After a federal jury in Houston awarded MM Steel, a metals service center in Houston that has closed its doors, $52 million in an antitrust lawsuit, MM Steel filed a motion on April 4 seeking a judgment with treble damages totaling $156 million.
In a March 25 verdict, a jury in U.S. District Judge Kenneth Hoyt’s court in Houston found that metals service centers American Alloy Steel Inc., Reliance Steel & Aluminum Co., and Reliance’s wholly owned division Chapel Steel Corp. conspired to persuade, induce or coerce steel mills not to sell steel plate to MM Steel; the jury also found that Arthur Moore, American Alloy’s president, did personally “approve, authorize, ratify, or participate” in the conspiracy. The jury found that JSW Steel (USA) Inc. and Nucor Corp. knowingly joined the conspiracy. Further, the jury found that the conspiracy was a “material cause of injury” to MM Steel’s business and awarded the company $52 million in damages.
The jury also found that JSW failed to comply with an Aug. 2, 2011, contract with MM Steel to supply certain steel plate products and MM Steel was injured because of it. The jury awarded MM Steel $2 million in damages to compensate for that failure to comply, but MM Steel, in its motion for entry of judgment, did not seek a judgment on those jury findings.
David Gersch, a senior counsel at Arnold & Porter in Washington, D.C., who represents Nucor, said his client was disappointed in the verdict.
“We believe Nucor’s conduct was proper in all respects, and we believe that Nucor will be vindicated, ultimately. We will file the appropriate posttrial motions and, if necessary, file an appeal,” Gersch said.
Karl Stern, a partner in Vinson & Elkins in Houston who represents Reliance and Chapel, did not return two telephone messages, but Reliance issued this statement following the verdict: “Reliance and Chapel disagree with the verdict and intend to pursue all available remedies, including taking the matter up on appeal.”
Christopher Hanslik, chairman of Boyar Miller in Houston, who represents American Alloy and Moore, said his clients will appeal but declined further comment because the litigation is pending.
Gregory Huffman, a partner in Thompson & Knight in Dallas, who represents JSW Steel, did not return two telephone messages, but the firm provided this statement from Steve Lazur, director of human resources at JSW Steel: “JSW respectfully disagrees with the verdict and is currently exploring all appropriate options.”
The defendants denied the allegations and filed motions to dismiss and motions for summary judgment, but Hoyt signed an order on Dec. 7, 2012, denying the motions to dismiss and on Nov. 21, 2013, denying the motions for summary judgment.
Paul Yetter, a partner in Yetter Coleman in Houston who represents MM Steel in the lawsuit, said the verdict has broad implications for businesses in the Gulf Coast area.
“Part of our economy is based on entrepreneurs and new startups, and that’s what our client was. The antitrust laws are specifically focused on encouraging vigorous competition and discouraging the sort of situation that we believed happened here,” Yetter said.
He said the evidence at trial “presented a pretty powerful picture of what is a classic antitrust conspiracy under the law: two powerful competitors cutting off the supply to a new competitor.”
Yetter said MM Steel, which lasted less than two years in business, shut down during the summer of 2013.
“They couldn’t get steel to sell, and they went out of business,” he said.
The plaintiff’s team also included lawyers from Taherzadeh Law Firm and Tate Young Law Firm, both of Houston.
The Start of MM Steel
As alleged in the complaint in MM Steel v. Reliance Steel & Aluminum Co., Mike Hume and Matt Schultz, who collectively have “decades of experience” in the steel industry, opened MM Steel in September 2011. Previously, each worked for American Alloy and Reliance/Chapel.
Shortly after MM Steel opened its doors, MM Steel alleged, Chapel obtained a temporary restraining order against Hume, Schultz and two employees “based on alleged covenants not to compete,” but they settled that litigation with an “agreed permanent injunction prohibiting MM Steel and its employees from soliciting a select list of Chapel customers until March 15, 2012.”
However, MM Steel alleged, despite the agreed permanent injunction, “defendants did not intend to allow plaintiff MM Steel to compete as a metals service center.”
MM Steel alleged in the complaint that Reliance/Chapel and American Alloy “entered into one or more agreements to drive plaintiff MM Steel out of business because they feared it would take business away from them.” MM Steel alleged that defendants JSW and Nucor conspired with the metals service centers to “execute a group boycott by refusing to sell steel to plaintiff MM Steel or to anyone with whom plaintiff MM Steel attempted to partner.”
MM Steel alleged that the defendants violated §1 of the Sherman Act and §4 of the Clayton Act. MM Steel brought a breach of contract cause of action against JSW, and it brought tortious interference with existing contracts and tortious interference with prospective contracts causes of action against all the defendants, along with business disparagement and conspiracy.
“Its only purpose was to cripple a competitor permanently—to seriously impair the competitive opportunities of a rival in a significant and permanent way. To defendants, nothing short of a group boycott would do,” MM Steel alleged in the complaint.
In its proposed judgment, MM Steel seeks the $156 million jointly and severally from the defendants. It also seeks interest and attorney fees.