A California appellate court has refused to undo a lower court's decision finding that Hooters of America must continue to fight former servers' allegations that they were harassed and abused at work, ruling that Hooters hasn't met its burden of showing that it was entitled to summary adjudication.

The Fourth Appellate District held Friday that the Riverside County Superior Court was correct in denying Hooters' motion for summary adjudication of two of the claims in the suit brought by Arlene Garcia and Brandi Smith. Those claims allege Hooters was liable for aiding and abetting the other defendants in the suit — the restaurant's other owners and operators, MS Foods LLC and Mahmood Saifie — and Hooters was liable for violations of unfair competition law.

The three-judge panel rejected Hooters' argument that the trial court "misapplied the law" by ruling that a franchisor may be held liable for aiding and abetting under the Fair Employment and Housing Act. The record "does not support [Hooters'] characterization of its motion for summary adjudication or the trial court's order," the panel said.

"Instead, the record shows that the trial court concluded that [Hooters'] evidence failed to meet its initial burden as the moving party and denied summary adjudication on that basis," the appellate court said. "Upon review of the record, we agree with the trial court that [Hooters] failed to satisfy its initial burden as the moving party seeking summary adjudication."

In particular, the Fourth District said Hooters waited too long to bring its argument that the workers' complaint is inadequate, raising it at a hearing but not in any moving papers. And the trial court was correct in opting to ignore the new argument at that time, it said.

"By waiting until the hearing on summary adjudication to raise an entirely new ground for granting its motion, [Hooters] deprived the trial court of the benefit of written briefing on the issue, prevented plaintiffs from having a meaningful opportunity to consider the argument and prepare a response, and deprived plaintiffs of the opportunity to timely seek amendment of the complaint to cure any purported pleading defects," the panel said.

And in any event, the operative complaint "on its face shows that plaintiffs alleged a combination of omissions and affirmative conduct as the basis for aiding and abetting liability," according to the ruling.

Todd Harrison, counsel for Garcia and Smith, said Monday that the decision, "albeit a limited one, allows franchise employees to go against a franchisor under aiding and abetting and business and professions code."

"The conduct of Mr. Saifie in this case is vile and horrendous," Harrison told Law360. "Hooters of America (franchisor) was made aware of the conduct and yet nothing was ever done by them to protect our clients. We are looking forward to a jury holding them accountable in the near future."

Hooters didn't immediately respond to a request for comment late Monday.

Garcia and Smith claim in their suit that they were subjected to abuse and harassment in violation of the FEHA. Late last year, the lower court partially sided with Hooters, granting a motion for summary adjudication in favor of the restaurant with respect to several of the claims. But it refused to grant summary adjudication on two others, and that's the decision Hooters challenged on appeal.

Specifically, Hooters argued the aiding and abetting claim "rests solely on [Hooters'] alleged inaction," but there aren't any allegations in the complaint supporting the theory that Hooters encouraged or supported the alleged FEHA violations.

But the Fourth District said Hooters never argued the inadequacy of the operative complaint in its moving papers. Given the circumstances, the panel said it sees "no basis" to find the trial court abused its discretion in declining to consider that argument, it said.

The panel noted that Garcia and Smith allege Hooters provided MS Foods with training, policies and procedures, legal, administrative, human resources and investigatory support during its quest to avoid liability. They also claim Hooters refused to individually investigate complaints of harassment or retaliation and refused to exercise its rights to revoke Saifie and MS Foods' license as a franchisee despite its ability to do that, the appellate court said.

Hooters Server Harassment Suit

At this stage in the litigation, Hooters' burden was to present evidence allowing a jury to conclude that it lacked the necessary knowledge of an FEHA violation.

"Yet all [Hooters] did as the moving party was present the declaration of its franchise business director stating that he had received Garcia's complaints and initiated an investigation into her allegations," the panel said.

Showing that Hooters had knowledge of certain facts doesn't mean Hooters has shown that it lacked knowledge of other, unmentioned facts, it said.

"Likewise, the record does not show that HOA presented any evidence to negate each theory of substantial assistance alleged in the operative complaint," the panel said.

Thus, the trial court didn't err in denying summary adjudication on that claim, the panel said.

As for the unfair competition claim, "the parties concede, and we agree, that this cause of action is merely derivative of the [aiding and abetting cause of action] in the context of this case," it added.

Judges Richard T. Fields, Manuel Ramirez and Frank J. Menetrez sat on the panel for the Fourth Appellate District.

Hooters is represented by Mark F. Lovell and Carlos Bacio of Ogletree Deakins Nash Smoak & Stewart PC.

Garcia and Smith are represented by Todd Hamilton Harrison and Jennifer S. Baskaron of the Law Offices of Perona Langer Beck & Harrison.

The case is Hooters of America v. the Superior Court of Riverside County, case number E082896, in the California Court of Appeal for the Fourth Appellate District.