Chapter 3 - § 3.7 • FEDERAL ARBITRATION ACT (FAA)

• Jurisdiction: Colorado

§ 3.7 • FEDERAL ARBITRATION ACT (FAA)

The Federal Arbitration Act²⁹ was passed in 1925, and has been amended several times. However, the original statute remains essentially unchanged.

Speaking very generally, the Federal Arbitration Act governs arbitration when the dispute involves a transaction in interstate commerce.³⁰ (The Interstate Commerce Clause of the U.S. Constitution is the basis for Congress's exercising jurisdiction over certain arbitrations.) More specifically, § 2 of the FAA validates arbitration clauses "in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction."³¹ Section 1 defines "commerce" as "among the several States or with foreign nations. . . ." The term "transactions involving commerce" has been defined by the U.S. Supreme Court as being the "functional equivalent of . . . 'affecting commerce' — words of art that ordinarily signal the broadest permissible exercise of Congress' Commerce Clause power."³² "Involving commerce" is equivalent to "affecting commerce," generally being the maximum scope of power under the Commerce Clause.³³ "Evidencing" means that the FAA applies not when the parties contemplated that their transaction would involve interstate commerce, but when the transaction involves interstate commerce.³⁴

• Annot., When Does Contract Evidence Transaction Involving Interstate Commerce Within Meaning of Federal Arbitration Act (FAA) — Serv. Contracts, 11 A.L.R. Fed.2d 233.
• Annot., When Does Contract Evidence Transaction Involving Interstate Commerce Within Meaning of Federal Arbitration Act (FAA) — Legal Issues and Principles, 10 A.L.R. Fed.2d 489.

Generally, if the FAA does not apply, a state arbitration act such as the CRUAA applies. Whether the CRUAA or the arbitration statutes of another state govern generally depends upon application by the court of traditional choice-of-law rules. However, unless otherwise agreed by the parties, state arbitration acts apply only when not preempted by the federal Act.

Very generally speaking, the FAA and CUAA do not differ much in substance, although they are very different in some particulars. The CRUAA, on the other hand, is substantially more detailed, and fills in many gaps in the FAA and the CUAA. However, at least two specific points about the statutes should be noted:

• Jurisdiction. The fact that the FAA governs an arbitration does not give the federal courts jurisdiction over disputes arising with respect to arbitrations governed by the statute. See Chapter 19, "Jurisdiction and Venue of the State and Federal District Courts and of the Arbitrator." Generally, it does not provide federal question jurisdiction under 28 U.S.C. § 1331. For the federal court to have jurisdiction, there must be a separate jurisdictional basis, such as diversity of citizenship, 28 U.S.C. § 1332. See § 19.3.

Most courts hold that if the FAA governs, but there is no other basis for federal court jurisdiction, the suit must be brought in state court, which will then apply the FAA, at least in part.³⁵ Colorado Court of Appeals decisions suggest that federal preemption of state law applies only to portions of the state arbitration law. See § 4.3.

• Time limits. Deadlines are generally shorter under the CRUAA than under the FAA. See, for example, the time for seeking a change or correction of award (CRUAA § 220 versus FAA § 12); confirmation of award (CRUAA § 222 versus FAA § 9); vacating an award (CRUAA § 223 versus FAA § 12); and modification of award (CRUAA § 223 versus FAA § 12). Generally, if the federal Act applies, its time limit "probably" governs.³⁶ However, there are those who may assert that time limitations are procedural, and therefore a Colorado court should apply the Colorado statutory time limit, even if the FAA is otherwise applicable to the arbitration. See § 4.3.8.

§ 3.7.1—Applicability Of The Federal Rules Of Civil Procedure

In federal court proceedings, F.R.C.P. 81(a)(6) further implements the FAA:

(a) Applicability to Particular Proceedings.
. . . (6) Other Proceedings. These rules, to the extent applicable, govern proceedings under the following laws, except as these laws provide other procedures:
. . . (B) 9 U.S.C., relating to arbitration.

Under this provision, the Federal Rules of Civil Procedure are applicable only where the FAA is silent — in sum, the rules of procedure supplement the FAA, but only to the extent consistent with the FAA. For example, the Federal Rules of Civil Procedure "appl[y] to a § 9 motion to confirm an arbitration award only to the extent that the Rule is consistent with the language and purpose of the Federal Arbitration Act."³⁷ F.R.C.P. 81 was used to permit discovery in aid of arbitration of a Title 9 arbitration proceeding to fill procedural gaps left open by the FAA.³⁸ F.R.C.P. 1 defines that the Federal Rules of Civil Procedure apply only to U.S. district courts.

• Annot., Discovery in Federal Arbitration Proceedings Under

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