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Kleiner Perkins Loses Round in Pao Case

A judge has ruled that Ellen Pao's sexual misconduct suit against the renowned venture capital firm will not go to arbitration.
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A high-profile discrimination case against venture capital firm Kleiner Perkins appears to have moved one step closer to the courtroom.
 
San Francisco Superior Court Judge Harold Kahn issued a tentative ruling that prominent Silicon Valley venture capital firm Kleiner Perkins Caulfield & Byers cannot force junior partner Ellen Pao into binding arbitration regarding a sexual discrimination complaint she filed against the firm, San Jose Mercury News reports.
 
Kleiner Perkins partners are bound to the arbitration agreements of the funds they are signed on to, the report says. But since Kleiner Perkins does not require its partners to sign a more expansive arbitration agreement concerning conflicts with the firm itself, Judge Kahn ruled that there was no legal basis for making Pao take the case to an arbitrator.

Kleiner Perkins has denied Pao's accusations. In a statement Tuesday, the firm said that it "continues to believe it has strong arguments and precedent to move the matter to arbitration … 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."
 
The ruling is seen as a loss for Kleiner Perkins. Arbitration is conducted behind closed doors, meaning that any more potentially damaging accusations from Pao would not reach the public. Additionally, arbitration allows companies to disclose less information to opposing counsel, and decisions are difficult to appeal in court.
 
"For some reason or another, employers always want to move things into arbitration," Maimon Kirschenbaum, partner at New York City-based employment rights law firm Joseph & Kirschenbaum, said. "For the plaintiff's side, it's always better to not be restricted to arbitration agreements."
 
Kirschenbaum said that one reason employers tend to favor the arbitration process is because of the perception that arbitrators tend to favor large firms in decisions. Because large firms are "repeat players" in the arbitration process, Kirschenbaum said, arbitrators may be hesitant to decide against a large company due to fear of losing that firm's business.
 
Pao's accusations--she says she was pressured into a sexual relationship with a senior partner and suffered personal and professional retaliation when she ended the relationship--have rocked Silicon Valley and re-ignited a conversation about gender dynamics within the tech start-up world. A recent New York Times article points out that venture capital companies and the enterprises they back are still male-dominated.

IMAGE: Photo courtesy Flickr userbloomsberries
Last updated: Jul 10, 2012

JOHN MCDERMOTT | Staff Writer

John McDermott is a business and culture reporter whose work has appeared in the Chicago Tribune and Playboy and on AOL.com. He recently moved from Chicago to Brooklyn, New York, to work for Inc.com.




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