A federal appeals court late Monday said a Michigan trial judge went too far when he ordered the chief executive officers of General Motors and Fiat Chrysler to meet face to face to talk about how to resolve a racketeering lawsuit that pits the automotive giants against each other.

The U.S. Court of Appeals for the Sixth Circuit issued a rare order to block the court-ordered meeting of GM's CEO Mary Barra and FCA's CEO Michael Manley. The initial order from the trial judge, Paul Borman, said only the CEOs would be required to meet. Borman later amended his order to allow an attorney for each side.

But the planned addition of counsel wasn't enough. Courts have many tools to manage their "busy dockets," the appeals court said, and judges "may consider and take appropriate action on settling the case." But dictating which corporate representative must participate at a pretrial conference was outside the judge's authority.

"The district judge did not consider or try the lesser alternative of permitting the parties and their counsel to select their own corporate representatives and allowing them to confer with one another by any reasonable means, including by telephone or videoconference," a three-judge panel of the Sixth Circuit said.

The panel added: "The district judge accordingly failed to provide legally adequate reasons to establish that it was appropriate to order the CEOs personally to meet face-to-face to consider a possible settlement."

GM last year sued Fiat Chrysler in the U.S. District Court for the Eastern District of Michigan. The complaint alleged Fiat Chrysler had "bribed United Auto Workers (UAW) union officials over many years to corrupt the bargaining process and gain advantages, costing GM billions of dollars," according to Reuters. Fiat Chrysler has resisted the claims and moved to dismiss the complaint.

Borman had called the dispute between the two companies a "distraction" in the middle of pressing social justice and health safety concerns. The litigation between the two companies, Borman said, was preventing their leaders "from fully providing their vision and leadership" on issues associated with racial justice and COVID-19.

Judge Joan Larsen, of the U.S. Court of Appeals for the Sixth Circuit. Credit: Diego M. Radzinschi / ALM

Those reasons, the appeals court said Monday, "are not related to settling the issues specific to this case." Judges Richard Suhrheinrich, Ronald Lee Gilman and Joan Larsen issued the ruling.

Kirkland & Ellis partner Paul Clement led the challenge for GM at the appeals court. "That unprecedented order is a profound abuse of the power and the critically important, but essentially limited, office of the federal judiciary," Clement told the Sixth Circuit.

Clement continued: "The health and social justice crises besetting our nation are undoubtedly issues that demand attention. But it is not within the power or properly limited office of an Article III judge charged with impartially adjudicating a federal cause of action Congress deemed worthy of judicial resources to label that action a 'distraction.'"

Lawyers from the law firms Sullivan & Cromwell and Miller, Canfield, Paddock and Stone advocated for Fiat Chrysler at the appeals court.

"Judge Borman's order that the parties explore settlement in no way warrants reproach, let alone the extreme sanction of having him removed from the case, which can be justified only where a court has plainly abused its power," Steven Holley, co-leader of Sullivan & Cromwell's antitrust group, told the appeals court. "GM may be unhappy about questions Judge Borman posed during oral argument that bore upon the validity of GM's claims—claims FCA believes are wholly meritless—but asking tough questions is a court's mandate; it is hardly grounds for a judge to be removed from a case."

Responding to the appeals court before it ruled, Borman, a federal trial judge since 1994, defended his order.

Borman said he would have asked the two CEOs, during an on-the-record pretrial teleconference, a "yes" or "no" question about whether they had met in person to discuss a settlement.

"Thereafter, the court will then request that their counsel read a jointly prepared limited statement of the results of the Mary Barra-Michael Manley meeting: 'Yes,' they have reached a resolution of the case, or 'No,' they have been unable to reach a resolution of this case," Borman told the appeals court. "The court will not request, or permit the parties or their counsel to discuss this matter further in the teleconference."

The appeals judges refused Clement's request to assign the case to a different judge.

"The district judge's desire for a quick settlement is not so extreme as to call for such a remedy," the appeals court said. "Contrary to GM's claim, neither the comments nor the conduct of the district judge 'establishes that he would not be able to decide fairly this factually complicated case upon remand.'"