Apr 13, 2020   SOURCE: BusinessWire

Steves Wins Preliminary Injunction Against JELD-WEN in New Lawsuit, Requiring JELD-WEN to Comply With Doorskin Supply Agreement; Judge Cited “Substantial Likelihood, Amounting to a Near Certainty, That Steves Will Succeed on the Merits” at Trial

On February 14, 2020, Steves and Sons, Inc. (www.StevesDoors.com) filed a second lawsuit against JELD-WEN, Inc. (NYSE: JELD) in federal court in Richmond, Virginia. In the new suit, Steves alleges that JELD-WEN continues to violate federal antitrust laws, that it has tortiously interfered with Steves’ current and prospective business relationships and has again breached the parties’ long-term doorskin Supply Agreement.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20200413005171/en/

In an 81-page opinion issued April 10, Judge Robert E. Payne granted Steves’ request for a Preliminary Injunction, ending JELD-WEN’s arbitrary “allocation” of doorskins to Steves and ordering JELD-WEN to honor its doorskin Supply Agreement with Steves. Judge Payne also ordered JELD-WEN to deliver more than 1 million doorskins ordered by Steves since November 1, 2019 but which JELD-WEN had refused to deliver.

Significantly, Judge Payne took into consideration the needs of other, smaller, independent door manufacturers, finding that “the record shows that JELD-WEN will not have to deprive [them] of their doorskin supply in order to service Steves as required by the [Steves] Supply Agreement.”

The Preliminary Injunction will remain in effect until the rest of the breach of contract case can be tried by a jury, perhaps as soon as mid to late June. Notably, in his Order implementing the injunction opinion Judge Payne wrote: “There is a substantial likelihood, amounting to a near certainty, that Steves will succeed on the merits” of its breach of contract claims at trial.

This new suit is the second Steves has filed against JELD-WEN.

In the first suit filed in June 2016, Steves claimed that JELD-WEN violated the federal antitrust laws in 2012 when it merged with a competitor. In February 2018, after nearly three weeks of trial, it took the federal court jury in Richmond less than three hours to decide that JELD-WEN was guilty of violating the antitrust laws and breaching its Supply Agreement with Steves. The jury unanimously awarded Steves more than $175 million in past overcharge damages and lost future profits (after mandatory trebling). Later in 2018, Judge Payne ordered JELD-WEN to divest the principal asset it acquired in the illegal merger—JELD-WEN’s Towanda, Pennsylvania doorskin manufacturing plant.

JELD-WEN has appealed. If Steves’ victories are upheld on appeal, JELD-WEN will also be liable for Steves’ attorneys’ fees, which now substantially exceed $35 million.

Nevertheless, in November 2019 JELD-WEN embarked on a new strategy to take advantage of the illicit market power that it had secured in the 2012 merger. After raising prices for doors by an extraordinary 25 percent, JELD-WEN declared “allocation” of its doorskins on December 19, 2019, unilaterally constraining the supply of doorskins to customers like Steves and other independent door manufacturers.

Under its allocation claim, JELD-WEN substantially reduced the numbers of doorskins it sells to customers like Steves, which also compete with JELD-WEN in the downstream market for doors. This action kept JELD-WEN’s existing door customers from moving to Steves and other competitors after JELD-WEN’s 25 percent price hike, because under allocation those independent door manufacturers would not have had enough doorskins to take on new door customers and, in some cases, serve their existing customers.

According to Steves attorney Marvin G. Pipkin, JELD-WEN’s latest scheme was working, until Steves sued it a second time this past February.

The Preliminary Injunction ordered by Judge Payne ends JELD-WEN’s “allocation” efforts. But a trial will still be necessary to determine whether the injunction should be made permanent.

In that trial, Steves will also undertake to prove that JELD-WEN’s most recent misconduct not only breached its doorskin Supply Agreement with Steves, but also that it constituted a continuing violation of the antitrust laws and tortious interference with Steves’ current and prospective business relationships, Pipkin said. If the jury agrees, Steves will be entitled to additional treble and punitive damages, plus its newly incurred attorneys’ fees.

“This ruling for a preliminary injunction is a win for all door manufacturers and all door customers, principally because Judge Payne agreed with Steves that both JELD-WEN’s allocation and the ‘mix methodology’ JELD-WEN devised to implement it were without justification,” Steves attorney Marvin G. Pipkin said.

In the opinion, Judge Payne said, “Steves has clearly and convincingly shown a strong likelihood that the mix methodology is neither fair nor reasonable.”

Pipkin continued, “These recent actions by JELD-WEN have already caused irreparable harm to Steves through lost business and damage to its reputation and good will. There was no option but to file a second lawsuit to return competition and choice to the marketplace, and to vindicate Steves’ contractual rights under the Supply Agreement. The Judge’s ruling of last Friday recognizes the harm JELD-WEN has done and will put a stop to it, as well as sending a strong signal.”

Steves’ President Sam Bell Steves II noted, “We were disheartened that we are again forced to litigate our doorskin requirements to properly serve our customers, particularly during these difficult and unprecedented times for our country. For the sake of both our companies, I am hopeful the court’s order will now provide clarity to enable us both to move forward with our businesses from here.”

The opinion and order were issued following a two-day hearing over March 5-6 on Steves’ request for expedited relief in response to JELD-WEN’s unilateral and arbitrary attempts to alter and supersede its 2012 Supply Agreement with Steves, Pipkin said. That agreement sets forth the terms by which Steves, a door manufacturer, will buy doorskins – an integral component to interior doors – from JELD-WEN.

Steves’ primary business is the manufacture of molded interior residential doors. To make these doors, Steves must have access to “doorskins,” which are the front and back panels of the doors. Along with most other door manufacturers, Steves has never made doorskins. JELD-WEN makes doorskins (at the Towanda plant and elsewhere) for its own use and for sale to independents like Steves, but it also makes and sells doors. Steves and JELD-WEN entered into a long-term doorskin supply agreement in May 2012. Since then, and until November 2019, JELD-WEN has supplied to Steves nearly 100 percent of its doorskins needs. Accordingly, JELD-WEN is not only Steves’ indispensable supplier of doorskins, it also competes with Steves for the sale of finished doors.

Steves CEO Edward Steves said, “We stand ready to try the second case. If, however, we could be made whole on this dispute, and if we could be assured that JELD-WEN once again would ship us product per the terms of our Supply Agreement, we would vastly prefer to go that route. Especially in these trying times, both companies have limited energies as we focus on our customers and employees, but Steves must have the doorskins we are entitled to under the Supply Agreement.”

About Steves and Sons

With interior and exterior door plants in San Antonio, and interior door plants in Richmond, Virginia and Lebanon, Tennessee, Steves employs more than 1,100 associates. The company has established its business and reputation among retailers, builders, and homeowners across the country with continued emphasis on quality materials, efficient distribution, and relentless customer service. (www.StevesDoors.com)