Here's Why Ellen Pao And Kleiner Perkins Are Fighting So Hard Over Her Arbitration Clause

The gender-discrimination lawsuit venture capitalist Ellen Pao filed against her employer, Kleiner Perkins Caufield & Byers, is raising all kinds of interesting legal issues.

Lisa Bloom, a civil-rights lawyer and an analyst for legal-advice site, offered to explain a key dispute in the case: whether it should go to a trial by jury or get resolved in arbitration.

Four lawyers from Kleiner and its law firm, Orrick Herrington & Sutcliffe, and two lawyers from the firm representing Pao, Rudy Exelrod Zieff & Lowe, showed up at San Francisco Superior Court today for a hearing on Kleiner’s motion to force the case into arbitration.

In his tentative ruling Monday, Judge Harold Kahn proposed denying the motion. In court on Tuesday, he denied it without prejudice, allowing Kleiner to refile its motion on other grounds. The parties are due to reappear in court on July 20, when Kahn will make a final decision on whether the case will go to trial.

Arbitration is a form of alternative dispute resolution that takes place outside the courts. It’s generally seen as quicker and less expensive than a court trial. Kleiner’s lawyers have been arguing that Pao agreed to an arbitration clause in signing documents that made her a partner in some of the venture-capital funds it runs.

Here’s how Bloom explained the significance of the arbitration dispute:

I’ve litigated dozens of employment cases over the years, and one of the early hurdles is often what Ellen Pao is up against now: the employer’s claim that she can’t have her day in court, only in arbitration.

Many employers have employees sign arbitration provisions their first day on the job, and newly hired people generally just sign all the forms put in front of them: W-2, check; direct deposit, check; immigration forms, check; arbitration agreement, check.

Unfortunately for employees, once they sign those arbitration forms, they generally lose major legal rights, such as the right to a trial by jury and the right to their day in open court. Juries are more likely to be employees who sympathize with discrimination claims. Arbitrators are more likely to be professionals who sympathize with employers. And arbitration is generally a private affair, so embarrassing information that comes out during the case is easier kept quiet there.

That’s why Ellen Pao and Kleiner Perkins are fighting so hard on this choice of forum at this early stage. Where the case gets heard will have a big impact on the outcome. 

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