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January 7, 2025 - Nippon Steel and U.S. Steel sued President Joe Biden on Monday over his decision to bar them from joining forces, alleging that he had violated their constitutional rights to due process in a corrupt bid to obtain political support.
In a second legal filing, the companies sued steelmaker Cleveland-Cliffs; Lourenco Goncalves, its chief executive; and David McCall, the president of the United Steelworkers union, for allegedly interfering with Nippon Steel’s plans to buy the American company.
That lawsuit, filed in U.S. District Court for the Western District of Pennsylvania, says Goncalves and McCall engaged in antitrust and racketeering violations while trying to wreck the transaction so that Cleveland-Cliffs could obtain a chokehold on the domestic steel market.
The legal filings followed the president’s announcement Friday that he had decided to prohibit Nippon Steel from completing its $14.9 billion acquisition of U.S. Steel on national security grounds. Taken together, the complaints paint an extraordinary picture of a corporate transaction allegedly derailed by a campaign of “illegal and improper political and anticompetitive interference,” the companies said in a joint statement.
The swift resort to legal action reflects a two-pronged strategy for overcoming Biden’s decision, according to two people familiar with the companies’ thinking who spoke on the condition of anonymity because they were not authorized to speak publicly.
The companies are asking a federal judge to grant expedited handling of their case against the government, seeking a quick win as soon as this spring that could result in a fresh government review of the embattled deal.
At the same time, they hope to use the legal discovery process in the second case to obtain emails, texts and other communications between Biden administration officials and Goncalves and McCall, which they believe will provide evidence that the federal review of the deal was distorted by Biden’s political needs, the people said.
Biden acted after “a committee of national security and trade experts determined this acquisition would create risk for American national security,” Robyn Patterson, a White House spokeswoman, said Monday. The Treasury Department declined to comment.
In a statement, Goncalves said Nippon Steel and U.S. Steel were trying to “scapegoat others” for their ill-fated deal. “Their lawsuit is completely baseless. We are well prepared to litigate and look forward to exposing the facts in court,” he said.
McCall likewise described the allegations as “baseless” and vowed a vigorous defense.
For the two companies, uncovering evidence that Goncalves and McCall influenced the review process will not be enough to overturn the president’s decision, said Alexis Early, a partner at the Jenner & Block law firm in Washington.
“I don’t think it’s enough to show the influence happened. They will need to show the influence resulted in a due process violation,” she said.
Obtaining a new review will be difficult but not impossible for the two companies, she said. “It’s fourth and long, but not a Hail Mary,” Early said, using a football metaphor.
The unspoken subtext to the steelmakers’ legal salvos is that a new president is scheduled to take office in two weeks, raising hopes that he might be persuaded to revive their partnership.
Though President-elect Donald Trump also opposed the sale of U.S. Steel to a Japanese company, he has previously reversed course on other controversial international business matters. In May 2018, for example, shortly after his administration blacklisted Chinese telecom giant ZTE, Trump abruptly ordered his aides to allow it to continue doing business with American suppliers, saying the ban threatened too many Chinese jobs.
The steelmakers hope that any revelations of improper actions by the Biden administration may persuade Trump to reconsider his opposition and instead negotiate a new remedy to the national security worries that the government raised about Nippon Steel’s plans, the people said.
But on Monday, the president-elect suggested he remained committed to his announced plan to bolster an independent U.S. Steel with a blend of tax benefits and tariff protection.
“Why would they want to sell U.S. Steel now when Tariffs will make it a much more profitable and valuable company? Wouldn’t it be nice to have U.S. Steel, once the greatest company in the World, lead the charge toward greatness again? It can all happen very quickly!” Trump wrote on his social media platform Truth Social.
The high-level federal review board that spent most of this year evaluating the transaction said it could damage national security by reducing domestic steel output in the future. If that happened, the United States might lack sufficient steel for critical markets, including energy, agriculture and transportation, the Committee on Foreign Investment in the United States (CFIUS) concluded.
The companies disputed that finding, calling it a cover for Biden’s election-year plan to veto the deal in return for backing from the United Steelworkers (USW).
“The President and CFIUS corrupted and compromised a critical mechanism for the protection of America’s national security in order to serve the President’s personal political agenda,” the lawsuit alleged.
As early as March 14, even before the CFIUS review had begun, the president publicly opposed the transaction, saying it was “vital” that U.S. Steel remain American-owned. Six days later, the steelworkers union endorsed him for reelection, the lawsuit noted.
Both Biden and Vice President Kamala Harris, his replacement atop the Democratic ticket, subsequently repeated their commitment to prevent the sale of the once-iconic American steelmaker in several campaign trail appearances. After Biden quit the race in July, the USW backed Harris.
“President Joe Biden ignored the rule of law to gain favor with the [USW],” the companies said.
In addition to the president, the suit names as defendants CFIUS; Treasury Secretary Janet L. Yellen, who chairs the panel; and Attorney General Merrick Garland.
In their case against the government, the companies describe a federal review process that was bent to serve Biden’s political needs. During an April 2024 campaign stop at the USW’s Pittsburgh headquarters, the president publicly guaranteed that the company would remain American-owned.
“That’s going to happen. I promise you,” the companies’ filing quotes the president as saying.
During the fall, the companies submitted three different proposals to address the review committee’s concerns but received no response, they said. The committee’s nonpartisan professional staff was not permitted to offer any feedback, which the companies said is usually “routine” during CFIUS reviews.
The second case, filed in Pennsylvania, alleges that Cleveland-Cliffs, Goncalves and McCall collaborated in a bid to undermine Nippon Steel’s acquisition “as part of a broader illegal campaign to monopolize the domestic steel markets,” the companies said in their statement.
Cleveland-Cliffs began the U.S. Steel saga in mid-2023 by making an unsolicited bid for the company, which was endorsed by McCall on behalf of the steelworkers union. The U.S. Steel board responded by seeking other offers, which ultimately led to Nippon Steel topping Cleveland-Cliffs’ bid.
The companies’ complaint describes what they call Cleveland-Cliffs’ “merge or murder” strategy: It would seek to force U.S. Steel into a merger that would give it a monopoly over some steel markets or weaken its rival by killing its marriage with Nippon Steel, the world’s fourth-largest steel producer.
Goncalves and McCall worked together on a public “smear campaign” to undermine the Japanese company’s purchase, the suit alleges. Goncalves, a Brazilian executive who became CEO in 2014, publicly assailed the transaction while McCall balked at engaging in good-faith talks with Nippon Steel executives, the companies said.
The suit quotes Goncalves as repeatedly assuring investors that the Nippon Steel bid for U.S. Steel was doomed. “CFIUS is just cover for a president to kill a deal,” he said, the companies alleged.
Nippon Steel and U.S. Steel are seeking a preliminary injunction from a federal judge in Pennsylvania to bar Goncalves and McCall from further efforts to disrupt the deal as well as damages that the two companies say could amount to billions of dollars. |
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