Washington: Nippon Steel and U.S. Steel have filed a lawsuit challenging President Joe Biden’s decision to block their proposed $14.9 billion merger, alleging the move violated constitutional due process rights. While legal experts suggest the lawsuit is unlikely to overturn Biden’s decision, it could serve as a strategic delay, potentially giving the companies time to renegotiate under incoming President Donald Trump.
Allegations of a Sham National Security Review
In the lawsuit announced on Monday, Nippon Steel and U.S. Steel argued that Biden used a “sham national security review” to block their merger, depriving them of a fair process. National security lawyer Nick Klein from DLA Piper called the case “an uphill battle,” citing the judiciary’s traditional deference to executive authority on national security matters. However, Klein acknowledged the lawsuit could buy the companies time to negotiate with Trump or explore alternative strategies.
Both Nippon Steel and U.S. Steel have declined to comment publicly on the case.
Trump’s Opposition to the Deal
Donald Trump, who will assume the presidency on January 20, has publicly expressed his disapproval of the merger, stating on his Truth Social platform:
“I am totally against the once great and powerful U.S. Steel being bought by a foreign company, in this case Nippon Steel of Japan. I will block this deal from happening. Buyer Beware!!!”
Despite this, some legal experts believe Trump’s history of shifting positions could provide an opportunity. “The lawsuit is as much about timing as it is about the law,” said Joshua Gruenspecht, a national security lawyer with Wilson Sonsini.
Legal Hurdles and Due Process Claims
Biden’s order, signed last Friday, requires the companies to unwind their transaction within 30 days. While the companies have not explicitly sought a stay of the order, their complaint indicates they may ask for preliminary relief if the government enforces the deadline. Their merger agreement includes a June 18 end date for obtaining regulatory approvals.
The companies also claim that the Committee on Foreign Investment in the U.S. (CFIUS), which reviews foreign transactions for national security risks, was improperly influenced by Biden. They allege Biden’s early opposition to the deal was motivated by political considerations, including securing support from United Steelworkers (USW) President David McCall to bolster his reelection bid in Pennsylvania. The White House and USW have rejected these allegations.
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The lawsuit accuses Biden and CFIUS of violating due process rights by prejudging the case and failing to base their decision on genuine national security concerns.
Legal experts, however, caution that the CFIUS statute explicitly limits judicial review of presidential decisions. Tatiana Sullivan, a former CFIUS official and national security lawyer at Skadden Arps, noted that the companies’ claims introduce novel constitutional arguments, but their success remains uncertain given courts’ deference to executive actions in national security cases.
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What’s Next for the Merger?
While the lawsuit faces significant legal obstacles, its broader aim may be to keep the merger alive long enough to secure a more favorable review under the Trump administration. The outcome could redefine the boundaries of presidential influence over national security reviews and foreign investment cases.
