Scrap Recyclers Sue Wheeling-Pitt

Metal Management Inc. has filed a suit against Wheeling-Pitt Steel Corp. in the New York States.

In an 8-Q filing with the Security Exchange Committee, Meal Management filed a complain with the Supreme Court of New York County, NY. The complaint arises from several purchase orders issued by Wheeling Pitt to Metal Management earlier this year for scrap metal to be shipped to the steel mill.

In the complaint, Metal Management is seeking damages for the breach, anticipatory breach, wrongful rejection and repudiation of the Purchase Orders based on the following WPSC actions:

(1) WPSC accepted delivery without objection of approximately $31 million worth of scrap metal sold to it by MM but has failed to make payment for those goods when due;

(2) by its conduct, WPSC has indicated its intention not to pay for an additional amount of approximately $8 million in scrap metal purchased by it but where payment will be coming due shortly; and

(3) WPSC has blanket rejected scrap metal as nonconforming, in some cases even before the scrap metal was delivered and inspected, and without giving MM an opportunity to cure any goods alleged by WPSC to be nonconforming as required by the Purchase Orders and the Uniform Commercial Code. Stated in terms of tonnage, WPSC has rejected and/or repudiated agreed Purchase Orders for approximately 86,400 tons of scrap metal, of which 76,800 tons not yet been shipped or which is en route to WPSC and 9,600 tons of which MM has already delivered to WPSC, in addition to the approximately 16,000 tons of scrap metal previously rejected.

The damages being sought include the contractual price of the goods, plus incidental damages, costs and disbursements of the action, prejudgment interest and such other relief as may be just and proper.

Metal Management also filed a notice of motion for summary judgment in lieu of a complaint against Esmark Inc., Sun Steel Company LLC, Century Steel Company LLC, North American Steel Company LLC, Great Western Steel Company LLC, Electric Coating Technologies Bridgeview LLC, U.S. Metals & Supply LLC, Miami Valley Steel Service, Inc., Premier Resource Group LLC, Independent Steel Company LLC, Electric Coating Technologies LLC, Esmark Realty LLC, Century Steel Realty LLC, Great Western Realty LLC, Isco Realty LLC, Miami Valley Realty LLC, Sun Steel Realty LLC, U.S. Metals Realty LLC.

Metal Management claims that it entered into an unconditional guaranty agreement with Esmark pursuant to which Esmark agreed to unconditionally, jointly and severally guarantee all money owing to MM under the Purchase Orders with WPSC without monetary limit. Therefore, MM filed the Notice to seek payment of approximately $31 million currently past due under Purchase Orders pursuant to the express terms and conditions of the Guaranty, together with interest, expenses and reasonable attorneys’ fees. MM intends to seek additional monies, together with interest, expenses and attorneys’ fees, as payments become due and owing in the ordinary course.

In a report by the Pittsburgh Post Gazette, Herman Strauss Inc., a long-time supplier to the steel mill, also is filing a suit against Wheeling-Pitt, for breaking a contract the two parties had

The report notes that Strauss, based in Wheeling, WV, is accusing Esmark of violating a five-year contract Wheeling-Pitt signed that required Strauss to annually provide nearly $400 million in scrap. Wheeling-Pitt terminated the contract in March.

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Strauss is seeking $18.4 million in damages from Wheeling-Pitt in a separate arbitration proceeding.