Wisconsin Supreme Court Vacates Arbitration Award Reinstating Lawyer

On July 21, 2010 the Supreme Court of Wisconsin decided Sands v. Menard, Inc., 2008AP1703. The employment discrimination case made national headlines because an arbitral panel awarded Sands, former general counsel for Menard, $1.6 million which included $900,000 in punitive damages. Furthermore, the panel ordered Sand’s reinstatement to her position with a salary of $175,000 per year plus a bonus (she previously earned $70,000 per year). The district and appellate courts affirmed confirmation of the arbitral award. Read our discussion of the appellate court decision here.

The Wisconsin Supreme Court held that the arbitration panel exceeded its powers because the reinstatement award was in violation of strong public policy. The court stated, “[i]n this case, we conclude that by accepting reinstatement, Sands would be forced to violate her ethical obligations as an attorney.” The court vacated the reinstatement portion of the award and remanded the case to the circuit court for determination of an appropriate award of front pay. Under employment discrimination laws, front pay is a substitute for reinstatement.

In the dissent, Chief Justice Shirley Abrahamson said the decision undermines the arbitration process and improperly extends the authority of the courts. He noted that “[i]t may well be that in some cases a direct conflict will arise between the mostly state laws governing the attorney-client relationship and the mostly-federal statutes and case law governing employment discrimination, including the provisions for reinstatement.” He added, however, that “the place to resolve novel and emerging questions of law is not in a court’s review of a private arbitration award.”

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