Court Opinion

ID: 3016661
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:15:54.215614+00
Date Added: 2024-06-11T12:17:28.568836
License: Public Domain

___________

                                   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 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.
I.      BACKGROUND

        The facts of this case are not in dispute and are derived from the
arbitrator's award.1          Keebler, a national manufacturer of snack-food
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-

        1
         The proceedings before the arbitrator were not transcribed.

                                            -2-
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.

                                       -3-
      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
                                        2
not diminished in recent years.              "[A]s long as the arbitrator is even
arguably construing

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

                                            -4-
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).3      Keebler
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

     3
      Of course, "decisions procured by the parties through fraud
or through the arbitrator's dishonesty [also] need not be
enforced." Misco, 484 U.S. at 38.

                                      -5-
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

                                        -6-
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

         4
        An arbitrator may not ignore the plain language of the
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.

                                          -7-
     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.5            The settlement letter states, in
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

         5
        Although the arbitrator correctly quoted the settlement
letter in his factual summary, he misquoted the language when he
relied on it in his analysis.
     6
      We have vacated arbitration awards "where relevant language
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).

                                         -8-
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.

                                   -9-