Nippon Steel (5401.T) and U.S. Steel (X.N) have filed a lawsuit against the Biden administration, challenging the president’s decision to block their $14.9 billion merger. The companies argue that President Joe Biden violated the U.S. Constitution by using a flawed national security review process to block the deal, depriving them of their right to a fair and unbiased review.
While legal experts acknowledge that the companies face an uphill battle in overturning the president’s decision, the lawsuit could provide them with crucial additional time to negotiate with the incoming administration or explore other options to keep the deal alive. The companies assert that the national security review, overseen by the Committee on Foreign Investment in the U.S. (CFIUS), was unfairly influenced by political motivations, claiming that Biden’s opposition to the merger was rooted in his desire to secure union support in Pennsylvania ahead of the 2024 election. U.S. Steel is headquartered in Pennsylvania, a key battleground state.
The heart of the lawsuit lies in the companies’ contention that Biden’s actions in blocking the merger amounted to a violation of their due process rights under the U.S. Constitution. They argue that the national security review, conducted by CFIUS, was improperly influenced by political considerations rather than a legitimate assessment of national security risks. This review process is typically designed to evaluate potential foreign investments for their national security implications, but the companies claim that the process was tainted by external factors, including Biden’s public statements about the deal.
The lawsuit comes at a time when the companies have just 30 days to unwind their transaction, following an order signed by President Biden. Although the companies have not explicitly requested a delay, they have indicated their intention to seek “preliminary relief” if the government moves to enforce the 30-day unwinding period. The merger agreement also includes a deadline of June 18 for regulatory approvals, creating additional urgency for the companies.
Central to the companies’ argument is the accusation that Biden’s opposition to the merger was politically motivated. They claim that the president’s decision to block the deal in March, prior to the commencement of the CFIUS review, was aimed at securing the support of the United Steelworkers (USW) union, which represents thousands of steelworkers across the country. The USW, led by President David McCall, has strongly opposed the merger, citing concerns about job losses and the potential consolidation of U.S. steel production. Biden’s efforts to appeal to the union are seen as a strategic move to gain favor in Pennsylvania, a critical state in the upcoming election.
Biden’s decision was further complicated by the fact that Vice President Kamala Harris, who replaced Biden on the ticket, also opposed the merger and received backing from the USW. Both the White House and the USW have rejected the companies’ allegations, but the legal challenge highlights the complex intersection of politics, national security, and corporate strategy.
While the lawsuit faces significant legal hurdles, national security experts suggest that the companies may be using it as a strategic move to buy time. According to Nick Klein, a national security lawyer at DLA Piper, courts generally defer to the executive branch on matters of national security. However, the lawsuit may still provide Nippon Steel and U.S. Steel with the opportunity to engage in further negotiations, particularly with the potential shift in administration should a new president take office. Former President Donald Trump has already expressed strong opposition to the merger, stating on his social media platform Truth Social that he would block the deal if given the chance.
“I am totally against the once-great and powerful U.S. Steel being bought by a foreign company, in this case, Nippon Steel of Japan,” Trump wrote. “I will block this deal from happening. Buyer beware!!!”
Despite Trump’s opposition, some legal experts believe that the lawsuit could create a window of opportunity for the companies to explore alternative pathways to secure the merger or find acceptable compromises with the new administration.
Tatiana Sullivan, a former CFIUS official and national security lawyer, acknowledges that the companies face an uphill battle in convincing the courts to overturn Biden’s decision. The CFIUS statute explicitly bars courts from reviewing presidential decisions regarding national security, and courts typically grant significant deference to the executive branch in such matters. However, Sullivan notes that the companies’ claims—arguing that political interference corrupted the review process—are novel and may present a fre
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