Big tobacco companies not required to deposit $1B, Court of Appeal rules

The Court of Appeal has ruled in favour of three big tobacco companies, saying that they are not required to immediately deposit $1 billion plus punitive damages in a trust account for members of a class action lawsuit.

In June, a Quebec Superior Court judge ruled that the three tobacco companies — Imperial Tobacco, Rothmans Benson & Hedges and JTI-MacDonald — owed $15 billion in damages to Quebec smokers who either became addicted to cigarettes or who became gravely ill from smoking.

• Tobacco companies ordered to pay $15B in damages
• Tobacco companies fighting $1.13B compensation payment

The judge who heard the two merged class action lawsuits, which was touted as the biggest civil case in Canadian history, ruled that the companies would have 60 days to deposit $1B plus damages in a trust account — regardless of whether or not they would appeal the verdict.

The provisional amount was to ensure that those who became ill due to smoking would benefit while an appeal, which would take years, wound through the legal system. 

But on Thursday afternoon, Quebec's highest court ruled that the reasons the trial judge gave to justify why the tobacco giants should set that money aside were inadequate.

"We consider the justification for a provisional execution weak," the ruling said.

Lawyers for all three firms argued earlier this month they simply didn't have the funds to cover the $1.13 billion, saying it could cause irreparable harm to their ability to appeal and even put them on the brink of bankruptcy.

They also argued the amount would not be recoverable if they eventually won on appeal.

The appeal court touched on that point in its ruling.

"There is the nagging issue of reimbursement if appellants succeed on appeal," the panel of three justices wrote.

"The potential necessity of seeking reimbursement of $10,000 from each of 100,000 class members is by any objective standard a prejudice that cannot be ignored."

Imperial Tobacco issued a statement late Thursday afternoon, saying it was pleased with the outcome.

"Our arguments were heard, and our motion was granted. We knew all along that we had very strong grounds to appeal and today's unanimous decision confirms that there was no legal basis for ordering the provisional execution," said Tamara Gitto, vice-president of Imperial Tobacco Canada.

Now the tobacco companies await a decision regarding an appeal of the verdict that orders them to pay $15.6 billion in punitive and moral damages to more than one million Quebecers. 

"It is unjustified to hold legal manufacturers responsible for the personal choices of adult consumers and we will continue to defend our position vigorously as we continue our appeal of the overall judgment," Gitto said.