New Brunswick

Stays of legal proceedings put damper on province's multi-billion-dollar tobacco suit

New Brunswick's bid to recover billions of dollars in smoking-related health-care costs from the world's largest tobacco companies has been stayed until March 12.

11 years after its launch, Canada's 'most advanced' provincial case on hold until March 12

New Brunswick's lawsuit was scheduled to go to trial Nov. 4, which would have made it the first province to have its tobacco case heard in court. (Toby Melville/Reuters)

New Brunswick's bid to recover billions of dollars in smoking-related health-care costs from the world's largest tobacco companies has been stayed until March 12 of next year.

The lawsuit, launched in the Court of Queen's Bench in Fredericton in 2008, claims corporate giants, such as Rothmans and Imperial Tobacco, knowingly inflicted harm on adults and youth by making and selling cigarettes for profit and in disregard of public health.

However, all Canadian litigation against the defendants has been on hold since they were granted insolvency protection in March.

That protection also shields the defendants from starting to pay out billions of dollars in damages to smokers in Quebec, after an appeal court upheld two historic class-action rulings.

On Wednesday, the companies were back before Ontario Superior Court Justice Thomas McEwan, seeking to have their protection extended again.

Industry sees 'existential threat'

They claimed they face an "existential threat" from tobacco-related litigation across Canada from plaintiffs "collectively seeking hundreds of billions of dollars in damages which exceed the applicants' total assets by many orders of magnitude," according to court documents.

The judge granted the stay but has yet to release his reasons. 

The Canadian Cancer Society says it had been hoping New Brunswick would be the first province to hold the industry accountable for its alleged wrongful behaviour.

Instead, it seems to be getting a pass, says senior policy analyst Rob Cunningham.

The litigation stay also protects the defendants against any legal claims about their vaping products in Canada.

Meanwhile, the list of vaping lawsuits filed in the United States continues to grow, including some that claim the devices caused debilitating strokes and seizures.

The Canadian Cancer Society's Rob Cunningham says 45,000 Canadians a year die of smoking-related diseases. (CBC)

"We're very concerned about a new generation of teenagers being hooked on e-cigarettes," said Cunningham.

"The tobacco companies have indicated publicly that they want a global settlement of all the lawsuits and then to carry on with business."

"The problem with business as normal is that there are 45,000 Canadians who die each year from smoking."

New Brunswick was out front

New Brunswick had been set to go to trial Nov. 4, which would have made it the first province to have its case heard in court.

"We were all geared up to come and watch another historical trial take place," said Cynthia Callard, executive director of Physicians for a Smoke-free Canada.

In preparation, the province's expert, Dr. Glenn Harrison, submitted five different reports on what it cost the publicly funded health-care system to treat smoking-related diseases such as emphysema, chronic bronchitis and various cancers.

Cynthia Callard is the executive director of Physicians for a Smoke-Free Canada, a registered charity that seeks to reduce tobacco-caused illness through reduced smoking and reduced exposure to second-hand smoke. (CBC)

In 2008, he pegged expenditures at $12.5 billion (in 2007 dollars) for smoking-related health-care costs between 1954 and 2007.

That figure ballooned to $67 billion (in 2015 dollars) in Harrison's fourth report, released in February 2018.

Then it shrank to $23.2 billion in his fifth report, released nine months later.

What comes next

The tobacco companies say they'll use the stay period to explore a negotiated settlement with the help of a court-appointed mediator.

According to court documents filed in Ontario, the applicants are also in the process of negotiating non-disclosure agreements with the provinces.

"It's essentially a backroom deal," said Callard.

She said New Brunswick's attorney general and the health minister should have been talking to the public about what happened and what comes next.

"This is going to be a penny on the dollar settlement in which most of that penny goes to American lawyers," she said.

History of legal bid

Before New Brunswick could launch its lawsuit against big tobacco, the government had to pass legislation giving it the authority to do so.

The New Brunswick Tobacco Damages and Health Care Costs Recovery Act was first introduced in 2005 and went into force in 2006.

The following year, the province announced it had retained a consortium of lawyers, including two from New Brunswick:  Philippe J. Eddie of Moncton and Chris Correia in Saint John.

The government said it would not pay any legal costs up front. Instead, the lawyers would recover their legal fees and disbursements as a percentage of the actual amounts recovered in litigation.

The fee schedule was broken into four stages:

  • Stage 1: If a settlement is reached during the initial stage after their retainer, the lawyers will be paid 12 per cent of any settlement reached.
  • Stage 2: If a settlement is reached after issuance of the statement of claim, the consortium's percentage increases to 18 per cent.
  • Stage 3: If a settlement is awarded after trial, the percentage rises to 20 per cent.
  • Stage 4: If a settlement is awarded on appeal, the consortium will receive 22 per cent.

That contingency fee agreement was challenged by the tobacco industry, whose lawyers argued there was a conflict of interest between the government lawyers' potential private financial gain and their duty to act impartially in the public interest when the province hired them.

The court rejected those arguments and ruled in the province's favour.

None of the allegations in the lawsuit have been proven in court.

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