Orlofsky ADR Services

Require Mediation Before Arbitration

Parties are increasingly including a mediation provision in their contractual arbitration clauses, requiring an aggrieved party to mediate before filing an arbitration. Although one might wonder about the success rate of mediations that take place when a party is forced to do so by contract, any settlements achieved so early in the process result in enormous cost savings. It would seem, therefore, that the downside of a contractual mediation requirement – a wasted day in an unsuccessful mediation – would be outweighed by even the slim chance of being able to settle before litigation is filed.

Courts have typically enforced contractual mediation clauses, dismissing arbitration claims if the party bringing the claim has failed to exhaust a contractual mediation requirement. Rodriguez v. Tex. Leaguer Brewing Co. (Tex. App., 2019), however, involved an interesting twist on this issue. The plaintiff ignored the contractual arbitration clause and filed a court case. When the defendant responded by moving to dismiss, arguing that the case should be sent to arbitration, the plaintiff argued that the defendant could not enforce the arbitration clause because it had failed to request a mediation. The plaintiff argued that mediation was a condition precedent to arbitration, and having failed to meet that condition precedent, the defendant could not enforce the contractual arbitration requirement.

The court was not impressed with plaintiff’s argument:

when the agreement requires the parties to mediate before arbitration, a party who proceeds first to litigation waives the right to mediation and cannot assert the mediation provision as a condition precedent to arbitration. … Because the Rodriguezes filed suit without first seeking mediation, they have waived their right under section 9.4 to insist on mediation before arbitration….

My takeaway: The plaintiff was in an untenable position when it tried to enforce a mediation requirement after having itself tried to sidestep the entire mediation/arbitration process by running to court. But absent egregious circumstances like this, contractual mediation requirements are enforceable, and also seem quite sensible.