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Canadian companies to appeal C$15.6 billion ruling

| June 2, 2015

Rothmans, Benson & Hedges (RBH) has said that it will appeal a Canadian trial court decision setting damages in respect of the members of two class actions at C$15.6 billion and allocating C$3.1 billion of that amount to RBH.

The decision, made public in Montréal yesterday, found in favor of the plaintiffs in two class actions – one seeking damages for addiction and one for smoking-related diseases. The cases, based on alleged conduct from decades ago, were filed in 1998 and later consolidated for trial.

The trial court found that the class members’ damages should be about C$15.6 billion, and allocated C$10.5 billion of that amount to Imperial Tobacco Canada, C$3.1 billion to RBH, and C$2 billion to JTI-MacDonald (JTI-MC).

‘The trial court calculated these amounts based on the assumption that all of the individuals estimated to be part of the disease class as defined will ultimately file a valid claim, while recognizing that in most large class actions only a small portion of eligible class members make a claim,’ RBH said in a report of the trial. ‘The ultimate damages disposition will depend on further proceedings at the trial court level and an individual claims process for eligible class members.’

RBH said that its parent company, Philip Morris International, was not a party to these cases and was not liable for any portion of the judgment.

“These cases are far from over,” said RBH spokesperson Anne Edwards. “We will vigorously appeal this lower court’s judgment, and believe that we have very strong legal grounds to overturn the judgment in its entirety.

“Plaintiffs sought money for over a million people but not a single class member, in nearly three years of trial, testified under oath. Not one showed up to say that he or she was unaware of the risks of smoking. We believe that, in light of prevailing law and common sense, the judgment should not stand.

“The evidence at trial, including the government’s own polling and statements, demonstrated that the Canadian public has been aware of the risks of smoking for many decades. The trial court explicitly acknowledged this but nonetheless held RBH liable to those who chose to smoke in light of these well-known risks.

“The Québec Court of Appeal has already ruled – in an earlier appeal in these very cases – that by bringing a class action, plaintiffs must prove not only that defendants engaged in wrongdoing but that this wrongdoing caused injury to every member of the class. The trial court had no evidence to conclude that any class members smoked and were injured due to any alleged wrongdoing by RBH, much less regarding the number of class members on which its judgment is based.”

RBH said the trial court had ordered the defendants to deposit a portion of the damages amounting to about C$1.1 billion into a trust account within 60 days. Imperial’s share of this deposit is C$743 million, RBH’s share is C$246 million and JTI-Macdonald’s share is C$143 million.

The cases are Létourneau v. Imperial Tobacco Canada Limitée, et al. (the addiction class), and Conseil Québécois sur le Tabac et la Santé (CQTS) et Blais v. JTI-Macdonald Corp., et al. (the disease class) before the Superior Court of the District of Montréal, Province of Québec.

In a note posted on its website, Japan Tobacco Inc. said that its subsidiary, JTI-MC, fundamentally disagreed with the court’s conclusions. JTI-MC intended to appeal the decision and to request that the Quebec Court of Appeal suspend the initial payment order, it said.

And in a note included on its website, British American Tobacco said ‘British American Tobacco plc was not a party to the proceeding and is not a party to the judgement, only its Canadian subsidiary, Imperial Tobacco Canada’.

‘On 1st June 2015, the judge publicly issued a ruling in favour of the Plaintiffs awarding a total of CAD$15.6 billion in moral and punitive damages, including interest,’ BAT said in its note. ‘Imperial Tobacco Canada’s share of the total damages would be CAD$10.4 billion.

‘The judgement also stated that if an appeal was to be made, a provisional execution order would require the defendants to pay CAD$1.131 billion between them. Imperial Tobacco Canada’s share of the provisional execution order would be CAD$743 million.

‘There are strong legal grounds with which to challenge both the overall judgement, and to seek a stay of the provisional execution order, which Imperial Tobacco Canada will do within 30 days of the original 27th May ruling.

‘As such, no payments will be made until the request to stay the provisional execution order has been heard and a judgement made.’

Mexican workers sue over Kentucky farm conditions

| June 2, 2015

Thirty nine Mexican guest workers are suing the Kentucky tobacco farmers who hired them through a government program for seasonal work, according to a WUKY (Lexington, Kentucky).

Three lawsuits have been filed by the workers who allege a number of abuses while they were working for Kentucky farmers through the H-2A program, a program that allows farmers to hire foreign workers when they cannot find US workers to fill jobs.

According to an Associated Press story relayed by the TMA, the three separate lawsuits were filed in the Kentucky Federal court last week by the non-profit legal advocacy firm Kentucky Equal Justice Center and Nashville, Tennessee-based Southern Migrant Legal Services, a federally-funded organization that handles the legal needs of migrant and seasonal agricultural workers in Tennessee, Kentucky, Arkansas, Louisiana, Mississippi and Alabama.

The lawsuits accuse tobacco farms in the counties of Scott, Monroe and Nicholas of paying the workers substandard wages, providing squalid housing and threatening some with jail or deportation if they complained or left, in violation of federal and state labor and civil rights laws.

The plaintiffs are seeking back wages and other damages.

The Federal government sets different H-2A wage rates by state. Caitlin Berberich, an attorney representing the workers, said that in Kentucky the rate was $9.80 per hour in 2013, $10.10 an hour in 2014 and is $10.28 an hour this year, but that some workers were paid less than the current federal minimum wage of $7.25.

Under the program, employers hiring H-2A workers are required to provide free housing and reimburse workers for costs incurred to reach their jobs.

The plaintiffs alleged that they were living in rat-infested housing with improper toilets, beds, ventilation and heating.

Eastern Tobacco looks set to manufacture in Malawi

| June 1, 2015

The Malawi government and Egypt’s Eastern Tobacco have signed a memorandum of understanding in respect of cigarette manufacturing in Malawi, according to a story in the Nyasa Times on Thursday.
The Times reported that Eastern was ‘expected to have a ground breaking ceremony marking the commencement of the company in the country Friday at Kanengo industrial area in Lilongwe’.
Malawi’s President Peter Mutharika commended Eastern for investing in the country and pointed out that Malawi’s big tobacco crop could earn more in foreign exchange if part of it were exported as finished products.
Mutharika said that Malawi was one of the largest tobacco producers but that, over the years there had been little improvement in respect of value addition.
“Today I am pleased to sign the memorandum of understanding between the Malawi Government and the Eastern Tobacco Company of Egypt which will be involved in cigarette making,” Mutharika was quoted as saying.
“These cigarettes will be sold either within or outside the country and this will make the country gain more foreign currency,” he said.

BAT signs agreement to acquire TDR

| June 1, 2015

British American Tobacco said today that it had signed an agreement to acquire TDR, the leading independent cigarette manufacturer in Central Europe.
If the agreement receives the necessary approvals, BAT will acquire TDR and other tobacco and retail assets from Adris Grupa ‘for a total enterprise value of €550 million’.
TDR is said to have a market leading position in Croatia and positions of scale in Bosnia and Serbia, all of which will provide BAT with the opportunity to grow its business in the region ‘significantly’.
‘By combining its existing business in the region together with TDR, BAT expects to benefit from highly skilled people, well established brands, enhanced regional leaf processing capabilities, a local high quality factory and print facility, and strong relationships with distributors and retailers in these markets, BAT said in a note posted on its website.
‘As part of the transaction BAT has committed to keeping TDR’s manufacturing facility in Kanfanar, Croatia, operational for at least five years following completion of the acquisition.
‘The transaction represents a multiple of approximately 12.5 times (based on TDR’s financial year ending 31 December 2014 EBITDA of approximately €44 million).’
“This is an exciting acquisition for BAT, which will provide immediate scale in three core markets of Croatia, Bosnia and Serbia and establishes a sustainable platform to grow our business in Central Europe,” said Nicandro Durante, BAT’s chief executive.
The proposed acquisition is subject to a number of anti-trust approvals and Adris shareholder consent. The transaction is expected to complete in October 2015.

Korea’s graphics must not be ‘excessively’ repulsive

| June 1, 2015

Korea’s National Assembly on Friday approved a bill that will make it obligatory for cigarette packs to carry graphic health warnings, though the warnings must not be ‘excessively’ repulsive, according to a story in the Korea Herald.
The graphics will have to account for more than 30 percent of the front and rear main surfaces of cigarette packs, while the graphics and textural warnings together will have to occupy more than 50 percent.
Under revisions to the National Health Promotion Act, the graphic warnings will become mandatory after an 18-month period of grace.
Cigarette companies that violate the law will be liable to up to WON10 million in fines and the loss of their business licenses, while executives will face up to a year in jail.
The passage of the bill came after 11 attempts dating back to 2002. The bill had been due for approval in February, but foundered before the vote because some lawmakers argued that making graphic warnings obligatory would be a violation of the rights of smokers.
Rival lawmakers managed to pass the bill this time following the agreement to include a new phrase into the revision that says ‘the warning photos should be based on facts and should not be too disturbing’.

Twenty six percent of EU citizens consume tobacco

| June 1, 2015

The incidence of tobacco use in the EU dropped from 28 percent in 2012 to 26 percent in 2014, according to a ‘Eurobarometer’ published on May 29.
The biggest fall was among people aged 15 to 24 where tobacco use went from 29 percent to 25 percent.
The incidence of tobacco consumption was lowest in Sweden (11 percent) and Finland (19 percent), and highest in Greece (38 percent) and Bulgaria (35 percent).
The European commissioner for Health and Food Safety, Vytenis Andriukaitis, said that the average age at which Europeans started smoking remained unchanged at 17.6 years. “Figures show that the fight against tobacco is not won, particularly amongst the young,” he said. “It is unacceptable that Europeans continue to be attracted to smoking when they are teenagers.
“A central aim of the Tobacco Products Directive is to ensure that these dangerous products are not unduly attractive to the young. That is why it bans flavours that mask the harsh taste of tobacco as well as slim packs and packs with less than 20 cigarettes, and makes picture and text health warnings covering 65 percent of pack mandatory.”
Meanwhile, according to the Eurobarometer figures; 12 percent of Europeans have tried electronic cigarettes and 2 percent were using them when the 2014 survey was carried out during November and December last year. These numbers were up from seven percent and one percent respectively in 2012.
Thirteen percent of 15-24 years olds have tried electronic cigarettes, as have three percent of people aged over 55.
Sixty seven percent of Europeans started using electronic cigarettes in order to reduce or stop smoking; 21 percent of smokers were able to cut down their smoking and 14 percent were able to stop smoking.

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