State suit alleges Pactiv violated grant agreement
Pactiv Evergreen's Canton mill closed in June 2023.
Max Cooper photo
Pactiv Evergreen’s shocking announcement that it would close its 115-year-old paper mill broke lots of hearts — and wallets — in Canton, but now, more than a year later, North Carolina’s Attorney General is looking for some payback over broken promises.
"Taxpayers in North Carolina invested in Pactiv Evergreen to bolster our state’s economy,” said Attorney General Josh Stein in a release issued earlier today. “We held up our end of the bargain, and we cannot let Pactiv cut and run away with our state’s money. 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.”
In late 2014 and with bipartisan support, Gov. Pat McCrory inked an agreement with Blue Ridge Paper, a subsidiary of Pactiv, granting the company $12 million from the state’s Job Maintenance and Capital Development Fund (JMAC). In exchange, Blue Ridge Paper agreed to spend $51 million of its own money over 10 years to convert two of its coal-fired boilers to natural gas.
There were other conditions, too — the company would have to pay most workers 140% of the area’s average wage and pay at least 50% of their health care coverage costs.
While Blue Ridge Paper indeed complied with those conditions, it appears to have missed or ignored one.
“The Company shall repay all Grant amounts previously received … for failure to maintain operations at the Canton Mill for the JMAC Agreement term,” the grant agreement reads, while further stipulating the company must “retain 800 positions to qualify.”
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The last whistle blew at the mill on May 23, 2023, and the vast majority of workers had already left or been laid off just three weeks later.
The breach of contract suit shouldn’t have come as a surprise to Pactiv, because state leaders have been talking about it since shortly after the company’s March 6, 2023, closing announcement — some 15 months after Pactiv cashed its last check from the state. On March 8, 2023, Stein told The Smoky Mountain News that his office would do everything in its power to hold Pactiv accountable for its obligations.
The next day, David Rhoades, communications director for the North Carolina Department of Commerce, confirmed to SMN that the grant agreement was still in force through Dec. 31, 2024, and that the Department of Commerce would initiate “a full assessment.”
A week later, Gov. Roy Cooper took things up a notch with a March 16, 2023, letter to Pactiv CEO Mike King, warning that if the mill closed before 2025, it would face consequences.
“In this Job Maintenance and Capital Development Agreement (“JMAC Agreement”), Pactiv Evergreen promised to maintain operations at the Canton mill and to retain at least 800 full-time employees through December 31, 2024,” Cooper’s letter reads. “Closing the paper mill in Canton would be a clear breach of the JMAC agreement. That breach would require you to repay in full the $12 million received under the contract. If you follow through your announced plans we will demand full repayment of those funds.”
Since then, Stein and his office have reemphasized that Pactiv was and would be under scrutiny. On May 17, 2023, a spokesperson in Stein’s office said they would continue to look closely at Pactiv’s obligations to its workers, the Town of Canton, Haywood County and the state.
During a May 31, 2023, visit to Canton, Stein reiterated that the state would fight to enforce the terms of the $12 million JMAC grant.
“Pactiv Evergreen signed a contract with the state of North Carolina in which it promised to employ a certain number of people through a certain date in exchange for the money,” Stein said at the time. “They failed to uphold their end of the bargain. The state is going to enforce its rights under that contract. I want you all to know that, and I want to thank Gov. Cooper, who has been on this from the very beginning.”
More recently, Stein, a Democrat locked in a tight race for governor with Republican Lt. Gov. Mark Robinson, said during an April trip to Canton that he would “not hesitate to hold Pactiv Evergreen accountable for its failure to live up to its promises to the state when it accepted that $12 million.”
Robinson recalled his own financial turmoil when he lost a manufacturing job in High Point under similar circumstances and empathized with Canton workers, saying, “ … the governor and the attorney general need to keep that in mind and pursue every remedy necessary. And I can assure you, if I was the governor, I certainly would be.”
After the suit was filed, Robinson told The Smoky Mountain News that perhaps it's better to focus on cultivating the business environment than to focus on incentivizing companies.
“I’m a former factory worker who lost jobs to NAFTA – and while these layoffs in Canton may be different, the results for the workers are the same. Right now, families are wondering how they are going to make ends meet. I know, because I’ve been in their shoes. While incentives for companies can be an effective tool when used properly, the foundations of keeping our economy strong — cutting taxes, reducing spending, and eliminating burdensome regulations — are more important. Because when incentives are used, and things go bad, the taxpayers are left holding the bag. So while we should hold companies accountable who don’t meet their obligations to the taxpayers, it’s better to not be in this situation to begin with.”
Even the candidates looking to replace Stein as attorney General — Democratic Congressman Jeff Jackson and Republican Congressman Dan Bishop — vowed strict enforcement of the terms of state law and the grant agreement during interviews earlier this year.
Bishop said there would be no difference between him and Stein on this particular issue. Jackson said the job of the attorney general is to “have people’s backs." A statement today from Jackson's campaign says Jackson stands behind Stein's suit.
"The job of the attorney general is to stand up for people, especially when they’re mistreated by large corporations. Pactiv Evergreen took millions of dollars from the state, then failed their obligations and left the people of Canton out to dry. That’s absolutely wrong," the statement read. "I support Attorney General Stein’s lawsuit and will continue to hold Pactiv accountable as attorney general."
Rhoades, speaking on behalf of the Department of Commerce, said, "Today’s action by Attorney General Stein and the Department of Justice is an important step in maintaining the integrity of the state’s performance-based economic development incentive programs. Whenever North Carolina invests taxpayer dollars in a company, that company must be accountable and live up to its obligations. Pactiv Evergreen did not do that for the people of Canton and Haywood County. We appreciate Attorney General Stein’s action and will do everything we can to make sure these taxpayer dollars are returned to the State and reinvested to benefit those people and communities most impacted by Pactiv Evergreen’s sudden closure of the Canton Mill."
Rhoades also pointed out that the JMAC fund is a rarely used program only employed in special circumstances when existing major employers in North Carolina must upgrade equipment and facilities or risk closure. All JMAC recipients have worked with the General Assembly to secure their appropriations.
During the period between the mill’s closing and the filing of today’s lawsuit, Stein faced questions over why the lawsuit hadn’t already been filed. It’s believed that the Town of Canton was attempting to strike a deal with Pactiv over the future of the 185-acre mill parcel, and Stein told The Smoky Mountain News a few weeks ago that he wanted to be “part of the solution” as those conversations continued.
Last week, Canton Mayor Zeb Smathers confirmed that Pactiv had received a letter of intent to purchase the property from St. Louis-based demolition and development company Spirtas Worldwide. Spirtas has a due diligence period of about 60 days to come to terms with Pactiv on a potential sale — meaning local control of the site is off the table, at least for now.
This morning, Smathers reacted to the lawsuit as his governing board ponders a $1 million budget hole, an impending wastewater treatment crisis and economic uncertainty over the future of the parcel.
“I am supportive but not surprised. Josh Stein and the North Carolina Department of Justice from zero hour have made clear they are holding Pactiv responsible, and that has not changed with a potential buyer of the property,” he said. “Pactiv broke our spirit, broke our economy and broke promises to the state and all of her citizens. I do not care if you’re a company or the children we raise — when you make promises you keep them, and taxpayers from Murphy to Manteo deserve to have their money back.”
Should the lawsuit be successful, Stein said the proceeds would be returned to the state's general fund; however, it's his position that those proceeds be used to help Canton repair the damage Pactiv has done.
"Obviously, it's the decision of the General Assembly, but Canton really took it on the chin when its largest employer shut down with not much advance notice. Lots of good jobs were lost. I've actually now been in Canton three times in the last year, and it's hard for people who are not from that part of the state to understand what a massive structure this is, just sitting in the middle of town," Stein said. "Canton is going to need a lot of help to get this property redeveloped into something really constructive."
Gov. Roy Cooper told The Smoky Mountain News he also believes any proceeds from the lawsuit should go "to support the people of Canton and Haywood County."
As one of the country's fastest growing states, North Carolina and its economic development agencies routinely incentivize development that brings jobs and prosperity to the state. Stein said that today's lawsuit sends them a message.
"We welcome many great businesses to North Carolina. There's a really bright future here. We have an exceptionally talented workforce, we have so many assets in our favor, so we want businesses to come here, invest and hire our people and pay them good wages," Stein said. "But when you make a deal with the state, you better live up to your end of the bargain, because if you don't, I will hold you accountable."
Pactiv Evergreen spokesperson Beth Kelly didn't respond to a request for comment from The Smoky Mountain News.
