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Judge denies Kleiner bid to arbitrate sex discrimination case

Silicon Valley venture capital firm Kleiner Perkins Caufield and Byers loses an effort to arbitrate a case brought by junior partner Ellen Pao.

Ellen Pao Kleiner Perkins Caufield and Byers

In a pivotal decision, San Francisco Superior Court Judge Harold Kahn on Friday rejected Kleiner Perkins' argument to send the Ellen Pao sexual discrimination lawsuit to arbitration.

Pao filed her lawsuit against Kleiner Perkins Caufield and Byers in May. She claimed the company discriminated against her and 20 other female employees, referred to in the lawsuit as Jane Does, when it came to pay and promotions.

Kleiner Perkins, which denies Pao's allegations, argued that she had earlier signed employment agreements that would have bound her to arbitrate any legal disputes. The obvious benefit for Kleiner Perkins here would have been to keep any salacious gossip out of court and thus hidden from public view

What's more, if the judge had ruled in favor of Kleiner, the firm would have had a better shot at limiting the amount it would have been required to pay in a settlement versus going through a public trial.

"I thought all of your papers were terrific, but I disagree with all of them," Kahn told Kleiner's attorney, Lynne Harmle.

Harmle argued at length with the judge over his decision. The two sparred over technicalities and previous employment cases, which might bear on the Pao lawsuit. But Kahn was not buying her arguments.

Cutting off the debate, Kahn said with a smile that Harmle was always free "to go across the street," in case Kleiner wanted to file an appeal. If, however, the firm decides to battle this out in court, the next stage in the trial would be the discovery process, where the two sides gather evidence in advance of going to court.

"We believe the judge has analyzed this absolutely correctly and Ms. Pao, I know, is very pleased with the decision," said her attorney, Alan Exelrod.

Kleiner Perkins, in a statement released after the hearing, said it was disappointed with Judge Kahn's ruling and would appeal.

"Ms. Pao, like other partners, signed a variety of standard agreements and it is these agreements with the managing LLCs that govern her claims and require, among other things, that disputes be resolved through arbitration," Kleiner wrote. "We expect arbitration to be a more efficient and speedier dispute resolution process than trying a matter before a jury years down the line in the San Francisco Superior Court."