Overview
To file a suit to compel arbitration in federal court, the court must have subject matter jurisdiction and personal jurisdiction, venue must be proper, special considerations must be met for certain kinds of defendants, and there must be a basis on the merits alleged to compel arbitration.
Subject Matter Jurisdiction In Domestic Cases
One set of rules applies in cases where all parties to the case are U.S. persons.
Some of the criteria are:
- diversity of citizenship
- the dispute must be worth at least $75,000
While this is usually the case, the requirements of 28 U.S.C. § 1332 pertaining to diversity jurisdiction don't always apply to motions to compel arbitration in federal court.
The FAA, 9 U.S.C. § 1 et seq., does not itself confer federal-question jurisdiction—the federal courts must have an independent jurisdictional basis to hear a case under the FAA. Hall Street Associates, L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008).
A federal court can compel arbitration under Section 4 of the FAA, however, if, on a “look through” basis, the underlying dispute were to give rise to federal question jurisdiction, even in the absence of diversity of citizenship. Vaden v. Discovery Bank, 556 U.S. 49 (2009). In these cases, there is no minimum amount in controversy and diversity of citizenship is not required.
But, Vaden’s “look through” approach to determining federal jurisdiction does not apply to requests to confirm or vacate arbitral awards
under Sections 9 and 10 of the FAA. Bagerow v. Walter, 596 U.S. ____, Case No. 20-1143 (March 31, 2022).
A motion to compel arbitration could also be brought in federal court if the United States government was one of the parties to the case.
Case law has also created some exceptions to the general rule that diversity jurisdiction is present when there is diversity of citizenship and the amount in controversy is in excess of $75,000. The most important of those exceptions are for family law matters and for probate cases. Most family law arbitration cases involve agreements of a Jewish married couple to submit certain marital disputes to arbitration before a Jewish law tribunal arbitration. Most arbitration requirements in probate cases are established in an instrument such as a will under which the case arises.
It is also possible for the parties to contractually agree to waive a federal forum for any purpose whatsoever. This is frequently done, for example, in cases involving marijuana business transactions in which the businesses are legal under state but not federal law.
Subject Matter Jurisdiction In International Cases
The subject matter jurisdiction analysis (but not the personal jurisdiction analysis) is usually different in international arbitration cases to which treaty agreements usually apply.
Enforcement of an international arbitration treaty will usually constitute a federal question under 28 U.S.C. § 1331, and provide a basis for federal court subject matter jurisdiction that would be absent under the FAA. As noted here:
In 1970, the United States acceded to the New York Convention on the
Recognition and Enforcement of Foreign Arbitral Awards (the “New York
Convention”), which requires all of its 157 State-Parties to enforce
arbitration agreements and awards rendered in other countries or which
are non-domestic. In the implementing legislation, Congress
established that any arbitration agreement or award that was
commercial and international in nature fell under the New York
Convention. 9 U.S.C. § 202.
Congress also provided that “An action or proceeding falling under the
Convention shall be deemed to arise under the laws and treaties of the
United States.” 9 U.S.C. § 203. This confers federal jurisdiction on
any motion to compel arbitration or any enforcement action regarding
an international arbitration.
Congress also provided extremely broad removal powers whenever a state
court action “relates to” an international arbitration agreement or
award. 9 U.S.C. § 205 allows for removal “at any time before the
trial” and says that the grounds for removal “need not appear on the
face of the complaint but may be shown in the petition for removal.”
Every circuit that has analyzed this has found that it confers broad
jurisdiction on the federal courts to hear claims “whenever an
[international] arbitration agreement . . . could conceivably affect
the outcome of the plaintiff’s case.” Infuturia Global Ltd. v. Sequus
Pharaceuticals, Inc., 631 F.3d 1133, 1138 (9th Cir. 2011); Reid v.
Doe Run Resources Corp., 701 F.3d 840, 844 (8th Cir. 2012); Beiser
v. Weyler, 284 F.3d 665, 669 (5th Cir. 2002).
The New York Convention will not always apply, however, in consumer cases and in other cases that are not commercial in nature, even if they are international.
Personal Jurisdiction
In addition to having "subject matter" jurisdiction over the type of controversy involved, a party filing suit in a U.S. District Court must establish that the court has "personal jurisdiction" over the parties. This analysis is the usually same as it would be if the suit were filed in a state court concerning the same matter. See Federal Rule of Civil Procedure 4(k).
Thus, the defendant must either be (1) subject to general personal jurisdiction in that state, because the defendant has a headquarters, place of incorporation, or a domicile in that state, or (2) the defendant must be subject to specific personal jurisdiction in that state (i.e. the specific controversy must involve conduct of the defendant that links the defendant to that state).
The scope of general jurisdiction over entities was greatly narrowed by the U.S. Supreme Court in Daimler A.G. v. Bauman, 134 S. Ct. 746 (2014), with respect to the prior rule under the longstanding U.S. Supreme Court holding of International Shoe Company v. Washington, 326 U.S 310 (1945) (which allowed a company or person to be sued on any matter anywhere that the defendant had an office for the conduct or business or a permanent agent). The law of personal jurisdiction, however, after many decades of great clarity, is now ridden with uncertainty and internal doctrinal ambiguities as a result of several recent U.S. Supreme Court rulings in this area. See, e.g., Richard D. Freer, "From Contacts to Relatedness: Invigorating the Promise of "Fair Play and Substantial Justice" in Personal Jurisdiction Doctrine" 73 Alabama L. Rev. 583 (2022).
Often, a forum selection clause in a contract containing an arbitration clause will supply a partial basis for a court to assert specific personal jurisdiction over a case. But the forum must still have some connection to the parties or the transaction or matter to support a federal court's personal jurisdiction over the case.
There are also some narrow exceptions to the usual personal jurisdiction rules requiring that either general jurisdiction or specific jurisdiction be present. These include "tag jurisdiction" over natural person defendants that allows them to be tried in a federal court in a state if the defendant was personally served with process in the case in that state, see Burnham v. Superior Court, 495 U.S. 604 (1990), "in rem" jurisdiction, and "quasi-in rem" jurisdiction. Tag jurisdiction is not available against entities, however. See Martinez v. Aero Caribbean, 764 F.3d 1062 (9th Cir. 2014).
For personal jurisdiction (but not venue) purposes, every U.S. District Court District in a state is on an equal footing. Facts necessary to establish personal jurisdiction in a U.S. District Court do not all have to be present in the judicial district in question if the facts establish that any state courts in the entire state in which the U.S. District Court is located would have personal jurisdiction over the case.
The defendant must also be properly served with process in the manner set forth in Federal Rule of Civil Procedure 4 in order to be subject to the personal jurisdiction of the federal court.
Venue
Venue is proper in a U.S. District Court if the state in which the U.S. District Court is located has personal jurisdiction over the case, and, in states with more than one U.S. District Court, one or more of the parties has the proper connection to that particular U.S. District Court. See generally 28 U.S.C. § 1391. The general rule under that statute is that:
A civil action may be brought in—
(1)a judicial district in which any defendant resides, if all
defendants are residents of the State in which the district is
located;
(2)a judicial district in which a substantial part of the events or
omissions giving rise to the claim occurred, or a substantial part of
property that is the subject of the action is situated; or
(3)if there is no district in which an action may otherwise be brought
as provided in this section, any judicial district in which any
defendant is subject to the court’s personal jurisdiction with respect
to such action.
If a U.S. District Court has personal jurisdiction over the parties, but the plaintiff has chosen an improper venue, then the usual remedy is a motion to change the venue and transfer the case to a different district, rather than to dismiss the case.
Other Considerations
Additional steps must be taken to protect a defendant's rights in order to commence a case in federal court to compel arbitration if a defendant is in military service (to which the Soldier's and Sailor's Civil Relief Act, 50 U.S.C. §§ 101-165, applies), if a defendant is a minor, or if a defendant is incompetent.
Stating A Claim Upon Which Relief Can Be Granted
Of course, there must also be allegations of a valid basis to compel arbitration on the merits - e.g., allegations that an arbitration agreement was entered into and that it binds the party against whom arbitration is sought to be compelled, and that it involves a matter that can be subject to arbitration.
