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Current Developments in the Commercial Divisions of the
New York State Courts
Posted: May 7, 2018

Failure to Use Contract’s Pre-Suit Dispute Resolution Process Dooms Claim

On May 3, 2018, the First Department issued a decision in MPEG LA, L.L.C. v America Information Systems, Inc., 2018 NY Slip Op. 03210, dismissing a claim for failure to use a pre-suit audit procedure, explaining:

The claim that Toshiba under-reported and underpaid royalties under the parties’ license agreement was correctly dismissed because plaintiff failed to comply with the agreement’s audit provision, a condition precedent to suit.

(Internal citations omitted).

This decision illustrates one the many rules for interpreting contracts: if a contract contains a pre-suit dispute resolution provision, the failure to comply with that provision likely will bar a claim for breach of the contract. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding a dispute over the interpretation of a contract.

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