Halifax lawyers are invited to the party to represent almost all Canadian smokers

A change of tactics

A lawyer friend of mine once explained to me a general pattern he had observed in class action lawsuits brought against big corporations. During the trial the corporate lawyers do all that they can to limit the number of members in the class. They do their best to restrict the period of liability to as short a period as possible. They seek to make it difficult for a person to prove he or she is a qualifying member of the class. These and other tricks of the lawyer trade are used to limit the financial hit that may be coming for their corporate client.

However, if and when the class action moves from trial to out-of-court settlement talks, a sea change comes over the corporate lawyers. From one day to the next they move from trying to exclude as many people from the class to including as many as possible. To be sure, they still want to hold the payout to each class member to a minimum, but they suddenly become zealous in searching in the most unlikely places to find as many class members as possible. Their strategy is to make small payouts to many people on the condition that the payees agree not to sue their corporate client in the future. In this way, they hope to limit the payout by their client to just one occasion, while guaranteeing that their client will not face more liability suits later on.

It is not known if this general pattern applies to the current specific CCAA proceedings protecting Big Tobacco from their creditors. Some elements of the general pattern seem to be present. Tobacco companies had some success in limiting the size of the classes in the Blais-Létourneau trial in Quebec. For example, Judge Riordan, wishing to foreclose any more discussion of who was in and who was out of the class of cancer patients, did not accept the finding of the plaintiff's expert witness Jack Siemiaticki that the threshold level of smoking for inclusion in the class of cancer patients who had smoked was four pack-years. The judge accepted information from a tobacco company expert witness and moved the threshold up to twelve pack-years, thereby excluding thousands of cancer patients with shorter smoking histories.

The tobacco defendants recruit (and pay) someone to negotiate against them

Now that settlement talks are underway, there is newfound sympathy from the tobacco companies for the plight of smokers, not just in Quebec, but everywhere in Canada. They want Justice McEwen to appoint someone to represent their interests in the ongoing mediation.

The Independent Monitors, who are paid by the tobacco companies, state in their joint submission to Justice McEwen:

The efficient treatment of the TRW [Tobacco-related wrongs] Claims is necessary to fulfill the chief purpose of these Tobacco CCAA Proceedings: a pan Canadian global settlement.

The Monitors propose to hire a class-action law firm, Wagners of Halifax to "provide representation of the interests of individuals with TRW Claims."

The appointment of the Proposed Representative Counsel will also increase the TRW Claimants’ access to justice in these Tobacco CCAA Proceedings to the benefit of all TRW Claimants, the Applicants and the Applicants’ stakeholders.

One of the chief qualifications of Wagners for the job,  as identified by the monitors,  is that they know little of tobacco lawsuits, having never worked on one.  This ensures that Wagners will be independent and free from any possible conflict of interest.

This independence is called into question, however, by the fact that the Proposed Independent Representative Counsel (Wagners) will be paid by the tobacco companies:

65. The Proposed Representative Counsel will be paid its reasonable professional fees and disbursements on an hourly basis and shall be paid by the Applicants in a timely manner and in accordance with an agreement among the Applicants. 

Their joint report spells out the terms of reference for Mr. Wagner and his firm.

5. This appointment will provide representation of the interests of individuals with TRW Claims, to the extent they are not currently represented in the certified Quebec and British Columbia class actions, which includes: (i) various residual tobacco-related disease claims that fall outside a previously certified class definition; (ii) various tobacco-related disease claims that are currently the subject of uncertified class actions; and (iii) various tobacco-related disease claims for which no individual or class proceedings have been commenced. 

22. ... It is contemplated that the Proposed Representative Counsel would represent TRW Claimants in Alberta, Manitoba, Nova Scotia, Saskatchewan, Ontario and British Columbia. .... 

23. No class proceedings or individual proceedings have been commenced in New Brunswick, Newfoundland and Labrador, Prince Edward Island or any of the Territories with respect to any of the above-noted categories of potential claims. 

24. It is contemplated that the Proposed Representative Counsel would represent all TRW Claimants in such provinces and Territories. 

25. The Tobacco Monitors propose that the TRW Claimants for which the Proposed Representative Counsel will be appointed to represent be defined as: all individuals (including their respective successors, heirs, assigns, litigation guardians and designated representatives under applicable provincial family law legislation) who assert or may be entitled to assert a claim or cause of action as against one or more of the Applicants, the ITCAN subsidiaries, the BAT Group, the JTIM Group or the PMI Group, or persons indemnified by such entities, in respect of Tobacco-Related Wrongs in Canada, or in the case of the Applicants, anywhere else in the world. 

Wagners, while billing the tobacco companies for their work, could end up representing the interests of almost all Canadian smokers and former smokers, living or dead. It would add up to millions and millions of people. We will see how well that works out.

A couple of exceptions

Wagners will not be representing users of heat-not-burn products, nor vapers. Both are specifically excluded from Wagners terms of reference. Does this mean users of these products could still sue tobacco companies?  No, because all actions against tobacco companies, their subsidiaries and affiliates are stayed, even ones that are not yet started. Still, there is an exception to the exception for some vaping products. Only Vype and Logic are products of the companies in bankruptcy protection - ITCAN and JTIM, respectively. Vapers of other brands like JUUL, STLTH, Mylé, BLU and others could sue the manufacturers if they suffer illness or injury from using these products. One class action against JUUL has been launched in British Columbia. Even though Altria, a company affiliated with RBH, owns a 35% share of JUUL, the latter is not considered an affiliate of Altria, nor of RBH.

More secrecy

Settlement talks, including negotiation and mediation are all going on in secret, and that secrecy is being solidified. According to the November 26 report of ITCAN's Monitor, non-disclosure agreements have been concluded with the lawyers for the Quebec class action plaintiffs as well as with lawyers for all the provinces. As far as we know, only money is being discussed. None of parties under the veil of secrecy has said that they want to see non-monetary outcomes that would improve public health.

A late objection from the Merchant Group

One of the effects of the proposed appointment of Wagners would be to shove all the uncertified class actions of the Merchant Group aside. Not surprisingly, the Merchant Group objected. They did so in a late court filing on December 5, recruiting the class action firm Rochon Genova to ask Justice McEwan to suspend any hearing on the proposal (a motion for adjournment). And so it was tha six minutes after the appointed hour of 10:00 AM, Joel Rochon informed the court that his firm had only been retained by the Merchant Group on Wednesday and would like an adjournment for few days to prepare his arguments. There ensued some back-and-forth between Mr. Rochon and lawyers for the monitors on whether an adjournment could be granted.

While we have yet to see the Quebec Class Action Plaintiffs (QCAP) agree with the tobacco companies in these proceedings, it happened today. Avi Fishman for the QCAP spoke against the request for adjournment, stating that his group was anxious to see the settlement talks proceed quickly and an adjournment would only bring more delay.

Jeff Leon for the consortium of six provinces (NS, PEI, NB, Man, Sask and BC) also spoke against the request for adjournment. He pointed out that there had been no action on the Merchant Group claims for a decade and that no further delay could be justified.

After about an hour of lawyer back-and-forth,  Mr. Justice McEwen, reflecting the uncharacteristic hurry-up mood of the room, ruled that an adjournment would not be granted, but Mr. Rochon and his colleague Peter Jervis could argue why the Merchant Group and their new counsel should be given an important role in representing people suffering from tobacco-related wrongs (TRW). The one condition was that such arguments had to be made TODAY. This put Mssrs. Rochon and Jervis in the unenviable position of arguing their case on the fly, having done little homework and having no documents to present to the court. But argue they did.

Joel Rochon and Peter Jervis argue on behalf of the Merchant Group

By 11 AM the main arguments and counter-arguments were being presented. Jane Dietrich, counsel for RBH's Monitor gave an overview of the proposal to retain Wagner's to represent all those suffering tobacco-related wrongs who were not already represented. Natasha MacParland, counsel for  ITL's Monitor referred the Judge to the Book of Authorities and outlined points of law and legal precedents that supported their motion. Linc Rogers for JTIM's Monitor, walked the judge through the exact wording of the motion.

Mssrs. Rochon and Jervis pointed out that the Merchant Group had eight class actions in six provinces (Nova Scotia, Ontario, Manitoba, Saskatchewan (2), Alberta and British Columbia (2)) and that "sui generis", they should be granted the right to represent all suffering from tobacco-related wrongs in those provinces.

Jane Dietrich countered that none of those class actions was certified. meaning that the Merchant Group and Rochon Genova represented only eight people - the named plaintiffs in the uncertified class actions.

Mssrs. Rochon and Jervis argued that their group should be included because they had experience in tobacco class action suits. In addition to the Merchant Group's eight class actions, Rochon Genova had previously represented clients in failed claims against tobacco companies brought by Ragoonanan (cigarette-caused fire) and another by Joseph Battaglia (misrepresentation of light cigarettes). Jane Dietrich countered that Wagners should be favoured over the Merchant Group for precisely the opposite reason that they had no experience in tobacco cases and would therefore be impartial and have no conflict of interest.

Jane Dietrich pointed out that Quebec, Ontario and Alberta did not object to the motion to appoint Wagners and the QCAP and the six-province consortium supported the motion. From the back of the room, Doug Lennox, counsel in the certified class action in BC, the Knight case, spoke up to add his name to the list of supporters. Only the Merchant Group was opposed. The Rochon Genova lawyers argued back that their voice was no less valid for being lonely.

With no written documents to hand, Joel Rochon and Peter Jervis fell to reciting their previous experiences (Lac Megantic!) and mediators with whom they had worked in previous class action settlements (Winkler!, Iacobucci!). Jane Dietrich replied that this was not Lac Mégantic.

By 12:25, lawyers had wrapped up their arguments. Mr. Justice Thomas McEwen said he would ponder the matter over the weekend and inform the parties of his decision "very early next week."

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Update!:

Very early Monday morning Justice McEwen's decision was circulated. "the Orders shall go as per the draft filed. The request of Rochon Genova LLP/Merchant Law Group LLP to apepar as co-counsel is denied.

Mr. Wagner is at the table.

Turns out another hearing in Justice McEwen's court can be arranged, after all.

When dozens of lawyers convened in early October before Justice Thomas McEwen to talk about the tobacco industry, it was made clear by the judge and the companies that an uninterrupted and prolonged recess was necessary if progress were to be made towards arriving at a global settlement between Canada's large tobacco companies and the provinces, smokers and farmers that are suing them.

Lawyers for the Quebec class action (the only case where the court has made a judgement and assigned damages) wanted the opportunity to connect with the judge before the mid-March date proposed by the companies. They suggested that rather than a 5 month hearing-hiatus, the court should reassemble on January 15th so that any foot-dragging or monkey business that arose could be given an airing.  (The province of Quebec was the only other party to support this request).

The companies were clearly opposed. "Any shorter extension would require attendance at hearings like these that would create distractions," said the lawyers for Imperial Tobacco.

Justice Winkler turned down the request for an earlier hearing. In doing so, he said: "I am not prepared to grant QCAP or any other stakeholder this right. To do so would tilt the playing field in favour of the stakeholder wielding this power."

And yet.

This week a joint motion by the independent (cough!) monitors was posted. They want a court hearing on December the 6th, and are asking the judge to appoint a law firm to represent all of the cases other than the provinces, the certified class actions, the farmers, and suppliers. The list of cases that were identified when the companies applied for protection (Schedule  A of the Thauvette Affidavit) that will be affected are identified below.

To these eyes, it seems they want to replace Tony Merchant's firm at the table with their own nominee, Wagner & Associates. Having nominated the mediator (Warren Winkler), they are now nominating their opponents' negotiators. Funny business, this CCAA.

Update - Wednesday November 17th. 

In their updated reports ahead of next week's hearing, the Monitors' have submitted identical explanations of why they propose Mr. Wagner's firm take over as a representative of all Canadian smokers who might have a claim against them, other than those captured by the Quebec and Knight class actions. (See, for example, Appendix A to the report by Deloitte on behalf of JTI-Macdonald).  This report includes:
* Some pretty pictures describing the types of cases the companies face
* Details of the Mr. Wagner's qualifications (he has no experience in tobacco) 
* Explanation that Mr. Wagner would be paid on an hourly basis by the tobacco companies. (Not only are the companies nominating their victims' representative, they will him on their payroll!)

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Litigation facing Imperial Tobacco that would be affected by the proposed Order
(From Thauvette Affidavit, March 2019)

Class actions

Alberta
June 15, 2009;  Linda Dorion

British Columbia
June 25, 2010; (Victoria) Barbara Bourassa on behalf of the Estate of Mitchell David Bourassa
June 25, 2010; Roderick Dennis McDermid

Manitoba 
June 2009;  Deborah Kunta

Nova Scotia 
June 18, 2009;  Ben Semple

Ontario
June 27, 2012; Suzanne Jacklin

Saskatchewan 
July 10, 2009; Thelma Adams

Individual Actions

Nova Scotia
February 20, 2002, Peter Stright

Ontario 
May 1, 1997 to 2004; Ljubisa Spasic as estate trustee of Mirjana Spasic
September 8, 2014; Ragoonanan et al.
June 30, 2003;  Scott Landry
June 12, 1997;  Joseph Battaglia

Quebec
December 8, 2016;  Roland Bergeron

Read it and weep: Justice McEwen explains himself

On October 2nd, Justice Thomas McEwen of the Ontario Superior Court was asked by Canada's tobacco companies to extend their get-out-of-court privileges until March 2020. Against the requests lawyers representing Quebec smokers for a shorter no-lolly-gagging-allowed extension, the judge agreed to 5 month extension the following day. On that day he also turned down a request by the Canadian Cancer Society to be able to participate in the mediation efforts between tobacco companies and those suing them.

Reasons, he said, were "to soon follow". And indeed they followed last Friday in the form of an 11-page handwritten Order. (Handwriting is not, apparently, a lost art. It is just hiding in the corridors of Toronto's court house.)

Justice McEwen's handwriting is easy to read, and his predispositions in this case are similarly legible. He not only dismissed the concerns of the Quebec class action lawyers, he dissed them for having any.

What a contrast to Justice Riordan's court!  In that Montreal court, after more than a decade of industry foot-dragging, the judge clearly tried to prevent further delays or ragging the puck, abuse of process, or further acts of bad faith. (Justice Riordan's attempts to assess the abuse of process by the companies is among many issues which remains stalled by Justice McEwen's stay order).

Meanwhile in this Toronto court, Justice McEwen sees bad faith on the part of those representing Quebec smokers. He uses this ruling to strongly chastise ("unacceptable to this court"!) the Quebec legal team for not playing nice with the process. He does not distinguish between activity (meetings) and action (a proposed plan of arrangement). 

This is a very discouraging ruling. Justice McEwen makes clear that he is currently prepared to give the process as long as the industry makes it take, and is not concerned that the process needs to be safeguarded from bad-faith actions of any parties. He emphasizes the importance of the "court-ordered" mediation process, and throws not the slightest bone to those who might be waiting for "court-ordered" damages to be paid to them. Its as though the 21 year Quebec struggle for justice never took place.

Read it and weep.

-----------------------------------------------------------

In the matter of the CCAA/Plan of Compromise or Arrangement re: JTIM/Imperial/RBH

On October 2, 2019 I dealt with three motions and shortly thereafter released decisions with Reasons to follow.

I am now providing these reasons:

1) ITCAN payments to BAT Mexico.

QCAP [Quebec Class Action Plaintiffs] seeks an order that all payments to BAT Mexico referred to in the Thauvette Affidavit be prohibited during the Stay Period.

This issue was resolved on the basis that it will be deferred until the Monitor has had an opportunity to review the matter and report. If the parties cannot resolve this dispute it will return to the Court. Pending a return to the Court, ITCAN has undertaken not to make the payments.

The Supply Agreement will be produced to QCAP on a confidential basis. It is otherwise available in the Data Room and available to those parties who have executed the NDAs.

2) Extension of the Stay Period

By Order dated October 3/19 I extended the Stay Period to March 12, 2020. 

The Applicants supported by the Consortium sought to extend the stay period to March 6, 2020 (a date on which I am not available).

QCAP [Quebec class action plaintiffs] submitted that the Stay Period should be extended only to January 15, 2020. In my view this timeline is unrealistically short. As I advised counsel at the last stay extension hearing and reminded them again at this motion, I thought that the October 2, 2019 date was overly ambitious. To, again, set a short extension period would distract the stakeholders from the court-ordered mediation process.

Further, much has been accomplished when one considers the enormous complexity of these three significant CCAA proceedings.

Since the last stay extension, a number of positive steps have been taken. Chief among them is the progress in the court-ordered mediation.

The Hon. Mr. Winkler conducted extensive meeting with the necessary stakeholders and by the time these reasons are released will have conducted a plenary session of approximately 80 participants.

Additionally, among other things, the Data Room has been set up and many NDAs completed.

Further, all three Applicants have sufficient liquidity to operate with the Stay Period.

I specifically do not accept QCAP's submission that there is not "at least a kernel of a plan." 

This submisison is contradicted by the record which demonstrates that meaningful progress has been made. It further ignores the considerable efforts expended by the Hon. Mr. Winkler and the stakeholders involved in the court-ordered mediation process.

I also pause here to note that I was surprised, and upon reflection, very concerned to hear QCAP's submission that QCAP has not asked to be part of the data room and that QCAP considers it a colossal waste of time.

Any resolution must be based on evidence and facts. I cannot see how QCAP, or for that matter, any stakeholder can meaningfully assess its own position if it does not have an understanding of the Applicant's financial situation and the positions of the other stakeholders. Anything less impedes the court-ordered mediation and is not in the best interests of all stakeholders. It is also unacceptable to this Court. All stakeholders must be fully engaged in the process which is one of the most complicated legal undertakings in Canadian history.

I also wish to note that in addition to the ITCAN payments to BAT Mexico, an issue surrounding certain restructuring with JTIM arose. As noted above, the issue concerning ITCAN is being deferred and the JTIM restructuring appears to be modest in nature.

I do wish, however, to remind the Applicants that they have an obligation to advise the Court, the mediator and the stakeholders of any material change to their operations which directly or indirectly affect these proceedings.

I should further acknowledge QCAP's submission wherein it seeks leave to return to the Court prior to March 12, 2020 if it considers that the progress being made in the court-ordered mediation is insufficient.

I am not prepared to grant QCAP or any other stakeholder this right. To do so would tilt the playing field in favour of the stakeholder wielding this power.

In conclusion, I reiterate that extending the Stay Period to March 12, 2020 is reasonable and allows for achievable progress to be made. The necessary provisions of ss 11.02 and 11.03 of the CCAA have been met.

3) The motion of the Canadian Cancer Society

The Canadian Cancer Society (CCS) seeks orders allowing it to continue to participate in these CCAA proceedings before the Court and to also participate in the court-ordered mediation.

As I set out in my October 3, 2019 endorsement, I am prepared to allow CCS limited participation in the court proceedings. I am not, however, allowing it to participate in the mediation at this time.

First, with respect to the Court proceedings, no one objects to the CCS participating. CCS is on the service list and receives filings. Thus far, I have not restricted its ability to make submissions. In this regard, I accept that CCS is a social stakeholder. I am not convinced, however, that CCS has a direct financial interest in these CCAA proceedings. It is neither a creditor nor a debtor. CCS, like many other persons, may be indirectly impacted by a settlement.

Given CCS's goals and its experience I believe it is reasonable to allow it to participate in the Court proceedings, subject to this Court's discretion.

Going forward CCS is free to file material in response to filings made by other stakeholders. I will then determine the extent to which CCS can make submissions.

CCS will require leave if it wishes to initiate its own motions. Leave can be requested in writing, on notice.

Second, with respect to the mediation, I am not prepared to allow CCS to participate at this time. As noted, it is neither a creditor nor a debtor. I accept that CCS has extensive experience as a health charity and it is open to CCS to liaise with the government and other stakeholders outside the mediation process if it deems it desirable to do so.

Further, I have given the Hon. Mr. Winkler broad discretion to conduct the mediation process. This includes broad discretion to consult with a wide variety of persons as he considers appropriate.

I see no reason, at this time, to vary that order. It is important to allow the Hon. Mr. Winkler, who has vast experience in this area, the ability to carry on with the flexibility outlined in my orders in these very complicated and significant matters.

Canada's health surveillance system becomes collateral damage of the CCAA process

Two things happened this week that underscore the vulnerability of our public health infrastructure to the terms of the insolvency protection now granted to Canada's 3 large tobacco companies.

Last week's decision 

A week ago, Justice Thomas McEwen extended for another 5 months the Ontario Court Order that gives all three companies relief from any lawsuits. The 'stay' on litigation will now be renewed or expire on March 12. Injured Quebec smokers who started their suit against the companies in 1998 and whose judgment against the companies was upheld by the Quebec Court of Appeal  21 years later will have had their access to justice delayed for at least one more year.

Justice McEwen has not (as far as I know) released his reasons for this lengthy extension of a litigation stay under the federal Companies' Creditors and Arrangement aCt (CCAA), but he has made clear his view that the companies should have ample time to try to settle all of the claims against them. Quebec smokers have been told to take their place in line with all other claimants -- even those who have never gone to court.

This week's meeting: "If you're not at the table, you're on the menu" 

On Tuesday a closed door, highly secret meeting was held at an undisclosed location. Invited to the meeting were the tobacco companies, two provincial attorneys general, lawyers representing 8 other governments, the Quebec class actions whose victory precipitated the CCAA process and some other would-be class action claims.

This meeting was reported to be the first such endeavor organized by Mr. Warren Winkler, who was recruited by Imperial Tobacco and whose role as mediator towards a 'global settlement' was authorized by the Ontario Court.

The veil of secrecy is so thick that it is hard to say for certain that no health ministries were invited to brief up or participate in the meeting. It will be some time before whether or how they have been engaged will be known.* If health perspectives were brought to the table, however, it is quite clear that they were not given the benefit of signficant public or expert consultation.

The Canadian Cancer Society volunteered to provide such input, but its request was turned down by Justice McEwen.

This week's news:  health research imperilled by data privacy loss 

On Wednesday, the Globe and Mail reported that Statistics Canada is calling back data from the Canadian Community Health Survey that it has shared with the provinces.

Their decision was prompted by a ruling by the Court of Queen's Bench of New Brunswick made public on March 7 this year. The ruling ordered the province to hand over the health records of 1,273 New Brunswick residents who had told Statistics Canada that they were smokers. (When participating in the Canadian Community Health Survey, Canadians are informed that "Statistics Canada and your Provincial Ministry of Health would like your permission to link information collected during this interview.  This includes linking your survey information to your past and continuing use of health services such as visits to hospitals, clinics and doctors’ services.")

This was a ruling that was destined for appeal -- probably right up to the Supreme Court, which only months earlier had made clear that the privacy of individuals should be protected from this kind of disclosure.

But any appeal was pre-empted by the CCAA process. On the very next day after the New Brusnwick ruling, (March 8) JTI-Macdonald asked and received CCAA protection. A week later (March 12), Imperial Tobacco did likewise, followed by Rothmans, Benson and Hedges on March 22.

Seven months later, all litigation related activities remain on ice. New Brunswick can't ask a higher court authority to review this decision or consdier the unintended consequences. Statistics Canada, which carefully asks survey participants to give permission for data linking, can no longer assume that its data security requirements will be honoured by the provinces. And now provinces can no longer have access to the data.

The Globe and Mail's Tavia Grant reports that health researchers and ministries are unhappy with this turn of events, and that the loss of this data will hinder public health research, programs and services.

Yet none of this was mentioned at last week's hearing. None of the lawyers for the provinces suggested that this one aspect of the litigation -- the potential release of personal health records -- be allowed to wend its way towards final decision by a higher court.

In fact, it was the lawyers managing the New Brunswick case who took the strongest stand against allowing any litigation to continue. During the court review, they sided with the tobacco companies and opposed any carve outs for the litigation stay. (It was a jaw dropping moment when they told Justice McEwen "All we are saying is give peace a chance. .... In my submission there comes a time when you have to lay down your sword....Have to put aside the past.")

Perhaps this is to be expected. These lawyers (who also represent 5 other Canadian provinces are working on a "contingency fee" arrangement, by which they get a percentage of any award (18% in the case of New Brunswick), but agree to pay the legal costs. They have no incentive or reason to fight to protect the CCHS or the privacy of thsoe who participate in it.

The health sector will need other champions. The issue of data privacy could maybe be clarified or strengthened by amendments to the Statistics Act.

But what about the other vulnerabilities of public health in this process?`

* It was many months after a previous set of settlements between the same governments and industry were made that we were able to confirm that health ministries had not been engaged. Requests under Access to Information laws returned hundreds of blacked out pages, but a "no records" response with respect to consultations with health ministries. 

Justice McEwen (again) rejects requests to accelerate CCAA process.

Justice McEwen's decision to grant the tobacco companies the 5 month extension on their creditor proofing was made yesterday, but released today. A week was added (from March 6 to March 12) to accommodate his availability.

As reported here yesterday, both the Quebec class action and the Quebec government had requested that the comeback hearing be scheduled at an earlier date.

The judge also gave the Canadian Cancer Society a very short leash with which to participate in the process. How short will be revealed when he issues his reasons later. But too short to be part of any mediation discussions (at this time).

The next major event in these proceedings is a "plenary meeting" of all the participants on October 8. Where it is and what it is intended to cover, I cannot tell you -- that information is just one more in a long line of secrets.

The long dark winter ahead

A whole season has passed since the last time Justice Thomas McEwen sat before the 50-plus lawyers involved in the insolvency protection of Canada's 3 major tobacco companies. Those who appreciate pathetic fallacy would note that the mid-summer sun that had shone so enthusiastically upon the June 26th hearing was today replaced by rainy grey skies. Now that October's here, can winter be far behind?

A recap of events to date  ...

At the last hearing, Justice McEwen added another 3 months to the creditor protection that had been given the companies in March. These court orders, made under the federal insolvency law (the Companies' Creditors Arrangement Act, CCAA), allow tobacco companies to continue their business as usual, while suspending the rights of their creditors to demand payment.

Among those creditors are the 100,000 or so injured Quebec smokers who thought they had been victorious when the Quebec Court of Appeal ruled in their favour on March 1st, 2019.

It was this ruling that triggered the CCAA process. Rather than begin making payments to the smokers, the companies instead used federal insolvency law to buy time while they tried to come to an arrangement with all of those suing them. (The Quebec judgment of $13 billion is a small fraction of the $600 billion they say the provinces and others are claiming).

The CCAA allows the companies to lump all their claimants together in group discussions towards a 'global settlement'. The arrangement was approved by Justice McEwen, with the support of many of  the provinces and others whose lawsuits against the companies had not yet gone to trial.  A former Chief Justice of the Ontario courts, Mr. Warren Winkler, was appointed as a mediator to the process.

This summer, Mr. Winkler demanded that everyone exchange "mediation briefs" at the beginning of August. In mid-September, some provinces responded to the industry positions. Data rooms have been opened and non-disclosure agreements negotiated to allow provinces to take a closer look at the companies' books. A closed-door plenary session with legal representatives of the tobacco companies and all their creditors in the room is scheduled for next week (October 8th).

Oh, and yes -- the last extension of the litigation time-out (the "stay") is due to expire this Friday (October 4th). Which brings us to today's hearing.

Up for debate today

There were two main issues put before Justice McEwen for decision today.

* How long the next extension order should be (This was discussed for about an hour.).
* Whether the Canadian Cancer Society should be allowed to participate in the CCAA process and the mediation talks. (This was discussed for about half an hour.).

A third issue involving whether Imperial Tobacco should be allowed to make extra payments to a related off-shore company was postponed.

Extending the stay: How long is too long?

No one today was proposing that the process be collapsed, or voicing an expectation that a settlement could be reached in less time than the 5 additional months that the companies were seeking.

Where positions differed was whether the companies should be required to come back to court and provide an update on mediation developments before their suggested date of March 6, or whether the process should be allowed to unfold without court oversight until then.

The tobacco companies were strongly of the view that any requirements to check in before March were ill-advised. "Any shorter extension would require attendance at hearings like these that would create distractions... We are moving as fast as possible under the circumstances in such a complex negotiations," explained the lawyers for Imperial Tobacco. The lawyers for Rothmans, Benson and Hedges and JTI-Macdonald agreed completely.

The Monitors (the accounting firms appointed as the 'independent' eyes and ears of the court) also agreed completely with the position of the companies, as they have done in all of these hearings. In a united presentation, the Monitors provided the judge with 4 text-book reasons the extension should be granted as requested:  ONE - there is enough money to keep things going; TWO - the mediation is at an early stage and is complex to work through; THREE - no one will be harmed ('prejudiced') by the extension and  FOUR - the companies have been behaving themselves.

The Quebec Class Action Plaintiffs say 5 months is 2 months too long 

The firm representing Quebec smokers took issue with the idea that no one would be hurt by a few months' extra delay. Mark Méland reminded the court of the reality for the Quebec smokers whose historic class action victory triggered these events, but whose serious illnesses meant they were unlikely to live to see justice.

"We told it to you on the very first day. There are real life consequences to delay for our people. The victims are wondering whether anybody – including the justice system – has any regard for their plight....By the time we get to the finish line we wont have a living class member. We won't have accomplished a great deal if we can't get victims money within their lifetime."

He criticized the companies for failing to make a concrete offer -- or even the "kernel of a plan"  and raised concerns about the companies lack of good faith shown by dragging the process out indefinitely instead of putting an offer on the table.

"Up to now we have, unfortunately, not received even the indication of what a plan would look like. The case law shows that there must exist a kernel of a plan. We have not seen the first molecule of a plan." 

"They have been involved in this process since March 8 - but they have been effectively involved for 4 years. They engaged their monitors when Justice Riordan ruled in 2015. There is no way that they do not know what they intend to put forward... Other than for tactical advantage or to try to pit one creditor against another – there is no reason that we are aware of that the applicants have not yet put their foot forward and told us what they are prepared to offer."

"What they are trying to do – and are using the passage of  time to assist them – is to get leverage. People are beginning to tire. The companies are expecting that creditor will get pitted against creditor and not against them."

He urged the judge to see that requiring the companies to return to court sooner would put pressure on them to make tangible progress. There was little downside in an earlier hearing -- but the downsides of not having a hearing if progress were stalled were real. "The comeback hearing serves a number of purposes. It forces parties to act more diligently. It provides more transparency to the process." 

He urged the judge to maintain control of the CCAA outcome. "The mediation is not a substitute for the CCAA process. The mediation is a parallel process. It does not change the requirements of parties to act diligently to put forward a kernel of a plan." 

The provincial view

The government of Quebec (in what I think is their first submission in this process) supported the position of the Quebec class action.  Their lawyer urged the judge to see an earlier hearing as "an opportunity for transparency and a focus for the parties." He echoed concerns voiced by others that the companies were making important decisions that were not being shared until the Monitor included them in the reports that only were prepared in advance of hearings.  He suggested a compromise. "Obviously parties need time – but that doesn’t mean that we need to go to March 6th. Perhaps making it earlier  - in the month of February - would be a balance."

The lawyers for the 'consortium' provinces (PEI, Nova Scotia, New Brunswick, Manitoba, Saskatchewan and B.C") supported a longer extension. "We support the process that is taking place under Chief Justice Winkler and it should be given time to play out."

The lawyers for Newfoundland and Labrador and Alberta said they were "sympathetic" to the position of the Quebec Class Action group, and pointed to the restructuring activities of JTI that only came to light in the Monitor's report. (JTI is moving 43 positions overseas). 

The government of Ontario did not oppose the extension to March.

Is there a seat at the table for the public interest?

Last week the Canadian Cancer Society filed a motion seeking permission to participate in the CCAA process and also in the mediation hearings. The formal motion was precipitated by a reaction by Justice McEwen when the Cancer Society tried to make representation at an earlier hearing, in which he made clear that the CCS would need to demonstrate its financial stake in the proceedings.

Today the CCS put forward its arguments in favour of a meaningful role in these events. As an organization with massive expenditures in supporting cancer victims, it was not a stretch to show its financial interest in any outcome that affected tobacco use. But its main point was to encourage the judge to see this important health charity as a "social stakeholder", and an agency whose contribution should be welcomed as a way to integrate the public interest into the proceedings.

The court was reminded of the previous participation of the CCS as an intervenor in the defence of tobacco legislation, and of the role that other social stakeholders have played in settling class actions. Seventeen organizations were supporting the CCS as a participant in this CCAA/mediation process, renouncing any intention to seek such status for themselves. The floodgates of interested intervenors will not open!

The tobacco companies did not express their opposition to the CCS playing this role -- but their monitors were prepared with a joint submission that was "no objection to participation", but which nonetheless would result in no participation.

The Monitors pointed out that the CCS was on the service list and received all of the filings, but argued that their ability to make any submission to the courts should be at the discretion of the judge. Should things come up which warranted the participation of the CCS then "we can deal with it at that time. Decisions should be made on a case by case basis."

As for participating in mediation, the Monitors thought that should be a question for Mr. Winkler to decide. They pointed to his broad mandate to consult  -  "He can invite whomever he thinks is appropriate" - and advised against ordering him to include anyone - "Absent that invitation there is no basis for an order directing that the CCS should be a participant."

The only participants to voice support for the Cancer Society's role were the class action teams (The Quebec Class Action, the B.C. class action and -- by letter - the non-certified claims filed by the Merchant group).

For the B.C. case, Mr. Doug Lennox gave his reasons, recalling meetings that the CCS had hosted with lawyers in 1999. "Two decades have passed since then, and they have always been a helpful resource. It is not unusual for social stakeholders to be involved in other class action settlements."

Wait for it ....!

Well before noon, the court adjourned. Justice McEwen said he would choose the length of the extension by tomorrow and that his reasons would follow. 

Whatever he decides - another season will have passed before this case is again in open court. 

Reading between the lines of the motion materials

There is one week to go until Canada's tobacco companies return to the Ontario Superior Court in connection with their insolvency protection under the Canadian Companies' Creditors Arrangement Act.

The "Big Three" tobacco firms have been under insolvency protection since last March. Next week they will be seeking a further 6 month "stay" of all legal proceedings against them so that they can try to negotiate a settlement of all claims against them.

To support this request, each company will be filing motions, affidavits, monitors reports and other material. Material may also be filed by other parties (the provinces, the injured smoker class actions and others). These documents are the only insight available to the public on the ongoing negotiations for a settlement of the historic tobacco lawsuits -- none of the provinces or other litigants has made public any information on the proceedings.

Noted below are some highlights from the material. This list will be updated as more material becomes available.

A mediation timetable has been set by Mr. Warren Winkler, the court-appointed mediator. 

So far there has been an exchange of position statements.
Mediation Briefs: Pursuant to a schedule set by the Court-Appointed Mediator, the Applicants, JTI, RBH, and various Tobacco Litigation plaintiffs exchanged mediation briefs on August 1, 2019.

On September 12, 2019, counsel for the Consortium of Provinces andthe Provinces of Quebec, Ontario, Alberta, Newfoundland and Labrador submitted reply briefs. 

A big meeting is planned
The Court-Appointed Mediator has scheduled a plenary session, which will be attended by the Tobacco Companies, the Tobacco Litigation plaintiffs, and other stakeholders. The Applicants anticipate that the Court-Appointed Mediator will schedule further steps in the mediation process following the plenary session.

Mr. Winkler directed the companies to make data available to the provinces

The Court-Appointed Mediator has ... direct[ed] the establishment of datarooms

Data exchange mechanisms were established, and confidentiality agreements negotiated with some provinces to allow the provinces to make this information available to their advisors. In order to facilitate the exchange of information necessary for asuccessful mediation process, data rooms were set up during the most recent Stay Period for each of the Imperial, JTI and RBH CCAA proceedings. 

On August 16, 2019, the Data Rooms first went “live” to be accessed by parties who had executed [non-disclosure agreements]. 

Everything is to remain a big secret

Pursuant to the endorsement of Justice McEwen dated May 24, 2019, the mediation isconfidential and all statements, discussions, offers made and documents produced by any ofthe parties in the course of the mediation process shall not be disclosed. Accordingly, thedescription of the activities of RBH and the mediation process below is general in nature.

The end is not in sight

The Stay Period presently expires on October 4, 2019. The plenary session with theCourt-Appointed Mediator will not occur until afterwards. Prior to this session, it is difficult toprovide any realistic estimates of the time required to complete the mediation and to developand implement a CCAA plan.

The companies have not made any concrete offers - and the Quebec class action lawyers are impatient.

However, since June 2019, no Plan, nor even the bare economics of a potential settlement,were proposed by any of the Applicants and they are now each requesting a further extension ofthe Stay Period (the “Third Stay Extension”), for an additional period of more than five (5)months, until March 6, 2020. 

The QCAPs oppose the length of the Applicants’ Third Stay Extension request, and submitthat, if granted by the Court, the Third Stay Extension should be limited to January 15, 2019,representing more than three additional months and being a length of time more consistent withprior extensions granted by the Court. 

To this end, unless a serious and viable offer is made by each of the Applicants, which must include a significant financial contribution on the part of each of their parent companies, by December 20, 2019, it is the QCAPs’ intention, on or prior to January 15, 2020, to contest any further extension of the Stay Period.

The Canadian Cancer Society wants to be included in mediation discussions

The CCS is asking for an order "permitting the participation of the CCS in the mediation process in these CCAA proceedings".  In support of its application to be a "public health stakeholder", the CCS has submitted letters from 17 tobacco control organizations.

Summer sales were up!

JTI reported that it sold more products in the summer period than it had expected it would. "A favourable variance of $9.2 million in third-party sales receipts due to higher than expected volume during the Reporting Period."

Companies are stocking up ahead of plain packaging rules

JTIM incurred $11.7 million in import duties not included in the forecast due in part to the accelerated import of certain products prior to the implementation of the new plain and standardized packaging measures. 

JTI spends 21% of its earnings from sales on promotions!

25 week forecast revenue from sales - $559,340,000; Total duties and taxes - $257,346,000; Revenue net of taxes - $302,004,000; Expenditures on promotion and marketing - $63,154,000.

Tobacco companies will ask for litigation stay to be extended to 1 year

Already half a year has passed since the Quebec Court of Appeal upheld the multi-billion dollar judgment against tobacco companies. Already the families of the 100,000 smokers have waited 6 months to learn whether they will receive compensation for the serious illnesses or deaths caused by the companies' wrongful behaviour.

Yesterday, Japan Tobacco made public that it wants them to wait at least another 6 months. In a motion filed in advance of the October 2nd hearing before Justice Thomas McEwen, lawyers for JTI-Macdonald asks for "an extension of the Stay Period until March 6, 2020".  It reports that the other companies will make similar requests. 

Very soon after losing at the Court of Appeal, the tobacco industry defendants sought protection under the federal Companies' Creditors Arrangement Act. This law allows large companies in financial distress to seek court protection from claimants while they try to work out a deal that will get them back on their feet.

Last March, the Ontario Superior Court extended that protection to all three defendant tobacco companies. It later assigned to former chief justice (Hon. Warren Winkler) the task of trying to mediate a settlement between the three companies and all of those who had filed lawsuits to seek compensation for the moral and economic damages that resulted from the companies' dishonest marketing and public relations practices. This included the 10 provinces, the Quebec class actions, one other certified class actions and a handful of copycat suits. 

The claims are said to be in the order of $600 billion. These estimates of the damages caused by tobacco use are exponentially larger than the current value of the market that caused it. It's far from clear how the claimants propose to square the circle of the hundreds of billions they are owed and the much smaller amount that is currently been shaken from the pockets of Canadian smokers.

(Data from reports filed by the companies with Health Canada were made public this summer. As shown below, the companies increased their Canadian revenue by 48% after 2014 - from $2.8 to $4.2 billion per year.)

It's possible that a vision of how to move forward was provided to Mr. Winkler in one of the 'mediation briefs' that he asked to be submitted on August 1st. 

At this point, outsiders are not permitted to know. All we have access to are the small details contained in the materials submitted to court. This week's motion from JTI included the following tidbits:

• A plenary session is in the works.
  ("the Applicant has complied with the timetable and procedure of the mediation process set out by the Court-Appointed Mediator, including the delivery of the Applicant’s mediation brief and preparation for the upcoming plenary session.")
• Some data sharing is underway.
  ("A virtual data room ... administered by the Monitor")

We may learn more when more documents are filed in advance of the October 2nd hearing. In theory, all material is expected to be circulated a week in advance. You can follow along at the monitor's web-sites for the three CCAA applicants:

• British American Tobacco - Imperial Tobacco Canada 
• Philip Morris International - Rothmans, Benson and Hedges
• Japan Tobacco JTI-Macdonald

Some thoughts for transparency on the day before the tobacco litigation settlement demands are submitted

The rest of us might have gone fishing, but there was likely little cottage time this July for the many parties caught up in the Canadian tobacco industry insolvency proceedings. The man assigned with the task of mediating a settlement between tobacco companies and those suing them imposed an August 1st deadline for the presentation of each party's "mediation brief". By this time tomorrow, the Hon. Warren Winkler will have each party's position in hand.

So what will the lawyers representing provincial governments and injured smokers include in their demands to settle their long-fought suits? And what will the companies offer to avoid further litigation?

Your guess is as good as mine. Or - if you are a provincial government health worker - it is hopefully better. Perhaps the health ministries have been let in on the discussion.

Over the past 20 years, government lawyers have not canvassed Canadian communities for suggestions on how to resolve these suits in a way which will prevent future disease, and this July they did not break with that tradition. This lack of engagement is a worrying signal that the provinces have not kept the transparent development of health outcomes uppermost in their demand list -- contrary to their international obligations to do so.

International law and Canadian tobacco lawsuits.

It is hard to imagine that a settlement which is purely financial will meet the international obligations of Canadian provinces to deal with tobacco liability in the context of public health. Nor is it obvious how a settlement which includes public health measures which has been secretly negotiated could satisfy expectations under global treaties to conduct negotiations with tobacco companies in a transparent way.

The requirement to direct litigation against tobacco companies towards tobacco control objectives is embedded in the global tobacco treaty to which Canada (and the provincial governments) are bound.

The Framework Convention on Tobacco Control encourages governments to address the liability of the tobacco industry, but requires them to do within the context of public health and tobacco control. The requirements to use litigation "for the purpose of tobacco control" and to make it "part of comprehensive tobacco control" are set out in Articles 4 and 19:

FCTC Article 19.1. For the purpose of tobacco control, the Parties shall consider taking legislative action or promoting their existing laws, where necessary, to deal with criminal and civil liability, including compensation where appropriate.

FCTC Guiding principle Article 4.5. Issues relating to liability, as determined by each Party within its jurisdiction, are an important part of comprehensive tobacco control

The FCTC also instructs governments to protect tobacco policies from interference by tobacco companies. This general obligation of parties is set out in Article 5.3 of the treaty, for which interpretive guidelines have been in place for over a decade. Among these is the guiding principle of transparency.

Principle 2: Parties, when dealing with the tobacco industry or those working to further its interests, should be accountable and transparent.
14. Parties should ensure that any interaction with the tobacco industry on matters related to tobacco control or public health is accountable and transparent.

The government department responsible for coordinating Canada's implementation of the FCTC is Health Canada. Just this week, lawyers for that federal department were added to the service list of the CCAA proceedings. Perhaps they will be brought in to the discussions.

Fingers crossed!

-------------------

"Common Service List" for the CCAA proceedings (July 29, 2019)

Party	Law firm
Applicant Tobacco Companies
JTI Group
1.      JTI-Macdonald Corp	Thornton Grout Finnigan LLP
2.      The Monitor of JTI-Macdonald Corp	Deloitte Restructuring INC
3.      Deloitte Restructuring INC., in its capacity as Monitor of JTI-Macdonald Corp.	Blake, Cassels & Graydon LLP
4.      Chief Restructuring Officer of JTI-Macdonald Corp.	Bluetree Advisors INC.
5.      JT Canada LLC INC. and PricewaterhouseCoopers INC., in its capacity as receiver of JTI-Macdonald TM Corp.	Torys LLP
6.      Receiver and Manager of JTI-Macdonald TM Corp.	Pricewaterhousecoopers
7.      R.J. Reynolds Tobacco Company and R.J. Reynolds Tobacco International Inc.	Chernos Flaherty Svonkin LLP
BAT Group
8.      British American Tobacco p.l.c., B.A.T. Industries p.l.c. and British American Tobacco (Investments) Limited	Stikeman Elliott LLP
9.      Imperial Tobacco Canada Limited and Imperial Tobacco Company Limited	Osler, Hoskin & Harcourt LLP
10.   FTI Consulting Canada INC., in its capacity as Monitor of Imperial Tobacco Canada Limited and Imperial Tobacco Company Limited	Davies Ward Phillips & Vindeberg LLP
11.   Monitor of Imperial Tobacco Canada Limited and Imperial Tobacco Company Limited	FTI Consulting Ccanada INC.
PMI Group
12.   Rothmans, Benson & Hedges, INC.	Mccarthy Tétrault LLP
13.   Monitor of Rothmans, Benson & Hedges, INC	Ernst & Young INC.
14.   Philip Morris International INC	Gowling WLG (Canada) LLP
15.   Ernst & Young INC, in its capacity as court-appointed monitor of Rothmans, Benson & Hedges, INC.	Cassels Brock & Blackwell LLP
Insurers to the Applicant Tobacco companies
16.   North Atlantic Operating Company, INC.	Miller Thomson LLP
17.   AIG Insurance Canada	Miller Thomson LLP
18.   La Nordique Compagnie D’Assurance du Canada	Blaney McMurtry LLP
Tobacco company suppliers
19.   Westrock Company
20.   The Bank of Nova Scotia	McMillan LLP
21.   Labstat International
22.   Citibank Canada	McMillan LLP
23.   Top Tube Company	BCF LLP
24.   Sobeys Capital incorporated	Stewart Mckelvey
Provincial government claimants
25.   Provinces of British Columbia, Manitoba, New Brunswick, Nova Scotia, Prince Edward Island and Saskatchewan, in their capacities as plaintiffs in the HCCR Legislation claims	Bennett Jones
26.   Financial Advisory for the Provinces of British Columbia, Manitoba, New Brunswick, Nova Scotia, Prince Edward Island and Saskatchewan, in their capacities as plaintiffs in the HCCR Legislation claims	KSV Advisory INC.
27.   Attorney General British Columbia	Ministry of the Attorney General
28.   Her Majesty the Queen in Right of Ontario	Ministry of the Attorney General
29.   Her Majesty the Queen in Right of Alberta	Jensen Shawa Solomon Dugid Hawkes LLP; Paliare Roland Rosenberg Rothstein LLP
30.   Her Majesty the Queen in Right of Newfoundland	Paliare Roland Rosenberg Rothstein LLP; Roebothan McKay Marshall
31.   Province of Quebec	McMillan LLP
Class Actions and individual claims
32.   Conseil québécois sur le tabac et la santé, Jean-Yves Blais and Cécilia Létourneau (Quebec Class Action Plaintiffs)	Fishman Flanz Meland Paquin LLP; Chaitons LLP; Trudel Johnson Lespérance
33.   Lawyers for the representative plaintiff, Kenneth Knight, in the certified British Columbia class action, Knight v. Imperial Tobacco Canada Ltd.	Klein Lawyers
34.   Class Action Plaintiffs (MLG)	Merchant Law Group LLP
35.   The Ontario Flue-Cured Tobacco Growers’ Marketing Board	Strosberg Sasso Sutts LLP
36.   Imperial Tobacco claimant	Lecker & Associates
Other government interests
37.   Superintendent of Financial Services, Ontario	Ministry of the Attorney General
38.   Minister of National Revenue, Canada	Attorney General of Canada
39.   Health Canada (or Public Security?)	Attorney General of Canada
40.   Retraite Québec	Vaillancourt & Clocchiatti
Other
41.   Former Genstar U.S. Retiree Group Committee	Kaplan Law
42.   Grand River Enterprises Six Nations Ltd	Brauti Thorning LLP
43.   Court-Appointed Mediator	Lax O’sullivan Lisus Gottlieb LLP
44.   Canadian Cancer Society	Fogler, Rubinoff LLP