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• Canada Provinces Accused of Misusing JTI Bankruptcy (Update2)  

Canadian provinces, seeking more than C$80 billion ($76 billion) from tobacco companies for treatment of smoking-related illnesses, are attempting to improperly use the bankruptcy process to force Japan Tobacco Inc.’s JTI-MacDonald unit to settle, a company lawyer said.

“The strategy is to force JTI into an expedited settlement,” David Scott, a lawyer for the tobacco company, told Superior Court Judge Peter Cumming in Toronto today. “It’s a lever to force JTI to settle these health-care claims.”

JTI-MacDonald, the maker of Export A cigarettes in Canada, filed for bankruptcy protection in 2004, after a Quebec judge ordered the company to pay C$1.4 billion that the province claims it lost in taxes when tobacco companies exported cigarettes to the U.S. in the 1990s, knowing they would be smuggled back into Canada for resale on the black market.

British Columbia, Ontario and New Brunswick today asked Cumming to put a time limit on new lawsuits seeking to recoup health-care costs from JTI-MacDonald and allow their claims to be included in the company’s restructuring process. The request put the provinces at odds with the federal government, which sided with the tobacco company and urged the judge to either dismiss it or put it on hold indefinitely.

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