At the time of the last post, it seemed like the sixth extension of the court-ordered insolvency protection for Canada's tobacco companies would go without a hitch. The hearing is scheduled for 2 p.m. on Tuesday, March 30 (viewable on YOUTUBE here!), a mere 24 hours before the current order expires.
Over the weekend a new motion appeared on one of the Monitors' sites. Ontario's tobacco farmers have now signalled they will ask the court to etablish that their claims against the companies are of a different nature than those of the provinces and injured smokers, and that the settlement of their claims should not be tangled up with these other suits.
Their 28-page Factum and 277-page Motion Record is a good refresher of the chain of events that lead from the cigarette manufacturers' participation in round-tripping cigarette exports in 1993 to a plea-deal struck with governments some 15 years later. In 2008 the companies agreed to pay $1.15 billion in fines and unpaid taxes. (No Canadian employees went to jail.)
As I read it, it was the admission of guilt in those proceedings that emboldened the farmers to claim that they had been underpaid under the terms of their contract with the companies, under which they were paid less for exported cigarettes than for those made for the Canadian market. In 2009 they filed a suit, demanding $50 million to make up for that shortfall.
The companies pushed back, saying that their agreements with government had closed that chapter and that the farmers's demands should be considered a 'released claim'. Besides which, so much time had passed that the issue could no longer be considered by the courts. These issues were swatted away, but they took court time, and the farmers' case had still not gone to trial before the tobacco companies headed to insolvency court in March 2019 immediately after the Quebec Court of Appeal told them to hand over $13.5 billion to Quebec smokers injured by decades of corporate wrongdoing.
As lengthy as the material filed by the farmers is, it does not tell the whole story. Two important details were left out.
The first is that $286 million was paid to farmers by the federal government, and was funded from the federal proceeds of the plea-deal. These payments were announced on August 1, 2008, the day after the agreement with the companies was reached as part of a Tobacco Transition Program. The farmers have arguably already been compensated as a result of their clients' redress for involvement in illicit sales.
The second missing element is the subversion of the Tobacco Transition Program from one intended to phase out tobacco-growing in Ontario to one which helped sustain it. This happened with the active involvement of farmers who took payments, but continued to participate in tobacco farming, including by transferring property to family members.
The farmers' brief does not identify the receipt of money to get out of tobacco growing, but does not deny the continued participation of the farmers. "Tobacco Manufacturers continue to be supplied with Ontario tobacco grown from some of the very same farms operated by the Producers who sold their tobacco through the Tobacco Board. Many of the licences to grow Ontario tobacco are now owned by the Producers’ offspring (children and grandchildren) and many of the Producers still assist in the production of Ontario tobacco currently supplied to the Tobacco Manufacturers."
As data from Ontario shows, a lot of tobacco is still being grown in Ontario.
Having had the $286 million cake of exit payments funded from a tobacco settlement, the farmers are now seeking an additional $50 million (plus interest) slice. If their case settles before the decisions of two Quebec courts are upheld, it will be one more blow to injured Quebec smokers.
