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Co. Says 4th Circ. Shows Private Divestiture Problematic
Law360 (March 5, 2021, 7:48 PM EST) A Fourth Circuit panel called the case a poster child for divestiture, but on Thursday, in a rehearing bid, the company facing the first-ever divestiture order won by a private plaintiff called the spat an extraordinary and extraordinarily disruptive remedy sought four years too late.
Doormaker Jeld-Wen Inc. wants the full Fourth Circuit to rehear last month s panel decision upholding an October 2018 district court order to spin off a Pennsylvania factory acquired when it purchased another door manufacturer, CraftMaster Manufacturing Inc., or CMI, in 2012. Plaintiff and rival doormaker Steves and Sons Inc. didn t file suit until 2016, Jeld-Wen said Thursday.
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On February 18, 2021, the Fourth Circuit upheld a District Court’s first-of-its-kind divestiture order against Jeld-Wen Inc., which was seeking to overturn the lower court’s 2018 order requiring Jeld-Wen to spin off a factory it acquired as part of the acquisition of Craftmaster Manufacturing Inc. (CMI) as part of a private challenge to the acquisition. This is an important reminder that merger challenges can come not just from federal and state antitrust enforcers, but also from customers who are disadvantaged by the transaction. It is also a reminder that antitrust challenges can arise even after a transaction has been consummated.
remedy in equity was warranted considering the balance of hardships between plaintiff and defendant; and
the public interest would not be disserved by a permanent injunction.
The court held that the first two factors were satisfied following testimony that Steves would likely go out of business by September 2021 without equitable relief. As to the third factor, the court held that the threat to Steves’s survival outweighed Jeld-Wen’s hardships, which could be mitigated by ordering the divested entity to sell Jeld-Wen as many doorskins as needed for two years. Finally, the court concluded that the divestiture would be in the public interest because it would restore competition to the doorskin market. The court ordered the divestiture of the Towanda plant, to be auctioned if the order was affirmed on appeal.
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