Wheeling-Pittsburgh comments on lawsuits by scrap suppliers
Wheeling-Pittsburgh Corporation (Wheeling-Pitt), the holding company of Wheeling-Pittsburgh Steel Corporation, commented on an arbitration proceeding commenced by Herman Strauss, Inc. (Strauss) and a lawsuit filed by Metal Management, Inc. (MMI).
The arbitration demand filed by Strauss arises out of the termination, in the first quarter of 2007, of three agreements dated April 8, 2004, between Wheeling-Pitt and Strauss relating to the supply and processing of steel scrap by Strauss. That termination arose out of the failure to resolve several issues, including workplace safety practices, billing issues and other significant matters, relating to Strauss’ non-performance under those agreements. Wheeling-Pitt’s response to the arbitration demand will be filed shortly at which time Wheeling-Pitt intends to assert substantial claims arising out of Strauss’ practices under the agreements.
The litigation filed by MMI was in response to Wheeling-Pitt’s June 4 written notification that, due to an unacceptable number of scrap quality deficiencies, it was rejecting and would accept no further deliveries of several grades of steel scrap. The June 4 notice of default was preceded by several weeks of efforts by Wheeling-Pitt to cope with, and mitigate injuries arising out of, these steel scrap deficiencies.
Wheeling-Pitt also advised MMI on June 4 that, subject to compliance with specifications, it would continue to accept delivery of, and make timely payment for, the two remaining scrap grades ordered by Wheeling-Pitt. To date, Wheeling-Pitt has made payments of over $25 million to MMI for steel scrap.
A significant portion of the claims asserted in MMI’s lawsuit are for scrap that was rejected as out-of-specification as well as amounts that are not yet due under existing contractual terms. Wheeling-Pitt will file a responsive pleading in due course and intends to vigorously assert its claims relative to MMI’s failure to comply with scrap specifications.
There can be no assurance as to the outcome of these actions or their effect on the financial condition or results of operation of Wheeling-Pittsburgh Corporation.