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United States v. Philip Morris USA Inc.

October 20, 2003



Defendant British American Tobacco (Investments) Limited ("BATCo") has filed a Motion for a Protective Order Regarding Compliance with Order No. 343 ("Compliance Motion"). The United States opposes the Compliance Motion and has filed a Cross Motion for a Finding of Contempt Against BATCo and for Imposition of Continuing Monetary Sanctions ("Cross Motion"). Upon consideration of the Compliance Motion, the Cross Motion, and the entire record herein, and for the reasons stated below, the Compliance Motion is denied and the Cross Motion is granted.


On April 14, 2003, the Court issued Order #343, adopting the Special Master's Report and Recommendation ("R&R") #102, which required BATCo to produce within thirty days certain documents that were in the possession of its affiliate British American Tobacco Australia Services, Ltd. ("BATAS"). BATCo subsequently requested additional time to comply with Order #343 on the ground that BATAS had not yet determined how it would respond to BATCo's request for the documents and, in any event, would need additional time due to the scope of the production involved. Order #354 at 1.

On May 16, 2003, the Court issued Order #354, which required BATCo to file a Status Report by June 1, 2003,"indicating what position BATAS intends to take with respect to Order #343." In a footnote, the Court also stated that"[i]f BATCo thereafter needs a reasonable amount of additional time to fully comply with Order #343, the Court will entertain a motion at that time." Id. at 2 n.1. BATCo then filed the Status Report as ordered and two motions which were considered in R&R #120.

The first motion, BATCo's Motion for a Protective Order Regarding Production of Non-Privileged BATAS Documents Under Order No. 343 ("Non-Privileged Documents Motion"), sought to have the use and dissemination of non-privileged BATAS documents limited to the litigation of this case. The Special Master recommended denial of the Non-Privileged Documents Motion. However, in Order #394 the Court overruled R&R #120 in that respect and granted BATCo's Motion for the reasons explained in its August 20, 2003 Memorandum Opinion.

The second motion that was the subject of R&R #120 was the Compliance Motion, which is now before the Court. In the Compliance Motion BATCo seeks to be released from compliance with Order #343 insofar as the Order requires BATCo to produce or log privileged BATAS documents; BATCo also seeks an order prohibiting the Government from seeking sanctions or additional compliance by BATCo with Order #343 absent a finding of"good cause." Compliance Mot. at 1. The Special Master recommended that the Court take jurisdiction of the Compliance Motion and R&R #120 was adopted in this respect. Order #394 at 2.

BATCo asks the Court to enter an order deeming it"as a matter of law... to be in substantial compliance with the mandate of Order #343," BATCo Mem. in Supp. at 1, even though it has not yet produced or logged a single one of the privileged documents subject to that Order. Its excuse is what it claims to be the"factual and legal impossibility" of obtaining the documents from BATAS.

In its Cross Motion, the Government argues that the issue of BATCo's control of the documents has already been decided and should not be revisited. According to the Government, BATCo has complied with neither Order #343 nor Order #354, Cross Mot. at 6, and its conduct warrants a contempt finding and the imposition of monetary sanctions. Id. at 27.

II. Legal Standard

There is"no question that courts have inherent power to enforce compliance with their lawful orders through civil contempt." Shillitani v. United States, 384 U.S. 364, 370 (1966); see also SEC v. Diversified Growth Corp., 595 F.Supp. 1159, 1170 (D.D.C. 1984) (to coerce obedience of a lawful order is within the court's civil contempt power). Civil contempt is a remedial sanction used to obtain compliance with a court order or to compensate for damage sustained as a result of noncompliance. NLRB v. Blevins Popcorn, Co., 659 F.2d 1173, 1184 (D.C. Cir. 1981). The principal purpose of civil contempt is vindication of judicial authority. Id. at 1185 n.73 (citing Gompers v. Bucks Stove & Range Co., 221 U.S. 418, 441 (1911)). A civil contempt proceeding is a three stage process in which: (1) a court must issue an order directing a party to take or not take certain action; (2) if there is disobedience of that order, the court must issue a conditional order finding the recalcitrant party in contempt and threatening to impose a specified penalty unless the recalcitrant party complies with prescribed conditions set forth in a"purgation order"; and (3) execution of the threatened penalty if the conditions are not fulfilled. Id. at 1184. The moving party has the burden of proving by clear and convincing evidence that the court's order has been violated. Id. at 1183. In finding a party to be in civil contempt of a court's order,"the intent of the recalcitrant party is irrelevant," and the court must only determine whether its order has been violated. Id. at 1184, 1186 n.77.


A. BATCo Has Neither Complied with Orders #343 and #354 Nor Established that Compliance is Impossible

Although BATCo asks that the Court deem it to be in"substantial compliance with the mandate of Order No. 343," BATCo Mem. in Supp. at 1, it is undisputed that BATCo has not logged, much less produced, any of the privileged documents covered by that Order. Order #354 granted BATCo until June 1, 2003 to"fully comply with Order #343," Order #354 at 2 n.1, and indicated that the Court would entertain a reasonable request for yet additional time. However, BATCo neither sought additional time from the Court, nor fully complied with Order #343 by June 1, 2003, as directed. Thus, the Government has shown by clear and convincing evidence that BATCo has failed to comply with both of this Court's Orders.

BATCo now requests that it be excused from further compliance with Order #343 (and #354) on the basis that production of the BATAS documents is factually and legally impossible. While it is true that impossibility is a defense to contempt, S.E.C. v. Ormont Drug & Chemical Co., Inc., 739 F.2d 654, 656 (D.C. Cir. 1984), it can be invoked only when a party demonstrates that it is "powerless" to comply with a court's order. Natural Resources Defense Council, Inc. v. Train, 510 F.2d 692, 713 (D.C. Cir. 1975). BATCo's argument is premised on the notion that it has no control over the documents in question ...

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