Originally from American Review of International Arbitration - ARIA

Preview Page

Last November, in Westmoreland Capital Corp. v. Findlay, a panel of the Second Circuit concluded that a federal court does not have subject-matter jurisdiction over an action to compel arbitration under the Federal Arbitration Act (FAA) "merely because the underlying claim raises a federal question."[1] Quoting with approval a 1988 analysis by District Judge (as he then was) Leval, the panel held that FAA Section 4 does not confer jurisdiction "where the claim of federal jurisdiction is not based on the petition itself, but rather on the federal character of the underlying dispute [in arbitration]."[2] Hence, the petition must be filed in state court "unless some other basis for federal jurisdiction exists, such as diversity of citizenship or assertion of a claim in admiralty" but not, apparently, the general federal question jurisdiction of 28 U.S.C. § 1331.[3] The elevation of Judge Leval's formulation to Circuit doctrine invites trouble.