In a unanimous decision, the Supreme Court held that federal courts generally do not have jurisdiction over suits seeking to invalidate collective bargaining agreements. Section 301 of the National Labor Relations Act grants federal courts jurisdiction over "[s]uits for violation of contracts between an employer and a labor organization." 29 U.S.C. ยง 185(a). Although several federal courts of appeals had found that Section 301confers jurisdiction over all contract-related claims, the Court unequivocally held that Section 301 confers jurisdiction only over suits claiming that a contract has been violated. The Supreme Court also rejected the suggestion that federal jurisdiction could be based upon the Declaratory Judgment Act. This part of the Court's decision, however, was more equivocal: while the decision left open the possibility that suits anticipating violations of labor contracts might be brought, it also raised questions concerning the appropriateness of anticipatory suits in general.
In this case, the UAW alleged that it had been induced to enter into a collective bargaining agreement by fraudulent representations, and it sought a declaration that the agreement was voidable at the UAW's option as well as both punitive and actual damages. In an opinion written by Justice Scalia, the Court held that a suit such as this one seeking to invalidate a labor contract was not "for violation" of a labor contract within the meaning of Section 301. "Suits for violation" of labor contracts, the Court reasoned, are "suits filed because a contract has been violated." The validity of a contract may, of course, be adjudicated in federal court in the course of deciding whether the contract has been violated. This power is, however, ancillary to, and not independent of, the power to adjudicate "[s]uits for violation of contracts."
The Supreme Court also held that the UAW's claim was not saved by the fact that it sought a declaratory judgment. The UAW argued that its request for declaratory relief was in anticipation of a suit by the petitioner Textron Lycoming seeking to enforce the collective bargaining agreement, that Section 301 would confer jurisdiction over such a suit, and that jurisdiction could therefore be premised upon the anticipated coercive suit. Although the Supreme Court had previously stated that jurisdiction over declaratory judgment actions may be based upon the coercive suit that might have been brought by the declaratory judgment defendant, it questioned whether federal jurisdiction over a nonfederal defense may be based upon an anticipated claim, particularly under Section 301. The Court found, however, that there was no need to resolve this issue because there was no actual case or controversy over the voidability of the agreement. In a concurrence, Justice Breyer suggested that the federal courts could consider a declaratory judgment suit seeking to invalidate a contract would be proper so long as there was an imminent threat of a suit to enforce the contract.