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When Petitioners-Appellees [Petitioners] were hired as employees of Twitter, Inc., now known as X Corp. and owned by Respondent-Appellant X Holdings Corp. [hereinafter Respondent and together referred to as “Twitter” in the instant action], Petitioners signed “Dispute Resolution Agreements” [DRAs] committing themselves to resolving any employment-related disputes with Twitter in binding individual arbitration. After Petitioners were fired by Twitter, they brought various employment-related claims to the Judicial Arbitration and Mediation Services [JAMS], the arbitral body identified in their DRAs, pursuant to the then-current JAMS Rules.
Twitter had argued that the DRAs provided for a pro-rata split, while JAMS, pointing to its own rules and policies, incorporated by reference into the DRAs, contended that Twitter was committed to paying all but the case initiation fees as a precondition to JAMS’s administering the arbitration.
Relying on a clause in the arbitration agreement that provided that “any disputes [over arbitration fees would] be resolved by the Arbitrator” – and not JAMS – Twitter refused to pay. As the result of JAMS refusing to appoint any arbitrators without the fees, "the proceedings ground to a halt". At the request of the parties, JAMS stayed the proceedings pending resolution of the fee issue.
Rather than fronting the fees themselves or asking JAMS to terminate the arbitral proceedings and pursuing other remedies, Petitioners sued to compel arbitration under 9 U.S.C. §4, arguing that, by refusing to pay the fees allocated to it by JAMS, Twitter was “refusing to arbitrate” in accordance with the terms of the DRAs.
For the reasons explained in the United States Court of Appeals, Second Circuit's opinion [see the link to the Circuit Court's opinion provided below], the Circuit Court opined that whether a party has failed to pay the arbitration fees necessary in an ongoing arbitral proceeding "is a procedural issue entrusted to the arbitrator or arbitral body – not the court – for resolution within that proceeding".
Thus, the Circuit Court held that once the parties are before their chosen arbitral body, failure or refusal to pay fees alone is not a “failure, neglect, or refusal . . . to arbitrate” and a "federal district court is empowered to address the matter under 9 U.S.C. §4".
Accordingly, the Circuit Court of Appeals reversed the judgment of the district court "to the contrary" and remanded the matter to the district court.
Click HERE to access the Second Circuit's decision posted on the Internet.