A federal court recently issued an opinion raising an interesting problem of jurisdiction over Federal Arbitration Act proceedings. See Taylor v. Western Southern Financial Group, No. 3:12mc00020 (S.D. Ohio June 19, 2013) (click here to see a copy of the decision). A party who lost an arbitration proceeding brought an action in federal court to vacate the arbitrator’s award. The dispute submitted to arbitration was an employment dispute, and the claims submitted to arbitration included federal civil rights claims.
The federal court found that it lacked subject matter jurisdiction over the action to vacate the award. The court conceptualized the arbitrator’s award as nothing more than a contract or agreement between the parties. According to the court, there was no federal claim involved, and there was no indication of diversity jurisdiction. Hence, the court dismissed the action for lack of subject matter jurisdiction.
I think the court’s reasoning was flawed. In a 2009 decision called Vaden v Discover Bank, the Supreme Court held that for a subject matter jurisdiction analysis involving the Federal Arbitration Act, a federal court should examine the underlying dispute to be arbitrated. Thus, under this Vaden analysis, the Taylor court should have looked to the claims being arbitrated, which included federal civil rights claims, and the Taylor court should have found subject matter jurisdiction to exist over the action to vacate the arbitration award. Although Vaden involved an action to compel arbitration from the front-end while the Taylor case involves an action to vacate an arbitration award from the back-end, the Federal Arbitration Act in my view should be considered a unified statute, and courts should analyze subject matter jurisdiction consistently when interpreting the Federal Arbitration Act.