B.C. Given Right to Sue Tobacco Firms

By TERRY WEBER

Thursday, September 29, 2005 Posted at 5:17 PM EDT

Globe and Mail Update

Canada's highest court has sided with the British Columbia government in a landmark ruling that opens the door for the province to sue cigarette makers in an effort to recover billions in health-care costs related to smoking.

The 9-0 decision — delivered late Thursday afternoon — the Supreme Court of Canada upheld provincial legislation allowing the government to seek damages for health-care costs dating back 50 years as well as future expenses stemming from illnesses resulting from tobacco use.

At the core of the action — closely watched by industry giants, public interest groups and other provinces — was whether B.C.'s health-care recovery legislation, the Tobacco Damages and Health Care Costs Recovery Act, ran afoul of the constitution.

"The Act is constitutionally valid," the court concluded in Thursday's decision, which dismissed the industry challenge and opened the door for similar actions in other provinces.

The B.C. law also makes it easier to prove a link between smoking and illness and limits some of the traditional defences in civil suits. As well, it curtails some traditional defences in civil suits, and it makes it easier to prove a link between smoking and disease.

The court released the decision at 4 p.m. EDT. Normally rulings are released at 9:45 a.m. EDT, but Thursday's decision was delayed at the request of cigarette maker Rothams. It wanted the ruling to be made public after stock markets closed.

The act, passed in 1998, authorizes direct legal action by the province to recover health-care costs from leading tobacco companies resulting from what it called "tobacco-related wrongs."

No dollar value has been put on the actual B.C. claim — which has yet to be heard — but some estimates have suggested that a figure of $10-billion would not be out of place.

Federal Health Minister Ujjal Dosanjh applauded the ruling. In an interview with CTV Newsnet, he said it's "appropriate" and "valid" for the government to be able to sue tobacco companies. He estimated that the claim could go into the hundreds of millions of dollars.

"I think that governments now can pursue the damages that had been wrongfully caused by these companies."

In a ruling handed down in May, 2004, the B.C. Court of Appeal upheld the constitutionality of the legislation after the province changed an earlier ruling from the Supreme Court of British Columbia, which sided with the industry.

The B.C. appeal court decision was appealed by members of the Canadian tobacco industry — Imperial Tobacco Canada Ltd., Rothmans, Benson & Hedges Inc., JTI-Macdonald Corp., British American Tobacco, Philip Morris — as well as the Canadian Tobacco Manufacturers' Council.

They argue that the legislation is unconstitutional, contending among other things that the province is overstepping its boundaries by trying to apply provincial legislation to company outside its jurisdiction.

The companies also contend that the new rules of evidence set out in the legislation would stack the deck in favour of the government, thus violating traditional tenets of judicial independence and the rule of law.

At the time of the B.C. court ruling, a spokesman for the association argued that the industry's view is that the lawsuit "makes no legal sense because the manufacture and sale of tobacco in Canada has been regulated and overseen by governments for decades."

The B.C. law is modelled on Florida legislation that resulted in a massive U.S. industry settlement that saw companies agree to pay out to $245-billion (U.S.) to individual states over 25 years to compensate for smoking-related health costs.

Canadian companies have said they will not pursue a similar agreement, arguing that the industry in this country could not withstand the impact of a settlement of that magnitude.

Eight other provinces — Alberta, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia and Newfoundland and Labrador — all intervened in the proceedings.

Right now, both Ontario and Newfoundland and Labrador already have legislation in place opening the door for future legal action.

Newfoundland and Labrador's Tobacco Health Care Costs Recovery Act, adopted in 2001, is similar to the B.C. legislation. In Ontario, the Ministry of Health and Long-term Care Statute Law Amendment Act, 1999 amends the provincial Health Insurance Act to allow the Minister of Health and Long—Term Care to bring an action against "to recover costs incurred to pay for insured services rendered as a result of the person's negligence or wrongful act or omission."

In 2000, Ontario also went to court in New York looking to sue the major tobacco companies for up to $40-billion in health-care costs for treating people suffering from tobacco-related diseases. However, that lawsuit, filed late Wednesday under the Racketeer, Influenced and Corrupt Organizations Act, was dismissed on the grounds that a foreign government could not sue in U.S. courts. The lawsuit has not been re-filed in Ontario.

With a report from Canadian Press and Allison Dunfield

More bad news for the Canadian tobacco industry
Last Updated Fri, 30 Sep 2005 17:30:10 EDT
CBC News

There's more bad news for the Canadian tobacco industry. Class-action lawsuits were filed in Quebec Friday, and the Rothmans Benson and Hedges credit rating was in danger of slipping.

Friday's developments came after Thursday's Supreme Court ruling that allowed provinces to sue tobacco companies for health care costs.

Two Quebec legal firms said Friday a class-action suit has been filed claiming $17.8 billion from the industry, on behalf of about 1.78 million Quebecers addicted to nicotine. Each smoker was asking for $10,000 from Rothmans, JTI MacDonald and Imperial Tobacco Canada Ltd., claiming they were deceived about the true nature of the tobacco products.

Don McCarty, vice-president legal of Imperial Tobacco Canada Ltd., called the Quebec class action suit an "attempt at theatrics."

In an interview Friday, McCarty said Imperial's liability insurance would only cover an "insignificant" portion of any legal judgements.

He said when the U.S. industry settlement was reached seven years ago, "cigarettes were a buck a pack. So what they did is increase the price of their product to pay for the settlement over 25 years. We don't have that option. Our cigarettes are already nine bucks a pop."

McCarty said that Imperial will not choose to settle the suits. "They want anywhere between $10-to-80 billion. After taxes, the three companies made maybe $500 million. Where do they think we're going to get the money from?"

McCarty wants to rally support from the other so-called "sin" industries, saying British Columbia has carved "a dangerous path" by assuming it can take on an industry "by passing a special law allowing it to sue them. Today it's tobacco, tomorrow it could be anybody. It could be the fast food industry, alcohol, junk food, gambling."

McCarty said: "We have many defences that we intend to bring forward. One is that the risks associated with tobacco have been well-known for decades. What we knew, the government knew. What we and the government knew, people knew. Our defence will be also that we're not the only ones involved in the regulation of tobacco, the government has been there."

He said the industry paid $9 billion in taxes last year. "They already have their settlement."

McCarty expects both the B.C. case and the class-action suit to drag on for more than five years.

Dominion Bond Rating Service said Friday it was reviewing Rothmans credit rating "with negative implications," because of the Supreme Court decision.

In a note to clients early Friday, Blackmont Capital analyst David Hartley said shares of Rothmans Inc. dipped 11 per cent in three days, and he expected them to fall further.

Hartley said that when similar legal actions occured in the United States in the late 1990s -- one of which led to a $246 billion US settlement over 25 years -- tobacco stocks plunged by as much as 25 per cent in two days, and 40 per cent in six months.

He wrote: "The potential for the Canadian tobacco industry to pay the provinces large sums of money could create tremendous financial hardship for industry participants."

In a note to clients, analyst Marc Marzollo of Merrill Lynch said "it should be noted that the ruling was procedural in nature; it endorsed the legislation but did not pass judgement on the merits of the claim...in our opinion, the B.C. case is about recovery of costs and trying to reduce the impact of smoking on B.C. society as opposed to bankrupting the industry participants. . . .we would point out that there does need to be a viable tobacco industry in Canada for the 20 per cent of Canadians that either choose to smoke or are unable to quit."

Marzollo said he believes that an out-of-court settlement will ultimately be more likely than a verdict.

The 9-0 Supreme Court judgment upheld provincial legislation allowing British Columbia to seek damages to cover public health-care costs dating back five decades, as well as future costs for sickness linked to tobacco.

The B.C. law curtails some traditional defences in civil suits and makes it easier to prove a link between smoking and disease.

After the Supreme Court decision, Ontario's Health Promotion Minister Jim Watson said his province was considering going after tobacco companies for health-care costs.

If all of the provinces follow suit, observers say the tobacco industry could be facing damages of about $80 billion.

While they're at it, the government should sue fast food for making people fatter, "Entertainment Tonight, E-Talk daily, etc." for making people stupider, alcohol companies for making people drunker, and wal-mart's clothing department for making people uglier.

At least, they should take their "BC Lotto 6/49" adds off of city buses before engaging in this mind-boggling hypocrisy.

You make a good point. It's proven time after time that a politican cares more about poll numbers than common sense. Raising taxes to cover the same amount would raise the hell of public opinion.

You're kidding me. The judge let them sue? Must have had a few loved relatives die by the bacco.
I'm a little disgusted this would pass.
Let's just sue fast food joints, and how about GM, FORD, CHRYSLER, and all the others considering people can also die in car accidents.
OoOOOoo let's sue mother nature too!!!!!!!!! That would be my favourite! I'd be the first to take mother nature to court.
B.C. bitch please.

…
OoOOOoo let's sue mother nature too!!!!!!!!! That would be my favourite! I'd be the first to take mother nature to court.
B.C. bitch please.
It's already happened, in a manner of speaking. A few years ago someone (I assume fat and ugly, since it wasn't on tv) tripped over a root in goldstream park and sued the provincial govt. I don't remember how this turned out. I hope they fined it for wasting court time.

/\ Yeah! LOL!
Some people I tell you!

Ummm... does anyone know what the issue is here? Apparently not. The issue is the constitutional legality of the BC statute. The Supreme Court of Canada found (rightly so) the statute valid.

http://cl.exct.net/?ffcc17-fe5e1773766300757410-fe2d1d707065037d771678-ff001575776106

It just affirms BC's has a right to the provision--the 'right to sue' was created by the BC legislature, not the Supreme Court. The court has merely held up the legislation as being consistent with the constitution. What were they supposed to do? Find the legislation unconstitutional because some people don't like it? That's not the role of the court. In any case, the tobacco companies knew they had an uphill fight to prove the act invalid on constitutional grounds, and they failed.

/\ Umm... no one argued other wise.

Amazing, we should have this law passed in all of Canada's territories and provinces.

/\ Umm... no one argued other wise.

Let's see:

You're kidding me. The judge let them sue? Must have had a few loved relatives die by the bacco.
I'm a little disgusted this would pass.
Let's just sue fast food joints, and how about GM, FORD, CHRYSLER, and all the others considering people can also die in car accidents.
OoOOOoo let's sue mother nature too!!!!!!!!! That would be my favourite! I'd be the first to take mother nature to court.
B.C. bitch please.

Notice the third paragraph here, and the fact that you're surprised the judge let them sue. Why are you surprised? Please explain how the legislation runs afoul of the constitution. Sounds to me like you don't like the legislation so you're blaming the court for not striking it down. That's not its job.