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| Salle Mignault Montreal Appeal Court |
Under normal rules, someone who is successfully sued does not have to make any payment until their last appeal has been exhausted. But the Montreal tobacco trials were not called an "exceptional case" by Justice Riordan for nothing, and when making his decision he had added a kicker:
"Finally, the Court orders the provisional execution of the judgment notwithstanding appeal with respect to the initial deposit of one billion dollars of moral damages, plus all punitive damages awarded. The Defendants must deposit these sums in trust with their respective attorneys within sixty days of the date of the judgment. The Court will decide how those amounts are to be disbursed at a later hearing."With the clock ticking till the money is due, the companies want the Court of Appeal to strike down this order for provisional execution and so today's hearing was added before the summer break.
The justices assigned to the panel were Justice Marie-France Bich, Justice Paul Vézina (who was on the same panel that heard the Constitutional challenge last month), and Justice Mark Schrager (a judge with special expertise in insolvencies). More on tobacco and judges at the end of this post!
It would appear that a fight over a billion dollars can still draw a crowd. But for the addition of a dozen chairs, this morning's session would have been standing room only. It seemed like everyone who had ever been involved in the trial was on hand - and more. There was a global presence - including Philip Morris International's corporate spokesperson, Anne Edwards. The competition for a seat with a view was tough.
Shhh... more secrets
Before the hearing got underway, there were (again) demands by the companies that the financial information that was part of their case should be kept confidential. Happily, the judges decided against going in camera and forcing the overflow crowd to wait in the corridors.
They did, however, impose a non-divulgation order on all of those in the room to not share any of the financial information that was subject to claims of confidentiality. Unhelpfully, they did not specify which information was supposed to be confidential, and which was not!
Some of the numbers bandied about have been in previous judgments and also in Annual Reports. As my ears heard them, the numbers only illustrated the general points, and there is nothing lost in today's story by having some specifics under wraps.
Three tests
In addition to the appropriate use of judicial discretion, it would appear from this morning's presentations that there are three main issues this panel of judges will focus on in their decision.
* Will the provisional execution cause "serious and irreparable" harm to the companies ?
* Are there apparent weaknesses in Justice Riordan's ruling that suggest the eventual appeal will be successful?
* What is the balance of inconvenience? (Which side comes out worst if the ruling goes against them)
After the secret stuff had been dispensed with, Simon Potter opened the case for the tobacco companies.
He charged Justice Riordan with having overstepped his authority to exercise his judgment in the case. His decision on provisional execution was "such a grave error of law that it resulted in an abuse of that discretion."
That's a loaded charge, and it triggered some push back from Justices Schrager and Vézina, who expressed at least an understanding of the rationale offered for this decision. Had Justice Riordan not expressed concern that "people were dying"?
For the next several minutes, Mr. Potter was pulled off his prepared notes. His lawyerly answers to their questions reinforced the view that these companies still do not get the message:
"[Justice Riordan] took it for granted [that they were dying]. But there was no proof. He is probably right that some members of the class are in their last days or weeks or months or years - but there was no evidence brought on that point."
His insistence on evidence for the obvious did not seem to fit well. He disparaged Justice Riordan's for having estimated with "absolutely ZERO" evidence that the time for the appeals to be exhausted was, optimistically, six years, (He put on the record that the companies are willing to expedite the appeals.)
"Four to six years seems realistic to me [as the time appeals will take]." said Justice Vezina, who also offered comments which would have given comfort to the class members watching the proceedings.
"Of the 100,000 people, some are dying and some are dead. A number will not live to see the end of the appeals.... Can we not give them $10,000 each to make their final years less awful? ( "moins penible").
Their questions clearly took Mr. Potter off his plan, and he was prompted by his colleagues to not overstep his time. (Each side of the argument was given 60 minutes to make their case).
"Serious and irreparable harm"
"Four to six years seems realistic to me [as the time appeals will take]." said Justice Vezina, who also offered comments which would have given comfort to the class members watching the proceedings.
"Of the 100,000 people, some are dying and some are dead. A number will not live to see the end of the appeals.... Can we not give them $10,000 each to make their final years less awful? ( "moins penible").
Their questions clearly took Mr. Potter off his plan, and he was prompted by his colleagues to not overstep his time. (Each side of the argument was given 60 minutes to make their case).
"Serious and irreparable harm"
The second part of the companies' argument was presented by Mr. Mahmud Jamal (for Imperial Tobacco).
He appealed to the judges' potential concerns with creating new interpretations of the rules. There was no precedent for distributing a provisional execution to a class action despite a forty-year history of class actions. "The reason is that it is not authorized by the Code of Civil Procedure."
He stressed the "irreparable harm" of "serious magnitude" that would result if the payment were required.
He appealed to the judges' potential concerns with creating new interpretations of the rules. There was no precedent for distributing a provisional execution to a class action despite a forty-year history of class actions. "The reason is that it is not authorized by the Code of Civil Procedure."
He stressed the "irreparable harm" of "serious magnitude" that would result if the payment were required.
"The uncontradicted evidence is that all three defendants will be in insolvency..."They will not be able to pay the amounts by the due date... Our submission is that all of the defendants will suffer irreparable harm of such serious magnitude." ... "My client can't pay at all."
Their appeal rights will be lost
One reason the companies say they cannot borrow money is that those who might be in a position to loan them such large sums (including their own parent companies) are scared off at the prospect that they will not be able to recover the sums. This is not an admission that they will eventually lose, however, but an assessment that it will not be possible to go to people who receive money in advance and get them to pay it back.
By their logic, this means they effectively lose their right to appeal. "The amounts will be unrecoverable for all intents and purposes .. this will render the appeal moot." said Mr. Jamal.
The manifest errors they see in the ruling
By their logic, this means they effectively lose their right to appeal. "The amounts will be unrecoverable for all intents and purposes .. this will render the appeal moot." said Mr. Jamal.
The manifest errors they see in the ruling
It fell to Guy Pratte (JTI Macdonald) to convince the panel that there was good reason to think that when the main appeal was heard it would be decided in favour of the companies.
To do this, he took them through a rapid, and somewhat colourlessly expressed, overview of the many errors he saw in Justice Riordan's ruling. (You can read them in the companies' inscriptions in appeal, available here.)
A reasonable and judicial exercise of discretion, say the plaintiffs
A reasonable and judicial exercise of discretion, say the plaintiffs
Gordon Kugler, on behalf of Quebec smokers, had the job of giving the panel reasons to leave Justice Riordan's ruling intact. He laid these reasons out one by one, in a steady series of short arguments expressed in the simplest of terms and without any rhetorical flourishes. Nothing theatrical - yet it felt like a scene from a good courtroom drama.
He reminded the panel that Justice Riordan had come to his decision after an extraordinarily long trial, and that having done so was "entitled to his discretion." Moreover, the Appeal Court should not challenge this discretion without considering the whole of the judgment -- something that this hearing was not set up to do. "For them to say he abused his discretion is unjust, unfounded and frankly insulting."
Hollow threats of self-inflicted harm
Mr. Kugler rejected the idea that the companies were losing their right to appeal. The amount in question is a small fraction of the ruling that they are appealing. "It is only 7% of the total award of $15 billion." The bulk of their punishment would not be faced until after their appeals were exhausted.
He said the companies would only go into bankruptcy if they chose to do so. The companies had the capacity to pay, were "hugely profitable" and had turned over billions and billions of dollars to their multinational owners in recent years.
They have earned billions of dollars from operations since 1999. yet not one of the defendants has made a provision, has taken a reserve nor set aside any money to satisfy an eventual judgment in these cases. What they have done is pay virtually all of their earnings to their offshore related companies in the guise of royalties, interest or dividends.
"What colossal nerve to point the finger at this court and say 'if you don't cancel provisional execution you will be responsible for putting them out of business." If the parent companies were not willing to return some money to these "hugely profitable" Canadian subsidiaries, "then that's their business decision. They will do what they want."
Mr. Kugler drew attention to other large legal payments that had been made by the companies to the federal government after faced with smuggling charges and in other litigation. (Another lawsuit against Imperial Tobacco had been settled last December, with a payment roughly the same as that they now say they cannot afford.)
Their capacity to pay had been established as "a finding of fact" in the Blais Létourneau trials. At that time, only one of the companies had argued that they would be unable to make a payment of this size, yet were now changing their story, "This court is not in a position today to overturn that finding of fact."
A reasonable balance
He expressed the balance of inconvenience argument for his class members in human terms. "There are 100,000 class members. Eighty-five percent will likely be dead within 5 years.... They are suffering from cancer and emphysema which the judge said was caused by numerous faults by [the companies]."
The provisional execution would allow for each member to receive $10,000 - much less than the up to $250,000 that the judgment provided. It was "pure speculation" on the part of the companies that they could not get this money back if they eventually won their appeals, but even if this were the case, "their appeal is maintained up to 93%." "Justice Riordan struck the right balance."
He asked the court to weigh the interests of these victims against the possibly "hollow threat" of bankruptcy.
"If the order of provisional execution is suspended, the Blais class members will die before the process is completed. They will be provided with no benefit even though it took 17 years to litigate to get this judgement."
A different litany
Hollow threats of self-inflicted harm
Mr. Kugler rejected the idea that the companies were losing their right to appeal. The amount in question is a small fraction of the ruling that they are appealing. "It is only 7% of the total award of $15 billion." The bulk of their punishment would not be faced until after their appeals were exhausted.
He said the companies would only go into bankruptcy if they chose to do so. The companies had the capacity to pay, were "hugely profitable" and had turned over billions and billions of dollars to their multinational owners in recent years.
They have earned billions of dollars from operations since 1999. yet not one of the defendants has made a provision, has taken a reserve nor set aside any money to satisfy an eventual judgment in these cases. What they have done is pay virtually all of their earnings to their offshore related companies in the guise of royalties, interest or dividends.
"What colossal nerve to point the finger at this court and say 'if you don't cancel provisional execution you will be responsible for putting them out of business." If the parent companies were not willing to return some money to these "hugely profitable" Canadian subsidiaries, "then that's their business decision. They will do what they want."
Mr. Kugler drew attention to other large legal payments that had been made by the companies to the federal government after faced with smuggling charges and in other litigation. (Another lawsuit against Imperial Tobacco had been settled last December, with a payment roughly the same as that they now say they cannot afford.)
Their capacity to pay had been established as "a finding of fact" in the Blais Létourneau trials. At that time, only one of the companies had argued that they would be unable to make a payment of this size, yet were now changing their story, "This court is not in a position today to overturn that finding of fact."
A reasonable balance
He expressed the balance of inconvenience argument for his class members in human terms. "There are 100,000 class members. Eighty-five percent will likely be dead within 5 years.... They are suffering from cancer and emphysema which the judge said was caused by numerous faults by [the companies]."
The provisional execution would allow for each member to receive $10,000 - much less than the up to $250,000 that the judgment provided. It was "pure speculation" on the part of the companies that they could not get this money back if they eventually won their appeals, but even if this were the case, "their appeal is maintained up to 93%." "Justice Riordan struck the right balance."
He asked the court to weigh the interests of these victims against the possibly "hollow threat" of bankruptcy.
"If the order of provisional execution is suspended, the Blais class members will die before the process is completed. They will be provided with no benefit even though it took 17 years to litigate to get this judgement."
A different litany
Bruce Johnston offered a counterpoint to the list of judicial errors that had been presented by Guy Pratte. He similarly took the panel through a review of selected sections of Justice Riordan's decision, but focused instead on the faults that the companies had been found guilty of.
As they had with Mr. Pratte, the panel offered no physical or verbal reaction to this presentation.
It was as if they wanted to leave the meat of the appeal untouched - untainted by any reflections on their part.
Spread some light
In a brief address at the end of the plaintiff's allotted hour, Mr. André Lespérance argued against maintaining any confidentiality on the affidavits and evidence that the companies were using as the basis of their claims of hardship. He took the court through decisions in the recent Marcotte bank case, where similar confidential issues had been resolved in a way which avoided unnecessary witholding of information.
The rebuttal
Each of the companies had few minutes to respond and make their final points. Some were worth noting:
Mr. Potter made a veiled suggestion of the consequences to public order if the cigarette companies became bankrupt and the contraband market became larger. The sale of cigarettes is permitted by law and regulated by government, he said.
It is "highly relevant to the balance of convenience to have this legal market served by legal companies who pay their taxes -- pay the excise taxes and who have obeyed the laws."
Mr. Jamal tried to explain away why Imperial Tobacco could make a settlement of more than a half billion U.S. dollars in December, but was unable to make the provisional execution a half year later. The decision on Flintkote was "financed by the parent company" as "a final judgment to settle historical claims."
He said it was a "business decision" for BAT to finance the Flintkote (asbestos) case, and that it had made a business decision not to finance the Blais (lung disease) case.
"In this case the company has said it will not finance the provisional execution. It is the right of the company to say it will not finance. It is not for counsel to disagree with business decisions."
As they had with Mr. Pratte, the panel offered no physical or verbal reaction to this presentation.
It was as if they wanted to leave the meat of the appeal untouched - untainted by any reflections on their part.
Spread some light
In a brief address at the end of the plaintiff's allotted hour, Mr. André Lespérance argued against maintaining any confidentiality on the affidavits and evidence that the companies were using as the basis of their claims of hardship. He took the court through decisions in the recent Marcotte bank case, where similar confidential issues had been resolved in a way which avoided unnecessary witholding of information.
The rebuttal
Each of the companies had few minutes to respond and make their final points. Some were worth noting:
Mr. Potter made a veiled suggestion of the consequences to public order if the cigarette companies became bankrupt and the contraband market became larger. The sale of cigarettes is permitted by law and regulated by government, he said.
It is "highly relevant to the balance of convenience to have this legal market served by legal companies who pay their taxes -- pay the excise taxes and who have obeyed the laws."
Mr. Jamal tried to explain away why Imperial Tobacco could make a settlement of more than a half billion U.S. dollars in December, but was unable to make the provisional execution a half year later. The decision on Flintkote was "financed by the parent company" as "a final judgment to settle historical claims."
He said it was a "business decision" for BAT to finance the Flintkote (asbestos) case, and that it had made a business decision not to finance the Blais (lung disease) case.
"In this case the company has said it will not finance the provisional execution. It is the right of the company to say it will not finance. It is not for counsel to disagree with business decisions."
Sooner rather than later
Although the Court of Appeal is under pressure to make a ruling soon, we will still have to wait. Justice Bich adjourned with their decision not yet made or shared.
Judges and tobacco lawyers
Mr. Mahmoud Jamal is a new face on the Imperial Tobacco team in this trial (although he has worked on tobacco cases for them in New Brunswick and possibly elsewhere).
One reason for the switch up is that Imperial Tobacco has two fewer Montreal-based lawyers than it did a year ago. Suzanne Côté was elevated to the Supreme Court of Canada last winter, and late last month Silvana Conté became a judge at the Quebec Superior Court.
A third lawyer who has worked for the companies in this case, albeit in a minor role, was also appointed to the bench last month. Marie-Josée Hogue, who is now a judge on Quebec's Court of Appeal, had subbed in for Mr. Potter on at least one occasion during the Blais-Létourneau trials.
Is it an advantage or a disadvantage for the companies to have so many of their own in high places?
This morning's hearing is an example of how it can make a difference.
In checking the court record today I found out that the original panel scheduled for this week included two judges (Chief Justice Nicole Duval Hesler and Justice Robert Mainville) who had to step back from this hearing because of potential conflicts as a result of their connections with tobacco.
This post was backdated to make for consistency in indexing
