In the case of Betty E. Vaden v. Discover Bank et al., 2008, the U.S Supreme Court ruled that federal courts do not have jurisdiction over state law claims just because they are predicated on a hypothetical federal defense. The dispute began when Discover Bank sued Betty Vaden in state court for unpaid credit card charges and she counterclaimed alleging violations of state law by charging excessive fees and interest rates. Discover then sought to move the entire dispute into federal court under Section 4 of Federal Arbitration Act (FAA), arguing that her counterclaims raised substantial questions of federal law since it was federally chartered bank regulated by Federal Reserve Act (FRA). However, the Supreme Court held that a defense or counterclaim cannot serve as basis for "arising under" jurisdiction which is required to bring cases from state to federal court unless those issues were part of plaintiff's well-pleaded complaint.

In the dissenting opinion for Betty E. Vaden v. Discover Bank et al., Justice Ruth Bader Ginsburg, joined by Justices Stevens and Souter, argued that federal jurisdiction should not be determined by looking through to a hypothetical federal defense in an otherwise state-law counterclaim. The majority's decision allows banks to remove cases from state court based on defenses they might raise if sued under federal law, which is inconsistent with the well-pleaded complaint rule and expands federal jurisdiction beyond what Congress intended when it enacted Section 4 of the Federal Arbitration Act (FAA). Furthermore, she noted that this interpretation could lead to forum shopping and manipulation of litigation strategy by defendants seeking a more favorable venue in federal court. She also disagreed with the majority’s view that Discover Bank was “acting here under” national banking laws merely because its credit card operations are federally regulated.