Historic $32.5B tobacco proposal faces final test in series of hearings

TORONTO — A historic proposal that would see three major tobacco companies pay out billions to provinces and territories as well as former smokers across Canada is set to face its final test over the coming weeks.

The proposed $32.5-billion settlement between the companies — JTI-Macdonald Corp., Rothmans, Benson & Hedges and Imperial Tobacco Canada Ltd. — and their creditors received unanimous support from those creditors in a vote last month and must now obtain the court’s approval.

Over roughly half a dozen days of hearings starting Wednesday, the companies and other parties in the case will have the chance to formally voice their concerns or objections regarding the proposed deal.

At least one of the companies has opposed the plan that was filed with the court in October, saying it would be impossible to implement unless several key issues were addressed.

The Canadian Cancer Society, which is a social stakeholder in the case, has also called for changes to add smoking-reduction measures, warning governments could otherwise fumble a unique opportunity to rein in the tobacco industry and protect the health of Canadians.

“There is a one-time, historic opportunity to get the provisions in the settlement right. It is essential that the settlement contain significant measures to reduce smoking,” Rob Cunningham, the organization’s lawyer, said in an email.

“This opportunity will never come again.”

Several health advocacy groups have similarly denounced the proposed deal as inadequate, accusing provincial governments of selling out to the tobacco industry by accepting payouts that hinge on future sales of harmful products.

The judge overseeing the years-long creditor protection proceedings acknowledged in November there were “outstanding issues,” including each company’s share of the total payout.

Ontario Superior Court Chief Justice Geoffrey Morawetz deemed the issues to be resolvable, however, and urged the parties to continue negotiating until the final hearing.

If the deal is approved, provinces and territories stand to get more than $24 billion over about two decades, while plaintiffs in two class-action lawsuits in Quebec would get more than $4 billion to split between them.

Another $2.5 billion is earmarked for Canadian smokers not included in the lawsuits, and more than $1 billion would go to a foundation to fight tobacco-related diseases. The money for the foundation also includes $131 million taken from the amount allocated to the Quebec plaintiffs.

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.

Morawetz has called the case one of “the most complex insolvency proceedings in Canadian history.”

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

The case migrated to Ontario in 2019 when the companies sought creditor protection after the Quebec ruling was upheld on appeal.

All legal proceedings against the three giants were frozen during the negotiations, an order that has now been extended until the end of January.

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.

Along with the proposed deal itself, the court must also approve the fees sought by lawyers in the Quebec class actions.

Court documents show the lawyers are seeking approval for more than $900 million in compensation for more than 175,000 hours of work in the case that began in the late 1990s.

The fee represents 22 per cent of the plaintiffs’ share of the settlement and includes tens of millions of dollars in costs incurred during the litigation, as well as future costs related to the claims process, the documents show.

This report by The Canadian Press was first published Jan. 28, 2025.

Paola Loriggio, The Canadian Press