Jeld-Wen Forced to Undo Doorskins Rationing for StevesApril 14th, 2020 by Drew Vass
A decision by Jeld-Wen to ration doorskins in 2019 has come back to bite the company amid the already trying times of COVID-19. The door and window manufacturer announced March 30 that it would suspend operations at some locations due to the impacts of the virus. In the meantime, Senior U.S. District Judge Robert E. Payne issued an Order of Preliminary Injunction April 10, requiring the company to undo its recent allocations of doorskins that limits the number available to Steves and Sons Inc. (Steves). The decision follows a suit filed by Steves February 14, 2020, alleging that Jeld-Wen persisted in anticompetitive practices—even after antitrust rulings against the company in prior years—this time by throttling orders for doorskins. The new case, which follows a string of legal disputes between the two companies, is set to be tried in June.
In February 2018, Steves was awarded $58.6 million in an antitrust lawsuit against Jeld-Wen. In December 2018, an initial trial-by-jury ruling was upheld by Federal Judge Robert E. Payne, requiring Jeld-Wen to divest its Towanda, Pa.-based manufacturing plant, in order to restore competition to the market for door skins. On November 19, 2019, a Virginia court judge issued an order in favor of Steves, upholding a motion for further relief, requiring Jeld-Wen to pay an additional $7 million. In February, Steves filed a new suit against the company, this time alleging that Jeld-Wen, “embarked on a new strategy to take advantage of the illicit market power that it had secured” from a 2012 merger that served as the centerpiece of previous cases. Officials for Steves allege that Jeld-Wen raised prices on its doorskins by 25%, after which it established a scheme for allocation that limited orders of doorskins.
Officials for Jeld-Wen confirm that their company established such a scheme, after, they say, there was a significant increase in demand in 2019. In a statement provided by the company, officials say an announcement was issued to all doorskin customers, explaining that it would allocate proportional shares, including those for Jeld-Wen’s own use.
Based on evidence provided orally and through documents on record, that move, the court says, is almost certain to violate a supply agreement established between the two companies in the wake of antitrust rulings. The court found that Steves clearly and convincingly established a substantial likelihood, “amounting to a near certainty,” that Steves will succeed in its breach of contract claim against Jeld-Wen, on the grounds that Jeld-Wen refused to deliver fully on Steves’ orders during fourth quarter 2019. Jeld-Wen breached the agreement by giving notice of allocation, the court order says.
The Judge’s supporting argument is detailed in a Memorandum of Opinion also filed April 10. Even if allocation had conformed with a previously established supply agreement, Jeld-Wen breached that agreement, the court memo says.
Without a temporary injunction, Steves will suffer irreparable injury resulting from those breaches, a court order explains. Consequently, because of the temporary injunction, Jeld-Wen is expected to, “suffer some … economic hardship, which is, however, significantly of its own creation,” the Judge opines.
With a trial set for June 1, 2020, the court has ordered that Jeld-Wen terminate allocation to Steves effective retroactively to January 1, 2020, including order, confirmation and delivery methods implemented by the company. The company must deliver to Steves all of the doorskins ordered from November 25, 2019, to the date of preliminary injunction, which lasts through the scheduled court date.
In a tit-for-tat motion established across court dealings, officials for Jeld-Wen claim that the court’s latest decision gives Steves a market advantage at the expense of its other doorskin customers.
“While Jeld-Wen was investing in its business, Steves has not built its own domestic doorskin production capabilities,” says Jeld-Wen president and CEO Gary Michel. “Instead, Steves continues in its efforts to unfairly benefit from Jeld-Wen’s investment at the expense of other door competitors,” Michel alleges.
Jeld-Wen has appealed an original antitrust ruling. If previous rulings are upheld, the company will also be liable for Steves’ legal fees, which officials for Steves say now, “substantially exceed $35 million.”