Federal Court Holds the Federal Arbitration Act (FAA) Preempts Louisiana’s Arbitration Restrictions in Construction Contracts under La. R.S. 9:2779
Authors: Christopher K. LeMieux and Jennifer Mura
In CSRS LLC et al. v. Element 25 Limited, the U.S. District Court for the Middle District of Louisiana considered whether Louisiana Revised Statute 9:2779, which invalidates out-of-state arbitration clauses in construction contracts, could override an arbitration agreement governed by the Federal Arbitration Act (FAA) and the New York Arbitration Convention (the “Convention”).
The Court first confirmed that there was an arbitration agreement contained within the construction contract. However, the plaintiff challenged its enforceability under La. R.S. 9:2779, arguing the agreement was null and void because it required arbitration to take place in London, England. Under La. R.S. 9:2779, any provision in a construction contract requiring arbitration to be brought in a forum or jurisdiction outside of Louisiana is deemed “null and void and unenforceable as against public policy.”
Relying on Fifth Circuit precedent, the Court reaffirmed that La. R.S. 9:2779 is preempted by the FAA. Specifically, in OPE Int’l LP v. Chet Morrison Contractors, Inc., the Fifth Circuit ruled that La. R.S. 9:2779 conflicts with Section 2 of the FAA because it imposes additional conditions on arbitration agreements such as selecting a Louisiana forum which does not apply to contracts generally. Since the FAA mandates that arbitration agreements be enforced according to their terms, the FAA overrides the state court restrictions in La. R.S. 9:2779. The Court further determined that the Convention, which encompasses Chapter 2 of Title 9 of the FAA, also preempts La. R.S. 9:2779. The Court reasoned that allowing a state law to override an international arbitration agreement would contradict prior U.S. Supreme Court rulings and undermine the uniform enforcement of arbitration agreements under federal law.
As a result, the Court granted the motion to compel arbitration, reaffirming that the FAA preempts La. R.S. 9:2779. This decision emphasizes the enforceability of arbitration clauses in certain Louisiana construction contracts and reinforces federal law’s supremacy over state law-imposed restrictions and conditions on arbitration agreements. The Court’s ruling eliminates arbitration protections afforded to Louisiana contractors under LA. R.S. 9:2779, preventing contractors from using the statute to require that arbitration be held in Louisiana and pursuant to Louisiana law. As a result, Contractors can be required to travel out of state for arbitrations and have arbitrations determined under out-of-state law.
