Allis-Chalmers Corp. v. Lueck

Supreme Court of the United States · 1985 · Labor Law

471 U.S. 202 (1985)

Updated August 1, 2026

Labor LawSection 301 preemptionLMRA § 301preemptioncollective-bargaining agreementfederal common lawbad-faith insurance tortarbitration

Facts

Lueck was an Allis-Chalmers employee covered by a collective-bargaining agreement that incorporated a separately negotiated disability plan funded by Allis-Chalmers and administered by Aetna. The agreement and a related letter of understanding created grievance procedures, including a Joint Plant Insurance Committee and final arbitration for insurance-related disputes. After Lueck suffered a nonoccupational back injury, Aetna approved his disability claim, but Lueck alleged that Allis-Chalmers periodically caused his benefits to be cut off, restored only after objections or additional information, and repeatedly required reexaminations. Lueck never pursued the contractual grievance process and instead brought a Wisconsin tort action alleging bad-faith handling of his claim and seeking compensatory and punitive damages.

Issue

Whether § 301 of the Labor Management Relations Act preempts a Wisconsin state-law tort action for bad-faith delay or handling of disability-benefit payments due under a collective-bargaining agreement. More specifically, the question is whether the tort claim is sufficiently independent of the labor contract or instead is substantially dependent on interpreting that agreement.

Rule

When resolution of a state-law claim is substantially dependent upon analysis of the terms of an agreement made between the parties in a labor contract, the claim must either be treated as a § 301 claim or dismissed as preempted by federal labor-contract law. State-law rights and obligations that do not exist independently of a collective-bargaining agreement, and whose evaluation is inextricably intertwined with consideration of that agreement's terms, are preempted by § 301.

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Nina Ortega works at a manufacturing plant in Toledo, Ohio, under a collective-bargaining agreement between her union and Lakefront Forge Systems. The agreement includes a wage-continuation benefit and a grievance process ending in binding arbitration. After Nina's payments are repeatedly delayed while the company requests additional medical certifications, she sues in Ohio state court for bad-faith claim handling and seeks punitive damages without filing a grievance.

Is Nina's state-law tort claim most likely preempted by § 301?

Explanation. Yes. Under the majority's rule, a state-law claim is preempted when its resolution is substantially dependent on analysis of a labor contract. A bad-faith processing claim about benefits created by the collective-bargaining agreement turns on what the agreement required regarding documentation, timing, and claim handling. A plaintiff cannot avoid § 301 by relabeling a contract-based dispute as a tort. (Derived from Allis-Chalmers Corp. v. Lueck (1985).)