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Construction Law
The MSA provided that: “In the event of a dispute arising out of or relating to this Agreement or a Purchase Order, the parties shall attempt to resolve such dispute by mediation[.]”
The Motion Court dismissed Plaintiff ’s Complaint because Plaintiff did not engage in mediation, pre-suit, and that was a condition precedent of the agreement.
The Appellate Division, First Department, affirmed, finding that the “mediation provision was enforceable against plaintiff even though plaintiff did not sign the MSA because the language of the purchase order, which plaintiff signed, unambiguously reflected the parties’ intent that the MSA govern the parties’ relationship until the parties formally execute the MSA[.]”
It can be inferred from this decision that New York Courts are likely to encourage parties to explore mediation as part of the litigation process.
Some Courts Employ Mandatory Mediation
The New York State Supreme Court, County of New York, Commercial Division, where many construction case matters are heard, has a robust ADR Program. A Justice can issue an Order of Reference to an Alternative Dispute Resolution Program, which is a mediation program where neutrals attempt to facilitate settlement discussions.
Notably, New York State’s Commercial Division requires that counsel for any party in Division cases certify that counsel has discussed ADR possibilities with his client at each status conference. In the construction case context, if parties do opt for dispute resolution by arbitration, the American Arbitration Association has provisions allowing for discovery and for optional appeal of the arbitral process.
The Takeaway
Where parties are involved in litigation in New York’s Commercial Division Courts, where many construction cases are heard, the Court will sometimes require the Parties to mediate. New York Courts will enforce pre- suit mediation provisions. It would behoove parties to construction contracts to address dispute resolution in some detail in alternative dispute provisions. Even if there is not a pre-suit mediation provision and the matter heads to litigation, parties should anticipate that the Court could require mediation. If parties include an arbitration provision in their construction contracts, they do have the opportunity to exert some control over the process by providing for some limited discovery, perhaps, or the right to appeal. New York Courts have an ADR program built into its system. That demonstrates that the Courts, in complex cases, are inclined to encourage parties to seriously explore ADR, and, in some cases may require it.
Kenneth A. McLellan is a Partner with Winget, Spadafora & Schwartzberg, LLP, based in New York, New York. Contact him at: mclellan.k@wssllp.com.
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FDCC ANNUAL INSIGHTS 2023