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Full Opinion
¶ 1. This is a review of a published decision of the court of appeals
¶ 2. We agree with Menard that the panel exceeded its authority. An arbitration panel exceeds its authority when its award violates strong public policy. An attorney owes a fiduciary duty of loyalty to her clients, a duty so replete in our cases and in the Rules of Professional Conduct as to be axiomatic. Such a duty is deeply rooted in our laws and embodies the strong public policy of the State of Wisconsin. In this case, we conclude that by accepting reinstatement, Sands would be forced to violate her ethical obligations as an attorney. Thus, we vacate the panel's award of reinstatement on the grounds that it is void as a violation of strong public policy. Under the applicable employment discrimination laws, front pay is a substitute for reinstatement. Accordingly, we vacate the panel's award of reinstatement and remand to the circuit court to determine an appropriate award of front pay.
I. BACKGROUND
¶ 3. Dawn Sands is a 1993 graduate of the William Mitchell College of Law. In 1998, John Menard,
A. Sands' Tenure at Menard
¶ 4. On June 1, 1999, Sands began working in a newly-created position at the corporate legal office of Menard. John Menard asked Sands to assess and oversee the in-house legal department,
¶ 5. Based on her pre-hire discussions and agreement with John Menard, Sands expected to begin working at Menard with a salary of $56,000 per year; On her first day at Menard, Sands learned that she was required to punch a clock and would be paid by the hour at a rate of $26.92 ($55,993.60 annually, plus overtime). With this hourly rate, Sands could earn up to $40.38 per hour for overtime (at time-and-a-half) and an additional $2.50 per hour for weekend hours worked.
¶ 6. On August 17, 1999, just months after Sands began working at Menard, Coriden was terminated following a disagreement with John Menard. Sands then assumed all of Coriden's duties while continuing to
¶ 7. In June 2001, after working for Menard for two years without any pay increases, Sands made verbal and written requests to John Menard to raise her salary to $70,000 per year. Menard responded by increasing her wage to $30.92 per hour (a $4.00 per hour raise), or $64,313.60 per year without overtime, effective July 29, 2001.
¶ 8. Over the next several years, Sands made repeated requests to John Menard for a pay raise. In one written request dated November 24, 2004, Sands requested a pay increase to $56.59 per hour, the equivalent of $117,707 per year. The memo explained that this proposed figure was based on Coriden's salary at the time of his termination in 1999, plus cost of living increases he would have received were he still employed at Menard. In the memo, Sands stated that she was "doing at least an equal level of work" as Coriden had done. Sands never received a second pay increase.
¶ 9. On March 18, 2005, Sands received an e-mail from Chief Operating Officer Charlie Menard stating that she was eligible for a bonus to be paid in 2006 if she signed an employment agreement and was evaluated by the "9-Block" evaluation system.
B. Sands' Termination
¶ 10. On January 11, 2006, Sands received an e-mail from Jessica Bierman of the corporate human resources office advising that Charlie Menard wanted a job description to include with a new compensation agreement. Several e-mails were exchanged between Sands, Charlie Menard, and Bierman, including an e-mail from Sands to Charlie Menard dated January 20, 2006, which stated, "Not only do I WANT to get paid more, but, in point of fact, I MUST be paid more (in both cash as well as bonus) if you intend to avoid a lawsuit."
¶ 11. In a meeting on that same day, Sands provided Bierman a binder that included a job description, a comparison of compensation packages with other high-level private sector executives around the country and her male comparators within Menard, a copy of Sands' November 24, 2004, memo to John Menard requesting a pay raise, and an Equal Employment Opportunity Commission Publication entitled "Facts About Compensation Discrimination." During the meeting, which lasted approximately 90 minutes, Sands reviewed the binder with Bierman. Sands stated that she believed she had grounds for a lawsuit because she was not receiving pay equal to Coriden or other top
¶ 12. After her meeting with Sands, Bierman gave the binder to Charlie Menard and told him about their meeting. Later that afternoon, Charlie Menard approached Sands and asked, "[H]ow dare you threaten a Menard?" Sands responded that she was not trying to threaten the company; she was "just trying to point out a legal reality" and explained that she believed she had a valid legal claim against Menard.
¶ 13. A little over six weeks later, on Monday, March 6, 2006, Charlie Menard entered Sands' office with a proposed employment contract. The contract included a wage of $30.92 per hour and an unspecified bonus to be paid in March and July of 2007. Sands told Charlie Menard that this was the same wage she had received for approximately five years. Charlie Menard then wrote "$50,029.98" on a Post-it note and affixed it to the second page of the contract, stating that this was the bonus she would receive if she continued to work for Menard for another year. Sands responded, "I've been sitting here working my butt off and I get nothing. I just get all these promises .... [W]hat is that, just a big lie to make me keep working?" Charlie Menard shrugged and said, "Worked, didn't it?" Sands replied that as a 43-year-old woman with no one else to rely on, she needed to be concerned about her retirement. Charlie Menard responded, "[W]hy don't you get married like every other girl?" Sands countered, "Charlie, you understand there is a law called the Equal Pay Act?" Charlie
¶ 14. On Thursday and Friday of that week (March 9 and 10, 2006), Sands went to Chicago on business for Menard. The following Monday, March 13, 2006, Sands returned to the office and found a memo from Charlie Menard dated Thursday, March 9, 2006, in her in-box. In the memo, Charlie Menard communicated his belief that Sands was not likely to accept the proposed contract, that an agreement on compensation might not be possible, and that she should suggest some ways to professionally dissolve their relationship.
¶ 15. According to the arbitration panel, on the evening of Tuesday, March 14, 2006, Sands was preparing for a meeting in her office when John Menard
¶ 16. Moments later, John Menard returned and declared, "[Y]ou know what, you're all done right now. Pick your shit up; I want your ass out of here. You've got five minutes." Sands asked if he was firing her. John Menard stated that he was placing her on administrative leave. Sands asked for a clarification and stated that Menard did not have an administrative leave policy. John Menard repeated that Sands was on administrative leave, that she had better get moving, and that she now had only four minutes. "[D]o you understand what you're doing right now is unlawful?" Sands asked. "I don't care," John Menard replied. "I want your ass out of here."
¶ 17. At some point during this encounter, Sands turned to her computer in an attempt to log off. John Menard saw this, approached her from the other side of her desk with his hand in a fist, and ordered her to get away from the computer. He then continued to tell Sands to get "[her] ass out of there" and that he wanted "[her] ass gone." Sands collected a few personal items, and left with John Menard following her out of the building.
¶ 18. Sands later testified that during this incident, she felt "intimidat[ed]" by John Menard, who seemed "out of control"; she further testified that she was "scared," "humiliated," and "so embarrassed" by these events. The following day, John Menard had Sands' office door secured with a chain and padlock, which was removed a few days later when the lock was changed.
¶ 19. Unsure of her status, Sands had her attorney send a letter to Menard on March 20, 2006, to
C. Arbitration and Award
¶ 20. After her termination, Sands maintained that she had been defamed by Menard and was the victim of gender-based discrimination and then retaliation for claiming discrimination. Sands and Menard initially attempted to settle their dispute independently. Among their efforts was a private meeting between Sands and John Menard in May 2006 that ultimately proved unsuccessful. On October 23, 2006, Sands and Menard mutually agreed to enter into binding arbitration.
¶ 21. The arbitration agreement bound both parties to resolve "all disputes" arising from Sands' employment with Menard. The agreement further provided
¶ 22. During the arbitration hearings, Sands testified regarding her role and work at Menard and her concerns about the discrepancy in pay between herself, her predecessor, and other made executives at Menard. She also described the circumstances leading up to and including her termination. The panel determined that various Menard representatives attempted to influence witnesses during the arbitration proceedings. The panel described one instance when John Menard called Debra Sands, Sands' sister, and stated, as Debra Sands recalled it, that "he did not want to talk about the case, but he wanted to tell me that I should seriously think about what I was doing and that he would hate to see my obituary in the paper anytime soon."
¶ 23. During the arbitration hearings, Sands did not request to be reinstated to her position at Menard, but instead sought two years of front pay. In fact, in a brief to the arbitration panel, Sands stated that "no reasonable person would entertain reinstatement as a possibility" in these circumstances. Sands also argued that reinstatement would be inappropriate in light of John Menard and Menard's conduct towards her.
¶ 24. On October 19, 2007, the arbitration panel came back with its written award. While it rejected Sands' defamation
¶ 25. Because of these violations, the panel awarded Sands various monetary damages. She was awarded $267,108 in back wages
¶ 26. In addition to these monetary damages, the panel ordered that Sands be reinstated to the position of Vice President and Executive General Counsel within 30 days of the date of the award. Sands' reinstatement was to come with a salary of $166,250, to be increased to $175,000 effective January 1, 2008. The panel also ordered Menard to pay her a profit sharing bonus of 15% of her 2007 earnings.
¶ 27. As justification for the reinstatement award, the panel noted that reinstatement is one of the remedies available for violation of the EPA and Title VII. See 29 U.S.C. § 215(a)(3); 42 U.S.C. § 2000e-5(g)(l). It also noted that front pay may be ordered in lieu of reinstatement when reinstatement is inappropriate, citing Williams v. Pharmacia, Inc., 137 F.3d 944, 951-52 (7th Cir. 1998). The panel explained its decision thusly:
In this case, Sands argues that reinstatement to her position... would be inappropriate in light of the company's, particularly John Menard's, conduct toward her. Whether to award reinstatement or front pay to Sands is a difficult decision. The Panel recognizes that John Menard clearly was hostile to Sands at and near the time of her termination (as well as toward her sister, Debra Sands, thereafter, including during the pendency of these proceedings), and that such a consideration could be a basis for awarding front pay in lieu of reinstatement. On the other hand, not to reinstate Sands would, in some sense, reward the company for its mistreatment of her and, moreover, would tend to send the wrong message to company employees who otherwise might be inclined to make meritorious complaints about unlawful conduct occurring within the company.*663 On balance, the Panel has concluded that reinstatement is the appropriate approach here, on the ground that reinstatement is the favored remedy under the law.
¶ 28. After the arbitration award was handed down, Menard prepared a check for the full amount of the panel's monetary award. In a letter to Sands, Menard indicated that the check was available to pick up, but that Menard would not reinstate Sands. Despite many additional communications between the parties, Menard continued to refuse to reinstate Sands.
D. The Case Goes to Court
¶ 29. On December 20, 2007, Sands filed suit in the Circuit Court for Eau Claire County, Paul J. Lenz, Judge, seeking to clarify the arbitration award and subsequently confirm it.
¶ 30. Menard appealed, again arguing that the arbitration panel disregarded the law by requiring reinstatement. The court of appeals affirmed. It concluded that reinstatement is a statutory remedy under the EPA and Title VII, and that neither provides an exception for in-house attorneys. Sands v. Menard, 2009 WI App 70, ¶ 10, 318 Wis. 2d 206, 767 N.W.2d 332. The court of appeals held that the panel's reinstatement order rested on substantial authority, and that the panel did not manifestly disregard the law. Id., ¶¶ 10-11. Additionally, the court found that awarding front pay in lieu of reinstatement is discretionary, and courts do not review arbitration awards for erroneous exercise of discretion. Id., ¶ 12. To choose one over the other is not a manifest disregard of the law, the court reasoned. Id.
¶ 31. Menard then petitioned this court for review, which we accepted.
II. DISCUSSION
¶ 32. The question before us is whether the arbitration panel exceeded its authority in ordering Sands' reinstatement. In Part A, we review the general legal framework governing reinstatement and front pay in allegations of the type here. In Part B, we examine whether the panel exceeded its authority, concluding that the panel did overstep its bounds in ordering Sands' reinstatement. In Part C, we discuss the appropriate remedy for the panel's error.
¶ 33. We first turn to a general overview of the remedial framework for Title VII violations,
¶ 34. Under Title VII, courts may "order such affirmative action as may be appropriate, which may include, but is not limited to, reinstatement or hiring of employees, with or without back pay . . ., or any other equitable relief as the court deems appropriate." 42 U.S.C. § 2000e-5(g)(l). Reinstatement is the preferred remedy for violations because this accords with making the victim of discrimination whole. Equal Employment Opportunity Commission v. Kallir, Philips, Ross, Inc., 420 F. Supp. 919, 926 (S.D.N.Y. 1976).
¶ 35. However, reinstatement is not appropriate or even possible in all cases. Numerous courts, including the Seventh Circuit, have held that front pay— compensation for projected future earnings — may be awarded in Title VII cases where reinstatement is unavailable or inappropriate. Williams, 137 F.3d at 951-52.
¶ 36. Reinstatement may be inappropriate for a number of reasons. Two such overlapping circumstances deserve further attention here.
¶ 37. The most common situation where reinstatement is inappropriate is when the employer-employee relationship is "pervaded by hostility." Id. at 952 (citing McNeil v. Econ. Lab., Inc., 800 F.2d 111, 118 (7th Cir. 1986)). This unacceptably high level of hostil
¶ 38. In one case, a U.S. District Court considered an age discrimination suit (under the Age Discrimination in Employment Act ("ADEA"), 29 U.S.C. §§ 621-634) by the Chief Labor Counsel for Union Carbide who was forced to retire upon reaching his 65th birthday. Whittlesey v. Union Carbide Corp., 567 F. Supp. 1320, 1321 (S.D.N.Y. 1983). Though under a different statute, the basic analytical framework regarding reinstatement under Title VII and the ADEA is the same.
*667 Carbide has exhibited such hostility and outrage against him by reason of his bringing suit, he would certainly have difficulty functioning in the Law Department. By all indications, he would be ostracized and excluded from the functions of giving counsel.
Id. Though Carbide's actions were without justification, the court stated, this level of employer-directed hostility rendered reinstatement too difficult.
¶ 39. In another case, a U.S. District Court denied reinstatement when an employer referred to the employee as a "cancer" and repeatedly attacked his abilities during trial. Cancellier v. Federated Dep't. Stores, 672 F.2d 1312, 1319 (9th Cir. 1982) (affirming the District Court's front pay award). The trial judge concluded that the employee and employer could no longer "co-exist in a business relationship that would be productive to the consumer, community or to the business itself." Id. at 1319-20. Hence, reinstatement was inappropriate. Id. at 1320.
¶ 40. Similarly, in Goss v. Exxon Office Sys. Co., the Third Circuit affirmed an award of front pay in lieu of reinstatement because of "the likelihood of continuing disharmony in a sensitive job and the difficulty of policing an ongoing relationship." 747 F.2d 885, 890 (3d Cir. 1984). The trial judge had explained its award as follows:
I do not believe that either plaintiff or defendant would seriously contend that it would be sensible to order plaintiff reinstated to a job in which harmonious working relationships are so important after the acrimony*668 this case has engendered, nor could I possibly draft an injunctive order that would effectively make the existing ill feelings disappear.
Id. Again we see that where hostility makes a future working relationship impossible, reinstatement is not an appropriate remedy.
¶ 41. Other courts have similarly found front pay to be more appropriate where antagonism and hostility render working relationships impossible. See Fitzgerald v. Sirloin Stockade, Inc., 624 F.2d 945, 957 (10th Cir. 1980) (affirming an award of front pay in lieu of reinstatement where the defendant had engaged in psychological warfare against the plaintiff and where reinstatement would have led to retaliation); Hoffman v. Nissan Motor Corp. in USA, 511 F. Supp. 352, 355 (D.N.H. 1981) (holding that ordering reinstatement would be inappropriate because it "would be a harbinger of disaster and a catalyst to more litigation"). We stress that this does not leave the victim of discrimination without remedy; front pay is available to make the victim whole.
¶ 42. A second situation where reinstatement may be inappropriate is when the employee served in a managerial or unusually high-level role, as a representative to the public, or other such sensitive position. Dickerson v. Deluxe Check Printers, Inc., 703 F.2d 276, 280 (8th Cir. 1983) ("Those cases in which courts have declined to reinstate injured plaintiffs have frequently involved high level, unique or unusually sensitive positions in defendant's organization."). Success in these positions of trust is difficult or impossible when trust has been broken. Whether the position is such that reinstatement would be unworkable due to the break in the relationship again depends upon the facts of each case.
Lack of complete trust and confidence between plaintiff and defendant could lead to misunderstandings, misrepresentations and mistakes, and could seriously damage defendant's relationship with its clients. The situation here is quite unlike that presented when reinstatement is sought for an assembly line or clerical worker, or even for an executive whose job is not as sensitive for his employer's interests as is plaintiffs job here. The Court is convinced that after three and a half years of bitter litigation the necessary trust and confidence can never exist between plaintiff and defendant. To order reinstatement on the facts of this case would merely be to sow the seeds of future litigation, and would unduly burden the defendant. Thus, reinstatement will not be ordered in this case.
Id. In light of the sensitive nature of the position and litigation "marked by more than the usual hostility between the parties," the court concluded that reinstatement was not appropriate. Id. at 926-27.
¶ 44. In Coston v. Plitt Theatres, Inc., 831 F.2d 1321 (7th Cir. 1987), vacated on other grounds, 486 U.S. 1020 (1988), the Seventh Circuit upheld the denial of reinstatement for an employee who "was required to hold himself out to the public as a managerial representative of the employer." Id. at 1331. The court recognized that the public image of the business could be compromised by a hostile employer-employee rela
¶ 45. Other cases make clear that the nature of the position is important to the determination of whether reinstatement is appropriate. Hyland v. Kenner Prods. Co., 13 Fair Empl. Prac. Cas. (BNA) 1309 (S.D. Ohio 1976) (denying reinstatement to a person in a management position because she would possess confidential information but lack the trust and confidence of her superiors, and because the parties would not be able to establish a proper working relationship and were very antagonistic toward each other); Combes v. Griffin Television, Inc., 421 F. Supp. 841, 846 (W.D. Okla. 1976) (denying reinstatement to a news anchorman where the "[d]iscord, tension, suspicion, antagonism and sensitivity among them would be productive of a very difficult employment environment, with the particular difficulty of being perceivable to the viewing audience").
¶ 46. These principles emerge from this analysis: While reinstatement is the preferred remedy under Title VII, it is an equitable remedy that may or may not be appropriate depending upon the facts of each case. Where the level of hostility is unusually high, or where the position is a sensitive one requiring a high degree of trust and cooperation between management and the employee, reinstatement is generally not appropriate.
¶ 47. Menard challenges the reinstatement portion of the arbitration award on multiple grounds. First, it alleges that the Wisconsin Constitution guarantees Menard its choice of counsel. Second, Menard argues that reinstatement was not feasible and appropriate under governing case law and employment law. Third, it maintains that the arbitrators lacked the authority under the arbitration agreement to order reinstatement. Finally, Menard argues that the panel exceeded its authority by ignoring the Rules of Professional Conduct for attorneys.
¶ 48. Our review of arbitration awards is limited. Lukowski v. Dankert, 184 Wis. 2d 142, 149, 515 N.W.2d 883 (1994). Our task is to ensure that the parties receive what they bargained for — the adjudication of their dispute via the arbitration process. Id. Though limited, a court's role is not a mere formality; a court must overturn an arbitrator's award when the panel exceeds its powers. Wis. Stat. § 788.10(l)(d). An arbitration panel exceeds its powers when it engages in perverse misconstruction or positive misconduct, when the panel manifestly disregards the law, or where the award itself is illegal or violates strong public policy.
¶ 49. 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. Moreover, we are persuaded that the panel exceeded its authority here because reinstatement of Sands would cause her to violate her ethical obligations as an attorney.
¶ 50. It is a rare occasion for this court to overturn an arbitration award on public policy grounds. The public policy exception to the general rule of judicial deference should be narrowly construed and limited to situations where the public policy "is well defined and dominant, and is to be ascertained by reference to the laws and legal precedents and not from general considerations of supposed public interests." State v. New England Health Care Employees Union, 855 A.2d 964, 970 (Conn. 2004). A public policy violation must be clear, and the burden of proving such a violation rests with the party seeking to overturn the award. Id.
¶ 52. While the Rules vary in emphasis and importance, some rules are so deeply established as to embody the strong public policy of the State of Wisconsin. For example, we could not countenance an arbitration award that ordered an individual to engage in the unauthorized practice of law, or one that ordered an attorney to use funds from the attorney's trust account in a fashion prohibited by the Rules of Professional Conduct. Similarly, 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.
¶ 53. Attorneys owe a fiduciary duty of loyalty to their clients. Berner Cheese Corp. v. Krug, 2008 WI 95, ¶ 41, 312 Wis. 2d 251, 752 N.W.2d 800. This obligation of absolute loyalty means that attorneys are required to act solely for the benefit of their clients. Zastrow v. Journal Commc'ns, Inc., 2006 WI 72, ¶ 31, 291 Wis. 2d 426, 718 N.W.2d 51. Several Supreme Court Rules are aimed at enforcing this duty, including the requirement in SCR 20:1.7(a)(2) that attorneys may not represent clients when "there is a significant risk that the representation ... will be materially limited by... a per
¶ 54. While it is unusual for a reinstatement award to be vacated on public policy grounds, it is not unheard of. See, e.g., Newsday, Inc. v. Long Island Typographical Union, 915 F.2d 840 (2d Cir. 1990)
¶ 55. There is also precedent for the proposition that an attorney's ethical duties constitute strong public policy and can be grounds for vacating an arbitration award. For example, in Perkins & Mario, P.C. v. Annunziata, an arbitration award resulting from a legal fees dispute was vacated on the grounds that it violated the general statutory prohibition protecting injured persons from excessive legal fees, and because the award was in contravention of attorney ethics rules regarding contingent fee agreements. 694 A.2d 1388 (Conn. App. Ct. 1997)
¶ 57. Leading up to and throughout the arbitration process, all parties agreed that the relationship was irretrievably broken. Sands understood this and unequivocally testified against reinstatement before the arbitration panel, even going so far as to state that "no reasonable person would entertain reinstatement as a possibility." She further made clear her view of the prospective employment conditions at Menard, stating, "[I]t would be impossible to return to such a hostile environment." Understanding that reinstatement was not feasible or available here, Sands sought two years of front pay instead.
¶ 58. Sands also made clear her views of Menard's leadership — her clients if reinstatement were upheld. In her briefing before the arbitration panel, Sands stated that John Menard's conduct was "so monstrous and reprehensible that it shocks the conscience"; that he is a "reckless, callous actor who carets] nothing about anyone else's rights or reputation"; that he "is a man with no parameters, no limits, no respect for the law and obviously, no self-discipline to control or limit his own behavior — nor does he see any need to"; that his honesty and integrity are "completely illusory"; and that his "dishonesty is serious and overwhelming."
¶ 59. Let there be no mistake — the mutual animosity and distrust between Sands and the executive