Gen. Motors v. Ashton

GENERAL MOTORS LLC, et al., Plaintiffs, v. JOSEPH ASHTON, Defendant.

Civil No. 20-12659

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY CAMDEN VICINAGE

June 22, 2021

OPINION

KUGLER, United States District Judge:

This matter comes before the Court upon Defendant Joseph Ashton's Motion to Dismiss (Doc. 17, "Mot. to Dismiss."). For the reasons expressed below, the Motion is DENIED IN PART, and the Court reserves judgment in part. The Court declines to rule on the statute of limitations issue at this time and instead orders supplemental briefing in accordance with this Opinion and accompanying Order.

I. BACKGROUND

In this case, Plaintiff General Motors LLC ("GM") alleges that Defendant Joseph Ashton committed fraud and a breach of his fiduciary duty to GM. During the relevant period, Ashton was an official at the International Union, United Automobile, Aerospace, and Agricultural Implement Workers of America ("UAW"), the Vice President of the UAW's GM Department, and a director on GM's Board of Directors. The Complaint alleges that during his tenure in the aforementioned positions, "Ashton sat at the center of two sprawling and long-running criminal schemes" that "cause[d] massive harm to GM." (Doc. 7, "FAC" ¶2.) GM brings the present suit seeking to recover for that harm. The factual and procedural posture of this case is lengthy; as such, the Court recites only what is necessary to determine the currently pending motion to dismiss.

A. Ashton's Role at GM

Ashton served as Vice President of the UAW's GM Department from 2010 to 2014. (FAC ¶58.) The Complaint alleges that, as UAW Vice President, Ashton was involved in negotiating and implementing collective bargaining agreements between the UAW and GM and influencing the terms of the UAW's collective bargaining agreements with Fiat Chrysler ("FCA"). (FAC ¶31.) In 2014, Ashton joined the GM Board of Directors and held this position until 2017. (FAC ¶33). Ashton additionally was a member of the UAW-GM Center for Human Resources ("CHR") Board. The Complaint pleads that the CHR's primary purpose is to educate and train GM's domestic union workforce. (FAC ¶20). It is governed by an eight-director board, with four members appointed by GM and four by the UAW. GM is the sole source of funding for the CHR. (FAC ¶¶3, 53.)

B. Written Director Questionnaire

The Complaint alleges that, upon joining GM's Board, Ashton signed a written director questionnaire and agreed to comply with his fiduciary duties to GM. (FAC ¶34.) In this questionnaire, Ashton made several written representations:

• He had no "business or financial interests or relationships" with a company selling goods in the vehicle manufacturing industry;

• He had not received or been offered anything of value in consideration for his Board service;

• He would "maintain the confidentiality of information provided to [him] in [his] capacity as a director of GM";• There was no "special arrangement or understanding between [him] and any other person pursuant to which" he was nominated to the Board; and

• He adhered to GM's Code of Conduct, which, among other things, prohibits bribery and receiving improper payments.

(FAC ¶¶ 34, 119, 128.)

C. Ashton's Alleged Misconduct

GM's claims in this case arise from two separate theories of misconduct by Ashton. The first theory is that Ashton committed fraud and a breach of his fiduciary duties to GM by participating in a "criminal kickback scheme" that siphoned money from the CHR.¹ The Complaint alleges that Ashton and several co-conspirators "deceptively solicited, influenced, and obtained contracts for CHR vendors to provide clothing and other items to UAW members." (Opp. at 7 (citing FAC ¶38.)) In return, they "demanded and accepted from [CHR vendors] hundreds of thousands of dollars in bribes and kickbacks in the form of cash, checks, and other things of value." (FAC ¶38.) As an example, the Complaint alleges that the CHR purchased 50,000 "Team UAW-GM" jackets for plant employees. (FAC ¶44.) Ashton and his co-conspirators recommended a specific vendor as the sole source of the contract, and Ashton received $300,000 in kickbacks. (FAC ¶44). As another example, the Complaint pleads that Ashton convinced an associate to loan $250,000 to a construction company. (FAC ¶46). When the company stopped paying the loan, "Ashton proposed that his associate could recoup the loan money by forming a company to sell watches to the CHR." (Opp. at 8.) The Complaint alleges that Ashton used his position at the CHR to ensure that the CHR purchased watches from this company, and Ashton received $250,000 in kickback money for the contract. (FAC ¶48) According to GM, "Ashton never disclosed thekickback scheme" and instead "affirmatively concealed the scheme through fraudulent checks, sham vendors, and other fraudulent means." (Opp. at 9) (citing FAC ¶¶ 51, 102-05.)) In November 2019, Ashton was criminally charged for his participation in the criminal kickback scheme involving the purchase of "commemorative watches" that the Court outlines above. (FAC ¶43.) Ashton pled guilty on December 4, 2019, and a court sentenced him to 30 months imprisonment. (FAC ¶43.) According to the Complaint, Ashton "admitt[ed] that he demanded and accepted hundreds of thousands of dollars in kickbacks and improperly used his position to enrich himself[.]" (FAC ¶43.)

The second theory of liability asserts that Ashton acted improperly in his role on GM's board during GM's 2015 collective bargaining negotiations.² As part of this theory, the Complaint alleges that Ashton disclosed confidential information discussed in GM board meetings to Fiat Chrysler ("FCA") and Fiat Chrysler Automobiles N.V. ("FCA NV.") The Complaint alleges that FCA and FCA NV gave millions of dollars to UAW officials to obtain advantages for FCA and secure disadvantages for GM in negotiating and implementing collective bargaining agreements. (Opp. at 9 (citing FAC ¶¶4, 55, 75-99.)) GM pleads that the scheme was two-fold. First, in return for its bribes, "FCA obtained labor cost advantages while ensuring such advantages were denied to GM[.]" (Opp. at 9 (citing FAC ¶72.)) Second, FCA and its CEO leveraged the bribery scheme in order to assist FCA NV in trying to "force a merger with GM." (FAC ¶¶75, 99-100.) GM pleads that Ashton, "as Vice President of the UAW's GM Department," could "directly influence and control the labor relations between GM and the UAW." (FAC ¶71.) Therefore, the Complaint alleges that Ashton ensured that GM did not receive the same labor advantages as FCA. GM also pleads that Ashton "acted clandestinely on FCA's behalf from inside GM's Boardroom" (FAC¶¶33-34, 90) by receiving detailed information about GM and sharing that information with "corrupt UAW leaders and FCA and FCA NV executives[.]" (Opp. at 11).

In 2017, the federal government began unsealing indictments related to the aforementioned conduct. (FAC ¶35.) GM alleges that to date "more than a dozen FCA and UAW officials have been criminally charged, and every one of them has pleaded guilty" to the "years-long pattern of corruption and racketeering activity[.]" (FAC ¶35.) GM asserts that these officials have "admitted to numerous racketeering acts, including millions of dollars in bribes designed to corrupt the negotiation, implementation, and administration of the collective bargaining process." (Opp. at 12 (citing FAC ¶¶2-4.)) After the first indictments were unsealed in 2017, Ashton resigned from GM's Board. (FAC ¶36.)

D. Related Cases and Procedural Posture

In November 2019, GM filed suit in the United States District Court for the Eastern District of Michigan. See General Motors LLC v. FCA, Case No. 19-cv-13429 (E.D. Mich.).³ In that case, GM sued FCA, FCA NV, and three former FCA employees and UAW officials—Alphons Iacobelli, Jermone Durden, and Michael Brown. The complaint in that case pleaded causes of action for violation of RICO, unfair competition, and civil conspiracy. Ashton was not a named defendant in that suit. The defendants in that case filed motions to dismiss. The motions were heard by the Honorable Paul D. Borman. Judge Borman dismissed the RICO claim after finding that GM had failed to plead sufficient facts to show that the defendants' RICO violations proximately caused GM's injuries. General Motors LLC v. FCA US LLC, No. 19-13429, 2020 WL 3833058 (E.D. Mich., July 8, 2020). After dismissing the only federal cause of action, Judge Borman declined to exercise supplemental jurisdiction over the state law claims. See id. at *7. Followingthe dismissal, GM moved to amend its complaint based on newly discovered evidence regarding the existence of foreign bank accounts. See General Motors LLC v. FCA US LLC, No. 19-13429, 2020 WL 4726941 (E.D. Mich. Aug. 14, 2020). Judge Borman denied that motion, finding that the "newly discovered evidence [was] too speculative to warrant reopening th[e] case." Id. at *1. GM has since appealed, and the appeal is pending before the Sixth Circuit.

Because Judge Borman declined to exercise jurisdiction over GM's state law claims, GM subsequently filed a new lawsuit against FCA, FCA NV, and several individual defendants in Michigan state court, alleging claims of fraud, breach of fiduciary duty, and unfair competition.⁴ Ashton is not a defendant in that case. FCA removed the action to federal court, General Motors LLC v. Iacobelli, Case No. 20-cv-12668 (E.D. Mich.), but Judge Robert H. Cleland remanded the case back to Michigan state court, where the case is currently pending.

On September 14, 2020, GM filed the present suit against Ashton in this Court. (Doc. 1.) The Court ordered GM to cure jurisdictional pleading deficiencies and to file an Amended Complaint. (Doc. 5.) GM did so and filed the operative complaint, the First Amended Complaint, on September 24, 2020. (Doc. 7.) On November 23, 2020, Ashton filed the presently pending motion to dismiss. (Doc. 17, "Mot. to Dismiss.") GM opposed (Doc. 20, "Opp."), and Ashton...