TORONTO, March 22, 2019 /CNW/ - Acting on an application by Rothmans, Benson & Hedges Inc. (RBH), the Ontario Superior Court of Justice today granted the company protection under the Companies' Creditors Arrangement Act (CCAA). The Court's initial order imposes a comprehensive stay of litigation proceedings against RBH while allowing the company to carry on its business in the ordinary course.
CCAA protection is a court-supervised proceeding designed to bring creditors and potential creditors together to resolve claims while the business continues to operate with minimal disruption. Consistent with this objective, the initial CCAA order authorizes RBH to pay all expenses incurred in carrying on its business in the ordinary course, including obligations to employees, vendors, and suppliers.
"The CCAA forum provides RBH with a promising opportunity to resolve all the pending litigation we have faced for decades in Canada," said Peter Luongo, Managing Director of RBH.
RBH sought the Court's order following an adverse appellate decision in two Class Action lawsuits in Québec against RBH, Imperial Tobacco Canada Limited, and JTI-Macdonald Corp.
As part of RBH's filing for creditor protection, the Ontario Superior Court of Justice made an initial order staying proceedings in the Québec class action proceedings and the other pending litigation, including the litigation brought by all ten provinces related to the recovery of health care costs.
Creditor Protection Offers an Opportunity to Resolve All Pending Canadian Litigation while RBH Continues Normal Business Operations
"While RBH disputes liability in the Canadian litigation given the widespread awareness of the health risks of smoking, we are optimistic about reaching an arrangement that could resolve all pending litigation and allow RBH to focus on the future," said Luongo.
"RBH and its predecessors have been in business for over 100 years. The company is operationally sound thanks to the hard work and commitment of its more than 800 employees across Canada. Furthermore, we are determined to replace cigarettes with innovative, smoke-free technologies that are a better choice for the millions of adults in Canada who would otherwise keep smoking," added Luongo.
Québec Class Actions Judgment and Filing for Creditor Protection
In 2015, the Québec trial court ruled in favor of the plaintiffs and found that the estimated class members' damages totaled approximately CAD 15.6 billion including interest. On March 1, 2019, the Court of Appeal largely affirmed the total amount of compensatory and punitive damages, but reduced the total class member damages due to an error in the interest calculation to approximately CAD 13.6 billion including interest.
While the trial court found that the ultimate damages disposition would depend on an individual claims process, the three defendants in the cases—RBH, JTI-Macdonald Corp., and Imperial Tobacco Canada Limited—are jointly and severally liable for the compensatory damages to be distributed to eligible class members. JTI-Macdonald Corp. and Imperial Tobacco Canada Limited were granted creditor protection under the CCAA in connection with the class actions, on March 8 and 12, 2019, respectively. Without creditor protection, RBH could have been required to pay, in addition to its allocated portion, the portions of the class actions judgment allocated to JTI-Macdonald Corp. and Imperial Tobacco Canada Limited.
RBH has not paid dividends since the trial court judgment in May 2015 and does not anticipate doing so while under creditor protection.
The Ontario Superior Court of Justice has scheduled the next hearing on RBH's CCAA filing for April 4-5, 2019 at which time the Court will consider requests, if any, from interested parties to vary the terms of the initial order for creditor protection.
Pursuant to the initial order, Ernst & Young Canada Inc. has been appointed as RBH's Monitor in the CCAA proceeding. Information regarding RBH's CCAA proceedings, including court orders and the Monitor's reports, will be available on the Monitor's website at: http://www.ey.com/ca/rbh.
About Rothmans, Benson & Hedges Inc.
Rothmans, Benson & Hedges Inc., an affiliate of Philip Morris International Inc., is one of Canada's leading tobacco companies and employs over 800 people across the country with its headquarters in Toronto and a factory in Québec City.
SOURCE Rothmans, Benson & Hedges Inc.