Tobacco giants would pay out $32.5B to provinces, smokers in ‘historic’ proposed deal

Three major tobacco companies are proposing to pay nearly $25 billion to provinces and territories and over $4 billion to tens of thousands of Quebec smokers and their families as part of a corporate restructuring process resulting from a prolonged legal dispute.

The companies—JTI-Macdonald Corp., Rothmans, Benson & Hedges, and Imperial Tobacco Canada Ltd.—submitted a proposed plan of arrangement in an Ontario court on Thursday after more than five years of negotiations with their creditors.

These companies sought creditor protection in Ontario in early 2019 following a lost appeal in a significant court case in Quebec.

The Ontario court halted all legal proceedings against the companies while they attempted to negotiate a settlement with their creditors, which include plaintiffs in two Quebec class-action lawsuits and provincial governments looking to recover healthcare costs associated with smoking.

According to the proposed plan filed on Thursday, payments to provinces and territories would be made over time, with approximately $6 billion disbursed upon implementation of the deal.

The Quebec plaintiffs would be able to file claims for compensation of up to $100,000 each. The plan also allocates more than $2.5 billion for smokers in other provinces and territories diagnosed with lung cancer, throat cancer, or chronic obstructive pulmonary disease between March 2015 and March 2019.

Bruce W. Johnston, a lawyer representing the Quebec plaintiffs, described the proposal as “historic and unprecedented” since it allows for compensation for both smokers and governments.

“When we took this case, there had never been a single plaintiff who had received a single penny from a tobacco company,” he said Thursday.

“We initiated this case in 1998, and as a result, tens of thousands of victims will be compensated by the tobacco industry in Canada, mostly in Quebec, while governments will share $24 billion.”

Johnston noted that the plaintiffs have faced long delays, but now they can see “probably a light at the end of the tunnel and that they will receive compensation.”

While many class-action members passed away before receiving any funds from the companies, their heirs—and in some cases, their heirs’ heirs—will qualify for compensation, he added.

Additionally, the proposed deal would require the companies to invest over $1 billion into a foundation aimed at combating tobacco-related diseases.

Before the proposal can be implemented, it must undergo several steps, including a creditor vote and court approval.

Negotiations between the companies and their creditors were confidential, leading several healthcare groups to argue that the lack of transparency would favor the companies at the expense of other stakeholders.

As recently as last month, three organizations—Action on Smoking & Health, Physicians for a Smoke-Free Canada, and the Quebec Coalition for Tobacco Control—indicated that recent court filings suggested the provinces had agreed to a process that would grant the companies veto power over the final agreement.

These groups have consistently urged provinces to implement regulations and smoking reduction measures as part of any agreement with the companies.

The Quebec lawsuits involved smokers who began smoking between 1950 and 1998 and who subsequently fell ill or became addicted. Heirs of these smokers were also included in the lawsuits.

Court documents from last year indicate that hundreds of class-action members have died since the creditor protection proceedings commenced.