Tobacco healthcare recovery cost law constitutional, rules appeal court

Tobacco companies lost another legal battle in Quebec after the appeal court sided with the provincial government in a ruling that opens the door province to sue tobacco companies to recover billions in healthcare costs related to smoking.

Nearly three months after a landmark ruling ordered three leading Canadian tobacco companies to pay $15.5 billion in moral and punitive damages to Quebec smokers, the Quebec Court of Appeal upheld a lower court ruling that found that while the province’s healthcare recovery legislation does deprive tobacco companies some traditional means of defence it does not affect their right to a fair trial.

“This is an important ruling because it confirms that the provincial government can intentionally change the rules of the game by lessening the burden of proof and by making it easier to prove the civil liability of tobacco companies because there is a problem applying the traditional rules in suits against the tobacco industry,” remarked Bruce Johnston, a class action lawyer with Trudel, Johnston & Lespérance, a Montreal law firm that joined forces with three other firms and successfully won the the precedent-setting class action against the cigarette makers.

“The appeal court found that the while the law had an impact on their defence, it was not illegal as the government is allowed to change the rules of civil responsibility, and it is not the role of the appeal court to question the choice made by the legislature,” added Johnston.

In 2009 the Quebec government enacted the Tobacco-related Damages and Health Care Costs Recovery Act (Act) which confirms the government’s right to sue tobacco manufacturers directly to recover healthcare costs it incurred and will incur as a result of a tobacco related wrong. The Act amends certain rules of the civil liability regime governing evidence and prescription. It eases the burden of proof required to link exposure to tobacco products to tobacco-related disease by allowing as evidence statistical data or data derived from epidemiological, sociological or any other relevant studies to establish causation between the alleged wrong committed by tobacco companies and healthcare costs related to smoking.

With the exception of Yukon, all of the provinces and territories have enacted similar healthcare recovery legislation aimed at tobacco manufacturers. In 2012, Quebec followed the lead of most provinces and territories and launched a $60 billion lawsuit against the tobacco firms to recoup health-care costs related to smoking. Ontario launched its $50 billion suit in 2009.

“From our perspective, these cases are fundamentally important,” said Rob Cunningham, a lawyer and senior policy analyst with the Canadian Cancer Society. “It is legal warfare, and the vast sums of stake means that the tobacco companies are going to fight very hard. So you need to have some aggregate way to have statistical evidence and so on, given the number of people that are involved from smoking and the healthcare costs. So while legislation to facilitate recovery of medical care costs does change things the tobacco companies have every opportunity to present their case. Legislation.”

Three tobacco companies – Imperial Tobacco Canada Ltd, JTI-MacDonald Corp., and Rothmans, Benson & Hedges Inc. — not surprisingly challenged the constitutionality of the Quebec Act. According to the tobacco companies, these new rules considerably restrict their right to be heard and make full answer and defence, and infringes section 23 of the Quebec Charter of Human Rights and Freedoms. They argued that section 23 of the Charter guarantees a fair trial that goes beyond the right to be heard by an impartial and independent tribunal, in particular due to the words “full and equal.” Moreover, they asserted that section 23 of the Charter includes the notion of “equality of arms,” which prohibits legislators from legislative interference in cases pending before the courts, according to European case law.

None of the arguments made by the tobacco firms prevailed. The Quebec Court of Appeal held that while the Act is “particularly harsh” towards the tobacco companies and “considerably eases” the burden of proof the government must make to prove their case, it is “not role of the appeal court to put into question” the choice that Quebec legislators made. The interpretation of the notion of “equality of arms” argued by the tobacco giants “does not appear to be a faithful reflection” of the case law of international courts. European Court case law does not suggest that legislators should be prevented from amending the general rules of evidence, procedure and prescription for the purposes of a specific remedy, added the appeal court. Heeding guidance provided by the Supreme Court of Canada in the precedent-setting ruling in British Columbia v. Imperial Tobacco Canada Ltd. 2005 SCC 49, the appeal court found that parliamentary supremacy allows the legislature to amend the law as it sees fit as long as the amendments fall within constitutional limits. (In a 9-0 decision the SCC upheld B.C. provincial legislation allowing the government to seek damages for health-care costs dating back 50 years and future expenses stemming from illnesses resulting from tobacco use).

“The legislator chose to target the tobacco products industry and take what can be described as strong measures towards it with respect to civil liability,” said Quebec appeal court Justice Geneviéve Marcotte in a unanimous ruling in Imperial Tobacco Canada Ltd. v. Quebec (Attorney General) 2015 QCCA 1554. “In this case, the appellants have not shown how the elimination of prescription or the other changes made to the rules of evidence and civil procedure would contravene their right to a fair trial, although it does in effect deprive them of certain defences.”

“The appeal court reaffirms the principle that the legislator can target the tobacco industry and take hefty measures against them in matters with respect to civil liability,” said Jean Saint-Onge, a Montreal class action lawyer with Lavery, de Billy. “A connection with the SCC ruling it rendered in the B.C. case can obviously be made but the SCC examined the issue through the prism of the Canadian Charter while the appeal case examined it through the Quebec Charter.”

The appeal court ruling will have a bearing on the class action suit that was won earlier this year, said Johnston. After a trial that spanned over 253 days of hearings, heard 76 witnesses, with 43,000 documents filed as exhibits, Quebec Superior Court Justice Brian Riordan found that Imperial Tobacco, Rothmans, Benson & Hedges, and JTI-MacDonald. committed four separate faults under Quebec law. The decision covers two class actions that were heard as part of the same trial, with one obtaining damages for 918,218 Quebecers afflicted with tobacco dependence and the other for 99,957 Quebec smokers and ex-smokers who developed emphysema, lung cancer, or throat cancer.

During the class action the tobacco companies argued that causation for each member of the class must be established. In essence, they wanted each class member to testify. But class action plaintiffs successfully argued that under the Act adequate proof of causation with respect to each member of a class can be made through epidemiological evidence.

The three companies have appealed the class action ruling, and were expected to argue that the Act was unconstitutional. But following the appeal court ruling, that argument no longer holds water. “They can no longer argue that adequate proof of causation with respect to each member of the class cannot be made through epidemiological evidence because the Act is constitutionally invalid,” said Johnston. “So it removes this cloud of uncertainty we had even though we were confident that the law would be upheld, and it provides us with an understanding of how the appeal court views the Act,” which will be important when the class action appeal is eventually heard by the court.

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