Pao’s Defeat To Chill Sex Bias Claims In Tech Industry

Law360, San Diego (March 30, 2015, 11:21 PM EDT) — Ellen Pao’s high-profile loss in her $100 million gender discrimination battle against former employer Kleiner Perkins Caufield & Byers LLC is likely to deter other female professionals from sticking their necks out and waging similar fights against venture capital firms and technology companies, lawyers say.

The 12-person jury in a San Francisco state court on Friday found that gender wasn’t a factor in Kleiner Perkins’ decision not to promote Pao, who is now serving as Reddit Inc.’s interim chief executive officer, nor did Pao’s internal discussions or complaints keep her from moving up the ladder. Those internal complaints, and her public lawsuit that followed, were not a substantial motivating reason for her termination, the jury found.

The defeat is likely to create a chilling effect for other women to come forward and pursue discrimination claims against venture capital firms like Kleiner Perkins, as well as technology companies and professional service industries where job performance can be very subjective, according to Travis Gemoets, a partner at Jeffer Mangels Butler & Mitchell LLP who counsels employers.

“Anytime a plaintiff loses a high-profile discrimination retaliation case, it will make the next person in line who feels discriminated against or retaliated against think twice,” he said. “Their case is really going to require more than just what Pao was able to allege — that she was unfairly passed over for promotions — and will require more tangible evidence, which Pao was not able to show.”

During the four-week trial, Pao claimed that she was pressured into a sexual relationship with a fellow junior partner at the venture capital firm and that he retaliated against her after she broke it off. She also alleged that Kleiner Perkins’ gender bias prevented her and other women from being promoted to lucrative senior partner roles.

Even though Pao alleged during the trial that Kleiner Perkins had weak employment policies in place, held men-only networking events and lost track of its employment policy, her claims weren’t enough to convince a jury to find in her favor, putting up roadblocks for future plaintiffs, according to Debra Katz, founding partner of civil rights and whistleblower law firm Katz Marshall & Banks LLP.

“Not only was Pao put through terrible treatment at the firm, she was put through the scrutiny of the press about each and every thing she did and why,” she said. “Most people have difficulty obtaining a job when they file a public lawsuit of this kind, one of many reasons that are a disincentive to coming forward. But seeing this kind of public loss is the greatest disincentive of them all.”

However, Katherine Catlos, managing partner of Kaufman Dolowich & Voluck LLP’s San Francisco office and adviser to employers, said Pao’s case is more likely to deter suits from being brought against venture capital firms than against technology companies.

Kleiner Perkins attorney Lynne Hermle of Orrick Herrington & Sutcliffe LLP effectively showed during the trial that climbing the ranks to partner in a venture capital firm is a rare achievement and similar to winning an Olympic gold medal, according to Catlos.

“Hermle showed how hard it is to become a venture capitalist and be in that group of people who are partners at the firm,” Catlos said. “For venture capitalist companies, there may be a hesitation [by plaintiffs] to pursue claims given the Kleiner Perkins’ win.”

Because technology companies aren’t run by a partnership, they are likely to continue to be litigation targets as long as there are fewer women in management roles, according to Catlos.

“We are in the middle of an already-existing trend of gender discrimination and sex harassment claims being brought against technology companies,” she said. “Many settle without publicity. The trend will continue and many women may feel emboldened to pursue claims despite Ms. Pao’s loss.”

During the trial against Kleiner Perkins, attorneys representing Pao launched a California state suit against Facebook Inc. on behalf of a former employee who claims she faced gender and racial discrimination at the social networking giant. And a former employee at Twitter this month reportedly filed a class action alleging the social media company’s promotion of workers in technical roles was unfair to women.

The outcome in the case against Kleiner Perkins offers parties in the Facebook and Twitter suits a point of comparison and may accelerate settlements, according to Gemoets.

“This decision gives more clarity about what it takes to win a case like this and defend a case like this,” he said. “I think these cases will most certainly be settled.”

Although Kleiner Perkins beat Pao’s claims at the trial court, it was forced to respond to uncomfortable allegations during the course of the trial over discussions about porn stars and the Playboy mansion on a business trip and its exclusion of women from events, including a dinner at former Vice President Al Gore’s house and a ski trip with potential investment partners.

“Kleiner Perkins’ brand and image have been extremely hurt,” Katz said. “This case sends a powerful message that you can win a case in court, but still lose the case in terms of public perception. It may serve as motivation for other companies to clean up their acts.”

The clear takeaway for venture capital firms, technology companies and professional service firms like law firms is that employers should create a detailed paper trail to demonstrate legitimate business reasons why somebody may be passed over for a promotion or receive a lower salary, according to Gemoets.

“Because both of the technology and professional services industries are subjective fields, the basis for decision-making needs to be explained” as events like promotions and raises come up, he said.

Increasing documentation of worker performance is likely to have a positive effect on the workplace as a whole by minimizing any decisions that might be colored by bias, he said.

“It’s harder for biased decision-making to actually take place and realize fruition when companies are looking to make sure their decisions are based on legitimate reasons,” he said. “If one manager [who is biased] says an employee is terrible and shouldn’t be promoted, but five others say the employee is great, that biased opinion won’t hold up under scrutiny.”

In addition to making sure performance reviews are based on specific objective criteria as well as subjective components, companies also would be wise to issue anti-harassment policies in light of the Kleiner Perkins case, according to Catlos. The venture capital firm’s HR attorney who investigated Pao’s initial complaints testified at trial that it wasn’t unusual for smaller firms not to have HR policies.

“I would imagine Kleiner Perkins would have been in an even better position had Kleiner Perkins had such policies in effect,” Catlos said.

The case has pushed gender bias into the open and offers more guidance for potential plaintiffs, according to Xinying Valerian, senior litigation counsel at Sanford Heisler Kimpel LLP, which represents employees.

“At the very least, there will be more open discussion and sharing of experiences by women and minorities in these firms,” she said. “Employees considering potential discrimination claims against venture capital and technology companies have something to compare and contrast their own situations to, and that kind of awareness should give pause to firms that have not seriously addressed Equal Employment Opportunity compliance.”

–Editing by Jeremy Barker.

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