Text or purpose? Plain language or pragmatism? Though the text does not provide for it, should courts interpret Sections 9 and 10 of the Federal Arbitration Act (FAA) to provide a “look through” approach to federal jurisdiction over confirming or vacating an arbitral award?

No, according to Justice Kagan’s 8-1 opinion in Bagderow v. Walters, courts should not pull “out of thin air” “look-through” jurisdiction “without textual support.” So, even though the underlying arbitral award in Bagderow addressed federal employment law, the Fifth Circuit erred in holding that a federal court in Louisiana could exercise jurisdiction over dueling petitions to vacate or confirm that award. Neither Sections 9 nor 10 include language permitting a “look through” approach to a federal court’s jurisdiction.

The Bagderow decision builds on the Court’s 2009 decision in Vaden v. Discover Bank, 556 U.S. 49 (2009); there, the Court held that a federal court should “look through” a petition to compel arbitration under Section 4 to the “underlying substantive controversy” between the parties. As the Court explained in Bagderow, the decision in Vaden rested on the particular language in Section 4 of the FAA (emphasis added):

"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 . . . over the controversy between the parties."

This language, the Court in Vaden explained, “drives our conclusion that a federal court should determine its jurisdiction by ‘looking through’ a Section 4 petition to the underlying substantive controversy” to see, for example, if that dispute “’arises under’ federal law.”

In sharp contrast, neither Sections 9 nor 10 include Section 4’s “save for” clause. As the Court in Bagderow explained: “They do not instruct a court to imagine a world without an arbitration agreement, and to ask whether it would then have jurisdiction over the parties’ dispute.” Given this difference, the Court concluded it had “no warrant to redline the FAA, importing Section 4’s consequential language into provisions containing nothing like it.”

Offering a pragmatic view of the Court’s role, Justice Breyer’s lone dissent criticized the majority’s fidelity to the FAA’s text as “adopting an interpretation that . . . creates unnecessary complexity and confusion.” Justice Breyer would simply use a “look through” approach for all provisions of the FAA to avoid “anomalous results” and provide “simplicity.”

Justice Breyer’s most compelling argument about the “anomalous results” concerned a provision not at issue in the case—Section 5, the appointment provision. Justice Breyer hypothesized that a party might obtain “look through” jurisdiction to compel arbitration under Section 4 but then be denied jurisdiction to “appoint” an arbitrator under Section 5 based on the majority’s reasoning. In a footnote, the majority left the issue for another day: “Because Section 5 is not at issue here, we do not express any view about” it.

In regards to data privacy and cybersecurity litigations going forward, because the Court ruled that the federal law claims in the underlying dispute are not sufficient for a federal court to confirm or vacate an arbitration award, many post-arbitration disagreements will likely shift to state courts going forward. This development is anticipated in other areas of the law outside the data privacy context, in light of the Court’s broadly worded opinion.