What is the CCAA?

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The CCAA, or Companies’ Creditors Arrangement Act, allows companies in serious financial difficulty to continue operating, while they work out how to deal with their debts.

When a company uses the CCAA, the Court grants the company temporary protection from lawsuits or demands for payment, in the form of a stay of proceedings, so that it can negotiate with those to whom it owes or may owe money (its “creditors”). This gives the company time to come up with a plan to deal with its debts, called a “Plan of Arrangement” or “CCAA Plan”, and explain how the company intends to pay the creditors.

Throughout the process, a court-appointed Monitor oversees the company’s operations and reports periodically to the Court.

What happened in this case?

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On March 1, 2019, the Quebec Court of Appeal rendered a historic judgment, confirming the judgment of the Quebec Superior Court, which ordered that the 100,000 Quebec victims covered by the CQTS-Blais class action who were diagnosed with lung cancer, throat cancer or emphysema (the “Class Members”) be compensated by the defendant tobacco companies (the “Tobacco Companies”). The value of the judgments is nearly $14 billion, including interest.

In addition to the $14-billion judgment ordered by the Quebec Court of Appeal, the three Tobacco Companies each also faced billions of dollars in legal claims, including lawsuits brought by the 10 Canadian provinces to recover health-care costs due to smoking, whose claims then exceeded $500 billion.

On March 8, 12 and 22, 2019, the Tobacco Companies sought, and were granted, the protection of the CCAA by the Ontario Superior Court of Justice (the “Court”), which ordered a stay of all proceedings against them.

The purpose of the stay of proceedings was to allow for negotiations with all the Tobacco Companies’ creditors and to negotiate a global settlement of all tobacco-related claims against them.

The Mediation

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The Court appointed the Honourable Warren K. Winkler as mediator to lead negotiations between the Tobacco Companies and all their creditors with tobacco-related claims in the CCAA proceedings. The mediation process began on April 5, 2019.

After the commencement of the mediation, the Court appointed a law firm, The Law Practice of Wagner & Associates (“Wagners”), to act as PCC Representative Counsel to represent people across Canada who were harmed by smoking (known as PCCs, or Pan-Canadian Claimants). Since their appointment, PCC Representative Counsel has participated in negotiations, represented, and voted on behalf of PCCs.

The Tobacco Companies’ creditors involved in the mediation include:

1. The Quebec Class Members (“CQTS-Blais Class Members”), who won their case before the Quebec Court of Appeal, represented by Quebec Class Counsel;
2. tobacco victims across Canada, who do not have the benefit of a judgment, represented by Court-appointed PCC Representative Counsel, The Law Practice of Wagner & Associates (“Wagners”); and
3. the Canadian Provinces and Territories seeking to recover the health care costs associated with tobacco-related illnesses.

The Settlement and CCAA Plans

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These creditors negotiated with the Tobacco Companies, as well as amongst themselves, and with the assistance of the Mediator and the Monitors, a global settlement of all claims was achieved.

On December 12, 2024, the CCAA Plans achieved a major milestone, receiving unanimous votes of approval from the creditors, including the Provinces, Territories, and legal representatives of tobacco harm victims.

The Plans pave the way for eligible tobacco-harm victims to receive compensation pursuant to the PCC Compensation Plan and the Quebec Class Action Administration Plan – as long as they submit their claim by the deadline, which will be announced soon.