___________ No. 95-1919

___________ Keebler Company, * * Appellant, * * v. * * Appeal from the United States Milk Drivers and Dairy * District Court for the Employees Union, Local No. 471, * District of Minnesota. affiliated with the * International Brotherhood * of Teamsters, Chauffeurs, * Warehousemen, and Helpers * of America, AFL-CIO, * * Appellee. *

___________ Submitted: November 15, 1995 Filed: April 4, 1996

___________ Before BEAM, JOHN R. GIBSON, and MORRIS SHEPPARD ARNOLD, Circuit Judges.

___________ BEAM, Circuit Judge.

Keebler C ompany (Keebler) appeals the district court's confirmation of a labor arbitration award, in which the arbitrator concluded tha t Keebler could not transfer certain accounts from a union marketing divisio n to a non-union division without the agreement of the Milk Drivers and Dair y Employees Union, Local No. 471 (the Union). Because the arbitrator's awar d does not draw its essence from the collective bargaining agreement, w e reverse and remand.

### The proceedings before the arbitrator were not transcribed. 1


### -2- I. BACKGROUND

The f acts of this case are not in dispute and are derived from th e arbit rator's award. Keebler, a national manufacturer of snack-foo d 1 produ cts, uses two separate methods of selling its wares. The Grocer y Sales Division operat es under a "store-to-door" procedure, which services the larger accounts. Under this method, a Keebler sales representativ e calls upon individual stores classified as either "Trade Class I" or "Trad e Class II" (chain supermarkets and large independent supermarkets)

. Generally, the Keebler sales representative takes orders for thes e accounts, and Union employees working at regional distribution centers fil l the orders. Union drivers then deliver the products to customers.

Keebler management determined that the store-to-door method was not an efficient way to sell their products to small er stores. Thus, in 1991, Keebler and the Union entered into an agreement (side agreement) tha t allowed Keebler to transfer certain accounts to a new Convenience Division , in which a "route sal es" or "step van sales" method of marketing would be used. Under this procedure, smaller accounts are assigned to a singl e employee who handles both product sales and delivery. The side agreement provides that these e mployees are not under the Union's jurisdiction. It also prov ides, however, that no Class I or Class II accounts can b e serviced by this method "unless such accounts ha ve been discussed with the Union." Finally, the side agreement mandates that any disagreement over such tr ansfers are subject to the grievance procedure outlined in th e collective bargaining agreement, which includes an arbitration clause.

In 1991, Keebler transferred the account of a Winona (Minnesota ) customer to the route sales method. The Union, through its Chief Steward, Scott Madison, responded by filing a class-

### -3-

action grievance in which it alleged that Keebler had violated the sid e agreeme nt. Prior to the scheduled arbitration, the parties reached a settlement, which stated:

The parties agree that the work involving the Scott Madiso n grievance of [June 27, 1991] was a bargaining unit account, and the Company acknowledges that settlement of this particula r grievance does not mean the Company has the right i n the future to transfer any future o r present #1 or #2 or present accounts without agreement of the Union.

Appellant's App. at 112 (settlement letter).

In Dec ember 1993, Keebler notified the Union that it wished t o discus s the transfer of several accounts to the Convenience Division

. Keeble r subsequently notified the Union that certain stores in wester n Wisconsin would be converted to step van sales. The Union filed a grievance and asserted that Keebler had violated both the side agreement and the settlement letter. After entering into discussions, Keebler and the Union agreed upon most of the proposed transfers. The parties , however, could not agree upon two of the stores that Keebler wished t o transf er to the Convenience Division. Pursuant to the collectiv e bargaining agreement, the parties selected an arbitrator and scheduled a hearing. Prior to the hearing, Keebler restored one of the two accounts to the Union's jurisdiction, leaving only one account in dispute.

At the he aring, the Union contended that Keebler could not transfer certai n bargaining unit work to the Convenience Division without prio r approval of the Union . The Union relied primarily on the language in the side agreement and the settlement letter to support its contention. Keebler argued that the transfer did not violate either the collectiv e bargaining agreement or the side agreement. Specifically, Keebler asserte d that the side agreement did not create an absolute right in the Union to veto all proposed transfers.

### The district court's order confirming the arbitrator's award, 2 

### however, is not entitled to any special deference on review an d thus we review the district court's conclusions of law de novo

. First Options of Chicago, Inc. v. Kaplan , 115 S. Ct. 1920, 192 6 (1995); PaineWebber, Inc. v. Agron , 49 F.3d 347, 350 n.2 (8th Cir. 1995).
-4- The arbitrator determined that Keebler was obligated to obtain th e agreemen t of the Union before it could transfer an account to th e Convenience Division and sustained the Union's grievance. On review, the dist rict court denied Keebler's motion for summary judgment, dismisse d Keebler's complaint w ith prejudice, and confirmed the arbitrator's award. Keebler appeals the district court's order, contending that th e arbitrator's award must be vacated because it does not draw its essenc e from the parties' agreements.

II. DISCUSSION

Our rev iew of an arbitrator's award under section 301 of the Labo r Mana gement Relations Act, 29 U.S.C. § 185, is limited to determinin g whether: (1) the par ties agreed to arbitrate; and (2) the arbitrator had th e power to make the award that he made. Daniel Const. Co. v

. International Union of Operating Eng'rs, Local 5 13 , 738 F.2d 296, 301 (8th Cir. 1984) (citing United Steelworkers v. Warrior & Gulf Navigation Co. , 363 U.S. 574, 582 (1960). In the present case, the parties do not dispute that th ey agreed to arbitrate. Consequently, our analysis focuses o n whether the arbitrator had the power to enter the award.
The Supreme Court long ago determine d that a labor arbitration award should be enforced "so long as it draws its essence from the collectiv e bargai ning agreement." United Steelworkers v. Enterprise Wheel & Ca r Corp. , 363 U.S. 593, 597 (1960). This extraordinary level of deference ha s not diminis hed in recent years. "[A]s long as the arbitrator is eve n 2 arguably construing

### Of course, "decisions procured by the parties through fraud 3 

### or through the arbitrator's dishonesty [also] need not b e enforced." Misco , 484 U.S. at 38.
-5- or applying the contract and acting within the scope of his authority, tha t
a court i s convinced he committed serious error does not suffice t o overturn his decision." United Paperworkers Int'l Union, AFL-CIO v. Misco , Inc. , 484 U.S. 29, 38 (1987). A reviewing court, however, may vacate an arbitratio naward when the award does not derive its essence from th e collective bargainingagreement, or when the arbitrator ignores the plain language of the contr act. Iowa Mold Tooling Co., Inc. v. Teamsters Local Union No. 828 , 16 F.3d 311, 312 (8th Cir. 1994) (citing Coca-Cola Bottling Co. v. Teamsters Local Union No. 688 , 959 F.2d 1438, 1440 (8th Cir.), cert
. denied , 506 U.S. 1013 (1992)); see also Northwest Airlines, Inc. v

. International Ass'n of Machinists & Aerospace Wo rkers, Air Transport Dist. Lodge No. 143 , 894 F.2d 998, 999-1000 (8th Cir. 1990); Inter-City Gas Corp

. v. Boise Cascade Corp. , 845 F.2d 184, 187-88 (8th Cir. 1988). Keeble r 3 asserts that the arbitrator committed several er rors that render his award fatally flawed. We agree.

Keebler asserts that the arbitrator's award does not draw its e ssence from the collective bargaining agreement or the side agreement because the arbitrator expressly stated that under those agreements, Keebler would hav e been able to transfer the account at issue after merely discussing it with the Union and absent Union agreement. The arbit rator found that under the
co llective bargaining agreement and side agreement, Keebler was onl y obligated to discuss the proposed transfer of certain accounts to non-unio n work ers. See Appellant's App. at 123. Specifically, the arbitrato r concluded: "It is clear that, prior to April 1992 [the date of th e settle ment letter], the Employer [Keebler] could proceed to make th e transfers after talking it over with the Local [Union], even if th e employee bargaining representative did not

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con cur with the proposed changes." Id. The arbitrator found tha t Keebler's obligation to obtain Union agreement arose under the settlement letter, to which the arbitrator apparently also looked to discern th e partie s' intent under the collective bargaining agreement and the sid e agreement.
The arbitrator's analysis contains aglaring internal inconsistency. The ar bitrator concludes that under the language of the collectiv e bar gaining agreement and side agreement, "it is clear" that Keebler wa s only obligated to discuss transfers with the Union; while at the same time , the arbitrator purportedly looks to the settlement letter and past practic e to dis cern the parties' intent under the same side agreement. It i s evi dent from the arbitrator's analysis that he relied on the settlemen t letter, rather than the collective bargaining ag reement or side agreement,
as the source of Keebler's obligation to obtain Union agreement and thus the arbitrator's award does not draw its essence from those agreements.
Although an arbitrator may look to s ources other than the collective bargaining agreement, or the side agreement, to aid in his interpretation of the contract, see , e.g. , Iowa Beef Processors , Inc. v. Amalgamated Meat Cutters & Butcher Workmen of N. America, AFL-CIO , 627 F.2d 853, 857 (8th Cir. 1980), the arbitrator may not amend the contract, Manhattan Coffee Co

. v. International Bhd. of Teamsters, Chauffeurs, Warehousemen & Helpers , Local No. 688 , 743 F.2d 621, 623 (8th Cir. 1984), cert. denied , 471 U.S. 1100 ( 1985). "The arbitrator has a right to interpret and apply th e contract and in doing so to consider not only the formal agreement bu t collat eral materials as well including past prevailing practices in th e compa nyplant." Iowa Beef Processors, Inc. , 627 F.2d at 857 (citatio n omitted).

In the present case, the arbitrator concluded that the settlemen t letter and Keebler's actions subsequent to the

### A n arbitrator may not ignore the plain language of th e 4 

### contract because that would, in effect, amend the contract. See , e.g. , Inter-City Gas Corp. , 845 F.2d at 187-88. This is esp ecially true in cases, such as the present one, where the arbitrato r him self finds the contract terms to be clear but nevertheles s enters an award contrary to those terms.
-7- settlem ent in 1992 indicated that Keebler believed it was required t o ob tain the Union's agreement prior to transferring certain accounts

. Specifically, the arbitrator concluded:
[Keebler's] acquiescence in dropping an account whi ch the Union did not a gree to be transferred in late 1993, is mos t consistent with (and therefore supportive of) the positio n being taken by the [Union] here. The Union did not agree t o the transfer of Bob's Westside Store, and thus it w as not moved to the Convenience Division.

Appellant's App. at 1 24. Although the arbitrator is free to look to past practi ce to construe ambiguous contract language, he cannot amend th e contract. Manhattan Coffee Co. , 743 F.2d at 623. We could not disturb th e arbitrator's award if he interpreted ambiguous language in the collective bargai ning agreement or side agreement to support his conclusion tha t Keebler could not transfer this account without the agreement of the Union , even if his interpretation of the agreement had been erroneous. See , e.g. , Misco , 484 U.S. at 37-38; Dreis & Krump Manf. Co. v. International Ass'n of Machinists & Aerospace Workers, Dist. No. 8 , 802 F.2d 247, 253 (7th Cir

. 1986). However, because the arbitrator found that under the clear terms of the collective bargaining agreement and side agreement Keebler was only obligat ed to discuss transfers with the Union, the arbitrator was no t
cons truing an ambiguous contract term, but rather was imposing a ne w obligation upon Keebler thereby amending the collective bargainin g agreeme nt and the side agreement. Therefore, the arbitrator erred i n imposing a new obligation upon Keebler that was not, by the arbitrator's own findings, in existence prior to the settlement letter. 4

### Although the arbitrator correctly quoted the settlemen t 5 

### letter in his factual summary, he misquoted the language when h e relied on it in his analysis. We have vacated arbitration awards "where relevant languag e 6 

### was not considered by the arbi trator." See George A. Hormel & Co. v. United Food & Commercial Workers, Local 9, AFL-CIO , 879 F.2 d 347, 351 (8th Cir. 1989) (citation omitted).
-8- Keebler also argues that the arbitrator erred in expressly relyin g on language not foundin any agreement between the parties to support his
awa rd. We agree. The arbitrator misquoted the key language from th e sett lement letter on which he relied to support his conclusion. Th e arbitr ator substituted language that had been rejected for the actua l language in the settlement letter. The settlement letter states, i n 5 pertinent part, that "settlement of this particular grievance does not mea n the Company has the right in the future to transfer . . . [certain ] accounts without agreement of the Union." Appellant's App. at 11 2 (emphasis added). Th e rejected language quoted by the arbitrator states, in relevant part, tha t "settlement of this particular grievance means the Company does not have the right in the future to transfer . . . [certain] accounts without agre ement of the Union." Id. (emphasis added); see also id. at 122-23. Accordingly, the arbitrator erro neously relied on rejected language to conclude that the settlement letter affirmatively created a ne w obligat ionon Keebler requiring it to obtain Union agreement prior t o tra nsferring certain accounts, when in fact, the actual language in th e settlement letter mak es it abundantly clear that the parties intended for the settlement to have no particular effect on future transfers. 6
In sum, the arbitrator amended the terms of the side agreement, which he foun d to be clear, by imposing a new obligation on Keebler to obtai n Union agreement prior to transferring certain accounts. The arbitrato r based his decision largely on erroneously quoted language from a settlemen t letter, which settlement letter

### -9-

was actually intended to have no effect on future transfers. Even given
our limited role in reviewing arbitration awards, we conclude that th e award in the present case must be vacated because the arbitrator's award does not draw its ess ence from the collective bargaining agreement or the side agreement.

III. CONCLUSION

For the reasons discussed above, we vacate the arbitrator's award in favor of the Union. Accordingly, we reverse the district court's orde r confirming the arbitrator's award and remand to the district court to ente r an order vacating the award.

A true copy.

Attest:

CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.