A group of small stores filed thousands of demands for arbitration against Amex with the AAA, challenging Amex’s swipe-fee policies. The parties disagreed about what fees were due to AAA, and the AAA administrator made a determination that a $3,500 filing fee applied to each demand, with the stores responsible for $350 and Amex the rest. Amex continued to disagree, and did not pay–even after the AAA administrator warned the cases would be administratively closed if Amex did not pay. The AAA then closed the cases, stating the closure was final and not subject to reopening.
The stores then filed a class action complaint in federal court, arguing that Amex waived its right to arbitrate by refusing to pay the fees owed to the AAA. Amex nonetheless moved to stay and compel arbitration. The district court denied the motion, holding that Amex had defaulted in the arbitration, and, separately, that Amex had waived its right to compel.
Amex appealed, and today, in 5-Star General Store v. American Express Co., the First Circuit affirmed. The court first held that the district court had the authority to determine whether Amex was in default in the arbitration, thus barring a motion to stay under section 3 of the FAA. It made no sense, the court held, to send the question back to the arbitrator. The court then went on to hold that default under section 3 includes waiver, and that Amex’s deliberate choice not to pay arbitration fees, despite being told the cases would be closed if it did not, constituted waiver.
