Appeals Court Referees GM-FCA Legal Bout

The litigation General Motors launched in November over corruption in Fiat Chrysler Automobiles’ dealings with the UAW is turning into an epic legal brawl.

An order by U.S. District Judge Paul Borman in Detroit calling for settlement talks between the two sides is on hold pending further review by the Sixth Circuit U.S. Court of Appeals in Cincinnati. The appeals court is taking up GM’s petition contesting Borman’s original order.

“We appreciate the Sixth Circuit’s consideration of our petition,” GM spokesman Jim Cain says in an e-mailed statement.

FCA says in a statement released after the Sixth Circuit issued its stay, “As we have said from the date this lawsuit was filed, it is meritless and FCA will continue to defend itself vigorously and pursue all available remedies in response to this groundless lawsuit.”

The appeals court has not indicated when it will decide the case or whether it will rule based on legal briefs filed by GM and FCA lawyers or schedule oral arguments before a three-judge appellate panel in Cincinnati.

Borman last week ordered GM CEO Mary Barra and FCA CEO Mike Manley to meet before July 1. But GM on Friday asked the appeals court to overturn the order and remove Borman from the case. FCA filed a separate motion opposing GM’s request.

While federal cases are assigned to individual district judges on a blind draw, over the past two years, Borman has handled several cases connected in investigations by the FBI, Internal Revenue Service and the U.S. Department of Labor into the UAW. Borman on June 3 accepted the guilty plea of former UAW President Gary Jones (left), who admitted to stealing more than $1 million from the union. Jones faces up to five years in prison at a sentencing hearing set for Oct. 6.

UAW President Gary Jones (2)_4

GM claims it was harmed by FCA’s corrupt labor practices that helped FCA obtain benefits and advantages that drove up GM’s costs and impaired its competitiveness. According to GM, FCA conspired with certain UAW leaders in connection with the 2015 collective bargaining agreement in an effort to force a GM/FCA merger by imposing more than a billion dollars in costs on GM.

In addition, GM’s original complaint filed in November notes Alphons Iacobelli, FCA’s former vice president-labor relations, admitted that he and others at FCA made illegal payments as part of “a corporate policy to buy good relationships with UAW officials.” They believed that would lead to benefits, concessions and advantages over GM in collective bargaining, GM’s petition noted.

Iacobelli pleaded guilty to violating federal labor law two years ago and was sentenced to 5½ years in prison.

The GM lawsuit is an outgrowth of a long-running investigation of UAW corruption in which 14 people, including three FCA executives, four UAW officers, six other UAW officials and the widow of a former UAW leader close to former FCA CEO Sergio Marchionne, have pleaded guilty to various federal criminal charges.

Despite his familiarity with the many issues underlying the corruption charges contained in GM’s November lawsuit, Borman is expressing skepticism about GM’s case against FCA, labeling it a “waste of time” during a hearing last week.

Instead of dismissing the lawsuit, Borman encouraged the two sides to reach a settlement and ordered Barra and Manley to meet without their attorneys present. Borman then amended his original order to allow the CEOs to have their lawyers at the proposed meeting, according to court documents filed over the weekend.  The July 1 deadline is now off the table.

GM says the order directing a Manley-Barra meeting is out of bounds.

In a petition filed June 26 with the Sixth Circuit, GM lawyers describe Borman’s original order as “unprecedented,” a “profound abuse of the power” and an overstepping of his authority.