By Aatreyee Dasgupta and Alexandra Alper
(Reuters) – U.S. President Joe Biden violated the Constitution by blocking Nippon Steel’s $14.9 billion bid for U.S. Steel through a bogus national security review, the companies alleged in a lawsuit filed on Monday.
The companies want a federal court to overturn Biden’s decision to void the contract so they can secure another shot at approval through a new national security review unfettered by political influence.
The lawsuit alleges that Biden prejudged the decision of the Committee on Foreign Investment in the USA (CFIUS), which scrutinizes foreign investments for national security risks, and violated the companies’ right to a fair audit.
The merger has become highly politicized ahead of November’s US presidential election, with Democrat Biden and Republican President Donald Trump vowing to end it while winning over voters in the swing state of Pennsylvania, where US Steel is headquartered. United Steelworkers (USW) union president David McCall opposed the merger.
Both Trump and Biden argued that the company should remain American-owned even after the Japanese company offered to move its US headquarters to Pittsburgh, where the US steelmaker is headquartered, and promised to honor all agreements between US Steel and of USW.
Biden sought to scuttle the deal in order “to curry favor with USW leadership in Pennsylvania in his re-election bid,” the companies claimed.
“As a result of President Biden’s undue influence to promote his political agenda, the Board on Foreign Investment in the United States failed to conduct a good faith regulatory review process focused on national security,” the companies said in a statement announcing the lawsuit.
The White House did not immediately respond to a request for comment.
The lawsuit, which echoes claims made by the companies 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 outlook for the lawsuit, which also targets Attorney General Merrick Garland and Treasury Secretary Janet Yellen, who oversees CFIUS, is unclear. Courts generally give CFIUS great deference in defining national security, experts say.
The companies also filed a second lawsuit against Cleveland-Cliffs (NYSE: ), its CEO Lourenco Goncalves and USW union president David McCall “for their unlawful and coordinated actions” aimed at preventing the work.
Ministry of Justice and Ministry of Finance, Cleveland Cliffs and USW also did not immediately respond to requests for comment.
Last week, Biden blocked the proposed purchase over national security concerns, dealing a potentially fatal blow to the controversial plan after a year of consideration.
US Steel, founded in 1901 by some of America’s greatest magnates, including Andrew Carnegie, JP Morgan and Charles Schwab (NYSE: ), became intertwined with the industrial recovery after the Great Depression and World War II.
The company is under pressure after several quarters of falling revenue and profits, making it an attractive takeover target for rivals looking to increase their share of the US market.
