Luxembourg-based ArcelorMittal claims that Esmark breached its August 2007 agreement to purchase the Sparrows Point plant for $1.35 billion. The proposed sale fell through in December because of financing problems.
The lawsuit, filed Thursday in New York's Supreme Court, seeks $540 million in damages.
Esmark Inc., based in Wheeling, W.Va., said in a statement that the lawsuit is frivolous and argues that ArcelorMittal "failed to meet various conditions which were required to close the transaction" and did not resolve disputes with the United Steelworkers over the sale.
Esmark "will vigorously defend against the lawsuit and pursue any claims it has against ArcelorMittal," the statement said.
ArcelorMittal SA agreed in March to sell the plant to Russian steelmaker OAO Severstal for $810 million.
The U.S. Justice Department ordered the sale of Sparrows Point in February 2007 because of antitrust concerns over the production of tin-plated steel, which is used to make cans for food, aerosol sprays and paint.
The plant employs about 2,500 people and can produce 3.6 million tons of steel a year.
