Filed: Aug. 11, 2016
Latest Update: Mar. 03, 2020
Summary: 15-2814 Doscher v. Sea Port UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT _ August Term 2015 (Argued: March 8, 2016 Decided: August 11, 2016) Docket No. 15-2814 DREW DOSCHER, Petitioner-Appellant, –v.– SEA PORT GROUP SECURITIES, LLC, STEPHEN SMITH, MICHAEL MEAGHER, MICHAEL MEYER, THE SEAPORT GROUP, LLC, ARMORY ADVISERS, LLC, ARMORY FUND, LP, and SEAPORT V, LLC, Respondents-Appellees. _ Before: POOLER and WESLEY, Circuit Judges, and EATON, Judge.* _ Appeal from the August 5, 2015 order a
Summary: 15-2814 Doscher v. Sea Port UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT _ August Term 2015 (Argued: March 8, 2016 Decided: August 11, 2016) Docket No. 15-2814 DREW DOSCHER, Petitioner-Appellant, –v.– SEA PORT GROUP SECURITIES, LLC, STEPHEN SMITH, MICHAEL MEAGHER, MICHAEL MEYER, THE SEAPORT GROUP, LLC, ARMORY ADVISERS, LLC, ARMORY FUND, LP, and SEAPORT V, LLC, Respondents-Appellees. _ Before: POOLER and WESLEY, Circuit Judges, and EATON, Judge.* _ Appeal from the August 5, 2015 order an..
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15-2814
Doscher v. Sea Port
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
______________
August Term 2015
(Argued: March 8, 2016 Decided: August 11, 2016)
Docket No. 15‐2814
DREW DOSCHER,
Petitioner‐Appellant,
–v.–
SEA PORT GROUP SECURITIES, LLC, STEPHEN SMITH,
MICHAEL MEAGHER, MICHAEL MEYER, THE SEAPORT
GROUP, LLC, ARMORY ADVISERS, LLC, ARMORY
FUND, LP, and SEAPORT V, LLC,
Respondents‐Appellees.
______________
Before:
POOLER and WESLEY, Circuit Judges, and EATON, Judge.*
______________
Appeal from the August 5, 2015 order and August 7, 2015
judgment of the United States District Court for the Southern
District of New York (Furman, J.). Petitioner‐Appellant Drew
Doscher appeals from the dismissal of his petition to vacate a
final arbitral award under section 10 of the Federal Arbitration
Act, 9 U.S.C. § 10 (the “Act”). The District Court concluded that
this Court’s decision in Greenberg v. Bear, Stearns & Co., 220 F.3d
22 (2d Cir. 2000), precluded it from using the so‐called “look‐
through” approach in determining whether federal‐question
jurisdiction exists over the petition. While the District Court
correctly applied Greenberg, we conclude that the Supreme
Court’s subsequent decision in Vaden v. Discover Bank, 556 U.S.
49 (2009), casts doubt upon Greenberg’s continued vitality. Upon
reconsideration of Greenberg, therefore, we conclude that the
reasoning of Vaden and the nature of the Act require overruling
Greenberg. We therefore hold that district courts may apply a
look‐through approach to § 10 petitions. We also conclude that
allegations that arbitrators disregarded rules of a self‐regulatory
organization do not allege a manifest disregard of federal law.
Accordingly, we VACATE the District Court’s order and
judgment and REMAND the case for further proceedings.
______________
* The Honorable Richard K. Eaton of the United States Court of
International Trade, sitting by designation.
2
A. TODD MEROLLA, Merolla & Gold, LLP, Atlanta, GA,
for Petitioner‐Appellant.
RONALD G. BLUM (Benjamin J. Wolfert, on the brief),
Manatt, Phelps & Phillips, LLP, New York, NY, for Respondents‐
Appellees.
______________
WESLEY, Circuit Judge:
This case arises from the dismissal of a petition to vacate
an arbitral award pursuant to section 10 of the Federal
Arbitration Act (the “FAA” or the “Act”), 9 U.S.C. § 10. It
requires us to reconsider the continuing viability of our Court’s
precedent in Greenberg v. Bear, Stearns & Co., 220 F.3d 22 (2d Cir.
2000), in which we held that a district court may exercise federal‐
question jurisdiction over a § 10 petition only if the petition
states a substantial federal question on its face—i.e., a district
court may not “look through” the petition to determine if the
underlying dispute that was subject to arbitration involved
substantial questions of federal law. Greenberg premised its
conclusion on a now‐overruled decision of this Court that
rejected a look‐through approach as applied to section 4 of the
Act, 9 U.S.C. § 4. See Westmoreland Capital Corp. v. Findlay, 100
F.3d 263 (2d Cir. 1996), overruled by Vaden v. Discover Bank, 556
U.S. 49 (2009).
We would not need to decide whether Greenberg remains
good law if, as Appellant argues, federal‐question jurisdiction
exists on the face of the petition because of an arbitration panel’s
alleged manifest disregard of a self‐regulatory organization’s
internal rule. But because the arbitration panel’s conduct
implicates no federal law and thus cannot form the basis of
jurisdiction, Greenberg’s continued viability takes center stage.
We conclude that Greenberg cannot survive Vaden’s later‐
3
established precedent; accordingly, we vacate the order and the
judgment of the District Court.
BACKGROUND1
In June 2013, Petitioner‐Appellant Drew Doscher—the
onetime co‐head of sales and trading for The Seaport Group,
LLC and Sea Port Group Securities, LLC (together, “Seaport”)—
commenced arbitration against his former employers; both are
members of the Financial Industry Regulatory Authority
(“FINRA”).2 Doscher also included the individual Respondents‐
Appellees—the two founders of Seaport and his former co‐head
of sales and trading—as well as the other three entity
Respondents‐Appellees. His initial statement of claim against his
counterparties alleged breach of contract, retaliatory discharge,
and unjust enrichment, but he later amended his statement to
add a claim for securities fraud under section 10(b) of the
Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C.
§ 78j(b), and Rule 10b‐5 of the Securities and Exchange
1 The facts here are drawn from the District Court’s August 5, 2015
memorandum opinion and order. See Doscher v. Sea Port Group Sec.,
LLC, No. 15‐CV‐384 (JMF), 2015 WL 4643159 (S.D.N.Y. Aug. 5, 2015).
2 FINRA is a “self‐regulatory organization” registered under section
15A of the Exchange Act, 15 U.S.C. § 78o‐3, and subject to oversight
under section 19 of the same act, id. § 78s. See Fiero v. Fin. Indus.
Regulatory Auth., Inc., 660 F.3d 569, 571–72, 574 (2d Cir. 2011) (internal
quotation marks omitted). FINRA’s internal rules require arbitration of
disputes between Doscher and Seaport as a “dispute aris[ing] out of
the business activities of a member or an associated person” that “is
between or among . . . Members and Associated Persons.” FINRA Rule
13200; see also FINRA Rule 13100(a), (o) (defining “Associated Person”
and “Member”). FINRA’s rules may be found at
http://tinyurl.com/finrarules.
4
Commission (“SEC”), 17 C.F.R. § 240.10b‐5. Doscher sought
more than $15 million in damages; ultimately, on October 22,
2013, the arbitral panel awarded him almost $2.3 million, with a
potential additional commission.
On January 20, 2015, Doscher filed a § 10 petition to
vacate and modify in part the award in the United States District
Court for the Southern District of New York (Furman, J.). His
petition identified two grounds for vacatur: (1) the arbitration
panel failed to ensure that documentary evidence was fully and
timely made available to Doscher, thereby warranting vacatur
under § 10(a)(3), and (2) the arbitration panel acted in manifest
disregard of FINRA Rule 13505 requiring parties to cooperate in
discovery. Doscher asserted that the District Court possessed
subject matter jurisdiction because, first, FINRA Rule 13505 was
a rule of federal law and the petition thus stated a federal
question on its face, and, second, that his section 10(b) claim in
the underlying arbitration conferred federal‐question
jurisdiction. On August 5, 2015, the District Court issued a
memorandum opinion and order rejecting both arguments. First,
it held that violations of internal FINRA rules do not present
questions of federal law, and second, it held that Doscher’s
reliance on his section 10(b) claim was “squarely foreclosed” by
Greenberg, which the District Court concluded remained good
law. Doscher, 2015 WL 4643159, at *2–4. Finding no subject
matter jurisdiction, the District Court dismissed the petition in
its entirety and entered judgment in Appellees’ favor on August
7, 2015.
DISCUSSION
Both grounds for subject matter jurisdiction asserted by
Doscher turn on questions of law, which we review de novo. See
Hachamovitch v. DeBuono, 159 F.3d 687, 693 (2d Cir. 1998).
5
Doscher’s argument that a substantial federal question appears
on the face of the petition receives our initial attention; if his
contention were correct, we would have no need to address
Greenberg’s continued vitality.
I.
As explained in Greenberg, federal‐question jurisdiction
lies on the face of the petition where “the petitioner complains
principally and in good faith that the award was rendered in
manifest disregard of federal law.” Greenberg, 220 F.3d at 27;
accord Perpetual Sec., Inc. v. Tang, 290 F.3d 132, 139 (2d Cir. 2002).3
Implicit in this holding is the requirement that the legal rule that
the arbitration panel allegedly manifestly disregarded is in fact a
rule of federal law.
Doscher argues that the internal rules of self‐regulatory
organizations (“SROs”) such as FINRA are federal law, because
those rules are subject to SEC approval, abrogation, or
modification, see 15 U.S.C. § 78s(b)–(c), and because SROs are
obligated both to abide by and to enforce their own internal
rules, see id. § 78s(g). He specifically alleges that the arbitration
panel failed to enforce FINRA Rule 13505, which provides, in
full, that “[t]he parties must cooperate to the fullest extent
practicable in the exchange of documents and information to
expedite the arbitration.”
In support of his argument, Doscher relies on a recent
decision of our Court, NASDAQ OMX Group, Inc. v. UBS
3 After the Supreme Court held that § 10 provides the exclusive
grounds for vacatur of an arbitration award, see Hall St. Assocs., L.L.C.
v. Mattel, Inc., 552 U.S. 576 (2008), our Court held that “manifest
disregard of the law” is a “judicial gloss” on § 10 that permits vacatur.
See Schwartz v. Merrill Lynch & Co., 665 F.3d 444, 451–52 (2d Cir. 2011)
(internal quotation marks omitted).
6
Securities, LLC, 770 F.3d 1010 (2d Cir. 2014). In NASDAQ,
although the plaintiffs alleged four claims arising under state
law, “a singular duty underl[ay] all four”—namely, “NASDAQ’s
duty to operate a fair and orderly market—a duty sourced in the
Exchange Act, amplified by SEC regulations, and implemented
through SEC‐approved NASDAQ rules.” Id. at 1021. Thus, we
concluded, any inquiry into whether this duty was violated—an
essential element of the four state‐law claims—necessarily raised
substantial and disputed questions of federal law. Id. at 1023
(applying Gunn v. Minton, 133 S. Ct. 1059, 1065 (2013)).
Doscher’s case is built on a distinctly different and,
unfortunately for him, unstable foundation. As discussed above,
the Exchange Act requires FINRA to subject its internal rules to
SEC approval, abrogation, or modification. See 15 U.S.C.
§ 78s(b)(1), (c).4 The Exchange Act also requires FINRA to
comply with its own internal rules and to enforce compliance by
its members and associated persons. Id. § 78s(g)(1)(B). While
Doscher must allege that the arbitration panel manifestly
disregarded a rule of federal law, federal law imposes
obligations only on self‐regulatory organizations—not on
arbitration panels applying their rules. Moreover, the rule
implicated here is one step further removed: it directs “[t]he
parties [to] cooperate to the fullest extent practicable.” FINRA
Rule 13505 (emphasis added). Doscher’s claim is, in essence, that
the Exchange Act requires FINRA to require the arbitration
panel to require the parties to cooperate, and the parties did not
4 Internal rules must be approved by the SEC if the rule “is consistent
with the requirements of this chapter and the rules and regulations
issued under this chapter that are applicable to” the SRO.
§ 78s(b)(2)(C)(i). The rule is also deemed approved by default if the
SEC fails to approve or disapprove the rule within the deadlines
provided by the Exchange Act. See § 78s(b)(2)(D).
7
cooperate. The only federal obligation is the one imposed by the
Exchange Act on FINRA, and none of FINRA’s conduct is
implicated by Doscher’s petition. Doscher’s asserted violation is
simply too attenuated to constitute a colorable claim that any
obligation or duty of federal law was manifestly disregarded.
Thus, this case is wholly unlike NASDAQ, in which an
obligation imposed by federal law on an SRO—to operate a fair
and orderly market—was a necessary element of the state law
actions.
Doscher’s position is not without some support. He
directs our attention to Sacks v. Dietrich, 663 F.3d 1065, 1069 (9th
Cir. 2011), in which the Ninth Circuit ruled that federal‐question
jurisdiction extended to claims premised on violations of
internal FINRA rules by arbitrators. Specifically, the plaintiff in
Sacks filed a suit in state court, challenging the arbitrators’
decision to disqualify him as a party’s representative in a FINRA
arbitration, because he had been barred from the securities
industry twenty years prior. Id. at 1067; see also FINRA Rule
13208(c) (precluding persons “currently suspended or barred
from the securities industry in any capacity” from representing a
party in FINRA arbitration). The defendants removed the case to
federal court. The Ninth Circuit concluded that the removal was
proper “because the central question of this case [was] whether
FINRA rules were violated” and thus “application of federal law
[was] necessary to resolve each of the state law theories.” Sacks,
663 F.3d at 1069.
In reaching this conclusion, the court relied heavily on a
prior Ninth Circuit precedent, Sparta Surgical Corp. v. National
Ass’n of Securities Dealers, Inc., 159 F.3d 1209 (9th Cir. 1998). In
Sparta, the plaintiffs had asserted state common‐law claims that
alleged, as a necessary component of the claims, conduct by the
8
National Association of Securities Dealers (“NASD”)5 that
violated its internal rules. The Ninth Circuit concluded that
“[b]ecause federal courts are vested by 15 U.S.C. § 78aa with the
exclusive jurisdiction over actions brought ‘to enforce any
liability or duty’ created by exchange rules,” federal jurisdiction
was proper. Id. at 1212. Relying on Sparta, the Sacks court saw no
distinction between a case in which the SRO violated its own
rules and one in which an arbitrator was charged with the rule
violation: the Sacks panel chose to ground its decision on the
characterization of internal SRO rules as federal law, regardless
of the identity of the alleged violator. Sacks, 663 F.3d at 1069.
With due respect to our sister circuit, its reasoning is
unpersuasive. There is a critical difference between cases like
Sparta and NASDAQ involving allegations that the SRO
breached its own internal rules and cases like Sacks and
Doscher’s involving allegations that someone other than the SRO
violated the internal rules. In the former, the SRO’s conduct may
breach § 78s(g)(1), while in the latter, neither the cause of action
nor any necessary element of it involves adjudicating any breach
of a federal obligation.
More importantly, however, whatever force existed in the
Ninth Circuit’s conclusion that any violation of internal SRO
rules falls categorically within 15 U.S.C. § 78aa’s grant of
“exclusive [federal] jurisdiction of violations of [Chapter 2B of
Title 15] or the rules and regulations thereunder,” it is no longer
tenable following the Supreme Court’s recent decision in Merrill
Lynch, Pierce, Fenner & Smith Inc. v. Manning, 136 S. Ct. 1562
5 NASD was the predecessor organization to FINRA. See Fiero, 660 F.3d
at 571 & n.1.
9
(2016).6 In Manning, the Supreme Court adopted the Third
Circuit’s test for determining what actions fall under exclusive
federal jurisdiction under § 78aa, laying out an identical inquiry
to the familiar “arising under” test for federal‐question
jurisdiction under 28 U.S.C. § 1331. Id. at 1567–68. In doing so, it
expressly rejected Sparta’s broader interpretation. See id. at 1567
& n.1. Applying the same principles as the “arising under”
6 Sparta’s interpretation of the scope of § 78aa did not necessarily make
sense prior to Manning either. Section 19 of the Exchange Act, for
example, requires compliance by an SRO with “the provisions of this
chapter, the rules and regulations thereunder, and its own rules,”
§ 78s(g)(1) (emphasis added). The Act thus clearly distinguishes
between “rules and regulations thereunder” and internal SRO rules,
and “[g]enerally, identical words used in different parts of the same
statute are presumed to have the same meaning,” Merrill Lynch, Pierce,
Fenner & Smith Inc. v. Dabit, 547 U.S. 71, 86 (2006) (alteration and
internal quotation marks omitted); see also Sebelius v. Cloer, 133 S. Ct.
1886, 1894 (2013) (“We have long held that where Congress includes
particular language in one section of a statute but omits it in another
section of the same Act, it is generally presumed that Congress acts
intentionally and purposely in the disparate inclusion or exclusion.”
(alteration and internal quotation marks omitted)).
Concluding that the Exchange Act’s phrase “rules and regulations
thereunder” includes internal SRO rules would also have the
necessary result under § 78(g)(1) of requiring each individual SRO to
comply with the rules of every other SRO. This interpretation not only
produces absurd results but would turn the requirement of
compliance with an SRO’s “own rules” in § 78s(g)(1) into surplusage,
thus running contrary to two canons of construction at once. See
Duncan v. Walker, 533 U.S. 167, 174 (2001) (reiterating the preference
for statutory interpretations that do not render terms superfluous);
United States v. Am. Trucking Ass’ns, 310 U.S. 534, 543 (1940)
(articulating the preference against interpretations producing absurd
or plainly unreasonable results).
10
standard, the Court held that § 78aa applies to two kinds of suits:
(1) those in which “federal law creates the cause of action
asserted” and (2) “‘a special and small category of cases’” that
“‘necessarily raise[] a stated federal issue, actually disputed and
substantial.’” Manning, 136 S. Ct. at 1569–70 (quoting Gunn, 133
S. Ct. at 1064; Grable & Sons Metal Prods., Inc. v. Darue Eng’g &
Mfg., 545 U.S. 308, 314 (2005)). The Court characterized the first
category as encompassing those cases “asserting an Exchange
Act cause of action”—i.e., “the prototypical way of enforcing an
Exchange Act duty.” Id. at 1569. For the second category, the
Court twice framed the inquiry as whether the non‐Exchange
Act action “necessarily depends on a showing that the defendant
breached the Exchange Act” or whether the plaintiff must prove
“as the cornerstone of his suit, that the defendant infringed a
requirement of the federal statute.” Id. (emphases added).7 As
described above, the Exchange Act itself imposes no duty to
comply with FINRA rules either on the arbitrators or non‐SRO
parties to arbitration. An action to vacate an arbitration award
on either ground therefore falls into neither of Manning’s
categories.
Doscher’s petition does not present a facial claim of any
manifest disregard of federal law. All that remains is to check
Greenberg’s pulse for vital signs in light of the Supreme Court’s
decision in Vaden.
7 Although it is unnecessary to decide conclusively, we nonetheless
note that Manning’s second category is identical to the basis asserted
for jurisdiction in NASDAQ. See NASDAQ, 770 F.3d at 1020. Thus, at
least on a facial read of the two cases, we think there is no reason to
suspect that Manning called NASDAQ into question, and we are
comfortable relying on NASDAQ’s reasoning here.
11
II.
It is a longstanding rule of our Circuit that a three‐judge
panel is bound by a prior panel’s decision until it is overruled
either by this Court sitting en banc or by the Supreme Court. See
United States v. Wilkerson, 361 F.3d 717, 732 (2d Cir. 2004); see also
Ingram v. Kumar, 585 F.2d 566, 568 (2d Cir. 1978). Nonetheless,
we have consistently recognized two instances in which a three‐
judge panel may issue an opinion that overrules Circuit
precedent. The first is often called a “mini–en banc,” in which the
panel circulates its opinion among all active judges and receives
no objections to its filing. See, e.g., Shipping Corp. of India Ltd. v.
Jaldhi, 585 F.3d 58, 67 & n.9 (2d Cir. 2009); see also United States v.
Roglieri, 700 F.2d 883, 887 n.2 (2d Cir. 1983). The second is
“where an intervening Supreme Court decision casts doubt on
the prior ruling.” E.g., Finkel v. Stratton Corp., 962 F.2d 169, 174–
75 (2d Cir. 1992); cf. Boothe v. Hammock, 605 F.2d 661, 663 (2d Cir.
1979).8
To qualify as an intervening decision, the Supreme
Court’s conclusion in a particular case must have “broke[n] the
link . . . on which we premised our [prior] decision,” Finkel, 962
F.2d at 175, or “undermine[d] [an] assumption” of that decision,
Sullivan v. Am. Airlines, Inc., 424 F.3d 267, 274 (2d Cir. 2005). It is
not, however, necessary that the Supreme Court have
8 We have not been particularly clear whether this latter situation is
merely an application of the rule, recognizing that the Supreme Court
may “implicitly” overrule the “rationale” of one of our precedents, e.g.,
United States v. Santiago, 268 F.3d 151, 154 (2d Cir. 2001) (Sotomayor, J.)
(internal quotation marks omitted), or whether it constitutes a separate
“exception” to the rule, e.g., Union of Needletrades, Indus. & Textile Emps.
v. INS, 336 F.3d 200, 210 (2d Cir. 2003) (citing Boothe, 605 F.2d at 663).
Whatever its origins, however, the rules governing the principle’s
application are well established, as we explain below.
12
“address[ed] the precise issue decided by the panel for this
exception to apply.” In re Zarnel, 619 F.3d 156, 168 (2d Cir. 2010).
If a panel concludes that a particular Supreme Court decision
does not cast sufficient doubt on our precedent, the precedent
continues to be binding. See, e.g., FDIC v. First Horizon Asset Sec.,
Inc., No. 14‐3648, 2016 WL 2909338, at *3 (2d Cir. May 19, 2016);
United States v. Robbins, 729 F.3d 131, 135–36 (2d Cir. 2013);
European Cmty. v. RJR Nabisco, Inc., 424 F.3d 175, 179 (2d Cir.
2005) (Sotomayor, J.). When sufficient doubt exists, however,
and the panel must reconsider whether that precedent should
continue as the law of the Circuit, it not only applies the
conclusions of the intervening Supreme Court case but also
employs normal interpretive methods and examines such things
as the internal consistency of the statute, statutory purpose and
legislative history, analogous statutes, and even changes in the
judicial landscape and the conclusions of other Circuits. See, e.g.,
Lotes Co. v. Hon Hai Precision Indus. Co., 753 F.3d 395, 405–08 (2d
Cir. 2014); United States v. Gill, 748 F.3d 491, 501–04 (2d Cir.
2014); Sullivan, 424 F.3d at 274–77; Union of Needletrades, Indus. &
Textile Emps. v. INS, 336 F.3d 200, 210 (2d Cir. 2003). Even if the
effect of a Supreme Court decision is “subtle,” it may
nonetheless alter the relevant analysis fundamentally enough to
require overruling prior, “inconsistent” precedent. Wojchowski v.
Daines, 498 F.3d 99, 108 (2d Cir. 2007) (alteration and internal
quotation marks omitted).
A less‐than‐stringent application of the standards for
overruling prior decisions not only calls into question a panel’s
respect for its predecessors but also increases uncertainty in the
law by revisiting precedent without cause. Nonetheless, a three‐
judge panel must answer a question squarely presented if no
other avenue for resolution of the case exists. See Sullivan, 424
F.3d at 274 (“Because the [Supreme] Court’s more recent
13
decision . . . entirely undermines [our prior] assumption about
the RLA, we must reconsider [prior] conclusions about RLA
preemption without rehearing this case en banc.”).9 Doscher has
argued to us that Vaden displaces Greenberg. Finding no other
basis for decision in this case, we must therefore evaluate
Greenberg’s continuing validity.
A.
Section 4 of the Act provides, in relevant part:
A party aggrieved by the alleged failure,
neglect, or refusal of another to arbitrate
under a written agreement for arbitration
may petition any United States district court
which, save for such agreement, would have
jurisdiction under Title 28, in a civil action or in
admiralty of the subject matter of a suit arising
out of the controversy between the parties, for an
order directing that such arbitration proceed
in the manner provided for in such
agreement.
9 U.S.C. § 4 (emphasis added). By contrast, section 10 of the Act
provides that “the United States court in and for the district
wherein the award was made may make an order vacating the
award upon the application of any party to the arbitration” if
certain grounds for vacatur exist. Id. § 10(a) (emphasis added).10
9 In addition, this opinion was circulated to all judges of this Court
prior to filing, and we received no objection. See In re Zarnel, 619 F.3d
156, 168 n.5 (2d Cir. 2010); United States v. Parkes, 497 F.3d 220, 230 n.7
(2d Cir. 2007).
Sections 9 and 11 of the Act contain substantially identical language
10
to § 10; all three lack the italicized clause in § 4. See 9 U.S.C. §§ 9–11.
14
The critical question before us is whether the textual difference
between § 4 and § 10 means that a look‐through approach
applies only to the former.
Westmoreland rejected the look‐through approach with
respect to § 4 based on the decisions of a number of district
courts in our Circuit, as well as the decisions of our sister
circuits. See 100 F.3d at 267 (citing cases). In chief, Westmoreland
accepted the reasoning of Drexel Burnham Lambert, Inc. v.
Valenzuela Bock, 696 F. Supp. 957 (S.D.N.Y. 1988), a decision
penned by Judge Leval while still on the district court. Valenzuela
Bock held, and Westmoreland agreed, that the “save for” clause in
§ 4 constituted a congressional repudiation of the “ouster
theory”—an “antiquated common law principle that an
agreement to arbitrate would oust the federal courts of
jurisdiction.” Westmoreland, 100 F.3d at 268 (citing Valenzuela
Bock, 696 F. Supp. at 961–62). Additionally, Westmoreland noted
that the provisions lacking § 4’s unique language “have not been
interpreted to confer jurisdiction on the federal courts” and that
it “would produce an odd distinction” if “a petition to compel
arbitration could be brought in federal court, but a petition
under FAA §§ 9 or 10 to confirm or vacate the arbitration award
in the same dispute could not.” Id. Westmoreland again relied on
Valenzuela Bock’s reasoning:
This distinction would truly be “bizarre,”
because “[t]he interest of the federal court in
determining whether the arbitration award
was entered in manifest disregard of the
federal law . . . would seem to be far greater
than the federal interest in seeing that the
claims could be arbitrated.”
Id. (alterations in original) (quoting Valenzuela Bock, 696 F. Supp.
at 963).
15
Four years later, a second panel of this Court was asked to
determine whether it possessed federal‐question jurisdiction
over a § 10 petition. It rejected the look‐through approach for
such petitions squarely and exclusively on the basis of
Westmoreland. See Greenberg, 220 F.3d at 26. In doing so, it
reiterated Westmoreland’s reliance on the “ouster theory”
explanation and then held that “[t]he holding in Westmoreland
logically extends to motions to vacate an arbitration award
under § 10 of FAA,” additionally citing the holdings of two other
circuits and two district courts in our Circuit. Id. The Greenberg
panel reasoned:
As with a motion under § 4, the only federal
rights that a motion under § 10 necessarily
implicates are those created by the FAA
itself, which rights do not give rise to federal
question jurisdiction. In both contexts, there
is no necessary link between the requested
relief and the character of the underlying
dispute. For example, a petition to compel
arbitration because the dispute falls within
the scope of an arbitration clause, or to
vacate an award because the arbitrators
exceeded their powers under that clause,
will turn on the interpretation of the clause,
regardless of whether the actual dispute
implicates any federal laws.
Id. It went on to conclude, however, that if a petition raised an
argument “that the award was rendered in manifest disregard of
federal law, a substantial federal question is presented and the
federal courts have jurisdiction to entertain the petition.” Id. at
27.
16
Nine years after Greenberg, the Supreme Court expressly
overruled Westmoreland in its Vaden decision. It began by
reaffirming its longstanding conclusion that the Act “is
something of an anomaly in the realm of federal legislation: It
bestows no federal jurisdiction but rather requires for access to a
federal forum an independent jurisdictional basis over the
parties’ dispute.” Vaden, 556 U.S. at 59 (alterations and internal
quotation marks omitted). Next, it laid out the general rules of
federal‐question jurisdiction under 28 U.S.C. § 1331—the
“independent jurisdictional basis” relied upon by the petitioner.
Id. The Court then announced that “[a] federal court may ‘look
through’ a § 4 petition to determine whether it is predicated on
an action that ‘arises under’ federal law.” Id. at 62.
This rule was, the Court held, driven by the text of § 4:
The phrase “save for [the arbitration]
agreement” indicates that the district court
should assume the absence of the arbitration
agreement and determine whether it “would
have jurisdiction under title 28” without it.
Jurisdiction over what? The text of § 4 refers
us to “the controversy between the
parties[,]” . . . [which is] most
straightforwardly read to mean the
“substantive conflict between the parties.”
Id. (first alteration in original) (citations omitted) (quoting § 4).
The Court noted that a majority of the federal courts of appeals
had rejected such an approach but concluded that the “ouster
theory” explanation on which most relied was not persuasive: if
any lingering ouster doctrine existed, section 2 of the Act, which
declared all arbitration agreements valid and enforceable,
“directly attended to the problem.” Id. at 64. The Court then
17
noted that rejecting the look‐through approach had “curious
practical consequences”:
It would permit a federal court to entertain a
§ 4 petition only when a federal‐question
suit is already before the court, when the
parties satisfy the requirements for
diversity‐of‐citizenship jurisdiction, or when
the dispute over arbitrability involves a
maritime contract.
Id. at 65 (citing Westmoreland, 100 F.3d at 268–69). In other words,
if a federal‐question suit was filed in federal court, the court
could compel arbitration—but if the suit had not already been
filed, it could not. Id. This approach “‘create[d] a totally artificial
distinction’ based on whether a dispute is subject to pending
federal litigation.” Id. (quoting 1 I. MACNEIL, R. SPEIDEL & T.
STIPANOWICH, FEDERAL ARBITRATION LAW § 9.2.3.3, at 9:21 (1995)).
B.
We think it clear that Vaden satisfies the standard for an
intervening Supreme Court decision that “casts doubt on the
prior ruling” in Greenberg. Finkel, 962 F.2d at 175. The only
rationale Greenberg employed to reach its conclusion was
“logically extend[ing]” Westmoreland’s rejection of the look‐
through approach to § 10. Greenberg, 220 F.3d at 26. Put another
way, if one were to excise all reliance upon Westmoreland from
Greenberg, we would be left exclusively with a question and an
answer but no intervening reasoning. The necessary conclusion
is that Vaden both “broke the link,” Finkel, 962 F.2d at 175, and
“undermine[d] [the] assumption,” Sullivan, 424 F.3d at 274,
underlying Greenberg’s conclusion that the look‐through
18
approach was inapplicable to § 10.11 Of course, the inquiry does
not end here: our task now is to determine whether Greenberg’s
result is “inconsistent” with Vaden and the post‐Vaden statutory
context of the Act. E.g., Wojchowski, 498 F.3d at 108; see also Lotes
Co., 753 F.3d at 406.
Vaden provides us with three critical pieces of guidance.
First, it reiterated the longstanding rule that the Act’s provisions
do not bestow or enlarge subject matter jurisdiction. Second, it
relied heavily upon the text of, and interaction between, the
relevant provisions of the Act. Third, it identified the practical
consequences resulting from the interpretive choices. The
application of these three guideposts, however, is significantly
more complicated.
Beginning with the most obvious point, § 10 lacks the
textual “save for” clause contained in § 4. This distinction is not
to be taken lightly, particularly in the face of the Supreme
Court’s statement that “[t]he text of § 4 drives our conclusion”
adopting the look‐through approach. Vaden, 556 U.S. at 62.12 In
In fact, two non‐precedential decisions of our Court have
11
suggested—if not directly stated—that Vaden may now permit a look‐
through approach in the § 10 context. See Giusti v. Morgan Stanley Smith
Barney, LLC, 581 F. App’x 34, 35 (2d Cir. 2014) (summary order); Bittner
v. RBC Capital Mkts., 331 F. App’x 869, 871 (2d Cir. 2009) (summary
order). No other Circuit has discussed Vaden’s applicability outside of
the § 4 context, though we note that a recent decision of the Third
Circuit applied the look‐through approach, without analysis, to a § 10
petition in which the underlying claims were, as here, based on
securities fraud under section 10(b). See Goldman, Sachs & Co. v. Athena
Venture Partners, L.P., 803 F.3d 144, 147 n.5 (3d Cir. 2015).
It is primarily for this reason that several district courts have
12
declined to apply Vaden to the Act’s provisions other than § 4. See
Doscher, 2015 WL 4643159, at *4; Trs. of Local Union No. 580 v. Gen. Fence
19
construing § 10, however, we must also keep in mind “the
cardinal rule that a statute is to be read as a whole, since the
meaning of statutory language, plain or not, depends on
context.” King v. St. Vincent’s Hosp., 502 U.S. 215, 221 (1991)
(citation omitted); accord Auburn Hous. Auth. v. Martinez, 277 F.3d
138, 144 (2d Cir. 2002) (“[T]he preferred meaning of a statutory
provision is one that is consonant with the rest of the statute.”).
We think Vaden’s other two guiding principles counsel against a
too‐hasty reliance on the absence of the “save for” clause.
Perhaps in an ordinary case, this absence would end our
inquiry—but the Act’s anomalous characteristics warrant, we
think, a more careful examination. We focus first on the
jurisdictional context of Vaden and this case and second on the
practical consequences of both interpretations.
Corp., No. 13‐CV‐6006, 2014 WL 1800428, at *9–11 (E.D.N.Y. May 5,
2014); Crews v. S & S Serv. Ctr. Inc., 848 F. Supp. 2d 595, 599 (E.D. Va.
2012); Francis v. Landstar Sys. Holdings, Inc., No. 3:09‐CV‐328‐J‐32, 2009
WL 4350250, at *4 (M.D. Fla. Nov. 25, 2009). This was also the
conclusion reached by the United States District Court for the Eastern
District of Pennsylvania, see Goldman v. Citigroup Global Mkts. Inc., No.
12‐4469, 2015 WL 2377962, at *3 (E.D. Pa. May 19, 2015) (citing
Greenberg); Royal Bank Am. v. Kirkpatrick, Nos. 11‐1058, 11‐1112, 2011
WL 4528349, at *3 n.5 (E.D. Pa. Sept. 30, 2011), but these decisions may
have been implicitly overruled by the Third Circuit decision discussed
supra at note 11. By contrast, a few district courts within our Circuit
have applied Vaden outside of § 4 petitions. See Santos v. Gen. Elec. Co.,
No. 10 Civ. 6948, 2011 WL 5563544, at *6 (S.D.N.Y. Sept. 28, 2011)
(report and recommendation) (§ 10 petition to vacate), adopted in full by
2011 WL 5563536 (S.D.N.Y. Nov. 15, 2011); In re September 11 Litig., 765
F. Supp. 2d 587, 591 (S.D.N.Y. 2011) (§ 3 petition to stay); UBS Sec. LLC
v. Voegeli, 684 F. Supp. 2d 351, 354 (S.D.N.Y. 2010) (§ 3 petition to stay);
see also Harris v. Sycuan Band of Diegueno Mission Indians, No. 08‐cv‐
2111, 2009 WL 5184077, at *4 (S.D. Cal. Dec. 18, 2009).
20
Vaden repeated the Supreme Court’s longstanding
conclusion that the Act “bestows no federal jurisdiction but
rather requires for access to a federal forum an independent
jurisdictional basis over the parties’ dispute.” 556 U.S. at 59
(alterations and internal quotation marks omitted); see also id. at
79 (Roberts, C.J., concurring in part and dissenting in part)
(explaining that the Act “enlarg[es] the range of remedies
available in the federal courts[,] . . . not extend[s] their
jurisdiction” (second and third alterations in original)). The
“independent jurisdictional basis” in Vaden, like this case, was
federal‐question jurisdiction deriving from § 1331. Id. at 59–60
(majority opinion). After laying out the contours of federal‐
question jurisdiction, the Court concluded that the “dispute”
giving rise to § 1331 jurisdiction was the “substantive conflict
between the parties.” Id. at 63 (internal quotation marks
omitted). Although the Court was unanimous on these points—
and on the applicability of the look‐through approach—it was
divided on how to define the substantive controversy.13 Despite
this disagreement over the scope of the dispute, all nine Justices
agreed that “the basic rules of federal‐court jurisdiction . . . must
13 The five‐Justice majority concluded that the substantive dispute was
the recovery of past‐due charges by a card‐issuing bank, and the
cardholders’ counterclaims alleging that the charges were preempted
by the Federal Deposit Insurance Act could not, under the well‐
pleaded complaint rule, constitute the required federal question. Id. at
66–67 (citing Holmes Grp., Inc. v. Vornado Air Circulation Sys., Inc., 535
U.S. 826 (2002)). By contrast, the four‐Justice minority concluded that
the dispute asserted in the § 4 petition exclusively related to the
legality under federal law of the bank’s charging of fees, and the filing
of a state complaint on a related issue did not affect jurisdiction over
this discrete dispute. Id. at 75–77 (Roberts, C.J., concurring in part and
dissenting in part).
21
be followed under § 4.” Id. at 79 (Roberts, C.J., concurring in part
and dissenting in part).
The only reasonable reading of Vaden’s jurisdictional
analysis thus makes clear two conclusions. First, the district
court possessed jurisdiction only by operation of § 1331. Second,
the federal question required by § 1331 arose from the
underlying dispute, not the face of the petition. These
conclusions, however, pose a challenge to the proposition that
no look‐through approach is appropriate in § 10 petitions, based
solely on the statutory text.
Pre‐Vaden, rejecting the look‐through approach with
respect to all of the Act’s provisions made sense, because a
federal court simply compared its jurisdictional statutes to the
face of the petition. See Greenberg, 220 F.3d at 26 (holding that, in
both § 4 and § 10, “the only federal rights . . . necessarily
implicate[d] are those created by the FAA itself, which rights do
not give rise to federal question jurisdiction”); Westmoreland, 100
F.3d at 267–68 (assuming no look‐through approach would
apply to §§ 9 and 10). Under such a construction, for example,
whether an action under the Act presented a substantial federal
question sufficient to confer jurisdiction under § 1331 always
depended on whether the face of the petition met the standards
of federal‐question jurisdiction.14 In essence, the “well‐pleaded
Although Greenberg stated that “[j]urisdiction would plainly lie if,
14
among other things, . . . the claim arose in admiralty,” 220 F.3d at 25,
this conclusion is less plain in the § 10 context than § 4. If jurisdiction
must lie on the face of the petition, the nature of the underlying
claim—whether arising under admiralty or federal law—would seem
to be irrelevant. But if the nature of the underlying claim is relevant in
admiralty, there is no reason—logical or textual—to distinguish
between those claims and federal‐question claims. The answer with
respect to § 4 may lie in the fact that the enforcement of any maritime
22
complaint” for our jurisdictional inquiries was the petition,
regardless of which particular remedy under the Act the
petitioner sought. Post‐Vaden, however, that consistency has
been called into question. If we assume that § 4’s unique textual
clause is dispositive regarding jurisdiction, then, for most of the
Act’s provisions, federal‐question jurisdiction under § 1331 lies
(or not) on the face of the petition. In other words, the
“ordinary” § 1331 inquiry—i.e., the one conducted absent any
special textual clause—requires examining the face of the
petition. For § 4 petitions, however, a court’s federal‐question
jurisdiction lies (or not) on the basis of the underlying
substantive dispute.
The inconsistency here is evident: if Ҥ 4 of the FAA does
not enlarge federal‐court jurisdiction,” e.g., Vaden, 556 U.S. at 66,
how can a federal court’s jurisdiction under the same
jurisdictional statute differ between § 4 and all other remedies
under the Act? Post‐Vaden, there is no question that a federal
court’s § 1331 jurisdiction extends to § 4 petitions that it would
have been unable to entertain applying a face‐of‐the‐petition
approach. A district court’s jurisdiction over disputes in which a
party seeks a § 4 remedy is, therefore, broader than its
jurisdiction over disputes in which a party seeks one of the other
remedies provided by the Act.15 Put differently, the necessary
contract provision may be brought in federal court, see 28 U.S.C.
§ 1333, and thus, a petition to compel arbitration pursuant to a
contractual provision is essentially identical to such an enforcement
action. But with respect to § 10 cases, the federal court is not enforcing
the contract but applying a federal remedy, and it is hard to see why
the nature of the underlying dispute, absent a look‐through approach,
changes between admiralty and a federal question.
A possible counterargument would say that § 4 does not actually
15
enlarge federal‐question jurisdiction under § 1331, it merely applies
23
result of limiting the look‐through approach solely to § 4
petitions is to conclude that the same dispute between the
parties would be sufficient to confer § 1331 jurisdiction for the
purposes of § 4 petitions but insufficient to confer § 1331
jurisdiction for the purposes of any of the Act’s other remedies.
That is simply not logically possible without construing § 4 to
expand federal jurisdiction—a conclusion the Supreme Court
has expressly forbidden us to draw.
Thus, there is some tension between two controlling
principles in Vaden: the first emphasizing § 4’s text in concluding
that a court has federal‐question jurisdiction over § 4 petitions
based on the underlying substantive dispute, see 556 U.S. at 62,
and the second emphasizing that the provisions of the Act do
not affect a federal court’s jurisdiction, see id. at 59, 66 (“[Section]
4 of the FAA does not enlarge federal‐court jurisdiction . . . .”
(emphasis added)).16 If we apply the first principle to conclude
those rules to one dispute, instead of another. We think this argument
is a distinction without a difference. While the standards for pleading
jurisdiction may remain the same, construing § 4—but not § 10—to
reach the substantive “dispute” for purposes of ascertaining § 1331
jurisdiction is functionally identical to extending § 1331’s reach over
the class of disputes over which it has cognizance. A court’s
“jurisdiction”—also called its competence—is its “power to decide a
case or issue a decree.” Jurisdiction, BLACK’S LAW DICTIONARY (10th ed.
2014); see also Rhode Island v. Massachusetts, 37 U.S. (12 Pet.) 657, 714
(1838) (“Jurisdiction is the power to hear and determine the subject
matter in controversy between parties to a suit; to adjudicate or
exercise any judicial power over them.”). Thus, a statute that
permits—even requires—a court to hear more cases through one
jurisdictional inquiry than through another is the epitome of an
expansion of that court’s jurisdiction.
See also Vaden, 556 U.S. at 79 (Roberts, C.J., concurring in part and
16
dissenting in part) (“To the extent § 4 brings some issues into federal
24
that the absence of the “save for” clause in § 10 requires us to
maintain the rule of Greenberg, we have, in essence, converted
§ 4’s “save for” clause into an expansion of jurisdiction—which
violates the second principle. The only way to avoid this
contradictory result is to reject the premise that produced it—i.e.,
to conclude that the “ordinary” jurisdictional inquiry under
§ 1331 looks to the underlying substantive dispute with respect
to all remedies under the Act, not just § 4.17
This tension is further resolved when we examine the
nature and function of the “save for” clause in § 4 and the
language of the Act’s other remedies. To some degree, each of
the Act’s sections contains some language identifying which
courts are authorized to issue which remedies. The most
consistent statutory interpretation is to read the “save for” clause
as defining the availability of the remedy, rather than a court’s
jurisdiction. Because Congress intended to ensure the broadest
availability possible for compulsion of arbitration, § 4 authorizes
it in the context of every dispute over which Title 28 confers
jurisdiction. The lack of the “save for” clause and the presence of
other text narrowing the availability of the remedies in the Act’s
court in a particular case that may not be brought in through other
procedural mechanisms, it does so by enlarging the range of remedies
available in the federal courts, not extending their jurisdiction.”
(alterations and internal quotation marks omitted)); Hall St. Assocs.,
552 U.S. at 581 (“As for jurisdiction over controversies touching
arbitration, the Act does nothing . . . .” (emphasis added)).
This is effectively an argument reductio ad absurdum, demonstrating
17
that the result of rejecting the look‐through approach is incompatible
with a controlling Supreme Court rule. See, e.g., Corley v. United States,
556 U.S. 303, 316–17 (2009) (articulating an example of such an
argument); see generally Reductio ad absurdum, BLACK’S LAW
DICTIONARY (10th ed. 2014).
25
other sections similarly authorize particular remedies to issue in
particular courts to serve important congressional interests.
Specifically, the Act’s other sections largely ground their
authorizing language by reference to geography, not the
jurisdiction of the issuing court.
For example, the remedy permitting a federal court to
compel the attendance of witnesses limits its authorization to
“the United States district court for the district in which such
arbitrators, or a majority of them, are sitting.” 9 U.S.C. § 7.18
Section 9 uses the same geographical hook, only linked to the
district “within which such award was made” and also expressly
establishes personal jurisdiction over the parties; §§ 10–11 are
similarly geographically connected to the location of the
arbitration. The identification of district courts by geography in
§§ 7 and 9–11 performs functions more analogous to venue or
personal jurisdiction than to subject matter jurisdiction.19 These
sections signal nothing about jurisdiction, suggesting—
consistent with Vaden—that they do not affect the ordinary
jurisdictional inquiry, which is focused on the underlying
dispute. There is thus no reason to construe the “save for”
This geographical limitation would have made particular sense at
18
the time of the Act’s passing. Prior to the 2013 amendments to the
Federal Rules of Civil Procedure, a federal district court’s subpoena
power was generally limited to within the district or within 100 miles
of the place of compliance. See Fed. R. Civ. P. 45(b)(2) (2007) (amended
2013).
One remedial provision contains no identifiers as to a particular
19
court’s jurisdiction and simply refers to “the court.” 9 U.S.C. § 5.
However, in context, this omission also makes sense: § 5 operates as a
kind of “add‐on” remedy to a § 4 petition to compel arbitration and
merely provides default rules for appointing an arbitrator in the event
an arbitration agreement is silent.
26
clause—or its absence from the other remedies—as governing
the predicate question of whether a federal court possesses
jurisdiction over the dispute at all.20 Construing the language of
these sections as authorizing the availability of the remedies,
rather than controlling jurisdiction over the dispute, is therefore
a more consistent interpretation of the statute as a whole, see
King, 502 U.S. at 221 (“[A] statute is to be read as a whole, since
the meaning of statutory language, plain or not, depends on
context.” (citation omitted))—not to mention being in full
accordance with the Supreme Court’s characterization of the Act
as having a “nonjurisdictional cast,” Vaden, 556 U.S. at 59; see also
Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25
n.32 (1983).
It is worth pausing briefly to consider the purposes for
which Congress passed the Act. The Supreme Court has
repeatedly stated that the Act, particularly § 2, “is a
congressional declaration of a liberal federal policy favoring
arbitration agreements” whose effect “is to create a body of
federal substantive law of arbitrability, applicable to any
arbitration agreement within the coverage of the Act.” Moses H.
Cone Mem. Hosp., 460 U.S. at 24. The first two sections of the Act
make clear its intent to reach maritime contracts “which, if the
subject of controversy, would be embraced within admiralty
jurisdiction” and contracts “evidencing a transaction involving”
interstate or foreign commerce, with limited exceptions. 9 U.S.C.
20 That is not to say § 4’s “save for” clause had no role at all in Vaden’s
jurisdictional analysis. If anything, it indicated that Congress
understood and intended for § 1331 jurisdiction to be considered on
the basis of the underlying dispute. But there is also no indication that
Congress intended something else to govern jurisdiction in petitions
under the rest of the Act, and—to the contrary—Supreme Court
precedent precludes us from so holding.
27
§§ 1–2. Congress’s ability to legislate substantive rules in these
areas derives from “‘the incontestable federal foundations of
control over interstate commerce and over admiralty.’” Southland
Corp. v. Keating, 465 U.S. 1, 11 (1984) (quoting Prima Paint Corp. v.
Flood & Conklin Mfg. Co., 388 U.S. 395, 405 (1967)). Of course, if
Congress cared only about enforcing arbitration or its results, it
could have ended the Act after § 9. Instead, it also provided
remedies of vacatur and modification in §§ 10 and 11, albeit on
exclusive and narrow grounds sounding in basic fairness and
due process—a fact which, the Supreme Court has said, suggests
Congress intended to “substantiat[e] a national policy favoring
arbitration with just the limited review needed to maintain
arbitration’s essential virtue of resolving disputes straightaway.”
Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 588 (2008).
A construction of the Act’s provisions as lacking
jurisdictional impact is not only consistent with but also well
suited to these congressional purposes. Under this approach, if a
federal court would possess federal‐question jurisdiction over
the dispute when pleaded in a complaint, the federal courts are
also able to enforce Congress’s narrow and defined remedies in
the same controversy. The Act thus favors arbitration by
constraining the role of the federal courts where arbitration
agreements exist, without displacing their ability to enforce the
remedies Congress created in disputes in which they would
otherwise be the determinative forum. See Moses H. Cone, 460
U.S. at 25 n.32 (“[A]lthough enforcement of the Act is left in
large part to the state courts, it nevertheless represents federal
policy to be vindicated by the federal courts where otherwise
appropriate.”). The authorizing language of the Act with respect
to particular remedies maps onto congressional interests well:
the remedy of compulsion may be obtained in “any United
States district court” possessing subject matter jurisdiction, § 4,
28
but where the federal courts must engage with an ongoing or
concluded arbitration, a geographical nexus is required, see §§ 7,
9–11.
Finally, we note that applying a look‐through approach to
the entire Act also prevents absurd and illogical discrepancies,
the final animating principle we identified in Vaden. As detailed
above, absurd or bizarre inconsistencies in jurisdiction among
the Act’s provisions were a central concern in both our prior
decisions. See Greenberg, 220 F.3d at 26; Westmoreland, 100 F.3d at
268; see also Valenzuela Bock, 696 F. Supp. at 963. Vaden’s
discussion of the practical consequences confirms that our desire
to achieve consistent results was not misplaced, even if the Court
disagreed with our interpretation of § 4. See Vaden, 556 U.S. at 65.
The Vaden Court identified a principal “curious practical
consequence[]”: that a face‐of‐the‐petition “approach would not
accommodate a § 4 petitioner who could file a federal‐question
suit in (or remove such a suit to) federal court, but who has not
done so.” 556 U.S. at 65. Yet the same kind of absurd result
would occur here if we reject a look‐through approach for § 10.
We have just recently held that § 3’s mandatory “shall”
language requires a federal court to stay, rather than dismiss, a
case if it is referred to arbitration and a stay is requested by a
party. See Katz v. Cellco P’ship, 794 F.3d 341, 347 (2d Cir. 2015). If
such a case were stayed, it could provide, as Vaden describes, an
independent jurisdictional basis sufficient to permit the federal
court to entertain, for example, petitions under §§ 7 and 9–11. See
556 U.S. at 65. But absent a look‐through approach, no
jurisdiction would exist over these petitions if filed as
freestanding petitions in the same court, involving the same
parties, and concerning the same underlying controversy. This
result is the same “‘totally artificial distinction’” on the basis of
29
pending federal action that Vaden rejected. Id. (quoting 1
MACNEIL § 9.2.3.3, p. 9:21).21
Likewise, there is a certain absurdity to an interpretation
that permits parties to file motions to compel arbitration in any
case where the underlying dispute raises a federal question but
precludes them from seeking the same federal court’s aid under
the Act’s other remedial provisions related to the same dispute.
Our sister circuit has posited an argument why there may be a
disparity between congressional interests in § 4 and in § 10—
specifically, that “[t]he central federal interest was enforcement
of agreements to arbitrate, not review of arbitration decisions”
and therefore “once the arbitration agreement is enforced, there
exists no compelling need for the federal courts to be involved.”
Minor v. Prudential Sec., Inc., 94 F.3d 1103, 1107 (7th Cir. 1996).
If enforcement were Congress’s only goal, however, it
would have had no need to pass §§ 10 or 11 at all. Merely
enacting §§ 2 and 3—declaring arbitration agreements
enforceable and providing for a stay and referral to arbitration of
disputes in federal court governed by such an agreement—
would suffice to ensure that federal courts did not sidestep
arbitration agreements. See Hall St. Assocs., 552 U.S. at 581–82;
Southland, 465 U.S. at 13–14. The fact that Congress decided to
enact substantive rules governing vacatur and modification
Like we do here, the United States District Court for the Eastern
21
District of Virginia expressly noted this discrepancy and identified it
as the same artificial distinction rejected in Vaden. See Crews, 848 F.
Supp. 2d at 600. Nonetheless, the district court concluded that such a
result was “necessitated by the fact that § 10 does not have § 4’s
unique jurisdictional hook.” Id. But, as we noted supra, characterizing
§ 4’s text as a jurisdictional hook does precisely what the other
principle of Vaden prohibits: it treats § 4 as “enlarg[ing] federal‐
question jurisdiction,” 556 U.S. at 66.
30
makes as clear as one can imagine that Congress intended a
substantive—albeit limited—review of certain arbitration
awards. See Hall St. Assocs., 552 U.S. at 588. Considering that
Congress did authorize freestanding petitions to compel
arbitration, compel witness attendance, and confirm, vacate, or
modify awards, neither Minor nor the parties give us any reason
why Congress would create a set of remedies yet make some
more enforceable than others. See Moses H. Cone, 460 U.S. at 25
n.32 (explaining that the Act as a whole “represents federal
policy to be vindicated by the federal courts where otherwise
appropriate”).
The bizarre jurisdictional tangle resulting from a look‐
through approach to § 4 and a face‐of‐the‐petition approach to
the other remedies will produce the exact opposite of the Act’s
goals. Intelligent practitioners who wish to preserve access to
federal courts for later disputes over arbitrators, subpoenas, or
final awards will attempt to “lock in” jurisdiction by filing a
federal suit first, followed by motions to compel and a stay of
proceedings. In other words, it will increase the number of
parties “seeking federal adjudication of the very questions [they]
want[] to arbitrate rather than litigate”—again, the same
perverse incentive and procedural incongruity identified by the
Vaden Court. 556 U.S. at 65. Construing the Act in a way that
encourages the protective filing of federal suits would be the
height of absurdity in light of Congress’s desire to cabin federal
involvement in disputes subject to arbitration—before, during,
and after the proceeding. See Hall St. Assocs., 552 U.S. at 588;
Moses H. Cone, 460 U.S. at 25 n.32.
Finally, we note that, in a twist of irony, a post‐Vaden
conclusion that § 10 requires a federal question on the face of the
petition seems oddly to mimic the kind of “ouster” that
concerned the Westmoreland and Greenberg panels and, to a lesser
31
degree, the Vaden Court. In other words, if the substantive
dispute between the parties is otherwise cognizable before a
federal district court, the limitation to the face of the petition
seems to restrict the federal courts not on the basis of principles
like res judicata or enforceability of arbitration agreements—
which are rules of decision—but on the basis of a lack of
jurisdiction. Thus, federal courts have been “ousted” of
jurisdiction over a substantive dispute between the parties that
they would otherwise be empowered under § 1331 to hear,
merely because of the presence of an arbitration agreement. By
contrast, if we conclude that federal‐question jurisdiction arises
from the underlying dispute, the arbitration agreement limits the
remedies a federal court may employ but does not affect the
court’s jurisdiction. This result seems to us the more internally
consistent approach, given the current state of Supreme Court
precedent.
Returning to where we began, we have confronted the
difficult task of reconciling the guiding principles that the
Supreme Court has handed down—principles which are
admittedly in some tension. To read Vaden’s text‐driven analysis
as a jurisdictional inquiry would, on the surface, lead us to reject
the look‐through approach. But that result would require us, as a
matter of internal consistency, to conclude that § 4 did exactly
what the Supreme Court says it does not do: enlarge a federal
court’s jurisdiction. Further, it would produce anomalous
discrepancies in the administration of the Act that both we and
the Supreme Court have consistently rejected as impermissible
results. We think the only way to reconcile this tension is to
adopt the following principles:
First, the existence of federal‐question jurisdiction over an
FAA petition turns on whether the district court would possess
32
jurisdiction over the underlying dispute under the standards of
§ 1331;
Second, the “save for” clause in § 4 evinces congressional
authorization for the remedy of compulsion of arbitration in any
district court with jurisdiction; and
Third, the Act’s other sections similarly authorize
particular courts with jurisdiction to issue particular remedies
but do not affect the jurisdictional inquiry.
Having conducted this analysis, we must now conclude
that Vaden, as an intervening Supreme Court decision, has
rendered Greenberg’s result fundamentally inconsistent with the
Act’s statutory context and judicial interpretations. We are
therefore obliged to overrule it and adopt the rule that a federal
district court faced with a § 10 petition may “look through” the
petition to the underlying dispute, applying to it the ordinary
rules of federal‐question jurisdiction and the principles laid out
by the majority in Vaden. Because the District Court concluded
below that a look‐through approach was foreclosed by
Greenberg, it did not conduct an analysis of the underlying
dispute. We think the proper disposition is therefore to vacate
the order and the judgment and remand for consideration of that
question in the first instance. See Schonfeld v. Hilliard, 218 F.3d
164, 184 (2d Cir. 2000).
CONCLUSION
In summary, we reject Doscher’s argument that his § 10
petition alleges, on its face, a manifest disregard of federal law,
because the petition does not necessarily present a substantial
question of any violation of a federal duty or obligation. Thus,
squarely faced with the question of Greenberg’s continuing
validity, we conclude that Vaden not only cast doubt on our
precedent but rendered its holding fundamentally inconsistent
33
with the Supreme Court’s analysis of jurisdictional inquiries
under the Act. Accordingly, we overrule Greenberg and conclude
that federal courts may “look through” § 10 petitions, applying
the ordinary principles of federal‐question jurisdiction to the
underlying dispute as defined by Vaden. The order and the
judgment of the District Court are VACATED, and the case is
REMANDED for further proceedings consistent with this
opinion.
34
