Home-Court Rules And Construction Disputes: An Update

• Published date: 15 April 2022
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Real Estate and Construction, Contracts and Commercial Law, Arbitration & Dispute Resolution, Construction & Planning
• Law Firm: Jones Day
• Author: Mr Christopher Thatch, Kevin O'Brien and Daniel D. McMillan

In Short

The Situation: A growing number of states have enacted "home-court" laws of varying scope that require construction disputes to be litigated or arbitrated in the state where the project is built, and under the governing law of that state.

The Result: While these statutes differ in some respects, most of them declare unenforceable any provision in a construction contract that requires litigation or arbitration in a state other than the home state or under another state's law.

Looking Ahead: Construction industry participants should know where home-court statutes exist and how the rules might impact their construction contracts. Because several federal courts have held that the Federal Arbitration Act ("FAA") preempts home-court statutes, the most predictable way to guard against a home-court statute nullifying a forum-selection clause is to specify in the contract that the parties' agreement involves interstate commerce and that all disputes will be arbitrated pursuant to the FAA.

Home-Court Statutes Continue to Spread. Forum-selection and choice-of-law provisions are meant to give contracting parties control over where a potential dispute between them will be litigated, and what law will govern their dispute. In the case of construction contracts, "home-court" statutes limit that control by mandating that disputes arising out of contracts to build in-state projects must be litigated or arbitrated in the home state under that state's governing law. Most home-court statutes expressly declare that any contract provision requiring litigation or arbitration in another state under another state's law will be considered void and unenforceable as a matter of public policy. In some states, the home-court statutes also invalidate contract provisions that require that mediation or other settlement processes take place outside the home state. In large part, states have enacted home-court statutes in response to advocacy by the subcontracting community, who maintain that requiring a local subcontractor to litigate or arbitrate a dispute in another state would increase the subcontractor's costs and make pursuing relief impractical.

As we described eight years ago in our original Commentary, several states have adopted home-court rules for disputes that stem from construction contracts to build in-state projects. There are now 31 states with home-court laws on the books that apply specifically to in-state projects: Arkansas, Arizona, California, Colorado, Connecticut, Delaware, Florida, Illinois, Indiana, Iowa, Kansas, Louisiana, Minnesota, Montana, Nebraska, Nevada, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island...