George and Lynne seem to be backstage at whatever production they are at. The curtains are right there so it also seems that they are literally backstage, rather than in the dressing rooms. This would imply that they know this woman they are talking to. You never can tell if Lynne doesn't refer to her by name, but in this case we will assume she is a friend. So George and Lynne have gone to the theatre to support their friend and wish her the best of luck. Lynne has dressed up for the occasion but George has decided that an open shirt and a scruffy jacket will suffice. On closer inspection, unless the lighting is casting a colourful shadow, George appears to be wearing his vintage Blackburn Rovers top. This is not appropriate attire for the theatre.
Lynne's friend is not happy. She has been the victim of sexual harassment and is anxious about the security of her job. Perhaps this snippet of George and Lynne's life happened before the incident at the law courts and this is the same woman. They look the same. So we now know what the case was about. However, this woman leads a very contradictory life if she sues for sexual harassment but then, in the same case, offers her phone number to the judge. But she did it and who are we to pass judgement.
Lynne's friend is not happy and Lynne inappropriately makes a joke about it. Not only does she make the joke, which they have undoubtedly heard before because they are in a chorus line, but she gets really close to the lady. Right in her face. That would have upset the lady even more. I suspect this is why George and Lynne are picking her up from the law courts. "Not the right time to make that joke Lynne, this is serious. Just for that you can pick me up from the court tomorrow to make up for it. I'm giving evidence against the director." Now if you look back to what George said, it now seems that he's being extremely sarcastic towards the woman. It all makes sense now.