The Rule SCOTUS Applies To Petitions To Confirm Or Vacate Is Different Than The Rule It Applies To Motions To Compel Arbitration.
In an 8-1 decision, Justice Elena Kagan, writing for the court majority, explains that federal courts, when determining whether federal jurisdiction exists to decide a petition to vacate an arbitration award, should not look to the underlying dispute. Badgerow v. Walters et al, No. 20-1143 (S.Ct. 3/31/22). This is different from the jurisdictional approach taken by SCOTUS when a motion to compel arbitration is brought in federal court under the Federal Arbitration Act, 9 USC § 4. Vaden v. Discover Bank, 556 U. S. 49 (2009).
In Vaden, the court explained that a motion to compel arbitration was brought under a statutory provision that required the court to look at the underlying dispute, based on the statutory language of § 4. The first sentence of that section provides: "A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court which, save for such agreement, would have jurisdiction under title 28, in a civil action or in admiralty of the subject matter of a suit arising out of the controversy between the parties, for an order directing that such arbitration proceed in the manner provided for in such agreement." (italics added). The court interpreted the "save for" language to mean that the court analyzed jurisdiction as if an arbitration agreement did not exist, and therefore looked instead at whether there was a basis for federal jurisdiction, e.g., diversity jurisdiction or a federal question. Merely because the FAA is invoked does not mean there is a basis for jurisdiction.
Badgerow v. Walters was a wrongful employment case in which the employee Badgerow brought a lawsuit for unlawful termination against her employer in state court. She received an adverse award and moved in state court to vacate the award. The employer removed the case, which had included federal claims in the arbitration, to federal court, Badgerow sought to remand. Assessing its jurisdiction under the Vaden analysis, the district court held on to jurisdiction, and it was affirmed by the court of appeals. However, Justice Kagan saw the matter differently, because the provisions of the FAA governing motions to confirm and vacate an award (§§ 9 & 10) do not include "save for" language and do not necessitate looking at the underlying dispute to determine whether jurisdiction exists. On its face, the application to the district court did not establish federal jurisdiction.
COMMENT: This is an 8-1 decision, with only Justice Stephen Breyer dissenting. There is a boring slab of business-as-usual cases in which the Supreme Court does its work without brouhaha. This case is one example.
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