Steves and Sons, Inc. v. Jeld-Wen, Inc., No. 3:2016cv00545 - Document 1759 (E.D. Va. 2018)

Court Description: MEMORANDUM OPINION. Signed by District Judge Robert E. Payne on 08/30/2018. (smej, )

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Steves and Sons, Inc. v. Jeld-Wen, Inc. Doc. 1759 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA Richmond Division STEVES AND SONS, INC., Plaintiff, Civil Action No. 3:16-cv-545 V JELD-WEN, INC., Defendant. MEMORANDUM OPINION This matter is before the Court on several evidentiary issues that are pertinent to the resolution of PLAINTIFF STEVES AND SONS, INC.'S MOTION FOR EQUITABLE RELIEF (EOF No. 1191). Before assessing the merits of the various equitable remedies requested by Steves, it is necessary to resolve motions filed by Steves seeking to preclude three categories of evidence to be offered by JELD-WEN. They are: (1) Steves' unclean hands in misappropriating JELD-WEN's trade secrets following the CMI Acquisition; (2) communications or other documents prepared by John Pierce (""Pierce"), a subset of the unclean hands evidence that Steves objected to on hearsay grounds; and (3) the steps that JELD-WEN would take if the Court ordered divestiture of Towanda. Steves objected to the Court's consideration of this evidence either before or at the Remedies Hearing, but the Court Dockets.Justia.com received that evidence provisionally, subject to its potential exclusion after briefing.^ I. Steves' Unclean Hands Steves relate to documents seeks JELD-WEN's trade C'Ambruz"); JELD-WEN, DEFENSE INC.'S exclude (2) by Pierce. INC.'S Nos. MOTION IN defense through These issues 1622, LIMINE of IN 1623) SUPPORT REGARDING evidence unclean that hands: misappropriation and with are and of Pierce communications MEMORANDUM (EOF categories concerning Steves' secrets and two alleged and testimony JELD-WEN's statements to John OF ITS PLAINTIFF in DX 303, 304, hearsay DEFENDANT UNCLEAN STEVES of Ambruz possible presented (1) AND HANDS SONS, 306, 307, 308, 309, 313, 327, 328, 331, 355, 445, 452, 481, 759, AND 764 (EOF No. 1380). A. In General At trial on the merits of the liability and damages case, the Court relied on Rule 402 to exclude the trade secrets evidence for the purpose of showing that Steves obtained certain ^ Steves also sought to exclude evidence of CMI's financial condition in 2011 under Rule 402, see Apr. 10 Remedies Tr. at 155:10-162:4, 227:10-230:9, and the parties submitted posthearing briefs on the issue, see DEFENDANT JELD-WEN, INC.'S MEMORANDUM REGARDING REGARDING CMI'S WHETHER FINANCIAL THE COURT CONDITION IN MAY 2011 CONSIDER (EOF EVIDENCE No. 1621). However, Steves withdrew that objection at oral argument on Steves' motion for equitable relief, see Aug. 3 Tr. (EOF No. 1752) at 261:18-21, so the Court can consider that evidence without issue. information by misappropriating it from JELD-WEN. See ECF No. 776. That ruling flowed from the Court's earlier determination that unclean hands is not a defense to an antitrust damages claim. See Counterclaims Amendment Op. (ECF No. 239) at 15-18. After JELD-WEN noted its intent to introduce evidence in support of an unclean hands defense at the Remedies Hearing, the Court ordered further briefing. ECF No. 1612; see also Apr. 11 Remedies Tr. at 324:15-325:10. JELD-WEN makes two broad arguments to show that evidence of Steves' trade secrets misappropriation First, it contends that unclean request for equitable remedies is hands is a in an admissible here. valid defense to a antitrust case, based primarily on a statement in California v. American Stores Co., 495 U.S. 271 (1990). Second, close nexus between anticompetitive Steves' conduct JELD-WEN asserts that there is a misappropriation because Steves pursued and its JELD-WEN's theft to avoid the anticompetitive effects of the CMI Acquisition, once it became aware of those consequences. As a general rule, ''he who seeks equity must do equity." Homeland Training Ctr., LLC v. Summit Point Auto. Research Ctr., 594 F.3d 285, 297 (4th Cir. 2010) (internal quotations omitted). Flowing from that maxim, the unclean hands doctrine "prevents a plaintiff from obtaining equitable relief if the plaintiff has been 'guilty of any inequitable or wrongful conduct with respect to the transaction or subject matter sued on.'" Smithfield Foods, Inc. V. United Food & Commercial Workers Int'l Union, 593 F. Supp. 2d 840, 847 (E.D. Va. 2008) (quoting WorldCom, Inc. v. Boyne, 68 F. App'x 447, 451 (4th Cir. 2003)). Section 16 of the Clayton Act, which authorizes courts to award injunctive relief to private that plaintiffs, does not speak to the defense. See 15 U.S.C. § 26. In availability of American Stores, the Supreme Court held for the first time that Section 16 permits courts to order divestiture and that, upon certain proofs, divestiture was an available remedy in cases brought by private litigants. 495 U.S. at 295-96. However, ^^equitable defenses such as laches, or perhaps transactions from ^unclean hands,' may protect consummated belated attacks by private parties when it would not be too late for the Government to vindicate the public interest." Id. at 296. The context Court of has already antitrust addressed liability. When this language JELD-WEN moved in the to add counterclaims alleging Steves' trade secret misappropriation, it had sought to prevent the severance of the antitrust and trade secrets trials by arguing that unclean hands can be a defense to an antitrust violation. The Court noted that the above-quoted portion of American Stores was dicta because neither laches nor unclean hands arose in that case. See Counterclaims Amendment Op. at 15-16 (citing Am. Stores, 495 U.S. at 296). Moreover, the Court observed, "the law in the Fourth Circuit is that unclean hands is not a defense Specifically, in to an antitrust claim." Id. Burlington Industries v. Milliken & at 16. Co., 690 F.2d 380 {4th Cir. 1982), the court found it "well settled that unclean hands is no bar to antitrust recovery." Id. at 388 (citing, inter alia, Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, Inc., 340 U.S. 211, 214 (1951), overruled on other grounds by Copperweld Corp. v. Indep. Tube Corp., 467 U.S. 752 (1984); Perma Life Mufflers, Inc. v. Int^l Parts Corp., 392 U.S. 134, 138 (1968), overruled on other grounds by Copperweld Corp., 467 U.S. at "avoid 765-66, 771). As liability . . . for alleging that [the a result, their plaintiff] the own [wa]s defendants antitrust culpable could not conspiracy for a by distinct infraction." Id. The result in Burlington Industries derived in part from the Supreme Court's decision in Perma Life. That case concerned the defense applies of only misconduct in if pari the underlying delicto, plaintiff the which, was litigation. unlike unclean involved In re in hands, the Derivium same Capital LLC, 716 F.3d 355, 367 (4th Cir. 2013).^ The Perma Life majority ^ Although the distinct definitions of in pari delicto and unclean hands "may be useful analytically . . ., courts have not been precise of careful in their designation, often using one term when the other is more appropriate. The outcome of the opinion rejected in pari delicto as a defense to an antitrust claim. 392 U.S. at 140. However, based on the disagreement of five Justices in the concurring and dissenting opinions, the Fourth Circuit ^'continues to recognize a narrow version of the defense." Burlington Indus., 690 F.2d at 387 n.6. In any event, in pari delicto was not implicated in Burlington Industries for procedural reasons, see id. at 387, and is inapplicable here because Steves did not participate in JELD-WEN's wrongdoing in violating the Clayton Act. Whether the bar on the unclean hands defense extends to the equitable remedies stage has not been definitely resolved. As an initial hands matter, rests opinions cases in that Burlington on somewhat both Industries^ unstable Kiefer-Stewart Burlington ground, and Industries rejection Perma cites in as of the Life—the support unclean majority only of two that holding—do not reference unclean hands. See Perma Life, 392 U.S. at 139-40; Kiefer-Stewart, 340 U.S. at 214. Indeed, the only Perma Life opinions that mention the doctrine at all are Justice Marshall's concurrence and Justice Marian's partial concurrence and partial dissent, neither of which is binding here. See Perma Life, n.l, 392 U.S. 156 at 151 (Marian, J., (Marshall, concurring J., in concurring); id. part and at 153 dissenting in litigation rarely turns on the term used." 11 Earl W. Kintner et al.. Federal Antitrust Law § 81.1 (2017). part). Furthermore, Burlington Industries and Perma Life considered the respective defenses in the context of antitrust liability and damages, not injunctive relief. See id. at 139-40; Burlington Indus., 690 F.2d at 388. And, most recently, American Stores left open the possibility that unclean hands could ''perhaps" be asserted as a defense to the equitable remedy of divestiture. See 495 U.S. at 296. The Court previously highlighted that very ambiguity. See Counterclaims Amendment Op. at 18. JELD-WEN argues that the Court, lacking any binding precedent, should defer to traditional equitable principles and allow evidence emphasizes related the to Supreme unclean Court's hands. recent In support, instruction JELD-WEN that "the decision whether to grant or deny injunctive relief rests within the equitable discretion of the district courts, and . . . such discretion principles must be exercised consistent of equity." eBay Inc. v. with MercExchange, traditional L.L.C., 547 U.S. 388, 394 (2006). That holding rests on the proposition that "'a major departure from the long tradition of equity practice should not be lightly implied.'" Id. at 391 (quoting Weinberger V. Romero—Barcelo, 456 U.S. 305, 320 (1982)). According to JELD- WEN, reading those statements together with American Stores' passing reference to unclean hands implies that the defense may still be used to oppose equitable remedies in antitrust cases. JELD-WEN's position is squarely at odds with numerous cases that have relied on Perma Life to find that unclean hands is not a defense to antitrust injunctive relief. Although unclean hands ''arose originally in the decisions . . . conclude unavailable, injunctive whether relief." that the 11 courts the of defense plaintiff Kintner et equity, is almost should be seeking al., supra, all equally monetary § 81.1[b]. or The central case among this group, Chrysler Corp. v. General Motors Corp., 596 F. Supp. 416 (D.D.C. 1984), considered a practically identical argument to JELD-WEN's: that Perma Life was distinguishable because "traditional principles of equity, which permit the unclean hands defense, should be held to apply in this case because [plaintiff] is seeking injunctive relief and not treble damages." Id. at 419. contention for two reasons. Yet the court rejected First, antitrust actions that are uniquely directed at protecting the public interest, such that "actions in equity," like actions at law, "must yield to the overall public policy of enforcing antitrust laws." Id. Second, in the wake of Perma Life, courts had "almost uniformly declined to permit the unclean hands defense" to antitrust claims seeking injunctive relief. Id. at 419-20 (citing Am. Motor Inns, Inc. v. Holiday modified Inns, on Inc., other 365 F. grounds, Supp. 521 1073, F.2d 1098 1230 (D.N.J. (3d Cir. 1973), 1975); Natcontainer Corp. v. Cont'1 Can Co., 362 F. Supp. 1094, 1099 8 (S.D.N.Y. 1973); Skil Corp. v. Black & Decker Mfg. Co., 351 F. Supp. 65, 66 (N.D. 111. Bureau Retail Credit Co., 358 F. Supp. 780, 796-97 (S.D. Tex. 1971), 1972); Credit Reports, Inc. v. aff^ d, 476 F.2d 989 (5th Cir. 1973)); see also Int^l Tel. & Tel. Corp. V. Gen. Tel. & Elecs. Corp., 296 F. Supp. 920, 926 (D. Haw. 1969) (reaching same conclusion in dicta). As a result, the court struck defendants' affirmative unclean hands defense. Chrysler Corp., 596 F. Supp. at 420. JELD-WEN is right that the line of authority rejecting unclean hands as a defense to antitrust injunctive relief is not technically unbroken, as Steves claims. Several cases have not applied the logic of Perma Life and Kiefer-Stewart, instead relying on evidence of unclean hands to prevent plaintiffs from pursuing or obtaining equitable relief for antitrust violations. See Singer v. A. Hollander 1953); Heldman v. U.S. & Son, 202 F.2d 55, 59-60 (3d Cir. Lawn Tennis Ass'n, 354 F. Supp. 1241, 1249 (S.D.N.Y. 1973); Graham v. Triangle Publ'ns, Inc., 233 F. Supp. 825, 832 (E.D. Pa. 1964), aff'd, 1965); La. Supp. Petroleum 334, 336 unpersuasive Retail (W.D. compared Dealers, La. to 1956). the 344 Inc. But opposing v. F.2d 775 (3d Tex. these cases Co., 148 decisions cited Cir. F. are above—both because three of the four preceded Perma Life, which is a clear dividing line with respect to this issue, see Chrysler Corp., 596 F. Supp. at 419; and because the reasoning on the cases on which JELD-WEN relies can very charitably be described as conclusory. Indeed, two of the cases cite no support for their statements about the availability of the unclean hands defense. See Heldman, 354 F. Supp, at 1249; La. Petroleum, 148 F, Supp. at 336. JELD-WEN therefore cannot use those cases to overcome more recent and well-reasoned decisions. JELD-WEN's fallback unclean caused Court's hands a defense sea change reference argument—that the cases rejecting the are in to unreliable the because law—fares unclean hands American no better. a possible as The Stores Supreme defense to divestiture claims is remarkably tentative. Whatever the Supreme Court intended the word ^^perhaps" to mean, it almost certainly indicates defense that to unclean equitable hands does remedies laches (which is mentioned not in necessarily antitrust exist actions, as a unlike without hesitation). See Am. Stores, 495 U.S. at 296. Moreover, cases decided after American Stores, including one in this district, have continued to follow Chrysler Corp. and Perma Life, suggesting that the Supreme Court did nothing Burlington to unsettle Industries). those See cases Higgins (or, v. Roads, 849 F. Supp. 1113, 1121 (E.D. for Med. that Coll. matter, of Va. 1994); see Hampton also CSU Holdings Inc. v. Xerox Corp., No. CIV. A. 94-2102-EEO, 1995 WL 261158, at *3 Organizations (D. Kan. Antitrust Apr. 5, Litig., 10 1995); 161 F.R.D. In re 107, Indep. 109 (D. Serv. Kan. 1995); cf. Am. Soc^y for the Prevention of Cruelty to Animals v. Ringling Bros. & Barnum & Bailey Circus, 244 F.R.D. 49, 53 (D.D.C. 2007), on reconsideration in part sub nom. Am. Soc. for Prevention of Cruelty to Animals v. Ringling Bros. & Barnum & Bailey Circus, 246 F.R.D. 39 (D.D.C. 2007). Indeed, even the Supreme Court noted after American Stores that it has ""rejected the unclean hands defense "where a private suit serves important public purposes,'" McKennon v. Nashville Banner Pub. Co., 513 U.S. 352, 360 (1995) (quoting Perma Life, 392 U.S. Chrysler at Corp. 138)—thus In core of Chrysler view American unclean reiterating light Corp. Stores the key of this continued and as Perma having underlying affirmation of the Life, there validated point an is no reason to approach hands doctrine that the majority of cases to the before that point had rejected. This is true notwithstanding the discussion of traditional equitable principles in eBay. That case simply repeated a general statement of law that does not contradict courts' longstanding approach to equitable defenses like unclean hands or in pari delicto in the antitrust context. Consequently, the Court concludes that unclean hands is not a valid defense to Steves' request for divestiture. Evidence of Steves' trade secret misappropriation therefore cannot be relevant because of an unclean hands defense. However, that does not necessarily mean that the evidence is not relevant 11 for some other probative of issue in Steves' the lack case. of For example, irreparable it could injury and be the hardships that Steves will suffer if no divestiture is ordered, because Steves' misappropriation of particular trade secrets might have helped it build a doorskin manufacturing plant, and thereby avoid termination of presented at the Remedies does show connection not a its Hearing business. But the evidence and the trade secrets trial between the misappropriated trade secrets and any actual efforts to build a doorskin plant, and there is no preparing evidence the that Ambruz Feasibility Study relied (the on only those secrets concrete step while that Steves has taken towards building a plant). Thus, the probative value of the misappropriation evidence depends on speculative assessments about future actions that Steves may or may not take while in possession of the stolen trade secrets. As a result, that evidence does not satisfy the barrier for admissibility under Rule 402, E.I, du Font de Nemours & Co. v. Kolon Indus., Inc., 847 F. Supp. 2d 843, 860 (E.D. Va. 2012), and will not be considered for any purposes here. B. Pierce Hearsay Documents Before the several exhibits Remedies concerning Hearing, Pierce's JELD-WEN had identified misappropriation of JELD- WEN's trade secrets on behalf of Steves and, at the final pre- hearing conference, Steves objected 12 to them. At the Court's direction, Steves filed PLAINTIFF STEVES AND SONS, INC.'S MOTION IN LIMINE REGARDING DX 303, 304, 306, 307, 308, 309, 313, 327, 328, 331, 355, 445, 452, 481, 759, AND 764 (EOF No. 1380). These documents are all e-mails between Pierce and Sam and/or Edward Steves. See PI. Pierce Hearsay Br. (EOF No. 1382) (Under Seal) at 2-3. Although the exhibits are a subset of the unclean hands evidence discussed above, all of which Steves sought to exclude as irrelevant, Steves also objected to the Pierce communications under Rule 802. See id. at 1. JELD-WEN broader body admits that the of unclean Pierce exhibits are part of the hands evidence, and thus subject to exclusion on the same basis. See Apr. 11 Remedies Tr. at 325:1525 (statement evidence by JELD-WEN's ^'incorporates counsel statements that made the unclean by . . . Pierce hands in e- mails that Steves has objected to as hearsay"). Indeed, of the sixteen documents identified in Steves' motion in limine, only seven are mentioned directly or by implication in JELD-WEN's proposed findings of fact, and only in connection with Steves' trade secret misappropriation. See Def. FOF (ECF No. 1657) (Under Seal) SISl 141-42.^ In other words, JELD-WEN appears to have introduced the Pierce communications for the exact same purposes ^ Four exhibits are explicitly referenced (DX-306, -308, -328, and -445), and three others (DX-452, -481, and -764) are duplicates of those documents. PI. Pierce Hearsay Br. at 2-3. 13 as the not other an unclean available hands defense evidence. to a Because request for unclean hands divestiture is under Section 16, the Pierce e-mails should be excluded as irrelevant, just like the rest of the unclean hands evidence. Accordingly, PLAINTIFF STEVES AND SONS, INC.'S MOTION IN LIMINE REGARDING DX 303, 304, 306, 307, 308, 309, 313, 327, 328, 331, 355, 445, 452, 481, 759, AND 764 {ECF No. 1380) will be granted. II. JELD-WEN's Post-Divestiture Operations Finally, before the Remedies Hearing, PLAINTIFF STEVES AND SONS, INC.'S MOTION EVIDENCE IT IN OF HOW WOULD OPERATE TO THE Steves EXCLUDE EVENT OF filed JELD-WEN'S DIVESTITURE (ECF No. 1329). Steves initially challenged the admissibility of ''evidence of how [JELD-WEN] would operate if ordered to divest the Towanda plant." PI. Post-Divestiture Ops. Br. (ECF No. 1331) (Under Seal) at 2, 11. As JELD-WEN pointed out, that category is imprecise and does not track the language of the discovery that Steves relies on in support of the motion. Steves then clarified that its motion does not extend to evidence of JELD-WEN's hardships from divestiture, "unless such claimed hardships are themselves how [JELD-WEN] would operate if ordered to divest the Towanda plant." PI. Post-Divestiture Ops. Reply (ECF No. 1398) at 2 (alteration example, Steves evidence that in says, it original) JELD-WEN would have (quotation should to: 14 marks not close a be omitted). able door to For present manufacturing plant; acquire new dies; retrofit existing dies; build a doorskin plant, or pursue other alternatives to obtain adequate doorskin volume; or modify JELD-WEN's legacy plants, such as by shifting Towanda's SKUs to those plants. See id. at 2-4. Steves First, which it asserts claims requires responses. two that parties bases for excluding that JELD-WEN has run of to supplement Because the failure afoul incomplete evidence. Rule 26(e), interrogatory was not substantially justified or harmless. Rule 37(c)(1) makes exclusion appropriate. Second, Steves asserts that Bruce Fedio (^"Fedio") did not explain during the company's operate if JELD-WEN Rule 30(b)(6) divestiture should be deposition occurred. precluded how Therefore, from JELD-WEN under elaborating Rule on its would 37(d), post- divestiture plans for the first time at the Remedies Hearing. A. Rule 37(c)(1) A party must supplement its interrogatory responses ^'in a timely manner if the party learns that in some material respect the . . . response is incomplete . . . , and if the additional or corrective information has not otherwise been made known to the other parties during the discovery process or in writing." Fed. R. Civ. P. 26(e)(1)(A). If the party fails to do so, it cannot rely on the undisclosed hearing '^unless the failure harmless." Id. 37(c)(1). information at a subsequent was substantially justified or is Courts 15 consider five factors in exercising their ''broad discretion" to determine whether a nondisclosure is substantially justified or harmless: "'(1) the surprise to the party against whom the evidence would be offered; (2) the ability of that party to cure the surprise; (3) the extent trial; to (4) which the nondisclosing allowing importance party's the of evidence the explanation would evidence; for disrupt and its failure the (5) to the disclose the evidence.'" Bresler v. Wilmington Tr. Co., 855 F.3d 178, 190 (4th Cir. 2017) (quoting S. States Rack & Fixture, Inc. v. Sherwin-Williams Co., 318 F.3d 592, 597 (4th Cir. 2003)). If Rule 37(c)(1) of" excluding instead "(A) may order has been the payment violated, "[i]n nondisclosed of the addition information, reasonable expenses, to a or court: including attorney's fees, caused by the failure; (B) may inform the jury of the party's failure; and (C) may impose other appropriate sanctions." Fed. R. Civ. P. 37(c)(1); see also id. 37(b)(2)(A). Courts must appropriate acted in consider sanction: bad four "'(1) faith, (2) factors whether the when the amount deciding on non-complying of an party prejudice that noncompliance caused the adversary, (3) the need for deterrence of the particular sort of non-compliance, and (4) whether less drastic sanctions would have been effective.'" Law Enf't All, of Am., Inc. V. USA Direct, Inc., 61 F. App'x 822, 830 (4th Cir. 2003) (quoting Anderson v. Found, for 16 Advancement, Educ. and Emp^t of Am. Indians, 155 F.3d 500, 504 (4th Cir. 1998)). The dispute here centers on JELD-WEN's responses to Steves' second set of interrogatories. See Interrogatory Responses (ECF No. 1331-1) (Under Seal) at 1. Interrogatory No. 17 asked JELDWEN to ""[iJdentify each action JELD-WEN asserts it would take, or likely would take, in order to effectuate the divestiture of any active or inactive doorskin plant . . . pursuant to an order in this action requiring any such divestiture." Id. at 4-5. In its first response, JELD-WEN objected to that interrogatory as ''call[ing] required for to JELD-WEN do in to speculate response to a about what hypothetical it would be order . . . for which there is no basis whatsoever under the law." Moreover, it pointed out that the ''steps JELD-WEN would need to take in response to an order in this action 'requiring divestiture' of Towanda would depend on the scope and content of the order." Nonetheless, JELD-WEN stated that "as a general matter, CMI has been fully integrated into JELD-WEN over the past four-and-a- half years since being acquired by JELD-WEN, and neither CMI nor the Towanda plant exist in the form they did back in 2012—making 'divestiture' impossible." Id. at 5. Were this JELD-WEN's only response, the hardship evidence that it could present at the Remedies Hearing might have been restricted. Yet, several weeks later, JELD-WEN served supplemental responses. See Suppl. Interrogatory Responses (ECF 17 No. 1331-2) {Under Seal). The supplemental response to Interrogatory No. 17 reiterated the objections in the original response, adding that ^'[n]o business plan currently exists, by definition, for how to comply with an order of divestiture that does not exist and, by the framing of this interrogatory might be directed to any number of different plants." Id. at 3. JELDWEN also stated: In the four-and-a-half years since JELD-WEN acquired CMI, the Towanda facility has been completely integrated into JELD-WEN. That process has involved significant efforts costing the company millions of dollars that it spent on reliance of the fact that no one, including Steves, was challenging the acquisition. Efforts that were undertaken at Towanda by JELD-WEN included retooling, updating the facility and fixing structural issues, and integrating Towanda into JELDWEN's technology, support services and human resource systems. In addition, JELD-WEN invested well over a million dollars in order to begin manufacturing certain products in-house in the Towanda facility. By virtue of acquiring Towanda and the capacity in that facility, JELD-WEN was able to shut down two of its other plants: Dubuque and Marion. As a result of shuttering those plants, dozens of employees were let go. In addition, since acquiring Towanda, JELD-WEN has been able to rationalize its product lines; it has ceased to sell certain doorskins and moved the manufacture of certain types of doorskins to different facilities. In the event divestiture the of Court Towanda, ordered some JELD-WEN sort would of have to unscramble all those eggs. While that might not have been as significant an issue had Steves brought suit in 2012 when the 18 merger was announced . . Steves' choice to wait over four years to bring suit means that undertaking that process now . . . would severely harm JELD-WEN and cost the company tens of millions of dollars if not more. Indeed, it is quite possible that a divestiture would require JELD-WEN for a period of time to purchase doorskins from another entity, and/or limit the number of doorskins it sold to third parties—all of which could severely harm not only JELD-WEN but its doorskin customers.^ Id. at 3-4. JELD-WEN did not further supplement its response, nor did Steves serve any other interrogatories about the effects of divestiture on JELD-WEN's operations. Steves then deposed Hachigian. Asked if JELD-WEN had ''analyze[d] the effects of an order requiring the divestiture of the Towanda plant," Hachigian indicated that he was "not . . . aware of" any such efforts, and that JELD-WEN "ha[d] not put the engineers or the manufacturing team to that." Hachigian Dep. Tr. {ECF No. 1372-2) (Under Seal) at 469:14-21. Pressed on why JELD-WEN had not "develop[ed] a contingency plan on how it would operate if the court orders the divestiture of the Towanda plant," Hachigian conceded that "to date [JELD-WEN] ha[s]n't put the resources together." Id. at 470:2-9. He then explained why JELD-WEN could not compensate for Towanda's lost ^ The portion of the response that discussed the effect of divestiture on JELD-WEN's MiraTEC and Extira business is omitted here because Steves does not seek to exclude any MiraTEC and Extira-related evidence. PI. Post-Divestiture Ops. Br. at 4 n.l. 19 capacity by building a doorskin plant, emphasizing that Towanda has ""capacity around 8-foot doors" and ""different styles and designs," which are ""impossible to separate" because they were ""integrated into Similarly, the Hachigian core business." briefly Id. described at the 470:11-22. ""environmental issues" and ""technical changes with regards to resins and clean air" that would make restarting the Marion plant costly. Id. at 471:12-472:7. Although he testified that a member of JELD-WEN's engineering team could Marion, noted that he better the explain plant is the not cost a of viable restarting alternative because it ""make different products [than Towanda]. These things are not interchangeable." Id. at 472:8-474:8. Steves subsequently deposed Fedio, as JELD-WEN's corporate representative. examined and One of the deposition topics on which was ""[t]he status of Your plants in Towanda, Dubuque, manufactured including: there; any their actions physical that condition; would be he was Marion, products required to produce doorskins at these plants; all actions You would take if order[ed] to divest any of these plants; and the effect any such divestiture would have on Your business." JELD-WEN 30(b)(6) Dep. Notice, Sched. testified about A (ECF the No. 1372-4) challenges and (Under costs Seal) SI 12. associated Fedio with restarting Marion, including the time and equipment replacement needed. He also noted that a ""significant" number of Marion's 20 doorskin (ECF dies No. Fedio had been 1372-3) said that moved to other (Under Seal) at JELD-WEN did not plants. Fedio 300:7-302:11. have a In Dep. Tr. addition, "comprehensive" or "formally documented plan" for "how it would maintain production of interior molded doorskins in the event of a disaster at one of its plants," aside from one for its plant in Latvia. However, he acknowledged that JELD-WEN could probably use excess capacity from other plants to cover the lost capacity at a plant affected by a disaster. Id. at 322:17-324:1. He then answered questions about the cost and hardship of building a doorskin manufacturing plant to replace Towanda's doorskin supply, as well as the possibility of purchasing doorskins from Masonite or Teverpan. Fedio stated that JELD-WEN would likely buy from the new owner of Towanda instead of either of those suppliers. Id. at 338:8- 342:17. Finally, he agreed with Hachigian that, outside of the Supplemental Interrogatory Responses, JELD-WEN had not examined the effects of a divestiture order. See id. at 334:5-337:3. After Steves prevailed at trial, the parties submitted briefs concerning the scope of Steves' divestiture request. In its opening brief, Steves proposed for the first time that the Court impose several conditions in addition to the sale of Towanda, including an order that JELD-WEN not purchase doorskins from Towanda for five years. In response, JELD-WEN argued that the loss of Towanda and Steves' conditions 21 would cause JELD-WEN hardship because, among other things, it would have to recreate doorskin dies that are used solely at Towanda, and it could not meet its Towanda. Towanda's customers' JELD-WEN lost demand also without outlined capacity by purchasing the viability reopening Marion, doorskins of from replacing using excess capacity from Latvia, building a new doorskin plant, or buying doorskins from Masonite or foreign suppliers. As noted in the factual background, JELD-WEN then presented considerable evidence on these issues at the Remedies Hearing. Steves appears to oppose the admission of most, if not all, of this evidence. See PI. Post-Divestiture Ops. Reply at 2-4. Whether JELD-WEN has even violated Rule 26(e) is dubious. The Court may look at both the original Interrogatory Responses and the Supplemental Interrogatory Responses to judge the adequacy of JELD-WEN's disclosures. See Aug. 3 Tr. at 311:18-25. Most of the evidence that Steves seeks to exclude was disclosed, either directly or by implication. The supplemental response to Interrogatory No. 17 indicated that, after acquiring CMI, JELD- WEN ^^beg[a]n manufacturing Towanda, '"rationalize[d] its certain product products in-house" lines," "ceased to at sell certain doorskins[,] and moved the manufacture of certain types of doorskins to different facilities." JELD-WEN further stated that divestiture would force JELD-WEN to undo these changes and, at least temporarily, "purchase doorskins from another entity, 22 and/or limit the number of doorskins it sold to third parties." Suppl. Interrogatory statements together, Responses it is at 4. readily Putting inferable these that two JELD-WEN allocated its doorskin designs to different plants after the CMI Acquisition, which necessarily means that the dies used to make particular designs would be stored at those plants. Those dies might need to be moved or recreated to allow JELD-WEN's legacy plants to produce doorskins that they had not made since the merger. Furthermore, by noting the impacts on doorskin purchases and sales, the response makes clear that divestiture would cause JELD-WEN to lose doorskin are not conclusions Hachigian and deductions volume opaque; at its indeed, the depositions. plants. Steves' Fedio suggest that Steves in legacy These questions relied on Accordingly, to those same the evidence presented at the Remedies Hearing does not meaningfully exceed the substance of the Supplemental Interrogatory Responses. Even if specificity. that evidence was not disclosed with enough Rule 26(e)(1) is an improper vehicle for Steves' challenge. Interrogatory No. 17 asks only what actions JELD-WEN might take "to effectuate the divestiture of any active or inactive doorskin plant." Id. at 2. Like any responding party, JELD-WEN had to use ordinary definitions "^reason to terms and common and phrases sense to utilized attribute in [the] interrogatories.'" Deakins v. Pack, No. CIV.A. 1:10-1396, 2012 23 WL 242859, at *12 (S.D.W. Va. Jan. 25, 2012) (quoting McCoo v. Denny^s Inc., 192 F.R.D. 675, 694 (D. Kan. 2000)). The plain meaning of ''effectuate" is to bring about or put something into effect. Thus, JELD-WEN likely understood Steves' interrogatory to be asking about the steps that JELD-WEN would take before or at the time of the actual separation of Towanda to accomplish that result, separation—the not about the information effects that of Steves divestiture apparently after intended the to elicit. Even though a responding party cannot avoid disclosing information by reading language in a formalistic or narrow way, words have meaning, and "there are limits to how accommodating th[a]t party must be in trying to understand and respond to a poorly worded . . . and ambiguous interrogatory." Lynn v. Monarch Recovery Mgmt., Inc., 285 F.R.D. 350, 359 (D. Md. 2012). Given the vagueness of Interrogatory No. 17, JELD-WEN's response provides even more than was requested, so it should not be penalized for failing to supplement that response further. Moreover, if JELD-WEN's conduct can be seen as a Rule 26(e) violation, harmless. that infraction Exclusion of was undisclosed substantially evidence is justified an or appropriate sanction when a party introduces a new theory of liability or damages or a new defense shortly before trial, even though that information had been requested in earlier interrogatories. See MicroStrategy Inc. v. Bus. Objects, S.A., 429 F.3d 1344, 1356-58 24 (Fed. Cir. 2005); Precision Fabrics Grp., Inc. v. Tietex Int^l, Ltd., 297 F. Supp. 3d 547, 559-61 (D.S.C. 2018); Contech Stormwater Sols., Inc. v. Baysaver Techs., Inc., 534 F. Supp. 2d 616, 624 (D. Md. 2008). Here, however, the Southern States factors weigh overwhelmingly in JELD-WEN's favor. Any surprise from JELD-WEN's divestiture on nondisclosure doorskin of dies, evidence SKU of the allocation, effect and of doorskin volume is limited. The response to Interrogatory No. 17 strongly implies that JELD-WEN would suffer such hardships, and any specific effects that were not disclosed are closely related to those that were. See Baker v. United States, 645 F. App'x 266, 270 (4th Cir. particular divestiture depositions Steves' 2016). of to Steves consequences JELD-WEN questions Moreover, fact in could more witnesses, Hachigian and as Fedio explore detail the at the demonstrated about, inter by alia, replacing Towanda's volume by reopening Marion or building a new plant. That Steves chose to pursue some lines of questioning and not others does not prevent JELD-WEN from introducing evidence unrelated vitally to those important to questions. In JELD-WEN's addition, arguments on the the evidence is balance of hardships factor, and allowing that evidence at the Remedies Hearing did not cause any notable disruption. Finally, JELD-WEN's explanation that it did not understand what Steves was asking is highly 25 plausible, for the reasons noted above. JELD-WEN's reliance on undisclosed information was also forced by Steves' proposal of certain conditions, like the limitation on JELD-WEN's purchases from Towanda, for the first time before the Remedies Hearing. That condition led JELD-WEN to highlight evidence that, without Towanda, it will lack adequate doorskin volume and be unable to produce the full range of SKUs that its customers need. That evidence may be less important now given Steves' updated divestiture proposal, WEN to buy enough doorskins from which allows JELD- Towanda to satisfy its customers' needs for a period of two years. Proposed Divestiture Order § V(J). However, Steves only modified its proposal after the Remedies Hearing, and JELD-WEN could not have anticipated that concession. Thus, any discovery violation was substantially justified or harmless, precluding Rule 37(c)(1) sanctions. B. Rule 37(d) Depositions designees chosen of by a corporate the entity company, who are conducted ^'must through testify about information known or reasonably available to the organization" that relates to the deposition topics noticed by the party taking the deposition. Fed. R. Civ. P. 30(b)(6). Designees must know the corporation's position on a wide range of issues, so the company's ^'duty to present and prepare . . . goes beyond matters personally known to that designee or to matters in which that designee was personally involved." United States v. Taylor, 26 166 F.R.D. 356, 361 (M.D.N.C. 1996). A court can impose the same range of sanctions noted above if a corporate designee "'fails, after being served with proper notice, to appear for th[e] . . . deposition." Id. 37(d)(1)(A), (3). There is no dispute that JELD-WEN's Rule 30(b)(6) unprepared witness is Fedio was literally present for deposition. tantamount However, "[p]roducing to a failure to an appear." Taylor, 166 F.R.D. at 363; see also Resolution Tr. Corp. v. S. Union Co., 985 F.2d 196, 197 (5th Cir. 1993) ("If th[e] agent is not knowledgeable appearance all."). is, Rule for 37(d) about all relevant practical sanctions are facts, . . . then purposes, no therefore "mandatory the appearance for at a "failure to appear by means of wholly failing to educate a Rule 30(b)(6) witness, unless the conduct was substantially justified.'" Robinson v. Quicken Loans, Inc., No. 3:12-CV-00981, 2013 WL 1776100, at *3 (S.D.W. Va. Apr. 25, 2013) (quoting Int'l Ass'n of Machinists and Aerospace Workers v. Werner-Masuda, 390 F. Supp. 2d 479, 489 (D. Md. 2005)). Steves contends that Fedio was unprepared to testify about Topic effect No. 12 to the extent any . . . divestiture that topic would was have directed on at "the [JELD-WEN's] business." It emphasizes Fedio's acknowledgements that JELD-WEN lacks a "contingency plan on how it would operate" in the event of divestiture, and that it has 27 not "put [its] engineering or . . . manufacturing team to the question of the effects of a potential order" 336:18-337:3, Steves, requiring divestiture. 337:22-338:5. prevent the Court These from Fedio statements, considering Dep. Tr. at according to evidence at the Remedies Hearing that JELD-WEN has a contingency plan for losing Towanda and will suffer certain effects because of divestiture. The bar for obtaining sanctions under Rule 37(d) is high. "[C]ases that obfuscation award and [such] sanctions . . . involve unpreparedness." Chapman v. HHCSC, extreme LLC, No. 2:14-CV-00051-RMG, 2014 WL 12615705, at *4 (D.S.C. Dec. 9, 2014) (internal al., quotations Moore^s omitted); Federal see Practice also 7 James § 30.72[1] (3d Wm. Moore ed. et 2018) (sanctions appropriate where designee ''knows nothing" or cannot "participate meaningfully in the deposition"). For instance, in Resolution Trust, a corporate designee stated that he had no knowledge of any topic in the Rule 30(b)(6) deposition notice. 985 F.2d at 196-97. Similarly, in International Association of Machinists & Aerospace Workers, an exchange revealed that the corporation had failed to provide its designee with even basic knowledge about the subjects of the deposition. See 390 F. Supp. 2d at 489. As these examples suggest, courts generally "need to be cautious before finding a violation" of Rule 30(b)(6), Moore et al., supra, § 30.72[1], and sanctions should not be imposed where a witness "rendered substantial testimony concerning the 28 subject areas of their designations," Wilson v. Lakner, 228 F.R.D. 524, 530 {D. Md. 2005) (internal quotations omitted). Viewed inadequate through enough divestiture's this to support effects absence of a lens, on contingency Fedio's the answers exclusion JELD-WEN. plan for His of were not evidence statement about about Towanda's divestiture the was a direct answer to a simple question, and Steves has not pointed to any evidence at the Remedies Hearing indicating that JELD-WEN has a plan that Fedio should have mentioned. Similarly, he gave complete answers when asked if the divestiture, effects of consequences of responses to Interrogatory JELD-WEN and divestiture. when Fedio No. 17, had formally analyzed asked specific about incorporated Fedio Dep. Tr. JELD-WEN's at 335:11- 337:3, which, as noted above, can be fairly read as disclosing the evidence that Steves wants to exclude. Any lack of knowledge about particular genuine issues disagreement Topic No. 12. See appears between id. at the to have been parties 313:11-323:10. the about And, product the scope Steves' of of current complaints are particularly bold given that it did not seek any further 30(b)(6) depositions on that topic after questioning Fedio, and has not challenged his answers until now. Moreover, general Steves statement consideration about of the misunderstands the effects engineering Fedio's or of divestiture 29 remarks. management does His team's not mean that no JELD-WEN employee has any idea how divestiture would impact the company. possibility Indeed, of Fedio reopening himself Marion or testified building about a the replacement doorskin plant. Consistent with that approach, at the Remedies Hearing, several JELD-WEN witnesses described the likely effects of divestiture manufacturing between based on their processes. reaching engineering or question," which a Steves definite the experience fails conclusion manufacturing Fedio to testified with grasp the company's difference after ''put[ting] [the] team to, the and to the making [effects] an informed judgment about specific harm based on changes that JELD-WEN has made since the CMI Acquisition, as JELD-WEN's witnesses did at the Remedies Hearing. Fedio's answer would likely prevent JELD- WEN from using the Remedies Hearing to put on evidence of, for example, a formal JELD-WEN study about the effects of divestiture. Nothing like that has happened here. Finally, evidence total goes accepting Steves' assertion that JELD-WEN's beyond diverges from Fedio indicated, exclusion of or that evidence is what an excessive sanction. Courts confronted with far more flagrant non-responsiveness at Rule 30(b)(6) depositions have only imposed monetary sanctions. See Resolution Tr., 985 F.2d at 197; Int'l Ass'n of Machinists & Aerospace Workers, 390 F. Supp. 2d at 489. In contrast, Steves wants to wield Rule 37(d) like a sword, cutting out any evidence 30 that may be related to what is at worst a minor discovery violation. But, as the Fourth Circuit has observed, ^^exclud[ing] that which is competent and relevant by mechanistic application of an exclusionary rule the . . . trial process" when is no exceedingly dangerous jury is involved. to Multi-Med. Convalescent & Nursing Ctr. of Towson v. NLRB, 550 F.2d 974, 977 (4th Cir. 1977). The Court is more than capable of looking at JELD-WEN's evidence distinguishing unsupported the ones. as real to the effects hardships Consequently, from Rule of divestiture the 37(d) speculative does not and or justify exclusion here. Because Steves thus cannot show any basis for excluding the evidence at issue, PLAINTIFF STEVES AND SONS, INC.'S MOTION TO EXCLUDE JELD-WEN'S EVIDENCE OF HOW IT WOULD OPERATE IN THE EVENT OF DIVESTITURE (EOF No. 1329) will be denied. CONCLUSION For the foregoing reasons, the Court will exclude evidence of Steves' unclean hands in deciding PLAINTIFF STEVES AND SONS, INC.'S MOTION FOR EQUITABLE RELIEF (EOF No. 1191), so PLAINTIFF STEVES AND SONS, INC.'S MOTION IN LIMINE REGARDING DX 303, 304, 306, 307, 308, 309, 313, 327, 328, 331, 355, 445, 452, 481, 759, AND 764 (EOF No. 1380) will also be granted. However, PLAINTIFF STEVES AND SONS, INC.'S MOTION TO EXCLUDE JELD-WEN'S EVIDENCE OF 31 HOW IT WOULD OPERATE IN THE EVENT OF DIVESTITURE (EOF No. 1329) will be denied. It is so ORDERED. /s/ Robert E. Payne Senior United States District Judge Richmond, Virginia Date; August 30, 2018 32

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