Appeals court weighs in on GM's racketeering suit against Fiat Chrysler, now Stellantis

  • In US
  • 2022-08-12 10:00:43Z
  • By Detroit Free Press

A federal appeals court has chosen not to side with General Motors in its attempt to continue a long-running legal battle over allegations its crosstown Detroit Three rival, Fiat Chrysler Automobiles, now known as Stellantis, corrupted contract bargaining with autoworkers in order to hurt GM.

A three-judge panel of the U.S. Sixth Circuit of Appeals on Thursday affirmed a dismissal of GM's case, originally filed in November 2019, by a federal district court judge in Detroit.

GM's lawsuit had heavy echoes of the federal government's corruption case that sent former UAW and FCA officials, including two ex-union presidents, to prison, but GM also brought new allegations to its racketeering suit, claiming offshore bank accounts were used to fuel a bribery scheme and that former GM board member and UAW Vice President Joe Ashton was actually a paid mole. Ashton was among those convicted in the corruption probe. FCA, the U.S. operating arm for Stellantis, pleaded guilty last year to a conspiracy charge connected to the probe and agreed to pay $30 million.

The union is not a defendant in the GM suit.

Stellantis, which has long called GM's claims "meritless," cheered the appeals court decision.

"We welcome today's unanimous decision by the federal court of appeals upholding the district court's dismissal of this baseless claim. We will continue to defend ourselves vigorously against these frivolous allegations and we will not be distracted from our focus on competing and winning in the marketplace," according to a company statement.

But GM, in a company statement of its own, signaled that it is not ready to drop the issue.

"Today's ruling, with which we strongly disagree, merely holds that GM may not utilize the federal RICO statute to recover the damages caused by Stellantis through the admitted bribery and fraud of FCA," according to the statement, referencing the Racketeer Influenced and Corrupt Organizations Act. "Our claims, however, are much broader than RICO and are based on theories, including unfair competition, that the Sixth Circuit identified as appropriate means of redress. We will continue to pursue our case against FCA and the other defendants in the Michigan state court to recover the damages caused to GM as a result of FCA's admitted corruption."

That state court mention appears to be a reference to a similar case GM filed in Wayne County Circuit Court, which had been dismissed last year but then revived. The current status of that case was unclear Thursday.

The federal lawsuit, which had been dismissed with prejudice at the district court level, captured headlines, not just because it pitted two Detroit automakers against each other, but also because of Judge Paul Borman's ultimately unsuccessful attempt to have GM CEO Mary Barra and then-FCA CEO Mike Manley meet to hash out a resolution. Borman indicated the case would be a waste of resources if allowed to proceed, and that the country, in the wake of the COVID-19 pandemic and the anger over George Floyd's death at the hands of police, needed to heal.

Attorneys representing GM and FCA, now known as Stellantis since FCA's merger with Peugeot maker PSA Group in January 2021, presented oral arguments to the three appeals judges, Jane Branstetter Stranch, Joan Larsen and John Nalbandian, on March 4 of that year via video, although only the audio was available when a Free Press reporter was attempting to observe.

The attorneys, Paul Clement for GM and Steven Holley for FCA, took turns presenting limited arguments in support of their filings and answered questions from the judges, who at times sounded skeptical of both sides.

More: Prosecutor: Corruption case involving FCA might be unmatched in U.S. history

More: Stellantis sentenced in diesel emissions cheating case involving Jeep SUVs, Ram pickups

Much of the focus during the session was on the 2015 contract talks, when FCA was selected before GM in the pattern bargaining. Rank-and-file members rejected the initial contract.

Clement argued that FCA conspired with the UAW to impose a collective bargaining agreement that had unusually high labor costs. He said that economists who study this type of bargaining say the typical practice is for the union to negotiate with the employer in the strongest position and then force a better deal from the weaker company. But that's not what happened in this case, and Clement said it was suspicious that the UAW picked FCA to go first.

But one of the judges - it wasn't clear whom because of the audio setup - noted the speculative nature of much of what Clement was arguing.

Clement suggested that greater specificity would happen if the judges allowed the case to get to a discovery phase.

"We allege that they controlled the union," Clement said of FCA. "We were dealing with the controlled entity, which was the UAW to our detriment."

More: UAW touts reform efforts ahead of convention, but corruption scandal still weighs heavily

More: Joe Ashton, ex-GM board member, sentenced to 30 months in UAW scandal

When Holly spoke for FCA, he made a point that GM's case did not fit the specifics of a Racketeer Influenced and Corrupt Organizations Act, or RICO, case. For one thing, two of the parties directly involved in the corruption - General Holiefield and Alphons Iacobelli - were gone. Holiefield, who had been a UAW vice president, had died, and Iacobelli, the onetime lead labor negotiator for FCA who is also a defendant in this case, had left before talks began in 2015. In his brief to the court, Holly noted that GM had hired Iacobelli, who was one of those later convicted in the corruption probe, "after his employment was summarily terminated by FCA without so much as asking FCA for a reference."

Holly also noted that a direct causal connection would be needed to prevent other companies, automakers and suppliers, who could have been affected by labor cost issues, from filing claims. He said that scenario is why most RICO claims fail.

The discussions also highlighted the use of temporary workers in reducing labor costs, and how that could have harmed GM. But Holly said that if there had been a corrupt deal to allow FCA to use more temporary workers, then the most immediately harmed people would have been the UAW members who would have been paid less.

In his brief to the appeals court, Holly argued that "the theory was rejected because allegations that 'def(y) common sense' need not be accepted as plausible ..."

He asked why FCA would "negotiate an unfavorable CBA (collective bargaining agreement) for itself, thereby putting pressure on GM to agree to a similarly unfavorable CBA, in hopes of forcing a merger with GM in which the combined company would be saddled for years with those unfavorable CBAs."

Contact Eric D. Lawrence: Follow him on Twitter: @_ericdlawrence. Become a subscriber.

This article originally appeared on Detroit Free Press: Appeals court won't side with GM in racketeering suit against FCA


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