Steves & Sons, Inc. v. Jeld-Wen, Inc., Civil Action No. 3:16-cv-545
| Decision Date | 16 August 2019 |
| Docket Number | Civil Action No. 3:16-cv-545 |
| Court | U.S. District Court — Eastern District of Virginia |
| Parties | STEVES AND SONS, INC., Plaintiff, v. JELD-WEN, INC., Defendant. |
STEVES AND SONS, INC., Plaintiff,
v.
JELD-WEN, INC., Defendant.
Civil Action No. 3:16-cv-545
UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA Richmond Division
August 16, 2019
MEMORANDUM OPINION
This matter is before the Court on COUNTERCLAIM DEFENDANTS EDWARD AND SAM STEVES' MOTION TO ENJOIN JELD-WEN FROM RELITIGATING CLAIMS (ECF No. 1890) and COUNTERCLAIM DEFENDANTS [sic] JOHN PIERCE'S MOTION TO ENJOIN JELD-WEN FROM RELITIGATING CLAIMS (ECF No. 1892) (collectively, the "Injunction Motions"). For the following reasons, the Injunction Motions will be granted.
The facts and the previous proceedings related to the counterclaims have been explained in detail in two previous opinions. See First Summary Judgment Opinion (ECF No. 1424); Second Summary Judgment Opinion (ECF No. 1581). Those opinions are incorporated by reference here. However, it is necessary to provide some of that background here as it is relevant to the Injunction Motions.
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A. The Virginia Action
Steves and Sons, LLC ("Steves") is an independent manufacturer of interior molded doors, and it relies primarily on JELD-WEN, Inc. ("JELD-WEN") to supply it with the doorskins needed to make the doors that Steves sells to retail stores. To that end, the parties entered into a long-term doorskin supply agreement in 2012 (the "Supply Agreement"). First Summary Judgment Opinion (ECF No. 1424) at 2.
In 2016, Steves filed an action against JELD-WEN in this Court (the "Virginia Action"), alleging a federal antitrust claim and breach of contract claims, among others. During the discovery phase of the Virginia Action, JELD-WEN sought leave to amend its answer and to add counterclaims against Steves based on documents that JELD-WEN had received from Steves during discovery. The documents suggested that Steves may have" used JELD-WEN's confidential information and trade secrets—obtained by John Pierce ("Pierce") and John Ambruz ("Ambruz")—in furtherance of building an independent doorskin manufacturing plant (the "MDS Project") and to assist in resolving a dispute under the Supply Agreement.
In the counterclaims that it filed in this Court, JELD-WEN alleged, inter alia, that Steves had violated the Defend Trade Secrets Act (the "DTSA"), 18 U.S.C. § 1831 et seq., and the Texas Uniform Trade Secrets Act (the "TUTSA"), Tex. Civ. Prac. & Rem. Code Ann. §§ 134A.001-134A.008, and that Steves had tortiously
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interfered with Pierce's contract under Texas common law. JELD-WEN's Counterclaim Complaint (ECF No. 252) ¶¶ 41-63.1 Steves was the only defendant named in JELD-WEN's counterclaims. However, Edward Steves and Sam Steves II (the "Steves Brothers") and Pierce were permitted to intervene as defendants to the counterclaims. At that time, the Steves Brothers and Pierce became full parties to the case even though the counterclaim complaint was never amended to specifically name them as defendants. Memorandum Opinion (ECF No. 1779) at 19 (citing Schneider v. Dumbarton
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Developers, Inc., 767 F.2d 1007, 1017 (D.C. Cir. 1985); Ctr. for Envtl. Sci. Accuracy & Reliability v. Nat'l Park Serv., No. 114-cv-02063, 2016 WL 4524758, at *9 (E.D. Cal. Aug. 29, 2016)). The Steves Brothers and Pierce, as defendants, participated fully in the trial of JEL-WEN's counterclaims which were tried separately from, and after, the trial of Steves' antitrust and breach of contract claims against JELD-WEN.
The factual predicate for JELD-WEN's counterclaims was that Steves, through the Steves Brothers, had retained Pierce, a former JELD-WEN employee, as a consultant to provide Steves with certain information that would allow it to build its own doorskin manufacturing plant. That was an issue because JELD-WEN had informed Steves that the Supply Agreement would be terminated on September 10, 2021.2 Pierce also was called upon to help Steves verify the accuracy of JELD-WEN's key input costs for doorskins that it manufactured and sold to Steves. Those input costs were the basis for the prices that JELD-WEN charged Steves for doorskins under the Supply Agreement, and JELD-WEN was required to provide the costs to Steves on an annual basis. Because JELD-WEN did not provide the details of the input costs as Steves thought JELD-WEN
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was contractually obligated to do, Pierce also was retained to consult on the details of the input costs.
When Pierce worked at JELD-WEN, he entered into employment contracts with JELD-WEN reciting that Pierce would be exposed to certain information that JELD-WEN considered confidential and/or trade secrets. Under those contracts, Pierce could not disclose the confidential information or trade secrets to any third parties except as required by law even after he retired from JELD-WEN. When Steves later hired Pierce, he notified the Steves Brothers that the confidentiality agreement with JELD-WEN prevented him from disclosing JELD-WEN's trade secrets or confidential information.
Thereafter, Pierce disclosed to the Steves Brothers information that he had learned while employed at JELD-WEN that JELD-WEN alleged to be trade secrets. Pierce also spoke with various JELD-WEN employees, to secure information about current input costs and manufacturing procedures, processes, and details. He conveyed some or all of that information to Steves and the Steves Brothers. And, JELD-WEN alleged that the trade secrets disclosed by Pierce also were used by Ambruz when Steves was assessing the feasibility of building an independent doorskin manufacturing plant.
Seven months after filing the counterclaims in the Virginia Action, JELD-WEN filed an action in Texas state court (the "Texas
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Action"), alleging several trade secrets claims and related claims against the Steves Brothers and Pierce based on the same underlying facts as those that comprised the basis of JELD-WEN's counterclaims in the Virginia Action. After receiving several adverse rulings in the Virginia Action (in the antitrust case and in the severed trade secrets case), and around a month after filing the Texas Action, JELD-WEN moved to voluntarily dismiss the counterclaims in the Virginia Action. Upon objection from Steves, the Court denied the motion, concluding that the trade secrets litigation had advanced so far that dismissal would prejudice the parties and that JELD-WEN had insufficiently explained the need for dismissal. ORDER (ECF No. 579); Memorandum Opinion (ECF No. 734). Afterward, the Texas court stayed that action pending the trial in the Virginia Action.
Steves' antitrust and contract claims were tried to a jury in January 2018. JELD-WEN's trade secret counterclaims were tried to a jury in May 2018.
The specific counterclaims tried to the jury were: (1) the First Counterclaim for Relief for a violation of the DTSA; and (2) the Third Counterclaim for Relief for a violation of the TUTSA. To prove a violation of the DTSA, JELD-WEN had to show by a preponderance of the evidence that: (1) JELD-WEN owned certain information that constitutes a trade secret; (2) Steves misappropriated the trade secret; (3) the trade secret was
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misappropriated (in that it was acquired, disclosed, or used in the manner described in Jury Instruction No. 323) on or after May 11, 2016; and (4) the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce. Trade Secret Jury Instrs. (ECF No. 1614) at Instr. Nos. 24, 32. To prove a violation of the TUTSA, JELD-WEN had to show by a preponderance of the evidence the same elements as required under the DTSA except that: (1) trade secrets under the Texas act need not be related to a product or service used in, or intended
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for use in, interstate or foreign commerce; and (2) the date of the alleged misappropriation (by acquisition, disclosure, or use) is not an element of the Texas claim, so JELD-WEN need not prove that the alleged misappropriation occurred on or after May 11, 2016. Id. at Instr. No. 40.
It is fair to say that the allegations in JELD-WEN's counterclaims and in the evidence presented at trial by JELD-WEN on the DTSA and TUTSA counterclaims in the Virginia Action focused almost entirely on the conduct of the Steves Brothers and Pierce. JELD-WEN's opening and closing arguments were largely focused on their conduct, as well. Indeed, without the evidence of the conduct of the Steves Brothers and Pierce, JELD-WEN's trade secrets counterclaims would not have been submitted to the jury in the Virginia Action.
Of the sixty-seven (67) pieces of information that JELD-WEN alleged were trade secrets, the jury found that only eight (8) were trade secrets, and it found that seven (7) of those trade secrets were misappropriated. See generally Jury Verdict (ECF No. 1609). The jury found that none of the trade secrets were misappropriated in a "willful and malicious" manner. Id. The jury awarded JELD-WEN $1.2 million as a reasonable royalty in compensatory damages. Id. The jury did not award any punitive damages, because of its finding that no misappropriation was willful and malicious. Id.
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JELD-WEN then moved to enjoin Steves, the Steves Brothers, and Pierce—as well as other Steves' employees, officers, directors, and current or former agents—"from possessing, publishing, disclosing, or using in any form or for any purpose" the seven (7) trade secrets found by the jury to have been misappropriated and for other injunctive relief. [Proposed] Permanent Injunction Order (ECF No. 1632-1). However, the Court declined to grant the injunction, finding, inter alia, that JELD-WEN's own expert witness, John Jarosz, quite clearly established in the mind of a reasonable jury that an award of a reasonable royalty would allow Steves to use any information found to have been a misappropriated trade secret without restraint as to either time or circumstance. Memorandum Opinion (ECF No. 1811) at 17-18.4
The Court later issued an Amended Final Judgment in favor of the Steves Brothers and Pierce...
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