A flag decoration on a fence in front of the United States Steel Corp. Edgar Thomson Works steel mill in Braddock, Pennsylvania, US, on Monday, Aug. 14, 2023.
Justin Merriman | Bloomberg | Getty Images
U.S. President Joe Biden violated the Constitution by blocking Nippon Steel‘s $14.9 billion bid for U.S. Steel through a sham national security review, the companies alleged in a lawsuit they said was filed on Monday.
The companies want the federal court to scrap Biden’s decision to scuttle the deal so they can secure another shot at approval through a fresh national security review unfettered by political influence.
The lawsuit alleges Biden prejudiced the decision of the Committee on Foreign Investment in the U.S. (CFIUS), which scrutinizes foreign investments for national security risks, and violated the companies’ right to a fair review.
The merger had become highly-politicized ahead of the November U.S. presidential election, with both Democrat Biden and Republican President-elect Donald Trump pledging to kill it as they wooed voters in the swing state of Pennsylvania where U.S. Steel is headquartered. United Steelworkers (USW) union President David McCall opposed the tie-up.
Trump and Biden both asserted the company should remain American-owned even after the Japanese firm offered to move its U.S. headquarters to Pittsburgh, where the U.S. steelmaker is based, and promised to honor all agreements in place between U.S. Steel and the USW.
Biden sought to kill the deal to “curry favor with the USW leadership in Pennsylvania in his bid for reelection,” the companies allege.
“As a result of President Biden’s undue influence to advance his political agenda, the Committee on Foreign Investment in the United States failed to conduct a good faith, national security-focused regulatory review process,” the companies said in a statement announcing the litigation.
The White House did not immediately respond to a request for comment.
The lawsuit, which echoes claims the companies made in a December letter to CFIUS obtained by Reuters, shows the companies are making good on their threats of litigation and will continue to fight to get the deal approved.
The prospects are unclear for the lawsuit, which also targets Attorney General Merrick Garland and Treasury Secretary Janet Yellen, who oversees CFIUS. Courts generally give great deference to CFIUS to define national security, experts say.
The companies also filed a second lawsuit against Cleveland-Cliffs, its CEO Lourenco Goncalves, and USW union President David McCall “for their illegal and coordinated actions” aimed at preventing the deal.
The Justice Department and Treasury Department, Cleveland Cliffs, and the USW also did not immediately respond to requests for comment.
Last week, Biden blocked the proposed purchase on national security concerns, dealing a potentially fatal blow to the contentious plan after a year of review.
U.S. Steel, founded in 1901 by some of the biggest U.S. magnates, including Andrew Carnegie, J.P. Morgan and Charles Schwab, became intertwined with the industrial recovery following the Great Depression and World War Two.
The company has been under pressure following several quarters of falling revenue and profit, making it an attractive takeover target for rivals looking to expand their U.S. market share.