The Foundation's foundation

Details were missing in some of the provisions of the settlement among Canadian tobacco companies and their victims that was agreed to in October 2024 and finalized in August 2025. Among these were how the $1 billion set aside for non-eligible victims (the cy-pres foundation)  would be operationalized.

Some information was provided this week in the paperwork provided in advance of a court hearing apparently scheduled for August 7 at 10:00 a.m. The hearing will consider changes to the settlement plans to facilitate the establishment of this "Cy-pres Foundation" to support research into tobacco-related diseases.

Paperwork for this hearing is available on the websites of the Plan Administrator for each company (JTI-Macdonald; Imperial Tobacco; Rothmans, Benson & Hedges).

The court is being asked to approve refinements and clarifications to the terms of reference for the Foundation (pasted below), as well as governance structure and the mechanisms to solicit and review proposals for funding. The board of directors are assigned an extensive list of duties and responsibilities, but will not be remunerated for their services.

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Extract from motion material:

The Terms of Reference of the Cy-près Foundation are set out below: 

Tobacco Cy-Près Research Foundation of Canada / Fondation canadienne cy-près de recherche sur le tabac Terms of Reference 

Introduction: This document describes the terms of reference for the Cy-près Foundation. 

Foundation Name: The corporate name of the Cy-près Foundation shall be “Tobacco Cy-Près Research Foundation of Canada / Fondation canadienne cy-près de recherche sur le tabac” which clearly relates to the purpose of the Cy-près Foundation which is to distribute the Cy-près Fund. This name will be used on the Cy-près Foundation’s website and other presentation materials. 

Purpose of the Cy-près Foundation: The Cy-près Foundation’s purpose is to provide an indirect benefit to Individuals who suffer or may in the future suffer from Tobacco-related Disease, except those Individuals who receive a direct benefit under the PCC Compensation Plan or the Quebec Administration Plan by funding research, programs and initiatives focused on achieving earlier diagnosis, more effective treatment and improved outcomes in Tobacco-related Disease. The Cyprès Foundation is intended to indirectly benefit users of Tobacco Products and their affected family members or estates who are not eligible to receive payments of compensation from the Quebec Administration Plan or the PCC Compensation Plan. The Individuals who will be directly compensated through the Quebec Administration Plan and PCC Compensation Plan include Individuals suffering from Lung Cancer, Throat Cancer or Emphysema/COPD (GOLD Grade III or IV) as defined in those plans. While the Cy-près Foundation is not intended to benefit those Individuals who are directly compensated, they may receive an incidental benefit from the research, programs and initiatives it funds. The Cy-près Foundation will also benefit the Canadian public at large by funding research, programs and initiatives pertaining to Tobacco-related Diseases. 

The Cy-près Foundation will not make any monetary payments to Individuals making claims arising from Tobacco-related Diseases. Those Individuals who are eligible to receive monetary compensation may be paid through either the Quebec Administration Plan or the PCC Compensation Plan in accordance with the provisions of those plans. 

The users of Tobacco Products in the provinces and territories who suffer or may in the future suffer from Tobacco-related Disease, except those Individuals who receive a direct benefit under the PCC Compensation Plan or the Quebec Administration Plan, include the following Individuals and any of their affected family members or estates:

 i) Smokers suffering from Lung Cancer, Throat Cancer or Emphysema/COPD (GOLD Grade III or IV) who are outside the PCC Claims Period or who smoked less than the requisite Twelve Pack-Years or, in the case of Emphysema/COPD, were not classified as GOLD Grade III or IV or the equivalent; 

ii) Smokers who have a Tobacco-related Disease other than Lung Cancer, Throat Cancer and Emphysema/COPD (GOLD Grade III or IV) or the equivalent; and 

iii) Individuals who smoke or have smoked Tobacco Products and have not yet or may never develop a Tobacco-related Disease. 

Vision for the Cy-près Foundation: Canadians in all provinces and territories will experience earlier diagnosis, more effective treatment and improved outcomes for tobacco-related cancers, Emphysema/COPD and other Tobacco-related Diseases. 

Mission of the Cy-près Foundation (“Mission”): The Cy-près Foundation will indirectly benefit current, past and future smokers and their families by funding research, programs and initiatives that will focus on achieving earlier diagnosis, more effective treatment and improved outcomes for Individuals who suffer or may in the future suffer from Tobacco-related Diseases. 

Values of the Cy-près Foundation: The Cy-près Foundation will focus on: the inherent value of the research, program or initiative from the standpoint of its indirect benefit to Individuals who suffer or may in the future suffer from a Tobacco-related Disease; the need to maintain a Rational Connection between the work funded by the Cy-près Foundation and those Individuals who suffer or may in the future suffer from a Tobacco-related Disease; commitment to principles of best evidence and expert peer review; collaboration to increase the impact of research funding while limiting Cy-près Foundation overhead costs to maximize the indirect benefit to Individuals who fall within the scope of the Cy-près Foundation; and, ensuring that Cy-près Foundation funded research, programs and initiatives reflect the principles of health equity and opportunity for inclusion of First Nations, Metis and Inuit people. 

What Will Be Eligible for Consideration for Support by the Cy-près Foundation: Proposals regarding research, programs and initiatives that have a Rational Connection to Tobacco-related Disease will be received by the Cy-près Foundation for consideration of eligibility for financial support from the Cy-près Foundation. Research regarding and programs and initiatives aimed at reducing or preventing tobacco use in Canada are outside of the scope of the Cy-près Foundation because they fall within the purview of the Provinces and Territories, involving policy issues and advocacy. Accordingly, such programs and initiatives will not be considered for funding from the Cy-près Foundation. 

The fact that a Proposal requesting funding for research or a program or initiative is received by the Cy-près Foundation for consideration does not mean that it will necessarily be awarded a Grant. The decision regarding whether to provide funding for a Proposal is within the sole discretion of the Foundation Board and is not reviewable by the CCAA Court or any other court in Canada. 

Early works: 

• Establish “Tobacco Cy-Près Research Foundation of Canada / Fondation canadienne cyprès de recherche sur le tabac” and apply for registration as a “registered charity”, as that term is defined in the ITA, and a public foundation for the purposes of the ITA. 

• Recruit a neutral and independent Foundation Board that will provide oversight of the Cyprès Foundation’s strategy for funding research, programs and initiatives to be funded by the Cy-près Foundation. The Foundation Board will also retain an investment and asset management firm to develop and oversee the financial and investment strategy for the Cyprès Foundation, subject to instructions from the Foundation Board. 

• Develop a strategic plan for the implementation of the intended activities of the Cy-près Foundation. Potential Areas of Cy-près Foundation Financial Support: 

• Improving methods for screening, diagnosis and treatment of tobacco-related cancers. • Establishing best practices for diagnosis and treatment of tobacco-related cancers, Emphysema/COPD and other Tobacco-related Diseases and increasing the likelihood that Canadians can achieve access to best practice care of these diseases. 

• Researching the treatment of nicotine addiction and dependence, and tobacco use in Canada. 

• Researching the effective treatment and palliation of Tobacco-related Diseases. 

• Funding such other program or initiative pertaining to Tobacco-related Diseases as the Foundation Board may approve, provided that it has a Rational Connection and fulfills all other requirements for funding. 

Benefit to the Public in Canada: 

• The results of the research to be funded by the Cy-près Foundation are intended to enure to the benefit of Individuals who suffer or may in the future suffer from Tobacco-related Diseases. The research findings and recommendations regarding earlier diagnosis and more effective treatment of Tobacco-related Diseases will be contributed to the Canadian body of medical knowledge and disseminated to health care practitioners across Canada through publication in peer-reviewed journals and academic databases and presentations made at medical conferences. 

• In addition to benefiting Canadians who have smoked or may smoke in the future, research to be funded by the Cy-près Foundation may have the potential to determine whether screening of higher risk populations and potentially all Canadians can identify cancers at earlier stages of oncogenesis when treatment is less morbid and potential cure is more likely.

 • Expanded learnings from Cy-près Foundation supported research into tobacco-related cancers, Emphysema/COPD and other Tobacco-related Diseases are expected to provide a benefit to members of the Canadian public. In fulfilling the Cy-près Foundation’s mandate, it is anticipated that the Canadian population will benefit from the knowledge generated by this work. 

Process for selection of proposals to receive Grants from Cy-près Fund

 

Addressing the bottleneck in accessing medical records

On Friday February 20, a two-hour "concurrent" hearing was held before Justice Catherin Piche of the Quebec Superior Court and Chief Justice Geoffrey Morawetz of the Ontario Superior Court. 

The focus of the hearing was a request by the lawyers representing injured Quebec smokers (QCAP) for modifications to the procedures available to establish the legitimacy of claims by heirs of members of the Quebec class of tobacco industry victims.

Documents circulated before the hearing included:

* Application by Quebec Class Counsel for an Extension to the Confirmation Order

* Written submissions by Quebec Counsel in support of their motion

* Legal Authorities in Support of the motion  

* Submission of Santé Quebec

Mark Meland presented the reasons for the request, described the process that they were requesting and provided examples of supportive decisions by Canadian courts.

He explained that with only six month left before the claims process ended, there was a risk that hospital archivists would not be able to provide the information required to validate the claims of tens of thousands heirs of smokers whose lung cancer, throat cancer or emphysema had been diagnosed in the specific period covered by the class action. He described the risk to claimants if they were unable to receive the information before the deadline.  "If they cannot find compensation merely because the system is too cumbersome to obtain the information they need to file the claim, then the process will have failed them."

Currently, hospital archivists must establish the succession status of a person making an information request for a deceased person in addition to seeking out the specific health information in the medical records. With tens of thousands of requests before them, Quebec health authorities perceived the risk that they would not be able to manage this one-time high demand before the claims period ended, and also that doing so could cause delays to processing requests from other Quebecers.

They consulted with the legal team representing the QCAP class to develop a proposal to reduce the administrative burden of Quebec hospitals. The proposal includes a mechanism for health authorities to communicate health information to the agencies managing the preparation and determination of claims (Proactio and Epiq). Doing so would allow hospital archivists to focus on the medical records while leaving the establishment of succession status to the agents and claims administrators.

Representing Santé Quebec, Anne de Ravinel briefly explained the desire of the health authority to have the changes approved. (This was the first time in the 7 years of the Ontario administration of this Quebec class action that anyone has spoken in French!).  

She explained that the primary concern for Quebec Santé was the need to respond to requests for records in an appropriately timely way and also to protect the privacy of these records and that the proposal helped the agency meet these responsibilities. 

Also speaking in favour of the request was Kate Boyle (on behalf of Pan Canadian class of victims, which have another year to file their claims) and Robert Cunningham (on behalf of the Canadian Cancer Society).  No parties raised objections or concerns. 

A qualified yes 

Both justices seemed favourably disposed to the request, but Mr. Meland was nonetheless probed about alternative solutions available. He explained that extending the deadline for making claims was unfair to claimants, who had already waited decades to receive compensation. Because no one will receive any money until all of the claims are received, an extension would delay everyone's payment.

A sticking point for Justice Morawetz was the proposal to give Santé Quebec blanket immunity for its new role in the claims process. He seemed unmoved by Mr. Meland's explanation that this was the same kind of immunity which was already extended to other participants in the process (claims administrator, mediator, etc.).  

At the end of the hearing, and after a brief off-camera judicial consultation, the judges said that orders from both courts would be issued in line with the  request, albeit with a minor modification to the immunity provisions. 

The rulings

Decisions made on February 20th were circulated after the weekend by both courts. They are:

• Endorsement of the Ontario Superior Court
• Extension of the Official Confirmations Order by the Ontario Superior Court
• Jugement by the Quebec Superior Court
• Motif (reasons) for Jugement by the Quebec Superior Court

Post-implementation decisions

Almost five months has passed since the settlement among tobacco companies and the governments and smokers whom they injured came into effect. 

This post reports on some of the implementation issues encountered by parties which have been brought to back to the court for review.

October: Establishing a method for joint oversight by Quebec and Ontario courts

The execution of the payments to Quebec smokers involves oversight by both the Quebec and Ontario Superior Courts.  In October a protocol Court to Court Communication Protocol was established to establish some of the ways in which this joint work will be managed. 

November and onwards: Formally dismissing the lawsuits filed against the companies

In November the monitors requested clarity/direction on the steps to formally terminate the lawsuits that were addressed by the settlement and proposed "Pending Litigation Orders to streamline the process for terminating and dismissing the Pending Litigation." 

This unopposed request was agreed to by Justice Morawetz, who initially issued an order in November seeking the support of courts across the country in dismissing the cases.  

In January 2026, he revisited the issue and subsequently requested the monitors to provide him with text to facilitate his using his own authority to accomplish this. 

December:  Authorization for Deloitte to play a double role for JTI-Macdonald

In December, JTI-Macdonald sought approval for Deloitte to work both as court-appointed administrator for the settlement plan and also as auditor for Japan Tobacco's Canadian operations. 

The request was apparently unopposed during the (non-broadcast) hearing and immediately approved. Justice Morawetz' endorsement was issued after the December break. 

January:  Streamlining the Quebec paperwork

Last week, the Quebec class action filed a request with both the Ontario and Quebec courts for approval of changes to the paperwork required by the heirs of injured smokers in submitting claims. A roadblock to finalizing the application is said to involve the paperwork required in getting access by families of dead smokers to the medical records required to provide alternative proof. 

Access to these medical files requires the assistance of Quebec health officials who are said to be "already struggling to respond ... due to the high volume of requests" 

The deadline to file claims under the Quebec class action is this coming August (claims under the Pan Canadian class have an additional year). A provincial government hiring freeze has raised concerns about the government's capacity to manage these requests for records within the mandated time frame. "If the public health institutions receiving these requests must analyse and determine the succession status of the individuals making them (which often is extremely complicated and requires the analysis of multiple documents), there will be a significant backlog and delay and it is unlikely that the alternative proof will be made available on a sufficiently timely basis."

The solution proposed is for officials in the Quebec health system to be permitted to transmit the medical records directly to the agencies which are administering the Quebec and Pan Canadian claim process. This approach is proposed with the full support of the Quebec ministries involved. 

A joint hearing of the Quebec and Ontario Superior Courts has been set for February 20th to decide this request.

51,000 Quebec claims underway - almost half of whom need more paperwork

As shown in the appendix to the request filed last week,  almost half of QCAP claimants will need access to documents for such alternative proof: 8,500 of 13,000 still-living victims and 13,100 of 37,000 succession claims.  

Court approval is sought for implementation steps - but no word yet on other key developments

On the morning of November 13th, Chief Justice Morawetz virtually faced the lawyers representing the companies, governments and smokers involved in the settlement of Canada's tobacco claims. 

The hearing had been scheduled for him to receive requests to tie up two loose ends on the multi-billion agreement which took effect at the end of August. 

The first of these was a blanket order which would dismiss all of the lawsuits the companies were facing before the settlement came into effect. As explained by RBH's monitor, this blanket approach "will simplify the process for the termination and dismissal of the Pending Litigation by consolidating (i) the list of Pending Litigation matters into one schedule and (ii) the operative provisions into a single order for each proceeding." 

The second was to give structure to the last-minute condition the judge introduced to his approval of the payments to the lawyers representing the Quebec class action.  This involved a $50,000,000 share of the lawyers fees being set aside as a reserve to be given to injured smokers should it turn out that the number of claimants is greater than the moneys left over after the approved legal fees were deducted.  The requested order sets out how this trust account will be managed, including some tax issues. 

It only took about 10 minutes for the judge to be persuaded that the "one stop shop" and "easy to understand" order would facilitate the companies in having the litigation against them dismissed, and to learn that there were no objections from any parties to either motion. His formal approval is expected later today, and the orders will be linked at the end of this post.

A limited peek behind the curtain ...

Also filed with the court in connection with this hearing were updates by the three monitors on the steps that were being taken to implement the agreement. Among the useful nuggets in these reports was a report on the distribution of the $12.722 billion paid out to date. (Figures below are from page 37 of FTI's report)

Other than general statements about these issues being under discussion, the Monitors Reports provided very little information on the corporate restructuring that is intended to carve out the "Alternative Products Business", or on the establishment of the Cy-Pres Foundation that will be responsible for investing $1 billion in research.

Documents

• FTI (for Imperial Tobacco) Motion Record, Thirty-Third Monitor's Report
• EY (for Rothmans, Benson & Hedges) Motion Record, Thirty-First Monitor's Report
• Deloitte (for JTI-Macdonald) Motion Record, Thirty-First Monitor's Report 
• Joint Factum of monitors and plan administrators

Orders and Endorsement

Imperial Tobacco (Pending Litigation Dismissal Order; QCC Reserve Protocol Order)
• Rothmans, Benson & Hedges (Pending Litigation Dismissal Order; QCC Reserve Protocol Order)
• JTI-Macdonald
• Endorsement

Plan Administrators' first reports show claims are trickling in

On Thursday (October 23rd) the first reports from the Claims Administrators were filed and made public on the websites of the administrators/monitors. (FTI Consulting for Imperial Tobacco, EY for Rothmans, Benson & Hedges, and Deloitte for JTI-Macdonald). 

These reports provide "substantially the same" updates on the same two bits of information: (a) progress in the filing of claims in the Pan Canadian and the Quebec Class Action cases and (b) the establishment of a protocol for Ontario and Quebec courts to work together on the file.

They remind that claimants in the Quebec class action have 10 months left to file their claims and that those in the Pan-Canadian claims which cover all Canadians but address illnesses diagnosed at a different time frame than the Quebec Class Action have 23 more months.

As of mid-October, a little over 400 claims had been received. Epidemiological projections of the number potential claimants exceeded 280,000 individuals.  A media campaign to reach potential claimants is now scheduled to start on November 5th.  

Public Accounts disclose legal costs of 11% for New Brunswick and 25% for Newfoundland and Labrador

 (This post was corrected on October 5)

All but two of Canada's 13 subnational jurisdictions managed their legal claims against tobacco companies through contingency arrangements with their legal counsel. As discussed here earlier, these fee contracts have generally not been made public. Even where there was disclosure (Newfoundland and New Brunswick), the fees may have been renegotiated over time.

New Brunswick is among the first provinces to report both the income and legal fees associated with the settlement approved last year and implemented in late summer. This week the top-line line financial reports from that province for the last fiscal year were made public. (Reflecting the timing of the settlement agreement, the province chose to report the initial payment in the fiscal year ending March 31, 2025).

Volume 1 of New Brunswick's Public Accounts can be downloaded here, and the relevant section is pasted below. "Under the agreement terms, $24.7 billion will be paid to the Provinces and Territories. New Brunswick's share is approximately 2.4%, equating to $596.0 million. In 2024-25, the Province recognized the upfront contribution of $156.0 million in revenue (Schedule 15) and $17.7 million in net associated legal fees and disbursements payable."

This suggests that the legal costs of this revenue were equal to 11.35% ($17.7 million as a percentage of $156 million). The net revenues from the settlement to the province from the initial payment were $138.3 million. 

This is roughly double the revenue reported by the province from tobacco and vaping taxes ($64.7 million and $900,000 respectively).

The legal fees inferred for New Brunswick are at a higher rate than the 10.2% fee for Nova Scotia, which engaged the same legal team, and lower in comparison to the 25% fee paid by Newfoundland and Labrador, which was represented by a different set of lawyers.  The implicit fee rate for British Columbia is 4.55% - this province initially hired a firm on a fee-for-service basis before transferring to the same firm as New Brunswick, Nova Scotia and three other provinces. Information on financial declarations by those provinces is provided below. 

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Notes from the Public Accounts of other provinces

BRITISH COLUMBIA:
In the 2024-25 Public Accounts, the Independent Auditor for British Columbia expressed concern that the province failed to include an estimate of revenues from the settlement. "An initial estimated amount of $0.9 billion is expected to be received in fiscal year 2026 with the remainder to be received over an estimated 20 years. At March 6, 2025, government should have recorded an asset, corresponding revenue, and related legal expenses."

When the province's 1st quarterly report for the 2025-26 fiscal year was made public in September, this recommendation was acted upon.  The province declared "$2.725 billion in one-time net revenue in relation to the tobacco settlement."

"This estimate includes $3.7 billion as the Province’s share of the arrangement, to be received over approximately 18 years. The net revenue also includes $130 million in legal costs and has been discounted to reflect the long-term nature of the payment schedule. These estimates will be updated throughout the fiscal year as more up‑to‑date information becomes available and confirmed at Public Accounts in summer 2026."

The stated figures imply a 4.55% contingency fee. This percentage is equal to the proportion of the $130 million legal costs of the net revenues before those costs were deducted ($2.725 billion + $130 million = $2.855 billion).

ALBERTA:
In the year-end report presented in June 2025, the Alberta Government identified that it was recording revenues from the settlement, but did not specify the amount or the associated legal costs.

SASKATCHEWAN:
In its financial statement released in June 2025, the Saskatchewan government noted revenues from the settlement and also expenses related to legal costs, but provided no specific figures.

MANITOBA
In its Public Accounts for 2024-25, the Manitoba Government chose to report revenues of $846 million with associated expenses of $425 million. Because the settlement agreement identified its share of the provincial revenues at 4.53%, its total revenue was anticipated to be $1,118.9 million, with an upfront payment of $284.3 million. The lower amount declared is explained as follows in the Public Accounts: "The tobacco settlement expense includes an allowance for doubtful accounts in the amount of $396 million that was established in recognition of the significant uncertainty over the amount and timing of the future payments related to the tobacco settlement and $29 million of legal fees that were expensed in 2024/25." 

If the legal fees of $29 million were in association with an upfront payment of $284.3 million, the implicit  legal fee is equal to 10.2%

ONTARIO
Ontario did not engage lawyers on a contingency fee basis.

Ontario's Public Accounts for 2024-2025 recognized revenue from the settlement, and applied a discount to adjust for the inflationary impact of future revenues. Ontario's share of the settlement was $7.1 billion, but the province calculated its present value to be $3.4 billion. The following explanation was provided:

"On March 6, 2025, the Ontario Superior Court of Justice approved a $32.5 billion settlement agreement in Canada under the Companies’ Creditors Arrangement Act arising from several legal claims against three major tobacco manufacturers, including compensation for smoking-related health care costs incurred by provincial and territorial governments. The Province is owed approximately $7.1 billion under this agreement. This receivable represents non-recurring revenue recorded in 2024–25. The net present value of the receivable is $3.4 billion calculated based on a discount rate which reflects the Province’s expected rate of return and the transaction-specific risks tied to this receivable such as the uncertainty of payments contingent on the companies’ long-term profitability. 

On August 29, 2025, the Province received the upfront payment of $1.9 billion from the tobacco companies in accordance with the stipulations set out in the settlement agreement established on March 6, 2025. The remaining $5.2 billion will be paid in future annual instalments over approximately the next 30 years, based on a percentage of the tobacco companies’ after-tax income, until the total amount is paid."

QUEBEC
In its Public Accounts, Quebec recognized revenues of $1,735 million as an "initial amount". Quebec's share of the provincial revenues is 28.2796151%. Quebec did not rely on outside counsel when making its claim against the companies (although it engaged outside counsel during the settlement process)

The government explained its decision to not report the total anticipated amount as follows: "There is significant uncertainty with regard to the future encashment of this amount and its recovery period, as they depend on the sales level of tobacco products, which will be affected by trends in the economy, regulations, and consumption habits. If cashed in full, the amount could be recovered over a period of approximately 20 years. The level of net profits from tobacco products cannot be reasonably estimated. Therefore, the government will record the remaining amount annually when it gets confirmation of the share of revenue to which it is entitled."

NOVA SCOTIA
In its Public Accounts for 2024-25, the province of Nova Scotia identified "$16.9 million in tobacco settlement legal fees" and "Tobacco Settlement Revenue of $203.1 million." The reported legal fee is 8.3% of the settlement revenue. The province also elected to only report revenue received and to defer the reporting of later payments: "... revenue will be recognized annually when there is certainty of the amounts, determined by these tobacco companies’ annual after-tax profit."

NEWFOUNDLAND AND LABRADOR
In its Public Accounts for 2024-25, the province of Newfoundland and Labrador reported settlement revenue of $138,832,000, with associated legal costs of $34.7 million. "Legal fees in relation to the tobacco settlement are 25% of the gross settlement proceeds, payable by the Province as the settlement proceeds are recovered. At 31 March 2025, the upfront settlement payment of $138.8 million has been recorded as revenue and receivable, with 25% of this amount, or $34.7 million, in relation to legal fees for the settlement recorded as other payable and professional services expense."

PRINCE EDWARD ISLAND
Prince Edward Island was represented by the same legal team as Nova Scotia, New Brunswick, British Columbia, Manitoba, Saskatchewan and the territories. Its public accounts for 2024-2025 are not available at this time.

TERRITORIES
Although none of the three northern territories initiated a lawsuit against tobacco companies, they participated in the settlement, and were represented by the same firm which managed the majority of provincial claims. Their public accounts are not available at this time. 

It's official!

Shortly after 9:40 this morning, copies of the Plan Implementation Certificates were circulated among the service list of those following the CCAA oversight of the settlement between the major tobacco companies operating in Canada and the provincial governments and class actions suing them. 

The near-identical documents confirm that: "The Plan Implementation Date has occurred and the CCAA Plan and the provisions of the Sanction Order which come into effect at the Effective Time are effective."

Wait and hurry up: A flurry of last minute orders

 At some point during yesterday's hearing, Chief Justice Geoffrey Morawetz observed that more than 6000 pages of documentation had been submitted to support the 13 or more formal agreements he was being asked to make just two days before the tobacco settlement takes effect.

In contrast to the volume of material, the time given to the presentation, discussion and approval of all these requests did not exceed 40 minutes. The lawyers presenting the requests were mostly concise to the point of laconic. And through their silence when given a chance to comment, all of the formerly warring parties seemed to be in agreement with the last-minute touch-ups to the agreements they approved last December.

Given the pace of developments over the past quarter century, yesterday's developments resembled the digestive tract of the proverbial goose. The decisions involved are linked at the end of this post. 

On second thought...

Before court was adjourned, Chief Justice Morawetz let it be known that a subsequent private discussion (case conference) would take place shortly afterwards. The topic under discussion was his ruling earlier that week that there would be a hold-back on the fees paid to lawyers representing the Quebec class action until all claims had been settled.  

Yesterday afternoon, he backtracked somewhat on that requirement and issued an amended version of his ruling on fees.  Instead of a vaguely defined requirement for a reserve fund, the new text (paras 77 to 79) establishes that "a reserve be held back from the QCAP Counsel fee and retained in the respective QCAP Trust Accounts in the total amount of $50,000,000, the purpose of which is to alleviate, to the extent possible, any reduction in compensation to claimants because of the actual take up rate ..." 

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Settlement-related decisions and orders released after August 26 - including one by the US Bankruptcy Court on Tuesday - are linked below.

Plan Amendment Orders:

• Imperial Tobacco - Fourth Amended and Restated
• Rothmans Benson & Hedges - Fourth Amended and Restated
• JTI-Macdonald - Fourth Amended and Restated

U.S. Chapter 5

• Order Recognizing and Enforcing the Orders of the Canadian Court: (I) Approving the Imperial CCAA Plan; (II) Enjoining the Solicitation of Claimants; and (III) Appointing the Foreign Representative as Plan Administrator under the CCAA

Insurance Settlements

• Imperial Tobacco

Collateral Agent Order

• Imperial Tobacco - Collateral Agent Order
• Rothmans Benson & Hedges - Collateral Agent Order
• JTI-Macdonald - Collateral Agent Order

Plan Administration Reserve Trust Order

• Imperial Tobacco - Plan Administration Trust 
• Rothmans Benson & Hedges -Plan Administration Trust 
• JTI-Macdonald - Plan Administration Trust 

Claims Administrator Order

• Imperial Tobacco - Claims Administrator Order
• Rothmans Benson & Hedges - Claims Administrator Order
• JTI-Macdonald - Claims Administrator Order

Other issues

• Decision on approval of fees by mediator

Class Counsel Fee Orders 

• Tobacco Producers
• Knight Class
• Quebec Class Action 

A decision to approve the requested legal fees

 Two months ago, Chief Justice Geoffrey Morawetz had indicated that he would issue his ruling on class counsel fees "long before the implementation date."  As it turns out, his ruling issued today arrives only 4 days in advance of that long-anticipated moment.

The lawyers whose fees were the subject of this ruling will consider that it was worth the wait. Chief Justice Morawetz endorsed their request for the full contracted amount. 

Two of these fee decisions will draw scant notice - the judge himself dismisses them as "de minimus". The legal team representing the B.C. "Knight" light cigarette action will receive $5 million, which is one-third of the settlement amount for the class. They will also be reimbursed for $1 million in disbursements and an additional award of $10,000 will be provided to the representative class member. The remainder of the $15 million will be allocated to the Cy Pres foundation. Lawyers representing tobacco producers are able to claim 25% of the $15 million recovered for farmers in the settlement (some of which they have already been provided). The remainder will be disbursed among the affected farmers. 

The third fee endorsement is the record-breaking decision to uphold the 22% fee contracted by the lawyers who have represented two classes of injured Quebec smokers since 1998. This legal team will receive  $901 million in compensation for their decades of work (totalling more than 200,000 hours of work since 1998 and covering future work). Because they have previously been provided with $5 million which was used to reimburse the Fond d'Aide, the legal fees will total almost $906.2 million.  

This is the largest fee award in Canada by a considerable margin - described in this ruling as "unheard of in Canadian legal history." 

The judge cautions that he does not intend his approval of this fee to become precedent for future legal fees. He nonetheless provides his reasoning at length in a text peppered with quotes, footnotes from other rulings, references to advice from a Quebec jurist, and the interventions of other parties. Fundamentally, he agreed with the position of Quebec lawfirms who said in February and in March that in the absence of a principled reason to alter the fee, their contract should be honoured.

Justice Morawetz summarizes his decision to - "reluctantly" - approve the amount requested.

(63) I accept the following:

(a) QCAP Counsel assumed great risk in accepting the retainer from the class

(b) The 22% fee arrangement is at the low end of the scale and is fair and reasonable.

(c) The ACQPs succeeded at trial and the Quebec Court of Appeal

(d) Although the CCAA Plans reflected a mediated settlement, the CCAA Plans were only put forth to a creditor vote after five and a half years of mediation. This reflects hard fought negotiations.

(d) An exceptional outcome was obtained for the Class. The monetary award for each member of the class if fixed. Even if the fee request of QCAP Counsel is reduced, the reduction will not flow to the benefit of the Class.

(f) The PCCs, as well as the provinces and territories obtained residual benefits as a result of the work of QCAP Counsel.

(g) With the exception of Quebec, the provinces and territories took no position on the appropriateness of fees. This is significant as any reduction in the fees being awarded to the QCAPs would flow to the provinces and territories.

Safeguarding class members' compensation

Justice Morawetz' approval of the $900+ million fee is contingent on the $4 billion awarded to the Quebec class of smokers being enough to provide all eligible members with the compensation provided for them in the settlement and also cover the legal fees. 

If it transpires that the class members are being short changed, then the fees to lawyers will be reduced. The endorsement provides for a reserve fund "to ensure that each approved claimant receives the full amount of their claim under the CCAA plans" and directs the monitors to work out the details of how this will happen.

A firm hint from the bench

Chief Justice Morawetz closes his decision by calling on the Quebec legal teams to be generous with their earnings. "This created the opportunity for QCAP Counsel to obtain compensation beyond their wildest expectations. In receiving this reward, they should recognize that they have a moral obligation to society ..." He calls on them to honour this obligation through charitable giving - "In this way they can be publicly recognized for their incredible work in this matter."

Last minute revisions to the settlement plans

On Wednesday August 27th Justice Morawetz will hear requests from a number of parties involved in the ink-almost-dry settlement among Canadian provincial governments, injured smokers and farmers and tobacco companies. 

This hearing will come two days before the expected implementation date, and one day after the US  Bankruptcy Court is expected to support Imperial Tobacco's settlement position in the United States.

This post identifies the issues that will be raised on the 27th with links to the paperwork involved. It will be updated as additional material comes on line.

1) "Amended and Restated Plans" 

The monitors are seeking another set of amendments to the plans of each company, and have submitted "Fourth Amended and Restated" versions for approval. In broadly similar motions for each company, they provide consistent rationale that the amendments are "necessary", "consistent" with the original plan that was voted on in December, "not materially adverse" to the financial interests of the creditors and adversely affecting any other party and are not opposed by other parties.

The large volume of changes is immediately apparent from the blackline version which is included in the motion record for each company (Imperial Tobacco, Rothmans, Benson & Hedges (Part 1 and Part 2)  and JTI-Macdonald). 

The rationale for the changes is explained earlier in the document in a sets of tables that summarize the proposed amendments. Some of the changes embed issues raised earlier this summer and/or proposed for discussion this week.

The Monitors (who also act as Plan Administrators) have submitted a Factum outlining their support for these changes. 

2) Collateral Agent Order

Plan Administrators are seeking a court order to appoint Computershare Trust Company as the collateral agent for the parties. Equivalent motions were filed for Imperial Tobacco, Rothmans, Benson & Hedges and JTI-Macdonald 

3) Claims Administrator Orders

Epic Class Actions Services is seeking an Order with respect to each company to approve their plan for notifying potential claimants and for their administrative costs and for related issues. They estimate it will cost them $92 million for their role in administering the claims.

* Motion with draft order, Global Notice Plan and related documents including claim forms, etc.  

3) Settlement of insurance claims 

The companies appear to have finalized their arrangements with those insurance companies which provided them coverage at the time of the behaviour which has resulted in the settlement. Imperial Tobacco will receive about $3 million from 5 insurance companies (Aviva, NHRAE, Lloyds, Westport and Zurich). The motion to approve the allocation of this to the settlement funds also identifies other insurance companies from whom there appears to be no pay-out.

"Critical elements" are put in place

In a brief (15 minute) hearing this morning, Chief Justice Geoffrey Morawetz granted two sets of requests for court orders. 

The first, made by the lawyers representing the Quebec class action on behalf of themselves and the three other claimant classes (Pan Canadian Claimants, Knight action and Tobacco Producers) will authorize these lawyers to sign releases and other documents required by the settlement plans.

The second, made by the Monitors-cum-Plan Administrators, will authorize the assignment of managing the settlement funds by BMO. 

The two orders which will be endorsed later today were described as "critical elements" of the settlement plan which is expected to take effect on August 29th. There were signals that there will be other issues that need court approval before that date.

The orders which were approved today can be found in the material submitted to the court:

• Motion of Quebec Class Action Plaintiffs for a Signing Authorization Order
• Motion for a Bankings Arrangements Order

Cue the bankers

In addition to the clarification about the authority of class action counsel, during this Friday's hearing Chief Justice Morawetz will also be asked to approve the banking arrangements between the Plan Administrators and the Bank of Montreal (BMO). 

Details of the parallel requests from each company were posted today on the websites of the monitors (who are also the Plan Administrators). These Motions can be accessed here:

• FTI: Imperial Tobacco Canada Ltd.
• EY: Rothmans, Benson & Hedges
• Deloitte: JTI-Macdonald

"Out of an abundance of caution"

A new notice of motion by the lawyers representing members of the Quebec class action was filed on Friday and made available today. At a hearing now scheduled for Friday, August 15th at 9:00 a.m., they will ask for clearer signing authority for lawyers representing all of the non-government claimants.

This pre-hearing paperwork includes an explanation that the Sanction Order inadvertently failed to specifically authorize these lawyers to release the claims in return for which settlement funds will be issued and to conduct other required paperwork. "Out of an abundance of caution, Quebec Class Counsel are seeking this Court’s authorization to execute and deliver any and all required plan implementation documentation as they consider advisable and propose that this Court’s authorization be extended to the other Claimant Class Counsel as well."

The order from Justice Morawetz they are seeking is to the effect that 

"(i) Quebec Class Counsel is hereby authorized to execute and deliver on behalf of the Quebec Class Action Plaintiffs, (ii) PCC Representative Counsel is hereby authorized to execute and deliver on behalf of the PanCanadian Claimants, (iii) Knight Class Counsel is hereby authorized to execute and deliver on behalf of the Knight Class Action Plaintiffs, and (iv) Counsel for the Tobacco Producers is hereby authorized to execute and deliver on behalf of the Tobacco Producers and Ontario Flue-Cured Tobacco Growers’ Marketing Board, any and all documents as they consider advisable to give effect to the implementation of the CCAA Plans including, as applicable and without limitation, the following documents: a. Claimant Contractual Releases; b. Plan Implementation Certificates; c. Collateral Agency Agreements; and d. Flow of Funds Agreement."

US Bankruptcy Court gives backing to JTI Settlement.

Yesterday the Monitors for JTI-Macdonald uploaded the Chapter 15 Order of Justice Mastando of the United States Bankruptcy Court Southern District of New York, giving effect in the United States to the CCAA settlement with respect to that company.

Although the hearing before Justice Mastando had been scheduled for August 7th, the Order was dated August 5th, and the drafting of the order makes no reference to oral submissions. 

As reported earlier this week, the same judge is currently scheduled to hear an equivalent request from Imperial Tobacco Canada on  August 26th. 

Documents related to the JTI-Macdonald decision are available on the Deloitte Insolvency website, at the following links:

• Order Scheduling Recognition Hearing.pdf
  
• Notice Application for an Order.pdf
  
• Verified Petition.pdf
  
• Aziz Declaration.pdf
  
• Memo of Law.pdf
  
• Chapter 15 Recognition Order.pdf

Imperial Tobacco files request for U.S. recognition of settlement plan

 Following a similar request by JTI earlier this summer, last week Imperial Tobacco submitted its request to a New York Court for "Recognition and Enforcement of the Orders of the Canadian Court".

The hearing is scheduled for "August 26, 2025 at 11:00 a.m., prevailing Eastern Time" before Honorable John P. Mastando III of the United States Bankruptcy Court for the Southern District of New York.

This is only 3 days before the day on which the implementation was earlier suggested to take place - and which is still suggested on the website for claims related to the Quebec class of victims.

Quebec courts give further support to the settlement

On July 29th, following a hearing in the morning, the Quebec Court of Appeal authorized the release of the almost $1 billion that it had ordered two tobacco companies to put aside almost a decade ago.   

In October 2015, that court had ordered a series of security payments from Imperial Tobacco (totalling $757,995,000) and Rothmans, Benson & Hedges (totalling $225,995,000). 

During the intervening period, the money has been managed by the Quebec Minister of Finance, which has now been ordered to release the money to the monitors of those two companies.  It would appear that no interest was involved. 

The joint request by the two largest companies involved was supported by the Quebec class action, on whose behalf the security payments had initially been imposed.

Quebec Superior Court gives support to the CCAA plan and orders health care agency to facilitate payments to injured smokers

 On Monday July 21, Justice Catherine Piché of the Quebec Superior Court issued two rulings aimed at implementing the tobacco settlements.

The first - "official confirmations" - includes a dozen specific orders establishing the authority and responsibility of the Quebec health insurance system in assisting the payment of compensation to injured Quebec Smokers. The Régie de l'assurance maladie du Québec (RAMQ) is directed to providing information which facilitates the eligibility of claims and which safeguarding the confidentiality of this information.

The second  - Come-in-Aid - provides assurance that the Quebec courts will "recognize, assist and give effect to" the CCAA application as though they had been issued in Quebec. 

The application for this order which was made by the Quebec class action can be read here. 

Japan Tobacco applies for Recognition under Chapter 15 of U.S. bankruptcy law

 At 10 a.m. on August 7th, lawyers for JTI-Macdonald will seek approval from a New York Court for recognition of and support for the CCAA settlement plan. This information was provided in an Order from the United States Bankruptcy Court (Southern District of New York) which appeared on the website of the company's monitors earlier this week. 

Also uploaded were the company's application for the Order, its Petition for Recognition, as well as an accompanying declaration and 'Memorandum of Law'. 

The first dozen pages of the Petition provide a readable re-cap of the issues and also the company's motivation in seeking the order. 

JTIM asserts that a positive decision to its request from the U.S. court is required before the Canadian settlement takes effect. "The entry of an order by this Court, pursuant to Chapter 15 of the Bankruptcy Code, recognizing the Canadian Proceeding and the CCAA Plan and granting related relief in order to give full force and effect to the Sanction Order and the CCAA Plan, and particularly the Releases in the U.S., which enjoyed full creditors’ approval in the Canadian Proceeding, is an unwaivable condition precedent to implementation of the CCAA Plan. Without a Chapter 15 order recognizing the Canadian Proceeding and giving full force and effect to the CCAA Plan and the Sanction Order in the United States, the CCAA Plan will not be implemented and the global settlement will fail." 

If an explanation was offered as to why the 'unwaivable condition' is only being addressed so many months later, I have missed it.

The Petition provides additional insight on the value of U.S. court support: this will ensure that the release from liability is extended to the United States, giving protection both to JTIM and also to its previous owners (now a subsidiary of British American Tobacco). 

"The purpose of this Chapter 15 case is to obtain recognition of the Canadian Proceeding and the CCAA Plan, and the entry of an order of this Court granting full force and effect to the Sanction Order and the CCAA Plan, so that the Debtor may enforce in the United States the CCAA Plan and the Releases for the Released Parties. The Released Parties include, among others, R.J. Reynolds Tobacco Company, R.J. Reynolds Tobacco International Inc. and RJR Nabisco, Inc. (now known as R.J. Reynolds Tobacco Holdings, Inc.) (collectively, the “RJR Group”). The RJR Group owned the Debtor from 1974 until the execution of the Purchase Agreement (as defined below) in May of 1999."

The U.S. judge who is managing the JTIM request  --  John P. Mastando III - is the same person who issued a recognition order to Imperial Tobacco last summer, and which has been available on the website of FTI, the monitors for that company since last November. No equivalent material appears to be available on the website of EY, the Monitors for Rothmans Benson and Hedges.

 

schedules the hearing 

Administrative powers extended and billings protected from public disclosure.

Late last week two short court orders were posted on the website of the monitors assigned to manage the CCAA proceedings for Imperial Tobacco, Rothmans, Benson and Hedges and JTI-Macdonald.

One of these extends the authority of the Hon. Warren Winkler, who has acted as mediator in this process for 6 years. His power in these proceedings is significant. In addition to those powers and services previously enumerated, this order directs him to "take all steps and actions, and to do all things, necessary or appropriate, in his sole discretion, with respect to the CCAA Plans (collectively, the "Ongoing Services") until further order of this court."

The confidentiality protocol, also extended by this order,  excludes disclosure of either the billings associated with these services or the administrative actions taken by this former chief justice in his role as mediator in these files. 

The second of these orders specifies that the fees paid to the monitors and their lawyers are subject to review by Mr. Winkler, and that these fees are also not to be made public.

August 29th is the target for settlement 'implementation date'

During a brief (15 minute!) hearing this morning before Chief Justice Geoffrey Morawetz, counsel for the Quebec tobacco class actions reported that August 29th was the target date to implement the settlement agreement that would end all pending litigation against Canada's tobacco companies. 

This may be the first public statement to this effect. The information was relayed during a discussion of administrative issues which need to be resolved before the companies begin to pay compensation. 

The purpose of today's hearing was to obtain court orders on the following pre-implementation issues:

• the transfer and use of the $1 billion security deposit imposed on two companies by the Quebec Court of Appeal in 2015. For the last 10 years this money has been held in trust by the Quebec government (without accruing any interest). It is expected that in July the Quebec Court of Appeal will be asked to order the transfer.
• a settlement that resolves all claims by a small number of pensioners of a former Imperial Tobacco subsidiary.
• settlements between Imperial Tobacco and four insurance companies with which the company had policies.
• agreements among Imperial Tobacco and the Canada Revenue Agency and Revenue Quebec to resolve tax disputes within the context of the CCAA proceedings. 

There were no objections to these requests and representatives of the parties involved were on hand to voice their support. The judge said these orders would be issued this morning with brief reasons (endorsements) to follow. When available, these will appear on the websites of the Monitors for the companies involved:

• FTI Consulting for Imperial Tobacco
• EY for Rothmans, Benson & Hedges

At the end of this session, Chief Justice Morawetz acknowledged that he had yet to rule on how much the lawyers representing Quebec smokers would be paid, but said his decision would be made public "long before the implementation date."