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U.S. v. PHILIP MORRIS USA INC.

June 1, 2004.

UNITED STATES OF AMERICA, Plaintiff,
v.
PHILIP MORRIS USA Inc., f/k/a PHILIP MORRIS Inc., et al., Defendants



The opinion of the court was delivered by: GLADYS KESSLER, District Judge

MEMORANDUM OPINION

I. INTRODUCTION

On April 15, 2004, Special Master Levie issued Report and Recommendation #155 ("R&R #155"), recommending that the Court grant the Government's Motion to Compel Production of the Foyle Memorandum and order Defendant British American Tobacco (Investments) Limited ("BATCo") to produce the document immediately. Upon consideration of R&R #155, BATCo's Objection, the Government's Opposition, BATCo's Reply, the applicable case law, and the entire record herein, the Court overrules BATCo's objection and adopts in part R&R #155.*fn1

 II. BACKGROUND

  In R&R #155, the Special Master considered once again the Government's request for production of the Foyle Memorandum, a document written by Andrew Foyle, a partner at the English law firm of Lovell White Durrant ("Lovells"), who represented both BATCo and its then wholly-owned Australian subsidiary, W.D. & H.O. Wills ("Wills"). R&R #155 at 2.*fn2 The Foyle Memorandum contains advice to Wills regarding modification of its document retention policy in light of increasing litigation against tobacco companies in the United States and Australia. United States v. Philip Morris, 347 F.3d 951 (D.C. Cir. 2003). The document's existence was brought to the Government's attention because it was discussed and quoted at length in a previously sealed opinion which was released by the Supreme Court of Victoria, Australia in March, 2002. See id.

  After BATCo failed to produce the document, Special Master Levie issued oral Report and Recommendation #55, which stated that "because Lovells has a copy of the Foyle Memorandum . . . that memorandum is deemed within the control and possession of BATCo." R&R #55 (adopted by Order #183, entered July 2, 2002). During the two years that the Government has been trying to obtain the Foyle Memorandum, there have been two appeals to the Court of Appeals. The second decision remanded the case to this Court, which referred it to the Special Master to consider "whether any of BATCo's three Objections covered the Foyle Memorandum; whether waiver was an appropriate sanction if no Objection applied; and whether, if an Objection did apply, it should be overruled, in which event BATCo must have the opportunity to log its privilege claim." Philip Morris, 347 F.3d, at 954. R&R #155 sets forth two bases for compelling production of the Foyle Memorandum: BATCo's waiver of privilege through its abuse of the discovery process and the crime-fraud exception to assertions of privilege.*fn3

 III. BATCO HAS WAIVED ITS CLAIMS OF PRIVILEGE OVER THE FOYLE MEMORANDUM

  BATCo raises three Objections to production of the Foyle Memorandum: the Guildford Objection, Third Party Objection, and Foreign Objection. The Court concludes, in agreement with the Special Master, that none of these Objections apply. Given the entirety of BATCo's conduct pertaining to production of the Foyle Memorandum, the Court further concludes that its conduct has been so inexcusable that any privilege it might have is deemed waived.

  A. BATCo's Guildford Objection Does Not Apply to the Foyle Memorandum

  BATCo's Guildford Objection states:
BATCo objects to the Comprehensive Requests to the extent that the discovery sought is obtainable from . . . the Guildford Depository. . . . [D]ocuments from BATCo files generated prior to August 18, 1994 which are responsive to the Comprehensive Requests can be found at the Guildford Depository. . . . BATCo objects to the Comprehensive Requests to the extent they may purport to require BATCo to conduct an enormously expensive, duplicative and unduly burdensome review of documents that BATCo has already made available by production into the Guildford Depository. BATCo will not produce documents located in the Guildford Depository for discovery and inspection outside the Guildford Depository.
R&R #155, at 25 (emphasis added). Because the Guildford Objection, on its face, applies only to documents which actually were produced into the Depository and the Foyle Memorandum was not so produced, the Special Master concluded that the Guildford Objection does not apply.

  The Objection states that all responsive pre-1994 documents are "located in the Guildford Depository," and that, therefore, the documents sought were "already made available" to the Government "by production into the Guildford Depository." There is no dispute that the Foyle Memorandum was never placed into the Guildford Depository. As the Foyle Memorandum was not "obtainable from," "made available" at, or "located in" the Guildford Depository — explicit requirements for application of the Guildford Objection — it is clear that the Guildford Objection can not be read to cover the Foyle Memorandum.*fn4

  B. BATCo's Third Party Objection Does Not Apply to the Foyle Memorandum BATCo's Third Party Objection states that BATCo will not "produce documents in the possession of a third party or a non-party which are not in the possession, custody, or control of BATCo." R&R #155, at 7-8. This Court has already ruled that, "as of February, 2002, there is no question . . . that the [Foyle Memorandum] was in the possession, custody, and control of BATCo." Mem. Op. to Order #183, at 3. Based on that ruling, the Special Master concluded that, even if prior to February, 2002 BATCo was not under an obligation to search third parties for responsive documents, "at that point, if not before, BATCo had an affirmative obligation to produce or log the document," and therefore the Third Party Objection did not apply. See R&R #155, at 27.

  BATCo objects to the Special Master's findings, arguing that the applicability of its Third Party Objection to documents in law firm files has already been affirmed by this Court in Order #488 (adopting R&R #132). BATCo's Obj., at 1. That Order denied the Government's motion seeking production of responsive documents "located at [D]efendants' representative law firms" because they were not in the possession, custody, or control of Defendants. See Mem. Op. to Order #183, at 3. However, BATCo ignores the definitive distinction between the Foyle Memorandum, which was within BATCo's control as of February, 2002 although it was also located at its law firm, and the documents at issue in R&R #132 and Order #183, which were located at Defendants' law firms but were not within any Defendant's control. See R&R #132, at 40 n.22. BATCo erroneously interprets Order #488 to suggest that the Third Party Objection applies to all law firm documents, regardless of whether the party itself had possession, custody, or control of the documents. However, a ...


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