⚕️🚬 Industry Requests a Twelfth Stay: 5 Years of Litigation Stays Have Allowed Big Tobacco to Maintain Business as Usual Including Recruiting New Addicts

Saturday, 06 April 2024 08:00.AM

ASH Canada, Physicians for a Smoke-Free Canada and the Quebec Coalition for Tobacco Control are condemning the insolvency process that has allowed the tobacco industry to continue "to operate its business in the normal course" for five years while it avoids compensating its Quebec victims. "Nine years after their victory in a Quebec court and five years since the industry filed for bankruptcy, Quebec tobacco victims still haven't seen a single penny," laments Flory Doucas, Co-Director and Spokesperson for the Coalition.

On Monday, March 25, Imperial Tobacco, Rothmans, Benson & Hedges et JTI-Macdonald asked Ontario's Chief Justice for a twelfth extension of the initial 2019 order that suspended all litigation aimed at the manufacturers and which set up a secretive negotiating process among the provinces, the Quebec class actions and others plaintiffs under the Companies' Creditors Arrangement Act (CCAA). Since the first stay, more than 700 victims registered in two Quebec class actions have died.

All provinces have acquiesced to this process

"Instead of compensating victims in a timely manner and forcing the companies to change their behaviour, the provinces are allowing this protracted process to maintain Big Tobacco's 'business-as-usual'. The result is more damage to the health of Canadians, the recruitment of new nicotine addicts and the generation of additional healthcare costs," explains Ms. Doucas.

Provinces sit idle as companies spend on product innovation and promotion

The CCAA process has not only blocked payments to Quebec victims, it has also allowed the companies to spend money opposing measures aimed at reducing smoking and vaping among young people, to introduce new nicotine products to the Canadian market, and to pay for advertising that minimizes the risks of vaping, favourably presents its new products and attempts to whitewash its image.

Indeed, the motions filed by the three manufacturers show they've been able to pursue profits at the expense of the health and well-being of Canadians. For example, Imperial Tobacco introduced "Zonnic" nicotine pouches in October 2023 that to date have generated net revenues of $4.5 million across Canada and that Quebec pharmacists say are being purchased by young people. Meanwhile, Rothmans, Benson & Hedges began distributing "VEEV" vaping products in October 2021, a disposable version in July 2022, and a new heated tobacco product ("IQOS ILUMA") in November 2023. These are among the many new products introduced by the companies since March 2019, including Imperial Tobacco's range of disposable e-cigarettes, new flavours and nicotine strengths.

A court process that protects the "normal" business operations of Big Tobacco

The motions filed for Monday's hearing show the extent to which the CCAA process is advantageous for tobacco manufacturers (see this appendix for complete excerpts). In fact, Imperial Tobacco concedes that, "overall, there has been negligible disruption of the Applicants' business operations" and that it is precisely in their interest to be engaged in a "process with the overriding objective of preserving the value of their business." For its part, Rothmans, Benson & Hedges writes that "a global settlement that addresses all pending and potential Tobacco Claims is the best outcome for the parties" and that it "RBH will continue to operate its business in the normal course." (Incidentally, the company is seeking an exemption to allow lawsuits involving its employees to proceed, while all other legal action against it remains suspended). Finally, JTI-Macdonald adds that the company favours the CCAA process in order to "maintain the status quo of its operations" and "preserve going concern value ", and that a further stay will enable it "to continue to operate in the ordinary course" of business.

"These secret negotiations among provincial governments and tobacco companies have now dragged on for more than five years. By giving explicit permission for the companies to operate their 'business as usual', these governments have been complicit in the recruitment of another generation of nicotine addicts. Indeed, there are more nicotine users in Canada today than there were when these insolvency proceedings began in March 2019," underscores Cynthia Callard, Executive Director of Physicians for a Smoke-Free Canada. "How is it our governments are engaged in a process that prioritizes the financial health of cigarette manufacturers at the expense of the health and well-being of the public and the right to justice of victims?"

Ensuring an outcome that's in the public's interest

Notwithstanding the outrageous delays incurred under this process, Les Hagen, Executive Director of ASH-Canada insists that "the provinces should use the historic power imbalance conferred on them by the threat of insolvency for the tobacco giants to demand groundbreaking concessions that will prevent the recruitment of new victims. No settlement agreement should ever be based on the need to entrap future addicts to pay monetary penalties to governments. All provinces have hidden behind an alleged confidentiality obligation to avoid stating their plans for the future of the tobacco industry in Canada. Under this shroud, it is difficult to believe the current process will serve the public interest.

"The current mediation process is not mandatory and there is no reason to sustain this deadly industry. Given the value of their respective claims, Quebec and Ontario could jointly suspend the CCAA proceedings should the mediators propose a settlement that is not in the public's interest. In the absence of an agreement that minimizes further damage, the infrastructure and trademarks of the bankrupt tobacco companies could be transferred to a new entity that will prioritize health over profits. For example, a suitable government agency or nonprofit organization could be mandated to shrink the tobacco and recreational nicotine markets," concludes Mr. Hagen.

An economic analysis by H. Krueger and Associates Inc. shows that the savings to the healthcare system resulting from a significant contraction in the tobacco market would far exceed any realistic compensation amounts for the provinces. According to this study, Quebec and Ontario would generate health savings of $22.2 billion and $26.1 billion respectively, if smoking prevalence fell to less than 5% by 2035. Such a reduction would represent 641,000 fewer smokers in Quebec, and 990,000 fewer smokers in Ontario.

SOURCE: Association des intervenants en dépendance du Québec (AIDQ)