Virginia Federal Court Holds that the Filing of a Mechanic’s Lien does not Waive Right to Enforce Contractual Disputes Resolution Procedure

May 29, 2014

The United States District Court for the Eastern District of Virginia recently determined that the filing of a mechanic’s lien does not waive a party’s right to insist on the satisfaction of contractual conditions precedent to filing suit.  In Dominion Transmission, Inc. v. Precision Pipeline, Inc., 2013 WL 5962939, a contractor and a utility company entered into an agreement for the construction of a pipeline in Pennsylvania and West Virginia.The contract required both parties to complete a four-step disputes resolution process before commencing a lawsuit.  The last step was the submission of the dispute to mediation governed by the American Arbitration Association (“AAA”).

Following a lengthy dispute, the contractor filed mechanic’s liens on the utility company’s property in Pennsylvania and West Virginia.  In response, the utility company commenced a lawsuit against the contractor without first submitting its claim to AAA mediation.  The contractor moved to dismiss the lawsuit due to the utility company’s failure to satisfy the contractual conditions precedent to litigation.  The utility company responded by alleging that the contractor had waived its right to enforce the disputes resolution provision by filing mechanic’s liens.

The district court noted that waiver requires an intentional relinquishment of a contractual right, that the utility company would bear the burden of proving waiver and that federal law has long favored the enforcement of alternative disputes resolution provisions.  In light of these factors, the district court granted the contractor’s motion to dismiss, holding that the utility company had not proven the contractor waived its right to enforce the disputes resolution procedure of the contract.