A smoker puts out a cigarette in a public ash tray in Ottawa on Tuesday, May 31, 2016.

Image Credit: THE CANADIAN PRESS/Sean Kilpatrick

A Canada-wide lawsuit holding Big Tobacco accountable for the individual and public harms caused by its products might conclude with the public receiving a fraction of its original damages claim.

Anti-smoking groups are extremely critical of the settlement because it doesn’t limit tobacco product sales or add restrictions to tobacco marketing.

It also doesn’t make internal tobacco company documents public, force companies to invest in research about preventing or reducing smoking or tobacco use, or wind down the tobacco industry, they complain.

And it recoups health-care costs only from historic, not current or future, tobacco use.

The sprawling lawsuit, which began back in the late ’90s, asked Canada’s three major tobacco companies to pay around $500 billion in damages.

On Oct. 17 a proposed settlement was reached that would have tobacco giants JTI-Macdonald Corp., Rothmans, Benson & Hedges and Imperial Tobacco Canada Ltd. and their parent companies pay $32.5 billion in damages. That’s about 6.5 per cent of the original claim.

If the settlement goes forward, it would disburse $24.7 billion to the provinces and territories, $4.1 billion to Quebec class-action plaintiffs, $2.5 billion to plaintiffs outside of Quebec and $1 billion to establish an independent foundation that will research how to improve diagnosis and treatment of tobacco-related disease.

Individual compensation in the class-action lawsuits depends on when someone started smoking and what illness they developed, but could pay up to $100,000 per person. There are around 100,000 people involved in the Quebec class action who could receive compensation.

The companies named in the lawsuit are respectively owned by Japan Tobacco Inc., Philip Morris International and Imperial Brands, which are known as the three global tobacco giants, said Les Hagen, executive director for Action on Smoking and Health, also known as ASH Canada.

Around 125 Canadians die every day from smoking-related illnesses, which is more than the deaths from alcohol, opioids, suicides, murders and traffic crashes combined, according to the federal government. That adds up to 48,000 tobacco-related deaths every year, or over one million deaths since 2000.

Settlement negotiations have been hidden from the public since March 2019 when the tobacco companies filed for creditor protection under the Companies’ Creditors Arrangement Act. The act is traditionally used for companies that can’t pay their bills, but tobacco companies are still very profitable, Rob Cunningham, a lawyer with the Canadian Cancer Society, previously told The Tyee.

On Oct. 31 an Ontario Superior Court justice will decide if they want to order a creditor meeting on Dec. 12. That meeting, if it goes forward, would allow creditors to vote on whether or not to accept the settlement. If they approve the settlement, it would go back to the courts for approval, which would likely happen in the first half of 2025, Cunningham told The Tyee in a recent interview.

So far JTI-Macdonald Corp. has said it opposes the settlement, but the other two companies haven’t come out against it, Cunningham said. It would be up to the justice to decide whether JTI-Macdonald’s opposition could derail the settlement, he added.

When asked why the proposed settlement was a fraction of the original ask, JTI-Macdonald Corp. sent an emailed statement that said there were “a number of critical issues with the proposed settlement” and it is committed to working with mediation to “find a settlement plan that is workable.”

BC would vote in favour of the settlement

At a press conference last week, Premier David Eby said B.C. would vote in favour of the settlement.

“I’m really proud of the work started a generation ago by the NDP government to initiate litigation against these tobacco firms. They’ve brought so much death, misery and destruction to our province, to people and their families,” he said.

B.C. launched its lawsuit against Big Tobacco in 1998 and joined forces with New Brunswick, Nova Scotia, Saskatchewan, Manitoba and P.E.I. in 2012 to create a single national lawsuit.

The lawsuit argued tobacco companies should be held responsible for health-care costs because they marketed to children, falsely marketed “light” cigarettes as safer, suppressed research about the harms of smoking and conspired to invalidate public health warnings, according to a provincial website.

“They covered up evidence about the impact of tobacco. They are finally being held accountable — just like we’re holding opioid manufacturers accountable as well — in terms of the financial impact that they had on people, because we can never bring those lives back,” Eby continued.

“The work was exhaustive around the table, involving many provinces, and my hope is we can get this agreement across the line and ensure that at least some recognition of the impact that tobacco companies had on British Columbians and all Canadians is realized.”

Financial compensation for smokers is the one part of the proposed settlement that critics and Eby alike approved of. Depending on the total number of surviving plaintiffs and their heirs, payouts could be $60,000 to $100,000, depending on how long someone smoked for and how they were impacted.

While that might not be a huge amount of money, it’s significant because this is the first time a lawsuit against Big Tobacco created direct compensation for people hurt by the products.

Eby’s response surprised ASH Canada’s Hagen, who said the proposed settlement is a “huge setback for public health and corporate justice.”

The proposed settlement will also shut down other lawsuits against Big Tobacco in Canada, according to a statement posted on the website of Rothmans Benson & Hedges.

“This all contrasts very sharply with the master settlement agreement in the U.S. in 1998, which we thought was pretty weak until we saw this deal,” Hagen said.

“We thought we could do a lot better in Canada,” Hagen said. “We didn’t even come close to that with the one exception with payouts for smokers. But the industry continues to operate with impunity.”

The government will be recouping pennies to the dollar for health-care costs, Hagen added.

“It’s a bad deal for Canadian youth, our health-care systems and governments,” he said.

According to a statement from Physicians for a Smoke-Free Canada, an initial $6 billion will be paid out of an account containing $12.5 billion set aside during the years of insolvency protection, and the remaining $19 billion in provincial payments will be taken out of future profits on tobacco sales.

For the first five years companies will provide 85 per cent of their profits, but every five years after that, the total percentage of income paid will drop by five per cent. For years 6 to 10 they’ll pay 80 per cent; in years 11 to 15, they’ll pay 75 per cent.

In the settlement document the companies predict they will pay around $1 billion to the provinces every year, which means they’ll be paying off the lawsuit until after 2045.

This means tobacco companies and provincial governments will both be incentivized to maintain tobacco sales, said Cynthia Callard, executive director of Physicians for a Smoke-Free Canada.

Who gets compensation

Not all smokers are eligible for compensation.

To join a provincial or territorial class action, a smoker needs either to have smoked around 87,000 cigarettes sold by the three named companies between Jan. 1, 1950, and Nov. 20, 1998, or to have been diagnosed with lung or throat cancer, emphysema or chronic obstructive pulmonary disease between 2015 and 2019.

Those 87,000 cigarettes roughly break down to 10 cigarettes a day for 24 years, 20 cigarettes a day for 12 years or 30 cigarettes a day for eight years.

Eligible cigarette brands include Accord, Benson & Hedges, Belmont, Belvedere, Camel, Cameo, Craven A and M, du Maurier, Dunhill, Export, LD, Mark Ten, Matinée, Medallion, Macdonald, More, North American Spirit, Number 7, Peter Jackson, Player’s, Rothmans, Vantage, Viscount, Winston and a longer list of sub-brands sold between 1950 and 1998.

Widespread criticism of the proposed settlement

The Canadian Cancer Society’s Cunningham said the settlement is a “total failure” from a public health perspective because the research foundation it will establish will not use its $1-billion budget to discourage smoking.

“There’s nothing in the settlement to actually reduce smoking. That is what started all these lawsuits — the health-care costs from smoking,” he said.

Cunningham said the U.S. Big Tobacco settlement included an independent fund to reduce tobacco use, restrictions on marketing and a public disclosure of millions of pages of internal tobacco company documents. The 1998 settlement included measures that raised the cost of cigarettes; restricted tobacco advertising, marketing and promotions including prohibiting product placement in movies, TV and video games; and banning tobacco brand sports sponsorship. It also required companies to fund youth anti-smoking initiatives.

He said the Canadian settlement should go further and ban all marketing, work to reduce tobacco product use even more and publish six million internal tobacco company documents obtained by the Ontario government as part of the lawsuit.

“None of that is in the Canadian settlement,” Cunningham said. “We should be trying to get people to quit smoking so they don’t get cancer or heart disease or emphysema.”

“Given that B.C. was the first province to file this lawsuit, B.C. can and should be a leader with respect to health measures being included in the settlement,” he added.

He pointed to how tobacco is a leading cause of death in Canada and said there needs to be an “aggressive approach to reduce this public health disaster that is ongoing.”

The foundation’s mandate could be “easily modified before the final approval,” he said.

When The Tyee asked JTI-Macdonald Corp. why the foundation was not being tasked with reducing smoking, the company emailed a statement that said the foundation was independent “and free from any influence by the tobacco companies.” The Tyee also asked this question to the other two tobacco giants and did not hear back by press time.

Canada has been introducing tobacco regulations over the past several decades.

Canada set the legal age to buy cigarettes at 18 in 1992. Around the same time the U.S. Big Tobacco lawsuit wrapped up, Canada introduced the Tobacco Act, which regulated the composition of tobacco products, young people’s access, tobacco labelling and product promotion. Companies fought the advertising restrictions but lost in 2007, and in 2010 the federal government required warning labels on cigarette packages to take up 75 per cent of the packaging. Around the same time provinces and territories introduced bans on indoor smoking or smoking in public places like patios or beaches. The act was updated to include vapes in 2018.

Places that sell tobacco products, such as gas stations and convenience stores, are given bonuses or incentives to win vacations or entertainment tickets if they meet sales targets or keep prices low, he added. Marketing like this between manufacturers and retailers is also still permitted in the United States, but should be prohibited everywhere, Cunningham said.

The settlement guarantees future tobacco sales and protects revenues made from vapes, nicotine pouches, heated tobacco products and other tobacco products not named in the settlement, Physicians for a Smoke-Free Canada’s Callard said. Revenue from traditional tobacco products like cigarettes, chewing tobacco, cigars, snuff, roll-your-own loose tobacco and pipes will go towards the settlement.

Callard noted that the health-care costs associated with allowing companies to continue selling their products will outweigh the payouts provinces get from the settlement, meant to cover health-care costs caused by those products.

Callard said another expense that hasn’t been made public is what the contingency fee paid to lawyers will be. Lawyers collect contingency fees only if their client wins, and it’s traditionally somewhere between 20 and 40 per cent of the winnings, she said.

It was also strange how little, if any, role the federal government seemed to play in this lawsuit, she said. Canada says it supports the World Health Organization’s Framework Convention on Tobacco Control, which is supposed to promote transparency in government dealings with tobacco companies, but there was very little transparency around this lawsuit and negotiations, she said.

By allowing lawsuit payments to come from future revenues, the federal government is contradicting its Tobacco Strategy to have less than five per cent of Canadians using tobacco by 2035, she said.

Callard said she is “very pleased” to see the Quebec class action resolved.

But she said it doesn’t seem like tobacco companies have been taught any lessons, especially when she looks at how vapes and nicotine pouches are being marketed, branded and sold.

Hagen said tobacco companies are still coming up with new products to get youth addicted to nicotine, ensuring future sales. As an example he pointed to nicotine pouches, such as the mint-flavoured Zonnic sold in Canadian pharmacies, and Zyn, which is sold in the United States and comes in various mint, citrus, cinnamon and coffee flavours. These products are marketed towards gen-Z consumers, who are between the ages of 12 and 27, he said.

The Campaign for Tobacco-Free Kids has collected dozens of examples of paid sponsorships for nicotine pouches with young social media influencers, and Cunningham shared a document of nicotine pouch advertisements that show young, happy people in a social setting.

“The settlement basically sells Canadian kids down the river because it allows tobacco companies to continue with business as usual. That means targeting kids, deceiving the public, continuing with its campaign of deception it’s carried on for decades and trying to unduly influence governments and public policy,” Hagen said.

CBC has reported that “hundreds” of plaintiffs involved in the lawsuit have died in the 20 years the court case has taken to get from its inception to its near conclusion.

The Tyee reached out to Rothmans, Benson & Hedges and Imperial Tobacco Canada Ltd. for comment but did not hear back by publication time.

— This story was originally published by The Tyee

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