Arbitration – Federal Arbitration Act – Subject Matter Jurisdiction – Arbitration Award Enforcement – Badgerow v. Walters

The district court lacked subject matter jurisdiction to confirm the arbitration award.

The court’s judgment is reversed, and the case is remanded.

Appellants Wireless Systems Solutions, LLC, Laslo Gross, Susan Gross, David D. Gross, DAG Wireless LTD (DAG Israel), and DAG Wireless USA, LLC appealed the district court’s confirmation of an arbitration award in favor of SmartSky Networks, LLC. SmartSky initially filed suit in the district court against all Appellants for breach of contract, trade secret misappropriation, and deceptive trade practices. After filing suit in the district court, SmartSky submitted an arbitration demand against Wireless for breach of contract. The arbitration tribunal ruled that all claims asserted in the district court against Wireless, save the request for entry of preliminary injunction, were to be arbitrated. DAG Israel, DAG USA, Laslo, Susan, and David voluntarily agreed to submit to arbitration with respect to SmartSky’s claims filed against them. On a motion from Wireless, the district court stayed the action pending arbitration.

The arbitration tribunal found in favor of SmartSky and issued an award, which included monetary damages in favor of SmartSky and a permanent injunction against Appellants. Thereafter, SmartSky filed a motion to enforce the award; and Appellants filed a motion to vacate same. The district court confirmed the award. This appeal followed. Appellants argued that pursuant to Badgerow v. Walters, 142 S. Ct. 1310 (2022), the district court lacked subject matter jurisdiction to enforce the arbitration award.

SmartSky argued the district court had subject matter jurisdiction to confirm the award because a complaint that asserts federal claims acts as a “jurisdictional anchor” for subsequent Federal Arbitration Act (FAA) Section 9 and 10 applications when the case was previously stayed pursuant to Section 3 of the FAA. SmartSky’s argument suggested that we treat such applications like motions arising out of the underlying civil action, thereby allowing the district court’s subject matter jurisdiction over the underlying action to extend to the petitions to enforce or vacate brought under the FAA. Badgerow does not permit such a result.

Badgerow‘s “look-through” jurisdiction — jurisdiction based on claims that were no longer pending before the district court — applies only in the face of a Section 4 motion to compel; and is inadequate for Section 9 and 10 applications. Accordingly, we held that the complaint filed in the district court could not, and did not, serve as a “jurisdictional anchor” for the parties’ applications brought pursuant to Sections 9 and 10 of the FAA.

Further, the district court did not have or “retain” subject matter jurisdiction to adjudicate the Section 9 and 10 applications because it had subject matter jurisdiction to stay the action under Section 3.

Reversed and remanded.

Smartsky Networks LLC v. DAG Wireless Ltd. (Lawyers’ Weekly No. 001-014-24, 21 pp.) (Julie R. Rubin, J.) Appealed from U.S. District Court for the Middle District of North Carolina at Greensboro (Thomas D. Schroeder, J.) Argued: Kenneth Kyre, Jr., Pinto Coates Kyre & Bowers, PLLC, Greensboro, North Carolina, for appellants; Mark S. VanderBroek, Nelson Mullins Riles & Scarborough, LLP, Atlanta, Georgia, for appellee; On Brief: Richard L. Pinto, Jon Ward, Pinto Coates Kyre & Bowers, PLLC, Greensboro, North Carolina, for appellants; Gavin B. Parsons, David E. Bennett, Coats + Bennett, PLLC, Cary, North Carolina, for appellants Wireless Systems Solutions, LLC; Laslo Gross; and Susan Gross. S. Wade Malone, Peter L. Munk, Atlanta, Georgia, Fred M. Wood, Jr., Nelson Mullins Riles & Scarborough, LLP, Charlotte, North Carolina, for appellee. U.S. Court of Appeals for the Fourth Circuit