Judge Marcus of 11th Circuit Notes Split Re Interpretation of Provision of Federal Arbitration Act

Per Judge Marcus, concurring, in Community State Bank v. Strong, --- F.3d ----, 2007 WL 1225343 (11th Cir. Apr. 27, 2007):

As should be clear from the majority opinion, I concur in the judgment and in all other aspects of our opinion in this case. I do so because I believe that we are bound by Tamiami Partners Ltd. ex rel. Tamiami Development Corp. v. Miccosukee Tribe of Indians of Florida, 177 F.3d 1212 (11th Cir.1999) ( “ Tamiami III”), which held that the text of § 4 of the FAA, 9 U.S.C. § 4, requires a district court, in determining whether it has federal question jurisdiction over a § 4 arbitration claim, to “look through” that claim and instead ask whether the underlying dispute the petitioner seeks to arbitrate states a federal question.FN1 I write separately to explain why I believe this holding is wrong, or at the very least ill-considered, and why the important, indeed basic, jurisdictional question embodied both in Tamiami III and in this case is ripe for en banc review by this Court or certiorari review by the Supreme Court.

As more than one court of appeals has noted, the “clear weight of authority” is that § 4 does not make federal question jurisdiction over a petition to compel arbitration dependent on the nature of the underlying dispute to be arbitrated. See, e.g., Kasap v. Folger Nolan Fleming & Douglas, Inc., 166 F.3d 1243, 1246 (D.C.Cir.1999) (noting as much but not reaching the issue itself); see also U.S. Bank Nat'l Ass'n ND v. Strand, 243 F.Supp.2d 1139, 1141-45 (D.Or.2002) (following the “great weight of authority” in holding irrelevant the federal nature of the underlying claim to be arbitrated).

Indeed, Tamiami III 's stance puts this Court squarely at odds with at least four of our sister circuits, and aligns us with just one other circuit. Compare Westmoreland Capital Corp. v. Findlay, 100 F.3d 263, 267-69 (2d Cir.1996) (“[T]he text of FAA § 4 should not be interpreted to mean that a federal court has subject matter jurisdiction over an action to compel or stay arbitration merely because the underlying claim raises a federal question. A petition under FAA § 4 to compel or stay arbitration must be brought in state court unless some other basis for federal jurisdiction exists, such as diversity of citizenship or assertion of a claim in admiralty.”); Prudential-Bache Sec., Inc. v. Fitch, 966 F.2d 981, 986-88 (5th Cir.1992) (holding, in response to an argument that § 4 directs the federal courts to take federal question jurisdiction over a § 4 petition based on the federal nature of the dispute to be arbitrated, that “when we read the [FAA] in light of its history and purpose and in conjunction with well established rules for determining federal question jurisdiction, we find that interpretation unpersuasive”); Smith Barney, Inc. v. Sarver, 108 F.3d 92, 94 (6th Cir.1997) (“Our cases have made clear ... that the Federal Arbitration Act does not supply an independent basis for federal jurisdiction, nor does the federal nature of the underlying claims that were submitted to arbitration. The rights asserted by Smith Barney in this case are based simply on an interpretation of the contract to arbitrate, as opposed to the actual merits of the underlying substantive claims.” (citations omitted)); and Wisconsin v. Ho-Chunk Nation, 463 F.3d 655, 659 (7th Cir.2006) (“[T]his circuit has recognized that [a] strong body of caselaw has developed ... holding that the nature of the underlying dispute [in arbitration] is irrelevant for purposes of subject matter jurisdiction, even on a motion to compel [arbitration] ... [T]he motion itself must involve diversity or federal question jurisdiction. Thus, we do not look to the Nation's underlying complaint in arbitration, but confine our analysis to the federal claims articulated in Wisconsin's complaint before the district court.” (citations and quotation marks omitted, first and last alterations added)), with Discover Bank v. Vaden, 396 F.3d 366, 373 (4th Cir.2005) (“A federal court may ... hear a § 4 petition to compel arbitration if, but for the arbitration agreement, subject matter jurisdiction over the case would otherwise exist by virtue of a properly invoked federal question in the underlying dispute.”).

Moreover, this issue on which the circuits are plainly split is an important one. Actions are regularly filed under the FAA, and the approach adopted by our Court in Tamiami III and by the Fourth Circuit in Vaden, which finds federal question jurisdiction to compel arbitration whenever the dispute before the arbitrator raises a federal question even though the federal court itself is asked only to enforce a private contract, considerably expands federal court jurisdiction. At the very least, this important issue merits more consideration than we were able to give it in Tamiami III, where we were confronted, for the third time, with a multi-count complaint presenting an array of complex issues including many that were federal in nature.


At 3:26 AM, Anonymous Anonymous said...

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