Machinery Hauling, Inc. v. Steel of West Virginia

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Brief Fact Summary. The Plaintiff/buyer contracted with the Defendant/seller to purchase and deliver steel to a third party. Defendant then told Plaintiff the steel was not merchantable and orally directed Plaintiff to return three loads of steel to Defendant. Plaintiff contends that it was told that if it did not pay the price of the undelivered loads, Defendant would cease doing business with Plaintiff. Plaintiff sued, based on extortion.

Synopsis of Rule of Law. In order to prove economic duress, an existing and ongoing contractual relationship is generally necessary.

Facts. The Plaintiff, Machinery Hauling, Inc. (Plaintiff), the buyer, contracted with the Defendant, Steel of West Virginia (Defendant), the seller, to purchase and deliver steel to a third party. Defendant later learned that the steel was unmerchantable and directed Plaintiff to return it. Plaintiff contends that it was told that if it did not pay the price of the undelivered loads, Defendant would cease doing business with Plaintiff. Plaintiff sued, based on extortion.
The circuit court denied Plaintiff’s recovery and the appellate court affirmed, holding that a threat not to do business in the future was not unlawful. Certified questions were sent to the Supreme Court of Appeals, dealing with the issue.

Issue. This case questions what level of threat is sufficient to invoke recovery under a theory of economic duress.

Held. Questions Answered in agreement with Lower Courts; Action dismissed.
In analyzing this case, the Court affirmed the judgments of the lower courts, holding that no continuing contract had been formed between the parties and the demands of Defendant were not coupled with a threat to terminate any such contract. Further, because Plaintiff did not pay the money to defendants, there was nothing for it to recover.
Plaintiff could not prevail in an extortion claim when it could not prove an on-going business relationship that would be harmed by Defendant’s request that the unmerchantable product be returned.

Discussion. If there is no ongoing contractual relationship, a party cannot claim economic duress because of a loss they may incur in the future. Economic duress is available as a remedy when a party has actually performed an act because of a compulsion to do so, generally in desperate circumstances.