Appellate Division Rules That A Party’s Mediation/Arbitration Demand Triggers The “First To File” Rule Of Comity

In its January 27, 2012 decision in  CTC Demolition Company, Inc. v. GMH AETC Management/Development LLC, which has been approved for publication, the Appellate Division considered the novel issue of whether a party’s demand for mediation or arbitration triggers the “first to file” rule. Notably, the court had found only one decision in any jurisdiction considering the impact of mediation or arbitration on the first to file rule of comity, which provides that courts will generally defer to a court that first acquires jurisdiction over a dispute.

The CTC Demolition court ruled that a demand for mediation or arbitration may be viewed as a first-filed action, such that the adverse party’s later declaratory judgment suit in another state is subject to dismissal. It reasoned that, although the first-filed rule was originally based upon the first filing of a lawsuit,

the proliferation of mediation and arbitration as an alternate but highly-favored method for resolving disputes since the first-filed rule’s development, suggests … that [the] demand for mediation should be treated like the filing of a complaint.

In CTC, the parties had entered into three contracts containing dispute resolution terms that required mediation, followed by arbitration, if necessary, as a condition precedent to litigation. After a dispute arose, plaintiff served the defendant with a demand for mediation in New Jersey. In response, the defendant filed suit in Pennsylvania. The CTC court ruled that “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.” The court concluded that the trial court had “correctly refused to defer to the Pennsylvania action.”

A copy of the January 27, 2012 opinion can be found here – CTC Demolition Company v. GMH Management