Thursday, October 7, 2010

Big money lost by Menards

I recently came across the very interesting case of Sands v. Menard, Inc., which was decided by the Wisconsin Supreme Court in July.  It raises a number of interesting points, and one basic one:  if an in-house lawyer—particularly a corporation’s General Counsel—is fired for a discriminatory reason, can the court order reinstatement as a remedy, thereby forcing the corporation into an attorney-client relationship with an attorney not of its choosing?  In its typical 4-3 split, the Wisconsin Supreme Court said no.

Here are the facts, according to the opinion.  In 1999, Dawn Sands (a 1993 graduate of William Mitchell Law School in St. Paul) began working in the legal department at Menard, Inc.—better known to us Midwesterners as Menards.  Though she was promised a salary of $56,000, she discovered on her first day that she was actually an hourly employee who would have to punch a clock.  Just months after Sands started, the Vice President and General Counsel of Mendards was fired, and Sands assumed all his duties.  Although the ex-General Counsel been making about $105,000 per year plus a bonus, Sands’s rate of pay remained unchanged.

Over the next few years, Sands made many requests to John Menard (President of Menards and the richest man in Wisconsin) for a raise.  In her requests, she noted that she was being paid far less than the previous General Counsel even though she was doing at least as much work as he had done.  She never got a raise.

Eventually, Sands became irritated and told Menard, “Not only do I WANT to get paid more, I MUST be paid more (in both cash as well as bonus) if you intend to avoid a lawsuit.”  John Menard and his brother nephew Charlie did not appreciate being threatened with a lawsuit.  Said Charlie: “How dare you threaten a Menard?”  After some embarrassing and obviously inappropriate comments from the Menards (e.g., "[W]hy don't you get married like every other girl?"), they fired Sands.

Sands sued Menards, alleging defamation, unlawful retaliation, gender discrimination under Title VII and the Wisconsin Fair Employment Act, and pay discrimination under the Equal Pay Act.  The parties agreed to binding arbitration, which took place before a three-arbitrator panel.  The panel ruled in favor of Sands on the Equal Pay and retaliation claims.  As a remedy, the panel imposed nearly $1.8 million in damages and ordered that Sands be reinstated to the position of Vice President and General Counsel with a salary of $175,000 effective Jan. 1, 2008.

Menards agreed to pay the damages, but refused to reinstate Sands.  Although Sands had not requested reinstatement during the arbitration, she filed suit in Wisconsin district court, seeking to confirm the award.  The Circuit Court did confirm the award, and the Court of Appeals affirmed. 

But the Supreme Court reversed, holding that forcing Menards to reinstate Sands as its chief in-house lawyer was a clear violation of public policy because Sands could not ethically represent Menards:  “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.”

But all is not lost for Ms. Sands.  She still gets her $1.8 million.  And now the case has been remanded for a calculation of front pay in lieu of the reinstatement.  Given that she was to receive $175,000 per year—and that she has decades left in her career—this could end up being quite the pyrrhic victory for Menards.  (Though it sounds like the Menards brothers can swing it.)

What are you thoughts on this case Mr. Gillette?  Here are a few of mine:

1)  I think there’s a fundamental error lurking in here, and it has to do with the identity of the client.  Here’s a telling passage from the majority opinion:
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 care[s] 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." 
There’s a fundamental mistake of law here: the notion that the leadership of Menards is the in-house counsel’s client.  In fact, it is the company itself­—not the leadership or the shareholders—that is the client.  See, e.g., Jesse by Reinecke v. Danforth, 485 N.W.2d 63, 66 (Wis., 1992) (“[W]here a lawyer represents a corporation, the client is the corporation, not the corporation's constituents.”).  So the idea that Sands owed any duty of loyalty to the brothers Menard is, I think, quite mistaken.

2)  How cheap do you have to be to pay your in-house lawyers by the hour?  And isn’t that just begging for some kind of FLSA class-action?

3)  The dissent does not really consider the merits of whether reinstatement is an appropriate remedy for an attorney who has been the subject of a discriminatory dismissal.  Instead, it relies on the procedural point that an arbitration award should not be upset by anything but a clear mistake of law, and this is new law that the majority is announcing.  This strikes me as a reasonable point.  But the tone of the dissent is one of scathing—and totally inappropriate—sarcasm.  The dissenters could have made their point in one paragraph.  Instead, they filed a 25-page rant that sarcastically accuses the majority of "exceed[ing] its powers" and "manifestly disregarding the law."  Obviously, something else is going on here:  the Wisconsin Supreme Court is pitched in partisan warfare, and the justices are acting like children.

UPDATE:  The Eau Claire county circuit court ordered Menards to pay about $600,000 for the front pay claim and another $600,000 in attorneys fees and prejudgment interest.

FURTHER UPDATE: Both parties have appealed the $1.2 million award.

FUTHER UPDATE (5.11.2013): On March 26, 2013, the Wisconsin court of appeals reversed the district court's decision. Essentially, the Court found that the circuit court judge should have considered whether to hold an evidentiary hearing on the front pay issues. So the case has been remanded for the court to reconsider that issue.


  1. John's brother is Not named Charlie

  2. So if one fact is invalid the whole article is invalid. signed any reliable journalist

  3. Well, the Supreme Court opinion implies that John and Charlie Menards as brothers (see, e.g., Footnote 2, and paragraph 29), and that's what I was relying on. It appears that Charlie is actually John's nephew. I apologize for the inconsequential error.

  4. Charlie is Larry's son. Larry was the long-time operations manager for Menards (he retired in about 2008). At one time Charlie was being groomed to be John's replacement, but John got all bent out of shape over something at Charlie's wedding reception (a friend who was present felt that John took offense to a picture that was projected on a screen of Charlie and his fiance in one of the company's planes, but who really knows) and demoted him.


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