Is Ohio’s Forum Selection Law Enforceable?
Kegler Brown Construction Newsletter May 1, 2002
Ohio adopted a law which, effective on March 22, 2001, mandates that any construction contract clause that requires a party to arbitrate or litigate in another state from where the construction project is located is unenforceable as against public policy. This statute was enacted at the behest of the construction industry in recognition of the non-negotiable and one-sided nature of many contract forms and the perceived unfairness in being forced to incur the high cost to litigate or arbitrate a dispute in a faraway place.
However, a few recent cases out of the 5th and 9th Circuits have held that the Federal Arbitration Act ("FAA") preempts these state laws and renders them unenforceable, offending the public policy behind such forum selection statutes. This issue would appear ultimately headed for the United States Supreme Court.
Unless courts rule otherwise, contractors and subcontractors will not receive the benefit of hard fought forum selection statutes and will have to arbitrate disputes in unfamiliar venues at much greater cost.
Such a result would likely discourage the use of and acceptance of arbitration clauses in certain quarters and encourage an amendment of the FAA to address this issue.