Kleiner Perkins Caufield & Byers, the Menlo Park venture-capital firm that provided startup financing to Google (GOOG) and Amazon.com, lost a bid to force ex-partner Ellen Pao to move her sex-discrimination claims to arbitration.

The California Court of Appeal in San Francisco said in an opinion Wednesday that mandatory arbitration clauses in the operating agreements Pao signed with seven managing LLCs for which she was an adviser weren't intended to govern employment disputes. Kleiner Perkins had sought to avoid a public trial.

"Pao's claims for employment discrimination, retaliation and failure to prevent discrimination bear little connection to the operating agreements containing the arbitration provisions," the three-judge appellate panel said in a unanimous decision.

Pao sued the firm last year alleging Kleiner treated female employees unfairly by promoting and compensating them less than men. She said she was retaliated against after she complained about sexual harassment.

Kleiner denied the allegations and asked a trial judge to rule that Pao's claims should be handled through private arbitration. A state court judge ruled against the firm and Kleiner appealed.


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Pao said in her complaint that in 2006 she "succumbed" to the advances of a married Kleiner junior partner who had pressured her to have a sexual relationship. When she ended the relationship, the co-worker, who was later promoted to senior partner, retaliated against her during the next five years, she said in her complaint.

John Doerr, Kleiner's lead partner, has said the lawsuit is "without merit," citing an independent investigation that found the firm doesn't discriminate on the basis of gender. Kleiner took "great care to treat this situation seriously, swiftly and with integrity," he said in a May 2012 statement.

Amanda Duckworth, a spokeswoman for Kleiner with the Brunswick Group, said the company didn't have any comment on the ruling.