The question of federal court jurisdiction over arbitration
proceedings has historically led to different conclusions. A few
years ago, the United States Supreme Court clarified in Vaden v. Discover Bank that Section 4
of the Federal Arbitration Act ("FAA") authorizes a
federal court to "look through" to the underlying
controversy to determine if there is federal court jurisdiction to
adjudicate a motion compelling arbitration. Until recently,
however, the "look through" approach had not been adopted
by the Second Circuit for determining whether a federal court has
jurisdiction to hear a motion to vacate an arbitration award.
The Second Circuit recently overturned its previous practice,
holding that a party can move to vacate an arbitration award in
federal court under Section 10 of FAA if the underlying arbitrated
controversy involves a federal question. Doscher v. Sea Port Group Securities, LLC
("Doscher II"). In other words, like for review
of a Section 4 petition, a federal court in Second Circuit facing a
Section 10 petition can "look through" the petition
itself to assess whether there is federal subject matter
In 2013, Drew Doscher commenced an arbitration against his
previous employer, The Seaport Group, LLC and Sea Port Group
Securities, LLC (together, "Seaport"), alleging,
inter alia, a violation of federal securities laws. After
the arbitration panel made its final ruling, Doscher filed a
Section 10 petition in the U.S. District Court of Southern District
of New York to vacate and modify panel's award. The district
court dismissed Doscher's petition for lack of subject matter
jurisdiction. SeeDoscher v. Sea Port Group
Securities, LLC ("Doscher I"). On
appeal, the Second Circuit vacated the district court's
decision and remanded the case.
In 1996, the Second Circuit in Westmoreland Capital Corp. v. Findlay
ruled that if a motion to compel arbitration under Section 4 does
not show a basis for federal jurisdiction on its face, then "a
federal court [does not have] subject matter jurisdiction over an
action to compel or stay arbitration merely because the underlying
claim raises a federal question."
In 2000, the Second Circuit relied on the logic of the
Westmoreland holding to reject a "look through"
approach for a Section 10 petition to vacate an arbitration award
in Greenberg v. Bear, Stearns &
However, the U.S. Supreme Court's 2009 holding in Vaden
abrogated the Second Circuit's Westmoreland decision regarding a
federal court's jurisdiction over a petition to compel
arbitration. The Supreme Court noted that denying a "look
through" approach – like Westmoreland had held
– "would not accommodate a § 4 petitioner who
could file a federal-question suit in (or remove such a
suit to) federal court, but who has not done so."
In Doscher II, the Second Circuit noted
Vaden as an intervening Supreme Court decision that
"'casts doubt on the prior ruling' in
Greensberg." Also, the Second Circuit highlighted
that "the Supreme Court expressly overruled
Westmoreland in its Vaden decision" nine
years after Greenberg. The Circuit Court further observed
that the holding of Greenberg is also inconsistent with
the holding in Vaden that the FAA "bestows no federal
jurisdiction but rather requires for access to a federal forum an
independent jurisdictional basis over the parties'
dispute." In other words, the look-through approach for a
Section 4 petition provided under Vaden "does not
enlarge federal-court jurisdiction."
Therefore, in Doscher II, the Second Circuit overturned
Greensberg and concluded that a look-through approach is
similarly appropriate for a Section 10 petition to preserve the
same jurisdictional basis for various remedies under FAA and to
avoid making Section 4 jurisdiction broader than the jurisdiction
under other sections of FAA. In this precedential opinion, the
Second Circuit also held that "applying a look-through
approach to the entire Act also prevents absurd and illogical
discrepancies . . ." For instance, not applying a look-through
approach in connection with a Section 10 petition would create an
absurdity "that permits parties to file motions to compel
arbitration in any case where the underlying dispute raises a
federal question but precludes them from seeking the same federal
court's aid under the Act's other remedial provisions
related to the same dispute."
The Second Circuit has now made clear that a look-through
approach can be employed on petitions to compel arbitration and to
vacate arbitration awards. Note, however, that other circuits are
still split on the proper approach to use to determine whether
there is federal court jurisdiction over a FAA Section 10 petition.
It still remains to be seen whether the Supreme Court will take up
the Section 10 petition analysis and resolve such a split.
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