Circuit Split Deepens
Vaden adopted the “look through” approach for section 4 of the Federal Arbitration Act. However, it did not decide whether the same approach applies to sections 9, 10, or 11. Therefore, a circuit split developed after the Vaden decision. The Fifth Circuit joined the First, Second, and Fourth Circuits in applying the “look through” analysis to confirm, vacate, or modify an arbitration award under sections 9, 10, or 11, respectively. On the other side of the split, the Third, Seventh, Ninth, and D.C. Circuits have rejected the “look through” analysis.
The Fifth Circuit reasoned that the virtues of the “look through” analysis include permitting a petitioner “to ask a federal court to compel arbitration without first taking the formal step of initiating or removing a federal-question suit—that is, without seeking federal adjudication of the very questions it wants to arbitrate rather than litigate.”
The appellate court further found that rejecting the “look through” analysis would create an “inefficient and formalistic” process where a litigant would be forced to “preserve federal jurisdiction over a motion to vacate, modify, or confirm an arbitration award by first filing a motion to compel arbitration under section 4, which benefits from the look-through approach.” With the “look through” analysis, the parties would not have to first file in federal court for the sole purpose of preserving federal jurisdiction to later review the award.
Practical Implications
The existence of the circuit split “really shouldn’t have much practical influence or significance unless federal enforcement jurisdiction is vitally important, as otherwise state courts remain available for post-arbitral relief,” explains John H. Mathias Jr., Chicago, IL, cochair of the ABA Section of Litigation’s International Litigation & Dispute Resolution Committee.
If federal jurisdiction is important to the practitioner who is in one of the circuits that has not adopted the “look through” analysis, then “the case highlights two potential strategic points, that could come up in some situations,” opines Henry L. Parr, Greenville, SC, cochair of the Section of Litigation’s International Litigation & Dispute Resolution Committee. “First, if a party knows well ahead of time that it will be important to have federal jurisdiction for a motion to confirm, vacate, or modify arbitration awards under FAA sections 9, 10, and 11, respectively, then it might be advisable to consider filing an action in federal court and then moving to compel arbitration and stay the federal action pending the arbitration, if that is possible,” says Parr.
“Second, until the Supreme Court resolves the circuit split over the ‘look through’ approach to jurisdiction for these motions, proceeding in state court might be the safest route, especially since there is a time deadline to make some of the motions,” Parr adds.