Attempt to Compel Payment of Arbitration Fees Fails

The dispute in Frazier v. X Corp., 93 F.4th 112 (2d Cir. 2025), arose in the wake of Elon Musk’s acquisition of Twitter, later renamed X Corp. Thousands of employees who had been laid off filed arbitration claims under JAMS rules.  The employees argued that the company was obligated to pay nearly all arbitration fees beyond the initial filing fee, citing JAMS’ administrative guidelines.  X Corp., however, maintained that its employment contracts required a pro rata split of fees.

When X Corp. refused to pay the fees demanded by JAMS, the arbitration forum suspended proceedings.  The employees sought relief in federal court, and the district court ordered X Corp. to pay the fees pending resolution by arbitrators.

On September 2, 2025, the Second Circuit reversed the district court’s order.  The panel held that Section 4 of the Federal Arbitration Act (FAA) does not authorize courts to compel payment of arbitration fees.  According to the court, non-payment of fees is a procedural issue, not a “failure, neglect, or refusal” to arbitrate within the meaning of the FAA.

The court emphasized that arbitration is designed to be self-contained, with arbitrators empowered to resolve disputes over procedure—including fee allocation.  Judicial intervention, the panel reasoned, would undermine arbitration’s efficiency and autonomy.

The Second Circuit’s decision aligns with rulings in other circuits specifically citing Dealer Computer Services, Inc. v. Old Colony Motors, Inc., 588 F.3d 884 (5^th Cir. 2009).  The Second Circuit joined a growing consensus that courts cannot compel fee payments under the FAA stating, “Accordingly, like the Third, Fifth, Ninth, and Eleventh Circuits, we see 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 9 U.S.C. §4”.

Employers gain protection against fee-based mass arbitrations tactics but must manage reputation fallout.  Employees face new hurdles in pursuing arbitration claims particularly where costs are prohibitive.

Frazier v. X Corp., 93 F.4th 112 (2d Cir. 2025).