A federal judge in Detroit has dismissed General Motors’ lawsuit alleging that rival Fiat Chrysler paid off union leaders to get better contract terms than GM.
In a ruling Wednesday, U.S. District Judge Paul Borman wrote that GM’s alleged injuries were not caused by FCA violating federal racketeering laws. He wrote that GM has not stated a claim that can be granted, so the case must be dismissed.
GM GM, -4.19% said it disagreed with the ruling and will pursue legal remedies.
The ruling came after a federal appeals court on Monday overturned Borman’s order that the CEOs of both companies meet in person to talk about settling the case. But the court denied GM’s request to assign the case to another judge.
In the lawsuit, GM alleged that Fiat Chrysler FCAU, -1.60% bribed officials of the United Auto Workers union to get lower labor costs, giving FCA an advantage over its Detroit-area rival. GM alleged that FCA CEO Sergio Marchionne wanted to pressure GM into merging by weakening GM with higher labor costs.
In his ruling, Borman wrote that GM’s “pay to harm” theory initially had appeal “but fails on a closer look.”
GM alleged that FCA used bribes to get the UAW to deny GM concessions that were given to Fiat Chrysler. But Borman wrote that the UAW wouldn’t give the concessions to any company that didn’t pay bribes. Therefore, GM’s labor costs weren’t any higher than they would have been without the bribes.
“In other words, FCA’s UAW workers were the direct victims of the bribes because they were paid less, and GM suffered only an indirect competitive harm,” Borman wrote.
GM failed to show facts backing up the claim that it was harmed by Fiat Chrysler’s actions under federal racketeering laws, Borman ruled.
FCA denies that it directed any prohibited payments. Its former labor chief, Al Iacobelli, is in prison after pleading guilty in 2018 to conspiracy and tax crimes in a scheme worth more than $1.5 million. He admitted that he turned the budget of a company-sponsored training center into a slush fund.
Earlier, Borman described GM’s lawsuit as a “nuclear option” that would be a “waste of time and resources” for years if he allowed the case to move forward. That prompted GM to ask an appeals court to change judges.
Federal agents have been rooting out corruption in the senior ranks of the UAW. The first wave of convictions in 2017 involved key FCA employees who used money from a jointly run training center to reward union officials.