WHEN MEDIATION IS A CONTRACTUAL PREREQUISITE

ALLIED CONSTR. CORP. v. PARSONS TRANSPORATION GROUP OF NY, INC., 2022 NY Slip Op 50126 - NY: Supreme Court 2022:

"This action arises from a dispute over payment for construction-management services provided by plaintiff, Allied Construction Corp., to defendant Parsons Transportation Group of New York in connection with a public-works project owned by defendant New York City Transit Authority. Plaintiff contends that Parsons failed to pay approximately $400,000 that Parsons owed to plaintiff under the terms of their construction agreement. Plaintiff brought this action to foreclose on several mechanic's liens securing payment from Parsons and to collect on a payment bond guaranteed by defendants Federal Insurance Company, Fidelity & Deposit Company of Maryland, and Zurich American Insurance Company. Plaintiff's complaint also asserts claims against Parsons sounding in breach of contract, unjust enrichment, and an account stated.^[1]

Three days after filing the original summons and complaint, plaintiff brought this motion to compel Parsons to arbitrate their dispute under terms set forth in the underlying construction agreement. (See NYSCEF No. 11.) The motion is denied without prejudice.

DISCUSSION

As a threshold matter, although it may appear incongruous that plaintiff is the party seeking to compel arbitration (and to stay its own action pending arbitration), plaintiff has not waived its right to arbitrate by bringing this suit. Plaintiff asserts that it brought the action to preserve its mechanic's liens and its right to payment under the payment bond. (See NYSCEF No. 18 at ¶ 13 [amended complaint]; NYSCEF No. 14 at ¶ 7 [affidavit of plaintiff's principal]; NYSCEF No. 12 at ¶¶ 7-12, 14 [attorney affirmation].) A suit of this kind, in the nature of an effort to preserve the status quo pending arbitration, is not an arbitration waiver. (See Tradesource Inc. v Ancor, Inc., 281 AD2d 538, 538 [2d Dept 2001]; see also Glickenhaus & Co. v Taylor, 163 AD2d 59, 60 [1st Dept 1990] [explaining that "[t]here is neither waiver nor an election of remedies where plaintiff moves in court for protective relief in order to preserve the status quo while at the same time exercising its right under the contract to demand arbitration"] [internal quotation marks and ellipsis omitted].)

This conclusion is not altered by the fact that plaintiff's complaint asserts a series of contractual claims for the same money sought in the lien-foreclosure and payment-bond causes of action. (See Riggi v Wade Lupe Constr. Co., 176 AD2d 1177, 1179 [3d Dept 1991], citing Matter of Assael v Assael, 132 AD2d 4, 9-12 [1st Dept 1987]; Bridas S.A. Petrolera Indus. y Comercial v International Std. Elec. Corp., 128 Misc 2d 669, 677 [Sup Ct, NY County 1985]; CEGF & G Plumbing Corp. v Transcorp Constr. Corp., 2006 WL 8422810, at *1 [Sup Ct, NY County Sept. 29, 2006].) Nor does plaintiff's limited availment of the judicial forum—i.e., filing a complaint and moving to compel arbitration three days later—constitute an arbitration waiver by litigation conduct.^[2]

Nonetheless, plaintiff's motion to compel arbitration must be denied, on two independent grounds.

First, the construction agreement under which plaintiff is moving to compel provides that in the event of a dispute that the parties cannot resolve on their own, they "shall submit to non-binding mediation prior to commencing arbitration or an action in a judicial forum." (NYSCEF No. 4 at § 7.14[b] [emphasis added].) Having engaged in (unsuccessful) mediation is thus a precondition to commencing an arbitral proceeding. Plaintiff does not, however, represent (either in the complaint or the papers supporting the motion to compel) that the parties previously engaged in mediation. Failure to establish that this precondition has been satisfied forecloses plaintiff's request on this motion to compel arbitration.^[3] (See Matter of County of Rockland v Primiano Constr. Co., 51 NY2d 1, 7-8 [1980]); Matter of Brenda DeLuca Trust v Elhannon, LLC, 108 AD3d 902, 904 [3d Dept 2013].)

Second, plaintiff has moved to compel under CPLR article 75. (See NYSCEF No. 11 at 1.) But CPLR 7503, governing requests to compel arbitration, provides that a party "may apply for an order compelling arbitration" only if it is "aggrieved by the failure of another to arbitrate." (CPLR 7503[a].) Plaintiff does not represent that it has asked Parsons to arbitrate or commenced an arbitration under the applicable arbitral rules. Absent a failure or refusal by Parsons to arbitrate, this court lacks authority to compel arbitration in the first instance. (See Matter of Cullman Ventures (Conk), 252 AD2d 222, 229 [1st Dept 1998].)

This court does not determine here that plaintiff cannot establish that it has satisfied the necessary contractual and statutory preconditions to arbitration—merely that plaintiff has not done so on this motion.

Accordingly, for the foregoing reasons, it is

ORDERED that plaintiff's motion to compel arbitration is denied without prejudice.

[1] Plaintiff recently amended its complaint (see NYSCEF No. 18); the amendment, though, appears limited to adding another exhibit in support of the complaint's allegations (see NYSCEF No. 23).

[2] Indeed, the record does not reflect whether plaintiff has even served defendants with copies of its pleadings.

[3] As a "prerequisite to entry into the arbitration process," rather than a "procedural prescription for the management of that process," compliance with the contractual mediation requirement is for the court to decide, rather than the arbitrator. (Matter of County of Rockland v Primiano Constr. Co., 51 NY2d 1, 8-9 [1980].)"