Tobacco Giants Near $23.6 Billion Settlement in Canada’s Landmark Smoking Lawsuit

Philip Morris, British American Tobacco, and Japan Tobacco have agreed to pay C$32.5 billion ($23.6 billion) to settle a massive tobacco litigation case in Canada. This potential settlement marks one of the largest outside the U.S. and follows years of legal battles involving 100,000 plaintiffs.

Quebec Court’s $15 Billion Award to Smokers Forces Tobacco Giants into Bankruptcy Protection

The company announced on October 18 that Philip Morris, British American Tobacco, and Japan Tobacco will pay C$32.5 billion ($23.6 billion) to resolve a protracted tobacco litigation in Canada as part of a court-appointed mediator's proposed plan, per Reuters.

If approved, the plan would be the largest settlement outside the United States, according to Jacob Shelley, co-director of the Health Ethics, Law, and Policy lab at Western University in Canada.

In 2015, the Canadian units of the three tobacco giants were dealt a significant setback when a Quebec court awarded damages to approximately 100,000 smokers and ex-smokers. The plaintiffs claimed that the companies were aware of the risk of cancer and other illnesses associated with their product since the 1950s, but they failed to warn consumers adequately.

In 2019, a Quebec court upheld the 2015 decision, which, after an appeal, awarded smokers in the Canadian province approximately C$15 billion. This decision compelled the Canadian subsidiaries of all three cigarette manufacturers to seek bankruptcy protection.

Since then, the subsidiaries have been engaged in a mediation procedure supervised by the court to negotiate a potential settlement.

Philip Morris has stated that the allocation of the aggregate settlement amount among the tobacco titans is still unresolved.

"Although important issues with the plan remain to be resolved, we are hopeful that this legal process will soon conclude, allowing RBH (Rothmans, Benson & Hedges) and its stakeholders to focus on the future," Philip Morris CEO Jacek Olczak said on October 18.

Philip Morris' Canadian subsidiary is Rothmans, Benson & Hedges.

BAT and Philip Morris Move Forward with $23.6 Billion Settlement Plan Amid Critical Unresolved Issues

On October 18, British American Tobacco stated that the proposed plan represented a positive development in pursuing a resolution. The plan that Philip Morris implemented should have been discussed in detail.

BAT stated that Imperial Tobacco Canada, its subsidiary, would contribute to the settlement framework and structure. The settlement would be funded by cash on hand and cash generated from the prospective sale of tobacco products in Canada.

On October 18, BAT shares experienced a 3.5% decline.

Philip Morris said the plan would be voted on in December of this year. If the claimants approve the plan, a hearing to consider its approval is anticipated in the first half of the following year.

"There are certain critical issues that would need to be resolved if we are to find a settlement plan that is workable," Japan Tobacco unit JTI-Macdonald said, without providing further details.

Shelley of Western University stated that the settlement failed to incorporate policy provisions, but it emphasizes the responsibility of manufacturers to inform consumers about the potential hazards of their products.

"That could have implications for sectors such as alcohol," he stated.

"We do not provide adequate warnings about the risks of many products," he said. "Manufacturers have a duty to warn us of these risks.... And so hopefully, this has a shift in how manufacturers start to look at the potential liability."