Friday, March 20, 2026
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Mere Reference to ‘Court’ in Agreement Doesn’t Undo Intent to Arbitrate—Ninth Circuit
Opinion Says Judge Improperly Applied California Cases to Contract Governed by Federal Law, Wrongly Declared That Severability Clause Giving Courts Power to Excise Invalid Sections Guts Clear Delegation to Arbitrator
By a MetNews Staff Writer
The Ninth U.S. Circuit Court of Appeals held yesterday that a District Court judge erred in finding that a .clause in an arbitration agreement giving authority to “a court or other body of competent jurisdiction” to sever any unconscionable provisions undermines the otherwise clear intent to delegate the right to determine the question of the contract’s validity to an arbitrator.
Saying that the jurist wrongly applied California case law to a contract governed by the Federal Arbitration Act (“FAA”) to reach the question of enforceability and to invalidate the agreement as unconscionable, the court declared that a defense motion to compel should have been granted.
Writing for the court, Circuit Judge Eric C. Tung said that “[t]he district court’s reliance on state-court opinions purporting to apply state law to negate a delegation clause is legal error” and added:
“Many contracts require that disputes be resolved by arbitration. Some contracts go further—delegating to an arbitrator (rather than a court) the power to resolve whether an arbitration agreement is valid in the first place. This case asks whether such a delegation can be defeated merely because another clause in the contract says that ‘a court or other body of competent jurisdiction’ can sever provisions found to be invalid—with the reference to ‘a court’ suggesting, as the argument goes, that the parties might not have intended to have an arbitrator resolve the question of validity. We hold that the answer is no.”
Circuit Judge Lawrence VanDyke and Senior Circuit Judge Richard C. Tallman joined in the opinion.
Employment Dispute
The question arose after Kara Sandler filed a complaint against her employer, Modernizing Medicine Inc., asserting claims under California and federal law for alleged age and disability discrimination in May 2024.
In June, the defendant moved to compel arbitration, citing an employment agreement that specifies that any disputes between the parties “shall be subject to binding arbitration under the Federal Arbitration Act” and administered by Judicial Arbitration & Mediation Services Inc. in accordance with that provider’s published rules, including one that provides that an arbitrator must resolve questions as to the validity of the contract.
Senior District Court Judge Anthony J. Battaglia of the Southern District of California denied the motion to compel on Oct. 9, 2024, acknowledging that the agreement delegated the question of validity to the arbitrator but agreeing with “California precedent” that the existence of a severability clause that permits a court to excise an unconscionable provision guts the enforceability of the delegation provision. He wrote:
“This Agreement lacks the ‘clear and unmistakable evidence’ required to override the presumption of judicial review of gateway arbitrability.”
Evidence of Agreement
Tung wrote:
“Who gets to decide the arbitration agreement’s validity—an arbitrator or a court—depends on whether there is ‘clear and unmistakable’ evidence that the parties agreed to delegate the validity question to the arbitrator….If there is such evidence, then the arbitrator has the power to resolve that question.”
Saying that the “standard is met here,” he opined:
“Two things can be true at once: First, parties can agree that disputes (including disputes over the validity of the arbitration agreement) shall be heard by an arbitrator. Second, the parties can nevertheless agree on a contingency—if a court somehow reaches (as it did here) the enforceability of contractual provisions, the severability clause tries to ensure that any invalidation would be limited.”
He added:
“The clear and unmistakable nature of the delegation is not negated by the presence of a severability clause. Many contracts, including this one, contain a generic severability clause that authorizes a court or other body of competent jurisdiction to sever provisions that are deemed unconscionable or otherwise unenforceable. Such a severability clause does not conflict with the clear and unmistakable delegation to an arbitrator to resolve questions of the arbitration agreement’s validity.”
Reasoning that “the severability…and…delegation clause are not at odds,” he pointed out that the provision does not refer just to a “court” but also to another “body of competent jurisdiction,” which “includes an arbitral forum.”
Citing the principle of construction that holds that clauses should be interpreted as consistent with one another, he noted that “[a]dopting Sandler’s (and the district court’s) interpretation here would allow the severability clause to ‘swallow up’ the delegation clause” and that an “otherwise clear and unmistakable…delegation clause” is not made ambiguous by a single reference to “court.”
Finding that Battaglia “erred in allowing state-court cases (purporting to apply state law) to dictate the outcome here,” he concluded:
“The reason for the application of federal law is clear. The ‘clear and unmistakable’ standard is an arbitration-specific rule. To have state law (rather than federal law) control the content of that rule in a way that disfavors arbitration would subject it to FAA preemption.”
Tung continued:
“We…vacate the district court’s judgment that the parties’ arbitration agreement is unconscionable; the district court should not have addressed this issue in the first place, but instead should have enforced the delegation clause requiring an arbitrator’s resolution. We remand the matter to the district court with instructions to grant the motion to compel and to stay the case pending the completion of arbitration proceedings.”
The case is Sandler v. Modernizing Medicine Inc., 24-6623.
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