In Vaden v. Discover Bank (pdf), decided March 9, a divided U.S. Supreme Court resolved a long-standing circuit split regarding parties’ ability to seek federal court assistance to compel arbitration of litigation pending in state court. The case pitted credit card purveyor Discover Bank against a defaulted credit card customer. The consumer counterclaimed in state court on behalf of a class of disgruntled card holders for alleged violation of Maryland’s usurious interest laws.
Discover sought to avoid the class claims by bringing a new action in federal court to compel arbitration. The Supreme Court, in a 5-4 majority opinion issued by Justice Ruth Bader Ginsburg, rejected this procedural gambit, holding that federal jurisdiction to compel arbitration will arise only when the entire controversy, as framed by the underlying complaint, satisfies traditional tests for federal jurisdiction.