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Ellen Pao suit against Kleiner Perkins heads to trial, with big potential implications

John Doerr
David Paul Morris | Bloomberg | Getty Images
John Doerr

Many women in technology believe Silicon Valley is stuck in the past. They say they are rarely hired, promoted or taken seriously, and are confronted on a daily basis by sexism and harassment. They feel demeaned and discouraged.

Now, in a high-profile suit set to go to trial this week, a jury will pass judgment about whether one woman suffered discrimination. The proceedings could resonate widely: A guilty verdict will be billed as a sweeping indictment of the high-tech world, while a dismissal might supply ammunition to those who feel gender issues are being overplayed.

The accuser is Ellen Pao, who worked at one of the valley's most prominent venture capital firms, Kleiner Perkins Caufield & Byers. At the center of the suit is John Doerr, a legendary investor who was Ms. Pao's boss and, according to court papers, practically a father to her. How the man with the Midas touch let his very proud, very image-conscious shop become embroiled in scandal is a question lurking behind the suit.

Ms. Pao says a married colleague pressured her into an affair and then retaliated against her when she broke it off. When she complained, she says she was discriminated against and got poor reviews, resulting ultimately in her dismissal. She accuses Kleiner of treating her "despicably, maliciously, fraudulently and oppressively" from "an improper and evil motive amounting to malice."

Kleiner fired back last week in a scorched-earth response filed in civil court here, saying the affair was consensual and there was no discrimination. Ms. Pao did not succeed at Kleiner, the firm said, because she "lacked the ability to lead others, build consensus and be a team player, which is crucial to a successful career as a venture capital senior investing partner."

No matter whose arguments prevail, the trial promises a rare unscripted peek at Silicon Valley, where every interview tends to be overseen by a publicist. Court papers show it to be a place where colleagues become intimately involved, break up messily, work incessantly and promote themselves remorselessly — a place, in short, like almost everywhere else in America, although perhaps a little more amorous. The couple first had sex "at a work event," the papers say.

Ms. Pao is seeking as much as $16 million in damages to replace the income she says she never had a chance to make at Kleiner.

Since the suit was filed three years ago, Silicon Valley's treatment of women has become a major flash point, as nearly every month brings new accusations of men behaving badly. Critics charge that start-up entrepreneurs feel entitled to act like jerks, and that the venture capitalists continue to pour money in because they are afraid of missing the next big thing.

Read MoreSilicon Valley 'needs guidance' to boost diversity: Entrepreneur

A case in point is Snapchat, the disappearing-message service. Last spring, emails that its chief executive wrote a few years ago to his Stanford fraternity brothers surfaced. They were contemptuous of women to a degree that is unquotable in a newspaper. He apologized after the emails became public.

A few months later, Snapchat raised a new investment round valuing it at $10 billion. Among those supplying cash was Kleiner Perkins.

There is an uproar over a lack of diversity in tech, highlighted most recently by Jesse L. Jackson Sr. and his Rainbow PUSH Coalition's campaign for more inclusiveness. But the clubby world of venture funding remains almost exclusively male.

The total number of female partners at venture capital firms has declined to 6 percent from 10 percent in 1999, according to a report last fall from the Diana Project, a research effort on female entrepreneurs. Fortune magazine, analyzing slightly different data, found the number of female V.C.s increased in 2014 by exactly one.

"Silicon Valley is far from perfect at living up to our ideals," said David A. Bell, a partner at the Fenwick & West law firm who has been measuring gender diversity in the valley for a decade. "It is clear that women are underrepresented at all levels."

Kleiner contends that Ms. Pao's suit is not only wrong in its specifics but also that the firm is being unfairly maligned. It says that over 20 percent of its partners are women, and that it backs start-ups run by women at four times the rate of the rest of the industry.

"We look forward to clearing our name in court," said Christina Lee, a Kleiner spokeswoman.

Ms. Pao did not respond to a request for comment left with her lawyer, Alan B. Exelrod.

Her original complaint, filed in May 2012, has already become part of Silicon Valley lore. It said that a Kleiner partner did not invite her or any other women to an important dinner because "women kill the buzz"; that another Kleiner partner inappropriately gave her Leonard Cohen's sex-drenched "Book of Longing"; and that this same partner told her "the personalities of women" did not lead to success at Kleiner "because women are quiet."

A Princeton-trained engineer and Harvard-trained lawyer who has deep experience in the technology field, Ms. Pao first came under media scrutiny when she married Alphonse Fletcher Jr. in 2007, after her affair with the colleague, Ajit Nazre, ended. Mr. Fletcher, a financier, has a history of both suing and being sued. His hedge fund is bankrupt and pension funds are suing to recover their investments amid accusations of fraud.

Mr. Fletcher's reversals appear in Kleiner's trial brief, presumably to imply that the couple has serious financial needs and that might be the underlying reason for her suit. The brief reprints the text messages from the breakup of her affair ("I can't believe I was so wrong about you"), cites her lackluster evaluations ("not sure I really trust her motivations") and dismisses her claims:

"Pao's complaints that she did not sit in the front row at a meeting, was not sitting at a table during an event, her office was not in 'the power corridor' (whatever that means), she was not included on someone's interview schedule, she was asked to take notes during a meeting — among many, many others — are simply not even close to being adverse employment actions sufficient to constitute retaliation."

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Some things are not intended for public consumption, however. In another filing, Kleiner's lawyers said how it managed its investment funds was a trade secret, and asked that the courtroom be closed during any discussion of the details.

Ms. Pao is interim chief executive of Reddit, the news commentary website, which has also been drawn into the case. An anonymous Reddit employee sent a letter to Kleiner's legal team, asking them to subpoena Reddit employees "for information regarding conflicts with Ellen Pao." Such information could support the defense's contention that the person really undermining Ms. Pao at Kleiner was Ms. Pao.

The danger in a no-holds-barred approach, of course, is that it also serves to tarnish Kleiner, which in its dot-com glory days used discretion to help perpetuate its mystique. Kleiner made fortunes in Netscape, Genentech, Amazon and Google, but has not had a huge name-brand hit recently.

Women might not kill the buzz, as Ms. Pao says she was told, but messy court cases sure do.

"It is very rare that an individual discrimination case reaches a jury, in Silicon Valley or elsewhere," said Melinda S. Riechert, a high-tech employment lawyer with Morgan, Lewis & Bockius. "Most cases settle."

There doesn't seem to be much chance of that happening here. At a hearing this month, Lynne C. Hermle, a lawyer for Kleiner, said a mediation attempt accomplished little.

"To say it was unproductive would be an understatement," Ms. Hermle said.