Friday, March 28, 2014

Court Orders Specific Performance of Pre-litigation ADR

The McCaffrey Group, Inc. v. Superior Court, No. F066080 (D5 Mar. 24, 2014)

Much of this appeal deals with the validity of certain contractual provisions under the Right to Repair Act, a statute particular to construction defect litigation. Since there are other outlets that specialize in that issue and I know virtually nothing about it, I'll leave that to them. But this opinion does have one interesting procedural angle that comes up in general commercial litigation quite often. The provisions at issue impose a pre-litigation alternative dispute resolution regime. Before a party can sue over a dispute, it must (1) give written notice; (2) meet and confer to attempt to negotiate a resolution; and (3) attend a non-binding mediation. The plaintiff here jumped the gun and sued without following the procedures, claiming they were unenforceable. 

These kinds of notice/negotiate/mediate provisions are not unique to construction defect litigation; they often appear in all kinds of commercial and corporate agreements. What can make them frustrating is the lack of clarity about how they are to be enforced if one side or the other is unenthusiastic about engaging in the agreed pre-litigation ADR process or if they become an excuse for interminable delay. Are they conditions precedent, such that failing to follow them could preclude a claim altogether? If so, if, when, and how can a party waive the right to enforce the condition through non-cooperation, bad faith, or delay? And can they be specifically enforced like an arbitration agreement? Although the court doesn’t really delve deeply into the remedies issue, the decision stands factually for the proposition that specific enforcement akin to a motion to compel arbitration is a viable procedural option. After finding the provisions enforceable under the Right to Repair Act, the court grants a writ and orders the parties to complete agreed notice, negotiation and mediation procedures before any further litigation of their claims proceeds. 

Writ granted.

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