Tobacco giants to pay C$32.5 billion to settle lawsuit

Philip Morris, British American Tobacco, and Japan Tobacco will pay C$32.5 billion ($23.6 billion) to settle a long-running tobacco lawsuit in Canada, as part of a court-appointed mediator’s proposed plan, Philip Morris said on Friday.

If approved, the plan would be the largest settlement of its kind outside the United States, said Jacob Shelley, co-director of the Health Ethics, Law and Policy lab at Canada’s Western University.

The Canadian units of the three tobacco giants were dealt a massive blow in 2015 after a Quebec court awarded damages to some 100,000 smokers and ex-smokers who alleged the companies knew since the 1950s their product was causing cancer, other illnesses and failed to warn consumers adequately.

After an appeal, a Quebec court in 2019 upheld the 2015 decision that awarded smokers in the Canadian province around C$15 billion, forcing the Canadian subsidiaries of all the three cigarette makers to seek bankruptcy protection.

The subsidiaries have been under a court-supervised mediation process negotiating a possible settlement since then.

The allocation of the aggregate settlement amount between the tobacco giants remains unresolved, according to Philip Morris.

“Although important issues with the plan remain to be resolved, we are hopeful that this legal process will soon conclude, allowing RBH (Rothmans, Benson & Hedges) and its stakeholders to focus on the future,” Philip Morris CEO Jacek Olczak said on Friday.

Rothmans, Benson & Hedges is Philip Morris’ Canadian unit.

British American Tobacco earlier on Friday said that the proposed plan marked a positive step towards finding a resolution. It did not provide details of the plan that Philip Morris did.

BAT said its unit Imperial Tobacco Canada supported the settlement framework and structure and the settlement would be funded by cash on hand and cash generated from the future sale of tobacco products in Canada.

BAT shares fell 3.5% on Friday.

Philip Morris said voting on the plan would happen in December this year and if accepted by claimants, a hearing to consider approval of the plan would then be expected in the first half of next year.

“There are certain critical issues that would need to be resolved if we are to find a settlement plan that is workable,” Japan Tobacco unit JTI-Macdonald said, without providing further details.

Shelley of Western University said the settlement missed the opportunity to include policy provisions, but underscores manufacturers’ duty to warn consumers about the risks of their product.

That could have implications for sectors such as alcohol, he said.

“We do not provide adequate warnings about the risks of many products,” he said. “Manufacturers have a duty to warn us of these risks…. And so hopefully, this has a shift in how manufacturers start to look at the potential liability.”

($1 = 1.3792 Canadian dollars)