Vaden v. Discover Bank

(Slip Opinion) OCTOBER TERM, 2008 1
Syllabus
NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
being done in connection with this case, at the time the opinion is issued.
The syllabus constitutes no part of the opinion of the Court but has been
prepared by the Reporter of Decisions for the convenience of the reader.
See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.
SUPREME COURT OF THE UNITED STATES
Syllabus
VADEN v. DISCOVER BANK ET AL.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
THE FOURTH CIRCUIT
No. 07–773. Argued October 6, 2008—Decided March 9, 2009
Section 4 of the Federal Arbitration Act (FAA or Act), 9 U. S. C. §4, au
thorizes a United States district court to entertain a petition to com
pel arbitration if the court would have jurisdiction, “save for [the ar
bitration] agreement,” over “a suit arising out of the controversy
between the parties.”
Discover Bank’s servicing affiliate filed a complaint in Maryland
state court to recover past-due charges from one of its credit card
holders, petitioner Vaden. Discover’s pleading presented a claim
arising solely under state law. Vaden answered and counterclaimed,
alleging that Discover’s finance charges, interest, and late fees vio
lated state law. Invoking an arbitration clause in its cardholder
agreement with Vaden, Discover then filed a §4 petition in Federal
District Court to compel arbitration of Vaden’s counterclaims. The
District Court ordered arbitration.
On Vaden’s initial appeal, the Fourth Circuit remanded the case
for the District Court to determine whether it had subject-matter ju
risdiction over Discover’s §4 petition pursuant to 28 U. S. C. §1331,
which gives federal courts jurisdiction over cases “arising under” fed
eral law. The Fourth Circuit instructed the District Court to conduct
this inquiry by “looking through” the §4 petition to the substantive
controversy between the parties. With Vaden conceding that her
state-law counterclaims were completely preempted by §27 of the
Federal Deposit Insurance Act (FDIA), the District Court expressly
held that it had federal-question jurisdiction and again ordered arbi
tration. The Fourth Circuit then affirmed. The Court of Appeals rec
ognized that, in Holmes Group, Inc. v. Vornado Air Circulation Sys
tems, Inc., 535 U. S. 826, this Court held that federal-question
jurisdiction depends on the contents of a well-pleaded complaint, and
2 VADEN v. DISCOVER BANK
Syllabus
may not be predicated on counterclaims. It concluded, however, that
the complete preemption doctrine is paramount and thus overrides
the well-pleaded complaint rule.
Held: A federal court may “look through” a §4 petition to determine
whether it is predicated on a controversy that “arises under” federal
law; in keeping with the well-pleaded complaint rule as amplified in
Holmes Group, however, a federal court may not entertain a §4 peti
tion based on the contents of a counterclaim when the whole contro
versy between the parties does not qualify for federal-court adjudica
tion. Pp. 6–21.
(a) Congress enacted the FAA “[t]o overcome judicial resistance to
arbitration,” Buckeye Check Cashing, Inc. v. Cardegna, 546 U. S. 440,
443, and to declare “ ‘a national policy favoring arbitration’ of claims
that parties contract to settle in that manner,” Preston v. Ferrer, 552
U. S. ___, ___. To that end, §2 makes arbitration agreements in con
tracts “involving commerce” “valid, irrevocable, and enforceable,”
while §4 provides for federal district court enforcement of those
agreements. The “body of federal substantive law” generated by
elaboration of §2 is equally binding on state and federal courts.
Southland Corp. v. Keating, 465 U. S. 1, 12. However, the FAA “re
quir[es] [for access to a federal forum] an independent jurisdictional
basis” over the parties’ dispute. Hall Street Associates, L. L. C. v.
Mattel, Inc., 552 U. S. ___, ___. Under the well-pleaded complaint
rule, a suit “arises under” federal law for 28 U. S. C. §1331 purposes
“only when the plaintiff’s statement of his own cause of action shows
that it is based upon [federal law].” Louisville & Nashville R. Co. v.
Mottley, 211 U. S. 149, 152. Federal jurisdiction cannot be predicated
on an actual or anticipated defense, ibid., or rest upon an actual or
anticipated counterclaim, Holmes Group, 535 U. S. 826. A complaint
purporting to rest on state law can be recharacterized as one “arising
under” federal law if the law governing the complaint is exclusively
federal, see Beneficial Nat. Bank v. Anderson, 539 U. S. 1, 8, but a
state-law-based counterclaim, even if similarly susceptible to rechar
acterization, remains nonremovable. Pp. 6–11.
(b) FAA §4’s text drives the conclusion that a federal court should
determine its jurisdiction by “looking through” a §4 petition to the
parties’ underlying substantive controversy. The phrase “save for
[the arbitration] agreement” indicates that the district court should
assume the absence of the agreement and determine whether it
“would have jurisdiction under title 28” over “the controversy be
tween the parties,” which is most straightforwardly read to mean the
“underlying dispute” between the parties. See Moses H. Cone Memo
rial Hospital v. Mercury Constr. Corp., 460 U. S. 1, 25, n. 32. Vaden’s
argument that the relevant “controversy” is simply and only the par
Cite as: 556 U. S. ____ (2009) 3
Syllabus
ties’ discrete dispute over the arbitrability of their claims is difficult
to square with §4’s language. If courts are to determine whether they
would have jurisdiction “save for [the arbitration] agreement,” how
can a dispute over an arbitration agreement’s existence or applicabil
ity be the controversy that counts? The Court is unpersuaded that
the “save for” clause means only that the “antiquated and arcane”
ouster notion no longer holds sway. To the extent that the ancient
“ouster” doctrine continued to impede specific enforcement of arbitra
tion agreements, FAA §2, the Act’s “centerpiece provision,” Mitsubi
shi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U. S. 614, 625,
directly attended to the problem by commanding that an arbitration
agreement is enforceable just as any other contract. Vaden’s ap
proach also has curious practical consequences. It would permit a
federal court to entertain a §4 petition only when a federal-question
suit is already before the court, when the parties satisfy the require
ments for diversity-of-citizenship jurisdiction, or when the dispute
over arbitrability involves a maritime contract, yet would not ac
commodate a §4 petitioner who could file a federal-question suit in,
or remove such a suit to, federal court, but has not done so. In con
trast, the “look through” approach permits a §4 petitioner to ask a
federal court to compel arbitration without first taking the formal
step of initiating or removing a federal-question suit. Pp. 11–15.
(c) Having determined that a district court should look through a
§4 petition, this Court considers whether the court “would have [fed
eral-question] jurisdiction” over “a suit arising out of the controversy”
between Discover and Vaden. Because §4 does not enlarge federal
court jurisdiction, a party seeking to compel arbitration may gain
such a court’s assistance only if, “save for” the agreement, the entire,
actual “controversy between the parties,” as they have framed it,
could be litigated in federal court. Here, the actual controversy is not
amenable to federal-court adjudication. The “controversy between
the parties” arose from Vaden’s “alleged debt,” a claim that plainly
did not “arise under” federal law; nor did it qualify under any other
head of federal-court jurisdiction. The Fourth Circuit misappre
hended Holmes Group when it concluded that jurisdiction was proper
because Vaden’s state-law counterclaims were completely preempted.
Under the well-pleaded complaint rule, a completely preempted coun
terclaim remains a counterclaim, and thus does not provide a key ca
pable of opening a federal court’s door. Vaden’s responsive counter
claims challenging the legality of Discover’s charges are merely an
aspect of the whole controversy Discover and Vaden brought to state
court. Whether one might hypothesize a federal-question suit involv
ing that subsidiary disagreement is beside the point. The relevant
question is whether the whole controversy is one over which the fed
4 VADEN v. DISCOVER BANK
Syllabus
eral courts would have jurisdiction. Section 4 does not give parties li
cense to recharacterize an existing controversy, or manufacture a
new controversy, in order to obtain a federal court’s aid in compelling
arbitration. It is hardly fortuitous that the controversy in this case
took the shape it did. Seeking to collect a debt, Discover filed an en
tirely state-law-grounded complaint in state court, and Vaden chose
to file responsive counterclaims. Section 4 does not invite federal
courts to dream up counterfactuals when actual litigation has defined
the parties’ controversy. Allowing parties to commandeer a federal
court to slice off responsive pleadings for discrete arbitration while
leaving the remainder of the parties’ controversy pending in state
court makes scant sense. Furthermore, the presence of a threshold
question whether a counterclaim alleged to be based on state law is
totally preempted by federal law may complicate the §4 inquiry. Al
though FAA §4 does not empower a federal court to order arbitration
here, Discover is not left without recourse. Because the FAA obliges
both state and federal courts to honor and enforce arbitration agree
ments, Discover may petition Maryland’s courts for appropriate aid
in enforcing the arbitration clause of its contracts with Maryland
credit cardholders. Pp. 15–20.
489 F. 3d 594, reversed and remanded.
GINSBURG, J., delivered the opinion of the Court, in which SCALIA,
KENNEDY, SOUTER, and THOMAS, JJ., joined. ROBERTS, C. J., filed an
opinion concurring in part and dissenting in part, in which STEVENS,
BREYER, and ALITO, JJ., joined.
Cite as: 556 U. S. ____ (2009) 1
Opinion of the Court
NOTICE: This opinion is subject to formal revision before publication in the
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notify the Reporter of Decisions, Supreme Court of the United States, Wash
ington, D. C. 20543, of any typographical or other formal errors, in order
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SUPREME COURT OF THE UNITED STATES
_________________
No. 07–773
_________________
BETTY E. VADEN, PETITIONER v. DISCOVER
BANK ET AL.
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE FOURTH CIRCUIT
[March 9, 2009]
JUSTICE GINSBURG delivered the opinion of the Court.
Section 4 of the Federal Arbitration Act, 9 U. S. C. §4,
authorizes a United States district court to entertain a
petition to compel arbitration if the court would have
jurisdiction, “save for [the arbitration] agreement,” over “a
suit arising out of the controversy between the parties.”
We consider in this opinion two questions concerning a
district court’s subject-matter jurisdiction over a §4 peti
tion: Should a district court, if asked to compel arbitration
pursuant to §4, “look through” the petition and grant the
requested relief if the court would have federal-question
jurisdiction over the underlying controversy? And if the
answer to that question is yes, may a district court exer
cise jurisdiction over a §4 petition when the petitioner’s
complaint rests on state law but an actual or potential
counterclaim rests on federal law?
The litigation giving rise to these questions began when
Discover Bank’s servicing affiliate filed a complaint in
Maryland state court. Presenting a claim arising solely
under state law, Discover sought to recover past-due
charges from one of its credit cardholders, Betty Vaden.
2 VADEN v. DISCOVER BANK
Opinion of the Court
Vaden answered and counterclaimed, alleging that Dis
cover’s finance charges, interest, and late fees violated
state law. Invoking an arbitration clause in its cardholder
agreement with Vaden, Discover then filed a §4 petition in
the United States District Court for the District of Mary
land to compel arbitration of Vaden’s counterclaims. The
District Court had subject-matter jurisdiction over its
petition, Discover maintained, because Vaden’s state-law
counterclaims were completely preempted by federal
banking law. The District Court agreed and ordered
arbitration. Reasoning that a federal court has jurisdic
tion over a §4 petition if the parties’ underlying dispute
presents a federal question, the Fourth Circuit eventually
affirmed.
We agree with the Fourth Circuit in part. A federal
court may “look through” a §4 petition and order arbitra
tion if, “save for [the arbitration] agreement,” the court
would have jurisdiction over “the [substantive] controversy
between the parties.” We hold, however, that the Court of
Appeals misidentified the dimensions of “the controversy
between the parties.” Focusing on only a slice of the par
ties’ entire controversy, the court seized on Vaden’s coun
terclaims, held them completely preempted, and on that
basis affirmed the District Court’s order compelling arbi
tration. Lost from sight was the triggering plea—
Discover’s claim for the balance due on Vaden’s account.
Given that entirely state-based plea and the established
rule that federal-court jurisdiction cannot be invoked on
the basis of a defense or counterclaim, the whole “contro
versy between the parties” does not qualify for federal
court adjudication. Accordingly, we reverse the Court of
Appeals’ judgment.
I
This case originated as a garden-variety, state-law
based contract action: Discover sued its cardholder,
Cite as: 556 U. S. ____ (2009) 3
Opinion of the Court
Vaden, in a Maryland state court to recover arrearages
amounting to $10,610.74, plus interest and counsel fees.1
Vaden’s answer asserted usury as an affirmative defense.
Vaden also filed several counterclaims, styled as class
actions. Like Discover’s complaint, Vaden’s pleadings
invoked only state law: Vaden asserted that Discover’s
demands for finance charges, interest, and late fees vio
lated Maryland’s credit laws. See Md. Com. Law Code
Ann. §§12–506, 12–506.2 (Lexis 2005). Neither party
invoked—by notice to the other or petition to the state
court—the clause in the credit card agreement providing
for arbitration of “any claim or dispute between [Discover
and Vaden],” App. 44 (capitalization and bold typeface
omitted).2
Faced with Vaden’s counterclaims, Discover sought
federal-court aid. It petitioned the United States District
Court for the District of Maryland for an order, pursuant
to §4 of the Federal Arbitration Act (FAA or Act), 9
U. S. C. §4, compelling arbitration of Vaden’s counter
claims.3 Although those counterclaims were framed under
state law, Discover urged that they were governed entirely
by federal law, specifically, §27(a) of the Federal Deposit
——————
1 Discover apparently had no access to a federal forum for its suit
against Vaden on the basis of diversity-of-citizenship jurisdiction.
Under that head of federal-court jurisdiction, the amount in contro
versy must “excee[d] . . . $75,000.” 28 U. S. C. §1332(a).
2 Vaden’s preference for court adjudication is unsurprising. The arbi
tration clause, framed by Discover, prohibited presentation of “any
claims as a representative or member of a class.” App. 45 (capitaliza
tion omitted).
3 Section 4 reads, in relevant part:
“A party aggrieved by the alleged failure, neglect, or refusal of an
other to arbitrate under a written agreement for arbitration may
petition any United States district court which, save for such agree
ment, would have jurisdiction under title 28, in a civil action or in
admiralty of the subject matter of a suit arising out of the controversy
between the parties, for an order directing that such arbitration pro
ceed in the manner provided for in such agreement.” 9 U. S. C. §4.
4 VADEN v. DISCOVER BANK
Opinion of the Court
Insurance Act (FDIA), 12 U. S. C. §1831d(a). Section 27(a)
prescribes the interest rates state-chartered, federally
insured banks like Discover can charge, “notwithstanding
any State constitution or statute which is hereby pre
empted.” This provision, Discover maintained, was com
pletely preemptive, i.e., it superseded otherwise applicable
Maryland law, and placed Vaden’s counterclaims under
the exclusive governance of the FDIA. On that basis,
Discover asserted, the District Court had authority to
entertain the §4 petition pursuant to 28 U. S. C. §1331,
which gives federal courts jurisdiction over cases “arising
under” federal law.
The District Court granted Discover’s petition, ordered
arbitration, and stayed Vaden’s prosecution of her coun
terclaims in state court pending the outcome of arbitra
tion. App. to Pet. for Cert. 89a–90a. On Vaden’s initial
appeal, the Fourth Circuit inquired whether the District
Court had federal-question jurisdiction over Discover’s §4
petition. To make that determination, the Court of Ap
peals instructed, the District Court should “look through”
the §4 petition to the substantive controversy between the
parties. 396 F. 3d 366, 369, 373 (2005). The appellate
court then remanded the case for an express determina
tion whether that controversy presented “a properly in
voked federal question.” Id., at 373.
On remand, Vaden “concede[d] that the FDIA com
pletely preempts any state claims against a federally
insured bank.” 409 F. Supp. 2d 632, 636 (Md. 2006).
Accepting this concession, the District Court expressly
held that it had federal-question jurisdiction over Dis
cover’s §4 petition and again ordered arbitration. Id., at
634–636, 639. In this second round, the Fourth Circuit
affirmed, dividing 2 to 1. 489 F. 3d 594 (2007).
Recognizing that “a party may not create jurisdiction by
concession,” id., at 604, n. 10, the Fourth Circuit majority
conducted its own analysis of FDIA §27(a), ultimately
Cite as: 556 U. S. ____ (2009) 5
Opinion of the Court
concluding that the provision completely preempted state
law and therefore governed Vaden’s counterclaims.4 This
Court’s decision in Holmes Group, Inc. v. Vornado Air
Circulation Systems, Inc., 535 U. S. 826 (2002), the major
ity recognized, held that federal-question jurisdiction
depends on the contents of a well-pleaded complaint, and
may not be predicated on counterclaims. 489 F. 3d, at
600, n. 4. Nevertheless, the majority concluded, the com
plete preemption doctrine is paramount, “overrid[ing] such
fundamental cornerstones of federal subject-matter juris
diction as the well-pleaded complaint rule.” Ibid. (quoting
14B C. Wright, A. Miller, & E. Cooper, Federal Practice
and Procedure §3722.1, p. 511 (3d ed. 1998) (hereinafter
Wright & Miller)).5
The dissenting judge considered Holmes Group disposi
tive. As §27(a) of the FDIA formed no part of Discover’s
complaint, but came into the case only as a result of
Vaden’s responsive pleadings, the dissent reasoned,
“[t]here was no ‘properly invoked federal question’ in the
underlying state case.” 489 F. 3d, at 610.
We granted certiorari, 552 U. S. ___ (2008), in view of
the conflict among lower federal courts on whether district
courts, petitioned to order arbitration pursuant to §4 of
the FAA, may “look through” the petition and examine the
parties’ underlying dispute to determine whether federal
question jurisdiction exists over the §4 petition. Compare
Wisconsin v. Ho-Chunk Nation, 463 F. 3d 655, 659 (CA7
——————
4 Our disposition of this case makes it unnecessary to take up the
question of §27(a)’s preemptive force generally or in the particular
context of Discover’s finance charges. We therefore express no opinion
on those issues. Cf. Beneficial Nat. Bank v. Anderson, 539 U. S. 1, 9–10
(2003) (holding that the National Bank Act, 12 U. S. C. §§85, 86,
completely preempts state-law usury claims against national banks).
5 But see 489 F. 3d 594, 612 (CA4 2007) (dissenting opinion) (observ
ing that the passage from Wright & Miller referenced by the majority
“makes clear that the doctrine of complete preemption is exclusively
focused on claims in a plaintiff’s complaint”).
6 VADEN v. DISCOVER BANK
Opinion of the Court
2006) (in determining jurisdiction over a §4 petition, the
court may not “look through” the petition and focus on the
underlying dispute); Smith Barney, Inc. v. Sarver, 108
F. 3d 92, 94 (CA6 1997) (same); Westmoreland Capital
Corp. v. Findlay, 100 F. 3d 263, 267–269 (CA2 1996)
(same); and Prudential-Bache Securities, Inc. v. Fitch, 966
F. 2d 981, 986–989 (CA5 1992) (same), with Community
State Bank v. Strong, 485 F. 3d 597, 605–606 (court may
“look through” the petition and train on the underlying
dispute), vacated, reh’g en banc granted, 508 F. 3d 576(CA11 2007);6 and 396 F. 3d, at 369–370 (case below)
(same).
As this case shows, if the underlying dispute is the
proper focus of a §4 petition, a further question may arise.
The dispute brought to state court by Discover concerned
Vaden’s failure to pay over $10,000 in past-due credit card
charges. In support of that complaint, Discover invoked
no federal law. When Vaden answered and counter
claimed, however, Discover asserted that federal law,
specifically §27(a) of the FDIA, displaced the state laws on
which Vaden relied. What counts as the underlying dis
pute in a case so postured? May Discover invoke §4, not
on the basis of its own complaint, which had no federal
element, but on the basis of counterclaims asserted by
Vaden? To answer these questions, we first review rele
vant provisions of the FAA, 9 U. S. C. §1 et seq., and con
trolling tenets of federal jurisdiction.
II
In 1925, Congress enacted the FAA “[t]o overcome judi
——————
6 In Community State Bank v. Strong, 485 F. 3d 597, 605–606 (CA11
2007), the Court of Appeals approved the “look through” approach as
advanced in circuit precedent. But Judge Marcus, who authored the
court’s unanimous opinion, wrote a special concurrence, noting that,
were he writing on a clean slate, he would reject the “look through”
approach.
Cite as: 556 U. S. ____ (2009) 7
Opinion of the Court
cial resistance to arbitration,” Buckeye Check Cashing,
Inc. v. Cardegna, 546 U. S. 440, 443 (2006), and to declare
“ ‘a national policy favoring arbitration’ of claims that
parties contract to settle in that manner,” Preston v. Fer
rer, 552 U. S. ___, ___ (2008) (slip op., at 5) (quoting South
land Corp. v. Keating, 465 U. S. 1, 10 (1984)). To that end,
§2 provides that arbitration agreements in contracts “in
volving commerce” are “valid, irrevocable, and enforce
able.” 9 U. S. C. §2.7 Section 4—the section at issue
here—provides for United States district court enforce
ment of arbitration agreements. Petitions to compel arbi
tration, §4 states, may be brought before “any United
States district court which, save for such agreement,
would have jurisdiction under title 28 . . . of the subject
matter of a suit arising out of the controversy between the
parties.” See supra, at 3, n. 3.8
The “body of federal substantive law” generated by
elaboration of FAA §2 is equally binding on state and
——————
7 Section2 reads, in full:
“A written provision in any maritime transaction or a contract evi
dencing a transaction involving commerce to settle by arbitration a
controversy thereafter arising out of such contract or transaction, or the
refusal to perform the whole or any part thereof, or an agreement in
writing to submit to arbitration an existing controversy arising out of
such a contract, transaction, or refusal, shall be valid, irrevocable, and
enforceable, save upon such grounds as exist at law or in equity for the
revocation of any contract.” 9 U. S. C. §2.
8 A companion provision, §3, provides for stays of litigation pending
arbitration. It reads:
“If any suit or proceeding be brought in any of the courts of the
United States upon any issue referable to arbitration under an agree
ment in writing for such arbitration, the court in which such suit is
pending, upon being satisfied that the issue involved in such suit or
proceeding is referable to arbitration under such an agreement, shall on
application of one of the parties stay the trial of the action until such
arbitration has been had in accordance with the terms of the agree
ment, providing the applicant for the stay is not in default in proceed
ing with such arbitration.” 9 U. S. C. §3.
8 VADEN v. DISCOVER BANK
Opinion of the Court
federal courts. Southland, 465 U. S., at 12 (quoting Moses
H. Cone Memorial Hospital v. Mercury Constr. Corp., 460
U. S. 1, 25, n. 32 (1983)); accord Allied-Bruce Terminix
Cos. v. Dobson, 513 U. S. 265, 271–272 (1995). “As for
jurisdiction over controversies touching arbitration,”
however, the Act is “something of an anomaly” in the
realm of federal legislation: It “bestow[s] no federal juris
diction but rather requir[es] [for access to a federal forum]
an independent jurisdictional basis” over the parties’
dispute. Hall Street Associates, L. L. C. v. Mattel, Inc., 552
U. S. ___, ___ (2008) (slip op., at 4) (quoting Moses H.
Cone, 460 U. S., at 25, n. 32).9 Given the substantive
supremacy of the FAA, but the Act’s nonjurisdictional
cast, state courts have a prominent role to play as enforc
ers of agreements to arbitrate. See Southland, 465 U. S.,
at 15; Moses H. Cone, 460 U. S., at 25, and n. 32.
The independent jurisdictional basis Discover relies
upon in this case is 28 U. S. C. §1331, which vests in
federal district courts jurisdiction over “all civil actions
arising under the Constitution, laws, or treaties of the
United States.” Under the longstanding well-pleaded
complaint rule, however, a suit “arises under” federal law
——————
9 Chapter 2 of the FAA, not implicated here, does expressly grant
federal courts jurisdiction to hear actions seeking to enforce an agree
ment or award falling under the Convention on the Recognition and
Enforcement of Foreign Arbitral Awards. See 9 U. S. C. §203 (“An
action or proceeding falling under the Convention shall be deemed to
arise under the laws and treaties of the United States. The district
courts of the United States . . . shall have original jurisdiction over such
an action or proceeding . . . .”). FAA §205 goes further and overrides
the well-pleaded complaint rule pro tanto. 9 U. S. C. §205 (“The proce
dure for removal of causes otherwise provided by law shall apply,
except that the ground for removal provided in this section need not
appear on the face of the complaint but may be shown in the petition
for removal.”). As Vaden points out, these sections demonstrate that
“when Congress wants to expand [federal-court] jurisdiction, it knows
how to do so clearly and unequivocally.” Brief for Petitioner 38.
Cite as: 556 U. S. ____ (2009) 9
Opinion of the Court
“only when the plaintiff’s statement of his own cause of
action shows that it is based upon [federal law].” Louis
ville & Nashville R. Co. v. Mottley, 211 U. S. 149, 152
(1908). Federal jurisdiction cannot be predicated on an
actual or anticipated defense: “It is not enough that the
plaintiff alleges some anticipated defense to his cause of
action and asserts that the defense is invalidated by some
provision of [federal law].” Ibid.Nor can federal jurisdiction rest upon an actual or an
ticipated counterclaim. We so ruled, emphatically, in
Holmes Group, 535 U. S. 826. Without dissent, the Court
held in Holmes Group that a federal counterclaim, even
when compulsory, does not establish “arising under” juris
diction.10 Adhering assiduously to the well-pleaded com
plaint rule, the Court observed, inter alia, that it would
undermine the clarity and simplicity of that rule if federal
courts were obliged to consider the contents not only of the
complaint but also of responsive pleadings in determining
whether a case “arises under” federal law. Id., at 832. See
——————
10 Holmes Group, Inc. v. Vornado Air Circulation Systems, Inc., 535
U. S. 826 (2002), involved 28 U. S. C. §1295(a)(1), which vests in the
Federal Circuit exclusive jurisdiction over “an appeal from a final
decision of a district court . . . if the jurisdiction of that court was based,
in whole or in part, on [28 U. S. C. §]1338.” Section 1338(a), in turn,
confers on district courts “[exclusive] original jurisdiction of any civil
action arising under any Act of Congress relating to patents.” The
plaintiff’s complaint in Holmes Group presented a federal claim, but not
one relating to patents; the defendant counterclaimed for patent
infringement. The Court ruled that the case did not “aris[e] under” the
patent laws by virtue of the patent counterclaim, and therefore held
that the Federal Circuit lacked appellate jurisdiction under §1295(a)(1).
See 535 U. S., at 830–832.
In reaching its decision in Holmes Group, the Court first attributed to
the words “arising under” in §1338(a) the same meaning those words
have in §1331. See id., at 829–830. It then reasoned that a counter
claim asserted in a responsive pleading cannot provide the basis for
“arising under” jurisdiction consistently with the well-pleaded com
plaint rule. See id., at 830–832.
10 VADEN v. DISCOVER BANK
Opinion of the Court
also id., at 830 (“[T]he well-pleaded complaint rule, prop
erly understood, [does not] allo[w] a counterclaim to serve
as the basis for a district court’s ‘arising under’ jurisdic
tion.”); Franchise Tax Bd. of Cal. v. Construction Laborers
Vacation Trust for Southern Cal., 463 U. S. 1, 10–11, and
n. 9 (1983) (“The well-pleaded complaint rule applies to
the original jurisdiction of the district courts as well as to
their removal jurisdiction.”).11
A complaint purporting to rest on state law, we have
recognized, can be recharacterized as one “arising under”
federal law if the law governing the complaint is exclu
sively federal. See Beneficial Nat. Bank v. Anderson, 539
U. S. 1, 8 (2003). Under this so-called “complete preemp
tion doctrine,” a plaintiff’s “state cause of action [may be
recast] as a federal claim for relief, making [its] removal
[by the defendant] proper on the basis of federal question
jurisdiction.” 14B Wright & Miller §3722.1, p. 511.12 A
state-law-based counterclaim, however, even if similarly
susceptible to recharacterization, would remain nonre
——————
11 The Court noted in Franchise Tax Bd. of Cal. v. Construction La
borers Vacation Trust for Southern Cal., 463 U. S. 1, 10–11, n. 9 (1983),
and in Holmes Group, 535 U. S., at 831, that commentators have
repeatedly suggested Judicial Code revisions under which responsive
pleadings that may be dispositive would count in determining whether
a case “arises under” federal law. See American Law Institute, Study
of the Division of Jurisdiction Between State and Federal Courts §1312,
pp. 188–194 (1969) (discussed in 14B C. Wright, A. Miller, & E. Cooper,
Federal Practice and Procedure §3722, pp. 505–507 (3d ed. 1998)
(hereinafter Wright & Miller)); cf. Wechsler, Federal Jurisdiction and
the Revision of the Judicial Code, 13 Law & Contemp. Prob. 216, 233–
234 (1948). Congress, however, has not responded to these suggestions.
12 Recharacterization of an asserted state-law claim as in fact a claim
arising exclusively under federal law, and therefore removable on the
defendant’s petition, of course does not mean that the claim cannot
remain in state court. There is nothing inappropriate or exceptional,
Discover acknowledges, about a state court’s entertaining, and applying
federal law to, completely preempted claims or counterclaims. See Tr.
of Oral Arg. 35.
Cite as: 556 U. S. ____ (2009) 11
Opinion of the Court
movable. Under our precedent construing §1331, as just
explained, counterclaims, even if they rely exclusively on
federal substantive law, do not qualify a case for federal
court cognizance.
III
Attending to the language of the FAA and the above
described jurisdictional tenets, we approve the “look
through” approach to this extent: A federal court may
“look through” a §4 petition to determine whether it is
predicated on an action that “arises under” federal law; in
keeping with the well-pleaded complaint rule as amplified
in Holmes Group, however, a federal court may not enter
tain a §4 petition based on the contents, actual or hypo
thetical, of a counterclaim.
A
The text of §4 drives our conclusion that a federal court
should determine its jurisdiction by “looking through” a §4
petition to the parties’ underlying substantive controversy.
We reiterate §4’s relevant instruction: When one party
seeks arbitration pursuant to a written agreement and the
other resists, the proponent of arbitration may petition for
an order compelling arbitration in
“any United States district court which, save for [the
arbitration] agreement, would have jurisdiction under
title 28, in a civil action or in admiralty of the subject
matter of a suit arising out of the controversy between
the parties.” 9 U. S. C. §4.
The phrase “save for [the arbitration] agreement” indi
cates that the district court should assume the absence of
the arbitration agreement and determine whether it
“would have jurisdiction under title 28” without it. See
396 F. 3d, at 369, 372 (case below). Jurisdiction over
what? The text of §4 refers us to “the controversy between
the parties.” That phrase, the Fourth Circuit said, and we
12 VADEN v. DISCOVER BANK
Opinion of the Court
agree, is most straightforwardly read to mean the “sub
stantive conflict between the parties.” Id., at 370. See
also Moses H. Cone, 460 U. S., at 25, n. 32 (noting in dicta
that, to entertain a §4 petition, a federal court must have
jurisdiction over the “underlying dispute”).13
The majority of Courts of Appeals to address the ques
tion, we acknowledge, have rejected the “look through”
approach entirely, as Vaden asks us to do here. See supra,
at 5–6. The relevant “controversy between the parties,”
Vaden insists, is simply and only the parties’ discrete
dispute over the arbitrability of their claims. She relies,
quite reasonably, on the fact that a §4 petition to compel
arbitration seeks no adjudication on the merits of the
underlying controversy. Indeed, its very purpose is to
have an arbitrator, rather than a court, resolve the merits.
A §4 petition, Vaden observes, is essentially a plea for
specific performance of an agreement to arbitrate, and it
thus presents principally contractual questions: Did the
parties validly agree to arbitrate? What issues does their
agreement encompass? Has one party dishonored the
agreement?
Vaden’s argument, though reasonable, is difficult to
square with the statutory language. Section 4 directs
courts to determine whether they would have jurisdiction
“save for [the arbitration] agreement.” How, then, can a
dispute over the existence or applicability of an arbitration
agreement be the controversy that counts?
——————
13 The parties’ underlying dispute may or may not be the subject of
pending litigation. This explains §4’s use of the conditional “would”
and the indefinite “a suit.” A party often files a §4 petition to compel
arbitration precisely because it does not want to bring suit and litigate
in court. Sometimes, however, a §4 petition is filed after litigation has
commenced. The party seeking to compel arbitration in such cases is
typically the defendant, who claims to be aggrieved by the plaintiff’s
attempt to litigate rather than arbitrate. This case involves the rela
tively unusual situation in which the party that initiated litigation of
the underlying dispute is also the party seeking to compel arbitration.
Cite as: 556 U. S. ____ (2009) 13
Opinion of the Court
The “save for” clause, courts espousing the view em
braced by Vaden respond, means only that the “antiquated
and arcane” ouster notion no longer holds sway. Drexel
Burnham Lambert, Inc. v. Valenzuela Bock, 696 F. Supp.
957, 961 (SDNY 1988). Adherents to this “ouster” expla
nation of §4’s language recall that courts traditionally
viewed arbitration clauses as unworthy attempts to “oust”
them of jurisdiction; accordingly, to guard against en
croachment on their domain, they refused to order specific
enforcement of agreements to arbitrate. See H. R. Rep.
No. 96, 68th Cong., 1st Sess., 1–2 (1924) (discussed in
Dean Witter Reynolds Inc. v. Byrd, 470 U. S. 213, 219–220,
and n. 6 (1985)). The “save for” clause, as comprehended
by proponents of the “ouster” explanation, was designed to
ensure that courts would no longer consider themselves
ousted of jurisdiction and would therefore specifically
enforce arbitration agreements. See, e.g., Westmoreland,
100 F. 3d, at 267–268, and n. 6 (adopting the “ouster”
interpretation advanced in Drexel Burnham Lambert, 696
F. Supp., at 961–963); Strong, 485 F. 3d, at 631 (Marcus,
J., specially concurring) (reading §4’s “save for” clause “as
instructing the court to ‘set aside’ not the arbitration
agreement . . . , but merely the previous judicial hostility
to arbitration agreements”).
We are not persuaded that the “ouster” explanation of
§4’s “save for” clause carries the day. To the extent that
the ancient “ouster” doctrine continued to impede specific
enforcement of arbitration agreements, §2 of the FAA, the
Act’s “centerpiece provision,” Mitsubishi Motors Corp. v.
Soler Chrysler-Plymouth, Inc., 473 U. S. 614, 625 (1985),
directly attended to the problem. Covered agreements to
arbitrate, §2 declares, are “valid, irrevocable, and enforce
able, save upon such grounds as exist at law or in equity
for the revocation of any contract.” Having commanded
that an arbitration agreement is enforceable just as any
other contract, Congress had no cause to repeat the point.
14 VADEN v. DISCOVER BANK
Opinion of the Court
See 1 I. MacNeil, R. Speidel, & T. Stipanowich, Federal
Arbitration Law §9.2.3.3, p. 9:18 (1995) (hereinafter
MacNeil) (“Th[e] effort to connect the ‘save for’ language to
the ancient problem of ‘ouster of jurisdiction’ is imagina
tive, but utterly unfounded and historically inaccurate.”
(footnote omitted)).14
In addition to its textual implausibility, the approach
Vaden advocates has curious practical consequences. It
would permit a federal court to entertain a §4 petition only
when a federal-question suit is already before the court,
when the parties satisfy the requirements for diversity-of
citizenship jurisdiction, or when the dispute over arbitra
bility involves a maritime contract. See, e.g., Westmore
land, 100 F. 3d, at 268–269; 1 MacNeil §9.2.3.1, pp. 9:12–
9:13 (when a federal-question suit has been filed in or
removed to federal court, the court “may order arbitration
under FAA §4”).15 Vaden’s approach would not accommo
date a §4 petitioner who could file a federal-question suit
in (or remove such a suit to) federal court, but who has not
done so. In contrast, when the parties’ underlying dispute
arises under federal law, the “look through” approach
permits a §4 petitioner to ask a federal court to compel
arbitration without first taking the formal step of initiat
ing or removing a federal-question suit—that is, without
seeking federal adjudication of the very questions it wants
to arbitrate rather than litigate. See 1 id., §9.2.3.3, p. 9:21
——————
14 Because “the ouster problem was just as great under state law as it
was under federal,” the absence of “save for” language in contempora
neous state arbitration acts bolsters our conclusion that §4 was not
devised to dislodge the common-law ouster doctrine. 1 I. MacNeil, R.
Speidel, & T. Stipanowich, Federal Arbitration Law §9.2.3.3, p. 9:18
(1995). See also 396 F. 3d 366, 369–370, n. 2 (CA4 2005) (case below).
15 Specific jurisdiction-granting provisions may also authorize a fed
eral court to entertain a petition to compel arbitration. See, e.g., 9
U. S. C. §§203, 205 (providing for federal-court jurisdiction over arbitra
tion agreements covered by the Convention on the Recognition and
Enforcement of Foreign Arbitral Awards).
Cite as: 556 U. S. ____ (2009) 15
Opinion of the Court
(explaining that the approach Vaden advocates “creates a
totally artificial distinction” based on whether a dispute is
subject to pending federal litigation).
B
Having determined that a district court should “look
through” a §4 petition, we now consider whether the court
“would have [federal-question] jurisdiction” over “a suit
arising out of the controversy” between Discover and
Vaden. 9 U. S. C. §4. As explained above, §4 of the FAA
does not enlarge federal-court jurisdiction; rather, it con
fines federal courts to the jurisdiction they would have
“save for [the arbitration] agreement.” See supra, at 7–8.
Mindful of that limitation, we read §4 to convey that a
party seeking to compel arbitration may gain a federal
court’s assistance only if, “save for” the agreement, the
entire, actual “controversy between the parties,” as they
have framed it, could be litigated in federal court. We
conclude that the parties’ actual controversy, here precipi
tated by Discover’s state-court suit for the balance due on
Vaden’s account, is not amenable to federal-court adjudi
cation. Consequently, the §4 petition Discover filed in the
United States District Court for the District of Maryland
must be dismissed.
As the Fourth Circuit initially stated, the “controversy
between the parties” arose from the “alleged debt” Vaden
owed to Discover. 396 F. 3d, at 370. Discover’s complaint
in Maryland state court plainly did not “arise under”
federal law, nor did it qualify under any other head of
federal-court jurisdiction. See supra, at 3, and n. 1.
In holding that Discover properly invoked federal-court
jurisdiction, the Fourth Circuit looked beyond Discover’s
complaint and homed in on Vaden’s state-law-based de
fense and counterclaims. Those responsive pleadings,
Discover alleged, and the Fourth Circuit determined, were
completely preempted by the FDIA. See supra, at 3–4.
16 VADEN v. DISCOVER BANK
Opinion of the Court
The Fourth Circuit, however, misapprehended our deci
sion in Holmes Group. Under the well-pleaded complaint
rule, a completely preempted counterclaim remains a
counterclaim and thus does not provide a key capable of
opening a federal court’s door. See supra, at 8–11. See
also Taylor v. Anderson, 234 U. S. 74, 75–76 (1914)
(“[W]hether a case is one arising under [federal law] . . .
must be determined from what necessarily appears in the
plaintiff’s statement of his own claim . . . , unaided by
anything alleged in anticipation o[r] avoidance of defenses
which it is thought the defendant may interpose.”).
Neither Discover nor THE CHIEF JUSTICE, concurring in
part and dissenting in part (hereinafter dissent), defends
the Fourth Circuit’s reasoning. Instead, the dissent in
sists that a federal court “would have” jurisdiction over
“the controversy Discover seeks to arbitrate”—namely,
“whether ‘Discover Bank charged illegal finance charges,
interest and late fees.’ ” Post, at 1 (quoting App. 30). The
dissent hypothesizes two federal suits that might arise
from this purported controversy: “an action by Vaden
asserting that the charges violate the FDIA, or one by
Discover seeking a declaratory judgment that they do not.”
Post, at 2.
There is a fundamental flaw in the dissent’s analysis: In
lieu of focusing on the whole controversy as framed by the
parties, the dissent hypothesizes discrete controversies of
its own design. As the parties’ state-court filings reflect,
the originating controversy here concerns Vaden’s alleged
debt to Discover. Vaden’s responsive counterclaims chal
lenging the legality of Discover’s charges are a discrete
aspect of the whole controversy Discover and Vaden
brought to state court. Whether one might imagine a
federal-question suit involving the parties’ disagreement
over Discover’s charges is beside the point. The relevant
question is whether the whole controversy between the
parties—not just a piece broken off from that contro
Cite as: 556 U. S. ____ (2009) 17
Opinion of the Court
versy—is one over which the federal courts would have
jurisdiction.
The dissent would have us treat a §4 petitioner’s state
ment of the issues to be arbitrated as the relevant contro
versy even when that statement does not convey the full
flavor of the parties’ entire dispute. Artful dodges by a §4
petitioner should not divert us from recognizing the actual
dimensions of that controversy. The text of §4 instructs
federal courts to determine whether they would have
jurisdiction over “a suit arising out of the controversy
between the parties”; it does not give §4 petitioners license
to recharacterize an existing controversy, or manufacture
a new controversy, in an effort to obtain a federal court’s
aid in compelling arbitration.16
Viewed contextually and straightforwardly, it is hardly
“fortuit[ous]” that the controversy in this case took the
shape it did. Cf. post, at 2. Seeking to collect a debt,
Discover filed an entirely state-law-grounded complaint in
state court, and Vaden chose to file responsive counter
claims. Perhaps events could have unfolded differently,
——————
16 Noting that the FAA sometimes uses “controversy” to refer to the
dispute to be arbitrated, the dissent insists that it must have the same
meaning in §4. Cf. post, at 2–3. But §4 does not ask a district court to
determine whether it would have jurisdiction over “the controversy the
§4 petitioner seeks to arbitrate”; it asks whether the court would have
jurisdiction over “the controversy between the parties.” Here, the issue
Discover seeks to arbitrate is undeniably only a fraction of the contro
versy between the parties. We decline to rewrite the statute to ignore
this reality.
Moreover, our reading of §4 fully accords with the statute’s subjunc
tive construction (“would have jurisdiction”) and its reference to “a
suit.” Cf. post, at 5. Section 4, we recognize, enables a party to seek an
order compelling arbitration even when the parties’ controversy is not
the subject of pending litigation. See supra, at 12, n. 13, 14–15.
Whether or not the controversy between the parties is embodied in an
existing suit, the relevant question remains the same: Would a federal
court have jurisdiction over an action arising out of that full-bodied
controversy?
18 VADEN v. DISCOVER BANK
Opinion of the Court
but §4 does not invite federal courts to dream up counter
factuals when actual litigation has defined the parties’
controversy.17
As the dissent would have it, parties could commandeer
a federal court to slice off responsive pleadings for arbitra
tion while leaving the remainder of the parties’ contro
versy pending in state court. That seems a bizarre way to
proceed. In this case, Vaden’s counterclaims would be
sent to arbitration while the complaint to which they are
addressed—Discover’s state-law-grounded debt-collection
action—would remain pending in a Maryland court.
When the controversy between the parties is not one over
which a federal court would have jurisdiction, it makes
scant sense to allow one of the parties to enlist a federal
court to disturb the state-court proceedings by carving out
issues for separate resolution.18
——————
17Our approach, the dissent asserts, would produce “inconsistent
results” based “upon the happenstance of how state-court litigation has
unfolded.” Post, at 5, 6. Of course, a party’s ability to gain adjudication
of a federal question in federal court often depends on how that ques
tion happens to have been presented, and the dissent’s argument is
little more than a veiled criticism of Holmes Group and the well
pleaded complaint rule. When a litigant files a state-law claim in state
court, and her opponent parries with a federal counterclaim, the action
is not removable to federal court, even though it would have been
removable had the order of filings been reversed. See Holmes Group,
535 U. S., at 831–832.
True, the outcome in this case may well have been different had
Vaden initiated an FDIA claim about the legality of Discover’s charges.
Because that controversy likely would have been amenable to adjudica
tion in a federal forum, Discover could have asked a federal court to
send the parties to arbitration. But that is not what occurred here.
Vaden did not invoke the FDIA. Indeed, she framed her counterclaims
under state law and clearly preferred the Maryland forum. The dis
sent’s hypothesizing about the case that might have been brought does
not provide a basis for federal-court jurisdiction.
18 The dissent observes, post, at 4, that our rule might enable a party
to request a federal court’s aid in compelling arbitration of a state-law
counterclaim that might otherwise be adjudicated in state court. But if
Cite as: 556 U. S. ____ (2009) 19
Opinion of the Court
Furthermore, the presence of a threshold question
whether a counterclaim alleged to be based on state law is
totally preempted by federal law may complicate the
dissent’s §4 inquiry. This case is illustrative. The dissent
relates that Vaden eventually conceded that FDIA §27(a),
not Maryland law, governs the charges and fees Discover
may impose. Post, at 1–2. But because the issue is juris
dictional, Vaden’s concession is not determinative. See
supra, at 4–5, and n. 4. The dissent simply glides by the
preemption issue, devoting no attention to it, although
this Court has not yet resolved the matter.
In sum, §4 of the FAA instructs district courts asked to
compel arbitration to inquire whether the court would
have jurisdiction, “save for [the arbitration] agreement,”
over “a suit arising out of the controversy between the
parties.” We read that prescription in light of the well
pleaded complaint rule and the corollary rule that federal
jurisdiction cannot be invoked on the basis of a defense or
counterclaim. Parties may not circumvent those rules by
asking a federal court to order arbitration of the portion of
a controversy that implicates federal law when the court
would not have federal-question jurisdiction over the
controversy as a whole. It does not suffice to show that a
federal question lurks somewhere inside the parties’ con
troversy, or that a defense or counterclaim would arise
under federal law. Because the controversy between
Discover and Vaden, properly perceived, is not one qualify
ing for federal-court adjudication, §4 of the FAA does not
empower a federal court to order arbitration of that con
troversy, in whole or in part.19
——————
a federal court would have jurisdiction over the parties’ whole contro
versy, we see nothing anomalous about the court’s ordering arbitration
of a state-law claim constituting part of that controversy. Federal
courts routinely exercise supplemental jurisdiction over state-law
claims. See 28 U. S. C. §1367.
19 This Court’s declaratory judgment jurisprudence in no way under
20 VADEN v. DISCOVER BANK
Opinion of the Court
Discover, we note, is not left without recourse. Under
the FAA, state courts as well as federal courts are obliged
to honor and enforce agreements to arbitrate. Southland,
465 U. S., at 12; Moses H. Cone, 460 U. S., at 25, 26, n. 34.
See also supra, at 7–8. Discover may therefore petition a
Maryland court for aid in enforcing the arbitration clause
of its contracts with Maryland cardholders.
True, Maryland’s high court has held that §§3 and 4 of
the FAA prescribe federal-court procedures and, therefore,
do not bind the state courts.20 But Discover scarcely lacks
an available state remedy. Section 2 of the FAA, which
does bind the state courts, renders agreements to arbitrate
“valid, irrevocable, and enforceable.” This provision “car
ries with it duties [to credit and enforce arbitration
agreements] indistinguishable from those imposed on
federal courts by FAA §§3 and 4.” 1 MacNeil §10.8.1,
p. 10:77. Notably, Maryland, like many other States,
provides a statutory remedy nearly identical to §4. See
Md. Cts. & Jud. Proc. Code Ann. §3–207 (Lexis 2006) (“If a
party to an arbitration agreement . . . refuses to arbitrate,
the other party may file a petition with a court to order
——————
cuts our analysis. Cf. post, at 2, 7. Discover, the dissent implies, could
have brought suit in federal court seeking a declaration that its charges
conform to federal law. Again, the dissent’s position rests on its mis
conception of “the controversy between the parties.” Like §4 itself, the
Declaratory Judgment Act does not enlarge the jurisdiction of the
federal courts; it is “procedural only.” Aetna Life Ins. Co. v. Haworth,
300 U. S. 227, 240 (1937). Thus, even in a declaratory judgment action,
a federal court could not entertain Discover’s state-law debt-collection
claim. Cf. 10B Wright & Miller §2758, pp. 519–521 (“The Declaratory
Judgment Act was not intended to enable a party to obtain a change of
tribunal from a state to federal court, and it is not the function of the
federal declaratory action merely to anticipate a defense that otherwise
could be presented in a state action.” (footnote omitted)).
20This Court has not decided whether §§3 and 4 apply to proceedings
in state courts, see Volt Information Sciences, Inc. v. Board of Trustees
of Leland Stanford Junior Univ., 489 U. S. 468, 477, n. 6 (1989), and we
do not do so here.
Cite as: 556 U. S. ____ (2009) 21
Opinion of the Court
arbitration. . . . If the court determines that the agree
ment exists, it shall order arbitration. Otherwise it shall
deny the petition.”). See also Walther v. Sovereign Bank,
386 Md. 412, 424, 872 A. 2d 735, 742 (2005) (“The Mary
land Arbitration Act has been called the ‘State analogue
. . . to the Federal Arbitration Act.’ The same policy favor
ing enforcement of arbitration agreements is present in
both our own and the federal acts.” (internal quotation
marks and citation omitted)). Even before it filed its debt
recovery action in a Maryland state court, Discover could
have sought from that court an order compelling arbitra
tion of any agreement-related dispute between itself and
cardholder Vaden. At no time was federal-court interven
tion needed to place the controversy between the parties
before an arbitrator.
* * *
For the reasons stated, the District Court lacked juris
diction to entertain Discover’s §4 petition to compel arbi
tration. The judgment of the Court of Appeals affirming
the District Court’s order is therefore reversed, and the
case is remanded for further proceedings consistent with
this opinion.
It is so ordered.
Cite as: 556 U. S. ____ (2009) 1
Opinion of ROBERTS, C. J.
SUPREME COURT OF THE UNITED STATES
_________________
No. 07–773
_________________
BETTY E. VADEN, PETITIONER v. DISCOVER
BANK ET AL.
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE FOURTH CIRCUIT
[March 9, 2009]
CHIEF JUSTICE ROBERTS, with whom JUSTICE STEVENS,
JUSTICE BREYER, and JUSTICE ALITO join, concurring in
part and dissenting in part.
I agree with the Court that a federal court asked to
compel arbitration pursuant to §4 of the Federal Arbitra
tion Act should “look through” the dispute over arbitrabil
ity in determining whether it has jurisdiction to grant the
requested relief. But look through to what? The statute
provides a clear and sensible answer: The court may con
sider the §4 petition if the court “would have” jurisdiction
over “the subject matter of a suit arising out of the contro
versy between the parties.” 9 U. S. C. §4.
The §4 petition in this case explains that the contro
versy Discover seeks to arbitrate is whether “Discover
Bank charged illegal finance charges, interest and late
fees.” App. 30. Discover contends in its petition that the
resolution of this dispute is controlled by federal law—
specifically §27(a) of the Federal Deposit Insurance Act
(FDIA), 12 U. S. C. §1831d(a) (setting forth the interest
rates a state-chartered, federally insured bank may
charge “notwithstanding any State constitution or stat
ute which is hereby preempted”). Vaden agrees that the
legality of Discover’s charges and fees is governed by
2 VADEN v. DISCOVER BANK
Opinion of ROBERTS, C. J.
the FDIA.* A federal court therefore “would have juris
diction . . . of the subject matter of a suit arising out of
the controversy” Discover seeks to arbitrate. That suit
could be an action by Vaden asserting that the charges
violate the FDIA, or one by Discover seeking a declara
tory judgment that they do not.
The majority is diverted off this straightforward path by
the fortuity that a complaint happens to have been filed in
this case. Instead of looking to the controversy the §4
petitioner seeks to arbitrate, the majority focuses on the
controversy underlying that complaint, and asks whether
“the whole controversy,” as reflected in “the parties’ state
court filings,” arises under federal law. Ante, at 16 (em
phasis added). Because that litigation was commenced as
a state-law debt-collection claim, the majority concludes
there is no §4 jurisdiction.
This approach is contrary to the language of §4, and
sharply restricts the ability of federal courts to enforce
agreements to arbitrate. The “controversy” to which §4
refers is the dispute alleged to be subject to arbitration.
The §4 petitioner must set forth the nature of that dis
pute—the one he seeks to arbitrate—in the §4 petition
seeking an order to compel arbitration. Section 4 requires
that the petitioner be “aggrieved” by the other party’s
“failure, neglect, or refusal . . . to arbitrate under a written
agreement for arbitration”; that language guides the
district court to the specific controversy the other party is
unwilling to arbitrate.
That is clear from the FAA’s repeated and consistent
——————
* Vaden has conceded that the FDIA completely pre-empts her state
law counterclaims. See 489 F. 3d 594, 604, n. 10 (CA4 2007). What is
significant about that concession is not Vaden’s agreement on the
jurisdictional question of complete pre-emption (which we need not and
do not address), cf. ante, at 19, but rather her agreement that federal
law—the FDIA—governs her allegation that Discover’s charges and
fees are illegal.
Cite as: 556 U. S. ____ (2009) 3
Opinion of ROBERTS, C. J.
use of the term “controversy” to mean the specific dispute
asserted to be subject to arbitration, not to some broader,
“full flavor[ed]” or “full-bodied” notion of the disagreement
between the parties. Ante, at 17, and n. 16. In §2, for
example, the “controversy” is the one “to [be] settle[d] by
arbitration” and the one “to [be] submit[ted] to
arbitration.” 9 U. S. C. §2. In §10(a)(3), it is a ground for
vacating an arbitration award that the arbitrator refused
to hear evidence “pertinent and material to the
controversy”—obviously the “controversy” subject to
arbitration, or the arbitrator’s refusal to consider the
evidence would hardly be objectionable. In §11(c), an
award may be modified if “imperfect in matter of form not
affecting the merits of the controversy”—again, necessar
ily the controversy submitted to arbitration, and therefore
the subject of the award.
There is no reason to suppose “controversy” meant the
controversy subject to arbitration everywhere else in the
FAA, but something quite different in §4. The issue is
whether there is jurisdiction to compel arbitration to
resolve a controversy; why would the pertinent contro
versy for assessing jurisdiction be anything other than the
same one asserted to be subject to arbitration?
The majority looks instead to the controversy the state
court litigation seeks to resolve. This produces the odd
result of defining “controversy” more broadly than the §4
petition itself. Discover’s petition does not seek to
arbitrate its state-law debt-collection claims, but rather
Vaden’s allegation that the fees Discover has been
charging her (and other members of her proposed class)
violate the FDIA. See App. 30. The majority does not
appear to question that there would be federal jurisdiction
over a suit arising out of the subject matter of that
dispute. The majority finds no jurisdiction here, however,
because “a federal court could not entertain Discover’s
state-law debt-collection claim.” Ante, at 20, n. 19. There
4 VADEN v. DISCOVER BANK
Opinion of ROBERTS, C. J.
is no jurisdiction to compel arbitration of a plainly federal
controversy—the FDIA dispute—because there is no juris
diction to compel arbitration of the debt-collection dispute.
But why Discover should have to demonstrate federal
jurisdiction over a state-court claim it does not seek to
arbitrate is a mystery. Cf. Moses H. Cone Memorial Hos
pital v. Mercury Constr. Corp., 460 U. S. 1, 19–21 (1983)
(affirming federal-court jurisdiction over a §4 petition
seeking to arbitrate only one of two disputes pending in
state-court litigation); Dean Witter Reynolds Inc. v. Byrd,
470 U. S. 213, 218–221 (1985) (when litigation involves
multiple claims, only some of which are covered by an
arbitration agreement, district court must compel arbitra
tion of the covered claims if so requested).
The majority’s approach will allow federal jurisdiction to
compel arbitration of entirely state-law claims. Under
that approach the “controversy” is not the one the §4
petitioner seeks to arbitrate, but a broader one encom
passing the “whole controversy” between the parties.
Ante, at 16. If that broader dispute involves both fed
eral and state-law claims, and the “originating” dispute
is federal, ibid., a party could seek arbitration of just
the state-law claims. The “controversy” under the ma
jority’s view would qualify as federal, giving rise to §4
jurisdiction to compel arbitration of a purely state-law
claim.
Take this case as an example. If Vaden had filed her
FDIA claim first, and Discover had responded with a
state-law debt-collection counterclaim, that suit is one
that “could be litigated in federal court.” Ante, at 15. As a
result, the majority’s approach would seem to permit
Vaden to file a §4 petition to compel arbitration of the
entirely state-law-based debt-collection dispute, because
that dispute would be part and parcel of the “full fla
vor[ed],” “originating” FDIA controversy. Ante, at 16, 17.
Defining the controversy as the dispute the §4 petitioner
Cite as: 556 U. S. ____ (2009) 5
Opinion of ROBERTS, C. J.
seeks to arbitrate eliminates this problem by ensuring
that the actual dispute subject to arbitration is federal.
The majority’s conclusion that this controversy “is not
one qualifying for federal-court adjudication,” ante, at 19,
stems from its mistaken focus on the existing litigation.
Rather than ask whether a court “would have” jurisdiction
over the “subject matter” of “a” suit arising out of the
“controversy,” the majority asks only whether the court
does have jurisdiction over the subject matter of a par
ticular complaint. But §4 does not speak of actual juris
diction over pending suits; it speaks subjunctively of
prospective jurisdiction over “the subject matter of a suit
arising out of the controversy between the parties.” 9
U. S. C. §4. The fact that Vaden has chosen to package
the FDIA controversy in counterclaims in pending state
court litigation in no way means that a district court
“would [not] have” jurisdiction over the “subject matter”
of “a suit” arising out of the FDIA controversy. A big part
of arbitration is avoiding the procedural niceties of for
mal litigation; it would be odd to have the authority of a
court to compel arbitration hinge on just such niceties in
a pending case.
By focusing on the sequence in which state-court litiga
tion has unfolded, the majority crafts a rule that pro
duces inconsistent results. Because Discover’s debt
collection claim was filed before Vaden’s counterclaims,
the majority treats the debt-collection dispute as the
“originating controversy.” Ante, at 16. But nothing
would have prevented the same disagreements between
the parties from producing a different sequence of events.
Vaden could have filed a complaint raising her FDIA
claims before Discover sought to collect on any amounts
Vaden owes. Because the “originating controversy” in
that complaint would be whether Discover has charged
fees illegal under federal law, in that situation Discover
presumably could bring a §4 petition to compel arbitration
6 VADEN v. DISCOVER BANK
Opinion of ROBERTS, C. J.
of the FDIA dispute. The majority’s rule thus makes §4
jurisdiction over the same controversy entirely dependent
upon the happenstance of how state-court litigation has
unfolded. Nothing in §4 suggests such a result.
The majority glosses over another problem inherent in
its approach: In many if not most cases under §4, no com
plaint will have been filed. See Hartford Financial Sys
tems, Inc. v. Florida Software Servs., Inc., 712 F. 2d 724,
728 (CA1 1983) (Breyer, J.) (“Normally, [§4] motions are
brought in independent proceedings”). What to “look
through” to then? The majority instructs courts to look to
the “full-bodied controversy.” Ante, at 17, n. 16. But as
this case illustrates, that would lead to a different result
had the state-court complaint not been filed. Discover
does not seek to arbitrate whether an outstanding debt
exists; indeed, Discover’s §4 petition does not even allege
any dispute on that point. See App. 28–41. A district
court would therefore not understand the §4 “controversy”
to include the debt-collection claim in the absence of the
state-court suit. Under the majority’s rule, the FDIA
dispute would be treated as a “controversy” qualifying
under §4 before the state suit and counterclaims had been
filed, but not after.
The far more concrete and administrable approach
would be to apply the same rule in all instances: Look to
the controversy the §4 petitioner seeks to arbitrate—as set
forth in the §4 petition—and assess whether a federal
court would have jurisdiction over the subject matter of a
suit arising out of that controversy. The controversy the
moving party seeks to arbitrate and the other party will
not would be the same controversy used to assess jurisdic
tion to compel arbitration.
The majority objects that this would allow a court to
“hypothesiz[e] discrete controversies of its own design,”
ante, at 16, in an apparent effort to find federal
jurisdiction where there is none. Not so. A district court
Cite as: 556 U. S. ____ (2009) 7
Opinion of ROBERTS, C. J.
entertaining a §4 petition is required to determine what “a
suit” arising out of the allegedly arbitrable controversy
would look like. There is no helping that, given the stat
ute’s subjunctive language. But that does not mean the
inquiry is the free-form one the majority posits.
To the contrary, a district court must look to the specific
controversy—the concrete dispute that one party has
“fail[ed], neglect[ed], or refus[ed]” to arbitrate—and de
termine whether that controversy would give rise to a suit
under federal law. District courts do that sort of thing
often enough; the exercise is closely analogous to the
jurisdictional analysis in a typical declaratory judgment
action. See Franchise Tax Bd. of Cal. v. Construction
Laborers Vacation Trust for Southern Cal., 463 U. S. 1, 19
(1983) (jurisdiction over a declaratory judgment action
exists when, “if the declaratory judgment defendant
brought a coercive action to enforce its rights, that suit
would necessarily present a federal question” (emphasis
added)). Looking to the specific controversy outlined in
Discover’s §4 petition (whether its fees violate the FDIA),
it hardly requires “dream[ing]” to conceive of a lawsuit in
which Vaden would claim the FDIA has been violated and
Discover would claim it has not. Ante, at 18.
Nor would respondents’ approach allow a §4 petitioner
to simply “recharacterize” or “manufacture” a controversy
to create federal jurisdiction. Ante, at 17. All of the
established rules of federal jurisdiction are fully applicable
in scrutinizing whether a federal court would have juris
diction over a suit arising out of the parties’ underlying
controversy.
For example, a federal question must be presented by
the specific controversy the §4 petitioner seeks to arbi
trate, not by some hypothetical federal issue “lurking in
the background.” Gully v. First Nat. Bank in Meridian,
299 U. S. 109, 117 (1936). A district court could not com
pel arbitration of a state-law dispute by pointing to a
8 VADEN v. DISCOVER BANK
Opinion of ROBERTS, C. J.
potential federal defense that the §4 petitioner is not
seeking to arbitrate, because the “claim itself must pre
sent a federal question” to arise under federal law. Skelly
Oil Co. v. Phillips Petroleum Co., 339 U. S. 667, 672
(1950). Nor could a district court compel arbitration of a
dispute that, though not federal in character, could lead to
the filing of a federal counterclaim, for “a counterclaim . . .
cannot serve as the basis for [federal] jurisdiction” of the
state-law dispute itself. Holmes Group, Inc. v. Vornado
Air Circulation Systems, Inc., 535 U. S. 826, 831 (2002).
Accordingly, petitioners may no more smuggle state-law
claims into federal court through §4 than they can through
declaratory judgment actions, or any other federal cause of
action. To the extent §4 brings some issues into federal
court in a particular case that may not be brought in
through other procedural mechanisms, it does so by
“enlarg[ing] the range of remedies available in the federal
courts[,] . . . not extend[ing] their jurisdiction.” Skelly Oil,
supra, at 671.
That is why the majority’s recital of the basic rules of
federal-court jurisdiction in Part II of its opinion is beside
the point: No one disputes what those rules are, and no
one disputes that they must be followed under §4 in
deciding whether a federal court “would have jurisdiction
. . . of the subject matter of a suit arising out of the
controversy between the parties.” The issue is instead
what suit should be scrutinized for compliance with those
rules. In defining “controversy” by reference to existing
litigation, the majority artificially limits the reach of §4 to
the particular suit filed. The correct approach is to accord
§4 the scope mandated by its language and look to “a suit,”
arising out of the “subject matter” of the “controversy” the
§4 petitioner seeks to arbitrate, and determine whether a
federal court would have jurisdiction over such a suit.
The majority concludes by noting that state courts are
obliged to honor and enforce agreements to arbitrate.
Cite as: 556 U. S. ____ (2009) 9
Opinion of ROBERTS, C. J.
Ante, at 20. The question here, however, is one of remedy.
It is a common feature of our federal system that States
often provide remedies similar to those under federal law
for the same wrongs. We do not, however, narrowly con
strue the federal remedies—say federal antitrust or civil
rights remedies—because state law provides remedies in
those areas as well. Cf. Monroe v. Pape, 365 U. S. 167, 183
(1961) (“It is no answer that the State has a law which if
enforced would give relief”).
* * *
Discover and Vaden have agreed to arbitrate any
dispute arising out of Vaden’s account with Discover.
Vaden’s allegations against Discover have given rise to
such a dispute. Discover seeks to arbitrate that contro
versy, but Vaden refuses to do so. Resolution of the
controversy is governed by federal law, specifically the
FDIA. There is no dispute about that. In the absence of
the arbitration agreement, a federal court “would have
jurisdiction . . . of the subject matter of a suit arising out
of the controversy between the parties,” 9 U. S. C. §4,
whether the suit were brought by Vaden or Discover. The
District Court therefore may exercise jurisdiction over this
petition under §4 of the Federal Arbitration Act.