Antitrust – Antitrust violation calls for unwinding of doorskin merger

After a jury determined the merger of two manufacturers in the American doorskin market violated the Clayton Antitrust Act, the remedy included unwinding the merger and ordering the sale of the acquired company.

Background

JELD-WEN Inc. acquired a competitor, CMI, in 2012. Four years later, one of JELD-WEN’s customers, Steves and Sons Inc., filed this suit challenging the merger. A jury found that the merger violated the Clayton Antitrust Act and that Steves was entitled to treble damages. The district court then granted Steves’s request to unwind the merger, and plans to hold an auction for the merged assets after this appeal.

The district court held another trial before a different jury on JELD-WEN’s countersuit against Steves for trade secret misappropriation. The court allowed the three individuals at the center of JELD-WEN’s allegations to intervene in the case. After the jury ruled for Steves on most of JELD-WEN’s claims, the court entered judgment for the intervenors.

Antitrust

First, JELD-WEN argues that Steves didn’t prove an antitrust injury. The court disagrees. The CMI merger hindered Steves’s access to other doorskin suppliers. The merger also weakened the competitive pressures on JELD-WEN to provide good customer service beyond its contractual duties. Moreover, JELD-WEN sought to leverage its enhanced market power to hurt its customers, including Steves.

JELD-WEN also complains that the theories of antitrust injury that this court now relies on to affirm the jury’s verdict don’t align with how the antitrust damages award was calculated. Not so. At most, the alleged mismatch means that Steves’s damages award was too large. But JELD-WEN doesn’t appeal the jury’s calculation of past damages. The court declines to consider, on its own, whether Steves’s damages award should be amended to correlate with its antitrust injuries.

JELD-WEN also contends that Steves had to prove “antitrust impact.” To do so, according to JELD-WEN, Steves had to construct a hypothetical market in which the merger never happened and show how it would have been better off therein. This argument fails on several levels.

Evidentiary rulings

The district court forbade evidence that the DOJ had twice investigated the merger without challenging it. The district court acted within its discretion. Next, JELD-WEN protests the exclusion of evidence regarding CMI’s pre-merger financial distress, which JELD-WEN claimed was central to its weakened-competitor defense. The district court’s ruling was, at worst, harmless error because JELD-WEN’s weakened-competitor defense would have failed.

Finally, JELD-WEN asserts that it should have been permitted to tell the jury (at the antitrust trial) about Steves’s alleged trade-secrets misappropriation. The court concludes that alerting the jury to the trade-secret allegations would have risked confusion and unfair prejudice to Steves.

Remedies

JELD-WEN attacks the divestiture order on the grounds that the district court improperly denied its laches defense and misapplied the factors governing equitable relief. First, while JELD-WEN contends that a nearly four-year delay after a merger’s consummation is presumptively unreasonable, the court disagrees.

JELD-WEN next argues Steves had notice of its injury right after the merger was announced and thus shouldn’t have waited until fall 2014 to pursue relief. But Steves lacked notice of the threatened injury on which its divestiture claim is based—its potential loss of access to doorskins in 2021—until 2014. Finally, while JELD-WEN contends that Steves lacks a good excuse for not seeking divestiture between 2014 and 2016, evidence supports the district court’s finding that Steves spent that time diligently exhausting its alternative remedies.

JELD-WEN also contends that the district court misapplied each of the four equitable factors applied to a Clayton Act suit. The court disagrees. The record supports the district court’s findings as to each of the equitable factors.

JELD-WEN also challenges the $139.4 million damages award for future lost profits, which would only kick in if divestiture doesn’t occur. Because Steves has not yet suffered the injury on which its claim for future lost profits rests, this claim wasn’t ripe for adjudication and thus should have been dismissed without prejudice.

Trade secrets trial

JELD-WEN challenges two of the district court’s jury instructions in the trade-secrets trial. The court rejects each challenge. Next, JELD-WEN asserts that the district court lacked authority to enter judgment for the intervenors in the trade-secrets case because JELD-WEN brought no claims against them. The court agrees.

Finally, while JELD-WEN asks the case to be reassigned on remand, alleging that the district judge “made repeated and critical errors that fundamentally skewed the proceedings against JELD-WEN,” the court declines to do so.

Affirmed in part, vacated in part and remanded.

Steves and Sons Inc. v. JELD-WEN Inc. (Lawyers Weekly No. 001-035-21, 67 pp.) (Albert Diaz, J.) (Allison Jones Rushing, J., concurring) Appeal No. 19-1397. Feb. 18, 2021. From E.D. Va. (Robert E. Payne, S.J.) Paul D. Clement for Appellant. Taylor Mayly Owings for Amicus United States of America. Benjamin Joseph Horwich for Appellees.