Gender bias suit could draw scrutiny to firm partnerships

A newly-revived gender bias lawsuit brought by a former Winston & Strawn LLP partner could lead to a closer look at how loosely a law firm is able to legally define a partnership.

A 1st District Court of Appeal panel ruled Friday that San Francisco County Superior Court Judge John Stewart erred in forcing patent practitioner and litigator Constance Ramos into arbitration with her former firm. Stewart found Ramos was bound to arbitrate by a clause in her partnership agreement, which she signed upon joining the firm's intellectual property group in 2014.

According to Ramos' complaint, her efforts to integrate with the firm were constantly rebuffed, and by January 2016, she received instruction from firm leadership to seek other employment. Despite being the San Francisco office's highest billing income partner that year, Ramos said she received no bonus for 2016, instead having her salary reduced by 33 percent.

A further cut brought the total reduction in her salary to 56 percent. Ramos quit in July 2017, writing "no reasonable attorney would be able to stay at Winston under these hostile circumstances" in a company resignation letter and filing suit soon after. Ramos v. Superior Court of San Francisco County, A153390 (1st Dist., filed Nov. 2, 2018)

Arguing against the arbitration demand, Ramos told the appellate panel the agreement was unlawful under the framework set by Armendariz. Winston & Strawn conversely argued the standards set by Armendariz, which require arbitration agreements to meet certain fairness standards for enforceability, has since been invalidated by a U.S. Supreme Case. Armendariz v. Foundation Health Psychcare Services Inc., 24 Cal. 4th 83 (2000)

In a decision written by Associate Justice Sandra L. Margulies, the panel called Armendariz "good law," and said it had been reaffirmed numerous times since the decision Winston & Strawn claimed invalidated it. Under the five standards set by Armendariz, the panel found the arbitration agreement was unconscionable.

"Because we cannot remove the taint of illegality by severing the unlawful provisions without altering the nature of the parties' agreement, we must void the entire agreement to arbitrate," Margulies wrote.

Steven Katz, an employment attorney at Constangy, Brooks, Smith & Prophete LLP not involved in the case, said he felt the unconscionability of Winston & Strawn's arbitration agreement wouldn't prove to be the norm at most law firms. He felt the panel was particularly motivated to reverse based on the overly restrictive requirements of the arbitration agreement -- like their imposition of limits on what remedies an arbitrator can offer, among others -- while arguing the agreement should be applied broadly.

"In essence, they're telling the firm it can't eat its cake and have it too," Katz said.

Although he felt this case in particular "might not make much of a difference down the road" in terms of precedent or case law, Katz said in an age of multi-tier partnerships it could prompt firms to take a second look at how they differentiate an "employee" from a "partner."

"This decision does signal that there's one idea you'll see worked out in the near future -- that courts are not going to be satisfied with the simple answer 'If you're called a partner, you are a partner for the applications of employment law,'" Katz said.

That discussion's going to become increasingly important as firms continue to transition away from equity partnerships in favor of income partnerships and other partner-like alternatives, said Glenn Danas, an employment partner at Robins Kaplan LLP not involved in the case. At the same time, aging firm partners are being transitioned away from traditional equity partnerships in favor of senior counsel positions while of counsel positions have been popular with newer attorneys with hyper-specialized practices.

"Legally it's interesting because income partners are increasingly a part of the big firm world as firms attempt to stay more profitable by making partnership splits into different tiers. So this is going to matter a lot more," Danas said. "Here, [the panel] looks beyond the label of the plaintiff's job title and looks to the substance of the power imbalance in the employment arrangement, and that's what's really most salient about it to me."

Noah D. Lebowitz, a Berkeley-based practitioner and counsel to Ramos, declined comment but praised the decision in a statement Wednesday.

"The decision reinforces the fundamental aspect -- longstanding in arbitration jurisprudence -- that a pre-dispute mandatory arbitration contract cannot act to curtail a litigant's ability to pursue all remedies when seeking redress for violation of unwaivable statutory rights," Lebowitz wrote.

Lynne C. Hermle, Jessica R. Perry, and Alexandra Pavlidakis, attorneys at Orrick, Herrington & Sutcliffe and counsel to Winston & Strawn, did not respond to a request for comment Wednesday nor did a spokeperson with Winston & Strawn.