Card Not Valid: Badgerow and Post-Award FAA Jurisdiction

by Andrew Flake

I recently discovered, with some surprise, that it was again time to renew my library card — and that I’d need to trek down in person! Imagine, in this era of online convenience… At about the same time, the Fourth Circuit decided Smartsky Networks, Ltd. Liab. Co. v. DAG Wireless, Ltd., a case discussing post-arbitration award practice under the Federal Arbitration Act, and specifically, when a party can seek vacatur or confirmation of the award in federal court as opposed to state court.

So what might we learn from these two seemingly unrelated events?

The answer involves the distinction between what we can call “look-through” jurisdiction, and independent federal jurisdiction, for example, diversity or a federal statute like the Copyright Act, and the distinction between moving to compel arbitration, and then petitioning to confirm or vacate an award. It’s the distinction between the “before” and the “after.”

Let’s say we have an arbitration in Florida involving a copyright licensing agreement, containing an arbitration clause, alleged copyright infringement, and some state law unfair competition claims. Both parties are Florida companies, and the plaintiff decides to sue in Florida state court.

Could the defendant initiate a proceeding to compel arbitration by filing in federal court? Yes – and the reason is that the FAA itself permits a party to do so. Under Section 4, the district court can “look through” the motion to compel to what is in dispute, evaluating the underlying claims in arbitration to determine whether federal jurisdiction exists. If the federal district court is the library, under Section 4 of the FAA, the underlying dispute provides the library card. This was the Supreme Court’s holding in its 2009 Vaden v. Discovery Bank opinion.

But, let’s say the district court compels arbitration, the arbitration proceeds to its conclusion, and a Florida arbitrator issues a final award. The plaintiff (now the claimant) wants to confirm it. Can he go back to federal district court to seek a judgment there?

It would depend on whether the Vaden approach holds, on whether the district court can “look-through” to what was at issue in the underlying arbitration. If it can, “looking through” the petition to confirm the award, the district court in our example would find federal question jurisdiction based on the Copyright Act. The plaintiff could have filed in federal court in the first place; he holds a would thus hold a valid library card.

In Badgerow v. Walters,  however, decided in 2022, the Supreme Court nixed this approach, clarifying that for motions to confirm or vacate arbitration awards under the FAA (Sections 9 and 10), federal jurisdiction cannot solely rely on the look-through approach. This means that even if the underlying dispute involves federal questions, a separate, independent jurisdictional basis is needed to bring the action in federal court. In our library, “Confirm or Vacate,” is a restricted section.

In Smartsky Networks, the party arguing for jurisdiction, SmartSky, had prevailed in a AAA arbitration and then gone to federal court to confirm its award. On appeal, SmartSky  tried to argue that because certain claims had been originally filed in federal court, and then stayed in favor of arbitration, they still served as an “anchor” for  jurisdiction for the federal court to confirm – an argument that it was already “in the library,” albeit arguing with another patron whether they should be there at all.

The Fourth Circuit, though, applied Badgerow, noting that a petition to confirm or vacate is an independent action, requiring an independent basis for jurisdiction. Because the district court did not have an independent basis of subject matter, the Fourth Circuit reversed and remanded, costing the parties time and presumably substantial expense.

For advocates, that result underscores the importance of a strategic approach when deciding where to file post-arbitral motions. Counsel must verify that the case has an independent jurisdictional basis—such as diversity of citizenship or a federal question—outside the arbitration agreement itself. Review Badgerow, and then make sure the application to vacate or confirm an arbitration award articulates that basis, with adequate record support, cleanly and clearly.

[The cases referenced are Smartsky Networks, Ltd. Liab. Co. v. DAG Wireless, Ltd., No. 22-1253, 2024 U.S. App. LEXIS 3362, at *3 (4th Cir. Feb. 13, 2024); Vaden v. Discover Bank, 556 U. S. 49, 129 S. Ct. 1262, 173 L. Ed. 2d 206 (2009), and Badgerow v. Walters, 596 U.S. 1, 142 S. Ct. 1310, 1314 (2022).]

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