In the case of International Brotherhood of Electrical Workers et al. v. Foust, 1978, the United States Supreme Court ruled that a union could not be held liable for damages resulting from wrongful discharge due to its breach of duty in fairly representing an employee during grievance proceedings. The plaintiff, Mr. Foust, was fired by his employer and sought help from his union to challenge this decision but claimed they did not adequately represent him leading to loss of employment and wages. He sued the union seeking compensatory damages for lost earnings caused by their alleged negligence or arbitrary action in handling his grievance against dismissal by his employer under Railway Labor Act (RLA). However, the court concluded that allowing such damage awards would risk draining unions' financial resources thereby hindering them in performing their roles effectively as collective bargaining representatives which is contrary to national labor policy goals set forth under RLA.

In the dissenting opinion for International Brotherhood of Electrical Workers v. Foust, Justice William Rehnquist argued that the majority's decision to bar punitive damages in cases involving unions' breach of duty of fair representation was not supported by federal labor policy or past court decisions. He contended that there is no explicit prohibition on punitive damages in such cases under federal law and noted several instances where courts had allowed them. Furthermore, he disagreed with the majority's view that allowing punitive damages would disrupt labor relations and potentially bankrupt unions, arguing instead that they could serve as a useful deterrent against union misconduct. Finally, he criticized the majority for overstepping its role by creating a rule barring punitive damages rather than leaving this issue to Congress.