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Steves and Sons, Inc. v. Jeld-Wen, Inc.

United States District Court, E.D. Virginia, Richmond Division

November 30, 2018

STEVES AND SONS, INC., Plaintiff,
v.
JELD-WEN, INC., Defendant.

          MEMORANDUM OPINION

          Robert E. Payne Senior United States District Judge.

         This 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.

         BACKGROUND

         I. Factual Background

         JELD-WEN, 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.

         One of 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.

         That 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 1568:8-1580:25.

         At some 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.[1] 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 1585:12-22.[2]

         However, 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), 21.[3] 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.

         When 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.

         Several 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.

         On June 1, 2016, in response to an e-mail from Sam Steves asking how to mitigate a condition known as "pre-cure"[4] 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.

         Steves 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.

         Then, 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.[5] 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.

         On July 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 ...


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