Topic: "Federal court jurisdiction" | Main
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).
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.
Federal jurisdiction to vacate $zero award
December 12, 2005 by Ross Runkel at LawMemo
If a party in federal court seeks to vacate a $zero award, does the court have jurisdiction?
Assume there is diversity of citizenship. The amount of the award was $0. The amount that will be sought in the next arbitration if the $0 award is vacated was $2,000,000.
The question is whether the amount in controversy exceeds $75,000 as required by the statute that grants federal courts jurisdiction.
The answer is yes.
So says the 11th Circuit. Peebles v. Merrill Lynch (11th Cir 12/12/2005).
An earlier case from the 9th Circuit reached the same result. Theis Research v. Brown & Bain (9th Cir 10/20/2004).
Source: Paul Secunda at Workplace Prof Blog: Federal Jurisdiction and the Vacation of Arbitration Awards
Cert petition: Goodrich v. Machinists
September 07, 2005 by Ross Runkel at LawMemo
A petition for certiorari was filed last week, raising two fascinating questions about (1) appealing court orders that enforce an arbitration clause in a collective bargaining agreement and (2) a union's ability to sue on behalf of non-employee retirees.
The petition states two "Questions Presented"
1. In Goodall-Sanford, Inc. v. United Textile Workers, 353 U.S. 550, 551 (1957), this Court held that, “A decree under § 301(a) ordering enforcement of an arbitration provision in a collective bargaining agreement is . . . a ‘final decision’ within the meaning of 28 U.S.C. § 1291.”
The first question presented is:In light of this Court’s decision in Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001), is appellate jurisdiction for the review of an order compelling arbitration in a § 301 action now dependent upon the existence of a “final decision” as that term has been interpreted with respect to the Federal Arbitration Act?
2. Section 301(b) of the Labor Management Relations Act provides that, “Any labor organization which represents employees . . . may sue . . . as an entity [on] behalf of the employees whom it represents.”
The second question presented is:Does a union have standing to sue a company in a § 301 action on behalf of a group made up entirely of non-employees?
The petition was filed September 2 by David Nagle of LeClair Ryan, the same lawyer that won one of the most important arbitration cases in the US Supreme Court - Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001).
These are important issues, worthy of the Supreme Court's attention.
- Historically, courts have treated collective bargaining arbitrations differently from individual contract arbitrations when deciding whether a court order compelling arbitration is a "final order." That's because collective bargaining arbitrations fall under Section 301 of the Labor Management Relations Act and individual contract arbitrations fall under the Federal Arbitration Act. The petition in Goodrich claims that the 5th Circuit has blurred that distinction. I think so too. The question, then, is whether the historical distinction should be maintained or eliminated.
- Section 301 allows unions to sue in federal court on behalf of "employees it represents." The union in the Goodrich case sued on behalf of retirees. By definition, they are not employees that the union represents for purposes of collective bargaining. However, these retirees all signed documents consenting to have the union represent them in the litigation. The 5th Circuit allowed the union to sue. The question, then, is whether to follow the text of Section 301 or to allow the documents signed by non-employees to override Section 301.
No appellate jurisdiction on order to arbitrate
May 22, 2005 by Ross Runkel at LawMemo
Sometimes a federal district court can make things so complex that a circuit court cannot review an order to arbitrate. So it was in Machinists Local 2121 v. Goodrich Corp (5th Cir 05/18/2005).
The union sued to compel arbitration of a dispute over retiree benefits in a collective bargaining agreement. The trial court granted partial summary judgment for the union; the 5th Circuit held that it lacked jurisdiction to review the trial court's order to arbitrate. The union actually made three claims: for (a) specific performance of the health care portion of the agreement, (b) specific performance of the arbitration clause, and (c) a declaration of rights under the agreement.
The 5th Circuit raised the question of its appellate jurisdiction on its own motion, and held that it lacked jurisdiction. (1) The trial court's order was not an appealable final order because it granted only part of the relief sought by the union. The trial court declined to address the declaratory judgment issue, closed the case administratively (the equivalent of a stay), and expressly retained jurisdiction. (2) The trial court stayed the case and ordered arbitration, and that is not an interlocutory injunction, and is not appealable under 28 USC 1292(a)(1). (3) The circuit court did not have appellate jurisdiction on the theory that the trial court wholly lacked jurisdiction. The employer argued that the union lacked standing under Labor Management Relations Act Section 301 because a union is limited to suing on behalf of "employees" and retirees are not employees. Without deciding that issue, the 5th Circuit ruled that the union had Section 301 standing because 52 retirees expressly authorized the union to represent them.
My view: I never heard of a case where a union can sue under Section 301 on behalf non-employees simply because the non-employees granted the union that authority. It would have been better for the 5th Circuit to address the issue of whether a union can sue under Section 301 on behalf of retirees.
Federal jurisdiction to enforce arbitration agreement
February 08, 2005 by Ross Runkel at LawMemo
I am grateful to David Nagle, chair of LeClair Ryan's Labor & Employment practice group, for pointing out a 4th Circuit decision dealing with federal court jurisdiction to enforce arbitration agreements.
Discover Bank v. Vaden [full text pdf] (4th Cir 01/24/2005) is a banking case that should have an impact on employment cases. This is another reminder that the law dealing with enforcement of individual employer-employee arbitration agreements (not involving collective bargaining agreements) is often shaped by cases that have nothing at all to do with employment law.
The bank sued its customer in federal court under Federal Arbitration Act Section 4 to compel arbitration of state law claims that the customer had filed in state court.
The issue was whether the presence of a federal question in the underlying dispute is enough to support subject matter jurisdiction. The 4th Circuit held that it was.
Courts of Appeals are split on the question of whether, in a Section 4 suit, a federal district court has subject matter jurisdiction when the underlying dispute between the parties raises a federal question. One line of authority is that the basis for federal jurisdiction must appear on the face of the arbitration petition itself. That would require that there be some basis for jurisdiction other than the underlying dispute - such as diversity of citizenship or admiralty. The other line of authority (adopted by the 4th Circuit) allows the district court to look through the arbitration petition and "assess whether the overall controversy between the parties 'raises a federal question.'"
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