American Steel (X.US) and Nippon Steel sue Biden, and may be able to get more time to negotiate with Trump

The Zhitong Finance App learned that American Steel (X.US) and Nippon Steel are unlikely to persuade the court to reverse President Biden's decision to block their $14.9 billion merger, but their lawsuit may give them more time to reach an agreement with incoming President Trump.

The two companies argued in a lawsuit announced on Monday that Biden blocked the merger through false national security reviews, denies the two companies the right to fair procedures and violates the Constitution.

Nick Klein (Nick Klein), a national security attorney at DLA Piper (DLA Piper), said suing the government would be “an uphill battle,” pointing out that when it comes to national security, the courts are generally very respectful of the executive branch.

Still, “the lawsuit will give them more time to negotiate with the new government or find an acceptable alternative,” Klein added.

These remarks suggest that while the lawsuit itself may be doomed to failure, if the two companies can persuade Trump to change their opposition, it could bring new life to the deal.

“I am totally against the once-powerful American Steel Company being bought by a foreign company, this time Nippon Steel in Japan,” Trump wrote on his social media platform Truth Social last month.

“I'm going to stop this deal from happening. Buyers beware! !”

But some lawyers saw an opportunity. Joshua Gruenspecht (Joshua Gruenspecht), a national security attorney at Wilson Sonsini Law Firm (Wilson Sonsini), said Trump “has a history of changing his mind,” and he also believes this lawsuit is a game that delays time.

30-day period

The order Biden signed last Friday gave these companies 30 days to undo the deal. Although the companies did not specifically ask the court to suspend enforcement of the order, a copy of the petition indicates that they intend to ask the government if they plan to enforce the 30-day requirement.

If that were the case, the two companies could seek “initial relief,” the document said. Meanwhile, the merger agreement stipulates that June 18 is the deadline for obtaining regulatory approval and completing the merger.

Right to due process

The companies claim that the US Committee on Foreign Investment (CFIUS) -led national security review was unfairly influenced by Biden, who targeted the deal in March before the review began. The Commission is responsible for examining whether foreign investment poses a threat to national security.

They claim that Biden opposed the deal to please David McCall, president of the American Federation of Steelworkers, and he hoped McCall's support would help him win the swing state of Pennsylvania in the November US presidential election. American Steel's headquarters are there. Vice President Kamala Harris later replaced Biden as the new presidential candidate, who also opposed the deal and was supported by the American Federation of Steelworkers.

The White House and the American Steel Association denied the accusations. But the two companies said these facts amount to CFIUS and Biden violating their due process rights under the Constitution and CFIUS regulations because they pre-judged the case rather than making decisions based on real national security risks.

The statute states that the President “shall review (the deal) through this committee to determine the impact of the transaction on US national security.”

However, Tatiana Sullivan (Tatiana Sullivan), a former CFIUS official at the Pentagon and a national security lawyer at Starbucks Law Firm, said that the CFIUS regulations clearly prohibit courts from reviewing the president's decisions, combined with the court's high respect for national security decisions, mean that these companies are in a very difficult situation.

However, she pointed out that the companies' argument that “the president's actions and public statements undermined the CFIUS review process, thereby causing violations of due process,” is a new claim the court needs to consider.