Lawyer Bruce Sendek has been around a long time, including a four-year stint with General Motors’ corporate counsel in the late 1970s and early ’80s.
But he’s never seen anything like GM’s lawsuit against crosstown rival Fiat Chrysler Automobiles.
Sendek had a lot of questions, that started at word one — literally.
“I do not necessarily accept on face value that GM’s reason for bringing this lawsuit is what’s stated in the first paragraph,” said Sendek, a partner in Detroit-area law firm Butzel Long.
The first paragraph states: This lawsuit is categorically not against the nearly 50,000 hard-working women and men employed by GM who are members of the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (“UAW”).
“It’s not typical to highlight the people you’re not suing and you’re not blaming,” said Sendek. “It’s no doubt they wanted to try to deflect any assertion that they are trying to weaken the UAW. But there is a little too much protesting going on here.”
Then again, nothing about the lawsuit is typical in what Sendek has seen in his 42-year legal career. The 95-page brief filed in U.S. District Court Eastern District of Michigan Southern division alleges conspiracies, names deceased officers, quotes passages from biographies and even includes a honeymoon photo.
“It isn’t common for one of the Detroit Three to sue another one for anything, especially under RICO,” said Sendek, whose partner at Butzel Long represents Al Iacabelli, one of the defendants cited in the lawsuit. “It’s an unusual situation and they spent a lot of time weighing the pros and cons of bringing such a lawsuit.”
GM’s reasons
GM CEO Mary Barra told investors last month that suing FCA, “was not a decision that we made lightly. It was something that we very, very carefully considered.”
The lawsuit, filed Nov. 20, is built around RICO and the Taft-Hartley Act. RICO stands for racketeering influenced and corrupt organizations. It’s a federal law designed to fight organized crime by granting private plaintiffs an ability to sue for damages suffered as a result of a criminal enterprise.
In 2015, GM had met most of the UAW’s demands with a proposed contract that would have raised pay and benefits by almost $1 billion over four years, Bloomberg reported. Had the UAW’s then-President Dennis Williams agreed to it and members ratified it, that contract would have set the pattern for similar deals between the UAW and Ford Motor Co. and FCA, the report and lawsuit allege.
But Williams rejected it and went to FCA to get the pattern-setting deal that GM said caused its four-year labor costs to go up to $1.9 billion instead of $1 billion.
GM is alleging that FCA got the better deal by bribing former UAW leaders, thereby corrupting labor talks over the past decade. GM also alleges that former FCA CEO Sergio Marchionne authorized bribes and conspired with the UAW to “effectively take over GM through a merger.” Marchionne died in July 2018.
FCA has called the lawsuit “meritless” and said GM filed it to disrupt FCA’s proposed merger with Peugeot maker PSA Groupe and its negotiations with the UAW. It vowed to “vigorously defend” against the lawsuit.
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The union’s top negotiator with GM in 2015 was Cindy Estrada. She told Bloomberg the reason the UAW balked on GM’s offer four years ago was because, among other things, management cut profit sharing, a key bargaining issue.
No option
GM insiders say the company had no choice but to sue after the federal government’s ongoing corruption investigation led to 13 criminal charges and 11 guilty pleas among former FCA executives and UAW leaders. One of those convicted, Al Iacobelli, worked for FCA before GM hired him. Another, Joe Ashton, held a GM board seat.
The probe has spread from misspending of money from a UAW-FCA training center to the highest reaches of the union, with both President Gary Jones and his predecessor Williams implicated. Jones resigned from the union last month amid contract negotiations with Detroit automakers, as UAW leaders were moving to remove him.
“We did this because we felt once we had the evidence, and we laid it out pretty clearly, should we just let it slide?” said a person inside GM familiar with the lawsuit. “Iacobelli was convicted of paying bribes to get competitive advantages in the negotiations. He admitted it in court.”
As for GM’s opening paragraph in the lawsuit, “We knew it would be questioned if this was against the UAW so that’s why we put it right up front in the lawsuit,” the person said. “We felt the damage was created by FCA not the UAW. The UAW’s issues are clearly being handled by the federal government.”
Tough to prove
The UAW has said the corruption had no influence on contracts with FCA. It says the union’s new leadership, after Jones resigned, is committed to making changes to ensure the misconduct will never happen again.
The UAW’s new president, Rory Gamble, has put a series of ethical policies and financial safeguards in place — though U.S. Attorney Matthew Schneider said the union has not actively cooperated with the investigation.
The UAW disputes that saying, “The UAW has said that it continues to cooperate in the investigation and turning in all records requested by the government.”
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So if this lawsuit is not about further dragging an already-weakened UAW through more mud, what is it about?
GM’s second paragraph in the complaint states: This case is about an Italian company, Fiat Chrysler Automobiles, which managed to win the support of the U.S. government in obtaining operational control, for no cash, over an iconic U.S. auto company, Chrysler Group. Shortly after this government approved acquisition, FCA Group betrayed our government’s and the U.S. auto industry’s trust and embarked on a systemic and near decade-long conspiracy to bribe senior union officials to corrupt the collective bargaining process and labor relations.
Sendek is cynical of any “altruistic” intention “to vindicate the labor process and industry at large.”
“I have a hard time accepting how it’s going to benefit the union members if you impose some draconian measure on FCA that endangers their jobs,” said Sendek.
GM will face a steep challenge to connect the dots showing that FCA’s bribery of UAW leaders directly cost GM billions of dollars, he said.
“We know some people pled guilty to giving someone a watch, setting someone up in business, they bought an expensive bottle of champagne,” said Sendek. “But why does that give GM reasons to collect billions from FCA?”
He understands GM’s argument that the UAW is “the enterprise through which FCA is getting its way, controlling the union, so that it got a better deal through the collective bargaining agreement and got special favors.” But, said Sendek, that’s going to be very hard to prove.
“GM will likely have to show that those gifts added up in negotiations and ended up in the deal for FCA that wasn’t just a good one for FCA, but designed to injure General Motors,” said Sendek.
As to GM’s allegation that Marchionne, on FCA’s behalf, had authorized the bribery of UAW leaders, whose support was essential to force a merger with GM, Sendek noted, “GM could always say no, and they did.”
Motion to dismiss
FCA was served a summons on Nov. 27, court records show. It has some 60 days to respond. In the meantime, FCA has retained law firms Miller Canfield, Paddock and Stone in Troy, and Sullivan and Cromwell in New York, records show.
Next, FCA likely will file a motion to dismiss the lawsuit, said Sendek. That could be tricky because the court must assume all the allegations in the lawsuit are true, he said.
“So it’s not an easy thing,” Sendek said. “There might be a deficiency in the pleading that the FCA lawyers find and they bring it to the court’s attention and win.”
“It’s very likely there’ll be motions to dismiss and whether or not they survive, I don’t know,” said Sendek. “But the process could take at least four to five months.”
Money, money, money
All of this will be costly.
Sendek is familiar with the outside law firms FCA and GM hired. GM hired Honigman in Detroit and Kirkland Ellis in Chicago.
“FCA’s main firm will be Sullivan and Cromwell, which is a very well respected law firm, and I’m sure a partner at a firm such as this charges $800 an hour or higher,” said Sendek.
Kirkland Ellis likely charges an excess of $800 an hour. He expects there to be a lot of hours, he said.
“Just proceeding on the motions will cost hundreds of thousands for both sides,” said Sendek. “They will go to discovery and they will be allowed for about a year. There goes a couple of million. It’s a huge case in terms of work load, damages, experts and fees and time.”
The experts in this case will cost a fortune too, Sendek said.
“You have to hire economists to show how you were damaged,” Sendek said. “FCA will push back and say, ‘Sour grapes, General Motors. You don’t think your cost structure is as good as we have, well you should have done a better job at the bargaining table.’”
Contact Jamie L. LaReau at 313-222-2149 or jlareau@freepress.com. Follow her on Twitter @jlareauan. Read more on General Motors and sign up for our autos newsletter.
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