Clothing supplier Nazareth International Inc is suing retail group JC Penney for fraud and breach of contract.

The lawsuit, filed with a US Federal Court in Dallas, Nazareth contends that Penney intentionally manipulated the company to avoid paying fair market prices for its goods and to extort concessions.

It also claims that, as a result of Penney's actions, it was forced to fire key employees and its business was destroyed.

According to the lawsuit, Texas-based Penney still owes New York-based Nazareth $360,752.84 for a shipment of children's T-shirts worth $750,784.30.

In 2003, Nazareth filed a $5 million lawsuit for fraud and breach of contract on behalf of Guild Inc against Penney, claiming the retailer took improper chargebacks that were part of a deliberate scheme to defraud Guild of money and property.