Originally from Alternatives to the High Cost of Litigation

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Despite the existence of Federal Arbitration Act Section 3 on jurisdiction for stays in arbitration as discussed in Part 1 last month (cited above), the case of SmartSky Networks LLC v. DAG Wireless Ltd., ___ F.4th ___, No. 22-1253, slip op. (4th Cir. Feb. 13, 2024) (available at https://bit.ly/4aviBLS), incorrectly concluded that FAA Sections 9 and 10 motions are always independent actions. (All FAA sections referred to in this article can be viewed at https://bit.ly/43h4buX).)

It determined that the very different procedural postures of SmartSky, an embedded proceeding, and Badgerow v. Walters, 596 U.S. 1, 142 S. Ct. 1310 (2022) (available at https://bit.ly/47CVvRG), an independent proceeding, were therefore irrelevant. (In Badgerow, the U.S. Supreme Court held that a basis for subject-matter jurisdiction—independent from the Federal Arbitration Act itself—must appear on the face of a standalone or independent petition to confirm or vacate an arbitration award and that independent basis cannot be established by “looking through” to the underlying arbitration proceeding.)

The reasoning SmartSky employed to justify this conclusion can be legitimately questioned. The court, for example, suggested that Section 9 and 10 applications are invariably independent actions because the Supreme Court in Badgerow “directed its subject matter jurisdiction at the matter that was before the district court–a contract enforcement action, not the employment-related lawsuit that was before the arbitrator.…” SmartSky, slip op. at 12.