Green Bay Professional Police Association v. City of Green Bay

2023 WI 33

• Court: Wisconsin Supreme Court
• Decided: April 27, 2023
• Docket: 2021AP000102
• Status: Published

Opinion

2023 WI 33

SUPREME 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 107 PDC 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 33 NOTICE 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.

2 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.

3 No. 2021AP102

(§ 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 4 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.

5 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).

8 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.

9 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.

11 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

2 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.

4 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

5 No. 2021AP102.akz

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.

6 No. 2021AP102.akz

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 No. 2021AP102.akz

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

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. 4 No. 2021AP102.rgb

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 5 No. 2021AP102.rgb

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, 144

Wis. 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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