Construction Bills: Recent Changes to Construction Laws

AuthorBy Asha A. Echeverria and Brian R. Zimmerman
Asha E. Echeverria Brian R. Zimmerman
Published in The Construction Lawyer, Volume 40, Number 2, Spring 2020. © 2020 American Bar Association. Reproduced with permission. All rights reserved. This information or any portion
thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
By Asha A. Echeverria and Brian R. Zimmerman
Asha A. Echeverria is a shareholder at Bernstein Shur
in Portland, Maine. Brian R. Zimmerman is
a shareholder at Hurtado Zimmerman S.C. in
Milwaukee, Wisconsin.
Federal Legislation and California Law May Limit
Arbitration Agreements
Federal Forced Arbitration Injustice Repeal Act
On September 20, 2019, the U.S. House of Representatives
passed the Forced Arbitration Injustice Repeal (FAIR) Act,
which, if enacted, would invalidate pre-dispute arbitration
agreements for employment, consumer, antitrust, and civil
rights disputes. The bill is currently pending before the
Senate Judiciary Committee and is opposed by the Trump
Under the FAIR Act, an agreement to arbitrate a dis-
pute that has not yet arisen involving one of these categories
would be invalid and unenforceable.
While the employment category
(and potentially, to a
lesser extent, the antitrust and civil rights dispute catego-
ries) would impact the construction industry, the inclusion
of consumer disputes poses a signicant change to residen-
tial construction, where contractors often require arbitration
through builder or remodeler trade groups.
The denition of “consumer disputes” is broad and
applies to disputes between
(A) one or more individuals who seek or acquire
real or personal property, services (including ser-
vices related to digital technology), securities or
other investments, money, or credit for personal,
family, or household purposes including an indi
vidual or individuals who seek certication as a
class under rule 23 of the Federal Rules of Civil
Procedure or a comparable rule or provision of
State law; and
(B) (i) the seller or provider of such property,
services, securities or other investments, money, or
credit; or
(ii) a third party involved in the selling, providing
of, payment for, receipt or use of information about,
or other relationship to any such property, services,
securities or other investments, money, or credit[.]
Accordingly, the FAIR Act would effectively preclude
pre-dispute arbitration clauses in contracts involving an
individual related to the construction, remodeling, or
other services associated with a personal residence or oth-
erwise involving personal, family, or household purposes.
The FAIR Act passed the House 225 to 186, largely
along party lines with two Republicans joining the
Democrats in support. It was then referred to the Sen-
ate Judiciary Committee. In the Senate, the FAIR Act
received 34 cosponsors, only one of which was a Republi-
can, Rep. Matt Gaetz of Florida. Although the legislation
has not garnered broader bipartisan support, some
Republicans have shown an interest in addressing arbi-
tration of disputes involving individuals. In a hearing
titled “American Arbitration” before the Senate Judi-
ciary Committee on April 2, 2019 (prior to the House’s
passage of the bill), the chair, Senator Lindsey Graham
(R-SC), expressed an interest in addressing mandatory
arbitration clauses: “It bothers me that when you sign up
for a product or service you are giving away your rights.
For the rest of this year this Committee will take a long
and hard look at how arbitration can be improved. We
will try to nd some middle ground. We will nd a way
forward. . . . There have to be fairness standards.”4
On September 17, 2019, the White House issued a for-
mal Statement of Administration Policy opposing the
FAIR Act: “These blanket prohibitions will increase liti-
gation, costs, and inefciency, including by exposing the
vast majority of businesses to even more unnecessary
litigation. As written, the FAIR Act disregards the ben-
ets of resolving disputes through arbitration, including
lower costs, faster resolution, and reduced burden on the
judiciary. By limiting contractual options, this bill would
hurt businesses and the very consumers and employees
it seeks to protect.”5
The White House conrmed that “[i]f H.R. 1423 were
presented to the President in its current form, his advi-
sors would recommend that he veto the bill.”6

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