Last week in Badgerow v. Walters, the United States Supreme Court held in an 8-1 decision that under the Federal Arbitration Act, a federal court cannot consider an underlying dispute to determine whether it has federal question jurisdiction over a request to confirm or vacate an arbitration award. Instead, federal courts may only look to the application itself to determine whether they have jurisdiction to confirm or deny an arbitration award. 

The decision arose out of a dispute between a financial advisor and her former employer. The plaintiff claimed that she was unlawfully terminated in violation of federal and state law. As required by her employment contract, she submitted her claims to binding arbitration. After the arbitrators dismissed her claims, the plaintiff filed a motion to vacate the arbitration award in federal court. The district court, as affirmed by the Fifth Circuit, determined that it had federal question jurisdiction over the application because when “looking through” the underlying dispute, the plaintiff had brought a federal claim.

In reversing the Fifth Circuit, the Supreme Court rejected the so-called “look through” approach with respect to requests to confirm or vacate arbitration awards. Going forward, parties on either side of an arbitration award will need to choose between filing such requests in state court or clearly identifying the basis for federal jurisdiction in their motion filed with a federal court.