Jurisdiction Issues

Second Circuit Affirms Dismissal of Challenge to FINRA Award

June 9, 2025 by Brendan Gooley

The Second Circuit Court of Appeals has affirmed the dismissal of a challenge to a FINRA arbitration award after concluding that federal courts lacked jurisdiction over the matter.

Versel Green filed an action seeking to vacate a FINRA arbitration award in favor of Bank of America Merrill Lynch and other entities. The district court dismissed his action for lack of jurisdiction. Green appealed. He conceded that no diversity existed but claimed the federal courts had federal question jurisdiction over his claim. The Second Circuit disagreed. It noted that even though Green invoked the Federal Arbitration Act, he still had to present an “independent jurisdictional basis” for his claim that appeared “on the face of the application itself.” The Second Circuit concluded that Green had not done that, explaining that “quarrels about legal settlements — even settlements of federal claims — typically involve only state law, like disagreements about other contracts.”

Green v. Bank of America Merrill Lynch, No. 24-2550 (2d Cir. May 13, 2025).

Fifth Circuit Reverses Decision Denying Motion to Compel International Arbitration

May 19, 2025 by Brendan Gooley

The Fifth Circuit Court of Appeals recently reversed a district court’s denial of a motion to compel arbitration, concluding that the contract between the parties evinced an intent to arbitrate even if the purported arbitral forum chosen by the parties no longer existed.

Baker Hughes Saudi Arabia Co. and Dynamic Industries Saudi Arabia Ltd. entered into a subcontract related to an oil and gas project in Saudi Arabia. The subcontract contained two arbitration clauses: Dynamic Industries could demand arbitration in Saudi Arabia and either party could initiate arbitration under the rules of the Dubai International Financial Centre’s joint partnership with the London Court of International Arbitration (DIFC-LCIA). The DIFC-LCIA was subsequently abolished, and a new institution was created in its place.

Baker Hughes then sued Dynamic Industries in court in the United States. Dynamic Industries moved to compel arbitration in the DIFC-LCIA. The court denied that motion because the parties’ designated forum, the DIFC-LCIA, no longer existed and the “forum-selection clause” was unenforceable.

The Fifth Circuit reversed. It noted that the arbitration clause related to the DIFC-LCIA provided that a “dispute shall be referred by either Party to and finally resolved by arbitration under the Arbitration Rules of the DIFC LCIA.” It concluded that that language was not a forum-selection clause because it “sets only the rules of arbitration and not the forum.” The Fifth Circuit also held that even if the clause was a forum-selection clause, the clause was not integral to the subcontract and the subcontract evinced a general intent to arbitrate regardless of the specific arbitral forum. Indeed, a separate arbitration provision allowed for arbitration in Saudi Arabia.

Baker Hughes Saudi Arabia Co. v. Dynamic Industries, Inc., 126 F.4th 1073 (5th Cir. Jan. 27, 2025).

Fourth Circuit Applies Supreme Court’s Coinbase Decision Outside Context of Arbitration

May 1, 2025 by Brendan Gooley

The Fourth Circuit Court of Appeals recently concluded that the U.S. Supreme Court’s decision in Coinbase Inc. v. Bielski is not limited to interlocutory appeals involving arbitration.

In Coinbase, which involved an interlocutory appeal from an order denying a motion to enforce an arbitration provision, the Supreme Court held that an interlocutory appeal of a motion denying arbitration “divests the district court of its control over those aspects of the case involved in the appeal.”

In City of Martinsville v. Express Scripts Inc., the city of Martinsville, Virginia, sued Express Scripts and OptumRx in state court related to their purported role in the opioid epidemic. The defendants removed the case to federal court, but the federal court remanded the case to state court. Immediately after the federal court remanded the case, but before the federal clerk mailed the remand order to the state court, Express Scripts filed an interlocutory appeal and sought to stay the case pursuant to Coinbase.

The district court denied the motion to stay, holding that Coinbase concerned appeals from motions regarding arbitration, not appeals regarding remand decisions. The Fourth Circuit reversed. It held that although Coinbase involved arbitration, that was a distinction without a difference and that Coinbase establishes that an automatic stay is in effect when appeals are filed regardless of whether the appeal concerns an order regarding arbitration, a remand order, etc. The court noted that while the stay may not preclude the court from taking any action whatsoever on the case, it precludes the court from taking action “over those aspects of the case involved in the appeal.” In the case of an appeal challenging a remand order, that includes mailing the remand order to the state court.

City of Martinsville v. Express Scripts Inc., No. 24-1912 (4th Cir. Feb. 10, 2025).

Fourth Circuit Holds It Lacks Jurisdiction to Consider Petition to Vacate

February 3, 2025 by Brendan Gooley

The Fourth Circuit Court of Appeals recently held that it lacked jurisdiction over a petition to vacate an arbitration award.

Petitioners Stanley and Gail Friedler and several other individuals opened brokerage accounts with Stifel, Nicolaus & Co. The petitioners were unhappy with the management of their accounts and filed claims for arbitration alleging mismanagement with FINRA. The arbitration panel ruled for Stifel. The petitioners moved to vacate FINRA’s award. The district court denied the petitioners’ motion, and the petitioners appealed to the Fourth Circuit.

The Fourth Circuit questioned whether the federal courts had jurisdiction in light of the Supreme Court’s decision in Badgerow v. Walters, 596 U.S. 1 (2022), which held that “the face of [a] petition [to vacate arbitration awards] must contain an independent jurisdictional basis beyond the Federal Arbitration Act (‘FAA’) itself.” Both parties argued the courts had jurisdiction.

The Fourth Circuit disagreed. It rejected the parties’ argument “that because the ‘face of the petition’ asserts that the arbitration panel manifestly disregarded federal securities laws, the district court had federal-question jurisdiction over the dispute.” The Fourth Circuit explained that a “petition to vacate an arbitration award doesn’t raise the merits of the underlying claim, but rather the ‘enforceability of an arbitral award,’ which is ‘no more than a contractual resolution of the parties’ dispute.’” The court also disagreed with the argument “that a claim of manifest disregard is a creature of federal common law that itself gives rise to federal-question jurisdiction.”

The Fourth Circuit therefore vacated and remanded the district court’s decision with instructions to dismiss the petition to vacate the arbitration award.

Friedler v. Stifel, Nicolaus & Co., No. 22-1895 (4th Cir. July 18, 2024).

Sixth Circuit Confirms Arbitration Award Despite Argument That Case Was International and Beyond Arbitrator’s Authority

November 1, 2024 by Benjamin Stearns

The arbitration award stemmed from the pro se complaint of Joseph Ruzindana for wrongful termination against his former employer, FCA US. In the arbitration, Ruzindana claimed that he was harassed and discriminated against by FCA US.

After the arbitrator rendered an award in favor of FCA US, Ruzindana filed a motion to vacate, arguing that the case “was an international one beyond the Arbitrator’s and state Authority because some of FCA US’s vehicles would be sold in Brazil and some of his colleagues were located in Brazil.” However, the arbitration agreement between the parties authorized the arbitrator to decide “whether the challenged personnel decision or action was (1) lawful under applicable federal, state and local law, or (2) consistent with the Company’s At Will employment policy.” As a result, the resolution of Ruzindana’s employment-related claims fell within the arbitrator’s powers, regardless of any connection between those claims and Brazil.

Under the Federal Arbitration Act, a district court may vacate an arbitration award under only four circumstances:

Where the award was procured by corruption, fraud, or undue means;
Where there was evident partiality or corruption in the arbitrators, or either of them;
Where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy, or of any other misbehavior by which the rights of any party have been prejudiced; or
Where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.

Ruzindana did not allege that the arbitration award was procured by corruption, fraud, or undue means or that the arbitrator was partial, corrupt, or guilty of any misconduct. He did allege that the matter was “beyond the arbitrator’s” authority but, as noted above, the district court and the Sixth Circuit held to the contrary.

Because Ruzindana did not satisfy any of the grounds for vacating an arbitration award under 9 U.S.C. § 10(a), the Sixth Circuit held that the district court properly denied his motion to vacate the arbitration award.

Ruzindana v. FCA US, LLC, No. 23-1649 (6th Cir. July 3, 2024).