TRT, Inc. CLE Blog

 

An arbitration award requiring a company to reinstate a fired in-house lawyer to her high-level, sensitive job is void as a violation of public policy, ruled a divided Wisconsin Supreme Court (Sands v. Menard, Inc., Wis., No. 2008AP1703, 7/21/10).  Given the strong, ongoing animosity between company executives and the lawyer, the court ruled that reinstatement would put her in the conflicted position of handling a representation at odds with her personal interests.  Front pay is the appropriate remedy for the company's wrongful termination of the lawyer, the court announced.  Three dissenting justices contended that the majority's “public policy” ruling undermines the authority of parties to decide what issues they will submit to arbitration and what limits, if any, will be placed on the arbitrators' powers and potential remedies. Dawn M. Sands was fired from her position as executive general counsel for home improvement chain Menard, Inc.  She believed that Menard had engaged in gender-based pay discrimination against her and then retaliated against her when she complained about it.  Pursuant to a binding arbitration agreement, Sands' claims were submitted to a three-member panel of arbitrators.  The arbitrators found that Menard violated the federal Equal Pay Act by paying Sands less than a similarly situated male employee and that the company retaliated against her for asserting her rights, all in violation of the Equal Pay Act, Title VII of the federal Civil Rights Act of 1964 and the Wisconsin Fair Employment Act.  The arbitration panel not only awarded Sands back pay and punitive damages but also ordered that Menard reinstate her with a specified salary and bonus.  Sands had not sought reinstatement, but the arbitrators concluded that reinstatement should be awarded in her case rather than “front pay”, i.e., loss of future earnings.  It found that not reinstating Sands would reward the company for its mistreatment of her and send the wrong message to company employees.  A trial court confirmed the arbitration award, and the intermediate appellate court affirmed.  When appealed to the high court, the Wisconsin Supreme Court vacated the reinstatement award and remanded for the trial court to award front pay instead of reinstatement.  The majority took the position that an attorney's professional obligations — particularly the duty of loyalty to clients —embody the strong public policy of Wisconsin.  “Therefore, an arbitration panel exceeds its powers when it orders the reinstatement of an attorney where reinstatement would clearly lead to a violation of that attorney's ethical obligations,” reads the opinion.  “We … hold that an arbitration award requiring an attorney to violate her ethical obligations is void as a matter of strong public policy.”  The majority emphasized that Sands performed an unusually high-level, sensitive role at Menard and that the relations between management and the lawyer were hostile and strained.  “In view of this especially bitter litigation marked by personal and professional animosity, we see no way Sands could now return to Menard and serve the company in conformity with her ethical obligations,” the court declared.  In a lengthy dissenting opinion, Chief Justice Shirley S. Abrahamson argued that the majority exceeded its own powers by vacating the reinstatement award. Emphasizing the limited role that courts play in reviewing arbitration awards, Abrahamson said that “the place to resolve novel and emerging questions of law is not in a court's review of a private arbitration award.”  Abrahamson disputed the majority's assertion that Sands would be forced to violate her ethical obligations if the reinstatement award were left in place. The “personal interest” conflict referenced in Rule 1.7(a)(2) means a business-related conflict, not merely personal feelings, she contended. It is entirely possible, Abrahamson added, that the parties' hurt feelings would fade so that the representation could continue without a conflict if Sands were reinstated, or that the parties would reach a settlement to avoid reinstatement.