Josh Stein sues company over closure of Canton paper mill, alleging breach of contract

One year after the closure of Canton’s paper mill, North Carolina Attorney General Josh Stein is suing the company that owns the mill for $12 million, arguing it’s in breach of an agreement it signed with the state.

North Carolina Attorney General Josh Stein last week filed a lawsuit against Pactiv Evergreen, the company that owns the site of the now-closed Canton paper mill, alleging the company did not live up to a 2015 economic development deal in which the state provided the company with $12 million in incentives.

The lawsuit seeks to claw back the $12 million the state provided the company.

Under the Job Maintenance and Capital Development Fund (JMAC) Grant that Pactiv Evergreen received, the company agreed to keep the mill open through the end of 2024 and maintain at least 800 employees on-site. When the mill’s final whistle was blown on May 24, 2023, the company ended this agreement nearly a year and half early.

“We held up our end of the bargain, and we cannot let Pactiv cut and run away with our state’s money,” Stein said in a press release. “My office has been working with Pactiv over the last year to address the company’s obligations under the JMAC agreement, but it has become clear that legal action was necessary to hold Pactiv accountable.”

Shortly after Pactiv announced the closure of the mill in March 2023, Governor Roy Cooper sent a letter to the CEO, warning the closure would violate the 2015 agreement.

“The mill’s closure would be a clear violation of a contract that two Pactiv Evergreen subsidiaries signed with the North Carolina Department of Commerce in February 2015,” he told the company.

In a statement last week, Cooper expressed his support for Stein’s lawsuit.

“Pactiv Evergreen’s closure of the Canton paper mill was a gut punch to our state’s economy and the people of Canton and Haywood County. This company broke its commitment to keep the mill open and the state is taking action to hold them accountable,” Cooper said.

What Canton hopes to gain from the suit

In an interview with Cardinal & Pine, Canton Mayor Zeb Smathers said he believes that the county and town should receive most, if not all of the $12 million, if it’s recovered by Stein’s lawsuit.

“First off, Haywood County, they put money towards the incentives. I’d like to see their money— it’s about $150,000—the county needs to be reimbursed for that part of the incentive linked to the JMAC,” Smathers said. 

Canton would also benefit from seeing some of those funds.

”It’s not just a want, it’s a need. Currently, I have a $1.4 million hole in my budget that we cannot fill,” Smathers said. “Our tax administrator said basically, ‘we’re now in the position the town was in 2012.’ So we have lost over a decade of economic gains that were built by small businesses and not raising taxes—that has vanished.” 

An analysis by Syneva Economics highlighted just how significantly the mill’s closure has impacted the broader community. The direct closure of the mill resulted in 900 jobs lost, but the closure also impacted businesses and industries associated with the mill, or that conducted direct business with the mill. As a result, 1,883 jobs were categorized as “lost or at-risk” as a consequence of the closure, which is roughly 9.5% of Haywood County’s total employment.

“Pactiv broke a promise to the state, a promise that was made to help support and sustain the economy of Canton and Haywood County,” Smathers said. “That promise was broken. That money, I think [it] makes sense to pay it back to Haywood County & Canton.”

A potential resolution on the horizon

While nothing is finalized, Spiritas Worldwide, a St. Louis based company, is in talks with Pactiv Evergreen to acquire the former mill site. According to its website, Spiritas provides an array of services, including complete industrial demolition, full environmental remediation & decontamination services, property redevelopment and structure reuse, and more.

Smathers said that talks are ongoing, but that he is optimistic about a potential purchase, and what Spiritas could provide for Canton. He says he has spoken with CEO Eric Spiritas about some of the key issues surrounding the mill site and the future of the town.

One of the sticking points in any negotiation is the future of the wastewater treatment plant that is currently controlled by Pactiv Evergreen.

Smoky Mountain News reports that the mill has been issued seven environmental violations since closing down last spring, including three instances in which the amount of fecal coliform discharged from the treatment plant was found to be 50% higher than allowed by law.

In last year’s state budget, the town was allocated $42 million to go towards its economic recovery, roughly 90% of which was set to go towards the building of a new wastewater treatment plant, Smathers said last fall. 

Smathers is optimistic that the town will be able to come to an agreement with Spiritas on how to navigate the wastewater issue.

“This is a situation that we feel there is a great opportunity to partner, a sincere partnership between Spiritas, the town, and county to answer those questions. He has responded very well to that, and that he wants to do good by the people, town, and county,” Smathers said.

As to what types of industry the former mill site could bring in, Smathers believes there are an array of opportunities.

“We want to decide together what is best for this community, especially what the people want. Personally, I see everything from manufacturing down there to mixed development to possibly attracting the university system. It could be an absolute economic furnace involving a lot of different things,” he said.

Smathers said he has also emphasized to Spiritas the importance of locals having job opportunities on potential demolition, construction, and the planning on the former mill site. 

“I have very, very clearly said, the more local people, whether they be involved in demolition, contractors, designers, whatever it may be—the more local people we can involve and put back to work, the better off we’ll all be. I think he has responded positively to those opportunities,” Smathers said.

In recent years, North Carolina has seen several global companies— including Apple, Wolfspeed, Red Hat, and Toyota—set up operations and open plants that have created thousands of jobs. However, the western part of the state has not felt this economic impact.

Smathers believes Canton is a strong destination for business and should be considered for similar investments moving forward.

“I’m a little biased, but I don’t think there’s a place on earth that is a better place to call home or do business than the state of North Carolina,” he said.” Closer to home, I would put Haywood County, our workers, our tradition, our public schools, our community college system, up against anybody else.”