The Federal Arbitration Act preempts an Indiana statute's prohibition on arbitration of real estate improvement disputes at a location outside the state, according to the Indiana Court of Appeals.

In LaSalle Group, Inc. v. Electromation of Delaware County, Inc., No. 18A02-0705-CV-397, 2008 WL 344098 (Ind. Ct. App. Feb. 8, 2008), subcontractor Electromation entered into a construction contract with contractor LaSalle. The contract provided that disputes would be resolved by arbitration or litigation in Michigan at LaSalle's sole discretion.

After a dispute arose, LaSalle attempted to compel arbitration of the dispute in Michigan. The trial court denied the motion, holding that it was void under Ind. Code § 32-28-3-17, which voids any provision in a contract for the improvement of Indiana real estate that requires arbitration or litigation of disputes outside the state.

According to the Court, other courts that have considered similar statutes attempting to limit provisions for arbitration outside the state have held them to be preempted by the Federal Arbitration Act (FAA). Like those similar statutes, Ind. Code § 32-28-3-17 does not apply to "any" contract, but only applies to arbitration forum selection in certain real estate contracts. Therefore, enforcing the Indiana statute would impermissibly frustrate the intent of the FAA to uphold the enforceability of arbitration agreements in contracts that involve interstate commerce, such as LaSalle's construction contract.