Takeaways
- The court held that an employer’s failure to pay disputed arbitration fees in an ongoing arbitration does not amount to a refusal to arbitrate within the meaning of the Federal Arbitration Act.
- Payment of arbitration fees is a matter for the arbitrator or arbitration provider to resolve, and courts do not have authority to intervene in “intra-arbitration” procedural disputes.
- Now, employers in the Second Circuit have greater opportunities to challenge improperly allocated arbitration fees, which may be especially important when facing mass arbitrations.
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An employer that withholds disputed arbitration fees in a pending arbitration has not “refused” to arbitrate within the meaning of the Federal Arbitration Act (FAA); therefore, a court has no authority to compel the employer to pay those fees under the FAA, the U.S. Court of Appeals for the Second Circuit held. Frazier v. X Corp., No. 24-1948 (Sept. 2, 2025).
A fee dispute is a procedural matter for the arbitrator or arbitration provider to resolve, the appeals court explained, and a court does not have authority to intervene under the FAA. The decision comes in a case arising from Twitter’s 2022 layoffs.
The Second Circuit has jurisdiction over federal courts in Connecticut, New York, and Vermont.
Arbitration Fee Dispute
Thousands of employees laid off by X Corp. (formerly known as Twitter) in 2022 filed individual arbitration demands challenging the company’s refusal to provide severance benefits, among other claims. The parties’ arbitration agreement specified JAMS as the arbitration provider and gave JAMS the authority to allocate arbitration fees between the parties. The agreement also incorporated the JAMS Employment Arbitration Rules and Procedures, which allow JAMS to suspend or terminate the proceedings if fees were not paid.
According to X Corp., the agreement also provided that arbitration fees be split pro rata between the parties. The JAMS Rules and Minimum Standards, however, require an employer to pay all but the initial fees in an arbitration.
When JAMS required X Corp. to pay the ongoing arbitration fees, X Corp. refused. Consequently, JAMS refused to assign arbitrators until the fees were paid, leaving the proceedings stalled.
The former employees filed suit, alleging that X Corp. was refusing to arbitrate and asking the court to compel X Corp. to pay the fees. A district court granted the motion. A Second Circuit panel reversed that decision.
A Matter for the Arbitrator
The Second Circuit held the district court had no authority to intervene to compel X Corp. to pay the arbitration fees.
The FAA allows a party to file a motion in court to compel arbitration when the other party to an arbitration agreement refuses to arbitrate. However, withholding arbitration fees is not a “failure, neglect, or refusal … to arbitrate” within the meaning of the statute, the appeals court found. Rather, failure to pay fees is a procedural “intra-arbitration” matter for the arbitrator or arbitration provider to resolve, not a court.
According to the Second Circuit, its decision aligns with rulings from the Third, Fifth, Ninth, and Eleventh Circuits that have likewise held there is “no role for a court to involve itself in a dispute in an ongoing arbitral proceeding over a party’s payment of fees or compliance with arbitral policies” under the FAA.
The Second Circuit did not decide whether any continued refusal to pay arbitration fees by X Corp. (and any resulting termination of the arbitrations by JAMS) would “open the courthouse doors” to the employees. It noted, however, that other courts have suggested as much in similar cases.
Lessons for Employers
The Second Circuit’s decision clarifies that procedural disputes arising during arbitration are not grounds for judicial intervention under the FAA. A court’s role is limited to compelling a reluctant party to arbitrate when required by the terms of their arbitration agreement, not to manage or enforce the procedural aspects of the arbitration itself. This means employers operating within the Second Circuit can challenge an arbitration provider’s allocation of fees without the prospect of a court compelling payment. The ability to withhold disputed fees may be especially important when facing mass arbitrations and huge amounts of arbitration fees.
The case also underscores the importance of careful drafting of arbitration agreements. Before specifying a required arbitration provider in your agreement, carefully review the provider’s rules and standards to ensure they do not conflict with any of the terms of your agreement and align with the goals of your arbitration program.
