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Jeld-Wen Asks Full Appeals Court to Rethink Novel Merger Ruling

March 5, 2021, 8:19 PM

Jeld-Wen Inc. asked the full U.S. Court of Appeals for the Fourth Circuit to reconsider a first-of-its-kind ruling by a three-judge panel unwinding its merger with a competing door manufacturer in response to an antitrust challenge brought by a rival rather than a regulator.

“This case is anything but a ‘poster child’ for divestiture,” as the Fourth Circuit called it, but rather “the ‘poster child’ for why private-party divestiture orders are problematic,” according to the rehearing petition Jeld-Wen filed Thursday.

The novel ruling, in defiance of settled precedent “and common sense,” is “a complete outlier” that “will have baleful consequences,” the petition says.

Divestiture Only Fix for Market ‘As a Whole’

The Fourth Circuit’s decision involved a challenge by Steves and Sons Inc., a 150-year-old family-run doormaking business, to a 2012 tie-up between Jeld-Wen and another industry leader, CMI.

The lawsuit accused Jeld-Wen of exploiting its market power, after the deal was consummated, to flagrantly breach its long-term supply contracts with Steves, which it allegedly threatened to cut off entirely from access to the “skins” used as “molded door” exteriors.

After a jury verdict in favor of Steves, a federal judge in Virginia ordered the sale of a doorskin plant in Towanda, Pa., that Jeld-Wen acquired in the merger.

A Fourth Circuit panel affirmed Feb. 18, dismissing Jeld-Wen’s broad-ranging challenge to the district court decision. Steves didn’t wait too long before bringing the case or impermissibly restyle contract claims as antitrust allegations in a bid for treble damages, the appeals court found.

It also rejected the arguments in favor of a narrower order requiring Jeld-Wen to keep supplying Steves with doorskins. Such a mandate would offer only a short-term fix, and it would fail to promote competition in the market “as a whole,” the panel said.

‘No Roving License’ to Meddle in Markets

Jeld-Wen assails those rulings in its rehearing petition, saying the panel exceeded the scope of its authority by seeking a marketwide solution despite the availability of narrower relief that “would prevent any injury to Steves.”

“A court hearing an antitrust suit has no roving license” to “remedy competitive harms however it sees fit” beyond “the injuries of the parties before it,” the petition says. “That is why, unsurprisingly, divestiture is far more likely to be an appropriate remedy in an antitrust case brought by the government.”

The ruling also rewarded Steves for its delay in challenging the merger and “ignored the overwhelming prejudice” to Jeld-Wen, which “devoted massive time and expense to improving and integrating its Towanda plant,” according to the petition.

The panel’s reason for refusing to rule the suit untimely—that Steves didn’t recognize the harm it faced until Jeld-Wen began breaching their contracts—also underscores that it really has a contract claim dressed up as an antitrust allegation, Jeld-Wen argues.

“If Steves could live with the acquisition for several years because of its supply agreement, then the source of its injury is not the acquisition, but the breach,” the petition says.

Jeld-Wen is represented by Kirkland & Ellis LLP. Steves is represented by Munger, Tolles & Olson LLP; Hunton Andrews Kurth LLP; and Pipkin Law LLP.

The case is Steves & Sons Inc. v. Jeld-Wen Inc., 4th Cir., No. 19-1397, petition for rehearing en banc filed 3/4/21.

To contact the reporter on this story: Mike Leonard in Washington at mleonard@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Nicholas Datlowe at ndatlowe@bloomberglaw.com

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