By The Canadian Press

Ontario judge begins hearing arguments over landmark $32.5-billion tobacco settlement

Jan 29, 2025 | 1:41 PM

TORONTO — An Ontario judge began hearing arguments Wednesday about whether to approve a landmark $32.5-billion settlement that would see three major tobacco companies compensate provinces, territories and ex-smokers across the country.

The settlement between the companies — JTI-Macdonald Corp., Imperial Tobacco Canada Ltd., and Rothmans, Benson & Hedges — and their creditors received unanimous support from those creditors in a vote held in mid-December.

The proposed deal was crafted by the monitors appointed to each company in collaboration with a mediator, capping off more than five years of confidential negotiations. They recommended that the court approve the plans — one drafted for each company — without amendment.

But a number of hurdles remain as the companies don’t agree with the plans as drafted.

Natasha MacParland, a lawyer representing one of the monitors, said the main sticking point is what share each company must pay.

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“The monitors are of the view that the most significant issue outstanding is the allocation of the global settlement amount as between the tobacco companies,” MacParland told the court.

Ontario Superior Court Chief Justice Geoffrey Morawetz is scheduled to hear submissions from companies and other parties into next week before deciding whether it should be approved.

The proposed deal includes more than $24 billion for the provinces and territories to settle lawsuits they brought against the companies for health-related costs due to tobacco use and $4 billion for plaintiffs in two class-action lawsuits heard in Quebec. Another $2.5 billion is earmarked for Canadian smokers not included in the Quebec lawsuits, and more than $1 billion would go to a foundation to fight tobacco-related diseases.

Lawyers representing two of the companies said Wednesday they could not endorse the deal as is.

“What is needed here is a plan that is supported by all three debtors, that’s the only circumstance in which the claimants get what they have bargained for,” said lawyer Robert Thornton, representing JTI-MacDonald. “Now this process has turned the heat in the kitchen way up.”

The judge quickly interjected. “I’m just wondering whether you should be facing me or turning around and facing the gallery, where there are obviously representatives from all concerned, because what you’re really advocating, your submissions largely, is to continue negotiating,” Morawetz told Thornton.

Mike Feder, a lawyer representing Rothmans, Benson & Hedges, said his client estimates that under the proposed deal it would end up paying $7 billion more than its fair share.

“The proposed plan holds tremendous potential to resolve all tobacco-related claims in Canada against RBH,” Feder told the court, describing the contested claims as “some of the most complex civil litigation ever seen in Canada.”

“However, to be fair and reasonable and capable of sanction, the tobacco companies’ respective responsibilities for funding the global settlement amount of $32.5 billion must be allocated among them, and that has not yet been done,” Feder added.

Of the $32.5 billion, an upfront contribution of $12.5 billion in cash would be paid by the three companies. The remaining $20 billion would be paid to creditors as annual contributions over roughly 20 years.

The case originated with a landmark ruling from Quebec that found the companies had chosen profits over the health of their customers and ordered them to pay about $15 billion to plaintiffs in the two class-action lawsuits.

The case then migrated to Ontario in 2019 where the companies sought creditor protection after the Quebec Court of Appeal upheld the initial ruling. That’s when discussions began about resolving all outstanding lawsuits against tobacco firms.

The companies faced claims of more than $1 trillion in total, including lawsuits from provincial governments seeking to recover smoking-related health-care costs, court documents show. Since 2019, all legal cases against the tobacco firms have been on hold.

Except for the Quebec lawsuit, at the time of the creditor filing, many of the other claims were only in preliminary stages or hadn’t even made their way to court.

“The two sides of the ledger had to move toward each other in order to achieve what this court mandated at the beginning of the proceeding, a pan-Canadian global settlement of all tobacco claims,” MacParland said.

The court will also have to rule on fees being sought by lawyers that led class actions, including the ones in Quebec. Retired Quebec judge André Prévost will help the court on motions regarding those fees, Morawetz said.

Hearings resume Thursday with lawyers representing Imperial Tobacco.

This report by The Canadian Press was first published Jan. 29, 2025.

— By Sidhartha Banerjee in Montreal.

The Canadian Press