United States District Court, E.D. Virginia, Richmond Division
E. PAYNE, SENIOR UNITED STATES DISTRICT JUDGE
matter is before the Court on DEFENDANT JELD-WEN, INC.'S
MOTION FOR PARTIAL SUMMARY JUDGMENT ON COUNTS I AND IV OF
PLAINTIFF STEVES AND SONS, INC.'S COMPLAINT (ECF No.
375). For the reasons set forth below, the motion was denied,
except on the issue of future lost profits damages under
Count One, as to which the Court ordered further briefing.
See ECF No. 578. The Court has considered that
briefing in the context of JELD-WEN, Inc.'s
("JELD-WEN") motion for judgment as a matter of law
on the future lost profits damages claim at trial, after
Steves and Sons, Inc. ("Steves") had put on its
fact witnesses. Accordingly, only the ripeness of that claim,
and not its validity, is addressed in this opinion.
A. Factual Background
Pre-2012 Interior Molded Doorskin Market
and JELD-WEN are both participants in the interior molded
doorskin market in the United States. That type of doorskin
is used to make interior molded doors, which are built to
resemble solid wood doors at a much lower cost. Interior
molded doorskin manufacturers create and ship doorskins to
assembly plants, where molded door manufacturers use the
doorskins to build door slabs that are then sold to retailers
or distributors. Steves is an independent door manufacturer
that is currently unable to produce its own doorskins, and
has never done so. As a result, it must purchase doorskins
from doorskin manufacturers. JELD-WEN, however, is a
vertically integrated door manufacturer, meaning that it both
produces doorskins and uses those doorskins internally to
manufacture and sell finished doors.
2012, Steves and other independent door manufacturers
purchased interior molded doorskins from three main
suppliers: JELD-WEN, CraftMaster Manufacturing, Inc.
("CMI"),  and Masonite. Like JELD-WEN, CM I and
Masonite were both vertically integrated manufacturers of
interior molded doorskins and doors.
. Execution of Supply Agreement
1, 2012, Steves and JELD-WEN entered into a long-term supply
agreement ("the Supply Agreement"), pursuant to
which Steves would purchase, inter alia, interior
molded doorskins from JELD-WEN. ECF No. 379-2 (Under Seal)
§ 1; JELD-WEN's Statement of Undisputed Material
Facts (ECF No. 379) (Under Seal) CDef. SUMF") ¶ 1.
The Supply Agreement would be in effect through December 31,
2019, but would automatically renew for a successive
seven-year term at that time unless either party terminated
the contract. Supply Agreement § 2. The Agreement
further provided that Steves could terminate it for any
reason upon two-year written notice to JELD-WEN, and that
JELD-WEN could likewise terminate it without cause upon
seven-year written notice to Steves. Id. §
3(a)(2)(b); Def. SUMF ¶ 2; Steves' Statement of
Additional Material Facts (ECF No. 452) (Under Seal)
("PI. SAMF") ¶ 4.
the Supply Agreement, Steves had to purchase at least 80% of
its interior molded doorskin requirements from JELD-WEN. PI.
SAMF ¶ 2. Steves could, however, purchase any quantity
of doorskins from another supplier that offered a price at
least 3% lower than JELD-WEN's purchase price, after
JELD-WEN had the chance to match that lower price.
Id. ¶ 3; Supply Agreement § 4. The prices
that JELD-WEN would charge Steves for doorskins were variable
and were calculated using a formula based on JELD-WEN's
key input costs. Supply Agreement § 6(c). In addition,
the contract obligated JELD-WEN to provide Steves with
doorskin products of satisfactory quality. Id.
§ 8. Finally, if any disputes arose under the Agreement,
the parties were required to participate in an alternative
dispute resolution process before initiating litigation. That
process began with an internal conference between the
parties' senior executives, and then mediation if the
conference was unsuccessful. Id. § 10.
JELD-WEN's Acquisition of CMI
15, 2012, JELD-WEN and CMI announced that JELD-WEN was
acquiring CMI and merging CMI's operations and assets
into JELD-WEN ("the CMI Acquisition"), pending due
diligence and the signing of a definitive agreement. Def.
SUMF ¶ 14. Although Steves knew before it executed the
Supply Agreement that JELD-WEN was planning to purchase CMI,
Steves and JELD-WEN did not condition the effectiveness of
that contract on the occurrence or non-occurrence of the
merger. Steves was aware at that time that the Acquisition
would reduce the U.S.-based doorskin manufacturers to only
JELD-WEN and Masonite. Id. ¶¶ 16-18.
17, 2012, the DOJ's Antitrust Division notified JELD-WEN
that it had opened a preliminary investigation into the
proposed CMI Acquisition. Steves indicated to the DOJ that it
did not oppose the merger. The Antitrust Division closed its
investigation on September 28, 2012 without having taken any
action to prevent the CMI Acquisition. Id.
¶¶ 19-21. The Acquisition was then completed on
October 24, 2012. Id. ¶ 15.
the merger, JELD-WEN closed the head office of CMI in
Chicago, as well as two of CMI's four door manufacturing
plants, and transitioned CMI's sales staff into
JELD-WEN's organizational structure. JELD-WEN also shut
down its own doorskin manufacturing plants in Iowa and North
Carolina. In addition to those broader changes, JELD-WEN
consolidated the JELD-WEN and CMI doorskin dies into one
portfolio, retired more than one hundred obsolete dies, and
reduced the number of doorskin designs from 31 to 19.
Id. ¶¶ 33-41.
also acquired CMI's Towanda plant. JELD-WEN subsequently
constructed a $1.6 million paint plant inside that building,
and JELD-WEN's MiraTec and Extira products are now
manufactured at the Towanda plant. Id. ¶¶
42-43. The effect of this consolidation of operations at the
Towanda plant is disputed. JELD-WEN contends that it cannot
physically separate the manufacturing lines for the MiraTec
and Extira products from the doorskin manufacturing lines
that are also at the Towanda plant, id. ¶ 44,
but Steves points to evidence that JELD-WEN has not conducted
an extensive analysis of the effects of a divestiture order
with respect to the plant, PI. SAMF ¶¶ 37, 39.
Post-Merger Interactions Between Steves and
the merger, JELD-WEN's key input costs declined, and have
continued to do so in most years since then. The parties
disagree about whether these declining costs are the result
of JELD-WEN having acquired the low-cost Towanda plant, or
whether the input costs for JELD-WEN's "legacy"
plants would have declined notwithstanding the CMI
Acquisition. Id. ¶ 5. Despite these declining
costs, however, Steves claims that JELD-WEN has increased the
prices it charges Steves to purchase doorskins under the
Supply Agreement. Id. ¶ 7. Steves also
highlights documents indicating that JELD-WEN might have
imposed price increases for certain doorskins that JELD-WEN
believed were outside the scope of the Supply Agreement.
JELD-WEN employees also acknowledged quality problems with
the company's doorskins after the CMI Acquisition, and
Steves complained to JELD-WEN about the declining quality of
the doorskins. Id. ¶¶ 10-11. Moreover,
Steves cites evidence that JELD-WEN made it more difficult
after the merger for external customers, such as Steves, to
return defective products. It is unclear, however, whether
these problems were caused by the CMI Acquisition. Indeed,
JELD-WEN began internal testing of thinner doorskins in early
2012, and informed Steves before the Acquisition was
consummated that it had reduced the target thickness of its
doorskins. Def. SUMF ¶¶ 10-11.
acrimony between Steves and JELD-WEN peaked in July 2014
when, according to Steves, JELD-WEN demanded that Steves
agree to a new pricing structure for the Supply Agreement,
including a "capital charge"-an 11% increase in the
price of doorskins. JELD-WEN asserts that it never made this
demand, noting that Steves has never paid any capital charge
under the Agreement. Id. ¶ 8. In any event,
shortly thereafter, on September 10, 2014, JELD-WEN provided
Steves with notice of termination of the Supply Agreement.
Consequently, the Agreement will terminate on September 10,
2021. Id. ¶¶ 3-4.
parties present conflicting evidence about JELD-WEN's
interest in continuing to sell doorskins to Steves after that
date. Steves claims that JELD-WEN has refused to provide
Steves with any proposal for terms of a new long-term supply
agreement, but JELD-WEN insists that it has told Steves it is
interested in negotiating future doorskin sales after 2021.
Notwithstanding this dispute, the parties agree that JELD-WEN
has supplied doorskins to Steves since giving notice of
termination. Id. ¶ 5.
Steves' Efforts to Obtain Alternative Doorskin
JELD-WEN notified Steves that it would terminate the Supply
Agreement, Steves began to explore ways to produce or acquire
interior molded doorskins without relying on JELD-WEN.
Id. ¶ 32. One other supplier that Steves
considered was Masonite. However, in July 2014, Masonite
announced that it would no longer sell doorskins to third
parties. Whether Masonite is, or ever was, amenable to
selling doorskins to Steves at reasonable prices is highly
disputed. Steves points to documents indicating that, after
the merger, Masonite has not entered into long-term supply
agreements with any third-party customers; will not negotiate
the price of its doorskins; limits external sales of
doorskins to customers or products with which Masonite does
not compete; cannot sell Steves enough doorskins to meet
Steves' needs; and has only offered Steves doorskins at
prices much higher than prices Masonite offered in 2012, or
prices JELD-WEN charged under the Supply Agreement in 2015.
PI. SAMF ¶¶ 16-22. JELD-WEN, however, claims that
some evidence indicates that Masonite would sell doorskins to
Steves at standard prices; that Masonite has sold doorskins
to external customers from 2010 to 2016; and that Steves has
not determined whether the 2015 prices that Masonite quoted
to Steves would be unprofitable for Steves. Def. SUMF
has also pursued relationships with foreign doorskin
suppliers like Teverpan, Kastamonu, and Yildiz, although it
is unclear whether those suppliers can provide Steves with
the quantity and range of doorskins that Steves requires.
Negotiations with those suppliers are at various stages. Pi.
SAMF ¶¶ 24-27. Some evidence indicates that Steves
could obtain doorskins from Teverpan at prices more than 3%
lower than those JELD-WEN charges under the Supply Agreement,
but other evidence suggests that the quality of doorskins
from foreign suppliers is inadequate to satisfy Steves.
Steves has considered becoming vertically integrated by
building its own doorskin manufacturing plant. The parties
disagree about how long this process might take. JELD-WEN
highlights evidence indicating that the timeline is closer to
two years, and Steves has presented evidence showing that
three to four years is a more realistic estimate. In any
event, Steves has not yet identified a partner to help it
build any manufacturing facility. Id. ¶ 29.
Initiation of Alternative Dispute Resolution Process
January 2015, consistent with the Supply Agreement, Steves
requested an affidavit from JELD-WEN supporting its announced
price increases. Id. ¶ 33. Then, in March 2015,
Steves demanded an internal conference to resolve its dispute
with JELD-WEN over doorskin pricing and quality issues. When
no resolution was reached, the parties participated in
mediation, and then entered into a standstill agreement
regarding Steves' claims under the Supply Agreement and
"the antitrust laws." Even after mediation, the
parties continued settlement discussions, and agreed to four
extensions of the standstill agreement between September 2015
and April 2016. IcL ¶¶ 34-36. However, that
agreement did not at any point explicitly prevent Steves from
filing an antitrust claim. Def. SUMF ¶ 26.
the failure of the parties' required dispute resolution
process, Steves initiated this action on June 29, 2016,
asserting antitrust and contract claims against JELD-WEN
related to the CMI Acquisition and JELD-WEN's alleged
breach of the Supply Agreement. Complaint (ECF No. 5) (Under
Seal). The Complaint contained the following claims: COUNT
ONE, a claim under the Clayton Act, Section 7, 15 U.S.C.
§ 18; COUNT TWO, Breach of Contract; COUNT THREE, Breach
of Warranty; COUNT FOUR, Declaratory Judgment, concerning
certain rights under the Supply Agreement and the putative
termination of that contract; COUNT FIVE, Specific
Performance, regarding the Supply Agreement; and COUNT SIX,
Trespass to Chattels. Id. ¶¶ 175-206. Count
One sought two forms of relief. It primarily requested
injunctive relief pursuant to Section 16 of the Clayton Act,
15 U.S.C. § 26, to force JELD-WEN to divest assets
sufficient to: (1) create a doorskin manufacturer with the
same market significance that CMI had before the Acquisition;
or (2) restore the interior molded doorskin market to its
competitive state before the CMI Acquisition. Alternatively,
Steves sought treble damages pursuant to Section 4 of the
Clayton Act, 15 U.S.C. § 15, for injuries suffered by
Steves as a result of the anticompetitive effects of the CMI
Acquisition, including JELD-WEN's refusal to sell
doorskins to Steves at prices consistent with the Supply
Agreement and JELD-WEN's termination of the contract.
Id. ¶¶ 177-78.
August 5, 2016, JELD-WEN moved to dismiss Count One for
failure to state a claim. ECF No. 20. The Court denied that
motion on October 21, 2016, concluding that the Complaint
plausibly alleged that the CMI Acquisition violated Section 7
by causing higher doorskin prices, lower doorskin quality,
reduced doorskin output, and increased coordination between
JELD-WEN and Masonite, and that these anticompetitive effects
impacted both Steves and the broader doorskin market. ECF No.
64. At a pretrial conference on October 19, 2016, the matter
was set for trial to begin on June 12, 2017, and a detailed