In 1935 Cagney was listed as one of the Top Ten Moneymakers in Hollywood for the first time, and was cast more frequently in non-gangster roles; he played a lawyer who joins the FBI in G-Men, and he also took on his first, and only, Shakespearean role, as top-billed Nick Bottom in A Midsummer Night's Dream alongside Joe E. Brown as Flute and Mickey Rooney as Puck
Cagney's last movie in 1935 was Ceiling Zero, his third film with Pat O'Brien. O'Brien received top billing, which was a clear breach of Cagney's contract. This, combined with the fact that Cagney had made five movies in 1934, again against his contract terms, caused him to bring legal proceedings against Warner Bros. for breach of contract. The dispute dragged on for several months. Cagney received calls from David Selznick and Sam Goldwyn, but neither felt in a position to offer him work while the dispute went on. Meanwhile, while being represented by his brother William in court, Cagney went back to New York to search for a country property where he could indulge his passion for farming.
In his autobiography, Cagney said that as a young man, he had no political views, since he was more concerned with where the next meal was coming from. However, the emerging labor movement of the 1920s and 1930s soon forced him to take sides. The first version of the National Labor Relations Act was passed in 1935 and growing tensions between labor and management fueled the movement. Fanzines in the 1930s, however, described his politics as "radical".