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)

Copyright (c) 2020 Dow Jones & Company, Inc.
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