Creditors scheduled to vote on $32.5B Tobacco Settlement in December

Creditors of three major tobacco companies will have the opportunity to provide input on a proposed multi-billion-dollar settlement in December.

An Ontario court has granted approval for a motion that will allow representatives for the creditors, which include provincial governments and plaintiffs in two Quebec class-action lawsuits, to review and vote on the proposal on Dec. 12.

One of the companies, JTI-Macdonald Corp., had requested the court to delay approval of the motion so that the proposed plan could be amended before presenting it to creditors.

JTI-Macdonald Corp. expressed opposition to the current form of the proposed plan, describing it as “unworkable.”

The proposal involves JTI-Macdonald Corp., Rothmans, Benson & Hedges, and Imperial Tobacco Canada Ltd. collectively paying $24 billion to provinces and territories, and over $4 billion to thousands of Quebec smokers and their heirs.

Before implementation, the proposed plan must pass a vote by creditor representatives and receive court approval.

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Ontario Superior Court Chief Justice Geoffrey Morawetz approved the motion on Thursday without providing reasons, indicating that discussions on any unresolved issues could continue before and after the creditors’ meeting.

During Thursday’s proceedings, several other parties suggested that JTI-Macdonald Corp.’s concerns should be addressed at a later stage of the process.

Rothmans, Benson & Hedges and Imperial Tobacco agreed to set a date for the creditors’ meeting but reserved the right to object to the proposal in subsequent stages, including when seeking court approval.

According to a court document filed before the hearing on Thursday, Rothmans, Benson & Hedges emphasized the need to resolve the issue of each company’s share in the $32.5-billion global settlement for progress to be made.

The company stated, “RBH has not consented to the proposed plan with the allocation issue remaining unresolved.”

It also expressed its commitment to promptly resolving the allocation issue to avoid potential objections during the sanction hearing and prevent further delays.

There is a dispute over whether the companies’ support for the plan is necessary for its implementation, with some parties suggesting that the court could enforce the settlement without their approval.

Other payments outlined in the proposal include over $2.5 billion for smokers in other provinces and territories diagnosed with smoking-related illnesses over a four-year period, as well as more than $1 billion for a foundation dedicated to detecting and preventing tobacco-related diseases.

The proposed settlement follows over five years of negotiations as part of a corporate restructuring process triggered by a prolonged legal battle.

In the initial ruling, a Quebec Superior Court judge ordered the three companies to pay around $15 billion in two class-action lawsuits involving Quebec smokers who started between 1950 and 1998 and suffered illnesses or addiction, or their heirs.

The decision was upheld by the province’s highest court in 2019, leading the companies to file for creditor protection in Ontario.

Legal proceedings against the companies, including lawsuits from provincial governments, were put on hold by the Ontario court as the parties pursued a global settlement.

The stay of proceedings, initially set to expire after a few months, has been extended multiple times and now lasts until January 31, 2025.