PORTLAND, Maine — The state’s top court upheld a ruling that the former managers of the shuttered Great Northern Paper mill in East Millinocket will have to pay all of a $9.2 million claim related to a partially fulfilled natural gas contract.
The Maine Supreme Judicial Court on Thursday upheld an arbitrator’s ruling on $1.5 million of that claim from supplier Xpress Natural Gas, which granted Cate Street a loan to help convert the mill to use natural gas. XNG delivers that compressed natural gas by truck.
Cate Street argued that the arbitrator in the case, the late Peter DeTroy, went beyond his authority in ruling Cate Street should repay that loan and that the ruling misinterpreted the contract.
The court upheld DeTroy’s decision and found it met a standard of being “rationally derived from the agreement.”
DeTroy’s February 2015 arbitration award issued judgment in favor of XNG for $9.1 million in claims, plus interest.
In XNG’s initial statement of claims to the arbitrator, the company said the mill began accepting its natural gas shipments in late 2013. When prices shot up 600 percent in December, Cate Street declined to pay for the gas and sought to back out.
The initial agreement called for Cate Street to begin accepting natural gas shipments in March on terms set to expire in October. The companies extended the terms of that supply agreement, but Cate Street argued that did not include the loan guaranty. It maintained that portion of the agreement expired in October 2013 and was a separate transaction from its gas supply purchases.
The court ruled the arbitrator was within his power, essentially, to find the renewed gas supply contract also extended Cate Street’s loan guarantee.
“The arbitrator interpreted an undefined term — ‘Transaction’ — to include the sales agreement, which was entered into before the automatic termination date of October 1, 2013,” Chief Justice Leigh Saufley wrote. “In doing so, the arbitrator did not exceed the scope of his authority but instead found any necessary facts and rationally interpreted the agreements submitted for decision to resolve the dispute and determine liability.”
The arbitration award entered judgment for XNG on outstanding loan obligations of about $1.4 million for both GNP Parent and Cate Street Capital, a two-year sale agreement worth about $4.8 million and a guarantee in the sale agreement for $1.5 million, plus attorney’s fees.
A Superior Court confirmed XNG’s award despite Cate Street’s effort to vacate the decision.
After arbitration hearings in December 2014, Cate Street attorney Brian Champion argued that the company should not be held responsible for any of the terms of the contract because the price spike of more than 600 percent made it impractical for it to satisfy the agreement.
He added that XNG “contributed to the financial strain on the Great Northern Paper Mill that ultimately led to its bankruptcy.”
In October, XNG’s attorney told the Bangor Daily News that he could not disclose whether Cate Street had paid any portion of the arbitration award, citing a confidentiality agreement in the contract.