Jeld-Wen announces final ruling in Steves & Sons litigation, to appeal decision
Jeld-Wen announced that the U.S. District Court for the Eastern District of Virginia, Richmond Division, has issued a final judgment in the company's ongoing antitrust and trade secrets litigation with Steves & Sons. Jeld-Wen believes that the District Court's ruling is in numerous respects both unprecedented and fundamentally incorrect as a matter of law, and results from a flawed trial process that improperly limited the Company's defenses. "Jeld-Wen firmly maintains that it has not violated any antitrust laws and that it has not damaged Steves," stated Gary Michel, President and Chief Executive Officer. "Rather than resolving a simple contractual dispute between two parties, the District Court has now delivered an erroneous ruling that improperly interferes with our company and the broader commercial marketplace." Consistent with the preliminary ruling previously announced on October 6, 2018, the final judgment orders the company to divest its facility in Towanda, Pennsylvania, the primary asset acquired in Jeld-Wen's 2012 acquisition of CraftMaster and one of the company's four domestic doorskin manufacturing facilities. The ruling requires Jeld-Wen to divest the Towanda facility to a third party, and gives Jeld-Wen and Steves the option, but not the obligation, to purchase doorskins from the acquiring company. The judgment anticipates that the divestiture will not be required until some time after the appeal process is complete. The initial appeal process is expected to take approximately 9 to 18 months. Should an appeal to the U.S. Supreme Court be necessary, the appeal process would be extended by an additional 6 to 18 months. The District Court's judgment also denied Steves' request for an injunction to extend the existing supply agreement between Jeld-Wen and Steves, which is scheduled to terminate in September 2021. As a result, should the appeal process extend beyond September 2021, Jeld-Wen will no longer be contractually obligated to supply doorskins to Steves. The company continues to believe that requiring a divestiture of the Towanda facility is both unprecedented and fundamentally incorrect as a matter of law and intends to appeal the judgment. No U.S. court has ever permitted divestiture as a remedy in private litigation for a merger that has already closed, such as Jeld-Wen's acquisition of CMI. Not only is there no precedent for a remedy of divestiture, the District Court's ruling disregards the significant passage of time since the CMI acquisition, which was completed more than six years ago. Furthermore, the judgment is contrary to established legal and equitable principles due to Steves' own misconduct in misappropriating Jeld-Wen's trade secrets and the District Court's acknowledgement of the availability of monetary remedies. The company also believes that the findings of violations of the antitrust laws and resulting damages award are legally and factually incorrect and the result of significant flawed rulings during the trial process. These rulings improperly limited the company's defenses in the trial by excluding key evidence and other relevant matters from the jury's consideration. Evidence that the company was prevented from presenting to the jury included the favorable results of the two previous DOJ antitrust enforcement reviews, the significant profitability growth and expansion of Steves' own business since the 2012 acquisition, and other benefits to the market resulting from the combination of Jeld-Wen and CMI. Jeld-Wen also believes that the District Court improperly bifurcated the trial involving Steves' contract claims from the trial involving Jeld-Wen's claims regarding Steves' misappropriation of trade secrets, allowing Steves to present contradictory evidence in the two different trials. The company is unable to estimate the ultimate timing of, transaction terms, or estimated potential proceeds from any divestiture of the Towanda facility. Regardless of the outcome of the appeal process, the company expects to meet its internal requirements for doorskins currently supplied by the Towanda facility through other existing internal sources of supply or from a supply agreement with the acquiring company. For the fiscal year ended 2017, the Towanda facility generated external revenues of approximately $120M from Steves and other third-party customers related to doorskins and other building products. The majority of Towanda's doorskin manufacturing capacity is used by the company in its own door assembly operations.