Kleiner Perkins Prevails In Discrimination Suit Brought By Ellen Pao

Forbes Susan Kalla
March 27, 2015

Tonight, a dozen jury members decided for the defense in the sex discrimination case that rocked Silicon Valley for a month. Ellen Pao’s marathon dispute with Kleiner Perkins ended with the jury dismissing all four claims. It was a startling defeat. Surprisingly, even the five jury members of Asian descent voted no to most or all the claims, according to Re/code’s Liz Gannes.

Most tech professionals expected a win for Pao. But, the popular opinion told a different story. Comments split along gender lines and men were negative. A few women joined the men, fearing the caustic fight would hurt women.

Before the verdict, we surveyed a group of employment lawyers on the merits of the case. They thought Pao had difficulty proving discrimination, but most thought she had a shot winning retaliation.

The litigators thought Pao could potentially win on one count, retaliation by termination. They would not speculate on the size of the award. Pao asked for $16 million in lost wages, or compensatory damages. Judge Harold Kahn allowed the jury to consider punitive damages late in the trial, raising the stakes dramatically for Kleiner Perkins.

In December 2104, a federal jury in California awarded a precedent-setting $185 million to a plaintiff who sued Autozone for sex discrimination. The punitive damages were 200 times the compensatory damages. In California, there is no cap on jury awards.

Win on Retaliation?

Pao accused the Silicon Valley firm of discrimination for not promoting her and ultimately firing her because of gender. She claimed the venture capital firm retaliated against her when she complained.

To prevail, Pao needed to win one of her four claims. Retaliation is easier to prove than discrimination, so when the jury dismissed the discrimination claims earlier this evening, Pao still had a chance to win retaliation. If an employee complains about unlawful behavior and the company punishes them, even if discrimination is without merit, the jury can find for retaliation.

The jury came close to siding with Pao in the claim for retaliation by termination. But, a last minute switch by a favorable juror shifted the majority to Kleiner. In the final analysis, the jury focused on performance reviews with the same critiques over time, meaning Pao did not improve. They were not convinced gender played a role in Kleiner’s decisions to promote individuals.

A well-respected leader in employment law is Wayne Outten, managing partner of Outten & Golden in New York City. Outten has battled financial giants like Morgan Stanley and Deutsche Bank, winning awards of over $100 million for individuals in federal court and arbitration. We had checked Outten’s pulse before the verdict. He was not sanguine about the discrimination claims, but held out hope for retaliation.

Plaintiffs can lose on discrimination and win on retaliation. It’s a common scenario. Jurors intuitively understand retaliation and the forces playing out. The employee pushes forward and the employer shoves back. It’s basic human nature. But, workers who assert their rights are protected. Employers can’t terminate or demote someone simply because they’ve complained in good faith about discrimination. If employers react negatively, the motivation becomes clear. It’s easy to prove by connecting the dots, ” said Outten.

Employment law conferences spend a lot of time on retaliation, considered the low hanging fruit for the business. The plaintiff doesn’t have to file a formal complaint with the EEOC or start a lawsuit to make a claim for retaliation. If someone tells human resources, I believe I’m being discriminated against because of gender, ” they are shielded from retaliation. Asserting legal rights is protected conduct, ” said Outten.

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Outten was reluctant to speculate on the potential size of the award, which is like predicting how the stock market will close a year from now. Juries decide the validity of the claim, and determine damages. They don’t rubber stamp the plaintiff’s view of lost income. If the actions were sufficiently egregious, they can add punitive damages. Defendants frequently appeal in the appellate courts.

Plaintiffs try to give a hook for the award, like 10% of the net worth of the company, according to Outten. In SEC filings from June 2014, Kleiner Perkins reported over $7 billion in assets in 24 private funds. The firm’s insiders own between 2% and 11% of the private funds.

You have to wonder why Kleiner Perkins gambled with a courtroom brawl. Outten said simply, They didn’t want to pay what Pao was asking. ” On whether the Pao v Kleiner slugfest is good or bad for women, Outten said, You can make the argument both ways. ”

He’s a pragmatist at heart.

Numbers Don’t Lie

Legal showdowns draw attention to inequality for women in tech, but reducing the disparity will take creative solutions. When I worked in the space industry as an engineer in the 1990 “²s the ratio of technical women was higher than it is now, a quarter of a century later. Women are entering STEM programs in Universities in droves, but jobs are elusive. Objective hiring measures can kick-start change, Numbers don’t lie, ” says Schaefer.

The world has shifted a long way from the sexual harassment in the 1990’s exemplified by the book, Tales from the Boom Boom Room: Women vs. Wall Street  where Susan Antilla broke the story of sex discrimination at Smith Barney.  Wall Street in the 1990’s seemed more like a 1960s fraternity, with the money and legal clout to silence any challenges.

It’s an era long gone, thankfully.