Indiana Law & Business Review

By Andrew J Thompson

Even when a contract applies to improvements on real estate in Indiana, and an Indiana statute protects the venue for a dispute involving real estate in Indiana, the state court of appeals has held that federal law preempts state law, and as a matter of interstate commerce, a contract term requiring arbitration to be held in another state is enforceable, La Salle Group, Inc. v. Electomation, 880 N.E.2d 330 ( Ind. App., 2008).

The holding is a bit unusual in that the state court is deferring to federal preemption even though the issue relating to interstate commerce is a matter of a contract between parties from differing states, yet the subject matter of their agreement involves real estate situated entirely within the boundaries of the state of Indiana. In other words, what is involved is an agreement between parties coming from different places, to work on a fixed parcel of land in Indiana – yet if they have a disagreement, to resolve that disagreement through the engagement of an arbitrator in an entirely different state, and by an arbitrator who is likely unfamiliar with the laws relating to liens and how they can be enforced in Indiana.

With this ruling, it becomes highly likely that in any case where an agreement can be construed to be covered by the Federal Arbitration Act, federal law will be applied in Indiana, the arbitration clause will be enforceable, and the case will be properly dismissed and sent to arbitration. Since the federal act provides broad encouragement for alternatives to litigation, the kinds of contracts that may be covered is virtually endless. Likewise, it does not matter where the arbitration will ultimately occur – only that it is required by the terms of the agreement.

As arbitration is heavily favored under Indiana law, a business owner can count on the enforcement of arbitration provisions, and can discount the prospect of trying to get a jury or judge to decide a case instead.

In fact, under IC 34-57-2-1, an agreement to arbitrate is enforceable under Indiana law, essentially to the same extent it is enforceable under federal law. But even with an enforceable arbitration provision, there are procedural matters only a court of general jurisdiction can adjudicate. The enforcement of an award, for example, is one issue that an arbitration award cannot resolve on its own. Rather, the state may have to be engaged to effect a levy, attachment or other remedy to give the recovering party the opportunity to actually receive what it is entitled to from the award of the arbitrator.

So If You Want to Enforce Arbitration…

If you want to have an arbitration clause enforced after a case has been filed, you will need to have an attorney petition the court to dismiss or refer the case to arbitration. The proper course is for the court to actually dismiss the case if the enforcement of the clause is the primary issue before it – not every judge will do this however, and you and your attorney then have to decide whether to appeal his judgment. The bottom line is that you are likely to prevail on the point of enforcing the clause under the agreement.

Or if You Aren’t Pleased to Arbitrate…

Remember there were good reasons you signed an agreement to go to arbitration in the beginning. It may be best to just prepare your case as best you are able, through your attorney, and let a decision be made. There’s a good chance it will come out as well, if not better, than if you had gone to a trial.

The Thompson Law Office has much experience handling cases that have gone through or must go to arbitration. We routinely draft clauses for our clients to help them make the most of arbitration and stay out of court. If we can help you or your business with a situation relating to arbitration, call us today – (317) 564-4976.