BC, Tobacco Companies Line Up For Battle

Big tobacco fears being forced to cough up half a century’s worth of smoking related health care costs after last week’s Supreme Court of Canada ruling. The unanimous September 29th judgement gave British Columbia the go ahead to use legislation to sue major tobacco companies for the past, present and future burden of caring for ill smokers—a lawsuit that could be worth billions of dollars.

The tobacco industry failed to convince the court that BC’s Tobacco Damages and Health Care Costs Recovery Act was unconstitutional. The legislation in question also limits the companies’ access to some legal defences and makes it easier to prove a connection between smoking and disease. It is expected the suit will take many years to wind its way through the courts. However, the impact of the precedent setting judgement is already being felt. A day after the judgement, two huge class-action lawsuits were to a whopping $23 billion in damages.

“This is very much a landmark ruling in our attempt to hold the tobacco industry responsible for its destructive product,” says BC Health Minister George Abbott. “We’re particularly concerned with the lack of disclosure in the fifties, sixties and seventies around the potential damages of this product. We want to hold them to account for that….”

Nine international tobacco firms, the Canadian Tobacco Manufacturers’ Council and the three main Canadian cigarette companies are facing charges: Rothmans Benson & Hedges Inc, Imperial Tobacco and JTI-Macdonald Corp. It is estimated that the initiative could net as much as $10 billion if successful. Other provinces are expected to follow suit. The BC government estimates that treating smoking-related diseases costs the health-care system between $500 million and $1 billion annually.

BC became the first province in Canada to launch a lawsuit against the tobacco manufacturers when the New Democratic Party government initiated proceedings in 1998. The companies are accused of targeting children in their advertising, of marketing cigarettes as being “light” when they knew they were not, and of conspiring to suppress and invalidate research on the risks of smoking.

“We deny absolutely the accusations that are contained in the government’s claim and we plan to have a vigorous defence based on the facts,” says Dave Laundy, Western Canada vice president for the CTMC.

“We’re confident that when we go to trial…the facts involving the history of tobacco regulation will come to the fore and we will be victorious in the end. There will be no settlement.”

Laundy says that the tobacco industry has been “very aggressively regulated” over many decades, and although the companies may often disagree, they have complied with the restrictions and prohibitions put in place by governments and are acting responsibly.

“The companies basically do what the governments tell them to do and obey the laws. Essentially our position is that these companies operate under the supervision of governments and collect a huge amount of money for governments. So it’s hypocritical for the government as a regulator to be suing the companies for doing exactly what the government gives them permission to do.”

Laundy points out that, in a similar suit in the US where the tobacco companies were ordered to collectively pay out $245 billion, the price of cigarettes went up with the result that the consumer actually ended up footing the bill for the legal costs. He says the same could happen in Canada because the tobacco companies don’t have the resources for a multi-billion dollar settlement.

A $10 billion lawsuit filed by private citizens in Illinois two years ago threatened to bankrupt tobacco giant Phillip Morris. In an unusual twist, attorneys-general from various states intervened in court on behalf of Phillip Morris in an effort to keep the company from going under.

A class-action suit filed in Quebec Superior Court last Friday by Cecilia Letourneau is seeking $17.8 billion on behalf of 1.8 million smokers in Quebec. The suit alleges smokers in the province were misled by tobacco companies regarding the addictive properties of nicotine and that the companies had a responsibility to warn people about the dangers of smoking. A separate suit also filed in the Quebec Superior Court wants $5 billion for those who contracted respiratory-related cancers from smoking. Both suits are to be argued together.

Robert Walsh, executive director of the Canadian Council for Tobacco Control agrees that the court action will likely drive up the price of cigarettes, but says the lawsuit is justified because the tobacco manufacturers “really did have a corporate behaviour that tricked people, and they should be held accountable.”

He adds that there is still room for raising taxes on tobacco products but only if the extra money is put toward treating smoking-related diseases. According to the Canada Revenue Agency, federal taxes and duties on tobacco products rose by 550 percent between 1982 and 1991.

“I don’t think people mind a higher price tax if they know the taxes are going to health care and prevention,” says Walsh. “There should be a policy decision to make sure that the taxes aren’t a general coffer but are used for health care.”