Plan Administrators' first reports show claims are trickling in

On Thursday (October 23rd) the first reports from the Claims Administrators were filed and made public on the websites of the administrators/monitors. (FTI Consulting for Imperial Tobacco, EY for Rothmans, Benson & Hedges, and Deloitte for JTI-Macdonald). 

These reports provide "substantially the same" updates on the same two bits of information: (a) progress in the filing of claims in the Pan Canadian and the Quebec Class Action cases and (b) the establishment of a protocol for Ontario and Quebec courts to work together on the file.

They remind that claimants in the Quebec class action have 10 months left to file their claims and that those in the Pan-Canadian claims which cover all Canadians but address illnesses diagnosed at a different time frame than the Quebec Class Action have 23 more months.

As of mid-October, a little over 400 claims had been received. Epidemiological projections of the number potential claimants exceeded 280,000 individuals.  A media campaign to reach potential claimants is now scheduled to start on November 5th.  

Public Accounts disclose legal costs of 11% for New Brunswick and 25% for Newfoundland and Labrador

 (This post was corrected on October 5)

All but two of Canada's 13 subnational jurisdictions managed their legal claims against tobacco companies through contingency arrangements with their legal counsel. As discussed here earlier, these fee contracts have generally not been made public. Even where there was disclosure (Newfoundland and New Brunswick), the fees may have been renegotiated over time.

New Brunswick is among the first provinces to report both the income and legal fees associated with the settlement approved last year and implemented in late summer. This week the top-line line financial reports from that province for the last fiscal year were made public. (Reflecting the timing of the settlement agreement, the province chose to report the initial payment in the fiscal year ending March 31, 2025).

Volume 1 of New Brunswick's Public Accounts can be downloaded here, and the relevant section is pasted below. "Under the agreement terms, $24.7 billion will be paid to the Provinces and Territories. New Brunswick's share is approximately 2.4%, equating to $596.0 million. In 2024-25, the Province recognized the upfront contribution of $156.0 million in revenue (Schedule 15) and $17.7 million in net associated legal fees and disbursements payable."

This suggests that the legal costs of this revenue were equal to 11.35% ($17.7 million as a percentage of $156 million). The net revenues from the settlement to the province from the initial payment were $138.3 million. 

This is roughly double the revenue reported by the province from tobacco and vaping taxes ($64.7 million and $900,000 respectively).

The legal fees inferred for New Brunswick are at a higher rate than the 10.2% fee for Nova Scotia, which engaged the same legal team, and lower in comparison to the 25% fee paid by Newfoundland and Labrador, which was represented by a different set of lawyers.  The implicit fee rate for British Columbia is 4.55% - this province initially hired a firm on a fee-for-service basis before transferring to the same firm as New Brunswick, Nova Scotia and three other provinces. Information on financial declarations by those provinces is provided below. 

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Notes from the Public Accounts of other provinces

BRITISH COLUMBIA:
In the 2024-25 Public Accounts, the Independent Auditor for British Columbia expressed concern that the province failed to include an estimate of revenues from the settlement. "An initial estimated amount of $0.9 billion is expected to be received in fiscal year 2026 with the remainder to be received over an estimated 20 years. At March 6, 2025, government should have recorded an asset, corresponding revenue, and related legal expenses."

When the province's 1st quarterly report for the 2025-26 fiscal year was made public in September, this recommendation was acted upon.  The province declared "$2.725 billion in one-time net revenue in relation to the tobacco settlement."

"This estimate includes $3.7 billion as the Province’s share of the arrangement, to be received over approximately 18 years. The net revenue also includes $130 million in legal costs and has been discounted to reflect the long-term nature of the payment schedule. These estimates will be updated throughout the fiscal year as more up‑to‑date information becomes available and confirmed at Public Accounts in summer 2026."

The stated figures imply a 4.55% contingency fee. This percentage is equal to the proportion of the $130 million legal costs of the net revenues before those costs were deducted ($2.725 billion + $130 million = $2.855 billion).

ALBERTA:
In the year-end report presented in June 2025, the Alberta Government identified that it was recording revenues from the settlement, but did not specify the amount or the associated legal costs.

SASKATCHEWAN:
In its financial statement released in June 2025, the Saskatchewan government noted revenues from the settlement and also expenses related to legal costs, but provided no specific figures.

MANITOBA
In its Public Accounts for 2024-25, the Manitoba Government chose to report revenues of $846 million with associated expenses of $425 million. Because the settlement agreement identified its share of the provincial revenues at 4.53%, its total revenue was anticipated to be $1,118.9 million, with an upfront payment of $284.3 million. The lower amount declared is explained as follows in the Public Accounts: "The tobacco settlement expense includes an allowance for doubtful accounts in the amount of $396 million that was established in recognition of the significant uncertainty over the amount and timing of the future payments related to the tobacco settlement and $29 million of legal fees that were expensed in 2024/25." 

If the legal fees of $29 million were in association with an upfront payment of $284.3 million, the implicit  legal fee is equal to 10.2%

ONTARIO
Ontario did not engage lawyers on a contingency fee basis.

Ontario's Public Accounts for 2024-2025 recognized revenue from the settlement, and applied a discount to adjust for the inflationary impact of future revenues. Ontario's share of the settlement was $7.1 billion, but the province calculated its present value to be $3.4 billion. The following explanation was provided:

"On March 6, 2025, the Ontario Superior Court of Justice approved a $32.5 billion settlement agreement in Canada under the Companies’ Creditors Arrangement Act arising from several legal claims against three major tobacco manufacturers, including compensation for smoking-related health care costs incurred by provincial and territorial governments. The Province is owed approximately $7.1 billion under this agreement. This receivable represents non-recurring revenue recorded in 2024–25. The net present value of the receivable is $3.4 billion calculated based on a discount rate which reflects the Province’s expected rate of return and the transaction-specific risks tied to this receivable such as the uncertainty of payments contingent on the companies’ long-term profitability. 

On August 29, 2025, the Province received the upfront payment of $1.9 billion from the tobacco companies in accordance with the stipulations set out in the settlement agreement established on March 6, 2025. The remaining $5.2 billion will be paid in future annual instalments over approximately the next 30 years, based on a percentage of the tobacco companies’ after-tax income, until the total amount is paid."

QUEBEC
In its Public Accounts, Quebec recognized revenues of $1,735 million as an "initial amount". Quebec's share of the provincial revenues is 28.2796151%. Quebec did not rely on outside counsel when making its claim against the companies (although it engaged outside counsel during the settlement process)

The government explained its decision to not report the total anticipated amount as follows: "There is significant uncertainty with regard to the future encashment of this amount and its recovery period, as they depend on the sales level of tobacco products, which will be affected by trends in the economy, regulations, and consumption habits. If cashed in full, the amount could be recovered over a period of approximately 20 years. The level of net profits from tobacco products cannot be reasonably estimated. Therefore, the government will record the remaining amount annually when it gets confirmation of the share of revenue to which it is entitled."

NOVA SCOTIA
In its Public Accounts for 2024-25, the province of Nova Scotia identified "$16.9 million in tobacco settlement legal fees" and "Tobacco Settlement Revenue of $203.1 million." The reported legal fee is 8.3% of the settlement revenue. The province also elected to only report revenue received and to defer the reporting of later payments: "... revenue will be recognized annually when there is certainty of the amounts, determined by these tobacco companies’ annual after-tax profit."

NEWFOUNDLAND AND LABRADOR
In its Public Accounts for 2024-25, the province of Newfoundland and Labrador reported settlement revenue of $138,832,000, with associated legal costs of $34.7 million. "Legal fees in relation to the tobacco settlement are 25% of the gross settlement proceeds, payable by the Province as the settlement proceeds are recovered. At 31 March 2025, the upfront settlement payment of $138.8 million has been recorded as revenue and receivable, with 25% of this amount, or $34.7 million, in relation to legal fees for the settlement recorded as other payable and professional services expense."

PRINCE EDWARD ISLAND
Prince Edward Island was represented by the same legal team as Nova Scotia, New Brunswick, British Columbia, Manitoba, Saskatchewan and the territories. Its public accounts for 2024-2025 are not available at this time.

TERRITORIES
Although none of the three northern territories initiated a lawsuit against tobacco companies, they participated in the settlement, and were represented by the same firm which managed the majority of provincial claims. Their public accounts are not available at this time. 

It's official!

Shortly after 9:40 this morning, copies of the Plan Implementation Certificates were circulated among the service list of those following the CCAA oversight of the settlement between the major tobacco companies operating in Canada and the provincial governments and class actions suing them. 

The near-identical documents confirm that: "The Plan Implementation Date has occurred and the CCAA Plan and the provisions of the Sanction Order which come into effect at the Effective Time are effective."

Wait and hurry up: A flurry of last minute orders

 At some point during yesterday's hearing, Chief Justice Geoffrey Morawetz observed that more than 6000 pages of documentation had been submitted to support the 13 or more formal agreements he was being asked to make just two days before the tobacco settlement takes effect.

In contrast to the volume of material, the time given to the presentation, discussion and approval of all these requests did not exceed 40 minutes. The lawyers presenting the requests were mostly concise to the point of laconic. And through their silence when given a chance to comment, all of the formerly warring parties seemed to be in agreement with the last-minute touch-ups to the agreements they approved last December.

Given the pace of developments over the past quarter century, yesterday's developments resembled the digestive tract of the proverbial goose. The decisions involved are linked at the end of this post. 

On second thought...

Before court was adjourned, Chief Justice Morawetz let it be known that a subsequent private discussion (case conference) would take place shortly afterwards. The topic under discussion was his ruling earlier that week that there would be a hold-back on the fees paid to lawyers representing the Quebec class action until all claims had been settled.  

Yesterday afternoon, he backtracked somewhat on that requirement and issued an amended version of his ruling on fees.  Instead of a vaguely defined requirement for a reserve fund, the new text (paras 77 to 79) establishes that "a reserve be held back from the QCAP Counsel fee and retained in the respective QCAP Trust Accounts in the total amount of $50,000,000, the purpose of which is to alleviate, to the extent possible, any reduction in compensation to claimants because of the actual take up rate ..." 

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Settlement-related decisions and orders released after August 26 - including one by the US Bankruptcy Court on Tuesday - are linked below.

Plan Amendment Orders:

• Imperial Tobacco - Fourth Amended and Restated
• Rothmans Benson & Hedges - Fourth Amended and Restated
• JTI-Macdonald - Fourth Amended and Restated

U.S. Chapter 5

• Order Recognizing and Enforcing the Orders of the Canadian Court: (I) Approving the Imperial CCAA Plan; (II) Enjoining the Solicitation of Claimants; and (III) Appointing the Foreign Representative as Plan Administrator under the CCAA

Insurance Settlements

• Imperial Tobacco

Collateral Agent Order

• Imperial Tobacco - Collateral Agent Order
• Rothmans Benson & Hedges - Collateral Agent Order
• JTI-Macdonald - Collateral Agent Order

Plan Administration Reserve Trust Order

• Imperial Tobacco - Plan Administration Trust 
• Rothmans Benson & Hedges -Plan Administration Trust 
• JTI-Macdonald - Plan Administration Trust 

Claims Administrator Order

• Imperial Tobacco - Claims Administrator Order
• Rothmans Benson & Hedges - Claims Administrator Order
• JTI-Macdonald - Claims Administrator Order

Other issues

• Decision on approval of fees by mediator

Class Counsel Fee Orders 

• Tobacco Producers
• Knight Class
• Quebec Class Action 

A decision to approve the requested legal fees

 Two months ago, Chief Justice Geoffrey Morawetz had indicated that he would issue his ruling on class counsel fees "long before the implementation date."  As it turns out, his ruling issued today arrives only 4 days in advance of that long-anticipated moment.

The lawyers whose fees were the subject of this ruling will consider that it was worth the wait. Chief Justice Morawetz endorsed their request for the full contracted amount. 

Two of these fee decisions will draw scant notice - the judge himself dismisses them as "de minimus". The legal team representing the B.C. "Knight" light cigarette action will receive $5 million, which is one-third of the settlement amount for the class. They will also be reimbursed for $1 million in disbursements and an additional award of $10,000 will be provided to the representative class member. The remainder of the $15 million will be allocated to the Cy Pres foundation. Lawyers representing tobacco producers are able to claim 25% of the $15 million recovered for farmers in the settlement (some of which they have already been provided). The remainder will be disbursed among the affected farmers. 

The third fee endorsement is the record-breaking decision to uphold the 22% fee contracted by the lawyers who have represented two classes of injured Quebec smokers since 1998. This legal team will receive  $901 million in compensation for their decades of work (totalling more than 200,000 hours of work since 1998 and covering future work). Because they have previously been provided with $5 million which was used to reimburse the Fond d'Aide, the legal fees will total almost $906.2 million.  

This is the largest fee award in Canada by a considerable margin - described in this ruling as "unheard of in Canadian legal history." 

The judge cautions that he does not intend his approval of this fee to become precedent for future legal fees. He nonetheless provides his reasoning at length in a text peppered with quotes, footnotes from other rulings, references to advice from a Quebec jurist, and the interventions of other parties. Fundamentally, he agreed with the position of Quebec lawfirms who said in February and in March that in the absence of a principled reason to alter the fee, their contract should be honoured.

Justice Morawetz summarizes his decision to - "reluctantly" - approve the amount requested.

(63) I accept the following:

(a) QCAP Counsel assumed great risk in accepting the retainer from the class

(b) The 22% fee arrangement is at the low end of the scale and is fair and reasonable.

(c) The ACQPs succeeded at trial and the Quebec Court of Appeal

(d) Although the CCAA Plans reflected a mediated settlement, the CCAA Plans were only put forth to a creditor vote after five and a half years of mediation. This reflects hard fought negotiations.

(d) An exceptional outcome was obtained for the Class. The monetary award for each member of the class if fixed. Even if the fee request of QCAP Counsel is reduced, the reduction will not flow to the benefit of the Class.

(f) The PCCs, as well as the provinces and territories obtained residual benefits as a result of the work of QCAP Counsel.

(g) With the exception of Quebec, the provinces and territories took no position on the appropriateness of fees. This is significant as any reduction in the fees being awarded to the QCAPs would flow to the provinces and territories.

Safeguarding class members' compensation

Justice Morawetz' approval of the $900+ million fee is contingent on the $4 billion awarded to the Quebec class of smokers being enough to provide all eligible members with the compensation provided for them in the settlement and also cover the legal fees. 

If it transpires that the class members are being short changed, then the fees to lawyers will be reduced. The endorsement provides for a reserve fund "to ensure that each approved claimant receives the full amount of their claim under the CCAA plans" and directs the monitors to work out the details of how this will happen.

A firm hint from the bench

Chief Justice Morawetz closes his decision by calling on the Quebec legal teams to be generous with their earnings. "This created the opportunity for QCAP Counsel to obtain compensation beyond their wildest expectations. In receiving this reward, they should recognize that they have a moral obligation to society ..." He calls on them to honour this obligation through charitable giving - "In this way they can be publicly recognized for their incredible work in this matter."

Last minute revisions to the settlement plans

On Wednesday August 27th Justice Morawetz will hear requests from a number of parties involved in the ink-almost-dry settlement among Canadian provincial governments, injured smokers and farmers and tobacco companies. 

This hearing will come two days before the expected implementation date, and one day after the US  Bankruptcy Court is expected to support Imperial Tobacco's settlement position in the United States.

This post identifies the issues that will be raised on the 27th with links to the paperwork involved. It will be updated as additional material comes on line.

1) "Amended and Restated Plans" 

The monitors are seeking another set of amendments to the plans of each company, and have submitted "Fourth Amended and Restated" versions for approval. In broadly similar motions for each company, they provide consistent rationale that the amendments are "necessary", "consistent" with the original plan that was voted on in December, "not materially adverse" to the financial interests of the creditors and adversely affecting any other party and are not opposed by other parties.

The large volume of changes is immediately apparent from the blackline version which is included in the motion record for each company (Imperial Tobacco, Rothmans, Benson & Hedges (Part 1 and Part 2)  and JTI-Macdonald). 

The rationale for the changes is explained earlier in the document in a sets of tables that summarize the proposed amendments. Some of the changes embed issues raised earlier this summer and/or proposed for discussion this week.

The Monitors (who also act as Plan Administrators) have submitted a Factum outlining their support for these changes. 

2) Collateral Agent Order

Plan Administrators are seeking a court order to appoint Computershare Trust Company as the collateral agent for the parties. Equivalent motions were filed for Imperial Tobacco, Rothmans, Benson & Hedges and JTI-Macdonald 

3) Claims Administrator Orders

Epic Class Actions Services is seeking an Order with respect to each company to approve their plan for notifying potential claimants and for their administrative costs and for related issues. They estimate it will cost them $92 million for their role in administering the claims.

* Motion with draft order, Global Notice Plan and related documents including claim forms, etc.  

3) Settlement of insurance claims 

The companies appear to have finalized their arrangements with those insurance companies which provided them coverage at the time of the behaviour which has resulted in the settlement. Imperial Tobacco will receive about $3 million from 5 insurance companies (Aviva, NHRAE, Lloyds, Westport and Zurich). The motion to approve the allocation of this to the settlement funds also identifies other insurance companies from whom there appears to be no pay-out.

"Critical elements" are put in place

In a brief (15 minute) hearing this morning, Chief Justice Geoffrey Morawetz granted two sets of requests for court orders. 

The first, made by the lawyers representing the Quebec class action on behalf of themselves and the three other claimant classes (Pan Canadian Claimants, Knight action and Tobacco Producers) will authorize these lawyers to sign releases and other documents required by the settlement plans.

The second, made by the Monitors-cum-Plan Administrators, will authorize the assignment of managing the settlement funds by BMO. 

The two orders which will be endorsed later today were described as "critical elements" of the settlement plan which is expected to take effect on August 29th. There were signals that there will be other issues that need court approval before that date.

The orders which were approved today can be found in the material submitted to the court:

• Motion of Quebec Class Action Plaintiffs for a Signing Authorization Order
• Motion for a Bankings Arrangements Order

Cue the bankers

In addition to the clarification about the authority of class action counsel, during this Friday's hearing Chief Justice Morawetz will also be asked to approve the banking arrangements between the Plan Administrators and the Bank of Montreal (BMO). 

Details of the parallel requests from each company were posted today on the websites of the monitors (who are also the Plan Administrators). These Motions can be accessed here:

• FTI: Imperial Tobacco Canada Ltd.
• EY: Rothmans, Benson & Hedges
• Deloitte: JTI-Macdonald

"Out of an abundance of caution"

A new notice of motion by the lawyers representing members of the Quebec class action was filed on Friday and made available today. At a hearing now scheduled for Friday, August 15th at 9:00 a.m., they will ask for clearer signing authority for lawyers representing all of the non-government claimants.

This pre-hearing paperwork includes an explanation that the Sanction Order inadvertently failed to specifically authorize these lawyers to release the claims in return for which settlement funds will be issued and to conduct other required paperwork. "Out of an abundance of caution, Quebec Class Counsel are seeking this Court’s authorization to execute and deliver any and all required plan implementation documentation as they consider advisable and propose that this Court’s authorization be extended to the other Claimant Class Counsel as well."

The order from Justice Morawetz they are seeking is to the effect that 

"(i) Quebec Class Counsel is hereby authorized to execute and deliver on behalf of the Quebec Class Action Plaintiffs, (ii) PCC Representative Counsel is hereby authorized to execute and deliver on behalf of the PanCanadian Claimants, (iii) Knight Class Counsel is hereby authorized to execute and deliver on behalf of the Knight Class Action Plaintiffs, and (iv) Counsel for the Tobacco Producers is hereby authorized to execute and deliver on behalf of the Tobacco Producers and Ontario Flue-Cured Tobacco Growers’ Marketing Board, any and all documents as they consider advisable to give effect to the implementation of the CCAA Plans including, as applicable and without limitation, the following documents: a. Claimant Contractual Releases; b. Plan Implementation Certificates; c. Collateral Agency Agreements; and d. Flow of Funds Agreement."

US Bankruptcy Court gives backing to JTI Settlement.

Yesterday the Monitors for JTI-Macdonald uploaded the Chapter 15 Order of Justice Mastando of the United States Bankruptcy Court Southern District of New York, giving effect in the United States to the CCAA settlement with respect to that company.

Although the hearing before Justice Mastando had been scheduled for August 7th, the Order was dated August 5th, and the drafting of the order makes no reference to oral submissions. 

As reported earlier this week, the same judge is currently scheduled to hear an equivalent request from Imperial Tobacco Canada on  August 26th. 

Documents related to the JTI-Macdonald decision are available on the Deloitte Insolvency website, at the following links:

• Order Scheduling Recognition Hearing.pdf
  
• Notice Application for an Order.pdf
  
• Verified Petition.pdf
  
• Aziz Declaration.pdf
  
• Memo of Law.pdf
  
• Chapter 15 Recognition Order.pdf

Imperial Tobacco files request for U.S. recognition of settlement plan

 Following a similar request by JTI earlier this summer, last week Imperial Tobacco submitted its request to a New York Court for "Recognition and Enforcement of the Orders of the Canadian Court".

The hearing is scheduled for "August 26, 2025 at 11:00 a.m., prevailing Eastern Time" before Honorable John P. Mastando III of the United States Bankruptcy Court for the Southern District of New York.

This is only 3 days before the day on which the implementation was earlier suggested to take place - and which is still suggested on the website for claims related to the Quebec class of victims.

Quebec courts give further support to the settlement

On July 29th, following a hearing in the morning, the Quebec Court of Appeal authorized the release of the almost $1 billion that it had ordered two tobacco companies to put aside almost a decade ago.   

In October 2015, that court had ordered a series of security payments from Imperial Tobacco (totalling $757,995,000) and Rothmans, Benson & Hedges (totalling $225,995,000). 

During the intervening period, the money has been managed by the Quebec Minister of Finance, which has now been ordered to release the money to the monitors of those two companies.  It would appear that no interest was involved. 

The joint request by the two largest companies involved was supported by the Quebec class action, on whose behalf the security payments had initially been imposed.

Quebec Superior Court gives support to the CCAA plan and orders health care agency to facilitate payments to injured smokers

 On Monday July 21, Justice Catherine Piché of the Quebec Superior Court issued two rulings aimed at implementing the tobacco settlements.

The first - "official confirmations" - includes a dozen specific orders establishing the authority and responsibility of the Quebec health insurance system in assisting the payment of compensation to injured Quebec Smokers. The Régie de l'assurance maladie du Québec (RAMQ) is directed to providing information which facilitates the eligibility of claims and which safeguarding the confidentiality of this information.

The second  - Come-in-Aid - provides assurance that the Quebec courts will "recognize, assist and give effect to" the CCAA application as though they had been issued in Quebec. 

The application for this order which was made by the Quebec class action can be read here. 

Japan Tobacco applies for Recognition under Chapter 15 of U.S. bankruptcy law

 At 10 a.m. on August 7th, lawyers for JTI-Macdonald will seek approval from a New York Court for recognition of and support for the CCAA settlement plan. This information was provided in an Order from the United States Bankruptcy Court (Southern District of New York) which appeared on the website of the company's monitors earlier this week. 

Also uploaded were the company's application for the Order, its Petition for Recognition, as well as an accompanying declaration and 'Memorandum of Law'. 

The first dozen pages of the Petition provide a readable re-cap of the issues and also the company's motivation in seeking the order. 

JTIM asserts that a positive decision to its request from the U.S. court is required before the Canadian settlement takes effect. "The entry of an order by this Court, pursuant to Chapter 15 of the Bankruptcy Code, recognizing the Canadian Proceeding and the CCAA Plan and granting related relief in order to give full force and effect to the Sanction Order and the CCAA Plan, and particularly the Releases in the U.S., which enjoyed full creditors’ approval in the Canadian Proceeding, is an unwaivable condition precedent to implementation of the CCAA Plan. Without a Chapter 15 order recognizing the Canadian Proceeding and giving full force and effect to the CCAA Plan and the Sanction Order in the United States, the CCAA Plan will not be implemented and the global settlement will fail." 

If an explanation was offered as to why the 'unwaivable condition' is only being addressed so many months later, I have missed it.

The Petition provides additional insight on the value of U.S. court support: this will ensure that the release from liability is extended to the United States, giving protection both to JTIM and also to its previous owners (now a subsidiary of British American Tobacco). 

"The purpose of this Chapter 15 case is to obtain recognition of the Canadian Proceeding and the CCAA Plan, and the entry of an order of this Court granting full force and effect to the Sanction Order and the CCAA Plan, so that the Debtor may enforce in the United States the CCAA Plan and the Releases for the Released Parties. The Released Parties include, among others, R.J. Reynolds Tobacco Company, R.J. Reynolds Tobacco International Inc. and RJR Nabisco, Inc. (now known as R.J. Reynolds Tobacco Holdings, Inc.) (collectively, the “RJR Group”). The RJR Group owned the Debtor from 1974 until the execution of the Purchase Agreement (as defined below) in May of 1999."

The U.S. judge who is managing the JTIM request  --  John P. Mastando III - is the same person who issued a recognition order to Imperial Tobacco last summer, and which has been available on the website of FTI, the monitors for that company since last November. No equivalent material appears to be available on the website of EY, the Monitors for Rothmans Benson and Hedges.

 

schedules the hearing 

Administrative powers extended and billings protected from public disclosure.

Late last week two short court orders were posted on the website of the monitors assigned to manage the CCAA proceedings for Imperial Tobacco, Rothmans, Benson and Hedges and JTI-Macdonald.

One of these extends the authority of the Hon. Warren Winkler, who has acted as mediator in this process for 6 years. His power in these proceedings is significant. In addition to those powers and services previously enumerated, this order directs him to "take all steps and actions, and to do all things, necessary or appropriate, in his sole discretion, with respect to the CCAA Plans (collectively, the "Ongoing Services") until further order of this court."

The confidentiality protocol, also extended by this order,  excludes disclosure of either the billings associated with these services or the administrative actions taken by this former chief justice in his role as mediator in these files. 

The second of these orders specifies that the fees paid to the monitors and their lawyers are subject to review by Mr. Winkler, and that these fees are also not to be made public.

August 29th is the target for settlement 'implementation date'

During a brief (15 minute!) hearing this morning before Chief Justice Geoffrey Morawetz, counsel for the Quebec tobacco class actions reported that August 29th was the target date to implement the settlement agreement that would end all pending litigation against Canada's tobacco companies. 

This may be the first public statement to this effect. The information was relayed during a discussion of administrative issues which need to be resolved before the companies begin to pay compensation. 

The purpose of today's hearing was to obtain court orders on the following pre-implementation issues:

• the transfer and use of the $1 billion security deposit imposed on two companies by the Quebec Court of Appeal in 2015. For the last 10 years this money has been held in trust by the Quebec government (without accruing any interest). It is expected that in July the Quebec Court of Appeal will be asked to order the transfer.
• a settlement that resolves all claims by a small number of pensioners of a former Imperial Tobacco subsidiary.
• settlements between Imperial Tobacco and four insurance companies with which the company had policies.
• agreements among Imperial Tobacco and the Canada Revenue Agency and Revenue Quebec to resolve tax disputes within the context of the CCAA proceedings. 

There were no objections to these requests and representatives of the parties involved were on hand to voice their support. The judge said these orders would be issued this morning with brief reasons (endorsements) to follow. When available, these will appear on the websites of the Monitors for the companies involved:

• FTI Consulting for Imperial Tobacco
• EY for Rothmans, Benson & Hedges

At the end of this session, Chief Justice Morawetz acknowledged that he had yet to rule on how much the lawyers representing Quebec smokers would be paid, but said his decision would be made public "long before the implementation date."

Steps towards implementing the settlement.

More than 3 months have elapsed since Chief Justice Morawetz approved the settlements brokered among Canadian provincial governments and the 3 large tobacco companies that have been the target of class action and cost-recovery suits for two decades. 

That approval was only an important finishing step in this saga, but came without an indication of when the agreement will be implemented and when the companies' victims will receive some compensation. Little information has been shared about that implementation date - although one mid-May news report suggested it would be in about "90 to 120 days" 

A joint motion filed this week by Rothmans, Benson & Hedges and Imperial Tobacco Canada and separate motions ITL hint at the activities that are taking place behind the scenes. These will be the subject of a hearing which starts at 9:30 a.m. on Wednesday June 18, which can be watched on YouTube at: https://youtube.com/live/VP2lCOG8zf8?feature=share

Gaining access to the security deposit

Chief Justice Morawetz is being asked to briefly suspend the stay of proceedings in order to allow the companies to approach Quebec courts. This is apparently required for the companies to access the almost $1 billion in security that the Quebec Court imposed on them 10 years ago and that will form part of their payments to injured smokers, the provinces and others. (JTI was not required to make a deposit).

He is also being asked to grant orders which approve three settlements entered into by Imperial Tobacco:

1. Resolving a dispute with Revenue Canada

In June 2019, shortly after the insolvency protection was in place, Revenue Canada disputed certain claims for tax deductions made by Imperial Tobacco for the 2011 and 2014 tax years, and made similar subsequent demands the following year for the 2015-2018 tax years. 

The affidavit  filed this week reports that the Canada Revenue Agency was seeking $42.3 million for 2011 (which would increase provincial tax by $6.5 million), with interests adjustments for delayed payment. The amount sought for 2014 was $64.3 million (plus $10.3 provincial). Additional tax demands totaled $7.5 million for 2015, $46.8 thousand for 2016, reduced overall tax for 2017 by $12.7 million, with a further reduction of $16.3 million for 2018. At the end of 2020 the assessment notice issued by Revenue Canada said the company owed $56,748,563.35 (shown below).

The details of the negotiations with CRA about the disputed amounts are not included in the material filed. It appears that the Agency was willing to resolve this large bill for considerably less than the amounts cited in the material filed: "an aggregate payment by ITCAN of $1.5 million and the exchange of full and final mutual releases." 

2. Finalizing obligations to 59 Genstar retirees.

Imperial Tobacco's legacy obligation to retirees of a real-estate company it sold many years ago was the subject of a non-controversial decision early in the CCAA process. It would appear there were lingering issues with 59 affected individuals which were resolved by the company at the beginning of 2025 in return for a payment of $850,000. The company wants these to be resolved through a special order of the court, and not through the "miscellaneous claims" process provided for in the settlement.

3. A contribution from insurance companies. 

Both ITL and RBH had at some point in previous years had liability-related policies with various insurance companies. In the material filed in advance of the June 18th hearing, ITL reports that it has reached a settlement with certain of its insurers for payments "totaling $2,750,000, to be held in trust by the Monitor" which will be transferred as part of payments made on the day the settlement takes effect.

A copy of the settlement, which includes some information on the policies held by the companies, was included in the material filed. 

JTI's request for an amendment to its initial order is granted.

This morning the monitor for JTI-Macdonald uploaded recent decisions by Chief Justice Morawetz, to agree to the company's request for an amendment to its initial orders, as discussed in a previous post.

The "Second Amended and Restated Order" giving the company CCAA protection is available, as is the "endorsement" in which Chief Justice Morawetz' reasons, pasted below, are given.

[1] The motion proceeded on April 29, 2025, on an unopposed basis. The evidence to support the requested relief is set out in the 26th and 27th Reports of the Monitor and in the Affidavit of William E. Aziz, sworn April 23, 2025. 

[2] The relief as set out in the Notice of Motion requests rectification of two points in paragraph 20 of the Initial Order. However, at the hearing, it became apparent that the Applicant was actually seeking to amend two inadvertent errors in paragraph 20 and relied upon Rule 59.06(1) of the Rules of Civil Procedure for such relief. 

[3] At the hearing, I indicated that the motion was conditionally approved upon being satisfied that there was direct contact with the Attorney General of Canada, representing Health Canada regarding the motion and that the Monitor was satisfied that no party in interest would be prejudiced if the relief was granted. 

[4] The Monitor’s 27th Report confirms that direct contact has been made with both the Attorney General of Canada, representing Health Canada and no objection to the requested relief has been made. The Monitor has reaffirmed its view that no party in interest will be prejudiced by the requested relief. 

[5] Having reviewed the record, I am satisfied that paragraph 20 of the Initial Order contains two inadvertent errors as referenced in the Notice of Motion and it is appropriate that these errors be corrected as requested by the Applicant. 

[6] The Motion is granted and an Order giving effect of the foregoing has been signed.

Newfoundland reveals its lawyers will receive 25% of $520 million settlement

All but two of the Canadian jurisdictions which reached a settlement with tobacco companies to resolve their claims for health-care cost recovery chose to enter into contingency-fee arrangements with the lawyers who represented them in court. These arrangements were discussed in a previous post.

Contingency fee arrangements mean that the lawyers agreed to be paid only upon a successful outcome, often as a percentage of any final payment. 

Newfoundland is one of the few Canadian provinces which had previously put on record its contractual obligation to the team it hired. In 2011 it said that the U.S. firm and its Canadian partners would share 30% of the proceeds of a lawsuit. 

Earlier this month, the Minister of Finance for Newfoundland and Labrador reported that the final fee that will be paid to the lawyers will be $130 million. This represents 25% of the $520 million slated for that province.

On May 13, the Minister was questioned by a member of the opposition, who wanted precision on how much the province would receive: "L. PADDOCK: This year's budget included $520 million in revenue from the tobacco settlement. So I ask the minister: How much of that will actually be received, in hand, this fiscal year?"

Mr. Siobhan Coady, the Minister of Finance and President of Treasury Board replied that "The payment terms are still being finalized... Newfoundland and Labrador's share of that $32.5 billion is $520 million, of which we have to pay legal fees. As the Member opposite knows, yesterday in Estimates we talked about what the legal fees cost out of that $520 million. If memory serves it was $130 million. So $390 million is what we are receiving in revenue, what we can book in revenue in this particular fiscal year."

JTI releases more information on its request for its own litigation stay to be removed

More details have emerged following the quiet (unobserved?) hearing held before Justice Morawetz on April 29th. The hearing took place at the request of JTI Macdonald, which wants to tweak the ground rules of their insolvency protection which were set in 2019.

The requested change would prevent an expiry of their own limitation period to sue other parties. The proposed change is shown in blackline below:

Yesterday, JTI's monitors tabled their 27th report (dated May 15, 2025), which provides details on why they want this wording change: they want to challenge federal regulations. "The Applicant sought the relief requested in the Amendment Motion in consideration of its current and future rights in respect of federal regulations applicable to the Applicant."

From this report, it would appear that Chief Justice Morawetz had sought reassurance that the federal government was aware of the potential change. According to the report (and the Appendix B to it), the  federal government was duly notified and decided to voice no opposition. 

A proposed wording change to JTIM's 6-year-old litigation stay

 After a month of no communication, a few new items were posted this week to the websites of the Monitors involved in Canada's tobacco insolvency proceedings. 

As of this moment, none of this new material contains information about the pending decisions on the date on which the settlement will be implemented (and victims can be paid) or about the fees that will be paid to the lawyers representing many of those individuals.

The new material includes the naming of the Quebec judge who will participate in the administration of the Quebec Class Action. Justice Catherine Piché - who has significant experience in class action theory - was assigned this responsibility mid-month.   

It also includes a motion that will likely be the subject of a hearing next week (April 29 at 11:00 a.m). JTI-Macdonald wants a change to the wording of the Initial Order issued by the court 6 years ago. 

As I read it, the effect of the wording would be to allow this company  to pick up where they left off on any lawsuits they wish to file without worrying about limitation periods. "JTIM seeks to rectify paragraph 20 of the Initial Order to include the word “by,” to align with the McEwen Endorsement and the initial orders of Imperial and RBH, to ensure that any prescription, time or limitation period related to any Proceeding by the Applicant is tolled."

The black-lined amendment proposed by JTIM

The wording change sought by JTI Macdonald would give the company the same rights as are already provided to the other two companies involved in this insolvency proceeding. It would make the language in their Initial Order the same as that already in place in the (amended) initial orders for Imperial Tobacco and Rothmans Benson and Hedges.

Looking for movement ...

No sign of an appeal

It is now 22 days since Justice Morawetz approved the measures that will end the decades-long lawsuits against Canada's tobacco companies. That means that 1 day has passed since the deadline for any parties to file their objections. 

Objections to any court decisions based on the Companies Creditors' Arrangement Act must be filed within 21 days (section 14 of the CCAA). Ontario's Court of Appeal has its own methods for managing such appeals that don't necessarily involve public hearings and which make it more difficult for outsiders to know what is going on:

"An appeal under the Companies’ Creditors and Arrangement Act is processed differently from other appeals. Under this act leave to appeal can be obtained by a single judge or a panel. A notice of motion for leave to appeal under this act must be served within 21 days from the date of the order being appealed.

*A panel motion follows Rule 61.03 (1) and is heard in writing without the attendance of parties or lawyer. A decision will be made by a panel of Judges.

*A single judge motion follows Rule 37 and a notice of motion (Form 37A) is served upon the respondent(s), and then filed in the office of the Court of Appeal with proof of service at least 7 business days before the hearing date of the motion. A date is chosen by the moving party/ies."

If any notice of motions to appeal the March 6 Sanction Decisions has been submitted, none have yet been identified on the Monitor's sites (the site for Imperial Tobacco has not been functional this week). 

No roadmap has been made public

Following the hearing on March 7th, a lawyers-and-judges-only huddle was held in the library of the court house to discuss what Chief Justice Morawetz described as "logistical issues". It seems likely that these related to the steps that must be completed before he will establish the date on which the arrangement will take effect. The plans (including in section 4.2) identify a number of such restructuring steps. 

It is not clear how long it will take for these to take place and no road-map or schedule has yet been posted. Even the lawyers seem uncertain. In an interview with the media in march, a lawyer working for several provincial governments gave a wide range for when money will change hands: "somewhere between 90 and 120 days".

Nor is there any indication of when other issues that need court approval - such as the establishment of the research foundation - will be addressed .

A quickie ruling made in semi-private

Last Friday, a motion was filed by lawyers representing the "Pan Canadian Claimants", with a request for the court to block other lawyers from offering their services to assist potential claimants. A similar request had made (and granted) in December, but the injunction which resulted on that occasion expired in March. The request was supported by the lawyers representing the Quebec class action and also by the Ontario government. 

A hearing on this issue was held by video conference on Wednesday, but no public access was indicated on the monitors' websites or on the court rolls. Today Chief Justice Morawetz issued the requested injunction. 

If other issues were discussed at this time, we are not aware of any public record of them. 

"Absurdly High" or "Just Reward"? - the decision on lawyers' fees

The finalizing hearings to resolve the lawsuits against tobacco companies ended shortly after noon today with a discussion of how much the lawyers representing the Quebec class actions should be paid.*

In theory, the fees of all three class actions were under discussion. In reality, the only question before the court was whether approval should be given to the $900+ million fee requested by the lawyers for the Quebec class action.

Their request had been filed more than a month ago, and the arguments in favour of it presented to Chief Justice Morawetz soon after. The review of their request was interrupted for a few weeks by Chief Justice Morawetz' decision to ask a former Quebec judge to act as an amicus curiae. The Hon. André Prevost was mandated to provide "a purely legal and academic description of the applicable test under Quebec law" as well as some advice on how to apply this to the current circumstances.

André Prévost filed his report in late February. This morning he presented his findings, beginning with the caution that the decision in this case -- whatever it was - would set a landmark for class action fees in other mega fund cases. 

He presented the rules that govern lawyers' fees in Quebec (Code of Professional Conduct, s. 102), court rulings on assessing class action fees (e.g. A.B. c. Clercs de Saint-Viateur du Canada, para 64-65), and recent reflections of academics on the subject of fee levels. His review of other cases across Canada, presented as schedules to his report, showed that the fee request under review was consistent with past practice. He cautioned that fees which encouraged large lawsuits are needed in a class action business environment where lawyers feel they are "better to take on smaller cases where the judge is unlikely to be shocked" by the fee. 

In short, if Justice Morawetz had been hoping for some comfort or support in turning down the fee request, he would have had to look hard in the report of the amicus curiae.

Yet it seemed that a reason to cut was what Justice Morawetz was looking for. Not because he thought the work had not met the criteria for reward  -- he described the endeavour as "spectacular" - but because $900 million might be "absurdly high". 

"One of the things that I have to consider is 'what is the objective of class proceeding  legislation compensation for lawyers – is it to create a fund for generations to come?'"

A backdrop to the decision imposed on the court is that the ruling will set a precedent for future mega-tort cases -- even though the likelihood of a parallel case is considered remote. Mr. Prévost acknowledged the challenge in his closing comments to the judge: "I am happy to be in my shoes and not in yours. In this case if you compare to all other cases, this is extreme. Counsel has 100% on all factors [to justify honouring their contracted fee]. This was a huge case – we will probably not have many such cases in Canada."

Quebec counsel: a fair and principled fee request

Counsel to the Quebec class action used the opportunity to respond to the Prévost report to repeat and emphasize some arguments to support their request. He batted back the idea that the fee would not be fair to the class members (who have voiced no objection, despite being canvassed). He rejected the idea that the fee would make lawyers look unreasonably profit-seeking or otherwise diminish the reputation of the legal profession, and said that their case had the opposite effect.  

At the end of these remarks, Chief Justice Morawetz asked what would happen if the fee were reduced. The answer (provided also by Ontario counsel later in the day) was that the provinces would be the recipient of any money that was not needed to pay legal fees in the (likely) case that there were enough funds to cover all of the claims made by class members. 

Cancer Society: A unique achievement

The last intervention in the day was by counsel for the Canadian Cancer Society. He identified that the Quebec case was "beyond the grid" of the table of other "mega-fund" cases that had been discussed earlier in the morning. "There has been nothing like it. There may never again be anything like it. .. It has enhanced the reputation of the profession. They have achieved what no one else has ever achieved going back to the 1950s - and against impossible odds. Their unique legal story will lats in Quebec, Canada and globally."

No public arguments in favour of a reduced fee

Although counsel for the Quebec government had originally raised concerns about the size of the fee, they withdrew any objection after the appointment of Mr. Prevost. If Justice Morawetz received any other recommendations or reasons to over-rule the contracted fee in this class action, they were not directly expressed before him in these proceedings. 

The mediator in this case -- former Chief Justice Warren Winkler - has played a major role over the past 6 years and is authorized to speak privately to the judge. His views on the fees are not on the public record. 

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 *Disclosure: The staff of Physicians for a Smoke-Free Canada were among those who worked on a contingency basis for the counsel to the Quebec class action.

Sanction: a seal of approval brings Canada's tobacco lawsuits closer to the end

 Late this afternoon - presumably after the markets had closed - Chief Justice Geoffrey Morawetz released his decision in favour of the Plan of Arrangement that will resolve a quarter century of lawsuits against tobacco companies.

His ruling can be read here.   In about 50 pages, he translates the 1,200+ text of the proposed plan into readable English before giving a thumbs up to the compromise that was unanimously agreed to in December by those suing tobacco companies and which was the subject of hearings earlier this winter.  

Fair and Reasonable and Not Contrary to the Public Interest

The final objections of two companies having been removed earlier in the week, there were few roadblocks to his endorsing the agreement exactly as it was drafted by the team lead by former Chief Justice Warren Winkler. 

After Monday, the only nay-sayers in the process were the Heart and Stroke Foundation and the Canadian Cancer Society, which had urged him to consider that some health-oriented measures were required for the plan to be fair and reasonable.

Justice Morawetz acknowledged these requests in his ruling, but firmly turned them down. It was not  his job, he said, to interfere in this way. 

(165). The decision for the court to make is a binary one. It is to either sanction the CCAA Plans or to reject the CCAA Plans. It is not the role or the function of the court to redraft or amend the CCAA Plans. The views expressed by HSF and CCS are important to consider. However, in my view, these views have been taken into account by the drafters of the CCAA Plans. 

In assessing the fairness, reasonableness and public interest of the plan, Chief Justice Morawetz stressed that individuals and provinces will receive compensation, a research institute will be established -- and that tobacco companies will be able "to continue as going concerns, which will benefit their employees, suppliers and other stakeholders."  

Not decided

A number of details still remain to be decided -- including important ones like the day on which this agreement will take force and when money will change hands. The "Plan Implementation Date" has yet to be decided - but the litigation stay will be in force until then.

A separate ruling is to be expected for the questions of counsel fees, discussion of which will be the subject of a hearing tomorrow (March 7th).

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Misleading or misreading? 

To buttress his rejection of the concern expressed by HSF for injured smokers whose potential claims were being released, Justice Morawetz used the (not public) transcript to cite the views expressed by Ontario's lawyer on January 31st. 

In response to the theoretical case raised by the Heart and Stroke Foundation, she had asserted that no Canadian who started smoking after 1996 and who was injured by tobacco products would have a viable claim for damages. The reason she gave was her reading of the Quebec Court in the Blais-Létourneau case. 

 "The (Quebec) Court found that the (public-knowledge) date to be March 1st of 1996, so the breach period during which the tobacco companies committed their wrongful conduct which grounds the cause of action, begins in 1950 and ends, very important, ends at the public knowledge date."

This does not jive with a normal reading of Justice Riordan's ruling. (Riordan, 2015, paras 139-142, 643-646, 818-836).

Justice Riordan considered the behaviour of the companies from 1950 to November 1998 (the class period) and did not hear evidence or decide upon later behaviour. During the class period he reviewed, he never identified a time when the companies were not at fault. "Thus, the Members' knowledge does not arrest the Companies' faults under these other provisions. Since the Companies took no steps to correct their faulty conduct, their faults continued throughout the Class Period." Because fault is not the only condition of civil liability, he also considered the "contributory fault" of those smokers who started smoking after the harms were known - the "knowledge dates".

Justice Riordan identified separate knowledge dates for knowledge of harm (1976) and knowledge of addiction (1996). The liability of the companies towards their injured customers continued after these dates, he ruled, except for those under one section of the Quebec law (Civil Code article 1468). Their breach of three other sections of the law continued to establish liability (Civil Code Articles 1457, Quebec Charter, article 49, Consumer Protection act, articles 219, 228).

He ruled that although injured smokers who had started smoking after the "knowledge date" had to carry some responsibility (20%), the companies were 80% to blame, and they remained 100% responsible for punitive damages. This 20% deduction for those who started smoking after 1976 remains in the compensation which will be awarded through the CCAA plan. 

Court agrees to minor amendments to proposed settlement

During the course of a 30 minute hearing today, Chief Justice Morawetz listened to and agreed to the request for his approval of a small amendment to the plan which would resolve the lawsuits facing Canada's tobacco companies.

The amendment in question (pasted below) would end the inter-company wrangling over dividing the check. With it, there is now full agreement among all the parties involved - tobacco companies and their creditors. It is hard at this point to see any reason why the plan will not soon be put into force. 

Rothmans, Benson and Hedges had earlier maintained it was getting a raw deal because it put more money into the initial kitty and because the Quebec court had ruled that Imperial Tobacco's behaviour was worse and therefore it was responsible for a greater portion of the damages. In the end, Imperial Tobacco agreed that it would relinquish any claim it might have on the $750 million from that kitty that was being returned to the companies in the form of "working capital."  With that concession, RBH withdrew all of its objections to the plan.

Japan Tobacco's affiliates (both the cigarette manufacturing branch and the trademark-owning branch) also withdrew their objections today, although there was nothing presented that would explain their change of heart. They may simply have known when to fold them: their objection was based on a desire to maintain dubious inter-corporate financial arrangements that had already been the subject of court criticism.

The longest part of today's session was the courtroom whipping of Heart and Stroke for its temerity in filing an objection to the amendment. Ontario's lawyer played the heavy - going on at some length about the limited role that social stakeholders should  have in such a process, and accusing the agency of  "abuse of process" and "egregious conduct that needs to be reined in by the court."

Some ganging-up is to be expected. Everyone seems anxious to get this to the finish line, and Heart and Stroke was alone in voicing any concerns about putting this last brick in the wall.  (The Canadian Cancer Society is also on record that  "plans should not be sanctioned in their current form", but did not intervene on this morning's request for amendment.)

Chief Justice Morawetz directed a courtroom-style tongue-lashing at Heart and Stroke's lawyer, asking him to identify how they would be affected by the request (he couldn't) and then pushing him to explain why the foundation should not be assigned costs for the time of the (many dozen!) lawyers whose time was impacted by the objection.

The hearing ended with the judge agreeing to the request for amendment and clarifying that the litigation stay which has suspended all lawsuits against these companies for almost 6 years would be sustained until he issued his decision on the settlement.  One (last?) hearing is scheduled for this Friday, March 7th, when the court will review the amicus curiae brief regarding legal fees.

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The amendment agreed to today:

 

Documents filed in connection with this request:

• Imperial Tobacco: Affidavit of Eric Thauvette. February 27, 2025
• Imperial Tobacco Motion Record Returnable March 3rd
• Imperial Tobacco. Monitor's 28th Report Japan Tobacco: Affidavit of William Aziz. February 27, 2025
• Japan Tobacco. Third Amended and Restated Plan.
• Japan Tobacco. Motion Record Returnable March 3rd, 2025
• Japan Tobacco. 25th report of the Monitor. Rothmans, Benson and Hedges. Affidavit of Milena Trentadue
• Rothmans, Benson and Hedges. Motion Record Returnable March 3 (part 1) (part 2)
• Rothmans, Benson and Hedges. 26th Monitor's Report (part 1) (Part 2)Joint Factum of the Monitors
• Objections by Heart and Stroke Foundation