Court of Appeals Upholds Order for Jeld-Wen to Divest of Towanda PlantFebruary 22nd, 2021 by Drew Vass
The United States Court of Appeals for the Fourth Circuit Court filed a decision last week, upholding an order for door and window manufacturer Jeld-Wen Inc. to divest of its Towanda, Pa.-based manufacturing plant.
In an opinion filed Thursday, a panel of three judges upheld the original ruling, stemming from a trial-by-jury process in 2018, finding that Jeld-Wen’s acquisition of Craftmaster International (CMI) in 2012 violated antitrust provisions. The trial followed an action filed in 2016 by fellow door manufacturer Steves and Sons Inc. (Steves), alleging damages on six counts, including violations of numerous sections of the Clayton Antitrust Act, an amendment that focuses on price discrimination, price fixing and unfair business practices.
In its decision to enforce divestiture, the judiciary panel vacated a jury’s prior awarding to Steves for $139.4 million in damages in future lost profits, declaring, “The injury on which the future lost profits award was premised can’t occur until September 2021, and the Clayton Act requires a plaintiff seeking damages—as opposed to equitable relief—to ‘show actual injury.’” But representatives for Steves told [DWM] that achieving both divestiture and damages in future lost profits was never part of the company’s plan.
“We’ve been in business 155 years … the money was inconsequential to us,” said Sam Steves, president. “We would rather that there by a divestiture to the highest bidder … somebody who will buy it and then get out there in the marketplace, provide product to the industry and compete.”
For this reason, “Steves never sought nor expected ‘double relief’ of both divestiture and lost profits damages,” said Marvin G. Pipkin, attorney for Steves. “Our best-case all along was forcing Jeld-Wen to divest itself of the Towanda plant.”
Following the court’s recent opinion, officials for Jeld-Wen maintained that their company hasn’t violated any antitrust laws. “Requiring a divestiture of the Towanda facility is unprecedented and fundamentally incorrect as a matter of law,” said president and CEO, Gary S. Michel. “We are disappointed with the Fourth Circuit’s decision to uphold the divestiture ruling and will use all available avenues of appeal,” he added, while vowing to continue supporting the “growth and development” of the company’s employees in Towanda.
The acquisition of CMI by Jeld-Wen reduced the number of domestic door skin manufacturers from three to two, the judiciary panel said, adding, “Recognizing that this could present antitrust issues, Jeld-Wen didn’t notify the Department of Justice’s Antitrust Division of the merger until July 2012, after it entered into long-term supply contracts with Steves and two other large Independents.”
In its review of Jeld-Wen’s appeal, the panel said that the court acted “within its discretion by excluding certain evidence from the antitrust trial and by ordering Jeld-Wen to unwind the merger, rejecting Jeld-Wen’s laches defense in the process.” The previous ruling for relief under the Clayton Act was appropriate, the judges declared, “because the merger created a significant threat that Steves will go out of business in 2021.” Referring to the case as “a poster child for divestiture,” the merger resulted in a duopoly, the panel said, adding, “Evidence indicates that they’ve used their market power to threaten the Independents’ survival.”
Judges Albert Diaz, Henry F. Floyd and Allison Jones Rushing determined that returning the Towanda-based operation to an independent status is expected to restore appropriate levels of competition to the market for domestic door skins. “… it’s reasonable to expect that a third supplier—even one that’s vertically integrated—will promote competition, as CMI did before the 2012 merger,” the panel said.
That third supplier could end up being Steves, they further suggested. Not only was Steves among the companies showing interest in CMI prior to its acquisition by Jeld-Wen, they said, but Steves’ preference for divestiture in lieu of $139.4 million in damages, “may signify that it hopes to buy Towanda at a bargain price,” the court document added. “But Steves won’t run the auction process,” the judges pointed out, cutting off concerns over conflicting interests, adding, “The special master will be charged with soliciting bids.” In his 2018 ruling, Federal Judge Robert E. Payne ordered a court-appointed a “special master” to oversee the divestiture and sale of Jeld-Wen’s plant, leaving Jeld-Wen to appeal.
Regarding the impending divestiture, it is “far from over,” the judiciary panel pointed out. In the event that the special master fails to locate a satisfactory buyer, the district court could be faced with revisiting its ruling, they said. Jeld-Wen will also have the opportunity to challenge whether a sale to a selected buyer will serve the public interest.
“We will certainly be a bidder,” Steves told [DWM].