In the
United States Court of Appeals
For the Seventh Circuit

No. 01-1992

Air Line Pilots Association, International,
  and Craig A. Moffatt,

Plaintiffs-Appellants,

v.

Midwest Express Airlines, Inc.,

Defendant-Appellee.

Appeal from the United States District Court
for the Eastern District of Wisconsin.
No. 00 C 718--Thomas J. Curran, Judge.

Argued November 2, 2001--Decided February 6, 2002



  Before Posner, Ripple, and Evans, Circuit
Judges.

  Posner, Circuit Judge. This appeal by a
pilot and his union from a grant of
summary judgment to his former employer
presents questions concerning arbitration
and contract law. Midwest first fired
Moffatt in 1999 because he failed a
proficiency test. Represented by the
union (ALPA), which had an informal
arrangement with Midwest, Moffatt invoked
Midwest’s grievance procedure. The
grievance was settled by an agreement,
signed by Midwest, Moffatt, and the
union, reinstating Moffatt and giving him
one last chance to demonstrate his
proficiency. The agreement provided that
if Moffatt "fails any part of the above
training or proficiency check ride, his
employment will be terminated
immediately, without recourse to filing
of a grievance, request for resolution
letter, claim, lawsuit or any other liti
gation."

  Several months later, Midwest and the
union entered into their first collective
bargaining agreement. It provides
multiple opportunities for crew members
to retake proficiency tests; states that
it "shall supersede and take precedence
over all agreements, supplemental
agreements, amendments and similar
related documents executed between
[Midwest] and [ALPA] prior to the signing
of this Agreement"; and contains both an
integration clause and an arbitration
clause. The arbitration clause requires
arbitration of all "disputes between any
employee covered by this Agreement and
the Company growing out of grievances or
out of interpretation or application of
any of the terms of this Agreement."

  Shortly afterward, Moffatt again failed
a proficiency check and was fired
pursuant to the "last chance" settlement
agreement. The union filed a grievance
with Midwest, claiming that the firing
violated the "multiple opportunities"
clause of the collective bargaining
agreement. Midwest denied the grievance
and asserted that it was not arbitrable,
precipitating this suit by Moffatt and
the union under the Railway Labor Act to
compel arbitration. 45 U.S.C. sec. 153
First (p). The district judge dismissed
the suit on the ground that the "last
chance" agreement had not been superseded
by the collective bargaining agreement
and therefore the parties had not agreed
to submit Moffatt’s grievance to
arbitration.

  The question whether a dispute is
arbitrable is usually for the court asked
to order arbitration to decide.
LittonFinancial Printing Division v.
NLRB, 501 U.S. 190, 208 (1991); AT & T
Technologies, Inc. v. Communications
Workers of America, 475 U.S. 643, 649,
651 (1986); Local 744, International
Brotherhood of Teamsters v. Hinckley &
Schmitt, Inc., 76 F.3d 162, 163 (7th Cir.
1996). (We say "usually" rather than "al
ways" because the parties to a contract
can if they wish assign the determination
of the arbitrability of a dispute to an
arbitrator--but then the question whether
they have done that is for the court.
First Options of Chicago, Inc. v. Kaplan,
514 U.S. 938, 943 (1995); Miller v.
Flume, 139 F.3d 1130, 1133-34 (7th Cir.
1998); U.S. Postal Service v. American
Postal Workers Union, AFL-CIO, 204 F.3d
523, 527 n. 1 (4th Cir. 2000).) The
answer here should have been easy. The
collective bargaining agreement between
Midwest and ALPA contains an arbitration
clause applicable to disputes arising
from grievances based on the
interpretation or application of the
agreement, and the grievance that Moffatt
wants to arbitrate is based on an
interpretation of the "multiple
opportunities" provision of the agreement
and also on an interpretation of the
agreement as having superseded the
earlier settlement agreement with its
"last chance" language. No more is
required to establish the arbitrability
of the dispute. It is true but irrelevant
that if the collective bargaining
agreement does not supersede the
settlement agreement, Moffatt’s grievance
lacks merit. Merit is for the arbitrators
to decide, not the court. They must
interpret the collective bargaining
agreement to determine whether the
"multiple opportunities" provision is
applicable to Moffatt.

  Granted, if that provision is
inapplicable to Moffatt because the
settlement agreement survived the making
of the collective bargaining agreement
and so barred him from filing a
grievance, then the arbitration clause is
also inapplicable to him. But when an
arbitration clause is so broadly worded
that it encompasses disputes over the
scope or validity of the contract in
which it is embedded, issues of the
contract’s scope or validity are for the
arbitrators. This is true, the Supreme
Court has held, even when the party
opposing arbitration is prepared to prove
that the contract containing the
arbitration clause (as distinct from the
clause itself) was procured by fraud.
Prima Paint Corp. v. Flood & Conklin Mfg.
Co., 388 U.S. 395, 403-04 (1967); see
also Sphere Drake Ins. Ltd. v. All
American Ins. Co., 256 F.3d 587, 590-91
(7th Cir. 2001). The arbitration clause
in the collective bargaining agreement
between Midwest and ALPA states that all
issues concerning the interpretation and
application of the agreement are for the
arbitrators to decide, including
therefore the applicability of the
agreement to Moffatt’s dispute with
Midwest. Cara’s Notions, Inc. v. Hallmark
Cards, Inc., 140 F.3d 566, 567, 569 (4th
Cir. 1998); Beck v. Reliance Steel
Products Co., 860 F.2d 576, 579-80 (3d
Cir. 1988); Employees Protective Ass’n v.
Norfolk & Western Ry., 571 F.2d 185, 193
(4th Cir. 1977). Were this not the rule,
the scope of arbitration would be unduly
curtailed; for even when arbitration is
the parties’ chosen method of resolving
contractual disputes, the position
adopted by the district judge would
require judges, not arbitrators, to
resolve disputes over contractual
provisions other than the arbitration
clause itself (the clause that judges
must interpret in order to perform their
function of determining whether the
dispute is arbitrable).

  Disputes over the meaning of a written
contract are ordinarily resolved by
reference to the meaning of the contract
as it would be gathered by a reader
competent in English (if the contract is
in English) and reasonably endowed with
common sense. This "literalist" approach
is desirable because it gives contracting
parties the security of knowing that
their contract will be interpreted in the
event of a legal dispute to mean what it
says, rather than being interpreted to
mean what a judge or jury, perhaps misled
by self-serving testimony by one of the
parties, might think it should have said.
Literalism has its pitfalls. A contract
might seem clear only because the
judicial reader didn’t understand the
commercial context of the contract--the
nonstandard verbal usages current in the
activity out of which the contract arose.
But in such a case (the case of what is
called "extrinsic ambiguity"), the party
challenging the literal meaning must
present objective evidence, not just his
say-so, that the contract does not mean
what it says. Rossetto v. Pabst Brewing
Co., 217 F.3d 539, 542-43 (7th Cir.
2000); PMC, Inc. v. Sherwin-Williams Co.,
151 F.3d 610, 614-15 (7th Cir. 1998); AM
International, Inc. v. Graphic Management
Associates, Inc., 44 F.3d 572, 575 (7th
Cir. 1995); Bohler-Uddeholm America, Inc.
v. Ellwood Group, Inc., 247 F.3d 79, 93,
94 n. 3 (3d Cir. 2001). We were following
the literal approach when we said that
the arbitration clause clearly covered
the parties’ dispute in this case, and we
were right to do so because no objective
evidence has been submitted that would
suggest that the clause doesn’t mean what
it says.

  Rather than leaving determination of the
supersession issue to the arbitrator, the
district judge made the determination
himself. He should not have done so. But
the plaintiffs, besides asking that the
issue be referred to arbitration,
challenge the district court’s
determination of the supersession issue,
in effect asking us to review that
determination. This is a request, however
irregular, to which Midwest cannot
object, since it agrees with the district
court that the issue is not arbitrable
but of course recognizes that a district
judge’s interpretation of a contract is
reviewable by the court of appeals. And
so let us consider that interpretive
issue.

  The collective bargaining agreement
states, in words that could not be
clearer, that the agreement supersedes
all previous agreements between Midwest
and the union. The settlement agreement
was such an agreement. The fact that it
had an additional party, Moffatt, did not
make it any less an agreement between
Midwest and the union. Had it not been
superseded, either of those parties, as
well as Moffatt, could have sued to
enforce it. Although the agreement
contains a waiver by Moffatt, in
Midwest’s favor, of his right to file a
grievance, the collective bargaining
agreement superseded the agreement that
contained the waiver and thus wiped it
out. United States v. Baus, 834 F.2d
1114, 1126-27 (1st Cir. 1987).
  Parties are sometimes allowed to make a
binding agreement that their contract
shall not be orally modifiable. E.g.,
Operating Engineers Local 139 Health
Benefit Fund v. Gustafson Construction
Corp., 258 F.3d 645, 649-50 (7th Cir.
2001), although the general rule is
otherwise, Much v. Pacific Mutual Life
Ins. Co., 266 F.3d 637, 644 n. 1 (7th
Cir. 2001); Williams v. Jader Fuel Co.,
944 F.2d 1388, 1395 (7th Cir. 1991). But
they cannot make a binding agreement not
to modify their contract by a writing.
See Teer v. George A. Fuller Co., 30 F.2d
30, 32 (4th Cir. 1929); Beatty v.
Guggenheim Exploration Co., 122 N.E. 378,
381 (N.Y. 1919) (Cardozo, J.). That would
lock parties into a contract that both
agree should be modified or terminated
without liability. "Whenever two men con
tract, no limitation self-imposed can
destroy their power to contract again."
Id. Midwest and ALPA contracted again. We
need not decide whether, as Moffatt’s
exclusive bargaining representative, the
union was empowered to waive any rights
that the last-chance agreement conferred
on him. He is not trying to enforce those
rights. Only Midwest is trying to enforce
the agreement, but it modified it by
entering into a subsequent agreement with
inconsistent terms.

  Midwest argues that the negotiating
history of the collective bargaining
agreement shows that the settlement
agreement was meant to be carved out of
it. The collective bargaining agreement
was actually negotiated before the
settlement agreement, though signed
after; and the union tried to incorporate
the arbitration clause in the collective
bargaining agreement in the settlement
agreement. Midwest refused and proposed
instead to include in the settlement
agreement the grievance-waiver provision.
The union and Moffatt accepted the
proposal. But negotiating history is just
what the parol evidence rule does not
allow to be used to vary the terms of a
written contract intended to be the
final, integrated expression of the
parties’ deal. E.g., Herzog Contracting
Corp. v. McGowen Corp., 976 F.2d 1062,
1070 (7th Cir. 1992); FDIC v. W.R. Grace
& Co., 877 F.2d 614, 620 (7th Cir. 1989);
Prentice v. UDC Advisory Services, Inc.,
648 N.E.2d 146, 152 (Ill. App. 1995). And
except in the Ninth Circuit (compare Pace
v. Honolulu Disposal Service, Inc., 227
F.3d 1150, 1157-58 (9th Cir. 2000), with
Pacific Northwest Bell Telephone Co. v.
Communications Workers of America, 310
F.2d 244, 247 (9th Cir. 1962)), the parol
evidence rule has been held to be fully
applicable to collective bargaining
agreements. Dugan v. Smerwick Sewerage
Co., 142 F.3d 398, 404 (7th Cir. 1998);
Merk v. Jewel Food Stores, 945 F.2d 889,
894-95 (7th Cir. 1991); Mohr v. Metro
East Mfg. Co., 711 F.2d 69, 72 (7th Cir.
1983); Brown-Graves Co. v. Central
States, Southeast & Southwest Areas
Pension Fund, 206 F.3d 680, 683 (6th Cir.
2000); Excel Corp. v. United Food &
Commercial Workers International Union,
Local 431, 102 F.3d 1464, 1468 (8th Cir.
1996); Clark v. Ryan, 818 F.2d 1102, 1105
(4th Cir. 1987).

  It is true that we and other courts have
sometimes considered bargaining history
in interpreting such agreements, see,
e.g., Oil, Chemical & Atomic Workers
International Union, Local 7-1 v. Amoco
Oil Co., 883 F.2d 581, 586-87 (7th Cir.
1989), but as far as we can tell, the
parol evidence rule had not been argued
to the court in those cases, or the
collective bargaining agreements at issue
in them deemed integrated. Here there was
an integration clause, showing that the
collective bargaining agreement between
Midwest and the union was indeed an
integrated contract, though we add for
completeness that the existence of such a
clause is just one way of showing that a
contract is integrated, that is, that it
was intended to be the final expression
of the parties’ agreement, superseding
any preliminary agreements. 2 E. Allan
Farnsworth, Farnsworth on Contracts sec.
7.3, pp. 198-200 (1990).

  Midwest points out finally that after
the collective bargaining agreement was
signed, Moffatt took (and failed) the
proficiency test provided for in the
settlement agreement. This implies,
Midwest argues, that he believed the
agreement remained in force. This is
objective evidence of the parties’
understanding of the meaning of the
supersession clause of the collective
bargaining agreement, because it does not
depend on self-serving testimony of a
party, cf. Bock v. Computer Associates
International, Inc., 257 F.3d 700, 707
(7th Cir. 2001); Rossetto v. Pabst
Brewing Co., supra, 217 F.3d at 546;
indeed, it’s undisputed that Moffatt took
the test. Only it proves nothing. The
collective bargaining agreement provides
multiple but not unlimited opportunities
to demonstrate proficiency. It does not
waive proficiency, and so Moffatt’s
taking the test says nothing about
whether he thought the settlement
agreement or the collective bargaining
agreement applicable; he would have had
to take the test in either event.

  The judgment is reversed with directions
to order the parties to arbitrate
Moffatt’s grievance.




  RIPPLE, Circuit Judge, concurring in part
and dissenting in part.


A.

  The basic principles that govern this
case are straightforward. The federal
courts serve a gatekeeper function in re
lation to arbitration processes found in
many collective bargaining agreements and
contracts. In Litton Financial Printing
Division v. NLRB, 501 U.S. 190 (1991),
the Supreme Court of the United States
reiterated the general rule that the
courts, rather than the arbitrator, must
determine if the parties have agreed,
through the terms of a collective
bargaining agreement, to submit a
particular dispute to arbitration. See
Litton Fin. Printing Div., 501 U.S. at
208 (citing AT & T Tech., Inc. v.
Communications Workers of America, 475
U.S. 643, 651 (1986)). The parties may
avoid this default rule by contracting to
permit the arbitrator, rather than the
courts, to determine if a dispute falls
within the scope of the arbitration
clause. See First Options of Chicago,
Inc. v. Kaplan, 514 U.S. 938, 944 (1995).
To do so, however, the parties must
evidence in their agreement a clear and
unmistakable intent to cede the
arbitrability question to the arbitrator.
See id. (citing AT & T Tech., Inc., 475
U.S. at 649). Even in this latter
instance, the court retains authority to
determine if the parties, in fact, have
agreed to commit the question of
arbitrability to the arbitrator. See id.

  In this case, the collective bargaining
agreement ("CBA") between the Air Line
Pilots Association ("ALPA") and Midwest
Express Airlines ("Midwest") contains an
extremely broad arbitration clause:

The Board shall have jurisdiction over
disputes between any employee covered by
this Agreement and [Midwest] growing out
of grievances or out of interpretation or
application of any of the terms of this
Agreement.

Appellants’ Appendix at 16. When a court
confronts such a broad arbitration
clause, "there is a presumption of
arbitrability in the sense that ’[a]n
order to arbitrate should not be denied
unless it may be said with positive
assurance that the arbitration clause is
not susceptible of an interpretation that
covers the asserted dispute.’" AT & T
Tech., Inc., 475 U.S. at 650 (quoting
Steelworkers v. Warrior & Gulf Navigation
Co., 363 U.S. 574, 582-83 (1960)).

  The plain wording of the arbitration
clause encompasses Mr. Moffatt’s
grievance against Midwest; he is an
employee of the airline covered by the
CBA who seeks an interpretation of the
terms of the agreement. Given the
expansive scope of the arbitration
clause, it cannot be said with positive
assurance that the preexisting settlement
agreement, entered into prior to the
enactment of the CBA, precludes
necessarily arbitration of Mr. Moffatt’s
grievance. The panel therefore correctly
concludes that the district court should
have ordered Midwest to arbitrate
Mr.Moffatt’s grievance.

B.

  Although I agree with the majority that
this dispute is subject to arbitration, I
cannot agree that the procedural posture
of this case permits us to reach,
nevertheless, the supersession issue that
is central to the merits of Mr. Moffatt’s
grievance. Once the court concludes that
the parties have agreed to arbitrate a
particular dispute, "it is [then] for the
arbitrator to determinate the relative
merits of the parties’ substantive
interpretations of the [CBA]." AT & T
Tech., Inc., 475 U.S. at 651. In its
brief to this court, the ALPA stressed
repeatedly that the district court lacked
the authority to interpret the CBA’s
supersession clause. To the extent the
union addressed the interpretation of
this provision in its brief before this
court, it only did so because the
district court had reached the issue and
because Midwest, defending the district
court’s conclusion, submitted that the
court had to address this issue in order
to determine if Mr. Moffatt’s grievance
was arbitrable.

  Under the panel’s own analysis, this
issue is for the arbitrator. Because we
have concluded that the plain terms of
the arbitration clause require
arbitration of this issue, we ought to
refrain from construing the supersession
clause.

  In my view, the panel’s decision to
construe the supersession clause treads
on the prerogative of the arbitrator and
deprives the parties of the determination
for which they bargained. Although the
panel majority takes the view that the
plain language of the supersession clause
makes clear that the CBA supercedes the
earlier "last chance" settlement
agreement, it is not at all clear that an
arbitrator necessarily would reach the
same result. The parties do not dispute
that, by virtue of the supersession
clause, the CBA takes precedence over
"all agreements, supplemental agreements,
amendments and similar related documents
executed between [Midwest] and [ALPA]
prior to the signing of this Agreement."
Appellants’ Appendix at 20. Rather,
Midwest and the ALPA dispute the precise
meaning of these terms in the
supersession clause. More precisely, the
parties differ as to whether the terms of
this provision encompass Mr. Moffatt’s
settlement agreement. Certainly the
arbitrator, in engaging in contract
interpretation, would have been within
his rights to deem the meaning of these
terms sufficiently ambiguous to consider
extrinsic evidence--including the oral or
written negotiations used to form this
CBA--to interpret this provision. See
Jasper Cabinet Co. v. United Steelworkers
of America, 77 F.3d 1025, 1030-31 (7th
Cir. 1996) (noting that it was
permissible for arbitrator, in an effort
to shed light on ambiguous terms of CBA,
to consider bargaining history of
agreement); Johnson Controls, Inc., Sys.
& Servs. Div. v. United Ass’n of
Journeymen & Apprentices of the Plumbing
& Pipe Fitting Indus. of the United
States & Canada, 39 F.3d 821, 824-25 (7th
Cir. 1994) (approving arbitrator’s use of
bargaining history to elucidate the
meaning of ambiguous terms of a CBA). See
also Local 1199, Drug, Hosp. & Health
Care Employees Union v. Brooks Drug Co.,
956 F.2d 22, 25 (2d Cir. 1992); Manville
Forest Prods. Corp. v. United
Paperworkers Int’l Union, 831 F.2d 72, 75
(5th Cir. 1987). Although the
arbitrator’s award must "draw[ ] its
essence from the collective bargaining
agreement," United Steelworkers of
America v. Enter. Wheel & Car Corp., 363
U.S. 593, 597 (1960), he may "look for
guidance from many sources." Id. The
principle simply recognizes that

The collective bargaining agreement . . .
is more than a contract; it is a
generalized code to govern a myriad of
cases which the draftsmen cannot wholly
anticipate. . . . It calls into being a
new common law--the common law of a
particular industry or of a particular
plant. . . . Gaps may be left to be
filled in by reference to the practices
of the particular industry and of the
various shops covered by the agreement. .
. . The labor arbitrator’s source of law
is not confined to the express provisions
of the contract, as the industrial common
law--the practices of the industry and
the shop--is equally a part of the
collective bargaining agreement although
not expressed in it.

Warrior & Gulf Navigation Co., 363 U.S.
at 578-82. Parties agree to arbitrate so
that a specialist, someone intimately
familiar with their industry, may resolve
disputes arising under their collective
bargaining agreement. See Sphere Drake
Ins. Ltd. v. All American Ins. Co., 256
F.3d 587, 592 (7th Cir. 2001). Here, the
panel majority, having just concluded
that the parties’ agreement reserves the
construction of the supersession clause
to the arbitrator, nevertheless deprives
the parties of this benefit. From this
portion of today’s decision, I
respectfully dissent.
