Months of litigation did not cost Avis Budget its right to arbitrate, a federal appeals court held, sending the fight back to a lower court.
The Third Circuit ruled a rental car company had not given up its right to force arbitration in a dispute over how supplemental liability insurance was provided, vacating a lower-court finding to the contrary.
Two British customers rented vehicles from Budget Rent A Car System on separate US trips between September 2016 and November 2019, with rentals including at least two in Massachusetts and two in Florida. Both booked through third-party websites and chose a package that added supplemental liability insurance for damage to third parties.
At pickup, each signed a rental form accepting the insurance, then received a "rental jacket" - a folded paper carrying extra terms. One term said the supplemental coverage would come from "an excess automobile policy issued to Budget." Another required arbitration of most disputes, with an exception for small claims.
The customers later concluded Budget never bought such a policy and instead planned to pay any supplemental claims from its own funds. In September 2022 they filed a putative class action against Budget and parent Avis Budget Group, alleging breach of contract, fraudulent misrepresentation and violations of Florida's Deceptive and Unfair Trade Practices Act. They sought over $5 million for nationwide, Massachusetts and Florida classes. Neither had been in an accident or had a claim denied.
Budget moved to dismiss and, in a reply footnote, "reserve[d] the right to move to compel arbitration." The breach-of-contract claim survived; the other two were dismissed. Budget then flagged arbitration as an affirmative defense, repeated the reservation in its discovery plan and initial disclosures, and deposed both customers in February 2024. In April 2024, about two months later, it moved to compel arbitration.
The District Court refused, finding Budget had impliedly waived the right by litigating for months and "pivoted to arbitration" only when early dismissal looked unlikely.
The Third Circuit vacated that ruling on August 24, 2026, and sent the case back. Under its earlier Bacon decision, the arbitration clause bound customers only if they knew of it when signing - a fact question the complaint alone could not answer. Budget needed discovery to build that record, the court reasoned, so waiting to move was consistent with developing a factual basis, not abandoning the right. Its repeated reservations cut strongly against any waiver.
