Taunton Metals of Florida sued Solutions in Stainless Inc. on July 25 in U.S. Bankruptcy Court in White Plains.
The St. Petersburg company claims that Stainless made false statements and promises to get Taunton to ship steel in 2011, meaning Stainless may not use bankruptcy court protection to deny debt payments.
Stainless’ president and owner, Daniel B. Katzman of Westport, Connecticut, did not immediately respond to a telephone message asking for his side of the story. In 2014, he depicted Taunton’s claims as spurious in an affidavit filed in U.S. Bankruptcy Court in Bridgeport, Connecticut.
Stainless operated as United Stainless & Alloy in Hillburn, Rockland County. In 2011, it ordered two shipments of steel from Taunton for $553,000.
When Stainless refused to pay, Taunton sued Stainless in Rockland Supreme Court.
Stainless quickly consented to paying the full amount plus attorney’s fees. But then Katzman filed for personal bankruptcy in Connecticut, declaring $408,264 in assets and more than $6.2 million in liabilities.
The Chapter 7 liquidation petition automatically stopped the Rockland case.
Taunton sued in bankruptcy court, making the same argument it makes now: Stainless should not be allowed to discharge debt on products it got by false or fraudulent means.
Katzman said in the 2014 affidavit that his business got further and further behind on payments to suppliers during an economic downtown that began in 2010. He mentioned the possibility of personally guaranteeing his debts to Taunton, he stated, but never formally put the guarantee in writing. Therefore, he argued, there was no misrepresentation or fraud.
“I filed my Chapter 7 petition,” he said in the affidavit, “for the purpose of moving on with my life after my business failed.”
A Connecticut bankruptcy judge eventually lifted the stay, allowing Taunton to resume the Rockland lawsuit.
Last year, Justice Robert M. Berliner of the Rockland Supreme Court granted Taunton judgment for $2,147,207.
Taunton petitioned in April to make Katzman’s wife, Rachel, and their jointly owned entity, Local Only LLC, liable for the debt.
Six weeks later, Stainless filed for Chapter 7 bankruptcy in White Plains, once again freezing the Rockland court case.
Stainless declared $0 in assets and nearly $2.4 million in liabilities.
Taunton sued again. Stainless shut down four years ago, the company argued, making it obvious that Katzman is using bankruptcy to further delay paying the debt.
Taunton, represented by attorney Eric P. Schutzer in Manhattan, is asking the bankruptcy court to lift the stay to permit the Rockland lawsuit to move forward.