The third day of the hearings before Justice Geoffrey Morawetz to finalize (or not) a plan to settle the lawsuits against Canada's tobacco companies was focused on the concerns of the "social stakeholders" -- the Canadian Cancer Society and the Heart and Stroke Foundation -- and on the rebuttals of parties to statements earlier in the week.
Heart and Stroke (H&S)
The criticisms of this leading Canadian health charity were presented at the end of Day 2 (but not reported here), and were concluded this morning.
Although this agency has lobbied governments about the management of their lawsuits, it is a new-ish presence in the CCAA process and its outsider status was made clear from the get-go. (It had an unsuccessful run at introducing its concerns in early 2023) The agency's counsel had barely opened his mouth yesterday afternoon before Justice Morawetz asked pointedly "Why are you here?".
"Because tobacco is a harmful product. The sale has devastating economic impacts and takes an unfathomable toll on individuals and families. This plan will facilitate the continued sale of a dangerous and addictive product that will kill Canadians. It is within that perspective to consider whether the plan is fair and reasonable."
H&S's counsel argued that there was a class of stakeholders who had been omitted from consideration in the settlement. These are those Canadians who have not yet experienced harm, but whose continued smoking puts them at risk of doing so. He characterized these individuals as the "Future Tobacco Harm Stakeholders" - Canadians whose continued purchases and resulting health risk will be used to finance the payments the companies will make to the provinces over the next 20 odd years but whose interests have not been represented during the negotiation.
The remedy which H&S proposes for this situation is to expand the scope of the Cy-Pres foundation to include prevention and cessation activities. It says that these activities are specifically excluded from the work that the $1 billion foundation will support.
Justice Morawetz' discomfort with this exogenous suggestion was its disconnect with his limited role to either approve or dismiss the settlement. "The problem I have is that while I hear everything you say, I have to deal with what is before me." He repeatedly pressed for a clear answer to the question "Is it your objective to see this plan fall apart?"
This question hung in the air as the agency's two counsels outlined their previous efforts to communicate these concerns to unresponsive monitors and governments, and identified other instances where resolution of tobacco and opioid lawsuits had produced resources to help reduce use.
The question was left hanging overnight. In the morning, H&S returned to offer a somewhat more nuanced objective. They suggested the Sanction decision was not a binary one, but that Justice Morawetz could approve the settlement subject and direct a subsequent vote on an expanded mandate for the Cy Pres foundation.
The Factum for the Heart and Stroke Foundation can be found here.
Canadian Cancer Society
The submission of this other large health charity was made in two parts. The first was a defence of the importance of the views of social stakeholders in situations with large public interest, and a promotion of the view that accepting propositions from social stakeholders was an appropriate evolution of CCAA application.
It would appear that there are slim pickings when it comes to finding precedents for the type of role that CCS wanted to see. Nonetheless, Justice Morawetz was presented with some rulings where the broader public interest will be a "factor against which the decision of whether to allow a particular action will be raised."
There was little sympathy offered to this argument, and it felt like Justice Morawetz was handing the nails for the lawyer to hammer into his own coffin when he asked. "Can you point me to any authority where such an action has been recognized?" he asked. "I am not aware of any such case."
The second part of CCS's presentation was a critique of certain provisions of the agreement, and proposals for 'administrative' textual changes that would address these concerns. One of these was the covenants in Article 11 which commit the companies to maintaining their historic business practices. Given the dubious and condemned past practices of this industry, "the effect of this wording is to offer partial protection from liability for future conduct."
Modifying the text to clarifying that there was no future protection should be viewed as an administrative change to the plan, CCS counsel argued, pointing to the public statements made in October that the intention was to release the companies from past liability.
Other amendments to the plan were also proposed. CCS asked that all of the documents exchanged under discovery be provided to the document library at the University of California at San Francisco. It proposed that ongoing promotional expenditures be disallowed, which in addition to public health benefits would also help accelerate payments to the provinces as it would increase profitability.
The Factum for the Canadian Cancer Society can be found here.
The Replies
Each of the parties had the opportunity to reply to the comments made by counsel to other participants. This resulted in some rebuttal to the shade that had been cast by one party on the others over the previous days. Not extortion! Not a do-over!
There were signs that there had been some movement in the positions of the parties on some areas of disagreement, such as how to allocate the $750 million assigned from the accumulated cash to the companies as working capital.
Counsel for Ontario spent her time trying to cut the ground out from beneath the arguments of the Heart and Stroke Foundation and Canadian Cancer Society. At length she described the legal reasons why only a small number of Canadians would technically qualify as victims with compensable diseases and therefore subject of either direct financial compensation or included in the the scope of the Cy Pres foundation.
Anyone who started to smoke after 1996 has no cause of action, she said, basing this conclusion on the knowledge date for addiction set by Justice Riordan in his ruling. The concerns of the CCS about the companies being able to act in wrongful ways in the future were misplaced: "It misunderstands the purpose and intent of Article 11 covenant.. .. They are simply not correct."
Implicit in her description, but unstated, was that there are neither direct nor indirect benefits for the vast majority of smokers. If she addressed the comments of the Heart and Stroke Foundation that these citizens would be financing the settlement while imperiling their lives, these ears did not catch it.
The counsel for the Pan Canadian Claimants gave another set of reasons for the judge to disregard the proposals of the health charities. He asserted the foundation's job was not to replace programs that are already underway, and these charities would have an opportunity to seek funds from the foundation in the future.
No party spoke in favour of the proposals of the social stakeholders.
By the end of the day the submissions on the plan had been completed. Most of the sticking points at the beginning of the session remained at the end: there was no consensus among the participants about whether a plan could be imposed on a debtor without their consent, or whether two companies' concerns about splitting the bill could trigger adjustments to the draft.
The extension
With only 8 hours until the current litigation stay expired, Justice Morawetz said he was extending all stays until March 3rd.
