Gen. Motors, LLC v. FCA US, LLC

• Decision Date: 11 August 2022
• Docket Number: 20-1791
• Citation: 44 F.4th 548
• Parties: GENERAL MOTORS, LLC; General Motors Company, Plaintiffs-Appellants, v. FCA US, LLC ; Fiat Chrysler Automobiles N.V.; Alphons Iacobelli; Jerome Durden ; Michael Brown, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

44 F.4th 548

GENERAL MOTORS, LLC; General Motors Company, Plaintiffs-Appellants,

v.FCA US, LLC ; Fiat Chrysler Automobiles N.V.; Alphons Iacobelli; Jerome Durden ; Michael Brown, Defendants-Appellees.

No. 20-1791

United States Court of Appeals, Sixth Circuit.

Argued: March 4, 2021

Decided and Filed: August 11, 2022

ARGUED: Paul D. Clement, KIRKLAND & ELLIS LLP, Washington, D.C., for Appellants. Steven L. Holley, SULLIVAN & CROMWELL LLP, New York, New York, for FCA Appellees.

ON BRIEF: Paul D. Clement, Erin E. Murphy, Matthew D. Rowen, Julie M.K. Siegal, KIRKLAND & ELLIS LLP, Washington, D.C., Hariklia Karis, Jeffrey Willian, KIRKLAND & ELLIS LLP, Chicago, Illinois, for Appellants. Steven L. Holley, Matthew J. Porpora, Jacob E. Cohen, Samantha F. Hynes, SULLIVAN & CROMWELL LLP, New York, New York, Thomas W. Cranmer, MILLER, CANFIELD, PADDOCK & STONE, PLC, Troy, Michigan, for FCA Appellees. Michael A. Nedelman, NEDELMAN LEGAL GROUP, PLLC, Farmington Hills, Michigan, for Appellee Iacobelli. Judith S. Gracey, THE GRACEY LAW FIRM, PLLC, Keego Harbor, Michigan, for Appellee Durden.

Before: STRANCH, LARSEN, and NALBANDIAN, Circuit Judges.

LARSEN, Circuit Judge.

For almost a decade, executives at FCA US, LLC and its parent company, Fiat Chrysler Automobiles N.V.,¹ engaged in a pattern of racketeering, involving bribery and corrupt labor relations with the United Auto Workers (UAW). General Motors (GM) believes that it was the intended victim of the scheme and says it has suffered billions of dollars in damages because of it. GM accordingly sued FCA, Fiat, and various executives under the Racketeer Influenced and Corrupt Organizations Act (RICO). The district court granted defendants' motions to dismiss, concluding that GM had failed to establish that the alleged RICO violations proximately caused its injuries. For the reasons stated, we AFFIRM.

I.

Because the case is at the motion to dismiss stage, the factual allegations in the complaint are what matter, and we accept them as true. See Ohio Pub. Emps. Ret. Sys. v. Fed. Home Loan Mortg. Corp. , 830 F.3d 376, 382–83 (6th Cir. 2016).

In 2008, the country was facing a financial crisis. As losses mounted, some U.S. auto companies looked to the federal government for help. The government gave financial relief to General Motors Corporation (Old GM) and Chrysler through the Troubled Asset Relief Program. That did not work, and Chrysler and Old GM filed for Chapter 11 bankruptcy in 2009. In Europe, Fiat faced similar troubles. Fiat CEO Sergio Marchionne determined that Fiat had to secure a partnership with one of the U.S. auto companies to survive. Marchionne determined that "the UAW was Fiat's bridge to establish a domestic footprint given the UAW's significance in the U.S. automotive market." Complaint, R. 1, PageID 25.

Marchionne began to cultivate a relationship with the UAW, "quickly ma[king] the head of the union's Chrysler Department, [General] Holiefield, a strategic partner and soon thereafter ‘a true friend.’ " Id. Marchionne sought to convince the UAW that a Fiat-Chrysler partnership would be good for the union, hoping that when it came time for Fiat to negotiate over a purchase of Chrysler, the UAW would "throw its weight behind Fiat." Id. at 25–26.

Fiat began to negotiate a partial purchase of Chrysler. As part of the purchase, Marchionne demanded that the UAW support World Class Manufacturing (WCM), a system that would make the Fiat/Chrysler facilities flexible, jettisoning "the union's rigid job classification system with its strict hierarchy and boundaries about who could do what." Id. at 26–27. Chrysler and the UAW agreed to Marchionne's request to implement WCM. Similarly, the UAW agreed to hire more temporary employees in place of hourly workers. And UAW leadership agreed that, until 2015, it would "lift any cap or restraint on Tier Two workers"—"a less expensive labor source," comprising less-senior employees with a lower wage structure and fewer benefits. Id. at 27. "Marchionne's goal overall was to have as few constraints as possible in his ability to operate Chrysler when it came out of bankruptcy." Id. GM alleges that "Marchionne implemented a bribery scheme to achieve this goal and help revive Chrysler and, relatedly, harm GM." Id.

Chrysler emerged from bankruptcy in June 2009 with Fiat owning 20 percent of its equity, and the UAW owning 55 percent. Fiat had the right to purchase 40 percent of the UAW's equity interest in Chrysler.² GM also emerged from bankruptcy, with the UAW owning 17.5 percent equity in the new company, making it the largest shareholder.

GM says the scheme began the following month, in July 2009, with a series of bribes. Defendant Alphons Iacobelli, the former Vice President of Employee Relations at FCA, "and other FCA officials began to transfer hundreds of thousands of dollars of Chrysler funds to Holiefield." Id. at 28. FCA paid for Holiefield's wedding to Monica Morgan in Venice and showered Holiefield with gifts, including a "custom-made Terra Cielo Mare watch worth several thousand dollars." Id. at 29.

From there, "FCA began a long-running intentional scheme of improper payments to certain UAW officials, funneled primarily through the [UAW-FCA National Training Center (NTC)], made by FCA senior executives and agents (including with the knowledge and approval of Marchionne) to influence the collective bargaining process." Id. at 31. FCA used NTC's credit card and bank accounts to conceal payments and gifts to UAW officers and employees worth over $1.5 million. The goal was "to obtain benefits, concessions, and advantages for FCA in its relationship with the UAW." Id. at 32. Defendant Michael Brown, FCA's Director of Employee Relations and NTC Co-Director, pleaded guilty to criminal charges for his role in the fraud. He explained that "it was the intent of FCA executives to ‘grease the skids’ in their relationship with UAW officials." Id.

FCA funneled money to Holiefield and his wife, Morgan, through charitable organizations and false front businesses, including Morgan's photography business. Defendant Jerome Durden, an FCA executive who served on the board of one of Holiefield's charities, assisted in these payments. The amounts were staggering. For example, FCA funneled $425,000 to one business; Holiefield and Morgan used the money for personal expenses, including closing costs on a house. The couple spent other payments made to these businesses—in amounts of $386,400; $350,000; and $200,000 and so-on—to finish an in-ground pool, buy clothes, and visit nightclubs and restaurants. On another occasion, the NTC directly paid off the mortgage on Holiefield's personal residence, sending a wire transfer for over $250,000.

FCA also encouraged UAW officials to use credit cards issued by the NTC. UAW officials happily complied, "charging, for example, $1,259.17 for luxury luggage; $2,182 for a[n] Italian-made Beretta shotgun; $2,130 for Disney World theme park tickets; over $1,000 for a pair of Christian Louboutin designer shoes; and thousands of dollars in electronics and many more such personal items." Id. at 35. Other UAW officials, including former President Dennis Williams, used FCA funds for lavish dinners and golf outings.

What did Chrysler get from the bribery scheme? GM says that because of FCA's bribes, "certain corrupt members of UAW's leadership began providing Chrysler with labor peace and competitive advantages to propel Chrysler's performance without regard to the interests of UAW membership." Id. at 36. The bribes "were made for this very purpose: to obtain ‘benefits, concessions, and advantages’ not only in labor negotiations but also the implementation and administration of at least the post-2009 CBAs, in 2011 and 2015." Id. at 36–37. Also, "through its bribery, FCA ensured that while these special advantages were conferred on FCA, the same or similar advantages were not provided to ... GM despite it seeking similar programs and concessions." Id. at 37. This, says GM, inflicted "massive direct damage on GM in the form of higher costs." Id.

FCA's bribes secured the UAW's agreement to FCA's preferred WCM system. GM had a similar, but inferior, program of its own (the Global Manufacturing System [GMS]). But despite having "worked closely" with FCA to ensure the success of its system and to bring the program on par with WCM, UAW leaders rebuffed GM's "repeated efforts to collaborate ... on improvements to" GMS. Id. at 38–39. Without "buy-in" from the Union, GMS could not be as successful as FCA's WCM. Id. at 39. So, GM says that because of the bribes, the UAW never "fully embraced" GM's efforts to implement GMS. Id.

FCA's bribes also secured it an advantage with respect to the hiring of lower cost workers. A prior agreement had limited both FCA and GM in terms of the number of lower-wage, Tier Two employees they could hire. But in 2009, the UAW and the auto companies agreed to lift the cap, with an understanding that the cap would be reinstated in 2015. Because of the bribes, the UAW privately told FCA that it would not actually reinstate the cap for either auto company in 2015. Without this knowledge, GM stayed below the cap on Tier Two workers between 2009 and 2015, while "FCA hired Tier Two workers with abandon, possessing the incredibly valuable foreknowledge that it would not be penalized." Id. at 40. "This difference purchased through the bribery scheme provided FCA with a dramatic advantage with respect to average labor costs." Id. Similarly, because the UAW did not hold FCA to the contractual limits on temporary workers (who are entitled to substantially less compensation than unionized employees), FCA was able to lower its average hourly labor costs. GM received no such concession on temporary workers. In addition, bribed UAW officials oversaw the UAW's grievance process. "Instead of zealously pursuing union grievances and health and safety issues," corrupt UAW grievance officials, "effectively" gave FCA "control" of ...