Avis Budget Group Wins Interlocutory Appeal on Arbitrability of Contract Claims at Third Circuit

Paul, Weiss won a significant victory at the Third Circuit on behalf of Avis Budget Group in an interlocutory appeal arising out of a consumer class action. In a precedential decision, a three-judge panel unanimously held that Avis Budget did not waive its right to arbitrate a breach of contract claim by litigating the case before seeking to compel arbitration. The court also vacated the district court’s order denying Avis Budget’s motion to compel arbitration and remanded the case for further proceedings.

In their 2022 complaint in the U.S. District Court for the District of New Jersey, the consumer plaintiffs allege that Avis Budget misrepresented the nature of additional liability and supplemental liability coverage offered in connection with vehicle rentals. After successfully obtaining the dismissal of all claims except a single breach of contract claim, Avis Budget moved to compel arbitration under arbitration provisions in the rental agreements. The district court denied the motion, finding that Avis Budget had impliedly waived its right to arbitrate by litigating the case through discovery before seeking to compel arbitration.

Paul, Weiss was retained by Avis Budget in March 2025 for an interlocutory appeal on the issue before the Third Circuit. We argued that Avis Budget could not have moved to compel arbitration earlier because the plaintiffs had not identified the operative contract or otherwise provided the information necessary to support such a motion until the discovery stage. While our appeal was pending, the Third Circuit decided a similar case, Valli v. Avis Budget Group, in which the panel vacated a lower court’s order denying Avis Budget’s motion to compel arbitration, which had been filed seven years into the litigation. The court concluded in Valli 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.

In the current case—and in light of its decision in Valli—the panel agreed with our arguments, finding that when the assertion of the right to arbitrate depends on the development of a factual record, the lack of a motion to compel arbitration before the facts are available to support such a motion is not evidence of an intention to waive the right to arbitration. Therefore, the court found, the lower court erred in its conclusion that there existed an implied waiver of Avis Budget’s right to arbitrate the claim.

The Paul, Weiss team included litigation partners Randy Luskey and William Marks.