Hooters of Am. v. Phillips

39 F. Supp. 2d 582 (D.S.C. 1998)



In addressing a motion to compel arbitration, a court is required to apply a multi-pronged test, known as the Genesco test: First, it must determine whether the parties agreed to arbitrate; second, it must determine the scope of that agreement; third, if federal statutory claims are asserted, it must consider whether Congress intended those claims to be nonarbitrable. 


The employee quit her job with the employer because of an incident in which the employer's close associate acted inappropriately. The employer filed a diversity action seeking a judgment that its arbitration clause was valid and to enjoin defendant employee from filing a claim against it. The employee filed individual and class action counterclaims for violations of Title VII of the Civil Rights Act of 1964. The employer sought to compel arbitration under the Federal Arbitration Act and to stay proceedings.


Should the motion to compel arbitration be granted where plaintiff was not given procedural rules of arbitration prior to signing the agreement?




The court denied the employer's motion to compel arbitration, holding that the employer's arbitration contract was unenforceable. The employees received the contract and signed their agreement to it before they were offered copies of its procedural rules. The court found that the employee agreed to the arbitration contract, but that in doing so, she did not make a knowing and intelligent waiver of her right to file her claims in court because the employer did not provide a copy of the rules before she agreed to the contract. The rules provided that the employer could appeal any decision, but the employee's appeal rights were unclear. Further, the employer selected the pool from which arbitrators were chosen, only the employee's witnesses would be sequestered, she would have to pay the employer's attorney fees, and she gave up compensatory and full punitive damages. The court held that the clause was unconscionable, violated public policy, was an illusory promise, and did not meet even the minimum standards of a bona fide arbitration clause.

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