1. Class actions have been commenced on behalf of Ontario flue-cured tobacco growers and producers against Rothman’s Benson & Hedges Inc. (“RBH”), Imperial Tobacco Canada Limited (“ITCL”), JTI-MacDonald Corp. (“JTI”). The plaintiffs are the Ontario Flue-Cured Tobacco Growers’ Marketing Board (the “Board”) and individual Ontario flue-cured tobacco growers and producers. The proposed class consists of growers and producers in Ontario who sold tobacco through the Board pursuant to agreements during the period January 1, 1986 to December 31, 1996.

THE CLASS ACTIONS

2.  RBH, ITCL and JTI have settled civil claims by the federal and provincial governments in respect of those companies' roles in cross-border smuggling of tobacco. While the governments will be compensated for the losses they have sustained due to tobacco smuggling, the tobacco growers and producers, who claim they were underpaid for their crops, have not been compensated for their losses stemming from that same activity. The class actions are intended to achieve that purpose.

3. On November 5, 2009, a class action was commenced on behalf of Ontario flue-cured tobacco growers and producers against RBH.

4. On December 2, 2009, a class action was commenced on behalf of Ontario flue-cured tobacco growers and producers against ITCL.

5. On April 23, 2010, a class action was commenced on behalf of Ontario flue-cured tobacco growers and producers against JTI.

6. The class actions seek to recover the difference between the export price paid by the domestic manufacturers (RBH, ITCL and JTI) for Ontario tobacco at the Board’s auctions and the higher price they ought to have paid because the tobacco was actually intended for domestic use. The pricing and payment obligations were contained in the agreements negotiated annually by the Board on behalf of Ontario flue-cured tobacco growers and producers.

ITCL WITHHOLDS PAYMENT FROM ONTARIO AND DEMANDS ARBITRATION

7.    On March 29, 2010, following its receipt of the statement of claim, ITCL delivered a notice to the Province of Ontario (“Ontario”) of its intention to withhold payment under the settlement agreement for the civil claims brought by the federal and provincial governments for losses they sustained due to tobacco smuggling.  In essence, ITCL asserted that the Board’s claim is a “Released Claim” which is “a complete defence” to the class proceeding.  Ontario disagreed with ITCL’s position, and as a result, Ontario commenced an application for an order to compel ITCL to pay the settlement money to Ontario pursuant to the settlement agreement.   In response, ITCL insisted that this issue must be determined by arbitration pursuant to the settlement agreement.

8.    On July 26, 2010, a motion judge of the Ontario Superior Court of Justice ordered a stay of Ontario’s application and found that Ontario’s dispute with ITCL must be determined by arbitration pursuant to the settlement agreement.  Ontario appealed that order to the Ontario Court of Appeal. 

9.    The Board supported Ontario’s appeal by arguing that any defence to the class proceeding based on the settlement agreement between ITCL, on the one hand, and the federal and provincial governments, on the other, must be dealt with by the court in a proceeding in which the Board is a party (and since the Board was not a party to the settlement agreement between ITCL and the federal and provincial governments, the Board would not be entitled to participate in the arbitration).

10.    On July 20, 2011, the Ontario Court of Appeal’s decision was released.  The Court of Appeal agreed with the Board’s position and allowed the appeal in part.  It found that the Board must be a party to the legal proceeding in which ITCL’s Released Claim defence is determined, and therefore, Ontario’s application should proceed for a determination of that issue.  However, the Court of Appeal concluded that the question of whether ITCL can withhold its payment to Ontario under the settlement agreement should be decided by arbitration.  The Court of Appeal’s order may be reviewed here.

NEXT STEPS

11. The class actions are still in the preliminary stages. The court will eventually set a timetable for the conduct of the actions, but that has not occurred yet.

12. A judge of the Ontario Superior Court of Justice will hear motions for certification of the class actions to determine whether the cases can proceed as class actions. The motion dates have not yet been set.  A further update will be posted once a schedule has been set.

13. The hearing of Ontario’s application will be scheduled along with a motion for certification of the class action against ITCL.  Further details on the schedule will be posted when the schedule has been set.

FURTHER INFORMATION

14. A list of frequently asked questions may be reviewed here.

15. If you have further questions about the class actions which are not answered on this website, please click here.

16. If you would like to learn more about how a class action works, please click here.