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Steves and Sons, Inc. v. JELD-WEN, Inc.

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

September 3, 2019

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

          REPORT AND RECOMMENDATION

          Hon. Lawrence F. Stengel (Ret.) Special Master Judge

         I. INTRODUCTION.

         There is a dispute between the parties over whether JELD-WEN may discontinue the manufacture and sale of three doorskin designs, specifically the Cashal, the Corvado, and the Coventry. Each are produced exclusively at the Towanda facility.[1] Steves and Sons, Inc. (Steves) contends that discontinuing the sale of these three designs violates the Court's Amended Final Judgment Order (ECF No. 1852) which requires JELD-WEN to "maintain the status quo at the Towanda facility" during the pendency of the appeal. Counsel for Steves presented argument opposing the discontinuation of these doorskin designs in letters to the Special Master dated April 29, 2019, and May 17, 2019. Counsel for JELD-WEN responded in a letter dated May 9, 2019. On July 11, 2019, the Special Master heard oral argument from counsel in a conference call.

         For the reasons set forth below, I recommend the Court enter the attached order denying Steves" request to enjoin the discontinuation of the Cashal, Corvado, and Coventry designs as JELD-WEN has presented a legitimate business purpose to discontinue these three designs. The information illustrates that the cost and capacity savings associated with this discontinuation will not only raise JELD-WEN's EBITDA[2] but also will increase the Towanda facility's value to an acquiring company. Prior to the divestiture trial, JELD-WEN routinely evaluated its doorskin sales and regularly determined which of its designs should be discontinued due to lack of profitability. Simply stated, the proposed discontinuation is business as usual at Towanda. It is therefore beyond the purview of the Order and my Special Master duties (as outlined in ECF No. 1863) to prevent JELD-WEN from performing a similar function during the pendency of its appeal.

         II. BACKGROUND AND APPLICABLE COURT ORDERS.[3]

         On December 14, 2018, the Court entered a Final Judgment Order in this antitrust case (ECF No. 1815). On March 13, 2019, the Court amended its Final Judgment Order (ECF No. 1852) (the ''Order"). JELD-WEN appealed the Order to the United States Court of Appeals for the Fourth Circuit on April 12, 2019. This appeal is pending.

         Under Paragraph (F)(2) of the Order and Fed.R.Civ.P. 53, this Court appointed a Special Master to oversee the divestiture of the Towanda facility to an acquiring company and "to assure that, until the divestiture is complete, the Towanda facility is preserved, operated, and maintained in good operating condition and in accord with applicable law." ECF No. 1852 at 6: accord ECF No. 1863 at 2. The Order states, in pertinent part:

(a) JELD-WEN shall continue to maintain and operate the Towanda facility during the pendency of the appeal unless otherwise ordered by the Court; and
(b) JELD-WEN shall not take any steps during the pendency of the appeal that would in any way reduce the value of the Towanda facility to a potential Acquiring Company or would make it more difficult or costly for the Acquiring Company to supply doorskins to Steves of the type, and in the quantity, that JELD-WEN supplies to Steves as of the date of the entry of this Order.

         ECF No. 1852 at 8-9; accord ECF No. 1863 at 2-3.

         There is also language in Section VIII of the Order requiring JELD-WEN to maintain the "status quo" at the Towanda facility. ECF No. 1852 at 13-14. That section pertains to the current Supply Agreement between the parties and reads, in pertinent part:

VIII. The Supply Agreement's Terms Shall Extend One Year Beyond the Conclusion of the Appeal if This Case Remains on Appeal Until September 10, 2021.
... [I]f, as of September 10, 2021, this case remains on appeal, the term and terms of the Supply Agreement... shall be extended for one year beyond the conclusion of the appeal to assure that Steves does not suffer ... irreparable injury ...; and
JELD-WEN shall maintain the status quo at the Towanda facility during the pendency of this appeal, and Steves has the right under Federal Rule of Civil Procedure 64(d) to request an injunction pending appeal to lengthen the period of Steves' Supply Agreement with ...

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