Construction Home-Court Statutes: Scope, Enforcement, and Preemption Under the Federal Arbitration Act

• Pages: 9-45
• Date: 01 October 2024
• Author: Daniel D. McMillan,Michael S. McCauley,David A. Hecker

Published in The Construction Lawyer Volume 43, Number 4, ©2024 by the American Bar Association. Reproduced with

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Construction Home-Court Statutes: Scope,

Enforcement, and Preemption Under the

Federal Arbitration Act

By Daniel D. McMillan, Michael S. McCauley, and David A. Hecker

Daniel D. McMillan and Michael S. McCauley are partners with Jones Day in Los Angeles. McMillan is

the leader of Jones Day’s global construction practice, which has been recognized by Law360 multiple

times as the Construction Group of the Year. McCauley is a member of Jones Day’s construction practice.

David Hecker is the Group General Counsel–Strategic Resolutions of Kiewit Corp., a Fortune 500

construction and engineering firm, where he is responsible for managing all claims and litigation. The

views and opinions set forth in this article are the personal views or opinions of the authors and do not

necessarily reflect the views or opinions of the firms with which they are associated.

Construction industry participants routinely include forum-selection and choice of law provisions in

their contracts to provide some predictability for any later disputes. A typical construction contract may

require that any dispute arising from the project be litigated or arbitrated in the state where the project

is located, and logically so, given that is where the dispute likely arose and where most of the witnesses

and other evidence are located. Sometimes, however, large contractors or owners with projects in multiple

states may prefer to have their disputes—whether in court or arbitration—pursued in a state other than

where the project is located. Take, for example, a large general contractor specializing in renewable energy

projects headquartered in one state with numerous construction projects throughout the United States.

The contractor may desire to centralize all future litigation or arbitrations arising from its projects in

one state under that state’s law—likely in its corporate home state miles away from most of its projects

spread across the country. This approach also may be favored because the location is more convenient

for corporate representatives and reduces the cost and other burdens that often accompany litigating or

arbitrating in several jurisdictions under a myriad of state laws.

While centralizing litigation or arbitration in one state may be desirable, forum-selection and choice of

law clauses specifying a location or state law other than that where the project is located may conflict

with so-called construction home-court statutes. An increasing number of states have enacted home-court

statutes that generally declare void any contract term requiring that disputes relating to a construction

project be litigated or arbitrated in a state other than where the project is located. Many of these statutes

also make void choice of law clauses specifying the governing law to be that of a state other than that of

the state where the project is located.

States have adopted these statutes frequently in response to intense lobbying efforts by the subcontractor

community, which maintains that local subcontractors should not be required to incur the inconvenience

and expense of traveling outside of the project-state to litigate disputes under a different state’s law.

Those advocating for the adoption of such statutes maintain that forum-selection clauses requiring

local contractors to litigate or arbitrate claims outside the state in which the project is located impose

significant burdens that can render pursuit of legitimate claims uneconomical and impractical and create

unfair leverage, causing subcontractors to abandon or settle otherwise meritorious claims at heavily

discounted amounts.1

Published in The Construction Lawyer Volume 43, Number 4, ©2024 by the American Bar Association. Reproduced with

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This article highlights some of the issues project participants and their counsel should consider when

drafting forum-selection or choice of law clauses that may conflict with construction home-court statutes

and options to deal with such conflicts after a dispute arises, when there is such a conflict.

There are potentially two paths to avoiding the risk of a home-court statute overriding a contractually

selected forum. First, if federal jurisdiction can be established, a federal court is far more likely to enforce

a forum-selection clause that conflicts with a home-court statute and transfer a case to a federal court in

a state specified in the forum-selection clause than a state court. A second way to avoid the operation of

a home-court statute is for the parties to agree to arbitration and expressly indicate in the agreement that

the Federal Arbitration Act (FAA) applies. Several courts have held that the FAA preempts any conflicting

home-court statute that would otherwise void the chosen arbitral forum or choice of law.2

This article is divided into four parts. Part I provides a general overview of the construction home-court

statutes and highlights certain similarities and differences among them. Part II summarizes some of the

more prominent exceptions to these home-court statutes. Part III discusses how federal courts have

applied these statutes and Part IV discusses how state courts have applied these statutes. Finally, Part V

summarizes selected cases holding that, when parties agree to arbitrate their dispute and the FAA applies

to the arbitration clause, a number of federal courts have held that the FAA preempts conflicting home-

court statutes.

Given the significant variation of these statutes and cases from state to state, project participants and their

counsel are well advised to analyze applicable home-court statutes and related caselaw when drafting or

seeking to enforce a forum-selection or choice of law clause different from the state where the project is

located.3 And, importantly, when there is a conflict between a home-court statute and a forum-selection

clause, specifying arbitration under the FAA may afford greater assurance of avoiding such conflict.

I. Overview of Construction Home-Court Statutes

A. Thirty-Two States Have Some Form of a Construction Home-Court Statute

Thirty-two states have enacted home-court statutes applicable to construction contracts. At the end of

this article, at Appendix B., is a map of the United States showing the states that have enacted these

statutes, as well as a table listing the statutes,4 at Appendix A. Construction home-court statutes differ

in some signicant respects but generally declare as unenforceable any provision in a construction

contract that requires litigation or arbitration in a state and/or under the law of a state other than the

state where the construction project is located. In this regard, these statutes limit the freedom of contract

parties typically enjoy when agreeing to forum-selection and choice-of-law provisions, which, as noted

below, are presumptively enforceable save for arguments that a state statute or other state public policy

precludes enforcement; the provision was induced by fraud; enforcing the provision is unconscionable,

unreasonable, or unjust under the circumstances; and other limited arguments.5

Before summarizing the scope of the construction home-court statutes, it is important to recognize that

there are a variety of home-court statutes that have been adopted in addition to those that apply to

construction contracts. Most notably, many states, such as California and Connecticut, have enacted

statutes declaring forum-selection clauses in franchise agreements void under certain circumstances,

relying on the same type of justification as those for construction home-court statutes.6 Numerous states

have enacted similar statutes applicable to consumer leases,7 consumer credit agreements,8 student loan

agreements,9 and other contracts.10 Finally, some states have enacted general home-court statutes that

preclude the enforcement of outbound forum-selection clauses in virtually all contracts, not just those in

construction contracts.11

Published in The Construction Lawyer Volume 43, Number 4, ©2024 by the 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

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B. Terminology: Outbound v. Inbound

Legal scholars have used various terms to refer to home-court statutes and how they operate in relation to

forum-selection clauses. One set of nomenclature refers to outbound and inbound forum-selection clauses.

“An outbound forum selection clause is a contractual provision stipulating that any litigation between the

parties must occur in a forum other than the one in which the suit was led.”12 In contrast, “[a]n inbound

forum selection clause … is a contractual provision stipulating that any litigation must occur in the court

where the suit was led.”13 Under this nomenclature, the same forum-selection clause can operate either as

an “inbound” or “outbound” clause, depending on where the litigation is led.

If, for example, the forum-selection clause provides that a dispute over a project in Texas must be

adjudicated in California and a lawsuit is filed in Texas, a motion to dismiss the case (or transfer, if the

case is in federal court) would result in the clause operating as an outbound clause because a party would

be seeking to defensively push the case out of the state where it was filed. If the situation was reversed and

the plaintiff had filed the case in California as provided by the forum-selection clause and the defendant

sought to have the case dismissed for lack of personal jurisdiction, the clause would then operate as an

inbound clause because it is used offensively to initiate and keep the case in the court in the state specified

in the clause.14 Where there is a home-court statute, the question becomes how that statute operates in

relation to the forum-selection clause and whether it conflicts with the forum specified in the forum-

selection clause.

C. Typical Construction Home-Court Statute

The Illinois construction home-court statute, which voids and makes unenforceable provisions in a

construction contract requiring that disputes be resolved in a state other than where the project is located

or under another state’s law, is fairly typical of these types of statutes and provides:

A provision contained in or executed in connection with a building and construction contract to be

performed in Illinois that makes the contract subject to the laws of another state or that requires any

litigation, arbitration, or dispute resolution to take place in another state is against public policy.

Such a provision is void and unenforceable.15

While the Illinois statute applies to both forum-selection and choice of law clauses, the home-court

statutes of five states apply to one type of clause or the other, but not both. Four of these states—Florida,

South Carolina, Utah, and Virginia—have construction home-court statutes that apply to forum-selection

clauses but not choice of law clauses.16 Colorado stands alone as the only state with a construction home-

court statute that applies to choice of law provisions but not forum-selection clauses.17 With the exception

of these five states, every construction home-court statute applies to both forum-selection and choice of

law clauses similar to the Illinois statute quoted above.

D. Parties and Contracts Subject to Construction Home-Court Statutes

The Illinois construction home-court statute, like most others, generally applies to construction contracts

without any qualication as to the specic type of construction contract or role of the contracting parties.

Some construction home-court statutes, however, limit their application to certain project participants or

types of contracts—for example, only to construction contracts between contractors and subcontractors.

This section summarizes some of the more notable differences among the construction home-court

statutes with respect to the project participants and types of contracts covered.

1. Owners/Contractors/Subcontractors

Some construction home-court statutes explicitly apply to only construction contracts between

contractors and subcontractors. The California construction home-court statute is structured this way