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Resolute defends lawsuit against 'biased' forest audits at shareholders meeting

MONTREAL - Resolute Forest Products has defended its decision to launch an unprecedented lawsuit against the group it contracted to conduct audits of its forestry operations in northern Ontario.

Chief executive Richard Garneau told shareholders Friday at a meeting in St. Felicien, Que., that the company took the unusual step of suing Rainforest Alliance and obtaining a court order to seal a damning audit because he said it contains biased interpretations, errors and omissions...and a clear conflict of interest.

Garneau responded to comments and questions from two Greenpeace representatives who challenged the newsprint giant's legal manoeuvre against a respected third-party group that routinely conducts audits of the company's compliance with Forest Stewardship Council (FSC) standards.

The Montreal-based company (TSX:RFP) accuses the Rainforest Alliance of breaching its contractual obligations by producing a draft audit that suspends FSC certificates in the Caribou Forest and Black Spruce-Dog River Matawin Forest.

It claims two auditors made errors and one was in a conflict because he is a supporter of Greenpeace, which has a long history of opposing Resolute's forestry practices, and which is also subject to a Resolute lawsuit.

Resolute is seeking $400,000 in damages and the production of an "unbiased" report.

The Rainforest Alliance says it has never before been sued by an FSC certificate holder.

"We are disappointed that Resolute has resorted to these measures," it said in a news release.

The New York-based agency, which is the largest of its type in the world, said the court order was granted May 8 on very short notice and in the absence of Rainforest and its lawyers. It didn't return calls seeking comment.

Resolute's northern Ontario certificates are the fourth that have been suspended, accounting for millions of hectares of forest in Quebec and Ontario.

Nicolas Mainville of Greenpeace, who grilled Garneau, said he was disappointed by his response and lack of a plan to win back the FSC stamp that makes products more valuable by reassuring consumers they come from sustainably grown forests that respect local communities and aboriginal people.

He called the legal attack on auditors regressive, counterproductive and harmful to the company's reputation and a deliberate attempt to bury the report from public scrutiny.

"They're embarrassed. They're about to fail a fourth certificate and they don't want it to go public.... A student who fails and exam should do his homework, not sue the professor and that's exactly what they just did," he said in an interview.

Resolute spokesman Seth Kursman says the report was so damaging it acted to protect the interests of the company, its employees and communities in which it operates.

"It was alarming and would cause immediate reputational and business damage and so we felt this was an extraordinary situation, we are the first to admit it, but the nature of the report was extraordinary and that is the reason why we were compelled to take the step that we did."

Anna Baggio of environmental group Wild Lands League said Resolute's legal strategy risks causing a chill among those who audit global forest management.

"If I was an auditor I would be really scared, I would be really nervous that even if you're going to do your job properly that you might get sued," she said.

Jason MacLean, assistant professor in the faculty of law at Lakehead University, said it seems Resolute's ultimate goal of suing instead of appealing through FSC's dispute resolution process is to keep the report from public scrutiny.

Ontario's Ministry of Natural Resources should intervene to protect the public interest, he said.

"I think, because this goes so far beyond just a run of the mill private dispute and raises a superordinate public interest issue — that of environmental protection — that the government does have a role, that the government would be legally entitled to seek to intervene in this case," he said from Thunder Bay, Ont.

A ministry spokeswoman said the department wouldn't comment because the parties are involved in litigation.

FSC Canada president Francois Dufresne doubts the government will get involved in a dispute over a voluntary marketing certification process.

Although Resolute's legal challenge is believed to be the first anywhere in the world, he doesn't believe it will ultimately damage the FSC brand.

"It's an extraordinary situation for us but I'm convinced that when we turn the page on this it will demonstrate the value of the FSC system," he said in an interview.

Follow @RossMarowits on Twitter

The Canadian Press

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