NEW YORK CSX Transportation Inc. has filed a lawsuit against New Era Recycling Solutions LLC and Harmon Scrap Metal LLC, alleging that New Era fraudulently obtained 16 scrap rail cars belonging to CSX and sold them to Harmon.
Jacksonville, Fla.-based CSX filed the complaint in U.S. District Court in Tennessee, citing counts of unjust enrichment and conversion.
CSX claims in the lawsuit against Independence, Ky.-based New Era and Cornersville, Tenn.-based Harmon Scrap that it entered an agreement with a company called Scrap Masters in October 2011 for the sale of 16 rail cars located at a CSX-owned property in Cornersville. The deal followed a request-for-bid process in which Scrap Masters proffered the highest bid, at $244,160.
"Soon after the agreement was reached between CSX and Scrap Masters, the 16 rail cars at issue were cut up and removed from CSX property by a different company known as Harmon Scrap without CSXs permission," the lawsuit states.
Owner Camuel Harmon is alleged to have produced an agreement between Harmon Scrap and New Era in which "Harmon Scrap paid $284,914.65 to New Era for the same 16 rail cars that CSX had agreed to sell to Scrap Masters," the suit alleges. CSX was subsequently unable to contact Scrap Masters.
New Era allegedly submitted a bid to CSX under the fictitious company name of Scrap Masters, and "New Era, under the guise of Scrap Masters, induced CSX to accept its bogus companys offer over those of legitimate competing bidders," the lawsuit claims.
"Because the sales agreement was between CSX and the bogus entity Scrap Masters, New Era had positioned itself such that it would receive the scrap rail cars but avoid any actual obligation to pay CSX," the lawsuit states.
However, New Era owner Shawn Snelling told AMM on Nov. 21 that Scrap Masters is a viable entity and that his company had helped broker the deal between Scrap Masters and CSX for the rail cars.
Snelling has receipts proving that New Era has paid Scrap Masters for the rail cars, he said, although he couldnt recall the name of his contact at Scrap Masters. Snelling also said he wasnt aware of the lawsuit and its allegations.
Meanwhile, the lawsuit said that Harmon Scrap "defied CSXs possession and ownership rights when it removed the scrap rail cars from CSXs property without authorization."
The lawsuit also alleges a count of trespass against Harmon, saying that "only the buyer, Scrap Masters, was permitted to enter the scrap rail cars" under the terms of the original sales agreement.
Harmon Scrap co-owner Kay Harmon told AMM that her company had paid New Era in full for the metal and was "talking with CSX," also denying any awareness of legal proceedings.