Born in Lakewood, Ohio, Gaughan received a Bachelor of Arts degree from Saint Mary's College in 1975 and a Juris Doctor from Notre Dame Law School in 1978.

She was an assistant prosecuting attorney of the Criminal Trial Division, Cuyahoga County Prosecutor's Office, Ohio from 1978 to 1983 and from 1984 to 1987.

She was an Assistant United States Attorney of the Economic Crime Division, Northern District of Ohio from 1983 to 1984.

She was a judge of the Cuyahoga County Court of Common Pleas from 1987 to 1995.

On September 29, 1995, Gaughan was nominated by President Bill Clinton to a seat on the United States District Court for the Northern District of Ohio vacated by Ann Aldrich.