Supreme Court Mulls Maryland Arbitration Case


WASHINGTON (Oct. 9, 2008)—U.S. Supreme Court Justices asked hard-hitting questions Monday in trying to resolve complicated jurisdictional claims in a Maryland arbitration case.

"I think (the justices) were really intellectually engaged with the issues and found it was a harder case than they thought when it first came in," said Daniel Ortiz, one of the lead attorneys in the case. "They prepared carefully and read the lower case decisions, which is always a good sign."

At issue, is whether federal courts have jurisdiction to review petitions to compel arbitration under state law. The case, Vaden v. Discover Bank, began in 2003 when Discover Financial Services, on behalf of Discover Bank, sued Betty Vaden, 68, a retiree from Baltimore, in the Baltimore City Circuit Court for alleged nonpayment of her credit card debt.

Vaden countersued, and later Discover Financial Services petitioned the 4th U.S. Circuit Court of Appeals to compel arbitration of Vaden's counterclaims. The case has been to the federal appeals court twice before landing in the Supreme Court.

But the Supreme Court justices were not there to decide the question of payment. They quizzed the lawyers on their reasoning for their choice of jurisdiction.

During the argument by Discover Bank's counsel, Justice Antonin Scalia said he was worried what would happen to the more difficult cases along the line if the justices decide to compel arbitration.

Lead counsel for Discover Bank, Alan Kaplinsky, said he did not want to comment on the argument.

According to Jay E. Grenig, professor of law at Marquette University Law School in Milwaukee and member of the National Academy of Arbitrators, the issue of preemption is what makes the decision hard to predict.

Preemption is a doctrine based on the supremacy clause, which states that federal law trumps any inconsistent state law or regulation. The Supreme Court has said that although the arbitration act is a substantive law, it does not in itself give the federal court jurisdiction.

"There are incredibly complex, but fundamental, civil procedure rules involved," Grenig said.

The Supreme Court's decision to hear the case stems from discrepancies in similar case decisions of the 13 federal circuit courts. Of the six courts that have decided such cases, only the 4th and 11th Circuit Courts have compelled arbitration.

Although it is difficult to predict which way the court is going to go, Grenig says he thinks there is a little more than 50 percent chance that it will compel arbitration.

"There's some question in my mind, but I think it's more likely than not that they'll rule in favor of (federal) jurisdiction," Grenig said. "I haven't seen the Supreme Court in about 25 years or so refuse to require a case to go arbitration. The Supreme Court has been very positive about arbitration. It's been protective of the federal courts and the Federal Arbitration Act. It's interesting to see where (Chief Justice John) Roberts and (Justice Samuel) Alito will come out."

The court will decide the case by July of next year.

"It's scary to make a prediction whether it's a win or lose," said Ortiz, lead counsel for Vaden. "They were asking hard questions of everyone. I'll keep my fingers crossed."

Capital News Service contributed to this report.

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