Client Alert
Vaden v. Discover Bank: The Look Through Doctrine and the Arbitration of State Law Usury Claims
May 21, 2009
John G. Parker, Candy Voticky Wilson and Sarah Galle Perry
In Vaden v. Discover Bank, 556 U.S. ___, 129 S. Ct. 1262, 2009 U.S. LEXIS 1781 (March 9, 2009), the Supreme Court resolved the circuit split regarding the proper standard for determining whether a federal court has jurisdiction to compel arbitration under §4 of the Federal Arbitration Act (FAA). Section 4 of the FAA permits a party to petition the enforcement of an arbitration agreement in federal court when the federal court would have subject matter jurisdiction over the action, save for the arbitration agreement. In a unanimous portion of the Vaden decision, the Court held that the federal court should look through the §4 petition to the underlying controversy between the parties to determine whether it has jurisdiction to grant the requested relief. The court was divided 5-4, however, in deciding what exactly constitutes the underlying controversy to which the federal courts should look through.