Companies’ Creditors Arrangement Act
What is the CCAA?
CCAA stands for Companies’ Creditors Arrangement Act.
The CCAA allows a company with significant debts to continue to operate and reorganize itself, in order for it to be able to pay its debts in part and avoid the disastrous consequences of bankruptcy.
The court grants the company protection in the form of a stay of proceedings against the company, so that it can negotiate a compromise with the people to whom it owes money (i.e. its “creditors“).
The purpose of the stay of proceedings under the CCAA is to give a company time to reorganize or negotiate with its creditors so that it can pay its debts and stay in business.
What happened in the tobacco class actions?
On March 1, 2019, the Quebec Court of Appeal rendered a historic judgment, confirming the no less historic 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.
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 “Ontario Court”), which ordered a stay of all proceedings against them. The three Tobacco Companies invoked the enormous $14-billion condemnation ordered by the Quebec Court of Appeal, as well as the lawsuits brought by the 10 Canadian provinces to recover health-care costs due to smoking, whose claims then exceeded $500 billion, in support of their request for court protection.
As a result of the CCAA Proceedings, the execution of the judgments obtained on behalf of Class Members who had won at the Quebec Court of Appeal were stayed by the Ontario Court.
Although the Tobacco Companies have filed for CCAA protection, they are not bankrupt.
The purpose of this stay of proceedings is to allow negotiations with all the Tobacco Companies’ creditors and to negotiate a global settlement of all tobacco-related claims against them.
The Ontario Court appointed a mediator to lead negotiations between the Tobacco Companies and all of their creditors with tobacco-related claims in the CCAA proceedings.
The Tobacco Companies’ creditors involved in the mediation include:
- the Class Members, who won their case in before the Quebec Court of Appeal, represented by Class counsel;
- tobacco victims across Canada, who do not have the benefit of a judgment, represented by The Law Practice of Wagner & Associates; and
- the 10 Canadian provinces seeking to recover the health care costs associated with tobacco-related illnesses.
These creditors must negotiate with the Tobacco Companies, as well as amongst themselves, in order to achieve a global settlement of all claims.
The intense mediation process has been underway since the Hon. Warren K. Winkler was appointed as mediator by the Ontario Court on April 5, 2019.
From the very beginning of the CCAA proceedings in March 2019, Class counsel, have been representing and defending the interests of the Class Members.