A plan to raze a dilapidated paper mill and replace it with riverfront housing in Cheboygan has been put on hold after developers became caught up in a lawsuit with a group claiming to own some of the property.
In a complaint filed last month, Cheboygan Hydro Services, LLC claims that it wasn’t properly evicted by the factory’s landlord, that developers had been trespassing and that the City of Cheboygan was complacent in “an unconstitutional taking of the plaintiff’s property.”
“This is a case of deep-pocketed developers trying to trample Plaintiff’s rights to ensure that their enormous (both in size and profit) development can succeed,” said the complaint, which was filed in the Cheboygan Circuit Court.
The development group Cheboygan Commons, LLC, landlord Hom Paper XI, LLC and the City of Cheboygan are all named as defendants. All three say they plan to fight the lawsuit, and two have asked for the case to be dismissed.
The development
The project involves demolishing a historic paper mill that takes up more than a dozen acres on the Cheboygan River. That will clear the way for about 100 new housing units, a hotel, a fitness center and a restaurant.
The building started as a sawmill in the late 1800s, and was run by multiple successful owners including the Charmin Paper Co. and Procter & Gamble. But its more recent owners have failed to capture the same success.
In recent years, the complex has fallen in disrepair. Last summer, a fire destroyed an adjacent warehouse that was being used to store “poly," or paper products. The Cheboygan Fire Department has since closed the case and the start of the fire was deemed inconclusive. The roof also collapsed in another area of the factory.
The team of developers hoping to turn the property around is spearheaded by Bob Pulte. He’s the son of William Pulte who was the founder and chairman of PulteGroup, one of the largest home construction companies in the United States.
This project is being led by Bob Pulte's own company, R.P. Investments. He said his goal is to transform the site over about five years.
At a project unveiling last year, the Cheboygan Commons project was praised by the U.S. Rep. Jack Bergman, McLaren Northern Michigan and other regional officials.
Developers expect the project to be both expensive and labor intensive.
The factory is attached to a hydroelectric dam and generator along the Cheboygan River, which helped generate power for the former paper mill and control water levels along Cheboygan’s inland waterway, which includes Mullet and Burt Lakes.
Last year, environmental experts discovered a lack of upkeep on the hydroelectric facility they say stems back years.
The lawsuit
The lawsuit was filed on March 7 by Cheboygan Hydro Services, the company that operated the hydroelectric facility and its equipment.
Cheboygan Hydro Services is owned by the Great Lakes Tissue Company, which originally entered into a lease agreement for the powerhouse in 2004. In January 2023, a new investment group called Patriot Advanced Environmental Technologies, LLC finalized the purchase of the tissue manufacturing facility, all associated operations, properties and an adjacent warehouse building.
But the land and buildings also have a landlord — Thomas Homco, a former NFL player who now represents Hom Paper XI, LLC.
After the fire of September 2023, Homco filed eviction proceedings naming “all occupants” of the factory and powerhouse. But Cheboygan Hydro Services claims that because it was a “tenant” not a “occupant,” the eviction does not terminate its original lease agreements.
“We were a tenant,” said attorney Kyle Konwinski of the Grand Rapids-based law firm Varnum who represents the group. “So, yeah, they had this eviction proceeding. The Cheboygan Hydro Services was never a party to it, and certainly not bound by it, nor would we ever agree to that."
The lawsuit aims to charge Homco for breach of contract and the Cheboygan Commons developers for trespassing, unjust enrichment and civil conspiracy.
“Defendants’ wrongful use of Plaintiff’s property has been willful and intentional particularly because defendant knew that Plaintiff continued to assert an ownership interest in the equipment,” the lawsuit says.
It also aims to charge the City of Cheboygan for what Konwinski said was “unlawfully rezoning and approving development for the property.”
Kip Boie, who leads Cheboygan Hydro Services, LLC, said the goal of the lawsuit is not to halt the development of the Cheboygan Commons but to “exercise rights to the property.”
“The hydro plant has been in operation for 100 years or more, and we are committed to keeping it operating,” Boie said. “There are several options possible to include the Commons project or the broader Cheboygan community as direct consumers of that [power].”
Defendants respond
“The claims of Cheboygan Hydro Services are completely frivolous, and we're confident the court will ultimately agree."Thomas Homco, Hom Paper XI, LLC
All three defendants have indicated they intend to fight the lawsuit.
In response to Cheboygan Hydro Services' claim of wrongful eviction, landlord Thomas Homco of Hom Paper said the company had abandoned the property for years before he drew up an eviction notice. Homco called the company’s actions “inexcusable.”
“After the fire, all occupants were evicted as a class action eviction in 2023," Homco said. "The hydro electric equipment was long ago abandoned and has not generated electricity for years. Cheboygan Hydro Services has no legitimate claims relating to the property or equipment, and it is abusing the legal system to put at risk a substantial redevelopment of this site.”
The City of Cheboygan did not return requests for comment but its attorney did file a response to the complaint on April 4, saying the Cheboygan Hydro Services' claims are “unripe.”
“Plaintiff has not suffered the degree of damage, loss, or injury which would support a claim of ‘taking,’ whether under the Michigan or United States Constitution, de facto, temporary, permeate or otherwise," the response stated.
The city requested to have Circuit Court Judge Aaron Gauthier dismiss the counts against it.
While the Cheboygan Commons, LLC took an extension to file its response to the complaint, officials said the lawsuit will force a pause on the project.
“Until these matters are fully resolved, the project is stepping back and will not launch such a positive/vision for the community from a courtroom,” said a statement the company posted to Facebook this month. “In the meantime, the serious concern in the team's opinion is the continued rapid decline of this increasingly dangerous site that could potentially pose a threat to public health, safety and the environment.”
Cheboygan Economic Development Coordinator Sharen Lange, a spokesperson for the project, said developers were led to believe there were no legal leases on the property.
“We're really disappointed that this is causing some significant issues, potentially even an interruption of the project,” she said.
