Commercial Division Blog

Posted: May 25, 2018 / Categories Commercial, Contracts, Arbitation, Mediation and Other ADR

Breach of Contract Action Barred by Contract's Mandatory Mediation Provision

On May 24, 2018, the First Department issued a decision in Korangy v. Malone, 2018 NY Slip Op. 03767, holding that a breach of contract claim was barred by a contract's mandatory mediation provision, explaining:

The motion court correctly dismissed the breach of contract cause of action, as under the plain language of the operating agreement, namely, paragraph 3.3.3, when the members are deadlocked on an issue, they are to submit to mediation, and the decision of the mediator shall be final and binding. Taking the allegations in the complaint as true, plaintiff admitted the parties were deadlocked and the dispute was submitted to mediation.

(Internal quotations and 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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