TORONTO – Lawyers representing the Ontario government are asking a judge to lift a stay on legal proceedings against three major Canadian tobacco companies so the province can pursue a lawsuit to recover billions in smoking-related health costs.
Ontario launched its lawsuit against a dozen Canadian firms and their parent companies roughly a decade ago and the case was projected to go to trial late next year or in early 2021.
But pre-trial preparations stalled last month after three of the tobacco companies involved in the suit sought creditor protection in response to a separate legal battle in Quebec.
Quebec’s highest court upheld an earlier judgment in March ordering the companies to pay out more than $15 billion to smokers in that province who took part in two class-action lawsuits.
The companies quickly turned to the Ontario court for relief and obtained an order suspending all legal proceedings against them as they try to negotiate a settlement with all their creditors, including Ontario and other provincial governments.
In a hearing Thursday, lawyers for Ontario argued their trial should be allowed to go ahead because the remaining 11 tobacco companies and organizations involved would not have to take part in mediation.
“I don’t believe this court has the authority to compel non-parties to participate in settlement negotiations,” lawyer Jacqueline Wall told the court.
The trial cannot proceed without the three companies seeking creditor protection because the case includes joint allegations that involve them, she said.
Wall said the province remains committed to the settlement discussions and, in the event the companies are ordered to pay damages at trial, it would not seek to have that judgment enforced while negotiations continue.
As such, there would be no disadvantage to the companies nor the other provincial governments whose lawsuits remain halted, she said.
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The three tobacco companies opposed Ontario’s motion, arguing that resuming trial preparations would distract from and undermine the negotiations. The province cannot claim to be committed to mediation while it devotes resources to a parallel process, they said.
The fact that several provinces are pursuing similar lawsuits makes it all the more appropriate to seek a global resolution, they said.
But lawyers for the Canadian Cancer Society, which is a party to the creditor protection proceedings, said going ahead with the lawsuit would in fact increase the odds of reaching a settlement in that case.
In many similar cases in the United States, a deal was made on the eve of trial or even after the trial began, lawyer Rob Cunningham said outside court.
“It would enhance settlement because it would increase the motivation for the foreign parent companies to actually have a meaningful settlement discussion,” he said. “These companies are so big and (have) so much capacity, it cannot be believed that they can’t walk and chew gum at the same time.”
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Allowing Ontario to proceed would also help the other provincial governments by spurring better settlement talks and, should the matter reach trial, by making public millions of documents they could then examine for their own lawsuits, he said.
He said the tobacco industry has historically sought to delay legal proceedings, and this is just its latest tactic.
Ontario Superior Court Justice Thomas McEwen is expected to rule on the issue by Monday.
McEwen previously extended the stay of legal proceedings, saying it was necessary to ensure a level playing field between the parties.
The stay had been challenged by lawyers for the Quebec smokers, who argued the creditor protection process should be stopped if the companies sought to appeal to the Supreme Court of Canada.
McEwen’s ruling on that issue, released Tuesday, said the stay would prevent the companies from applying to appeal while the creditor negotiations are underway.