Badgerow v. Walters

• Decision Date: 31 March 2022
• Docket Number: 20-1143
• Citation: 142 S.Ct. 1310
• Parties: Denise A. BADGEROW, Petitioner v. Greg WALTERS, et al.
• Court: U.S. Supreme Court

142 S.Ct. 1310

Denise A. BADGEROW, Petitioner

v.Greg WALTERS, et al.

No. 20-1143

Supreme Court of the United States.

Argued November 2, 2021

Decided March 31, 2022

Daniel L. Geyser, Los Angeles, for the petitioner.

Lisa S. Blatt, Washington, DC, for the respondents.

Amanda Butler Schley, Business Law Group, New Orleans, LA, Daniel L. Geyser, Counsel of Record, Ryan N. Gardner Haynes and Boone, LLP, Dallas, TX, for petitioner.

Daniel L. Geyser, Alexander Dubose & Jefferson LLP, Walnut Glen Tower, Dallas, TX, Amanda Butler Schley, Business Law Group, New Orleans, LA, Counsel of Record, for petitioner.

Eve B. Masinter E. Fredrick Preis, Jr. Matthew M. McCluer Breazeale, Sachse & Wilson, L.L.P., New Orleans, LA, Lisa S. Blatt, Counsel of Record, Sarah M. Harris Katherine Moran Meeks Sumeet Dang, Aaron Z. Roper Williams & Connolly LLP, Washington, DC, for respondents.

Justice KAGAN delivered the opinion of the Court.

The Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq. , authorizes a party to an arbitration agreement to seek several kinds of assistance from a federal court. Under Section 4, for example, a party may ask the court to compel an arbitration proceeding, as the agreement contemplates. And under Sections 9 and 10, a party may apply to the court to confirm, or alternatively to vacate, an arbitral award.

Yet the federal courts, as we have often held, may or may not have jurisdiction to decide such a request. The Act's authorization of a petition does not itself create jurisdiction. Rather, the federal court must have what we have called an "independent jurisdictional basis" to resolve the matter. Hall Street Associates, L. L. C. v. Mattel, Inc. , 552 U.S. 576, 582, 128 S.Ct. 1396, 170 L.Ed.2d 254 (2008).

In Vaden v. Discover Bank , 556 U.S. 49, 129 S.Ct. 1262, 173 L.Ed.2d 206 (2009), we assessed whether there was a jurisdictional basis to decide a Section 4 petition to compel arbitration by means of examining the parties’ underlying dispute. The text of Section 4, we reasoned, instructs a federal court to "look through" the petition to the "underlying substantive controversy" between the parties—even though that controversy is not before the court. Id. , at 62, 129 S.Ct. 1262. If the underlying dispute falls within the court's jurisdiction—for example, by presenting a federal question—then the court may rule on the petition to compel. That is so regardless whether the petition alone could establish the court's jurisdiction.

The question presented here is whether that same "look-through" approach to jurisdiction applies to requests to confirm or vacate arbitral awards under the FAA's Sections 9 and 10. We hold it does not. Those sections lack Section 4's distinctive language directing a look-through, on which Vaden rested. Without that statutory instruction, a court may look only to the application actually submitted to it in assessing its jurisdiction.

I

This case grows out of the arbitration of an employment dispute. Petitioner Denise Badgerow worked as a financial advisor for REJ Properties, a firm run by respondents Greg Walters, Thomas Meyer, and Ray Trosclair. (For ease of reference, we refer from now on only to Walters.) Badgerow's contract required her to bring claims arising out of her employment to arbitration, rather than to court. So when she was (in her view, improperly) fired, she initiated an arbitration action against Walters, alleging unlawful termination under both federal and state law. The arbitrators sided with Walters, dismissing Badgerow's claims.

What happened afterward—when Badgerow refused to give up—created the jurisdictional issue we address today. Believing that fraud had tainted the arbitration proceeding, Badgerow sued Walters in Louisiana state court to vacate the arbitral decision. Walters responded by removing the case to Federal District Court—and, once there, applying to confirm the arbitral award. Finally, Badgerow moved to remand the case to state court, arguing that the federal court lacked jurisdiction over the parties’ requests—under Sections 10 and 9, respectively—to vacate or confirm the award.

The District Court assessed its jurisdiction under the look through approach this Court adopted in Vaden v. Discover Bank . See 2019 WL 2611127, *1 (ED La., June 26, 2019). That approach, as just noted, allows a federal court to exercise jurisdiction over an FAA application when the parties’ underlying substantive dispute would have fallen within the court's jurisdiction. See supra , at 1314. The District Court acknowledged that Vaden involved a different kind of arbitration dispute: It concerned a petition to compel arbitration under the FAA's Section 4, rather than an application to confirm or vacate an arbitral award under Section 9 or 10. And Vaden ’s "reasoning was grounded on specific text" in Section 4 that Sections 9 and 10 "do[ ] not contain." 2019 WL 2611127, *2. But the court thought it should apply the look-through approach anyway, so that "consistent jurisdictional principles" would govern all kinds of FAA applications. Ibid . And under that approach, the court had jurisdiction because Badgerow's underlying employment action raised federal-law claims. The court thus went on to resolve the dispute over whether fraud had infected the arbitration proceeding. Finding it had not, the court granted Walters's application to confirm, and denied Badgerow's application to vacate, the arbitral award.

The United States Court of Appeals for the Fifth Circuit affirmed the District Court's finding of jurisdiction, relying on a just-issued Circuit precedent. See 975 F.3d 469, 472–474 (2020) (citing Quezada v. Bechtel OG&C Constr. Servs., Inc. , 946 F.3d 837, 843 (2020) ). In that decision, the Fifth Circuit had echoed the reasoning of the District Court here. Yes, the language of Section 4 directing use of the look-through approach "is in fact absent in" the FAA's other sections. 946 F.3d, at 842. But, the court continued, a "principle of uniformity" applying to the FAA "dictates using the same approach for determining jurisdiction under each section of the statute." Ibid. ; but see id. , at 845–846 (Ho, J., dissenting) (rejecting that asserted principle in favor of "[f]idelity to text"). As applied to this case, that analysis meant that the district court had jurisdiction over Walters's Section 9 and Badgerow's Section 10 applications.

Courts have divided over whether the look-through approach used in Vaden can establish jurisdiction in a case like this one—when the application before the court seeks not to compel arbitration under Section 4 but to confirm, vacate, or modify an arbitral award under other sections of the FAA.¹ We granted certiorari to resolve the conflict, 593 U. S. ––––, 141 S.Ct. 1532 (2021), and now reverse the judgment below.

II

The district courts of the United States are courts of limited jurisdiction, defined (within constitutional bounds) by federal statute. See, e.g. , Kokkonen v. Guardian Life Ins. Co. of America , 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994). Congress has granted those courts jurisdiction over two main kinds of cases. District courts have power to decide diversity cases—suits between citizens of different States as to any matter valued at more than $75,000. See 28 U.S.C. § 1332(a). And they have power to decide federal-question cases—suits "arising under" federal law. § 1331. Typically, an action arises under federal law if that law "creates the cause of action asserted." Gunn v. Minton , 568 U.S. 251, 257, 133 S.Ct. 1059, 185 L.Ed.2d 72 (2013). So when federal law authorizes the action, the party bringing it—once again, typically—gets to go to federal court.

But that is not necessarily true of FAA-created arbitration actions. As noted above, the FAA authorizes parties to arbitration agreements to file specified actions in federal court—most prominently, petitions to compel arbitration (under Section 4) and applications to confirm, vacate, or modify arbitral awards (under Sections 9 through 11). See supra , at 1314. But those provisions, this Court has held, do not themselves support federal jurisdiction. See Hall Street , 552 U.S., at 581–582, 128 S.Ct. 1396 ; Vaden , 556 U.S., at 59, 129 S.Ct. 1262. (Were it otherwise, every arbitration in the country, however distant from federal concerns, could wind up in federal district court.) A federal court may entertain an action brought under the FAA only if the action has an "independent jurisdictional basis." Hall Street , 552 U.S., at 582, 128 S.Ct. 1396. That means an applicant seeking, for example, to vacate an arbitral award under Section 10 must identify a grant of jurisdiction, apart from Section 10 itself, conferring "access to a federal forum." Vaden , 556 U.S., at 59, 129 S.Ct. 1262. If she cannot, the action belongs in state court. The FAA requires those courts, too, to honor arbitration agreements; and we have long recognized their "prominent role" in arbitral enforcement. Ibid. ; see id., at 71, 129 S.Ct. 1262 ; Southland Corp. v. Keating , 465 U.S. 1, 12–16, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984).²

The issue here is about where a federal court should look to determine whether an action brought under Section 9 or 10 has an independent jurisdictional basis. An obvious place is the face of the application itself. If it shows that the contending parties are citizens of different States (with over $75,000 in dispute), then § 1332(a) gives the court diversity jurisdiction. Or if it alleges that federal law (beyond Section 9 or 10 itself) entitles the applicant to relief, then § 1331 gives the court federal-question jurisdiction. But those possibilities do Walters no good. He and Badgerow are from the same State. And their applications raise no federal issue. Recall that the two are now contesting not the legality of Badgerow's firing but the enforceability of an arbitral award. That award is no more than a contractual resolution of the parties’ dispute—a way of settling legal...