Ontario judge begins hearing arguments over landmark $32.5-billion tobacco settlement

TORONTO — An Ontario judge began hearing arguments Wednesday about whether to approve a landmark $32.5-billion settlement that would see three major tobacco companies compensate provinces, territories and ex-smokers across the country. The settlement between the companies — JTI-Macdonald Corp.

, Imperial Tobacco Canada Ltd., and Rothmans, Benson & Hedges — and their creditors received unanimous support from those creditors in a vote held in mid-December. The proposed deal was crafted by the monitors appointed to each company in collaboration with a mediator, capping off more than five years of confidential negotiations.



They recommended that the court approve the plans — one drafted for each company — without amendment. But a number of hurdles remain as the companies don't agree with the plans as drafted. Natasha MacParland, a lawyer representing one of the monitors, said the main sticking point is what share each company must pay.

"The monitors are of the view that the most significant issue outstanding is the allocation of the global settlement amount as between the tobacco companies," MacParland told the court. Ontario Superior Court Chief Justice Geoffrey Morawetz is scheduled to hear submissions from companies and other parties into next week before deciding whether it should be approved. The proposed deal includes more than $24 billion for the provinces and territories to settle lawsuits they brought against the companies for health-related costs due to tobacco use and $4 billion for plaintiffs in two class-action lawsuits heard in Quebec.

Another $2.5 billion is earmarked for Canadian smokers not included in the Quebec lawsuits, and more than $1 billion would go to a foundation to fight tobacco-related diseases. Lawyers representing two of the companies said Wednesday they could not endorse the deal as is.

"What is needed here is a plan that is supported by all three debtors, that's the only circumstance in which the claimants get what they have bargained for," said lawyer Robert Thornton, representing JTI-MacDonald. "Now this process has turned the heat in the kitchen way up." The judge quickly interjected.

"I'm just wondering whether you should be facing me or turning around and facing the gallery, where there are obviously representatives from all concerned, because what you're really advocating, your submissions largely, is to continue negotiating," Morawetz told Thornton. Mike Feder, a lawyer representing Rothmans, Benson & Hedges, said his client estimates that under the proposed deal it would end up paying $7 billion more than its fair share..