Roth Steel Products v. Sharon Steel Corp.

In November 1972, Roth Steel Products (Roth) (plaintiff) contracted to purchase 200 tons of “hot rolled” steel per month from Sharon Steel Corp. (Sharon) (defendant) at $148.00 per ton through December 1973. Sharon also indicated that it could sell hot rolled steel at $140.00 per ton on an open schedule basis. Finally, Sharon offered to sell up to 500 tons of “cold rolled” steel at varying prices. In early 1973, the market price for steel and the demand for steel production both drastically increased. In March 1973, Sharon notified Roth that it was increasing the price of steel and would no longer honor the prices it quoted in November 1972. After negotiations, the parties agreed that Roth would continue paying the contract price for steel until June 30, 1973, and would pay an increased price following that date through the end of 1973. Sharon informed Roth that if it refused to pay these higher prices, Sharon would cease supplying steel to Roth entirely. Roth did not want this modification, but reluctantly agreed because Sharon supplied a substantial amount of Roth’s steel and Roth believed it had no other reasonable alternative supplier. During 1974 and 1975, Sharon only accepted orders for steel from Roth “at the price prevailing at the time of shipment.” Sharon’s deliveries were increasingly late, which Sharon justified by stating that there was a shortage of raw materials. In reality, Sharon was reserving large quantities of rolled steel for sale to a subsidiary at premium prices. Roth brought suit in federal district court against Sharon for breach of contract. The district court found that Sharon acted in bad faith by using its position as the chief supplier of Roth’s steel to force Roth to agree to the contract modification in 1973. The district court held the contract modification was unenforceable, and awarded damages to Roth. Sharon appealed.