Jottings By An Employer's Lawyer

Tuesday, January 25, 2005

Setting One Up for the Supremes - 4th Cir. Takes Broad View On Its Jurisdiction Under FAA

More use of arbitration means more litigation about arbitration and the 4th Circuit authors an important chapter in Discover Bank v. Vaden (4th Cir. 1/24/05) [pdf]. The issue -- when does a federal court have jurisdiction over a petition to compel arbitration? The Court divined two existing lines of precedent, the so called Westmoreland view, which "holds that for a district court to have federal question jurisdiction over a suit compelling arbitration, the federal question must be evident on the face of the arbitration petition itself." The second, broader, view allows the court to "look through" the arbitration request to the underlying controversy between the parties to see if it presents a federal question.

The 4th Circuits opinion lays out a well reasoned argument why the Westmoreland doctrine is not valid, including an attempt to justify it based on the well-pleaded complaint rule. In fact you could almost envision the opinion standing as the brief for those supporting a broad view of jurisdiction when this issue is submitted to the Supreme Court for review.

The underlying case is not an employment case, but a consumer dispute, and the 4th Circuit sent most of the substantive questions back to the district court for further determination. But the Court clearly staked out its position on the broader interpretation of federal court jurisdiction to enforce an arbitration request.

What this means for employment law practitioners in those circuits that ascribe to the broader view, now clearly including the 4th Circuit, is that if the underlying controversy is founded in federal law, such as Title VII, the FMLA, the FLSA etc., an action to enforce arbitration will now lie in federal court. For those faced with hostile state courts, an important distinction.

For now it's a circuit by circuit call, but the tenor of this opinion makes me think the matter is ripe for review.


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