Steves and Sons, Inc. v. Jeld-Wen, Inc.

Filing 955

MEMORANDUM OPINION. Signed by District Judge Robert E. Payne on 02/05/2018. (tjoh, ) Modified on 2/6/2018 to correct clerical error.(tjoh, ).

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UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF VIRGINIA
Richmond Division

STEVES AND SONS,

CLERK, U.S. Di.'5TRICT COURT
RICHMOImD, VA

INC.,

Plaintiff,
Civil Action No.

V.

JELD-WEN,

3:16cv545

INC.,

Defendant.

MEMORANDtm OPINION

This

SONS,
THAT

matter

INC.'S
CMI

ACQUIRED
below,

is

before

MOTION

WOULD

IN

HAVE

LIMINE

EXITED

BY JELD-WEN

the

THE

(ECF No.

Court

TO

on

PLAINTIFF

EXCLUDE

DOORSKIN

499) .

EVIDENCE

MARKET

For

the

STEVES

AND

OR ARGUMENT

HAD

IT

reasons

NOT

set

BEEN

forth

the motion will be granted.

BACKGROUND

Steves

& Sons,

("JELD-WEN")

Inc.

violated

("Steves")

Section

7

acquired CraftMaster Manufacturing,
(ECF No.
Steves

5)

(Under

must

show

Seal)

that

If

"the

alleged that

of

Inc.

175-78.
effect

the

To
of

("CMI")
prevail

acquisition

asserts

could

not

that

have

it

will

argue

substantially

Act

in 2012.
on

Inc.

when

that

acquisition

substantially to lessen competition." 15 U.S.C.
JELD-WEN

JELD-WEN,

Clayton

such

i
: i!
1 ij

it

Compl.
claim,
may

be

§ 18.
that

lessened

the

CMI

competition

because
the

CMI's

"weakened

acquisition

made

competitive

it

"unlikely

condition"
to

be

at

able

the

to

time

of

compete

as

effectively as a seller of doorskins, whether or not it remained
in business." Def. 0pp.

(ECF No.

654)

(Under Seal) at 2.

In particular, JELD-WEN will show through
fact
witnesses,
including
Bob
Merrill
[("Merrill")], the CEO of CMI at the time of
the
Acquisition,
as
well
as
JELD-WEN's

experts,

that

distress

when

assets.

CMI

CMI's

direct
market

its

was

in

owners

financial

severe

decided

financial

to

sell

distress

the

was

a

result of the
crash in 2007.

catastrophic housing
CMI had lost money
every year since 2008 and that had been kept
afloat by a $36 million loan from the two
families who owned i t . In 2010, CMI suffered
a net loss of $8.9 million. In 2011, i t lost
$11.9 million.
As of March 30,
2012,
CMI
owed

an

additional

$16.7

million

under

third

party
loan
agreements
that
were
set
to
expire in October of that year,
with no
commitments
from
any
of
its
lenders
to
refinance
those borrowings.
As
a
result,
CMI's own independent auditors reported that
these debts,
combined with the fact
that
"business has been negatively impacted by
the
prolonged
downturn
in
the
U.S.
homebuilding
industry
.
.
.
raise
substantial doubt about [CMI]'s ability to
continue as a going concern."

Id.

at

omitted).

2-3

(alteration

in

original)

Steves moves to exclude at trial:

argument that CMI

(internal
(1)

citations

any evidence or

"would have exited the market" had i t not been

acquired by JELD-WEN;

and

(2)

any evidence or argument that CMI

"would not have
any merger.

continued to be an effective competitor" absent

PI. Mem.

(ECF No.

502)

(Under Seal)

at 2,

10.

JELD-WEN also says that:

JELD-WEN . . . will show the jury that there
is no likelihood of anticompetitive effects,
because CMI would not likely have remained
an
effective
competitor
absent
the
Acquisition. JELD-WEN is entitled to present
evidence to the jury that would permit the
jury
to
find
that
CMI
would
not
have
remained

an

effective

seller

of

doorskins

in

competition
with
JELD-WEN
absent
the
Acquisition, even if CMI somehow found a way
to survive as an independent entity.
Id.

at 5.

Similarly,

i t argues that:

JELD-WEN's
economist,
[Edward]
Snyder
[("Snyder")], put the question squarely at

issue, critiquing Professor [Carl] Shapiro
[("Shapiro")]
for
failing
to
give
this
important
evidence
proper
economic
consideration.
E.
Snyder Rep.
at
if 117121 . . .
(explaining how the substantial
evidence

of

Shapiro's

CMI's

weakness

analysis

rebuts

of

Professor

anticompetitive

effects) . . . . In short. Professor Shapiro
was fully aware of the evidence and the
competitive implications of CMI's weakened
financial

state

and

inability

to

compete

that was developed during fact discovery in
this case; he simply chose not to address it
other than to say it did not satisfy the
failing firm defense.

.

.

.

It was the choice of Steves and its expert,
not JELD-WEN, to have Dr. Shapiro ignore the
merits
of CMI's
inability to effectively

compete.
failure

He
to

(and Steves)

address

the

must live with his

issue.

Def. Response to PI. Suppl. Brief (ECF No. 887) at 5-6.
3

As the arguments progressed on the issue,

view

that

Snyder's

Shapiro's analysis

evidence

is

is

really

only

flawed because he did not

financial difficulties when he assumed that,
the

market

things

would

now

continue

stand,

JELD-WEN took the

that

in

is

CMI's weakened financial

the

the

way

it

predicate

to

show

factor

that

in CMI's

absent the merger,

was

in

So,

as

JELD-WEN's

for

2012.

use

of

condition.
DISCUSSION

Assessing a
shifting
context

Section

framework,
for

the

plaintiff must

the

market and

understanding

admissibility

Saint

Luke's Health Sys. ,

so,

of

prima

Alphonsus

Ltd.,

plaintiff
(2)

claim involves

establish a

anticompetitive.

do

an

7

778

"must

of

Med.

provides

evidence.

case

that

Ctr.-Nampa

F.3d 775,

(1)

three-step burden-

which

this

facie

a

783

propose

First,

a

merger

Inc.

(9th Cir.

the

helpful

v.

2015).

proper

the

is
St.
To

relevant

show that the effect of the merger in that market

is likely to be anticompetitive," FTC v. Penn State Hershey Med.
Ctr.,

838

F.3d

327,

337-38

(3d

Cir.

2016),

which

typically

involves statistical analysis of market concentration and market
share

before

Inc.,

855

and

F.3d

after

345,

the

349

merger.

(D.C.

Cir.

United

States

2017).

v.

Second,

Anthem,

if

the

plaintiff shows a prima facie case, the defendant must rebut the
presumption-either by "provid[ing]

sufficient evidence that the

prima

facie

transaction's

case

inaccurately

probable

effect

predicts

on

future

the

relevant

competition,"

or

by

"sufficiently discredit[ing]

the evidence underlying the initial

presumption"

share

plaintiff).

(the

Id.

market

(internal

rebuttal is successful,

the

[plaintiff]

burden

of

and

evidence

quotations

offered

omitted).

by

if

Third,

the

that

"the burden of production shifts back to

merges

persuasion."

with

Saint

the

[plaintiff's]

Alphonsus,

778

ultimate

F.3d

at

783

(internal quotations omitted).
Two

case

similar

are

defenses

relevant

to

available

the

arguments

"failing company" defense,

to

rebut

made

the

here.

prima

The

facie

first,

applies where "the resources of

the

[a]

company [a]re so depleted and the prospect of rehabilitation so
remote"

that

competition
States,

its

under

394 U.S.

Shoe Co. V.

acquisition

FTC,

this defense,

Section

131,

137

280 U.S.

7.

291,

not

Citizen

(1969)

here JELD-WEN,

elements to succeed.

could

substantially

Publ'g

Co.

(emphasis added)

302

v.

lessen

United

(citing Int' 1

(1930)). A defendant invoking

bears the burden of showing three

See id.

at 138-39.

First,

i t must establish

that the merging firm faces "a grave probability of a business
failure."

507
Inc.

United

(1974)
v.

States

v.

Gen.

(emphasis added);

FTC,

991

F.2d

859,

Dynamics

see also Dr.
864

(D.C.

Corp.,

415

U.S.

486,

Pepper/Seven-Up Cos.,
Cir.

1993)

(requiring

showing

that

acquired

failure").

The

element

"whether

is

company

"most

"is

important

the

firm

in

imminent

factor"

is

in

insolvent

insolvency either in the bankruptcy sense,
net

worth,

meet

its

or

debts

Sys.,

130

must

show

F.

bankruptcy
U.S.

at

in

the

as

laws

138,

2d

are
such

must

acquires

establish

415

the

the

due."

(N.D.
for

the

on

the

that the
the

firm

Cal.

v.

is

this

brink

unable

Sutter

2001).

of

to

Health

Second,

it
the

Publ^g,

Citizen

under

394

reorganization

is

"no[t]

F.2d at 865.

991

merging

of

firm has no

reorganization

successful

Third,

firm

has

"tried

and

company other than the acquiring one."

U.S.

defendant

failing

or

nonexistent,"

that

considering

California

1133

"dim or
that

that

Pepper/Seven-Up Cos.,

Dynamics,

requirement,

come

prospects

failed to merge with a

Gen.

sense,

1109,

the

realistic,"^ Dr.
JELD-WEN

they

Supp.

that

equity

danger

at

506.

must

As

show

a

corollary

that

company . . . is

"the

the

to

that

company

that

only

available

^ Not all courts agree that this is "an actual requirement of the
failing company defense." Sutter Health Sys., 130 F. Supp. 2d at
1135.

The evidence here

not want

to

they made to the
does

not

discussed

seems to be that the owners of CMI did

reorganize because,

show

that

below,

in bankruptcy,

the

company would not be recoupable.
bankruptcy

whether

that

was

not

available.

requirement

is

loans

The

However,

met

immaterial to the admissibility of JELD-WEN's evidence.

that

record

here

as

is

purchaser." Citizen Publ^g, 394 U.S. at 138.^ Given these strict
requirements,

the

defense

the

leading

"rarely

antitrust

succeeds."

Hovenkamp, Antitrust Law f
The

second

competitor'"

953

relevant

argument,

is

(4th ed.

E.

has

observed

Areeda

749

F.3d

the

(6th

Cir.

2014)

FTC,

652 F.2d 1324,

& Herbert

so-called

(quoting
1339

Inc.

Kaiser

(7th Cir.

"^weakened

ground of all

ProMedica Health Sys.,

572

makes

weakness,

a

which

substantial

cannot

be

showing

resolved

would cause that

firm's market

would

undermine

the

Univ.

Health,

Inc.,

(emphasis added);

by

the

any

F.2d

prima

1206,

&

when the

acquired

firm's

competitive

means,

facie

1221

FTC,

1981)). Courts

share to reduce to a

[plaintiff]'s

938

that

v.

Aluminum

generally "credit such a defense only in rare cases,
defendant

that

2016).

"'^probably the weakest

justifying a merger.'"

Chem. Corp. v.

Phillip

defense,

for

559,

4A

treatise

case."

(11th

see also Areeda & Hovenkamp,

level that

FTC

Cir.

supra,

v.

1991)

1 963a3

^ The Horizontal Merger Guidelines impose substantially similar

requirements, not "credit[ing] claims that the assets of the
failing firm would exit the relevant market unless all of the
following circumstances are met: (1) the allegedly failing firm
would be

unable

to meet

its

financial

obligations

in

the

near

future;
(2) it would not be able to reorganize successfully
under Chapter 11 of the Bankruptcy Act; and (3) it has made
unsuccessful good-faith efforts to elicit reasonable alternative
offers that would keep its tangible and intangible assets in the
relevant market and pose a less severe danger to competition
than does the proposed merger." U.S. Dep't of Justice & Fed.
Trade Comm'n, Horizontal Merger Guidelines § 11 (2010); see also
FTC V. Arch Coal, Inc., 329 F. Supp. 2d 109, 154 (D.D.C. 2004).
7

("[F]inancial

otherwise
that
to

(1)

objectionable
if unresolved,

decline

and

difficulties

(2)

to

a

there

level
is

resolving them.")
General

share

"insufficient

in

to

that

unless

the

be

it

would make

competitively

which

sustain

the

not

a

is

defense

to

reasonably

an

clear

they would cause the firm's market share

statistics

account

commitments,

merger

(emphasis added).

Dynamics,

market

into

no

should

the

acquired

statistics

permissible;

alternative

for

This defense is derived from

Supreme

case

merger

preferable

introduced

its

the

Court

by

the

because,

firm's

held

the

government

by

were

failing

take

long-term

overestimated

that

the

to

contractual

acquired

firm's

ability to compete in the relevant market in the future." Univ.
Health, 938 F.2d at 1220 (citing Gen. Dynamics, 415 U.S. at 50004); see also FTC v. H.J. Heinz Co., 246 F.3d 708, 715 n.7

(D.C.

Cir. 2001). Thus, a defendant's showing on rebuttal of "[a] weak
financial

condition,

or

limited

reserves,

may

mean

that

a

company will be a far less significant competitor than current
market

share,

or

production

statistics,

appear

to

indicate."

Arch Coal, 329 F. Supp. 2d at 153.

Whatever theory is used to introduce evidence,
relevant

to be

admissible.

relevant

if "it has

Fed.

R.

Evid.

any tendency to make

a

402.

it must be
Evidence

is

fact more or less

probable than it would be without the evidence," and "the fact

is

of

consequence

standard

is

a

in

"low

determining

barrier

to

the

action."

Id.

admissibility";

This

satisfy

to

401.

it,

"evidence need only be worth consideration by the jury,
a

plus

value."

(4th Cir.

2003)

i f evidence

probative

of .

.

jury,

United

is

States

Leftenant,

341

(internal quotations omitted).
relevant,

value

is

the Court

delay,

can s t i l l

substantially

. unfair prejudice,

undue

v.

cumulative evidence." Fed.

R.

time,
Evid.

exclude

346

even

it

i f "its

a

danger

by

issues,

or

338,

In addition,

outweighed

confusing the

wasting

F.3d

or have

misleading the

needlessly

presenting

403.

Steves explicitly seeks exclusion only under Rule 403, but

its arguments first require analysis under Rule 401.
I.

Rule 401

Steves

contends

that

JELD-WEN

should

not

be

able

to

introduce evidence that CMI might have exited the market if it

had

not

been

acquired

by

JELD-WEN

because

JELD-WEN

has

not

alleged a failing firm defense, and its experts' testimony did
not

implicate that defense.

cannot

show

business

that

failure;

CMI:

(1)

(2)

ever

Moreover,
faced

a

claims

any

other

that

the

company

besides

evidence

does

(3)

JELD-WEN

probability"

the

of

possibility

of

could not have merged

JELD-WEN.
not

argues,

"grave

contemplated

reorganization under Chapter 11; or
with

Steves

show

Similarly,
that

CMI

Steves
had

no

alternatives other than being acquired by JELD-WEN or that CMI's
market

share

market

would

share

prerequisites

have

decreased

calculations

for

a

without

weakened

undermine

the

competitor

defense.

failing

firm or weakened competitor defense,

JELD-WEN

firm

defense,

evidence

to

establish

JELD-WEN

asserts

effectively

primarily of
relevant

nor

both

Consequently,

could

establish,

evidence

a

of CMI's

condition should be excluded.

response,

failing

alleged,

Steves'

acquisition,

JELD-WEN

In

neither

to

because

financial

has

enough

in

that

the

and

concedes

it

that

position.

evidence

doorskin

two

different

it

has

of

it

However,

CMI's

market

and

reasons.

not

that

acknowledges

testimony by Merrill

for

that

in

inability

beyond

alleged

lacks

a

the

its

brief,

to

compete

2012—consisting

JELD-WEN's
First,

it

experts—is
says,

evidence will undermine the assumption made by Shapiro,

such

Steves'

expert on antitrust liability, that CMI would have remained an
effective competitor in the absence of any acquisition,

such

that Steves will be unable to establish its prima facie case,^
Second, JELD-WEN argues that, even if Steves could establish its

prima facie case, CMI's circumstances are analogous to those of
^ At

the

Final

Pretrial Conference

("FPTC"),

JELD-WEN restated

this position in different form, arguing that this evidence
would expose Shapiro's testimony as unreliable because Shapiro's
market

share

calculations

did

not

evidence of CMI's financial weakness.
10

account

for

non-statistical

the

weakened

company

in

General

Dynamics,

so

JELD-WEN

can

present rebuttal evidence that would allow the jury to find that
CMI

would not

have

remained an effective competitor after 2012.

Although JELD-WEN states these arguments as two separate grounds
for

relevance,

it

does

not

explain

how

they

are

distinct.

Indeed, both arguments rely on the same core assertion: that the
market

prima

share

facie

statistics

case

are

that

Steves

unreliable

will

use

because

to

they

establish

overstate

its

CMI's

future ability to compete given its weak financial condition. In
other

words,

theory

to

Dynamics,

JELD-WEN

show

the

415 U.S.

572; Univ. Health,

The

evidence

is

relying

relevance

at 508;

of

on

the

weakened

this

competitor

evidence.

ProMedica Health Sys.,

See

Gen.

749 F.3d at

938 F.2d at 1221.

identified by

failing firm theory.

JELD-WEN

is

not

In its prima facie case,

relevant

on

a

Steves only must

show a likelihood of anticompetitive effects, which it can do by

examining
Anthem,

market

concentration

855 F.3d at 349.
financial

before

and

after

the

merger.

The events preceding the merger that

affected

CMI's

condition

are

not

relevant

showing,

which depends on statistical calculations,

to

this

but may be

relevant on rebuttal to the extent that JELD-WEN will attempt to

establish a failing firm defense. S^ United States v.
Petroleum

Co.,

367

F.

Supp.

1226,
11

1258-59

(C.D.

Cal.

Phillips
1973),

aff'd sub nom.

(1974)

Tidewater Oil Co.

("[U]nless

^failing company'

the

v.

seller

doctrine,

United States,

objectively

418

comes

U.S.

within

906

the

it is irrelevant why one corporation

sells its assets to another.^ The issue in an antitrust case is
not

a

determination

the

effect

anticompetitive

of

reasons

of

the

for

selling,

sale.").

JELD-WEN's

in that

firm

is

only

weakness
market

(emphasis
CMI's

relevant

weak

the

weakened

if the defendant

the

predictive
Univ.

Consequently,

financial

that Steves'

of

statistics."

added).

however,

so its evidence

competitor

theory

Evidence of "[t]he weakness of the acquired

undermines
share

the

sense.

discussion

holds more weight.

only

JELD-WEN,

asserts that it will not make any such attempt,
cannot be relevant

but

demonstrates

value
Health,

of

the
938

that

this

[plaintiff]'s
F.2d

at

1221

to establish the

condition,

relevance of

JELD-WEN

able

must

be

to

show

market share statistics overestimate CMI's ability

to compete in the doorskin market if JELD-WEN had never acquired
it. JELD-WEN argues that it has made such a showing because it
has introduced evidence that,

as in General Dynamics,

CMI was in

^ This case preceded the Supreme Court's decision in General
Dynamics, upon which the weakened competitor defense is based.
See Univ.

Health,

938 F.2d at 1221. The Phillips Petroleum court

would therefore have had no reason to consider that separate
basis for the relevance of financial weakness when it made this
statement about the irrelevance of such information.
12

a

precarious

preceding
not .

.

financial

years.

position in 2012

Accordingly,

. necessarily

"past

from

production

picture

of

ability to compete." General Dynamics,

415 U.S.

relies

on

General

exclusively in support of admissibility,

here.

The

district

court

there

under

Section

7

challenged

competition

did

Dynamics

almost

that case is inapposite

found

not

an

acquisition

substantially

from

spot

purchases

in

relating

lessen

fundamental changes in the structure of the coal industry,

for

evidence

that

(1)

coal

considering

future

to:

producing

after

had

[it]s

does

at 493.

JELD-WEN

a

CMI's

different

proper

Although

give

that was

the

open

market

to

distributing coal under long-term supply agreements; and

(2)

the

acquired

of

the

company's

acquisition.

Gen.

industry shifts,

depleted coal
Dynamics,

415

reserves

at

U.S.

501-06.

at

the

time
Given

those

the company's past production figures based on

spot sales inaccurately reflected the company's future ability
to distribute coal under long-term supply agreements,

limited

by

its

depleted

reserves.

See

id.

The

which was

government

contended on appeal that defendant could not rely on evidence of

those depleted reserves because it had not established a failing
company defense.
that

Id.

such evidence was

at 506.

The

relevant to

13

Supreme Court,

however,

held

an entirely different point.
Rather than
showing that
[the acquired company]
would
have
gone
out
of
business
but
for
the
merger . . .,
the
finding
of
inadequate
reserves

went

of

the

statistical
prima
facie
production
figures

Government's
based
on

to

case
and

substantiated

the

the

conclusion that

heart

District

Court's

[the acquired company],

even

if i t remained in the market, did not have
sufficient reserves to compete effectively
for long-term contracts.

Id.

at

[of

the

of

508.

coal

the

showed

other

that

words,

industry]

government's

H.J. Heinz,
at

In

the

.

the

.

"unique

economic

. undermine [d]

statistics" because

statistics

were

the

those

based on

a

circumstances

predictive

economic

flawed

value

factors

methodology.

246 F.3d at 715 n.7; see also Univ. Health,

938 F.2d

1218.

JELD-WEN's

attempts

to

compare

this

case

situation in General Dynamics are unsuccessful.

CMI's

financial

condition

only

shows

that

with

the

unique

The evidence of

"Steves

pulled

its

doorskin volume from CMI," and that "CMI was hemorrhaging money

and had no plan to pay off or refinance its debts." Def. 0pp. at

8.

By JELD-WEN's

"financial

its

own admission,

wherewithal

resources.

Id.

and .

Indeed,

as

.

.

these

facts

available

pertain to CMI's

customer

Steves points out,

base,"

CMI was

not

fully

able to continue manufacturing doorskins at the time of the 2012

merger,

and there is no evidence that the doorskin industry was
14

experiencing
coal

the

industry

distinctions,
show

the

same
in

fundamental

General

However,

of

under

this

weakness

anticompetitive
F,2d at 1221

possible

2012

these

as

the

factual

Dynamics alone to

evidence.

case,

may

effects

evidence of an acquired company's

be

from

probative

a

merger.

of

See

the

of

Health,

Univ.

lack

938

("The acquired firm's weakness . . . is one of many

factors

on

Given

rely on General

that

a

defendant

[plaintiff]'s prima facie case.").
relied

around

the broader weakened competitor theory that

has developed from that
financial

Dynamics.

JELD-WEN cannot

relevance

changes

the

weak

and

may

introduce

Indeed,

worsening

to

rebut

the

"several courts have

position

of

the

proposed

acquired company as a significant factor in declining to enjoin
a proposed merger." Arch Coal,
Lektro-Vend

1981)

Corp.

(discussing

acquired

firm's

acquisition"

in

(8th Cir.

1979)

market

finding

and

that

district

FTC v.

Supp.

660

court's

F.2d

market

judgment

2d at 153
255,

reliance

276

on

in

(7th

prior

defendant's
603

(citing
Cir.

evidence

position

Nat'l Tea Co.,

F.2d

to

favor

694,

of

the
on

699-700

(district court properly relied on evidence of
departure

the

Co.,

affirming

claim);

imminent

Vendo

"deteriorating

Section 7

"the

v.

329 F.

of

increased

acquired

[acquired

firm]

concentration

firm's

"present
15

that

from

the

would

market

relevant

result"

share

was

in

an

inaccurate reflection of its
also

United

(7th

Cir.

States

1977)

v.

("In

future competitive strength")) ;

Int^l

Harvester

responding

to

a

Co.,

564

F.2d

statistical

769,

showing

see
773

of

concentration and in concluding that Section 7 was not violated,

[district
firm]'s

U.S.

court]

properly

considered

Weakness as a competitor.'"

evidence

(quoting Gen.

at 503)).^ Such evidence is only relevant,

limited

circumstances

undermines
share

added);

the

predictive

statistics."

see

evidence of

noted

also

Univ.

Arch

financial

above-that

value
Health,

Coal,

329

of

is,

the

938

F.

of

[acquired

Dynamics,

though,

where

the

Supp.

at

2d

or other weakness must

in the

"weakness

[plaintiff]'s

F.2d

415

market

1221

at

(emphasis

154

("[T] the

genuinely undercut

^ JELD-WEN seemed to assert at the FPTC that i t is not seeking to
introduce
evidence
of
CMI's
condition
under
the
weakened

competitor defense, but instead only to undermine Shapiro's
analysis. This contention relies selectively on older case law
that did not clearly define the weakened competitor theory:
Kaiser
Aluminum,
International
Harvester,
Lektro-Vend,
and
National Tea.

More recent cases have universally recognized that

those older cases, even if they did not specifically mention the
weakened competitor defense, were in reality discussing that
defense when they examined the principles derived from General

Dynamics. See ProMedica Health Sys., 749 F.3d at 572; Univ.
Health, 938 F.2d at 1221; United States v. Aetna Inc., 240 F.

Supp. 3d 1, 92 (D.D.C. 2017); Arch Coal, 329 F.
54.

JELD-WEN

cannot

avoid

the

requirements

of

Supp. 2d at 153the

defense

ignoring these newer cases and rephrasing its argument.
16

by

the

statistical

showing

of

anticompetitive

market

concentration." (emphasis added)).®
Based

predicate
standard

on

the

for

evidence

that

admissibility,

here.

Indeed,

JELD-WEN

JELD-WEN

JELD-WEN's

has

offered

could

proffered

not

as

meet

evidence

the

this

does

not

show that CMI's market share in the absence of the merger-if it
correctly accounted for the effect of CMI's alleged weakness on

its

competitive

undermine"

condition

ability-would

Steves'

could

prima

facie

"be

resolved

not

® Steves also argued at the
defense

not
that

is

an

in

relevant
its

to

case,

by

a

level

or

any

that

that

would

CMI's

competitive

poor

means."

FPTC that the weakened competitor

affirmative defense,

possibly be
defense

"reduce

here

Answer.

so

JELD-WEN's

because

It

is

true

JELD-WEN
that

a

evidence could

never

pleaded

defendant

must

make a certain showing to establish that defense. See ProMedica
Health Sys., 749 F.3d at 572; Univ. Health, 938 F.2d at 1221.
But

some

courts

have

used

the

terms

"defense"

and

"argument"

interchangeably when discussing the weakened competitor theory,
suggesting that it is only a rebuttal argument that a defendant
can develop throughout litigation and present evidence in
support of at trial. See ProMedica Health Sys., 749 F.3d at 572;
Aetna, 240 F. Supp. 3d at 92. Moreover, the only court to have
addressed this argument directly has rejected it. See Kaiser
Aluminum, 652 F.2d at 1340 ("Characterization of the defense in
General Dynamics as an ^affirmative defense' is wrong. General
Dynamics does not require the defendant to present a defense
upon which he bears the burden of proof in the sense of
ultimately persuading the trier of fact that he is entitled to
relief. General Dynamics requires the defendant to come forward
with evidence to rebut the government's prima facie case of
substantial lessening of competition through statistics showing
increase

in

market

share

and

concentration

in

relevant

markets.").
JELD-WEN's
failure
to
plead
this
therefore not dispositive of the relevance question.
17

product

defense

is

Unlv.

Healthy

therefore

938

F.2d

appears

to

at

1221.

The

far

short

fall

evidence

of

of

the

CMI's

decline

"imminent,

steep

plummet" required to make a "substantial showing" of statistical
unreliability.

47,

2011

that

WL

FTC

v.

1219281,

defendant

9.3

at

would

"from 11.5 percent
from

ProMedica

percent

(N.D.

need

to

less

to

to

*58

Health

than 2

less

1.3

Inc.,

Ohio Mar.

show

than

Sys.,

No.

3:11

CV

percent

2011)

(noting

market

that

29,

share

dropped

for

percent

GAC services

for

OB

services"

and
to

establish weakened competitor defense).
At

the

same

time,

JELD-WEN

is

right

that

the

cases

discussed above do not require the exclusion of evidence merely

because a
courts

defendant has

have

weakened

needed

condition

See Aetna,

240 F.

to
to

a

weak claim to the defense.^ Rather,

weigh

evidence

determine

Supp.

if

that

of

the

defense

3d at 92; Arch Coal,

acquired
is

329 F.

firm's

persuasive.

Supp.

2d at

153-57. Those cases imply that such evidence is admissible where

Although University Health stated that "[t]he weakness of the
acquired firm is only relevant if the defendant demonstrates
that

this

weakness

undermines

the

predictive

value

of

the

government's market share statistics," that case was discussing
the showing needed to "credit such a defense" at trial, not the
showing needed to have such evidence admitted in the first
place. See 938 F.2d at 1221 (emphasis added). Indeed, requiring
a defendant to provide sufficient evidence of the acquired
firm's

weakness

before

even

considering

that

evidence

would be

contrary
to
general
principles
of
evidence,
under
which
individual pieces of evidence are admitted or excluded based on
each piece's relevance to the issues in the case. See Fed. R.
Evid.

401.
18

it

is

relevant

evidence

account

market

account

merger

in

for

2012.

defendant's

the
of

JELD-WEN's

Shapiro's
not

a

underlying

inaccurate
Here,

to

theory

plaintiff s

the

acquired

liability

statistics

CMI's

financial

Consequently,

prima

the

facie

firm's

expert,

share

that

case

future

flawed

weakness

evidence

at

gives

market

Snyder,

were

statistical

share.

claimed
because

the

of CMI's

that

they

time

an

of

did
the

weak financial

state could conceptually be probative of an argument that JELD-

WEN may make in rebuttal to Steves' prima facie case.
But,

the

conceptual.

record

Instead,

does

the

not

manner

in

take

JELD-WEN

which

beyond

JELD-WEN

the

proposes

to

use Snyder's testimony is actually a backdoor into the weakened

competitor defense,
not

satisfied.

the components of which JELD-WEN simply has

Furthermore,

even

if

that

were

not

so,

and

Snyder's evidence is regarded as relevant only for its value to
impeach Shapiro, the relevance is marginal.
II.

Rule 403

Under Rule 403,

evidence may be excluded "if its probative

value is substantially outweighed by a

prejudice,
delay,

confusing

wasting

time,

the

issues,
or

danger of

misleading

needlessly

.

the

presenting

.

.

unfair

jury,

undue

cumulative

evidence." The probative value of CMI's financial circumstances,

as advanced by Snyder and as principally argued by JELD-WEN,
19

is

a

thinly

disguised,

competitor defense.
Hail-Mary

pass

watered-down

version

of

the

weakened

That theory of defense has been called "the

of

presumptively

doomed

mergers"

because

an

acquired company's weakness is "^probably the weakest ground of
all for

justifying a merger.'" ProMedica Health Sys.,

at

(quoting

Kaiser

cannot

sustain a

572

JELD-WEN
of

CMI's

issues
Thus,

financial

of

Aluminum,

652

F.2d

at

749 F.3d

1339).

weakened competitor defense,

difficulties

anticompetitive

would

effects

not

that

be

the

that evidence would be left afloat,

Because
evidence

tethered

jury

and the

must

to

the

decide.

jury would be

left to speculate as to its significance.
And,

Shapiro's

for the evidence to be used to measure the validity of

method

of

analysis

it would be necessary to get
defense,

(i.e.,

for

impeachment

purposes),

fully into the weakened competitor

thereby making the impeachment value of CMI's financial

condition substantially more prejudicial than probative.

The

cases

admissibility

cited
of

by

its

JELD-WEN

evidence

provide

under

Rule

involved bench trials or judicial hearings,
even

603
the

implicated.

F.2d at

695-96;

acquired

financial

See

firms

positions

Lektro-Vend,

660

Int'l Harvester,
in

than

those

CMI

cases

in
20

no

F.2d

564

403.

on

Those

the

cases

so that rule was not
at

262;

F.2d at

were

2012,

guidance

in

having

772.

much

lost

Nat'l

Tea,

Moreover,
more

money

dire

for

several

years,

or

their

financial

conditions

continued

decline after the mergers at issue. See Lektro-Vend,
276;

Nat'l Tea,

774-76.

This

603

F,2d at

evidence

of

699;

Int'l

financial

660 F.2d at

Harvester,

weakness

564

was

F.2d at

thus

highly

probative of the validity of market share statistics,
risk of misleading the

jury nonexistent.

to

Therefore,

and the

those cases

are inapplicable to the unique procedural circumstances here.
JELD-WEN

appears

to

be

correct

that

courts

previously excluded this type of evidence on Rule
However,

speaks

in

more

involves a

this

to

particular

the

procedural

Section 7

JELD-WEN's

have

excluded evidence

7871059,

at

*3

novelty

counsel has made

Bd.

absence

of

of

(W.D.

repeatedly.

under Rule

to have ulterior motives
Pittsburgh

the

403 where

in presenting the
Pub.

Pa.

Educ.,

Dec.

3,

No.

2015)

not

403 grounds.
of

this

precedent

case,

claim that will be tried to a

that

V.

case,

have

which

jury—a point

Furthermore,

defendants
evidence.

appeared

See

2:13-CV-220,

(evidence

courts

Devine

2015

relating

WL

to

plaintiff's previously-rejected retaliation claim excluded where
plaintiff
back

attempted

door"

by

to

conflating

discrimination

claim);

Nat.

Co.,

Life

(evidence

Ins.

present

that was

597

retaliation

evidence

of

Transamerica

F.

Supp.

inadmissible to
21

theory

that

"through

theory

Life

2d

Ins.

Co.

897,

907

(N.D.

show patent

with
v.

the

racial
Lincoln

Iowa

2009)

invalidity could

not be introduced for purpose of rebutting defendant's arguments

about

prior

Similarly,

art

because

JELD-WEN

of

seems

potential

to

want

for

the

confusing

jury

to

jury).

decide

the

anticompetitive effects question based primarily on the evidence
of CMI's financial condition,

even though JELD-WEN is aware that

it likely cannot establish-indeed,
firm

or

weakened

confusion
marginal

jury.

is

company

high.

relevance

As

a

This

has not even pled-a failing

defense.

is

a

complex

cannot

result,

be

used

if

the

risk

of

jury

about defenses not even pled,

Here

the

case,

it

risk

and

tends

or minimally argued,

jury

evidence

to

confusion

of

confuse

from

of
the

evidence

substantially

outweighs any marginal relevance the evidence would have.
CONCLUSION

For
INC.'S

WOULD

the

MOTION

HAVE

BY JELD-WEN
It

is

foregoing
IN

LIMINE

EXITED

THE

(ECF No.

reasons,
TO

EXCLUDE

DOORSKIN

499)

PLAINTIFF
EVIDENCE

MARKET

HAD

STEVES

AND

OR ARGUMENT

IT

NOT

BEEN

THAT

will be granted.

so ORDERED.

/s/

Date:

Virginia

February XT 2018
22

CMI

ACQUIRED

Robert E. Payne
Senior United States District Judge

Richmond,

SONS,