author: Chief Justice Rehnquist

text:
    CHURCH OF SCIENTOLOGY OF CALIFORNIA v. INTERNAL REVENUE SERVICE
    No. 86-472.
    Argued October 5, 1987
    Decided November 10, 1987

      Rehnquist, C. J., delivered the opinion of the Court, in which all other Members joined, except Brennan and Scalia, JJ., who took no part in the consideration or decision of the case.

      Michael Lee Hertzberg argued the cause for petitioner. With him on the briefs were Eric M. Lieberman and Ellen J. Winner.

      Deputy Solicitor General Lauber argued the cause for respondent. With him on the brief were Solicitor General Fried, Acting Assistant Attorney General Mann, and Alan I. Horowitz

        David C. Vladeck and Alan B. Morrison filed a brief for Professor John L. Neufeld et al. as amici curiae urging reversal.

        John A. Powell, Stephen K. Strong, and David F. Stobaugh filed a brief for the American Civil Liberties Union et al. as amici curiae.

   Chief Justice Rehnquist

delivered the opinion of the Court.

Section 6103 of the Internal Revenue Code, 26 U. S. C. § 6103, lays down a general rule that “returns” and “return information” as defined therein shall be confidential. “Return information” is elaborately defined in § 6103(b)(2); immediately after that definition appears the following proviso, known as the Haskell Amendment:

“[B]ut such term does not include data in a form which cannot be associated with, or otherwise identify, directly or indirectly, a particular taxpayer.”

Petitioner Church of Scientology of California, seeking disclosure under the Freedom of Information Act, contends that the Haskell Amendment excepts from the definition of “return information” all material in the files of the Internal Revenue Service (IRS) which can be redacted to delete those parts which would identify a particular taxpayer. Respondent IRS in opposition argues that the mere redaction of identifying data will not, by virtue of the Haskell Amendment, take the material out of the definition of “return information.” We agree with the IRS.

Petitioner filed a request with respondent under the Freedom of Information Act (FOIA), 5 U. S. C. §552, for the production of numerous documents. Among the materials sought by petitioner were “[c]opies of all information relating to or containing the names of, Scientology, Church of Scientology, any specific Scientology church or entity identified by containing the words Scientology, Hubbard and/or Dianetics in their names, L. Ron Hubbard or Mary Sue Hubbard in the form of written record, correspondence, document, memorandum, form, computor [sic] tape, computor [sic] program or microfilm, which is contained in” an extensive list of respondent’s case files and data systems. FOIA Request Dated May 16, 1980, App. 20a-27a. Petitioner also requested similar information from the offices and personal areas of a number of respondent’s officials.

Dissatisfied by the slow response to its request, petitioner filed suit in the United States District Court for the District of Columbia to compel release of the materials. In the District Court the parties agreed — as they continue to agree here — that § 6103 of the Internal Revenue Code is the sort of statute referred to by the FOIA in 5 U. S. C. § 552(b)(3) relating to matters that are “specifically exempted from disclosure by statute . . . ”; thus, if §6103 forbids the disclosure of material, it may not be produced in response to a request under the FOIA. Respondent argued that many of the records were protected as “returns” or “return information” under § 6103. Section 6103(a) provides that “[r]eturns and return information shall be confidential” and shall not be disclosed “except as authorized by this title.” A “return” is defined in § 6103(b)(1) as “any tax or information return, declaration of estimated tax, or claim for refund” including supporting schedules, attachments, and lists. Section 6103(b)(2) then supplies a more extensive definition of “return information,” which includes:

“[A] taxpayer’s identity, the nature, source, or amount of his income, payments, receipts, deductions, exemptions, credits, assets, liabilities, net worth, tax liability, tax withheld, deficiencies, over-assessments, or tax payments, whether the taxpayer’s return was, is being, or will be examined or subject to other investigation or processing, or any other data, received by, recorded by, prepared by, furnished to, or collected by the Secretary with respect to a return or with respect to the determination of the existence, or possible existence, of liability (or the amount thereof) of any person under this title for any tax, penalty, interest, fine, forfeiture, or other imposition, or offense . . . .”

After providing this detailed explanation of confidential “return information,” § 6103(b)(2), as previously noted, continues: “but such term does not include data in a form which cannot be associated with, or otherwise identify, directly or indirectly, a particular taxpayer.” This last clause — the Haskell Amendment — was proposed as a floor amendment by Senator Haskell of Colorado and was adopted by a voice vote during the debate on the 1976 amendments to the Internal Revenue Code.

The District Court, after an in camera review of representative documents, held that respondent had correctly limited its search for and disclosure of materials requested by petitioner. 569 F. Supp. 1165 (DC 1983). Petitioner appealed that decision to the United States Court of Appeals for the District of Columbia Circuit. Following briefing and argument before a three-judge panel, the Court of Appeals sua sponte undertook en banc review of the meaning of the Haskell Amendment and the modification it works upon § 6103(b)(2). The Court of Appeals concluded that, by using the words “in a form,” Congress contemplated “not merely the deletion of an identifying name or symbol on a document that contains return information, but agency reformulation of the return information into a statistical study or some other composite product. . . .” 253 U. S. App. D. C. 85, 92, 792 F. 2d 153, 160 (1986) (emphasis in original). Thus, the court held, before respondent may produce documents otherwise protected, the Haskell Amendment requires that some modification have occurred in the form of the data contained in the documents. “[M]ere deletion of the taxpayer’s name or other identifying data is not enough, since that would render the reformulation requirement entirely duplicative of the nonidentification requirement.” Id., at 95, 792 F. 2d, at 163.

We granted certiorari, 479 U. S. 1063 (1987), to consider the scope of the Haskell Amendment and its relation to the confidentiality provisions of §§ 6103(a) and (b). Petitioner believes that the Haskell Amendment makes significantly greater inroads on the definition of “return information” than did the Court of Appeals. It makes two interrelated contentions: first, that the Haskell Amendment removes from the classification of “return information” all data which do not identify a particular taxpayer, and, second, that 5 U. S. C. § 552(b) — requiring that “[a]ny reasonably segregable portion” of a record be provided to a requester after deletion of the portions which are exempt — compels respondent to redact “return information” in its files where possible so as to bring that material within the terms of the Haskell Amendment. We reject both of these arguments.

We are told by the IRS that, as a practical matter, “return information” might include the report of an audit examination, internal IRS correspondence concerning a taxpayer’s claim, or a notice of deficiency issued by the IRS proposing an increase in the taxpayer’s assessment. Tr. of Oral Arg. 24-25. Petitioner asserts that the segregation requirement of the FOIA, § 552(b), directs respondent to remove the identifiers from such documents as these and that, once the materials are purged of such identifiers, they must be disclosed because they no longer constitute return information described in § 6103(b)(2).

We find no support for petitioner’s arguments in either the language of § 6103 or in its legislative history. In addition to the returns themselves, which are protected from disclosure by § 6103(b)(1), § 6103(b)(2) contains an elaborate description of the sorts of information related to returns that respondent is compelled to keep confidential. If the mere removal of identifying details from return information sufficed to put the information “in a form” envisioned by the Haskell Amendment, the remainder of the categories included in § 6103(b)(2) would often be irrelevant. The entire section could have been prefaced by the simple instruction to respondent that the elimination of identifiers would shift related tax data outside the realm of protected return information. Respondent would then first determine whether the information could be redacted so as not to identify a taxpayer; only if it could not would the extensive list of materials that constitute “return information” become pertinent. And if petitioner correctly interprets the intent of the Haskell Amendment, Congress’ drafting was awkward in the extreme. The Amendment exempts “data in a form” (emphasis added) that cannot be associated with or otherwise identify a particular taxpayer. A much more natural phrasing would omit the confusing and unnecessary words “in a form” and refer simply to data.

Other provisions of § 6103 likewise belie petitioner’s construction of the Haskell Amendment. Subsections (c) through (o) of § 6103 set forth various exceptions to the general rule that returns and return information are confidential and not to be disclosed. These subsections provide that in some circumstances, and with special safeguards, returns and return information can be made available to congressional committees, the President, state tax officials, and other federal agencies. The subsections also recognize that “return information” remains such even when it does not identify a particular taxpayer. Subsections 6103 (f)(1), (2), and (4), for example, allow the release of returns and return information to congressional committees, but distinguish between return information that identifies a taxpayer and return information that does not. Subsection (f) is thus inconsistent with petitioner’s theory that nonidentifying data cease to be return information at all.

The legislative history of the Tax Reform Act of 1976, Pub. L. 94-455, 90 Stat. 1520, of which the amendments to § 6103 are a part, also indicates that Congress did not intend the statute to allow the disclosure of otherwise confidential return information merely by the redaction of identifying details. One of the major purposes in revising § 6103 was to tighten the restrictions on the use of return information by entities other than respondent. See S. Rep. No. 94-938, p. 318 (1976) (“[Rjeturns and return information should generally be treated as confidential and not subject to disclosure except in those limited situations delineated in the newly amended section 6103”). Petitioner’s suggestion that the Haskell Amendment was intended to modify the restrictions of §6103 by making all nonidentifying return information eligible for disclosure would mean that the Amendment was designed to undercut the legislation’s primary purpose of limiting access to tax filings.

The circumstances under which the Haskell Amendment was adopted make us reluctant to credit it with this expansive purpose. During debate on the Senate floor, Senator Haskell proposed that § 6103(b)(2) be amended to make clear that return information “does not include data in a form which cannot be associated with, or otherwise identify, directly or indirectly, a particular taxpayer.” He then added this explanation of his proposal:

“[T]he purpose of this amendment is to insure that statistical studies and other compilations of data now prepared by the Internal Revenue Service and disclosed by it to outside parties will continue to be subject to disclosure to the extent allowed under present law. Thus the Internal Revenue Service can continue to release for research purposes statistical studies and compilations of data, such as the tax model, which do not identify individual taxpayers.
“The definition of ‘return information’ was intended to neither enhance nor diminish access now obtainable under the Freedom of Information Act to statistical studies and compilations of data by the Internal Revenue Service. Thus, the addition by the Internal Revenue Service of easily deletable identifying information to the type of statistical study or compilation of data which, under its current practice, has [sic] been subject to disclosure, will not prevent disclosure of such study or compilation under the newly amended § 6103. In such an instance, the identifying information would be deleted and disclosure of the statistical study or compilation of data be made.” 122 Cong. Rec. 24012 (1976).

After these remarks, the floor manager of the legislation, Senator Long, added that he would “be happy to take this amendment to conference. It might not be entirely necessary, but it might serve a good purpose.” The Haskell Amendment was then passed by voice vote in the Senate and became part of the conference bill.

We find it difficult to believe that Congress in this manner adopted an amendment which would work such an alteration to the basic thrust of the draft bill amending § 6103. The Senate’s purpose in revising § 6103 was, as we have noted, to impose greater restrictions on the disclosure of tax data; a change in the proposed draft permitting disclosure of all return information after deletion of material identifying a particular taxpayer would have, it seems to us, at a minimum engendered some debate in the Senate and resulted in a rollcall vote. More importantly, Senator Haskell’s remarks clearly indicate that he did not mean to revise § 6103(b)(2) in this fashion. He refers only to statistical studies and compilations, and gives no intimation that his amendment would require respondent to remove identifying details from material as it exists in its files in order to comply with its requirement. All in all, we think this is a case where common sense suggests, by analogy to Sir Arthur Conan Doyle’s “dog that didn’t bark,” that an amendment having the effect petitioner ascribes to it would have been differently described by its sponsor, and not nearly as readily accepted by the floor manager of the bill.

We thus hold that, as with a return itself, removal of identification from return information would not deprive it of protection under § 6103(b). Since such deletion would not make other-wise protected return information disclose-able, respondent has no duty under the FOIA to undertake such redaction. The judgment of the Court of Appeals is accordingly

Affirmed.

Justices Brennan and Sc alia took no part in the consideration or decision of this case.

       The decision of the District of Columbia Circuit was thus in substantial agreement with the Seventh Circuit’s opinion in King v. IRS, 688 F. 2d 488 (1982), and the Eleventh Circuit’s determination in Currie v. IRS, 704 F. 2d 523 (1983). The Seventh Circuit concluded in King that § 6103 “protects from disclosure all nonamalgamated items listed in subsection (b) (2)(A), and that the Haskell Amendment provides only for the disclosure of statistical tabulations which are not associated with or do not identify particular taxpayers.” 688 F. 2d, at 493. Similarly, in Currie the Eleventh Circuit held that the Haskell Amendment does not obligate the IRS, in a suit under the FOIA, to delete identifying material from documents and release what would otherwise be return information. 704 F. 2d, at 531-532.
      The Ninth Circuit, however, reached a different result in Long v. IRS, 596 F. 2d 362 (1979), cert. denied, 446 U. S. 917 (1980). In Long, the court found that the Haskell Amendment removes from the category of protected return information any documents that do not identify a particular taxpayer once names, addresses, and similar details are deleted. See 596 F. 2d, at 367-369.

       The original panel applied the en bane decision to the search and disclosure undertaken by respondent. See 253 U. S. App. D. C. 78, 792 F. 2d 146 (1986). Although many of the requested documents were protected as “return information,” the panel found that the District Court had erred in accepting respondént’s blanket assertion that all information responsive to petitioner’s request in files unrelated to petitioner’s California branch was exempt from disclosure. The panel remanded the case to District Court with instructions that respondent conduct a new search for information about the third parties identified by petitioner and justify any withholding of the information under the FOIA or § 6103. See id., at 84-85, 792 F. 2d, at 152-153.


source: Caselaw Access Project

author: Justice White

license: Public Domain

text:
    CARPENTER et al. v. UNITED STATES
    No. 86-422.
    Argued October 7, 1987
    Decided November 16, 1987

      White, J., delivered the opinion for a unanimous Court as to holding number 2, above.

      Don D. Buchwald argued the cause for petitioners. With him on the briefs were Jed S. Rakoff, Howard W. Goldstein, James Niss, E. Michael Bradley, I. Scott Bieler, and Alan R. Kaufman.

      Solicitor General Fried argued the cause for the United States. With him on the brief were Assistant Attorney General Weld, Deputy Solicitor General Cohen, Charles A. Rothfeld, Daniel L. Goelzer, Paul Gonson, Jacob H. Still-man, Rosalind C. Cohen, and Katherine Gresham

        Benjamin W. Heineman, Jr., and Carter G. Phillips filed a brief for the Reporters Committee for Freedom of the Press et al. as amici curiae urging reversal.

   Justice White

delivered the opinion of the Court.

Petitioners Kenneth Felis and R. Foster Winans were convicted of violating § 10(b) of the Securities Exchange Act of 1934, 48 Stat. 891, 15 U. S. C. §78j(b), and Rule 10b-5, 17 CFR §240.10b-5 (1987). United States v. Winans, 612 F. Supp. 827 (SDNY 1985). They were also found guilty of violating the federal mail and wire fraud statutes, 18 U. S. C. §§ 1341, 1343, and were convicted for conspiracy under 18 U. S. C. §371. Petitioner David Carpenter, Winans’ roommate, was convicted for aiding and abetting. With a minor exception, the Court of Appeals for the Second Circuit affirmed, 791 F. 2d 1024 (1986); we granted certiorari, 479 U. S. 1016 (1986).

I

In 1981, Winans became a reporter for the Wall Street Journal (the Journal) and in the summer of 1982 became one of the two writers of a daily column, “Heard on the Street.” That column discussed selected stocks or groups of stocks, giving positive and negative information about those stocks and taking “a point of view with respect to investment in the stocks that it reviews.” 612 F. Supp., at 830. Winans regularly interviewed corporate executives to put together interesting perspectives on the stocks that would be highlighted in upcoming columns, but, at least for the columns at issue here, none contained corporate inside information or any “hold for release” information. Id., at 830, n. 2. Because of the “Heard” column’s perceived quality and integrity, it had the potential of affecting the price of the stocks which it examined. The District Court concluded on the basis of testimony presented at trial that the “Heard” column “does have an impact on the market, difficult though it may be to quantify in any particular case.” Id., at 830.

The official policy and practice at the Journal was that prior to publication, the contents of the column were the Journal’s confidential information. Despite the rule, with which Winans was familiar, he entered into a scheme in October 1983 with Peter Brant and petitioner Felis, both connected with the Kidder Peabody brokerage firm in New York City, to give them advance information as to the timing and contents of the “Heard” column. This permitted Brant and Felis and another conspirator, David Clark, a client of Brant, to buy or sell based on the probable impact of the column on the market. Profits were to be shared. The conspirators agreed that the scheme would not affect the journalistic purity of the “Heard” column, and the District Court did not find that the contents of any of the articles were altered to further the profit potential of petitioners’ stock-trading scheme. Id., at 832, 834-835. Over a 4-month period, the brokers made prepublication trades on the basis of information given them by Winans about the contents of some 27 “Heard” columns. The net profits from these trades were about $690,000.

In November 1983, correlations between the “Heard” articles and trading in the Clark and Felis accounts were noted at Kidder Peabody and inquiries began. Brant and Felis denied knowing anyone at the Journal and took steps to conceal the trades. Later, the Securities and Exchange Commission began an investigation. Questions were met by denials both by the brokers at Kidder Peabody and by Winans at the Journal. As the investigation progressed, the conspirators quarreled, and on March 29, 1984, Winans and Carpenter went to the SEC and revealed the entire scheme. This indictment and a bench trial followed. Brant, who had pleaded guilty under a plea agreement, was a witness for the Government.

The District Court found, and the Court of Appeals agreed, that Winans had knowingly breached a duty of confidentiality by misappropriating prepublication information regarding the timing and contents of the “Heard” column, information that had been gained in the course of his employment under the understanding that it would not be revealed in advance of publication and that if it were, he would report it to his employer. It was this appropriation of confidential information that underlay both the securities laws and mail and wire fraud counts. With respect to the § 10(b) charges, the courts below held that the deliberate breach of Winans’ duty of confidentiality and concealment of the scheme was a fraud and deceit on the Journal. Although the victim of the fraud, the Journal, was not a buyer or seller of the stocks traded in or otherwise a market participant, the fraud was nevertheless considered to be “in connection with” a purchase or sale of securities within the meaning of the statute and the rule. The courts reasoned that the scheme’s sole purpose was to buy and sell securities at a profit based on advance information of the column’s contents. The courts below rejected petitioners’ submission, which is one of the two questions presented here, that criminal liability could not be imposed on petitioners under Rule 10b-5 because “the newspaper is the only alleged victim of fraud and has no interest in the securities traded.”

In affirming the mail and wire fraud convictions, the Court of Appeals ruled that Winans had fraudulently misappropriated “property” within the meaning of the mail and wire fraud statutes and that its revelation had harmed the Journal. It was held as well that the use of the mail and wire services had a sufficient nexus with the scheme to satisfy §§1341 and 1343. The petition for certiorari challenged these conclusions.

The Court is evenly divided with respect to the convictions under the securities laws and for that reason affirms the judgment below on those counts. For the reasons that follow, we also affirm the judgment with respect to the mail and wire fraud convictions.

II

Petitioners assert that their activities were not a scheme to defraud the Journal within the meaning of the mail and wire fraud statutes; and that in any event, they did not obtain any “money or property” from the Journal, which is a necessary element of the crime under our decision last Term in McNally v. United States, 483 U. S. 350 (1987). We are unpersuaded by either submission and address the latter first.

We held in McNally that the mail fraud statute does not reach “schemes to defraud citizens of their intangible rights to honest and impartial government,” id., at 355, and that the statute is “limited in scope to the protection of property rights.” Id., at 360. Petitioners argue that the Journal’s interest in prepublication confidentiality for the “Heard” columns is no more than an intangible consideration outside the reach of § 1341; nor does that law, it is urged, protect against mere injury to reputation. This is not a case like McNally, however. The Journal, as Winans’ employer, was defrauded of much more than its contractual right to his honest and faithful service, an interest too ethereal in itself to fall within the protection of the mail fraud statute, which “had its origin in the desire to protect individual property rights.” Mc-Nally, supra, at 359, n. 8. Here, the object of the scheme was to take the Journal’s confidential business information— the publication schedule and contents of the “Heard” column — and its intangible nature does not make it any less “property” protected by the mail and wire fraud statutes. McNally did not limit the scope of § 1341 to tangible as distinguished from intangible property rights.

Both courts below expressly referred to the Journal’s interest in the confidentiality of the contents and timing of the “Heard” column as a property right, 791 F. 2d, at 1034-1035; 612 F. Supp., at 846, and we agree with that conclusion. Confidential business information has long been recognized as property. See Ruckelshaus v. Monsanto Co., 467 U. S. 986, 1001-1004 (1984); Dirks v. SEC, 463 U. S. 646, 653, n. 10 (1983); Board of Trade of Chicago v. Christie Grain & Stock Co., 198 U. S. 236, 250-251 (1905); cf. 5 U. S. C. § 552(b)(4). “Confidential information acquired or compiled by a corporation in the course and conduct of its business is a species of property to which the corporation has the exclusive right and benefit, and which a court of equity will protect through the injunctive process or other appropriate remedy.” 3 W. Fletcher, Cyclopedia of Law of Private Corporations §857.1, p. 260 (rev. ed. 1986) (footnote omitted). The Journal had a property right in keeping confidential and making exclusive use, prior to publication, of the schedule and contents of the “Heard” column. Christie Grain, supra. As the Court has observed before:

“[N]ews matter, however little susceptible of ownership or dominion in the absolute sense, is stock in trade, to be gathered at the cost of enterprise, organization, skill, labor, and money, and to be distributed and sold to those who will pay money for it, as for any other merchandise.” International News Service v. Associated Press, 248 U. S. 215, 236 (1918).

Petitioners’ arguments that they did not interfere with the Journal’s use of the information or did not publicize it and deprive the Journal of the first public use of it, see Reply Brief for Petitioners 6, miss the point. The confidential information was generated from the business, and the business had a right to decide how to use it prior to disclosing it to the public. Petitioners cannot successfully contend based on Associated Press that a scheme to defraud requires a monetary loss, such as giving the information to a competitor; it is sufficient that the Journal has been deprived of its right to exclusive use of the information, for exclusivity is an important aspect of confidential business information and most private property for that matter.

We cannot accept petitioners’ further argument that Winans’ conduct in revealing prepublication information was no more than a violation of workplace rules and did not amount to fraudulent activity that is proscribed by the mail fraud statute. Sections 1341 and 1343 reach any scheme to deprive another of money or property by means of false or fraudulent pretenses, representations, or promises. As we observed last Term in McNally, the words “to defraud” in the mail fraud statute have the “common understanding” of “ ‘wronging one in his property rights by dishonest methods or schemes,’ and ‘usually signify the deprivation of something of value by trick, deceit, chicane or overreaching.’” 483 U. S., at 358 (quoting Hammerschmidt v. United States, 265 U. S. 182, 188 (1924)). The concept of “fraud” includes the act of embezzlement, which is “ ‘the fraudulent appropriation to one’s own use of the money or goods entrusted to one’s care by another.’” Grin v. Shine, 187 U. S. 181, 189 (1902).

The District Court found that Winans’ undertaking at the Journal was not to reveal prepublication information about his column, a promise that became a sham when in violation of his duty he passed along to his co-conspirators confidential information belonging to the Journal, pursuant to an ongoing scheme to share profits from trading in anticipation of the “Heard” column’s impact on the stock market. In Snepp v. United States, 444 U. S. 507, 515, n. 11 (1980) (per curiam), although a decision grounded in the provisions of a written trust agreement prohibiting the unapproved use of confidential Government information, we noted the similar prohibitions of the common law, that “even in the absence of a written contract, an employee has a fiduciary obligation to protect confidential information obtained during the course of his employment.” As the New York courts have recognized: “It is well established, as a general proposition, that a person who acquires special knowledge or information by virtue of a confidential or fiduciary relationship with another is not free to exploit that knowledge or information for his own personal benefit but must account to his principal for any profits derived therefrom.” Diamond v. Oreamuno, 24 N. Y. 2d 494, 497, 248 N. E. 2d 910, 912 (1969); see also Restatement (Second) of Agency §§388, Comment c, 396(c) (1958).

We have little trouble in holding that the conspiracy here to trade on the Journal’s confidential information is not outside the reach of the mail and wire fraud statutes, provided the other elements of the offenses are satisfied. The Journal’s business information that it intended to be kept confidential was its property; the declaration to that effect in the employee manual merely removed any doubts on that score and made the finding of specific intent to defraud that much easier. Winans continued in the employ of the Journal, appropriating its confidential business information for his own use, all the while pretending to perform his duty of safeguarding it. In fact, he told his editors twice about leaks of confidential information not related to the stock-trading scheme, 612 F. Supp., at 831, demonstrating both his knowledge that the Journal viewed information concerning the “Heard” column as confidential and his deceit as he played the role of a loyal employee. Furthermore, the District Court’s conclusion that each of the petitioners acted with the required specific intent to defraud is strongly supported by the evidence. Id., at 847-850.

Lastly, we reject the submission that using the wires and the mail to print and send the Journal to its customers did not satisfy the requirement that those mediums be used to execute the scheme at issue. The courts below were quite right in observing that circulation of the “Heard” column was not only anticipated but an essential part of the scheme. Had the column not been made available to Journal customers, there would have been no effect on stock prices and no likelihood of profiting from the information leaked by Winans.

The judgment below is

Affirmed.

       Section 10(b) provides:
      “It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange—
      “(b) To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [Securities and Exchange] Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.”

       Rule 10b-5 provides:
      “It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any national securities exchange,
      “(a) To employ any device, scheme, or artifice to defraud,
      “(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
      “(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person,
      “in connection with the purchase or sale of any security.”

       Section 1341 provides:
      “Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, or to sell, dispose of, loan, exchange, alter, give away, distribute, supply, or furnish or procure for unlawful use any counterfeit or spurious coin, obligation, security, or other article, or anything represented to be or intimated or held out to be such counterfeit or spurious article, for the purpose of executing such scheme or artifice or attempting so to do, places in any post office or authorized depository for mail matter, any matter or thing whatever to be sent or delivered by the Postal Service, or takes or receives therefrom, any such matter or thing, or knowingly causes to be delivered by mail according to the direction thereon, or at the place at which it is directed to be delivered by the person to whom it is addressed, any such matter or thing, shall be fined not more than $1,000 or imprisoned not more than five years, or both.”

       Section 1343 provides:
      “Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined not more than $1,000 or imprisoned not more than five years, or both.”

       Section 371 provides:
      “If two or more persons conspire either to commit any offense against the United States, or to defraud the United States, or any agency thereof in any manner or for any purpose, and one or more of such persons do any act to effect the object of the conspiracy, each shall be fined not more than $10,000 or imprisoned not more than five years, or both.”

       The mail and wire fraud statutes share the same language in relevant part, and accordingly we apply the same analysis to both sets of offenses here.


author:
Justice White
      Justice Blackmun,

text:
    UNITED PAPERWORKERS INTERNATIONAL UNION, AFL-CIO, ET AL. v. MISCO, INC.
    No. 86-651.
    Argued October 13, 1987
    Decided December 1, 1987

      White, J., delivered the opinion for a unanimous Court. Blackmun, J., filed a concurring opinion, in which Brennan, J., joined, post, p. 46.

      David Silberman argued the cause for petitioners. With him on the briefs were Lynn Agee, Michael Gottesman, and Laurence Gold.

      A. Richard Gear argued the cause and filed a brief for respondent.

        David E. Feller and William P. Murphy filed a brief for the National Academy of Arbitrators as amicus curiae urging reversal.

        Philip A. Lacovara and William R. Stein filed a brief for Northwest Airlines, Inc., et al. as amici curiae urging affirmance.

   Justice White

delivered the opinion of the Court.

The issue for decision involves several aspects of when a federal court may refuse to enforce an arbitration award rendered under a collective-bargaining agreement.

I

Misco, Inc. (Misco, or the Company), operates a paper converting plant in Monroe, Louisiana. The Company is a party to a collective-bargaining agreement with the United Paper-workers International Union, AFL-CIO, and its union local (the Union); the agreement covers the production and maintenance employees at the plant. Under the agreement, the Company or the Union may submit to arbitration any grievance that arises from the interpretation or application of its terms, and the arbitrator’s decision is final and binding upon the parties. The arbitrator’s authority is limited to interpretation and application of the terms contained in the agreement itself. The agreement reserves to management the right to establish, amend, and enforce “rules and regulations regulating the discipline or discharge of employees” and the procedures for imposing discipline. Such rules were to be posted and were to be in effect “until ruled on by grievance and arbitration procedures as to fairness and necessity.” For about a decade, the Company’s rules had listed as causes for discharge the bringing of intoxicants, narcotics, or controlled substances on to plant property or consuming any of them there, as well as reporting for work under the influence of such substances. At the time of the events involved in this case, the Company was very concerned about the use of drugs at the plant, especially among employees on the night shift.

Isiah Cooper, who worked on the night shift for Misco, was one of the employees covered by the collective-bargaining agreement. He operated a slitter-rewinder machine, which uses sharp blades to cut rolling coils of paper. The arbitrator found that this machine is hazardous and had caused numerous injuries in recent years. Cooper had been reprimanded twice in a few months for deficient performance. On January 21,1983, one day after the second reprimand, the police searched Cooper’s house pursuant to a warrant, and a substantial amount of marijuana was found. Contemporaneously, a police officer was detailed to keep Cooper’s car under observation at the Company’s parking lot. At about 6:30 p.m., Cooper was seen walking in the parking lot during work hours with two other men. The three men entered Cooper’s car momentarily, then walked to another car, a white Cutlass, and entered it. After the other two men later returned to the plant, Cooper was apprehended by police in the backseat of this car with marijuana smoke in the air and a lighted marijuana cigarette in the frontseat ashtray. The police also searched Cooper’s car and found a plastic scales case and marijuana gleanings. Cooper was arrested and charged with marijuana possession.

On January 24, Cooper told the Company that he had been arrested for possession of marijuana at his home; the Company did not learn of the marijuana cigarette in the white Cutlass until January 27. It then investigated and on February 7 discharged Cooper, asserting that in the circumstances, his presence in the Cutlass violated the rule against having drugs on the plant premises. Cooper filed a grievance protesting his discharge the same day, and the matter proceeded to arbitration. The Company was not aware until September 21, five days before the arbitration hearing was scheduled, that marijuana had been found in Cooper’s car. That fact did not become known to the Union until the hearing began. At the hearing it was stipulated that the issue was whether the Company had “just cause to discharge the Grievant under Rule II. 1” and, “[i]f not, what if any should be the remedy.” App. to Pet. for Cert. 26a.

The arbitrator upheld the grievance and ordered the Company to reinstate Cooper with backpay and full seniority. The arbitrator based his finding that there was not just cause for the discharge on his consideration of seven criteria. In particular, the arbitrator found that the Company failed to prove that the employee had possessed or used marijuana on company property: finding Cooper in the backseat of a car and a burning cigarette in the frontseat ashtray was insufficient proof that Cooper was using or possessed marijuana on company property. Id., at 49a-50a. The arbitrator refused to accept into evidence the fact that marijuana had been found in Cooper’s car on company premises because the Company did not know of this fact when Cooper was discharged and therefore did not rely on it as a basis for the discharge.

The Company filed suit in District Court, seeking to vacate the arbitration award on several grounds, one of which was that ordering reinstatement of Cooper, who had allegedly possessed marijuana on the plant premises, was contrary to public policy. The District Court agreed that the award must be set aside as contrary to public policy because it ran counter to general safety concerns that arise from the operation of dangerous machinery while under the influence of drugs, as well as to state criminal laws against drug possession. The Court of Appeals affirmed, with one judge dissenting. The court ruled that reinstatement would violate the public policy “against the operation of dangerous machinery by persons under the influence of drugs or alcohol.” 768 F. 2d 739, 743 (CA5 1985). The arbitrator had found that Cooper was apprehended on company premises in an atmosphere of marijuana smoke in another’s car and that marijuana was found in his own car on the company lot. These facts established that Cooper had violated the Company’s rules and gave the Company just cause to discharge him. The arbitrator did not reach this conclusion because of a “narrow focus on Cooper’s procedural rights” that led him to ignore what he “knew was in fact true: that Cooper did bring marijuana onto his employer’s premises. ” Ibid. Even if the arbitrator had not known of this fact at the time he entered his award, “it is doubtful that the award should be enforced today in light of what is now known.” Ibid.

Because the Courts of Appeals are divided on the question of when courts may set aside arbitration awards as contravening public policy, we granted the Union’s petition for a writ of certiorari, 479 U. S. 1029 (1987), and now reverse the judgment of the Court of Appeals.

II

The Union asserts that an arbitral award may not be set aside on public policy grounds unless the award orders conduct that violates the positive law, which is not the case here. But in the alternative, it submits that even if it is wrong in this regard, the Court of Appeals otherwise exceeded the limited authority that it had to review an arbitrator’s award entered pursuant to a collective-bargaining agreement. Respondent, on the other hand, defends the public policy decision of the Court of Appeals but alternatively argues that the judgment below should be affirmed because of erroneous findings by the arbitrator. We deal first with the opposing alternative arguments.

A

Collective-bargaining agreements commonly provide grievance procedures to settle disputes between union and employer with respect to the interpretation and application of the agreement and require binding arbitration for unsettled grievances. In such cases, and this is such a case, the Court made clear almost 30 years ago that the courts play only a limited role when asked to review the decision of an arbitrator. The courts are not authorized to reconsider the merits of an award even though the parties may allege that the award rests on errors of fact or on misinterpretation of the contract. “The refusal of courts to review the merits of an arbitration award is the proper approach to arbitration under collective bargaining agreements. The federal policy of settling labor disputes by arbitration would be undermined if courts had the final say on the merits of the awards.” Steelworkers v. Enterprise Wheel & Car Corp., 363 U. S. 593, 596 (1960). As long as the arbitrator’s award “draws its essence from the collective bargaining agreement,” and is not merely “his own brand of industrial justice,” the award is legitimate. Id., at 597.

“The function of the court is very limited when the parties have agreed to submit all questions of contract interpretation to the arbitrator. It is confined to ascertaining whether the party seeking arbitration is making a claim which on its face is governed by the contract. Whether the moving party is right or wrong is a question of contract interpretation for the arbitrator. In these circumstances the moving party should not be deprived of the arbitrator’s judgment, when it was his judgment and all that it connotes that was bargained for.
“The courts, therefore, have no business weighing the merits of the grievance, considering whether there is equity in a particular claim, or determining whether there is particular language in the written instrument which will support the claim.” Steelworkers v. American Mfg. Co., 363 U. S. 564, 567-568 (1960) (emphasis added; footnote omitted).

See also AT&T Technologies, Inc. v. Communications Workers, 475 U. S. 643, 649-650 (1986).

The reasons for insulating arbitral decisions from judicial review are grounded in the federal statutes regulating labor-management relations. These statutes reflect a decided preference for private settlement of labor disputes without the intervention of government: The Labor Management Relations Act of 1947, 61 Stat. 154, 29 U. S. C. § 173(d), provides that “[f]inal adjustment by a method agreed upon by the parties is hereby declared to be the desirable method for settlement of grievance disputes arising over the application or interpretation of an existing collective-bargaining agreement.” See also AT&T Technologies, supra, at 650. The courts have jurisdiction to enforce collective-bargaining contracts; but where the contract provides grievance and arbitration procedures, those procedures must first be exhausted and courts must order resort to the private settlement mechanisms without dealing with the merits of the dispute. Because the parties have contracted to have disputes settled by an arbitrator chosen by them rather than by a judge, it is the arbitrator’s view of the facts and of the meaning of the contract that they have agreed to accept. Courts thus do not sit to hear claims of factual or legal error by an arbitrator as an appellate court does in reviewing decisions of lower courts. To resolve disputes about the application of a collective-bargaining agreement, an arbitrator must find facts and a court may not reject those findings simply because it disagrees with them. The same is true of the arbitrator’s interpretation of the contract. The arbitrator may not ignore the plain language of the contract; but the parties having authorized the arbitrator to give meaning to the language of the agreement, a court should not reject an award on the ground that the arbitrator misread the contract. Enterprise Wheel, supra, at 599. So, too, where it is contemplated that the arbitrator will determine remedies for contract violations that he finds, courts have no authority to disagree with his honest judgment in that respect. If the courts were free to intervene on these grounds, the speedy resolution of grievances by private mechanisms would be greatly undermined. Furthermore, it must be remembered that grievance and arbitration procedures are part and parcel of the ongoing process of collective bargaining. It is through these processes that the supplementary rules of the plant are established. As the Court has said, the arbitrator’s award settling a dispute with respect to the interpretation or application of a labor agreement must draw its essence from the contract and cannot simply reflect the arbitrator’s own notions of industrial justice. But as long as the arbitrator is even arguably construing 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. Of course, decisions procured by the parties through fraud or through the arbitrator’s dishonesty need not be enforced. But there is nothing of that sort involved in this case.

B

The Company’s position, simply put, is that the arbitrator committed grievous error in finding that the evidence was insufficient to prove that Cooper had possessed or used marijuana on company property. But the Court of Appeals, although it took a distinctly jaundiced view of the arbitrator’s decision in this regard, was not free to refuse enforcement because it considered Cooper’s presence in the white Cutlass, in the circumstances, to be ample proof that Rule II. 1 was violated. No dishonesty is alleged; only improvident, even silly, factfinding is claimed. This is hardly a sufficient basis for disregarding what the agent appointed by the parties determined to be the historical facts.

Nor was it open to the Court of Appeals to refuse to enforce the award because the arbitrator, in deciding whether there was just cause to discharge, refused to consider evidence unknown to the Company at the time Cooper was fired. The parties bargained for arbitration to settle disputes and were free to set the procedural rules for arbitrators to follow if they chose. Article VI of the agreement, entitled “Arbitration Procedure,” did set some ground rules for the arbitration process. It forbade the arbitrator to consider hearsay evidence, for example, but evidentiary matters were otherwise left to the arbitrator. App. 19. Here the arbitrator ruled that in determining whether Cooper had violated Rule II. 1, he should not consider evidence not relied on by the employer in ordering the discharge, particularly in a case like this where there was no notice to the employee or the Union prior to the hearing that the Company would attempt to rely on after-discovered evidence. This, in effect, was a construction of what the contract required when deciding discharge cases: an arbitrator was to look only at the evidence before the employer at the time of discharge. As the arbitrator noted, this approach was consistent with the practice followed by other arbitrators. And it was consistent with our observation in John Wiley & Sons, Inc. v. Livingston, 376 U.S 543, 557 (1964), that when the subject matter of a dispute is arbitrable, “procedural” questions which grow out of the dispute and bear on its final disposition are to be left to the arbitrator.

Under the Arbitration Act, the federal courts are empowered to set aside arbitration awards on such grounds only when “the arbitrators were guilty of misconduct... in refusing to hear evidence pertinent and material to the controversy.” 9 U. S. C. § 10(c). See Commonwealth Coatings Corp. v. Continental Casualty Co., 393 U. S. 145 (1968). If we apply that same standard here and assume that the arbitrator erred in refusing to consider the disputed evidence, his error was not in bad faith or so gross as to amount to affirmative misconduct. Finally, it is worth noting that putting aside the evidence about the marijuana found in Cooper’s car during this arbitration did not forever foreclose the Company from using that evidence as the basis for a discharge.

Even if it were open to the Court of Appeals to have found a violation of Rule II. 1 because of the marijuana found in Cooper’s car, the question remains whether the court could properly set aside the award because in its view discharge was the correct remedy. Normally, an arbitrator is authorized to disagree with the sanction imposed for employee misconduct. In Enterprise Wheel, for example, the arbitrator reduced the discipline from discharge to a 10-day suspension. The Court of Appeals refused to enforce the award, but we reversed, explaining that though the arbitrator’s decision must draw its essence from the agreement, he “is to bring his informed judgment to bear in order to reach a fair solution of a problem. This is especially true when it comes to formulating remedies.” 363 U. S., at 597 (emphasis added). The parties, of course, may limit the discretion of the arbitrator in this respect; and it may be, as the Company argues, that under the contract involved here, it was within the unreviewable discretion of management to discharge an employee once a violation of Rule II. 1 was found. But the parties stipulated that the issue before the arbitrator was whether there was “just” cause for the discharge, and the arbitrator, in the course of his opinion, cryptically observed that Rule II. 1 merely listed causes for discharge and did not expressly provide for immediate discharge. Before disposing of the case on the ground that Rule II. 1 had been violated and discharge was therefore proper, the proper course would have been remand to the arbitrator for a definitive construction of the contract in this respect.

C

The Court of Appeals did not purport to take this course in any event. Rather, it held that the evidence of marijuana in Cooper’s car required that the award be set aside because to reinstate a person who had brought drugs onto the property was contrary to the public policy “against the operation of dangerous machinery by persons under the influence of drugs or alcohol.” 768 F. 2d, at 743. We cannot affirm that judgment.

A court’s refusal to enforce an arbitrator’s award under a collective-bargaining agreement because it is contrary to public policy is a specific application of the more general doctrine, rooted in the common law, that a court may refuse to enforce contracts that violate law or public policy. W. R. Grace & Co. v. Rubber Workers, 461 U. S. 757, 766 (1983); Hurd v. Hodge, 334 U. S. 24, 34-35 (1948). That doctrine derives from the basic notion that no court will lend its aid to one who founds a cause of action upon an immoral or illegal act, and is further justified by the observation that the public’s interests in confining the scope of private agreements to which it is not a party will go unrepresented unless the judiciary takes account of those interests when it considers whether to enforce such agreements. E. g., McMullen v. Hoffman, 174 U. S. 639, 654-655 (1899); Twin City Pipe Line Co. v. Harding Glass Co., 283 U. S. 353, 356-358 (1931). In the common law of contracts, this doctrine has served as the foundation for occasional exercises of judicial power to abrogate private agreements.

In W. R. Grace, we recognized that “a court may not enforce a collective-bargaining agreement that is contrary to public policy,” and stated that “the question of public policy is ultimately one for resolution by the courts.” 461 U. S., at 766. We cautioned, however, that a court’s refusal to enforce an arbitrator’s interpretation of such contracts is limited to situations where the contract as interpreted would violate “some explicit public policy” that is “well defined and dominant, and is to be ascertained ‘by reference to the laws and legal precedents and not from general considerations of supposed public interests.’” Ibid, (quoting Muschany v. United States, 324 U. S. 49, 66 (1945)). In W. R. Grace, we identified two important public policies that were potentially jeopardized by the arbitrator’s interpretation of the contract: obedience to judicial orders and voluntary compliance with Title VII of the Civil Rights Act of 1964. We went on to hold that enforcement of the arbitration award in that case did not compromise either of the two public policies allegedly threatened by the award. Two points follow from our decision in W. R. Grace. First, a court may refuse to enforce a collective-bargaining agreement when the specific terms contained in that agreement violate public policy. Second, it is apparent that our decision in that case does not otherwise sanction a broad judicial power to set aside arbitration awards as against public policy. Although we discussed the effect of that award on two broad areas of public policy, our decision turned on our examination of whether the award created any explicit conflict with other “laws and legal precedents” rather than an assessment of “general considerations of supposed public interests.” 461 U. S., at 766. At the very least, an alleged public policy must be properly framed under the approach set out in W. R. Grace, and the violation of such a policy must be clearly shown if an award is not to be enforced.

As we see it, the formulation of public policy set out by the Court of Appeals did not comply with the statement that such a policy must be “ascertained ‘by reference to the laws and legal precedents and not from general considerations of supposed public interests.’” Ibid, (quoting Muschany v. United States, supra, at 66). The Court of Appeals made no attempt to review existing laws and legal precedents in order to demonstrate that they establish a “well-defined and dominant” policy against the operation of dangerous machinery while under the influence of drugs. Although certainly such a judgment is firmly rooted in common sense, we explicitly held in W. R. Grace that a formulation of public policy based only on “general considerations of supposed public interests” is not the sort that permits a court to set aside an arbitration award that was entered in accordance with a valid collective-bargaining agreement.

Even if the Court of Appeals’ formulation of public policy is to be accepted, no violation of that policy was clearly shown in this case. In pursuing its public policy inquiry, the Court of Appeals quite properly considered the established fact that traces of marijuana had been found in Cooper’s car. Yet the assumed connection between the marijuana gleanings found in Cooper’s car and Cooper’s actual use of drugs in the workplace is tenuous at best and provides an insufficient basis for holding that his reinstatement would actually violate the public policy identified by the Court of Appeals “against the operation of dangerous machinery by persons under the influence of drugs or alcohol.” 768 F. 2d, at 743. A refusal to enforce an award must rest on more than speculation or assumption.

In any event, it was inappropriate for the Court of Appeals itself to draw the necessary inference. To conclude from the fact that marijuana had been found in Cooper’s car that Cooper had ever been or would be under the influence of marijuana while he was on the job and operating dangerous machinery is an exercise in factfinding about Cooper’s use of drugs and his amenability to discipline, a task that exceeds the authority of a court asked to overturn an arbitration award. The parties did not bargain for the facts to be found by a court, but by an arbitrator chosen by them who had more opportunity to observe Cooper and to be familiar with the plant and its problems. Nor does the fact that it is inquiring into a possible violation of public policy excuse a court for doing the arbitrator’s task. If additional facts were to be found, the arbitrator should find them in the course of any further effort the Company might have made to discharge Cooper for having had marijuana in his car on company premises. Had the arbitrator found that Cooper had possessed drugs on the property, yet imposed discipline short of discharge because he found as a factual matter that Cooper could be trusted not to use them on the job, the Court of Appeals could not upset the award because of its own view that public policy about plant safety was threatened. In this connection it should also be noted that the award ordered Cooper to be reinstated in his old job or in an equivalent one for which he was qualified. It is by no means clear from the record that Cooper would pose a serious threat to the asserted public policy in every job for which he was qualified.

The judgment of the Court of Appeals is reversed.

So ordered.

Justice Blackmun,

with whom Justice Brennan joins, concurring.

I join the Court’s opinion, but write separately to underscore the narrow grounds on which its decision rests and to emphasize what it is not holding today. In particular, the Court does not reach the issue upon which certiorari was granted: whether a court may refuse to enforce an arbitration award rendered under a collective-bargaining agreement on public policy grounds only when the award itself violates positive law or requires unlawful conduct by the employer. The opinion takes no position on this issue. See ante, at 45, n. 12. Nor do I understand the Court to decide, more generally, in what way, if any, a court’s authority to set aside an arbitration award on public policy grounds differs from its authority, outside the collective-bargaining context, to refuse to enforce a contract on public policy grounds. Those issues are left for another day.

I agree with the Court that the judgment of the Court of Appeals must be reversed, and I summarize what I understand to be the three alternative rationales for the Court’s decision:

1. The Court of Appeals exceeded its authority in concluding that the company’s discharge of Cooper was proper under the collective-bargaining agreement. The Court of Appeals erred in considering evidence that the arbitrator legitimately had excluded from the grievance process, in second-guessing the arbitrator’s factual finding that Cooper had not violated Rule II. 1, and in assessing the appropriate sanction under the agreement. See Steelworkers v. American Mfg. Co., 363 U. S. 564, 567-568 (1960); Steelworkers v. Enterprise Wheel & Car Corp., 363 U. S. 593, 596-597, 599 (1960). Absent its overreaching, the Court of Appeals lacked any basis for disagreeing with the arbitrator’s conclusion that there was not “just cause” for discharging Cooper. See ante, at 39-42.

2. Even if the Court of Appeals properly considered evidence of marijuana found in Cooper’s car and legitimately found a Rule II. 1 violation, the public policy advanced by the Court of Appeals does not support its decision to set aside the award. The reinstatement of Cooper would not contravene the alleged public policy “against the operation of dangerous machinery by persons under the influence of drugs or alcohol.” 768 F. 2d 739, 743 (CA5 1985). The fact that an employee’s car contains marijuana gleanings does not indicate that the employee uses marijuana on the job or that he operates his machine while under the influence of drugs, let alone that he will report to work in an impaired state in the future. See ante, at 44. Moreover, nothing in the record suggests that the arbitrator’s award, which gives the company the option of placing Cooper in a job equivalent to his old one, would require Cooper to operate hazardous machinery. See ante, at 44-45.

3. The public policy formulated by the Court of Appeals may not properly support a court’s refusal to enforce an otherwise valid arbitration award. In W. R. Grace & Co. v. Rubber Workers, 461 U. S. 757 (1983), we stated that the public policy must be founded on “flaws and legal precedents.’” Id., at 766, quoting Muschany v. United States, 324 U. S. 49, 66 (1945). The Court of Appeals identified no law or legal, precedent that demonstrated an “explicit public policy,” 461 U. S., at 766, against the operation of dangerous machinery by persons under the influence of drugs. Far from being “well defined and dominant,” as W. R. Grace prescribed, the Court of Appeals’ public policy was ascertained merely “from general considerations of supposed public interests.” Ibid. See ante, at 43. I do not understand the Court, by criticizing the company’s public policy formulation, to suggest that proper framing of an alleged public policy under the approach set out in W. R. Grace would be sufficient to justify a court’s refusal to enforce an arbitration award on public policy grounds. Rather, I understand the Court to hold that such compliance is merely a necessary step if an award is not to be enforced. See ante, at 44.

It is on this understanding that I join the opinion of the Court.

       App. 20-21. The language quoted is from Article XI of the agreement, which concerns maintenance of discipline. Article VI of the agreement sets out the arbitration procedure. Id,., at 18-20. The reserved rights of management are specified in Article IV of the agreement. Id., at 13-15.

       Rule II. 1 lists the following as causes for discharge: “Bringing intoxicants, narcotics, or controlled substances into, or consuming intoxicants, narcotics or controlled substances in the plant, or on plant premises. Reporting for duty under the influence of intoxicants, narcotics, or controlled substances.” App. to Pet. for Cert. 31a.

       Cooper later pleaded guilty to that charge, which was not related to his being in a car with a lighted marijuana cigarette in it. The authorities chose not to prosecute for the latter incident.

       The Company asserted that being in a car with a lit marijuana cigarette was a direct violation of the company rule against having an illegal substance on company property. App. 23.

       These considerations were the reasonableness of the employer’s position, the notice given to the employee, the timing of the investigation undertaken, the fairness of the investigation, the evidence against the employee, the possibility of discrimination, and the relation of the degree of discipline to the nature of the offense and the employee’s past record.

       The arbitrator stated: “One of the rules in arbitration is that the Company must have its proof in hand before it takes disciplinary action against an employee. The Company does not take the disciplinary action and then spend eight months digging up supporting evidence to justify its actions. In addition, the use of the gleanings evidence prevented the Grievant from knowing the full extent of the charge against him. Who knows what action the Grievant or the Union would have taken if the gleanings evidence had been made known from the outset of the Company’s investigation.” App. to Pet. for Cert. 47a.

       The decision below accords with the broader view of the courts’ power taken by the First and Seventh Circuits. See, e. g., United States Postal Service v. American Postal Workers Union, AFL-CIO, 736 F. 2d 822 (CA1 1984); E. I. DuPont de Nemours and Co. v. Grasselli Employees Independent Assn, of East Chicago, Inc., 790 F. 2d 611 (CA7), cert. denied, 479 U. S. 853 (1986). A narrower view has been taken by the Ninth and District of Columbia Circuits. See, e. g., Bevles Co. v. Teamsters Local 986, 791 F. 2d 1391 (CA9 1986); Northwest Airlines, Inc. v. Air Line Pilots Assn. International, 257 U. S. App. D. C. 181, 808 F. 2d 76 (1987); American Postal Workers Union v. United States Postal Service, 252 U. S. App. D. C. 169, 789 F. 2d 1 (1986).

       Labor arbitrators have stated that the correctness of a discharge “must stand or fall upon the reason given at the time of discharge,” see, e. g., West Va. Pulp & Paper Co., 10 Lab. Arb. 117, 118 (1947), and arbitrators often, but not always, confine their considerations to the facts known to the employer at the time of the discharge. 0. Fairweather, Practice and Procedure in Labor Arbitration 308-306 (2d ed. 1983); F. Elkouri & E. Elkouri, How Arbitration Works 634-635 (3d ed. 1973).

       The Arbitration Act does not apply to “contracts of employment of. . . workers engaged in foreign or interstate commerce,” 9 U. S. C. § 1, but the federal courts have often looked to the Act for guidance in labor arbitration cases, especially in the wake of the holding that § 301 of the Labor Management Relations Act, 1947, 61 Stat. 156, 29 U. S. C. § 185, empowers the federal courts to fashion rules of federal common law to govern “[s]uits for violation of contracts between an employer and a labor organization” under the federal labor laws. Textile Workers v. Lincoln Mills, 353 U. S. 448 (1957) (construing 29 U. S. C. § 185). See, e. g., Ludwig Honold Mfg. Co. v. Fletcher, 405 F. 2d 1123 (CA3 1969); Pietro Scalzitti Co. v. International Union of Operating Engineers, Local No. 150, 351 F. 2d 576 (CA7 1965).

       Even in the very rare instances when an arbitrator’s procedural aberrations rise to the level of affirmative misconduct, as a rule the court must not foreclose further proceedings by settling the merits according to its own judgment of the appropriate result, since this step would improperly substitute a judicial determination for the arbitrator’s decision that the parties bargained for in the collective-bargaining agreement. Instead, the court should simply vacate the award, thus leaving open the possibility of further proceedings if they are permitted under the terms of the agreement. The court also has the authority to remand for further proceedings when this step seems appropriate. See, e. g., Amalgamated Food & Allied Workers Union, Local 56 v. Great A&P Tea Co., 415 F. 2d 185 (CA3 1969) (vacating and remanding to the arbitrators for decision after finding that the arbitrators declined to arbitrate the issues submitted). See also 9 U. S. C. § 10(e) (“Where an award is vacated and the time within which the agreement required the award to be made has not expired the court may, in its discretion, direct a rehearing by the arbitrators”).

       The issue of safety in the workplace is a commonplace issue for arbitrators to consider in discharge cases, and it was a matter for the arbitrator in the first instance to decide whether Cooper’s alleged use of drugs on the job would actually pose a danger. That is not a problem here, for the arbitrator recognized that being under the influence of marijuana while operating slitter-rewinder machinery was indeed dangerous, and no one disputed this point. '

       We need not address the Union’s position that a court may refuse to enforce an award on public policy grounds only when the award itself violates a statute, regulation, or other manifestation of positive law, or compels conduct by the employer that would violate such a law.