Second Circuit Rejects Former Employees' Attempt To Seek Review Of Arbitral Fees Dispute

Duane Morris Takeaways: A Second Circuit panel of Judges Gerard Lynch, Michael Park, and Beth Robinson reversed the Southern District of New York in Frazier v. X Corp., Case No. 24-1948 (2d Cir. Sept. 2, 2025), holding that X's (formerly Twitter) refusal to pay ongoing arbitral fees did not amount to a "failure, neglect, or refusal ... to arbitrate" that the district court was empowered to remedy under the Federal Arbitration Act ("FAA"). The Second Circuit explained that under 9 U.S.C. § 4, district courts may only address a narrow category of disputes limited to whether arbitration must occur between particular parties over particular issues. The decision follows related precedent set by the Third, Fifth, Ninth, and Eleventh Circuits and makes clear that a party's decision not to abide by the procedural determinations of an arbitrator or arbitral body does not empower a district court to intervene and review.

The decision is an important primer for corporate counsel in handling disputes over ongoing arbitral proceedings.

Case Background

Plaintiff-Petitioners, seven former employees of Twitter, signed arbitration agreements committing them to resolve any employment-related disputes in binding individual arbitration. The employees filed arbitration demands following their termination, believing that they had been denied severance and had been illegally discriminated against, among other claims. After making certain payments of arbitral fees, Twitter asserted that the arbitration agreements required that the fees be apportioned equally between it and the former employees. The agreements called for a pro-rata split of arbitral fees but incorporate by reference Judicial Arbitration and Mediation Services' ("JAMS") rules and policies, which required Twitter to pay all but the case initiation fees. The employees sued to compel arbitration under 9 U.S.C. § 4, arguing that by refusing to pay the fees allocated to it by the arbitral body, Twitter was "refus[ing] to arbitrate" in accordance with the arbitration agreements.

At issue before the Second Circuit was whether Twitter's refusal to pay ongoing arbitral fees constituted an outright refusal to arbitrate that the district court was empowered to remedy under 9 U.S.C. § 4. The former employees took the position that by incorporating the arbitral body's rules in the arbitration agreements, Twitter agreed to be bound by the arbitral body's initial determination that Twitter was responsible for the disputed fees. Therefore, the former employees argued, the district court could compel Twitter to pay the disputed fees under 9 U.S.C. § 4.

The Decision

The Second Circuit rejected the former employees' argument.

It held that a party's decision not to abide by the procedural determinations of an arbitrator or arbitral body is an intra-arbitration delinquency that arbitral bodies are empowered to manage. Therefore, the former employees could not use 9 U.S.C. § 4 as a vehicle to seek judicial review of the arbitral body's decision not to proceed with the arbitration process.

Implications Of The Decision

The Frazier decision marks another federal circuit keeping the courts out of disputes in ongoing arbitral proceedings over a party's payment of fees or compliance with arbitral policies. Corporate counsel must consider the limited scope of permitted review under 9 U.S.C. § 4 when facing disputes in ongoing arbitral proceedings, whether over payment of fees or otherwise.

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