California Top Court Clarifies When to Sever Arbitration Clauses

California courts deciding whether to carve unconscionable terms out of an arbitration agreement or toss them entirely should focus on whether the contract’s main purpose is illegal, rather than its quantity of unfair terms, the state’s top court ruled.

No bright line rule requires courts to throw out agreements with multiple unconscionable terms, or to preserve an agreement with only one unconscionable term, California Supreme Court Justice Carol A. Corrigan wrote in a Monday opinion.

Still, “it is fair to say that the greater number of unconscionable provisions a contract contains the less likely it is that severance will ...