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Court Limits Federal Jurisdiction Over Arbitration Cases: SCOTUS Today

The Court has decided the latest in a series of important cases interpreting the reach of the Federal Arbitration Act (FAA), 9 U. S. C. §§ 1 et seq.

On March 31, in Badgerow v. Walters, by an 8-1 majority (opinion written by Justice Kagan, and a lone dissent by Justice Breyer), the Court reversed an order of the Fifth Circuit and held that the federal courts do not have authority to “look through” an arbitration dispute for a federal question that would establish jurisdiction to confirm or deny an arbitral award.

Most readers of this blog know that the FAA authorizes a party to an arbitration agreement to seek several kinds of assistance from a federal court. For example, under Section 4, a party may ask the court to compel an arbitration proceeding as the subject agreement contemplates. Sections 9 and 10 empower a party to apply to the court to confirm, or alternatively to vacate, an arbitral award.

However, as the Supreme Court previously has held, the federal courts don’t automatically have jurisdiction to decide such requests. Instead, the FAA’s authorization of a petition presupposes that the federal court must have an “independent jurisdictional basis” to resolve the matter. See Hall Street Associates. S L. L. C. v. Mattel, Inc., 552 U. S. 576, 582 (2008). In Vaden v. Discover Bank, 556 U. S. 49 (2009), the Court had previously approved a “look-through” with respect to petitions to compel arbitration under Section 4 of the FAA. However, Justice Kagan noted, “Sections 9 and 10 of the FAA contain none of the statutory language on which Vaden relied. So under ordinary principles of statutory construction, the look-through method should not apply.”

The opinion is somewhat lengthy, but it is unsurprising both in its holding and the fact that it was Justice Kagan who wrote an opinion joined by all the Court’s jurisprudential conservatives. This is a decision displaying pure “textualism,” and Justice Kagan clearly has adopted what has been for a long time the favored interpretive approach of the conservatives. It is equally unsurprising that the soon-to-be-retired traditional liberal Justice Breyer dissented, arguing that the Court should search for a practical solution following what might be determined to be a purpose of the law that its language might not have specifically addressed.

I also note the Court’s order of March 28th denying cert. in Texas v. Commissioner of Internal Revenue.

While none of the Justices voted to hear the case, apparently because certain threshold questions complicated things, Justices Thomas and Gorsuch joined a statement by Justice Alito suggesting that, if it could have been heard, the Court necessarily would reach the fundamental question about the limits on the federal government’s authority to delegate its powers to private actors. See Department of Transportation v. Association of American Railroads, 575 U. S. 43 (2015); Carter v. Carter Coal Co., 298 U. S. 238 (1936).

While the Court won’t deal with it this time, this trio of Justices agree that the statutory scheme at issue “points up the need to clarify the private non-delegation doctrine in an appropriate future case.” I have suggested that there is interest in resurrecting the “anti-delegation doctrine” among several of the Justices. However, it is worthy of notice that Justices Kavanaugh and Barrett did not join Justice Alito’s statement.

The issue of congressional authority and possible executive overreach is not far from center stage.