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Sample Motion To Compel Mediation And Stay Litigation When There Is No Arbitration Clause

Posted by: on Thu, Dec 13, 2012

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The Residential Purchase Agreement, a true and correct copy of which is attached hereto as Exhibit “A,” contains a mandatory mediation provision in

paragraph 18 which provides as follows:

18. DEFAULT:

A. MEDIATION: Before any legal action is taken to enforce any term or condition under this Agreement, the parties agree to engage in mediation, a dispute resolution process, through GLVAR. Notwithstanding the foregoing, in the event the Buyer finds it necessary to file a claim for specific performance, this section shall not apply.

Nevada Title Company filed its Complaint in Interpleader with respect to the earnest money held in escrow on October 25, 20­­__.

II. LEGAL ARGUMENT

Defendant’s request that this Court compel mediation per the agreement through the Greater Las Vegas Association of Realtors (“GLVAR”), is appropriate as Nevada has established a policy of favoring mediation and arbitration. The parties entered into a valid mediation agreement, and the mediation clause contained in the Purchase Agreement is clear and unambiguous. Moreover, none of the parties have waived the opportunity to mediate. Indeed, the mediation clause was asserted by Tang as an affirmative defense. As such, this Court should compel mediation and stay the litigation.

A. The Mediation Clause is Valid and Enforceable.

Applying Nevada substantive law, the mediation clause in the Purchase Agreement is valid and enforceable. Both the Nevada Legislature and Nevada Supreme Court support the enforcement of alternative dispute resolution provisions (such as arbitration and mediation clauses) in Nevada.

For example, with respect to arbitration clauses, the Nevada Arbitration Act recognizes that a written provision in a contract to submit any existing controversy to arbitration is valid, enforceable and irrevocable. NRS 38.219.1.

On motion of a person showing an arbitration agreement and alleging another person’s refusal to arbitrate pursuant to the agreement… the court shall proceed summarily to decide the issue and order the parties to arbitrate unless it finds that there is no enforceable agreement to arbitrate.

NRS 38.221.1(b) (emphasis added).

Where an alternative dispute resolution clause exists, any doubts concerning the arbitrability of the subject matter of the dispute are to be resolved in favor of arbitration. Exber, Inc. v. Sletten Const. Co., 92 Nev. 721, 558 P.2d 517 (1976). In the absence of the most forceful evidence of the purpose to exclude a claim from arbitration, the claim is properly submitted to arbitration. Clark County Public Employees v. Pierson, 106 Nev. 587, 798 P.2d 136 (1990). The Nevada Supreme Court has further indicated, where the contract calls for alternative dispute resolution that the parties are not to be deprived by the Court of the benefit of arbitration, and any doubt is to be resolved in favor of arbitration. Exber, Inc. v. Sletten Construction Co., 92 Nev. 721, 528 P.2d 517 (1976).

All doubts concerning the arbitrability of the subject matter of the dispute are to be resolved in favor of arbitration. Once it is determined that an arbitrable issue exists, the parties are not to be deprived by the courts of the benefits of arbitration, for which they bargained – speed and the resolution of the dispute and the employment of the specialized knowledge and competence of the arbitrator. Id. at 729, 558 P.2d 517. (Emphasis added).

Mediation, another form of alternative dispute resolution, should be treated similarly. In this case, the parties entered into a Purchase Agreement that established mediation as the forum for dispute resolution before resorting to litigation.

Numerous courts have held that agreements to mediate are specifically enforceable. In Brosnan v. Dry Cleaning Station Inc., 208 U.S. Dist. Lexis 44678 (N.D. Cal 2008), the Brosnans sued Dry Cleaning Station, Inc. for fraud and breach of contract arising from the franchise agreement to authorize a dry cleaning store. The franchise agreement required that the parties mediate all disputes involving the franchise agreement for a minimum of four hours before instituting any legal action against the other person or party. The defendants filed a motion to dismiss the Brosnans’ claims because the Brosnans had failed to engage in mediation as required in the franchise agreement. The Brosnans admitted the failure but sought a stay of the litigation rather than a dismissal of the complaint. The court granted the defendants’ motion to dismiss stating that “failure to mediate a dispute pursuant to a contract that makes mediation a condition precedent to filing a lawsuit warrants dismissal. Id. 2.” The court found that a dismissal without prejudice, not a stay, was appropriate because the defendants did not seek a stay and the Brosnans did not cite any authority supporting a mere stay.

The court in Tattoo Art, Inc. v. TAT International, LLC, 711 F.Supp. 2d 645 (E.D.Va. 2010) came to a similar conclusion. Tattoo entered into a contract with TAT International that provided the parties would “submit the dispute to mediation… prior to filing any action to enforce this agreement.” Tattoo Art filed the action without formerly requesting to submit the matter to mediation. Defendant filed a motion to dismiss for lack of subject matter jurisdiction for failure to request mediation before filing litigation. The court found mediation was a condition precedent to litigation and rejected the argument that requiring fulfillment of the condition would be futile. The court viewed the requirement “to submit the dispute to mediation” as merely requiring the party to request mediation and emphasized the fact that defendants advise the court that they would mediate in good faith.

A similar result occurred in DeValk Lincoln Mercury, Inc. v. Ford Motor Company, 811 F.2d 326 (7th Cir. 1986). In DeValk, the court enforced a pre-litigation alternative dispute provision at the summary judgment stage. Plaintiffs owned a Ford car dealership, pursuant to a dealership agreement. The agreement required that any controversy or claim by plaintiffs with respect to any termination of the dealership agreement by Ford must be appealed through mediation within 15 days after receipt of notice of termination. The agreement expressly provided that mediation was a condition precedent to plaintiff’s right to pursue any other remedy available under the dealership agreement or law. Plaintiffs’ dealership was terminated and defendant Ford had to repurchase the remaining inventory. A dispute arose during this process, and plaintiffs negotiated with Ford for several months. Plaintiffs then sued Ford for several causes of action including breach of the dealership agreement. Defendants moved for summary judgment, in part upon plaintiffs’ failure to comply with the pre-litigation mediation clause. The District Court granted summary judgment and the Seventh Circuit Court of Appeals affirmed. The Seventh Circuit held that the mediation clause was straightforward and required plaintiffs to submit any “protest, controversy, or claim,” to mediation and further stated that mediation is a condition precedent to any other remedy available at law including litigation. Id. at 335.

Rather than dismissing the complaint and litigation, a number of courts have taken the position that litigation should be stayed or delayed in some manner until the mediation occurs. For example in N-Tron Cor. v. Rockwell Automation, Inc., 2010 U.S. District Court, Lexis, 14130 (S.D. Ala. 2010), the employees had entered into a contract to facilitate cooperative marketing efforts. The contract contained a pre-litigation dispute resolution provision requiring disputes relating to the marketing program to first be submitted to negotiations and third-party non-binding mediation before submitting the matter to court. A dispute arose between the parties and N-Tron sued Rockwell in court without first submitting the matter to mediation. Rockwell in turn responding with a motion to dismiss N-Tron’s claims because N-Tron had failed to comply with the mandatory mediation clause. Specifically, Rockwell filed a motion to dismiss based on FRCP 12(b)(1) for lack of subject matter jurisdiction and for failure to state a claim under 12(b)(6). The court denied the motion to dismiss and instead entered a stay, requiring the parties to go and negotiate and mediate in good faith pursuant to the dispute resolution provision in the agreement. Id. at 36.

In the instant case the Greater Las Vegas Association of Realtors (“GLVAR”), which was selected by the parties to conduct the dispute resolution process, charges only $100.00 as a filing fee and has a complete package on its website, attached hereto as Exhibit “B,” to file the mediation form and designate counsel and to challenge proposed mediators. Twenty-three (23) designated local mediators, trained by the GLVAR to handle residential purchase agreement disputes, are listed on the notice of rights to challenge mediators. The instructions provide that these trained third-party mediators, selected by the Association of Realtors, are “experienced qualified mediators who have agreed to participate in the program.” Although parties to the mediation have the right to be represented by counsel, attorneys are not required to participate in the mediation conference. Fees for DRS Mediation Services are established by the mediation provider and are published in accordance with the DRS Rules and Procedures.

B. The Contract is Clear and Unambiguous.

Courts are bound by language that is clear and free of ambiguity and cannot, using the guise of interpretation, distort the plain meaning of the agreement. Watson v. Watson, 95 Nev. 495, 496 P.2d 507 (1979).

In this case, there is no doubt the parties agreed to a clear and unambiguous requirement to mediate. The mediation provision is clearly marked in the Purchase Agreement. As such, the contract clearly and unambiguously requires that the parties mediate this dispute and this Court should enforce the clear language of the Purchase Agreement between the parties. See, e.g., Southern Trust Mortgage Co. V. Kay & Door Co., Inc., 104 Nev. 564, 763 P.2d 353 (1988) (holding that where a document is clear and unambiguous, the court must construe the document from its language); see, e.g., Love v. Love, 114 Nev. 572, 959 P.2d 523 (1998) (concluding that a clear and unambiguous document on its face must be construed according to its plain language); see, e.g., Ellison v. California State Automobile Association, 106 Nev. 601, 797 P.2d 975 (1990) (finding that Purchase Agreements are construed from written language and enforced as written). Needless to say, the overwhelming authority from the Nevada Supreme Court and elsewhere holds that unambiguous Purchase Agreements must be construed according to their plain language.

C. The Purchase Agreement Clearly and Unambiguously Requires Mediation.

The mediation clause is clearly and unambiguously written. In particular, the provision governing disputes of the Purchase Agreement is wholly free of ambiguity and states that any dispute must be settled by Mediation. Exhibit 1. Moreover, the Purchase Agreement specifically provides that the Mediation should take place according to the rules of GLVAR. Id. The mediation clause was fully negotiated and executed. It is contained in the standard form utilized in Nevada by the GLVAR. Thus, given the clear and unambiguous language of the Purchase Agreement requiring mediation and Nevada’s presumption in favor of mediation, the Purchase Agreement should be specifically enforced, requiring that this dispute be submitted to mediation and that this litigation be stayed in the interim.

In the instant case, no discovery has taken place and there has not been significant activity towards litigating either party’s claims or defenses. No Answer has yet been filed. No discovery has taken place. Therefore, no parties will suffer prejudice from, as there is no prejudice, this Court should compel mediation.

In the instant case, no discovery has taken place and there has not been significant activity towards litigating either party’s claims or defenses. No Answer has yet been filed. No discovery has taken place. Therefore, no parties will suffer prejudice from, as there is no prejudice, this Court should compel mediation.

D. The Court is Not to Consider the Merits.

The United States Supreme Court prohibits consideration of the merits on a motion to compel alternative dispute resolution. The Supreme Court held that “there is a presumption of arbitrability in the sense that ‘[a]n order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the mediation clause is not susceptible of an interpretation that covers the asserted dispute.’” At & T Tech., Inc. v. Communications Workers of Am., 475 U.S. 643, 650, 106 S.Ct. 1415, 1419, 89 L.Ed.2d 648 (1986) (quoting Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582-83, 80 S.Ct. 1347, 1353, 4 L.Ed.2d 1409 (1960)). In ruling on the arbitrability of a dispute, a court should not decide the merits of the underlying claims. See AT & T Tech., 475 U.S. at 649. The same principles of law should also apply to mediation clauses.

III. CONCLUSION

Defendant respectfully requests that this Court compel the mediation of the dispute between Plaintiff and Defendants and stay the litigation during the mediation process. The parties entered into a valid, clear and unambiguous mediation agreement requiring mediation of claims concerning the action or inaction of any party to the Purchase Agreement. A dispute has now arisen concerning the earnest money deposit. As such, the mediation provision in the agreement between the parties should be given its full force and effect and this case should proceed through mediation before the GLVAR.

This lawsuit should be stayed pending binding mediation. Nevada law (as articulated by both the Nevada Legislature and the Nevada Supreme Court), as well as the GLVAR, uniformly hold that alternative dispute resolution clauses in a written contract or agreement must be enforced. Moreover, Nevada law consistently enforces the clear and unambiguous language of contracts, particularly broad mediation and arbitration provisions. In this case, the clear and unambiguous contractual provision requires mediation of any disputes arising out of or related to the Purchase Agreement. Pursuant, thereto, this dispute should immediately be submitted to binding mediation and this litigation stayed in the interim.

DATED this _____ day of December, 20__.

ALBRIGHT, STODDARD, WARNICK & ALBRIGHT

____________________________________________

G. MARK ALBRIGHT, ESQ.

Nevada Bar No. 001394

D. CHRIS ALBRIGHT, ESQ.

Nevada Bar No. 004904

801 South Rancho Drive, Suite D-4

Las Vegas, Nevada 89106

(702) 384-7111

Attorneys for Defendant

About the Authors: The law firm of Albright, Stoddard, Warnick & Albright is an A-V Rated Nevada-based full-service law firm having attorneys licensed in Nevada, California and Utah. Our firm’s practice includes a strong emphasis on personal injury accidents. Call us at 702-384-7111.

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