Waiving the right to arbitration in class actions. Overview of recent decisions from the First, Third, and Seventh Circuits

Under the Federal Arbitration Act (“FAA”), 9 U.S.C. § 3, if a suit is brought in any U.S. court upon an issue referable to arbitration, a party may petition the court to stay the trial of such an action until the arbitration has been had in accordance with the agreement, provided that the moving party is not in default in proceeding with such arbitration. Under §4 of the FAA, a party may move to compel arbitration. But a party may waive this right by conduct.

In Morgan v. Sundance,[1] the Supreme Court held that courts may not impose arbitration-specific waiver rules derived from a policy favoring arbitration. In particular, prejudice to the opposing party is not a prerequisite to a waiver finding.[2]

So how do courts assess arbitration waivers post-Morgan in class actions? Recent decisions from the U.S. Courts of Appeals for the First, Third, and Seventh Circuits clarify this issue.

First Circuit. Waiver found due to failure to pay arbitration fees

In 5-Star Gen. Store v. Am. Express Co.,[3] thousands of small merchants, including 5-Star General Store (collectively “5-Star”), sought to challenge swipe fees charged by American Express Co. (“Amex”) every time 5-Star’s customers used a credit card to pay, and certain other provisions of the applicable agreements. In August 2023, 5-Star demanded that the dispute be resolved in more than 5,000 AAA arbitrations under the applicable agreements. But after the Plaintiffs filed the demands for arbitration, the parties disagreed about the filing fees. While 5-Star paid its share of the fees, Amex did not. As a result, no arbitrator was appointed, and the cases were administratively closed for non-payment in February 2024.

In March 2024, 5-Star filed a class action complaint in the District Court for the District of Rhode Island, alleging that Amex waived its right to arbitration by refusing to pay its share of the arbitration filing fees. Amex then moved to stay the proceeding and compel arbitration. The district court denied Amex’s motion, and Amex appealed.

On August 19, 2026, the United States Court of Appeals for the First Circuit affirmed the district court’s decision, holding that:

The motion to stay litigation and compel arbitration should be interpreted together, and so the court must assess whether a party defaulted in proceeding with arbitration.
Under First Circuit precedent, Marie v. Allied Home Mortg. Corp., 402 F.3d 1 (1st Cir. 2005), default includes waiver. And courts have the power to decide waiver issues “at least” when they involve “litigation-related activity.”
The court concluded that the failure to pay the fees in arbitration before an arbitrator’s appointment was a “litigation-related activity” as the claims in both the arbitration and the litigation were the same, and in the existing circumstances, efficiency weighed in favor of the court, not an arbitrator, deciding the issue of waiver.
The court held that the “deliberate choice not to pay arbitration fees,” after repeated warnings from the AAA, was inconsistent with an intent to arbitrate. Therefore, it constituted an arbitration waiver by conduct.
The First Circuit rejected the unclean hands argument on the facts, finding that 5-Star did not engage in such conduct. However, it left open the legal question of whether this doctrine is a defense to an arbitration waiver.

Third Circuit. No waiver where defendants reserved arbitration and moved to compel promptly after obtaining necessary discovery

In Parkin v. Avis Rent A Car System, LLC,[4] Plaintiffs booked rental vehicles from one of the defendants and received a “rental-jacket,” a folder containing the terms and conditions for the rentals. The terms required arbitration of all claims except those subject to a small-claims exception, and provided that supplemental liability insurance would be provided through an excess automobile policy issued to the defendant.

In September 2022, plaintiffs initiated a class action alleging breach of contract, fraudulent misrepresentation, and violation of a state consumer protection statute. They alleged that defendants did not purchase the supplemental liability through an excess automobile policy as required by the agreement, but instead intended to indemnify customers from its own funds. Defendants moved to dismiss the claims for failure to state a cause of action. The district court granted the motion as to all claims except the breach of contract.

Throughout the proceeding, defendants repeatedly reserved their right to compel arbitration, including in their June 2023 answer and the August 2023 joint discovery plan, where they reserved this right “pending further discovery.” Plaintiffs were deposed in February 2024, where they testified they believed the rental-jackets’ contents were part of their rental agreements. Two months later, in April 2024, defendants moved to compel arbitration.

The district court denied the motion to compel based on implied waiver, finding that defendants’ conduct during the litigation was inconsistent with an intent to arbitrate. Defendants appealed.

On August 24, 2026,the United States Court of Appeals for the Third Circuit vacated and remanded the case, holding that:

As held in Valli v. Avis Budget Group, Inc., 162 F.4th 396 (3d Cir. 2025), “the implied-waiver analysis starts at the moment the movant knows of its arbitration rights as opposed to when the arbitration rights are enforceable.”
Furthermore, as explained in Valli, “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.”
However, a reservation of rights may not be sufficient to avoid waiver if “its conduct unambiguously indicates a relinquishment or abandonment of the right.”
At the same time, under Bacon v. Avis Budget Group, Inc., 959 F.3d 590 (3d Cir. 2020), a rental-jacket arbitration clause could not bind a customer unless the customer was on notice of the clause when signing the rental agreement.
Plaintiffs’ complaint did not provide an adequate basis to move to compel arbitration; therefore, defendants’ choice to move to dismiss rather than compel arbitration did not indicate an implied waiver of the right to arbitration.
The reservations made thereafter, and the fact that the motion to compel was filed two months after the plaintiffs’ depositions about their knowledge of the contractual terms in the rental-jackets, weighed against a finding of an implied waiver of the right to arbitrate.
The Third Circuit left it to the district court to assess other arguments plaintiffs raised against compelling arbitration that it did not address in the decision on appeal.

Seventh Circuit. Pre-certification conduct is relevant to the assessment of arbitration waiver

In Moore v. Club Exploria, LLC,[5] Plaintiff received two pre-recorded calls as part of a telemarketing campaign for Exploria, a company managing vacation properties. In April 2019, he sued Exploria in a class action, alleging that receiving these calls without his and the putative class members’ prior consent violated the Telephone Consumer Protection Act of 1991 (“TCPA”). For the next four years, Exploria defended the case, asserting affirmative defenses, engaging in class-related discovery, filing multiple motions on the merits, and opposing class certification.

After the class certification, Exploria moved to reopen discovery and, in its second amended answer, reserved the right to assert arbitration for the first time. Thereafter, it moved for leave to amend the answer for the third time, to add an affirmative defense based on purported arbitration agreements from opt-in sites. The court then denied Exploria’s latter motion. The class notice was issued, and Plaintiff moved for summary judgment. Two months after briefing on this motion was completed, but before the court’s decision, Exploria finally moved to compel arbitration.

The district court denied the motion, finding waiver because the conduct before and after class certification was inconsistent with the intent to arbitrate. Exploria appealed.

On August 18, 2026, the United States Court of Appeals for the Seventh Circuit affirmed the district court’s decision. It held that:

Implied waiver requires determining under the totality of the circumstances, whether the party acted inconsistently with the right to arbitrate.
Clarifying the standard of review applicable to the denial of a motion to compel arbitration under U.S. Bank National Ass’n v. Village at Lakeridge, LLC, 583 U.S. 387 (2018), the court held that generally applicable legal questions with precedential significance are reviewed de novo, while the ultimate, fact-intensive determination of waiver is reviewed for clear error.
Reviewing de novo the issue of what a party must do before class certification to preserve the right to arbitrate, the court held that pre-certification conduct may support an inference of waiver of the right to arbitrate with putative class members. The court noted that arbitration agreements with putative class members should be produced during class-related discovery and, where relevant, invoked in opposition to class certification. Failure to do so may imply a defendant’s intent to litigate the putative class members’ claim in court.
Reviewing the district court’s waiver findings for clear error, the court concluded that Exploria waived its right to arbitration by engaging in two years of class-related discovery, during which it reviewed the purported arbitration agreements, but failed to raise the arbitration defense in opposition to class certification.
Exploria’s waiver was further supported by the post-certification conduct. Although Exploria reserved the right to assert arbitration in its second amended answer, it did not seek to plead arbitration as an affirmative defense until the motion for leave to amend the answer for the third time. This motion was filed more than four years after the case commenced. All this was inconsistent with an intent to arbitrate, and the district court did not clearly err in finding waiver.
A party opposing arbitration based on waiver does not have a heavy burden because, following the Supreme Court’s holding in Morgan, arbitration agreements are enforced like any other contract. In the Seventh Circuit, diligence is a preeminent factor in evaluating waiver.

Takeaways

Taken together, these decisions show that post-Morgan, waiver in class actions remains a fact-intensive inquiry centered on the arbitration proponent’s conduct.

A party need not file a premature or unsupported motion to compel. It should, however, identify its arbitration position promptly, undertake the factual development reasonably necessary to establish arbitrability, and move once that basis exists. The arbitration proponent should produce arbitration agreements with putative class members during class-related discovery. Because the permissible extent of such discovery may vary by circuit, counsel should assess the governing circuit’s waiver precedent at the outset. Once arbitration has commenced, deliberate nonpayment of arbitration fees may itself waive the right to insist on arbitration.

[1] Morgan v. Sundance, Inc., 596 U.S. 411 (2022).

[2] Id. at 417-419.

[3] 5-Star General Store v. American Express Co., No. 25-1023 (1st Cir. Aug. 19, 2026).

[4] Parkin v. Avis Rent A Car System, LLC, No. 25-1385 (3d Cir. Aug. 24, 2026).

[5] Moore v. Club Exploria, LLC, No. 25-2721 (7th Cir. Aug. 18, 2026).