Two issues in modern construction law

By Steve Smith

There are two issues confronting the construction lawyer today that clearly have an impact upon everyone in the business of construction. The first is a case known simply as Alley Cat, which has had a significant impact upon the enforcement of arbitration clauses in construction contracts. Alley Cat stands for the proposition that unless the arbitration clause itself contains language stating that the arbitration must take place in the Commonwealth of Kentucky, the clause is void, and no arbitration decision will be enforced in Kentucky courts. When both parties agree to go forward with the arbitration, it is a simple matter to enter into a revised arbitration agreement and move forward. The problem arises when one of the parties objects to the arbitration and wants to go to court. Based upon experience in local courts, that move will be supported (unless the clause itself contains the “magic words”), requiring the arbitration to be held in the Commonwealth of Kentucky. We at Goldberg Simpson encourage each of our clients who require in their contracts that arbitration be the method of dispute resolution under their contracts to revise them to make sure that the “magic language” is present. We can help with that modification if any help is needed.

The second issue is one which is having ramifications all around the industry. As more and more contract disputes are being resolved through various alternative dispute resolution (ADR) techniques, a smaller number of cases are finding their way to the courts. Without a significant number of cases being adjudicated, there are less published cases resulting from judicial decision. Without a court’s interpretation of various laws and government regulations, the construction lawyer is left without much guidance in interpretation. As an example, standard form contracts have their value in the considerable interpretation applied to the language in the contract from years of judicial interpretation. Many of the standard form contracts have been revised in recent years. But very few cases are making their way to the Court of Appeals or state Supreme Courts, which leads to a lack of judicial guidance for construing the new contractual language.

Arbitrations, by definition, are confidential. Therefore, even though an arbitration panel may render a solid, well-reasoned opinion on a controversial clause in a contract, that opinion will not be published or circulated in the legal community. We are left without much guidance in the interpretation of many of these new contracts.

This is a problem shared by all of us in the construction community, and a problem which will have no easy resolution in the near future.