Federal District Court Declines to Rule on Arbitration Award, Finding No Independent Basis for Jurisdiction
Following arbitration, the parties filed cross-motions to confirm and vacate the arbitration award. The District Court for the Southern District of California issued an order to show cause why the case should not be dismissed for lack of subject matter jurisdiction because the FAA does not independently confer jurisdiction, and the parties did not adequately plead a jurisdictional basis that would permit the court to rule. Golub, moving that the award be vacated, argued that the court had jurisdiction because (1) she was denied a fair arbitral hearing, and (2) the award was in manifest disregard of federal law. The court rejected both arguments, reasoning that federal question jurisdiction to enforce or vacate an arbitration award exists only when ultimate disposition of the matter by the federal court necessarily depends on resolution of a substantial question of federal law, such as when the petition alleges that the arbitrator manifestly disregarded federal substantive law. The court went on to warn that “even in those cases where the arbitrator manifestly disregarded federal substantive law, courts are reluctant to find jurisdiction.” Last, the court stated that the allegation that the arbitrator denied a party a fair opportunity to present its case by refusing to compel production of documents, does not raise a “substantial question of federal law.” The court was “aware of no case … stating that failure to follow federal procedure in an arbitration can give rise to federal question jurisdiction.” BOFI Fed. Bank v. Golub, Case No. 3:18-cv-00816 (USDC S.D. Cal. Nov. 8, 2018).