CMC to Appeal $110 Million Verdict in Restraint of Trade Case

California Jury Sides with Pacific Steel in Noncompete Dispute with CMC

A California jury ruled in favor of Pacific Steel Group in its trade dispute against CMC, one of the largest steel manufacturers in Texas. The case centers on a noncompete agreement between CMC and Italian Electric Arc Furnace (EAF) vendor Danieli. Pacific Steel claims the agreement blocked its entry into the Southern California rebar market. The jury awarded Pacific Steel $110 million in damages, a sum that will be tripled under California law, along with attorney fees. CMC plans to appeal, defending its business practices.

Background: Trump’s Tariffs and Their Impact on Steel Supply

The legal battle stems from the 2018 Section 232 tariffs imposed by the Trump administration, which restricted steel imports into the U.S. Pacific Steel argues that these tariffs, along with difficulties securing steel from CMC, prompted the lawsuit. As CMC expanded operations and acquired additional rebar fabrication plants, Pacific Steel faced challenges obtaining steel. CMC’s failure to secure a tariff exemption further fueled the dispute.

Pacific Steel’s Attempt to Build a Micromill and Legal Obstructions

Pacific Steel aimed to build a micromill in California, using renewable energy sources like wind and solar power. The mill would produce 380,000 metric tons of rebar annually. However, Danieli, the supplier contracted to provide equipment for the mill, informed Pacific Steel that the site fell within a restricted area covered by CMC’s noncompete agreement. Pacific Steel claims this effectively blocked the project and its entry into the Southern California rebar market.

Legal Allegations: Restraint of Trade and Market Monopolization

Pacific Steel argues that CMC’s exclusivity agreement with Danieli constitutes an illegal restraint of trade. The lawsuit claims the agreement was designed to maintain CMC’s dominance in the Southern California rebar market and block competition. Pacific Steel asserts that there is no legitimate market justification for the agreement, which limits competition and prevents the company from offering a more efficient and sustainable production method.

CMC’s Response: Appeal Plans and Industry Implications

CMC, the largest U.S. producer and fabricator of steel rebar, expressed disappointment with the jury’s decision and plans to appeal. The company defends its business practices, claiming that its agreements with suppliers like Danieli follow industry standards. While CMC intends to challenge the ruling, the case raises important questions about the legality of noncompete clauses and their impact on competition within the U.S. steel industry.

Looking Ahead: Market Shifts and Legal Precedents

This case highlights ongoing tensions within the U.S. steel market, shaped by tariffs and the consolidation of production capacities. The ruling may set a legal precedent regarding noncompete agreements and their effect on competition in the steel industry. Pacific Steel, which continues with its plans for the Mojave micromill, remains optimistic about overcoming legal challenges and taking on CMC’s market dominance.