## Facts

- Discover Bank’s servicing affiliate sued Betty Vaden in Maryland state court to collect past-due credit-card charges, pleading only state-law claims.
- Vaden answered and asserted state-law counterclaims challenging Discover’s finance charges, interest, and late fees.
- The cardholder agreement contained an arbitration clause.
- Discover filed a petition in federal district court under § 4 of the Federal Arbitration Act (FAA) to compel arbitration of Vaden’s counterclaims.
- The district court ordered arbitration and concluded it had federal-question jurisdiction after Vaden’s counterclaims were treated as completely preempted by federal banking law.
- The Fourth Circuit affirmed, reasoning that a federal issue in the counterclaims could support jurisdiction under a “look-through” approach.

## Issues

1. Whether a federal court considering an FAA § 4 petition may “look through” the petition to the underlying controversy to determine whether it would have federal subject-matter jurisdiction absent the arbitration agreement.
2. Whether a federal question appearing only in a counterclaim (including one asserted to be completely preempted) can supply federal-question jurisdiction for an FAA § 4 petition under the well-pleaded complaint rule.

## Decision

- The Supreme Court held that FAA § 4 allows a federal court to “look through” a petition to compel arbitration to the underlying controversy to assess whether federal jurisdiction would exist “save for” the arbitration agreement.
- The Court held that, even under the look-through approach, federal-question jurisdiction cannot be based on a federal issue raised only in a counterclaim under the well-pleaded complaint rule.
- Because the underlying state-court collection complaint asserted only state-law claims, the federal courts lacked subject-matter jurisdiction over Discover’s § 4 petition.
- The Court vacated the judgment and remanded with instructions to dismiss the § 4 petition for lack of jurisdiction.
- Chief Justice Roberts concurred in the jurisdictional result but disagreed that § 4 authorizes the look-through approach.

## Legal Principles

- FAA § 4 does not itself create federal jurisdiction; a federal court may entertain a § 4 petition only if it would have jurisdiction over the underlying controversy absent the arbitration agreement.
- Under FAA § 4, courts may determine jurisdiction by looking through the petition to the “controversy between the parties” and asking whether a hypothetical non-arbitration suit would fall within federal jurisdiction.
- Federal-question jurisdiction is governed by the well-pleaded complaint rule: it must appear on the face of the plaintiff’s properly pleaded complaint and cannot be supplied by defenses or counterclaims.
- Complete preemption can recharacterize certain state-law claims as federal for jurisdictional purposes, but it does not permit jurisdiction to rest on a counterclaim rather than the plaintiff’s claim.

## Conclusion

The Court approved a look-through method for FAA § 4 petitions but reaffirmed that federal-question jurisdiction must be anchored in the plaintiff’s well-pleaded complaint; because only the defendant’s counterclaims implicated federal law, the federal courts lacked jurisdiction to compel arbitration in this case.


Vaden v. Discover Bank, 556 U.S. 49 (2009)