Ninth Circuit: Severability Clause Does Not Defeat Delegation of Arbitration Validity Questions
When an employee challenges an arbitration agreement as unconscionable, who decides that challenge, a judge or an arbitrator? In Sandler v. Modernizing Medicine, Inc., the Ninth Circuit answered that question by enforcing the parties’ delegation clause and sending the dispute to arbitration.
The decision is important for employers using arbitration agreements because it rejects a common argument made against delegation clauses: that a severability clause referring to a “court” creates ambiguity about whether an arbitrator may decide the validity of the arbitration agreement. The Ninth Circuit held it does not.
The Employment Agreement Sent Disputes to Arbitration
Kara Sandler worked for Modernizing Medicine, Inc., also called ModMed. Her employment contract required employment-related disputes to be resolved through binding arbitration under the Federal Arbitration Act, using procedures from the California Arbitration Act. The agreement also provided arbitration would be administered by JAMS under its employment arbitration rules.
That detail proved decisive. JAMS Rule 11 states jurisdictional and arbitrability disputes, including disputes over the formation, existence, validity, interpretation, or scope of the arbitration agreement, must be submitted to and decided by the arbitrator. In other words, the agreement did more than require arbitration of employment claims. It also delegated threshold disputes about the arbitration agreement itself to the arbitrator.
Sandler sued ModMed in federal court, alleging state and federal claims based on age and disability discrimination. ModMed moved to compel arbitration. Sandler opposed the motion, arguing the arbitration agreement was unconscionable.
The District Court Found the Agreement Unconscionable
The district court agreed with Sandler and denied ModMed’s motion to compel arbitration. The court acknowledged the agreement incorporated JAMS rules and, therefore, appeared to delegate the validity question to the arbitrator. But the court relied on California state-court decisions involving severability clauses.
The severability clause in Sandler’s agreement said if a “court or other body of competent jurisdiction” found a provision invalid or unenforceable, the provision would be enforced to the maximum extent permitted and the rest of the agreement would remain in effect. The district court reasoned this language undermined the clarity of the delegation clause because it contemplated a court deciding whether a provision was invalid or unenforceable.
After deciding it could reach the issue, the district court found the arbitration agreement unconscionable and declined to sever the provisions it found problematic. ModMed appealed.
The Ninth Circuit Reversed
The Ninth Circuit reversed. The court held the parties “clearly and unmistakably” agreed to have the arbitrator decide challenges to the validity of the arbitration agreement. Under Ninth Circuit precedent, incorporating arbitral rules that assign arbitrability disputes to the arbitrator is enough to satisfy that standard. The court cited its prior decisions involving JAMS and AAA rules, including Patrick v. Running Warehouse, LLC and Brennan v. Opus Bank.
The severability clause did not change the result. The Ninth Circuit explained that a generic severability clause and a delegation clause can both be given effect. A contract may provide that an arbitrator decides whether the arbitration agreement is valid, while also stating what happens if a court or other competent body later determines a contractual provision is unenforceable. The court emphasized the severability clause did not refer only to a court; it also referred to another “body of competent jurisdiction,” which can include an arbitral forum.
The court rejected the idea that the word “court” in a severability clause allows the severability clause to swallow the delegation clause. Contract interpretation favors reading provisions consistently when reasonable. Here, the Ninth Circuit found no conflict between the provisions.
Federal Law Controlled the Delegation Question
The Ninth Circuit also faulted the district court for relying on California state-court decisions to negate the delegation clause. The court held federal law controls whether parties clearly and unmistakably delegated arbitrability when the agreement is governed by the FAA.
That point drove much of the decision. The “clear and unmistakable” rule is specific to arbitration. A state rule making delegation clauses harder to enforce because the agreement also contains a severability clause would disfavor arbitration and would be preempted by the FAA when applied to FAA-governed contracts. The Ninth Circuit cited the United States Supreme Court’s decision in Kindred Nursing Centers Ltd. Partnership v. Clark and its own decision in O’Connor v. Uber Technologies, Inc. in rejecting that approach.
The Court Did Not Decide Whether the Arbitration Agreement Was Unconscionable
One of the practical takeaways from Sandler is what the Ninth Circuit did not decide. It did not hold the arbitration agreement was conscionable. It held the district court should not have decided unconscionability at all because the parties had delegated that issue to the arbitrator.
The court therefore vacated the district court’s ruling that the arbitration agreement was unconscionable. It remanded the case with instructions to grant ModMed’s motion to compel arbitration and stay the court case while arbitration proceeds.
Why Employers Should Pay Attention
Sandler gives employers a useful appellate decision on delegation clauses in FAA-governed employment arbitration agreements. If an agreement incorporates arbitral rules that assign arbitrability disputes to the arbitrator, the Ninth Circuit will generally treat that incorporation as clear and unmistakable evidence of delegation.
The decision also reduces the force of an argument often made in California employment arbitration litigation: that a severability clause mentioning a “court” creates ambiguity defeating delegation. According to the Ninth Circuit, that argument misreads the contract and improperly applies state-law rules hostile to arbitration.
Employers should still draft arbitration agreements with care. Delegation clauses should be direct. Severability clauses should be written to avoid unnecessary confusion. And arbitration agreements should still be reviewed for procedural and substantive unconscionability. Sandler does not give employers a free pass on unfair terms. It says the parties’ chosen decisionmaker, the arbitrator, must decide the validity challenge when the delegation is clear and unmistakable.
Sandler v. Modernizing Medicine, Inc. was filed on March 19, 2026, by the United States Court of Appeals for the Ninth Circuit, Case No. 24-6623. The Ninth Circuit reversed the district court’s order denying ModMed’s motion to compel arbitration, vacated the district court’s unconscionability ruling, and remanded with instructions to compel arbitration and stay the case pending completion of arbitration proceedings.