Aatria Dasgupta and Alexandra Alper
(Reuters) – U.S. President Joe Biden violated the Constitution by blocking Nippon Steel’s $14.9 billion bid to acquire U.S. Steel through a bogus national security review, the companies allege in a lawsuit filed on Monday.
The companies want a federal court to overturn Biden’s decision to scuttle the deal so they can get another chance at approval through a new national security review unfettered by political influence.
The lawsuit alleges that Biden undermined the decision of the Committee on Foreign Investment in the United States (CFIUS), which reviews foreign investments for national security risks, and violated companies’ rights to fair review.
The merger has become highly politicized ahead of November’s US presidential election, with both Democrat Biden and Republican President-elect Donald Trump vowing to kill it as they woo voters in the swing state of Pennsylvania, where US Steel is headquartered. United Steelworkers (USW) President David McCall opposed the merger.
Trump and Biden argued that the company should remain American-owned even after the Japanese firm proposed moving its U.S. headquarters to Pittsburgh, where the U.S. steel mill is based, and promised to honor all existing agreements between U.S. Steel and USW.
Biden sought to kill the deal to “curate favor with USW leadership in Pennsylvania in his re-election bid,” the companies said.
“As a result of President Biden’s undue influence to advance his policy agenda, the Committee on Foreign Investment in the United States failed to conduct a diligent 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 statements the companies made in a December CFIUS letter obtained by Reuters, shows the companies are following through on their threats of litigation and will continue to fight to get the deal approved.
The prospects for the lawsuit, which also targets Attorney General Merrick Garland and Treasury Secretary Janet Yellen, who oversees CFIUS, are unclear. Experts say courts generally give CFIUS more deference when making national security determinations.
The companies also filed a second lawsuit against Cleveland-Cliffs (NYSE:), its CEO Lorenzo Goncalves and USW President David McCall “for their unlawful and coordinated actions” to prevent the deal.
Ministry of Justice and Ministry of Finance, Cleveland Cliffs and the USW also did not immediately respond to requests for comment.
Biden last week blocked the proposed purchase on national security grounds, dealing a potentially fatal blow to the controversial plan after a year of consideration.
US Steel, founded in 1901 by some of the biggest tycoons in the US, including Andrew Carnegie, J.P. Morgan and Charles Schwab (NYSE:), became intertwined with industrial recovery after the Great Depression and World War II.
The company has come under pressure after several quarters of falling revenue and profits, making it an attractive takeover target for rivals looking to expand their share of the U.S. market.