United States: Only In America: The Controversy Concerning Federal Jurisdiction Over Motions To Confirm, Vacate, Or Modify Arbitral Awards

Last Updated: May 10 2017
Article by Todd Rosenbaum

In most countries, it is uncontroversial that a court sitting at the situs of an arbitration has jurisdiction to adjudicate a petition to confirm or vacate or modify an award issued in that arbitration. In the United States federal courts, however, the mix of issues concerning subject matter jurisdiction and personal jurisdiction, respectively, has made for bewilderment galore.

Thus, the question of federal jurisdiction over petitions to confirm, vacate or modify an arbitration award under the Federal Arbitration Act ("FAA") is an apparently fertile ground for befuddlement. There is a diversity of views among the Circuit Courts, as the Third, Seventh, and D.C. Circuits plow in one direction and the Second and First Circuits plow in another, and the Supreme Court is unable, as a practical matter, to promptly resolve such splits among the Courts of Appeal.

The controversy stems from (i) the requirement that a federal court must have subject matter jurisdiction in order to entertain a petition under the FAA to confirm or vacate or modify an arbitration award, 9 U.S.C. § 9-11, and (ii) the principle that the FAA itself does not provide a basis for federal question jurisdiction, e.g., Vaden v. Discover Bank, 556 U.S. 44, 50 (2009) (the FAA "requir[es] [for access to a federal forum] an independent jurisdictional basis" over the parties' dispute") (quoting Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 582 (2008)).  Diversity jurisdiction under 28 U.S.C. § 1332 would suffice as a basis for subject matter jurisdiction.  See, e.g., Discover Bank v. Vaden, 489 F.3d 594, 599 n.2 (4th Cir. 2007) ("were diversity jurisdiction to exist, this alone would be sufficient to confer federal jurisdiction [for FAA § 10 purposes]."). But, absent diversity jurisdiction, a petitioner must show federal question jurisdiction under 28 U.S.C. § 1331. How to do that when all he/she is asking the federal court to do is to confirm an arbitration award?

Federal "Look Through" Jurisdiction – The Vaden Influence (Second and First Circuits)

In 2009, the U.S. Supreme Court adjudicated an analogous question regarding the subject matter jurisdiction of a federal court regarding a motion to compel arbitration under FAA § 4. (9 U.S.C. § 4)  In Vaden v. Discover Bank, 556 U.S. 49, 62 (2009), the high court ruled that the federal court would have such jurisdiction if it would have jurisdiction over the underlying substantive dispute (i.e., "look through" jurisdiction).

The Vaden Court relied on the language of FAA § 4, which says that a party seeking to compel arbitration "may petition any United States district court which, save for such [arbitration] 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." Id. (emphasis added).  The Court reasoned that the phrase "save for [the arbitration] agreement" indicates that "the district court should assume the absence of the arbitration agreement and determine whether it 'would have jurisdiction under title 28' without it." Id. Accordingly, the proper test for a Federal court's assessment regarding its subject-matter jurisdiction over a petition under FAA § 4 is to 'look through' the motion to compel to the underlying dispute. Id. at 62-63 ("'the controversy between the parties' ... is most straightforwardly read to mean the 'substantive conflict between the parties.'").

Seven years later, in 2016, the Second Circuit looked to the Vaden decision for guidance while considering a petition to vacate an arbitral award under FAA § 10.  The Court of Appeals reasoned that (1) "[Section] 4 of the FAA does not enlarge federal-court jurisdiction"; and (2) the Supreme Court endorsed the 'look through' test for determining whether there is subject-matter jurisdiction pursuant to Section 4, Vaden, 556 U.S. at 49, 51, and therefore "a federal court's jurisdiction under the same jurisdictional statute [cannot] differ between § 4 and all other remedies under the act[.]" Doscher v. Sea Port Grp. Secs., LLC, 832 F.3d 372, 383 (2d Cir. 2016) (emphasis in original).  Thus, the Doscher Court concluded that "a federal district court faced with a § 10 petition may 'look through' the petition to the underlying dispute, applying to it the ordinary rules of federal-question jurisdiction and the principles laid out by the majority in Vaden."   Id. at 44. Accord Harman v. Wilson-Davis Co., No. 2:16-cv-00229-CW, 2017 U.S. Dist. LEXIS 2447, at *11-12 (D. Utah Jan. 6, 2017) (adopting Second Circuit's reasoning in Doscher and applying 'look through' test to determine if court had federal question jurisdiction over vacatur petition under FAA §10).

Five months later, in January 2017, the First Circuit opined that the Doscher analysis could be applied even more broadly by ruling that "the look-through approach applies to sections 9, 10, and 11 of the FAA." Ortiz-Espinosa v. BBVA Sec. of P.R., Inc., No. 16-1122, 2017 U.S. App. LEXIS 1206, at *19 (1st Cir. Jan. 20, 2017) (looking through to underlying dispute and holding that federal question jurisdiction existed over petition under FAA §§ 10-11 to vacate or modify arbitration award).  The First Circuit's dictum further extended the Doscher reasoning to FAA § 9 regarding confirmation of an award (in addition to Sections 10 and 11). Id. at *16-17 ("Congress cannot have intended for jurisdiction over §§ 9-11 petitions only to exist in diversity or perhaps admiralty.").

The "Well-Pleaded Complaint Rule" (Seventh, D.C., and Third Circuits)

Prior to Vaden, the Seventh Circuit and the D.C. Circuit both held that a petition to vacate an arbitration award pursuant to FAA § 10 must have an independent basis for federal subject-matter jurisdiction because, unlike Section 4, Section 10 does not include the "save for [the arbitration] agreement" and "arising out of the controversy between the parties" language upon which the Vaden Court relied. See Minor v. Prudential Secs., Inc., 94 F.3d 1103, 1106-07 (7th Cir. 1996) ("[W]e see no reason to artificially import the language into § 10, since we do not believe it is necessarily anomalous for Congress to have intended that the federal courts take jurisdiction for purposes of a motion to compel where the underlying dispute is federal, but not take jurisdiction on a parallel motion to vacate."); Kasap v. Folger Nolan Fleming & Douglas, Inc., 166 F.3d 1243, 1247 (D.C. Cir. 1999).  And the Seventh Circuit reaffirmed its position in that regard more recently.  See Magruder v. Fid. Brokerage Servs. LLC, 818 F.3d 285, 288 (7th Cir. 2016) (existence of federal question jurisdiction in underlying dispute does not establish district court's subject-matter jurisdiction over petition made pursuant to FAA §§ 9-10 to confirm or vacate arbitral award).

Furthermore, fewer than two weeks after the Second Circuit issued its opinion in Doscher, the Third Circuit joined ranks with the Seventh Circuit and the D.C. Circuit, holding that "Vaden's 'look-through' basis for jurisdiction does not extend to § 10 motions to vacate." Goldman v. Citigroup Global Mkts., Inc., 834 F.3d 242, 255 (3d Cir. 2016).

Accordingly, district courts in the Seventh Circuit, the D.C. Circuit, and the Third Circuit have used and continue to use the "well-pleaded complaint rule" to determine whether they have jurisdiction over a petition for vacatur under the FAA. See Minor, 94 F.3d at 1107 ("[A] district court has subject matter jurisdiction over a petition to vacate an arbitration award pursuant to 9 U.S.C. § 10 only where diversity of citizenship exists or the motion discloses a federal question on its face."); Kasap, 166 F.3d at 1247- 48; Goldman, 834 F.3d at 255.


As the gulf between the Circuits widens, see Magruder, 818 F.3d at 288 (citing pre-Vaden federal appellate court decisions that are inconsistent with the Court's Vaden decision, one might expect the Supreme Court to welcome an opportunity to resolve the analogous federal jurisdiction issue with respect to petitions under FAA §§ 9-11.  In the meantime, it is important for litigants to know the law in their jurisdictions.

For example, litigants in the Third, Seventh, and D.C. Circuits who cannot establish diversity jurisdiction and whose petitions do not show an independent basis for federal question jurisdiction must seek relief under FAA §§ 9, 10, or 11 in their respective state trial courts, as their federal courts are not, at the moment, welcoming. See, e.g., Goldman, 834 F.3d at 249, 259 ("[T]he grounds for [federal question] jurisdiction [must] be clear on the face of the pleading that initiates the case;" affirming dismissal of vacatur petition under FAA § 10 for lack of subject-matter jurisdiction).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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