March 07, 2016 Articles

Failure to Pay Arbitration Fees Can Result in a Lift of Arbitration Stay

By Robyn Weinstein

In Pre-Paid Legal Services, Inc. v. Cahill, 786 F.3d 1287 (10th Cir. 2015), Pre-Paid Legal Services sued its former employee, Todd Cahill, alleging tort and contract violations. Cahill removed the case to federal court, and then moved to stay the district court proceeding under the Federal Arbitration Act (FAA) so the parties could pursue arbitration. Section 16(a)(1)(A) of the FAA requires a court to stay its proceedings pending arbitration, provided "the applicant for the stay is not in default in proceeding with the arbitration." See FAA ยง 3.

Once arbitration was initiated, Cahill failed to pay his share of the arbitration fees, and the arbitrators directed termination of the arbitration proceedings. As a result, Pre-Paid moved the district court to lift the stay of arbitration and resume litigation. The court granted the motion, but Cahill appealed the district court's order, arguing the court violated section 3 of the FAA by lifting the stay. Pre-Paid opposed Cahill's appeal, arguing that the court lacked jurisdiction.

Premium Content For:
  • Litigation Section
Join - Now