## Facts

- Timothy and Carla Brosnan entered into a franchise agreement with Dry Cleaning Station, Inc. for operation of a Dry Cleaning Station store.
- The franchise agreement required the parties to mediate disputes involving the agreement or their relationship for a minimum of four hours before initiating legal action.
- The agreement contained limited exceptions to the pre-suit mediation requirement (including situations involving equitable relief and certain collection claims).
- The Brosnans filed suit in California state court asserting state-law claims for fraud and breach of contract arising from the franchise relationship.
- Defendants removed the case to federal court based on diversity jurisdiction.
- Defendants moved to dismiss under Rule 12(b)(6) on the ground that plaintiffs failed to comply with the contract’s pre-suit mediation condition.
- Plaintiffs did not dispute they had not mediated; they asked the court to stay the action to allow mediation.

## Issues

1. Whether claims must be dismissed when plaintiffs file suit without completing contractually required pre-suit mediation that is stated as a condition precedent to initiating legal action.

## Decision

- The court granted defendants’ Rule 12(b)(6) motion.
- The court dismissed the action without prejudice due to plaintiffs’ failure to satisfy the pre-suit mediation condition precedent.
- The court rejected plaintiffs’ request to stay the case pending mediation, concluding dismissal was the proper procedural consequence for premature filing.

## Legal Principles

- When a contract makes mediation a condition precedent to filing suit, a lawsuit filed before completing the required mediation is subject to dismissal.
- Courts enforce clear, mandatory pre-suit dispute-resolution provisions according to their terms, including minimum mediation requirements and stated exceptions.
- Dismissal without prejudice is an appropriate remedy where the defect is failure to satisfy a contractual precondition to suit rather than a merits deficiency, permitting refiling after compliance.

## Conclusion

The court enforced the franchise agreement’s mandatory pre-suit mediation clause as a condition precedent to litigation and dismissed the fraud and breach of contract action without prejudice because plaintiffs sued before mediating as required.


Brosnan v. Dry Cleaning Station, Inc., No. C 08-02028 EDL, 2008 U.S. Dist. LEXIS 44678 (N.D. Cal. June 6, 2008)