In the case of Caterpillar Inc. et al. v. Williams et al., 1986, employees sued their employer, Caterpillar Inc., alleging breach of individual employment contracts when they were demoted from salaried to hourly positions without consent and with a reduction in benefits and job security. The Supreme Court ruled that the federal court did not have jurisdiction over this state law claim just because it was similar to a collective bargaining agreement under section 301 of the Labor Management Relations Act (LMRA). The Court held that if an employee's claim is based on rights arising out of an individual contract rather than a collective one, then it does not fall within LMRA §301’s purview even if disputes involving those rights may also implicate interpretation or application of terms in a labor contract.

The dissenting opinion in the case of Caterpillar Inc. v. Williams argued that federal jurisdiction should not be exercised over a state law claim simply because it is predicted that a defense will raise a question of federal law. The dissenters believed this approach would unnecessarily expand the scope of federal jurisdiction and undermine principles of judicial restraint, comity, and respect for states' rights to handle their own affairs. They also pointed out potential practical problems with such an expansion, including increased workload for already burdened federal courts and possible forum shopping by plaintiffs seeking more favorable treatment under federal laws or procedures than they might receive in state court.