By Linda Cheim, LAW360 | August 17, 2020
A Michigan federal judge’s dismissal of General Motors’ lawsuit against rival Fiat Chrysler underscores how difficult it is to prove a civil Racketeer Influenced and Corrupt Organizations Act case between competitors and that scoring a shot at repleading claims isn’t always guaranteed, experts say.
U.S. District Judge Paul D. Borman last week reiterated his earlier decision dismissing General Motors LLC’s bid to hold Fiat Chrysler Automobiles NV liable for allegedly running a racketeering scheme using foreign bank accounts to bribe senior union officials and plant moles within GM to undercut GM’s position during collective bargaining.
GM sought to bolster its case with fresh allegations detailing the scope of Fiat Chrysler’s alleged corporate espionage, but it still couldn’t meet the strict proximate cause standard that applies to civil RICO cases, the judge determined.
Experts told Law360 that it has always been challenging for a civil RICO plaintiff to convince courts that its alleged injuries are directly linked to a RICO defendant’s alleged illicit dealings. GM filed a notice of appeal Monday to the Sixth Circuit, where the Detroit auto giant is sure to face an uphill battle to revive the suit, experts say.
“The general principle of a pretty strict direct relationship requirement between the alleged RICO violation and the injury claimed by a civil RICO plaintiff is a well-established proposition at this point, and in that respect, Judge Borman is on pretty solid ground,” said Dylan Smith, a partner and co-leader of Freeborn & Peters LLP’s white collar defense and investigations team.
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Etan Mark of Miami-based Mark Migdal & Hayden, who has written extensively about the racketeering statute and has represented both plaintiffs and defendants in RICO litigation, said proximate causation was always going to be one of GM’s largest hurdles.
“It is not uncommon for competitors to sue each other under RICO, but GM’s big problem here is that the purpose of the alleged bribes was not to harm GM. That just happened to be one of the alleged effects,” he said. “Further, that effect was more than one step removed — bribes led to lower labor costs, which in turn led to FCA obtaining competitive advantages, which in turn led to GM being harmed.”
Mark said that the strongest argument that GM may have on appeal is that it should have been provided an opportunity to replead its allegations.
“But in order to prevail in that argument, it will need to argue to the Sixth Circuit that it had a viable potential theory of causation,” he said. “I think the well-reasoned district court opinion, supported by [Friday’s] opinion denying the motion to alter/amend the judgment, makes it very unlikely that GM will be able to do that.”
