The US Supreme Court heard oral argument on October 6 in Betty E. Vaden v. Discover Bank. The Court is expected to decide an important jurisdictional question: whether a district court may "look through" to the underlying complaint in a case in order to decide whether it has "federal question" jurisdiction to hear a motion to compel arbitration under the Federal Arbitration Act. Discover Bank's counsel, Carter Phillips, an attorney with Sidley Austin in Washington, DC, argued that the issue in this case -- whether Section 4 authorizes a district court to compel arbitration when it determines it would have jurisdiction over the underlying dispute -- is a question of federal law.
ADR news High Court Hears Debate on Ron Chapple/Getty Images Federal Question Jurisdiction T he U.S. Supreme Court BY JUSTIN KELLY heard oral argument on Oct. 6 in Betty E. Vaden v. Discover Chief Justice John Roberts called this Bank (No. 07-773, review granted argument a “tough sell,” although he March 17, 2008). The Court is ex- agreed that the “save for” language in pected to decide an important juris- Section 4 seemed to direct the court dictional question: whether a district to decide if, without the arbitration court may “look through” to the un- agreement, the case could be brought derlying complaint in a case in order in federal court. to decide whether it has “federal Associate Justice Ruth Bader Gins- question” jurisdiction to hear a mo- burg asked Ortiz whether Section 2 tion to compel arbitration under the of the FAA took care of the ouster Federal Arbitration Act (FAA). Also doctrine. He responded that Section before the Court is “whether a com- 2 was insufficient to declare the pletely preempted state-law counter- ouster doctrine dead, so Congress claim can supply subject matter juris- “took the extra step in Section 4” to make sure that the ouster doctrine Roberts pointed out that the issue diction” to a federal court. (The DRJ could be framed to avoid federal law, previously reported on this case in the would not be a problem. Ortiz also argued that allowing which would put the case in state August-October 2008 issue.) court. Both Ginsburg and Associate The parties construe Section 4 of courts to look through to the un- derlying complaint would undermine Justice David Souter observed that a the FAA differently. Discover Bank state court is competent to apply fed- argued that the FAA clearly autho- getting the parties into arbitration rapidly so arbitrators could decide the eral law. rizes the “look through” approach But Phillips expressed a preference because Section 4 says that a district issues. Discover Bank’s counsel, Carter for federal court, saying, “We have court is authorized to compel arbitra- serious doubts as to whether or not in tion when, “but for” the arbitration Phillips, an attorney with Sidley Austin in Washington, D.C., argued fact we will
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