LONDON—A Canadian court has ordered British American Tobacco
PLC, Philip Morris International Inc. and Japan Tobacco Inc. to pay
15.6 billion Canadian dollars ($12.5 billion) in damages to Quebec
smokers after a 17-year legal battle, in the latest case to roil
the global tobacco industry.
More than one million Quebecers—comprising smoking addicts and
people who had become sick from smoking—were represented in
class-action suits claiming tobacco companies should be held
responsible for selling a harmful product and obscuring the health
impact of smoking.
Imperial Tobacco Canada, a unit of British American Tobacco, was
ordered to pay 10.4 billion Canadian dollars. Rothman's Benson
& Hedges—a unit of Philip Morris—and JTI-Macdonald Ltd., a unit
of Japan Tobacco, were also ordered to make payments. The case
stretched back to 1998 and went to trial in 2012.
The judgment called on the companies to pay initial compensation
of at least 1.13 billion Canadian dollars within 60 days,
regardless of whether they appeal the ruling. Imperial Tobacco
Canada's share is $743 million Canadian dollars.
The firms argued that Canadian smokers have had a high awareness
of smoking health risks for decades, not least through health
warnings on cigarette packaging.
But the plaintiffs, following one of Canada's largest
class-action suits, said the companies didn't properly warn their
customers of the risks and failed in their general duty not to
cause injury to another person, according to the Quebec Superior
Court in Montreal.
"The companies earned billions of dollars at the expense of the
lungs, the throats and the general well-being of their customers,"
said Judge Brian Riordan.
The news hit U.K.-listed tobacco stocks. At 0957 GMT, BAT shares
were down 2.5% at 3,504 pence. Shares in Imperial Tobacco, another
tobacco company, were down 1.7% at 3,249 pence.
BAT said it planned to appeal. "There are strong legal grounds
with which to challenge both the overall judgment and to seek a
stay of the provisional execution order," said BAT.
Philip Morris and Japan Tobacco weren't immediately available
for comment.
Laith Khalaf, an analyst at Hargreaves Lansdown, said the
companies involved are likely to "throw the kitchen sink" at
defending their case. "The wider implications of the legal battle
are more significant than the billions of dollars in damages
awarded to the plaintiffs in this particular instance."
Citi analyst Adam Spielman added that while tobacco companies
have a solid track record on overturning rulings of this type,
especially in the U.S., there is no such form in Canada.
"This is the first big ruling in Canada," said Mr. Spielman. "It
is by no means certain that the industry will be as successful on
appeal there as it has been in the U.S. Also, we expect the appeals
process to take several years."
In February, the three largest U.S. tobacco companies—Altria
Group Inc., Reynolds American Inc. and Lorillard Inc.—agreed to pay
a total of $100 million to settle hundreds of federal lawsuits in
Florida, following a class-action suit brought by state residents
in 1994 over the health impact of smoking.
Units of those companies were charged with misleading consumers.
The Florida cases, which collectively became known as the Engle
lawsuits, sprang from an initial class-action lawsuit on behalf of
a smoker, Howard Engle.
Still, despite the agreement, thousands of cases have also been
dismissed.
Ed Ballard contributed to this article.
Write to Simon Zekaria at simon.zekaria@wsj.com
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