In the
United States Court of Appeals
For the Seventh Circuit

No. 00-1320

IN RE:

BENTZ METAL PRODUCTS COMPANY, INC.,

Debtor-Appellee,

APPEAL OF:

LARRY FAEHNRICH, et al.,

Plaintiffs-Appellants,

v.

BENTZ METAL PRODUCTS COMPANY, INC., and
BANK ONE, INDIANA, NATIONAL ASSOCIATION,
a national banking association, as
successor to NBD BANK, N.A.,

Defendants-Appellees.

Appeal from the United States District Court
for the Northern District of Indiana, Fort Wayne Division.
No. 99-C-449--William C. Lee, Chief Judge.

Argued April 11, 2001--Decided June 7, 2001


  Before FLAUM, Chief Judge, and BAUER,
POSNER, COFFEY, EASTERBROOK, RIPPLE, MANION,
KANNE, ROVNER, DIANE P. WOOD, EVANS, and
WILLIAMS, Circuit Judges.

  EVANS, Circuit Judge. Indiana law
broadly protects the rights of workers
("mechanics and laborers employed in or
about any shop, mill, wareroom,
storeroom, . . . bridge, reservoir, . . .
drainage ditch . . . or any other earth-
moving operation . . . ." in the
charming, though antiquated, language of
the old Hoosier statute) against losing
wages due when an employer encounters
tough economic times. It does so by
moving workers to the front of the
company’s creditor queue with a
mechanic’s lien that trumps the rights of
other creditors to the company’s assets.
Today we consider whether that lien,
established under Indiana Code sec. 32-8-
3-1 et seq., protects unionized workers
to the same extent it undoubtedly
protects the rights of nonunionized
workers. We find that it does, a
determination that compels us to overrule
In re Bluffton Castings Corp., 

(7th Cir. 1999).

  The 20 employee-plaintiffs in this suit
are members of the United Automobile,
Aerospace and Agricultural Implement
Workers of America, Local 2298, and as
such they are parties to a collective
bargaining agreement with their employer,
the Bentz Metal Products Company, Inc.,
of Fort Wayne, Indiana.

  In 1996 an involuntary bankruptcy
petition under 11 U.S.C. sec. 303 was
filed against Bentz. While the bankruptcy
was pending, the employees filed liens
under Indiana law seeking to secure
unpaid vacation pay owed to them under
the CBA. Everyone agrees that unpaid
vacation pay, like other employee fringe
benefits, is treated the same as unpaid
wages, and the parties have stipulated
that the amount owed the employees is
$12,700.38. The employees filed an
adversary proceeding in bankruptcy court
to determine the validity and priority of
their liens. They named Bentz and its
secured creditor, now Bank One, as
defendants. Relying on our decision in
Bluffton Castings, which is directly on
point, the bankruptcy court quite
naturally held that sec. 301 of the Labor
Management Relations Act of 1947 (29
U.S.C. sec. 185(a) preempted the liens.
The district court affirmed.

  Graced with astute legal representation,
the employees appealed, candidly
acknowledging that what they were asking
us to do was reconsider a ruling which a
panel of the court recently issued. In
this instance, they have convinced us to
take this unusual step. Unusual, but not
unheard of. It is well-established that
on rehearing en banc, the full court may,
and sometimes does, overrule a decision
reached earlier by a three-judge panel in
a separate case. See Mojica v. Gannett
Co., 

(7th Cir. 1993) (en
banc).

  Two intertwined reasons compel the
result we reach today. First, our
examination of the relevant cases shows
that this issue requires case-by-case
factual analysis to determine the extent
to which a state law claim will require
interpretation of a CBA. The second is we
believe that the controlling legal
principle is stated too broadly in
Bluffton Castings.

  In Bluffton Castings the issue was, in
part, whether a claim based on the same
Indiana mechanic’s lien statute at issue
here was preempted under sec. 301. The
panel, relying on language in Lingle v.
Norge Division of Magic Chef, Inc., 

, 410 n.10 (1988), concluded that
it was. That language is that "[s]ection
301 governs claims founded directly on
rights created by collective-bargaining
agreements, and also claims
’substantially dependent on analysis of a
collective-bargaining agreement.’" From
this, the panel derived two alternative
conditions under which preemption would
result: "either because it depends on
interpretation of a CBA or because the
claim is founded on the CBA." Bluffton
Castings, at 862. In what we conclude was
too broad a reading of the phrase, the
panel held that the mechanic’s lien
claims were "founded on the CBA" and thus
preempted. We now hold, consistent with
Lingle and Livadas v. Bradshaw, 

(1994), that a state law claim is not
preempted if it does not require
interpretation of the CBA even if it may
require reference to the CBA.

  Since Textile Workers Union of America
v. Lincoln Mills, 

(1957), it
has been clear that sec. 301 expresses a
policy that the substantive law to apply
in sec. 301 cases is federal law, which
courts were directed to fashion from the
policy of national labor laws. The
preemptive effect of sec. 301 was first
explored in Teamsters v. Lucas Flour Co.,

(1962), a case involving a
claim for violating a collective
bargaining agreement. The guiding
principle behind sec. 301 preemption was
that a contract should not have different
meanings under federal law and the laws
of various states. Today, it is well-
understood that a claim for breach of a
collective bargaining agreement is
preempted. But in other cases, not based
directly on a CBA, the scope of
preemption continues to cause some
bewilderment. The Supreme Court itself
has noted, "We are aware . . . that the
Courts of Appeals have not been entirely
uniform in their understanding and
application of the principles set down in
Lingle and Lueck [Allis Chalmers Corp. v.
Lueck, 

(1985)]." Livadas, at
124 n.18. The Court, however, declined,
at that time, to make it clearer.

  So we must do our best. While preemption
is a strong federal policy, Congress has
not exercised authority to occupy the
entire field of labor legislation, and it
did not explicitly declare the extent to
which it intended sec. 301 to preempt
state law. What has become clear is that
preemption can extend beyond contract
disputes to other state law claims if
resolution of those claims is
sufficiently dependent on an
interpretation of a CBA. In Lueck, a
claim based on the Wisconsin tort of bad
faith in the handling of an insurance
claim was preempted because the claim was
substantially dependent on the
interpretation of a CBA. Two years later,
the Court made the statement relied on in
Bluffton Castings: that sec. 301 governs
claims "founded directly on rights
created by collective-bargaining
agreements, and also claims
’substantially dependent on analysis of a
collective-bargaining agreement.’"
Caterpillar Inc. v. Williams, 

, 394 (1987), (quoting Electrical
Workers v. Hechler, 

, 859 n.3
(1987)). But the Supreme Court has often
cautioned that "not every dispute
concerning employment, or tangentially
involving a provision of a collective-
bargaining agreement, is pre-empted by
sec. 301 or other provisions of the
federal labor law." Lueck, at 211.

  Then in Lingle, a claim based on the
Illinois tort of retaliatory discharge
was found not to be preempted: "[W]e
hold that an application of state law is
pre-empted by sec. 301 of the Labor
Management Relations Act of 1947 only if
such application requires the
interpretation of a collective-bargaining
agreement." At 413. More recently, in
Livadas, the Supreme Court said that a
claim based on a California wage payment
penalty statute should have been allowed
to proceed even though the amount of the
claim might be determined under the
collective bargaining agreement. The mere
need to look to the CBA for damage
computation was said to be no reason to
hold the state-law claim defeated by sec.
301. The issue is whether a state law
conflicts or interferes with federal law.
These principles were applied in a case
under the Railway Labor Act, in which a
state wrongful discharge was allowed to
proceed. Saying the standard under the
RLA was "virtually identical" to that in
LMRA cases, the Supreme Court again
cautioned that sec. 301 cannot be read
broadly to preempt rights conferred on
individual employees as a matter of state
law. Hawaiian Airlines, Inc. v. Norris,

(1994). The principles set
out in these cases, as other courts have
noted, are sometimes easier to mouth than
to apply, see, e.g., Foy v. Pratt &
Whitney Group, 

(2nd Cir.
1997), involving as they do, claims
reaching far beyond those clearly founded
on rights created by CBAs--for instance,
those for breach of a collective
bargaining agreement.

  In our case, as in Bluffton Castings,
the employees’ rights to the monies due,
and the precise amount, depend on the
collective bargaining agreement. Here,
that sum is undisputed. Nevertheless, it
remains true that the entitlement to the
money due is laid out in the CBA. If
entitlement or the amount due were
seriously in dispute, as to these
questions interpretation of the CBA would
be necessary and would be resolved in the
appropriate way--arbitration followed by
confirmation, or a direct 301 suit in
federal court if arbitration is not
called for in the CBA. But whether the
amount due is resolved, as here, by
stipulation, or whether it is resolved
through procedures set out in the CBA,
the contract issues are separate from the
claim the employees presented to the
bankruptcy court. Once the contract
issues are resolved, the employees can
present their separate claim in
bankruptcy for priority based on the
Indiana mechanic’s lien statute. The
priority among creditors in a bankruptcy
proceeding is not dependent on a CBA. It
is not something which a collective
bargaining agreement can or does dictate.
No amount of interpretation of a CBA and
no arbitrator’s decision would,
independent of the state law lien, compel
a bankruptcy court to let employees jump
ahead of a bank in the money line, which
brings us to some interesting sidelights.

  One is that the controversy before us is
not between employee and employer, as is
most often the case when sec. 301
preemption is an issue. In reality, this
case does not involve an employee suing
the employer (even though the employer is
a named defendant). Here, a third party--
the bank--is presenting a vigorous
defense of federal labor policy. That
defense, though, turns the policy behind
federal labor laws on its head. What the
bank really is arguing is that the
employees’ collective bargaining
agreement with their employer should be
used to benefit the bank at the
employees’ expense.

  The other issue we consider a sidelight
is whether preemption somehow depends on
whether the state law provides a benefit
which is nonnegotiable or whether it is
negotiable and waivable. The bank makes
the argument that if a right is subject
to negotiation or waiver, it is
preempted. The logic apparently is that
if the parties can negotiate over an
item, then whether, in fact, there was
negotiation or not, the union members do
not retain the benefit of the state law.
According to the bank, the mechanic’s
lien is subject to waiver and therefore
preempted. We do not think it is that
simple, even if this lien is waivable--a
point on which we offer no opinion.

  It is true that there is language in the
cases about negotiability and waiver.
Livadas says that both Lueck and Lingle
say that sec. 301 does not broadly
preempt "nonnegotiable rights conferred
on individual employees as a matter of
state law." At 123. Or, stated a bit more
positively, in Lueck, the Court makes a
reference to waiver: "[S]tate-law rights
and obligations that do not exist
independently of private agreements, and
that as a result can be waived or altered
by agreement of private parties, are pre-
empted by those agreements." At 213.
However, especially in light of later
statements, we do not read this language
as saying starkly that rights which can
be waived are automatically preempted;
rather, we think it is the independent
existence of the rights, not their
waivability, that has significance.

  In fact, in holding that a Maine
severance pay statute was not preempted,
the Supreme Court has said, in effect,
that negotiability enhances the case
against preemption: "[T]hat the parties
are free to devise their own severance
pay arrangements, however, strengthens
the case that the statute works no
intrusion on collective bargaining." Fort
Halifax Packing Co. v. Coyne, 

,
22 (1987). Finally, in yet another
footnote in Lingle, we find the following
rather confusing statement:

  Petitioner points to the fact that the
Illinois right to be free from
retaliatory discharge is nonnegotiable
and applies to unionized and nonunionized
workers alike. While it may be true that
most state laws that are not pre-empted
by sec. 301 will grant nonnegotiable
rights that are shared by all state
workers, we note that neither condition
ensures nonpre-emption. It is conceivable
that a State could create a remedy that,
although nonnegotiable, nonetheless
turned on the interpretation of a
collective-bargaining agreement for its
application. Such a remedy would be pre-
empted by sec. 301. Similarly, if a law
applied to all state workers but
required, at least in certain instances,
collective-bargaining agreement
interpretation, the application of the
law in those instances would be pre-
empted. Conversely, a law could cover
only unionized workers but remain unpre-
empted if no collective-bargaining
agreement interpretation was needed to
resolve claims brought thereunder.

Lingle, at 408 n.7. We are not convinced
that whether a right is negotiable or not
provides any sort of bright line between
claims that are preempted and those which
are not. It does not comport with federal
labor policy to have one rule for union
members and another for the rest of the
work force. A state cannot be allowed to
penalize or burden the right to
collective bargaining. In Livadas, the
result did not turn on the parties’
inability to contract around state
statutes, but rather the state’s
neutrality as between unionized and
nonunionized workers.

  Our conclusion that the claim pursuant
to the state law lien is not preempted
is, we think, based on a fair
interpretation of the cases. However,
perhaps we could have saved ourselves the
trouble and rested on dicta in a footnote
in Lingle, which sums up what we are
saying:

  A collective-bargaining agreement may,
of course, contain information such as
rate of pay and other economic benefits
that might be helpful in determining the
damages to which a worker prevailing in a
state-law suit is entitled. Although
federal law would govern the
interpretation of the agreement to
determine the proper damages, the
underlying state-law claim, not otherwise
pre-empted, would stand. Thus, as a
general proposition, a state-law claim
may depend for its resolution upon both
the interpretation of a collective-
bargaining agreement and a separate
state-law analysis that does not turn on
the agreement. In such a case, federal
law would govern the interpretation of
the agreement, but the separate state-law
analysis would not be thereby pre-empted.
As we said in Allis-Chalmers Corp. v.

, "not every
dispute . . . tangentially involving a
provision of a collective-bargaining
agreement, is pre-empted by sec. 301 . .
. ."

Lingle, at 413 n.12 (emphasis added)
(citation omitted).

  To require that for preemption to exist,
resolution of a claim must require
interpretation of a CBA, not a mere
glance at it, is consistent with recent
cases in this circuit and in other
circuits. Looking to the facts before us
in Atchley v. Heritage Cable Vision
Associates, 

, 502 (7th Cir.
1996), we held that the Indiana wage
payment statute was preempted, but we
cautioned:

  Our opinion today does not mean that
whenever a collective bargaining
agreement exists interpretation of that
agreement always will be required in
connection with the Indiana wage payment
statute and that the statute always will
be preempted by sec. 301.

See also United States v. Palumbo Bros.,

(7th Cir. 1998). Other
circuits require the same case-by-case
analysis of the state-law claim as it
relates to the CBA. As one would expect
in case-by-case analysis, in some
situations preemption is found and in
others it is not. A sampling of cases
finding preemption includes Firestone v.
Southern California Gas Co., 

(9th Cir. 2000) (California fair
labor provision preempted because the
claim required interpretation of the
CBA), and Martin v. Shaw’s Supermarkets,
Inc., 

(1st Cir. 1997) (
preemption of claims based on a statute
which contained a proviso that if the
rights created by statute were
inconsistent with a CBA, the agreement
would prevail). In other cases, there was
no preemption: Balcorta v. Twentieth
Century-Fox Film Corp., 

(9th Cir. 2000) (California wage law not
preempted); Voilas v. General Motors
Corp., 

(3rd Cir. 1999)
(fraud claim not preempted); Owen v.
Carpenters’ Dist. Council, 

(4th Cir. 1998) (wrongful discharge claim
survives); Foy v. Pratt & Whitney Group,

(2nd Cir. 1997)
(misrepresentation and unfair trade
practices claims allowed to
proceed);Hernandez v. Conriv Realty
Assoc., 

(2nd Cir. 1997)
(state breach of contract claims based on
a contract other than the CBA not
preempted even though CBA would dictate
the rate of pay).

  In summary, the overriding principle is
that for preemption to apply,
interpretation of the CBA and not simply
a reference to it is required. If the
entitlement to wages (or other employee
pay) or the amount due were at issue, the
CBA would control; almost certainly,
interpretation of the agreement would be
necessary and would be subject to the
arbitration procedures in the contract.
So as to that determination, preemption
would apply. The mechanic’s lien,
however, is a benefit provided to workers
based on a state policy protecting
workers; it is a separate claim, not
dependent on interpretation of the
agreement for its existence even though
the amount of the pay is dependent on the
CBA. In this situation, the claim is not
preempted.

  Accordingly, the decision of the
district court is REVERSED. This case is
REMANDED for the entry of judgment in
favor of the plaintiffs.



  Bauer, Circuit Judge, joined by Flaum,
Chief Judge, Coffey, Ripple, and Kanne,
Circuit Judges, dissenting. I
respectfully dissent. Ours is still the
sole Circuit to address whether a state’s
mechanic’s lien law is preempted by sec.
301 of the Labor Management Relations Act
of 1947, 29 U.S.C. sec. 185(a), and
although alone on the matter, we have
given it much attention. Two panels of
this Court and the en banc panel have
eyed it, and this dissent takes one more
look. I agree with the majority that the
applicable legal principles are far
"easier to mouth than to apply," ante at
5, but I disagree with the majority’s
application. I would uphold the vacated
panel opinion in this case and would
decline to reverse In re Bluffton
Castings Corp., 

(7th Cir.
1999).

  Lingle v. Norge Div. of Magic Chef, Inc.
instructs that sec. 301 "governs claims
founded on rights created by [CBAs], and
also claims ’substantially dependent on
analysis of a [CBA].’" 

, 410
n.10 (1988). Our opinion in Bluffton
rephrased the test as follows: "Various
circuits, including this one, have
recognized that a claim may be preempted
under the LMRA either because it depends
on interpretation of the CBA or because
the claim is founded on the 

(citations omitted). So, pre
emption applies, first, if the right is
created by state law and interpretation
of the CBA is required or, second, if the
claim is founded directly on rights
created by the CBA. I do not believe that
Bluffton stated these legal principles
too broadly.

  I am convinced that preemption applies
because the employees’ claims are founded
on rights created by the CBA. The
interpretation prong has been generally
applied when independent state rights are
implicated, such as tort actions, which
require some interpretation of the CBA to
resolve. When a cause of action is
created by state law, independent of the
CBA, a court must determine whether the
CBA needs to be interpreted or if a quick
look is enough. See Loewen Group Int’l,
Inc. v. Haberichter, 

, 1421
(7th Cir. 1995). The employees here seek
unpaid vacation pay owing to them only
under the CBA, which Bentz failed to pay
because it went bankrupt. This means,
simply put, that for whatever reason,
including lack of funds, Bentz breached
its contract with its employees. The
employees seek to enforce the CBA, and
therefore their claims are wholly founded
on rights created by the CBA. This is not
a case in which the employees seek
enforcement of a state right independent
of the CBA. As the majority notes,
federal law preempts a claim for breach
of a CBA. See ante at 4. Since the
employees’ claims are founded on the CBA,
the interpretation prong is not
implicated, and the employees’ state
mechanic’s liens are preempted.

  Section 301 "creates a federal remedy
for the breach of a [CBA]. The remedy is
exclusive; no action to enforce such an
agreement may be based on state law."
National Metalcrafters v. McNeil, 

, 823 (7th Cir. 1986). A state
mechanic’s lien does not create an
independent right to vacation pay; rather
it is merely a remedial vehicle used to
enforce the underlying claim to vacation
pay. The employees’ claim for vacation
pay is founded on the CBA. Since the
underlying claim to vacation pay is a
federal one, the employees’ attempt to
enforce their rights under the CBA via a
state mechanic’s lien runs full tilt into
the barriers of federal law.

  The majority writes, "[i]f the
entitlement to wages (or other employee
pay) or the amount due were at issue, the
CBA would control; almost certainly
interpretation of the agreement would be
necessary and would be subject to the
arbitration procedures in the contract.
So as to that determination, preemption
would apply." Ante at 10; see ante at 5.
The majority further says that if the
amount owing was disputed the dispute
"would be resolved in the appropriate
way--arbitration followed by
confirmation, or a direct 301 suit in
federal court if arbitration is not
called for in the CBA." Ante at 6. It is
true that the amount of vacation pay
owing to employees here is not disputed;
nevertheless, a state mechanic’s lien is
not the appropriate collection remedy.
Regardless of whether the amount due is
disputed or not, preemption applies
because the employees are seeking to
enforce the CBA. The CBA in this case
calls for disputes to be resolved through
arbitration.

  The parties have stipulated to the
amount owing to employees. The majority
says that since there is no dispute over
the amount, no interpretation of the CBA
is required, so preemption does not
apply. Whether the CBA needs to be
interpreted is not the question; no
matter how phrased the rights to be
enforced are founded on the CBA. In the
end, the rule adopted by the majority
will encourage employers to avoid
liability by simply disputing the amount
owed under the CBA. Cf. Antol v. Esposto,

, 1123 (3d Cir. 1996)
(Mansmann, J., dissenting). This may well
encourage artificial disputes between
employers and employees, which would buck
the purpose of the labor laws created to
maintain harmony between the parties.

  While it is true that the reasoning and
result urged by this dissent would have
the effect of treating unionized and
nonunionized workers differently, this
treatment should not be legally
offensive; unionized workers have
voluntarily bargained to be treated
differently by entering into the CBA and
agreeing to arbitral remedies to resolve
any breach of the CBA. This means that
secured creditors would maintain their
priority position, which, again, is not
an offensive result. While the employees’
situation is a sympathetic one, both the
case and statutory law require this
result. Side- stepping the law to reach
an equitable result in what is a contract
claim I do find legally offensive. I
would affirm.