Canadian Provinces fear nothing would remain if JTI settles a federal lawsuit ..

November 4, 2009 - Judge rejects as premature a deadline for lawsuits seeking to recoup smokers’ health-care costs from a Japan Tobacco Inc. (JTI) unit that had been sought by British Columbia, Ontario and New Brunswick. The Canadian provinces want their claims for treating people with smoking-related illnesses included among those of creditors for Japan Tobacco’s insolvent JTI-MacDonald unit. The provinces said they feared nothing would remain if JTI settled a federal lawsuit that seeks to recover lost taxes from cigarette smuggling in the 1990s.

Ontario Superior Court Judge Peter Cumming called the request premature in an October 30, 2009 ruling. The provinces may challenge the company’s plan to exit bankruptcy when it is submitted, the judge said. “There is no plan of arrangement being put forth or even seen at this point on the distant horizon,” Cumming wrote.

JTI-MacDonald, the maker of Export A cigarettes in Canada, entered bankruptcy protection in 2004 after Quebec’s Ministry of Revenue demanded a C$1.4 billion ($1.31 billion) payment for lost taxes from smuggling. The company said at the time it had C$1.81 billion in assets and C$1.8 billion in liabilities.

Imperial Tobacco Canada Ltd. and Rothmans Inc., the two biggest Canadian tobacco companies by market share, agreed last year to pay about C$1.15 billion in fines and penalties to settle federal charges that they aided cigarette smuggling in the 1990s./ JTI, the third-biggest Canadian cigarette manufacturer, wasn’t a part of the settlement.

The judge urged the provinces to proceed with a single lawsuit for their health-care claims outside of bankruptcy. “It seems obvious that it would be both efficient and expeditious to have a single trial,” Cumming wrote. “There will probably be several years of litigation and negotiation ahead before any resolution.” (Canada - tobacco companies may face C$200 billion in claims..)

Ontario, Canada’s most populous province, has filed a separate suit seeking C$50 billion from tobacco manufacturers to cover the costs to its government-funded health-care system for treating sick smokers. British Columbia was the first province to sue and is seeking unspecified damages, as is New Brunswick. Quebec has said it plans to sue and would likely seek about C$30 billion, Laura Donaldson, an attorney representing British Columbia said in court.

All other Canadian provinces, with the exception of Prince Edward Island, have legislation allowing them to sue to recover health-care costs.

The case is Between JTI-MacDonald and the Attorney General of Canada, 04-cl-5530, Ontario Superior Court of Justice (Toronto).

Reference: Provinces Lose Bid to Set Deadline for JTI Tobacco Health Suits by Joe Schneider(jschneider5@bloomberg.net), Bloomberg.com, 11/3/2009.