Home court advantage

Editor’s note: This article is for general educational purposes only and does not constitute legal advice.

As a contractor, you need to be familiar with the home court rule of construction. Essentially, this law stipulates any construction disputes must be arbitrated or litigated in the state where the project is located and that state’s laws must be followed. If you are operating in a state with a home court law, it is critical you are aware of its details and limitations.

Which states have it?

Currently, 31 states have home court laws, but the statutes vary. In most states, the forum for litigation must occur in that state and the home state’s laws govern such litigation. However, in four states (Florida, South Carolina, Utah and Virginia), the law stipulates the forum must be in the home state but is not subject to the home state’s laws. In contrast, Colorado calls for the governing state’s law to be followed but does not require the forum be in the home state.

What this means

When construction contracts are drafted, provisions for forum selection and choice of law often are included to give the parties control over where litigation can occur and what rules will govern disputes. However, in states with home court laws, contract provisions requiring arbitration or litigation in another state or per another state’s governance will be declared unenforceable and void. In addition, the home court law may invalidate any provisions stipulating mediation can occur outside the home state.

The exceptions

Although the home court law seems straightforward, some situations call for exceptions. For example, there may be instances when disputes between certain parties (such as a roofing contractor and an architect) fall outside the scope of the home court law. Also, if a project is located on federal property, such as a military base, a state’s home court law should not apply. In addition, if a dispute occurs outside the home state but is in the state contractually stipulated as the preferred forum, the home court law may not be enforced.

Federal arbitration

Several federal courts have ruled the Federal Arbitration Act can preempt home court laws. This means if parties have contractually agreed to submit their disputes to arbitration in a state outside the home state, the home court law cannot void that agreement. Therefore, if parties want to prevent the home court law from invalidating their forum selection clause, they should stipulate in the contract their project involves interstate commerce and any resulting dispute will be arbitrated in keeping with the Federal Arbitration Act.

Advice

The home court law was created with good intentions. Primarily, it came about as a way to protect subcontractors. Advocates argued if subcontractors were forced to participate in litigation or arbitration in other states, subcontractors would incur higher costs and perhaps choose not to pursue legal remedies.

That is a legitimate reason for the law, but there are times when enforcing it is impractical for the parties involved.

It is essential you know which states have home court laws and understand those states’ rules. If all parties agree to litigate disputes in their home state and under that law, they should ensure their contract designates their state as the preferred forum and include language about the home court statute. In contrast, if the parties do not prefer their home state and its laws for litigation, they could choose arbitration under the Federal Arbitration Act to resolve any disputes. If that is the case, the contract should include language about interstate commerce involvement and clearly state the parties’ agreement about arbitration.

The interplay of home court laws with multiparty construction litigation is a subject of many reported case decisions. As you can imagine, whenever an owner, contractor and its subcontractors, manufacturers, design professionals and surety are involved, there may be a fight over venue and forum for dispute resolution. Make sure to pay close attention to venue and choice of law provision in any contract because it could end up saving you litigation costs and potentially provide you with more favorable laws.  

TRENT COTNEY is a partner and practice group leader at the law firm Adams and Reese LLP, Tampa, Fla., and NRCA’s general counsel.