Avery v. TEKsystems, Inc.
The Ninth Circuit holds that Federal Rule of Civil Procedure 23(d) authorizes a district court to deny enforcement of a mandatory arbitration agreement that an employer rolled out to putative class members mid-litigation through misleading communications that threatened the fairness of the class action.
Avery v. TEKsystems, Inc. (9th Cir. 2026) 165 F.4th 1219
Ninth Circuit — binding federal authority in the Ninth Circuit, including the district courts of California. Confirm subsequent history before relying on it.
Arbitration
Class Actions
Rule 23(d)
Affirmed
In brief. Twenty-two months into a wage-and-hour class action — five days after class-certification briefing closed — TEKsystems rolled out a new mandatory arbitration agreement to its internal employees, including the recruiter class members, and then moved to compel arbitration days before the class-notice period closed. The district court denied the motion under Federal Rule of Civil Procedure 23(d), finding TEK’s rollout communications “misleading” and that they “omitted key information,” thereby “threaten[ing] the fairness of the litigation.” The Ninth Circuit affirmed, holding that Rule 23(d) — an ordinary procedural rule that treats arbitration contracts like any other — authorizes a district court to invalidate or refuse to enforce agreements that disrupt the class-action process, and that the district court did not abuse its discretion. (Avery v. TEKsystems, Inc. (9th Cir. 2026) 165 F.4th 1219, 1221–1222.)
By Jonathan J. Delshad
Draft for review · source-verification pending
Facts
TEKsystems is a professional staffing agency. (165 F.4th at p. 1222.) The plaintiffs — Bo Avery, Jill Unverferth, Kristy Camilleri, and Phoebe Rogers — were former TEK recruiters who, on January 28, 2022, brought a putative class action on behalf of California recruiters, alleging TEK misclassified them as exempt and failed to pay overtime or provide meal and rest breaks. (Id. at pp. 1221–1222.) TEK removed the case to federal court, and the parties litigated for over a year. (Id. at p. 1222.)
In September 2023, TEK approved a plan to expand its mandatory arbitration policy to its internal employees, including recruiters. (165 F.4th at p. 1222.) Plaintiffs moved for class certification on October 6, 2023; briefing closed December 14, 2023. (Ibid.) “On December 19, 2023, five days after class certification briefing had closed,” TEK rolled out the new mandatory arbitration agreement, announced to relevant class members in two stages of emails. (Ibid.) The agreement applied automatically to class members unless they affirmatively opted out. (Id. at pp. 1221–1222.) Then, on June 10, 2024 — after class certification and Plaintiffs’ partial-summary-judgment motion, and “five days before the close of the class notice period” — TEK moved to compel arbitration against the class members bound by the agreement. (Id. at p. 1221.)
Procedural history
The district court denied the motion to compel under Rule 23(d), concluding that TEK’s rollout communications “threatened the fairness of the litigation because the communications were misleading and omitted key information.” (165 F.4th at pp. 1221–1222.) TEK took an interlocutory appeal under 9 U.S.C. § 16(a). (Id. at p. 1221.) Reviewing the Rule 23(d) order for abuse of discretion, the Ninth Circuit affirmed. (Id. at pp. 1221–1222, 1234.)
Issue
Does Federal Rule of Civil Procedure 23(d) authorize a district court to deny a motion to compel arbitration — refusing to enforce an arbitration agreement an employer rolled out to putative class members during the litigation — where the rollout communications were misleading and threatened the fairness of the class action; and if so, did the district court abuse its discretion in doing so here? (165 F.4th at pp. 1221–1222.)
Holding
Affirmed. First, Rule 23(d) authorizes a district court to invalidate, or decline to enforce, arbitration agreements that disrupt the class-action process. “Arbitration agreements can be invalidated based on federal procedural rules,” and courts may not “create arbitration-specific variants of federal procedural rules … based on the FAA’s policy favoring arbitration,” because “[t]he federal policy is about treating arbitration contracts like all others, not about fostering arbitration.” (165 F.4th at p. 1228.) Rule 23(d) is such an “ordinary federal procedural rule” and “permits district courts to invalidate any contracts that disrupt the class action process.” (Ibid.) Second, the district court did not abuse its discretion in finding that TEK’s rollout communications “were misleading and omitted key information” and “thus threatened the fairness of the class action,” justifying denial of the motion to compel. (Id. at pp. 1222, 1234.)
Reasoning
1. Rule 23(d) gives courts broad control over class communications and the opt-out process. The court explained that Rule 23 “establishes an opt-out process for class actions,” and that “[t]he district court has broad authority under … Rule 23(d) to control the opt-out process,” including authority to enter orders “governing the conduct of counsel and parties” and to curb communications that threaten the fairness of the proceeding. (165 F.4th at pp. 1228–1229.) A trial court “has a substantial interest” in protecting the integrity of the class device against communications that mislead absent class members about their rights. (Id. at pp. 1228–1229.)
2. The FAA does not exempt arbitration agreements from ordinary procedural rules. The court rejected any notion that the FAA insulated TEK’s mid-litigation agreement from Rule 23(d). “Federal courts cannot create arbitration-specific variants of federal procedural rules … based on the FAA’s policy favoring arbitration.” (165 F.4th at p. 1228.) “If an ordinary procedural rule … would counsel against enforcement of an arbitration contract, then so be it.” (Ibid.) Because the FAA requires treating arbitration contracts “like all others,” Rule 23(d) applies to them as it would to any contract that disrupts the class process. (Ibid.)
3. The timing and content of the rollout threatened fairness. The court emphasized the circumstances: TEK introduced the mandatory agreement “five days after class certification briefing had closed,” aimed it at the very recruiters who were class members, made it automatically binding unless they opted out, and then moved to compel “five days before the close of the class notice period.” (165 F.4th at pp. 1221–1222.) The district court found the communications misleading and incomplete about “how and when to opt out” and the consequences of doing so, and the Ninth Circuit held that finding was not an abuse of discretion. (Id. at pp. 1222, 1234.) An opt-out arbitration rollout that runs parallel to, and undermines, Rule 23’s own opt-out class mechanism is precisely the kind of interference Rule 23(d) empowers courts to police. (Id. at pp. 1228–1229.)
4. The remedy fit the abuse. Having found the communications unfair, the district court was entitled to deny enforcement of the resulting agreement rather than merely issue curative notice; Rule 23(d) supplied the authority to do so, and the court of appeals affirmed that exercise of discretion. (165 F.4th at pp. 1228–1229, 1234.)
Significance
Avery is an important check on a familiar defense tactic: rolling out a new mandatory arbitration agreement to putative class members after a wage-and-hour class action is underway, in an effort to shrink or destroy the class. The Ninth Circuit confirms that Rule 23(d) — not any arbitration-specific carve-out — governs such communications, and that a district court may refuse to enforce an agreement obtained through misleading, mid-litigation communications that threaten the fairness of the class action. The decision harmonizes with the Supreme Court’s repeated instruction that the FAA requires treating arbitration agreements like other contracts, no better and no worse, and pairs naturally with the year’s other arbitration decisions cabining aggregate-defeating maneuvers (compare O’Dell). For California wage-and-hour class litigation, much of which lands in the Ninth Circuit on removal, Avery is binding authority that constrains post-filing arbitration rollouts.
Key quotes
“Federal courts cannot create arbitration-specific variants of federal procedural rules … based on the FAA’s policy favoring arbitration. … The federal policy is about treating arbitration contracts like all others, not about fostering arbitration. [Rule] 23(d) serves as an ordinary federal procedural rule that treats arbitration contracts like other contracts and permits district courts to invalidate any contracts that disrupt the class action process.” (Avery, supra, 165 F.4th at p. 1228.)
“[TEK’s] communications ‘threatened the fairness of the litigation because the communications were misleading and omitted key information.’” (Avery, supra, 165 F.4th at p. 1222.)
Read the full opinion (U.S. Court of Appeals, Ninth Circuit) →
Practice pointer
When a defendant rolls out a new arbitration agreement to putative class members after your class action is filed, move quickly under Rule 23(d): document the timing relative to certification and the class-notice period, and identify every way the rollout communications are misleading or omit material information about how to opt out and the consequences. Avery establishes that the district court can not only issue curative notice but refuse to enforce the agreement entirely, and that the FAA provides no special protection. Preserve the communications themselves (emails, portals, training modules) as exhibits. For defense counsel, the case is a strong caution against post-filing arbitration rollouts aimed at the class: if the communications are not scrupulously clear and complete — and if their timing suggests an effort to undercut the Rule 23 process — the agreement may be unenforceable as to class members, and the effort may backfire. (165 F.4th at pp. 1221–1222, 1228–1229.)
Open questions
Because the court affirmed on Rule 23(d) grounds, it did not need to decide whether the same rollout would also be independently unenforceable under state-law unconscionability or waiver principles, leaving those alternative theories for future cases. (165 F.4th at pp. 1221–1222.) The opinion holds the district court did not abuse its discretion on this record but does not draw a bright line between a permissible post-filing arbitration program and an impermissible one — leaving the fairness inquiry fact-intensive, turning on timing, content, and the completeness of opt-out information. And while it confirms Rule 23(d) authority to refuse enforcement, it does not catalogue the full range of remedies (curative notice, invalidation, or other orders) a district court may select among in less egregious circumstances. (Id. at pp. 1228–1229.)