Analysis-Nippon Steel lawsuit against Biden could buy time to keep US Steel deal alive Reuters
Written by Alexandra Alper
WASHINGTON (Reuters) – Nippon Steel and US Steel are unlikely to convince a court to overturn President Joe Biden’s decision to block their $14.9 billion merger, but the case could give them more time to reach a deal with incoming President Donald Trump.
The companies argued in a lawsuit announced Monday that Biden violated the Constitution by blocking the merger through a bogus national security review that deprives the companies of their right to due process.
Suing the government will be an “uphill battle,” said Nick Klein, a national security lawyer for DLA Piper, noting that courts often defer to the executive branch in matters of national security.
Still, “the lawsuit will give them more time to negotiate with the new administration or find acceptable alternatives,” Klein added.
Nippon Steel declined to comment. US Steel did not immediately respond to a request for comment.
The comments indicate that while the lawsuit itself may be thrown out, it could give the deal a new lease on life, if the companies can convince Trump to reverse his objections.
“I am totally against the once big and powerful US Steel being bought by a foreign company, in this case Japan’s Nippon Steel,” he wrote on his social media site Truth Social last month.
“I will prevent this deal from happening. Buyer Beware!!!”
But some lawyers see an opening. Trump “has a history of changing his mind,” said Joshua Gruenspecht, a national security attorney with Wilson Sonsini, who also sees the case as a long-term game.
THIRTY DAYS
The order signed by Biden on Friday gives the companies 30 days to reverse their transactions. While the companies are not explicitly asking the courts to suspend the order, they said in a copy of the complaint shared with Reuters that they intend to ask the government whether it plans to enforce the 30-day requirement.
If it does, companies can seek “first aid,” the document said. Meanwhile the merger agreement includes a June 18 deadline to obtain regulatory approvals and complete the merger.
DUE PROCESS RIGHTS
The companies say a national security review led by the Committee on Foreign Investment in the US, which scrutinizes foreign investment for national security threats, was unduly influenced by Biden, who aimed for a deal in March before the review began.
His opposition to this agreement, they said, was aimed at winning the favor of the President of the United Steelworkers, David McCall, and his hope that it will help him win the state of Pennsylvania in the US presidential election in November. US Steel is headquartered there. Biden was then replaced on the ticket by Vice President Kamala Harris, who also opposed the deal and was endorsed by the USW.
The White House and USW deny the allegations. But the companies say those facts amount to CFIUS and Biden violating their due process rights under the constitution and the CFIUS statute, by prejudging the case and not removing the decision from real risks to national security.
The president, through the committee, “shall review (the agreement) to determine the effects of the transaction on the national security of the United States,” the law said.
But the fact that CFIUS law prevents courts from reviewing presidential decisions, coupled with the high level of judicial deference to national security decisions, means that companies are in a difficult position, according to Tatiana Sullivan, a former CFIUS official at the Pentagon as well. national security attorney with Skadden Arps.
However, he noted that the companies’ arguments that “the President’s actions and public comments undermined the CFIUS process and thus created a violation of due process are new claims that must be considered by the courts.”
