In the
United States Court of Appeals
For the Seventh Circuit

No. 00-4089

ANHEUSER-BUSCH, INC.,

Plaintiff-Appellant,

v.

BEER, SOFT DRINK, WATER, FRUIT JUICE,
CARBONIC GAS, LIQUOR SALES DRIVERS, HELPERS,
INSIDE WORKERS, BOTTLERS, WAREHOUSEMEN,
SCHOOL, SIGHTSEEING, CHARTER BUS DRIVERS,
GENERAL PROMOTIONS EMPLOYEES, AND EMPLOYEES
OF AFFILIATED INDUSTRIES, MALTSTER, LABORERS,
SYRUP, YEAST, FOOD, VINEGAR, BREWERY,
RECYCLING AND MISCELLANEOUS WORKERS OF
CHICAGO AND VICINITY, ILLINOIS, LOCAL UNION
NO. 744, AFFILIATED WITH THE INTERNATIONAL
BROTHERHOOD OF TEAMSTERS,

Defendant-Appellee.

Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 00 C 1424--James B. Zagel, Judge.

Argued JUNE 7, 2001--Decided February 15, 2002



  Before COFFEY, EASTERBROOK and ROVNER,
Circuit Judges.

  COFFEY, Circuit Judge. Plaintiff-
Appellant Anheuser-Busch, Inc., appeals
the judgment of the district court
upholding an arbitrator’s decision in
favor of Teamsters Local Union #744 ("the
Union"), concerning the commission rate
Anheuser-Busch paid its union drivers
pursuant to the terms of a collective
bargaining agreement executed in 1998. We
reverse and remand with instructions to
vacate the award and enter judgment in
favor of Anheuser-Busch, Inc.

I.   FACTUAL BACKGROUND

  Anheuser-Busch Brewing Company (the
"employer") operates a beer
distributorship in Arlington Heights,
Illinois, and employs Union drivers-
salespeople ("drivers") and assistants to
deliver pre-sold products to roughly
1,300 retail accounts in the northern
suburbs of Chicago. The drivers are paid
on a commission basis, with the
commission rate set forth in a 5-year
collective bargaining agreement (the
"contract") that took effect February 1,
1998./1 The contract provides one
commission rate for drivers who work
alone ("one-person routes") and a lower
commission rate for drivers who are
assisted by a helper ("two-person
routes").

  From May 1986 to April 1989, the
employer and the Union operated under an
earlier collective bargaining agreement,
which provided that drivers, whether
assisted by a helper or not, received the
same commission rate. This commission
rate became an issue in negotiations, and
after long, reasoned, and thorough
negotiating sessions, the parties
executed a new contract in 1990 that
altered the prior commission arrangement
and adopted a new two-tiered commission
payment structure as referred to above.
The same commission rate payment
provision was thereafter incorporated
into and made a part of the parties’ 1994
and 1998 contracts, again after extensive
and reasoned negotiations. During the
term of the 1990 and 1994 contracts, the
employer paid all the drivers at the one-
person commission (higher) rate.
Anheuser-Busch continued this practice of
paying the drivers the increased rate of
compensation, in contradiction of the
written contract, only during the first
two months of the newly negotiated, 60-
month 1998 contract. In early April 1998,
the company announced that effective
April 27, 1998, the drivers would
henceforth be reimbursed according to the
contract language now in force. According
to testimony taken during the arbitration
hearings, the decision was motivated by
the company’s need to create more two-
person routes and hire additional helpers
in response to an increasing number of
customers as well as customer complaints
dealing with the timeliness of their
deliveries. At this same time, in order
to achieve more pay for each driver, the
employer reduced the number of routes
from ten to nine, eliminating all
expenses associated with one route and
dispersed the cost savings and workload
among the remaining nine drivers. On May
7, 1998, the Union filed a grievance
protesting the company’s decision to
follow the terms of the contract, and the
dispute proceeded to arbitration pursuant
to the terms of the agreement.

  The parties stipulated to the parameters
of the issue as being, "Did the company
violate the labor agreement by changing
its practice to conform to the contract
provision relating to two-person route
commission rates?" It is interesting to
note that the question presented was: "Is
the company violating the contract when
complying with the written terms of the
most recent labor agreement?" The
contract contained two clauses that
limited the arbitrator’s power, the
arbitration clause and the "zipper
clause," or merger clause. The zipper
clause states that: (1) the written
agreement constitutes the full and
complete agreement between the parties;
and (2) the written agreement supercedes
all prior agreements and practices not
specifically preserved in the contract.
Further, the contract specified that the
arbitrator had "no authority to add to,
subtract from, modify or change" the
terms of the contract. The zipper clause
in its entirety reads:

This Agreement constitutes the full and
complete agreement between the parties
and supercedes all prioragreements
between the parties or their
representatives, oral or written,
including all practices not specifically
preserved by the express provisions of
this Agreement. This Agreement is the
entire agreement between the parties and
is the result of extensive negotiations
in which both parties had the right and
the opportunity to submit proposals and
to negotiate their proposals with the
other party.

  The arbitrator somehow sustained the
Union’s grievance, and found that the
employer’s payment of the greater
commission rate to all drivers during the
brief span of but the first two months
(60 days) of the new five-year contract
constituted a "practice," in the eyes of
the arbitrator, that rose to the level of
a "post-execution amendment" of the
agreement. This action, according to the
arbitrator, allegedly nullified the
company’s right to invoke the thoroughly
negotiated and mutually agreed upon
contract provision dealing with the
parties’ agreement to have the two-tiered
commission rate. The arbitrator somehow
made this finding in spite of the very
specific and limiting language in the
zipper clause of the contract, "This
Agreement . . . supercedes all prior
agreements between the parties . . . oral
or written, including all practices not
specifically preserved by the express
provisions of this Agreement," as well as
the specific arbitration clause
forbidding him from modifying the written
contract. The arbitrator recognized that
the company’s April 27, 1998, decision to
pay the two-tier (lower) commission rate
to drivers working two-person routes was
in full compliance with the terms of the
collective bargaining agreement agreed to
by the Union and the company in each of
the three contracts (1990-2003) referred
to herein; that the 1998 contract also
contained the zipper clause; and that the
1998 contract was the product of
exhaustive negotiations. But instead of
adhering to the limitations the contract
placed on his authority and to the
unambiguous and plain language of the
contract as it was written, the
arbitrator took an end-run around the
clear and unambiguous restrictive terms
of the contract. The arbitrator somehow
reasoned that because the employer
allowed the first two months of the
sixty-month contract to elapse before
changing its practice to adhere to the
written contract’s commission rates
clause, it thus "deprived the Union of
its right to bargain [over commission
rates] for almost five years," a result
that the arbitrator somehow felt (without
any explanation) was a "fundamentally
unfair maneuver inconsistent with well-
settled principles of collective
bargaining."

  In a vain attempt to find support for
his newly fashioned remedy, the
arbitrator reached all the way back and
justified his overreaching decision in
the partial testimony taken at the
arbitration hearing that during a
worker’s strike in 1989, some thirteen
years ago, the distributorship’s general
manager commented to the drivers that the
drivers would "have the same pay" whether
they worked alone or with a helper. The
arbitrator found that this passing state
ment somehow and someway became an "oral
understanding," which, according to the
arbitrator, was "readopted" by the
employer during the first two months of
the 1998 contract in spite of the fact
that each of the three most recent
collective bargaining agreements
(ratified in 1990, 1994 and 1998)
contained the very explicit and properly
limited zipper clause stating that the
contract contained the parties’ entire
agreement, as well as the identical
language dealing with commission rates.
Further, these contracts failed to
contain any indication, much less
language, that the parties had reached
any type of oral understanding that all
drivers would be compensated equally,
much less an understanding that was the
product of a meeting of the minds
reflecting an enforceable agreement
supported by offer, acceptance and
consideration, which is so vital to any
contract.

  Thus, the arbitrator cast aside the
written and thoroughly negotiated terms
of the agreement and returned to the
terms of the contract in effect prior to
1990 by ordering the employer to pay the
higher commission to drivers regardless
of whether they were working on one or
two-person routes. This finding by the
arbitrator contradicts and ignores the
express language throughout the 1998
contract at issue, including the
unambiguous terms contained within the
commission rates clause, the arbitration
clause, and the zipper clause. Moreover,
the arbitrator’s finding re-institutes
the commission structure that the drivers
agreed in negotiation to give up as a
concession in 1990 and reaffirmed in the
last two contracts in 1994 and 1998. The
arbitrator summarized his conclusion as
follows:

[N]either the zipper clause nor the
parole evidence rule bars post-execution
amendment or modification of an agreement
. . . . Although I cannot "add to,
subtract from, modify or change in any
way the terms of this Agreement," I am
not precluded from giving effect to a
long-standing practice or oral
understanding reaffirmed and readopted by
the Company following execution of the
agreement.

  The employer filed suit in federal court
requesting the court to vacate the award,
and the Union counter-claimed for
enforcement of the arbitrator’s decision.
The trial court granted summary judgment
in favor of the Union, holding that
because the arbitrator had "interpreted
the parties agreement to include both the
written [collective bargaining agreement]
and a separate oral agreement," the
decision should be affirmed under the
high degree of deference given to
arbitral orders. Anheuser-Busch appeals.

II.   STANDARD OF REVIEW

  In Tootsie Roll Indus., Inc. v. Local
Union #1, 832 F.2d 81 (7th Cir. 1987), we
set forth the applicable standard of
review for arbitration awards. Quoting
from language that has been approved in
Supreme Court decisions that are of no
less vitality today, we stated in
pertinent part as follows:

[A]n arbitrator is confined to
interpretation and application of the
collective bargaining agreement; he does
not dispense his own brand of industrial
justice. He may of course look for
guidance from many sources, yet his award
is legitimate only so long as it draws
its essence from the collective
bargaining agreement. When the
arbitrator’s words manifest an infidelity
to this obligation, courts have no choice
but to refuse enforcement of the award.

Id. at 83 (quoting United Steelworkers v.
Enterprise Wheel & Car Corp., 363 U.S.
593, 597 (1960)).

[T]he arbitrator’s decision should not be
upset unless it is arbitrary or
capricious or fails to draw its essence
from the collective bargaining contract
because it exceeds the confines of
interpreting and applying the contract .
. . . It is only when the arbitrator must
have based his award on some body of
thought, or feeling, or policy, or law
that is outside the contract that the
award can be said not to "draw its
essence from the collective bargaining
agreement."

Id. (quoting Burkort Randall v. Lodge
#1076, 648 F.2d 462, 465 (7th Cir. 1981)
and Ethyl Corp. v. United Steelworkers of
Am., 768 F.2d 180, 184-85 (7th Cir.
1985)).

  The Supreme Court recently reiterated
that judicial review of an arbitrator’s
decision is limited, stating that "the
fact that a court is convinced [the
arbitrator] committed serious error does
not suffice to overturn his decision."
Major League Baseball Players Ass’n v.
Garvey, 532 U.S. 505, 509 (2001) (quoting
Eastern Assoc. Coal Corp. v. Mine
Workers, 531 U.S. 57, 62 (2000))
(internal quotations omitted). Thus, we
wish to make it clear that we are not
questioning whether the arbitrator has
misinterpreted the agreement. Rather, our
concern is limited to whether the
arbitrator wentbeyond, or outside, the
bounds of interpreting the contract
before him while fashioning his award.
The question is not whether the
arbitrator misinterpreted the agreement,
but only whether the arbitrator’s inquiry
disregarded the very language of the
agreement itself./2 See Chicago
Newspaper Publ’rs Ass’n v. Chicago Web
Printing Pressmen’s Union #7, 821 F.2d
390, 395 (7th Cir. 1987); Hill v. Norfolk
& W. Ry. Co., 814 F.2d 1192, 1195 (7th
Cir. 1987).

  The dissent claims that we may not
reverse the arbitrator’s decision, "given
the law laid down in Garvey." Judge
Easterbrook seems to imply that Garvey
somehow worked a radical revision of
arbitration law. But the dissent’s
characterization of Garvey as
groundbreaking can best be classified as
confusing because Garvey contained no
landmark reformulation of the standard of
review in arbitration cases. In fact,
Garvey itself relies on the 42-year-old
Enterprise Wheel case, cited throughout
the majority opinion, and recognizes that
in situations like this, "when the
arbitrator strays from interpretation and
application of the agreement and
effectively ’dispense[s] his own brand of
industrial justice’ . . . his decision
may be unenforceable." Garvey, 532 U.S.
at 509 (quoting Enterprise Wheel, 363
U.S. at 597). The notion that a reviewing
court does not review the "correctness"
of an arbitrator’s conclusion certainly
is hardly a novel one. Garvey merely
follows Enterprise Wheel--a decision
rendered more than forty years ago--and
we refuse to accept the dissent’s
exaggerated implication that it has
fundamentally reworked the standard of
review in arbitration cases.

  We have pointed out that an arbitrator
cannot shield himself from judicial
correction by merely "making noises of
contract interpretation." Ethyl Corp.,
768 F.2d at 187. "In other words, the
arbitrator cannot dress his policy
desires up in contract interpretation
clothing." NIPSCO v. United Steelworkers
of Am., 243 F.3d 345, 347 (7th Cir.
2001). In these situations, the
arbitrator exceeded the scope of his
authority, and his award must be
reversed. See Young Radiator Co. v.
International Union, UAW, 734 F.2d 321,
325 (7th Cir. 1984) (an arbitration award
will not be enforced when the arbitrator
"failed to confine himself to the terms
of the collective bargaining
agreement.").

III.   DISCUSSION

  Anheuser-Busch claims that the
arbitrator modified (rather than
interpreted) the terms of the contract
when he found a way to employ language
not found any place in the contract (in
fact contrary to the express language of
the contract) by relying on what he
referred to as a "long standing practice"
(the payment of one commission rate for
all drivers) in spite of the very
language of the zipper clause stating,
"This Agreement constitutes the full and
complete agreement between the parties
and supercedes all prior agreements
between the parties or their
representatives, oral or written,
including all practices not specifically
preserved by the express provisions of
this Agreement." The company argues that
the very language of the contract
contained everything the arbitrator
needed to render his decision and barred
him from considering the parties’
practices. Additionally, the company
claims that the arbitrator improperly
reached outside the contract and relied
on the parties’ practices in place of the
agreement’s clear and unambiguous
language requiring the payment of
disparate commission rates between
drivers working alone and those using
helpers. "To place past practice on a par
with the parties’ written agreement would
create the anomaly that, while the
parties expend great energy and time in
negotiating the details of the Agreement,
they unknowingly and unintentionally
commit themselves to unstated and perhaps
more important matters which in the
future may be found to have been past
practice." Chicago Web Printing
Pressman’s Union #7 v. Chicago Newspaper
Publ’rs Ass’n, 772 F.2d 384, 387 (7th
Cir. 1985). The employer further contends
that the arbitrator exceeded the
contract’s limitation on his power not to
"add to, subtract from, modify or change
in any way" the terms of the written 1998
contract. We agree with the employer.

  In Tootsie Roll Industries, 832 F.2d at
84, we noted that, "[w]hile [an
arbitrator’s] reliance on the law of the
shop is appropriate to interpret
ambiguous contract terms . . . the law of
the shop cannot be relied upon to modify
clear and unambiguous provisions."/3 See
also International Ass’n of Mach., Lodge
#1000 v. General Elec. Co., 865 F.2d 902,
906 (7th Cir. 1989) (the "common law of
the shop comes into play" only when an
ambiguity in the written collective
bargaining agreement requires
interpretation); Ethyl Corp., 768 F.2d at
186 ("The arbitrator may not modify the
contract unless authorized to do so.");
Judson Rubber Works, Inc. v. Mfg. Prod’n
& Serv. Workers Union #24, 889 F. Supp.
1057, 1066 (N.D. Ill. 1995) (an award
will not be enforced when it "draws it
essence solely from the parties’ past
practice.").

  In reaching out for some validity in the
arbitrator’s decision, Judge Easterbrook
suggests that the arbitrator was unable
to "sharply differentiate pre- from post-
signing conduct" and that "[i]t is not
sufficient to annul an award that an
arbitrator might have acquiesced in a
temptation to enforce pre-contractual
conduct in the name of fair play." These
assumptions are, at best, most
problematical. Judge Easterbrook implies
that the arbitrator "might" have relied
on clearly forbidden pre-arbitration
conduct and thus the award should be
preserved at all costs. But despite Judge
Easterbrook’s creative (and factually
unsupported) characterization of the
arbitrator’s opinion, it is clear the
arbitrator did actually rely (not might
have relied) on the employer’s past
practices. Indeed, despite the
arbitrator’s best and vain efforts to
disguise the fact that he did rely on
past practices, he actually admitted in
his decision that he was going outside
the very terms of the written contract by
stating that he was "giving effect to a
long-standing practice or oral
understanding reaffirmed and readopted by
the Company." Second, all parties agreed
that the contract was clear and
unambiguous, facts entirely ignored by
the dissent, as well as written in
specific language that defined the limits
of the negotiated agreement and the scope
of the arbitrator’s authority. It
required neither interpretation nor
interpretative devices. In fact, neither
the arbitrator nor the parties contend
that there is any ambiguity in the
language of the contract establishing
commission rates for drivers. Thus, there
was no need for the arbitrator, in
reaching his desired result, to
"interpret" the unambiguous contract by
reaching outside the contractual language
and creating a scheme to rely on past
contradictory practices or customs. As we
have explained:

The existence of . . . "industrial common
law" does not necessarily mean, however,
that the parties should be bound by their
customs to the same extent as by
explicitly negotiated provisions in their
collective bargaining agreement. Unlike
contractual agreements, past practices
may not always be the result of joint
determination[.] . . . In such cases
there is no thought of obligation or
commitment for the future. Such practices
are merely present ways, not prescribed
ways, of doing things.

Chicago Web Printing Pressman, 772 F.2d
at 387.

  As stated earlier, the parties to the
contract agree, and so do we, that the
document at issue in this case is neither
ambiguous nor incomplete, and the very
language of the contract made clear and
specific that the arbitrator was without
authority to "add to, subtract from,
modify or change in any way the terms of
[the] Agreement." Nevertheless, the
dissent insists without any reference to
the record, much less explanation or
discussion, that Arbitrator Berman
"performed an interpretive task." But the
dissent never explains what this task was
or what term, in the contract that the
parties agreed was unambiguous, required
interpretation. Indeed, the dissent
ignores the fact that this contract
required no interpretation: the zipper
clause was unambiguous; the arbitration
clause was unambiguous; and the
commission-rates clause was unambiguous.
Any interpretation drawing its essence
from the written contract necessarily
would have recognized that the arbitrator
was without the authority to modify or
change the contract in any way. By
contrast, in this case, the arbitrator
issued an award based not on any reading
of or language in the contract, but
rather on his personal view of how the
contract would read if Anheuser-Busch’s
conduct were somehow codified and
inserted into the document itself. Thus,
it is evident that the arbitrator
rejected the plain language of the
contract, without ever claiming to be
"interpreting" any provision of it and in
doing so rewrote the contract and
inscribed his own language upon the
contract; something that he was not
authorized to do./4 Another sister
circuit very recently agreed. In
Pennsylvania Power Co. v. IBEW, 276 F.3d
174 (3d Cir. 2001), the Third Circuit
reversed the award of an arbitrator who
ignored a zipper clause like the one in
this contract and, by considering the
parties’ practices and other extrinsic
evidence, "exceeded his powers under the
Agreement" and "altered the Agreement in
direct violation of its provision that he
had no power to do so." Id. at 179. The
court held that "the arbitrator’s
decision conflicts with the express
provisions of the Agreement between the
Company and the Union" and therefore,
"fails to draw its essence from that
Agreement." Id. at 181.

  Carefully written, well-reasoned, and
throughly negotiated contracts are
presumptively complete, and the added
presence of a merger clause is further
strong evidence "that the parties
intended the writing to be the complete
and exclusive agreement between them."
Regensburger v. China Adoption
Consultants, Ltd., 138 F.3d 1201, 1206
(7th Cir. 1998). The dissent states in
seeking to avoid the impact of the merger
clause and suggests that the arbitrator
made an "effort to interpret the contract
by reference to post-signing conduct, and
a collective bargaining agreement may be
altered by the post-signing acts of the
party sought to be bound." He (dissenting
judge) goes on to cite several cases,
contending that they support his theory
that "a collective bargaining agreement
may be altered by the post-signing acts
of the party sought to be bound." But it
is obvious that these cases are
irrelevant; none of the contracts in
those cases contain a strong, rock-solid
zipper clause as well as an arbitration
clause barring the arbitrator from
"adding to, subtracting from, modifying
or changing in any way the terms of the
Agreement." Further, as Judge Rovner
explains (contrary to the dissent’s
notion that the concurring opinion
supports the dissent’s theory) that
whether the arbitrator was justified in
concluding that Anheuser-Busch
effectively modified the contract "is not
a question we are called upon to answer,
for that is not what the arbitrator
held." There would be no need to prevent
the arbitrator from "adding to,
subtracting from, modifying or changing
in any way the terms of the Agreement"
unless the parties clearly intended to
prevent the arbitrator from relying on
what the dissent calls "post-signing
conduct" when interpreting the agreement.

  Let us not forget that the parties have
stipulated that the contract before us is
an unambiguous, exclusive statement of
the parties’ rights and obligations. The
conduct of the parties is absolutely
irrelevant in situations like this
involving a dual zipper clause-
arbitration clause, as the Second Circuit
noted in Leed Architectural Prods., Inc.
v. United Steelworkers of Am., 916 F.2d
63, 67 (2d Cir. 1990). In Leed, the court
considered the effect of an arbitral
clause, like the one in this case, which
"denie[d] the arbitrator the right to
’add to, subtract from, or any way
modify’ its terms." Id. at 66. The court
held that "[t]he ’zipper clause’ in [the]
collective bargaining agreement, which
denies the arbitrator the right to ’add
to, subtract from or in any way modify’
its terms, is a pragmatic restatement of
the above holdings. Its purpose is to
make the written contract the exclusive
statement of the parties’ rights and
obligations." Id. Thus, Leed makes clear
that the combined effect of the
arbitration and zipper clauses was to
prohibit the arbitrator from deviating
from the clearly defined and thoroughly
negotiated written contract.

  The arbitrator’s decision paid only lip
service to the limitations on his
authority imposed by the combination of
the language of the arbitration clause
and the zipper clause. He saw fit to
withdraw the commission provision
specifically delineated in the 1990,
1994, and 1998 contracts and proceeded to
add to the agreement while ignoring its
clear language and intent and substituted
his personal views of fairness based on a
factor he was forbidden to consider,
namely the parties’ past practices. The
dissent cleverly makes only a brief,
passing reference to the arbitration
clause, suggesting without explanation,
that it is not "sound to read a no-
arbitral-modification clause as if it
were a no-arbitral-error clause"
(emphasis added). The dissent’s argument
is premised upon its assumption
(unsupported by any reference to the
wording in the arbitrator’s decision)
that the arbitrator made "an effort to
interpret the contract"--even though the
unambiguous and thoroughly negotiated,
written contract barred any such
interpretation--when he concluded that
Anheuser-Busch had itself modified the
deal. But were we to accept the dissent’s
theory, an arbitrator need only claim
that he concluded, as did this
arbitrator, the "parties modified the
contract" in order to completely
eviscerate all judicial review, which is
what the arbitrator has attempted to do
here. We cannot agree to such a view.
Garvey makes clear that arbitrators
cannot stray "from interpretation and
application of the agreement." 532 U.S.
at 509. As we have pointed out, an
arbitrator cannot "dress his policy
desires up in contract interpretation
clothing"; a wolf in sheep’s clothing is
still nothing other than a wolf. NIPSCO,
243 F.3d at 347 (emphasis added). In this
case, the contract was clear and
unambiguous and needed no interpretation.
Accordingly, we are convinced that the
arbitrator, not the parties, modified the
contract and thereby exceeded his
authority.

  Arbitrators must not "stray from
interpretation and application of the
agreement and effectively ’dispense . . .
[their] own brand of industrial justice.’"
Garvey, 532 U.S. at 509 (quoting
Enterprise Wheel, 363 U.S. at 597). But
that is precisely what the arbitrator did
when he cast aside the extensively
negotiated contract and ignored the clear
and specific language of the commission-
rates clause, the arbitration clause, and
the zipper clause. Indeed, the arbitrator
himself admitted when he stated that the
employer’s decision to adhere to the
contract as negotiated and written,
rather than its past practice, was a
"fundamentally unfair maneuver," making
clear that the decision, in spite of the
arbitrator’s sleight of hand, dispensed
the arbitrator’s own brand of industrial
justice.

  We note further that the arbitrator’s
personal opinion concerning the
"fairness" of the employer’s actions is
lacking of support in the record. He went
on to find inequity in the fact that
Anheuser-Busch’s decision to abide by the
contract "deprived the union of its right
to bargain" over commission rates during
the remaining term of the 1998 contract.
But this analysis ignores the obvious
fact that between 1990 and 1998, the
Union and the employer, after extensive
negotiation on each occasion, agreed to
all the terms of the most recent
contract, including the agreement’s
specific commission structure and the
zipper clause not once, but on three
different occasions (in 1990, 1994, and
1998). Furthermore, despite the fact that
the record reflects that the Union agreed
to the inclusion of the language of the
two-tiered commission provision in the
two previous contracts as well as in the
current agreement, nothing contained
herein indicates that the Union was
surprised in any manner, much less
precluded from renegotiating the
commission rates for drivers during the
respective bargaining sessions concerning
each of the three contracts. The zipper
clause set forth in each of the three
contracts, as ratified by the Union on
three different occasions, clearly states
that the contract "is the result of
extensive negotiations in which both
parties had the right and the opportunity
to submit proposals and to negotiate
their proposals with the other party." It
is also most interesting to note that all
of the witnesses called to testify at the
arbitration hearing (both Union and
employer) agreed that they were fully
cognizant of the fact that the two-tiered
commission structure and the zipper
clause was included in each of the three
contracts. The witnesses further
testified that following the execution of
the first contract in 1990, the employer
made absolutely no "promises" or "oral
agreements" to the Union that payment of
only the greater commission rate would
continue into the future.

  In any event, the word "fairness" is as
wide and as deep as the ocean and can
have a multitude of meanings depending on
an individual arbitrator’s personal whims
and caprice. Thus, any decision motivated
by an arbitrator’s view of what is "fair"
is prohibited by the rule that "[a]n
arbitrator is confined to interpretation
and application of the collective
bargaining agreement; he does not sit to
dispense his own brand of industrial
justice," and that "courts have no choice
but to refuse enforcement of the award"
when the award fails to "draw its essence
from the collective bargaining
agreement." Enterprise Wheel, 363 U.S. at
597. The arbitrator’s reliance on the
supposed "unfairness" of the employer’s
conduct is also at odds with our prior
holding that "the arbitrator cannot dress
his policy desires up in contract
interpretation clothing." NIPSCO, 243
F.3d at 347; see also Appalachian Reg’l
Healthcare, Inc. v. United Steelworkers
of Am., 245 F.3d 601, 606 (6th Cir. 2001)
("even if we were to credit the
arbitrator’s construction of the
Agreement as against its conflict with
express provisions, we would still have
to vacate the award as it imports notions
not found in the Agreement itself.").

  Judge Easterbrook goes on to argue that
"[m]any a reference to ’fairness’ is just
a code word for a genuine interpretive
principle," and points to the doctrine of
"good faith and fair dealing" in contract
law as an example. In an attempt to
invent a cover for the arbitrator, the
dissent implies that the arbitrator in
this case was inartfully attempting to
ground his decision using some similar
interpretive device. However, the dissent
fails to point to even a scintilla of
evidence in the record to support its
speculation that the arbitrator was
relying upon any interpretive principle
in fashioning his award. On the other
hand, because the arbitrator explicitly
stated that his award was designed to
stamp out what he saw as "fundamentally
unfair maneuver[s]" that worked to what
he believed was the detriment of the
labor union, we are quite confident that
he was simply effectuating his personal
bias regarding proper labor-management
relations. If the arbitrator’s decision
is read, and attention paid to the
context in which the arbitrator uses the
word "fairness," it is clear that the
arbitrator reference to ’fairness’ was
not mere slippage of tongue, as the
dissent argues in an unconvincing attempt
to explain away the arbitrator’s actions;
instead it was a--clear and unambiguous--
statement that unequivocally denounced
the employer’s actions on the basis that
they failed to comport with the
arbitrator’s subjective notions of
fairness in the collective bargaining
process. A thorough reading of the record
makes clear that the arbitrator did more
than errantly invoke contract principles
when he branded the employer’s actions
"unfair."

  The majority opinion makes it perfectly
clear that the arbitrator disregarded the
plain language of the contract,
including, but not limited to, language
in the zipper clause, the arbitration
clause, and the commission rates clause.
Nevertheless, the dissent would uphold
the arbitrator based on mere speculation
that the arbitrator relied on some
unspoken interpretive device when reading
the contract. Were we to accept the
dissent’s theory, then it would never
matter whether the respective parties
thoughts and ideas are clearly and
unambiguously drafted and documented, nor
how thoroughly the parties negotiated,
nor how clearly the parties placed a
precise issue before the arbitrator: if
the arbitrator personally felt offended
by one party’s conduct, we would still
uphold his award and permit him to impose
his own brand of industrial justice upon
the parties under the guise of "good
faith." We cannot and will not accept
this view. See Enterprise Wheel, 363 U.S.
at 597.

  The arbitrator attempted to cloak his
actions with "noises" of contract
interpretation, but he improperly used
the parties’ practices to add to the
agreement, and his decision reads as
though it was deeply rooted in his own
personal idea of industrial justice,
rather than living up to the very
specific language of the contract at
issue. It is particularly telling that
the arbitrator, while on the one hand
claiming to consider practices occurring
only during the first two months of the
1998 contract, actually relied on the
fact that the employer’s payment of the
higher commission rate to all drivers
was, to quote the arbitrator’s own words,
a "long-standing practice or oral
understanding" to which he was giving
effect. Had the arbitrator abided by the
terms of the contract and disregarded
past practices and "understandings" as he
was bound to do by both the zipper clause
and our case law, he certainly would have
recognized and concluded that he had no
authority to consider, much less rely
upon, any supposed "long-standing
practice."

  The arbitrator took it upon himself to
right what he perceived to be a wrong in
the workplace. In doing so, he improperly
injected his personal notions of fairness
into his decision and thus manifested "an
infidelity to his obligation" to follow
the law and the language of the contract
and not to "add to . . . modify or
change" any portion of the thoroughly
negotiated agreement. See Tootsie Roll,
832 F.2d at 83-84. Long and thoroughly
negotiated written contracts would cease
to have meaning should we approve of the
actions of the arbitrator and allow him
to completely ignore and disregard and
cast aside clear and unambiguous
contractual language and traverse beyond
the limited scope of his review merely by
invoking the magic words "contract
interpretation." We are convinced that
the arbitration decision in this case
failed to "draw its essence" from the
collective bargaining agreement that took
effect on February 1, 1998, because the
decision exceeded the confines of
interpreting and applying the contract.

  On a final note, we agree with the
dissent that one purpose of arbitration
is to provide the parties with swift,
inexpensive, and final decisions. But
this does not vitiate judicial review of
an arbitrator’s decision. Arbitrators are
not free to dispense their own brand of
industrial justice and "may not ignore
the plain language of the contract."
Paperworkers v. Misco, Inc., 484 U.S. 29,
38 (1987) (emphasis added). Thus, while
the parties may agree to arbitration,
they may also agree, as they did in this
contract, to limit the arbitrator’s
authority and preserve their right to
challenge decisions when the arbitrator
has reached out and rendered a decision
that strays beyond his delegated
authority and is barred by the negotiated
contract. See George Watts & Son, Inc. v.
Tiffany & Co., 248 F.3d 577, 581 (7th
Cir. 2001) ("People who want their
arbitrators to have fewer powers need
only provide this by contract."). In this
case, the arbitrator ignored the plain
language of three clauses in the
contract--the clause concerning
commission rates, the zipper clause, and
the arbitration clause--all of which
limited his authority and were written by
the parties to prevent the type of
improper award that is the subject of
this appeal. See IBEW v. Thomas & Betts
Corp., 182 F.3d 469, 472 (6th Cir. 1999)
("When a collective bargaining agreement
prohibits the addition of contract terms,
the arbitrator may not proceed to do
so.").

  The arbitrator did not merely misread
the contract; he intentionally
disregarded and thus violated the clear,
specific language of the contract, and
created an escape hatch through which he
could dispense his own brand of
industrial justice. Accordingly, the
judgment of the district court is
REVERSED. This case is REMANDED with
instructions to VACATE the award of the
arbitrator and ENTER judgment in favor of
Anheuser-Busch, Inc.

FOOTNOTES

/1 In order to compensate drivers equally, the
contract also provides that some drivers on low
volume routes receive a salary in addition to the
commissions earned.

/2 The dissent states "for the sake of argument"
that the arbitrator "made a whopper of an error,
the sort of thing that the Supreme Court called
an ’improvident, even silly’ conclusion." We are
somewhat puzzled by Judge Easterbrook’s apparent
eagerness to joust over the merits of the arbi-
trator’s decision--something which is beyond the
scope of our review. We emphasize that we neither
allege that the arbitrator committed clear error
nor reached an untenable conclusion based on
poorly supported factual findings. To the con-
trary, we are convinced that in his opinion the
arbitrator deliberately disregarded the clear
language of the contract--and thus his award
failed to construe or apply the contract.

/3 Our cases use the phrase "law of the shop," to
refer to "the body of past practices between the
parties." Tootsie Roll, 832 F.2d at 84.

/4 The dissent suggests that "if the dispute is
arbitrable, then the adjudicator acts ’within his
authority’ even if the decision is bad on the
merits" and thus because the dispute was arbitra-
ble, the arbitrator made only an interpretive
error. We disagree. The dissent appears to equate
jurisdiction with authority, but an arbitrator
can act within the scope of his jurisdiction
(reviewing an arbitrable matter) and still exceed
the scope of his authority (by ignoring the plain
language of the contract that limits his authori-
ty). To state otherwise is to ignore much of the
caselaw cited throughout this opinion.

  In this case, let us make clear that the dis-
sent fails to point out a single clause in this
thoroughly negotiated contract that the parties
or the arbitrator labeled as ambiguous--because,
quite simply, everyone involved agreed that the
contract was unambiguous. Further, the arbitrator
failed to offer any justification for how his
decision was derived from the language of the
contract, as it could not, because the language
employed by the arbitrator is contrary to the
express terms of the contract. As we explain more
fully in the text of the opinion below, the
arbitrator’s decision is a transparent effort to
burden the parties with his own personal, subjec-
tive notions of fairness in collective bargain-
ing. The arbitrator exceeded his authority, as we
discuss more fully below, not because he made an
interpretive error--but instead because he modi-
fied the terms of a clear and unambiguous con-
tract that needed no interpretation whatsoever.




  ROVNER, Circuit Judge, concurring in the judg-
ment. The 1998 collective bargaining agreement,
as written, gave Anheuser-Busch the authority to
pay individuals working on two-person routes a
lower commission than workers assigned to one-
person routes. The unambiguous terms of that
agreement also barred the arbitrator from looking
to practices pre-dating the agreement (what Judge
Easterbrook refers to as "pre-signing conduct")
as a source of new or modified contract terms;
Article 20, Section 20 expressly provided that
"[t]his Agreement constitutes the full and com-
plete agreement between the parties and super-
sedes all prior agreements between the parties or
their representatives, oral or written, including
all practices not specifically preserved by the
express provisions of this Agreement." (Emphasis
mine.) We are agreed, therefore, that any prior
oral understandings that Anheuser-Busch may have
had with the union, and any previous practice
with respect to the commissions paid on two-
person routes, cannot be imported into the 1998
agreement.

  Whether the arbitrator would have been justified
in concluding that Anheuser-Busch’s practice, for
two months after the 1998 agreement took effect,
of paying workers on two-person routes at the
higher, one-person rate (what Judge Easterbrook
refers to as "post-signing conduct") effectively
modified the terms of the 1998 Agreement, is not
a question we are called upon to answer, for that
is not what the arbitrator held. The arbitrator
never inquired whether the parties’ post-signing
conduct was sufficient, in and of itself, to
trump the plain language of the contract. At all
times, he was concerned with whether the parties
had signaled an intent to carry forward their
pre-signing understandings and practices in the
1998 Agreement. This much is evident from the way
in which the arbitrator framed the question
before him: "I must decide whether a long-stand-
ing past practice supersedes the contract lan-
guage." Arbitrator’s Opinion and Award at 17
(emphasis mine), quoting the Union’s Brief at 12.
But that question is answered unequivocally by
Article 20, Section 20--all prior practices not
expressly preserved by the contract are dis-
placed, and the written terms of the contract
control.

  True enough, the arbitrator did advert to the
parties’ post-signing conduct. But as the arbi-
trator’s rationale makes plain, he viewed the
post-signing conduct as a window onto the par-
ties’ past practices, not as an independent
revision of the 1998 terms regarding commission
rates. What the arbitrator seized upon is the
parties’ failure, upon execution of the 1998
Agreement, to promptly abandon their pre-signing
practice and conform their conduct to the perti-
nent terms of the new contract--as if longstand-
ing practices were to be read into the contract
unless timely discontinued by the parties. See
Arbitrator’s Opinion and Award at 22 ("Had the
practice under review not been carried over into
the term of the 1998-2003 Agreement, the zipper
clause, as well as the parol evidence rule, would
undoubtedly have invalidated it."). In the end,
it is the parties’ pre-signing conduct that the
arbitrator read into the contract; their post-
signing conduct is cited merely as a convenient
bootstrap to reinsert a longstanding, but unwrit-
ten, practice into the agreement. See, e.g.,
Arbitrator’s Opinion and Award at 20 ("the Compa-
ny did, in fact, carry the practice embodied in
Green’s [1989] promise into the 1998-2003 con-
tract"). Yet, the unmistakable effect of Article
20, Section 20 is to wipe the slate clean of such
previous understandings and practices. And no one
is arguing that the parties modified or abandoned
that provision. Without the pre-signing conduct
to rely upon, the arbitrator’s construction of
the agreement is wholly bereft of support.

  I do not think that the arbitrator was acting
in bad faith, or that he purposely set about to
dispense his own brand of industrial justice. His
own perception of the equities do appear to have
influenced his construction of the contract,
however. See, e.g., Arbitrator’s Opinion and
Award at 23-24. More importantly, I think it
evident that his decision purporting to interpret
the 1998 agreement relied substantially on the
unwritten understandings and lengthy course of
conduct that preceded that agreement--and resort
to such pre-signing conduct was verboten under
the express terms of the contract. To that ex-
tent, I agree that the arbitrator exceeded his
authority, and that his award must be vacated.



  Easterbrook, Circuit Judge, dissenting. Arbi-
trator Herbert M. Berman found that Anheuser-
Busch and its drivers’ union had modified their
written collective bargaining agreement by post-
signing conduct. The district court enforced that
decision. Now this court reverses. My colleagues’
separate opinions rely principally on the agree-
ment’s integration clause, which forbids any
reference to pre-signing conduct and negotiating
history. The arbitrator’s decision, my colleagues
believe, effectively bound the employer to con-
tinue its pre-agreement treatment of two-driver
routes, thus offending the integration clause.

  Because the post-agreement conduct was a contin-
uation of pre-agreement conduct, this is a possi-
ble understanding of what happened, but it is not
an inevitable one. Arbitrator Berman recognized
that the zipper "clause invalidates prior agree-
ments and prior practices not incorporated into
the written contract" (see page 22 of his opin-
ion). He wrote that Anheuser-Busch modified the
deal, to the union’s benefit, when it continued
paying the higher rates for two months after the
new collective bargaining agreement became effec-
tive. This may be right or wrong--if our review
were plenary, I would join my colleagues in
holding that it is wrong--but it does not trans-
gress the integration clause. It is an effort to
interpret the contract by reference to post-
signing conduct, and a collective bargaining
agreement may be altered by the post-signing acts
of the party sought to be bound. See Transporta-
tion-Communication Employees v. Union Pacific
R.R., 385 U.S. 157, 160-61 (1966); see also
International Business Lists, Inc. v. American
Telephone & Telegraph Co., 147 F.3d 636, 641 (7th
Cir. 1998); Matuszak v. Torrington Co., 927 F.2d
320, 324 (7th Cir. 1991). Judge Coffey denies the
applicability of this principle on the ground
that an integration clause (which negates the
significance of pre-signing words and conduct)
makes post-signing modification by conduct impos-
sible. This reads into the clause more than it
contains. But if, as Judge Coffey believes,
matters turn on the meaning of the particular
text in this zipper clause, that is itself a
subject for the arbitrator, and a court’s dis-
agreement with an arbitrator’s understanding of
contractual language does not justify displace-
ment of the arbitrator’s decision.

  To see the difference between misinterpreting
clear language and ignoring it, consider a clear
federal statute--42 U.S.C. sec.1997e(a), the
exhaustion requirement in the Prison Litigation
Reform Act. This law provides that "No action
shall be brought with respect to prison condi-
tions under [42 U.S.C. sec.1983], or any other
Federal law, by a prisoner confined in any jail,
prison, or other correctional facilityuntil such
administrative remedies as are available are
exhausted." Some courts of appeals concluded
that, even if some administrative remedies are
"available," exhaustion is unnecessary unless
these are the same remedies the prisoner seeks in
court. Booth v. Churner, 121 S. Ct. 1819 (2001),
holds that this is not what the statute means:
exhaustion always is required. Should the Supreme
Court have said that the courts of appeals that
had come to a different conclusion "ignored"
sec.1997e(a) or "dispensed their own brand of
prison justice"? What it actually said is that
those courts misinterpreted sec.1997e(a). It is
clear and comprehensive (just like the zipper
clause in this collective bargaining agreement),
but texts that seem clear to some readers may be
understood differently by others. This difference
need not imply that one side has ignored the text
or decided on grounds extrinsic to it. Arbitrator
Berman did not ignore or refuse to follow the
integration clause; he discussed it and explained
why, in his view, it does not have the effect
that Anheuser-Busch and my colleagues attribute
to it.

  Nor does the award offend the clause forbidding
the arbitrator to modify the contract. The arbi-
trator concluded that Anheuser-Busch had itself
modified the deal, and nothing in this collective
bargaining agreement forbids post-signing changes
by the employer that benefit the employees. It
would not be sound to read a no-arbitral-modifi-
cation clause as if it were a no-arbitral-error
clause (on the ground that if the arbitrator errs
then he has effectively modified the contract);
that would imply that courts intervene to correct
all blunders. Likewise with the question whether
an arbitrator has "exceeded his authority." A
court exceeds its authority when it acts without
jurisdiction; so too with an arbitrator. But if
the dispute is arbitrable, then the adjudicator
acts "within his authority" even if the decision
is bad on the merits. To say otherwise is to turn
every interpretive error into a decision "in
excess of authority" (because no arbitrator is
"authorized to err") and so to make every error
(perhaps every "plain" error) a ground for refus-
ing to enforce the award. The parties concede
that the dispute at hand was arbitrable. Thus one
cannot say that arbitrator Berman "exceeded his
authority" because he may have misunderstood or
misapplied an integration clause that we judges
find clear. The Justices themselves sometimes
infer exceptions to the seemingly clear and
sweeping language of statutes. E.g., INS v. St.
Cyr, 121 S. Ct. 2271 (2001). Even when a forceful
dissent remarks on the lack of a textual basis
for the maneuver (as in St. Cyr) the majority
does not concede that it has either exceeded
lawful authority or failed to interpret at all.

  Judge Rovner and I agree that post-signing
conduct by an employer may in principle create
legal obligations as an alteration of the agree-
ment. We agree, moreover, that arbitrator Berman
acted in good faith and did not attempt to
smuggle into the award preconceptions about
labor’s entitlements. He did not, for example,
implement personal notions about the appropriate
relative wages for one-driver and two-driver
delivery systems. Likewise we agree that because
the employer’s post-signing conduct is identical
to its pre-signing conduct, it is very hard to
disentangle the two--and that there is a corre-
sponding temptation to enforce the pre-signing
conduct in the name of post-signing acts. The
arbitrator’s reference to "fairness" permits an
inference that he took that forbidden step, and
both of my colleagues fault him on this ground.
Avoiding the "f" word in both contemplation and
exposition promotes clear thought and accurate
decision. Yet it cannot be that every opinion
referring to "fairness" shows that the law and
the parties’ dealings have been put to one side.
If that were so, a goodly number of our own
opinions would be suspect. Many a reference to
"fairness" is just a code word for a genuine
interpretive principle. The misleadingly named
doctrine of "good faith and fair dealing" in
contract law is an example. See L.A.P.D., Inc. v.
General Electric Corp., 132 F.3d 402 (7th Cir.
1997).

  Having come this far together, Judge Rovner and
I part company. She concludes that the arbitrator
did not rely on Anheuser-Busch’s post-agreement
conduct. By this she means that the arbitrator
did not implement post-signing conduct "in and of
itself" (slip op. 22)--that is, taken in isola-
tion from the pre-signing conduct. She also
believes that the arbitrator was swayed at least
in part by a desire to achieve a more fair
outcome. I accept these as factual propositions
but do not think they have legal consequences.
How could an arbitrator sharply differentiate
pre- from post-signing conduct? One was a contin-
uation of the other. It is not sufficient to
annul an award that an arbitrator might have
acquiesced in a temptation to enforce pre-con-
tractual conduct in the name of fair play. Even
judges often say that they reach one result over
another in interpreting a contract because they
think the result better on grounds of policy (a
more concrete substitute for "fairness"). By
ruling that considerations of this kind spoil an
award my colleagues yield to a temptation of our
own profession--to equate an interpretive error
with failure to interpret the contract at all.

  "[T]he question for decision by a federal court
asked to set aside an arbitration award . . . is
not whether the arbitrator or arbitrators erred
in interpreting the contract; it is not whether
they clearly erred in interpreting the contract;
it is not whether they grossly erred in inter-
preting the contract; it is whether they inter-
preted the contract." Hill v. Norfolk & Western
Ry., 814 F.2d 1192, 1194-95 (7th Cir. 1987).
Arbitrator Berman performed an interpretive task-
-one complicated by the rule that post-signing
conduct can become a contractual obligation, and
by the fact that the post-signing conduct contin-
ued a practice that predated the latest collec-
tive bargaining agreement, but an interpretive
exercise nonetheless. Parties who want to pre-
clude courts or arbitrators from treating their
course of performance as altering the bargain
have only to provide that deals may not be
modified by conduct (or, more broadly, in any way
other than writing). No such clause appears in
this collective bargaining agreement. Let me harp
on a vital point: to the extent that the real
dispute is about the meaning and effect of the
zipper clause, that is itself a matter of con-
tractual interpretation on which the arbitrator’s
view is conclusive. The conclusions on which
Judge Rovner and I agree--that the arbitrator was
not "acting in bad faith, [and that he did not]
purposely set about to dispense his own brand of
industrial justice" (slip op. 23)--should lead
straight to an order enforcing the award, for if
he was not ladling out "his own brand of indus-
trial justice" then he must have been implement-
ing the parties’ bargain as he understood it,
rather than acting on extra-contractual grounds.
  Last May the Supreme Court reiterated the
principles that govern the enforcement of arbi-
tral awards:

Courts are not authorized to review the arbitra-
tor’s decision on the merits despite allegations
that the decision rests on factual errors or
misinterprets the parties’ agreement. Paperwork-
ers v. Misco, Inc., 484 U.S. 29, 36 (1987). We
recently reiterated that if an "’arbitrator is
even arguably construing or applying the contract
and acting within the scope of his authority,’
the fact that ’a court is convinced he committed
serious error does not suffice to overturn his decision.’"
Eastern Associated Coal Corp. v. Mine Workers,
531 U.S. 57, 62 (2000) (quoting Misco, supra, at
38). It is only when the arbitrator strays from
interpretation and application of the agreement
and effectively "dispenses his own brand of
industrial justice" that his decision may be
unenforceable. Steelworkers v. Enterprise Wheel
& Car Corp., 363 U.S. 593, 597 (1960). When an
arbitrator resolves disputes regarding the appli-
cation of a contract, and no dishonesty is al-
leged, the arbitrator’s "improvident, even silly,
factfinding" does not provide a basis for a
reviewing court to refuse to enforce the award.
Misco, 484 U.S. at 39.

Major League Baseball Players Ass’n v. Garvey,
532 U.S. 504, 121 S. Ct. 1724, 1728 (2001). I am
willing to concede for the sake of argument that
arbitrator Berman made a whopper of an error, the
sort of thing that the Supreme Court called an
"improvident, even silly" conclusion. Nonethe-
less, given the law laid down in Garvey and its
predecessors, the award must be enforced--for the
parties delegated interpretation to an arbitra-
tor, not a court. To equate error with non-inter-
pretation is to vitiate the doctrine that awards
must be enforced even if they reflect factual,
interpretive, or legal blunders, see George Watts
& Son, Inc. v. Tiffany & Co., 248 F.3d 577 (7th
Cir. 2001), and to deprive the parties of what
they bargained for when they chose arbitration:
swift, inexpensive, and final decision. Arbitra-
tion can be neither swift nor inexpensive if it
is not also conclusive; otherwise parties are
just adding one layer to those that courts pro-
vide already.
