Snell & Wilmer
Legal Alert
spacer15spacer8
March 11, 2016
Nevada Supreme Court Holds That Failure to Comply With Contract’s Mediation Provision Bars a Suit on the Contract

by Bob L. Olson and Nathan G. Kanute

In MB America, Inc., v. Alaska Pacific Leasing Company, 132 Nev. Adv. Op. 8 (February 4, 2016), the Nevada Supreme Court was presented with an appeal from an order granting a summary judgment in the defendant’s favor because the plaintiff had not first submitted the parties’ dispute to mediation as required by their contract. The Supreme Court affirmed the lower court’s decision and its award of attorney’s fees to the defendant.

In MB America the parties’ Agreement provided in part:

The parties agree that any disputes or questions arising hereunder, including the construction or application of [the] Agreement shall be submitted to mediation between [MBA] and [Alaska Pacific] with the rules of the American Arbitration Association, of which any hearing or meeting should be conducted in Reno, NV. . . .

If mediation between the parties does not result in a mutual satisfying settlement within 180 days after submission to mediation, then each party will have the right to enforce the obligations of this Agreement in the court of law of Reno, Nevada with all reasonable attorney fees, court costs and expenses incurred by the prevailing party in such litigation to be paid by the other party.

Rather than demanding mediation under the rules of the American Arbitration Association (the “AAA”), MB America sued Alaska Pacific for (1) declaratory relief that the parties’ agreement was binding and had not been breached by MB America and (2) specific performance of the mediation provision of the Agreement. Subsequently Alaska Pacific filed a motion for summary judgment which alleged that the suit had been filed prematurely because MB America had not first complied with the mediation provision in their Agreement. The lower court granted Alaska Pacific’s motion for summary judgment and awarded it attorney’s fees pursuant to NRS 18.010.

When affirming the lower court’s award, the Supreme Court agreed with case law from other jurisdictions holding that a prelitigation mediation provision in the parties’ contract constitutes an enforceable condition precedent to litigation. The Court then analyzed the mediation provision quoted above and the commercial mediation procedures contained in paragraph M-2 of the AAA’s “Commercial Arbitration Rules and Mediation Procedures,” which provide for a simplified process for the parties to a contract to initiate mediation. The Supreme Court then held that MB America had a duty to submit a request to “any of the AAA’s regional offices or case management centers” to commence a mediation but failed to do so.

The Supreme Court also rejected MB America’s arguments that it did not have to first submit the dispute to mediation before filing suit because it would be futile and Alaska Pacific had refused to consent to mediation. In doing so, the Supreme Court held that the evidence submitted by MB America of Alaska Pacific’s refusal to participate in the mediation, “when taken in the light most favorable to MBA” does not constitute evidence that Alaska Pacific refused to participate in mediation.

Finally, the Supreme Court affirmed the lower court’s award of attorneys’ fees to Alaska Pacific because it was the prevailing party which had obtained a judgment dismissing MBA’s complaint.

Two of the lessons learned from MB America are that (1) Nevada courts will likely enforce contractual provisions requiring that parties first submit their dispute to mediation or arbitration and (2) will award attorney’s fees to the party that was sued in violation of the contract’s mediation or arbitration clauses even though the court did not rule on the merits.

Twitter

LinkedIn

 
 

©2016 Snell & Wilmer. All rights reserved. The purpose of this legal alert is to provide readers with information on current topics of general interest and nothing herein shall be construed to create, offer or memorialize the existence of an attorney-client relationship. The content should not be considered legal advice or opinion, because it may not apply to the specific facts of a particular matter. Please contact a Snell & Wilmer attorney with any questions.

Hughes Center  |  3883 Howard Hughes Parkway  |  Suite 1100  |  Las Vegas, Nevada 89169
The material in this legal alert may not be reproduced, distributed, transmitted, cached or otherwise used, except with the written permission of Snell & Wilmer.