## Facts

- Allis-Chalmers and an employee union entered a collective-bargaining agreement (CBA) that included a self-funded disability plan administered by an insurer.
- The CBA provided disability benefits for nonoccupational injuries and established a grievance process for disability disputes ending in final and binding arbitration.
- Roderick S. Lueck, a covered employee, suffered a nonoccupational back injury and began receiving disability payments.
- Lueck alleged the employer and insurer intermittently terminated payments, required additional medical examinations, and delayed reinstatement of benefits.
- Lueck bypassed the CBA grievance/arbitration process and filed a Wisconsin state-court tort action alleging bad-faith handling of his disability claim under Wisconsin law.

## Issues

1. Whether LMRA § 301 preempts a state-law tort claim for bad-faith handling of disability benefits provided under a CBA when resolving the claim requires analysis of the CBA’s terms.
2. Whether such a claim must be treated as a federal § 301 claim subject to the CBA’s contractual dispute-resolution procedures.

## Decision

- The Supreme Court reversed the Wisconsin Supreme Court.
- The Court held that when resolution of a state-law claim is substantially dependent on analysis of a CBA’s terms, the claim must be treated as a § 301 claim or dismissed as preempted.
- Lueck’s bad-faith claim was preempted because determining whether the employer/insurer acted wrongfully required interpreting the CBA’s disability-benefit obligations and administration standards.
- Because the CBA provided a binding grievance/arbitration mechanism for disability disputes, Lueck could not proceed in state tort without resort to the contractual process applicable to CBA-based rights.

## Legal Principles

- LMRA § 301 requires a uniform federal body of law for interpreting and enforcing collective-bargaining agreements.
- State-law claims are preempted if they are founded directly on rights created by a CBA or if their resolution is substantially dependent on interpreting the CBA.
- Preemption turns on the substance of the claim, not the state-law label (contract vs. tort).
- State rules of general application may survive § 301 if they create rights and obligations independent of the CBA and can be applied without construing CBA terms.
- Federal labor policy favors enforcement of agreed grievance and arbitration procedures for disputes over CBA-created benefits.

## Conclusion

The Court held that a state tort claim for bad-faith handling of disability benefits is displaced by LMRA § 301 when deciding the claim requires interpreting the collective-bargaining agreement, ensuring uniform federal labor-contract law and preserving the CBA’s grievance and arbitration process.


Allis-Chalmers Corp. v. Lueck, 471 U.S. 202 (1985)