Request For Mediation Can Be A “First-Filed Action”

       The “first filed action” rule says that when lawsuits over the same dispute are filed in different states, the courts in both states will give the “first filed” action the exclusive right to go forward. Often described as a matter of “comity,” the rule furthers the practical goals of certainty and efficiency within our federal system. However, as a matter of policy, the rule can be seen as unfavorable towards alternative dispute resolution. Counsel faced with the possibility of litigation in an unfriendly jurisdiction will often race to be the “first to file” a lawsuit rather than pursuing mediation. Not so in New Jersey anymore.

       Last week, the Appellate Division of the Superior Court of New Jersey ruled that the “first filed action” rule applies when a party demands mediation or arbitration, as contractually obligated, and the other party later files a lawsuit in a different jurisdiction. In CTC Demolition Company, Inc. v. GMH AETC Management/Development LLC, et al (Docket No. A-3703-10T4), Judge Clarkson S. Fisher, Jr., wrote for a unanimous panel:

“Although the creation of the first-filed rule may have presupposed that the interplay of its principles would relate solely to which of two lawsuits should proceed to disposition, the proliferation of mediation and arbitration as an alternate but highly-favored method for resolving disputes since the first-filed rule\’s development, suggests the legitimacy of CTC\’s argument that its demand for mediation should be treated like the filing of a complaint.

…once mediation was demanded to occur in New Jersey, the later institution of the Pennsylvania action represented an untoward attempt to move the situs of this dispute, giving rise to special equity that warrants a disregarding of the Pennsylvania action.”

       This is great news for ADR in New Jersey, and hopefully elsewhere. Although this case was remanded to the trial judge for findings of fact on which of the parties\’ contracts applied to this dispute (raising the possibility that the contract providing for mediation would be held not to apply at all), the Court\’s holding on the first-filed action rule is clear. At least where the parties\’ agreement requires mediation before arbitration (or, presumably, litigation), a demand for mediation in New Jersey will trump a later filed lawsuit in another jurisdiction.

[Image:Brown filing cabinet, March 9, 2007, via Wikipedia Commons]