JANE PARKIN; DAVID HUGHES, individually and on behalf of all others similarly situated v. Avis Rent Acar System, LLC

UNITED STATES COURT OF APPEALS FOR THE
THIRD CIRCUIT
No. 25-1385
JANE PARKIN; DAVID HUGHES,
individually and on behalf
of all others similarly situated
v.
AVIS RENT A CAR SYSTEM, LLC;
BUDGET RENT A CAR SYSTEM, INC.;
AVIS BUDGET GROUP, INC.
Budget Rent A Car System, Inc.; Avis Budget Group, Inc.,
Appellants
_____________________________
On Appeal from the U.S. District Court, D.N.J.
Judge Christine P. O’Hearn, No. 1:22-cv-05481
Before: RESTREPO, PHIPPS, and MASCOTT, Circuit Judges
Submitted: Jan. 22, 2026; Decided: August 24, 2026
_____________________________
OPINION OF THE COURT
PHIPPS, Circuit Judge.
While separately visiting the United States, two foreign
nationals rented vehicles from the same rental car company. In
booking those rentals, they were offered a package of
upgrades, which included supplemental liability insurance, and
they chose that package. In formalizing the rental agreement
on site before picking up the vehicles, they each received a
‘rental jacket,’ a folded paper containing additional terms and
conditions of the rental. One of the terms in that rental jacket

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stated that for their chosen upgrade package, supplemental
liability insurance would be provided through an excess
automobile policy issued to the rental car company. Another
of the terms in the rental jacket was a requirement to arbitrate
all claims except those subject to a small-claims exception.
Both customers later came to believe that the rental car
company did not purchase supplemental liability insurance
through an excess automobile policy issued to the company,
but rather it intended to indemnify customers from its own
funds for any supplemental liability claims. On that premise,
they initiated this putative class action against the rental car
company and its parent corporation in the District Court for
breach of contract, fraudulent misrepresentation, and for
violations of a state consumer protection statute. In defending
the case, the rental car company reserved its right to compel
arbitration, and after deposing the two customers in discovery,
it relied on the arbitration clause in the rental jacket to move to
compel arbitration. The District Court denied that motion on
the grounds that the rental car company, by litigating the case
into discovery, had impliedly waived its right to arbitration.
Through this interlocutory appeal, the rental car company
and its parent corporation challenge that ruling. For the
reasons below, on de novo review of the legal conclusion of
waiver, see White v. Samsung Elecs. Am., Inc., 61 F.4th 334,
338 (3d Cir. 2023), we will VACATE the District Court’s order
and REMAND for further consideration of the motion to compel.
FACTUAL BACKGROUND
On separate trips to the United States between September
2016 and November 2019, Jane Parkin and David Hughes,
both citizens of the United Kingdom, rented vehicles from
Budget Rent A Car System, Inc., referred to herein as ‘Budget.’
Budget is a subsidiary of Avis Budget Group, Inc., abbreviated
herein as ‘ABG,’ and both entities are citizens of Delaware by
incorporation and New Jersey by virtue of the locations of their
principal places of business.

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Instead of making reservations directly with Budget, Parkin
and Hughes used third-party websites to reserve the rental
vehicles. For each rental, which included at least two in
Massachusetts and two in Florida, they selected a rental
package that included additional supplemental liability
insurance for damages caused to third parties.
When Parkin and Hughes arrived to pick up their vehicles,
they were each presented with a rental form by a Budget sales
representative. Those forms listed optional products and
services that each renter had accepted, including supplemental
liability insurance. The forms also stated that the renter has
“reviewed&agreed to all notices&terms here and in the rental
jacket.” Parkin Budget Rental Agreement (JA144); Hughes
Budget Rental Agreements (JA146–47). Both Parkin and
Hughes signed those forms before they each received a rental
jacket from a Budget sales representative.
The rental jackets contained several additional terms and
conditions for the rental agreements. Those included
statements that supplemental liability insurance coverage
would be provided from “an excess automobile policy issued
to Budget.” Mass. Budget Rental Jacket ¶ 22 (JA153); Fla.
Budget Rental Jacket ¶ 22 (JA163). The rental jackets also
included a mandatory arbitration clause that had an exception
for disputes within the scope of a small-claims court’s
authority.
After Parkin and Hughes’s rentals, this Court in Bacon v.
Avis Budget Group, Inc., 959 F.3d 590 (3d Cir. 2020),
addressed the binding effect of an arbitration clause contained
in a rental jacket. In that case, another subsidiary of ABG had
customers sign rental agreements before providing them with
rental jackets. Id. at 595. Under those circumstances, and
based on the application of New Jersey and Florida contract
law, Bacon held that the arbitration clause was not binding on
customers – at least as long as the customer was not on notice

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of the arbitration clause when signing the rental agreement. Id.
at 600–02.
PROCEDURAL HISTORY
In September 2022, Parkin and Hughes filed this three-
count putative class action in the District Court against Budget,
ABG, and an affiliated corporate entity.1 Their suit was not a
coverage dispute in the traditional sense – neither of them had
been in an accident, and neither of them had submitted a claim
that Budget denied. Rather, on the premise that they did not
receive supplemental liability insurance coverage through an
excess automobile policy issued to Budget as represented in
the rental jacket, they brought claims for breach of contract,
fraudulent misrepresentation, and violations of the Florida
Deceptive and Unfair Trade Practices Act, see Fla. Stat.
§§ 501.201–501.213. For relief, they sought over $5 million
in damages on behalf of a nationwide class of renters, a class
of renters in Massachusetts, and a class of renters in Florida.
With that amount in controversy and minimal diversity among
the parties, the lawsuit was within the District Court’s diversity
jurisdiction under the Class Action Fairness Act.2
1 That entity was Avis Rent A Car System, LLC, which was
treated as a citizen of Delaware and New Jersey based on the
citizenship of its alleged sole member, ABG. See Zambelli
Fireworks Mfg. Co. v. Wood, 592 F.3d 412, 420 (3d Cir. 2010)
(holding that “the citizenship of an LLC is determined by the
citizenship of its members”). Through a later stipulation by the
parties, Avis Rent A Car System, LLC was dismissed from the
case without prejudice.
2 See 28 U.S.C. § 1332(d)(2)(B); Life of the S. Ins. Co. v.
Carzell, 851 F.3d 1341, 1346 (11th Cir. 2017) (explaining that
minimal diversity jurisdiction is satisfied if “any member of a
class of plaintiffs is a foreign state or a citizen or subject of a
foreign state and any defendant is a citizen of a State” (quoting
28 U.S.C. § 1332(d)(2)(B))).

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Before answering the complaint, Budget and ABG moved
to dismiss each of the three counts for failure to state a claim
for relief under Rule 12(b)(6).3 With respect to the breach-of-
contract claim, they argued that the allegations were
insufficient to establish a contractual relationship. For the
fraudulent misrepresentation claim, they challenged the
particularity of the pleadings, see Fed. R. Civ. P. 9(b), the
absence of allegations of reasonable reliance on a
misrepresentation, and the failure to allege non-conclusory
facts pertaining to fraudulent intent. And with respect to the
claim under the Florida Deceptive and Unfair Trade Practices
Act, they argued primarily that it was duplicative of the breach-
of-contract claim and was therefore outside the reach of that
statute. Budget and ABG did not mention the possibility of
arbitration in their opening brief, but their reply brief included
a footnote stating that they “reserve[d] the right to move to
compel arbitration.” Defs.’ Reply Mem. of Law in Supp. of
Mot. to Dismiss 4 n.1 (JA49 n.1).
That motion to dismiss had mixed success. After
determining that the allegations of a contractual agreement
were plausible, the District Court denied the motion to dismiss
as to the breach-of-contract claim. See Parkin v. Avis Rent A
Car Sys., LLC, 2023 WL 4045049, at *4–5 (D.N.J. June 16,
2023). But because it concluded that a contract plausibly
existed, the District Court reasoned that the other two claims
were not viable, and it dismissed those. Id. at *5–7.
As the case progressed, Budget and ABG signaled on
multiple occasions that they had an arbitration defense. In
answering the complaint in June 2023, they pleaded, as an
affirmative defense, that the claims against them were barred
3 ABG and Avis Rent A Car System, LLC, which was still a
party to the case at that time and had joined the motion to
dismiss, also argued, unsuccessfully, that they were improper
parties because there were no allegations that Parkin or Hughes
had any interactions with them.

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by the arbitration clause in the rental agreements. In the joint
discovery plan submitted in August 2023, they reserved the
right to compel arbitration “pending further discovery.” Joint
Proposed Disc. Plan 3 (JA93). And in making initial
disclosures later that month, they identified “an agreement to
arbitrate disputes” as relevant to their potential defenses.
Initial Disclosures of Defs. 4 (JA140).
As part of their discovery efforts, Budget and ABG sought
to depose Parkin and Hughes. The parties were unable to
schedule the depositions, but after an order from a magistrate
judge, Parkin and Hughes were deposed in February 2024 in
the United States. During those depositions, both Parkin and
Hughes were asked whether they believed that the information
contained in the rental jackets was part of their rental
agreements with Budget, and they replied affirmatively.
About two months later, in April 2024, Budget and ABG
moved to compel arbitration. In a later-filed memorandum in
support, they argued that based on their deposition responses,
Parkin and Hughes were subject to arbitration because, unlike
the plaintiffs in Bacon, they knew of the arbitration clause in
the rental jackets when signing their rental agreements. Budget
and ABG further argued that because Parkin and Hughes were
relying on the supplemental-liability-insurance provision in the
rental jackets, they were equitably estopped from avoiding the
arbitration clause, which was also contained in the rental
jackets.
Parkin and Hughes opposed that motion on three fronts.
First, they argued that like the plaintiffs in Bacon, they were
not subject to the arbitration clause. Second, they asserted that
even if they were subject to the arbitration clause, Budget and
ABG impliedly waived their arbitration rights by litigating for
a year and a half before moving to compel arbitration. And
third, they contended that even if the arbitration clause applied
and was not waived, their claims fit within the small-claims
exception.

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The District Court denied the motion to compel for the
second rationale that Parkin and Hughes advanced – implied
waiver – and did not address the remaining arguments in the
briefing. Parkin v. Avis Rent A Car Sys., LLC, 774 F. Supp. 3d
707, 714 (D.N.J. 2025). In finding an implied waiver, the
District Court determined that Budget and ABG’s conduct
during the litigation was “inconsistent with a genuine intent to
arbitrate,” and that Budget and ABG had “pivoted to
arbitration” approximately eight months into discovery, “when
it became clear that they would not be able to obtain an early
dismissal.” Id. at 713. Because such conduct “demonstrate[d]
a strategic shift rather than a genuine attempt to determine
arbitrability early in the case,” the District Court denied the
motion to compel. Id. at 714.
Through a notice of appeal of that order, Budget and ABG
invoked this Court’s appellate jurisdiction, see 9 U.S.C.
§ 16(a)(1)(C), and in response to that interlocutory appeal, the
District Court stayed the proceedings, see Coinbase, Inc. v.
Bielski, 599 U.S. 736, 741–43 (2023).
During the pendency of this appeal, this Court decided Valli
v. Avis Budget Group, Inc., 162 F.4th 396 (3d Cir. 2025), an
interlocutory appeal of a denial of a motion to compel
arbitration. That case was brought by a putative class against
ABG for fees that its subsidiaries had charged renters for traffic
and parking tickets they received during the rental period. Id.
at 401–02. After litigating the case for over seven years, ABG
moved to compel arbitration based on an arbitration clause in
its post-2016 rental agreements (those from the same time
period as the rental agreements at issue here), and the district
court held that through its conduct during the litigation, ABG
had impliedly waived its right to arbitrate. Id. at 401, 404–05.
In evaluating the implied-waiver issue, this Court accounted
for futility principles and concluded that the implied-waiver
analysis starts at the moment the movant knows of its
arbitration rights as opposed to when the arbitration rights are
enforceable. Id. at 409–10. The Valli decision also

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acknowledged 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. Id. at 410. Based
on those and other principles, Valli vacated the denial of the
motion to compel arbitration and remanded the case to the
district court. Id. at 416. The parties to this appeal received an
opportunity to address the impact of Valli on this case, and they
submitted supplemental letter briefs.
DISCUSSION
A known right to compel arbitration under the Federal
Arbitration Act, see 9 U.S.C. § 4, can be waived only if the
right holder intended to relinquish or abandon that right. See
Morgan v. Sundance, Inc., 596 U.S. 411, 417 (2022)
(explaining waiver as “the intentional relinquishment or
abandonment of a known right” (quoting United States v.
Olano, 507 U.S. 725, 733 (1993))). An express renunciation
of rights is the mainline method of waiver, but arbitration rights
can also be impliedly waived if a right holder “act[s]
inconsistently with an intent to assert its right.” White,
61 F.4th at 339–40. To protect its right against an implied
waiver, a right holder may expressly reserve its right to
arbitrate, and such a reservation cuts strongly against a finding
of an implied waiver. See Valli, 162 F.4th at 410 (recognizing
that after consistent, express reservations, “there is no
uncertainty to resolve by inference and the predicate for
implied waiver largely collapses”). But this Court’s precedent
does not treat a reservation of the right to arbitrate as an
absolute bar to finding an implied waiver of the right – a party
may impliedly waive its right despite an express reservation
when its conduct unambiguously indicates a relinquishment or
abandonment of the right. See id. at 410 n.15 (explaining that
“[n]ominal reservations” will not prevent a finding of waiver
where “a party’s conduct is so inconsistent with an intent to
arbitrate that it evinces an intentional relinquishment”). With
or without a reservation of rights, the analysis of intentionality

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in the context of an implied waiver of a right to arbitration must
also account for the realities that litigation and arbitration are
alternative methods for formal dispute resolution and that a
party with a right to arbitration need not assert that right and
may instead elect litigation. See Michael A. Helfand,
Arbitration’s Counter-Narrative: The Religious Arbitration
Paradigm, 124 Yale L.J. 2994, 3000–01 (2015) (explaining
that “over the past three decades, the Supreme Court’s answer
to” whether “arbitration serve[s] as a viable alternative to
litigation” has been “an unequivocal and emphatic yes”).
Accounting for those, 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.
Accordingly, assessing an implied intention to relinquish or
abandon a known right to compel arbitration once litigation has
commenced depends on the procedural posture of the case and
the conduct of the party asserting the right. See Gray Holdco,
Inc. v. Cassady, 654 F.3d 444, 451 (3d Cir. 2011) (explaining
that the waiver inquiry is “necessarily case specific and thus
depends on the circumstances and context of each case”). If
allegations on the face of a complaint provide a sufficient basis
for a successful motion to compel arbitration, then a defendant
who prolongs the litigation in court instead of moving to
compel arbitration is at risk of impliedly waiving the ability to
compel arbitration based on nothing more than the allegations
in the complaint. See Young v. Experian Info. Sols., Inc.,
119 F.4th 314, 319 (3d Cir. 2024) (explaining that when the
complaint makes clear that “a party’s claims are subject to an
enforceable arbitration clause,” the Rule 12(b)(6) standard
applies).4 When the assertion of the right to arbitrate against a
4 Implied waiver on such facts is a possibility but not an
absolute rule because any determination of implied waiver is
circumstance dependent, and the nature of the continued
litigation matters. For instance, a motion to change venue,
which itself is subject to waiver, see Fed. R. Civ. P. 12(h)(1),

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party depends on the development of a factual record, the lack
of a motion to compel arbitration before the development of a
factual record needed for such a motion is not evidence of an
intention to relinquish or abandon the right, and it would be
very difficult, if not impossible, to find an implied waiver of a
reserved arbitration right before that factual issue has been
resolved. See Valli, 162 F.4th at 409–10 (explaining that a
court may infer waiver when a party’s actions are “inconsistent
with a desire to arbitrate,” but that a party which has reserved
its rights does not impliedly waive its right to arbitration by
refraining from moving to compel when doing so would be
futile); cf. Guidotti v. Legal Helpers Debt Resol., LLC,
716 F.3d 764, 774, 776 (3d Cir. 2013) (explaining that the
summary-judgment standard applies to motions to compel
arbitration based on a factual record). In that same vein, the
Federal Arbitration Act, through its multiple references to a
“jury trial,” 9 U.S.C. § 4, accounts for the possibility that a
factual dispute over arbitrability would have to be resolved at
a trial. See Guidotti, 716 F.3d at 776 (explaining that if
“summary judgment is not warranted . . . the ‘court may then
proceed summarily to a trial’” on the issue of arbitrability
(quoting Somerset Consulting, LLC v. United Cap. Lenders,
LLC, 832 F. Supp. 2d 474, 482 (E.D. Pa. 2011))); see also
Nicosia v. Amazon.com, Inc., 834 F.3d 220, 229 (2d Cir. 2016)
(“If there is an issue of fact as to the making of the agreement
for arbitration, then a trial is necessary.” (quoting Bensadoun
v. Jobe-Riat, 316 F.3d 171, 175 (2d Cir. 2003))). Thus, in
some instances, a case may have to go to trial – at least on the
question of arbitrability – and that possibility also bears on the
implied-waiver analysis.
In this case, there is no express waiver at issue, and the
challenge is to the District Court’s finding of an implied waiver
based on conduct during the litigation. See Parkin,
774 F. Supp. 3d at 712–14. Some of that conduct occurred
is less indicative of an implied waiver of arbitration than is a
motion to expedite discovery and proceed to trial on the merits.

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before an express reservation of rights, and some of it took
place after an express reservation of rights. Specifically,
Budget and ABG moved to dismiss the complaint before
reserving their right to move to compel arbitration, and while
they preserved their right to arbitration as an affirmative
defense in their answer, they also litigated the case months into
discovery before moving to compel arbitration. Critically, the
arbitration defense that they asserted was governed by the rule
of Bacon, and without allegations in the complaint needed to
meet that rule, the arbitration defense required factual
development with respect to each customer’s knowledge at the
time of signing a rental agreement. So, as explained below, the
occurrence of other procedural events in the litigation before
the filing of the motion to compel does not, under these
circumstances, amount to an implied waiver.
Some of the implied-waiver analysis takes place without
the need to account for an express reservation of the right to
arbitration because when Budget and ABG filed their motion
to dismiss, they had not yet expressly reserved their right to
arbitrate. In one sense, by filing a motion to dismiss, instead
of filing an answer asserting the arbitrability defense, Budget
and ABG did demonstrate a preference for litigation over
arbitration. See White, 61 F.4th at 340 (weighing a defendant’s
motion to dismiss in favor of finding waiver of its arbitration
right). But that choice was not pronounced enough to imply a
waiver. See generally id. at 340–41 (holding that a defendant
implicitly waived its arbitration right by failing to “inform
plaintiffs of the potential for arbitration at any point” in the
three years of litigation prior to the month it moved to compel).
Under Bacon, the allegations in the complaint did not provide
an adequate basis to move to compel arbitration. So, without
a meaningful opportunity to move to compel arbitration, the
immediate options before Budget and ABG were not whether
to litigate or to seek arbitration, but rather how to litigate. From
that perspective, their choice to move to dismiss instead of to
answer the complaint and proceed to discovery is not a clear

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enough indication of a relinquishment or abandonment to
constitute an implied waiver of the right to arbitration.
The remainder of the implied-waiver analysis must account
for Budget and ABG’s express reservation of their right to
arbitrate. Budget and ABG expressly and formally reserved
that right by identifying it as an affirmative defense in their
answer. And they twice confirmed that reservation of the right
– once in their joint proposed discovery plan, and once in their
initial disclosures. But because the allegations in the complaint
did not provide adequate grounds for compelling arbitration,
Budget and ABG needed discovery to discern whether there
was a factual basis under Bacon for such a motion. Indeed,
after they had deposed Parkin and Hughes, they moved to
compel arbitration based on testimony Parkin and Hughes gave
in their depositions about their knowledge of the contractual
terms contained in the rental jackets.5 In addition, Budget and
5 Parkin and Hughes also contend that to avoid an implied
waiver, Budget and ABG should have requested separate,
preliminary discovery on arbitration. While such an approach
to discovery is permissible, see Guidotti, 716 F.3d at 776, a
defendant’s preference for how to shoulder the burdens of
discovery is not a particularly strong indication of an intention
to relinquish an asserted affirmative defense. See Valli,
162 F.4th at 412 (explaining that “discovery directed at non-
arbitrable claims does not, by itself, waive the right to arbitrate
arbitrable claims,” and “hesitation” to infer waiver from
discovery conduct is “apt where, as here, the party has
repeatedly put its intent to arbitrate on the record”); cf. Morgan,
596 U.S. at 419 (holding that courts may not “us[e] custom-
made rules, to tilt the playing field in favor of (or against)
arbitration”). But cf. White, 61 F.4th at 340 (holding that a
defendant, which had not reserved its right to arbitrate,
implicitly waived the right because it “continuously sought and
agreed to stays in discovery—which may have resulted in
receipt of the necessary” information to determine
arbitrability).

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ABG did not unduly delay that motion; they filed it within a
reasonably prompt time (about two months) after the
depositions. Those circumstances do not provide the certainty
needed to find an intentional relinquishment or abandonment
of the expressly reserved right to compel arbitration.
The intervening Valli decision only strengthens the
conclusion that the District Court erred in finding an implied
waiver of arbitration. Valli reiterated White’s holding that the
implied-waiver analysis begins when “a defendant is on notice
that a claim ‘could be arbitrable.’” Valli, 162 F.4th at 408
(quoting White, 61 F.4th at 340). But Valli demonstrated that
waiver – the “intentional relinquishment or abandonment of a
known right,” Morgan, 596 U.S. at 417 (quoting Olano,
507 U.S. at 733) – depends on more than just knowledge; it
also requires intentionality. Valli, 162 F.4th at 409–10
(holding that an inference that a party intended to forgo
arbitration “can be reasonably drawn only when there at least
appears to be uncertainty as to what the party actually
intends”). And while Budget and ABG may have known that
arbitrability could be a defense, they were not obligated to
move to compel arbitration before having a meaningful
opportunity to investigate facts related to arbitrability through
“an inquiry reasonable under the circumstances.” Fed. R. Civ.
P. 11(b); see also 9 U.S.C. § 6 (providing that any application,
such as one to compel arbitration, “shall be made and heard in
the manner provided by law for the making and hearing of
motions, except as otherwise herein expressly provided”);
Morgan, 596 U.S. at 419 (explaining that 9 U.S.C. § 6 “is
simply a command to apply the usual federal procedural rules”
to federal arbitration applications). Thus, their decision not to
move to compel arbitration until after they had engaged in
some discovery, in particular the depositions of Parkin and
Hughes, does not establish an intentional relinquishment or
abandonment of the right to arbitrate. Rather, that conduct is
consistent with developing a factual basis needed for a motion
to compel arbitration.

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CONCLUSION
For the foregoing reasons, the District Court’s order will be
VACATED and the case will be REMANDED.6
Counsel for Appellants
William T. Marks
Jake L. Kramer
Matthew D. Kaminer
PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP
Counsel for Appellees
James E. Cecchi
Jason H. Alperstein
CARELLA, BYRNE, CECCHI, OLSTEIN, BRODY & AGNELLO,
P.C.
6 On remand, the District Court should address, as needed, the
other arguments presented in the briefing on the motion to
compel, perhaps with an opportunity for supplementation. For
instance, it appears that Valli rejected a similar small-claims
defense as that raised by Parkin and Hughes. See Valli,
162 F.4th at 414.

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