Construction Law Ed.
October 2025 Supreme Court Term
While the U.S. Supreme Court now rarely accepts cases involving discrete construction law issues, it often issues opinions with important implications for construction industry disputes. Several decisions from the October 2025 term fall in this category. Not surprisingly, some address arbitration procedures. Others resolve questions relating to contracts or federal civil procedure.
Arbitration Decisions
In Jules v. Andre Balazs Properties, 146 S. Ct. 1209 (2026), a unanimous Court held that a federal court that granted a motion to stay a suit on a federal claim (there, an employment discrimination claim) pending arbitration retained jurisdiction over post-arbitration proceedings. “Because a federal court in this scenario has jurisdiction over the original claims and does not lose that jurisdiction while the case is stayed pending arbitration, it retains jurisdiction to determine whether the arbitral award resolving those claims is valid and should be confirmed.” Id. at 1214-15. The opinion distinguishes a situation, such as the one then before the Court, in which the motion to compel arbitration was filed in a pre-existing lawsuit, from one involving a “freestanding” motion. That second category refers to a motion filed apart from a pre-existing lawsuit. Examples of the freestanding variety include a motion filed to compel arbitration before any lawsuit has commenced or a motion filed after the parties have commenced arbitration that seeks the court’s assistance on a procedural right, such as an order enforcing a subpoena or confirming or vacating an arbitration award.
Another unanimous decision, Flowers Foods, Inc. v. Brock, 146 S. Ct. 1358 (2026), held that a worker who transported products for a bakery company which distributed its products nationwide from facilities located in 19 states was engaged in interstate commerce even though the worker himself did not cross state lines or even interact with a vehicle that did. As a result, the worker qualified under the Federal Arbitration Act provision exempting workers engaged in interstate commerce from being compelled to arbitrate certain disputes. In transporting the products in question solely within one state, the worker was participating a process of “continuous carriage” in interstate commerce. Id. at 1364. The decision is the latest in a line of Supreme Court cases rejecting efforts “to cabin” the scope of the exemption. Id. at 1363. The decision’s application within the construction industry context may well vary depending on the circumstances of the specific delivery chain involved, but one can easily imagine circumstances that would qualify for the continuous carriage analysis.
In a third unanimous decision involving arbitration, Waetzig v. Halliburton Energy Services, Inc, 145 S. Ct. 690 (2026), the Court held that a plaintiff who filed a case in federal court and then voluntarily dismissed it without prejudice to proceed in arbitration could properly later move under the Federal Rules of Civil procedure to reopen the case to seek to vacate the arbitration award. Aside from resolving a conflict among the Cours of Appeal, this case has limited significance because the normal, and more prudent, course of action would have been for the plaintiff to file a motion to stay the proceedings pending arbitration. As the District Court commented in granting the motion, the plaintiff “committed a ‘careless mistake’ when he voluntarily dismissed his case instead of moving for a stay pending arbitration or administratively closing the case.” Id. at 309.
Contract Decisions
Geo Group, Inc. v. Menocal, 146 S. Ct. 774 (2026) held that the government contractor defense merely creates a potential defense to liability on the merits of a claim and does not grant a government contractor immunity from suit. Under the government contractor defense. “a federal contractor cannot be held liable for conduct that the Government has lawfully ‘authorized and directed’ the contractor to perform. Rather, liability may attach only if the authorization was unlawful or if the contractor acted outside its scope.” Id. at 779-80. While the case involved operation of a private detention facility operated under a contract with U.S. Immigration and Customs Enforcement (the plaintiff asserted forced labor allegations), the case establishes the general principle that a government contractor cannot bring an immediate appeal of an unfavorable pretrial order denying the defense but must, instead, contest that order after a final judgment. Justices Thomas and Alito filed concurring opinions.
Kousisis v. United States, 145 S. Ct. 1382 (2025), holds that a painting contractor could be convicted of federal wire fraud for falsely representing that it would secure supplies from a disadvantaged business enterprise. The Court rejected the argument that conviction would require evidence that the contractor intended to cause economic harm to the victim, a state department of transportation. Justices Thomas, Gorsuch, and Sotomayor filed concurring opinions.
In Hencely v. Fluor Corp., 146 S. Ct. 1086 (2026) a divided court rejected a federal preemption defense to a state-law tort claim against a federal military contractor. The plaintiff (an Army Specialist at the time of his injury) based his tort claim on conduct that “was not authorized by, but was even contrary to, federal instructions.” Id. at 1086.
The unanimous decision in Wisconsin Bell, Inc. v. United States ex rel. Heath, 145 S. Ct. 498 (2025), holds that reimbursement requests made under a federal program qualify as claims under the federal False Claims Act even when the government merely acts as an intermediary rather than as the direct payor. The federal program subsidized costs of internet services for schools and libraries by drawing on a pool of funds created in part by fees collected from telecommunications carriers under a federal regulation and in part by federal Government contributions. While the case only involves claims under that specific program in the telecommunications industry, the decision arguably evidences an expansive view of a “claim” subject to the False Claims Act. Justices Thomas, Kavanaugh, and Alito joined in concurring opinions.
Federal Civil Procedure
Berk v. Choy, 146 S. Ct 546 (2026), holds that a state law requiring a plaintiff wishing to commence a medical malpractice suit to attach to the complaint an “affidavit of merit” does not apply to a case otherwise properly filed in federal court (such as under diversity jurisdiction). The Court reasoned that the condition precedent conflicted with the minimal pleading requirements established by the Federal Rules of Civil Procedure. Justice Jackson wrote a concurring opinion that articulated an alternative analysis of the precise procedural rules giving rise to the conflict. In the construction industry context, the Court’s interpretation of the Federal Rules of Civil Procedure should apply as well to similar requirements that state law may impose with respect to malpractice claims against design professionals. It remains to be seen whether the case may allow plaintiffs in federal court to evade other state laws imposing conditions precedent on the assertion of state-law claims. For example, might the Court’s reasoning also apply to state laws requiring a plaintiff in a construction defect case to give the builder notice of the alleged defects and an opportunity to cure before filing suit? Several states impose such requirements in residential construction defect cases. Because the decision in Berk v. Choy only expressly addresses conflicts in state and federal pleading requirements, the opinion does not create a broad exception to state laws that subject claims to conditions precedent.
Spring 2025
A movement may be afoot to impose malpractice liability on design professionals who fail to take into account climate change risks. “Climate change advocates are already stating that design professionals and others in the construction and engineering industry must adapt to climate change and consider climate change issues in connection with the services they deliver. If that attitude represents a new standard of care, then the ramifications could be profound.” So states Josh M. Leavitt, of the Much Shelist law firm, in a PE Magazine article, (Thoughts on an Emerging Standard of Care Regarding Climate Change)
The standard of care for design professionals certainly evolves with developments in knowledge, skill, and accepted practices. It is not yet clear whether the state of the art in the design professions is approaching a level of awareness and experience relating to climate change and sustainable design and construction that may lead to a new standard of care requiring engineers and architects to furnish design services and advice to their clients that incorporate strategies and technologies for adapting to climate change. According to Leavitt, however, the evidence points to “building blocks” for a changing standard of care. Among other factors, he notes the growing number of firms offering “resiliency services,” the attention generated by extreme weather events, promulgation of carbon emission standards, and increasing pronouncements from professional associations about the need to adopt climate change policies.
Construction lawyers may soon need to address whether the time has come when a design professional could be held liable for failing to provide designs, advice, and other services that address the risks that climate change pose for a specific project. Indeed, cases may already be in the litigation pipeline.
Under what circumstances does a commercial general liability policy afford coverage for property damage attributable to defective construction? For construction law professors, this issue stands out as a gift that keeps on giving, as the flow of judicial opinions continues. The reported cases present many complications, in part because of variations in policy provisions, exclusions, and exceptions and in part due to conflicting judicial interpretations of those provisions. For example, what is “property damage,” what is an “occurrence,” and when is loss or damage “accidental” as those terms are used in a CGL policy?
Four cases included in recent installments of Westlaw’s Construction Contracts Law Report demonstrate that lawyers for insureds continue to test the limits of the most fundamental principle on this issue—that a CGL policy does not afford coverage for defective work itself. These four opinions, admittedly representing somewhat random examples of current litigation on this complex topic, address that basic principle in a range of circumstances. At least for construction lawyers not steeped in the history, nuances, and jurisdictional variations involved, whether a CGL policy may afford coverage for property damage arising out of defective construction remains truly puzzling. In the future, perhaps some answers may become clearer as insurance industry forms and practices evolve further, and as cases in the pipeline continue to work their way through the courts. It seems, however, that we are not there yet.
In Lessard v. R.C. Havens & Sons, Inc., 241 N.E.3d 744 (Mass. App. Ct. 2024), a homeowner sued the builder over construction defects that caused water intrusions and cracks in walls. The jury awarded the homeowner over $270,000 in damages. The court affirmed summary judgment for the builder’s CGL insurer, holding “that construction defects, standing alone, do not constitute property damage within the meaning of a commercial general liability policy.” 241 N.E.3d at 746. The homeowners argued that the construction defects caused damage to property other than the construction work itself by causing cracks in walls and water damage. The court concluded, however, that the evidence only established costs incurred to correct the defective construction work itself and not any costs to repair distinct property damage.
Westchester Modular Homes of Fairfield County, Inc. v. Arbella Protection Ins. Co., 312 A.3d 1118 (Conn. App. Ct. 2024) also involved defects in residential construction. In affirming summary judgment for the insurer, the court noted that, at most, the homeowner was alleging that the construction defects resulted in the presence of water, but not in water damage. For purposes of coverage under a CGL policy, evidence of “defective work that, if not remedied, could lead to property damage in the future” is not sufficient to show “property damage” unless the defective construction has caused damage to non-defective property. 312 A.3d at 1128-29.
The other two cases in this series apply Illinois law. In the first of these, the Illinois Supreme Court clarified some fundamental principles governing coverage under a CGL policy. Acuity v. M/I Homes of Chicago, LLC, 234 N.E.3d 97 (Ill. 2023). The dispute stemmed from claims of construction defects in a townhouse project that allegedly resulted in damage to the completed project due to water intrusions and moisture. Following completion of the project and the sale of the individual living units, the owners’ association sued the successor to the original general contractor and developer. The plaintiff alleged damage caused entirely by defective materials and work provided and performed by the defendant’s subcontractors including “damage to other building materials, such as windows and patio doors, including but not limited to water damage to the interior of units.” 234 N.E.3d at 101. The defendant claimed coverage under a CGL policy issued to one of the subcontractors and under which the defendant was an additional insured.
The court held that under Illinois law “property damage that results from inadvertent faulty work can be caused by an “accident” and therefore constitute an “occurrence” for purposes of the initial grant of coverage under the insuring agreement.” 234 N.E.3d at 108. Although the court rejected the insurer’s argument that the allegations related to the defective construction of the project itself and not damage to other property, the opinion left some important related questions unresolved. The court concluded that further proceedings at the trial level were required to consider the impact of certain exclusions and exceptions to exclusions under the policy. One of the contested exclusions withdrew coverage for damage to property requiring repair due to the insured’s own work, unless coverage was restored by an exception for damage included in the “products-completed operations hazard;” another contested exclusion related to damage to the insured’s work unless such damage was performed on the insured’s behalf by a subcontractor. 234 N.E.3d at 109. The second of these, involving the frequently litigated “subcontractor exception,” suggested further complications because the defendant general contractor sought coverage as an additional insured under a CGL policy issued to one of its subcontractors. The court left it to the trial court on remand to disentangle the exclusion-exception complications.
The other case applying Illinois law addressed whether CGL policies afforded coverage for liability the general contractor incurred to the project owner resulting from a sub-subcontractor’s defective work. St. Paul Guardian Ins. Co. v. Walsh Constr. Co., 99 F.4th 1035 (7th Cir. 2024). The insured was a sub-subcontractor that fabricated and installed steel columns for a canopy and curtain wall system at O’Hare International Airport. The general contractor was an additional insured under that policy. The property damage at issue concerned cracks in welds in the sub-subcontractor’s steel work. The Seventh Circuit affirmed the district court’s determination that the policies provided no coverage because the subcontractor’s defective work did not actually damage property beyond the steel elements the insured subcontractor manufactured. In other words, the allegations involved defective work that merely created a risk that property damage might occur in the future.
July 2024
In Loper Bright Enterprises v. Raimondo, decided on June 28, 2024, the U.S. Supreme Court overruled Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837 (1984). The decision, involving a rule promulgated by the National Marine Fisheries Service, marks a monumental change in federal administrative law. While the “Chevron Doctrine” is not itself a matter of construction law (I do not routinely cover the doctrine in my courses), participants in the construction industry should take note of the case because of the many federal regulations to which they are subject.
Chief Justice Roberts, writing for the majority in this 6-3 decision, explained that the now-defunct doctrine established a “framework to interpret statutes administered by federal agencies.” Under Chevron, if ‘the statute is silent or ambiguous with respect to the specific issue’ at hand, the court must . . . defer to the agency’s interpretation if it ‘is based on a permissible construction of the statute.’”
Roberts summarized the new standard in the opinion’s penultimate paragraph:
“Courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority, as the APA [the Administrative Procedures Act] requires. Careful attention to the judgment of the Executive Branch may help inform that inquiry. And when a particular statute delegates authority to an agency consistent with constitutional limits, courts must respect the delegation, while ensuring that the agency acts within it. But courts need not and under the APA may not defer to an agency interpretation of the law simply because a statute is ambiguous.”
This term, the U.S. Supreme Court decided two cases (neither arising out of a construction industry dispute) that interpret narrow aspects of the FAA.
The case most likely to impact construction contracts is Smith v. Spizzirri, 144 S. Ct. 1173 (2024), decided on May 16. The delivery drivers who brought the case asserted violations of federal and state employment laws. Justice Sotomayor’s opening paragraph in her brief opinion for the unanimous Court tells the essential story: “The Federal Arbitration Act (FAA) sets forth procedures for enforcing arbitration agreements in federal court. Section 3 of the FAA specifies that, when a dispute is subject to arbitration, the court “shall on application of one of the parties stay the trial of the action until [the] arbitration” has concluded. 9 U.S.C. § 3. The question here is whether § 3 permits a court to dismiss the case instead of issuing a stay when the dispute is subject to arbitration and a party requests a stay pending arbitration. It does not.”
The opinion’s penultimate paragraph provides a similarly concise explanation of what may be the holding’s chief practical significance: “staying rather than dismissing a suit comports with the supervisory role that the FAA envisions for the courts. The FAA provides mechanisms for courts with proper jurisdiction to assist parties in arbitration by, for example, appointing an arbitrator, see 9 U.S.C. § 5; enforcing subpoenas issued by arbitrators to compel testimony or produce evidence, see § 7; and facilitating recovery on an arbitral award, see § 9. Keeping the suit on the court’s docket makes good sense in light of this potential ongoing role, and it avoids costs and complications that might arise if a party were required to bring a new suit and pay a new filing fee to invoke the FAA’s procedural protections. District courts can, of course, adopt practices to minimize any administrative burden caused by the stays that § 3 requires.”
The second case, decided on May 23, is Coinbase, Inc. v. Suski, 144 S. Ct. 1186 (2024), which involved two contracts between the parties. The first (a user agreement for a cryptocurrency exchange platform) contained an arbitration provision specifying that an arbitrator should decide any dispute over whether a particular matter was arbitrable. The second contract (governing participation in a cryptocurrency sweepstakes) included a forum selection clause, specifying that all disputes related to that contract should be decided in California state or federal courts. Justice Jackson’s opinion for the Court provides this summary: “Coinbase insists that the first contract’s delegation clause established the terms by which all subsequent disputes were to be resolved, so the arbitrability of a contract-related dispute between these parties is a matter for the arbitrator to decide. But respondents maintain—and the Ninth Circuit held—that the second contract’s forum selection clause superseded that prior agreement. This case thus presents the following question: When two such contracts exist, who decides the arbitrability of a contract-related dispute between the parties—an arbitrator or the court?”
The Court affirmed the Ninth Circuit’s decision, relying on the logical basis that because arbitration is matter of contract, these conflicting dispute resolution provisions in related contracts presented a question of contract interpretation for a court to decide under contract law principles. This decision was also unanimous, although Justice Gorsuch filed a concurring opinion to express his view that the affirmance should not be read as endorsing all aspect’s of the Ninth Circuit’s reasoning and analysis.
Construction industry cases are beginning to reflect the U.S. Supreme Court’s decision in Students for Fair Admissions, Inc. v. Pres & Fellows of Harvard College, 600 U.S. 181 (2023). Applying strict scrutiny under the Equal Protection Clause, the Court held that race-conscious affirmative action admissions criteria at Harvard College and The University of North Carolina were unconstitutional.
One of the most recent cases of interest to the construction industry is Nuziard v. Minority Business Development Agency, 2024 WL 965299 (N.D. Tex. Mar. 5, 2024). That case involved a program of the Minority Business Development Agency pursuant to the federal Infrastructure Act. The Construction Litigation Reporter summarizes the holding concisely: “A federal program created under the Infrastructure Act of 2021, to provide assistance to socially or economically disadvantaged individuals presumptively defined as specific racial or ethnic groups, but not including white-owned businesses, violates the Fifth Amendment’s Equal Protection Clause and is permanently enjoined.” 45 No. 5 Construction Litigation Reporter NL 16. In another application of the Students for Fair Admissions case, a court enjoined use of a “‘rebuttable presumption’ of social disadvantage for certain minority groups to qualify them for inclusion in a federal program that awards government contracts on a preferred basis to businesses owned by individuals in those minority groups.” Ultima Servs. Corp. v. U.S. Dep’t of Agric., No. 220CV00041DCLCCRW, 2023 WL 4633481, at *1 (E.D. Tenn. July 19, 2023).
Such cases could have profound impacts on affirmative action programs that federal, state, and local governments use for awarding contracts—and not only for public projects but also for private projects that benefit from government funding. At a minimum, governmental agencies need to reassess their affirmative action programs based on the Supreme Court’s analysis in the Students for Fair Admissions case.
Construction industry participants and their lawyers will find many reasons to take note of the federal Inflation Reduction Act, passed in 2022. Among other things, the IRA offers incentives for greener construction projects. For example, it provides several billion dollars for spending on “low-carbon” materials for certain federal projects, which can include both new construction and renovations. Low-carbon materials include all materials that have “substantially lower levels of embodied greenhouse gas emissions associated with all relevant stages of production, use, and disposal.” This focus on “low-carbon” materials is part of a broader initiative by the Biden administration to reduce the construction industry’s demand for steel, concrete, asphalt, and flat glass, which the administration cites as accounting for one-sixth of total U.S. greenhouse gas emissions.
Here are two technological developments attracting the attention of construction lawyers. Both can benefit from artificial intelligence. Of course, AI holds a much broader array of promises and perils for the industry.
Animations in Dispute Resolution Proceedings: In a wide range of cases, experts are preparing 4D animations (the fourth dimension being time) to replace or supplement traditional 3D trial graphics. For example, with the help of advanced forms of scheduling and design software, forensic delay claim analysists are increasingly using animations to illustrate their analysis and conclusions about the causes and consequences of project delays, which they can play out over a timeframe coordinated with the expert’s report. Because they can serve to simulate the expert’s version of highly complex matters of cause and effect, animations can be powerful and persuasive tools in construction delay disputes. With the emerging popularity of animations to explain forensic delay claim analysis, construction lawyers will increasingly need to address new questions under the rules of evidence.
Payment Management Systems: Innovations in payment management systems can impact payment procedures in industry contracts. One popular system is Oracle’s Textura, which automatically generates invoices, manages payment approvals, and facilitates digital lien waivers, among other things. A principal challenge for lawyers is to understand such processes well enough to advise clients about potential conflicts between contractual requirements and how these systems manage the payment process. This can be especially complex when steps in the automated programs conflict with state prompt payment or lien laws.
New prevailing wage standards and regulations: The federal Davis-Bacon Act, along with related regulations, requires employers to pay “prevailing wages” for certain projects. Recent regulatory changes, some stemming from the federal Inflation Reduction Act, include the process for determining the prevailing wage for a project, an expanded definition of “prime contractor,” and new guidance for apprenticeship. Under related provisions of the Internal Revenue Code and Regulations, taxpayers may earn federal income tax credits associated with prevailing wage and apprenticeship requirements.
Build America Buy America Act: Enacted as part of the federal Infrastructure Investment and Jobs Act in 2021, this legislation establishes a domestic content procurement preference for new, federally assisted infrastructure projects. The procurement preferences directly concern iron, steel, manufactured products, and construction materials used in covered infrastructure projects.
Revisiting Diversity, Equity, and Inclusion programs: In response both to recent cases challenging affirmative action programs and state law developments, many companies are reviewing their DEI initiatives.
The Corporate Transparency Act: Enacted into law as part of the National Defense Authorization Act for Fiscal Year 2021, this law requires many businesses to report information about their beneficial owners. The goal is to combat money laundering, terrorist financing, corruption, tax fraud, and other illicit activity,
The increasing use of joint ventures in the industry requires lawyers to refine legal risk management and risk allocation practices. Lawyers are also reassessing the professional complications they face when asked to represent the joint venture while also representing one of the members of the venture.
In this arena, legal counsel currently have been advising their clients more and more about two topics—wage theft and human trafficking, which can intersect with international, federal, and state laws and regulations.
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