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Archive for the ‘Amount in Controversy’ Category

Southern District of California Dismisses Petition to Vacate Arbitration Award for Lack of Subject Matter Jurisdiction

September 25th, 2024 Amount in Controversy, Application to Vacate, Arbitration Practice and Procedure, Awards, Challenging Arbitration Awards, FAA Chapter 1, FAA Section 10, Federal Arbitration Act Enforcement Litigation Procedure, Federal Arbitration Act Section 10, Federal Courts, Federal Question, Federal Subject Matter Jurisdiction, Look Through, Petition to Vacate Award, Post-Award Federal Arbitration Act Litigation, Practice and Procedure, Section 10, United States Court of Appeals for the Ninth Circuit, United States District Court for the Southern District of California, Vacate, Vacatur No Comments »

vacate subject-matter jurisdictionWe’ve repeatedly emphasized that—particularly since  Badgerow v. Walters, 596 U.S. 1 (2022)—subject-matter jurisdiction issues arising out of petitions to confirm, vacate, modify, or correct arbitration awards present traps for the unwary. (See, e.g., posts here, , herevacate subject matter jurisdiction, and here.) White v. U.S. Center For SafeSport, No. 22-cv-04468-JD, slip op. (C.D. Cal. Sept. 18, 2024), illustrates another subject- matter jurisdiction problem that arises, especially post-Badgerow: Is the amount-in-controversy requirement met when a petitioner seeks to vacate a “take nothing” award? The Court said the answer is “no,” at least in the circumstances of the case before it.

Petition to Vacate: Background

Respondent, United States Center for SafeSport (“SafeSport”) has been charged by Congress with “investigat[ing] and adjudicat[ing] allegations of sexual abuse and misconduct within U.S. Olympic and Paralympic organizations. Slip op. at 1 (citing 36 U.S.C. § 220541(a)). SafeSport investigated horse training and riding instructor Charles White (“White”) for allegedly engaging, over a period of three decades, in sexual misconduct against minors and adult females who participated in equestrian sports. Concluding those allegations had merit, SafeSport banned for life White from participating in in Olympic and Paralympic activities.   Slip op. at 1.

SafeSport’s rules provided White with an option to submit to arbitration the question whether the lifetime ban was warranted. White pursued that option but the arbitrator made an award upholding the ban. Slip op. at 1-2.

White petitioned the District Court for the Southern District of California to vacate the award under Section 10 of the Federal Arbitration Act (“FAA”). He alleged diversity jurisdiction under 28 U.S.C. § 1332(a), which required him to show not only diversity of citizenship but also that the amount-in-controversy exceeded $75,000, exclusive of interests and costs. 28 U.S.C. § 1332(a).

The petition sought to: (a) vacate the award, which awarded neither him nor anyone else any monetary relief, and simply upheld the lifetime ban; or (b) remand the award for reconsideration. The petition was bereft of any allegations or evidence demonstrating that the amount-in-controversy requirement was met. Slip op. at 2 (citing 28 U.S.C. § 1332(a)).

The Court ordered White to show cause why the petition should not be dismissed on subject matter jurisdiction grounds. Initially, White submitted to the Court a declaration stating “he had lost more than $75,000 in income as a hay dealer and horse stable operator ‘as a direct result’ of the arbitration decision.” Slip op. at 2 (quoting Dkt. No. 44 ¶ 4). The Court dismissed the case because White did not amend his petition to make those allegations but granted leave for White “to ‘articulate the basis for his claim that the amount-in-controversy requirement is satisfied for purposes of diversity jurisdiction,’ among other possible amendments.” Slip op. at 2 (quoting Dkt. No. 47).

White’s amended petition “include[d] the hay dealer and stable operator losses mentioned in his declaration[,]” and “contend[ed] that the losses were ‘a direct result of [the arbitrator’s] decision, which upheld the sanction of lifetime ineligibility to participate in the sport.’” Slip op. at 2 (quoting Dkt. No. 48 ¶ 10).

Discussion: No Subject Matter Jurisdiction Over Petition to Vacate

Focusing on the allegation that the losses directly resulted from the arbitrator “upheld[ing]” the ban, the Court found White’s amended subject-matter jurisdiction allegations to be flawed. “Vacating the arbitration decision or remanding for new arbitration proceedings,” said the Court, “which is the sole relief White seeks in the amended petition, might start the arbitration process anew, but it would not overrule or otherwise reverse the ban imposed by SafeSport.” Slip op. at 2 (record citation omitted).

“The SafeSport ban[,]” explained the Court, “remains in full effect unless an arbitrator were to decide otherwise, which has not happened.” Slip op. at 2. Even if the Court vacated the award, that “would not restore to White the income he says he lost in his hay and stables businesses.” Slip op. at 2. White would not recover any of its losses because, even in the event of vacatur, the lifetime ban would remain effective. Slip op. at 3.

The Court explained that where, as here, an action seeks “nonmonetary relief, ‘the amount in controversy is measured by the value of the object of the litigation.’” Slip op. at 3 (quoting Maine Community Health Options v. Albertsons Cos., Inc., 993 F.3d 720, 723 (9th Cir. 2021))(quotation and citation omitted).

The Court concluded that White had failed to satisfy his burden to show that the amount in controversy requirement had been met “because a remand for further arbitration proceedings would not terminate or reverse the SafeSport ban, and would not restore the lost income White alleges. . . .” Slip op. at 3 (citations omitted).

White argued that Badgerow’s requirement that “the determination of subject matter jurisdiction over petitions to vacate under the FAA looks only to ‘the face of the application itself[,]’” Badgerow, 596 U.S. at 9, was inapplicable. According to White, that requirement applied only when the basis for the petition was federal question, as it was in Badgerow. Slip op. at 3. But the Court said “there is no good reason why an FAA petition based on diversity jurisdiction should be treated any differently[]” from one falling under federal question jurisdiction, and White offered none. Slip op. at 3.

But the Court did not decide whether or not White’s argument might have merit “because, as discussed, White’s petition comes up short under established principles of diversity jurisdiction.” Slip op. at 3.

The Court also pointed out that White’s reliance on Theis Research, Inc. v. Brown & Bain, 400 F.3d 659 (9th Cir. 2005), was misplaced. Theis was a legal malpractice case in which the arbitrator awarded no monetary relief to either side. The client plaintiff filed in federal court a notice of motion to vacate, an application to vacate and a complaint seeking more than $200 million in damages. The defendant law firm moved to confirm the award. The Court denied the motion to vacate, granted the motion to confirm and entered summary judgment for the law firm on the complaint.

The Ninth Circuit determined that the district court had subject matter jurisdiction based on “‘the amount at stake in the underlying litigation.’” Slip op. at 4 (quoting 400 F.3d at 662-65.) “Because[,]” said the Court, the [Theis] plaintiff ‘sought to obtain by its district court complaint substantially what it had sought to obtain in the arbitration,’ the circuit court had no trouble concluding that the prayer for more than $200 million in damages established the required amount in controversy.” Slip op. at 4 (quoting 400 F.3d at 662-65).

The Court said the circumstances here were completely different in that there were no damages claims before the arbitrator, and that, in any event, “[i]t is also not clear that Theis survives Badgerow and its rejection of the ‘look-through’ approach to subject matter jurisdiction.” Slip op. at 4 (citing Badgerow, 596 U.S. at 9). We are not sure that is necessarily so because Theis involved a claim seeking more than $200 million damages, and the amount in controversy was not solely based (and did not have to be based) on the amount in controversy in the arbitration but on the $200 million-plus amount the complaint sought.

The Court found that granting further leave to amend was unwarranted and “dismissed [the case] on jurisdictional grounds without prejudice to a vacatur proceeding in state court, as circumstances might permit.”  Slip op. at 4.

Contacting the Author

If you have any questions about this article, arbitration, arbitration-law, arbitration-related litigation, then please contact Philip J. Loree Jr., at (516) 941-6094 or PJL1@LoreeLawFirm.com.

Philip J. Loree Jr. is principal of the Loree Law Firm, a New York attorney who focuses his practice on arbitration and associated litigation. A former BigLaw partner, he has nearly 35 years of experience representing a wide variety of corporate, other entity, and individual clients in matters arising under the Federal Arbitration Act or state arbitration law, as well as in insurance or reinsurance-related and other matters.

ATTORNEY ADVERTISING NOTICE: Prior results do not guarantee a similar outcome.

 Photo Acknowledgment

The photos featured in this post were licensed from Yay Images and are subject to copyright protection under applicable law.

 

Weighing the “Jurisdictional Anchor”: Post-Badgerow Second Circuit Subject Matter Jurisdiction Requirements for Applications to Confirm, Modify, or Vacate Arbitration Awards

November 13th, 2023 Amount in Controversy, Appellate Jurisdiction, Appellate Practice, Application to Compel Arbitration, Application to Confirm, Application to Enforce Arbitral Summons, Application to Stay Litigation, Arbitral Subpoenas, Arbitration Law, Arbitration Practice and Procedure, Confirmation of Awards, FAA Chapter 1, FAA Chapter 2, FAA Section 16, Federal Arbitration Act 202, Federal Arbitration Act Enforcement Litigation Procedure, Federal Arbitration Act Section 10, Federal Arbitration Act Section 11, Federal Arbitration Act Section 202, Federal Arbitration Act Section 203, Federal Arbitration Act Section 3, Federal Arbitration Act Section 4, Federal Arbitration Act Section 5, Federal Arbitration Act Section 7, Federal Arbitration Act Section 9, Federal Courts, Federal Question, Federal Subject Matter Jurisdiction, Modify or Correct Award, Motion to Compel Arbitration, Petition or Application to Confirm Award, Petition to Compel Arbitration, Petition to Enforce Arbitral Summons, Petition to Modify Award, Petition to Vacate Award, Post-Award Federal Arbitration Act Litigation, Practice and Procedure, Pre-Award Federal Arbitration Act Litigation, Section 10, Section 11, Section 3 Stay of Litigation, Section 4, Section 5, Section 7, Section 9, Stay of Litigation, Stay of Litigation Pending Arbitration, Subject Matter Jurisdiction, United States Court of Appeals for the Second Circuit Comments Off on Weighing the “Jurisdictional Anchor”: Post-Badgerow Second Circuit Subject Matter Jurisdiction Requirements for Applications to Confirm, Modify, or Vacate Arbitration Awards

Jurisdictional Anchor | Subject Matter JurisdictionThe U.S. Supreme Court decision, Badgerow v. Walters, 142 S. Ct. 1310 (2022) (discussed here), requires that an independent basis for subject matter jurisdiction (usually diversity) must appear on the face of petitions to confirm, vacate, or modify arbitration awards, and, by extension, petitions to enforce arbitral subpoenas or appoint arbitrators. See Badgerow, 142 S. Ct. at 1314, 1320. That independent basis for subject matter jurisdiction cannot be established by “looking through” to the underlying arbitration proceeding. In other words, the federal court cannot base subject matter jurisdiction on whether the court would have had subject matter jurisdiction over the merits of the controversy had they been submitted it to court rather than to arbitration.  See Badgerow, 142 S. Ct. at 1314, 1320.

Badgerow does not change the rule that federal question jurisdiction over a Section 4 petition to compel arbitration can be established by “looking through” to the underlying dispute that is or is claimed to be subject to arbitration. 142 S. Ct. at 1314; see  Vaden v. Discover Bank, 556 U.S. 49, 53 (2009); Hermès of Paris, Inc. v. Swain, 867 F.3d 321, 324-26 (2d Cir. 2017) (diversity of citizenship not determined by “look through”).

Section 4 of the Federal Arbitration Act expressly authorizes a Court to exercise subject-matter jurisdiction on that basis: “A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court which, save for such 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, for an order directing that such arbitration proceed in the manner provided for in such agreement.” 9 U.S.C. § 4; see Badgerow, 142 S. Ct. at 1317.

Unlike Section 4, Sections 5 (appointment of arbitrators), 7 (arbitral subpoena enforcement), 9 (confirmation of awards), 10 (vacatur of awards), and 11 (modification of awards), do not expressly authorize the exercise of subject matter jurisdiction on a “look through” basis.  See 142 S. Ct. at 1317-18; 9 U.S.C. §§ 4, 5, 7, 9, 10, & 11.

Badgerow, in the specific context of an action commenced by petition to vacate an award under FAA Section 10—which, in turn, prompted a cross-petition to confirm under FAA Section 9—held that the absence in Sections 9 and 10 of Section 4’s express language authorizing subject matter jurisdiction based on “look through” meant that Congress did not authorize “look through” subject matter jurisdiction for Section 9 and 10 claims (and presumably for claims seeking relief under Sections 5, 7, or 11). See 142 S. Ct. at 1319.

An independent basis for subject matter jurisdiction is required, and in the absence of a federal question appearing on the face of the petition (such as a claim for relief under Chapter Two of the FAA, see 9 U.S.C. § 203; 28 U.S.C. § 1331), the only possible basis for subject matter jurisdiction is diversity of citizenship. See 28 U.S.C. § 1332(a). And there could be no diversity jurisdiction in Badgerow because the parties to the petitions were citizens of the same state. See 142 S. Ct. at 1316.

Badgerow’s reasoning certainly applies to independent, summary proceedings in which the only relief sought is under the FAA. But does it apply with equal force where litigation on the merits of an arbitrable or allegedly arbitrable dispute has commenced, and the motion to compel arbitration is made by motion in the pending action, which is stayed pending arbitration? Can the stayed merits litigation act as what former Associate Justice Stephen G. Breyer, in his Badgerow dissent, referred to as a “jurisdictional anchor” for not only the motion to compel arbitration, but also other subsequent applications for pre- or post-award FAA relief relating to the arbitration?  See Badgerow, 142 S. Ct. at 1326 (Breyer, J., dissenting).

That is an open question in the Second Circuit after Badgerow, although pre-Badgerow the answer was yes. Let’s look at it more closely and try to get a sense of how the Second Circuit might rule on it considering Badgerow. Continue Reading »

Subject Matter Jurisdiction in FAA Proceedings: Eighth Circuit Demonstrates It’s a Trap for the Unwary

August 23rd, 2023 Amount in Controversy, Application to Compel Arbitration, Arbitration Law, Arbitration Practice and Procedure, Award Vacated, Awards, Challenging Arbitration Awards, Confirmation of Awards, FAA Chapter 1, Federal Arbitration Act Enforcement Litigation Procedure, Federal Arbitration Act Section 10, Federal Arbitration Act Section 11, Federal Arbitration Act Section 4, Federal Arbitration Act Section 5, Federal Arbitration Act Section 7, Federal Arbitration Act Section 9, Federal Courts, Federal Question, Federal Subject Matter Jurisdiction, Look Through, or Modify Award, Petition or Application to Confirm Award, Petition to Compel Arbitration, Petition to Enforce Arbitral Summons, Petition to Modify Award, Petition to Vacate Award, Post-Award Federal Arbitration Act Litigation, Practice and Procedure, Pre-Award Federal Arbitration Act Litigation, Section 10, Section 11, Section 4, Section 5, Section 7, Section 9, United States Court of Appeals for the Eighth Circuit Comments Off on Subject Matter Jurisdiction in FAA Proceedings: Eighth Circuit Demonstrates It’s a Trap for the Unwary

Introduction

Subject Matter Jurisdiction | Petition to Confirm | Petition to Vacate The U.S. Court of Appeals for the Eighth Circuit recently decided a case that provides a good—and simple—example of how subject matter jurisdiction can be a trap for the unwary, especially for parties seeking to confirm or vacate arbitration awards under the Federal Arbitration Act (the “FAA”). In Prospect Funding Holdings (N.Y.) v. Ronald J. Palagi, P.C., No. 22-1871, slip op. (8th Cir. Aug. 7, 2023), the Eighth Circuit vacated a district court’s judgment vacating two arbitration awards because the petitioner failed to plead the citizenship of the parties and therefore could not establish the requisite independent basis for subject matter jurisdiction. But there was more to it than that. Continue Reading »

Second Circuit Clarifies Rules Governing Forum Selection Clauses

August 7th, 2023 Amount in Controversy, Appellate Practice, Arbitration Law, Conflict of Laws, Federal Arbitration Act Enforcement Litigation Procedure, Federal Courts, Federal Subject Matter Jurisdiction, Forum Non Conveniens, Forum Selection Agreements, Jurisdiction Clause, Nuts & Bolts, Nuts & Bolts: Arbitration, Petition or Application to Confirm Award, Post-Award Federal Arbitration Act Litigation, Practice and Procedure, United States Court of Appeals for the Second Circuit, Venue 1 Comment »

Forum Selection Clauses: Introduction to Kelman

Forum Selection Clause Sometimes appellate courts render opinions that helpfully explain somewhat complexed or arcane procedural rules. The Second Circuit’s decision in Rabinowitz v. Kelman, No. 22-1747, slip op. (July 24, 2023) is of this ilk, and is one that should be consulted not only when litigating forum-selection-related issues, but also for purposes of drafting forum selection clauses.

Kelman— which arose out of a petition filed in U.S. District Court for the Southern District of New York (the “SDNY”) to confirm a rabbinical arbitration award—addressed two issues: (1) whether the district court had subject matter jurisdiction where the amount of controversy and diversity of citizen requirements were met but the court was not one expressly contemplated by the forum selection clause; and (2) whether the forum selection clause was mandatory or permissive, that is, whether it required the action to be brought in one of the fora specified in the clause and no other.

The Court held that the district court had subject matter jurisdiction under the diversity jurisdiction (28 U.S.C. § 1332(a)(2)) because the petitioner adequately pleaded diverse citizenship and an amount in controversy in excess of $75,000, exclusive of interests and costs, and because the parties lacked the power to divest the court of subject matter jurisdiction by agreement, including by agreement to a forum selection clause.

It further held that the “forum selection clauses” were “permissive arrangements that merely allow litigation in certain fora, rather than mandatory provisions that require litigation to occur only there.” Slip op. at 32.  Under a “modified forum non conveniens” analysis prescribed by the United States Supreme Court, the forum selection clauses did not bar litigation brought in the SDNY. Slip op. at 32. The Court accordingly vacated the district court’s judgment dismissing the case for lack of subject matter jurisdiction and remanded the case to the district court. Slip op. at 32. Continue Reading »

2021 Term SCOTUS Arbitration Cases: Is the Pro-Arbitration Tide Beginning to Ebb?

July 18th, 2022 Amount in Controversy, Applicability of Federal Arbitration Act, Application to Appoint Arbitrator, Application to Compel Arbitration, Application to Stay Litigation, Arbitrability, Arbitral Subpoenas, Arbitration Agreements, Arbitration Law, Arbitration Practice and Procedure, Authority of Arbitrators, Awards, Challenging Arbitration Agreements, Challenging Arbitration Awards, Equal Footing Principle, FAA Chapter 1, FAA Transportation Worker Exemption, Federal Arbitration Act Section 1, Federal Arbitration Act Section 10, Federal Arbitration Act Section 11, Federal Arbitration Act Section 2, Federal Arbitration Act Section 4, Federal Arbitration Act Section 5, Federal Arbitration Act Section 7, Federal Arbitration Act Section 9, Federal Courts, Federal Policy in Favor of Arbitration, Federal Question, Federal Subject Matter Jurisdiction, International Arbitration, International Judicial Assistance, Judicial Review of Arbitration Awards, Look Through, Modify or Correct Award, Moses Cone Principle, Petition or Application to Confirm Award, Petition to Compel Arbitration, Petition to Modify Award, Petition to Vacate Award, Policy, Post-Award Federal Arbitration Act Litigation, Practice and Procedure, Presumption of Arbitrability, Richard D. Faulkner, Section 10, Section 11, Section 1782, Section 3 Stay of Litigation, Section 5, Section 6, Section 7, Section 9, Small Business B-2-B Arbitration, State Arbitration Law, Statutory Interpretation and Construction, Subject Matter Jurisdiction, Substantive Arbitrability, Textualism, United States Supreme Court, Vacatur, Waiver of Arbitration Comments Off on 2021 Term SCOTUS Arbitration Cases: Is the Pro-Arbitration Tide Beginning to Ebb?

Introduction: This Term’s SCOTUS Arbitration Cases 

SCOTUS FAA CasesThe 2021 Term was a busy and controversial one for the United States Supreme Court (“SCOTUS”) regarding abortion, First Amendment rights, Second Amendment rights, and administrative agency power.  However, many may not know SCOTUS decided four Federal Arbitration Act cases during the 2021 Term (the “FAA Cases”), as well as a pair of cases consolidated into one concerning whether U.S. Courts may provide under 28 U.S.C. § 1782 judicial assistance to international arbitration panels sited abroad. See Viking River Cruises, Inc. v. Moriana, 596 U. S. ____, No. 20–1573, slip op. (June 15, 2022) (construing FAA); ZF Automotive US, Inc., et al. v. Luxshare, Ltd., 596 U.S. ___, No. 21–401, slip op. (June 13, 2022) (construing 28 U.S.C. § 1782); Southwest Airlines Co. v. Saxon, 596 U.S. ___, No. 21-309, slip op. (June 6, 2022) (construing FAA); Morgan v. Sundance, Inc., 596 U.S. ___, No. 21-328, slip op. (May 23, 2022) (construing FAA); Badgerow v. Walters, 596 U.S. ___, No. 20-1143, slip op. (March 31, 2022) (construing FAA).  

Three of the SCOTUS FAA Cases, Badgerow, Morgan, and Southwest Airlines signal SCOTUS’s apparent intention to construe strictly the Federal Arbitration Act’s text without indulging in any pro-arbitration presumptions or applying arbitration-specific rules intentionally encouraging arbitration-friendly outcomes. ZF Automotive, the 28 U.S.C. § 1782 judicial-assistance case also  employed a strict, textualist approach to interpreting 28 U.S.C. § 1782, used the FAA to help support its conclusion, and held that 28 U.S.C. § 1782 did not authorize U.S. district courts to provide judicial assistance to private arbitration panels sited abroad—an outcome not particularly solicitous of international arbitration. It is therefore at least indirectly supportive of the more textually oriented and arbitration-neutral approach SCOTUS appears to have endorsed with special force during the 2021 Term.  

The SCOTUS 2021 Term FAA Cases are not the first ones in which the Court applied textualist interpretations to the FAA. There are others. See, e.g., New Prime Inc. v. Oliveira, ___ U.S. ___, 139 S. Ct. 532 (2019) (discussed here and here). But common themes in three of those FAA Cases—echoed in ZF Automotive —suggest a marked trend by the Court to interpret the FAA in a less expansive manner that is not presumptively arbitration friendly. The expression of these common themes in four cases decided in a single term is particularly significant because Morgan, Southwest Airlines, and ZF Automotive were decided unanimously by all participating Justices and Badgerow was decided 8-1, with now retired Associate Justice Stephen G. Breyer dissenting.  

Many previous FAA SCOTUS decisions of the last three or four decades have been very indulgent of arbitration. The Court encouraged arbitration proliferation far beyond B-2-B commercial and industry arbitration between sophisticated and resource-laden entities of roughly equal bargaining power.  Arbitration was introduced into consumer and employment disputes and other disputes involving persons (including businesses) of vastly disparate resources and sophistication. SCOTUS made arbitration agreements readily enforceable, interpreted them expansively in favor of arbitration, limited defenses to arbitration agreements and awards, and promoted arbitration to make it, at least in the eyes of some, an attractive alternative to litigation. Critics challenged that view and assailed arbitration as “do it yourself court reform.”  The SCOTUS arbitration decisions developed and implemented an expansive federal policy in favor of arbitration and a presumption of arbitrability and championed a very pro-arbitration approach to arbitration law in general.  

That SCOTUS, the lower federal courts, and eventually even the skeptical state courts that are bound by its FAA decisions, have been solicitous and supportive of arbitration is unsurprising. The assumed (but not necessarily realized) benefits of arbitration have long been touted by academics and promoted by business and industry representatives.  Of course, courts have for many years recognized that arbitration helps reduce docket congestion, which was exacerbated by COVID and remains a problem today, even with the help of proliferated arbitration proceedings. Arbitral dispute resolution is also a very impressive business sector in and of itself, generating billions in revenues for law firms, arbitrators, and arbitration providers. It therefore has many proponents.  

But Badgerow, Morgan, Southwest Airlines, and ZF Automotive suggest that SCOTUS is rethinking its prior expansive, and highly-arbitration-friendly approach to the FAA and might be more willing to entertain seriously arguments for interpreting: (a) arbitration agreements less expansively, and more like ordinary contracts; and (b) Sections 10 and 11 of the FAA strictly according to their text and not in an exceedingly narrow manner designed to encourage, arbitration-award-favoring outcomes. These cases may also embolden lower courts, especially the state courts, to do the same. Continue Reading »

CPR Interviews Downes, Faulkner & Loree About Recent SCOTUS Developments

December 8th, 2021 Amount in Controversy, Appellate Practice, Application to Compel Arbitration, Application to Stay Litigation, Arbitration Agreements, Arbitration and Mediation FAQs, Arbitration as a Matter of Consent, Arbitration Law, Arbitration Practice and Procedure, Contract Defenses, CPR Speaks Blog of the CPR Institute, Diversity Jurisdiction, Equal Footing Principle, FAA Chapter 1, Federal Arbitration Act Enforcement Litigation Procedure, Federal Arbitration Act Section 2, Federal Arbitration Act Section 3, Federal Arbitration Act Section 4, Federal Courts, Federal Question, International Arbitration, International Institute for Conflict Prevention and Resolution (CPR), International Judicial Assistance, Laches, Loree and Faulkner Interviews, Moses Cone Principle, Nuts & Bolts, Nuts & Bolts: Arbitration, Petition to Compel Arbitration, Practice and Procedure, Pre-Award Federal Arbitration Act Litigation, Section 3 Stay of Litigation, Small Business B-2-B Arbitration, Stay of Litigation, Stay of Litigation Pending Arbitration, Subject Matter Jurisdiction, United States Supreme Court, Waiver of Arbitration Comments Off on CPR Interviews Downes, Faulkner & Loree About Recent SCOTUS Developments
CPR | SCOTUS | Sundance | Morgan | Interview | Downes | Faulkner | Loree

Steps and columns on the portico of the United States Supreme Court in Washington, DC.

Arbitration is an important topic this year at the U.S. Supreme Court (“SCOTUS”). On Monday, November 23, 2021 the International Institute of Conflict Protection and Resolution (“CPR”) conducted a video interview of Professor Angela Downes,  Assistant Director of Experiential Education and Professor of Practice Law at the University of North Texas-Dallas College of Law; Dallas-based arbitrator, attorney, and former judge Richard D. Faulkner, Esq.;  and Loree Law Firm principal Philip J. Loree Jr. about three recent SCOTUS arbitration-law developments. To watch and listen to the video-conference interview, CLICK HERE or HERE.

As reported in CPR’s blog, CPR Speaks, the three SCOTUS arbitration-law developments are:

  1. SCOTUS’s recent decision to Grant Certiorari in Morgan v. Sundance Inc.No. 21-328, which will address the question: “Does the arbitration specific requirement that the proponent of a contractual waiver defense prove prejudice violate this Court’s instruction that lower courts must ‘place arbitration agreements on an equal footing with other contracts?’” Morgan v. Sundance, Inc., No. 21-328, Petition for a Writ of Certiorari (the “Petition”), Question Presented (quoting AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011)). (See SCOTUS Docket here for more information and copies of papers.) Prior to SCOTUS granting certiorari, we discussed the Morgan petition in detail here.
  2. Two SCOTUS petitions for certiorari that address the issue whether, for purposes of 28 U.S.C. 1782’s judicial-assistance provisions, an arbitration panel sited abroad is a “foreign or international tribunal” for purposes of the statute, which permits “any interested person” to seek U.S. judicial assistance to obtain evidence in the U.S. for use abroad. These petitions are AlixPartners LLP v. The Fund for Protection of Investors’ Rights in Foreign StatesNo. 21-518, and ZF Automotive US Inc. v. Luxshare Ltd.No. 21-401. Information about these cases is available at Bryanna Rainwater, “The Law on Evidence for Foreign Arbitrations Returns to the Supreme Court,” CPR Speaks(Oct. 22, 2021) (available here) and “CPR Asks Supreme Court to Consider Another Foreign Tribunal Evidence Case,” CPR Speaks (Nov. 12, 2021) (available here).
  3. Badgerow v. WaltersNo. 20-1143, a recently-argued SCOTUS case that presents the question “[w]hether federal courts have subject-matter jurisdiction to confirm or vacate an arbitration award under Sections 9 and 10 of the FAA where the only basis for jurisdiction is that the underlying dispute involved a federal question.” See id., Question Presented Report, here. The case was argued before SCOTUS on November 2, 2021, and you can listen to the oral argument here. The oral argument is discussed in Russ Bleemer, “Supreme Court Hears Badgerow, and Leans to Allowing Federal Courts to Broadly Decide on Arbitration Awards and Challenges,” CPR Speaks (November 2, 2021) (available here).

Our good friend Russ Bleemer, Editor of CPR’s newsletter, Alternatives to the High Cost of Litigation, did a fantastic job conducting the interview.

Photo Acknowledgment

The photo featured in this post was licensed from Yay Images and is subject to copyright protection under applicable law.

Look Through: Second Circuit Holds that District Courts Must “Look Through” a Section 9 Petition to Confirm to Ascertain Subject Matter Jurisdiction

May 13th, 2019 Amount in Controversy, Arbitration Practice and Procedure, Awards, Confirmation of Awards, Convention on the Recognition and Enforcement of Foreign Arbitral Awards, Diversity Jurisdiction, FAA Chapter 1, FAA Chapter 2, FAA Chapter 3, Federal Arbitration Act Enforcement Litigation Procedure, Federal Arbitration Act Section 10, Federal Arbitration Act Section 11, Federal Arbitration Act Section 4, Federal Arbitration Act Section 9, Federal Courts, Federal Question, Look Through, Petition to Modify Award, Petition to Vacate Award, Subject Matter Jurisdiction, United States Court of Appeals for the Second Circuit Comments Off on Look Through: Second Circuit Holds that District Courts Must “Look Through” a Section 9 Petition to Confirm to Ascertain Subject Matter Jurisdiction
Look Through

In Landau v. Eisenberg, ___ F.3d ___, No. 17-3963, slip op. (May 1, 2019) (per curiam), the U.S. Court of Appeals for the Second Circuit recently held that district courts must “look through” a Section 9 petition to confirm an arbitration award to determine whether the court has subject matter jurisdiction to adjudicate the petition. District courts must therefore ascertain whether the district court would, absent an arbitration agreement, have had subject matter jurisdiction over the underlying controversy that resulted in the arbitration, and ultimately the award.

While the Second Circuit ruled in a per curiam decision, the issue it decided was of first impression. But it followed on the heels of, and heavily relied on, Doscher v. Sea Port Grp. Sec., LLC, 832 F.3d 372, 379-89 (2d Cir. 2016), which held that district courts should look through a Section 10 or 11 petition to ascertain the existence of federal subject matter jurisdiction. Doscher instructed federal courts to focus not on whether the Section 10 and 11 FAA award review and enforcement process presented substantial federal questions, but on the same thing they would have focused on had they been asked to compel arbitration of the controversy: whether the underlying controversy, in keeping with the well-pleaded complaint rule, would have been within the Court’s subject matter jurisdiction had it not been submitted to arbitration. See Doscher, 882 F.3d at 379-89.  

While Eisenberg and Doscher concerned the question whether federal-question subject matter jurisdiction exists over FAA Sections 9, 10, and 11 petitions, the reasoning of those cases also applies to the question whether there is federal subject matter jurisdiction over such petitions based on the diversity jurisdiction.

The Problem Addressed by Eisenberg and Doscher

Problem | Issue

The Federal Arbitration Act is “something of an anomaly in the realm of federal legislation: It bestows no federal jurisdiction but rather requires for access to a federal forum an independent jurisdictional basis over the parties’ dispute.” Vaden v. Discover Bank, 556 U.S. 49, 59 (2009).

Section 4 of the FAA, which governs motions to compel arbitration, provides that to determine the “independent jurisdictional basis” the court must ascertain whether “save for such agreement, [the district court] would have jurisdiction. . . of the subject matter of a suit arising out of the controversy [claimed to be arbitrable][:]”

[a] party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court which, save for such 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, for an order directing that such arbitration proceed in the manner provided for in such agreement.


9 U.S.C. § 4 (emphasis added).

The Supreme Court held in Vaden that “§ 4 of the FAA does not enlarge federal court jurisdiction,” 556 U.S. at 66, and district courts must “look through” the petition to the controversy between the parties to ascertain whether the court had subject matter jurisdiction over the controversy. 556 U.S. at 62. District courts must therefore “assume the absence of the arbitration agreement and determine whether it would have jurisdiction under title 28 without it.” Id. at 63.

But section 4 of the FAA expressly specifies the circumstances under which a federal district court will have jurisdiction over an application to compel arbitration, whereas Sections 9, 10, and 11 of the FAA—which address applications to confirm, vacate, and modify awards—say nothing about subject matter jurisdiction. The availability of relief under those portions of the FAA is not conditioned on either the existence of a lawsuit over which the Court already has subject matter jurisdiction (and which may have been stayed pending arbitration under Section 3 of the FAA) or on a party having previously invoked the court’s jurisdiction by filing a proceeding to compel arbitration under Section 4.

Sections 9, 10, and 11 of the FAA do not in and of themselves vest jurisdiction in a district court simply because they are part of a federal statute—the FAA requires an independent basis for federal subject matter jurisdiction. But what determines subject matter jurisdiction, the nature of the petition to confirm, vacate, or modify the award, or the nature of the underlying dispute that ultimately resulted in the arbitration award?   

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