Supreme Court Limits Federal Jurisdiction to Uphold or Void Arbitral Awards

March 31, 2022

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Decided on March 31, 2022

Badgerow v. WaltersNo. 20-1143

Today, the Supreme Court ruled 8-1 that federal jurisdiction to affirm or vacate an arbitration award under Sections 9 and 10 of the Federal Arbitration Act must exist regardless of the underlying controversy. that is, the courts cannot “examine” the underlying dispute. establish federal jurisdiction in this area.

Context: Under the Federal Arbitration Act (FAA), a party to an arbitration agreement can ask a federal court to confirm or vacate an arbitration award. 9 USC §§ 9, 10. A Louisiana resident commenced arbitration against her Louisiana employer, alleging unlawful termination under federal and state law. After the arbitrators dismissed the claims, the plaintiff sued to have the arbitration award set aside. The defendant returned the case to federal court based on the underlying federal employment claims and asked the court to affirm the arbitrators’ decision. The Fifth Circuit held that the Federal Court had jurisdiction to “consider” the plaintiff’s motion to the underlying federal employment claims.

Publish: Do federal courts have subject matter jurisdiction to affirm or vacate an arbitration award under Sections 9 and 10 of the Federal Arbitration Act when the sole basis of jurisdiction is that the underlying dispute involved a federal matter ?

Court attire: No. Federal jurisdiction to affirm or set aside an arbitration award must exist regardless of the underlying controversy, and it is not sufficient for federal jurisdiction that the underlying claim that the parties arbitrated arose under federal law.

“Congress has made its call. We will not impose uniformity on non-uniform jurisdictional rules of law.

Justice Kagan, writing for the Court

What this means:

  • Today’s decision resolves a divided circuit on whether the Court’s decision in wanderer v. Discover the Bank556 US 49 (2009) – which held that federal courts should consider underlying claims to determine whether they have jurisdiction over a claim for constrain FAA Section 4 Arbitration – applies to claims to confirm Where leave arbitral awards under Articles 9 and 10 of the FAA.
  • The Court ruled that wandererit’s The “search through” approach was based on textual clues unique to Section 4, which Congress did not include in Sections 9 and 10. Therefore, the Court declined to extend wanderer in Articles 9 and 10.
  • The Court’s decision that the “look through” approach is limited to Section 4 petitions means that federal courts will not have jurisdiction over many Sections 9 and 10 petitions. unless there is a federal issue on the face of the petition, or total diversity between the parties and the amount of the arbitration award exceeds $75,000, federal courts are not likely to have jurisdiction over motions for confirmation or annulment of an arbitral award.
  • The Court’s decision does not extend to the enforcement of international arbitral awards under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, as the FAA independently confers federal jurisdiction over such matters.
  • The decision demonstrates the Court’s commitment to applying the laws as they are written. The Court declined to allow political concerns to override Congress’ “obvious choice” to “respect the ability of state courts to properly enforce arbitral awards.” By contrast, Judge Breyer, writing in dissent, acknowledged that he was looking beyond the “literal words of the law” to its “objectives” and “likely consequences” flowing from a non-uniform approach to assessment. jurisdiction over claims filed under the FAA.

The Court’s opinion is available here.

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Related Practice: International Arbitration

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