Category: Litigation

Juul ban sought
Schlesinger Law Firm has filed a motion for preliminary injunction asking a U.S. federal court in Florida to ban the sale of Juul electronic cigarettes across the United States. The firm says it wants halt “an epidemic of youth nicotine addiction that has surged due to the skyrocketing growth of Juul.”
Juul and other e-cigarette makers have not applied for or received FDA premarket authorization to sell their electronic nicotine devices, as required under the Tobacco Control Act.
“Under the law, companies must have regulatory permission before they can sell new tobacco products in the public space,” said Scott P. Schlesinger, an attorney at Schlesinger Law Offices in Fort Lauderdale.
“In 2017, the FDA granted makers of e-cigarettes a five-year extension to file for approval. Since then, sales of the product have exploded and created an epidemic.”
A federal judge in Maryland recently ordered the FDA to shorten that time “but that relief is insufficient to end the dramatic increase of nicotine addiction among youth,” says Schlesinger.
Citing independent research, the FDA says that 3.62 million middle and high school students used e-cigarettes in 2018. E-cigarette use jumped 78 percent among high school students from 2017 to 2018 and 48 percent among middle school students during the same time period.
“The motion to enjoin Juul from selling its products seeks only to treat the company as it should have been all along,” said Jonathan R. Gdanski, an attorney at Schlesinger. “You don’t get to sell a tobacco product, take over the marketplace and then ask for permission for that product after it is engrained in society.”
The FDA says that five brands, including Juul, control 97 percent of the U.S. market for e-cigarettes. Juul had 72 percent of the market in August, according to Nielsen. The company has forecast $3.4 billion in revenue this year, triple that in 2018.
In April, Schlesinger Law Firm filed a class-action lawsuit on behalf of a Sarasota County teenager, age 15, and her parents against Juul Labs and Altria Group, which owns Philip Morris USA, which claims in part that the plaintiff is addicted to the nicotine in Juul e-cigarettes. Altria holds a 35 percent interest in Juul.
The lawsuit, filed in U.S. District Court for the Middle District of Florida, seek damages under the RICO Act and for fraud, product liability and deceptive trade practices. It says that Juul and Altria/Philip Morris are violating federal racketeering laws by intentionally exploiting adolescents while falsely denying they are doing so.
According to Jeffrey Haberman, an attorney at Schlesinger Law Offices, “Juul knew that its e-cigarettes were unsafe for non-smokers and that the product posed a risk of aggravating addiction in those addicted to cigarettes.”
July 26, 2019
Creditor protection granted
Philip Morris International’s Canadian subsidiary, Rothmans, Benson & Hedges (RBH) has obtained an initial order from the Ontario Superior Court of Justice granting it protection under the Companies’ Creditors Arrangement Act (CCAA).
In a note posted on its website, PMI said that RBH had said that obtaining creditor protection became necessary following recent developments in two class action proceedings in Québec against RBH, Imperial Tobacco Canada, and JTI-Macdonald.
PMI listed the key elements and impact of RBH’s decision to file for protection:
- ‘The initial order includes a comprehensive stay of all tobacco-related litigation pending in Canada against RBH and PMI, thus providing an efficient forum for RBH to seek resolution of all such litigation.
- ‘The CCAA process allows RBH to carry on its business in the ordinary course with minimal disruption to its customers, suppliers and employees.
- ‘As a result of the filing, and under US GAAP, PMI will deconsolidate RBH from its financial statements, resulting in an estimated one-time non-cash charge of approximately $0.10 per share, as described below.
- ‘While it remains under creditor protection, RBH does not anticipate paying dividends. As RBH has not paid dividends since the trial court’s judgment in May 2015, the deconsolidation will not have an impact on PMI’s current annualized dividend rate.’
PMI said that, as a result of the deconsolidation of RBH, PMI was revising its full-year 2019 reported diluted earnings per share forecast to be at least $4.90 at prevailing exchange rates. This full-year guidance, it said, reflected:
- ‘The current estimated one-time net impact of the deconsolidation of RBH under US GAAP of approximately $0.10 per share, to be recorded in the first quarter of 2019, which is a non-cash item, plus the tobacco litigation-related charge of approximately $0.09 per share announced on March 4, 2019; and
- ‘The exclusion of RBH’s previously anticipated earnings from PMI’s consolidated financial statements from the date of deconsolidation to December 31, 2019, of approximately $0.28 per share.’
March 25, 2019
Seeking a grand settlement
British American Tobacco’s Canadian subsidiary, Imperial Tobacco Canada (ITCAN) has obtained an Initial Order from the Ontario Superior Court of Justice granting it protection under the Companies’ Creditors Arrangement Act (CCAA). This has the effect of staying all current tobacco litigation in Canada against ITCAN and other Group companies.
‘ITCAN’s decision to file for protection under the CCAA follows the Quebec Court of Appeal judgment holding the industry jointly and severally liable for a maximum of C$13.6 billion, and the recent decision by one of the other Canadian tobacco companies, JTI-Macdonald, to seek, and subsequently obtain, CCAA protection,’ BAT said in a note posted on its website yesterday. ‘If ITCAN had not also obtained court protection, it could have been required to pay for all or part of JTI-Macdonald’s share of the Quebec judgment, in addition to its own.’
ITCAN’s share of the judgment was said by BAT to be a ‘maximum of approximately C$9.2 billion.
Meanwhile, BAT said that, across Canada, other tobacco plaintiffs and provincial governments were collectively seeking significant damages that substantially exceeded ITCAN’s assets. ‘In seeking protection under the CCAA, ITCAN will look to resolve not only the Quebec case but also all other tobacco litigation in Canada under an efficient and court supervised process, while continuing to trade in the normal course,’ BAT said.
‘It will remain business as usual for ITCAN, its employees, customers and suppliers, and during the CCAA process, ITCAN’s management will continue to focus on growing its current cigarette and potentially reduced risk products business.
‘The Group will continue to consolidate the results of ITCAN, in line with IFRS 10 “Consolidated Financial Statements”, and ITCAN’s CCAA filing will not negatively affect the Group’s adjusted net debt to adjusted EBITDA ratio.
‘The £2.3 billion of goodwill relating to ITCAN on the Group’s balance sheet at 31 December 2018 will continue to be reviewed on a regular basis. Any future impairment charge would result in a non-cash charge to the income statement that will be treated as an adjusting item.
‘Since 2014 the Group has received no dividends from ITCAN and expects that this situation will continue whilst ITCAN remains under CCAA protection. Notwithstanding this, there will be no impact on the BAT Group’s dividend payments or policy.’
A BAT spokesperson was quoted as saying that ITCAN disagreed with the Court’s judgment. “However, we understand that CCAA protection will provide Imperial Tobacco Canada an opportunity to settle all of its outstanding tobacco litigation under an efficient and court supervised process whilst continuing to run its business in the normal course,” the spokesperson said.
March 13, 2019
Creditor protection granted
The Canadian tobacco manufacturer JTIMacdonald Corp has been granted protection from its creditors following a March 1 court judgement under which it is liable for an award that exceeds its capacity to pay.
In a note posted on Japan Tobacco Inc’s website on Saturday, the company said that, as announced previously, the Quebec Court of Appeal had dismissed an appeal by JTIMacdonald Corp. (JTI-MC), a member of the JT Group, and other Canadian tobacco manufacturers of a lower court decision in the two class action lawsuits heard together in Montreal.
‘JTI-MC filed for protection from its creditors under the Companies’ Creditors Arrangement Act (CCAA) on March 8, 2019, local time,’ the note said. ‘This filing followed the Quebec Court of Appeal’s judgment on March 1, 2019, local time, making JTI-MC liable for up to C$1.77 billion, of which it is required to pay C$145 million as an initial deposit.
‘As the amount of the award exceeds JTI-MC’s capacity to pay, JTI-MC has decided to seek protection from its creditors under the CCAA so as to continue its business operations. The Ontario Superior Court has granted the CCAA application and extended protection in favor of JTI-MC. Whilst all of the proceedings pending against it are now stayed, JTI-MC intends to continue to proceed with an appeal to the Supreme Court of Canada.
‘JTI-MC filed for protection as it considers doing so to be the best possible option for JTI-MC. It enables JTI-MC to carry on business in the ordinary course.
‘JTI-MC is the only JT Group company that is party to these proceedings and the financial impact of JTI-MC’s protection under the CCAA is currently under review. If any material impact on JT Group’s consolidated financials is identified, JT will announce it in a timely manner.’
March 11, 2019
Slowly does it
A federal court on Tuesday ordered the US Food and Drug Administration to issue a final rule mandating graphic health warnings on cigarette packs and advertising, according to a statement issued by a number of health and anti-tobacco organizations and posted on the website of the Campaign for Tobacco-Free Kids.
The order by Judge Indira Talwani of the US District Court for the District of Massachusetts was said to have been made in response to a lawsuit filed in October 2016 by eight public health and medical groups and several individual pediatricians.
‘In a September 2018 ruling, Judge Talwani agreed with the health groups that the FDA has both “unlawfully withheld” and “unreasonably delayed” agency action to require the graphic warnings,’ the statement said.
‘In response to Judge Talwani’s ruling, the FDA proposed issuing the final graphic warnings rule by May 2021. ‘Instead, Judge Talwani ordered the FDA to issue a proposed rule by August 15, 2019, and a final rule by March 15, 2020.
The current cigarette warnings, which are printed on the side of packs, date back to 1984.
The March 6 statement was issued on behalf of the American Academy of Pediatrics, the Massachusetts Chapter of the American Academy of Pediatrics, the American Cancer Society, the American Cancer Society Cancer Action Network, the American Heart Association, the American Lung Association, the Campaign for Tobacco-Free Kids and the Truth Initiative.
March 8, 2019
Accounting for judgment
British American Tobacco has said that a provision of about £436 million will be charged to the Group’s consolidated income statement in 2019 following an appeals-court judgment in two class action lawsuits in Quebec, Canada.
In a statement posted on its website, BAT said the Quebec Court of Appeal in Montreal, in a judgment made public on Friday, had upheld a trial court’s decision of May 2015 in respect of two Quebec class action lawsuits against its subsidiary, Imperial Tobacco Canada (ITCAN) and two other Canadian tobacco companies. As part of that decision, the defendants were required to deposit about C$1.1 billion into a court escrow account.
‘As part of the 2015 decision, ITCAN was required to place C$758 million (approximately £436 million) in escrow – the final payment of which was made in 2017,’ the note said. ‘This deposit was held as an asset on the Group’s balance sheet at the year-end (31 December 2018).
‘Following the 1 March 2019 judgment, the Board of Directors of ITCAN have reassessed the recoverability of the deposit and have determined that the asset’s recoverability is, under IFRS, less than virtually certain. ‘Consequently, a provision of approximately £436 million will be charged to the Group’s consolidated income statement in 2019. This will be treated as an adjusting expense.
‘There will be no impact from this charge to the ratio of adjusted net debt to adjusted EBITDA, with this decision having no impact to cash flow in 2019.
‘The Board of Directors of ITCAN and the Group are monitoring developments. As previously stated, ITCAN intends to seek leave to appeal this judgment to the Supreme Court of Canada.
‘British American Tobacco p.l.c. was not a party to the proceeding and is not a party to the judgment.’
March 5, 2019
Proceeding with caution
Philip Morris International has revised its full-year 2019 reported diluted earnings per share forecast following the publication of a Canadian appeals-court judgment in respect of two class-actions in Quebec.
In a statement posted on its website, PMI said that on March 1, 2019, the Court of Appeal of Québec in Montreal had issued its judgment in two class action lawsuits against Rothmans, Benson & Hedges (RBH), a subsidiary of PMI, as well as Imperial Tobacco Canada (a British American Tobacco subsidiary), and JTI-Macdonald. PMI was not a party to the cases.
‘In 2015, the trial court ruled in favor of plaintiffs and found that the estimated class members’ damages totaled approximately C$15.6 billion including interest,’ the statement said. ‘In its decision, the Court of Appeal largely affirmed the total amount of compensatory and punitive damages including the trial court’s order for the defendants to deposit a portion of the damages, approximately C$1.1 billion, into trust accounts within 60 days. RBH’s share of the deposit is approximately C$257 million. RBH previously deposited C$226 million as security with the Court of Appeal. RBH will seek leave to appeal this judgment to the Supreme Court of Canada…
‘As a result of this decision against RBH, PMI will incur in its consolidated results a pre-tax charge of approximately $194 million, representing approximately $142 million net of tax, in the first quarter of 2019, recorded as tobacco litigation-related expenses. The charge reflects PMI’s assessment of the portion of the judgment that it believes is probable and estimable at this time and corresponds to the trust account deposit required by the court.
‘The company is monitoring developments in these proceedings and further assessing the situation, as there is a significant lack of clarity with respect to several factors, including the actual number of claimants, the associated administrative process for verification of their applications, further proceedings, and actions by parties to these proceedings. Therefore, the ultimate liability may differ significantly from this amount.
‘As a result of this charge, PMI today revises its full-year 2019 reported diluted earnings per share forecast to be at least $5.28 at the exchange rates prevailing at the time of PMI’s earnings release of February 7, 2019. Excluding the impact of this charge of approximately $0.09 per share and an unfavorable currency impact, at the then prevailing exchange rates, of approximately $0.14 per share, this forecast represents a projected increase of at least 8.0 percent versus adjusted diluted earnings per share of $5.10 in 2018 (calculated as reported diluted EPS of $5.08, plus tax items of $0.02 per share primarily related to the implementation of the Tax Cuts and Jobs Act).’
March 5, 2019
Billion-dollar award upheld
Quebec’s Court of Appeal has upheld a Quebec Superior Court ruling that awarded billions of dollars in damages to 100,000 people as part of two class-action lawsuits against tobacco companies, according to a CBC – Canadian Broadcasting Corporation – News story.
In the 422-page ruling, the court said the Superior Court’s decision was correct, except for some small technicalities. The adjustment in damages amounts to about C$2 million of the approximate C$15 billion the companies were ordered to pay, the prosecution said on Friday.
“It’s excellent news for the victims that have been waiting for this day for a long time,” said Philippe Trudel, one of the lawyers representing the smokers.
“We are calling this a total victory on all fronts.”
The prosecution estimates the damages the companies will eventually pay out to the smokers will amount to more than C$17 billion. Interest on the damages continues to accrue as the case moves through the court system.
The CBC story said that, in 2015, a Quebec Superior Court justice ruled in favour of two groups representing Quebec smokers, which argued the companies didn’t warn their customers about the dangers of smoking.
Imperial Tobacco, a subsidiary of British American Tobacco, Rothmans Benson & Hedges, a subsidiary of Philip Morris International, and JTI-Macdonald, were ordered to pay for punitive and moral damages. The companies appealed the decision in 2016.
In a Saturday, website announcement of the appeal court’s decision, Japan Tobacco Inc. said the court had substantively upheld the decision of the Superior Court, finding JTI-MC liable for C$1.77 billion.
‘JTI-MC is currently reviewing the judgement and is considering all options, including asking for permission to appeal the decision to the Supreme Court of Canada,’ the announcement said.
‘The decision follows an appeal by JTI-MC and other Canadian tobacco manufacturers to a judgment released in June 2015 by the Quebec Superior Court. JTI-MC was ordered to pay about C$2 billion in the judgment.
‘JTI-MC is the only JT Group company that is a party to these proceedings.
‘JT will issue a statement concerning JTI-MC’s response to the decision once it has had an opportunity to review the judgment in detail.’
Meanwhile, a spokesperson for BAT said that the company was extremely disappointed that the Quebec Court of Appeal had not overturned the trial court’s judgment against its Canadian subsidiary, Imperial Tobacco Canada.
“We are still of the view that this decision is wrong – ignoring the reality that both adult consumers and government have known about the risk associated with smoking for decades, the spokesperson was quoted as saying, as part of a note posted on BAT’s website. “As a result, we believe it should be overturned.
“Imperial Tobacco Canada Ltd. needs to review the court’s decision in more detail and will decide on next steps over the coming days and weeks. Given the significance of the judgment, they have said that they fully intend to appeal the decision to the Supreme Court of Canada.”
BAT said that, following the release of the judgment from the Quebec Court of Appeal, the plaintiffs had requested immediate release of the funds on deposit, which was refused. They had then filed a formal motion to release the funds. Imperial Tobacco Canada Ltd. filed a motion to prevent the release of the funds in question.
‘British American Tobacco was not a party to the proceeding and is not a party to the judgment, only its Canadian subsidiary, Imperial Tobacco Canada Ltd,’ BAT said.
The CBC story said that Rothmans, Benson & Hedges had confirmed in a statement that it would seek leave to appeal the ruling with the Supreme Court of Canada.
March 4, 2019
Industry friction denied
The CEO of the Tobacco Board of Zambia (TBZ), James Kasongo, has told journalists at a media briefing that the Board ‘has not put any restrictions on the amount of tobacco companies in Zambia or abroad must buy during the 2019 marketing season,’ according to a Zambia National Broadcasting Corp story.
Kasongo was said also to have ‘dismissed speculations’ that the Tobacco Association of Zambia, Japan Tobacco International and Alliance One had sued the government and the TBZ over ‘the tobacco levy’.
Last week, a story in The Mast reported that Japan Tobacco International Leaf Zambia and Alliance One Zambia had filed a notice in the Lusaka High Court principal registry seeking leave to start judicial review proceedings over a two percent levy placed on tobacco sales that was allegedly retroactive and illegal.
The sales in question were said to have been completed before the effective date of the statutory instrument imposing the levy.
In the Mast’s story, the two firms were said to have been challenging also a decision to issue two statutory instruments which restricted their operations on the tobacco sales floors. That decision they allege went beyond the powers granted under the Tobacco Act.
February 20, 2019
Buyers challenge levy
Japan Tobacco International Leaf Zambia and Alliance One Zambia have filed a notice in the Lusaka High Court principal registry seeking leave to start judicial review proceedings over a levy placed on tobacco sales that was allegedly retroactive and illegal, according to a story in The Mast, relayed by the TMA.
The sales in question were said to have been completed before the effective date of Statutory Instrument No 67.
The companies want to challenge the decision of the Tobacco Board of Zambia (TBZ) to collect the tobacco levy from them.
They are seeking to ask the court to rule that a minister’s decision to demand the two percent levy from them on completed purchases retroactively was illegal.
The applicants argue that the minister cannot demand payments of the levy for purchases that were made prior to August 31, 2018.
The two firms are challenging too the minister’s decision to issue SI 84 and 85 of 2018 which restrict their operating tobacco sales floors. That decision they allege went beyond the powers granted under the Tobacco Act.
The companies are asking for an order prohibiting the minister from implementing or enforcing SI 84 and 85.
February 15, 2019