In 1995, Phillips became a United States magistrate judge of the Central District of California.
On January 26, 1999, Phillips was nominated by President Bill Clinton to be a United States district judge of the United States District Court for the Central District of California, to a seat vacated by Judge William Matthew Byrne Jr. She was confirmed by the United States Senate on November 10, 1999, and received her commission on November 15, 1999.
On September 9, 2010, Phillips ruled that the United States Department of Defense's "don't ask, don't tell" policy is unconstitutional in the case Log Cabin Republicans v. United States of America.
[5] On October 12, Phillips issued a permanent worldwide injunction ordering the military to immediately "suspend and discontinue any investigation, or discharge, separation, or other proceeding, that may have been commenced" under "don't ask, don't tell".
[9] On September 29, 2011, the Ninth Circuit vacated the district court's decision, ruling that the legislative repeal of "don't ask, don't tell" had rendered the case moot.