NEW YORK — Now Fabrics Inc., a textile converter, has filed a $5.7 million suit against its factor, BNY Financial Corp., charging it withheld negative financial information about a manufacturer that eventually filed a Chapter 7 liquidating petition.
BNY gave Now assurances that the manufacturer, United Apparel Group, a client of Now and also factored by BNY, was “credit-approved,” even though BNY was aware of accounts receivable “irregularities and improprieties” that made UAG a poor credit risk, according to court papers filed in Manhattan State Supreme Court.
At the time, BNY refused to accept the entire credit risk for UAG, citing “BNY policy,” and Now was forced to assume much of the risk itself, court papers charge. Now said it eventually lost $678,000 on its deal with UAG.
The converter contends that BNY withheld the negative information on UAG in order to reduce its losses on its UAG account. “BNY had a financial interest and incentive in permitting, facilitating and causing the resulting shipment from Now to UAG,” Now charges in its suit.
In addition to seeking to recoup its losses, Now is asking for $5 million in punitive damages.
Requests for comment at BNY were referred to Joseph Grimaldi, president, who was not available. — Fairchild News Service