The Paperwork

January 13 was the first of several filing days leading up to the month's end hearing to seek approval of the settlement reached in October between Canada's three large tobacco companies and those who are suing them.  

The timetable for these filings, approved by the court in December, is displayed below (click to enlarge.) The documents appear on the websites of the firms which act as court monitors: EY for Rothmans, Benson & Hedges; Deloitte for JTI-Macdonald and FTI for Imperial Tobacco. 

This post will identify some of these documents as they become available on the website of the monitors. Stay tuned for updates!

January 13: Fee approvals

The settlement requires the fees charged by lawyers representing Quebec class action, the Knight class action and tobacco farmers to be approved by the court. Contingency fees charged by lawyers for eight provincial governments and three territories do not require court approval, nor do counsel for injured smokers who are not part of the Quebec class action (the Pan-Canadian claimants). 

Quebec Class Action *

The Quebec class action counsel motion filed on January 13 requests approval of payment of 22% of the settlement amount, which works out to $901 million of their $4.1 billion share of the settlement. The percentage was set in an agreement signed with the Conseil Québécois pour le Tabac et la Santé (CQTS) in 1998 and amended in 2017. 

The lengthy (300+ pages!) material filed in support of this request is compelling reading. This set of personal narratives details the personal, legal and financial history of this historic trial and how several lawfirms joined forces to sustain the claim over decades. To date more than 100 person years of plaintiff lawyers' effort (203,849 hours) have been logged. (The major firms involved are Trudel, Johnston, Lespérance; De Grandpré Chait; Kugler Kandestin; and Fishman Flanz Meland Paquin.

Tobacco Producers

The farmers' share of the settlement is $15 million, and counsel is requesting a payment of $3.1 million. Their original retainer agreement was for 25% of the award. In support of this request, the document provides a background on the lawsuit and the companies' contracts with farmers. These Ontario farmers are represented by Strosberg Wingfield Sasso. 

Knight Class action

Imperial Tobacco was the only company implicated in the B.C. "Knight" class action lawsuit focused on the sale of light cigarettes. The settlement provides for a $15 million dollar payment in this case which, apart from legal fees, will be allocated to the research foundation established as part of the settlement. 

The retainer fee negotiated at the outset of this case was 30%, and the lawyers are asking for approval of $5 million plus $1 million in disbursements plus interest and sales taxes. Almost $3 million in billing hours is identified since the law firm, Klein Lawyers, filed the action in 1998. 

This document provides background on the evolution and context of the lawsuit. Included is matrial that would otherwise never see the light of day, such as the expert reports on health impact prepared by David Hammond and David Burns and also a review of the financial benefits to Imperial Tobacco of light cigarette sales.

January 15 

Stay Extensions

As it now stands, the insolvency protection extended to Canada's tobacco companies will expire at the end of this month -- halfway through the Sanction hearing at which the fate of the draft settlement will be discussed. One of the first parts of the agenda of that hearing is expected to address the need for a further stay extension, and January 15th was the deadline for the companies to submit their extension requests. 

At the end of October the companies failed to convince Justice Morawetz to extend the stay until the end of this March.  In Rothmans, Benson and Hedges' motion, the request is for an extension until  the end of February. Imperial Tobacco is asking for and the stay to be extended until  the "Effective Time" when the settlement is put in place. JTI-Macdonald is asking for an extension to March 31, 2025. 

Sanction Order

Draft versions of the court orders to approve the settlement have were submitted together with rationale for adoption. Draft Sanction Orders and Plan Administrator Appointment Orders for Imperial Tobacco, Rothmans,  Benson and Hedges and  JTI-Macdonald's were filed by their monitors. 

Monitor's Reports

The monitor for each company also filed a report providing their support for the proposed motions and additional information considered useful to the court. These reports provide new background to the mediation process. Reports are now downloadable for JTI-Macdonald, Imperial Tobacco and Rothmans, Benson and Hedges.

One of these reports contain red flags. The reports signal that there could be bumps on the road to implementing a settlement as the companies have not yet agreed on how to divide the responsibility to make payments. According JTI's monitor,  unless this is resolved, the agreement should not be Sanctioned. The "allocation needs to be resolved prior to the sanctioning of the JTIM CCAA Plan as this unresolved issue has the potential to introduce significant commercial uncertainty and ambiguity in the application of the settlement on the Canadian tobacco industry. As a result, JTIM has advised the Monitor that JTIM and its Tobacco Company Group do not support the JTIM CCAA Plan in its current form..."

Although all the monitors had previously given a green light for moving ahead with a Sanction hearing, JTI's is now expressing concerns that because of the unresolved issues the agreement might be doomed to fail.  

"44. The working assumption of the Monitor in seeking the Meeting Order and the Sanction Protocol Order was that the issue of allocation had a reasonable prospect of being resolved in the existing Mediation process prior to the sanctioning of the CCAA Plan and therefore the JTIM CCAA Plan was not doomed to fail. 

45. In the Monitor’s view, addressing the uncertainty arising from the allocation issue is a significant consideration in the workability of the JTIM CCAA Plan. 

46. If the parties do not agree on allocation, or allocation is not otherwise settled, there is an implementation risk."

Nor have JTIM's other concerns regarding the impact of the settlement on its intra-corporate financial practices been resolved. Their Monitor's report provides a background on this issue and uses them as a basis to demur on whether the court should sanction the agreement. Monitors for the other two companies recommend that the court issue a Sanction Order. 

Updated January 17, 1:00 p.m.

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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.