Counsel can’t be reinstated

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Front pay is proper remedy for discrimination

It would violate public policy to order an employer to reinstate in-house counsel as a remedy for discrimination.

The Wisconsin Supreme Court held July 21 that where the animosity between the attorney and her employer is so extreme, it would risk violation of the attorney’s ethical obligations to require the employer to reinstate her.

Justice Michael J. Gableman wrote for the court, “we cannot countenance an award that forces an attorney to represent a client when it is clear that the complete disintegration of mutual goodwill, trust, and loyalty renders ethical representation by that attorney impossible.”

Attorney Dawn M. Sands was hired by Menard, Inc., to work in its corporate legal office in 1999. After two years of working without a pay increase, Sands requested one, a request she would repeat over the next several years.

After complaining that she was not being paid as much as men with comparable positions, she was terminated.

She brought suit for gender-based discrimination and retaliation. She prevailed in arbitration, and the panel awarded more than $1.7 million in damages. However, although Sands sought two years of front pay, arguing “no reasonable person would entertain reinstatement as a possibility,” the panel ordered reinstatement instead.

After Menard told Sands that it would pay her damages, but refused to reinstate her, Sands sought and obtained confirmation of the award in circuit court.

Menard appealed, arguing that reinstatement was improper, but the Court of Appeals affirmed in a published decision. Sands v. Menard, 2009 WI App 70, 318 Wis.2d 206, 767 N.W.2d 332.

The Supreme Court accepted review and reversed in a 4-3 ruling.

The court acknowledged that reinstatement is the preferred remedy for violations.

However, it found this case fit into two exceptions to the general rule: where the relationship is “pervaded by hostility”; and where the employee is in an unusually high-level role.

The court also acknowledged that review of arbitration awards is extremely limited. However, the court found that in this case, the panel exceeded its authority by making an award that violates strong public policy.

Gableman wrote for the court, “We conclude that an attorney’s ethical obligations, particularly an attorney’s duty of loyalty to her clients under our cases and the Rules of Professional Conduct, embody the strong public policy of the State 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.”

The court cautioned that it was not adopting a per se rule that reinstatement is always inappropriate for in-house lawyers, and said that the specific circumstances of each case must be considered.

But after detailing in length the extreme hostility between the parties in this case, it held that reinstatement would have the practical effect of forcing Sands to violate her ethical obligations in violation of public policy.

Turning to the remedy, the court rejected Menard’s request that it simply vacate the reinstatement award. Instead, it remanded the case to the circuit court to determine an appropriate award of front pay.

Chief Justice Shirley S. Abrahamson dissented, in an opinion joined by Justices Ann Walsh Bradley and N. Patrick Crooks, emphasizing the limited role that courts have when reviewing arbitration awards.

The dissent complained that the majority opinion undermines the goals of arbitration.

Abrahamson asked, “What other ‘strong public policies’ may be lurking, not-previously articulated, that this court could use to vacate an arbitration award that one party seeks to escape and with which four members of this court simply disagree.”

The dissent also found that, if the parties truly considered reinstatement untenable, they could simply negotiate a settlement that avoids it.

Attorney Daniel R. Shulman, who represented Sands, said that, even though the court ruled in favor of Menard, the outcome is the same. Shulman said that Menard had made clear it would not reinstate Sands.

“The case was sent back for a determination of front pay which is equivalent to what we would have gotten via contempt proceedings,” Shulman said. “I think the dissent was persuasive, but to be compensated was what we wanted originally anyway. We were only in the Supreme Court because the arbitrators did something that no one asked for.”

Case analysis

The majority opinion devotes many paragraphs to detailing just how hostile the relationship was between Sands and Menard.

Presumably, the purpose of this was to bolster its case that reinstatement was an impossible remedy.

However, the inclusion of this information will, in future cases, make the opinion arguably distinguishable. A party seeking reinstatement as a remedy in a future case can plausibly argue that the relationship is not nearly as strained as it was in this case, and therefore, reinstatement would not violate public policy.

But a couple of footnotes in the majority opinion also leave room for parties to argue that reinstatement of in-house attorneys is never a permissible remedy.

In footnote 21, the court notes that Art. I, sec. 21, of the Wisconsin Constitution gives parties the right to counsel of their choice. The court observed, “While we need not address whether this provision precludes the reinstatement of Sands in this situation, this provision provides further support for the notion that the mutuality of trust underlying the attorney-client relationship is central in our laws.”

In footnote 31, the court notes that it is arguable that employment discrimination laws don’t even apply to in-house attorneys, but that employers have the right to discharge their in-house attorney employees at any time. However, the court declined to address the issue.

Some courts have held that a client’s unfettered right to counsel of choice applies to in-house attorneys. Willy v. Coastal Corp., 647 F.Supp. 116 (S.D.Tex., 1986); Herbster v. North Am. Co. for Life & Health Ins., 501 N.E.2d 343 (1986).

The modern trend, however, is to permit suits by in-house attorneys for discrimination. Parker v. M&I Chemical, Inc., 566 A.2d 215 (N.J.Super.A.D. 1989); General Dynamics Corp. v. Rose, 876 P.2d 487 (Cal. 1994); and GTE Products Corp. v. Stewart, 653 N.E.2d 161 (Mass.1995).

But Menard did not raise these arguments, and footnote 31 leaves them open.

It is also noteworthy that the majority did not just reverse the Court of Appeals, but did so on a ground that the Court of Appeals found insufficiently preserved for appeal.

The Court of Appeals wrote, “While Menard makes scattered references to the arbitrators’ award being contrary to public policy, Menard does not develop a distinct argument in that regard.” 767 N.W.2d at 335, fn. 2.

Instead, the Court of Appeals considered whether the arbitrators “manifestly disregarded the law.” Id., at 335.

The majority opinion, in contrast, relies solely on the public policy argument that the Court of Appeals concluded was insufficiently developed, without addressing whether the issue was waived.

This procedural background is essential to appreciate the subtlety of the barb in the dissent’s opening sentence: “I do not join the majority opinion because I conclude that the majority has ‘exceeded its powers’ by ‘manifestly disregarding the law’ in its decision to vacate the arbitration panel’s award of reinstatement.”