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On the Alert

SCOTUS: Federal court cannot
"look through" arbitration award
for jurisdiction to vacate or confirm

Badgerow v. Walters (US Supreme Ct 03/31/2022)
http://case.lawmemo.com/us/badgerow.pdf
Sent to Custom Alerts™ subscribers on 03/31/2022

The U.S. Supreme Court held that a federal court could not "look through" an arbitration award to the underlying dispute to determine if it had jurisdiction to confirm or vacate the award.

An employee sued in state court to vacate an arbitration award in favor of an employer on a wrongful termination claim. The employer then removed the case to the federal trial court which granted the employer's request to confirm the award. The Supreme Court reversed because the federal court lacked subject matter jurisdiction.

The Federal Arbitration Act (FAA) authorizes a party to an arbitration agreement to petition a federal court to vacate or confirm an arbitration award.

However, the FAA itself does not create subject matter jurisdiction. That must be based on diversity of citizenship or a federal question.

When someone petitions to compel arbitration under FAA 4, the federal court will “look through” the petition to the “underlying substantive controversy.” That's based on specific 4 language: A party to an arbitration agreement may petition for an order to compel arbitration in a “United States district court which, save for [the arbitration] agreement, would have jurisdiction” over “the controversy between the parties.”

It is FAA 9 and 10 that apply to confirming or vacating an existing arbitration award. Those sections contain none of the same statutory language. Therefore, the "look through" approach does not apply.

Bottom line: As a result, federal courts will look through to the underlying controversy when asked to compel arbitration, but not when asked to confirm or vacate an existing arbitration award.


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