Read it and weep: Justice McEwen explains himself

On October 2nd, Justice Thomas McEwen of the Ontario Superior Court was asked by Canada's tobacco companies to extend their get-out-of-court privileges until March 2020. Against the requests lawyers representing Quebec smokers for a shorter no-lolly-gagging-allowed extension, the judge agreed to 5 month extension the following day. On that day he also turned down a request by the Canadian Cancer Society to be able to participate in the mediation efforts between tobacco companies and those suing them.

Reasons, he said, were "to soon follow". And indeed they followed last Friday in the form of an 11-page handwritten Order. (Handwriting is not, apparently, a lost art. It is just hiding in the corridors of Toronto's court house.)

Justice McEwen's handwriting is easy to read, and his predispositions in this case are similarly legible. He not only dismissed the concerns of the Quebec class action lawyers, he dissed them for having any.

What a contrast to Justice Riordan's court!  In that Montreal court, after more than a decade of industry foot-dragging, the judge clearly tried to prevent further delays or ragging the puck, abuse of process, or further acts of bad faith. (Justice Riordan's attempts to assess the abuse of process by the companies is among many issues which remains stalled by Justice McEwen's stay order).

Meanwhile in this Toronto court, Justice McEwen sees bad faith on the part of those representing Quebec smokers. He uses this ruling to strongly chastise ("unacceptable to this court"!) the Quebec legal team for not playing nice with the process. He does not distinguish between activity (meetings) and action (a proposed plan of arrangement). 

This is a very discouraging ruling. Justice McEwen makes clear that he is currently prepared to give the process as long as the industry makes it take, and is not concerned that the process needs to be safeguarded from bad-faith actions of any parties. He emphasizes the importance of the "court-ordered" mediation process, and throws not the slightest bone to those who might be waiting for "court-ordered" damages to be paid to them. Its as though the 21 year Quebec struggle for justice never took place.

Read it and weep.

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In the matter of the CCAA/Plan of Compromise or Arrangement re: JTIM/Imperial/RBH

On October 2, 2019 I dealt with three motions and shortly thereafter released decisions with Reasons to follow.

I am now providing these reasons:

1) ITCAN payments to BAT Mexico.

QCAP [Quebec Class Action Plaintiffs] seeks an order that all payments to BAT Mexico referred to in the Thauvette Affidavit be prohibited during the Stay Period.

This issue was resolved on the basis that it will be deferred until the Monitor has had an opportunity to review the matter and report. If the parties cannot resolve this dispute it will return to the Court. Pending a return to the Court, ITCAN has undertaken not to make the payments.

The Supply Agreement will be produced to QCAP on a confidential basis. It is otherwise available in the Data Room and available to those parties who have executed the NDAs.

2) Extension of the Stay Period

By Order dated October 3/19 I extended the Stay Period to March 12, 2020. 

The Applicants supported by the Consortium sought to extend the stay period to March 6, 2020 (a date on which I am not available).

QCAP [Quebec class action plaintiffs] submitted that the Stay Period should be extended only to January 15, 2020. In my view this timeline is unrealistically short. As I advised counsel at the last stay extension hearing and reminded them again at this motion, I thought that the October 2, 2019 date was overly ambitious. To, again, set a short extension period would distract the stakeholders from the court-ordered mediation process.

Further, much has been accomplished when one considers the enormous complexity of these three significant CCAA proceedings.

Since the last stay extension, a number of positive steps have been taken. Chief among them is the progress in the court-ordered mediation.

The Hon. Mr. Winkler conducted extensive meeting with the necessary stakeholders and by the time these reasons are released will have conducted a plenary session of approximately 80 participants.

Additionally, among other things, the Data Room has been set up and many NDAs completed.

Further, all three Applicants have sufficient liquidity to operate with the Stay Period.

I specifically do not accept QCAP's submission that there is not "at least a kernel of a plan." 

This submisison is contradicted by the record which demonstrates that meaningful progress has been made. It further ignores the considerable efforts expended by the Hon. Mr. Winkler and the stakeholders involved in the court-ordered mediation process.

I also pause here to note that I was surprised, and upon reflection, very concerned to hear QCAP's submission that QCAP has not asked to be part of the data room and that QCAP considers it a colossal waste of time.

Any resolution must be based on evidence and facts. I cannot see how QCAP, or for that matter, any stakeholder can meaningfully assess its own position if it does not have an understanding of the Applicant's financial situation and the positions of the other stakeholders. Anything less impedes the court-ordered mediation and is not in the best interests of all stakeholders. It is also unacceptable to this Court. All stakeholders must be fully engaged in the process which is one of the most complicated legal undertakings in Canadian history.

I also wish to note that in addition to the ITCAN payments to BAT Mexico, an issue surrounding certain restructuring with JTIM arose. As noted above, the issue concerning ITCAN is being deferred and the JTIM restructuring appears to be modest in nature.

I do wish, however, to remind the Applicants that they have an obligation to advise the Court, the mediator and the stakeholders of any material change to their operations which directly or indirectly affect these proceedings.

I should further acknowledge QCAP's submission wherein it seeks leave to return to the Court prior to March 12, 2020 if it considers that the progress being made in the court-ordered mediation is insufficient.

I am not prepared to grant QCAP or any other stakeholder this right. To do so would tilt the playing field in favour of the stakeholder wielding this power.

In conclusion, I reiterate that extending the Stay Period to March 12, 2020 is reasonable and allows for achievable progress to be made. The necessary provisions of ss 11.02 and 11.03 of the CCAA have been met.

3) The motion of the Canadian Cancer Society

The Canadian Cancer Society (CCS) seeks orders allowing it to continue to participate in these CCAA proceedings before the Court and to also participate in the court-ordered mediation.

As I set out in my October 3, 2019 endorsement, I am prepared to allow CCS limited participation in the court proceedings. I am not, however, allowing it to participate in the mediation at this time.

First, with respect to the Court proceedings, no one objects to the CCS participating. CCS is on the service list and receives filings. Thus far, I have not restricted its ability to make submissions. In this regard, I accept that CCS is a social stakeholder. I am not convinced, however, that CCS has a direct financial interest in these CCAA proceedings. It is neither a creditor nor a debtor. CCS, like many other persons, may be indirectly impacted by a settlement.

Given CCS's goals and its experience I believe it is reasonable to allow it to participate in the Court proceedings, subject to this Court's discretion.

Going forward CCS is free to file material in response to filings made by other stakeholders. I will then determine the extent to which CCS can make submissions.

CCS will require leave if it wishes to initiate its own motions. Leave can be requested in writing, on notice.

Second, with respect to the mediation, I am not prepared to allow CCS to participate at this time. As noted, it is neither a creditor nor a debtor. I accept that CCS has extensive experience as a health charity and it is open to CCS to liaise with the government and other stakeholders outside the mediation process if it deems it desirable to do so.

Further, I have given the Hon. Mr. Winkler broad discretion to conduct the mediation process. This includes broad discretion to consult with a wide variety of persons as he considers appropriate.

I see no reason, at this time, to vary that order. It is important to allow the Hon. Mr. Winkler, who has vast experience in this area, the ability to carry on with the flexibility outlined in my orders in these very complicated and significant matters.

Canada's health surveillance system becomes collateral damage of the CCAA process

Two things happened this week that underscore the vulnerability of our public health infrastructure to the terms of the insolvency protection now granted to Canada's 3 large tobacco companies.

Last week's decision 

A week ago, Justice Thomas McEwen extended for another 5 months the Ontario Court Order that gives all three companies relief from any lawsuits. The 'stay' on litigation will now be renewed or expire on March 12. Injured Quebec smokers who started their suit against the companies in 1998 and whose judgment against the companies was upheld by the Quebec Court of Appeal  21 years later will have had their access to justice delayed for at least one more year.

Justice McEwen has not (as far as I know) released his reasons for this lengthy extension of a litigation stay under the federal Companies' Creditors and Arrangement aCt (CCAA), but he has made clear his view that the companies should have ample time to try to settle all of the claims against them. Quebec smokers have been told to take their place in line with all other claimants -- even those who have never gone to court.

This week's meeting: "If you're not at the table, you're on the menu" 

On Tuesday a closed door, highly secret meeting was held at an undisclosed location. Invited to the meeting were the tobacco companies, two provincial attorneys general, lawyers representing 8 other governments, the Quebec class actions whose victory precipitated the CCAA process and some other would-be class action claims.

This meeting was reported to be the first such endeavor organized by Mr. Warren Winkler, who was recruited by Imperial Tobacco and whose role as mediator towards a 'global settlement' was authorized by the Ontario Court.

The veil of secrecy is so thick that it is hard to say for certain that no health ministries were invited to brief up or participate in the meeting. It will be some time before whether or how they have been engaged will be known.* If health perspectives were brought to the table, however, it is quite clear that they were not given the benefit of signficant public or expert consultation.

The Canadian Cancer Society volunteered to provide such input, but its request was turned down by Justice McEwen.

This week's news:  health research imperilled by data privacy loss 

On Wednesday, the Globe and Mail reported that Statistics Canada is calling back data from the Canadian Community Health Survey that it has shared with the provinces.

Their decision was prompted by a ruling by the Court of Queen's Bench of New Brunswick made public on March 7 this year. The ruling ordered the province to hand over the health records of 1,273 New Brunswick residents who had told Statistics Canada that they were smokers. (When participating in the Canadian Community Health Survey, Canadians are informed that "Statistics Canada and your Provincial Ministry of Health would like your permission to link information collected during this interview.  This includes linking your survey information to your past and continuing use of health services such as visits to hospitals, clinics and doctors’ services.")

This was a ruling that was destined for appeal -- probably right up to the Supreme Court, which only months earlier had made clear that the privacy of individuals should be protected from this kind of disclosure.

But any appeal was pre-empted by the CCAA process. On the very next day after the New Brusnwick ruling, (March 8) JTI-Macdonald asked and received CCAA protection. A week later (March 12), Imperial Tobacco did likewise, followed by Rothmans, Benson and Hedges on March 22.

Seven months later, all litigation related activities remain on ice. New Brunswick can't ask a higher court authority to review this decision or consdier the unintended consequences. Statistics Canada, which carefully asks survey participants to give permission for data linking, can no longer assume that its data security requirements will be honoured by the provinces. And now provinces can no longer have access to the data.

The Globe and Mail's Tavia Grant reports that health researchers and ministries are unhappy with this turn of events, and that the loss of this data will hinder public health research, programs and services.

Yet none of this was mentioned at last week's hearing. None of the lawyers for the provinces suggested that this one aspect of the litigation -- the potential release of personal health records -- be allowed to wend its way towards final decision by a higher court.

In fact, it was the lawyers managing the New Brunswick case who took the strongest stand against allowing any litigation to continue. During the court review, they sided with the tobacco companies and opposed any carve outs for the litigation stay. (It was a jaw dropping moment when they told Justice McEwen "All we are saying is give peace a chance. .... In my submission there comes a time when you have to lay down your sword....Have to put aside the past.")

Perhaps this is to be expected. These lawyers (who also represent 5 other Canadian provinces are working on a "contingency fee" arrangement, by which they get a percentage of any award (18% in the case of New Brunswick), but agree to pay the legal costs. They have no incentive or reason to fight to protect the CCHS or the privacy of thsoe who participate in it.

The health sector will need other champions. The issue of data privacy could maybe be clarified or strengthened by amendments to the Statistics Act.

But what about the other vulnerabilities of public health in this process?`

* It was many months after a previous set of settlements between the same governments and industry were made that we were able to confirm that health ministries had not been engaged. Requests under Access to Information laws returned hundreds of blacked out pages, but a "no records" response with respect to consultations with health ministries. 

Justice McEwen (again) rejects requests to accelerate CCAA process.

Justice McEwen's decision to grant the tobacco companies the 5 month extension on their creditor proofing was made yesterday, but released today. A week was added (from March 6 to March 12) to accommodate his availability.

As reported here yesterday, both the Quebec class action and the Quebec government had requested that the comeback hearing be scheduled at an earlier date.

The judge also gave the Canadian Cancer Society a very short leash with which to participate in the process. How short will be revealed when he issues his reasons later. But too short to be part of any mediation discussions (at this time).

The next major event in these proceedings is a "plenary meeting" of all the participants on October 8. Where it is and what it is intended to cover, I cannot tell you -- that information is just one more in a long line of secrets.

The long dark winter ahead

A whole season has passed since the last time Justice Thomas McEwen sat before the 50-plus lawyers involved in the insolvency protection of Canada's 3 major tobacco companies. Those who appreciate pathetic fallacy would note that the mid-summer sun that had shone so enthusiastically upon the June 26th hearing was today replaced by rainy grey skies. Now that October's here, can winter be far behind?

A recap of events to date  ...

At the last hearing, Justice McEwen added another 3 months to the creditor protection that had been given the companies in March. These court orders, made under the federal insolvency law (the Companies' Creditors Arrangement Act, CCAA), allow tobacco companies to continue their business as usual, while suspending the rights of their creditors to demand payment.

Among those creditors are the 100,000 or so injured Quebec smokers who thought they had been victorious when the Quebec Court of Appeal ruled in their favour on March 1st, 2019.

It was this ruling that triggered the CCAA process. Rather than begin making payments to the smokers, the companies instead used federal insolvency law to buy time while they tried to come to an arrangement with all of those suing them. (The Quebec judgment of $13 billion is a small fraction of the $600 billion they say the provinces and others are claiming).

The CCAA allows the companies to lump all their claimants together in group discussions towards a 'global settlement'. The arrangement was approved by Justice McEwen, with the support of many of  the provinces and others whose lawsuits against the companies had not yet gone to trial.  A former Chief Justice of the Ontario courts, Mr. Warren Winkler, was appointed as a mediator to the process.

This summer, Mr. Winkler demanded that everyone exchange "mediation briefs" at the beginning of August. In mid-September, some provinces responded to the industry positions. Data rooms have been opened and non-disclosure agreements negotiated to allow provinces to take a closer look at the companies' books. A closed-door plenary session with legal representatives of the tobacco companies and all their creditors in the room is scheduled for next week (October 8th).

Oh, and yes -- the last extension of the litigation time-out (the "stay") is due to expire this Friday (October 4th). Which brings us to today's hearing.

Up for debate today

There were two main issues put before Justice McEwen for decision today.

* How long the next extension order should be (This was discussed for about an hour.).
* Whether the Canadian Cancer Society should be allowed to participate in the CCAA process and the mediation talks. (This was discussed for about half an hour.).

A third issue involving whether Imperial Tobacco should be allowed to make extra payments to a related off-shore company was postponed.

Extending the stay: How long is too long?

No one today was proposing that the process be collapsed, or voicing an expectation that a settlement could be reached in less time than the 5 additional months that the companies were seeking.

Where positions differed was whether the companies should be required to come back to court and provide an update on mediation developments before their suggested date of March 6, or whether the process should be allowed to unfold without court oversight until then.

The tobacco companies were strongly of the view that any requirements to check in before March were ill-advised. "Any shorter extension would require attendance at hearings like these that would create distractions... We are moving as fast as possible under the circumstances in such a complex negotiations," explained the lawyers for Imperial Tobacco. The lawyers for Rothmans, Benson and Hedges and JTI-Macdonald agreed completely.

The Monitors (the accounting firms appointed as the 'independent' eyes and ears of the court) also agreed completely with the position of the companies, as they have done in all of these hearings. In a united presentation, the Monitors provided the judge with 4 text-book reasons the extension should be granted as requested:  ONE - there is enough money to keep things going; TWO - the mediation is at an early stage and is complex to work through; THREE - no one will be harmed ('prejudiced') by the extension and  FOUR - the companies have been behaving themselves.

The Quebec Class Action Plaintiffs say 5 months is 2 months too long 

The firm representing Quebec smokers took issue with the idea that no one would be hurt by a few months' extra delay. Mark Méland reminded the court of the reality for the Quebec smokers whose historic class action victory triggered these events, but whose serious illnesses meant they were unlikely to live to see justice.

"We told it to you on the very first day. There are real life consequences to delay for our people. The victims are wondering whether anybody – including the justice system – has any regard for their plight....By the time we get to the finish line we wont have a living class member. We won't have accomplished a great deal if we can't get victims money within their lifetime."

He criticized the companies for failing to make a concrete offer -- or even the "kernel of a plan"  and raised concerns about the companies lack of good faith shown by dragging the process out indefinitely instead of putting an offer on the table.

"Up to now we have, unfortunately, not received even the indication of what a plan would look like. The case law shows that there must exist a kernel of a plan. We have not seen the first molecule of a plan." 

"They have been involved in this process since March 8 - but they have been effectively involved for 4 years. They engaged their monitors when Justice Riordan ruled in 2015. There is no way that they do not know what they intend to put forward... Other than for tactical advantage or to try to pit one creditor against another – there is no reason that we are aware of that the applicants have not yet put their foot forward and told us what they are prepared to offer."

"What they are trying to do – and are using the passage of  time to assist them – is to get leverage. People are beginning to tire. The companies are expecting that creditor will get pitted against creditor and not against them."

He urged the judge to see that requiring the companies to return to court sooner would put pressure on them to make tangible progress. There was little downside in an earlier hearing -- but the downsides of not having a hearing if progress were stalled were real. "The comeback hearing serves a number of purposes. It forces parties to act more diligently. It provides more transparency to the process." 

He urged the judge to maintain control of the CCAA outcome. "The mediation is not a substitute for the CCAA process. The mediation is a parallel process. It does not change the requirements of parties to act diligently to put forward a kernel of a plan." 

The provincial view

The government of Quebec (in what I think is their first submission in this process) supported the position of the Quebec class action.  Their lawyer urged the judge to see an earlier hearing as "an opportunity for transparency and a focus for the parties." He echoed concerns voiced by others that the companies were making important decisions that were not being shared until the Monitor included them in the reports that only were prepared in advance of hearings.  He suggested a compromise. "Obviously parties need time – but that doesn’t mean that we need to go to March 6th. Perhaps making it earlier  - in the month of February - would be a balance."

The lawyers for the 'consortium' provinces (PEI, Nova Scotia, New Brunswick, Manitoba, Saskatchewan and B.C") supported a longer extension. "We support the process that is taking place under Chief Justice Winkler and it should be given time to play out."

The lawyers for Newfoundland and Labrador and Alberta said they were "sympathetic" to the position of the Quebec Class Action group, and pointed to the restructuring activities of JTI that only came to light in the Monitor's report. (JTI is moving 43 positions overseas). 

The government of Ontario did not oppose the extension to March.

Is there a seat at the table for the public interest?

Last week the Canadian Cancer Society filed a motion seeking permission to participate in the CCAA process and also in the mediation hearings. The formal motion was precipitated by a reaction by Justice McEwen when the Cancer Society tried to make representation at an earlier hearing, in which he made clear that the CCS would need to demonstrate its financial stake in the proceedings.

Today the CCS put forward its arguments in favour of a meaningful role in these events. As an organization with massive expenditures in supporting cancer victims, it was not a stretch to show its financial interest in any outcome that affected tobacco use. But its main point was to encourage the judge to see this important health charity as a "social stakeholder", and an agency whose contribution should be welcomed as a way to integrate the public interest into the proceedings.

The court was reminded of the previous participation of the CCS as an intervenor in the defence of tobacco legislation, and of the role that other social stakeholders have played in settling class actions. Seventeen organizations were supporting the CCS as a participant in this CCAA/mediation process, renouncing any intention to seek such status for themselves. The floodgates of interested intervenors will not open!

The tobacco companies did not express their opposition to the CCS playing this role -- but their monitors were prepared with a joint submission that was "no objection to participation", but which nonetheless would result in no participation.

The Monitors pointed out that the CCS was on the service list and received all of the filings, but argued that their ability to make any submission to the courts should be at the discretion of the judge. Should things come up which warranted the participation of the CCS then "we can deal with it at that time. Decisions should be made on a case by case basis."

As for participating in mediation, the Monitors thought that should be a question for Mr. Winkler to decide. They pointed to his broad mandate to consult  -  "He can invite whomever he thinks is appropriate" - and advised against ordering him to include anyone - "Absent that invitation there is no basis for an order directing that the CCS should be a participant."

The only participants to voice support for the Cancer Society's role were the class action teams (The Quebec Class Action, the B.C. class action and -- by letter - the non-certified claims filed by the Merchant group).

For the B.C. case, Mr. Doug Lennox gave his reasons, recalling meetings that the CCS had hosted with lawyers in 1999. "Two decades have passed since then, and they have always been a helpful resource. It is not unusual for social stakeholders to be involved in other class action settlements."

Wait for it ....!

Well before noon, the court adjourned. Justice McEwen said he would choose the length of the extension by tomorrow and that his reasons would follow. 

Whatever he decides - another season will have passed before this case is again in open court.