Judge dismisses GM's racketeering lawsuit against Fiat Chrysler
Detroit — A federal judge on Wednesday dismissed "with prejudice" General Motors Co.'s racketeering lawsuit against Fiat Chrysler Automobiles NV.
U.S. District Court Judge Paul Borman threw out the case after he had previously ordered GM CEO Mary Barra and FCA CEO Mike Manley to meet in person and come to a resolution in the matter. An appeals court on Monday said the two didn't have to meet.
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 called the allegations "meritless" and sought to dismiss the case.
GM backed its case with details from convictions against former FCA executives in a union bribery scandal. While GM argued it was the victim, Borman in his Wednesday order wrote: "FCA’s UAW workers were the direct victims of the bribes because they were paid less, and GM suffered only an indirect competitive harm."
Borman wrote that while it can be concluded that the intent of FCA executives "was to lower FCA’s labor costs by inducing UAW officials to act against the interests of workers," it cannot be inferred they "wanted to increase GM’s labor costs by asking the UAW to deny GM concessions that it otherwise would have given."
"So, the only credible inference from the facts alleged in GM’s complaint is that defendants’ bribes were intended to secure advantages and concessions for FCA from the UAW that would not otherwise be available to it," he wrote. "Accordingly, the direct victims of defendants’ alleged bribery scheme are FCA’s workers."
Experts have said GM's case would be difficult. The suit, which claimed GM suffered "massive monetary damage" by FCA's actions, alleged violations of the Racketeering Influenced and Corrupt Organizations Act, or RICO. GM had to show that a pattern of racketeering existed, that actions taken during union negotiations directly harmed GM, and that those actions weakened GM's profitability.
"Racketeering is very difficult to prove," said Erik Gordon, a faculty member at the University of Michigan's Ross School of Business. "GM might be able to prove that FCA did bad things and that it should pay GM damages, but proving racketeering requires that you prove that the bad things were two or more crimes of the type listed in the federal statute. Disputes between companies could meet the requirements, but that rarely happens."
In a statement GM said: “We strongly disagree with the District Court’s order and will pursue our legal remedies. There is more than enough evidence from the guilty pleas of former FCA executives to conclude that the company engaged in racketeering, our complaint was timely and showed in detail how their multi-million dollar bribes caused direct harm to GM. The district court’s opinion is contrary to well-settled RICO case law and would let wrong-doers off the hook for the massive harm caused by their criminal conspiracy.”
FCA 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.”