NEW YORK Scrap Metal Services LLC (SMS) has filed a countersuit against Consultants Group Commercial Funding Corp. (CGCF) over a letter of intent regarding a $21.1-million equipment lease.
The dispute has made its way to federal District Court in California after both parties originally filed civil complaints in California Superior Court.
Both lawsuits concern a letter of intent signed by SMS and CGCF on Oct. 25 under which CGCF proposed to lease to SMS $21.1 million worth of equipmentincluding a CAT 924 loader, a crane, a scarfing line and a Euclid R25 truckfor use at Severstal North America LLCs Dearborn, Mich., slab scarfing facility.
SMS and Severstal signed a steel slab conditioning services agreement in November 2013 that would see SMS "provide infrastructure, equipment and personnel to fully scarf, cut to length and slice to width steel slabs as required."
SMS claims in its lawsuit that the letter of intent was executed "to allow the parties to further negotiate a final lease agreement," but shortly after the letter of intent was executed "CGCF filed a false and fictitious lien related to the equipment entirely without the knowledge, approval or authorization of (SMS)."
SMS claims that during subsequent negotiations in December over a final lease agreement, CGCF said it would fund only $4 million of the project, a proposal that was rejected by SMS.
"(SMS) immediately responded and indicated that they needed to know that there was a commitment to fund the entire amount of the project. At no time did CGCF ever confirm the full amount of financing would be forthcoming," the complaint states. "As a result of CGCFs failure to confirm the full financing and due to CGCFs unwillingness and/or inability to fund the entire project, (SMS) withdrew any offer made to CGCF related to the funding of the equipment and were forced to seek other available funding sources."
CGCF claims in its lawsuit that it "was evaluating whether to accept all or any portion" of the remaining $17.1 million needed to fund the project, and accuses SMS of "improperly attempting to revoke the offer in the agreement before CGCFs time to accept all or any part of the remaining $17.1 million in leased property had expired," claiming that SMS "directly and knowingly caused CGCF to needlessly incur additional expense, time and effort ... working on a transaction which SMS, but not CGCF, knew would never be completed."
Burnham, Ill.-based SMS has denied any wrongdoing, while Irvine, Calif.-based CGCF said it does not comment on pending litigation.