Business Litigation & Dispute Resolution

Four Recent Second Circuit Decisions Make Arbitration Just Another Contract

5 Min Read By: Scott Kessler 5 days ago

In Brief

Arbitration clauses require genuine assent at the point of contracting; constructive notice buried in later materials or cluttered interfaces will not survive scrutiny in the Second Circuit.
Broadly worded arbitration clauses will not necessarily reach statutory claims, such as antitrust or consumer protection theories, that are conceptually distinct from the underlying transaction.
A party that litigates in court before moving to compel arbitration now runs a greater risk of waiver, because the Second Circuit no longer requires a showing of prejudice to find that the right was forfeited.
Once arbitration is underway, courts will generally decline to intervene on procedural matters such as fee allocation, leaving those disputes to the arbitral forum.

The U.S. Court of Appeals for the Second Circuit decided four arbitration cases in 2025, each addressing a different piece of the process: agreement formation, scope, waiver, and judicial oversight of ongoing arbitration proceedings. Individually, they generated the usual case-specific commentary. But read together, they tell a bigger story: The Second Circuit is done treating arbitration agreements as a special category of contract that gets the benefit of the doubt. Going forward, they will be evaluated like any other agreement.

You Need Real Consent

Start with how agreements get made. In Davitashvili v. Grubhub Inc.,^[1] the court examined Grubhub’s checkout page and arbitration clause through a consumer-protection lens. In particular, the court focused on where the hyperlink to the arbitration provision sat, how cluttered the screen was, and whether the prompt was clear enough to put a reasonable user on notice. Under the circumstances presented, the clause survived—but barely. Judge Pérez wrote separately to warn that the page was “likely the high-water mark” for enforceability. In other words, a slightly more jumbled checkout screen likely would have defeated the clause altogether.

In Sudakow v. CleanChoice Energy, Inc.,^[2] the Second Circuit went further. In this decision, a company mailed an arbitration clause in a “Welcome Package” weeks after the customer had already signed an enrollment agreement, and nothing flagged the new terms. Simply receiving the Welcome Package and continuing to pay for electricity were not enough, the court held, to establish assent to arbitration.

The bottom line from both cases is that if you want an arbitration clause to survive a challenge in the Second Circuit, you need genuine assent at the point of contracting because constructive notice buried in later materials is not enough.

Broad Language Won’t Cover Every Claim

Davitashvili also addresses what arbitration clauses actually cover. Grubhub’s clause was extremely broad, covering disputes that “in any way relate to your use of the Platform.”^[3] Nonetheless, the court held that antitrust claims about anti-price-competition provisions between Grubhub and restaurants lacked a sufficient connection to an individual customer ordering dinner through the Grubhub app. Judge Sullivan dissented, arguing that a more lenient “meaningful nexus” standard should apply, while the majority required a more substantial link. The practical upshot is that where statutory claims (for example, antitrust, consumer protection, or securities claims) are conceptually distinct from the transaction governed by the general terms of service, you should not assume that a broadly worded arbitration clause will sweep them in.

Pick Your Forum Early or Lose It

Doyle v. UBS Financial Services, Inc.^[4] changed the Second Circuit’s approach to waiver of the right to arbitrate. Previously, a party could often avoid the waiver as long as the other side was not prejudiced by delay in seeking arbitration. Doyle removed that requirement, following the Supreme Court’s 2022 decision in Morgan v. Sundance, Inc.,^[5] which stripped courts of the ability to require a showing of prejudice before finding waiver. Now, the waiver turns on whether a party acted inconsistently with the right to compel arbitration. In Doyle, arbitration was waived where the defendant joined a motion to dismiss, waited to see how it played out, and only then moved to compel arbitration after an adverse decision. The days of “testing the waters” in court before falling back on arbitration appear to be over.

Once You’re In, You’re In

Frazier v. X Corp.^[6] addresses what happens after arbitration has started. In a mass-arbitration dispute involving former Twitter employees, the district court ordered the company to pay arbitration fees as assessed by JAMS. The Second Circuit reversed, holding that fee allocation is a procedural question for the arbitral forum to address; it was not a “failure, neglect, or refusal to arbitrate” that courts may remedy under the Federal Arbitration Act. The decision aligns the Second Circuit with the Third, Fifth, Ninth, and Eleventh Circuits. Because companies facing thousands of individual arbitration demands can be forced to pay millions of dollars in filing and administrative fees before the merits are even considered, court-ordered fee payments have become a central pressure point in mass-arbitration campaigns—and that lever has now been limited.

What It All Adds Up To

The pattern is clear. At every stage (formation, scope, waiver, and judicial oversight), the Second Circuit is applying the same basic principle: an arbitration agreement is a contract, and it gets treated like one. You need real consent. Your clause covers what it says it covers, not everything you wish it covered. You have to commit to arbitration early or risk losing it. And once the arbitration is underway, courts generally will not step in to manage the proceeding.

The immediate implication is a shift in leverage. Consumers and employees gain more room to challenge arbitration at the front end (especially where assent is imperfect or the clause is presented late), and plaintiffs with statutory claims may more often keep at least some theories in court when the dispute is only loosely connected to the underlying transaction. Businesses, by contrast, lose some of the “margin for error” that historically made arbitration a reliable default—and they lose the ability to wait and see how a case develops before invoking the clause.

None of this means that the Second Circuit is hostile to arbitration. Properly implemented, arbitration remains a powerful tool. But these recent 2025 decisions clarify who is likely to win and who is likely to lose. The practical takeaway is straightforward: make assent unmistakable; draft scope with precision; move to compel early; and expect procedural fights to be decided in arbitration, not federal court.