Letting Ontario proceed with tobacco lawsuit would be unfair to others: judge

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TORONTO — A judge says he refused to let the Ontario government push forward with a lawsuit against three major tobacco companies because it would give the province an unfair advantage over other governments seeking to do the same.

Ontario last week asked a Toronto court to lift a stay on legal proceedings against the companies so that its lawsuit, which aims to recover smoking-related health-care costs, could go to trial in roughly 18 months.

The lawsuit was launched about a decade ago and targets a dozen Canadian firms and their parent companies. The province recently received court approval to amend its statement of claim to seek damages of $330 billion.

The case came to a standstill in March, however, when three of the tobacco companies named in the suit — Imperial Tobacco Canada, JTI-Macdonald Corp. and Benson & Hedges — sought creditor protection as a result of a separate case in Quebec.

After the Quebec appeal court ordered them to pay more than $15 billion to smokers in that province, the companies turned to the Ontario court, which suspended all legal proceedings against them.

The stay aims to maintain the status quo while the companies try to negotiate a global settlement with all those who have claims against them, including Ontario and several other provincial governments.

In a hearing last week, Ontario argued the trial cannot move forward without the three companies that are seeking creditor protection, and the remaining 11 defendants cannot be compelled to participate in the settlement talks.

Ontario Superior Court Justice Thomas McEwen dismissed the application late last week but did not release his reasons until Wednesday.

The judge said allowing the trial to proceed would tip the scales in Ontario’s favour, even though the province said it would not seek to collect any damages won until the negotiations were over.

“Ontario would be allowed to advance its action while the other proceedings, including the other claims by the provinces seeking the same or similar relief, were stayed,” McEwen wrote in the document. “It would be inappropriate to favour the interests of Ontario above all others.”

He also rejected Ontario’s arguments that the other defendants in the suit could not be forced to participate in mediation, but said he would not deal with the matter at this time since the others were not present in court.

“It may well be, in any event, that they are entirely motivated to attend and participate in the mediation process,” McEwen said. “It is difficult to see why they would not be interested,” particularly since many of them have ties to the three companies that were granted the stay, he said.

The judge agreed with the tobacco companies that moving ahead with the trial would distract from and undermine the settlement negotiations.

“This (creditor protection) process is at its very early stages. It must be given an opportunity to evolve and succeed without multiple, significant, expensive distractions,” he wrote.

Lawyers for the Canadian Cancer Society had argued that going ahead with the lawsuit would actually motivate the tobacco companies to negotiate meaningfully and improve the chances of reaching a timely settlement.

McEwen had previously rejected a request from lawyers in the Quebec case to lift the stay, citing a similar concern for fairness.

Paola Loriggio, The Canadian Press