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Arbitrators find pay gap for women at law firm

Peter Vieth//October 16, 2018

Arbitrators find pay gap for women at law firm

Peter Vieth//October 16, 2018

Pay Gap_MAINA Title VII gender discrimination case with a tangled procedural history has led to a request for a judgment against the LeClairRyan law firm for more than $1 million in compensation, fees and costs.

A three-member arbitration panel found disparate compensation effects on women lawyers that supported an inference of intentional gender discrimination in the action brought by former LeClair partner Michele Burke Craddock.

Craddock won an award of nearly $300,000 in back pay and other compensation for 2014, but many other claims were rejected by the panel.

Bonus at issue

Craddock contended she was denied a fair reward for her work on a case that settled in 2013 for $73 million and produced a $20 million contingent fee. Craddock said she prevented the client from leaving the firm and was entitled to more credit for the firm’s fees.

The litigation involved a closely held Kyanite mining company in Buckingham County that refused to share profits with minority shareholders regarded as interlopers.

Following her success in the Kyanite case, Craddock chafed at her compensation in 2014 and sued after being asked to accept a salary reduction in 2015.

Disparate effect

The arbitration panel agreed there were inequities.

Despite LeClair’s strong record of encouraging the employment and success of women lawyers, the firm’s compensation policy had a “demonstrable disparate effect on women lawyers,” the arbitrators wrote.

Firm statistics showed that, for the years 2003-2016, the highest paid female shareholder each year was paid significantly less than the highest paid male shareholder each year, the panel said. For the five years before the Kyanite settlement, the highest paid female shareholders were paid only fractions of what the highest paid shareholders made.

Impact on Craddock

The arbitrators concluded that Craddock’s 2014 salary was the result of intentional discrimination based on gender. If the firm had properly followed its compensation policy, Craddock would have received a substantial raise in 2014, the panel said. Instead, she was paid about $273,000, the arbitration award said.

Firm decision makers improperly discounted her contributions, especially her “extraordinary performance” with the Kyanite case, and allowed subjective factors to dominate the pay decision, the panel said.

“The failure to follow the Firm’s policy on the application of the objective factors in setting compensation was a serious deviation from its accepted process,” the arbitrators wrote.

The firm’s origination credit policy could explain some of the disparate compensation effects, the panel said. One woman partner testified that the policy made it difficult for a more recently employed shareholder to meet the “durability and predictability” standards used to determine pay levels.

Although the firm pointed to examples of beneficial treatment of Craddock, including early promotion to shareholder, her favorable treatment “is not more compelling than the proved disparate effect of the compensation policy at issue here and the discounting of the objective factors in setting her 2014 compensation,” the arbitrators wrote.

The panel concluded the evidence failed to show intentional discrimination in Craddock’s salary the following year. Between a third and a half of the firm’s shareholders took pay cuts that year, the arbitrators said.

The panel also rejected a claim under the Equal Pay Act and claims of retaliation and constructive discharge. The panel awarded back pay and compensation for 2014. The total amount should be $294,746, according to revised calculations suggested to the arbitration panel by her attorneys.

Fee award

Craddock’s compensation under the arbitration decision is dwarfed by the panel’s approval of a fee award expected to total $678,151.50.

LeClair did not “seriously contest” the reasonableness of the claimed attorney fees, the panel said. Craddock’s legal team was headed by Richmond’s Harris D. Butler III, who charged $500 an hour. The panel appeared impressed by “excellent documentation in the form of time sheets that identify each timekeeper, his or her hourly rate, the task performed for each time entry, and the time spent on each task.

Since Craddock had demanded $4 million and stood to recover less than $300,000, her limited success justified a cut in attorneys’ fees, the panel said.

“However this reduction must be tempered by the novelty of [the] case, which involved her challenge to entrenched gender-based discrimination in the compensation practices of a well-known and long-established firm,” the panel said, deciding on a 20 percent reduction for lack of success. The analysis did not end there, however. The panel added back 25 percent to reflect the degree of success given the challenge.

“A case involving gender-based discrimination claims against a highly competent law firm is clearly an undesirable undertaking within the legal community,” the arbitrators wrote.

Procedural posture

The arbitration award was filed in federal court Oct. 1 in support of a motion asking U.S. District Judge Robert E. Payne to confirm the award and enter judgment against LeClairRyan.

If Payne agrees, he could close the door on an arbitration proceeding that provided neither speed, economy nor privacy for the law firm.

Procedural complications caused delays. Payne allowed arbitration only after the parties fully litigated whether an arbitration clause applied. Craddock appealed that decision and the parties again briefed the issue. The 4th U.S. Circuit Court of Appeals decided it lacked jurisdiction because Payne’s decision was a mere stay, not a dismissal. Only then did arbitration begin.

Besides the arbitration award, LeClair is on the hook for the costs of arbitration under rules for arbitration of employment disputes.

Moreover, the public filing of the arbitration award rankled attorneys for LeClairRyan.

“We are extremely disappointed that Ms. Craddock chose to file an un-redacted document on the public record, containing confidential and privileged information about her former clients,” said John M. Bredehoft of Norfolk, who represented the firm.

“Substantively, we note that three-quarters of the award consists of attorney’s fees,” Bredehoft continued. “Ms. Craddock received a mere fraction of what she demanded in her federal court complaint – a complaint which itself was filed on the public record despite her obligation to arbitrate, as confirmed by the federal district court and the court of appeals,” he said.

LeClair General Counsel Lori D. Thompson declined comment on the record, as did Butler, Craddock’s lead counsel.

The arbitrators who decided the case were Linda R. Singer of JAMS Resolution Center in Washington, retired U.S. Magistrate Judge F. Bradford Stillman and retired Virginia Court of Appeals Judge Rosemarie Annunziata.

Revised Oct. 17 to identify Annunziata as retired from the Court of Appeals.

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