GM appeals order for Barra, Manley to settle racketeering suit against FCA
Detroit — General Motors Co. on Friday asked the U.S. Court of Appeals for the 6th Circuit to vacate a federal judge's June 23 order and reassign its racketeering lawsuit against Fiat Chrysler Automobiles NV.
U.S. District Judge Paul Borman on Tuesday called the high-stakes litigation "a waste of time and resources," and took the unusual step of ordering the companies' two CEOs to meet without legal counsel within the next week to reach a "sensible" resolution — and to report the results to him at noon, July 1.
GM filed its federal racketeering lawsuit last November, accusing Fiat Chrysler's late CEO, Sergio Marchionne, of orchestrating a bribery conspiracy to corrupt three rounds of bargaining with the United Auto Workers in a bid to harm and take over Detroit's largest automaker. GM says it lost "billions" from the arrangement, while Fiat Chrysler calls the allegations "meritless" and is seeking to dismiss the case.
In his order, Borman said GM CEO Mary Barra, FCA CEO Mike Manley and other senior leaders at both companies would be distracted by the litigation at a time when their attention and leadership are needed during the fight against the COVID-19 pandemic and racial injustice.
But in its emergency petition Friday, GM wrote that Borman's "unprecedented order is a profound abuse of the power and the critically important, but essentially limited, office of the federal judiciary. The health and social justice crises besetting our nation are undoubtedly issues that demand attention. But it is not within the power or properly limited office of an Article III judge charged with impartially adjudicating a federal cause of action Congress deemed worthy of judicial resources to label that action a 'distraction.'"
In Tuesday's hearing, Borman drilled GM with questions as GM Counsel Jeff Willian presented his arguments, GM said in its filing, which was not the case when FCA's counsel presented: "Judge Borman asked GM’s lone representative more than two dozen questions, many (if not most) having nothing to do with the facts and claims."
GM also argued against Borman's specific request for just the two CEOs to meet without counsel present, writing "the district court leaped straight to the top in ordering the highest-ranking officers of GM and FCA to not only appear alone at a settlement conference, but actually negotiate the settlement themselves, without counsel, and personally report back to the court just eight days later."
Borman declined to comment Friday.
In a statement, Fiat Chrysler said it did not have objections to the meeting: "As we have said from the date this lawsuit was filed, it is meritless. It will not distract FCA from its mission to provide its customers with outstanding and exciting cars, trucks and SUVs and the continued implementation of its long-term strategy to create further significant value for all its stakeholders. This includes the landmark agreement to combine with Groupe PSA to create the world's third largest global automaker by revenues."
In a statement, GM said it "has played a vital role in helping the country fight the COVID-19 pandemic, advance diversity and inclusion, and drive prosperity with good paying jobs. Nothing, including the RICO lawsuit we filed against FCA and three convicted former FCA executives, has or will distract GM and its leadership team from 'fully providing their vision and leadership' on these critical issues now and into the future.
"And we reject the notion that seeking justice for the direct harm caused to GM is a 'waste of time,' a 'distraction,' or a 'diversion.' Justice is worth pursuing in all its facets and any forums. Our commitment to justice includes responsibility to expose corruption in our industry when we learn of it and seek damages when we are targeted and directly harmed."
Both GM and FCA have helped in the fight against the pandemic around the world. GM and partner Ventec Life Systems built ventilators for the national stockpile, and the Detroit automaker also manufactured masks. Fiat Chrysler retooled a plant in China to produce face masks for frontline workers in North America, assisted an Italian ventilator manufacturer in boosting its production, and set up two field hospitals in Brazil.
Meanwhile, amid continuing protests of police misconduct in major cities across the country, including Detroit, executives at both companies publicly took a stand against racism with Mayor Mike Duggan at an early June press conference.
Borman noted on Tuesday that he saw Barra and Manley during the country’s fight against the virus and racism “joined together time and again, often with Bill Ford, to provide some attention, leadership and skills to solving social and economic issues for the good of their companies, their workers, their communities, and our country.”
The action suggests GM is hopeful the suit will not be dismissed and will go into the discovery phase where more information related to the case could be disclosed, said Peter Henning, a former federal prosecutor and law professor at Wayne State University.
GM has served Fiat Chrysler with 55 documents and four interrogation requests covering the relevant bargaining agreement, emails between Marchionne and various UAW employees, communications concerning a potential merger with GM and communications between the Italian American automaker and French automaker Groupe PSA, which now is looking to merge with FCA.
"Judges don’t always like RICO lawsuits," Henning said. "They're very complex, and it requires that you show a pattern of racketeering activity. GM has pointed to the various corruption prosecutions of the different senior FCA leaders. I don’t expect to see GM backing down."
Typically parties’ attorneys are called by the judge to meet and propose a settlement, Erik Gordon, a professor at the University of Michigan’s Ross Business School and a former lawyer, previously told The Detroit News. He added that calling upon the companies’ CEOs is uncommon and intrusive.
"I think they might find the appeals court sympathetic," Gordon said after Friday's filing by GM. "The judge's order was extreme. He could have done something less intrusive to encourage them to talk about settling the case.”
GM contends FCA executives bribed United Auto Workers officials, as documented by a continuing federal investigation into UAW corruption that has led to 14 convictions, including three former FCA executives. GM also alleges FCA aimed to force higher labor costs on GM in an effort to weaken the Detroit automaker and make it more open to a merger with FCA.
"We filed a lawsuit against FCA for the same reason the U.S. Department of Justice continues to investigate the company: former FCA executives admitted they conspired to use bribes to gain labor benefits, concessions and advantages," GM said. "Based on the direct harm to GM these actions caused, we believe FCA must be held accountable. Not pursuing justice rewards wrongdoers at the expense of honest, hard-working people."