Preserving Future Arbitration Rights After Valli v. Avis Budget Group
Arbitration clauses are often drafted for exactly the kinds of high-volume disputes that later show up as class actions. But class procedure creates a recurring strategic problem: the parties most likely bound to arbitrate may not be “in” the case yet in a way that allows a court to compel them. In that window, litigation still moves forward — motions are filed, discovery happens, mediation occurs, and the record grows. Then, when the procedural “trigger” finally happens (most commonly class certification), the defendant tries to compel arbitration — and the plaintiff argues waiver.
The Third Circuit’s December 16, 2025 decision in Valli v. Avis Budget Group Inc. provides a practical roadmap for preserving future arbitration rights when a motion to compel would have been futile earlier. The holding is especially useful for counsel litigating putative class actions where arbitration agreements exist for some (but not all) putative members — and where the enforceability of arbitration hinges on a foreseeable procedural event, like certification.
This post focuses on the single most important takeaway for attorneys and clients who want arbitration to remain viable: when arbitration cannot yet be compelled, the right still must be actively preserved — on the record, early, and repeatedly — and then invoked promptly when it becomes enforceable.
The dispute that produced the rule
The plaintiffs brought a putative class action against Avis Budget Group and related entities, alleging that Avis’s policy for handling traffic fines and charging administrative fees violated the New Jersey Consumer Fraud Act and supported unjust enrichment claims.
Key timing mattered:
The lawsuit began in 2014, based on rentals predating any arbitration provision at issue.
On April 1, 2016, Avis updated its rental terms to add a broad arbitration clause with an individual-arbitration requirement and class-action waiver (and a “small claims” carve-out). The clause applied prospectively — it did not cover the named plaintiffs’ 2014 rentals.
The case proceeded through motion practice, discovery, and mediation. Avis later asserted arbitration and the class waiver as affirmative defenses in its answers.
Years later, plaintiffs sought class certification and defined a class period extending “through the Present,” which for the first time clearly swept in renters who rented after April 1, 2016 and thus were potentially arbitration-bound.
The district court ultimately certified a subclass in October 2023 and — relying on Third Circuit precedent — concluded that Avis had waived arbitration by litigating for years without moving to compel.
Avis moved to compel bilateral arbitration in February 2024, after certification and after the Rule 23(f) process played out, but the district court denied the motion on waiver grounds.
The Third Circuit reversed, vacating the waiver ruling and remanding for the district court to consider enforceability issues it had not reached.
The core legal problem: “Futility” does not mean “hands off”
After Morgan v. Sundance, federal courts cannot require a showing of prejudice to find waiver of arbitration rights — the focus is on whether the right-holder acted inconsistently with arbitration. Valli applies that post-Morgan framework, but keeps an important concept alive: futility can excuse a delayed motion to compel when it would have been “almost certain to fail.”
Here’s the twist that matters for preserving future arbitration rights:
In some cases, futility exists because the law blocks arbitration until a later change (as in earlier cases applying Concepcion).
In Valli, futility existed for a different reason: the court could not compel absent, unnamed class members to arbitrate before certification because those people were not yet within the court’s power for that purpose.
That distinction drove the Third Circuit’s key holding:
When enforceability of the right to arbitrate depends on a foreseeable procedural event (like class certification), futility excuses only the failure to seek judicial action the court could not grant — it does not erase the relevance of the party’s pre-event litigation conduct.
So the question becomes: what must be done before the trigger event to avoid a later waiver finding?
The Third Circuit’s preservation rule: early record notice + prompt post-trigger action
Valli answers that question with a practical standard:
Give clear, reasonably prompt record notice of an intent to invoke arbitration once the defendant knows arbitration may matter for at least some claims or members — even if a motion to compel would be futile at that stage.
Move promptly to compel arbitration once the foreseeable procedural event occurs and the motion is no longer futile.
This two-step approach is the heart of “preserving future arbitration rights.” It is not enough to privately intend to arbitrate. It is not enough to hope futility will excuse years of silence. Preservation requires a record.
What “record notice” looks like in real litigation
The opinion provides several concrete examples of actions that helped Avis avoid waiver:
1) Plead arbitration early — and treat it like a real defense, not boilerplate
Avis pleaded arbitration and the class-action waiver as affirmative defenses in its answer. The Third Circuit treated that as meaningful, not as a throwaway line, particularly because Avis reiterated its position over time.
Practice implication: an arbitration defense should be pled early, prominently, and in plain terms that signal genuine intent.
2) Reassert the intent to arbitrate as the case evolves
As class certification became real — particularly once plaintiffs defined the class period to include post-2016 renters — Avis repeatedly argued that many putative class members were subject to arbitration and that this created typicality and adequacy problems. Those filings served as ongoing record notice.
Practice implication: preservation is not “set it and forget it.” As pleadings and class definitions evolve, the arbitration position should be refreshed on the record.
3) Even substantial litigation activity may not equal waiver if the record is clear
The district court relied heavily on Avis’s litigation activity — including a motion to dismiss, discovery participation, and mediation. The Third Circuit did not say such activity can never support waiver. It said the waiver inference collapses when the record consistently dispels uncertainty about intent to arbitrate.
Practice implication: the risk is not simply “doing litigation things.” The risk is creating a record that reasonably suggests an election to litigate instead of arbitrate.
Promptness after the trigger event: don’t drift after certification
Even with good pre-certification preservation, Valli reinforces that delay after the triggering event can still be dangerous.
Here, roughly four months passed between certification and the motion to compel — but the Third Circuit found the timing reasonable in context, including the Rule 23(f) petition process and the district court’s scheduling.
Practice implication: once certification happens (or another foreseeable trigger occurs), counsel should treat arbitration as time-sensitive and move as soon as it is procedurally sensible — ideally aligned with the court’s schedule, but without “dead time.”
Practical checklist: preserving future arbitration rights in putative class actions
Below is an attorney-facing checklist derived from Valli’s preservation framework:
Early-stage (when a motion to compel would be futile)
Plead arbitration and class waiver as affirmative defenses in the first responsive pleading whenever plausible.
Make “record notice” explicit in motions, status conferences, or case management statements: the intent is to compel arbitration for arbitration-bound individuals if and when they become properly before the court.
Track the class definition — especially time periods and subgroups — and update the record when the definition sweeps in arbitration-bound cohorts.
Avoid litigation conduct that looks like a merits election without also clarifying the arbitration intent. A motion to dismiss can be filed, but the record should “set the record straight” shortly thereafter.
As certification approaches
Build the arbitration record in class briefing (typicality, adequacy, predominance) where it naturally fits, without overreaching.
Be careful with discovery targeted uniquely at arbitration-bound putative members; discovery aimed at non-arbitrable issues is less likely to support waiver, but targeted arbitration-member discovery can cut the other way depending on context.
After certification (or other trigger event)
Move promptly to compel arbitration once the court has power to act — and explain the timeline in the motion so the court sees the logic.
Avoid delay caused by “waiting to see how things go.” A record of hedging can be devastating in a post-Morgan waiver analysis.
Two additional lessons that matter to clients and counsel
1) “Small claims” carve-outs usually won’t defeat arbitration in large class actions
The plaintiffs argued that the small-claims carve-out exempted claims because each class member’s individual loss was only a few hundred dollars. The Third Circuit rejected that framing, focusing on the aggregated class action posture and the pleaded amount in controversy under CAFA.
For companies and counsel drafting arbitration clauses: carve-outs should be read carefully, but plaintiffs should not assume a small-claims exception is an easy escape hatch in a large aggregated case.
2) Changing arbitration terms during pending litigation can create separate enforceability fights
The plaintiffs also argued the arbitration provision was unenforceable because it was added while the class action was pending — but the Third Circuit held that argument was forfeited because it was not raised below. The court noted, however, that Rule 23(d) issues (communications with putative members) could be litigated on remand if properly presented and supported by a developed record.
For businesses: rolling out arbitration provisions mid-litigation should be approached with extreme care and with counsel involved early, because it can generate a separate, expensive enforceability battle.
Why Valli matters: arbitration is not self-executing
The most important business-facing point is simple: arbitration rights can be lost without an explicit waiver. In class action litigation, the danger zone is the period where arbitration cannot yet be compelled, but litigation is in full swing. Valli provides a disciplined approach:
Preserve early.
Preserve clearly.
Preserve on the record.
And act quickly when arbitration becomes available.
For companies that rely on arbitration programs, and for counsel defending class actions, those steps can be the difference between enforcing individualized arbitration and being locked into years of class litigation.
A closing thought from a dispute-resolution perspective
Arbitration clauses exist to create predictability and manage risk — but predictability depends on preservation. The Third Circuit’s approach in Valli rewards transparency and discourages gamesmanship: if arbitration is the destination, the record should say so early, and the motion should follow promptly when the court can act.
For parties navigating that path, early strategic planning matters. Nationwide ADR routinely helps counsel evaluate dispute-resolution strategy — including arbitration posture, waiver risk, and the procedural moves that preserve options without inflaming costs. For demanding cases where process choices drive outcomes, a deliberate, resolution-driven approach can keep the endgame from being decided by an avoidable waiver ruling.