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Have you ever tried to read tea leaves to discover what’s in store?
Try reading tobacco leaves instead — and there, suddenly, the future isn’t very bright.
Over the past few years, provincial governments across the country have joined what looked like it might be a profitable endeavour: suing Big Tobacco to recover the money that cigarette smoking has added to provincial health costs.
In Newfoundland and Labrador, the court battle started with a piece of legislation called the Tobacco Health Care Costs Recovery Act in 2001 — some 17 years in, the province has paid out $850,000 to fight the case, but hasn’t won anything yet. Nova Scotia and New Brunswick launched similar legislation in 2005, and then went on a hunt for law firms, with New Brunswick’s legal action starting in 2008 and Nova Scotia’s in 2015. Prince Edward Island was the last to bring in legislation, in 2009, but started its court action in 2012.
The idea is to capture billions of dollars in settlements or court verdicts — but something that happened last week in Quebec should probably send a little shiver of doubt about whether any sort of settlement windfall will ever come to the now 10 provinces suing tobacco companies.
In Quebec, a verdict in a class-action lawsuit filed in 1998 against Big Tobacco was upheld by that province’s Court of Appeal, meaning that JTI-Macdonald Corp. (a division of Japan Tobacco Inc.), and the Canadian units of British American Tobacco PLC and Philip Morris International Inc. would have to come up with damages totalling $13.5 billion.
But the legal shoes to drop last week might be more significant: after the Quebec Court of Appeal upheld the lower court verdict, JTI-Macdonald went before an Ontario Superior Court justice and successfully applied for creditor protection, arguing its portion of the court verdict was too large for the company to be able to pay and still stay in business.
Then, this week, British American Tobacco’s Canadian division, Imperial Tobacco Canada, did the same thing, saying in a news release, “This protection will enable the company to continue to operate in the normal course, thereby generating the cash flow necessary to pay its employees, suppliers and various levels of government — which in 2018 received taxes of approximately $3.8 billion from the company.”
The company also said it plans to appeal the Quebec verdict to the Supreme Court of Canada.
Something that happened last week in Quebec should probably send a little shiver of doubt about whether any sort of settlement windfall will ever come to the now-10 provinces suing tobacco companies.
That $3.8 billion figure is clearly a not-too-veiled poke at the 10 provincial governments currently also suing the tobacco firms. The court protection, incidentally, also holds up the cases undertaken by those 10 provinces until April 5 — a hiccup in time, given how long the cases have taken to actually get to court.
But that’s only part of the problem.
The provincial governments want a big piece of money from the tobacco giants: Ontario alone wants $50 billlion. All 10 of the lawsuits together top out at more than $120 billion. U.S. court settlements have already hit up tobacco firms for more than US$206 billion over the last two and a half decades.
But Imperial Tobacco sought creditor protection after facing the liability for its share of the Quebec verdict of just $9.2 billion; JTI-Macdonald argued its $1.77 billion share of the Quebec damages was too much for that company to bear as well.
Even though the provinces have done what they can to draw up legislation to help them win in court, where the winning may have to happen is in how governments find a way to get any money they win in the courts from defunct Canadian subsidiaries and their overseas owners.
It may not be the windfall the provinces expect.
Russell Wangersky’s column appears in 36 SaltWire newspapers and websites in Atlantic Canada. He can be reached at firstname.lastname@example.org — Twitter: @wangersky.
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