Looking for movement ...

No sign of an appeal

It is now 22 days since Justice Morawetz approved the measures that will end the decades-long lawsuits against Canada's tobacco companies. That means that 1 day has passed since the deadline for any parties to file their objections. 

Objections to any court decisions based on the Companies Creditors' Arrangement Act must be filed within 21 days (section 14 of the CCAA). Ontario's Court of Appeal has its own methods for managing such appeals that don't necessarily involve public hearings and which make it more difficult for outsiders to know what is going on:

"An appeal under the Companies’ Creditors and Arrangement Act is processed differently from other appeals. Under this act leave to appeal can be obtained by a single judge or a panel. A notice of motion for leave to appeal under this act must be served within 21 days from the date of the order being appealed.

*A panel motion follows Rule 61.03 (1) and is heard in writing without the attendance of parties or lawyer. A decision will be made by a panel of Judges.

*A single judge motion follows Rule 37 and a notice of motion (Form 37A) is served upon the respondent(s), and then filed in the office of the Court of Appeal with proof of service at least 7 business days before the hearing date of the motion. A date is chosen by the moving party/ies."

If any notice of motions to appeal the March 6 Sanction Decisions has been submitted, none have yet been identified on the Monitor's sites (the site for Imperial Tobacco has not been functional this week). 

No roadmap has been made public

Following the hearing on March 7th, a lawyers-and-judges-only huddle was held in the library of the court house to discuss what Chief Justice Morawetz described as "logistical issues". It seems likely that these related to the steps that must be completed before he will establish the date on which the arrangement will take effect. The plans (including in section 4.2) identify a number of such restructuring steps. 

It is not clear how long it will take for these to take place and no road-map or schedule has yet been posted. Even the lawyers seem uncertain. In an interview with the media in march, a lawyer working for several provincial governments gave a wide range for when money will change hands: "somewhere between 90 and 120 days".

Nor is there any indication of when other issues that need court approval - such as the establishment of the research foundation - will be addressed .

A quickie ruling made in semi-private

Last Friday, a motion was filed by lawyers representing the "Pan Canadian Claimants", with a request for the court to block other lawyers from offering their services to assist potential claimants. A similar request had made (and granted) in December, but the injunction which resulted on that occasion expired in March. The request was supported by the lawyers representing the Quebec class action and also by the Ontario government. 

A hearing on this issue was held by video conference on Wednesday, but no public access was indicated on the monitors' websites or on the court rolls. Today Chief Justice Morawetz issued the requested injunction. 

If other issues were discussed at this time, we are not aware of any public record of them. 

"Absurdly High" or "Just Reward"? - the decision on lawyers' fees

The finalizing hearings to resolve the lawsuits against tobacco companies ended shortly after noon today with a discussion of how much the lawyers representing the Quebec class actions should be paid.*

In theory, the fees of all three class actions were under discussion. In reality, the only question before the court was whether approval should be given to the $900+ million fee requested by the lawyers for the Quebec class action.

Their request had been filed more than a month ago, and the arguments in favour of it presented to Chief Justice Morawetz soon after. The review of their request was interrupted for a few weeks by Chief Justice Morawetz' decision to ask a former Quebec judge to act as an amicus curiae. The Hon. André Prevost was mandated to provide "a purely legal and academic description of the applicable test under Quebec law" as well as some advice on how to apply this to the current circumstances.

André Prévost filed his report in late February. This morning he presented his findings, beginning with the caution that the decision in this case -- whatever it was - would set a landmark for class action fees in other mega fund cases. 

He presented the rules that govern lawyers' fees in Quebec (Code of Professional Conduct, s. 102), court rulings on assessing class action fees (e.g. A.B. c. Clercs de Saint-Viateur du Canada, para 64-65), and recent reflections of academics on the subject of fee levels. His review of other cases across Canada, presented as schedules to his report, showed that the fee request under review was consistent with past practice. He cautioned that fees which encouraged large lawsuits are needed in a class action business environment where lawyers feel they are "better to take on smaller cases where the judge is unlikely to be shocked" by the fee. 

In short, if Justice Morawetz had been hoping for some comfort or support in turning down the fee request, he would have had to look hard in the report of the amicus curiae.

Yet it seemed that a reason to cut was what Justice Morawetz was looking for. Not because he thought the work had not met the criteria for reward  -- he described the endeavour as "spectacular" - but because $900 million might be "absurdly high". 

"One of the things that I have to consider is 'what is the objective of class proceeding  legislation compensation for lawyers – is it to create a fund for generations to come?'"

A backdrop to the decision imposed on the court is that the ruling will set a precedent for future mega-tort cases -- even though the likelihood of a parallel case is considered remote. Mr. Prévost acknowledged the challenge in his closing comments to the judge: "I am happy to be in my shoes and not in yours. In this case if you compare to all other cases, this is extreme. Counsel has 100% on all factors [to justify honouring their contracted fee]. This was a huge case – we will probably not have many such cases in Canada."

Quebec counsel: a fair and principled fee request

Counsel to the Quebec class action used the opportunity to respond to the Prévost report to repeat and emphasize some arguments to support their request. He batted back the idea that the fee would not be fair to the class members (who have voiced no objection, despite being canvassed). He rejected the idea that the fee would make lawyers look unreasonably profit-seeking or otherwise diminish the reputation of the legal profession, and said that their case had the opposite effect.  

At the end of these remarks, Chief Justice Morawetz asked what would happen if the fee were reduced. The answer (provided also by Ontario counsel later in the day) was that the provinces would be the recipient of any money that was not needed to pay legal fees in the (likely) case that there were enough funds to cover all of the claims made by class members. 

Cancer Society: A unique achievement

The last intervention in the day was by counsel for the Canadian Cancer Society. He identified that the Quebec case was "beyond the grid" of the table of other "mega-fund" cases that had been discussed earlier in the morning. "There has been nothing like it. There may never again be anything like it. .. It has enhanced the reputation of the profession. They have achieved what no one else has ever achieved going back to the 1950s - and against impossible odds. Their unique legal story will lats in Quebec, Canada and globally."

No public arguments in favour of a reduced fee

Although counsel for the Quebec government had originally raised concerns about the size of the fee, they withdrew any objection after the appointment of Mr. Prevost. If Justice Morawetz received any other recommendations or reasons to over-rule the contracted fee in this class action, they were not directly expressed before him in these proceedings. 

The mediator in this case -- former Chief Justice Warren Winkler - has played a major role over the past 6 years and is authorized to speak privately to the judge. His views on the fees are not on the public record. 

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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.

Sanction: a seal of approval brings Canada's tobacco lawsuits closer to the end

 Late this afternoon - presumably after the markets had closed - Chief Justice Geoffrey Morawetz released his decision in favour of the Plan of Arrangement that will resolve a quarter century of lawsuits against tobacco companies.

His ruling can be read here.   In about 50 pages, he translates the 1,200+ text of the proposed plan into readable English before giving a thumbs up to the compromise that was unanimously agreed to in December by those suing tobacco companies and which was the subject of hearings earlier this winter.  

Fair and Reasonable and Not Contrary to the Public Interest

The final objections of two companies having been removed earlier in the week, there were few roadblocks to his endorsing the agreement exactly as it was drafted by the team lead by former Chief Justice Warren Winkler. 

After Monday, the only nay-sayers in the process were the Heart and Stroke Foundation and the Canadian Cancer Society, which had urged him to consider that some health-oriented measures were required for the plan to be fair and reasonable.

Justice Morawetz acknowledged these requests in his ruling, but firmly turned them down. It was not  his job, he said, to interfere in this way. 

(165). The decision for the court to make is a binary one. It is to either sanction the CCAA Plans or to reject the CCAA Plans. It is not the role or the function of the court to redraft or amend the CCAA Plans. The views expressed by HSF and CCS are important to consider. However, in my view, these views have been taken into account by the drafters of the CCAA Plans. 

In assessing the fairness, reasonableness and public interest of the plan, Chief Justice Morawetz stressed that individuals and provinces will receive compensation, a research institute will be established -- and that tobacco companies will be able "to continue as going concerns, which will benefit their employees, suppliers and other stakeholders."  

Not decided

A number of details still remain to be decided -- including important ones like the day on which this agreement will take force and when money will change hands. The "Plan Implementation Date" has yet to be decided - but the litigation stay will be in force until then.

A separate ruling is to be expected for the questions of counsel fees, discussion of which will be the subject of a hearing tomorrow (March 7th).

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Misleading or misreading? 

To buttress his rejection of the concern expressed by HSF for injured smokers whose potential claims were being released, Justice Morawetz used the (not public) transcript to cite the views expressed by Ontario's lawyer on January 31st. 

In response to the theoretical case raised by the Heart and Stroke Foundation, she had asserted that no Canadian who started smoking after 1996 and who was injured by tobacco products would have a viable claim for damages. The reason she gave was her reading of the Quebec Court in the Blais-Létourneau case. 

 "The (Quebec) Court found that the (public-knowledge) date to be March 1st of 1996, so the breach period during which the tobacco companies committed their wrongful conduct which grounds the cause of action, begins in 1950 and ends, very important, ends at the public knowledge date."

This does not jive with a normal reading of Justice Riordan's ruling. (Riordan, 2015, paras 139-142, 643-646, 818-836).

Justice Riordan considered the behaviour of the companies from 1950 to November 1998 (the class period) and did not hear evidence or decide upon later behaviour. During the class period he reviewed, he never identified a time when the companies were not at fault. "Thus, the Members' knowledge does not arrest the Companies' faults under these other provisions. Since the Companies took no steps to correct their faulty conduct, their faults continued throughout the Class Period." Because fault is not the only condition of civil liability, he also considered the "contributory fault" of those smokers who started smoking after the harms were known - the "knowledge dates".

Justice Riordan identified separate knowledge dates for knowledge of harm (1976) and knowledge of addiction (1996). The liability of the companies towards their injured customers continued after these dates, he ruled, except for those under one section of the Quebec law (Civil Code article 1468). Their breach of three other sections of the law continued to establish liability (Civil Code Articles 1457, Quebec Charter, article 49, Consumer Protection act, articles 219, 228).

He ruled that although injured smokers who had started smoking after the "knowledge date" had to carry some responsibility (20%), the companies were 80% to blame, and they remained 100% responsible for punitive damages. This 20% deduction for those who started smoking after 1976 remains in the compensation which will be awarded through the CCAA plan. 

Court agrees to minor amendments to proposed settlement

During the course of a 30 minute hearing today, Chief Justice Morawetz listened to and agreed to the request for his approval of a small amendment to the plan which would resolve the lawsuits facing Canada's tobacco companies.

The amendment in question (pasted below) would end the inter-company wrangling over dividing the check. With it, there is now full agreement among all the parties involved - tobacco companies and their creditors. It is hard at this point to see any reason why the plan will not soon be put into force. 

Rothmans, Benson and Hedges had earlier maintained it was getting a raw deal because it put more money into the initial kitty and because the Quebec court had ruled that Imperial Tobacco's behaviour was worse and therefore it was responsible for a greater portion of the damages. In the end, Imperial Tobacco agreed that it would relinquish any claim it might have on the $750 million from that kitty that was being returned to the companies in the form of "working capital."  With that concession, RBH withdrew all of its objections to the plan.

Japan Tobacco's affiliates (both the cigarette manufacturing branch and the trademark-owning branch) also withdrew their objections today, although there was nothing presented that would explain their change of heart. They may simply have known when to fold them: their objection was based on a desire to maintain dubious inter-corporate financial arrangements that had already been the subject of court criticism.

The longest part of today's session was the courtroom whipping of Heart and Stroke for its temerity in filing an objection to the amendment. Ontario's lawyer played the heavy - going on at some length about the limited role that social stakeholders should  have in such a process, and accusing the agency of  "abuse of process" and "egregious conduct that needs to be reined in by the court."

Some ganging-up is to be expected. Everyone seems anxious to get this to the finish line, and Heart and Stroke was alone in voicing any concerns about putting this last brick in the wall.  (The Canadian Cancer Society is also on record that  "plans should not be sanctioned in their current form", but did not intervene on this morning's request for amendment.)

Chief Justice Morawetz directed a courtroom-style tongue-lashing at Heart and Stroke's lawyer, asking him to identify how they would be affected by the request (he couldn't) and then pushing him to explain why the foundation should not be assigned costs for the time of the (many dozen!) lawyers whose time was impacted by the objection.

The hearing ended with the judge agreeing to the request for amendment and clarifying that the litigation stay which has suspended all lawsuits against these companies for almost 6 years would be sustained until he issued his decision on the settlement.  One (last?) hearing is scheduled for this Friday, March 7th, when the court will review the amicus curiae brief regarding legal fees.

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The amendment agreed to today:

 

Documents filed in connection with this request:

• Imperial Tobacco: Affidavit of Eric Thauvette. February 27, 2025
• Imperial Tobacco Motion Record Returnable March 3rd
• Imperial Tobacco. Monitor's 28th Report Japan Tobacco: Affidavit of William Aziz. February 27, 2025
• Japan Tobacco. Third Amended and Restated Plan.
• Japan Tobacco. Motion Record Returnable March 3rd, 2025
• Japan Tobacco. 25th report of the Monitor. Rothmans, Benson and Hedges. Affidavit of Milena Trentadue
• Rothmans, Benson and Hedges. Motion Record Returnable March 3 (part 1) (part 2)
• Rothmans, Benson and Hedges. 26th Monitor's Report (part 1) (Part 2)Joint Factum of the Monitors
• Objections by Heart and Stroke Foundation