Court Enforces Contractual Agreement for Mediation Before Filing Lawsuit
Construction contracts often contain agreements requiring mediation before a party may file a lawsuit. However, a party may not want to wait through the mediation process and instead may prefer to go straight to a lawsuit. Given that mediation is not binding and does not guarantee a resolution, can a party ignore a contractual agreement to mediate and instead go right to litigation? A recent Kentucky federal court decision said no, a party cannot ignore a previous contractual agreement to mediate. See Mitsui Mumitomo Insurance USA, Inc. v. Denham-Blythe Company Inc., et al., No. 5:18-CV-152-JHM, 2019 WL 1938791 (E.D. Ky. May 1, 2019).
In Mitsui, an owner and design-builder entered into an AIA A141-2004 construction contract that contained several provisions designed to avoid litigation: an initial decision maker, mediation, and then arbitration (in that order). Because the parties failed to identify an initial decision maker, the design-builder argued that none of the ADR provisions applied and filed a lawsuit in lieu of mediation or arbitration. The Mitsui court ruled that the lack of an initial decision maker did not invalidate the parties’ agreement for mediation and arbitration, and, as a result, dismissed the lawsuit.
This case is a reminder for parties to a construction contract to give careful consideration to a contract’s ADR and other dispute resolution provisions before signing a contract and to closely review a contract’s dispute resolution provisions before filing a lawsuit.