S.P. Dunham & Company v. Kudra

S.P. Dunham & Company (Dunham) (plaintiff) owned a department store. The operation of Dunham’s fur department was subcontracted to Elmer A. Hurwitz & Company (Hurwitz). Dunham’s customers gave their fur coats to Hurwitz to clean and store, believing that they were dealing with Dunham. In turn, Hurwitz contracted with Kudra Furs (Kudra) (defendant), one of Dunham’s competitors, to perform the cleaning and storage services. One fall, Hurwitz, the middle link in this chain, declared bankruptcy. At that point, Kudra possessed 412 coats from Hurwitz. Hurwitz owed Kudra: (1) $622.50 for Kudra’s services for these coats and (2) $3,232.55 for unpaid prior services. With the colder temperatures, Dunham’s customers were asking for their coats back. Dunham offered to pay Kudra the $622.50 bill for the coats. Kudra responded that it would release the coats only if Dunham also paid Hurwitz’s prior debt. Around that time, the temperature dropped further, and customer requests for coats increased. Trying to maintain customer goodwill, one of Dunham’s owners spent hours in the fur department personally speaking with customers. Kudra proposed that Dunham give Kudra the customers’ names and information, and Kudra would deliver the coats and bill the customers directly. Dunham declined because it feared disclosing customer lists to its competitor and feared losing goodwill if its customers learned that Dunham had not cleaned and stored their coats. Left with no other good choice, Dunham paid Kudra both the amount owed for the coats and Hurwitz’s prior debt. After receiving the coats, Dunham sued Kudra in state court, seeking restitution or return of its $3,232.55 prior-debt payment. Dunham alleged that it had agreed to pay that amount under duress by business compulsion. The trial court ruled that Dunham had acted under duress and ordered Kudra to return the prior-debt payment. Kudra appealed.