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Rothmans stock sinks 6%

By ROMA LUCIW

Friday, September 30, 2005

Globe and Mail Update

One day after a landmark Supreme Court of Canada ruling cleared the way for British Columbia to sue tobacco companies for lost health-care costs, smokers in Quebec filed a class-action lawsuit seeking up to $17.8-billion in damages.

“In dollar terms, this is to my knowledge the largest class-action suit that has been undertaken in Canada,” said Gordon Kugler, senior partner with Kugler Kandestin, which along with Trudel & Johnston will be representing the provinces' smokers.

The case against Rothmans Inc., Imperial Tobacco Canada Ltd. and JTI-MacDonald Corp., was consolidated into a single class-action lawsuit after a February judgment by the Quebec Superior Court that authorized Cecilia Létourneau to proceed on behalf of the roughly 1.78 million Quebecers addicted to nicotine.

The lawsuit seeks $10,000 in damages for each of the smokers in Quebec, half for punitive damages and the other half for moral damages. Mr. Kugler estimated that the case will be tried in the next 18 to 24 months.

“The claim is that cigarette manufactures put a product on the market - a cigarette - which they knew was addictive and through a series of allegedly deceptive means, the public was not informed of the addictive nature of the product,” Mr. Kugler said.

The Quebec case, which coincidentally arrives on the heels of Thursday's Supreme Court decision - is also the first class-action suit against tobacco companies that has been given the green light to proceed in Canada, Mr. Kugler said.

Shares of Toronto-based Rothmans, which owns 60 per cent of Rothmans, Benson & Hedges Inc., fell $1.38 or 6 per cent to $21.62 Friday. The stock has fallen 10 per cent in the last month but is up 15 per cent so far this year.

Thursday's Supreme Court of Canada decision not only cleared the way for B.C. to sue Canadian tobacco companies for as much as $10-billion in health-care costs, it also opened the door to suits from other provinces.

In a statement, Rothmans said it was “disappointed with the result,” but “believes that it continues to have strong defences” to the province's claim.

Dominion Bond Rating Service placed Rothmans under review with "negative" implications Friday, citing the Supreme Court's decision.

Bill Chisholm, an analyst with Dundee Securities, cut Rothmans to “market underperform” from “market perform” Friday and lowered his stock price target to $20 from $26.50 .

© The Globe and Mail

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