Tobacco Companies Face Big Litigation Threat in Canada

, The Litigation Daily

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Fifteen years after signing a landmark $206 billion healthcare reimbursement settlement with 46 states, tobacco companies are again facing daunting liabilities. But this time it's Canada that is the torts danger zone.

Next year a Canadian court is expected to rule in the first smokers class action trial in Quebec, and that outcome is likely to influence other suits across the country seeking at least $150 billion collectively. The Quebec bench trial, involving claims by thousands of smokers in twin class actions, Letourneau v. Imperial Tobacco and Blais v. Imperial Tobacco, is expected to conclude in March after nearly two years, 23,000 exhibits, and more than 200 days of live testimony. 

The judge in Montreal has been asked to decide if the Canadian units of Imperial Tobacco Group PLC, JTI Group, and Philip Morris International should pay an estimated $27 billion in compensatory and punitive damages to two smoker classes he certified in 2005. The sum represents $105,000 apiece for roughly 90,000 Quebec smokers with serious smoking-related illnesses and $10,000 for roughly 1.8 million smokers who allege the companies knowingly induced their addiction. "Legally, this is the edge of the wedge," said Cynthia Callard, a blogger who has written extensively about the Letourneau trial for a website funded by anti-smoking groups.

In addition to the 13-year-old Letourneau/Blaiscases are lawsuits filed in the past several years by nine of 10 Canadian provinces seeking reimbursement for smoking-related healthcare costs. Because Canada provides government-funded medical insurance, the provinces are seeking huge sums: Quebec claims $60 billion and Ontario wants $50 billion, for example. The provincial suits put the tobacco companies "in a very financially precarious position" in Canada, according to a white paper issued in March by Canada's Smoking and Health Action Foundation that lists the status of all the country's tobacco litigation.

The judges presiding over these provincial cases, which are at various stages of litigation, have put off making major rulings until the Quebec court issues its decision. (For more on the lawyers involved, and the trial's connections to earlier U.S. actions, see this article last year in The American Lawyer.)

A verdict for plaintiffs in Letourneau would likely jump start these and other claims. "Our legal system has a principle of res judicata that may be broader than in the U.S.," said Klein Lyons partner Douglas Lennox, who is spearheading a parallel class action certified in Ontario on behalf of smokers of light cigarettes. 

In contrast to the Letourneau and Blais class actions, the provincial authorities have targeted the parent companies of tobacco makers. Defense lawyers have repeatedly tried to get the parent companies dismissed, claiming a lack of jurisdiction, but they have lost that battle 11 times in trial and appellate courts. (Key documents and timelines for these cases can be found at Smoke-free Canada's website.)

While the industry has succeeded in curbing its liability in the U.S., it's had a different experience in Canada. For instance, industry lawyers failed to defeat new provincial laws confirming each province's right to recover costs for treating smoking-related illnesses. And in Letourneau, tobacco lawyers lost a key appeal to Canada's Supreme Court in 2011 in their attempt to include the Canadian government as a third-party defendant. The industry lawyers argued that the federal government should be held accountable because it long supported the Canadian tobacco industry and issued the relevant regulations that the companies followed.

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