APRIL 2009

ABA Launches National Database of Mediation Ethics Opinions

The Ethics Committee of the ABA Dispute Resolution Section has developed a searchable database of state ethics opinions from across the United States. Launched last month, the National Clearinghouse for Mediator Ethics Opinions is available. Marnie Huff, a member of the TBA Dispute Resolution Executive Council, is serving her second year as co-chair of the Ethics Committee of the American Bar Association Dispute Resolution Section. Contact Ms. Huff at 615-812-5557 for more information about the database.

ADR Caselaw Update
by Marnie Huff

U.S. Supreme Court Arbitration Cases

Federal Question Jurisdiction Issue Resolved. In Vaden v. Discover Bank, No. 07–773. 556 U.S. ___ (March 9, 2009), the U.S. Supreme Court considered two issues: 1. “Whether a suit seeking to enforce a state-law arbitration obligation brought under Section 4 of the Federal Arbitration Act, 9 U.S.C. § 4, “aris[es] under” federal law, see 28 U.S.C. § 1331, when the petition to compel itself raises no federal question but the dispute sought to be arbitrated—a dispute that the federal court is not asked to and cannot reach— involves federal law”; and 2. “If so, whether a “completely preempted” state-law counterclaim in an underlying state-court dispute can supply subject matter jurisdiction.” Vaden v. Discover Bank, No. 07-773 (questions presented). The Court took the case to resolve a split in the circuits on the authority of courts under Section 4 of the FAA to "look through" to underlying claims to determine federal question jurisdiction. In an opinion authored by Justice Ginsburg reversing the Fourth Circuit Court of Appeals, the Court held that a federal court may “look through” a §4 petition to determine whether it is predicated on a controversy that “arises under” federal law. In keeping with the well-pleaded complaint rule as amplified in Holmes Group, Inc. v. Vornado Air Circulation Systems, Inc., 535 U. S. 826 however, a federal court may not entertain a §4 petition based on the contents of a counterclaim when the whole controversy between the parties does not qualify for federal-court adjudication.

FAA Overrides State Statute Vesting Initial Jurisdiction in Administrative Agency. In Preston v. Ferrer, No. 06-1463, 556 U.S. ___ (February 20, 2008), the Court decided whether the Federal Arbitration Act "overrides not only state statutes that refer certain state-law controversies initially to a judicial forum, but also state statutes that refer certain disputes initially to an administrative agency." The case involved a dispute between an attorney seeking unpaid fees and a client, a TV personality who claimed their contract was void and unenforceable because the attorney had served as an unlicensed talent agent. The client sought a stay of any arbitration, pending a decision from the California Labor Commissioner in an administrative proceeding. Following Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006), the U.S. Supreme Court held that when parties agree to arbitrate all questions arising under a contract, the FAA supercedes state laws that lodge primary jurisdiction in another forum, whether judicial or administrative. Unlike the situation in Volt Information Services, Inc. v. Bd. of Trustees, 489 U.S. 468 (1989), in Preston there was no third party who was not bound by the parties' arbitration agreement. The parties' contract adopted an American Arbitration Association rule that the arbitrator had the power to decide the existence or validity of their contract, but it also had a choice of law clause incorporating California state law. Relying on Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52 (1995), the Court decided the best way to harmonize these provisions is to read the adoption of California law as governing the parties' substantive rights, but not California rules limiting the arbitrator's authority. To do otherwise would undercut the FAA's basic policy to achieve efficiency through agreements to arbitrate. The Court declined to take up Preston's invitation to overrule Southland Corp. v. Keating, 465 U.S. 1 (1984) (holding that FAA requires application of federal substantive law regarding arbitration in state as well as federal courts).

Tennessee Cases
Click here for a summary of Tennessee cases on ADR issues.

ADR Caselaw Update is by Marnie Huff, a Past Chair of the TBA Dispute Resolution Section and Co-Chair of the ABA DR Section Ethics Committee. Ms. Huff has an ADR practice in Nashville, TN.