By R. David Gallo
On March 31, 2022, the United States Supreme Court issued its decision in Badgerow v. Walters, No. 20-1143.* Badgerow arose from an employment dispute between Louisiana parties. That dispute involved one or more federal law employment claims. Plaintiff (Claimant) Badgerow lost in arbitration and then petitioned a Louisiana state court to vacate the award. Defendants (Respondents) removed the case to federal court and requested confirmation of the award. Badgerow sought to remand the case back to state court, arguing that, while the Federal Arbitration Act, 9 U.S.C. § 1, et seq. (FAA) applies to the petitions to confirm (§ 9) and vacate (§ 10), federal courts lack subject matter jurisdiction to decide those petitions.
The federal court denied Badgerow’s request to remand, relying on the Supreme Court’s 2009 Vaden decision, in which the Court determined that federal courts may have subject matter jurisdiction to hear petitions to compel arbitration filed under § 4 of the FAA. 556 U.S. 49 (2009).
In Vaden, the Court held that, while the FAA itself generally does not give rise to the subject matter jurisdiction of federal courts, § 4 contains language that instructs federal courts to “look through” the petition to compel arbitration to determine whether the parties’ underlying dispute is of a type that would typically be heard in a federal court. While §§ 9 and 10 of the FAA do not have the “look through” language found in § 4, the federal district court in Badgerow nevertheless “looked through” the petitions to confirm and vacate, found underlying federal law employment claims, and determined it had jurisdiction to decide those petitions. The Fifth Circuit Court of Appeals agreed and affirmed.
The Supreme Court reversed and remanded on the basis that only § 4 of the FAA contains the “look through” language and, therefore, Congress must have intended to expand federal jurisdiction only with respect to § 4. For a federal court to hear a petition under §§ 9 or 10, the Court held, there needs to be an independent source of federal jurisdiction, such as diversity jurisdiction. If there is no independent source of federal jurisdiction, a state court must hear petitions under §§ 9 or 10.
Why it matters. It is important to know where you and can and cannot file your arbitration-related petition. When you are trying to compel arbitration, or vacate or confirm an award, you do not want to invite the added cost and time that can come along with having to move from federal to state court, or vice versa. Following the 2009 Vaden decision, lower courts were split on whether the reasoning in Vaden could be applied to other parts of the FAA. The Badgerow decision provides helpful clarity and consistency on this issue.
The Dissent. As the lone dissenter in Badgerow, Justice Breyer identified what he sees as “curious consequences and artificial distinctions” created by the majority’s decision. For example, Breyer noted that, after Badgerow, a party may request that a federal court compel arbitration (§ 4) but might not be allowed to ask that same court to appoint the arbitrator (§ 5). The dissent observed that this “does not seem to be what Congress had in mind for these neighboring provisions—provisions that appear to assume that a judge can appoint an arbitrator in tandem with ordering parties to arbitration.”
In this author’s view, Justice Breyer’s critique only scrapes the surface. In a follow-up blog post, I will further explain why the Badgerow decision adds to the Supreme Court’s long history of tortured interpretations of the FAA.
About the author:
David Gallo specializes in business litigation and arbitration. Prior to moving to Atlanta, David studied under leading arbitration practitioners and scholars at Columbia Law School, practiced litigation and arbitration at two AmLaw 100 firms in New York, and taught arbitration at Fordham Law School.
About the Arbitration Blog
This blog is a user-friendly resource for businesses and individuals who find themselves faced with issues involving arbitration. Perhaps you want to include an arbitration clause in your contract, or you are being asked to sign a contract with an arbitration clause. Maybe a dispute has arisen and you want to begin arbitration proceedings but you are not sure whether your arbitration clause covers the dispute (hint: it usually does). Perhaps you received a subpoena for documents in connection with an arbitration in which you are not otherwise involved. This blog provides you with answers to simple questions and will help you ask the right questions when confronted with more complex issues.
Among other topics, we cover how to draft an arbitration clause and what to expect in arbitration proceedings. We discuss the differences and similarities among arbitrations governed by Georgia law, federal law, and international law. We explore—in layman’s terms, whenever possible—the Georgia Arbitration Code, the Federal Arbitration Act, transnational law, and decisions from Georgia’s state courts, Georgia’s federal district courts, the U.S. Court of Appeals for the Eleventh Circuit, the U.S. Supreme Court, and foreign tribunals. We provide toolkits and checklists you can use to navigate everyday arbitration issues. We discuss the various contexts and industries in which we have handled arbitration issues for our clients, including:
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