Allis-Chalmers Corporation v. Lueck

PETITIONER: Allis-Chalmers Corporation
LOCATION: Cleburne City Hall

DOCKET NO.: 83-1748
DECIDED BY: Burger Court (1981-1986)
LOWER COURT: Wisconsin Supreme Court

CITATION: 471 US 202 (1985)
ARGUED: Jan 16, 1985
DECIDED: Apr 16, 1985

Gerald S. Boisits - on behalf of the Respondent
Theophil C. Kammholz - on behalf of the Petitioner

Facts of the case


Media for Allis-Chalmers Corporation v. Lueck

Audio Transcription for Oral Argument - January 16, 1985 in Allis-Chalmers Corporation v. Lueck

Warren E. Burger:

Mr. Kammholz, you may proceed whenever you're ready.

Theophil C. Kammholz:

Mr. Chief Justice and members of the Court:

At issue in this case is the extent to which a state, by application of state law, may regulate the legal obligations of parties to a collective bargaining agreement and adjudicate the legal consequences of the breach of such agreement.

A majority of the Wisconsin supreme court held that Section 301 of the Labor Management Relations Act of 1947 did not preempt a state court suit brought by a union employee against his employer, alleging tortious bad faith in the administrative handling of a disability claim, even though the employee's right to benefits derived entirely from a collective bargaining agreement, and the employee did not resort to the contractual grievance procedure which included arbitration at the terminal level.

The facts are simple and undisputed.

Allis-Chalmers and the UAW union for many years have been parties to collective bargaining agreements.

The current agreement at issue here incorporates a group health and disability plan funded by Allis-Chalmers and administered by Aetna Insurance Company.

Disability benefits are provided for non-occupational illness and injury to all UAW represented employees, including Lueck.

The agreement between the UAW and Allis-Chalmers also contains a provision for resolution of disputes, as I have noted earlier.

It's a typical union contract dispute resolution procedure, grievance procedure, culminating in arbitration at the final level.

Lueck suffered a nonwork-related disability.

Payments were initiated under the plan.

Lueck ultimately received all that was due him under the plan, but there was some delay in payment with respect to some of the obligation under the plan.

Lueck did not go to his union.

He did not go to the grievance procedure.

What he did do was to go to the circuit court for Milwaukee County, Wisconsin and file a lawsuit against Allis-Chalmers alleging contemptuous, deliberate, repeated conduct on the part of the company in failing to pay... make payments promptly.

He further alleged that as as result of the defendant's bad faith, he incurred emotional distress, pain and suffering, physical impairment, all to his damages to the extent of $10,000 compensatory and $300,000 punitive.

With respect to the circuit court suit, Allis-Chalmers and Aetna raised two defenses.

First, that the suit was preempted by Section 301 of the labor Management Relations Act; and secondly, that Lueck had not resorted to the contractual grievance procedure.

Sandra Day O'Connor:

Mr. Kammholz--

Theophil C. Kammholz:

Yes, Justice--

Sandra Day O'Connor:

--on a side point, may I inquire whether the disability plan involved here is governed by ERISA?

Theophil C. Kammholz:

--The record does not show this.

It may well be.

The reason I say the record does not show it, the case went up on summary judgment.

And I was about to come to that motion for summary judgment on the failure to exhaust the grievance procedure and on account of preemption under 301.

The circuit court granted motion for summary judgment on behalf of both defendants Allis-Chalmers and Aetna.

An appeal was taken to the Wisconsin court of appeals.

It affirmed the lower court decision.

And further appealed to the Wisconsin supreme court with respect to certiorari, to wit we're here today.