On March 19, 2026, in a precedent-setting case, Barton won reversal in the United States Court of Appeals for the Ninth Circuit of a district court judgment denying a motion to compel arbitration. In Sandler v. Modernizing Medicine, Inc., ___ Fed.4th ___; 2026 WL 773099 (9th Cir. 2026), the Court of Appeals held that Barton’s client’s employment contract unmistakably requires binding arbitration of any employment dispute.
In so ruling, the Court of Appeals held that, where a contract clearly and unmistakably delegates an arbitrator to resolve any challenge to the validity of the arbitration agreement, the presence of a severability clause does not nullify this delegation. If such a state law exists to the contrary, this state law would be preempted by the Federal Arbitration Act (“FAA”).
In May 2024, Kara Sandler brought a civil suit against her employer, Modernizing Medicine, Inc. (“ModMed”), in the Southern District of California. The suit alleged various employment violations, including age and disability discrimination, as well as wrongful termination.
A previously established employment agreement between the plaintiff and ModMed contained an arbitration provision which stipulated that any employment-related disputes were to be arbitrated under the Federal Arbitration Act (“FAA”) using the rules set forth by Judicial Arbitration and Mediation Services, Inc. (“JAMS”).
The employment agreement also included a “severability clause” that allowed for a “court or other body of competent jurisdiction” to excise any parts of the employment agreement that may be deemed unenforceable or unconscionable, without voiding the entire contract.
The plaintiff asserted that the arbitration provision was “unconscionable” (i.e., so unfair as to be unenforceable) and that a court—not an arbitrator—should decide whether the dispute was even arbitrable to begin with. ModMed, on the other hand, argued that the JAMS rules that it had incorporated into the arbitration provision clearly delegated issues of arbitrability to an arbitrator.
Moreover, the FAA applies to any “contract evidencing a transaction involving commerce” that contains an arbitration provision, bringing ModMed’s employment agreement under its governance since both ModMed’s business and the plaintiff’s employment duties affected interstate commerce. The FAA holds a liberal policy favoring arbitration, stating that any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.
However, the District Court relied on a California precedent that states that when “a contract includes a severability clause stating a court of competent jurisdiction may excise an unconscionable provision, there is no clear and unmistakable delegation to the arbitrator to decide if the arbitration agreement is unconscionable.”
The District Court therefore concluded that it must decide on the validity of the arbitration agreement that the plaintiff claimed was invalid due to, among other reasons, a high degree of “substantive unconscionability.”
In October 2024, the District Court denied ModMed’s motion to compel arbitration, ruling that the agreement was substantively unconscionable because there was a “lack of mutuality” in the terms of the arbitration provision that unfairly benefitted ModMed.
Despite the employment agreement’s severability clause, the District Court argued that too much of the agreement was unconscionable to simply sever the problematic parts: “Taken together, the provisions represent an attempt to enforce a one-sided alternative to litigation that favors the employer. There is no single provision’s absence that would change this result.”
Barton LLP subsequently filed an appeal with the United States Circuit Court of Appeals on behalf of ModMed. The Appeals Court held that ModMed’s employment contract with the plaintiff unmistakably required binding arbitration of any employment dispute and mandated that an arbitrator—not a judge—resolve any challenge to the validity of the arbitration agreement.
The Ninth Circuit further clarified that this clear delegation was not nullified by the presence of a severability clause and that the lower court had “misapplied federal law and erroneously relied on state-court decisions pointing to the existence of a severability clause to refuse to compel Arbitration.” It asserted that “[w]hether the parties manifested a clear and unmistakable intent to delegate arbitrability to an arbitrator is a question of federal law,” not state law.
The Court of Appeals reversed the District Court’s judgment denying ModMed’s motion to compel arbitration accordingly and remanded the case back to the District Court with instructions to grant the motion to compel arbitration instead. Additionally, the Ninth Circuit vacated the lower court’s judgment that the arbitration agreement was unconscionable because the court should have never addressed that question.
The opinion will be published in the Federal Reporter and may therefore be cited as precedent not only by Barton’s client ModMed, but also by other similarly situated companies.
This case establishes that parties who agree to resolve disputes through private arbitration can rely on that agreement under federal law notwithstanding adverse decisions under state law (in this case, under California law).
Even if a case is brought in California, the Federal Arbitration Act will apply as long as it involves interstate commerce. In this case, ModMed is a Delaware corporation based in Florida with employees in California, which fulfills the interstate commerce requirement. ModMed was therefore able to avoid a California judicial exception to its freedom to contract for binding arbitration by arguing successfully for the application of federal law.
The Barton attorneys involved in this case included Partner Bernard M. Resser and Senior Associate Gina P. Young.
Bernard M. Resser
Georgiana P. Young