American Paper sues Clearwater over alleged unjust end of contract
A Puerto Rico-based distributor has filed a federal lawsuit against Clearwater Paper Corp., accusing the Idaho-based manufacturer of unlawfully terminating a long-standing sales agreement and violating Puerto Rico law.
American Paper Corp. filed the complaint June 4 in the U.S. District Court for the District of Puerto Rico, alleging that Clearwater ended its exclusive representation rights for sales of solid bleached sulfate (SBS) paperboard to MM Packaging Puerto Rico, a major pharmaceutical and consumer packaging company with facilities in Guaynabo and Manatí.
“This diversity action for damages arises from Defendant’s unilateral termination, without just cause, of an exclusive sales representation agreement,” the suit states.
American Paper argues the termination violates Puerto Rico’s Act 21, which protects local sales representatives from being dismissed without just cause. The law is designed to prevent companies from ending long-term sales relationships arbitrarily, especially when the agreements lack written contracts but are demonstrated through sustained commercial practices.
According to the lawsuit, American Paper began serving as the exclusive representative in 2011 under an arrangement originally made with International Paper. The agreement was later passed to Graphic Packaging and ultimately to Clearwater after its acquisition of the business in 2024. Although verbal, the contract was supported by over a decade of consistent transactions, including order management, customer service and coordination with suppliers and shippers.
Clearwater notified American Paper of its termination on Aug. 21, 2024, citing a company policy against working with third-party sales agents. American Paper contends the decision lacked justification under Act 21 and was not based on any failure to perform.
The firm claims it was fulfilling all obligations and was not was not given advance notice of the decision. It had served as the exclusive liaison between Clearwater and MM Packaging, which the lawsuit states controls more than 60% of the specialized SBS packaging market on the island.
“Defendant unfairly and without just cause terminated the agreement and has failed to compensate American Paper, even after being informed of the preexisting contractual obligations,” the complaint states.
American Paper said it attempted to resolve the dispute through an extrajudicial demand letter sent Oct. 16, 2024. After failing to reach a resolution, it filed suit seeking more than $600,000 in damages, along with attorneys’ fees and interest. The case has been assigned to Judge Raúl M. Arias-Marxuach.
Founded in 1982, American Paper supplies packaging products throughout Puerto Rico, the Caribbean and Central America. The company said Clearwater’s decision ended nearly 15 years of uninterrupted representation, damaging its business and long-term client relationships.
The suit seeks a jury trial. Clearwater Paper has not yet filed a response.
