Jeld-Wen Facing Securities Class Action Over Alleged Interior Molded Door Price-Fixing Conspiracy

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A proposed class action filed in Virginia looks to represent those who bought or otherwise acquired shares of door and window manufacturer Jeld-Wen’s common stock between January 26, 2017 and October 15, 2018 (the class period). 

Filed by the retirement system for current and former Cambridge, Massachusetts employees, the 23-page lawsuit wages a number of allegations against Jeld-Wen, its top executives and Canadian private equity firm Onex Corporation. The suit alleges that the defendants not only engaged in a conspiracy to artificially increase or maintain the price of interior molded doors, but simultaneously misrepresented the market for Jeld-Wen’s products as “highly competitive,” while issuing a number of other materially false and misleading statements that caused company stock to trade at artificially inflated prices.

The complaint alleges that when the truth of Jeld-Wen’s conduct finally came to light, the company’s stock prices declined numerous times, financially injuring proposed class members. 

The case begins by explaining that Jeld-Wen and competitor Masonite Corporation are the two largest manufacturers of interior molded doors in the United States. Interior molded doors, according to the suit, are made by joining two door skins between a wood frame with a hollow or solid core. Such products made by Jeld-Wen and Masonite are the most popular type of interior door in North America.

In October 2012, Jeld-Wen acquired another interior molded door maker, CraftMaster Manufacturing, and subsequently gained ownership of the company’s Towanda, Pennsylvania door skin manufacturing plant while removing CraftMaster as the third supplier of door skins for the interior molded door market. With CraftMaster out of the way, the lawsuit continues, Jeld-Wen and Masonite came to control 85 percent of the market for interior molded doors in the United States, leaving the remaining interior molded door manufacturers with no other choice but to purchase their door skins from either company. 

The suit claims that although Jeld-Wen and Masonite aggressively competed with each other prior to Jeld-Wen’s acquisition of CraftMaster, the companies began rolling out “uniform” price increases for interior molded doors in late 2012. Over the next six years, the lawsuit says, Jeld-Wen and Masonite increased the prices of their interior molded doors “in the same or similar percentage increments, either simultaneously or in brief succession of each other.” In 2014, however, Masonite “abruptly and inexplicably” stopped selling door skins to other manufacturers just months after Jeld-Wen announced it had rolled out a new less-competitive pricing strategy, the case says. Moreover, it was around this time that Jeld-Wen, the sole supplier of door skins, began taking “adverse actions” – namely by raising prices – against independent door makers with which the company had long-term agreements to supply door skins, according to the lawsuit. 

In June 2016, independent door manufacturer Steves and Sons, Inc. sued Jeld-Wen over its acquisition of CraftMaster four years prior, according to the case. Less than two years later, a jury found that Jeld-Wen violated federal antitrust laws, the suit notes.

Despite the unfavorable jury verdict in the Steves and Sons case, Jeld-Wen “continued to assure investors that it participated in a highly competitive market,” the plaintiff alleges. Further still, the lawsuit says the “true breadth” of Jeld-Wen’s apparent misconduct and its harmful financial impact on business “continued to be concealed from investors." 

The lawsuit alleges that between the time of the company’s initial public offering until October 15, 2018, Jeld-Wen, in addition to issuing materially false and misleading statements and failing to disclose adverse facts about its “business, operations, growth prospects, and competitive positioning,” fraudulently attributed its strong margins and anticipated growth to legitimate business factors. In truth, according to the plaintiff, the representations made by Jeld-Wen to proposed class members during this time were false in that the defendants “knew that Jeld-Wen was engaged in a price-fixing conspiracy with another door manufacturer” to increase or maintain interior molded door prices.

In August 2018, the case says, a J.P. Morgan analyst bumped down his earnings estimates for Jeld-Wen in 2018 and 2019 and lowered his target price for company stock in part due to the yet-to-be-resolved antitrust litigation. Following the J.P. Morgan report, Jeld-Wen’s stock price sank by 10 percent, the lawsuit says.

Alongside the verdict in the Steves and Sons litigation, the judge presiding over the case ordered that Jeld-Wen divest the door skin plant the company had obtained with its acquisition of CraftMaster. Once this news went public, the suit says, Jeld-Wen share prices dropped again, this time by five percent. After the market closed on October 15, 2018, the lawsuit says, Jeld-Wen announced its third quarter 2018 financial results would include a $75.6 million charge related to the Steves and Sons litigation, along with the resignation of its CFO. 

These disclosures, according to the proposed class action, caused Jeld-Wen’s stock to decline by 19 percent, from $21.31 to $17.28 per share.