Totem contracted with Alyeska to transport pipeline construction materials to Alaska, but the job encountered major difficulties and Alyeska eventually terminated the contract. After termination, Totem submitted invoices totaling roughly $260,000 to $300,000 and pressed Alyeska for payment, while Totem was facing urgent debts and possible bankruptcy. Totem alleged that Alyeska knew of Totem's financial distress, withheld funds it acknowledged were owed, and then offered only $97,500 in settlement. Totem signed a release in exchange for that payment and later sued to rescind the release for economic duress and recover on the original contract.
Issue
Whether Totem's allegations and summary-judgment materials were sufficient to create genuine issues of material fact that the release was executed under economic duress. Also, whether Stair and Pacific had independent contractual claims against Alyeska despite not signing the release.
Rule
Economic duress exists where a party involuntarily accepts another's terms, has no reasonable alternative, and those circumstances are the result of the other party's wrongful or coercive acts. A wrongful act may include a bad-faith threat to breach a contract or to withhold payment of an admitted debt, and a legal remedy is not necessarily adequate if delay would cause immediate and irreparable economic loss. On summary judgment, once the movant shows entitlement to judgment, the nonmovant need only produce specific facts showing genuine issues for trial, not prove ultimate success.
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Blue Mesa Hauling, a small trucking company in Denver, completed most of a materials-transport contract for Red Summit Energy Services. After termination, Blue Mesa demanded $240,000 in unpaid invoices, and Red Summit's manager told Blue Mesa that the company expected to owe "about that much" but would not pay anything for several months unless Blue Mesa accepted $80,000 immediately and signed a full release. Blue Mesa was days away from defaulting on fuel and equipment debts, which Red Summit knew about.
If Blue Mesa later sues to rescind the release on grounds of economic duress, which is the strongest analysis?
Explanation. Economic duress exists where one party involuntarily accepts another's terms, has no reasonable alternative, and the circumstances result from the other party's wrongful or coercive acts. The majority recognized that bad-faith withholding of payment of an admitted or approximately acknowledged debt may be wrongful, and that legal remedies may be inadequate if delay would cause immediate and irreparable business loss. Here, Red Summit allegedly used Blue Mesa's known, imminent insolvency to force an inadequate settlement, so the release would be voidable if those facts are proved. (Derived from Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Service Co. (n.d.).)