Class Actions Brief Blog

The widespread adoption of arbitration agreements with class action waivers began fifteen years ago following the Supreme Court’s decision in AT&T Mobility LLC v. Concepcion. Concepcion held that the Federal Arbitration Act (FAA) preempts state laws or policies preventing the enforcement of such agreements as unconscionable and unenforceable. Commentary at the time noted that it was unclear how enforceable such class-action waivers would be. Now, a decade and a half later, such waivers are widespread and routinely enforced. (A recent trip to Disneyland started with an acknowledgment of the “Binding Arbitration Agreements and Class Action Waivers” that are part of the price of admission.) However, a recent decision from the Ninth Circuit, Avery v. TEKsystems, Inc., 165 F.4th 1219 (9th Cir. 2026) provides an example of an exception to the rule: Courts very often will invalidate or decline to enforce an agreement to arbitrate when a defendant had no policy to obtain such agreements before the filing of a class action, but begins obtaining waivers only during the pendency of the litigation.

At issue in Avery was whether class members, who were recruiters employed by the defendant professional staffing agency TEK, were entitled to overtime and meal and rest breaks under California law. Shortly after the class certification briefing closed, TEK rolled out a new agreement with its employees that included mandatory arbitration. The district court and Ninth Circuit particularly took issue with language in the defendant’s cover email to its employees that said,

In our experience, litigation in court – particularly class and collective actions – are wasteful, inefficient means for resolving disputes, and tend to enrich only attorneys rather than the individuals who may have legitimate claims.

The cover email included a link to a website with more information, including a statement that

The arbitrator will have the same authority to award all the same remedies that would have been available to you in court on an individual claim. But you will not have the right to proceed on a class-wide claim (which generally tends to enrich attorneys, not individual class members).

The Agreement itself also said

YOU WILL BE DEEMED AS HAVING ACCEPTED THIS AGREEMENT IF YOU REMAIN EMPLOYED BY TEKSYSTEMS ON OR AFTER JANUARY 1, 2024.

TEK sent another email later that same day stating, “You may opt out of the arbitration agreement for the limited purpose of keeping your ability to participate in that lawsuit by signing and returning the attached agreement by January 9, 2023.”

The district court determined that the defendant’s communications had been “misleading and threatened the fairness of the class action proceeding.” It noted several problems with these communications: their internal inconsistency (first saying the arbitration agreement was mandatory, then saying employees could still decide to remain in the class), their likelihood of creating confusion among affected class members and their disparaging and (according to the court) false remarks about the merits of the class action process. The court also objected that TEK had “turned this Rule 23 opt-out class proceeding into an opt-in proceeding.”

In affirming, the Ninth Circuit cited two grounds for declining to enforce an arbitration agreement in class action. The first is the “equal footing” doctrine: The Supreme Court held in Rent-A-Ctr., W., Inc. v. Jackson (2010) that the Federal Arbitration Act “places arbitration agreements on an equal footing with other contracts, and requires courts to enforce them according to their terms. Like other contracts, however, they may be invalidated by generally applicable contract defenses, such as fraud, duress, or unconscionability.” Note that the “equal footing” ground would apply to arbitration agreements entered into before a class action is filed as well, which raises the question: Are such agreements at risk if a court takes issue with the language a defendant uses in rolling out an arbitration agreement in the absence of a pending lawsuit?

Probably not. Avery went on to base its holding on the authority of the court “to control class actions under FRCP 23(d).” The Ninth Circuit reasoned that “the district court could have enjoined TEK’s communications under FRCP 23(d) for being misleading and attempting to disrupt the opt-out process,” and therefore it could, under the same authority, refuse to enforce the arbitration agreement the defendant obtained with such communications. That authority under the rules of civil procedure does not exist before a class action is filed. Further, all the cases Avery cites in support of its holding share a specific factual scenario in which arbitration agreements are not enforced where (1) after the commencement of the class action, the defendants roll out arbitration agreements that would bind putative class members, and (2) those arbitration agreements came with misleading and coercive communications that threatened the fairness of the class action proceedings. None of the authority cited in Avery involves invalidating arbitration agreements embedded in class action waivers that the parties entered before a class action was filed.

Avery has already been adopted by at least one district court outside of the Ninth Circuit. In Greystone Mortgage, Inc. v. Equifax Workforce Solutions LLC (2026) (appeal pending), the Eastern District of Pennsylvania adopted the reasoning of Avery, recognized the power of the district court to refuse to enforce arbitration agreements as an extension of the power to restrict communications in ongoing litigation under FRCP 23(d). Greystone also adopted a five-factor test first articulated by the Southern District of New York to discern whether exercising that power is appropriate given the specific facts. The five factors are: (1) the relative vulnerability of the putative class members; (2) evidence of actual coercion or conditions conducive to coercion; (3) whether the defendant targeted putative class members in a purposeful effort to narrow the class; (4) whether the arbitration provision was unilaterally imposed on the putative class; and (5) evidence of misleading conduct, language, or omissions from the defendant.

So, once a lawsuit is filed, is it too late to arbitrate? In theory, no. There is no rule that any arbitration agreement obtained while a class action is pending is invalid. However, cases enforcing such agreements are unusual. If the defendant had a pre-existing policy to obtain such agreements (such as from all new hires), but members of the class entered into the agreements only after the class action was filed, the agreement may be enforced (depending on the other factors). (Andersen v. Briad Rest. Grp. (D. Nev. Jan. 13 2020) is an example, where the court excluded from its class definition those with arbitration agreements, but without prejudice to revisit the issue if there was “evidence showing that Defendant engaged in improper, prejudicial actions during litigation which threaten the participation of putative class members.”) If the class members are sophisticated and receive significant consideration for the agreement to arbitrate, a court may enforce it, as the Southern District of New York did against Goldman Sachs employees who “were generally well educated and highly compensated” in Chen-Oster v. Goldman, Sachs & Co. (Sept. 15, 2021).

The lesson for companies concerned about exposure to class actions is first, to obtain arbitration agreements and class action waivers before any case is filed. If litigation is already pending, it may not be impossible to enter into a binding arbitration agreement and class action waiver, but because the court’s authority over the case under FRCP 23(d) kicks in, the policy to obtain such agreements must be broad and not targeted only at class members, any communications with putative class members must be clear and accurate and the defendant must avoid any language that denigrates the class action process. Even then, the result may depend on whether the relationship between the parties implies coercion. And don’t forget that, if defendant’s counsel is involved, the ethics rules relating to communications with represented parties also must be consulted. It may not be too late to arbitrate, but it will be much more difficult to obtain enforceable agreements.

*Jarrod Lowe, a rising third-year law student at Wake Forest University and summer associate at Robinson Bradshaw, contributed to this post.