Green Bay Professional Police Association v. City of Green Bay ( 2023 )

2023 WI 33SUPREME COURT OF WISCONSIN
CASE NO.: 2021AP102
COMPLETE TITLE: Green Bay Professional Police Association and
Andrew Weiss,
Plaintiffs-Appellants-Petitioners,
v.
City of Green Bay,
Defendant-Respondent.
REVIEW OF DECISION OF THE COURT OF APPEALS
Reported at 399 Wis. 2d 504, 966 N.W.2d 107PDC No: 2021 WI App 73 - Published
OPINION FILED: April 27, 2023
SUBMITTED ON BRIEFS:
ORAL ARGUMENT: December 12, 2022
SOURCE OF APPEAL:
COURT: Circuit
COUNTY: Brown
JUDGE: Kendall M. Kelley
JUSTICES:
KAROFSKY, J., delivered the majority opinion of the Court, in
which ZIEGLER, C.J., ANN WALSH BRADLEY, ROGGENSACK, DALLET,
HAGEDORN, JJ., joined. ZIEGLER, C.J., filed a concurring
opinion. REBECCA GRASSL BRADLEY, J., filed a concurring opinion.
NOT PARTICIPATING:
ATTORNEYS:
For the plaintiffs-appellants-petitioners, there were
briefs filed by Jonathan Cermele and Cermele Law, S.C.,
Milwaukee. There was an oral argument by Jonathan Cermele.
For the defendant-respondent, there was a brief filed by
William E. Fischer, Kyle J. Gulya, and von Briesen & Roper,
S.C., Madison. There was an oral argument by William E. Fischer.
An amicus curiae brief was filed by Brendan P. Matthews and
Cermele & Matthews, S.C., Milwaukee, for the Milwaukee Police
Association.
An amicus curiae brief was filed by Andrew T. Phillips,
Matthew J. Thome, and Attolles Law, S.C., Milwaukee, for the
Wisconsin Chiefs of Police Association.
2
2023 WI 33NOTICE
This opinion is subject to further
editing and modification. The final
version will appear in the bound
volume of the official reports.
No. 2021AP102
(L.C. No. 2019CV1248)
STATE OF WISCONSIN : IN SUPREME COURT
Green Bay Professional Police Association and
Andrew Weiss,
FILED
Plaintiffs-Appellants-Petitioners,
APR 27, 2023
v.
Sheila T. Reiff
City of Green Bay, Clerk of Supreme Court
Defendant-Respondent.
KAROFSKY, J., delivered the majority opinion of the Court, in
which ZIEGLER, C.J., ANN WALSH BRADLEY, ROGGENSACK, DALLET,
HAGEDORN, JJ., joined. ZIEGLER, C.J., filed a concurring
opinion. REBECCA GRASSL BRADLEY, J., filed a concurring opinion.
REVIEW of a decision of the Court of Appeals. Affirmed.
¶1 JILL J. KAROFSKY, J. The Green Bay Police Department
(the Department) disciplined Andrew Weiss for violating several
Department policies and demoted him from his position as a
detective to a patrol officer. The demotion resulted in Weiss's
loss of an $80 monthly stipend. Weiss1 challenged this
The Green Bay Professional Police Association brought this
1
action against the City of Green Bay along with Weiss. As their
arguments are identical and briefed together, we refer only to
Weiss throughout the opinion.
No. 2021AP102
disciplinary action in an arbitration proceeding. The
arbitrator concluded that the Department had cause to take its
chosen disciplinary action. Additionally, the arbitrator
concluded that the Department's disciplinary procedures did not
violate Weiss's constitutional due process rights.2 The circuit
court3 confirmed the arbitration award, and the court of appeals
affirmed.4 We afford a high level of deference to arbitration
decisions because of the contractual nature of arbitration
agreements. Given this deference, the arbitrator did not exceed
his powers, and so we likewise affirm.
I. BACKGROUND
¶2 In the fall of 2017, Weiss, a detective for the
Department, accessed sensitive information via the Green Bay
Electronic Records Program (GERP) regarding two sexual assault
cases that the Department was investigating. Weiss was not
involved in either investigation. After obtaining the sensitive
information, Weiss used a personal cellphone to provide
information to a third party. After launching an internal
investigation, the Department issued a formal complaint alleging
that Weiss violated the following four Department policies:
Media Relations (§ 322.4); Media Requests (§ 322.6(a));
Unauthorized Disclosure (§ 320.5.6(a)); and Conduct Unbecoming
2 See U.S. Const. amends. V, XIV.
The Honorable Kendall
3 M. Kelley of the Brown County
Circuit Court presided.
Green Bay Pro. Police Ass'n v. City of Green Bay, 2021 WI
4
App 73, 399 Wis. 2d 504, 966 N.W.2d 107.
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No. 2021AP102
an Officer (§ 320.5.9(n)). The Department held an investigative
interview with Weiss and gave Weiss the opportunity to address
the allegations. Weiss admitted both accessing information on
GERP and then using a personal cell phone to relay information
to a friend.
¶3 The following month, the Department conducted a second
interview with Weiss and provided him with an amended formal
complaint alleging two additional violations of the Department
policy regarding the use of personal communication devices
(§§ 701.2 & 701.5(e)). At that interview, investigators asked
Weiss to turn over his phone logs for the relevant time period.
The investigators allowed Weiss time to discuss the request with
his union and its attorney before meeting for a third time. At
the third meeting, Weiss refused to provide the requested phone
records and the investigators gave him a copy of the Department
policy regarding cooperation with personnel complaint
investigations (§ 1008.2).
¶4 One month later, the Department issued Weiss a final
notice5 informing him that the Department was "considering a
serious level of discipline." The notice listed four policy
violations: Media Relations (§ 322.4); Media Requests
5 Both the Department and Weiss refer to this notice and
accompanying hearing as the "Loudermill notice" and "Loudermill
hearing" in reference to Cleveland Bd. of Educ. v. Loudermill,
470 U.S. 532 (1985), which held that oral or written notice and
opportunity to respond was required prior to the termination of
the subject public employee who could only be terminated for
cause.
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(§ 322.6(a)); Unauthorized Disclosure (§ 320.5.6(a)); and
Conduct Unbecoming an Officer (§ 320.5.9(n)). The notice
referenced Weiss's admission that he accessed case information
on GERP and then provided information to a friend. A final
hearing was held that same day, and Weiss was allowed to address
the allegations.
¶5 The following month the Department issued its
disciplinary decision in which it determined that Weiss violated
the following policies: Unauthorized Disclosure (§ 320.5.6(a));
Conduct Unbecoming an Officer (§ 320.5.9(n)); Use of Personal
Communication Devices (§§ 701.2 & 701.5(e)); and Failure to
Cooperate in an Investigation of Personnel Complaint (§ 1008.2).
As a result of these violations, the Department demoted Weiss
from his position as a detective to a position as a patrol
officer, resulting in the loss of an $80 per month stipend
associated with the detective assignment.
¶6 Weiss filed a grievance with the Green Bay Personnel
Committee which was denied. Weiss then sought arbitration,
arguing that the Department did not have cause to discipline him
and that his due process rights under Cleveland Bd. of Educ. v.
Loudermill, 470 U.S. 532 (1985), were violated because he was
ultimately disciplined for three policy violations that were not
included in the Department's final notice——Use of Personal
Communication Devices (§§ 701.2 & 701.5(e)) and Failure to
Cooperate in an Investigation of Personnel Complaint (§ 1008.2).
The arbitrator determined that the Department had cause, as
required by the collective bargaining agreement, to discipline
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No. 2021AP102
Weiss by removing him from his detective assignment. The
arbitrator concluded that the discipline was warranted because
Weiss had violated all referenced Department policies except for
Conduct Unbecoming an Officer.6
¶7 The arbitrator also addressed Weiss's due process
argument as follows:
The reliance Weiss puts in Loudermill is misplaced.
In Loudermill, the court balanced competing interests
specific to the discharge of a public employee. The
weight accorded to Loudermill varies depending on the
severity of the disciplinary action taken. Subsequent
cases have confirmed that a neutral pre-termination
adjudicator is not required where there is also a
post-termination administrative procedure. Locurto v.
Safir, 264 F.3d 154 (2nd Cir. 2001); Schacht v.
Wisconsin Dept. of Corr., 175 F.3d 497 (7th Cir.
1999). In the present case, the arbitrator serves as
the post-disciplinary administrative procedure and
satisfies due process requirements under Loudermill,
particularly given that the disciplinary action taken
was short of discharge.
¶8 Weiss challenged the arbitration award in circuit
court, arguing that the award manifestly disregarded the law
with regards to the due process issue under Loudermill. The
circuit court denied Weiss's request to vacate the award and
granted the City of Green Bay's request to confirm the
arbitration award. The court of appeals affirmed.
6 The arbitrator decided that Weiss's actions did not fit
the behavior historically understood to be conduct unbecoming an
officer, and that the violation of this section was duplicative
of his other violations.
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No. 2021AP102
II. ANALYSIS
¶9 In determining whether an arbitration award is
confirmed or vacated, we independently interpret and apply Wis.
Stat. § 788.10(1) (2021-22).7 Racine Cnty. v. Int'l Ass'n of
Machinists & Aerospace Workers Dist. 10, AFL-CIO, 2008 WI 70,
¶11, 310 Wis. 2d 508, 751 N.W.2d 312. The choice to arbitrate,
at its core, is a contract between the parties intended to keep
a dispute out of the court system. Borst v. Allstate Ins. Co.,
2006 WI 70, ¶61, 291 Wis. 2d 361, 717 N.W.2d 42. As such, the
court's role in reviewing an arbitrator's award is generally
limited to ensuring that the parties received the arbitration
process for which they bargained. Racine Cnty., 310 Wis. 2d
508, ¶11. In that light, Wis. Stat. § 788.10(1) sets out
specific circumstances under which the court must vacate an
arbitration award. As relevant here, courts must vacate an
arbitration award if the "arbitrators exceed[] their powers."
§ 788.10(1)(d). Arbitrators exceed their powers when: (1) they
demonstrate "perverse misconstruction" or "positive misconduct,"
(2) they manifestly disregard the law, (3) the award is illegal,
or (4) the award violates a strong public policy. Racine Cnty.,
310 Wis. 2d 508, ¶11.
¶10 We reverse an arbitration award as manifestly
disregarding the law "when the arbitrator[] fail[s] to examine
and apply the relevant law" because parties to arbitration have
All subsequent references to the Wisconsin Statutes are to
7
the 2021-22 version unless otherwise indicated.
6
No. 2021AP102
"a legitimate expectation that the governing law [will] be
followed and applied properly." Orlowski v. State Farm Mut.
Auto. Ins. Co., 2012 WI 21, ¶¶37-38, 339 Wis. 2d 1, 810 N.W.2d
775. However, we will not reverse an arbitration award for
"mere errors of judgment as to law or fact" on the part of the
arbitrator. Joint Sch. Dist. No. 10, City of Jefferson v.
Jefferson Ed. Ass'n, 78 Wis. 2d 94, 117, 253 N.W.2d 536 (1977).
¶11 Weiss primarily argues that the arbitrator exceeded
his powers because the arbitrator manifestly disregarded the law
when he determined that the Department provided adequate notice
to Weiss under Loudermill.8 Weiss bases this claim on the fact
that the Department's final notice did not list three of the
Department policies for which he was ultimately disciplined,
depriving Weiss of his opportunity to respond. Weiss contends
that the failure to include those policies in the final notice
violated the due process requirements set out in Loudermill.
¶12 Importantly, we need not decide whether Weiss was
afforded all the process due to him. We need determine only
whether the arbitrator exceeded his powers under Wis. Stat.
§ 788.10(1)(d) by manifestly disregarding the law. Although it
may be difficult to define exactly what it means to "manifestly
Weiss also claims that the arbitrator exceeded his powers
8
under Wis. Stat. § 788.10(1)(d) because the arbitration award
"violates strong public policy" and "conflicts with the
governing law." However, these arguments are almost entirely
duplicative of his argument that the arbitrator manifestly
disregarded Loudermill. Because we conclude that the arbitrator
did not manifestly disregard Loudermill, these additional
arguments also fail.
7
No. 2021AP102
disregard the law," we know that this standard does not entitle
arbitration participants to de novo court review of an
arbitrator's interpretation of the law. See City of Oshkosh v.
Oshkosh Pub. Libr. Clerical and Maint. Emp.: Union Loc. 796-A,
99 Wis. 2d 95, 104, 299 N.W.2d 210 (1980) ("Having agreed to be
bound by the arbitrator's determination, the arbitrator has the
'authority' to err and a mistake of judgment is plainly not
grounds for vacating an award under sec. 298.10(1)(d)."9).
Arbitrators are bound to follow precedent, Racine Cnty., 310
Wis. 2d 508, ¶34, but they are not expected to anticipate how a
court might apply or extend that precedent when faced with novel
arguments or fact scenarios. Parties do not have the same
"legitimate expectation" regarding new applications of the law
that they have in established applications. See Orlowski, 339
Wis. 2d 1, ¶38.
¶13 Loudermill, the precedent that Weiss argues the
arbitrator manifestly disregarded, provides guidance on what
pre-termination process an employer must afford a public
employee who can be discharged only for cause. 470 U.S. at 535.
In Loudermill, the Cleveland Board of Education terminated a
security guard after discovering he had previously been
convicted of a felony but did not disclose that felony in the
application process. Id. The employee was provided no pre-
termination process whatsoever where he could assert his defense
9 Wisconsin Stat. § 298.10(1)(d) is the identical
predecessor statute to § 788.10(1)(d).
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No. 2021AP102
to the allegations.10 Id. In holding that some pre-termination
process was due, the Court emphasized that "[a]n essential
principle of due process is that a deprivation of life, liberty,
or property 'be preceded by notice and opportunity for hearing
appropriate to the nature of the case[,]'" and "that an
individual be given an opportunity for a hearing before he is
deprived of any significant property interest." Id. at 542
(quoting Mullane v. Cent. Hanover Bank & Tr. Co., 339 U.S. 306,
313 (1950) & Boddie v. Connecticut, 401 U.S. 371, 379 (1971)).
¶14 The Court emphasized that the "formality and
procedural requisites for the hearing can vary, depending upon
the importance of the interests involved and the nature of the
subsequent proceedings." Id. at 545 (quoting Boddie, 401 U.S.
at 378). Recognizing the importance of a person's interest in
retaining employment, the Court held that the following pre-
termination procedures were constitutionally required: (1) "oral
or written notice of the charges" against the employee with "an
explanation of the employer's evidence;" and (2) an opportunity
for the employee to "present his side of the story" either in
person or in writing before the termination decision is made.
Id. at 546.
10The employee explained in post-termination proceedings
that he thought his conviction was for a misdemeanor rather than
a felony.
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No. 2021AP102
¶15 At the outset, we note that the specific process
outlined in Loudermill may not govern in this case.11 Unlike the
public employee in Loudermill, Weiss was not terminated——he was
reassigned within the Department and lost an $80 per month
stipend——which implicates a different property interest than the
interest addressed in Loudermill. Our focus on Loudermill stems
from Weiss's argument, which is limited to the arbitrator's
application of Loudermill. Consequently, we address whether the
arbitrator's application of Loudermill demonstrates a manifest
disregard of the law.
¶16 The arbitrator directly addressed Weiss's Loudermill
arguments by explaining that "the weight accorded to Loudermill
varies depending on the severity of the disciplinary action
taken." Weiss offers no argument for why this statement is
inaccurate, let alone how this statement manifestly disregarded
Loudermill. At best, Weiss's position could be seen as a
request to extend Loudermill's pre-termination process
requirements to less serious forms of discipline. However, the
arbitrator is not bound to extend Loudermill in this way.
¶17 The arbitrator then determined that, in light of his
view of Loudermill, the process the Department afforded to
Weiss——which included notice of all of Weiss's alleged policy
violations, opportunities to be heard at four in-person hearings
See Gilbert v. Homar, 520 U.S. 924, 930 (1997)) ("Due
11
process is flexible and calls for such procedural protections as
the particular situation demands." (quoting Morrissey v. Brewer,
408 U.S. 471, 481 (1972))).
10
No. 2021AP102
prior to the Department's disciplinary decision, and opportunity
to bring post-disciplinary review through a Green Bay Personnel
Committee grievance and arbitration——was constitutionally
adequate. The arbitrator did not manifestly disregard
Loudermill in doing so, and Weiss received the arbitration he
bargained for. Thus, he is contractually bound by the
arbitrator's decision.
III. CONCLUSION
¶18 The arbitrator did not exceed his powers by manifestly
disregarding the law when he determined that Weiss was afforded
the constitutional process he was due under Loudermill. As
such, Weiss received the arbitration he bargained for, and the
arbitration award was appropriately confirmed.
By the Court.—The decision of the court of appeals is
affirmed.
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No. 2021AP102.akz
¶19 ANNETTE KINGSLAND ZIEGLER, C.J. (concurring). I
agree with the majority that no grounds exist in this case for
vacating the arbitrator's decision, and I therefore join the
majority opinion. I write separately to address the atextual
nature of the "manifest disregard" standard and to request that,
in future cases, parties include the arbitration agreement as a
part of the circuit court record.
¶20 Arbitration agreements are not special. They are
contracts just like any other. As is true with all contracts,
our task in cases concerning arbitration awards is to review the
arbitration agreement and determine whether the parties received
the arbitration they bargained for. See Midwest Neurosciences
Assocs., LLC v. Great Lakes Neurosurgical Assocs., LLC, 2018 WI
112, ¶40, 384 Wis. 2d 669, 920 N.W.2d 767 (quoting Joint Sch.
Dist. No. 10 v. Jefferson Educ. Ass'n, 78 Wis. 2d 94, 101, 253
N.W.2d 536 (1997)) ("Arbitration agreements are 'a matter of
contract.'"); Emps. Ins. of Wausau v. Jackson, 190 Wis. 2d 597,
610, 527 N.W.2d 681 (1995) ("Arbitration is essentially
contractual . . . ."); Wis. Auto Title Loans, Inc. v. Jones,
2005 WI App 86, ¶8, 280 Wis. 2d 823, 696 N.W.2d 214 (alteration
in original) (quoting Gilmer v. Interstate/Johnson Lane Corp.,
500 U.S. 20, 24 (1991)) ("The Federal Arbitration Act's purpose
is 'to reverse the longstanding judicial hostility to
arbitration agreements . . . and to place arbitration agreements
upon the same footing as other contracts.'"). This task is
1
No. 2021AP102.akz
exceedingly difficult when, as here, the agreement containing
the terms for arbitration is absent from the record.
¶21 The Wisconsin Arbitration Act ("WAA") helps define the
circumstances where parties did not receive the arbitration they
bargained for by establishing several grounds for vacating an
arbitral award. These grounds include where "the award was
procured by corruption, fraud or undue means"; "there was
evident partiality or corruption on the part of the
arbitrators"; "the arbitrators were guilty of misconduct"; or,
most relevant here, "the arbitrators exceeded their powers, or
so imperfectly executed them that a mutual, final and definite
award upon the subject matter submitted was not made." Wis.
Stat. § 788.10(1). The parties to this case agree that the
arbitrator exceeded his powers if he "manifestly disregarded the
law," and the majority correctly applies this standard for that
reason.
¶22 However, this "manifest disregard" language is wholly
absent from the statutory text. The "manifest disregard"
standard instead originates from dicta in the United States
Supreme Court's decision in Wilko v. Swan, 346 U.S. 427, 436
(1953), overruled on other grounds by Rodriguez de Quijas v.
Shearson/Am. Express, Inc., 490 U.S. 477 (1989). The Court in
Wilko appears to have simply described how arbitrators might
exceed their powers as defined by a choice-of-law provision in
an arbitration agreement. After Wilko, the "manifest disregard"
standard became seemingly untethered from the text of
arbitration agreements, taking on a life of its own as the
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No. 2021AP102.akz
standard for reviewing essentially all challenges to arbitral
awards without regard to the language in the underlying
contract. Parties involved in requests to vacate arbitral
awards must submit the arbitration agreement to the circuit
court so the court may determine the scope of the arbitrator's
powers and confirm whether applying the "manifest disregard"
standard is appropriate. Without the arbitration agreement, we
may not be able to determine whether the parties received the
arbitration they bargained for.
I. THE "MANIFEST DISREGARD" STANDARD IN WISCONSIN.
¶23 In 1931, the Legislature enacted the WAA, "which
attempted to invest the courts of this state with power to
specifically enforce an agreement to arbitrate future disputes."
Dunphy Boat Corp. v. Wis. Empl. Rels. Bd., 267 Wis. 316, 325, 64
N.W.2d 866 (1954). Relevant to this case, the WAA also
identified grounds for vacating an arbitral award, and the text
remains identical to this day:
(1) In either of the following cases the court in
and for the county wherein the award was made must
make an order vacating the award upon the application
of any party to the arbitration:
(a) Where the award was procured by corruption,
fraud or undue means;
(b) Where there was evident partiality or
corruption on the part of the arbitrators, or either
of them;
(c) Where the arbitrators were guilty of
misconduct in refusing to postpone the hearing, upon
sufficient cause shown, or in refusing to hear
evidence pertinent and material to the controversy; or
of any other misbehavior by which the rights of any
party have been prejudiced;
3
No. 2021AP102.akz
(d) Where the arbitrators exceeded their powers,
or so imperfectly executed them that a mutual, final
and definite award upon the subject matter submitted
was not made.
§ 2, ch. 274, Laws of 1931 (codified at Wis. Stat. § 788.10).
¶24 Conspicuously absent from this text is the phrase,
"manifest disregard." Regardless, we have repeatedly described
our review of arbitral awards using the "manifest disregard"
standard without explaining where this standard came from. See,
e.g., McAdams v. Marquette Univ., 2018 WI 88, ¶29, 383
Wis. 2d 358, 914 N.W.2d 708; Marlowe v. IDS Prop. Cas. Ins. Co.,
2013 WI 29, 346 Wis. 2d 450, 828 N.W.2d 812; Orlowski v. State
Farm Mut. Ins. Co., 2012 WI 21, 339 Wis. 2d 1, 810 N.W.2d 775;
Sands v. Menard, Inc., 2010 WI 96, ¶48, 328 Wis. 2d 647, 787
N.W.2d 384; Baldwin-Woodville Area Sch. Dist. v. W. Cent. Educ.
Ass'n-Baldwin Woodville Unit, 2009 WI 51, ¶24, 317 Wis. 2d 691,
766 N.W.2d 591; Racine County v. Int'l Ass'n of Machinists &
Aerospace Workers Dist. 10, AFL-CIO, 2008 WI 70, ¶11, 310
Wis. 2d 508, 751 N.W.2d 312; Franke v. Franke, 2004 WI 8, ¶24
n.8, 268 Wis. 2d 360, 674 N.W.2d 832; Lukowski v. Dankert, 184
Wis. 2d 142, 149, 515 N.W.2d 883 (1994); City of Madison v.
Madison Pro. Police Officers Ass'n, 144 Wis. 2d 576, 586-87, 425
N.W.2d 8 (1988); Nicolet High Sch. Dist. v. Nicolet Educ. Ass'n,
118 Wis. 2d 707, 713 n.3, 348 N.W.2d 175 (1984); City of
Milwaukee v. Milwaukee Police Ass'n, 97 Wis. 2d 15, 25-26, 292
N.W.2d 841 (1980); Milwaukee Bd. of Sch. Dirs. v. Milwaukee
Tchrs' Educ. Ass'n, 93 Wis. 2d 415, 422, 287 N.W.2d 131 (1980);
Glendale Pro. Policemen's Ass'n v. City of Glendale, 83
Wis. 2d 90, 99 n.2, 264 N.W.2d 594 (1978); Joint Sch. Dist. No.
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No. 2021AP102.akz
10, City of Jefferson v. Jefferson Educ. Ass'n, 78 Wis. 2d 94,
117-18, 253 N.W.2d 536 (1977).
¶25 The first time we used the "manifest disregard"
standard was in Scherrer Construction Co. v. Burlington Memorial
Hospital, 64 Wis. 2d 720, 221 N.W.2d 855 (1974). Scherrer
Construction presented the issue, "What is the scope of judicial
review of arbitration awards?" Id. at 725. Rather than
examining the language of Wis. Stat. § 788.10 to answer this
question, Scherrer Construction instead reviewed how this court
described the standard for reviewing arbitral awards in previous
cases. Id. at 726–28. We concluded, "[T]his court has
consistently held[] the scope of review of such matters is
extremely limited," id. at 726, and expressed a general standard
for reviewing arbitral awards:
These statements are consistent with the views
expressed in Domke on Commercial Arbitration, the
leading treatise in the field. The author states that
to vacate an arbitration award, the court must find
not merely an error in judgment, but "perverse
misconstruction or positive misconduct . . . plainly
established'," "'manifest disregard of the law'," or
that the award itself "violates public policy," "is
illegal," or that "the penal laws of the state will be
violated."
Id. at 729 (footnotes omitted). Without clearly explaining how
or whether this standard was based in the language of the WAA,
Scherrer Construction apparently adopted "manifest disregard of
the law" from Domke on Commercial Arbitration as the standard
for reviewing all arbitral awards. According to that treatise,
the standard's origin "lies in dicta from the Supreme Court's
decision in Wilko v. Swan." Martin Domke et al., 2 Domke on
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Commercial Arbitration § 39:16 (2022). In continued search of
how this standard came about, I turn next to federal law.
II. THE "MANIFEST DISREGARD" STANDARD'S ORIGIN
IN FEDERAL LAW.
¶26 In 1925, Congress enacted the Federal Arbitration Act
("FAA") in order to "abolish the common law rule that
arbitration agreements were not judicially enforceable." Cost
Brothers, Inc. v. Travelers Indem. Co., 760 F.2d 58, 60 (3d Cir.
1985); accord Pub. L. No. 68.41, 43 Stat. 883 (1925) (codified
at 9 U.S.C. §§ 1-16). The FAA "was specifically aimed at the
historical problems of courts' refusing to honor contractual
arbitration agreements" and "was intended to make arbitration
agreements specifically enforceable upon the terms established
by the parties." Dickinson v. Heinold Sec., Inc., 661 F.2d 638,
645 (7th Cir. 1981) (citation omitted). But the Act also
identifies grounds for vacating an arbitrator's decision:
(1) where the award was procured by corruption,
fraud, or undue means;
(2) where there was evident partiality or
corruption in the arbitrators, or either of them;
(3) where the arbitrators were guilty of
misconduct in refusing to postpone the hearing, upon
sufficient cause shown, or in refusing to hear
evidence pertinent and material to the controversy; or
of any other misbehavior by which the rights of any
party have been prejudiced; or
(4) where the arbitrators exceeded their powers,
or so imperfectly executed them that a mutual, final,
and definite award upon the subject matter submitted
was not made.
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9 U.S.C. § 10(a). Apart from its use of the Oxford comma, this
is the exact same language as appears in the Wisconsin
Arbitration Act. See Wis. Stat. § 788.10(1).
¶27 The United States Supreme Court first discussed the
grounds for vacating an arbitral award under the FAA in Wilko v.
Swan. Wilko involved a customer's suit against a securities
brokerage firm under the Securities Act of 1933, alleging
fraudulent inducement. Wilko, 346 U.S. at 428–29. The
securities brokerage firm, "[w]ithout answering the
complaint, . . . moved to stay the trial of the action pursuant
to § 3 of the [FAA] until an arbitration in accordance with the
terms of identical margin agreements was had." Id. at 429.
¶28 Notably, Wilko did not address whether to vacate an
arbitral award at all. By the time the case reached the Supreme
Court, no arbitration had yet taken place. The issue was
instead whether "an agreement to arbitrate a future controversy
is a 'condition, stipulation, or provision binding any person
acquiring any security to waive compliance with any provision'
of the Securities Act which § 146 declares 'void.'" Id. at 430.
The Court concluded such an agreement is void, a holding later
overturned by Rodriguez de Quijas, 490 U.S. 477. While
discussing how the effectiveness of buyer protections under the
Securities Act "is lessened in arbitration as compared to
judicial proceedings," the Court noted the high standard for
vacating an arbitral award:
Power to vacate an award is limited. While it may be
true, as the Court of Appeals thought, that a failure
of the arbitrators to decide in accordance with the
provisions of the Securities Act would 'constitute
7
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grounds for vacating the award pursuant to section 10
of the Federal Arbitration Act,' that failure would
need to be made clearly to appear. In unrestricted
submission, such as the present margin agreements
envisage, the interpretations of the law by the
arbitrators in contrast to manifest disregard are not
subject, in the federal courts, to judicial review for
error in interpretation.
Wilko, 346 U.S. at 435–37 (emphasis added) (footnotes omitted).
This is where the "manifest disregard" language first appeared.
¶29 After the Wilko decision, "manifest disregard" seemed
to take on a life of its own. As the Supreme Court has
observed, Wilko's cryptic language caused much confusion and
varying approaches to reviewing arbitral awards in the years
since:
Maybe the term "manifest disregard" was meant to name
a new ground for review, but maybe it merely referred
to the § 10 grounds collectively, rather than adding
to them. See, e.g., Mitsubishi Motors Corp. v. Soler
Chrysler–Plymouth, Inc., 473 U.S. 614, 656 (1985)
(Stevens, J., dissenting) ("Arbitration awards are
only reviewable for manifest disregard of the law, 9
U.S.C. §§ 10, 207"); I/S Stavborg v. National Metal
Converters, Inc., 500 F.2d 424, 431 [(2d Cir. 1974)].
Or, as some courts have thought, "manifest disregard"
may have been shorthand for § 10(a)(3) or § 10(a)(4),
the paragraphs authorizing vacatur when the
arbitrators were "guilty of misconduct" or "exceeded
their powers." See, e.g., [Kyocera Corp. v.
Prudential-Bache Trade Servs., Inc., 341 F.3d 987, 997
(9th Circ. 2003)].
Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 585
(2008). However, the Court has not attempted to clarify the
meaning of "manifest disregard," how it fits into the FAA's
language, or whether it is an extra-statutory ground for
vacating arbitral awards. See Stolt-Nielsen S.A. v. AnimalFeeds
Int'l Corp., 559 U.S. 662, 672 n.3 (2010) ("We do not decide
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whether 'manifest disregard' survives our decision in [Hall
Street Associates, 552 U.S. 576] as an independent ground for
review or as a judicial gloss on the enumerated grounds for
vacatur set forth at 9 U.S.C. § 10.").
III. "MANIFEST DISREGARD" IS LIKELY NOT A UNIVERSAL
STANDARD OF REVIEW.
¶30 Several aspects of the Wilko opinion indicate that the
United States Supreme Court might not have intended for
"manifest disregard" to be a general standard of review for all
arbitral awards.
¶31 First, the Court used the phrase "manifest disregard"
in passing as dicta. The issue was whether the parties agreed
to arbitrate. There was no arbitral award for the Court to
review, and no need to determine the permissible scope of
review. Wachovia Sec., LLC v. Brand, 671 F.3d 472, 480 (4th
Cir. 2012) ("The origins of modern manifest
disregard . . . likely lie in dicta from the Supreme Court's
decision in Wilko . . . .").
¶32 Second, none of the authorities cited in Wilko appear
to support the proposition that "manifest disregard" is the
general standard for reviewing arbitral awards. Wilko collected
several sources cited in footnote 24 in support of the "manifest
disregard" dicta. Wilko, 346 U.S. at 437 n.24. Rather than
recognizing a general standard of review, these authorities
instead seem to recognize a reviewing court's ability to vacate
an arbitral award in part depends on the scope of submission to
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the arbitrator as stated in the arbitration agreement.1 One of
the cited cases, Kleine v. Catra, most comprehensively explains
how the standard of review stems from the contract language:
1 See, e.g., Burchell v. Marsh, 58 U.S. (17 How.) 344, 349
(1854) (emphases added) ("If an award is within the submission,
and contains the honest decision of the arbitrators, after a
full and fair hearing of the parties, a court of equity will not
set it aside for error, either in law or fact. In this case,
one of the parties sued the other for debt, who, in his turn,
claimed damages for the manner in which he was sued. The
submission was broad enough to cover all these demands on either
side."); United States v. Farragut, 89 U.S. (22 Wall.) 406, 413-
14 (1874) (stating "the whole controversy was submitted to three
arbitrators" and reviewing the terms of the arbitration
agreement); Tex. & P. Ry. Co. v. St. Louis Sw. Ry. Co., 158 F.2d
251, 256-57 (8th Cir. 1946) (discussing authority of the
arbitrators under rules established by contract); The
Hartbridge. N. of Eng. S.S. Co. v. Munson S.S. Line, 62 F.2d 72,
73 (2d Cir. 1932) (emphasis added) (quoting Wilkins v. Allen, 62
N.E. 575, 576 (N.Y. 1902)) ("Where the merits of a controversy
are referred to an arbitrator selected by the parties, his
determination, either as to the law or the facts, is final and
conclusive; and a court will not open an award unless perverse
misconstruction or positive misconduct upon the part of the
arbitrator is plainly established, or there is some provision in
the agreement of submission authorizing it."); Mut. Benefit
Health & Accident Ass'n v. United Cas. Co., 142 F.2d 390, 393
(1st Cir. 1944) ("It is the contention of the Association that
the decision of the arbitrator is not binding on it, because he
did not follow the terms of submission . . . ."); Wesley A.
Sturges, A Treatise on Commercial Arbitrations and Awards § 218
(1930) ("Judicial opinion, as it is expressed in the cases, is
uniformly to the effect that under an unrestricted submission
arbitrators are not required to decide 'according to law.' They
may disregard the 'strict letter of the law.'"); Note, Judicial
Review of Arbitration Awards on the Merits, 63 Harv. L. Rev.
681, 685 (1950) (emphasis added) ("[T]he general view, both at
common law and by statute, is that the courts will not review
for its wisdom or soundness the principle selected by the
arbitrator, unless his discretion in making that selection is
limited by the terms of the submission agreement."); Archibald
Cox, The Place of Law in Labor Arbitration, 34 Chi. Bar Rec.
205, 207 (1953) (arguing arbitrators should apply the governing
law as a judge would, but nonetheless recognizing "[t]he power
of arbitrators differs with the breadth of the provision").
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If the parties wish to reserve the law for the
decision of the court, they may stipulate to that
effect in the submission; they may restrain or enlarge
its operation, as they please. If no such reservation
is made in the submission, the parties are presumed to
agree, that every thing, both as to law and fact,
which is necessary to the ultimate decision, is
included in the authority of the referees.
Under a general submission, therefore, the
arbitrators have rightfully a power to decide on the
law and the fact; and an error in either respect ought
not to be the subject of complaint by either party,
for it is their own choice to be concluded by the
judgment of the arbitrators. Besides, under such a
general submission, the reasonable rule seems to be,
that the referees are not bound to award upon the mere
dry principles of law applicable to the case before
them.
14 F. Cas. 732, 735 (C.C.D. Mass. 1841). Wilko's cited
authorities therefore may instead support the idea that the
standard of review for arbitral awards depends on the contract,
meaning there is no universal standard.
¶33 Finally, Wilko itself apparently did not purport to
establish "manifest disregard" as a universal standard. The
Court only said the standard for reviewing an arbitral decision
for legal error is "manifest disregard" "[i]n unrestricted
submissions, such as the present margin agreements envisage."
Wilko, 346 U.S. at 436. Whether the applicable standard is
"manifest disregard" seems instead to depend on the language in
the arbitration agreement.
¶34 Unlike the record in this case, Wilko helpfully
includes the contract language defining the scope of submission
to the arbitrator:
Any controversy arising between us under this
contract shall be determined by arbitration pursuant
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to the Arbitration Law of the State of New York, and
under the rules of either the Arbitration Committee of
the Chamber of Commerce of the State of New York, or
of the American Arbitration Association, or of the
Arbitration Committee of the New York Stock Exchange
or such other Exchange as may have jurisdiction over
the matter in dispute, as I may elect. Any
arbitration hereunder shall be before at least three
arbitrators.
Id. at 432 n.15. This is a choice-of-law provision, which
defines which jurisdiction's law the arbitrator is required to
apply. Based on this reading of Wilko, so long as the
arbitrator applied this law, the parties received the
arbitration they bargained for. However, if the arbitrator did
not apply the law described in the choice-of-law provision——in
other words, manifestly disregarded the law——then the parties
did not receive the arbitration they bargained for. See James
M. Gaitis, Clearing the Air on "Manifest Disregard" and Choice
of Law in Commercial Arbitration: A Reconciliation of Wilko,
Hall Street, and Stolt-Nielsen, 22 Am. Rev. Int'l Arb. 21, 22
(2011) ("[T]he advent of the phrase manifest disregard in
American case law and commentary is an unfortunate and
unnecessary adjunct to evaluating the enforceability of choice-
of-law provisions in agreements to arbitrate. . . . [M]anifest
disregard of the law is nothing more than a loosely used
catchall misnomer that should be forever abandoned in favor of a
simple and clear pronouncement mandating the enforcement, to one
degree or another, of choice-of-law provisions governing
agreements to arbitrate.").
¶35 This formulation seems to fit neatly with the
statutory vacatur standard. A reviewing court may vacate an
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arbitral award "[w]here the arbitrators exceeded their powers."
Wis. Stat. § 788.10(1)(d); 9 U.S.C. § 10(a)(4). One must look
to the arbitration agreement to discern the scope of the
arbitrators' powers. 6 C.J.S. Arbitration § 101 (2023)
(footnotes omitted) ("Except to the extent that an arbitrator's
power may derive from a statute mandating arbitration, or a
court order, the scope of an arbitrator's authority is
determined by the arbitration agreement . . . ."). Where an
arbitrator fails to abide by a choice-of-law provision, and
therefore manifestly disregards the law, it may be that the
arbitrator exceeded his powers, and a reviewing court may vacate
the award.2
IV. PARTIES MUST INCLUDE ARBITRATION AGREEMENTS
IN THE RECORD.
¶36 In certain cases, it may be that "manifest disregard"
is the proper standard for reviewing challenges to arbitral
awards. But whether that is the case may depend on how the
parties defined the arbitrator's powers in the arbitration
agreement, and a reviewing court likely cannot know the scope of
2This explanation of "manifest disregard" does not
necessarily run contrary to the Supreme Court's decision in Hall
Street Associates, L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008).
In Hall Street, the Court concluded the grounds for vacatur
under the FAA are exclusive and cannot "be supplemented by
contract." Id. at 578. The arbitration agreement in that case
permitted district court "review for legal error," which the
Court concluded was a supplemental ground for vacatur in
violation of the FAA. Id. at 578–80. Though parties cannot
supplement the statutory grounds for vacatur under the FAA, they
may be free to define the arbitrator's powers as they wish.
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the arbitrator's powers without first seeing the arbitration
agreement.
¶37 In the present case, the arbitration agreement appears
absent from the record. The closest we have in the record is a
provision of the collective bargaining agreement stating, "The
decision of the arbitrator shall be limited to the subject
matter of the grievance. The arbitrator shall not modify, add
to or delete from the express terms of this Agreement. The
arbitrator's decision shall be final and binding." This
somewhat establishes the scope of the arbitrator's powers, but
it contains no language stating how the arbitrator was to arrive
at a decision. Such a contract provision does not appear in the
record, and we have no indication as to whether one even exists.
Nonetheless, the parties agree that the arbitrator would have
exceeded his powers if he were to manifestly disregard the law,
and the majority correctly applies the "manifest disregard"
standard for that reason.
¶38 In future cases, however, parties must ensure the
record contains the contract language establishing the scope of
the arbitrator's powers. Arbitration agreements are no
different from all other contracts. Our duty is to read the
contract language and ensure the parties received the
arbitration they bargained for. The arbitration agreement may
very well call for us to apply a "manifest disregard" standard——
or it may not. Either way, fulfilling our duty to enforce the
arbitration agreement as written becomes nearly impossible when
the parties omit it from the record.
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¶39 For the foregoing reasons, I respectfully concur.
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¶40 REBECCA GRASSL BRADLEY, J. (concurring). Although
the majority treats Cleveland Board of Education v. Loudermill,
470 U.S. 532 (1985) as the lodestar in cases involving the due
process rights of public employees deprived of a property
interest, in this case it isn't. As the arbitrator noted,
Andrew Weiss's reliance on Loudermill is "misplaced." Mathews
v. Eldridge, 424 U.S. 319 (1976) governs the due process
analysis but the majority doesn't even mention it. Accordingly,
I respectfully concur but do not join the majority opinion.
¶41 In Loudermill, a school board terminated a security
guard because he did not disclose in his employment application
that he had been convicted of a felony. 470 U.S. at 535. Under
state law, a security guard could be terminated only for cause.
Id. Accordingly, the terminated security guard had a
constitutionally-protected property interest in continued
employment under binding precedent. Id. at 535–41.
¶42 The terminated security guard sued, alleging he was
not given an opportunity to respond to the charge of dishonesty
prior to his termination. Id. at 536. He claimed he mistakenly
thought he had been previously convicted of a misdemeanor, not a
felony, and that this mistaken belief should have mitigated his
discipline. Id. at 535.
¶43 The United States Supreme Court held the terminated
security guard stated a due process claim under the Fourteenth
Amendment to the United States Constitution, relying heavily on
its previous decision in Mathews. In that case, the Court set
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forth a three-factor test to determine the amount of process
due:
(1) "the private interest that will be affected by the
official action";
(2) "the risk of an erroneous deprivation of such interest
through the procedures used, and the probable value, if
any, of additional or substitute procedural safeguards";
and
(3) "the Government's interest, including the function
involved and the fiscal and administrative burdens that
the additional or substitute procedural requirement
would entail."
Mathews, 424 U.S. at 335 (citing Goldberg v. Kelly, 397
U.S. 254, 263–71 (1970)). In Loudermill, the Court merely
applied the Mathews test to a specific set of facts, ultimately
concluding both notice and a hearing were required before
termination. 470 U.S. at 546. The Court said little about
these requirements, probably because the facts of the case
warranted a narrow holding. It did explain, however, that
notice may be provided in writing or orally, and a hearing,
while "necessary," "need not be elaborate." Id. at 545–46.
¶44 The Court's application of the Mathews test in
Loudermill provides no guidance as to the test's proper
application in this case. Regarding the first factor, the
"private interest," the Court repeatedly emphasized that the
case involved termination; in this case, Weiss was merely
demoted. In fact, the words "terminated," "termination,"
"pretermination," and "post-termination" collectively appear
twenty-nine times in the Loudermill majority opinion. The first
sentence of the opinion states, "we consider what pretermination
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process must be accorded a public employee who can be discharged
only for cause." Id. at 535. Similarly, the concluding
paragraph begins, "[w]e conclude that all the process that is
due is provided by a pretermination opportunity to respond,
coupled with post-termination administrative procedures as
provided by . . . [state law]." Id. at 547–48. In applying the
first factor, the Court emphasized the gravity of a job loss:
[T]he significance of the private interest in
retaining employment cannot be gainsaid. We have
frequently recognized the severity of depriving a
person of the means of livelihood. While a fired
worker may find employment elsewhere, doing so will
take some time and is likely to be burdened by the
questionable circumstances under which he left his
previous job.
Id. at 543 (citations omitted). Throughout the opinion, the
Court focused on the significance of losing employment.
¶45 The private interest at stake in this case is
obviously less than in Loudermill. Weiss will lose $80 a month
as a result of his demotion, a small fraction of his salary,
whereas the security guard in Loudermill lost his entire salary.
Additionally, Weiss will not face the less-tangible burdens
associated with termination. He will not have to look for
employment elsewhere and accordingly will not have to explain to
potential employers why he is no longer working for the Green
Bay Police Department. The stigma associated with demotion is
substantially less than the stigma associated with termination.
The decision to demote Weiss has a quantifiably and
qualitatively smaller effect on his private interest than the
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decision to fire in Loudermill had on the private interest of
the terminated security guard.
¶46 The Loudermill Court's application of the second
factor——"the risk of an erroneous deprivation" and the "probable
value" of additional "procedural safeguards"——is similarly
inapplicable in this case. The Court noted:
[S]ome opportunity for the employee to present his
side of the case is recurringly of obvious value in
reaching an accurate decision. Dismissals for cause
will often involve factual disputes. Even where the
facts are clear, the appropriateness or necessity of
discharge may not be; in such cases, the only
meaningful opportunity to invoke the discretion of the
decisionmaker is likely before the termination takes
effect.
Id. (citations omitted). The Court stated that a hearing could
be "informal"——the point of the hearing, it explained, is to
"alert[]" the employer "to the existence of disputes about facts
and arguments[.]" Id. at 543 n.8 (quoting Goss v. Lopez, 419
U.S. 565, 583–84 (1975)).
¶47 With respect to the second factor, this case is
distinguishable from Loudermill on multiple grounds. Loudermill
involved a classic dispute of fact: Did the terminated security
guard know he had been convicted of a felony? Unlike
Loudermill, this case involves no such dispute——Weiss admitted
he gave confidential information to a friend. See majority op.,
¶2.
¶48 Additionally, Weiss received four in-person hearings
prior to being demoted, while the terminated security guard in
Loudermill alleged he did not receive a pretermination hearing.
See id., ¶17. Weiss does not dispute he received a hearing.
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Instead, he argues the final notice did not cite some of the
specific policies he was ultimately disciplined for violating.
See id., ¶11. The Court in Loudermill did not discuss that
category of due process claim. In the particular context of
employment termination, the Court determined that a "tenured
public employee is entitled to oral or written notice of the
charges against him, an explanation of the employer's evidence,
and an opportunity to present his side of the story." 470 U.S.
at 546 (citations omitted).
¶49 Weiss's notice argument suffers from two further
flaws: he focuses on the final notice, but nothing in
Loudermill suggests notice must be given in a single, formal
document. Weiss had either oral or written notice of each
policy he was alleged to have violated, as the majority notes.
Majority op., ¶17. Whether a notice even has to cite a specific
policy is questionable. Cf. Kohlbeck v. Reliance Const. Co.,
2002 WI App 142, ¶12 n.3, 256 Wis. 2d 235, 647 N.W.2d 277("[L]egal theories need not be fully developed, or even
expressly identified, at the pleading stage." (citing Murray v.
City of Milwaukee, 2002 WI App 62, ¶12 n.6, 252 Wis. 2d 613, 642
N.W.2d 541)).
¶50 Lastly, Loudermill's application of the third factor,
"the Government's interest," is immaterial. The Court reasoned:
[A]ffording the employee an opportunity to respond
prior to termination would impose neither a
significant administrative burden nor intolerable
delays. Furthermore, the employer shares the
employee's interest in avoiding disruption and
erroneous decisions; and until the matter is settled,
the employer would continue to receive the benefit of
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the employee's labors. It is preferable to keep a
qualified employee on than to train a new one. A
governmental employer also has an interest in keeping
citizens usefully employed rather than taking the
possibly erroneous and counterproductive step of
forcing its employees onto the welfare rolls.
Finally, in those situations where the employer
perceives a significant hazard in keeping the employee
on the job, it can avoid the problem by suspending
with pay.
470 U.S. at 544–45. The Court's analysis of the third factor
places great weight on the purported benefit the government
receives by retaining a qualified employee pending a hearing.
In this case, the Department held four hearings; it did not lose
the benefit of Weiss's labor; and Weiss remained gainfully
employed in a different position. Obviously, the government did
not perceive any hazard in keeping Weiss on the job; the
department only demoted him.
¶51 In summary, Weiss has not explained how the arbitrator
erred. He was afforded a great deal of process, and Loudermill
does not entitle him to more. The Court in Mathews even noted,
"[d]ue process is flexible and calls for such procedural
protections as the particular situation demands." 424 U.S. at
334 (quoting Morrissey v. Brewer, 408 U.S. 471, 481 (1972)).
Despite the fact-intensive nature of the Mathews test, Weiss
latches onto one particular application of that test and asks
this court to take the rare step of setting aside an
arbitrator's decision based on that application. The
application he cites, Loudermill, does not fit the facts of this
case and therefore provides no guidance; accordingly, Weiss's
argument fails.
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¶52 "[I]t is this court's function to develop and clarify
the law." State ex rel. Wis. Senate v. Thompson, 144Wis. 2d 429, 436, 424 N.W.2d 385 (1988) (citations omitted).
Although litigants often treat Loudermill as the benchmark by
which to determine whether a disciplined government employee
received due process, it set the standard only for cases
involving a terminated government employee. The majority should
have taken the opportunity to clarify that Loudermill represents
but one application of Mathews, which governs the analysis of
whether the government satisfied due process in depriving an
individual, including a public employee, of a property interest.
Although the majority reaches the right result, it applies the
wrong case. I therefore respectfully concur.
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1