UPDATE 1-Esmark says ArcelorMittal suit "frivolous"

(Adds details of suit, quotes, background)

NEW YORK, May 9 (Reuters) - Steel producer and distributor Esmark Inc (ESMK.O: Quote, Profile, Research) branded as "frivolous" on Friday a breach of contract lawsuit brought by ArcelorMittal (ISPA.AS: Quote, Profile, Research)(MT.N: Quote, Profile, Research), the world's biggest steelmaker.

Esmark said any claims arising out of the contract it and E2 Acquisition Corp had with ArcelorMittal to purchase the Sparrows Point steel plant in Maryland are without merit.

ArcelorMittal said late on Thursday it filed suit against Esmark and E2 in New York State Supreme Court. It is seeking in excess of $540 million, charging that Esmark/E2 breached an Aug. 1, 2007 contract to purchase Sparrows Point for $1.35 billion.

That contract was terminated Dec. 16, and Sparrows Point was subsequently sold to Russian steelmaker OAO Severstal (CHMF.MM: Quote, Profile, Research) for $810 million.

In a statement, Esmark, which recently said it has agreed to be acquired by India's Essar Steel Holdings Ltd, said it was "surprised and disappointed that ArcelorMittal would file such a frivolous lawsuit."

Among reasons it cited for concluding the suit is without merit, were:

* The company is not a party to agreements with ArcelorMittal regarding the proposed Sparrows Point transactions.

* ArcelorMittal failed to meet various conditions which were required to close the transaction.