Tuesday, 29 September 2020

Another six months.....

 This morning the Ontario Superior Court quickly extended protection under the Companies Creditors Arrangement Act (CCAA) for Canada's three large tobacco companies for another six months. As it now stands, the companies have until at least March 31, 2021 before anyone can take any legal action against them.

As a COVID-precaution, the hearing was a virtual one. Instead of an aging court room where accoustics made the exchanges inaudible in the public galleries, today's proceedings were hosted by ZOOM, where the public phone-line crackle made exchanges mostly inaudible.

Reading the tea leaves  

In advance of the hearing, there were two signs that the extension would be agreed to quickly. 

The first was a court order issued two weeks ago. On September 15 - hours before the companies had to file their requests for an extention -- Justice McEwen added another experienced hand to the mediation payroll: Daniel Shapiro. The timing of the appointment and Mr. Shapiro's experience in adjudicating settlement payments to thousands of individuals is noteworthy in the context of the Quebec court award to almost 100,000 injured smokers which precipitated the CCAA process.

The second was the absence of any documents filed by any of the parties suing tobacco companies ahead of this hearing. Previously these long extensions have been objected to (in vain) by lawyers representing the Quebec class actions, who have expressed concern about the absence of meaningful negotiations and the impact of further delays on the ability of any victim receiving any compensation. This time, their silence spoke for them.

During the hearing, representative of Ontario farmers (whose lawsuit about events in the 1990s is over a decade old) grumbled that members of that class action were also beginning to die off, but did not oppose another 6 months of protected mediation. 

How big a pie?

The Monitor's reports which are required before each extension provide business data for each of the tobacco companies. Information from the latest reports, when combined with that from previous reports, show both revenues and profits for each company.  

This business data provides a reality check against the combined claims of the provinces and injured smokers for more than $500 billion. 

Currently, there is only one-hundredth of that amount in the Canadian kitty - and it only grows by $1.5 billion per year. The entitlement and ability of Canadians to access resources of the foreign owners of these companies is far from established. Those companies have also adopted a Mother Hubbard approach, providing dividends to their (protected) shareholders instead of reserving funds to compensate injured consumers. 

Actual and Projected Cash Balance

Links to documents