When Penske Logistics lost its contract to provide transportation services for the Indianapolis Star, it went out of business. It agreed to provide its employees several benefits, including recall rights, severance, and reemployment assistance. Several former employees filed suit against both Penske and the Union pursuant to Section 301 of the Labor-Management Relations Act. Chief Judge Young (S.D. Ind.) granted summary judgment to the defendants. He concluded that plaintiffs failed to meet either prong of a Section 301 action. First, they did not even allege that Penske violated the collective bargaining agreement. Second, they cannot contend that the Union violated its duty of fair representation since they never even complained to the Union. Plaintiffs appeal.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Tinder and Hamilton affirmed in part and vacated and remanded in part. The Court addressed the two arguments made on appeal. First, the plaintiffs contend that Penske could have been more generous with its benefits and had the cost covered by the Star under its contract with the Star. The Court noted that this claim was not a federal labor law claim, but rather a common law contract claim. The claim does not arise out of the same "controversy" as the alleged breach of the collective bargaining agreement so there is no supplemental jurisdiction. Although the plaintiffs allege diversity jurisdiction, they failed to provide any facts in support and the Court noted that it appeared that diversity jurisdiction did not exist. Second, with respect to the plaintiffs' contention that the Union failed to bargain hard enough, the Court identified a second jurisdictional problem. Section 301 only covers actions for violation of the collective bargaining agreement. The plaintiffs do not allege a violation of the agreement -- only a failure to bargain hard enough to get a better agreement with Penske. That claim is a claim alleging an unfair labor practice which is within the exclusive jurisdiction of the National Labor Relations Board. The Court affirmed summary judgment on the contract claim and remanded to dismiss for lack of jurisdiction on the unfair labor practice claim.