Construction Bills: Recent Changes to Construction Laws

• Author: By Asha A. Echeverria and Brian R. Zimmerman
• Pages: 38-39

THE CONSTRUCTION LAWYER38 Spring 2020

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.

CONSTRUCTION BILLS: RECENT CHANGES

TO CONSTRUCTION LAWS

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,

1

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

administration.

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

2

(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[.]

3

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