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Supreme Court Returns to an Arbitration Docket (Web)

The U.S Supreme Court kicks off its 2008-09 term today, and its third argument, set for 1 p.m. Eastern, involves an alternative dispute resolution case.

The court was set to tackle Vaden v. Discover Bank, 07-773, which reviews a jurisdictional question that will decide whether an arbitration takes place.  A federal court compelled arbitration requested by Discover Bank where the bank had filed suit in state court to collect an outstanding cardholder’s bill, and then faced state law counterclaims.  The credit card provider elected to go to the federal court to compel arbitration, which was granted.

Discover Bank made the motion to compel under Federal Arbitration Act Section 4.  The case raises two questions:  Does the FAA require a federal question arising from the allegations in the motion, or can the federal question arise from the parties’ substantive dispute? From Discover Bank’s view, the Federal Deposit Insurance Act preempted the counterclaims, though all arose under Maryland state law.

The case also focuses on the reach of so-called look-through jurisdiction.  Can the state law counterclaims that were preempted by federal law provide subject matter jurisdiction under the FAA?

For more background, see the CPR News archive item here.  

The Scotusblog’s wiki page has the briefs and a comprehensive summary here.

--Russ Bleemer, Editor, Alternatives