Cate Street sues paper industry newsletter for alleged defamatory article

Great Northern Paper in East Millinocket
Great Northern Paper in East Millinocket
Posted May 14, 2014, at 5:33 p.m.
Last modified May 14, 2014, at 8:01 p.m.

EAST MILLINOCKET, Maine — Cate Street Capital on Tuesday sued a monthly paper industry newsletter for printing what it claims are several defamatory statements in a May article that was highly critical of the New Hampshire-based investment firm’s management of its Katahdin region mills.

In the article, “The Maine Problem,” Reel Time Report writer Verle Sutton wrote several statements that “were false,” according to the complaint filed in federal court in Bangor.

Sutton also “acted in reckless disregard of whether the statements were false or not,” according to the complaint filed by attorney Brian Champion of Kennebunk, who represents Cate Street.

Champion said that Sutton and the company that publishes the newsletter, Industry Intelligence Inc., “acted negligently in their failure to ascertain the truth” regarding Great Northern Paper Co. LLC, Cate Street and its CEO, John Halle. He also said in the eight-page filing that Cate Street and Halle manage Great Northern Paper, which operates the mill.

The lawsuit seeks at least $75,000 in damages.

Sutton did not return a message left at his Los Angeles office on Wednesday. An official at his Kennebunk office said that Champion was at a seminar on Wednesday.

Cate Street spokeswoman Alexandra Ritchie expressed satisfaction with the lawsuit.

“For too long, Cate Street and [Great Northern Paper] have sat by while our names and reputations has been tarnished, and while we will not comment in detail on the specifics of the lawsuit, it was in response to nonfactual reporting, escalating to such a slanderous level that it could only be addressed in a court of law,” Ritchie said in a statement. “More importantly, Cate Street’s proven track record demonstrates a commitment to economic development, not only in the state of Maine but across the country.”

According to the complaint, Sutton’s article makes some basic factual errors. It states that the East Millinocket paper mill never restarted, and the Millinocket paper mill has run occasionally since Cate Street bought both mills for $1 in September 2011.

The Millinocket mill has not restarted since its then-owner, Brookfield Asset Management, shut it down in September 2008. Under Cate Street’s management, the East Millinocket mill halted production twice since October 2011, once, briefly, for what company officials called maintenance and repair operations. It has not restarted since a shutdown on Jan. 23, when company officials said they were restructuring to improve energy efficiencies.

The mill laid off 212 of the mill’s 256 workers on Feb. 6. The company said in May 2013 that it was having significant problems paying vendors. The IRS is among several entities that filed liens against the company.

According to the complaint, Cate Street claims Sutton defamed the company when he wrote that it “messed up everything right from the beginning: it agreed to pay higher local taxes than it should have; it got its sales started by selling newsprint offshore through a pulp company; it made immediate upper management changes; and it generally behaved like a company that had no clue what it was doing.”

Sutton also blasts Maine politicians for giving the company $142 million in tax breaks and loans, according to excerpts of Sutton’s article contained in the complaint.

“One would think that politicians would be disassociating themselves from Cate Street and trying to forget that it ever existed. But, that is not the case,” Sutton wrote, according to the complaint. “Cate Street not only gets a free pass for its unsurpassed incompetence (and possible fraud-like management fees), but the state of Maine has offered Cate Street another $16 million (of the $25 million requested) to start up the long-awaited wood pellet business. … Would you buy a used car from Cate Street?”

Cate Street’s complaint states that these statements “are unprivileged, false, defamatory and suggest the existence of undisclosed defamatory facts.”

The statements are actionable, the lawsuit states, because they adversely affect the company’s “fitness for the proper conduct of its business.”

No hearing dates have been set, according to court officials.

The Reel Time Report is a monthly newsletter offering more than 300 clients, including many Fortune 500 companies, “relevant market intelligence including news, financial data, transcripts and analyses on a range of industries,” according to Industry Intelligence’s website, industryintel.com. Those businesses include the forest products, packaging, printing, publishing and household products industries, according to the website.

Sutton is a former vice president of sales and marketing for Lake Superior Paper Industries of Minnesota. In 1991, he founded R.O.S. Paper Sales, a company that sells paper on behalf of mills throughout North America and Europe. He launched Reel Time in 1999, according to suttonpaperstrategies.com.

 

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