United States Court of Appeals
For the First Circuit
No. 25-1023
5-STAR GENERAL STORE, a/k/a Bento LLC; MARC ALLEN, INC.; FAST
FORWARD MEDIA, INC.; KENNEDY'S IRISH PUB INC.; CARDEN, INC.;
FRENCH FLORIST, LLC; LUXE FURNITURE, INC.; LUNA'S HOSPITALITY
GROUP, LLC; THE GENT’S PLACE MEN'S FINE GROOMING LLC, on
behalf of themselves and others similarly situated; MEZE LLC,
Plaintiffs, Appellees,
v.
AMERICAN EXPRESS COMPANY; AMERICAN EXPRESS TRAVEL
RELATED SERVICES COMPANY, INC.,
Defendants, Appellants.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
[Hon. Mary S. McElroy, U.S. District Judge]
Before
Gelpí, Thompson, and Montecalvo,
Circuit Judges.
Peter T. Barbur, with whom Kevin J. Orsini, Helam Gebremariam,
David H. Korn, Rebecca J. Schindel, and Cravath, Swaine & Moore
LLP were on brief, for appellants.
Thomas Scott-Railton, with whom Scott C. Harris, Peggy
Wedgworth, Milberg Coleman Bryson, Phillips Grossman PLLC, Deepak Gupta, Matthew W.H. Wessler, Gupta Wessler LLP, Tracey Kitzman,
Song PC, Antony R. Leone, II, John Joseph O'Brien, and Leone Law, LLC, were on brief, for appellees.
Brendan Benedict and Benedict Law Group PLLC on brief as amici
curiae supporting appellees.
August 19, 2026
MONTECALVO, Circuit Judge. Defendants-Appellants
American Express Company and American Express Travel Related
Services Company, Inc. ("Amex") appeal the district court's order
denying their motion to stay litigation and compel arbitration.
Plaintiffs-Appellees include the named plaintiff, a small store
located in Pawtucket, Rhode Island, 5-Star General Store & Deli,
and thousands of other small merchants based throughout the United
States who we will refer to collectively as "5-Star." 5-Star filed
demands for arbitration against Amex in the American Arbitration
Association tribunal ("AAA," colloquially referred to as triple
A), the largest arbitration association in the United States and
one of the associations named in Amex's arbitration agreement with
5-Star. After the district court denied Amex's motion, Amex timely
appealed. This dispute centers on whether the district court
exceeded its authority when it held that Amex defaulted under the
Federal Arbitration Act ("FAA"), 9 U.S.C. § 3, and waived its right
to compel arbitration. As we will explain, we find that the
district court neither exceeded its authority nor erred in finding
that 5-Star waived its right to compel arbitration.
- 3 -I. Background
In August 2023, 5-Star demanded arbitrations in AAA
against Amex under an existing arbitration agreement.1 That month,
5-Star filed demands for arbitration challenging Amex's
"swipe-fee" policies. A swipe fee is a charge levied on merchants
every time a customer uses a credit card to pay them. 5-Star
claims these swipe fees, which are around three percent or more of
each credit card sale, pose a substantial expense to small
merchants. 5-Star's arbitrations challenge certain
"non-discrimination provisions" within Amex's swipe-fee policies
that prohibit 5-Star from "incentiviz[ing] shoppers to use cheaper
payment cards." These provisions, 5-Star alleged, have forced
almost all credit-card-accepting merchants to accept Amex, despite
their burdensome fees.
Before AAA, the parties disagreed about the filing fees
that Amex owed to the tribunal in 5,155 of the demanded
arbitrations, which involve damages and injunctive relief claims.
No arbitrator was appointed in those cases because arbitrators are
appointed after filing fees are paid, and because the parties did
not follow AAA's suggestion to appoint an arbitrator to oversee
the fee dispute. For that reason, an administrator of AAA oversaw
The parties do not dispute the terms of the arbitration
1
agreement. Merchants must agree to Amex's arbitration agreement in order to accept payment by Amex credit card.
- 4 -this dispute. The AAA administrator informed the parties that
under the AAA Commercial Arbitration Rules' Administrative Fee
Schedule, damages claims that request injunctive relief and are
not contested have fees of $3,500 per case.2 After numerous written
exchanges between the parties and the AAA administrator regarding
the fee disagreement -- which took place over several
months -- the AAA administrator issued a determination stating the
fees owed by the parties. The administrator determined that a
filing fee of $3,500 applied to the at-issue arbitrations, with
5-Star responsible for $350 of that total and Amex responsible for
the remaining $3,150.
5-Star paid its share of the $3,500 filing fee, but Amex
refused to pay. Amex continued to dispute the $3,500 fee charged,
asserting that it contested those claims and, therefore, a lower
fee should apply to each case instead.3 During these exchanges,
the AAA administrator repeatedly warned that if the fees were not
paid by the due date -- February 26, 2024 -- "the cases [would] be
administratively closed." On February 29, 2024, pursuant to the
warnings, the AAA administrator informed the parties that the
2The administrator also informed the parties that the initial
filing fees would be smaller for damages claims where additional
injunctive relief was contested by Amex.
3 Amex asserted that a lower fee applied because they
contested those injunctive relief claims, and the administrator
had previously informed the parties that cases with contested
injunctive relief claims are subject to a lower filing fee.
- 5 -claims were "administratively closed for non-payment." The AAA
administrator then held a videoconference with counsel in March
2024, stating that the closure of the cases "was final" and that
the cases were "not subject to reopening."
In March 2024, 5-Star filed a class action complaint in
the District Court for the District of Rhode Island. On behalf of
a class of merchants involved in the arbitrations, 5-Star alleged
that Amex waived its right to compel arbitration in those suits.
5-Star claimed that Amex's refusal to pay filing fees in the
arbitrations before AAA caused those arbitration proceedings to
close and constituted a default under the FAA, 9 U.S.C. § 3, and
a waiver under common law. Amex responded by filing a motion to
stay the district court proceedings under the FAA, 9 U.S.C. § 3,
and to compel arbitration under § 4 in order to place the parties
back before AAA. 5-Star opposed Amex's motion. The district court
denied Amex's motion, explaining that the court first had to
determine whether Amex defaulted under § 3 and holding that Amex
did in fact default. The district court also held that, to the
extent a separate waiver analysis was required, Amex waived its
right to compel arbitration.4 Amex timely appealed.
4 Amex also moved to strike the class allegations in 5-Star's
complaint, but it does not appeal the district court's denial of
its motion to strike. Therefore, we do not discuss the class
allegations further.
- 6 -II. Discussion
A.
Amex requests that the district court stay litigation
here in order to return 5-Star's claims to the AAA tribunal and
restart proceedings there. To achieve that end, Amex must show
1) that the district court exceeded its authority in deciding
whether Amex waived its right to compel arbitration, and 2) that
Amex, in refusing to pay the administrative fees assigned to it,
did not waive its right to compel arbitration by its own behavior
before AAA. We address these questions in the order they arise.
1. Did the district court have the authority to decide whether
Amex waived its right to compel arbitration, thus defaulting in
proceeding with arbitration before AAA under 9 U.S.C. § 3?
We begin by assessing the district court's decision that
it had the authority to determine whether Amex defaulted under 9
U.S.C. § 3, rather than directing that question to an arbitrator,
when deciding Amex's motion to stay litigation and compel
arbitration. We review this preserved issue de novo. See Marie
v. Allied Home Mortg. Corp., 402 F.3d 1, 9 (1st Cir. 2005).
A court is only permitted to stay litigation under § 3
of the FAA if "the applicant for the stay is not in default in
proceeding with such arbitration." Marie, 402 F.3d at 13 (quoting
9 U.S.C. § 3)(emphasis omitted).5 If a court stays litigation, it
5 Section 3 states in full:
- 7 -should also compel arbitration under § 4 of the FAA. See id. And
even though § 4, which covers motions to compel arbitration, does
not include the word default, courts have long advised that § 3
and § 4 should be interpreted together. See id. (collecting
cases). As a result, questions about default are within the
court's ambit because a court must decide whether a party defaulted
to determine whether it should stay litigation and compel
arbitration under the FAA. See id. at 12-13, 14 n.10. And
"'default' has generally been viewed by courts as including a
'waiver.'" See id. at 13 (collecting cases).
Here, the parties disagree about whether the district
court exceeded its power under Marie, which instructs that courts
have the power to "decide waiver issue[s]" themselves, "at least"
when they involve "litigation-related activity." Id. In Marie,
we found that a party's participation in earlier proceedings before
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 (emphasis added).
- 8 -the Equal Employment Opportunity Commission ("EEOC") was
litigation-related activity, so the district court, not an
arbitrator, was empowered to decide whether a party's
participation in those proceedings constituted a waiver of its
right to compel arbitration. Id. at 13-14. This was because, in
Marie, the court was well-suited to answer the question and it
promoted efficiency. Id. at 14. Here, Amex contends that the
district court exceeded its authority because Amex's failure to
pay fees to AAA is not a "litigation-related activity" under Marie,
while 5-Star claims the failure to pay fees to AAA is a
litigation-related activity.
As we will explain, we view Amex's repeated failure to
pay arbitration fees to AAA for the claims here -- before an
arbitrator was assigned and resulting in AAA's administrative
closing of the cases -- to be the sort of litigation-related
activity discussed in Marie. The claims before us are the same
claims that 5-Star attempted to bring before AAA, and in each one
of those claims, Amex refused to pay the fees to open the
arbitration despite the AAA administrator's repeated warnings that
the cases would be closed without Amex's payment. Like the
activity in Marie, the activity here thus "arises out of conduct
within the very same litigation in which the party attempts to
- 9 -[now] compel arbitration."6 Id. at 13. And here, like in Marie,
the efficiencies weigh in favor of allowing the district court to
decide waiver. "[A] key purpose of the FAA" is "to permit speedy
resolution of disputes," and Amex is essentially asking for a
do-over of its arbitration before AAA.7 Id. at 14. Here, it would
be inefficient and likely unworkable to send this waiver issue
back to AAA when no arbitrator was ever appointed to adjudicate
5-Star's claims and AAA already administratively closed the cases
following Amex's nonpayment.8 For these reasons, we think that
6 While the activity constituting waiver occurred not before
the district court but before AAA, we explained in Marie that this distinction does not matter. 402 F.3d at 13-14 (explaining that
the fact that the at-issue activity occurred before the EEOC rather than the district court "ma[de] no difference"). Moreover, this
court has already held that activity before AAA can constitute
waiver. In re Tyco Intern. Ltd. Sec. Litig., 422 F.3d 41, 44-45
(1st Cir. 2005).
7 Amex not only argues that it should get a do-over, but also
that AAA's revised mass arbitration rules, which are more favorable to Amex and which became effective after AAA closed these cases,
should now be applied by AAA to these cases. We need not reach
these arguments. However, we note that AAA rules are not
retroactive but "apply in the form in effect at the time the
administrative filing requirements are met for a demand for
arbitration."
8 Amex makes two other arguments in connection with this
issue, but neither has merit. First, Amex contends that the
district court created a catch-22 when it applied Marie to this
case because the district court cannot revisit AAA's fee decision. This argument falls flat because the district court properly
understood that AAA had the power to make a fee determination and administratively close the arbitrations for nonpayment, while the district court had the power to determine whether that nonpayment constitutes a default under § 3 of the FAA. Amex also argues that the district court's extension of Marie to "encompass[] all issues concerning whether failure to pay arbitral fees constitutes
waiver" created a per se rule and was error. But, this is a
- 10 -the at-issue activity -- Amex's nonpayment of fees despite
repeated warnings from the AAA administrator that the cases would
be closed without payment -- is litigation-related activity under
Marie. Because the district court "at least" has authority to
determine whether a party waived its right to compel arbitration
when the at-issue activity is a litigation-related activity, on
the facts of this case, the district court had the authority to
determine whether Amex defaulted under § 3 of the FAA.9
misreading of Marie, and the district court's order only applied
to the specific facts here.
9 Amex also contends that nonpayment of fees is a procedural
issue and that under Howsam v. Dean Witter Reynolds, Inc., 537
U.S. 79 (2002) procedural issues should be decided by the
arbitrator while substantive issues should be decided by the court. According to Amex, the dispute here implicates a circuit split on whether nonpayment of filing fees should be decided by the court
or the arbitrator. See, e.g., Pre-Paid Legal Servs. v. Cahill,
786 F.3d 1287, 1298 (10th Cir. 2015) (holding that a nonpayment of fee issue should be decided by the court); Dealer Comput. Servs.
Inc. v. Old Colony Motors, Inc., 588 F.3d 884, 887 (5th Cir. 2009) (holding that a nonpayment of fee issue should be decided by the
arbitrator). We do not answer that question today. In Marie, we
explained the import of Howsam and noted that it "did not intend
to disturb the traditional rule that waiver by conduct, at least
where due to litigation-related activity, is presumptively an
issue for the court." 402 F.3d at 14. We follow, as we must, the
holding of Marie, and find only that the failure to pay the
administrative filing fee in this case -- where the claims before us are the same claims 5-Star tried to bring before AAA, where no arbitrator was assigned, where Amex chose not to pay the fees
despite repeated warnings, and where AAA administratively closed
the cases due to nonpayment -- falls into litigation-related
activity under Marie. See 402 F.3d at 9-10, 13.
- 11 -2. Did Amex waive its right to arbitrate, and thus default?
Having determined that the district court had authority
to decide whether Amex defaulted for nonpayment, we now review its
decision that Amex did in fact default. We review that legal
conclusion de novo, but we review the district court's underlying
factual findings for clear error. Joca-Roca Real Est., LLC v.
Brennan, 772 F.3d 945, 947-48 (1st Cir. 2014), abrogated on other
grounds by Morgan v. Sundance, Inc., 596 U.S. 411, 417 (2022).
Amex contends that the district court erred in defining
"default" under 9 U.S.C. § 3 using the dictionary definition rather
than defining default as waiver.10 Amex argues that this was error
because the dictionary definition conflicts with the FAA's
statutory scheme "to make arbitration agreements as enforceable as
other contracts." 5-Star, by contrast, argues that the definition
is consistent with the FAA's statutory scheme, and that Amex is
instead interested in making arbitration agreements more
enforceable than other contracts.
In reviewing the district court's decision that Amex
defaulted, we need not consider the district court's adoption of
the dictionary definition of default because the district court
correctly evaluated default under Supreme Court precedent. As
10 When defining "default," the district court consulted
Black's Law Dictionary's definition, which states that default is "the omission or failure to perform a legal or contractual duty;
esp., the failure to pay a debt when due."
- 12 -discussed, default includes waiver. Marie, 402 F.3d at 13.
Moreover, waiver is "the intentional relinquishment or abandonment
of a known right."11 Morgan, 596 U.S. at 417 (quoting United States
v. Olano, 507 U.S. 725, 733 (1993)). The district court properly
considered this standard. It explained that Amex made the
"deliberate choice not to pay arbitration fees" even after being
warned by AAA repeatedly that the cases would be administratively
closed absent payment. The district court held that this
constitutes waiver, and we agree. Waiver by conduct may be present
where a party's conduct is inconsistent with a future desire to
arbitrate its claims.12 Marie, 402 F.3d at 11-12. We find waiver
by conduct here. The record makes clear that AAA warned Amex
multiple times, over the course of months, that its cases would be
administratively closed without payment. At the same time Amex
does not argue, nor could it, that it did not understand that the
cases would be administratively closed. Amex's refusal to pay the
filing fees set by the arbitrator resulted in the foreseeable (and
11 While Marie is instructive about the power of the district
court to decide whether Amex defaulted under 9 U.S.C. § 3, the
waiver test recited by this court in Marie was later impacted by
Morgan. See Marie, 402 F.3d at 15; Joca-Roca Real Est., LLC, 772
F.3d at 948, abrogated by Morgan, 596 U.S. at 417-19. For that
reason, we apply the test for waiver as discussed by the Supreme
Court in Morgan. 596 U.S. at 417-19.
12 "Like any other contract right, the right to arbitrate may
be waived either explicitly or through an implicit course of
conduct." Toddle Inn Franchising, LLC v. KPJ Assocs., LLC, 8 F.4th 56, 64 (1st Cir. 2021).
- 13 -forewarned) outcome of closure of those arbitrations. Under these
circumstances, we conclude that Amex's conduct was inconsistent
with an intent to arbitrate. Therefore, Amex waived their right
to compel arbitration and thereby defaulted in proceeding with the
arbitration.13
B.
We now turn to the unclean hands doctrine, reviewing for
abuse of discretion the district court's decision that 5-Star did
not have unclean hands. See Vaquería Tres Monjitas, Inc. v.
Irizarry, 587 F.3d 464, 480 (1st Cir. 2009). The district court's
decision on this issue was two-fold. First, it held that Amex
could not raise an unclean hands defense because under the FAA,
the district court first needed to ensure that Amex was not in
"default." Second, the district court found that regardless,
5-Star did not have unclean hands. Amex contests both parts of
this decision, while 5-Star agrees with the district court in full.
We need not decide whether the unclean hands doctrine
applies in this case because in any event, we affirm the district
court's finding that 5-Star did not have unclean hands. When
deciding whether a party has unclean hands, the court considers
whether the party seeking relief engaged in misconduct that is
13Because we hold that Amex defaulted under 9 U.S.C. § 3, the
district court did not err when it denied Amex's motion to stay
litigation and compel arbitration, and we need not reach Amex's
additional arguments regarding waiver.
- 14 -directly related to the merits of the controversy. See Vaquería
Tres Monijitas, Inc., 587 F.3d at 480; Precision Instrument Mfg.
Co. v. Auto. Maint. Mach. Co., 324 U.S. 806, 814–15 (1945). The
record does not suggest that 5-Star engaged in misconduct directly
related to the merits of the controversy. 5-Star participated in
dialogue with Amex and the AAA administrator about the fees owed,
and it paid the fees that the AAA administrator decided were owed.14
For this reason, we find that the district court did not abuse its
discretion when it found that 5-Star did not act with unclean
hands.
III. Conclusion
For the foregoing reasons, we affirm the district
court's order denying Amex's motion to stay litigation and compel
arbitration.
14 While Amex insists that 5-Star failed to pay filing fees
on four separate occasions, it does not suggest that 5-Star refused to pay the invoiced fees at issue here by the deadline AAA set.
- 15 -