In most countries, it is uncontroversial that a court sitting at the situs of an arbitration has jurisdiction to adjudicate a petition to confirm or vacate or modify an award issued in that arbitration. In the United States federal courts, however, the mix of issues concerning subject matter jurisdiction and personal jurisdiction, respectively, has made for bewilderment galore.
Thus, the question of federal jurisdiction over petitions to confirm, vacate or modify an arbitration award under the Federal Arbitration Act (“FAA”) is an apparently fertile ground for befuddlement. There is a diversity of views among the Circuit Courts, as the Third, Seventh, and D.C. Circuits plow in one direction and the Second and First Circuits plow in another, and the Supreme Court is unable, as a practical matter, to promptly resolve such splits among the Courts of Appeal.
The controversy stems from (i) the requirement that a federal court must have subject matter jurisdiction in order to entertain a petition under the FAA to confirm or vacate or modify an arbitration award, 9 U.S.C. § 9-11, and (ii) the principle that the FAA itself does not provide a basis for federal question jurisdiction, e.g., Vaden v. Discover Bank, 556 U.S. 44, 50 (2009) (the FAA “requir[es] [for access to a federal forum] an independent jurisdictional basis” over the parties’ dispute”) (quoting Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 582 (2008)). Diversity jurisdiction under 28 U.S.C. § 1332 would suffice as a basis for subject matter jurisdiction. See, e.g., Discover Bank v. Vaden, 489 F.3d 594, 599 n.2 (4th Cir. 2007) (“were diversity jurisdiction to exist, this alone would be sufficient to confer federal jurisdiction [for FAA § 10 purposes].”). But, absent diversity jurisdiction, a petitioner must show federal question jurisdiction under 28 U.S.C. § 1331. How to do that when all he/she is asking the federal court to do is to confirm an arbitration award?
Federal “Look Through” Jurisdiction – The Vaden Influence (Second and First Circuits)
In 2009, the U.S. Supreme Court adjudicated an analogous question regarding the subject matter jurisdiction of a federal court regarding a motion to compel arbitration under FAA § 4. (9 U.S.C. § 4) In Vaden v. Discover Bank, 556 U.S. 49, 62 (2009), the high court ruled that the federal court would have such jurisdiction if it would have jurisdiction over the underlying substantive dispute (i.e., “look through” jurisdiction).
The Vaden Court relied on the language of FAA § 4, which says that a party seeking to compel arbitration “may petition any United States district court which, save for such [arbitration] 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.” Id. (emphasis added). The Court reasoned that the phrase “save for [the arbitration] agreement” indicates that “the district court should assume the absence of the arbitration agreement and determine whether it ‘would have jurisdiction under title 28’ without it.” Id. Accordingly, the proper test for a Federal court’s assessment regarding its subject-matter jurisdiction over a petition under FAA § 4 is to ‘look through’ the motion to compel to the underlying dispute. Id. at 62-63 (“‘the controversy between the parties’ … is most straightforwardly read to mean the ‘substantive conflict between the parties.’”).
Seven years later, in 2016, the Second Circuit looked to the Vaden decision for guidance while considering a petition to vacate an arbitral award under FAA § 10. The Court of Appeals reasoned that (1) “[Section] 4 of the FAA does not enlarge federal-court jurisdiction”; and (2) the Supreme Court endorsed the ‘look through’ test for determining whether there is subject-matter jurisdiction pursuant to Section 4, Vaden, 556 U.S. at 49, 51, and therefore “a federal court’s jurisdiction under the same jurisdictional statute [cannot] differ between § 4 and all other remedies under the act[.]” Doscher v. Sea Port Grp. Secs., LLC, 832 F.3d 372, 383 (2d Cir. 2016) (emphasis in...
