Tennessee Business Litigation

The U.S. Supreme Court held March 31, 2022, that the Federal Arbitration Act (“FAA”) does not allow federal courts to “look through” to the dispute underlying an arbitration to establish jurisdiction to confirm or vacate an arbitration award.

The 8:1 decision by Justice Kagan distinguished the language of FAA Sections 9 (confirmation) and 10 (vacatur).

While the FAA authorizes various petitions for relief, it does not provide a basis for jurisdiction of itself. Thus, a petitioner must establish an independent basis for federal court jurisdiction, whether federal-question or diversity. The court previously held that FAA Section 4 allowed “look-through” jurisdiction for petitions to compel arbitration. Vaden v. Discover Bank, 556 U. S. 49 (2009). The Vaden court wrote: “Under Section 4, a party to an arbitration agreement may petition for an order to compel arbitration in a ‘United States district court which, save for [the arbitration] agreement, would have jurisdiction’ over ‘the controversy between the parties.’” Id. at 62. The court rejected the Fifth Circuit’s reasoning, and Justice Breyer’s dissent, that jurisdictional consistency would better serve the FAA’s purpose, notwithstanding the linguistic dissimilarities of Section 4 versus Sections 9 and 10.

The underlying dispute below involved a wrongful-termination arbitration before FINRA in which the unsuccessful claimant moved to vacate the arbitration panel’s dismissal. The Respondent removed to federal court based on “look-through” federal-question jurisdiction. The District Court confirmed the award and the Fifth Circuit affirmed.

The decision in Badgerow v. Walters, No. 20-1143 (U.S. Mar. 31, 2022) may be found here.