The recent lawsuit filed by Nippon Steel and U.S. Steel against President Biden’s decision to block their proposed $14.9 billion merger faces significant legal hurdles. While the legal challenge may ultimately prove unsuccessful, it could provide a strategic window for the companies to renegotiate or seek alternative solutions.
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Legal Experts Weigh In: An Uphill Battle
Legal experts suggest that overturning a presidential decision based on national security concerns is highly challenging. Courts generally defer to the executive branch on such matters. Nick Klein, a national security lawyer at DLA Piper, characterized the lawsuit as “an uphill battle,” emphasizing the courts’ traditional deference to the executive branch in national security cases.
Nevertheless, the lawsuit could buy time. Klein added that the legal action “will give them more time to negotiate with the new administration or find alternatives that are acceptable.” This suggests that the primary objective of the lawsuit might be strategic, aiming to prolong the negotiation process rather than achieve a legal victory.
Nippon Steel declined to comment on the ongoing situation. U.S. Steel has not yet issued a public statement regarding the lawsuit.
Trump’s Stance and Potential for Change
The companies’ hope for a successful outcome hinges on the possibility of persuading incoming President Donald Trump to reverse his previously stated opposition to the merger. Trump explicitly voiced his disapproval on Truth Social last month: “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… I will block this deal from happening. Buyer Beware!!!”
Despite Trump’s strong initial stance, some legal experts see a potential opening. Joshua Gruenspecht, a national security lawyer at Wilson Sonsini, pointed to Trump’s “history of changing his mind” and suggested that the lawsuit might be a tactic to gain more time for negotiations and potentially influence the incoming administration.
The 30-Day Deadline and Due Process Claims
President Biden’s order grants the companies 30 days to unwind the transaction. While the lawsuit doesn’t explicitly request a stay on the order, the companies indicate their intention to inquire about the enforcement of the 30-day requirement. If enforced, they could seek “preliminary relief.” The merger agreement itself stipulates a June 18 deadline for obtaining regulatory approvals and finalizing the merger.
Central to the companies’ legal argument is the allegation that the national security review conducted by the Committee on Foreign Investment in the U.S. (CFIUS) was unfairly influenced by Biden’s preemptive opposition to the deal. They contend that Biden’s stance, expressed in March before the review commenced, was motivated by political considerations, specifically seeking the endorsement of United Steelworkers President David McCall to secure the crucial swing state of Pennsylvania in the upcoming presidential election.
The companies argue that these actions constitute a violation of their due process rights under the Constitution and CFIUS statute, claiming that the decision was prejudiced and not based on genuine national security risks. The CFIUS statute mandates that the President review transactions to “determine the effects of the transaction on the national security of the United States.”
Legal Challenges and Novel Claims
The legal landscape presents significant challenges. The CFIUS statute explicitly prohibits judicial review of presidential decisions, and courts generally demonstrate a high degree of deference to national security judgments. Tatiana Sullivan, a former CFIUS official and national security lawyer at Skadden Arps, acknowledges the difficulty of the companies’ position but notes the novelty of their claims. Sullivan highlights that the arguments alleging that “the President’s actions and public comments corrupted the CFIUS process and thus created due process violations are novel claims for the courts to consider.”
Conclusion: A Precarious Path Forward
The lawsuit filed by Nippon Steel and U.S. Steel confronts substantial legal obstacles. While the chances of overturning the presidential decision remain slim, the legal action could provide a strategic opportunity to extend negotiations, explore alternative solutions, and potentially influence the incoming administration. The case presents novel legal arguments regarding due process violations, which will be interesting for the courts to consider. The outcome remains uncertain, but the legal battle underscores the complex intersection of national security, politics, and international business.
