Hooters of America, Inc. v. Phillips

Annette Phillips (defendant) had worked as a bartender at a Hooters of America, Inc. (Hooters) (plaintiff) franchisee’s restaurant since 1989. In 1994, Hooters implemented an alternative-dispute-resolution (ADR) program that conditioned employees’ continued employment on agreeing to submit any employment-related disputes to arbitration. The arbitration agreement that employees were expected to sign stated that the employee and Hooters agreed to resolve any claims pursuant to ADR rules and procedures to be promulgated by Hooters. Hooters eventually promulgated ADR rules that, among other things, (1) required employees to give Hooters notice of claims but did not require Hooters to give employees notice of defenses, (2) required employees to give Hooters a list of fact witnesses but did not require Hooters to reciprocate, (3) required that all arbitrators be selected from a list created by Hooters, and (4) allowed Hooters, but not employees, to expand the scope of arbitration or seek summary judgment. Phillips and other employees at the franchisee’s restaurant were given five days to review the arbitration agreement and decide whether to accept the agreement’s terms. However, no employees received a copy of Hooters’ ADR rules. Phillips signed the arbitration agreement and continued working for the franchisee’s restaurant. In 1996, Phillips allegedly was sexually harassed at work by a Hooters official. After Phillips’s manager disregarded Phillips’s request for help with the harassment, Phillips quit her job. Phillips’s lawyer then contacted Hooters and asserted that the sexual harassment and Hooters’ lack of response violated Phillips’s rights under Title VII of the Civil Rights Act of 1964. Hooters asserted that Phillips had to arbitrate the claims, but Phillips refused. Hooters sued Phillips in federal district court, seeking to compel arbitration under the Federal Arbitration Act. During the district court proceedings, multiple arbitration experts testified that Hooters’ ADR rules were completely one-sided and unfair. The district court ultimately denied Hooters’ motion to compel arbitration, and Hooters appealed.