Where the parties’ contract required they pursue mediation before filing a lawsuit, this requirement did not extend the statute of limitations for any claims.  Johnson Bros. v. City of Charlotte, 2024 NCBC 11 (J. Bledsoe). As a result, Plaintiff’s contract claims that were known more than two (2) years before it filed suit were time-barred, notwithstanding the fact that it waited until after mediation to file its lawsuit.

In 2016, Plaintiff and Defendant entered into a contract (“Agreement”) for Plaintiff to act as general contractor on a project extending Defendant’s Gold Line Streetcar. (the “Project”). The  Agreement contained a provision which required the parties to undergo mediation as a precondition to initiating any lawsuit related to the Agreement.  Over the years, the Project experienced numerous delays and the parties exchanged numerous correspondence accusing one another of being responsible for the delays. However, neither party ever initiated the Agreement’s mediation process, even though the Project opened to the public in August 2021.  In November 2021, Plaintiff requested the parties undergo the mediation process, which was completed in January 2023.  When no resolution was reached, Plaintiff filed suit on January 30, 2023.  Defendant moved to dismiss, contending that Plaintiff’s breach claims were barred by North Carolina’s 2-year statute of limitations for contract claims related to agreements with a government entity. Plaintiff argued that the Agreement’s mediation requirement meant that it could not maintain its lawsuit until mediation had been complete and, as such, the statute of limitation did not begin to run until after mediation was completed.

The Business Court agreed with Defendant. Finding that many of the breaches Plaintiff claimed had accrued and were known to Plaintiff more than 2 years before it filed its lawsuit, the Business Court rejected Plaintiff’s contention that the mediation requirement acted as a tolling agreement to stay the running of the statute of limitations.  (Opinion, ¶62).  The Business Court also rejected Plaintiff’s contention that its breach claims did not accrue until mediation was complete, when Defendant made it clear that it would not pay the at-issue claims. This argument, the Business Court pointed out, confused when the claims “accrued” (i.e., at the time of the breach) with when they became “ripe.” (Id., ¶65-66).   As a result, the Business Court dismissed any breach of contract claims that had accrued prior to January 30, 2021 (i.e., 2 years prior to when Plaintiff initiated its lawsuit).

Based upon this decision, any company that has agreements which contain mandatory, pre-suit mediation clauses would do well to try and complete the mediation before the running of any applicable statute of limitations.