otts filed a complaint against Kaiser in the U.S. District Court for the District of Columbia.
*645Kaiser moved for dismissal of the circuit court action and confirmation of the arbitration award, citing Rule BY4, which requires that the complaint (or “declaration,” as it is called in the Rules)2 be filed within 30 days in the same court where the “notice of action” was filed. The Circuit Court for Montgomery County (Mitchell, J.) granted the motion and entered final judgment as to defendant Kaiser. The Otts appealed following denial of their motion for reconsideration. We granted certiorari on our own motion.
I
In 1976 the General Assembly enacted the Health Care Malpractice Claims Act, which requires the submission of medical malpractice claims to an arbitration panel prior to the bringing of an action in court. The Act specifies procedures for arbitration of a claim and for seeking judicial relief when a party is unsatisfied with an award. If a claimant wishes to reject an award and proceed with the cause of action, the special procedures prescribed by the Act must be followed. Tranen v. Aziz, 304 Md. 605, 612, 500 A.2d 636, 639 (1985).
The mandatory arbitration requirement does not divest courts of subject matter jurisdiction over health claims, but rather “ ‘creates a condition precedent to the institution of a court action.’ ” Tranen, 304 Md. at 612, 500 A.2d at 639 (quoting Oxtoby v. McGowan, 294 Md. 83, 91, 447 A.2d 860, 865 (1982)). Upon fulfillment of the condition precedent, malpractice claims may be heard in court.
The final step in the arbitration process, an essential prerequisite to institution of judicial proceedings, is the filing of a notice of rejection with the director of the Arbitration Office. Tranen, 304 Md. at 612, 500 A.2d at *646639; § 3-2A-06(a). Failure to file notice of rejection permits the arbitration award to become final and binding. Tranen, 304 Md. at 613, 500 A.2d at 640; § 3-2A-05(h).
The “exclusive step by which the aggrieved party may initiate proceedings in court,” Tranen, 304 Md. at 612, 500 A.2d at 639, is the action to nullify the award. Section 3-2A-06(b). Although called an action to nullify, the proceeding is not analogous to an appeal from an administrative decision. Rather, the action is essentially a separate common law tort action with the added element that the arbitration process must be complete. See Attorney General v. Johnson, 282 Md. 274, 385 A.2d 57, appeal dismissed, 439 U.S. 805, 99 S.Ct. 60, 58 L.Ed.2d 97 (1978).
This Court promulgated rules to establish the procedures unique to the action to nullify. These rules are found at Subtitle BY of Chapter 1100 of the Maryland Rules. Rule BY2 provides that the action to nullify “shall be commenced by filing notice of the action with the clerk of a court____” Rule BY4 requires the plaintiff, that is, the party making the claim against the health care provider, to file a complaint within 30 days after the filing of the notice of action, no matter which party rejects the award. Thus the Rules divide the action to nullify into a two-step process: a “notice of action” followed by a complaint. Cherry v. Brothers, 306 Md. 84, 507 A.2d 613 (1986); Tranen. Rule BY 4 a 2 states in pertinent part:
If the plaintiff filed the notice of action, the [complaint] shall be filed in the court where the notice of action was filed. If the defendant filed the notice of action, the plaintiff may file the [complaint] in any court having venue.
The Otts acknowledge they did not comply strictly with this rule, but they claim they were confused by the distinctions among the notice of rejection, the notice of action, and the complaint. The confusion was compounded, they say, by the definitional section of the Act, which defines “court” as “a circuit court for a county.” Section 3-2A-01(c). When the tactical decision was made to sue Kaiser in *647federal court, the Otts read Rule BY2 to require the filing of the notice of action in a circuit court. They indicate they thought this was a requirement to perfect the matter for judicial action, much like the notice of rejection.
Because either party may reject an award, the obvious purpose of the two-step process is to address the situation where the defendant is unsatisfied by the decision of the arbitration panel. In such a case the defendant need only reject the award and file the notice of action in court. The plaintiff must then file a complaint.3 Indeed, we have acknowledged that, where the plaintiff is rejecting the award, he or she may file a single pleading in court constituting both the notice of action and the complaint. See Cherry, 306 Md. at 90 n. 5, 507 A.2d at 616.
The Otts indicate they also considered the definition of “court” as a circuit court to be a vain attempt by the legislature to limit actions to nullify to state courts and thereby to divest the federal courts of jurisdiction. Section 3-2A-09 of the Act declares that the provisions of the Act shall be deemed procedural in nature. The U.S. District Court in Davison v. Sinai Hospital of Baltimore, 462 F.Supp. 778 (D.Md.1978), aff'd, 617 F.2d 361 (4th Cir.1980), interpreted this section as an indication that the legislature was not attempting to create a new cause of action in enacting the Act.4 That court further declared that there was nothing in the legislative history to indicate that the legislature even considered the matter of federal jurisdic*648tion. Davison, 462 F.Supp. at 779. Necessarily, the legislature could not have intended the Act to divest the federal courts of jurisdiction over malpractice claims where diversity requirements were met. See Group Health Ass’n, Inc. v. Blumenthal, 295 Md. 104, 453 A.2d 1198 (1983) (acknowledging federal diversity jurisdiction over malpractice claims). Presumably the legislature is aware that it cannot deprive federal courts of jurisdiction. See Chicago & Northwestern Rwy. Co. v. Whitton, 80 U.S. (13 Wall.) 270, 20 L.Ed. 571 (1872); Beach v. Owens-Corning Fiberglas Corp., 728 F.2d 407 (7th Cir.), cert. denied, 469 U.S. 825, 105 S.Ct. 104, 83 L.Ed.2d 48 (1984); Duchek v. Jacobi, 646 F.2d 415 (9th Cir.1981).
In Duchek the U.S. Court of Appeals for the Ninth Circuit examined the effect upon a federal court’s jurisdiction of a state statute facially requiring that proceedings be held before a state tribunal, where the federal rules required the federal court to follow state procedure. The proceeding was one to enforce a judgment. The applicable statute required that “ '[t]he petition must be filed with the clerk of the superior court.’ ” 646 F.2d at 417 [emphasis from Ninth Circuit]. In upholding the jurisdiction of the District Court, the Ninth Circuit noted that the statutes in question were essentially state venue provisions not to be elevated to the status of substantive abridgements of the federal court’s jurisdiction to enforce its judgments. Id. at 418. “[S]tate rules are to be applied in a common sense manner and those which make sense only where applied to state courts need not be imported into federal practice.” Anderson v. Tucker, 68 F.R.D. 461, 462-63 (D.Conn.1975) (quoted in Duchek, 646 F.2d at 418).
The federal District Court in Davison v. Sinai Hospital took a similar view of the statutes and rules we consider today. We agree with the Davison court that the legislature did not intend to limit the federal court’s jurisdiction, and that common sense requires that the definition of *649“court” found at § 3-2A-01(c) must encompass the federal District Court when jurisdictional requirements are met.
Adopting this common sense definition, the requirements of Rules BY2 and BY4 become clear. Where the claimant or plaintiff is rejecting the arbitration award he or she must file both parts of the two-step action to nullify in the same court.5 As we have noted, a rejecting plaintiff may combine both these steps in a single document. Indeed, the statute itself speaks neither of two documents nor of two steps. Section 3-2A-06(b) calls only for “an action in court to nullify the award____” The Otts filed such a document in the Circuit Court for Montgomery County and in this sense complied literally with the requirements of the Act. The document did not, however, contain sufficient allegations against Kaiser to constitute a valid complaint under Rule BY4. Thus, the Otts did not fully comply with the BY Rules.
II
Having determined that the Otts did not comply with the Rules’ requirements to maintain the action in the circuit court, it remains to be seen whether the sanction imposed by the circuit court was appropriate. The Otts claim that they should be allowed to amend their complaint. Kaiser claims that the action was properly dismissed and the arbitration award properly confirmed as to it.
Although the statutes, rules, and case law provide guidance as to the prerequisites to bringing an action in either the circuit court or the federal district court, we are persuaded that there is some cause for confusion. We note also that the Otts did not have the benefit of our recent decision in Cherry at the time the pleadings in this case *650were filed. Nor did they have any extensive opportunity to analyze our decision in Tranen.6
Kaiser bases its argument on language in the Court of Special Appeals’ opinion in its Tranen v. Aziz, 59 Md.App. 528, 476 A.2d 1170 (1984), which we affirmed. In that Tranen, the Court of Special Appeals stated that the failure of a claimant to file a complaint after rejecting the award and filing a notice of action would warrant confirmation of the award. Id. at 533, 476 A.2d at 1173. But the facts in Tranen disclose that neither the notice of rejection nor the notice of action was timely filed. Thus the language relied upon by Kaiser is dictum. Moreover, language to that effect was conspicuously omitted from our opinion affirming the Court of Special Appeals. See Tranen, 304 Md. 605, 500 A.2d 636.7
In our Tranen, the decision to uphold the dismissal of the action to nullify was based in part on the plaintiff’s failure to take the “final step in the arbitration procedure.” 304 Md. at 612, 500 A.2d at 639. We noted the important role played by the director of the Arbitration Office, since the finality of the award hinges on the notice of rejection filed with that official. Attempting to “bypass” the director was not compliance with the Act. Id. at 613, 500 A.2d at 640. The failure to perfect the claim warranted dismissal. Id. One essential element of the cause of action was missing.
In Cherry v. Brothers, on the other hand, dismissal was found to be inappropriate where the plaintiffs miscaptioned pleadings—at most a rule violation. The error in Cherry did not affect substantial rights of the defendants because they were not misled. 306 Md. at 91, 507 A.2d at 617 (citing former Rule 320 a 4). We held that the error should have been disregarded or, alternatively, that plaintiffs should have been allowed to amend the pleadings. But we ex*651pressly declined to address the role, if any, of the prejudicial impact of the plaintiffs’ error on the appropriateness of dismissal as a sanction. Id. at 86-87, 507 A.2d at 614.
In Tranen, then, there was a lack of compliance with the requirements of the Act. The failure to file either timely notice of rejection or timely action to nullify implicated important concerns underlying the policy of the Act, and amounted to inexcusable circumvention of the Act’s mandatory procedures. 304 Md. at 614, 500 A.2d at 640. Cherry did not involve a departure from the statute; there was no more than a trivial departure from the form prescribed by the Rules. This case falls somewhere between the two.
Of course compliance with the Act’s requirements is a condition precedent to the maintenance of a medical malpractice action in any court. Cherry, 306 Md. at 88-89, 507 A.2d at 615; Tranen. But as Cherry shows, substantial compliance with the Rules is sufficient if the purpose of the Rules is gratified.
The Otts filed a timely notice of rejection. They timely filed in the Circuit Court for Montgomery County a document entitled “Action to Nullify Award.” As we have already explained, there is no reason why such a document, when filed by claimants-plaintiffs, may not include both the notice of action to nullify and the complaint required by the BY Rules. Osheroff v. Chestnut Lodge, 62 Md.App. 519, 490 A.2d 720, cert. denied, 304 Md. 163, 497 A.2d 1163 (1985). That is, the Act’s requirement that judicial proceedings be commenced by filing an action to nullify, § 3-2A-06(b), may be met, in circumstances like these, by a single document, if it complies with the time, information, and service requirements of Rules BY2 and BY4. The “Action to Nullify Award” filed by the Otts did comply with the provisions of Rule BY2. It did not contain sufficient factual allegations to constitute a viable complaint under Rule BY4. But, as we have seen, the Otts did timely file a complaint, with seemingly sufficient allegations, in the U.S. District Court for the District of Columbia.
*652All of these papers were served on Kaiser. Like the health care providers in Cherry and in Osheroff, Kaiser could not have been misled about the Otts’s rejection of the award or their intent to pursue a malpractice action against it. All this information was conveyed in timely fashion and adequate detail; the only uncertainty was in which court Kaiser might have to defend. In short, the requirements of the Act and the essential requirements of the Rules were met; the Otts touched all the fundamental bases.
That being so, we do not believe dismissal of the action was appropriate. There is no subject matter jurisdiction problem here. The difficulty is that the Otts’s “Action to Nullify Award” filed in Montgomery County did not contain sufficient allegations to amount to a valid complaint. But while the Rule BY4 a 1 requirement that a complaint be filed within 30 days of the filing of the notice of action is mandatory, the rule states no consequences for noncompliance. In this situation, Rule 1-201 instructs that “the court may compel compliance with the rule or may determine the consequences of the noncompliance in light of the totality of the circumstances and the purpose of the rule.”
In short, whether to dismiss became a matter for the exercise of Judge Mitchell’s discretion. See Parren and Bright v. State, 309 Md. 260, 281-82, 523 A.2d 597, 607 (1987); State v. Lyles, 308 Md. 129, 139, 517 A.2d 761, 766 (1986) (Eldridge, J., concurring); Golub, 70 Md.App. at 156-58, 520 A.2d at 399-400. We hold that he abused his discretion when he dismissed the Otts’s action because of an insubstantial noncompliance with the BY Rules—a noncompliance which in no way subverted the policy served by those rules, and which amounted to little more than the filing of a complaint which would be subject to dismissal for failure to state a claim, but with leave to amend.
Because of this abuse of discretion we must reverse the dismissal order. And because of that we must also reverse the confirmation of the award. Since the notice of rejection *653had been filed, and the action to nullify now remains pending, confirmation of the award is clearly improper.
As we have noted, however, the Otts’s “Action to Nullify Award” is deficient in terms of its failure to allege facts that would state a cause of action against Kaiser. On remand, the Otts may either amend this document, or amend their complaint against Dr. Levitt, to supply this lack. Since Kaiser throughout these proceedings has been on notice of the Otts’s intention to press their claim against it, amendment to include Kaiser and their claim against it will work no injustice. Amendment is consistent with Maryland’s “liberal policy in permitting amendments so that causes of action may be determined on the merits.” Cherry, 306 Md. at 92, 507 A.2d at 617; see Md.Rule 2-341(c); see also Crowe v. Houseworth, 272 Md. 481, 325 A.2d 592 (1974).
JUDGMENT OF THE CIRCUIT COURT FOR MONTGOMERY COUNTY REVERSED. CASE REMANDED FOR PROCEEDINGS NOT INCONSISTENT WITH THIS OPINION APPELLEE TO PAY THE COSTS.
McAULIFFE, J., dissents.
. All statutory citations are to the Cts. & Jud.Proc.Art, and to the Act as it read in 1985.
. The Maryland Rules were extensively revised in 1984. Rules 2-101 and 2-302 now require that an action be commenced in circuit court by filing a "complaint." The BY Rules have not yet been amended to reflect this change. In the interest of consistency, we shall apply the current terminology and refer to the pleading as a complaint.
. See Golub v. Spivey, 70 Md.App. 147, 155, 520 A.2d 394, 398 (1987).
. The Davison court also held that the arbitration provisions of the Act were substantive for purposes of Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Insofar as the arbitration process, including notice of rejection, must be completed before a cause of action arises in Maryland, those requirements are properly considered substantive, as we acknowledged in Group Health Ass’n, Inc. v. Blumenthal, 295 Md. 104, 108 n. 5, 453 A.2d 1198, 1202 (1983). Whether the action to nullify requirement would be considered substantive or procedural for purposes of the Erie doctrine was not before the court in Davison.
. With respect to a federal court, this would depend on the extent to which the federal court would deem this substantive for Erie doctrine purposes.
. Tranen was filed 2 December 1985, less than a month before the complaints were filed in the circuit court and federal district court, and two days after the notice of action was filed.
. Very recently, the Court of Special Appeals rejected the very same dictum in Golub v. Spivey, 70 Md.App. at 158, 520 A.2d at 400.