There is one week to go until Canada's tobacco companies return to the Ontario Superior Court in connection with their insolvency protection under the Canadian Companies' Creditors Arrangement Act.
The "Big Three" tobacco firms have been under insolvency protection since last March. Next week they will be seeking a further 6 month "stay" of all legal proceedings against them so that they can try to negotiate a settlement of all claims against them.
To support this request, each company will be filing motions, affidavits, monitors reports and other material. Material may also be filed by other parties (the provinces, the injured smoker class actions and others). These documents are the only insight available to the public on the ongoing negotiations for a settlement of the historic tobacco lawsuits -- none of the provinces or other litigants has made public any information on the proceedings.
Noted below are some highlights from the material. This list will be updated as more material becomes available.
A mediation timetable has been set by Mr. Warren Winkler, the court-appointed mediator.
So far there has been an exchange of position statements.
Mediation Briefs: Pursuant to a schedule set by the Court-Appointed Mediator, the Applicants, JTI, RBH, and various Tobacco Litigation plaintiffs exchanged mediation briefs on August 1, 2019.
On September 12, 2019, counsel for the Consortium of Provinces andthe Provinces of Quebec, Ontario, Alberta, Newfoundland and Labrador submitted reply briefs.
A big meeting is planned
The Court-Appointed Mediator has scheduled a plenary session, which will be attended by the Tobacco Companies, the Tobacco Litigation plaintiffs, and other stakeholders. The Applicants anticipate that the Court-Appointed Mediator will schedule further steps in the mediation process following the plenary session.
Mr. Winkler directed the companies to make data available to the provinces
The Court-Appointed Mediator has ... direct[ed] the establishment of datarooms
Data exchange mechanisms were established, and confidentiality agreements negotiated with some provinces to allow the provinces to make this information available to their advisors. In order to facilitate the exchange of information necessary for asuccessful mediation process, data rooms were set up during the most recent Stay Period for each of the Imperial, JTI and RBH CCAA proceedings.
On August 16, 2019, the Data Rooms first went “live” to be accessed by parties who had executed [non-disclosure agreements].
Everything is to remain a big secret
Pursuant to the endorsement of Justice McEwen dated May 24, 2019, the mediation isconfidential and all statements, discussions, offers made and documents produced by any ofthe parties in the course of the mediation process shall not be disclosed. Accordingly, thedescription of the activities of RBH and the mediation process below is general in nature.
The end is not in sight
The Stay Period presently expires on October 4, 2019. The plenary session with theCourt-Appointed Mediator will not occur until afterwards. Prior to this session, it is difficult toprovide any realistic estimates of the time required to complete the mediation and to developand implement a CCAA plan.
The companies have not made any concrete offers - and the Quebec class action lawyers are impatient.
However, since June 2019, no Plan, nor even the bare economics of a potential settlement,were proposed by any of the Applicants and they are now each requesting a further extension ofthe Stay Period (the “Third Stay Extension”), for an additional period of more than five (5)months, until March 6, 2020.
The QCAPs oppose the length of the Applicants’ Third Stay Extension request, and submitthat, if granted by the Court, the Third Stay Extension should be limited to January 15, 2019,representing more than three additional months and being a length of time more consistent withprior extensions granted by the Court.
To this end, unless a serious and viable offer is made by each of the Applicants, which must include a significant financial contribution on the part of each of their parent companies, by December 20, 2019, it is the QCAPs’ intention, on or prior to January 15, 2020, to contest any further extension of the Stay Period.
The Canadian Cancer Society wants to be included in mediation discussions
The CCS is asking for an order "permitting the participation of the CCS in the mediation process in these CCAA proceedings". In support of its application to be a "public health stakeholder", the CCS has submitted letters from 17 tobacco control organizations.
Summer sales were up!
JTI reported that it sold more products in the summer period than it had expected it would. "A favourable variance of $9.2 million in third-party sales receipts due to higher than expected volume during the Reporting Period."
Companies are stocking up ahead of plain packaging rules
JTIM incurred $11.7 million in import duties not included in the forecast due in part to the accelerated import of certain products prior to the implementation of the new plain and standardized packaging measures.
JTI spends 21% of its earnings from sales on promotions!
25 week forecast revenue from sales - $559,340,000; Total duties and taxes - $257,346,000; Revenue net of taxes - $302,004,000; Expenditures on promotion and marketing - $63,154,000.
Wednesday 25 September 2019
Saturday 21 September 2019
Tobacco companies will ask for litigation stay to be extended to 1 year
Already half a year has passed since the Quebec Court of Appeal upheld the multi-billion dollar judgment against tobacco companies. Already the families of the 100,000 smokers have waited 6 months to learn whether they will receive compensation for the serious illnesses or deaths caused by the companies' wrongful behaviour.
Yesterday, Japan Tobacco made public that it wants them to wait at least another 6 months. In a motion filed in advance of the October 2nd hearing before Justice Thomas McEwen, lawyers for JTI-Macdonald asks for "an extension of the Stay Period until March 6, 2020". It reports that the other companies will make similar requests.
Very soon after losing at the Court of Appeal, the tobacco industry defendants sought protection under the federal Companies' Creditors Arrangement Act. This law allows large companies in financial distress to seek court protection from claimants while they try to work out a deal that will get them back on their feet.
Last March, the Ontario Superior Court extended that protection to all three defendant tobacco companies. It later assigned to former chief justice (Hon. Warren Winkler) the task of trying to mediate a settlement between the three companies and all of those who had filed lawsuits to seek compensation for the moral and economic damages that resulted from the companies' dishonest marketing and public relations practices. This included the 10 provinces, the Quebec class actions, one other certified class actions and a handful of copycat suits.
The claims are said to be in the order of $600 billion. These estimates of the damages caused by tobacco use are exponentially larger than the current value of the market that caused it. It's far from clear how the claimants propose to square the circle of the hundreds of billions they are owed and the much smaller amount that is currently been shaken from the pockets of Canadian smokers.
(Data from reports filed by the companies with Health Canada were made public this summer. As shown below, the companies increased their Canadian revenue by 48% after 2014 - from $2.8 to $4.2 billion per year.)
It's possible that a vision of how to move forward was provided to Mr. Winkler in one of the 'mediation briefs' that he asked to be submitted on August 1st.
At this point, outsiders are not permitted to know. All we have access to are the small details contained in the materials submitted to court. This week's motion from JTI included the following tidbits:
- A plenary session is in the works.
("the Applicant has complied with the timetable and procedure of the mediation process set out by the Court-Appointed Mediator, including the delivery of the Applicant’s mediation brief and preparation for the upcoming plenary session.") - Some data sharing is underway.
("A virtual data room ... administered by the Monitor")
We may learn more when more documents are filed in advance of the October 2nd hearing. In theory, all material is expected to be circulated a week in advance. You can follow along at the monitor's web-sites for the three CCAA applicants:
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