Earlier today, the Supreme Court issued its decision in Badgerow v. Walters, No. 20-1143 (U.S. March 24, 2022) (click here for a copy of the decision). The Court rejected a uniform theory of jurisdiction for FAA proceedings. The “look-through” jurisdictional analysis from Section 4 of the FAA, an analysis recognized in the 2009 case of Vaden v. Discover Bank, does NOT extend to other FAA proceedings, like a petition to confirm or vacate an award.
If a federal court has power to hear the underlying dispute being arbitrated, the federal court has power to hear a section 4 petition to enforce an arbitration agreement. According to today’s decision, the federal court, however, would not have subject matter jurisdiction to vacate or confirm an award involving the same underlying dispute. This result seems inconsistent and problematic. Why would a federal court have power to compel arbitration from the front end, but lose the power to confirm or vacate an award at the back end involving the exact same dispute?
Although the case narrowly involves a petition to confirm or vacate an arbitral award, the majority’s reasoning will broadly impact the power of the federal judiciary to facilitate other aspects of arbitration. Going forward, post-Badgerow, parties will have a harder time trying to get into the federal courthouse door for other types of FAA proceedings used to facilitate arbitration, such as a petition for judicial enforcement of an arbitral subpoena, or a petition for judicial appointment of an arbitrator.
The majority’s opinion represents a strong textualist view, which will lead to strange results here and which is not very supportive of arbitration in this case. (If the Court were writing on a clean slate and adopted a textualist view for all other FAA matters, look out – we would have an entirely different statute.) As suggested by Justice Breyer in dissent, law is interpreted and applied in a better, simpler manner when courts engage in a broader examination of a statute’s text, structure, history, and purpose, instead of engaging in a single-minded, narrow focus just on the text.