Virginia Lawyers Weekly VA Lawyers Weekly
Holding that “unclean hands” is not a defense to equitable relief in antitrust, the court excluded the defendant’s evidence that the plaintiff misappropriated its trade secrets, finding such evidence not probative under Federal Rule of Evidence 402.
Background
Plaintiff Steves & Sons Inc. seeks equitable relief against Jeld-Wen based on antitrust violations. At the hearing on the particular remedies sought, Jeld-Wen sought to introduce evidence relating to Steves’s unclean hands in misappropriating Jeld-Wen’s trade secrets and to the steps Jeld-Wen would take if the court ordered divestiture of its Towanda plant. Steves seeks to exclude this evidence from the court’s consideration in ruling on the requested equitable remedies.
“Unclean hands” evidence not probative
Whether the bar on the unclean-hands defense extends to the equitable remedies stage has not been definitively resolved, but numerous cases have found that it does. First, courts have held that the availability of this defense should not depend on whether the plaintiff seeks monetary or equitable relief. Second, because antitrust actions are uniquely directed at protecting the public interest, actions in equity must yield to the overall public policy of enforcing antitrust laws. These more recent and well-reasoned decisions are more persuasive than the authorities Jeld-Wen offers for the opposing view. Therefore, evidence of Steves’ trade-secret misappropriation cannot be relevant to an unclean hands defense.
This conclusion does not necessarily mean that the evidence could not be relevant for some other issue. But here, evidence presented at the remedies hearing and the trade-secrets trial shows no connection between the misappropriation and any actual efforts to build a doorskin plant. Thus, the probative value of the misappropriation evidence depends on speculation 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 Rule 402’s barrier for admissibility and will not be considered for any purposes here.
Divestiture evidence sufficiently disclosed
Another dispute centers on Jeld-Wen’s responses to Steves’s second set of interrogatories. After prevailing at trial, Steves objected to most, if not all, of Jeld-Wen’s evidence on its post-divestiture operations as not properly disclosed in discovery.
Contrary to Steves’s position, most of the evidence it seeks to exclude was disclosed, either directly or by implication. Jeld-Wen’s supplemental responses indicated that, after acquiring the CMI plant, Jeld-Wen began manufacturing certain products in-house at Towanda, rationalized its product lines, ceased to sell certain doorskins, and moved the manufacture of certain types of doorskins to different facilities. Jeld-Wen explained that divestiture would force it to undo these changes and, at least temporarily, purchase doorskins from another entity and/or limit the number of doorskins it sold to third parties.
Thus, it is readily inferable that Jeld-Wen allocated its doorskin designs to different plants after the 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 volume at its legacy plants. These conclusions are not opaque: Steves’s deposition questioning suggests that it relied on those same deductions. Thus, the post-divestiture evidence does not meaningfully exceed the substance of Jeld-Wen’s interrogatory responses.
Even if that evidence lacked specificity, Rule 26(e)(1) is an improper vehicle for Steves’s challenge. Although a responding party cannot avoid disclosing information by a formalistic or narrow reading of the request, there are limits to how accommodating that party must be in trying to respond to a poorly worded and ambiguous interrogatory. Given the vagueness of the interrogatory at issue, Jeld-Wen’s response provides even more than was requested.
Jeld-Wen’s reliance on undisclosed information was also forced by Steves’s late proposal of remedial conditions. For example, the proposed limitation on Jeld-Wen’s purchases from the Towanda plant led it to highlight evidence that, without Towanda, it will lack adequate doorskin volume to fill customers’ needs.
Finally, Steves contends that Jeld-Wen’s corporate representative was unprepared to testify about the effects of divestiture. But the court finds that his answers were not so inadequate to support exclusion of evidence about divestiture’s effects on Jeld-Wen. His statement about the absence of a contingency plan was a direct answer to a simple question, and there is no evidence that Jeld-Wen has a plan that should have been mentioned.
Even if Jeld-Wen’s evidence goes beyond or diverges from what its representative indicated, total exclusion is an excessive sanction. Steves wants to wield Rule 37(d) like a sword, cutting out any evidence that may be related to what is, at worst, a minor discovery violation.
Accordingly, Steves’s motion to exclude Jeld-Wen’s evidence of how it would operate in the event of divestiture will be denied.
Steves & Sons Inc. v. Jeld-Wen Inc., Case No. 3:16cv545, Aug. 30, 2018. EDVA at Richmond (Payne). VLW No. 018-3-363, 32 pp.
