Facts
- Denise Badgerow, a former financial advisor at REJ Properties, Inc., agreed to arbitrate disputes with three company principals, including Greg Walters.
- After her termination, Badgerow brought FINRA arbitration claims alleging tortious interference and violations of Louisiana whistleblower law.
- The arbitration panel dismissed Badgerow’s claims with prejudice.
- Badgerow filed in Louisiana state court to vacate the award, alleging the award was procured by fraud.
- The principals removed to federal court and sought confirmation of the award.
Issues
- Whether a federal court deciding an application to confirm (§ 9) or vacate (§ 10) an arbitral award may “look through” to the underlying dispute to find federal-question jurisdiction.
- Whether, absent diversity or a federal issue on the face of the §§ 9–10 application, a federal court has subject-matter jurisdiction over post-award FAA proceedings.
Decision
- The Supreme Court reversed the Fifth Circuit and remanded.
- The Court held, 8–1, that the “look-through” approach applies to FAA § 4 petitions to compel arbitration but does not extend to FAA §§ 9 and 10 applications to confirm or vacate awards.
- Because the application itself raised no federal issue and diversity jurisdiction was lacking, federal subject-matter jurisdiction was absent.
Legal Principles
- The Federal Arbitration Act does not itself confer federal subject-matter jurisdiction; an independent jurisdictional basis is required.
- “Look-through” jurisdiction is permitted for FAA § 4 because that provision’s text directs courts to assess whether, absent the arbitration agreement, the court would have jurisdiction over the underlying controversy.
- FAA §§ 9 and 10 lack § 4’s “save for” and “arising out of the controversy” language; jurisdiction for confirmation/vacatur must be determined from the face of the application, not the underlying arbitration dispute.
- Policy concerns about fragmented federal and state supervision of arbitration cannot override statutory text allocating jurisdiction.
Conclusion
Federal courts may not rely on the underlying arbitration’s federal issues to establish jurisdiction over FAA §§ 9 and 10 proceedings; unless the confirmation or vacatur application independently satisfies federal-question or diversity jurisdiction, it must proceed in state court.