In a recent decision, McCormick v. America Online, No. 17-1542 (4th Cir. Nov. 29, 2018) (click here for a copy of the decision), the Fourth Circuit addressed how district courts should assess subject matter jurisdiction in connection with a petition to vacate an arbitrator’s award. The Fourth Circuit, disagreeing with the Third and Seventh Circuits and agreeing with the First and Second Circuits, held that a federal court has jurisdiction over a motion to vacate an award if the court would have had jurisdiction in connection with the underlying dispute on the merits. The Fourth Circuit adopted the Supreme Court’s “look through” approach from the Supreme Court’s 2009 decision in Vaden v. Discover Bank, although Vaden involved the enforcement of an arbitration agreement, not the vacatur of an arbitration award.
I agree with the “look through” approach adopted by the Fourth Circuit here in McCormick. The Supreme Court appears to flip-flop in how it conceptualizes the enforcement of an arbitration agreement. Sometimes, like in the 1984 Southland case, the Court views the enforcement of an arbitration clause as a substantive right, but at other times, like in Mitsubishi’s discussion of the effective vindication doctrine and in Vaden, the Supreme Court treats the enforcement of an arbitration clause as procedural in nature. I tend to agree with the procedural view because arbitration is ultimately used as a means to resolve underlying disputes; arbitration involves a bundle of procedures, authorized by the parties, to resolve a dispute. The jurisdictional analysis adopted by the Fourth Circuit in McCormick is consistent with this procedural view of arbitration. I tend to view the FAA as similar to the federal venue statute, 28 U.S.C. 1391, which is procedural in nature and helps define the forum where the merits will be resolved and which has no applicability in state courts. To advance a manufactured federal interest, the Supreme Court in Southland improperly treats the FAA as binding in state courts. However, the FAA should not apply in state courts at all given its procedural nature, the text, and history of the statute. The Fourth Circuit’s recent decision correctly treats the FAA as procedural in nature.
There are dozens of court splits involving how to interpret the FAA, which is approaching its 100 year anniversary. To help promote arbitration as a speedy method of dispute resolution, arbitration law should be crystal clear and not subject to confusing, conflicting decisions.