Source: http://openjurist.org/print/32431
Timestamp: 2015-11-28 18:56:52
Document Index: 781667980

Matched Legal Cases: ['§ 301', '§ 301', '§ 301', '§ 301', '§ 301', '§ 301', '§ 301', '§ 185', '§ 301', '§ 301', '§ 301', '§ 8', '§ 158']

471 US 202 Allis-Chalmers Corporation v. S Lueck
Home > 471 US 202 Allis-Chalmers Corporation v. S Lueck
471 US 202 Allis-Chalmers Corporation v. S Lueck 471 U.S. 202
105 S.Ct. 1904
85 L.Ed.2d 206
ALLIS-CHALMERS CORPORATION, Petitioner,v.Roderick S. LUECK.
The bad-faith handling of an insurance claim, including a claim under a disability insurance plan included in a collective-bargaining agreement, is a tort under Wisconsin law. Petitioner and a labor union, of which respondent employee of petitioner is a member, are parties to a collective-bargaining agreement that incorporates a self-funded disability plan administered by an insurance company and providing benefits for nonoccupational injuries to employees. The agreement establishes a disability grievance procedure that culminates in final and binding arbitration. Respondent, after suffering a nonoccupational injury, entered into a dispute over the manner in which petitioner and the insurer handled his disability claim. Rather than utilizing the grievance procedure, respondent brought a tort suit against petitioner and the insurer in a Wisconsin state court, alleging bad faith in the handling of his claim and seeking damages. The trial court ruled in favor of petitioner and the insurer, holding that respondent had stated a claim under § 301 of the Labor Management Relations Act, which provides that suits for violations of collective-bargaining agreements may be brought in federal district court. In the alternative, if the claim were deemed to arise under state law rather than § 301, it was pre-empted by federal labor law. The Wisconsin Court of Appeals affirmed. The Wisconsin Supreme Court reversed, holding that the claim did not arise under § 301 as constituting a violation of a labor contract but was a tort claim of bad faith. The court reasoned that under Wisconsin law the tort of bad faith is distinguishable from a bad-faith breach-of-contract claim, and that although a breach of duty is imposed as a consequence of the relationship established by contract, it is independent from that contract.
Held: When resolution of a state-law claim is substantially dependent upon analysis of the terms of a collective-bargaining agreement, that claim must either be treated as a § 301 claim or dismissed as pre-empted by federal labor-contract law. Here, respondent's claim should have been dismissed for failure to make use of the grievance procedure or as preempted by § 301. The right asserted by respondent is rooted in contract, and the bad-faith claim could have been pleaded as a contract claim under § 301. Unless federal law governs that claim, the meaning of the disability-benefit provisions of the collective-bargaining agreement would be subject to varying interpretations, and the congressional goal of a unified body of labor-contract law would be subverted. Preemption is also necessary to preserve the central role of arbitration in the resolution of labor disputes. Pp. 208-221.
Gerald S. Boisits, Milwaukee, Wis., for respondent.
The collective-bargaining agreement also establishes a four-step grievance procedure for an employee's contract grievance. This procedure culminates in final and binding arbitration if the union chooses to pursue the grievance that far. App. 18-29. A separate letter of understanding that binds the parties creates a special three-part grievance procedure for disability grievances. Id., at 43-44. The letter establishes a Joint Plant Insurance Committee composed of two representatives designated by the union and two designated by the employer. Id., at 43. The Committee has the authority to resolve all disputes involving "any insurance-related issues that may arise from provisions of the [Collective-Bargaining] Agreement." Ibid. An employee having an insurance-related complaint is to address it first to the Supervisor of Employee Relations. If the complaint is rejected or otherwise remains unresolved, the employee then may bring the dispute before the Insurance Committee. If the Committee does not resolve the matter, the employee may bring it to arbitration in the manner established under the collective-bargaining agreement. As indicated, that agreement permits the union or the employer to request that a grievance be submitted to final and binding arbitration before a neutral arbitrator agreed upon by the parties.1
Ruling on cross-motions for summary judgment, the trial court ruled in favor of Allis-Chalmers and Aetna. The court held that Lueck stated a claim under § 301 of the Labor Management Relations Act of 1947 (LMRA), 61 Stat. 156, 29 U.S.C. § 185(a), and that, in the alternative, if his claim "were deemed to arise under state law instead of Section 301," it was "preempted by federal labor law." App. to Pet. for Cert. 26-27. The Wisconsin Court of Appeals, in a decision "[n]ot recommended for publication in the official reports," id., at 25, affirmed the judgment in favor of Aetna on the ground that it owed no fiduciary duty to deal in good faith with Lueck's claim. The court agreed with the Circuit Court that federal law pre-empted the claim against Allis-Chalmers.3
The Supreme Court of Wisconsin, with one justice dissenting, reversed. Lueck v. Aetna Life Ins. Co., 116 Wis.2d 559, 342 N.W.2d 699 (1984). The court held, first, that the suit did not arise under § 301 of the LMRA, and therefore was not subject to dismissal for failure to exhaust the arbitration procedures established in the collective-bargaining agreement. The court reasoned that a § 301 suit arose out of a violation of a labor contract, and that the claim here was a tort claim of bad faith. Under Wisconsin law, the tort of bad faith is distinguishable from a bad-faith breach-of-contract claim: though a breach of duty exists as a consequence of the relationship established by contract, it is independent of that contract. Therefore, it said, the violation of the labor contract was "irrelevant to the issue of whether the defendants exercised bad faith in the manner in which they handled Lueck's claim." Id., at 566, 342 N.W.2d, at 703. The action, thus, was not a § 301 suit.
The court went on to address the question whether the state-law claims nevertheless were pre-empted by §§ 8(a)(5) and (d) of the National Labor Relations Act (NLRA), 49 Stat. 452, as amended, 29 U.S.C. §§ 158(a)(5) and (d). Applying the standard for determining NLRA pre-emption as enunciated in San Diego Building Trades Council v. Garmon, 359 U.S. 236, 244-245, 79 S.Ct. 773, 779-780, 3 L.Ed.2d 775 (1959), and Farmer v. Carpenters, 430 U.S. 290, 296-297, 97 S.Ct. 1056, 1061-1062, 51 L.Ed.2d 338 (1977), the court determined that the claims were not pre-empted. It found that the administration of disability-claim procedures under a collective-bargaining agreement is a matter only of peripheral concern to federal labor law, since payment of a disability claim is not a central aspect of labor relations. On the other hand, the court observed, the bad-faith insurance tort is of substantial significance to the State of Wisconsin, which has assumed a longstanding responsibility for assuring the prompt payment of disability claims. Permitting the state action to proceed would not have an adverse impact on the effective administration of national labor policy, since the courts will make no determination as to whether the labor agreement has been breached.
Finally, the court found that Aetna could be liable to Lueck for bad-faith administration of his disability claim since it was an agent of Allis-Chalmers for the purpose of administering claims. It thus reversed the appellate court's judgment and remanded the case for a determination whether Aetna played any role in the processing of Lueck's dis