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Supremes take another arbitration case
March 17, 2008 by Ross Runkel at LawMemo

The US Supreme Court this morning granted certiorari in Vaden v. Discover Bank, et al. (Docket number 07-773).

Briefs are available from LawMemo and SCOTUSblog. Oral arguments will be scheduled for the Fall of 2008.

Discover Bank sued Betty Vaden in state court for nonpayment of her credit card balance. Vaden counterclaimed, raising state-law claims of breach of contract and violation of state statutes regulating credit card fees and charges. Discover Bank then petitioned a federal district court seeking to compel arbitration of Vaden's state-court counterclaims. The federal district court granted the motion to compel arbitration. The 4th Circuit affirmed (2-1).

The Federal Arbitration Act (FAA) itself does not create jurisdiction in the federal courts, and there must be a federal question or diversity of citizenship.

The 4th Circuit held (2-1) that federal courts have jurisdiction because of the presence of a federal question in the underlying dispute. Because Discover Bank is a federally-insured bank, the Federal Deposit Insurance Act (FDIA) is implicated by Vaden's counterclaims. The court also found that Vaden's counterclaims are completely preempted by the FDIA.

The DISSENT argued that the federal court should look no further than the face of the petition to compel arbitration to see whether a federal question exists.

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