PUBLISH 

UNITED STATES COURT OF APPEALS 

 TENTH CIRCUIT

PRE-PAID LEGAL SERVICES, INC.,

 Plaintiff - Appellee,

v.

TODD CAHILL,

Defendant - Appellant.

No. 14-7032 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE EASTERN DISTRICT OF OKLAHOMA 

(D.C. No. 6:12-CV-00346-JHP) 

 

Gary E. Smith, Gary E. Smith, P.C., Dallas, Texas, appearing for Appellant. 

Timila S. Rother (Harvey D. Ellis, Jr. and Melanie Wilson Rughani, with her on the 

brief), Crowe & Dunlevy, Oklahoma City, Oklahoma, appearing for Appellee. 

Before MATHESON, SEYMOUR, and McHUGH, Circuit Judges. 

MATHESON, Circuit Judge. 

Pre-Paid Legal Services, Inc., d.b.a. LegalShield (“Pre-Paid”), sued Todd Cahill, 

its former employee, alleging tort and contract violations. Mr. Cahill removed the case 

from state to federal court based on diversity jurisdiction, and moved to stay the district 

court proceedings under the Federal Arbitration Act (“FAA”) so the parties could pursue 

FILED 

United States Court of Appeals 

Tenth Circuit 

May 26, 2015

Elisabeth A. Shumaker 

Clerk of Court

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arbitration. 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.” 9 

U.S.C. § 3. The district court granted Mr. Cahill’s motion to stay the proceedings. 

Mr. Cahill, however, failed to pay his share of the arbitration fees, and the 

arbitrators directed termination of the arbitration proceedings. Pre-Paid moved the 

district court to lift the stay and resume with litigation. The court granted the motion, 

adopting a magistrate judge’s report and recommendation. The magistrate judge had 

recommended lifting the stay because the arbitrators “elected to terminate” the 

proceedings and “[i]t is clear under these circumstances that the arbitrators considered 

Cahill’s failure to pay to be a default in arbitration.” App. at 603. 

Mr. Cahill appeals the district court’s order, arguing the court violated § 3 of the 

FAA by lifting the stay. He asks this court to reinstate the stay. Pre-Paid argues we lack 

jurisdiction to hear this appeal. It also opposes the appeal on the merits. 

We have jurisdiction to hear this appeal under 9 U.S.C. § 16(a)(1)(A). On the 

merits, we affirm. 

I. BACKGROUND 

A. Factual History 

Pre-Paid sells legal services contracts through which members have access to the 

assistance of provider attorneys. Independent sales associates sell these contracts through 

a network marketing system. Mr. Cahill became an independent sales associate with PrePaid in 2004. 

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In his employment contract with Pre-Paid, Mr. Cahill agreed not to solicit or 

recruit Pre-Paid’s other sales associates during the term of his contract or for two years 

after its termination. The contract also required 

[a]ll disputes and claims relating to [Pre-Paid], [this] Agreement, . . . or any 

other claims or causes of action between [Cahill and Pre-Paid] . . . , whether 

in tort or contract, shall be settled totally and finally by arbitration . . . in 

accordance with the Commercial Arbitration Rules of the American 

Arbitration Association . . . . 

App. at 120. 

In 2012, Mr. Cahill left Pre-Paid to join another network marketing company. 

Pre-Paid alleges Mr. Cahill began to misuse trade secret information, contact other PrePaid associates, and solicit them to join his new place of employment. 

B. Procedural History 

On August 14, 2012, Pre-Paid filed an action in Oklahoma state court claiming 

Mr. Cahill had breached his contract, unlawfully misappropriated Pre-Paid’s trade 

secrets, and tortiously interfered with contract and business relations. Mr. Cahill 

removed the action to the District Court for the Eastern District of Oklahoma. 

On August 24, 2012, Mr. Cahill moved to stay the district court proceedings 

pending arbitration. Pre-Paid did not object. A magistrate judge recommended granting 

Mr. Cahill’s motion for a stay. On February 12, 2013, the district court adopted the 

magistrate judge’s recommendation and entered the stay pending arbitration. 

On February 13, 2013, Pre-Paid initiated arbitration proceedings before the 

American Arbitration Association (“AAA”). Pre-Paid paid its share of arbitration fees, 

but Mr. Cahill did not. Pre-Paid declined to pay Mr. Cahill’s share of the fees. The 

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Director of ADR Services at the AAA repeatedly warned Mr. Cahill’s attorney that if Mr. 

Cahill did not pay, the arbitration proceedings would be suspended, which is exactly what 

happened. 

On June 27, 2013, the arbitration panel suspended the arbitration, warning the 

parties that if the deposits were not paid by a certain date, the arbitration would be 

terminated. Mr. Cahill still refused to pay and did not request any form of 

accommodation from the arbitrators. On July 10, 2013, the AAA terminated the 

arbitration: “As advised in our correspondence dated June 27, 2013, the outstanding 

balance remains unpaid. . . . By direction of the Panel, we have closed our file pursuant to 

R-54.” Id. at 441. 

On July 16, 2013, Pre-Paid moved to lift the stay of district court proceedings. 

Mr. Cahill filed a response opposing Pre-Paid’s motion to lift the stay. On March 31, 

2014, a magistrate judge recommended the motion be granted. On April 16, 2014, the 

district court adopted that recommendation and lifted the stay. 

Mr. Cahill appeals the district court’s lifting of the stay. He argues this court has 

jurisdiction under 9 U.S.C. § 16(a)(1)(A). Pre-Paid moves to dismiss the appeal for lack 

of jurisdiction. If we reach the merits, Pre-Paid urges us to affirm the lifting of the stay. 

C. Legal Background 

Two FAA provisions and two AAA rules are relevant to this case. Section 

16(a)(1)(A) of the FAA provides: “(a) An appeal may be taken from—(1) an order—(A) 

refusing a stay of any action under section 3 of this title.” 9 U.S.C. § 16(a)(1)(A). 

Section 3, in turn, mandates a stay of federal court proceedings pending arbitration: 

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If any suit or proceeding be brought in any of the courts of the United 

States upon any issue referable to arbitration under an agreement in writing 

for such arbitration, the court in which such suit is pending, upon being 

satisfied that the issue involved in such suit or proceeding is referable to 

arbitration under such an agreement, shall on application of one of the 

parties stay the trial of the action until such arbitration has been had in 

accordance with the terms of the agreement, providing the applicant for the 

stay is not in default in proceeding with such arbitration. 

9 U.S.C. § 3. 

AAA Rule 50 requires parties to share arbitration expenses equally “unless they 

agree otherwise or unless the arbitrator in the award assesses such expenses or any part 

thereof against any specified party or parties.” App. at 486. AAA Rule 54 provides that 

if the payments are not made, “the AAA may so inform the parties in order that one of 

them may advance the required payment.” Id. at 487. But if the payments remain 

unpaid, “the arbitrator may order the suspension or termination of the proceedings.” Id. 

II. DISCUSSION 

We have jurisdiction under 9 U.S.C. § 16(a)(1)(A) to hear this appeal. On the 

merits, we affirm the district court. 

A. Jurisdiction 

1. Interlocutory Review under the FAA 

28 U.S.C. § 1291 grants courts of appeals jurisdiction over “all final decisions of 

the district courts of the United States.” A final decision “is a decision by the district 

court that ‘ends the litigation on the merits and leaves nothing for the court to do but 

execute the judgment.’” Utah ex rel. Utah State Dep’t of Health v. Kennecott Corp., 14 

F.3d 1489, 1492 (10th Cir. 1994) (quoting Catlin v. United States, 324 U.S. 229, 233 

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(1945)). A district court’s decision to lift a stay is not final; rather than end the litigation, 

it revives it. It would initially appear we do not have jurisdiction to review the district 

court’s decision here to lift the stay. 

Section 16(a)(1)(A) of the FAA, however, recognizes an exception to the final 

decision rule for an order that refuses a stay under 9 U.S.C. § 3. See 9 U.S.C. 

§ 16(a)(1)(A). As explained above, § 3 mandates a stay of federal court proceedings 

pending arbitration. The provision manifests a “liberal federal policy favoring arbitration 

agreements.” Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 25 (1991) 

(quotations omitted). “In considering our appellate jurisdiction, . . . § 16(a) ensur[es] that 

district court orders hostile to arbitration agreements can be immediately appealed.” 

Grosvenor v. Qwest Corp., 733 F.3d 990, 995 (10th Cir. 2013) (alteration in original) 

(quotations omitted). 

Here, the district court initially stayed its proceedings on February 12, 2013. Its 

April 16, 2014 order lifted that stay. Our threshold question is whether the order lifting 

the stay is an order “refusing a stay of any action under section 3,” which would confer 

jurisdiction on this court to review the order. 9 U.S.C. § 16(a)(1)(A). 

2. Statutory Interpretation and Application 

When interpreting a statute, “we turn first to the text.” Conrad v. Phone 

Directories Co., 585 F.3d 1376, 1381 (10th Cir. 2009) (quotations omitted). “If the 

words of the statute have a plain and ordinary meaning, we apply the text as written.” Id. 

We also consider the statute’s broader context. Id. 

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Federal courts interpret jurisdictional statutes narrowly. Id. at 1382 (“Because of 

the limited and defined nature of the jurisdiction of the federal courts, we are bound to 

construe statutes conferring jurisdiction narrowly.”). “[I]f there is ambiguity as to 

whether the instant statute confers federal jurisdiction over this case, we are compelled to 

adopt a reasonable, narrow construction.” Pritchett v. Office Depot, Inc., 420 F.3d 1090, 

1095 (10th Cir. 2005). 

Our jurisdictional analysis focuses on two phrases in § 16(a)(1)(A)—“refusing a 

stay” and “under section 3.” 

a. “[R]efusing a Stay” 

Section 16(a)(1)(A) permits an appeal only from an order “refusing a stay.” 9 

U.S.C. § 16(a)(1)(A). Pre-Paid argues Mr. Cahill is not appealing an order “refusing a 

stay” but is instead appealing an order lifting the stay the district court had previously 

granted. This appeal, according to Pre-Paid, falls outside the scope of § 16(a)(1)(A). We 

disagree. 

The order lifting the stay here was effectively one “refusing a stay.” Mr. Cahill 

sought and initially received a stay. When the district court later lifted the stay, it 

declined to keep the stay in effect. The court’s decision granted Pre-Paid’s request to lift 

the stay but also denied Mr. Cahill’s request to maintain the stay, a request Mr. Cahill 

made in his response to Pre-Paid’s motion to lift the stay. We cannot draw a meaningful 

distinction in applying § 16(a)(1)(A) between an order that refuses a request for a stay 

and an order that refuses a request to maintain a stay already in place. The district court’s 

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decision both lifting the stay and refusing to continue the stay was therefore effectively 

one “refusing a stay.” 

Three other circuits have equated lifting a stay with “refusing a stay” under 

§ 16(a)(1)(A). In GEA Group AG v. Flex-N-Gate Corp., 740 F.3d 411, 414 (7th Cir. 

2014), the appellee moved the district court to lift an already-imposed stay, and the 

appellant argued for its continuation while arbitration was pending. The district court 

agreed with the appellee in part, partially lifting the stay to allow for limited discovery. 

Id. at 415. On appeal, the Seventh Circuit determined it had jurisdiction over the district 

court’s order: 

[The appellant] asked for a stay under section 3 of all proceedings in the 

district court. The district judge in the order that [the appellant] is 

appealing has granted in effect a more limited stay. His refusal to grant the 

complete stay that [the appellant] seeks is appealable even though the stay 

order is interlocutory and the appellant might not be entitled to the stay that 

he is seeking. 

Id.; see also Dobbins v. Hawk’s Enters., 198 F.3d 715, 716 (8th Cir. 1999) (equating, 

without explanation, an order to lift a stay with an order refusing a stay); Corpman v. 

Prudential-Bache Sec., Inc., 907 F.2d 29, 30 (3d Cir. 1990) (noting it had jurisdiction to 

consider an order vacating a stay and reinstating a case “since the district court’s order is 

in essence an order refusing to stay an action under section 3 of the Federal Arbitration 

Act”). 

Guided by the statute’s text and persuasive authority from other circuits, we 

conclude the district court’s order lifting the stay in this case was effectively one 

“refusing a stay” under § 16(a)(1)(A). 

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b. “[U]nder section 3” 

Section 16(a)(1)(A) permits an appeal only from an order “refusing a stay of any 

action under section 3 of this title.” 9 U.S.C. § 16(a)(1)(A) (emphasis added). We must 

therefore also consider whether Mr. Cahill appeals an order refusing a stay “under section 

3.” Id. 

In Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 627-29 (2009), the Supreme 

Court instructed that circuit courts should not consider the underlying merits of an appeal 

from the denial of a stay in determining whether they have jurisdiction. Instead, “any 

litigant who asks for a stay under § 3 is entitled to an immediate appeal from denial of 

that motion—regardless of whether the litigant is in fact eligible for a stay.” Id. at 627. 

“Jurisdiction over the appeal . . . must be determined by focusing upon the category of 

order appealed from, rather than upon the strength of the grounds for reversing the 

order.” Id. at 628 (quotations omitted). Thus, in determining whether we have 

jurisdiction in this case, Arthur Andersen prohibits us from considering the merits of the 

appeal—whether Mr. Cahill was in default or the arbitration had terminated at the time 

the district court refused to maintain the stay. 

Shortly after Arthur Andersen, this court in Conrad recognized two ways for a 

circuit court to determine whether an appellant had asked the district court for a stay 

“under section 3” for purposes of appellate jurisdiction under § 16(a)(1)(A). 585 F.3d at 

1385. First, the “surest way to guarantee appellate jurisdiction under § 16(a) is to caption 

the motion in the district court as one brought under FAA § [] 3.” Id. Second, if a 

motion “is not explicitly styled as a motion under the FAA, or the court suspects that the 

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motion has been mis-captioned in an attempt to take advantage of § 16(a), the court must 

look beyond the caption to the essential attributes of the motion itself.” Id. “If the 

essence of the movant’s request is that the issues presented be decided exclusively by an 

arbitrator and not by any court, then the denial of that motion may be appealed under 

§ 16(a).” Id. at 1386. 

Conrad then applied this test to the appellants’ appeal of a district court order 

granting in part and denying in part their motion to dismiss. Id. at 1379-80, 1386. We 

held this court lacked jurisdiction to hear the appeal because the appellants failed to meet 

either means to satisfy § 16(a)(1)(A). First, they styled their motion in district court as 

one to dismiss rather than a motion under § 3 to stay litigation. Id. at 1386. Second, 

looking beyond the motion’s caption, we identified the requested judicial relief was for 

dismissal “rather than a request that the court refer the case to an arbitrator to decide the 

issues.” Id. 

Mr. Cahill’s response to Pre-Paid’s motion to lift the stay satisfies § 16(a)(1)(A)’s 

and Conrad’s requirements. Mr. Cahill did not caption his response as one brought under 

§ 3, but he did ask the court to maintain the stay under the FAA. He argued that whether 

he was in default “is for the arbitrators, not the District Court to decide.” App. at 502. 

By contrast, the appellants in Conrad did not request relief under the FAA from the 

district court, nor did they seek arbitration as the sole remedy. 

Pre-Paid argues we have no jurisdiction under § 16(a)(1)(A) and Conrad because 

its motion in district court did not seek relief under § 3; rather, its motion sought to lift 

the stay and proceed in court, not in arbitration. But Pre-Paid, the appellee here, 

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mistakenly focuses on itself rather than the appellant, Mr. Cahill. Although Mr. Cahill 

technically did not move for a stay under § 3, his response to Pre-Paid’s motion sought a 

§ 3 stay and therefore satisfies § 16(a)(1)(A) and Conrad. See GEA Group AG, 740 F.3d 

at 415 (noting the appellant “asked for a stay under section 3” even though the appellee 

had moved for a lift of the stay and the appellant opposed the lift). 

Pre-Paid also attempts to rely on Grosvenor. In that case, Mr. Grosvenor had sued 

Qwest. Grosvenor, 733 F.3d at 992. The parties filed cross-motions for partial summary 

judgment contesting the enforceability of an arbitration agreement. Id. at 991-92. The 

district court’s summary judgment order held that the arbitration agreement between the 

parties was illusory and unenforceable. Id. at 992. Qwest appealed, and this court 

dismissed for lack of jurisdiction. Id. 

Grosvenor interpreted and applied 9 U.S.C. §§ 16(a)(1)(B) and 4. Section 

16(a)(1)(B) provides: “(a) An appeal may be taken from—(1) an order . . . (B) denying a 

petition under section 4 of this title to order arbitration to proceed.” 9 U.S.C. 

§ 16(a)(1)(B). Section 4 provides, in relevant part: 

A party aggrieved by the alleged failure, neglect, or refusal of another to 

arbitrate under a written agreement for arbitration may petition any United 

States district court . . . for an order directing that such arbitration proceed 

in the manner provided for in such agreement. . . . The court shall hear the 

parties, and upon being satisfied that the making of the agreement for 

arbitration or the failure to comply therewith is not in issue, the court shall 

make an order directing the parties to proceed to arbitration in accordance 

with the terms of the agreement. 

Id. § 4. 

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Among other differences, § 16(a)(1)(B) allows appellate jurisdiction only when 

the district court has denied a particular form of request: “a petition . . . to order 

arbitration to proceed.” Id. § 16(a)(1)(B). By contrast, § 16(a)(1)(A) is not limited to a 

particular form of request, and it allows appellate jurisdiction when the district court has 

“refus[ed] a stay.” Id. § 16(a)(1)(A). 

Grosvenor said Qwest’s motion for partial summary judgment did not ask the 

district court to order arbitration under § 4, thereby failing Conrad. Grosvenor, 733 F.3d 

at 998.1

 For the reasons explained above, Mr. Cahill’s response requested to maintain a 

stay under § 3, thereby satisfying Conrad. The Grosvenor court also said it could not 

consider Qwest’s response to Mr. Grosvenor’s motion for partial summary judgment 

because it was not a “‘petition under section 4 . . . to order arbitration.’” Id. at 997 

(quoting 9 U.S.C. § 16(a)(1)(B)). Qwest had neither petitioned the court for an order to 

compel arbitration nor did it even ask for such an order in its response. Id. But Mr. 

Cahill’s response to Pre-Paid’s motion requested to maintain a stay, which is sufficient 

under §§ 16(a)(1)(A) and 3. Pre-Paid’s reliance on Grosvenor fails. 

* * * * 

For the foregoing reasons, we have jurisdiction to hear this appeal. 

 1

 Earlier in the litigation, the district court had denied Qwest’s motion to compel 

arbitration under § 4, and Qwest did not attempt to appeal from that order. Id. at 991, 

997. Both parties then moved for partial summary judgment. Id. at 991. In its motion, 

Qwest argued the parties had entered an arbitration agreement, but it “did not make 

another request for an order to compel arbitration.” Id. This court therefore determined 

that Qwest’s appeal could not satisfy Conrad’s requirements. Id. at 998. 

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B. Merits 

We affirm the district court’s lifting of the stay because § 3 did not require the 

court to maintain a stay. We analyze two relevant phrases in § 3—“until such arbitration 

has been had in accordance with the terms of the agreement” and “in default in 

proceeding with such arbitration.” 9 U.S.C. § 3. Each independently supports the district 

court’s order. 

As for the standard of review, “[w]e review de novo the district court’s decision to 

deny a stay pending arbitration.” Chelsea Family Pharmacy, PLLC v. Medco Health 

Solutions, Inc., 567 F.3d 1191, 1196 (10th Cir. 2009). “We review a district court’s 

decision as to default of arbitration de novo but defer to the district court’s underlying 

factual findings.” Forrester v. Penn Lyon Homes, Inc., 553 F.3d 340, 342 (4th Cir. 

2009). “[W]e review the factual findings of a district court for clear error.” Sink v. Aden 

Enters., 352 F.3d 1197, 1199 (9th Cir 2003). 

1. “[U]ntil such arbitration has been had in accordance with the terms of the 

agreement” 

In recommending the stay be lifted, the magistrate judge noted “the arbitration in 

this case is not still pending, because the arbitrator has decided that the appropriate 

remedy for Cahill’s failure to pay his share of costs was dismissal.” App. at 602. 

Although § 3 does not use the term “pending” in reference to arbitration, it does state a 

federal court must stay court proceedings until arbitration “has been had in accordance 

with the terms of the agreement.” 9 U.S.C. § 3. The employment contract between Mr. 

Cahill and Pre-Paid specifies that “[a]ll disputes and claims . . . shall be settled totally and 

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finally by arbitration . . . in accordance with the Commercial Arbitration Rules of the 

American Arbitration Association.” App. at 120. 

The phrase “totally and finally” may suggest the arbitration “ha[d] [not] been had 

in accordance with the terms of the agreement” because it had not reached a merits 

determination. Id.; 9 U.S.C. § 3. But the agreement specifies the arbitration settle all 

disputes and claims “totally and finally . . . in accordance with” the AAA rules. App. at 

120. The rules require the parties to share arbitration expenses equally. Without 

payment, the arbitration panel can and did terminate the proceedings. 

The AAA determined the arbitration had gone as far as it could due to Mr. Cahill’s 

repeated refusal to pay the fees. Under the AAA rules, the panel terminated the 

proceedings. As such, the arbitration “ha[d] been had in accordance with the terms of the 

agreement,” 9 U.S.C. § 3, removing the § 3 requirement for the district court to stay the 

proceedings. 

Our holding is consistent with decisions of other courts that have determined a 

party’s failure to pay its share of arbitration fees breaches the arbitration agreement and 

precludes any subsequent attempt by that party to enforce that agreement. See, e.g., 

Brown v. Dillard’s, Inc., 430 F.3d 1004, 1011 (9th Cir. 2005) (explaining the defendant 

“breached the arbitration agreement by refusing to participate in properly initiated 

arbitration proceedings” and that the “breach was tantamount to a repudiation of the 

arbitration agreement”); Sink, 352 F.3d at 1201 (“[F]ailure to pay required costs of 

arbitration was a material breach of its obligations in connection with the arbitration.”); 

Garcia v. Mason Contract Prods., LLC, No. 08-23103-CIV, 2010 WL 3259922, at *3 

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(S.D. Fla. Aug. 18, 2010) (unpublished) (holding “[b]y failing to timely pay its share of 

the arbitration fee, Defendant materially breached its obligations, thereby ‘scuttling’ [its] 

opportunity” to insist on arbitration).2

 

Mr. Cahill breached the arbitration agreement by failing to pay his fees in 

accordance with AAA rules and was not entitled to maintain the stay under § 3. 

2. “[I]n default in proceeding with such arbitration” 

Alternatively, lifting the stay was permissible under § 3 because Mr. Cahill was 

“in default in proceeding with [the] arbitration.” 9 U.S.C. § 3. Section 3 does not require 

a stay when the applicant for the stay is in default. Because only Mr. Cahill wanted a 

stay and because he was in default, § 3’s mandate to issue a stay did not apply. 

a. Mr. Cahill was “[i]n default in proceeding with [the] arbitration.” 

The parties agree and the record shows Mr. Cahill failed to pay his share of the 

arbitration fees. The AAA repeatedly asked him to pay. In the arbitration proceeding, 

Mr. Cahill did not show he was unable to afford payment, ask the arbitrators to modify 

his payment schedule, or move for an order requiring Pre-Paid to pay his share for him so 

that arbitration could continue. Instead, by refusing multiple requests to pay, he allowed 

arbitration to terminate. 

Failure to pay arbitration fees constitutes a “default” under § 3. Because Mr. 

Cahill failed to pay his arbitration fees, he was in “default.” See Garcia, 2010 WL 

 2

 Although unpublished, out-of-circuit, district court opinions lack precedential 

value, we find the reasoning of such decisions cited here to be instructive under the 

circumstances of this case. See 10th Cir. R. 32.1 (“Unpublished decisions are not 

precedential, but may be cited for their persuasive value.”); see also Fed. R. App. P. 32.1. 

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3259922, at *4 (“[T]his default was . . . an intentional and/or reckless act because the 

AAA provided repeated notices to the Defendant that timely payment of the fee had not 

been received. . . . There is no other description the Court can find for this self-created 

situation other than ‘default.’”); Rapaport v. Soffer, No. 2:10-cv-00935-KJD-RJJ, 2011 

WL 1827147, at *2 (D. Nev. May 12, 2011) (unpublished) (finding the defendant was in 

default under § 3 because the AAA “closed” or “terminated” the case because of his 

failure to pay fees); Sanderson Farms, Inc. v. Gatlin, 848 So. 2d 828, 837-38 (Miss. 

2003) (finding the defendant refused to pay its one-half of the costs pursuant to an 

arbitration agreement and that this constituted “default” under § 3). Because Mr. Cahill 

was in default, the district court was not obligated under § 3 to maintain the stay so that 

arbitration could proceed.3

b. The question of default under § 3 is not reserved for a formal finding by 

arbitrators. 

Mr. Cahill contends the arbitrators must find default under § 3. Because the 

arbitrators did not make a formal finding of default when they terminated the 

proceedings, Mr. Cahill argues “it is not the trial court’s place to substitute its judgment 

or to guess what the arbitrator meant” on the nonpayment of fees and its consequences. 

Aplt. Br. at 7. 

 3

 The FAA does not define “[d]efault in proceeding with [the] arbitration.” 9 

U.S.C. § 3. As noted above, some courts have viewed a party’s failure to pay its share of 

the arbitration fees as a breach of the arbitration agreement, which precludes any 

subsequent attempt by that party to enforce that agreement. Other courts have treated the 

failure to pay arbitration fees as a waiver of the right to arbitrate. See, e.g., Brown, 430 

F.3d at 1012-13. Under either approach, the result is the same: Mr. Cahill’s failure to 

pay his share of costs precludes him from seeking arbitration. 

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Mr. Cahill relies primarily on Howsam v. Dean Witter Reynolds, 537 U.S. 79 

(2002). In Howsam, the Supreme Court considered a rule of the National Association of 

Securities Dealers (“NASD”) that no dispute is subject to arbitration when six years have 

elapsed since the event giving rise to the dispute. Id. at 81. After the petitioner sought 

arbitration, the respondent sued in federal district court, invoking the NASD rule. Id. at 

82. The Supreme Court held an arbitrator, not the court, should apply the rule. Id. at 82-

85. “[P]rocedural questions which grow out of the dispute and bear on its final 

disposition are presumptively not for the judge, but for an arbitrator, to decide. So, too, 

the presumption is that the arbitrator should decide allegations of waiver, delay, or a like 

defense to arbitrability.” Id. at 84 (quotations, citation, and alterations omitted). 

Howsam is distinguishable. It dealt with an NASD rule about time limits, not 

default under § 3 of the FAA. The time limit was part of the arbitrator’s own rules and 

not contained in a federal statute like § 3. Indeed, the Court in Howsam noted that NASD 

arbitrators, as compared to judges, are “comparatively more expert about the meaning of 

their own rule, [and] are comparatively better able to interpret and to apply it.” Id. at 85. 

The same cannot be said, however, of the meaning of “default” in a federal statute; the 

parties “would likely have expected a court to have decided [this] gateway matter.” Id. at 

83.4

At least one circuit has expressed concern about divesting courts of the power to 

decide whether a default has occurred under § 3. In Marie v. Allied Home Mortgage 

 4

 But even if we were to assume Howsam established a firm rule that default 

determinations under § 3 must be made by arbitrators, the arbitrators did make a finding 

of default here, as will be explained below.

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Corp., 402 F.3d 1, 3 (1st Cir. 2005), the First Circuit considered whether the appellant 

had waived its right to arbitrate due to inconsistent activity in another litigation forum. 

The court analyzed this waiver issue under § 3 because “default” in § 3 includes 

“waiver.” Id. at 13. Citing § 3’s default language, the First Circuit noted “[t]his language 

would seem to place a statutory command on courts, in cases where a stay is sought, to 

decide the waiver issue themselves.” Id.; see also id. at 14 n.10 (“The ‘default’ language 

in Section 3 of the FAA . . . perhaps gives courts a duty, which cannot be shifted by 

contract between the parties, to determine whether waiver has occurred.”). 

In addition to Marie, we find Sink more instructive to decide our case than 

Howsam. In Sink, the Ninth Circuit permitted the lifting of a stay after the district court 

found the defendants had failed to pay their arbitration fees. 352 F.3d at 1199-1200. The 

arbitration entity had cancelled the arbitration due to the nonpayment of fees. Id. at 1199. 

The plaintiff then sought, and the arbitrator entered, default against the defendants. Id. 

The plaintiff moved to lift the stay of district court proceedings, which the court granted 

because the defendants had defaulted. Id. The defendants appealed, arguing it was error 

for the district court to find they had defaulted. Id. The Ninth Circuit affirmed, noting 

the district court’s finding was “in confirmation” of the arbitrator’s determination of 

default and was supported by the record. Id. at 1199-1200. 

Mr. Cahill argues Sink is distinguishable because the AAA in this case did not 

enter a formal default order against him, whereas the arbitration entity did in Sink. We 

disagree. Contrary to Mr. Cahill’s assertion that “[t]he arbitrator’s finding of default in 

Sink was dispositive,” Aplt. Br. at 8, the Ninth Circuit did not rely exclusively on the 

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formal default order. It also relied on the record, which showed the defendants had 

received multiple notices to pay, did not report inability to pay, and had not made 

genuine efforts to make alternative arrangements. Sink, 352 F.3d at 1199; see also 

Garcia, 2010 WL 3259922, at *1 (“The record here shows that Defendant is now in 

default.”). The Ninth Circuit never mentioned Howsam. 

Other courts also have rejected the argument that Sink is distinguishable from 

cases where the arbitrators had not formally entered default. See, e.g., Rapaport, 2011 

WL 1827147, at *2 (discounting the fact the arbitrator had not entered a default judgment 

against the defendant because the record showed the defendant had failed to pay his fees 

and the “[l]ack of a formal ruling of default from the arbitrator does not change [the] 

reality” that “the failure by a party to pay fees in arbitration will prevent that party from 

successfully moving to compel arbitration in the same case in the future”). 

Mr. Cahill also cites Lifescan, Inc. v. Premier Diabetic Services, Inc., 363 F.3d 

1010 (9th Cir. 2004), and Dealer Computer Services, Inc. v. Old Colony Motors, Inc., 

588 F.3d 884 (5th Cir. 2009), to argue the arbitrators, not the district court, should have 

made a formal finding of default. 

In Lifescan, the parties submitted their dispute to AAA arbitration. 363 F.3d at 

1011. A few days before the final hearings, the defendant announced it could not pay its 

share of fees. Id. The arbitrators gave the plaintiff the option of advancing the 

defendant’s fees, but it refused. Id. The AAA suspended the proceedings. Id. The 

plaintiff filed a motion to compel arbitration and order the defendant to pay its share of 

fees under 9 U.S.C. § 4, which the district court granted. Id. The Ninth Circuit reversed, 

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holding “the arbitration has proceeded pursuant to the parties’ agreement and the rules 

they incorporated. There was therefore no basis for an order requiring [the defendant] to 

pay the fees, or compelling arbitration.” Id. at 1013. 

In Dealer, the plaintiff sought arbitration and paid its share of fees. 588 F.3d at 

886. The defendant notified the AAA it did not have adequate funds to pay. Id. The 

arbitrators asked the plaintiff to pay the defendant’s share, but it refused. Id. The 

arbitrators suspended the proceedings. Id. The plaintiff filed a motion to compel 

arbitration and order the defendant to pay its share of fees under § 4, which the district 

court granted. Id. The Fifth Circuit reversed, citing Lifescan and stating the “[p]ayment 

of fees is a procedural condition precedent that the trial court should not review.” Id. at 

887, 889. 

Dealer and Lifescan are distinguishable from our case. First, in both Dealer and 

Lifescan, the arbitrators had asked the party that had already paid its share of arbitration 

fees to pay the fees of the other party, which had refused to pay. Dealer, 588 F.3d at 886; 

Lifescan, 363 F.3d at 1011. Rather than do so, the party that had paid its share sought 

help outside the arbitration proceedings and asked the district court to order the other 

party to pay. Dealer, 588 F.3d at 886; Lifescan, 363 F.3d at 1011. Both district courts 

granted the request. Dealer, 588 F.3d at 886; Lifescan, 363 F.3d at 1011. But the circuit 

courts reversed, leaving the issue of how to allocate fee payment to the AAA, which had 

already decided to ask the paying party to advance the fees for both sides. Dealer, 588 

F.3d at 888-89; Lifescan, 363 F.3d at 1012-13. Here, the AAA did not ask Pre-Paid to 

advance Mr. Cahill’s fees. Instead, it terminated the arbitration. Pre-Paid did not ask the 

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district court to order Mr. Cahill to pay. Instead, Pre-Paid asked the district court to lift 

the stay, arguing Mr. Cahill was in default in the arbitration proceedings under § 3. 

Neither Dealer nor Lifescan concerned whether a district court could address that issue—

whether a party was in default—because it was not a question presented in those cases.5

 

Second, in both Dealer and Lifescan, the arbitration panels responded to the 

paying party’s refusal to advance the full fees by suspending, rather than terminating the 

proceedings. Dealer, 588 F.3d at 886; Lifescan, 363 F.3d at 1011. The parties 

conceivably could have continued with arbitration; indeed, no one asked the district 

courts to lift the stay of judicial proceedings. By contrast, the arbitration proceedings 

 5

 Mr. Cahill cites Juiceme, LLC v. Booster Juice Ltd. Partnership, 730 F. Supp. 2d 

1276 (D. Or. 2010), to argue only the arbitrators can decide procedural questions. In 

Juiceme, one of the defendants failed to pay its share of the arbitration costs. Id. at 1278. 

The arbitrator terminated the proceedings. Id. at 1279. The plaintiffs then sued in district 

court. Id. The defendants moved to dismiss, arguing the plaintiffs’ claims were subject 

to arbitration. Id. at 1280. The district court concluded that whether inability to pay 

precluded arbitration was not for the court to decide. Id. at 1283. It distinguished Sink in 

two ways. First, it noted that in its case, “Plaintiffs did not move for an order of default 

in arbitration nor did an arbitrator have any opportunity to make any finding of default.” 

Id. at 1285. Second, “a collateral fee-sharing agreement is at issue here rather than the 

arbitration agreement itself.” Id. The arbitration agreement was silent as to costs, so the 

parties had entered a collateral fee-sharing agreement to split the costs. Id. at 1281-82. 

The parties later disputed this collateral fee-sharing agreement. The court held “the 

effect, if any, on the parties’ arbitration agreement of [the defendant’s] inability to 

continue paying the costs of arbitration as required in a collateral fee-sharing agreement 

. . . is an issue for the arbitrator rather than the Court.” Id. at 1285. 

We are not convinced Juiceme helps Mr. Cahill. Juiceme’s first attempt to 

distinguish Sink fails to recognize that Sink did not rely exclusively on the arbitrators’ 

formal order of default. Further, as we explain later, we believe the arbitrators here did 

make a finding of default. Juiceme’s second way of distinguishing Sink does not apply 

here because Pre-Paid and Mr. Cahill have no collateral fee-sharing agreement. Their 

arbitration agreement refers to the AAA rules, which require parties to split costs. Mr. 

Cahill calls this a “distinction without a difference.” Aplt. Br. at 10. But Juiceme itself 

relied on this distinction to distinguish Sink. The lack of a collateral fee-sharing 

agreement here makes our case more analogous to Sink. 

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here were terminated, and there is no indication the AAA has left open the possibility for 

the proceedings to continue. 

We hold in the circumstances of this case that the absence of a formal finding of 

default by the arbitrators does not preclude the district court from making that 

determination under § 3. 

c. Even if the question of default is left to the arbitrators, the arbitrators here 

found Mr. Cahill was in default. 

Even assuming the issue of default must be left to the arbitrators, the arbitrators in 

this case found that Mr. Cahill was in default. Rather than alter the payment schedule, 

order Pre-Paid to pay Mr. Cahill’s share, or relieve Mr. Cahill of his obligation to pay, the 

arbitrators first suspended and then terminated the proceedings and closed the case. As 

the district court found, this termination constituted a finding of default because it was 

the result of Mr. Cahill’s failure to pay. See App. at 600 (“[A]lthough no order of default 

was entered, it is difficult to see termination of the proceedings under such circumstances 

as anything other than a declaration of default.”); id. at 603 (“It is clear under these 

circumstances that the arbitrators considered Cahill’s failure to pay to be a default in 

arbitration . . . .”); see also Garcia, 2010 WL 3259922, at *3-4 (noting that although the 

arbitrator did not take the “affirmative action” of entering a default, “[t]here is no other 

description the Court can find for this self-created situation other than ‘default’”); 

Rapaport, 2011 WL 1827147, at *2 (noting that although the arbitrator had not “formally 

entered an order of default against him due to his inability to pay,” the arbitrator’s 

termination of the arbitration for this reason nevertheless constituted a finding of default, 

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and the “[l]ack of a formal ruling of default from the arbitrator does not change this 

reality”). 

Mr. Cahill argues that even if the termination constituted a finding of default, the 

arbitrators did not know which party had failed to pay and their termination thus could 

not have been a finding of default against Mr. Cahill specifically. We disagree. The 

district court did not clearly err in finding the arbitration panel knew of Mr. Cahill’s 

failure to pay. Although the relevant emails were between the Director of ADR Services 

at the AAA and Mr. Cahill’s attorney, the emails permitted the inference that the Director 

informed the arbitrators of Mr. Cahill’s failure to pay. See App. at 515 (stating in an 

email “[i]f payment is not received by the end of the week, Friday, June 21, 2013, I will 

be advising the arbitrator that the first deposits have not yet been received.” (emphasis 

omitted)); id. at 441 (stating in an email from the Director that “[b]y direction of the 

Panel, we have closed our file”). 

Even if we assume the arbitrators did not know, the district court could determine 

for itself, as explained above, which party was in default, as evident from the record. See 

Rapaport, 2011 WL 1827147, at *2 (observing that, although the record was insufficient 

to determine the correctness of the defendant’s contention that the AAA “simply closed 

the arbitration because neither party paid the arbitration fees,” it was “evident from the 

limited record available” that defendant was responsible for paying the deficient fees 

“and that the termination resulted from his lack of payment” (emphasis and quotations 

omitted)); Brandifino v. CryptoMetrics, Inc., 896 N.Y.S.2d 623, 625, 631 (N.Y. Sup. Ct. 

2010) (finding party in default as a matter of fact where arbitrators simply closed the 

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arbitration due to nonpayment, but the opposing party had “attache[d] an AAA invoice” 

as “evidence that it is Respondent who owes the outstanding fees”).6

 

III. CONCLUSION 

We have jurisdiction under 9 U.S.C. § 16(a)(1)(A). We therefore deny the motion 

to dismiss. The district court did not err in lifting the stay under 9 U.S.C. § 3 because the 

arbitration “ha[d] been had in accordance with the terms of the agreement” and Mr. 

Cahill was “in default in proceeding with such arbitration.” 9 U.S.C. § 3. We therefore 

affirm.7

 6

 The AAA rules did not require Pre-Paid to advance Mr. Cahill’s payment. See

App. at 487 (“If arbitrator compensation or administrative charges have not been paid in 

full, the AAA may so inform the parties in order that one of them may advance the 

required payment.” (emphasis added)). The fact Pre-Paid could have volunteered to pay 

Mr. Cahill’s share of the fees does not negate that Mr. Cahill was in default. See 

Rapaport, 2011 WL 1827147, at *3 (“[T]he fact that the AAA arbitration rules allow the 

arbitrator to ask [the plaintiff] whether [the plaintiff] would like to pay in order to prevent 

termination does not create an obligation for [the plaintiff] to do so, nor does it change 

the fact that [the defendant] owed the unpaid fees.”); Garcia, 2010 WL 3259922, at *1 

(“Plaintiff could absolve the Defendant of that default but chooses not to. Therefore, the 

FAA no longer compels us to dismiss or stay this case for arbitration. And we choose not 

to.”). 

7

 Our disposition is consistent with the purposes of arbitration: 

[W]hen the purpose of arbitration—to provide a cost-effective and efficient 

means of resolving a claim—is thwarted by a party’s default in failing to 

pay the required fees[,] the Court believes that the paying party’s right to 

have its dispute adjudicated and not to be unreasonably held at the mercy of 

a nonpaying party outweighs the strong presumption in favor of arbitration 

. . . . 

Brandifino, 896 N.Y.S.2d at 630. Indeed, the party that seeks a stay of federal litigation 

so as to proceed through arbitration typically “is careful to preserve its right to arbitrate 

by timely paying the fees required by the arbitration process, by not litigating elsewhere, 

and by faithfully abiding by the supposedly ‘speedy’ and ‘summary’ procedures afforded 

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to the parties at arbitration.” Garcia, 2010 WL 3259922, *2. Here, Mr. Cahill originally 

sought a stay of the district court proceedings to pursue arbitration. But then he failed to 

meet the AAA’s fee requirements. Now he seeks to keep the stay in place for more 

arbitral proceedings, which he thwarted in the first place. 

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