Oglebay Norton Co. v. Armco, Inc.

52 Ohio St. 3d 232, 556 N.E.2d 515 (1990)

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Nature of the Case

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Facts

On January 9, 1957, Armco Steel Corporation (D), entered into a long-term contract with Columbia Transportation Company, which later became a division of Oglebay Norton Company (P). The contract required P to have adequate shipping capacity available and D to utilize such shipping capacity if D wished to transport iron ore on the Great Lakes from mines in the Lake Superior district to D's plants in the lower Great Lakes region. The contract established a primary and a secondary price rate mechanism. D was to pay the regular net contract rates for the season in which the ore is transported, as recognized by the leading iron ore shippers. The price was established by reference to the regular rates published in Skillings Mining Review. If there was no regular net contract rate recognized by the leading iron ore shippers, the parties were to mutually agree upon a rate taking into consideration the contract rate being charged for similar transportation by the leading independent vessel operators engaged in transportation of iron ore from The Lake Superior District. In twenty-three years, the modified four times. With each modification, D agreed to extend the time span of the contracts beyond the original date. It was recognized that the ever-increasing requirements capacity D sought from P would require a substantial capital investment from P to maintain, upgrade, and purchase iron ore carrier vessels. With the fourth amendment, signed in 1980, P had to modify and upgrade its fleet to provide D with a self-unloading capability. This was a $95 million capital improvement program. In 1983 the iron and steel industry suffered a serious downturn in business. P quoted the shipping rate for the 1984 season, and D challenged that rate. The parties then negotiated a mutually satisfactory rate for the 1984 season. The parties were unable to establish a mutually satisfactory shipping rate for the 1985 season. P billed D $7.66, and D reduced the invoice amount to $5 per gross ton. D paid the $5 indicating payment in full language on the check. They failed to reach a rate for 1986. P filed a declaratory judgment action requesting the court to declare the rate set forth in the contract to be the correct rate, or in the absence of such a rate, to declare a reasonable rate for P's services. D denied that the $7.41 rate sought by P was the 'contract rate,' and denied that the trial court had jurisdiction to declare this rate of its own accord, as a 'reasonable rate' or otherwise. P continued to ship iron ore, and D paid $422 per gross ton for ore shipped prior to August 1, 1986, and $3.85 per gross ton for ore shipped after August 1, 1986. The court held that P and D intended to be bound by the 1957 contract, even though the rate or price provisions in the contract were not settled. It also found that when a service contract pricing mechanism based upon the mutual agreement of the parties fails, the contract called for the price to be that which is reasonable' under all the circumstances at the time the service is rendered. The trial court held that the parties must continue to comply with the alternative pricing provision contained within paragraph two of the 1957 contract and to consider rates charged for similar services by leading independent iron ore vessel operators. The court also agreed to act as a mediator to help the parties agree. D appealed. The court of appeals affirmed. D appealed again.