Everyone seemed to agree, so tobacco companies get a 3 month extension

It was all over before today's hearing had begun. With agreements hammered out well before Justice McEwen entered the court room, it took less than an hour to impose a further suspension of the rights of injured Quebec smokers to receive compensation for the wrongdoing of tobacco companies.

The negotiations towards this 95 day extension were more or less conducted in public view.

• Last week, tobacco companies filed notice that they would be asking for a further 6 month extension on the creditor protection they received in March under Canada's Companies' Creditors Arrangement Act.
  (e.g.  Imperial Tobacco's motion)
• Soon after, those to whom the companies owe or will owe money filed notice that they thought that six months was twice as long as it should be. The Quebec Class Action team suggested September 27. Counsel from 9 of the provinces suggested October 16.
  (e.g. letter from from counsel for Alberta)  
• The companies blinked and amended their request to align with a midpoint between these earlier dates: October 4.
  (e.g. Blacklined amended stay order from Imperial)

With this matter settled to everyone's apparent satisfaction, the mood of the room was a dramatic contrast to that of the first comeback hearing, less than 3 months ago. The tension had left the air. Body language was relaxed. There was no nervous fussing with papers. There were few corridor conversations.

As it turned out, the only one in the room willing to voice opposition to the consensus was Justice McEwen. Before any of the paperwork had been handed over to him for signature, he expressed his reservations about reducing the proposed extension from 6 months to 3: "I am a little surprised by the date - it seems ambitious. I am not going to get into the way of a consent order, but I have some misgivings about where we are going to be on October 4th."

He was not going to let his concerns stand in the way, however - If the parties have agreed to that, frankly I am prepared to go along. I will set October 2nd as the date for the next comeback hearing."

Objections to the extended stay on litigation were expressed outside the room, however. Yesterday several tobacco control organizations made public their request that provincial justice and health ministers step back from the CCAA process.

A very short leash for outsiders 

The Canadian Cancer Society joined in the CCAA proceedings several weeks ago, and last week intervened for the first time by filing a notice that they opposed the "such a lengthy [6 month] extension of the Stay Period."

This action triggered Justice McEwen to issue some guidance on what he would require of external parties in any future interventions.

"No doubt the Canadian Cancer Society is a well respected organization," he prefaced his remarks before cautioning that before being allowed to meaningfully participate in the CCAA proceedings, the CCS would be required to demonstrate its financial stake in the process. This condition would be equally applied to any participation in proceedings outside the courtroom: "Those entities don’t have a role in mediation. The mediation proceedings are with those people who have financial stakes in the ongoing dispute."

"I just want to be clear. I am not foreclosing participation."  His meaning was clear to me: I'm-not-saying-you-can't-but-you-will-understand-that-it's-not-going-to-happen.)

More non-opposition

A few other non-opposed requests from the companies were also quickly approved.

• Rothmans, Benson and Hedges clarified the rights of certain pensioners.  
• Imperial Tobacco's settlement with Genstar was approved (with some chit-chat about their place in any future pecking order) 
• The monitors will coordinate a common service list.

Where there was opposition, Justice McEwen refused to hear it. The Quebec Class action lawyers have objected to a transfer of $3.5 million by JTI-Macdonald to its sister company, which was identified in the most recent Monitor's report. This, they felt, went against an earlier direction of the court, and they wanted Justice McEwen to order the payment reversed. This prompted a rebuttal from JTI's receiver, as well as the Monitor.   

Justice McEwen was clearly in no mood to manage a discussion over what he sees as a penny ante sum that had no urgency attached to it. He proposed that the issue be instead handed to the mediator to manage. In doing so, he identified that he knew that Warren Winkler has engaged accounting experts to help him. Perhaps he learned this as a result of discussions between the two of them, now permitted under a special court order. Mr. Winkler now has one more issue on his plate!

Parting words

The CCAA process is now in its 4th month and, as reported, nothing of substance has yet happened to forward meaningful discussions between the parties. The Quebec class action plaintiffs expressed concern that "Nearly four months into this CCAA process, no tangible progress has been made by any of the Applicants." Meanwhile, injured Quebecers - "whose conditions are deteriorating significantly and often rapidly" - are unable to receive the compensation awarded to them.

Justice McEwen has not acknowledged the frustration of these victims' entitlements, but today he expressed his own frustration about the types of matters that he has been asked to adjudicate.

"It exhausts me - the number of small issues that we have to deal with. It is fiddling while Rome burns. We need to get to the big issues. We have to drive past these [small things]– or park them and get to the big picture. That’s my speech for this morning."

The August 1st deadline

The court-appointed mediator, Mr. Warren Winkler, has requested all sides to submit mediation briefs by August 1st.

Tobacco companies ask for a further 6 month immunity from lawsuits.

In March, Canada's 3 large tobacco companies asked for (and got) a month-long time-out on all of the litigation facing them. As that neared expiry, they asked for (and got) an additional three month grace period during which they did not have to pay the court-ordered damages to Quebec smokers, nor did they have to respond to the legal claims made by provinces seeking compensation for health care costs.

This immunity period expires on June 28th - and the companies have now given notice that they will be asking for an additional six month grace period to be given to them.

Both JTI-Macdonald and Rothmans, Benson and Hedges made this request public this weekend, stating that Imperial Tobacco would be making the same request. (This request is scheduled to be heard before Justice Thomas McEwen on June 26th. Parties are expected to file material with the court at least a week before the hearing -- meaning that more paper is likely to be available by June 17th).

Within these requests are a few snippets of interest:

• There have been no negotiations yet between the companies and their claimants. JTI says that lawyers have had initial discussions with many of those suing it (but not the province of Quebec) "in an attempt to commence resolution discussions". [Emphasis added]
• Mr. Warren Winkler, who was appointed as a mediator in the process, has asked the companies to negotiate, and has asked the companies to "deliver a mediation brief to him on August 1, 2019."
• Any settlement process is expected to extend well beyond 2019. ("RBH is of the view that the complex process to complete the mediation and to develop and implement a CCAA plan is unlikely to be complete before year end and could take more time beyond that.")

Other material in circulation hints at the continued opacity of the discussions that will take place between the provinces, the mediator and the tobacco companies.

• The mediator (Warren Winkler) is permitted to communicate in private with Justice McEwen, but the content of his discussions with all parties will not be made public:
  "All statements, discussions, offers made and documents produced by any of the parties in the course of the Mediation Process shall not be subject to disclosure through discovery or any other process; shall be confidential; shall not be referred to in Court and shall not be admissible into evidence for any purpose, including impeaching credibility or to establish the meaning and/or validity of any settlement or alleged settlement arising from the Mediation Process."
• The companies intend to insist that business information they share with the provincial governments in support of their settlement offers be kept from public view.
  "JTIM, along with Imperial and RBH, are in the process of negotiating and finalizing a form of non-disclosure agreement that will permit stakeholders to access requested commercially sensitive and confidential information" (JTIM notice June26)

The insurance dispute is settled

On May 14, Justice Thomas McEwen had entertained arguments about why or why not the Quebec class action lawyers should be allowed to spend money provided to them by bankrupted insurance companies who had once issued policies to Imperial Tobacco and Rothmans, Benson and Hedges.

He told them to go work it out themselves, with the help of the former Chief Justice who is mediating between the companies and their litigation-related creditors during the CCAA process. Justice McEwen gave the two tobacco companies and the Quebec class action team a 2 week deadline to cone to an agreement. If they couldn’t do so by last Friday (May 31) he threatened to take a winner-take-all approach to his decision.

Sure enough, late last week a proposal was submitted to him, and posted on the monitors’ websites. It is short and to the point:  the class action team can ask Justice Riordan for the funds to be spent in the way they had been suggesting from the start, but this should not be considered a precedent. Some of provinces and the tobacco companies have signalled that they similarly oppose the Quebec claim being able to access the $1 billion put in trust for their claim by order of the Quebec Court if Appeal.

Once this draft order is signed by Justice McEwen, and the dispersal of funds is approved by Justice Riordan, the Quebec government’s arms-length Fonds d’aide will be repaid for at least some of the loans it has provided to the case over the past many years. There will also be some money to cover the costs of handling questions from potential class members.

Meanwhile the clock is ticking.  Justice McEwen’s order suspending all tobacco litigation expires at the end of the month. Our next big peek at developments will likely be on June 26th, when the next phase of this process will be discussed in his court.