By Mark Kantor
Today is an important day in the US Supreme Court, as the Court agreed for the first time in many years to hear a case on abortion rights. Court watchers will rightly focus extensively on that development.
In far-less significant news, but perhaps of interest to the arbitration community, this morning the U.S. Supreme Court also denied certiorari in Selden v. Estate of Silverman, 20-895, a Federal Arbitration Act case involving (1) whether vacatur on public policy grounds is permitted and (2) the proper standard for “evident partiality” vacatur. The March 2020 Nebraska Supreme Court decision in the matter stands, upholding the confirmation of an arbitration as well as sanctions and attorneys fees.
The Court, however did grant certioraritoday in another FAA case, Badgerow v. Walters, No. 20-1143 (documents available at https://www.scotusblog.com/case-files/cases/badgerow-v-walters/).
The Question Presented in Badgerow is:
Whether federal courts have subject-matter jurisdiction to confirm or vacate an arbitration award under Sections 9 and 10 of the Federal Arbitration Act when the only basis for jurisdiction is that the underlying dispute involved a federal question.
Badgerow is thus a dispute regarding when, if at all, the U.S. federal courts have “federal question” jurisdiction over an FAA confirmation/vacatur dispute. It will accordingly be of primary interest for U.S. litigators seeking a court ruling on whether a local state court or a federal court is the proper forum to decide whether an arbitration award can be confirmed or vacated under the FAA when the underlying arbitration award resolves a question of federal law.
Federal courts are forums of limited jurisdiction. Longstanding jurisprudence holds that the FAA itself does not create federal court jurisdiction. Rather, a party seeking to have a U.S. federal court forum for an FAA-related dispute must find an independent ground for jurisdiction.
The implementing statutes for the New York and Panama Conventions do, however, expressly create federal subject matter jurisdiction for their covered international awards. Consequently, the issue does not arise for those awards.
Badgerow poses the question of whether a federal court may “look through” to see if the underlying subject matter of the arbitration award resolves a “Federal question” and, if the answer is “yes,” take jurisdiction of the case.
The petitioner’s cert petition summarizes the legal issue and circuit split succinctly:
As this Court has repeatedly confirmed, the FAA does not itself confer federal-question jurisdiction; federal courts must have an independent jurisdictional basis to entertain matters under the Act. In Vaden v. Discover Bank, 556 U.S. 49 (2009), this Court held that a federal court, in reviewing a petition to compel arbitration under Section 4 of the Act [failure to arbitrate under agreement; petition to United States court having jurisdiction for order to compel arbitration], may “look through” the petition to decide whether the parties’ underlying dispute gives rise to federal-question jurisdiction. In so holding, the Court focused on the particular language of Section 4, which is not repeated elsewhere in the Act.
After Vaden, the circuit courts have squarely divided over whether the same “look-through” approach also applies to motions to confirm or vacate an arbitration award under Sections 9 and 10. In Quezada v. Bechtel OG & C Constr. Servs. Inc., 946 F.3d 837 (5th Cir. 2020), the Fifth Circuit acknowledged the 3-2 “circuit split,” and a divided panel held that the “look-through” approach applies under Sections 9 and 10. In the proceedings below, the Fifth Circuit declared itself “bound” by that earlier decision, and applied the “look-through” approach to establish jurisdiction. That holding was outcome-determinative, and this case is a perfect vehicle for resolving the widespread disagreement over this important threshold question.
The question presented is:
Whether federal courts have subject-matter jurisdiction to confirm or vacate an arbitration award under Sections 9 and 10 of the FAA where the only basis for jurisdiction is that the underlying dispute involved a federal question.
[Emphasis is in the brief, which can be found here.]
The dispute will likely come up for oral argument before the U.S. Supreme Court sometime in its October Term.
Badgerow is the second arbitration case slated for the new fall term. On March 22, the Court agreed to hear Servotronics Inc. v. Rolls-Royce PLC, et al., No. 20-794, which will examine “[w]hether the discretion granted to district courts in 28 U.S.C. §1782(a) to render assistance in gathering evidence for use in ‘a foreign or international tribunal’ encompasses private commercial arbitral tribunals, as the Fourth and Sixth Circuits have held, or excludes such tribunals without expressing an exclusionary intent, as the Second, Fifth, and, in the case below, the Seventh Circuit, have held.”
Argument dates for both cases are expected this summer.
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Mark Kantor is a member of CPR-DR’s Panels of Distinguished Neutrals. Until he retired from Milbank, Tweed, Hadley & McCloy, he was a partner in the firm’s Corporate and Project Finance Groups. He currently serves as an arbitrator and mediator. He teaches as an Adjunct Professor at the Georgetown University Law Center (Recipient, Fahy Award for Outstanding Adjunct Professor). He also is Editor-in-Chief of the online journal Transnational Dispute Management. He is a frequent contributor to CPR Speaks, and this post originally was circulated to a private list serv and adapted with the author’s permission.