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JSW Steel Joined in Conspiracy to Tank Competitor, 5th Cir. Affirms

By Jonathan R. Tung, Esq. on December 08, 2015 5:05 AM

The Court of Appeals for the Fifth Circuit has ordered a major steel company, JSW steel, to pay the equivalent of $156 million in fines, affirming a jury decision that the company was involved in a conspiracy to throttle supply lines to a competitor.

The ruling comes as very bad news to JSW, which has struggled in recent years to stay profitable in the rising tide of Chinese competitors.

Steel Lawsuit

Back in 2011, MM steel opened during one of the most productive and frothy years for the steel industry in modern history. However, MM soon realized that it was difficult to stay profitable because local distributors and other manufacturers, including JSW, refused to do any business with them.

MM sued the other steel manufacturers and distributors alleging that rivals had conspired to throttle MM of required supplies, damaging its business. It is alleged that the conspiracy was material in MM having to shutter its business in 2013. At trial, the jury agreed that the defendant manufacturers did enter into that conspiracy under a "per se" theory of liability.

Circuit Language

According to the order, the court held "that there was substantial evidence for the jury to conclude that JSW joined the conspiracy between distributors." In comments to news agencies, JSW said that it disagreed with the ruling and that it was currently weighing its options for appeal.

Losing Money

As mentioned, JSW's latest legal woes are the latest in bad news for the company. It had only just recouped most of its losses this quarter from a complete loss in the previous three months. Also, JWS had acquired several US interests in 2007 which had yet to pan out profitably for the company.

Expert Witness

Much contention revolved around whether the lower court abused its discretion in allowing MM's expert witness testify as to the proper measure of gross-profit margins and projected losses -- a technique with which JSW vehemently disagreed, decrying it as "patently unreliable." However, the court's denial underscored that almost any expert opinion can be introduced so long as it is "scientifically valid."

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