ONTARIO TOBACCO GROWERS CLASS ACTIONS
Updated on May 26, 2020
The Tobacco Manufacturers were granted CCAA protection from their creditors in March 2019. As a result, all legal proceedings against the Tobacco Manufacturers, including the class actions, are stayed. Counsel is engaged in the CCAA proceedings and will continue to protect the rights of the tobacco growers. For further details, please read below.
OVERVIEW OF THE CLASS ACTIONS
1. In 2009 and 2010, class actions were commenced by The Ontario Flue-Cured Tobacco Growers’ Marketing Board (“Board”) and individual tobacco growers against Rothman’s Benson & Hedges Inc., Imperial Tobacco Canada Limited and JTI-MacDonald Corp. (collectively, “Tobacco Manufacturers”) for breach of contract on behalf of tobacco growers and producers (collectively, “Producers”) who sold tobacco through the Board in the period January 1, 1986 to December 31, 1996.
2. In 2008 to 2010, the Tobacco Manufacturers first publicly disclosed their involvement in the smuggling of duty-free cigarettes and other tobacco products back into Canada in response to charges brought against them under the federal Excise Act. The Tobacco Manufacturers subsequently settled civil claims with the federal and provincial governments concerning their involvement in the cross-border tobacco smuggling. The Board and Producers now seek compensation for the Tobacco Manufacturers’ underpayment of purchased tobacco stemming from this smuggling activity.
3. The class actions seek to recover the difference between the discounted export price paid by the Tobacco Manufacturers for Ontario tobacco at the Board’s auctions and the higher price they ought to have paid for tobacco that was actually intended for domestic use. The pricing and payment obligations were contained in contracts negotiated annually by the Board on behalf of the Producers.
DISMISSAL OF THE RELEASED CLAIM DEFENCE
4. On March 29, 2010, following its receipt of the statement of claim, Imperial delivered a notice to the Province of Ontario (“Ontario”) of its intention to withhold payment under the settlement agreement for the civil claims. In essence, Imperial asserted that the Board’s claim is a “Released Claim” which is “a complete defence” to the class proceeding. Ontario disputed Imperial’s position and commenced an application for an order to compel Imperial to pay the settlement money to Ontario pursuant to the settlement agreement. In response, Imperial insisted that this issue must be determined by arbitration pursuant to the settlement agreement.
5. On July 26, 2010, a motion judge of the Ontario Superior Court of Justice ordered a stay of Ontario’s application and found that Ontario’s dispute with Imperial must be determined by arbitration pursuant to the settlement agreement. Ontario appealed that order to the Ontario Court of Appeal. The Board supported Ontario’s appeal. In a decision released on July 20, 2011, the Ontario Court of Appeal allowed the appeal and found that Ontario’s application should proceed with the Board as a necessary party for determining Imperial’s Released Claim defence.
6. On September 19, 2012, the Court heard arguments on Ontario’s application for a determination of Imperial’s Released Claim defence to the class proceeding. Rothmans participated as an Intervener. JTI agreed to be bound by the result of this decision. In a decision dated January 2, 2013, the Court rejected the positions of Imperial and Rothmans and found in the Board’s favour by concluding that the class actions are not released claims by a releasing entity. Imperial and Rothmans appealed this decision. On July 16, 2013, the Court of Appeal dismissed their appeal on the Released Claim defence.
DISMISSAL OF THE LIMITATIONS DEFENCES
7. On May 3, 2013, Rothmans, Imperial and JTI delivered statements of defence. Each of the Tobacco Manufacturers pleaded in their statements of defence that the class actions are barred by the provisions of the Limitations Act, R.S.O. 1990, c. L.15 or alternatively the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B.. The Tobacco Manufacturers alleged that the class actions were not commenced within the time periods prescribed by those statutes.
8. On May 23, 2013, the Tobacco Manufacturers each served a notice of motion for summary judgment based on their limitations defences. In a decision released on June 30, 2014, the Court dismissed the Tobacco Manufacturers’ summary judgment motions.
9. On April 23, 2015, the Court granted the Tobacco Manufacturers leave (permission) to appeal the dismissal of their summary judgment motions to the Divisional Court. On July 4, 2016, the Divisional Court dismissed their appeals. On November 4, 2016, the Ontario Court of Appeal dismissed the Tobacco Manufacturers’ motions for leave to appeal the Divisional Court’s dismissal of their appeals.
TOBACCO MANUFACTURERS GRANTED CCAA PROTECTION
10. On March 1, 2019, the Quebec Court of Appeal upheld trial judgments made in 2015 against the Tobacco Manufacturers in favour of Quebec residents with tobacco-related diseases. The damages awarded against the Tobacco Manufacturers, as affirmed by the Quebec Court of Appeal, totaled approximately $13.6 billion including interest.
11. Shortly after the Quebec Court of Appeal decision, JTI, Imperial and Rothmans made separate applications for court protection from their creditors under the Companies’ Creditors Arrangement Act (“CCAA”).
12. CCAA proceedings are Court-supervised proceedings designed to bring creditors and potential creditors together to resolve their claims while the businesses of the debtor companies continue to operate under CCAA protection with minimal disruption. The CCAA is federal legislation designed to avoid harm associated with the bankruptcy and liquidation of insolvent companies by permitting them to devise a plan of compromise or arrangement with their creditors to restructure and become viable businesses again in the future (“Plan”).
13. On March 8, 2019, the Court made CCAA Initial Orders that imposed a comprehensive stay of pending litigation against the Tobacco Manufacturers and enjoined creditors from starting any new litigation proceedings while allowing the Tobacco Manufacturers to carry on their businesses in the ordinary course.
14. Common with all other litigation proceedings pending against the, the CCAA Initial Orders stayed the Board’s class actions against JTI, Imperial and Rothmans brought on behalf of the Producers. The CCAA Initial Orders have been amended and extended since March 2019 and the stay of these class actions remain in effect.
15. The Board retained Strosberg Sasso Sutts LLP to represent its interests and those of the Producers in the CCAA Proceedings.
16. As part of the CCAA process, the Court appointed Monitors for each of the Tobacco Manufacturers. The Monitors have websites that contain a complete record of the CCAA Proceedings. The link to the Monitors’ websites are as follows:
17. In the CCAA Proceedings, the Court appointed the Honourable Warren Winkler, Q.C., former Chief Justice of Ontario, to mediate a global settlement of the “Tobacco Claims” (as defined in the Initial Orders) and assist the parties in agreeing upon the terms of a Plan. The presiding CCAA judge, Justice Thomas McEwen, directed a Confidentiality Protocol for the mediation process which provides that all statements, discussions, offers made, and documents produced by any of the parties in the course of the mediation must remain confidential and not be disclosed for any purpose. As a result, further details of the CCAA mediation cannot be disclosed on this website or elsewhere.
18. The Court appointed mediator is actively engaged in directing all parties in the mediation process. If a settlement of the terms of a Plan is achieved from mediation, it is subject to the approval of the creditors and the Court in the CCAA Proceedings.
19. Counsel will continue to advance the interests of the Board and the Producers in the classes identified in the class proceedings against JTI, Imperial, and Rothmans. We will report on the outcome of the mediation process when permitted by the mediator and the Court.
20. If you would like to learn more about how a class action works, please click here.
This website provides general information to potential class members on three class actions commenced against Rothman’s Benson & Hedges Inc., Imperial Tobacco Canada Limited and JTI-MacDonald Corp.. The court will ultimately decide who will be included as a class member.
GENERAL INFORMATION ABOUT THESE CLASS ACTIONS
Q: What are these class actions about?
A: These class actions seek to recover the difference between the export price paid by the domestic manufacturers (Rothman’s Benson & Hedges Inc., Imperial Tobacco Canada Limited and JTI-MacDonald Corp.) for Ontario tobacco at the Board’s auctions and the higher price they ought to have paid because the tobacco was actually intended for domestic use. The pricing and payment obligations were contained in the agreements negotiated annually by the Board on behalf of Ontario flue-cured tobacco growers and producers
Q: How do I know if I may be a class member?
A: The proposed class in each of the class actions consists of growers and producers in Ontario who sold tobacco through the Board pursuant to agreements during the period January 1, 1986 to December 31, 1996.A judge of the Ontario Superior Court of Justice will hear motions for certification of the class actions to determine whether the cases can proceed as class actions. At the certification motions, the judge will decide whether the class definition is appropriate. Until that time, we cannot determine with exact certainty who is a class member.
PARTICIPATION IN THESE CLASS ACTIONS
Q: What is required of me if I participate in the class actions?
A: If the class actions are successful and you are a class member, you will eventually be required to complete a claim form in order to submit your claim for payment. You will not be required to attend a trial to determine whether the defendants are liable to the class.
Q: How much money will be recovered and how much will I receive in the event of success?
A: We can never predict how much money will be recovered in the event of success. The amount of money that each person receives will depend upon the amount of the recovery, if any, and the particular losses that each person incurred.
PROGRESS OF THESE CLASS ACTIONS
Q: How long will it take to resolve these actions?
A: It is not possible to predict how long it will take to resolve these actions. These actions are in the preliminary stages. A judge will eventually set a timetable for the conduct of the actions, but that has not occurred yet.
Q: Why should I participate in a class action?
A: All of the members of the class stand to benefit from a successful class action and are not burdened with the expense and inconvenience of starting and prosecuting their own lawsuit.
Q: What will it cost me to participate in a class action?
A: Individual class members are not personally liable to pay counsel for prosecuting the common issues in the class action. Individual class members are also not liable to pay any costs if the class action unsuccessful. Counsel will be paid for their services only if the class action is successful. Counsel fees and disbursements are paid from the funds recovered in the action. Court approval of counsel fees and disbursements must be obtained before they are paid.
Q: What is a class action?
A: A class action is a lawsuit commenced by one or more persons on his, her, or their own behalf, which seeks to include others who have suffered a similar harm at the hands of the same person, company or group. At the certification motion, the court is asked to decide whether the lawsuit meets certain legal criteria to be certified as a class action on behalf of a group of people.Once a class action is certified, it allows a group of people to have access to the court in situations where the case would be too expensive or too complex for one person to sue on his or her own.
Q: How does a class action work?
A: In Ontario, class actions are governed by the Class Proceedings Act, 1992, S.O. 1992, c. 6, as amended. Please click here to review a copy of the Act. At the certification motion, a judge decides whether to permit the lawsuit to proceed as a class action and, if so, who will be included in the group or class. If the court decides to permit the lawsuit to proceed as a class action, it will appoint one or more persons to act as the representative for the others in the class. The representative(s) will instruct counsel on behalf of the class members. The court also decides on questions of fact and law which are common to the members of the class. Subsequently, a trial may be held to determine these common issues or the parties to the action may arrive at a settlement.