Judge Approves Class Action in Suit Against Jeld-WenApril 6th, 2021 by Drew Vass
After the U.S. Court of Appeals for the Fourth Circuit denied a request by Jeld-Wen Inc. for a rehearing of an anti-trust ruling, U.S. District Judge John A. Gibney Jr. issued an order last week certifying a class of investors to proceed in a suit against the company. Investors in the company’s publicly traded stock allege they bought at inflated prices. Filed in February 2020, the case alleges that Jeld-Wen misled investors through statements and omissions, by failing to disclose intentionally anticompetitive conduct that was later found to violate federal antitrust law.
The company, along with other defendants, filed motions to dismiss those allegations, arguing they had no duty to disclose Jeld-Wen’s actions. After denying those motions, Judge Gibney recently certified the class action suit, approving representation by Robbins Geller Rudman and Dowd LLP and Labaton Sucharow LLP as class counsel, with Cohen Milstein Sellers and Toll PLLC serving as liaison counsel. “The plaintiffs have satisfied the requirements for class certification under Rule 23(a) and 23(b)(3),” the judge’s opinion states.
The defendants, including Mark A. Beck, L. Brooks Mallard, Kirk S. Hachigan and Jeld-Wen CEO Gary S. Michel (labeled as individual defendants) and Jeld-Wen and Onex, opposed the class certification partly by suggesting that plaintiffs cannot “satisfy the predominance or typicality requirements set forth in Federal Rule of Civil Procedure 23.” Those arguments fell short, the recent court opinion declared.
A hearing was held March 4, 2021, after which the court certified all persons or entities who purchased Jeld-Wen’s publicly traded stock between January 26, 2017, and October 15, 2018, to participate. The class excludes: the defendants; immediate family of any defendant; any person who acted as an officer or director for the involved companies amid the class period; any firm, trust, corporation or other entity in which any of the defendants currently has or previously had controlling interests; Jeld-Wen’s or Onex’s employee retirement and benefit plans, including participants or beneficiaries; and legal representatives, affiliates, heirs, successors-in-interest or assigns of any of the excluded persons or entities.
In the arguments against the class action suit, officials for Jeld-Wen previously said they did not make false statements, because they “accurately described their products’ quality and their pricing strategy and because the competitiveness statements do not specifically refer to the doorskin market,” court documents say. But Jeld-Wen’s statements, combined with its failure to disclose anticompetitive conduct, “would have misled a reasonable investor about the nature of” its securities, a court memo states.
Court documents point to a 5% drop in the company’s stock price on October 9, 2018, following an opinion published October 5, 2018, by Judge Payne, detailing the company’s anti-competitive behavior, ordering divestiture of one of its plants. That decrease was worsened by an announcement that the company expected to incur $76.5 million in liability, court documents say, after which the company also announced its then CEO L. Brooks Mallard would resign, leaving its stock to tumble by 19%.
Plaintiffs allege that they purchased the company’s stock at an inflated price, because defendants “lied about Jeld-Wen’s anticompetitive conduct and the legal risks that conduct posed to Jeld-Wen.”