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 and Draft implementation orders
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.
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 (#22),
Imperial Tobacco (#25) and
Rothmans, Benson and Hedges (#23).
One of these reports again signals a red flag over the outcome of the settlement. The companies have not yet agreed on how to divide the responsibility to make payments. 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.
JTI's monitor, reports that without a resolution of these issues, the agreement should not be sanctioned in the view of the company, as 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...".
"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."
January 20: Objections to adopting the settlement
Health Charities
Two Canadian health charities filed objections to elements of the settlement that were proposed to be included in the finalizing court order.
The
Heart and Stroke Foundation repeated the concerns they had expressed at Hallowe'en. The
"Responding Motion Record" they filed today provides copies of their correspondence with the monitors and an expert report written by Dr. Andrew Pipe. The foundation signals that they will object to the sanctioning of the settlement because the foundation that will be created through it has too narrow a mandate.
"HSF is concerned not only about the limited mandate of the Cy Pres fund, but also that the limited mandate arises at least in part because the interests of those who will suffer future harm related to tobacco use or exposure have not been adequately represented during these proceedings. For these
reasons, among others, the HSF will be objecting to the Sanction Orders approving and sanctioning the Tobacco CCAA Plan."
The
Canadian Cancer Society's responding motion record covers 600 pages (in
volume 1 and
volume 2). In addition to extensive background on their involvement in the lawsuits over the years, it also includes reports written by Dr. Robert Schwartz and Monique Muggli.
The Cancer Society offers textual changes to the settlement that have the effect of:
* broadening the scope of activities for the Foundation,
* requiring the documents obtained from the industry during discovery to be made public through the UCSF Library,
* including a number of tobacco control marketing restrictions that have been the subject of CCS advocacy in recent years.
Tobacco companies
JTI-Macdonald filed a "responding motion" to the proposal of other parties that the settlement be approved. The company provides an account of some exchanges in the fall that were held without a public audience (i.e. the hearing of December 12th). The company articulates its strong opposition to the settlement:
"JTIM does not agree to the JTIM M&M Plan and cannot support it due to the outstanding
important commercial and legal issues that have been previously identified to the Mediator
during the mediation and to the Court through my affidavit sworn October 24, 2024 (the
“October Affidavit”), a copy of which (without exhibits) is attached hereto as Exhibit
“C”. These issues are further discussed in this affidavit. Until these issues are resolved, the
JTIM M&M Plan is not fair, reasonable or workable."
The company provides calculations of the differing financial impact of the plan: "Based on the attached calculations, if the CCAA Plan were implemented without an allocation as between the Tobacco Companies, RBH would be required to contribute far more towards the Global Settlement Amount than would be required under any reasonable allocation of responsibility. Such a CCAA Plan would effectively force RBH to subsidize Imperial, JTIM and their affiliates by a significant amount compared to what RBH would pay if responsibility were allocated in a reasonable way. For example, the calculations in Exhibit “A” reflect that RBH would contribute approximately $6.923 billion more under the proposed CCAA Plan without an allocation than it would be responsible to pay if the Court-Determined Allocation were applied to the Global Settlement Amount."
Imperial Tobacco has provided its own version of the allocation dispute in an
"aide memoire". As with the other documents filed by the companies on this day, this contribution to the court wanders into describing the negotiation process (which has mostly otherwise been kept confidential): The disclaimer about allocation in the proposed settlement
"Article 5.2 was included in the CCAA Plan at first instance because Rothmans, Benson & Hedges Inc. (“RBH”), very late in the process, sought to backtrack from the terms of the negotiated deal – which include an internal and self-adjusting allocation formula – in an effort to reduce its own contribution obligations." ... " In an effort to advance matters to the creditors’ meetings and avoid an impasse, the Monitors
ultimately included Article 5.2 so that a draft plan could be put forward for a vote without
opposition from the Tobacco Companies. To be clear, however, Imperial does not view the
“issue of allocation of the Global Settlement Amount” to be “unresolved”. To the contrary, the
respective contributions by each Tobacco Company to the Global Settlement Amount are
expressly defined by the CCAA Plan."
January 22, 2025: Factums, etc.
The documents filed on this day are the shrink-wrapped versions of their case - the factums. These documents provide readable versions of the parties' positions.
Fees:
Sanction Order
Stay Extension:
January 24, 2025: More Factums
Fees:
Sanction Order
January 27, 2025: Still More Factums
February 6, 2025: Documents related to fee approvals.
Updated January 28, 1 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.
