United States District Court, E.D. Virginia, Richmond Division
E. Payne Senior United States District Judge.
matter is before the Court on COUNTERCLAIMANT JELD-WEN,
INC.'S MOTION FOR PERMANENT INJUNCTION AGAINST
COUNTERDEFENDANT STEVES & SONS, INC. (ECF No. 1631) . For
the reasons set forth below, the motion will be denied.
Inc. ("JELD-WEN") has manufactured interior molded
doorskins in plants located in the United States and abroad
since the 1970s. It built six of the nine doorskin
manufacturing plants that it has operated during that period.
The experience with starting and operating those plants has
helped JELD-WEN develop certain knowledge about, and best
practices for, various aspects of the doorskin manufacturing
process. See Apr. 30 Trial Tr. at 258:20-264:13.
JELD-WEN's customers is Steves and Sons, Inc.
("Steves"), an independent manufacturer of interior
molded doors. Steves competes in the interior molded doors
market with other independent door manufacturers and
vertically-integrated door manufacturers like JELD-WEN and
Masonite, both of which also produce doorskins for their own
use to manufacture and sell finished doors. Steves relies
primarily on JELD-WEN to supply it with the doorskins needed
to make the doors that Steves sells. May 7 Trial Tr. at
1555:22-1557:21. That supply occurs by virtue of a long-term
doorskin supply agreement between Steves and JELD-WEN dated
May 1, 2012 ("the Supply Agreement") . Id.
at 1564:17-1565:17. The Supply Agreement, which is still in
effect today, will terminate in September 2021, based on a
notice of termination that JELD-WEN sent to Steves in
September 2014. See id. at 1566:14-22; CDX-076.
notice of termination followed a shift in JELD-WEN's
business strategy that was put into motion following a
management transition. Philip Orsino was JELD-WEN's CEO
when the Supply Agreement was signed, but Kirk Hachigian
("Hachigian") became JELD-WEN's CEO in March
2014. With Hachigian as CEO, JELD-WEN began to take a quite
aggressive approach with respect to supplying doorskins to
independent door manufacturers, including Steves, because, as
Hachigian expressed to Steves, the Supply Agreement was too
favorable to Steves. Consequently, when Sara Steves and
Edward Steves, the principal officers of Steves, met with
JELD-WEN executives to discuss the Agreement in August 2014,
JELD-WEN insisted that Steves agree to add a capital charge
(of $0.40 per skin) to the normal doorskin prices permitted
under the Supply Agreement and to otherwise increase the
price. Steves refused to accede to JELD-WEN's demands,
and shortly thereafter, JELD-WEN sent a letter terminating
the Supply Agreement. See May 7 Trial Tr. at
point after receiving that letter and after unsuccessfully
trying to arrange an alternate source of supply from
Masonite, Steves started to investigate the possibility that
Steves might build its own doorskin manufacturing plant
("the MDS Project") or obtain an alternate doorskin
supply from foreign suppliers. Id. at
1581:23-1582:2. Two things caused Steves to take that
approach more seriously. First, based on a Masonite
presentation, Steves reasonably believed that Masonite was
withdrawing from the interior molded doorskin market. As a
result, independent door manufacturers like Steves could
obtain doorskins on the domestic front only from JELD-WEN,
which had a strained relationship with Steves after
Hachigian's arrival. See id. at 1575:7-1576:15.
Second, although, after receiving the notice of termination,
Steves continued to work with JELD-WEN to resolve their
differences. However, on March 26, 2015, JELD-WEN sent Edward
Steves another letter stating that JELD-WEN would reserve the
right to assert that the Supply Agreement terminated on
December 31, 2019 instead of in September 2021 (the date
originally set by JELD-WEN and the Supply Agreement). See
id. at 1582:9-1583:23; CDX-089. This threat was more
bullying by JELD-WEN and it "accelerated [Steves']
concern [about the termination of the Supply Agreement]
dramatically." May 7 Trial Tr. at
even before JELD-WEN sent that second letter, Steves (also in
March 2015) retained John Pierce ("Pierce"), a
former JELD-WEN employee, as a consultant for two reasons.
First, Steves asked Pierce to provide information that Steves
could use in furtherance of its MDS Project. May 7 Trial Tr.
at 1531:16-1532:1; May 8 Trial Tr. at 1792:17-21. Second,
Steves wanted Pierce to "confirm the input costs"
for JELD-WEN's doorskins, which provided the basis for
doorskin prices under the Supply Agreement. May 7 Trial Tr.
at 1530:3-11; May 8 Trial Tr. at 1770:25-1772:15, 1809:4-21.
The Supply Agreement required JELD-WEN to give annual notice
of doorskin prices and related input costs for that year, and
also allowed Steves to verify those inputs, including by
requesting "back-up documentation" if an affidavit
from JELD-WEN did not settle the matter. See May 8
Trial Tr. at 1772:21-1774:16; CPX-044 §§ 6(c),
But, as a result of communications between Edward Steves and
JELD-WEN, Steves believed that JELD-WEN was not providing
accurate input costs, or enough information to verify the
accuracy of those costs. Accordingly, Steves requested that
Pierce confirm the costs given by JELD-WEN or, alternatively,
indicate what the input costs should be, based on his
knowledge. May 7 Trial Tr. at 1530:12-24; see also
May 8 Trial Tr. at 1791:18-1792:16.
Pierce was hired, both Edward and Sam Steves knew that he had
left his employment with JELD-WEN in June 2012. See
May 7 Trial Tr. at 1531:9-15. And, when Pierce met with
Steves in March 2015, Pierce disclosed to Edward Steves that
he had a confidentiality agreement with JELD-WEN.
See May 3 Trial Tr. at 1024:6-15. Nonetheless,
Steves used Pierce to obtain confidential information from
JELD-WEN. For instance, on March 19, 2015, after having
talked to several JELD-WEN employees, Pierce e-mailed Edward
Steves a report with extensive information about
"important choices that would need to be made by anyone
contemplating entering the business of molded door skin
manufacturing." Id. at 1029:23-1030:25; see
also CPX-101 at 1. That report contained, among other
things, information about the optimal configuration and
operation of a doorskin plant, see CPX-101 at 80-81; ECF No.
1633-2 at 9-11 (Trade Secret Nos. 9, 10, and 11), which could
help a company like Steves-with no previous experience in
doorskin manufacturing-build and run such a plant,
see May 1 Trial Tr. at 636:25-637:14; May 4 Trial
Tr. at 1331:2-9; May 9 Trial Tr. at 2023:13-23. After
receiving the report, Edward Steves told Pierce that he found
it "very informative." CPX-103.
days later, on March 23, Edward Steves sent Pierce a text
message seeking information about JELD-WEN's "wood
chip and resin pricing by location." CPX-105. On April
4, Pierce sent the Steves Brothers another report that
contained, among other things, JELD-WEN's wood fiber and
resin costs for each plant. See CPX-109 at 60-61;
ECF No. 1633-2 at 51-52 (Trade Secret Nos. 46 and 47). These
costs were specific to JELD-WEN and shed light on its cost
structure and resulting doorskin prices, so they could
benefit, in a general way, another company that used the same
wood fiber or resin as JELD-WEN. See Apr. 30 Trial Tr. at
349:7-350:17; May 2 Trial Tr. at 791:4-14; May 4 Trial Tr. at
1366:23-1367:6. After receiving the report, both Edward and
Sam Steves referred to the information as helpful.
See CPX-110; CPX-111.
1, 2016, in response to an e-mail from Sam Steves asking how
to mitigate a condition known as
"pre-cure" on doorskins, Pierce provided a report
detailing several manufacturing variables that can be
controlled to mitigate pre-cure. See CPX-220; ECF No. 1633-2
at 26-28 (Trade Secret No. 23). Taken together, these
variables comprise a unique piece of information that is only
available to JELD-WEN. See May 1 Trial Tr. at
642:17-644:9; May 4 Trial Tr. at 1354:22-1355:20. After
sending this report, Pierce did not perform any more tasks on
Steves' behalf. See May 7 Trial Tr. at 6-15.
also received some of the information about JELD-WEN's
manufacturing process through another former JELD-WEN
employee, John Ambruz ("Ambruz"). Steves engaged
Ambruz as a full-time consultant in July 2015, and still
employed him in that position at the time of trial. May 7
Trial Tr. at 1540:3-15, 1586:21-25. Because Ambruz had
considerable experience in the interior molded doorskin
industry, Steves hired him to assist with the MDS Project,
primarily by completing a study about the feasibility of
Steves building a doorskin manufacturing plant ("the
Feasibility Study"). See id. at 1587:1-11; May
3 Trial Tr. at 1066:2-14. On March 30, 2016, Ambruz e-mailed
to Steves the completed Feasibility Study, which discussed
the challenges associated with building a doorskin
manufacturing plant-particularly the cost, time, and need for
a manufacturing partner. See May 7 Trial Tr. at
1587:15-1591:9; CPX-200. By describing these problems in such
detail, the Feasibility Study helped Steves decide whether it
could build its own plant, apparently even more so than
Pierce's reports. May 7 Trial Tr. at 1591:10-22,
1702:21-1703:6; see also May 8 Trial Tr. at
1836:17-1837:15. The extent to which the Feasibility Study
incorporates JELD-WEN information acquired by Pierce was not
proved at trial. See May 7 Trial Tr. at 1687:15-20.
And, there is dispute whether any information provided by
Ambruz was a trade secret.
in June 2016, Sam Steves sent an e-mail to Ambruz and Gregory
Wysock ("Wysock")-a former Masonite employee who
was not hired by Steves until July 2016, id. at
1688:1-13, 1697:13-15-with an attachment that combined the
various communications that Steves had received from Pierce
throughout his consultancy. See id. at
1689:5-1693:23; CPX-231. Sam Steves believed that the
compendium would help with the work on the MDS Project. May 7
Trial Tr. at 1694:2-23.
20, 2016, Ambruz asked Sam Steves' assistant to scan and
e-mail him a document with Pierce's "recommendation
on the best way for J [ELD] -W [EN] to expand its production
capacity," which Pierce had prepared as a JELD-WEN
employee in 2006 ("the 2006 Pierce Proposal").
See Ambruz Dep. at 560:14-21; May 3 Trial Tr. at
1002:10-23. The Proposal included information about the
proposed configuration, capacity, measurements, and projected
efficiencies of JELD-WEN's Louisiana plant, see
CPX-245; ECF No. 1633-2 at 36 (Trade Secret No. 31), which
could help a potential competitor evaluate the possible
construction of a new plant, see Apr. 30 Trial Tr.
at 381:5-382:15; May 4 Trial Tr. at 1361:22-17. The scanned
Proposal contained some handwriting in the margins. Although
the provenance of those ...