GM Suffers Setback In Fiat Chrysler Suit -- WSJ
July 09 2020 - 3:02AM
Dow Jones News
By Mike Colias
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 9, 2020).
A federal judge dismissed a General Motors Co. lawsuit accusing
Fiat Chrysler Automobiles NV of bribing union officials to gain an
advantage on its labor costs, in an unusual legal standoff between
rival automotive giants.
GM in November filed a civil-racketeering lawsuit against Fiat
Chrysler, claiming the Italian-American auto maker intentionally
hurt GM by paying off United Auto Workers leaders to win
more-favorable contract terms for union-represented factory
workers.
On Wednesday, U.S. District Judge Paul Borman said GM failed to
show it was the primary victim of any alleged racketeering activity
that Fiat Chrysler officials might have engaged in.
Instead, the alleged primary victims were rank-and-file UAW
workers, who would have received lower pay from any attempt by Fiat
Chrysler to lower labor costs, the judge concluded. "GM suffered
only indirect competitive harm," he said.
GM said it plans to continue pursuing the case and believes
there is evidence to show that Fiat Chrysler employees engaged in
racketeering that harmed GM. "The district court's opinion is
contrary to well-settled RICO case law and would let wrongdoers off
the hook for the massive harm caused by their criminal conspiracy,"
the company said.
Fiat Chrysler said: "We have said from the very outset that this
was a meritless lawsuit. The dismissal of GM's complaint with
prejudice earlier today vindicates our position."
The case's dismissal is a rebuke to GM Chief Executive Mary
Barra, who believed Fiat Chrysler intentionally took steps to put
GM at a disadvantage, and felt strongly about pursuing a legal
case, people familiar with the matter said.
Legal experts had described GM's civil-racketeering suit as
unusual and a long shot, noting that such cases often are settled
or dismissed because of the difficulty of proving the company was
the primary victim of the alleged corruption.
In a civil-racketeering case, a court typically considers claims
from only the primary victim of the alleged corruption, legal
experts have said. In his dismissal, the judge said any competitive
disadvantage suffered by GM as a result of Fiat Chrysler's lower
labor costs would have been an indirect injury.
Peter Henning, a law professor at Wayne State University in
Detroit, said GM could appeal the decision, but it is difficult to
revive a lawsuit once a judge has granted a motion to dismiss.
Mr. Borman's tossing of the lawsuit came after he issued a
surprising and pointedly worded order late last month, requiring
the CEOs of both companies to meet in person, without lawyers, to
find a resolution to the dispute. The judge at the time described
GM's legal challenge as a "waste of time and resources" and a
distraction for executives whose leadership is needed to steer
their companies through a health crisis and period of social
unrest.
GM appealed the decision asking a higher court to toss out the
initial order, arguing Mr. Borman had overstepped his authority,
and also asked that the case be moved to a different judge.
On Monday, the court sided with GM on the meeting between Ms.
Barra and Fiat Chrysler Chief Executive Mike Manley, but denied the
request to reassign the case.
GM based much of its racketeering suit on evidence from a
long-running federal investigation into union corruption that has
led to the convictions of Fiat Chrysler's former top bargainer and
several United Auto Workers officials.
Federal prosecutors have said Fiat Chrysler executives tried to
buy "labor peace" by spending worker-training funds on union
leaders' lavish trips to Palm Springs, Calif., and other personal
expenses.
Fiat Chrysler has said the misconduct was limited to individuals
acting in their own interest.
In its lawsuit, GM said Fiat Chrysler's alleged bribery was to
gain a labor-cost advantage over GM and part of a broader plot by
then-Chief Executive Sergio Marchionne to weaken GM and force a
merger between the longtime rivals. GM publicly brushed off Mr.
Marchionne's merger advances in 2015. He died in 2018.
In granting the motion to dismiss, the judge also said GM failed
to make the case that Fiat Chrysler's alleged payoff of UAW
officials was intentionally aimed at hurting GM.
GM and Fiat Chrysler compete head-on across many categories of
the U.S. auto market, including large pickup trucks, which generate
much of their profits. JPMorgan Chase had estimated that GM could
seek damages from Fiat Chrysler in excess of $6 billion if the case
were to move forward.
--Nora Naughton contributed to this article.
Write to Mike Colias at Mike.Colias@wsj.com
(END) Dow Jones Newswires
July 09, 2020 02:47 ET (06:47 GMT)
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