Lawyers in $280B Racketeering Suit Against Big Tobacco Seek Secret Memo [09/13/04]

Lawyers in $280B Racketeering Suit Against Big Tobacco Seek Secret Memo [09/13-3]

Excerpts from: Secret Memo Sought by U.S. In Tobacco Suit

By VANESSA O'CONNELL The Wall Street Journal [09/13/04]

As major tobacco companies prepare for their biggest-ever legal showdown -- a $280 billion claim from the U.S. government -- a critical pretrial drama remains unresolved: Can lawyers for the U.S. get their hands on a confidential tobacco-company memo that could help them make their case?

The document, known as the "Foyle Memorandum," was written in 1990 by Andrew Foyle, a partner at the London law firm Lovells, who was advising British American Tobacco PLC, the world's second-largest publicly traded tobacco company. In his note, Mr. Foyle expressed concerns about the burdens of complying with discovery requests in smoker lawsuits and made it clear that document destruction had been taking place, according to lawyers for U.S.

The memo could provide key evidence of the government's central claim in the giant lawsuit -- which goes to trial Sept. 21 -- that the tobacco companies defrauded the public by concealing the health risks of smoking for more than five decades.

BAT has been fighting to keep the Foyle memo secret, along with other internal documents, on the grounds that Mr. Foyle's communications with the company are subject to attorney-client privilege. The company argues that if it hands over the memo, it would in essence be waiving the right of attorney-client privilege. "Waiving privilege is irrevocable and would apply across the U.S.," says Teresa la Thangue, a spokeswoman for London-based BAT, which owns 42% of Reynolds American Inc. and markets Lucky Strike, Dunhill and Pall Mall. "We would never be entitled to claim privilege in the U.S. again."

Lawyers for the U.S. claim that because the memo allegedly counsels the company to commit fraud, it is exempt from privilege. And they say BAT waived its claim to privilege by failing to include the memo on a privilege log during the discovery process.

At least three times, the federal District Court for the District of Columbia has ordered BAT to surrender the memo to lawyers for the U.S. In June, Judge Gladys Kessler accused the company of "dilatoriness and delay," saying BAT's conduct was an "inexcusable effort to subvert the discovery process." BAT and its Australian subsidiary have appealed her ruling, and oral arguments in the Foyle-memo appeal are scheduled for Sept. 27 -- six days after the trial date for the underlying case.

Judge Kessler will rule in the underlying case without a jury. She currently has the memo under seal and lawyers for the U.S. haven't seen it. The U.S. has been seeking the memo since 2002, when it learned an Australian court had disclosed significant portions of it in a trial-court decision.

The Australian court found that the Foyle Memorandum was subject to the crime-fraud exception under Australian law. But the decision was overturned in December 2002 by an Australian appellate court, which found nothing improper about the document or its advice. The plaintiff was ordered to return all copies -- and the memo was deemed "privileged" once again.

The Foyle memo's allure is that it allegedly points to a tobacco-company cover-up and, therefore, might illustrate one of the Justice Department's core arguments: that cigarette makers suppressed and destroyed documents in their scheme to hide the health risks of cigarettes. Mr. Foyle, who was advising BAT's Australian subsidiary on its document-retention policy, counseled it on how to direct potentially sensitive internal research and other corporate documents to company lawyers in light of increasing lawsuits against tobacco companies in the U.S. and Australia, according to the earlier ruling by the Australian trial court.

BAT disputes the characterization of the memo as one that lays out plans to destroy documents. The company says the memo was produced merely with "a view to obtaining legal advice from Australian lawyers" on the "document retention policy" of the Australian subsidiary.

The Foyle memo played an important role in Australia's tobacco litigation, when Rolah McCabe, then a 51-year-old woman dying from lung cancer, became the first smoker ever in Australia to obtain a damages verdict against a major tobacco company. She sued BAT and was awarded about $375,000 in damages in April 2002. The Australian jury considered only the amount of damages and not any liability questions because the trial judge found that BAT's document-destruction activities made a fair trial impossible.

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