Analysis-Nippon Steel lawsuit against Biden could buy time to keep US Steel deal alive

By Alexandra Alper

WASHINGTON (Reuters) – Nippon Steel and US Steel are unlikely to convince a court to throw out President Joe Biden’s decision to block their $14.9 billion merger, but their lawsuit 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 deprived the companies of their right to a fair process.

Suing the government will be “an uphill battle,” said Nick Klein, national security attorney at DLA Piper, noting that courts are often very deferential to the executive branch on national security issues.

Still, “the lawsuit will give them more time to negotiate with the new administration or find alternatives that are acceptable,” Klein added.

Nippon Steel declined to comment. US Steel did not immediately respond to a request for comment.

The comments show that while the lawsuit itself may be doomed, it could give the deal new life — if the companies can convince Trump to reverse his opposition.

“I am totally against the once great and powerful US Steel being bought by a foreign company, in this case Nippon Steel of Japan,” he wrote last month on his Truth Social social media platform.

“I will block this deal from happening. Buyer beware!!!”

But some lawyers see an opportunity. Trump “has a history of changing his mind,” said Joshua Gruenspecht, a national security lawyer at Wilson Sonsini, who also sees the lawsuit as a play to wait longer.

THIRTY DAYS

The order signed by Biden on Friday gives companies 30 days to undo their transaction. While the companies are not explicitly asking the courts to suspend the order, they say in a copy of the complaint shared with Reuters that they intend to ask the government if it plans to enforce the 30-day requirement.

If it does, companies could request a “preliminary measure,” the document states. Meanwhile, the merger agreement includes a final date of June 18 to obtain regulatory approvals and complete the merger.

DUE PROCESS RIGHTS

The companies claim that a national security review led by the Committee on Foreign Investment in the United States, which examines foreign investments for national security threats, was unfairly influenced by Biden, who targeted the deal in March before the review will begin.

Their opposition to the deal, they allege, was aimed at currying favor with United Steelworkers President David McCall, whose support they hoped would help them capture the swing state of Pennsylvania in November’s US presidential election. US Steel is headquartered there. Biden was later replaced on the ticket by Vice President Kamala Harris, who also opposed the deal and was endorsed by the USW.

The White House and the USW reject the accusations. But the companies say those facts amount to CFIUS and Biden violating their due process rights under the Constitution, as well as the CFIUS charter, by prejudging the case and not basing the decision on true national security risks.

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 statute states.

But the fact that the CFIUS statute explicitly prohibits courts from reviewing presidential decisions, coupled with the courts’ high degree of deference to national security decisions, means companies are in a difficult situation, according to Tatiana Sullivan. , former CFIUS official at the Pentagon and National Security Attorney at Skadden Arps.

However, he noted that the companies’ arguments that “the president’s actions and public comments corrupted the CFIUS process and therefore created due process violations are novel claims that the courts should consider.”

(Reporting by Alexandra Alper in Washington; Editing by Chris Sanders and Matthew Lewis)