Fourth Circuit Reverses Dismissal, Finding Federal Question Jurisdiction for Review of Arbitral Award
The Fourth Circuit Court of Appeals reversed a Virginia federal court’s dismissal of a challenge to an arbitration award. The underlying dispute arose out of a lawsuit filed by Alvin Moore against his email service provider, America Online, Inc. (“AOL”), for divulging information about his account to law enforcement who sought the information as part of an investigation into a claimed imminent threat. Moore sued AOL in state court, alleging a claim under Title II of the Electronic Communications Privacy Act of 1986 (known as the Stored Communications Act), 18 U.S.C. § 2701 et seq., for divulging the information about him without a warrant, a subpoena, or his consent. Moore also alleged that AOL had, without his consent, deleted all his emails, causing him damages in the amount of $74,999 (presumably just under the jurisdictional requirement for diversity jurisdiction in order to avoid removal to federal court).
However, AOL successfully compelled arbitration under its service provider agreement with Moore, and prevailed in the arbitration. Moore filed a petition to vacate the award in Virginia federal court, alleging both federal question and diversity jurisdiction. The court granted AOL’s motion to dismiss the petition for want of jurisdiction, finding it did not satisfy the amount in controversy requirement to sustain diversity jurisdiction. It did not address the issue of whether it had federal question jurisdiction due to the fact that the subject of the arbitration included a claim under the federal Stored Communications Act.
The Fourth Circuit reversed and remanded, for a merits consideration of Moore’s petition, given its finding that the district court has jurisdiction. It sided with the First and Second Circuits in a circuit split about whether the enforcement mechanisms under the FAA §§ 10 and 11 required the court to “look through” the petition to determine if the underlying dispute could have been brought in federal court, absent the arbitration agreement. Other Circuits have held in favor of an approach treating petitions to vacate or confirm as strictly matters of contract under an arbitration agreement, regardless of the subject matter of the dispute, and thus governed by state law, providing no independent basis for federal question jurisdiction. The Fourth Circuit explicitly rejected that approach, based on U.S. Supreme Court precedent adopting the “look through” approach with respect to petitions to compel arbitration under FAA § 4, and finding no reason that this approach should not also apply to the FAA’s enforcement mechanisms under §§ 10 and 11.
McCormick v. America Online, Inc., No. 17-1542 (4th Cir. Nov. 29, 2018).