In the morning, Justice Riordan heard arguments against the head of Canada's third largest tobacco company being called again to testify. In the afternoon, the same company introduced its final expert witness, a man with a clearly deep belief in the social benefits of marketing.
More on Mr. David Soberman tomorrow - today's post is about JTI-Macdonald's motion to quash a subpoena served on Michel Poirier.
Reviewing the patrimonial situation
Almost a year has passed since the plaintiffs declared their proof "closed". The sole caveat to this declaration was that they would still have the right to enter proof regarding the patrimonial situation of the defendant companies. ('Patrimonial situation' is not an attempt to provide a gendered counterpart to matrimony, but is a civil code gallicism used to describe assets or wealth).
This is no small matter -- the 'patrimonial situation' of the defendants and their capacity to pay is a factor that Justice Riordan must take into account when assessing punitive or exemplary damages. (This is established in Article 1621 of the Civil Code, reprinted below). The more they can pay, the greater the punitive damages could be.
"Been there, done that."
While agreeing that the plaintiffs had the right to proof on the patrimonial situation, he thought they were not already in receipt of all the information necessary. The reason they had subpoenaed Mr. Poirier was because "they did not like what they saw." They would have to live with it, he said - "it is what it is."
Moreover, the circumstances of JTI-Macdonalds corporate structure had already been reviewed by Justice Mongeon, who had ruled against the plaintiff's request for a safeguard order. The Quebec Court of Appeal had upheld that decision, Mr. Pratte said, and the issue should now be considered closed. He suggested to Justice Riordan that not one but "two courts say that you have to take into account that it has been settled.... The capacity to pay issue has been settled!"
Mr. Pratte described the plaintiffs intention as a "forensic examination" which was beyond their entitlement to do. Even then, he said, the president was the wrong person for them to have identified for this purpose. The right man for the job was the same Mr. McMaster, the company's treasurer, who had provided evidence during the discussion about a safeguard motion.
The financial statements are not enough
He said that the financial statements were not sufficient for Justice Riordan's needs. "They do not answer the question of whether the company is able to pay." To know that, he told Justice Riordan, it would also be important to understand the corporate relationships within the company.
And as to the suggestion that the question was settled -- he pointed to the ability of the companies to raise the issue of access to medical records three times during the trial, and yet to argue that the financial statements and the corporate relationships behind them could only be discussed once. "This is another example of the double standard that is being applied at this trial."
The left and right pockets are not independent
And, perhaps for the first time, Justice Riordan heard the background to the case. (It was never made clear to me why the safeguard motion was redirected to Justice Mongeon).
Mr. Kugler explained that 14 years ago, JTI-Macdonald created a wholly-owned subsidiary, JTI-TM, to which it transferred ownership of its principal assets, its trade-marks, which were valued in billions.
JTI-Macdonald subsequently became indebted to its subsidiary, and "a circle of so-called loans ended up so that it pays an interest payment of $100 million a year, roughly equal to its income." He described this as the right pocket paying the left pocket. But only one pocket is party to the class action trials -- JTI-TM was not included in the suits.
Mr. Kugler said that the interest rate on the loan that JTI-Macdonald pays to JTI-TM has varied at the direction of JTI-Macdonald management. "In 2009, 2010 and 2011 they amended their contract agreement to reduce their interest rate to 0.1%." But at the end of 2012, it was increased back to 7% - information that was not shared with the plaintiffs until the fall of 2013. "This demonstrates they have the capacity to pay."
(Mr. Kugler did not mention that 2009-2011 was the period when JTI-Macdonald was making payments to the federal and provincial treasuries as a result of its settlement on contraband charges.)
The judge decides: the subpoena stands
As soon as the hearing resumed after the lunch break, Justice Riordan gave his decision.
He noted that the plaintiffs were of the view that Mr. McMaster "is not a knowledgeable witness" for the types of questions they wished to ask. "I must respect the plaintiffs' choice of witness." On this ground alone, he said, he would reject the motion to quash the subpoena.
He characterized other concerns raised by Mr. Pratte as objections to questions that were anticipated -- but he could not rule in advance on questions that had not been asked. When the moment came, he said, all sides would be able to weigh in on how "all appropriate circumstances" in Article 1621 should be applied.
JTI-Macdonald's motion was dismissed with costs.
Quebec Civil Code, Article 1621.
Where the awarding of punitive damages is provided for by law, the amount of such damages may not exceed what is sufficient to fulfil their preventive purpose.
Punitive damages are assessed in the light of all the appropriate circumstances, in particular the gravity of the debtor's fault, his patrimonial situation, the extent of the reparation for which he is already liable to the creditor and, where such is the case, the fact that the payment of the damages is wholly or partly assumed by a third person.The road ahead
These weeks everyone seems to be on tenterhooks, waiting for the Court of Appeal to decide whether Justice Riordan's decision to block access to the medical records of class members will stand.
In the meantime, the days ahead are being filled with a few left over witnesses and more than a few disputes to settle.
Easter Monday is a holiday. On Tuesday and possibly Wednesday morning, David Sobertman will complete his testimony.
On Wednesday afternoon, views will be exchanged on three issues: (a) the companies' response to the draft outline of final arguments circulated by Justice Riordan, (b) discussion of RBH's view regarding the non-application of sections of Quebec's Tobacco-related Damages and Health Care Costs Recovery Act and (c) Justice Riordan's suggestion that "three to five" class members be heard in advance of the Court of Appeal ruling, so as to get a sense of time required.
Thursday will allow for "2870" documents to be filed.
In two weeks:
On May 5 and 6th, the plaintiffs' rebuttal testimony will begin with the Paul Slovic, who was engaged to respond to the defendants' experts' views on warnings.
On May 7th, two contentious issues: (a) whether the companies' financial records should remain confidential, and whether the plaintiffs should be allowed to file a strategic reflection by a U.S. company lawyer (Exhibit 1702R).
Mary Trudelle has been scheduled for the 8th, but this may be postponed to coincide with the later appearance of Mr. Poirier.
The testimony of David Soberman resumes tomorrow.