I currently have four cases in my list in which one party moves to compel arbitration, and the other party claims that the movant has waived (forfeited?) the right because it has litigated too long or too energetically. I thank Tamar Meshel, whose Arbitration Substack is the source of my list. Here’s the short version:
The Fifth Circuit held in an unpublished opinion, Global Advantech Resources Ltd. v. Brown, that defendants had waived their arbitration rights by repeatedly requesting dismissal with prejudice, by raising thirty-two affirmative defenses in their Answer without reserving a right to seek arbitration, and by engaging in merits-based discovery.
In Parkin v. Avis Rent a Car System, LLC, the Third Circuit granted an appeal from a denial of a motion to compel arbitration of a putative class action, finding that filing a motion to dismiss and conducting discovery did not constitute an implied waiver of their right to arbitrate.
In Salvatora v. XTO Energy Inc., the Third Circuit also granted a an appeal from a denial of a motion to compel arbitration despite the fact that defendant litigated for 55 months after class certification before moving to compel arbitration.
In Uhl, et al. v. Roblox Corporation, the Ninth Circuit ruled, over a dissent, that the district court did not err in finding that defendant waived its right to compel arbitration by litigating for almost a year, removing the case to federal court, and moving to dismiss on the merits.
The question for us is what standard applies in these cases and are the courts applying the standard consistently? To prevent this post from getting overlong, I will just discuss the first two cases in this post and continue with a second post on the other two cases next week.
In the Fifth Circuit case, Global Advantech Resources Ltd. (GAR) alleged that defendants disclosed GAR’s proprietary and confidential information to state and federal regulatory agencies without GAR’s authorization. GAR’s allegations rest on a November 2018 email in which one of the defendants who settled apologized for having done that very thing. A suit was filed in November 2022 and the complaint was amended, adding new defendants, including the Brown Defendants who later moved to compel arbitration, in May 2023. Defendants filed a motion to dismiss, alleging both lack of personal jurisdiction and failure to state a claim. When that motion was denied in September 2024, defendants filed their Answer, asserting thirty-two defenses and affirmative defenses and demanding a jury trial. In February 2025, defendants filed a renewed motion to dismiss. The District Court denied that motion and the parties conducted a deposition in June. In July, GAR notified the court of settlement with some of the defendants and sought an extension of discovery, which the Brown Defendants did not oppose. In August, the Brown Defendants filed a motion seeking transfer to the District of Idaho or, in the alternative, compelled arbitration. The District Court denied that motion, and an interlocutory appeal followed in September 2025.
Before turning to the merits, the Fifth Circuit’s per curiam decision chided the District Court for its “failure to provide even a summary explanation of the legal and factual bases for its ruling.” The panel soldiered on, piecing together sufficient information to conclude that the basis for the District Court’s denial of defendants’ motion was their waiver of the right to arbitrate.
On the merits, waiver is an intentional relinquishment of a known right. The right to arbitrate is waived through conduct inconsistent with the right such as having “substantially koked the judicial process.” After Morgan v. Sundance, which we discussed here, the non-moving party does not need to show that they were prejudiced by delay. This is a totality of the circumstances test and, reviewing the procedural history already recounted, the Court was persuaded that the District Court had correctly concluded that Brown Defendants had eked the judicial process and thus waived the right to compel arbitration. The Brown Defendants had been in possession of the non-disclosure agreement at issue since the onset of the litigation. They thus had knowledge of their right to arbitrate and did not act on it. On two occasions, all defendants moved to dismiss without invoking the right to arbitrate. The Brown Defendants did not merely participate in discovery; they took a deposition and agreed to extensions of deadlines for discovery before first invoking their right to arbitrate more than two years after they were added as defendants in the case.
The Third Circuit case involving Avis Rent A Car System, LLC (Avis) was brought by two customers who purported to represent a class. The named plaintiffs actually rented through Budget Rent A Car (Budget), an Avis sister company, and there is a third defendant, the Avis Budget Group, Inc. (ABG). Avis itself was dismissed from the case without prejudice. For simplicity, we will just refer to the Defendants, even though the motion to compel seems to be brought by only Budget and ABG. Plaintiffs filed their complaint in September 2022, alleging breach of contract, fraudulent misrepresentation, and violations of a state consumer protection statute in connection with representations that the Defendants made about supplemental insurance coverage. They sought to recover over $5 million on a class-wide basis. The Defendants proceeded with discovery, including depositions of the named plaintiffs, while expressly reserving their right to compel arbitration. The District Court denied Defendants’ motion to compel, and the Defendants took an interlocutory appeal.
Here, as in the Fifth Circuit case, the Defendants brought a motion to dismiss, and the grounds for the motion were substantive. Only in a footnote to their reply brief did the Defendants reserve their right to compel arbitration. However, they asserted their right to compel arbitration in their Answer and in various documents relating to discovery. The District Court dismissed two of the three claims, allowing the breach of contract claim to proceed.
The Defendants deposed the two named plaintiffs in February 2024, and they moved to compel arbitration in April of that year. There were grounds other than waiver that could have been the basis for the District Court’s denial of the motion. For one thing, in reliance on the Third Circuit’s precedent in Bacon v. Avis Budget Group, Inc., plaintiffs argued that they could not be bound by an arbitration clause contained in a document they did not see until after they signed the rental agreement. The District Court denied the motion based on waiver and did not address the other grounds for denial.
While the appeal was pending the Third Circuit decided Valli v. Avis Budget Group, Inc. There, the District Court concluded that defendants had impliedly waived their right to compel arbitration after seven years of litigation. However, the Third Circuit ruled that a movant can preserve a known but presently unenforceable arbitration right by providing “clear, reasonably prompt record notice of its intent to exercise its arbitration right,” followed by a prompt motion to compel once the arbitration right becomes enforceable. In that case, the Third Circuit concluded that the sequence of events did not suggest intentional relinquishment of the right to arbitrate, and the case was remanded to address other bases for denying the motion to compel. The Court in Parkin reads Valli as supporting its position that an express reservation of the right to arbitrate “cuts strongly against a finding of an implied waiver.” But an express reservation does not rule out a waiver in every case. By a circuitous path, the Court arrives at a position not too different from the totality of the circumstances test that the Fifth Circuit employed:
The more that a party with a right to arbitration seeks to resolve the dispute through litigation, the more likely it is that the party has intentionally relinquished its right to arbitration.
Sometimes, the Court explains, there needs to be factual development before a party can move to compel arbitration. That was the case here, as the enforceability of the arbitration clause turned, under Bacon, on the named plaintiffs’ knowledge of the existence of an arbitration clause. Only after plaintiffs had been deposed could the Defendants be confident that they had a basis to compel arbitration. That is so even though Defendants filed their motion to dismiss before expressly reserving their right to arbitrate. While that choice does signal a preference for litigation over arbitration, given that Defendants’ right to compel arbitration was unclear, the choice was not whether to proceed in litigation but how to proceed in litigation. As in Valli, the Third Circuit did not grant the motion to compel. Rather, it remanded the case to the District Court to consider the remaining issues relevant to the motion to compel arbitration.
The Court makes good arguments, but I remain uneasy. When I was in practice, I got a taste of arbitration. My role was to draft motions to dismiss claims brought before arbiters in which our clients, securities brokers and analysts, were defendants. The partners warned me in advance that we would never win on a motion to dismiss before an arbiter. The charitable explanation for that was that arbiters want to allow claimants to have their say before an adjudicatory body. The actual audience for my motions was the plaintiffs’ attorneys, who may learn from my brief for the first time what a total loser their claim was and offer to settle for pennies on the dollar. When they did so, I was furious because the claim was worth nothing, but the client was delighted, and I was instructed not to be in the client’s presence, unless I were on a handtruck trussed up like Hannibal Lecter.
I don’t know how generalizable my experience is, and reliable data on the matter is hard to find, but if it is true that arbiters are far less likely to dismiss claims than courts, then it seems like the Court allowed Defendants to have their cake and eat it too. They got the District Court to dismiss two of three claims. That accomplished, Defendants then got enough information in discovery to proceed with their motion to compel arbitration. The District Court opinion indicates that the arbitration clause includes a class action waiver, so if Defendants succeed on their motion to compel arbitration at this point, they may be facing two individual arbitration claims rather than a $5 million class action. Moreover, it’s hard to see how plaintiffs will show harm on their breach of contract claim. I assume the statutory claim was what would have gotten the plaintiffs their recovery and, perhaps more importantly, attorneys’ fees. It seems willfully naive to ignore that context.
Defendants could have moved to compel right out of the box and moved, in the alternative, for limited discovery relevant to the issue of whether the claims were arbitrable. The Court acknowledges in a footnote that this would have been possible, but it did not regard Defendants’ failure to follow that course as indicative of an inclination to litigate rather than arbitrate. In the abstract that might be so, but in this particular case, it seems indicative of a strategy that, if I am right about courts being more inclined to dismiss claims than are arbitral bodies, prejudiced Plaintiffs.
There is also a substantive tension between the District Court and the Third Circuit on the relationship between knowledge and intention in the waiver decision. Both consider all conduct starting from when the party seeking to arbitrate knows that claims could be arbitrable. However, the Third Circuit asks what that conduct shows about intent, and it treats an express reservation, together with uncertainty about whether the clause is enforceable, as making it difficult to infer an intent to relinquish the right to arbitrate. It said it would be “very difficult, if not impossible” to find waiver of a reserved right before the facts bearing on arbitrability are resolved. That allocates the risk of uncertainty to the plaintiffs, even though the uncertainty here was of the defendants’ own making. The clause sat in a rental jacket delivered after the rental form was signed. The Third Circuit’s position does not promote arbitration; it promotes litigation tactics that give the party that drafted the arbitration clause the best of both worlds.
Stay tuned for two more cases next week.
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