Orlofsky ADR Services

Contractually Required Mediation Before Arbitration

Contractually Required Medition Before ArbitrationBased on a number of recent cases, it seems that more and more parties are putting a mediation requirement into their arbitration clauses. Such mediation clauses typically provide that a party with a dispute arising out of the contract must first mediate as a condition precedent to arbitration. In addition, like arbitration clauses, the contracts are sometimes setting out how the mediator will be selected and what the rules governing the mediation will be.

In Clarke’s Allied, Inc. v. Rail Source Fuel, LLC, 2010 WL 6161565 (E.D.Tex 2012), for example, the contract provided:

If any dispute arises between the parties, the parties shall first mediate their dispute, utilizing the American Arbitration Association (“AAA”). The parties shall attempt to settle on a mediator, but if they fail to do so, shall accept a mediator chosen by AAA. The mediation shall take place as soon as reasonably possible in Kansas, at a location agreeable to all parties. Parties may attend by video. Costs shall be split equally between the parties.  If mediation is unsuccessful, either party may request arbitration….

A big problem in getting adverse parties to voluntarily mediate, even when they may think it makes sense, is that litigants and their counsel often view asking for mediation as a sign that they lack confidence in their case. This belief, whether or not accurate, makes litigants particularly reluctant to request mediation at the outset of a case, or before it is even filed. A contractually-required mediation provision eliminates this and offers a low cost procedure that may resolve a case before a lawsuit is even filed.