Complaint Dismissed for Failure to Mediate First

“Mandatory mediation” may seem an oxymoron, since mediation is a process whereby parties seek to resolve their dispute in an elective process. But a federal court judge has held that a contract clause mandating mediation prior to litigation is to be enforced. Thus, a third-party complaint between contracting parties was dismissed, pending mediation.

The original lawsuit was for alleged personal injuries suffered at a water park. The plaintiff sued the water park owner, Camelback, who subsequently filed a third-party complaint against the manufacturer of the waterslide at issue, Whitewater.

Whitewater moved to dismiss the third-party complaint on the grounds that its contract with Camelback called for mediation prior to any litigation. The clause read:

In the event that any dispute arises between the parties to this Contract, the parties shall first endeavor to settle the dispute through direct discussions between their respective authorized representatives designated for such purpose. If the authorized representatives cannot resolve the dispute, the parties shall next endeavor to resolve the dispute through mediation. Mediation shall be conducted at [Camelback's] offices in Cohoes, New York under the Construction Industry Mediation Rules of the American Arbitration Association ("AAA") by a mediator who is experienced and knowledgeable about the construction industry and construction contracts. . . . Unless otherwise agreed in writing, [Whitewater] shall continue with the Work and maintain the Project Schedule during any dispute resolution proceeding.

Camelback argued that the clause did not apply to a post-project claim for indemnification. But the judge noted that the clause refers to “any dispute” without any limitation or qualification. So the third-party claim for indemnification will have to wait pending mediation between Camelback and Whitewater.

The case is Rivas v. CBK Lodge General Partner, LLC, 2021 U.S. Dist. LEXIS 139345 (M.D. Penn., July 27, 2021) (paywall).