## Facts

- Patricia Cooper was hired to work at a Kentucky Fried Chicken restaurant in Waverly, Tennessee, operated by MRM Investment Co., beginning around January 2000.
- Before starting work, Cooper signed a preprinted “Arbitration of Employee Rights” form requiring confidential, binding arbitration of employment-related claims, including sexual harassment.
- The agreement applied to disputes between Cooper and “KFC, its related companies and/or their current or former employees,” and incorporated American Arbitration Association rules and the Federal Arbitration Act (FAA) where consistent.
- The agreement was a mandatory, nonnegotiable condition of employment offered on a take-it-or-leave-it basis.
- Cooper alleged sexual harassment by Terry Rogers (an owner) and constructive discharge around August 2000.
- The agreement required the employee to pay a share of arbitration costs, raising the possibility of materially higher costs than court litigation for a low-wage worker.
- The jury-trial and court-forum waiver was not prominently disclosed or separately explained to Cooper.

## Issues

1. Whether the arbitration agreement covered disputes between Cooper and MRM and the individual defendant, even though the form referred to KFC and “related companies” and “employees.”
2. Whether the arbitration agreement was unenforceable under generally applicable contract defenses because it was imposed as a condition of employment, did not clearly obtain a knowing waiver of court access and jury trial, and required potentially prohibitive cost-sharing for statutory discrimination claims.

## Decision

- The court denied defendants’ motion to dismiss or compel arbitration and stay the case.
- The court concluded the agreement’s language was broad enough to reach claims against MRM (treated as within the “related companies” category and/or as an agent) and against covered individuals.
- The court held the arbitration agreement was unconscionable and unenforceable as applied to Cooper’s Title VII and Tennessee Human Rights Act claims.
- The court allowed the statutory harassment and constructive discharge claims to proceed in federal court.

## Legal Principles

- The FAA favors enforcement of arbitration agreements, including agreements imposed as a condition of employment, but permits invalidation on grounds applicable to contracts generally, including unconscionability.
- An arbitration clause may be unenforceable where the circumstances of formation show lack of meaningful choice, including a standardized, mandatory agreement presented to an employee in an unequal bargaining position.
- A waiver of access to a judicial forum and jury trial in the employment discrimination context must be knowing and clear; an inconspicuous or unexplained waiver can support unenforceability.
- Arbitration provisions that require an employee to bear significant fees or cost-sharing may be unconscionable when the likely expense would deter or prevent pursuit of statutory civil-rights remedies.
- Courts may refuse to enforce an arbitration scheme that, in operation, curtails or effectively precludes vindication of federal and analogous state statutory rights.

## Conclusion

The court refused to compel arbitration because, although the agreement was drafted broadly enough to cover the employer, its mandatory and nonnegotiable presentation, unclear waiver of court and jury rights, and potential for prohibitive cost-sharing rendered it unconscionable and unenforceable for the employee’s Title VII and state civil-rights claims.


Cooper v. MRM Inv. Co., 199 F. Supp. 2d 771 (M.D. Tenn. 2002)