More Pain for Ellen Pao

Author: David Nied

It no doubt was extremely distressing for Ellen Pao to lose her pioneering gender discrimination lawsuit against her former employer, Kleiner Perkins Caufield & Byers, LLC, earlier this spring.  On Friday, however, the pain got worse.  San Francisco Superior Court Judge Harold Kahn awarded KPCB nearly $276,000 in costs against Ms. Pao.  How did this happen?

One of the tools available to litigants in California is the ability to make a pre-trial offer to settle a case pursuant to California Code of Civil Procedure section 998.  If you do better than your offer at trial, you can ask the court to have many of the costs that you incurred after the offer was made shifted to the “loser.”  KPCB decided in November 2014, several months before trial and before it had incurred most of its costs, to offer Ms. Pao nearly $1 million dollars under section 998.  Ms. Pao decided not to take the offer.  Her gamble didn’t pay off.

After the trial concluded, KPCB submitted a cost bill to the court totaling nearly $1 million dollars, the vast majority of which consisted of expert witness fees.  Ms. Pao opposed the bill on a number of grounds, some of which worked and some of which didn’t.  Most importantly, Ms. Pao argued that a recent California Supreme Court decision, Williams v. Chino Valley Independent Fire District, 61 Cal. 4th 97 (2015), precluded an award of costs against her because her lawsuit was not frivolous, which is the standard that applies when a successful defendant seeks to recover its costs under the Fair Employment and Housing Act.  Not so, said Judge Kahn.  Section 998 is different—it is a separate and distinct statute that a prior appellate court had found did not conflict with the FEHA.  Judge Kahn concluded that KPCB’s 998 offer of nearly $1 million was made in good faith and not token.  Although not addressed directly in the court’s order, the problem with the offer from Ms. Pao’s perspective is that it probably did not come anywhere close to covering her attorneys’ fees after nearly three years of hard-fought litigation.  Such is the dilemma that plaintiffs in a FEHA lawsuit face.

So what about those expert witness fees totaling nearly $865,000?  In determining whether the amounts were reasonable, Judge Kahn considered the parties’ respective resources in an effort to “scale” the expert fee award.  Conceding that his evaluation required a “rough” approximation of the parties financial positions, Judge Kahn noted that KPCB had “vastly” greater resources than Ms. Pao—but that Ms. Pao was not indigent.  Ultimately, Judge Kahn awarded KPCB expert witness fees that approximated what Ms. Pao herself had spent on her own experts.  And that is how you get to a cost award of nearly $276,000.

It might be of some solace to Ms. Pao that she was able to knock down KPCB’s request by $670,000, but it still can’t feel good.  And while a spokesman from KPCB described the ruling as a “fair result,” most savvy defense lawyers will recognize that the award probably won’t deter many employees from pursuing lawsuits under FEHA, since most of them have minimal economic resources.

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