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Duane Morris Takeaways: On January 7, 2026, in Valli et al. v. Avis Budget Group Inc. et al., Case No. 24-3025 (3d Cir. Jan. 7, 2026), the Third Circuit issued a mandate vacating an order from the District Court for the District of New Jersey denying a rental car company's motion to compel arbitration and remanding the action for the District Court to address properly presented challenges to enforceability of the arbitration provisions that it did not reach in its decision. Avis appealed an order from the District Court denying its motion to compel arbitration of the claims of a certified class of renters presenting legal challenges to imposition of fees associated with traffic or parking fines incurred during the rental period. The Third Circuit found that Avis did not waive its right to compel arbitration by participating in litigation for years with the named Plaintiffs (whose rental agreements did not contain arbitration provisions) as Avis asserted its arbitration rights as an affirmative defense in its answers, raised the issue in opposition to class certification, and promptly field to a motion to compel after its Rule 23(f) petition challenging class certification was denied. This decision underscores that where named plaintiffs are not subject to arbitration provisions, but class members may have such constraints, pre-certification conduct preserving arbitration rights is essential to avoid waiver post-certification when arbitration rights are ripe.
Case Background
The named Plaintiff Dawn Valli filed a putative class action in September 2014 challenging Avis' imposition of fees associated with a speeding traffic violation caught by a traffic camera that Avis paid and then charged Plaintiff Valli the $150 traffic fine it covered as well as a $30 administrative fee. Case No. 24-3025, ECF No. 53-3, at 3. The notice that Avis sent to Plaintiff Valli warned that Avis would charge $180 to Ms. Valli's credit card if she did not make timely payment. Id. at 4. Plaintiff Valli brought an action on behalf of herself and other putative class members asserting state law claims including violations of the New Jersey Consumer Fraud Act and unjust enrichment on the theory that Avis deprived renters of an opportunity to contest the traffic violations by paying fines before notifying renters of the infractions and allowing them the ability to contest the fines. Id.
Avis moved to dismiss the complaint several times for failure to state a claim. Id. at 4-5. On April 1, 2016, Avis updated its rental agreement to include a mandatory arbitration provision for disputes arising out of the rental agreement and rental of its vehicles. Id. at 5. After Avis filed a renewed motion to dismiss (which did not mention the arbitration agreement as it only applied prospectively), the District Court denied the motion on May 10, 2017. Id. at 6. On May 25, 2017, Avis answered the First Amended Complaint ("FAC") asserting its arbitration rights as an affirmative defense. Id. In June 2018, Avis allowed Ms. Valli to file a second amended complaint ("SAC") adding another named Plaintiff. Id. at 7. Avis again invoked its arbitration rights as an affirmative defense in its answer. Id.
In July 2019, the two named Plaintiffs moved to certify a class of renters that were required to reimburse Avis for traffic, parking, tolls, or other violations and associated administrative fees. Id. at 8. In support of the motion for class certification, Plaintiffs defined the class period for the first time as September 30, 2008, through the present. Id. In opposition to class certification, Avis argued that the named Plaintiffs—who were not subject to its 2016 arbitration provisions—could not adequately represent the interest of renters that must arbitrate their claims. Id. Avis also argued that, at the motion to dismiss stage, such arguments were not ripe as it was unclear how the named Plaintiffs would define the class and whether it would include renters bound by arbitration agreements. Id. Oral argument on class certification occurred two years later, but Avis asserted the argument that the arbitration provisions defeated class certification. Id. at 8-9. Plaintiffs countered that Avis waived the argument by not having raised it earlier and choosing to participate in the litigation. Id. at 9. The District Court ordered supplemental briefing on the issue. Id. In its supplemental brief filed on September 15, 2022, Avis reiterated that nearly half the members of the putative class signed arbitration agreements and the named Plaintiffs (who had not) could not fairly represent the interests of those putative class members. Id. Avis filed another brief approximately two weeks later, arguing that it had preserved its arbitration rights by raising arbitration as an affirmative defense in its answers to both the FAC and SAC. Id. Avis also emphasized that Plaintiffs' July 2019 class certification motion was the first time they identified arbitration-bound renters as putative class members. Id.
In October 2023, the District Court certified a subclass of individuals that rented an Avis vehicle from September 30, 2008, through the present and whose rented vehicle was the subject of an alleged parking, traffic, tolls, or other violation, where the class member was charged for such fine, penalty, and court costs, and/or associated administrative fee. Id. at 10. Avis filed a Rule 23(f) petition challenging certification of the class that was denied in November 2023. Id. at 10-11. Three months later, in February 2024, Avis moved to compel individual arbitration of the relevant class members' claims. Id. at 11. Avis disputed that it waived its right to enforce its arbitration agreements arguing that any earlier motion to compel would have been directed at unnamed class members and would have therefore been futile before class certification. Id. On September 30, 2024, the District Court denied Avis' motion to compel arbitration and faulted Avis for failing to formally seek to enforce arbitration until after the class had been certified. Avis appealed that decision to the Third Circuit.
The Third Circuit's Decision
The Third Circuit found that Avis' pre-certification litigation conduct was indeed relevant to the waiver issue, but this conduct indicated that the company had adequately preserved its arbitration rights.
The Third Circuit found that "[c]entral to th[e] case" was the "interplay between" the doctrine of waiver and futility. Id. at 12. The Third Circuit resolved the parties' dispute as to whether Avis' pre-certification conduct was relevant to the issue of waiver by answering this question in the affirmative. Id. at 14. In support of that finding, the Third Circuit found it notable that Avis "knew" of its prospective right to enforce arbitration "even if it lacked a present ability to enforce it pre-certification." Id. at 19. The Third Circuit reasoned that the purpose of the waiver doctrine is to prevent "gamesmanship" or permitting a defendant to litigate aggressively for a merits advantage so that it can pivot to arbitration "the moment it becomes advantageous to do so, all without consequence." Id. at 20. Yet, the Third Circuit found that the doctrine of futility "excuses the failure to file a formal motion to compel as to the unnamed class members" because to do so would be futile given that a District Court lacks jurisdiction to grant such a request. Id. The Third Circuit next addressed what a party must do to preserve future arbitration rights it cannot presently enforce. Id. at 21. The Third Circuit held that to implicitly waive arbitration rights, a party must litigate in a way that is inconsistent with a desire to arbitrate.
The District Court had identified two such events: (1) Avis' motion of August 18, 2016 that did not mention arbitration; and (2) Avis' participation in discovery and mediation. Id. at 26. Rejecting the first ground for finding waiver, the Third Circuit opined that it was not until two years later that plaintiffs defined the putative class to include post-April 2016 renters thus the motion to dismiss did not waive its arbitration rights. As to the second ground for finding waiver, the Third Circuit ruled that while Avis did not object to discovery or seek to exclude information concerning arbitration-bound renters, Plaintiffs could identify "only a single instance in which Avis produced information not also relevant to other customers who are not subject to arbitration." Id. at 27. Further, "critically, Avis never sought discovery specifically targeted at arbitration-bound putative class members." Id. at 27-28. The Third Circuit clarified that "discovery and mediation conduct can support a finding of waiver in the appropriate circumstances," but explained that "discovery directed at non-arbitrable claims does not, by itself, waive the right to arbitrate arbitrable claims." Id. at 28. The Third Circuit also found it significant that Avis "repeatedly put its intent to arbitrate on record" by consistently asserting its arbitration rights in opposing certification and reaffirming its stance two years later during oral argument. Id. at 29. The Third Circuit further reasoned that the fact that Avis moved to compel arbitration four months after the District Court's certification decision was prompt enough and "not unreasonable" particularly as Avis' Rule 23(f) petition was still pending. Id. Ten days after the Third Circuit denied the Rule 23(f) petition, the District Court held a status conference on December 14, 2023, setting a deadline of February 2024 for the motion to compel which Avis met. Id. at 29-30.
The Third Circuit stopped short of directing the District Court to compel the relevant class members to arbitrate their claims and did not reach the Plaintiff's claims challenging the enforceability of the arbitration agreements, finding that the District Court relied exclusively on waiver in its decision and remanding the action permitting the District Court to reach the issue of enforceability if properly presented.
On January 13, 2026, the District of New Jersey issued an order implementing the mandate of the Third Circuit and vacating its September 30, 2024 order denying Avis' motion to compel arbitration. A status conference is set for February 2026.
Implications For Class Action Defendants
Where named plaintiffs are not subject to arbitration agreements but defendants suspect that putative class members may be, defendants must act promptly to preserve their arbitration rights even where a motion to compel arbitration is not ripe, by asserting arbitration rights as an affirmative defense in answers to class action complaints and in opposition to class certification (as a basis for lacking commonality, adequate representation, typicality, etc.). The Third Circuit's decision in Avis provides a guidepost for proper preservation of arbitration rights that class action defendants are well-advised to heed.
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