A discrimination complaint threw a harsh light on Yahoo's legal department, and two years later, the case remains one of the Internet giant's ongoing struggles.

One of its own lawyers — a black woman named Eulonda Skyles — claims her bosses discriminated against her after she came back from a 2005 maternity leave. Skyles alleges she was passed over for promotions and relegated to employee slip-and-fall-type cases instead of the big-ticket litigation she had worked on before having a kid, until she left (says Yahoo) or was fired (says Skyles) in 2007.

The fight, now unfolding before the Equal Employment Opportunity Commission, offers a rare look at the tensions that can arise in a legal department around race and gender and the way that a department responds. It's unusual because in-house departments are thought to be much more diverse and women-friendly than law firms. And though an internal investigation found the charges "meritless," Yahoo subsequently made changes to its legal department that appear to address some of the issues raised by Skyles.

Yahoo General Counsel Michael Callahan says the moves were unrelated, and is dismissive of the allegations.

"We're obviously fully cooperating with the [EEOC] investigation, but we do believe that the claims are baseless and without merit, and we're going to defend it vigorously," he said.

The allegations underscore how far the struggling Internet company's legal department has grown from a tight-knit, dot-commy bunch in the late 1990s. The unit now has 130 lawyers, 70 staff, and the problems that come with managing a large legal department. While growth presents one challenge, another is Yahoo's problems — failure to keep up with rival Google, and a declining stock price. Labor lawyers observe that discrimination charges often pop up during difficult times.

"When times get tough, companies don't seem to be willing to accommodate parents of young children, and even if they're able to perform, there are biases that creep in," said Cliff Palefsky, a San Francisco labor lawyer who's not involved in the case.

Skyles' EEOC complaint — which alleges that she was both mommy-tracked and treated worse than white mothers returning from maternity leave — is the third by a Yahoo in-house lawyer over the past 10 years. The others were dismissed for lacking probable cause, according to the company.

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While Yahoo says this claim lacks cause as well, it may have prompted action. About two months after the investigation, the supervisor at the center of Skyles' complaint changed jobs. Reggie Davis, the head of litigation, left the legal department to be "click fraud czar" in Yahoo Search Marketing. Other changes included the departure of attorney Lynn Loeb. Skyles had pointed out to executives that Loeb was overseeing extensive legal work by her husband's law firm, and two or three months later she left the company.

Callahan said the moves had nothing to do with Skyles' allegations.

"Reggie Davis decided to move to a business unit within Yahoo to pursue a great career opportunity as an executive. Lynn Loeb decided to leave the company for personal reasons," he said. "Their decisions were wholly unrelated to the allegations you described."

Davis, an insurance litigator who was one of Yahoo's early lawyers, directed questions to Yahoo's public relations department. Loeb did not return phone calls seeking comment.

The company has hired Paul Cane Jr., a partner at Paul, Hastings, Janofsky & Walker, to handle the matter. Skyles has consulted with San Jose labor lawyer Jeffrey Park of Habbu & Park. Last month, Yahoo offered $10,000 to settle, according to Skyles. Now in Maryland with her own practice, Skyles didn't take the offer, and her complaint is in the EEOC's hands.

The EEOC declined to comment, saying it can't confirm or deny that it is investigating a case. But The Recorder has reviewed documents from the case provided by Skyles and other sources.

TROUBLE IN HOUSE

Hired by Davis in 2002 from Fenwick & West, Skyles was the first black lawyer in Yahoo's legal department. Things turned sour after she came back from maternity leave in 2005. "Davis made inappropriate comments about my family life, my commitment to the job with young children, and my overall competence as a lawyer," she later wrote in a memo to Yahoo execs. Skyles said she was overly scrutinized and not given the same leeway to telecommute as white mothers in the department.

In early 2006, Davis arranged for her to report to another supervisor, Yahoo attorney Darren Weingard. That August, Weingard told Skyles that her performance wasn't cutting it and gave her two choices, according to Skyles: Leave quietly with a party and a cake or go on the company's "performance improvement plan." And if she made noise, it would be "death in the Valley" for her, Skyles said Weingard told her. Reached on Friday, Weingard referred questions to the company.

In September 2006, then-CFO Sue Decker authorized an internal investigation after receiving a complaint from Skyles. Mill Valley solo Lisa Spann Maslow interviewed 15 people from the department and billed 168.5 hours on the investigation, according to Yahoo's response to the EEOC, which said Maslow found that none of the six working mothers in the department reported the same experience with Davis. Yahoo told the EEOC that two mothers "praised Mr. Davis as a manager who supported work-life balance." However, at least a few Yahoo lawyers who were interviewed for the investigation did back up Skyles' claims. Maslow did not return calls seeking comment.

In the end, Maslow found that "no one took adverse action against Ms. Skyles based on her race, or status as a mother," according to Yahoo's letter to the EEOC. Instead, the company said the problem was Skyles' performance, writing that "over several years she was considered one of the least-satisfactory performers compared to her peers."

Former Yahoo lawyers, speaking on condition of anonymity, countered that assessment. They said Skyles was a good lawyer who performed well in Yahoo's legal department. But they also said they did not perceive widespread discrimination at Yahoo.

During the investigation, Skyles was allowed to go on leave. When she filed for disability leave, the company resisted. Whether Skyles then "abandoned" her job or was fired depends on whose lawyers you're talking to.

WHERE IT STANDS

Callahan said there's no problem promoting women and minorities at Yahoo legal. He points out that four of his eight deputy general counsel are women, though not minorities. Seven of the 27 lawyers at the vice president level, which includes deputy and associate general counsel, are minorities. Those current numbers reflect some promotions and hirings made since Skyles' complaint.

As the complaint makes its way through the EEOC, labor lawyers say they're surprised the story made the light of day. Companies aren't usually eager to get into fights with their own lawyers, and for the individual, waging such a battle can be a career-ender.

"They're not always easy to bring because of their professional obligations and attorney-client issues," Palefsky observed, "and they're not always the best idea to bring because of their future career."