Texas rebar giant CMC gets hit with $110M anti-trust verdict in lawsuit with Pacific Steel Group

A unanimous nine-member jury handed down the verdict, finding in favor of San Diego, California-based steel fabricator PSG, after taking less than three hours of deliberation in the jury trial that began on October 22 in Oakland, California, according to court documents.

In 2020, PSG filed a complaint against Commercial Metals Co (CMC) and Danieli Corp in US District court in California, where PSG alleged that CMC attempted to monopolize the California rebar market.

PSG accused CMC of suppressing competition by pushing Danieli Corporation, a maker of rebar micro-mills, into an exclusivity contract for the next three years, effectively barring Danieli Corp from developing any rival mills within a 500-mile radius from CMC’s now-defunct Rancho Cucamonga California mill.

On November 5, jurors found that PSG had proven “by a preponderance of the evidence” that there is a relevant steel rebar market 500 miles around the mill, and that CMC’s exclusivity contract with Danieli was an unreasonable restraint of trade in that market, according to the verdict form.

Jurors concluded that CMC made a move to monopolize the market, and that its subsequent conduct harmed PSG, who acquired land north of Los Angeles for developing a new, technologically cutting-edge and rival micro-mill with Danieli, the verdict form says.

In light of CMC’s purported misconduct, jurors awarded PSG $74 million in lost profits from its mill operations; $12.9 million in lost rebar transportation savings; $10.8 million in lost fabrication cost savings and $12.28 million in increased costs to purchase the mill due to inflation, according to the verdict form.

This verdict brings PSG’s total damages award to $110 million, which is the full amount PSG’s counsel had sought during trial closings.

Rebar prices have been soft for most of 2024

The domestic rebar market is amply supplied and prices have been soft for the majority of 2024, with CMC and other major rebar and construction markets reporting that widespread uncertainty surrounding the US presidential election adversely affected construction markets, as well as the steel industry at large, with construction sources reporting that there has been significant market disruption for the second half of 2024.

CMC top executives expanded on this in the company’s fiscal fourth quarter earnings call on October 17, saying that the pervasive uncertainty in the US long steel markets had a significant impact on demand in domestic rebar and general construction markets.

Fastmarkets assessed steel reinforcing bar (rebar), fob mill US at $36 per hundredweight ($720 per short ton) on November 6, up by 1.41% from $35.50 per cwt on October 30.

The nine-count verdict wrapped up a three week-long trial, where jurors were presented with evidence that CMC pushed an anti-competitive “hands-off California” provision in its contract with Danieli Corp, just days after learning of PSG’s plans to develop a rebar micro-mill in the now-exclusionary zone with Danieli Corp.

This provision legally barred Danieli from building any rival mills within a 500-mile area surrounding its CMC’s mill location in Rancho Cucamonga, California – despite the fact that CMC already had plans to shutter the mill by the end of 2020.

PSG’s counsel, William Price, of Quinn Emanuel Urquhart & Sullivan LLP, argued that evidence showed PSG’s chief executive officer Eric Benson intended on building its own micro-mill with Danieli Corp, and Benson had lobbied for years to ascertain a land parcel and financing for the development. This decision refuted CMC’s allegations that PSG hadn’t been prepared to finance the project at the time of the proposal.

Evidence showed PSG’s theory of anti-trust market was “contrived”

CMC’s counsel, Steven Bizar of Dechert LLP, said during the trial that evidence showed the PSG’s theory of the relevant anti-trust market was “contrived” by corporate lawyers, without being a true reflection in the “real world,” where consumers purchase rebar from import traders around the world.

CMC’s counsel Bizar said during his closing statement that CMC does not have market power, nor the capacity to raise prices and therefore pose a risk to anti-competitive practices, because it engages in fair competition with other rebar mill producers in the global market – Nucor Corp and Hybar among those big names in the rebar and general construction markets.

On November 4, presiding US District Judge Haywood S Gilliam Jr delayed rebuttal arguments until the morning of November 5, once PSG’s counsel argued that CMC’s closing arguments allegedly misled jurors about the legal standard for “harm” in these type of anti-trust lawsuits.

PSG counsel argued in court that CMC’s legal team had incorrectly suggested that PSG needs to show the burden of proof, that the anti-competitive effects of the exclusivity agreement were then felt and absorbed by rebar buyers, during the time the agreement was actively in force.

Following CMC’s argument for that in court, PSG’s counsel petitioned the judge to then adopt PSG’s proposed jury instruction, which stated that PSG should show restraint “is likely to result” in competitive harm.

District Judge Gilliam said this particular issue threw “a complete wrench” in the trial – warning CMC’s counsel: “Don’t cut corners, counsel.”

The following day, Gilliam decided – before PSG’s counsel could offer their final rebuttal argument – that he would consent to adopting PSG’s proposed and amended instruction, according to court documents.

Counsel and representatives for CMC didn’t immediately respond to Fastmarkets’ requests for comment at the time of publication.