NEW YORK Essar Steel Algoma Inc. has filed a lawsuit against Galvstar LLC, Galvstar Holdings LLC and Bain Partners LLC for alleged breach of contract and unjust enrichment, claiming it is owed more than $2.4 million in unpaid invoices.
The Sault Ste. Marie, Ontario-based steelmaker said it sold 3,116 tons of cold-rolled steel coils to Buffalo, N.Y.-based Galvstars coating facility between October 2011 and July 2012 but has not been paid despite repeated attempts to collect, according to a complaint filed April 23 in U.S. District Court in New York.
"In the months following the breaches of contract ... defendants have continued to engage in substantial correspondence with Essar Steel from locations in or around Buffalo, and through that correspondence, have delayed payment and perpetuated the breaches," Essar alleged in the court documents.
Essar said it was told by Galvstar that it was experiencing cash flow difficulties that resulted in the nonpayment. As a result, Bain Partners entered into a pledge agreement with Essar Steel on May 25 in which Essar Steel was granted membership interests in Galvstar Holdings as security for outstanding and anticipated payment obligations.
"Defendants continued to order more product they could not pay for, some for delivery three days after the pledge agreement was executed, for example," the lawsuit said. "Essar Steel relied on the purported security conferred by the pledge agreement, but unfortunately, as is clear from subsequent discussions with Bain, neither Galvstar nor (Galvstar) Holdings had sufficient working capital to make good on the obligation or pledge, rendering the pledge agreement meaningless."
"Any security conferred by the Pledge Agreement was illusory," Essar added.
The steelmaker has asked the court for the $2,420,783 it says it is owed for the steel, plus interest, damages and other fees.
A spokeswoman for Essar and a spokesman for Galvstar declined to comment.