Antitrust Law Daily Wrap Up, ANTITRUST—E.D. Va.: Court upholds divestiture of JELD-WEN facility, (Dec 20, 2024)

By WK Editorial Staff

JELD-WEN could not exploit its right to object to the Special Master's recommendations on how to consummate the divestiture of Towanda by objecting to the divesture of Towanda itself.

The federal district court in Richmond has overruled objections by JELD-WEN, Inc. and partially sustained objections by Steves and Sons, Inc. regarding the divestiture of JELD-WEN's Towanda facility to Woodgrain, Inc. This decision follows a protracted legal battle centered on antitrust violations stemming from JELD-WEN's acquisition of CraftMaster Manufacturing, Inc. (CMI) in 2012 (Steves and Sons, Inc. v. Jeld-Wen, Inc., No. 3:16-cv-00545-REP (E.D. Va. Dec. 19, 2024)).

Until 2012, there were three doorskin manufacturers in the U.S.: JELD-WEN, Masonite, and CMI. All three made their own molded doors and also sold doorskins to the independent doorskin manufacturers (Independents), such as Steves and Sons, Inc. JELD-WEN acquired competitor CMI in 2012 and four years later, JELD-WEN customer Steves sued to challenge the merger. A jury awarded Steves more than $175 million in trebled antitrust damages. The district court granted Steves’s request to unwind the merger, and required JELD-WEN to hold an auction for the merged assets (CMI’s Towanda factory). The district court held another trial 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—Steves’s owners and one employee—to intervene in the case. After the jury ruled for Steves on most of JELD-WEN’s claims, a district court entered judgment for the intervenors, even though JELD-WEN had brought no claims against them. JELD-WEN appealed various portions of both of the district court’s rulings.

JELD-WEN appealed the divestiture order, but the Fourth Circuit upheld the district court's decision, affirming the necessity of divestiture to remedy the antitrust injury and restore market competition.

JELD-WEN's objections to the Special Master's recommendation, which identified Woodgrain as the purchaser, were primarily based on claims that market conditions had changed and that the sale would not yield a reasonable price. JELD-WEN argued that Steves' announcement of a new doorskin manufacturing facility altered the competitive landscape, rendering divestiture unnecessary. However, the court deemed these objections procedurally improper at this stage, reiterating that the divestiture decision itself was final and not subject to re-litigation under the current proceedings.

Additionally, JELD-WEN contended that the divestiture would harm the public interest by increasing costs and potentially leading to Towanda's closure. The court rejected these claims, emphasizing that Woodgrain had the business acumen and financial capability to operate the facility successfully and restore competition. The court noted that Woodgrain's experience as a former owner of Towanda further supported its ability to manage the facility effectively.

On the issue of sale price, JELD-WEN argued that Woodgrain's offer was unreasonably low compared to the facility's intrinsic value. The court found JELD-WEN's valuation analysis unconvincing, as it failed to account for the unique circumstances of a court-ordered divestiture. The Special Master, supported by expert analysis, determined that Woodgrain's bid was within a reasonable range given the market conditions and the nature of the forced sale.

Steves' objections focused on specific contractual provisions related to the transition of ownership and supply agreements. The parties reached agreements on most issues, resolving concerns about confidentiality, force majeure clauses, and licensing rights. The court adopted the parties' proposed revisions, ensuring that the agreements aligned with the objectives of restoring competition and facilitating a smooth transition.

In conclusion, the court's decision to uphold the divestiture of the Towanda facility to Woodgrain underscores the commitment to enforcing antitrust laws and restoring competition in the doorskin market. This ruling marks the culmination of a complex legal process aimed at addressing the anticompetitive effects of JELD-WEN's acquisition and ensuring fair market practices.

The Case is No. 3:16-cv-00545-REP.

Judge: Payne, R.

Attorneys: Lewis Franklin Powell (Hunton Andrews Kurth LLP) for Steves and Sons, Inc. Brian Charles Riopelle (McGuireWoods LLP) for Jeld-Wen, Inc.

Companies: Steves and Sons, Inc.; Jeld-Wen, Inc.

Cases: Antitrust