A federal court will decide who owes the city of Hamilton about $3.2 million for a termination fee to treat wastewater from the former SMART Papers plant.

In late August, International Paper Co. filed a lawsuit against SMART Papers Holding LLC in the U.S. District Court in Cincinnati over the termination fee for wastewater services. The lawsuit is related to the user agreement signed in 1997 between the city and Champion International Corp., which was later acquired by International Paper.

SMART Papers bought the Hamilton mill from International Paper in December 2000.

The user agreement listed a schedule of termination fees over the 25-year agreement. However, a 2001 consent agreement between the city and Champion to sell the Hamilton mill to SMART Papers did not release Champion — later International Paper — from its obligations under the user agreement, according to court documents.

According to a letter sent to International Paper, the city claims it was owed $3.24 million plus interest as of May 31, 2012. The city said if it did not receive payment by Aug. 15, 2012, it would begin legal action. International Paper then sent a letter saying it would collect from SMART Papers for the termination fee, claiming that SMART had assumed responsibility for the termination fee in the sale agreement.

SMART Papers ended its paper making operations last March. The city then purchased the site of the Hamilton mill on North B Street to control future redevelopment.

The city then filed a lawsuit in Butler County Common Pleas Court in late August, but that case was transferred to federal court on Aug. 30 as International Paper wanted to consolidate both cases, said Colleen Taylor, acting Hamilton Law Director.

“We just want our money,” Taylor said.

She said a settlement conference was to have been held Tuesday but was postponed as some lawyers were unable to travel due to Hurricane Sandy.