Hooters of America, Inc. v. Phillips

*587 ORDER

CONTENTS

I. BACKGROUND. 01 00 00

II. PROCEDURAL HISTORY . cn 00 00

III. HOA’S § 4 MOTION TO COMPEL ARBITRATION.

A. Hooters’ Arguments to Compel Arbitration.

1. The Making of the Arbitration Agreement .

2. Misrepresentation Issues .

3. Unconscionable Adhesion Contract.

4. Fairness of Arbitral Procedures & Rules.

5. Interpretation of Arbitral Rules.

B. Phillips’ Arguments Opposing Arbitration .

1. General.

2. Absence of Essential Terms of Arbitration Agreement.

3. Misrepresentation of Arbitral Process as Fraud in the Inducement.

4. Selective Incorporation of Unconscionable Rules into the Arbitration Agreement. Cn -a

5. Voiding of Arbitration Agreement Based on Restrictions on Substantive Title VII Rights and Remedies. cn CO co

IV. FINDINGS OF FACT AND CONCLUSIONS OF LAW AS TO MAKING OF CONTRACT AND MISREPRESENTATION. 05 o to

V. CONCLUSIONS OF LAW ON UNCONSCIONABILITY AND PUBLIC POLICY.. CO

A. FAA Principles . GO

1. Generally.•.

2. Substantive arbitrability inquiry.

3. Section 1 Exemption .

4. Test for Motion to Compel Arbitration.

B. The State Law Inquiry Whether the Parties Agreed to Arbitrate.

1. Generally.

2. Elements of an Agreement.

3. Other Validity Challenges under State Law .

4. Fraudulent Inducement as a Matter for Federal Court Resolution.

5. Unconscionability.

6. Public Policy Violation.

7. Illusory Promise.

C. Fundamental Requirement of Arbitrator Impartiality and Fairness of Procedure . 05 H 00

1. Generally. 05 H 00

D. Whether Congress Intended Title VII Claims to be Nonarbitrable. 05 W O

1. History of Arbitration of Statutory Claims. 05 N) O

2. The Gilmer-exception: Where Arbitration is Inadequate to Protect Federal Rights. 05 to

3. Public Policy as a Matter of Post-Award Review under 9 U.S.C. § 10. 05 to CO

VI. REMEDIES OF CONTRACT REFORMATION OR SEVERANCE . ^ <M CO

A. Generally. ^ <N

B. Reformation... ^ <N CD

C. Severance . ^ <M CO

1. Generally. ^ ID

2. Arbitrator Selection Provisions and 9 U.S.C. § 5. bo (M ZD

*588 3. Other Rules Provisions: Attempting to Reconcile Conflicting Provisions . 626

VII. CONCLUSION. 627

I. BACKGROUND

This is a declaratory judgment and Title VII case involving a former “Hooters Girl,” who complains of sexual harassment by Hooter’s managers and the brother of the company’s CEO. The case is unusual for several reasons. Unlike the party alignment in the typical employment discrimination case, the plaintiff here is the former employer, Hooters of America, Inc. (“hereinafter HOA”) and the employee, Ms. Phillips, is the defendant (hereinafter “Phillips”). Second, the case includes both an individual and a class counterclaim brought by Phillips and all other similarly situated Hooters Girls against HOA and its Myrtle Beach, South Carolina, facility, “Hooters of Myrtle Beach,” (hereinafter “HOMB”), which is alleged to be the former joint employer of Phillips. 1

The matter is before the court on HOA’s “Motion for Preliminary Injunction,” filed November 8, 1996, treated as a motion to compel arbitration under 9 U.S.C. § 3. Also before the court is Hooters’ Motion to Stay Proceedings, filed February 25, 1997, which seeks to stay the non-arbitrable Rule 23, FRCP, allegations of the counterclaim under 9 U.S.C. § 3. The court has had extensive briefing and oral argument, and has conducted an evidentiary hearing on factual issues pertinent to the motions. The matter is ripe for adjudication. For the reasons given below, the court finds that both HOA’s motion to compel arbitration and Hooters’ motion to stay should be DENIED.

II. PROCEDURAL HISTORY

This case has a long and convoluted procedural history. An understanding of this procedural history is, however, essential to understanding the present posture of the case.

The case commenced when HOA filed a complaint on November 4, 1996, seeking a declaratory judgment, 28 U.S.C. § 2201, that the November 25, 1994, and April 23, 1995, arbitration agreements signed by Phillips were valid and enforceable. Jurisdiction was alleged to be based on diversity of citizenship, 28 U.S.C. § 1332. HOA also sought injunctive relief restraining Phillips from pursuing legal proceedings in state or federal court arising from her former employment at HOMB. On November 8,1996, HOA filed a motion for preliminary injunction. This motion asked the court to restrain Phillips from filing any state or federal court action relating to her former employment, and to compel arbitration of Phillips’ claims under 9 U.S.C. § 4. This motion is hereinafter referred to as “the § 4 motion.”

On January 15, 1997, Phillips filed her initial opposition to the § 4 motion. The next day she filed an answer to the complaint, and interposed a counterclaim against HOA, and additional counterclaim defendant HOMB. The answer denied that Phillips had entered into an enforceable arbitration agreement covering her dispute with HOA. Phillips asserted that the agreements were neither knowingly nor voluntarily entered into, and were unconscionable adhesion contracts violative of public policy. Moreover, the answer asserted that the alleged arbitration agreements were not supported by adequate consideration and were illusory. Finally, Phillips’ last defense contended that HOA’s purported “arbitration” plan did not constitute bona fide arbitration within the meaning of the Federal Arbitration *589 Act, 9 U.S.C. §§ 1 et seq., because the procedures deprived Phillips of due process, substantive protection against sexual harassment, and statutory remedies under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq.

Phillips’ counterclaim is comprised of two parts. The first part is an individual action by Phillips seeking damages and injunctive relief against Hooters for violations of Title VII, based on the alleged hostile environment and harassing behavior, culminating in a constructive discharge. Although Phillips’ individual counterclaim enumerates several incidents of hostile behavior, 2 the primary complaint concerned a June 19, 1996, incident between Phillips and Gerald Brooks, the brother of the Hooters CEO. Robert Brooks. 3 While Phillips was bartending at HOMB, Gerald Brooks allegedly grabbed and slapped Phillips’ buttocks while in the presence of HOMB management and customers. Phillips responded that Brooks should not touch her, to which he allegedly responded that “he would cram her shorts down her face.” Phillips further contends that HOMB management witnessing the event advised her that she should let the matter go because nothing could be done to correct Gerald Brooks’ behavior as he was the brother of the CEO. As a result, on June 25, 1996, Phillips submitted her written resignation citing the incident of June 19 and management’s alleged failure to take remedial action as the reason for her constructive discharge.

Phillips’ individual counterclaim further alleges that Gerald Brooks sexually assaulted another Hooters Girl on June 19. Phillips avers that HOA and HOMB management were well acquainted with Gerald Brooks’ habit of harassing Hooters Girls, and took no remedial measures.

Phillips received her Notice of Right to Sue from the EEOC on November 25, 1996, for her individual counterclaim and filed the action within 90 days, on January 15, 1997. Her counterclaim for sexual harassment seeks damages, injunctive relief, and reinstatement to a harassment-free workplace.

The second part of the counterclaim (hereinafter “the class counterclaim”), is brought on behalf of Phillips and a proposed class, described as:

All Hooters non-managerial female employees, all or most of whom are known as “Hooters Girls,” who are, have been, or will be employed by, Hooters of Myrtle Beach, Inc., or by Hooters of America, Inc., its subsidiaries, affiliates, licensees, franchisees, or any employer for whom HOA provides management services and who may have been or may be required or asked to sign agreements to arbitrate employment-related disputes.

Answer and Counterclaim, filed 1/15/97, at 9. The class counterclaim alleges Hooters has compelled the classmember employees to execute arbitration agreements, and that Hooters intentionally deprives the class members of any knowledge of the procedures employed in the arbitration proceeding, or the statutory remedies being forfeited. The class counterclaim asserts that in Phillips’ own case, Hooters *590 took the position that Phillips could not pursue her Title VII claim in court, and should proceed to arbitration to be conducted under purportedly unfair procedures not even promulgated until after Phillips had left Hooters’ employ. The class counterclaim thus asserts that Hooters will attempt to enforce these purportedly unfair arbitration procedures against any class member who seeks a judicial forum for violations of Title VII.

The class counterclaim asserts four causes of action. The first claim is for a declaratory judgment that the purported arbitration agreements deprive class members of substantive and procedural rights under Title VII and are unenforceable. 4 The second cause of action, based on an alleged violation of § 703 of Title VII, 42 U .S.C. § 2000e-2, asserts that promulgation of such mandatory and unfair arbitration procedures deprives the proposed class of equal employment opportunities because of their sex, and is itself a violation of Title VII. In the third cause of action, Phillips contends that Hooters has retaliated against class members who have opposed its unlawful employment practices, in violation of § 704 of Title VII, 42 U.S.C. § 2000e-3. The fourth cause of action asserts that by its promulgation of such mandatory unfair arbitration procedures. HOA has deprived the class members of the right to an impartial determination of a civil action and the right to substantive remedies guaranteed by law, on account of their sex, in violation of § 706(f) & (g) of Title VII, 42 U.S.C. § 2000e-5(f) & (g).

Phillips received her Notice of Right to Sue on the arbitration issue class counterclaim involving the arbitration agreement on January 9, 1997, which was within 90 days of the filing of the counterclaim. Phillips alleges individual injury on the class counterclaim from mental anguish and emotional distress resulting from Hooters’ invocation of the unfair arbitration procedures, and seeks back pay, reinstatement or front pay and benefits, compensatory and punitive damages. On behalf of the class she requests compensatory and punitive damages, declaratory and injunctive relief.

On February 13, 1997, Hooters filed its “Answer to Counterclaim and Demand for Arbitration.” Hooters admitted that its employees had executed various agreements and asserted that the documents spoke for themselves. Moreover, Hooters asserted that it had a progressive “open door” policy, part of which prohibited sexual harassment and provided a mechanism for reporting it. Hooters admitted, however, that Gerald Brooks entered the HOMB location on June 19, 1996, and that Phillips was the Hooters Girl on duty at the bar. Hooters disputed Phillips’ interpretations of the Hooters arbitration rules. Hooters admitted that it requested that Phillips proceed to arbitration and that it instituted the principal claim in an effort to accomplish that.

As to the class counterclaim. Hooters disputed the validity of such counterclaim, but admitted that the class counterclaim would not be subject to arbitration under any provision of its arbitration agreement. 5 *591 Hooters asked that the counterclaim be dismissed with prejudice, and it be awarded costs and expenses, including attorney’s fees.

Following the volley of initial pleadings, 6 the parties began submitting extensive briefs on the outstanding § 4 motion. The court scheduled a hearing on the motion for February 28, 1997. However, on February 25, 1997, Hooters filed a motion to stay proceedings pending arbitration. Hooters contended, in part, 7 that any discovery served by Phillips pertinent to her individual counterclaim was inappropriate. This motion is “the § 3 motion.” That same day the court held a telephone status conference with counsel in which the court ordered Phillips to respond to the § 3 motion and tolled the time for answering any discovery pending the court’s resolution of the outstanding motions.

Thereafter the parties initiated voluminous briefing relative to the § 4 motion, prompting several requests for extensions of time to respond. Hooters challenged Phillips’ inclusion of certain affidavit evidence of Susan Ainsworth, a former HOA manager, and moved, on April 11, 1997, to strike and seal the Ainsworth declaration on attorney client privilege grounds. Hooters contended Phillips’ counsel had violated ethical rules in securing the Ains-worth declaration. At a telephone conference hearing held April 23, 1997, the court deferred ruling on the Ainsworth declaration issue pending receipt of further briefing from the parties, but ordered limited discovery. The court concluded that in order for Phillips to respond properly to the § 3 and § 4 motions, she was entitled to limited discovery relative to the circumstances surrounding the making of the alleged arbitration agreement. The court authorized limited discovery in the form of interrogatories, requests to produce and five depositions.

On May 7, 1997, Hooters submitted an in camera declaration of James P. Dirr. Esquire, its General Counsel, accompanied by a motion to place the declaration under seal on the grounds of attorney client privilege. The Dirr declaration pertained to the circumstances surrounding adoption of the Hooters arbitration program, including the role assumed by Dirr. The Dirr declaration also addressed Dirr’s participation in the “roll out” of the arbitration program to Hooters General Managers on October 25, 1994, in Atlanta. The Dirr declaration was submitted to support Hooters’ contention that several matters addressed at the October 25, 1994, meeting were privileged on attorney client grounds. In a telephone conference on May 29, 1997, the court agreed with Hooters that the Dirr declaration contained some protected matter, and ordered that a redacted version be provided to Defendant, and the original be maintained under seal.

In the same telephone conference the court also denied Hooters’ motion to strike the Ainsworth declaration, finding that Defendant’s attorneys committed no ethical violation in procuring the affidavit. As to several documents which Hooters claimed were not discoverable on attorney client privilege grounds, the court ordered Hooters to compile a privilege log of such documents, and established a method for resolving such objections. 8 Finally, as to *592 issues pertaining to validity of the arbitration agreements, the court concluded it had received conflicting affidavit evidence concerning the roll out of the arbitration program in Myrtle Beach in November, 1994, 9 and the General Manager’s meeting in Atlanta, 10 all of which pertained to the making of the agreement itself. Accordingly, the court found that an evidentiary •hearing would be required:

[A]nd the actual evidence that I think I will need will be what I call formation evidence or fact evidence relating to what happened at Myrtle Beach on the relevant dates, and to the extent that what happened somewhere else is pertinent or relevant to what may or may not have happened in Myrtle Beach and is disputed, then anything that relates to that. But I would not hear evidence on what I call validity issues, as to the arbitration rules. I think that I can rely for that on the rules themselves and the affidavits that have previously been submitted.

At this point, we have controverted facts on issues that relate to formation with regard to Ms. Phillips’ agreement to arbitrate, and on those, I will take evidence.

Tr. of May 20, 1997, telephone conference, at 34. The court set an evidentiary hearing for July 17,1997.

Just prior to the evidentiary hearing, on July 15, 1997. Phillips filed her motion to certify the class action counterclaim. The court suspended the time period for Hooters’ response to the motion, pending the court’s rulings on the §§ 3 and 4 motions. On the same date Phillips also moved to amend her answer and the counterclaim. Phillips wished to amend her individual pleadings and the class counterclaim pleadings to add an additional defense that the arbitration agreements were obtained by intentional or negligent misrepresentation. Hooters filed its opposition to the motion to amend on July 16, 1997. At the commencement of the hearing on July 17, 1997, the court granted Phillips’ motion to amend, finding that Phillips did not discover certain information pertinent to the new defenses until discovery. Accordingly, the court ruled that the liberal amendment provisions of Rule 15(a), FRCP, authorized the amendment.

The parties asked the court to consider as evidence excerpts of several depositions. Accordingly, the court reviewed the depositions of Paul G. Schaefer (former HOA Director of Human Resources). Susan Ainsworth (former Hooters General Manager in Athens. Georgia). Christopher Watson (former HOMB General Manager), Gene Fulcher (former HOMB General Manager), and Defendant and Counterclaim Plaintiff Annette Phillips. The parties also presented numerous live witnesses, including Paul G. Schaefer, Gene Fulcher. Annette Phillips, Susan Ains-worth, Dennis Lamberjack (former HOMB assistant kitchen manager). Leon Kulasa (former HOMB assistant manager). Donna Wilette (former HOMB Hooters Girl), Shelley Pauley (former HOMB Hooters Girl), and James Dirr (HOA General Counsel). The court has also considered *593 all documents filed as attachments to pre-hearing memoranda on the §§ 3 and 4 motions. Following continuation of the hearing on July 18, 1997, the court, at the request of the parties, recessed until September 29, 1997. On that date Hooters called its final witness, James Dirr, after which the parties offered closing arguments.

Thereafter, the court announced its preliminary oral ruling. The court stated that it intended to deny Hooters’ § 4 motion and would refuse to compel arbitration. The court found that although Phillips had failed to establish either fraud, coercion or negligent misrepresentation in the making of the arbitration agreement, the procedural Rules drafted by Hooters were plagued with infirmities. The court reasoned that in order to determine whether an enforceable contract was formed or if there was a valid ground for revocation, the court had to examine the substance of the procedural rules, especially because one of the challenges was unconscionability. In doing so, the court concluded that the proposed Hooters arbitration Rules were so one-sided in Hooters’ favor and so oppressive to the employee that the Rules violated public policy and were unconscionable. In addition, the court concluded that certain provisions of the procedural Rules, which allowed Hooters to modify the Rules without notice, rendered the agreement illusory.

The court also observed that it had given serious consideration to whether the court could sever the invalid portions of the procedural rules and compel the case to arbitration under court-modified procedural rules. The court found, however, that the existing procedural rules were so conflicting, ambiguous, and poorly drafted that no arbitrator would be able to understand any redacted version of the rules. The court also recognized the limits placed on its ability to rewrite the parties contract under South Carolina law. Accordingly, the court announced that it would draft a written order detailing its findings, and that the case would be stayed pending issuance of the order.

III. HOA’S § 4 MOTION TO COMPEL ARBITRATION

The parties’ arguments, supplemented by the evidence adduced at the hearing, are as follows.

A. Hooters’ Arguments to Compel Arbitration

1. The Making of the Arbitration Agreement

In overview, Hooters’ arguments to compel arbitration rest initially on three assertions: (1) that on two different occasions Phillips knowingly and voluntarily entered into an enforceable arbitration agreement that incorporated certain Rules 11 and which covered the instant individual Title VII claim: (2) that Phillips has failed to prove any affirmatively fraudulent or negligent misrepresentations by Hooters in the making of the agreement: moreover, because no special relationship existed between the parties. Hooters was not required to disclose the terms of the Rules to Phillips: and (3) that Phillips has failed to prove that the arbitration agreement was an unconscionable adhesion contract. Hooters contends the court’s analysis should stop there, and that any further review of the purported “fairness.” or due process Phillips would receive under the *594 Rules is inappropriate at this juncture. Hooters contends such review might be suitable at an award review initiated under 9 U.S.C. § 10. 12

Hooters points to the broad language of the arbitration clause executed by Phillips on two occasions:

In consideration of the Company offering you employment and employing you, you and the company each agrees [sic] that, provided, when appropriate, the employee, complies with the company’s open door policy and/or compliance resolution procedure, the employee and the company agree to resolve any claims pursuant to the company’s rules and procedures for alternative resolution of employment-related disputes, as promulgated by company from time to time (the “Rules”). Company will make available or provide a copy of the rules upon written request of the employee.

Joint Exh. 1 & 2.

As to the circumstances regarding the making of the arbitration agreement. Hooters relies on Paul Schaefer’s testimony that he instructed all General Managers at the October 25,1994, meeting in Atlanta on the specific manner in which the roll out should be accomplished. The key elements of the plan were that General Managers would use a fixed agenda and read from documentation supplied by HOA and would require each employee to hold the arbitration agreement for at least five days before signing. Two General Managers attending the Atlanta meeting. Fulcher and Watson, corroborated Schaefer’s testimony. Hooters points to Gene Fulcher’s testimony that he conducted the roll out according to the guidelines established at the Atlanta meeting. Moreover. Fulcher testified (1) that each of his employees was required to hold the arbitration agreement at least five days before signing it in his presence and the presence of another witness: (2) that he told employees, including Phillips, that they should have the arbitration agreement reviewed by a lawyer, if they wished: (3) that he also informed employees they could decline to sign the arbitration agreement, but that they would not be eligible for further promotion: and (4) that he informed employees that the procedural rules to be used in arbitration, while not available at HOMB, were available by request in writing to a Divisional Vice-President. Unquestionably Phillips executed an arbitration agreement, dated November 25, 1994, that expressly covered sexual harassment claims. Jt. Exh. 1 at ¶ 1 (“[r]elating to any claim of discrimination, sexual harassment, retaliation, or wrongful discharge, whether arising under federal or state law, by a statute, rule, regulation or common law ... ”).

Fulcher’s testimony regarding roll out procedures was corroborated by Ms. Wil-lette, who testified that Fulcher had advised them of the Rules’ availability, and by Ms. Pauley, who testified that she followed Fulcher’s suggestion and took her agreement to a lawyer.

Although Chris Watson was a General Manager of the Baltimore Hooters location at the time of the 1994 roll out, he transferred to HOMB in March 1995. Upon reviewing HOMB employees’ files for completeness, he noted several omissions, and requested that all employees execute another arbitration agreement. He testified he told the employees he was updating their files and wanted them to fill out new-hire packets. He testified he told the employees they had the right to decline the arbitration agreement and retain their jobs. He testified that Annette Phillips executed her second arbitration agreement on April 23, 1995, (Watson Depo. at 159). This agreement contained the same language as the first arbitration agreement as to its coverage of sexual harassment claims.

Hooters thus contends that Phillips twice failed to avail herself of the opportu *595 nities to have the arbitration agreement reviewed by a lawyer or to request a copy of the Rules. Hooters points to Mr. Dirr’s testimony that the Rules had been drafted and were in existence during the initial roll out period. Hooters thus relies on the preceding evidence and the language of the arbitration agreement to argue that Phillips knowingly and voluntarily entered into an arbitration agreement that specifically covered sexual harassment claims and that any lack of information regarding the Rules was Phillips’ own fault.

2.Misrepresentation Issues

As to Phillips’ claims of fraudulent or negligent misrepresentation. Hooters claims there is a total lack of evidence of an actionable misrepresentation. Even if testimony that Schaefer described the arbitration program at the Atlanta roll out as “fair” is credited. Hooters contends Phillips was unaware of such statement and could not have relied on it. Hooters also insists that Phillips’ claim of fraud in the omission fails because Hooters had no duty to furnish a copy of the Rules to Phillips at the time of signing the agreement. Hooters claims such a duty would arise, if at all, only in a situation of a special or fiduciary relationship, Finally. Hooters notes that arbitration agreements often incorporate by reference procedural rules, and that the relationship between the parties was arms length. Hooters notes that this is not a case of an ignorant and unwary person entering into an agreement, relying on Phillips’ self-described assessment of herself as having “above-average judgment.” Accordingly, Hooters concludes that Phillips has failed to prove fraudulent or negligent misrepresentation that might vitiate the arbitration agreement.

3.Unconscionable Adhesion Contract

Hooters insists that Phillips’ arguments that the arbitration agreement was an unconscionable adhesion contract are groundless. It points to testimony that the employees could decline to sign the agreement and retain their jobs, and that Phillips never heard of anyone being fired for refusing to sign.

4. Fairness of Arbitral Procedures & Rules

Hooters also insists that the court would be in error to conduct an unconscionability or public policy analysis of the Rules at the 9 U.S.C. § 2 stage. Hooters relies on O’Mary v. Mitsubishi Electronics America, Inc., 59 Cal.App.4th 563, 69 Cal. Rptr.2d 389 (4 Dist.1997), for the proposition that a § 2 review is narrow, and Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967), for the contention that disputes that are not about the making of the arbitration agreement are for an arbitration forum to decide, subject to review at the award enforcement stage. Hooters also cites Glass v. Kidder Peabody & Co., Inc., 114 F.3d 446 (4th Cir.1997), for the proposition that the court may not reach procedural arbitrability issues until after arbitration and Local Union Number 637 v. Davis H. Elliot Co., Inc., 13 F.3d 129, 132 (4th Cir.1993), for the proposition that a subsequent defense to arbitrability is within the jurisdiction of the arbitration forum. As to alleged infirmities concerning the method for arbitrator selection under its Rules. Hooters insists that this is a procedural matter for the arbitrator to consider, and would only be § 10 award review matter for this court. Finally, Hooters argues that any cases finding that the court should perform a “gatekeeper” function at the time of a motion to compel arbitration, are wrongly decided.

5. Interpretation of Arbitral Rules

Although, as noted above, Hooters claims that this court cannot construe the terms of the Rules incorporated into the arbitration agreement. Hooters .insists that Phillips interpretation of the Rules is erroneous. The current version of Hooters’ Rules, adopted July 23, 1996, is set forth at Joint Exh. 4. Hooters points to Rule 22-1 as evidence that all Phillips statutory rights would be preserved in the *596 arbitration forum. Hooters contends- Rule 19-1, the Rules’ damages provision, is supplemented by Rules 19-2, 19-5 and 19-7, and allows for just and reasonable punitive damages. Hooters points to Rule 19-l(a)’s provisions for backpay, from which collateral sources must be offset. Hooters insists that under Rule 19-1 reasonable attorney’s fees and costs are recoverable, including attorney’s fees and costs as sanctions. Rules 20-1 and 20-2. As to the Rules’ provision for arbitrator selection, see Rules 8-1 through 8-9. Hooters points to language from Mitsubishi refusing to indulge a presumption that arbitrators will be less than impartial, see Mitsubishi, 473 U.S. at 634, 105 S.Ct. 3346, and a January 27, 1995, letter from Hooters’ General Counsel soliciting experienced lawyers for Hooters’ arbitration pools. See Pltfs Exh. 1. Finally, Hooters argues that the Rules are expendable. Under section 3 of both arbitration agreements executed by Phillips.

[i]f any provision of ... the Rules is declared void, or otherwise unenforceable, such provision shall be deemed to have been severed from this Agreement, which shall otherwise remain in full force and effect; provided that Company shall be permitted a reasonable opportunity to unilaterally amend ... the Rules to legally effect the ability of the Employee and the Company to arbitrate Claims as contemplated by this Agreement.

Thus, while Hooters contends the court’s interpretation of the Rules is unwarranted, it insists that even if the court’s review indicates the Rules are unenforceable, the court must nevertheless compel arbitration, after having severed the unenforceable provisions or allowing Hooters to amend its provisions.

B. PHILLIPS’ARGUMENTS OPPOSING ARBITRATION

1.General

In overview, Phillips contends any arbitration agreement signed by her is subject to revocation on the following grounds: (1) that the essential terms of the contract, ie., the Rules, were not available to Phillips at the time of executing the agreement: (2) that Hooters misrepresented the terms of the arbitral process at the November 1994 roll out meeting, constituting fraud in the inducement of the arbitration agreement: (3) that the arbitration agreement and its incorporated Rules are unconscionable, and were executed by Phillips while she was under economic duress; and (4) that the arbitration agreement and its incorporated Rules violate Title VII and are void as against public policy. Phillips relies on the following evidence to establish her revocation grounds.

2.Absence of Essential Terms of Arbitration Agreement

Phillips contends that because the Rules provide the only source of information concerning the substantive rights and procedures to be followed in arbitration, the Rules were essential terms of any arbitration agreement. Phillips further asserts that the Rules were not in existence at the time of the November 24, 1994, meeting, relying on an in-house memorandum of Paul Schaefer dated January 17, 1995, in which earlier versions of the Rules were referred to as “draft copies.” Def s Exh. 1. In addition, Phillips points to Rule 24-1, which provides that Hooters may amend the Rules without notice, as proof that Hooters’ so-called “agreement to arbitrate” was wholly illusory and did not bind it to any specific promise. Based on the foregoing, therefore, Phillips contends that no arbitration agreement ever arose, or, if it did, it is subject to revocation.

3.Misrepresentation of Arbitral Process as Fraud in the Inducement

Phillips contends that Hooters’ knowing concealment of the Rules and the manner in which it conducted the HOMB roll out in November 1994 misrepresented the arbitration program, constituting fraud in the inducement, a ground for revocation.

*597 Phillips points to evidence that the HOMB roll out was conducted in a noisy, rushed atmosphere, which she contends thwarted careful consideration of the arbitration agreement. The roll out covered three distinct areas: the new employee handbook, the HOA Alternative Dispute Resolution (ADR) Agreement, and employee benefits information. Joint Exh. 6. She argues that the roll out agenda and materials were either purposefully or negligently designed to confuse the employees concerning the ADR program. She points to numerous references to the “open door policy,” “compliance resolution procedure” and “arbitration” in the roll out documents and contends the documents appear to interchangeably confuse the processes. She notes that the 1994/95 Employee Handbook, Defs Exh. 8, 13 discussed Hooters’ sexual harassment policy but failed to mention that any such claims would be subject to arbitration. Phillips argues that an explanation of the ADR program read aloud at the roll out meeting, Joint Exh. 7, fails to reference the Rules, and that the employee handbook, Joint Exh. 8, only discusses arbitration in one paragraph and inconsistently uses the term “ADR” (formerly used in other documents to refer collectively to the open door, CRP, and arbitration processes) in lieu of “arbitration.” Moreover, Phillips contends that the one paragraph discussion, Joint Exh. 8 at 7-8, erroneously implies that arbitration is an appeal from an unsuccessful CRP matter. Additionally, she argues that paragraph 2 of the arbitration agreements signed by her, Joint Exhs. 1 & 2, also implies that arbitration would be an appeal of an unresolved CRP matter. Finally, she notes that neither the roll out documents nor the employee skit conducted at the meeting alerted any employee that they would be giving up their right to go to court by signing the arbitration agreement. In summary, then, Phillips contends the preceding circumstances establish fraud under Prima, Paint. 388 U.S. at 402, 87 S.Ct. 1801.

4. Selective Incorporation of Unconscionable Rules into the Arbitration Agreement

Phillips urges this court to find, as a matter of law, that the Hooters Arbitration Agreement and Rules are unconscionable, and provide an adequate ground, in law or equity, to revoke Phillips’ agreements. Phillips relies in part on the testimony of Hooters’ General Counsel to show uncon-scionability. James Dirr, Hooters General Counsel, testified that he drafted the Arbitration Agreement and Rules at the request of the HOA board of directors in 1994. He testified that the first version of the Rules had been adopted by the time of the Atlanta General Managers meeting in October 1994 and would have been available upon request to any employee in November 1994. Dirr admitted that the Divisional Vice-Presidents did not have a final copy of the Rules until January 1995, but insisted they had received a draft prior to that time.

Dirr further testified that in 1994 he received a copy of a model arbitration agreement and procedures promulgated by the Center for Public Resources, Inc. (CPR), an association of management lawyers. He testified that he modeled the Hooters Rules very closely after the CPR rules. 14 It appears, however, that the CPR model rules examined by Dirr in 1994, Joint Exh. 16, were published in 1990, prior, of course, to the adoption of the 1991 Amendments to the Civil Rights *598 Act. Thus, the CPR rules did not provide for statutory remedies available under the 1991 Amendments, such as compensatory and punitive damages. Nevertheless, in his testimony Dirr insisted he was aware of the 1991 Amendments at the time he drafted the Hooters Rules.

Based on the preceding testimony. Phillips urges that Hooters tracked an outdated model arbitration agreement for termination disputes which was wholly inconsistent with expanded remedies available under the 1991 Amendments. Moreover. Phillips contends that Hooters consciously failed to provide remedies under its Rules notwithstanding its knowledge of passage of the 1991 Amendments. Phillips points to Hooters’ own comparison of its rules to the CPR rules. 15 included in a table set forth as Exh. 1 to Hooters’ April 14, 1997, filing entitled “Appendix to HOA’s and HOMB’s Reply to Defendant’s and Counterclaim Plaintiffs Supplemental and Opposition Memorandum.” Phillips points to numerous instances in which it contends Hooters consciously deleted CPR arbitration rules equitably drawn for both parties and adopted, without exception, rules favoring Hooters.

Phillips also contends that the Rules are fatally flawed based on the provisions for arbitrator selection alone. Phillips contends that in practical effect the Rules permit only Hooters to select arbitrators because Hooters controls the selection of individuals for the list of available arbitrators. Phillips also denies that the employee can simply reject each proposed list of arbitrators, asserting that the employee is limited to only one additional list. Because of the perceived unfairness in the arbitrator selection process and the absence of any requirement that arbitrators be impartial and independent of Hooters. Phillips asserts that Hooters is the judge of its own claim in arbitration.

As evidence that Hooters’ Rules fall far outside the realm of conventional arbitration rules. Phillips points to several affidavits of arbitration experts 16 that unanimously proclaim Hooters’ Rules to be unconscionable. For example, George Nicolau. President of the National Academy of Arbitrators, states unequivocally that the Hooters Rules “fall far short of the Protocol standards, that they are not fair to employees and do not afford adequate procedural protections, and, in contravention of the Protocol, do not afford employees the substantive rights to which they are entitled by law.” Similarly, Lewis L. Maltby, member of the Board of Directors of the American Arbitration Association, opines that the Hooters Rules fail “to provide even minimally acceptable due process to employees. This is without a doubt the most unfair arbitration program I have ever encountered.” In like vein Professor Dennis Nolan concludes that the Hooters Rules “do not satisfy the minimum requirements of a fair arbitration system.”

To establish that Phillips lacked any meaningful choice in the execution of the arbitration agreements — an element generally considered an adjunct to unconscio-nability — Phillips relies on testimony from two former Hooters’ employees. Messrs. Kulasa and Lamberjack. Lamberjack tes *599 tified that at a meeting with his assistant managerial staff on the day before the November 25, 1997, roll out, Gene Fulcher told his managers that if the employees refused to sign the employee arbitration agreement the managers should find a reason to get rid of them. Kulasa attended the same assistant manager’s meeting and testified that he thereafter informed the Hooter’s Girls that they needed to sign the arbitration agreement or they would lose their jobs. Phillips herself testified that she believed that if she did not sign the agreement management would find a way to get rid of her.

5. Voiding of Arbitration Agreement Based on Restrictions on Substantive Title VII Rights and Remedies

In this argument Phillips relies once again on the perceived restrictions on Title VII remedies and absence of due process imposed under the Hooters Rules. In arguing Phillips was forced to forgo substantive Title VII rights under the Rules, Phillips contends the Rules contain the following illegal restrictions:

1) Compensatory Damages. Rule 19-1, the Rules’ damages provision, is silent as to compensatory damages, which are fully recoverable under the Civil Rights Act of 1991, 42 U.S.C. § 1981(a)(a), (b)(3).

2) Backpay Relief. HOA Rule 19-1 limits any backpay award by requiring that backpay be reduced for funds received from collateral sources, ie., unemployment compensation, disability benefits, which does not apply to judicial proceedings under Title VII.

3) Frontpay Relief. HOA Rule 19-1 and 19-2 limit any front pay award to a two year period.

4) Punitive Damages. Phillips contends that Rule 19-5 allows the arbitrators to award punitive damages up to a maximum of one year of gross cash compensation, which is approximately § 13,000, compared to the limit of $300,000 in punitive damages for unlawful employment discrimination available under 42 U.S.C. § 1981a(a), (b)(3), for joint employers of the size of HOA and HOMB.

5) Attorney’s Fees. Phillips contends that Title VII attorney’s fees and costs are traditionally awarded to a successful Title VII plaintiff under 42 U.S.C. § 2000e-5k, whereas under HOA Rules 19-1 and 20-1 attorney’s fees can only be awarded upon a showing of frivolity or bad faith of the unsuccessful litigant.

6) Injunctive Relief. Whereas under Title VII an employer that intentionally engages in unlawful activity may be enjoined from continuing such conduct. 42 U.S.C. § 2000e-5(g)(i), under Hooters Rule 2-6 the arbitration panel is precluded from awarding injunctive relief of any kind affecting Hooters policies or procedures (“[Njothing in these Rules shall be construed as to prohibit the company from enforcing any of its rules, regulations, policies or procedures”) and Rule 8-9 (“[tjhe Adjudication Panel shall not have the power to: (1) Modify or alter any policy of the Company, including any of these Rules.... ”). Moreover, Phillips points out that relief for the employer is not so limited, and that in cases brought by the employer the panel may award any relief that is “just and reasonable.” which includes injunc-tive relief.

7) Burden of Proof. Rule 13