Friday, 28 April 2017

Some scant tidbits of news plucked from the annual reports

The Annual Reports of the multinational tobacco companies which operate in Canada were issued last month. Contained within them were some small nuggets of news about the progress of the provincial cost recovery suits against them.

The companies are required to inform shareholders of the potential liabilities they face as a result of lawsuits. This protection for investors has, for more than a decade, been the only regular source of information on the progress of the provincial health care cost recovery suits.

Page 144 in the BAT 2016 Annual Report is devoted to details on the Canadian actions. From this I have learned that:

  • the B.C. government "delivered an expert report dated October 2016, quantifying its damages in the amount of CAD $118 billion."  This is more than the combined claim to date for Ontario ($50 billion) and Quebec ($60 billion).
  • New Brunswick's claim has also been quantified -- "in the rage of $25 - $60 billion from 1954 to 2060".

As for the other cases? No sign of any trial dates, but "discoveries are substantially complete" in New Brunswick.  The rest are still in "early case management stage".

Philip Morris' Annual Report for 2016 notes that 10 of the 16 health care cost recovery actions that are pending against it are in Canada (5 of the rest are in Nigeria, and the other one is in Korea). It also reports that:

  • The New Brunswick Court "entered a consent order establishing a discovery timetable that contemplates the province of New Brunswick applying by September 2017 for a trial date.
  • "Pre-trial discovery" is also ongoing in British Columbia, Ontario, Newfoundland and Labrador, Alberta and Manitoba. It is scheduled to begin this year for Saskatchewan, Prince Edward Island and Nova Scotia.

Japan Tobacco's Annual Report for 2016 doesn't contain much in the way of news -- and even seems to have missed out on some of the details in the others. It notes, for example, that the "claim amount is unspecified" for B.C. -- no mention of any $118 billion figure.

Notices filed with the Supreme Court

B.C. had 60 days to tell the Supreme Court if it wished to appeal the unfavourable decision from the B.C. Court of Appeal on disclosure of records. That window closed on Easter weekend -- but not before B.C. submitted an Application for Leave to Appeal. Unlikely that the court record will provide much insight -- two certificates on limitations to public access were also submitted -- as was a Certificate "if inappropriate for a judge to take part in adjudication." No risk, I suspect, of Imperial Tobacco's former counsel being asked to wade in on this one!

Wednesday, 15 February 2017

And B.C. rules the other way ....

Anyone with two parents doubtless learned at an early age that there is some variability in decisions from authority figures, and had the experience of getting different answers to the same question depending on which authority was asked.

Events this week showed that this may be a lifelong experience.

Yesterday, the B.C. Court of Appeal upheld a lower court's decision to give the defendants in that province's cost recovery lawsuit the very thing that the New Brunswick Courts had only recently refused them: access to (annonymized) individual electronic medical records.

I don't think it was intended to go this way when near-identical rules for these lawsuits were set across the provinces many years ago. Both the New Brunswick and British Columbia Tobacco Damages and Health Care Cost Recovery Acts contain identical provisions about whether medical records are or are not "compellable" (can be given to the other side):
2(5)(b) the health care records and documents of particular individual insured persons or the documents relating to the provision of health care benefits for particular individual insured persons are not compellable except as provided under a rule of law, practice or procedure that requires the production of documents relied on by an expert witness.
Last June, Justice Cyr of New Brunswick decided that this clause protected medical records from discovery, and that releasing them would risk "exposure of very sensitive information." Neither the New Brunswick Court of Appeal, nor the Supreme Court of Canada was interested in entertaining PMI/Rothmans, Benson and Hedges challenge to this decision. (The other tobacco defendants have accepted a data-access agreement involving Statistics Canada). New Brunswick Courts up the line said "no" to PMI/RBH's request for the data.

A year earlier, Justice Smith of the B.C. trial court had come to a very different conclusion. He ruled that access to data was necessary to generate the kind of statistical proof that the case required, and that the information could be given over in confidence because the security demands on expert witnesses were as sound as those imposed by Statistics Canada in the arrangement preferred by the province.

The Court of Appeal took the New Brunswick court's views into consideration, but was not persuaded by it anymore than it was by lawyers representing the province or the provincial Information and Privacy Commissioner. B.C. courts up the line said "yes" to the request for data.

The B.C. Appeal court acknowledged its colleagues, and explained why they thought they were wrong: "[Justice Cyr]did not attempt to read the provisions of the New Brunswick Act as a harmonious whole."  

As if that were not enough, it raised the stakes further by suggesting that denying access to these medical records (as New Brunswick had done) was effectively denying the companies  a fair trial:  "It cannot have been the intention of the Legislature for the playing field to be tipped unfairly in the Province’s favour."

So where do they all go from here? If B.C. is successful in engaging the Supreme Court in a review - and loses - will that put the New Brunswick case under a shadow?

As it turns out, there is a good chance of a harmonious whole to the appraoch by the provincial plaintiffs. Both actions are lead by the same law firm (Siskinds) and the same lead lawyers (James Virtue and André Michael.

Saturday, 28 January 2017

New Brunswick medical records will not be disclosed.

This past Thursday, the Supreme Court of Canada decided that it would not review the decisions New Brunswick courts to refuse the tobacco industry defendants in the government's cost recovery suits to get access to the medical records of that province's citizens.

The issue, you may recall from an earlier post, is one that was simultaneously before the courts in New Brunswick and British Columbia.

The B.C. Court of Appeal has yet to decide whether it will align its thinking with that of Justice Thomas Cyr in New Brunswick (now left untouched by both the New Brunswick Court of Appeal and the Supreme Court), or whether it will side with  Justice Nathan Smith's different way of seeing things in B.C..

That court has now had more than 3 months to reflect on the arguments they were presented with around Thanksgiving last year. A blink of an eye in this business!

Saturday, 7 January 2017

Smokers are paying more for their cigarettes. Coincidence? I think not.

Somewhere in Canada there is a cache of almost three-quarters of a billion dollars, the fate of which is hanging on the decisions of higher courts on the  Quebec class action suits.

This money was set aside after Justice Schrager ordered two of the defendant companies to lock it up while the appeals of Justice Riordan's ruling were ongoing. He made this decision after the plaintiffs raised concerns that the companies might not honour a ruling against them and might find ways of escaping the penalty.

Ten of the 13 payments required by this October 2015 security order will have been posted by now.

Rothmans, Benson and Hedges was told to put aside about $400,000 per day. Imperial Tobacco was required to save almost three times as much ($1.18 million).

That's a fair chunk of change, as they say! Yet there seems to have been little discussion about the impact of this on the companies, their shareholders or their clients. (Last year, BAT informed shareholders that it was consider the money "an asset to be recovered upon successful appeal" and PMI made a similar disclosure.)

Today, by chance, I came across some information on price increases implemented by the companies around the time that the request for the security order was being made.

In the first week of August 2015, both Imperial Tobacco and Rothmans Benson and Hedges increased the prices of their premium brands by $2.00 a carton, with somewhat smaller increases on mid-priced ($1.50) and discount ($1.00) brands. JTI, which escaped having to make security as a result of a scheduling conflict, matched these price increases two weeks later.

There were at least three more rounds of price increases: in January 2016 prices went up by $1.00 to $1.50 per carton, as they did again in May 2016, September 2016 and again this month.

All told, Imperial Tobacco now charges $5.00 cents more for a carton of du Maurier, $3.20 for Player's, $2.50 for Pall Mall than it did in July 2015. RBH charges $7.5 more for a carton of premium brands like Dunhill or Rothmans, and $4.00 more for a package of its discount brand, NEXT.

Has this allowed them to fully offload the costs of the security order onto smokers?  More data would be needed to know for sure. The market share per brand is considered confidential business information by those who collect it (industry, government, trade analyists) and not available to the likes of me.

But enough data is available to conclude that this may be the case.  Health Canada recently reported that about 29 billion cigarettes were sold in 2015, or slightly more than 36 million cartons per quarter. Of these, the market share for RBH and ITL (87%) would be approaching 32 million cartons each quarter. To recoup the quarterly security payments of $146 million, the companies would have to raise prices per carton by about $4.60.

The price increases over the past 18 months are about equal to the last federal tax increase of $4 per carton in February 2014. Interesting that wholesale price increases do not result in the same cries of alarm from the industry about contraband that tax increases of the same magnitude do.