Publications

Greetings, Court Fans!

Just one new decision this week. In Badgerow v. Walters (No. 20-1143), the Court resolved a circuit split over a technical jurisdictional issue involving the Federal Arbitration Act (“FAA”), while airing the ever-diminishing differences among the Justices when it comes to formalistic or functional approaches to statutory interpretation.

Section 4 of the FAA authorizes a party to an arbitration agreement to request that a federal court compel arbitration. Sections 9 and 10 authorize a party to request that the court confirm or vacate an arbitral award. None of these sections, however, automatically provides the federal court with jurisdiction; the court still needs an independent jurisdictional basis. Back in 2009, the Supreme Court held in Vaden v. Discover Bank that, in determining whether a jurisdictional basis exists for a petition to compel arbitration under Section 4, a federal court may “look through” the petition and assess the “underlying substantive controversy.” Under Vaden, even if the petition alone cannot establish jurisdiction, the court still has jurisdiction if the underlying dispute between the parties offers a jurisdictional basis (by, for example, raising a federal question).

Badgerow considered whether that same “look-through approach” applies to requests to confirm or vacate arbitral awards under Sections 9 and 10. The plaintiff, Denise Badgerow, worked as a financial advisor and signed an agreement to arbitrate disputes with her employer, a financial services provider. After she was fired in 2016, she initiated arbitration proceedings against the employer. The arbitrator sided with the employer, and Badgerow filed a suit in Louisiana state court, seeking to vacate the arbitration award. The employer removed the case to federal district court and petitioned for confirmation of the award. The parties disputed jurisdiction. The petitions themselves did not reveal a jurisdictional basis, as there was no diversity of citizenship and the petitions raised no federal question. (At this stage, the dispute was over the enforceability of the arbitral award, not over whether Badgerow was improperly fired.) But Badgerow’s underlying substantive dispute with her employer did involve claims that the employer violated federal law. The District Court applied Vaden’s look-through approach and reasoned that it had jurisdiction because the underlying employment dispute raised a federal question. It then confirmed the award. The Fifth Circuit affirmed, reasoning that a “principle of uniformity . . . dictates using the same [‘look-through’] approach for determining jurisdiction under each section of the statute.” The Fifth Circuit’s decision was the latest entry into a widening circuit split: While the First, Second, Fourth, and Fifth Circuits have issued decisions applying Vaden’s look-through approach to petitions under Sections 9 and 10, the Third and Seventh Circuits have held that the look-through approach did not apply to such requests. The Supreme Court granted certiorari to resolve the split.

In an 8-1 decision authored by Justice Kagan, the Supreme Court sided with the minority, holding that the look-through approach does not apply to petitions under Sections 9 and 10 of the FAA. Kagan reasoned that Sections 9 and 10 lack Section 4’s “distinctive language directing a look-through.” Specifically, Section 4 states that it authorizes a party to an arbitration agreement to petition for an order to compel arbitration in a “United States district court which, save for [the arbitration] agreement, would have jurisdiction” over “the controversy between the parties.” That text necessarily focuses the jurisdictional inquiry on the underlying substantive controversy between the parties: If a federal district court would have jurisdiction over the case absent an arbitration agreement, then it has jurisdiction to consider a petition to compel arbitration under the agreement. But that “save for” language does not appear in Sections 9 and 10; Congress chose not to even mention subject-matter jurisdiction in those sections. As Kagan explained, the look-through approach is “highly unusual” and an “outlier” in that “[i]t locates jurisdiction not in the action actually before the court, but in another controversy neither there nor ever meant to be.” The Vaden approach emerged from a “careful analysis” of the specific text of Section 4. Without that textual nudge, the Court was disinclined to extend the look-through approach to Sections 9 and 10. After all, Kagan stressed, federal courts must have a statutory basis for jurisdiction and cannot expand their own jurisdiction by judicial decree.

Justice Breyer alone dissented, with what might be regarded as a swan song to purposivism and pragmatism in statutory interpretation. Though he had also dissented in Vaden, Breyer now wrote that he believed its holding should be extended to all jurisdictional inquiries under the FAA. As he saw it, Vaden was motivated not solely by Section 4’s text, but also by a desire to avoid the “curious practical consequences” that would result if federal jurisdiction were found only where a petition to enforce an arbitration agreement itself established jurisdiction. In Breyer’s view, the majority’s decision (which would necessarily extend as well to other sections of the FAA that lack Section 4’s “save for” language) would “create[] what Vaden feared—curious consequences and artificial distinctions.” In fact, the majority’s approach created even greater confusion as it essentially “split[s] what is, or should be, a single jurisdictional atom”—it makes little sense in Breyer’s view to have different jurisdictional texts for different parts of the same statute. Though he recognized that the majority’s interpretation of Section 4 was “consistent with its text,” Breyer warned that “looking solely to the text, and with a single-minded focus on individual words in the text, will sometimes lead to an interpretation at odds with the statute as a whole.”

It was Justice Kagan who remarked (at a lecture honoring Justice Scalia), “We’re all textualists now.” That maxim (always truer of statutory construction than constitutional interpretation) is even more ascendant now, as the Court’s last true pragmatist retires.

That’s all for now. Have a great weekend!