Judges Set Jurisdictional Framework for Judicial Oversight of Arbitration

Opinion Analysis

Supreme Court on Thursday Bargello v Walters Provides a comprehensive view of the appropriate role of the Federal Court in the arbitration process.All but Justice Stephen Breyer joined Justice Elena Kagan Viewwhich narrows the availability of federal jurisdictions to efforts to confirm or set aside arbitral awards.

The case was brought under the Federal Arbitration Act, which does some things explicitly — enforce a pre-dispute arbitration agreement — but is vague about other things, such as telling us which courts should enforce statutory orders. We know two things from earlier Supreme Court rulings. First, the FAA generally does not give federal courts jurisdiction to hear cases that enforce its rules. Second, according to recent decisions (Wadden v. Discovery Bank), we know how to assess jurisdiction at the beginning of an arbitration: a motion to a court to compel arbitration.under Wadden, the Federal Court “looks” at potential disputes through an arbitration agreement. If the dispute is a dispute for which the federal court has jurisdiction (eg, a dispute under the Fair Labor Standards Act), the federal court has jurisdiction over any action to compel arbitration. If not, then only state courts have jurisdiction over any effort to compel arbitration.

Bargello Judicial oversight involving the conclusion of an arbitration: efforts to confirm, set aside or amend an arbitral award. To illustrate the facts of this case, Denise Badgerow worked for a business partly owned by Greg Walters. After her dismissal, she initiated an arbitration proceeding alleging that she was wrongfully dismissed in compliance with an employment agreement that required her to arbitrate the dispute.Because she claimed the termination violated Title VII of the Civil Rights Act, a federal court will Wadden Any action to force arbitration; as Badgerow voluntarily seeks arbitration, no such action is required.

After the arbitration failed, Badgerow filed a lawsuit in Louisiana, asking the state court to set aside the arbitration award; Walters moved the lawsuit to federal court and asked that court to affirm the award. The question for the justices is whether the federal court has the power to decide whether the ruling should be affirmed or reversed. Kagan’s opinion held that the federal courts did not have jurisdiction.

Two key points drive Kagan’s point.The first was the unusual statutory language that drove the decision Wadden. Wadden considered Section 4 The Federal Aviation Administration (FAA) states that it is appropriate to file a compulsory motion in any federal district court, “except [the arbitration] Agreement, has jurisdiction [over] Litigation arising from disputes between the parties. As noted above, the Supreme Court interpreted the language to compel the district court to “review” the petition to compel arbitration to establish jurisdiction on the substance of the underlying dispute.

BargelloHowever, involving Section 9 and 10 The FAA, which describes the procedures for affirming or setting aside an arbitral award.Kagan noted that these sections “do not contain any Wadden Depend on. She refused to “redraw the FAA to introduce the corresponding language of Section 4 into provisions that do not contain similar content,” noting that “Congress could have replicated the read-through directive of Section 4 in Sections 9 and 10.” “, or it “could have drafted a global – by providing, applying[at] The entire FAA approach. But Congress has neither. ” Kagan emphasized that the “perspective rule” is Wadden are “very unusual” and “jurisdictional outliers”. Pulling perspective jurisdiction ‘out of thin air’ and finding that “without textual support, federal courts may use[at] SOLUTION…Section 9 and 10 applications. “

The second point, more practical than text, is the distinction between a potential dispute resolved by arbitration (enforced under Article 4) and an award resulting from the arbitration (assessed under Articles 9 and 10). This distinction is at the heart of the vision that infuses Kagan’s views. Earlier, she explained that, conceptually, arbitral awards “are nothing more than the contractual settlement of disputes between parties — a way of resolving legal claims.” Among other things, this means that disputes over these awards should follow” Disputes over legal settlements,” rules, “usually involve only state law, like disagreements over other contracts.”That’s it, she points out, “even if [for] Settlement of Federal Claims. “

For Kagan, the distinction explains “why Congress has chosen to file fewer arbitration disputes in federal court than Walters would have liked.” She described a “statutory program” for affirming or setting aside arbitration awards. The application provides for a “normal and sensible division of justice”.Because “the underlying dispute is now not in dispute” – even for “arbitration of federal law disputes” – “the application involves contractual rights set forth in an arbitration agreement” which are “generally governed by state law” and usually belong to[] in state court. “

Her last point is mandatory arbitration (usually in federal court under Wadden) and affirmation or annulment of arbitral awards (rarely thereafter in federal court Bargello). Earlier cases have recognized that “the FAA’s ‘preeminent’ purpose was to overcome some judges’ reluctance to enforce arbitration agreements when a party tries to bring a case in court,” but the Supreme Court “never found similar concerns in Congress about judges” “willing to enforce the arbitral award that has been made. Kagan argues that this distinction supports the difference in results between the two Wadden and Bargellobecause “Congress is likely to deem expansion of federal jurisdiction appropriate for a separate compulsory petition,” leaving “[a]Application for Arbitration Decision [to] Follow normal rules. “

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