Judge dismisses GM racketeering lawsuit against Fiat Chrysler

A US court has thrown out claims by General Motors that it was forced to pay billions of dollars in higher wages after bargaining talks were corrupted by bribes paid to union leaders by rival Fiat Chrysler Automobiles.

GM sued FCA in November under a federal racketeering law usually reserved to target criminal organisations, arguing that FCA used a corruption scandal at the United Auto Workers to poison bargaining between GM and the union. The scheme, it alleged, was part of an attempt by FCA to curb GM’s profits and force it to enter merger talks.

Judge Paul Borman dismissed the lawsuit on Wednesday. He wrote in his opinion that GM was not entitled to labour concessions obtained by bribery and therefore could not argue that it was harmed by not getting them.

“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 said. “Accordingly, the direct victims of defendants’ alleged bribery scheme are FCA’s workers.”

Any competitive injury to GM from high labour costs is indirect, and therefore does not fall under the scope of the Racketeer Influenced and Corrupt Organizations Act, he added.

Three FCA officials and several former UAW officials have pleaded guilty to operating a long-running bribery scheme, following an investigation by the US attorney for the eastern district of Michigan into corruption at the union. 

GM had also alleged that FCA bribes allowed the company to be the first US automaker to enter contract negotiations with the UAW in 2015, which let FCA set the tone for contracts between the union and the other two big US automakers.

But Mr Borman wrote that the relationship between FCA’s actions and GM’s harm was too tenuous and that “further scrutiny of this theory reveals additional holes in its logic”.

“The difficulty of calculating the difference between the labour costs GM had to pay under its ultimate 2015 [collective bargaining agreement] and the costs it would have had to pay in the counterfactual world where it was selected as the lead [in negotiations] is exactly the difficulty that” caused a previous court to rule in a separate case that litigants must demonstrate a direct injury, he wrote.

FCA said in a statement that the “dismissal of GM’s complaint with prejudice vindicates our position.”

GM said it disagreed with the judge’s ruling and would pursue “legal remedies”.

GM had sought to have Mr Borman removed from the case after he ordered the two automakers’ chief executives — Mary Barra at GM and Mike Manley of FCA — to meet in person to resolve their differences, implying the lawsuit was a waste of resources at a time when the US was suffering from a pandemic and seeing widespread protests over racial injustice.

The 6th US Circuit Court of Appeals ruled on Monday that Mr Borman could not order the meeting but declined to remove him from the case.