___________

No. 95-1919 

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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

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

___________

BEAM, Circuit Judge.

Keebler Company (Keebler) appeals the district court's confirmation

of a labor arbitration award, in which the arbitrator concluded that

Keebler could not transfer certain accounts from a union marketing division

to a non-union division without the agreement of the Milk Drivers and Dairy

Employees Union, Local No. 471 (the Union). Because the arbitrator's award

does not draw its essence from the collective bargaining agreement, we

reverse and remand.
 The proceedings before the arbitrator were not transcribed. 1

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I. BACKGROUND

The facts of this case are not in dispute and are derived from the

arbitrator's award. Keebler, a national manufacturer of snack-food

1

products, uses two separate methods of selling its wares. The Grocery

Sales Division operates under a "store-to-door" procedure, which services

the larger accounts. Under this method, a Keebler sales representative

calls upon individual stores classified as either "Trade Class I" or "Trade

Class II" (chain supermarkets and large independent supermarkets).

Generally, the Keebler sales representative takes orders for these

accounts, and Union employees working at regional distribution centers fill

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 smaller stores. Thus, in 1991,

Keebler and the Union entered into an agreement (side agreement) that

allowed Keebler to transfer certain accounts to a new Convenience Division,

in which a "route sales" or "step van sales" method of marketing would be

used. Under this procedure, smaller accounts are assigned to a single

employee who handles both product sales and delivery. The side agreement

provides that these employees are not under the Union's jurisdiction. It

also provides, however, that no Class I or Class II accounts can be

serviced by this method "unless such accounts have been discussed with the

Union." Finally, the side agreement mandates that any disagreement over

such transfers are subject to the grievance procedure outlined in the

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-
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action grievance in which it alleged that Keebler had violated the side

agreement. Prior to the scheduled arbitration, the parties reached a

settlement, which stated:

The parties agree that the work involving the Scott Madison

grievance of [June 27, 1991] was a bargaining unit account, and

the Company acknowledges that settlement of this particular

grievance does not mean the Company has the right in the future

to transfer any future or present #1 or #2 or present accounts

without agreement of the Union.

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

In December 1993, Keebler notified the Union that it wished to

discuss the transfer of several accounts to the Convenience Division.

Keebler subsequently notified the Union that certain stores in western

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 to

transfer to the Convenience Division. Pursuant to the collective

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 hearing, the Union contended that Keebler could not transfer

certain bargaining unit work to the Convenience Division without prior

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 collective

bargaining agreement or the side agreement. Specifically, Keebler asserted

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 and

thus we review the district court's conclusions of law de novo.

First Options of Chicago, Inc. v. Kaplan, 115 S. Ct. 1920, 1926

(1995); PaineWebber, Inc. v. Agron, 49 F.3d 347, 350 n.2 (8th Cir.

1995).

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The arbitrator determined that Keebler was obligated to obtain the

agreement of the Union before it could transfer an account to the

Convenience Division and sustained the Union's grievance. On review, the

district court denied Keebler's motion for summary judgment, dismissed

Keebler's complaint with prejudice, and confirmed the arbitrator's award.

Keebler appeals the district court's order, contending that the

arbitrator's award must be vacated because it does not draw its essence

from the parties' agreements.

II. DISCUSSION

Our review of an arbitrator's award under section 301 of the Labor

Management Relations Act, 29 U.S.C. § 185, is limited to determining

whether: (1) the parties agreed to arbitrate; and (2) the arbitrator had

the power to make the award that he made. Daniel Const. Co. v.

International Union of Operating Eng'rs, Local 513, 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 they agreed to arbitrate. Consequently, our analysis focuses on

whether the arbitrator had the power to enter the award.

The Supreme Court long ago determined that a labor arbitration award

should be enforced "so long as it draws its essence from the collective

bargaining agreement." United Steelworkers v. Enterprise Wheel & Car

Corp., 363 U.S. 593, 597 (1960). This extraordinary level of deference has

not diminished in recent years. "[A]s long as the arbitrator is even

2

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

or through the arbitrator's dishonesty [also] need not be

enforced." Misco, 484 U.S. at 38.

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or applying the contract and acting within the scope of his authority, that

a court is convinced he committed serious error does not suffice to

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

arbitration award when the award does not derive its essence from the

collective bargaining agreement, or when the arbitrator ignores the plain

language of the contract. 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 Workers, 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). Keebler

3

asserts that the arbitrator committed several errors that render his award

fatally flawed. We agree.

Keebler asserts that the arbitrator's award does not draw its essence

from the collective bargaining agreement or the side agreement because the

arbitrator expressly stated that under those agreements, Keebler would have

been able to transfer the account at issue after merely discussing it with

the Union and absent Union agreement. The arbitrator found that under the

collective bargaining agreement and side agreement, Keebler was only

obligated to discuss the proposed transfer of certain accounts to non-union

workers. See Appellant's App. at 123. Specifically, the arbitrator

concluded: "It is clear that, prior to April 1992 [the date of the

settlement letter], the Employer [Keebler] could proceed to make the

transfers after talking it over with the Local [Union], even if the

employee bargaining representative did not
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concur with the proposed changes." Id. The arbitrator found that

Keebler's obligation to obtain Union agreement arose under the settlement

letter, to which the arbitrator apparently also looked to discern the

parties' intent under the collective bargaining agreement and the side

agreement. 

The arbitrator's analysis contains a glaring internal inconsistency.

The arbitrator concludes that under the language of the collective

bargaining agreement and side agreement, "it is clear" that Keebler was

only obligated to discuss transfers with the Union; while at the same time,

the arbitrator purportedly looks to the settlement letter and past practice

to discern the parties' intent under the same side agreement. It is

evident from the arbitrator's analysis that he relied on the settlement

letter, rather than the collective bargaining agreement 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 sources 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 the

contract and in doing so to consider not only the formal agreement but

collateral materials as well including past prevailing practices in the

company plant." Iowa Beef Processors, Inc., 627 F.2d at 857 (citation

omitted). 

In the present case, the arbitrator concluded that the settlement

letter and Keebler's actions subsequent to the
 An arbitrator may not ignore the plain language of the

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contract because that would, in effect, amend the contract. See,

e.g., Inter-City Gas Corp., 845 F.2d at 187-88. This is especially

true in cases, such as the present one, where the arbitrator

himself finds the contract terms to be clear but nevertheless

enters an award contrary to those terms.

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settlement in 1992 indicated that Keebler believed it was required to

obtain the Union's agreement prior to transferring certain accounts.

Specifically, the arbitrator concluded:

[Keebler's] acquiescence in dropping an account which the Union

did not agree to be transferred in late 1993, is most

consistent with (and therefore supportive of) the position

being taken by the [Union] here. The Union did not agree to

the transfer of Bob's Westside Store, and thus it was not moved

to the Convenience Division.

Appellant's App. at 124. Although the arbitrator is free to look to past

practice to construe ambiguous contract language, he cannot amend the

contract. Manhattan Coffee Co., 743 F.2d at 623. We could not disturb the

arbitrator's award if he interpreted ambiguous language in the collective

bargaining agreement or side agreement to support his conclusion that

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

obligated to discuss transfers with the Union, the arbitrator was not

construing an ambiguous contract term, but rather was imposing a new

obligation upon Keebler thereby amending the collective bargaining

agreement and the side agreement. Therefore, the arbitrator erred in

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 settlement

5

letter in his factual summary, he misquoted the language when he

relied on it in his analysis.

 We have vacated arbitration awards "where relevant language

6

was not considered by the arbitrator." See George A. Hormel & Co.

v. United Food & Commercial Workers, Local 9, AFL-CIO, 879 F.2d

347, 351 (8th Cir. 1989) (citation omitted).

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Keebler also argues that the arbitrator erred in expressly relying

on language not found in any agreement between the parties to support his

award. We agree. The arbitrator misquoted the key language from the

settlement letter on which he relied to support his conclusion. The

arbitrator substituted language that had been rejected for the actual

language in the settlement letter. The settlement letter states, in

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pertinent part, that "settlement of this particular grievance does not mean

the Company has the right in the future to transfer . . . [certain]

accounts without agreement of the Union." Appellant's App. at 112

(emphasis added). The rejected language quoted by the arbitrator states,

in relevant part, that "settlement of this particular grievance means the

Company does not have the right in the future to transfer . . . [certain]

accounts without agreement of the Union." Id. (emphasis added); see also

id. at 122-23. Accordingly, the arbitrator erroneously relied on rejected

language to conclude that the settlement letter affirmatively created a new

obligation on Keebler requiring it to obtain Union agreement prior to

transferring certain accounts, when in fact, the actual language in the

settlement letter makes 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 found to be clear, by imposing a new obligation on Keebler to obtain

Union agreement prior to transferring certain accounts. The arbitrator

based his decision largely on erroneously quoted language from a settlement

letter, which settlement letter
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was actually intended to have no effect on future transfers. Even given

our limited role in reviewing arbitration awards, we conclude that the

award in the present case must be vacated because the arbitrator's award

does not draw its essence 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 order

confirming the arbitrator's award and remand to the district court to enter

an order vacating the award.

A true copy.

Attest:

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