Montville - A federal appellate court upheld a lower court ruling Monday that the town must pay Rand-Whitney Containerboard Ltd. $11.5 million for failure to comply with a 1993 agreement with the company.

The decision will most likely end the protracted legal battle that started in March 1996 when the Massachusetts-based company sued the town for failing to satisfy water-quality requirements in the contract between the two parties.

The town said it would provide the quality of water the company needs to produce its paper products, but the company contends it has not done so.

A panel of three judges for the U.S. District Court of Appeals for the Second Circuit concluded that three of the town's four requests to reverse various decisions made by the lower court were without merit. The town's fourth request - to not pay for Rand's attorney's fees - was approved by the panel.

Monday evening, Mayor Joseph Jaskiewicz said it was “too bad” that the two sides had not been able to settle the issue and that the town must abide by the court's decision.

Jaskiewicz declined to comment further, saying he wanted to assess the decision before talking about how it will affect the town.

One thing was clear Monday: The $1 fortune Town Council Chairwoman Candy Buebendorf bought from a Buddhist temple in Chinatown prior to the July appellate court hearing was far from prophetic.

”The probability of success: excellent” is the message she read when Buebendorf opened the fortune just before she entered the federal appellate court in Manhattan.

Monday night, Buebendorf did not want to make light of the situation, but said, “It could have been worse.”

The council will hold a special meeting, possibly as early as Thursday, to hear from the attorneys involved in the case. Buebendorf said the town will have to bond the amount to be paid to Rand, which will require a special town meeting and then a referendum vote.

Town officials would not say what would happen if taxpayers do not approve the bond request.

Earlier in the day, Rand-Whitney Chief Financial Officer Mike Quattromani said, “This is the last stop.”

”It means we can begin to focus on our business again,” he said, adding that the company has suffered a “tremendous” financial and personnel drain as a result of the legal proceedings.

In October 2006, 10 years after the initial lawsuit was filed, a federal judge ordered the town to pay Rand $13.5 million: $10 million for damages and $3.5 million for legal fees. With interest accrued, that amount had reached nearly $16 million. The 2006 decision reversed an earlier jury verdict in favor of the town.

In 2007, with legal bills and interest rapidly growing, town officials decided to appeal the judge's decision. They had their hearing in mid-July.

During the hearing, attorneys for the town argued that a previous wastewater treatment plant superintendent had relied on misrepresentations by Rand-Whitney in the quality of effluent the company would send to the town's wastewater plant for treatment. They also argued that Rand had not proved that the quality of water used in its operations could affect future profits.

Since the appeal was filed, town and Rand officials have tried to settle the legal disagreement. At one point, Rand offered to end the dispute if the town either paid the settlement or at least $12 million. The town countered with an offer of $10 million, which was rejected.

Earlier this year it appeared the two sides had finally settled the issue when they agreed, in principle, to a non-binding memorandum of understanding. The document outlined, in part, what needs to be done to provide the company with the quality of water its officials say is necessary to produce its products and addressed a potential financial settlement.

It was not clear Monday what the status of that document is, given the court's decision.

Monday afternoon, Quattromani said there is still work to be done on the water quality issue.

”The judgment resolves all issues, past and future, nevertheless the town … collectively Rand-Whitney and the town, have issues to resolve with the treatment plant” and the state Department of Environmental Protection, Quattromani said.

Patrick Kinney, a spokesman for the company, said Rand has invested more than $100 million into the Montville plant and intends to be in town for generations to come.

”We want to be a good member of the community and a good corporate citizen. We want to rebuild our relationships with the town,” Kinney said.

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