Vaden v. Discover Bank, et al.

Case Updates

The Supreme Court held that federal courts do not have jurisdiction to hear a counterclaim that would qualify for federal review under the Federal Arbitration Act, if a federal court would not have jurisdiction to hear the original claim. However, the Court agreed with NCLC that a federal court may look to the underlying nature of the original dispute to decide whether federal courts would have jurisdiction under the FAA.

NCLC argued that the Federal Arbitration Act (FAA) provides a federal court with jurisdiction over arbitration disputes where the underlying controversy involves federal law. In its brief, NCLC argued that although the FAA was enacted to counter hostility to arbitration, many state courts – particularly California, Montana, Pennsylvania and West Virginia - continue to be openly hostile to arbitration. NCLC argued that in light of the purpose of the FAA to overcome judicial resistance to arbitration, Section 4 of the FAA should be construed to permit federal courts to exercise jurisdiction over a petition to compel arbitration by looking to the nature of the underlying dispute to be arbitrated.