Federal Arbitration Act Preempts Pennsylvania Payment Act

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Attorney Wally Zimolong discusses Bauguess Electrical Services, Inc. v. Hospitality Builders, Inc.

June 15, 2020
Wally Zimolong - Supplemental Conditions

I am back. It feels like an entirety since I last posted. But a hellacious trial schedule got me off the blogosphere for some time. Plus, there was nothing to write about.

But I am back with a bang thanks to a decision from the Eastern District of Pennsylvania concerning the interplay of a forum selection clause appearing in an arbitration clause in a construction contract and the Pennsylvania Contractor and Subcontractor Payment Act. In Bauguess Electrical Services, Inc. v. Hospitality Builders, Inc., the federal court (Judge Joyner) ruled that the federal arbitration act preempted the Payment Act’s prohibition on forum selection clauses and held that an arbitration must proceed in South Dakota even though the construction project were the work was performed was located in Pennsylvania.

The Payment Act applies to all commercial construction projects performed in Pennsylvania. As some you might know, Section 514 of the Payment Act, 73 P.S. 514, prohibits choice of law and forum selection clauses. It states “[m]aking a contract subject to the laws of another state or requiring that any litigation, arbitration or other dispute resolution process on the contract occur in another state, shall be unenforceable.” Therefore, if a construction contract is for a project located in Pennsylvania, Pennsylvania law must apply and all disputes must be adjudicated in Pennsylvania.

Mr. Zimolong may be contacted at wally@zimolonglaw.com



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