Third Circuit Clarifies When Arbitration Rights Are Not Waived By Litigation
The Third Circuit ruled defendants did not waive arbitration rights by limited litigation.
Why it matters: This decision helps litigators and in-house counsel understand how to manage arbitration rights without risking waiver during necessary litigation steps like discovery and enforceability challenges.
- In Parkin v. Budget Rent A Car System, Inc., the Third Circuit held no waiver occurred despite defendants' litigation activities to determine arbitration enforceability.
- Waiver requires intentional relinquishment of arbitration rights, which the court found was absent here.
- Defendants preserved arbitration rights early by asserting them as an affirmative defense and disclosing the arbitration agreement initially.
- The Third Circuit vacated a lower court ruling that Budget Rent A Car had waived arbitration rights in a class action dispute.
- In Salvatora v. XTO Energy Inc., the court ruled no waiver of arbitration occurred against unnamed class members despite extensive pre-certification litigation.
On August 24, 2026, the Third Circuit issued important rulings in Parkin v. Budget Rent A Car System, Inc. (No. 25-1385) and Salvatora v. XTO Energy Inc. (No. 25-1327), clarifying when litigation conduct does not equate to waiver of arbitration rights. These rulings provide guidance on preserving arbitration protections while engaging in necessary litigation.
In Parkin, the Third Circuit vacated a district court ruling that found Budget Rent A Car and Avis Budget Group had waived arbitration rights by litigating a putative class action concerning supplemental liability insurance. The appeals court emphasized that waiver requires an intentional relinquishment or abandonment of arbitration rights. Since the defendants had clearly reserved their rights early—asserting arbitration as an affirmative defense and identifying the arbitration agreement in initial disclosures—their litigation activity, geared towards addressing enforceability, did not demonstrate waiver.
Similarly, in Salvatora, the court held that XTO Energy did not waive arbitration rights against unnamed class members whose leases contained arbitration provisions, even though substantial litigation occurred before class certification. This confirms that arbitration rights apply firmly unless parties intend to abandon them through conduct.
Litigators often face strategic dilemmas between moving to compel arbitration on incomplete records or engaging in limited discovery that might be construed as inconsistent with arbitration, as noted by legal commentators Frederick A. Acomb and Sarah C. Reasoner. The Third Circuit rulings provide a clearer path: limited litigation aimed at clarifying whether arbitration is enforceable is permissible without risking waiver, provided parties explicitly reserve arbitration rights.
This guidance matters most in disputes involving class actions or complex arbitration clauses, where early, clear reservation of rights and focused litigation preserve a party's ability to arbitrate ultimately.
By the numbers:
- August 24, 2026 — Decision date for Parkin and Salvatora cases
- No. 25-1385 — Parkin v. Budget Rent A Car System, Inc. case number
- No. 25-1327 — Salvatora v. XTO Energy Inc. case number