CTC Demolition Co., Inc. v. GMH AETC Management, 424 N.J. Super. 1 (App. Div. 2012). The “first-filed” rule of comity says that, as a general notion, the court that first acquires jurisdiction over a matter takes precedence over another court that acquires jurisdiction later unless there are “special equities.” The question in this case, in which Judge Fisher wrote the panel’s opinion, was whether a party’s demand for mediation or arbitration takes precedence over a later-filed declaratory judgment suit in another jurisdiction regarding the applicability of mediation or arbitration. The panel concluded that the demand for mediation was to be viewed as the first-filed action and was to take precedence.
The parties here had entered into contracts for asbestos removal. The contracts provided (among other related provisions) that any claim arising out of or related to those agreements “shall be subject” to mediation as a condition precedent to arbitration or suit. A dispute arose, and plaintiff served defendants with a demand for mediation, in New Jersey. Two weeks later, defendants sued in Pennsylvania for a declaration that plaintiff lacked standing to enforce or sue on the contracts. Plaintiff then countered with this New Jersey action, which sought a declaration regarding the propriety of plaintiff’s demand for mediation.
The Law Division ruled that plaintiff was entitled to mediation. That court also held that special equities existed that precluded application of the first-filed principle, so that the later-filed New Jersey lawsuit had primacy. Defendants appealed.
After discussing the first-filed rule in general, Judge Fisher found “no principled reason” to limit the first-filed principle to actual lawsuits. The strong policy in favor of arbitration, which the panel viewed as indistinguishable from mediation for purposes of this case, meant that the court should not view “a demand for mediation or arbitration, contractually stipulated as a means for resolving disputes, as something that has no value or less value in this analysis than a complaint filed in a civil court.”
Even apart from that rationale, Judge Fisher agreed with the Law Division that special equities precluded defendant’s Pennsylvania action from taking precedence. “[O]nce 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 a special equity that warrants a disregarding of the Pennsylvania action.” However, the panel remanded to the Law Division for further factual development the merits issue of whether plaintiff was entitled to mediation under the contracts.
On both bases cited by Judge Fisher, this was a classic equitable decision. Leaving aside the statement about policies that favor arbitration, a demand for mediation initiates formal proceedings no less than does the filing of a complaint. A contrary decision would have elevated form over substance. The panel’s invocation of special equities in order to frustrate defendants’ apparent forum-shopping was also eminently fair in these circumstances.