Once You Step Over the Line, You Can’t Go Back

by Lionel M. Schooler, FCIArb Jackson Walker LLP1

INTRODUCTION. In Myers v. Papa Texas LLC, 2026 WL 394071 (10th Cir. Feb. 12, 2026), the United States Court of Appeals for the Tenth Circuit addressed the rare issue of the potential consequences to an arbitration proponent for failing to comply with an arbitral organization’s requirements and deadlines.

BACKGROUND. Papa Texas is the entity that franchises and operates “Papa John’s” pizza stores. Mr. Myers was hired by one of its stores as a delivery driver in New Mexico. Before commencing employment, he signed an employment agreement that required him to submit any dispute about his employment to arbitration with the American Arbitration Association (“AAA”).

Mr. Myers later filed a class and collective action lawsuit in the United States District Court for the District of New Mexico in the Summer of 2023, alleging violation of the Fair Labor Standards Act (“FLSA”) and other laws. In response, Papa Texas moved to dismiss and compel arbitration. In reply, Mr. Myers agreed to the motion to compel without responding to it. As a result, by agreement the lawsuit was dismissed without prejudice in August 2023.

INITIATION OF ARBITRATION PROCEEDINGS BEFORE THE AAA. Mr. Myers then proceeded to arbitration in September 2023 by promptly filing the requisite arbitration demand with the AAA and, simultaneously, paying his share of the filing fee (in compliance with AAA Rules on Employment Arbitration Fees).

The AAA then sent a case-opening letter to both parties explaining that Papa Texas’s share of the filing fee was due on October 9, 2023. In boldface type, the letter warned that under the applicable arbitration rules, “the employer’s full share [of the filing fee] is due as soon as the employee meets his or her filing requirements, even if the matter settles or is withdrawn. This notice confirms that employee’s filing requirements have been met.”

At this point, Papa Texas began active settlement discussions with Myers. On the initial due date of October 9, Papa Texas solicited and received from the AAA an extension until October 24 by which to comply with its filing requirements, in light of ongoing settlement discussions.

CONCLUSION OF ARBITRATION PROCEEDINGS BEFORE THE AAA. On October 20, Mr. Myers accepted a settlement offer from Papa Texas. Believing the matter would indeed settle, Papa Texas did not pay the AAA filing fee on October 24. This prompted an October 25 e-mail from AAA stating that if Papa Texas did not pay the filing fee by November 1, AAA would close the file.

After not having heard from the parties by November 1, the AAA on November 9 e-mailed the parties to state that it had closed its file. It further stated that the employer’s failure to comply with AAA Employment Rules would authorize it to “decline to administer any future employment matter involving Papa Texas.” The AAA notice also stated that it was requesting that Papa Texas “remove its (the AAA’s) name from its arbitration agreements.”

POST-ARBITRATION-DISMISSAL EVENTS. Although the parties continued to negotiate the pending wage claim, no settlement was achieved. Accordingly, Mr. Myers filed a second lawsuit against Papa Texas in another District Court in New Mexico. Papa Texas opted to seek to have the claims in that second case compelled to arbitration. In response, Mr. Myers contended that Papa Texas had waived its right to compel arbitration based upon Papa Texas’ alleged waiver of the right to compel arbitration in the wake of its prior failure to pay the arbitration filing fee and the resulting preclusion by the AAA of any further arbitration requests by Papa Texas.

The District Court held that it was unclear whether the AAA would decline to accept the renewed call for arbitration. It therefore stayed pursuit of the claims in court, directing the parties to submit the dispute to arbitration, yet again, to determine the AAA’s position regarding arbitrability.

POST-ARBITRATION-REJECTION EVENTS. In the wake of the District Court’s order, Mr. Myers communicated with the AAA, inquiring whether the AAA would be willing to arbitrate the dispute in the wake of the prior “administrative closure.” Mr. Myers further stated that he refused to consent to reinstatement of the arbitration proceeding. Although the AAA initially re-opened the dispute, it thereafter closed it given Mr. Myers’ refusal to consent.

Mr. Myers then returned to the District Court, requesting that it lift the “arbitration stay.” He supported this request by contending that the AAA’s refusal to proceed with arbitration in the wake of his non-consent meant that the arbitration proceeding was “in default,” and therefore that the District Court was no longer required by the Federal Arbitration Act (“FAA”) to compel arbitration. He reinforced this request by contending that Papa Texas could not satisfy the requirements of 9 U.S.C. §3 of the FAA, which precluded an arbitration proponent from seeking to compel arbitration when it was “in default” in proceeding with such arbitration. Unsurprisingly, Papa Texas disputed its status as being in default, and moved to enforce the arbitration agreement.

The District Court sided with Mr. Myers. It held that Papa Texas’ failure to pay the filing fee in the original arbitration triggered the closure of that proceeding such that Mr. Myers had no duty to consent to a second proceeding. It therefore lifted the stay and proceeded with litigation. Papa Texas timely appealed that Order to the United States Court of Appeals for the Tenth Circuit.

ISSUE PRESENTED. Whether the Court of Appeals could compel the AAA to accept the arbitration. Alternatively, whether the Court of Appeals could require Mr. Myers to consent to the renewed presentation of the dispute to the AAA.

JUDICIAL ANALYSIS. The Myers Court first noted that Section 4 of the FAA, 9 U.S.C. §4, empowers a District Court to enter an order directing that arbitration proceed in the manner provided for in the arbitration agreement. It then turned its attention to FAA Section 3, 9 U.S.C. §3, which focuses upon the authority of a District Court to stay or refuse to stay a dispute pending arbitration. It decided that while Section 3 empowered a District Court to compel arbitration and stay the litigation process, that power was conditioned upon the requirement that the applicant for arbitration (in this case, Papa Texas) not be in default in proceeding with arbitration.

Evaluating the impact of that Section 3 exception, the Myers Court held that a District Court need not order consent to arbitration. It therefore focused upon the issue of whether the District Court correctly declined to order the dispute arbitrated. In doing so, it referred to precedent construing the failure to pay arbitration fees as a default under Section 3. In response, Papa Texas contended that the second lawsuit filed by Mr. Myers was a “different case” from the first lawsuit; in reply, Mr. Myers contended that Papa Texas’ default in the first lawsuit nullified the arbitration agreement “forever and ever.”

The Myers Court rejected Papa Texas’ position, holding that the two lawsuits raised substantively the same issue. From that determination, the Court then determined that the District Court’s focus upon Papa Texas’ conduct rather than Mr. Myers’ conduct as such conduct related to arbitration was proper, particularly the determination that Papa Texas was in default in proceeding with arbitration in violation of FAA §3. It therefore upheld the District Court’s determination that by its default, Papa Texas had waived its right to enforce the arbitration agreement.

CONCLUSION. The Myers decision highlights the vitality of FAA §3 and, more specifically, the risks to any proponent of arbitration that fails to comply with the fundamental requirements of enforcing an arbitration clause.

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1 Mr. Schooler is a former member of the Board of the CIArb North American Branch, and the Immediate Past Chair of the Texas Chapter.