How Arizona Applies Separability Doctrine to Arbitration Clauses

William M. Fischbach,  |  October 10, 2018

In Hamblen v. Hatch, 242 Ariz. 483 (2017), the Arizona Supreme Court gave further force to arbitration clauses by affirming the applicability of the “Separability Doctrine” even where a contract containing the arbitration provision has been rescinded. This case underscores the importance of consulting counsel regarding the scope and applicability of an arbitration clause to any potential dispute.

What is the Separability Doctrine? The idea of the Separability Doctrine is that an arbitration clause in a contract is “separable” from the overall contract. So if one party to a contract merely alleges that the contract as a whole was fraudulently induced rather than the arbitration clause in particular, courts consider the arbitration clause to be independent, enforceable, and separable from the main contract.

In Hamblen, the Little Colorado Medical Center (“LCMC”) in Winslow, Arizona, hired Jeff Hamblen as its president and CEO. The employment contract had an arbitration clause.

LCMC later made allegations that Hamblen had provided false information to LCMC during the hiring process and put Hamblen on administrative leave. Hamblen filed a claim with the American Arbitration Association, seeking severance pay because of his alleged misrepresentations and omissions. The arbitrator denied Hamblen’s request for severance pay, granted LCMC’s request to rescind the contact, and issued an award to that effect. LCMC then sought to pursue what essentially were compulsory claims against Hamblen (such as unjust enrichment) in Navajo County Superior Court. LCMC reasoned that because the arbitrator had rescinded the employment contract, LCMC was no longer required to pursue those claims against Hamblen in the arbitration forum.

The Arizona Supreme Court disagreed. It held that, per the Separability Doctrine, the arbitration clause had survived the rescission of the employment contract and still applied to LCMC’s post-arbitration claims.

Hamblen is consistent with Arizona’s general policy of giving broad and robust application to agreements to arbitrate.

Will Fischbach is a member of the American Arbitration Association’s (AAA) panel of arbitrators and a Tiffany & Bosco shareholder. His practice focuses on commercial and civil litigation. Connect with Will Fischbach on his attorney page, read more articles by him or ask a question.