U.S. v. Philip Morris Inc.

• Decision Date: 07 January 2003
• Docket Number: No. 02-5210.,02-5210.
• Citation: 314 F.3d 612
• Parties: UNITED STATES of America, United States Department of Justice, Appellee, v. PHILIP MORRIS INCORPORATED, et al., Appellees. British American Tobacco (Investments) Ltd., Directly and as Successor to British-American Tobacco Company, Ltd., Appellant.
• Court: U.S. Court of Appeals — District of Columbia Circuit

314 F.3d 612

UNITED STATES of America, United States Department of Justice, Appellee, v. PHILIP MORRIS INCORPORATED, et al., Appellees British American Tobacco (Investments) Ltd., Directly and as Successor to British-American Tobacco Company, Ltd., Appellant.

No. 02-5210.

United States Court of Appeals, District of Columbia Circuit.

Argued September 3, 2002.

Decided January 7, 2003.

COPYRIGHT MATERIAL OMITTED

Appeal from the United States District Court for the District of Columbia (99cv2496).

On Motion for Stay Pending Expedited Appeal or, in the alternative, a Petition for a Writ of Mandamus.

Bruce G. Sheffler argued the cause for appellant. With him on the motion/petition was Garyowen P. Morrisroe. Timothy M. Hughes entered an appearance.

Sharon Y. Eubanks, Director, U.S. Department of Justice, argued the cause for federal appellee. With her on the opposition were Stephen D. Brody, Deputy Director, and Daniel K. Crane-Hirsch, Trial Attorney.

Before: GINSBURG, Chief Judge, and SENTELLE and RANDOLPH, Circuit Judges.

Opinion for the Court filed by Circuit Judge SENTELLE.

Dissenting opinion filed by Circuit Judge RANDOLPH.

SENTELLE, Circuit Judge:

British American Tobacco (Investments) Ltd. ("BATCo"), seeks an emergency stay pending expedited appeal of the district court's discovery orders requiring BATCo to produce an allegedly privileged document. In the alternative, BATCo seeks a writ of mandamus vacating the orders. BATCo contends that this Court has jurisdiction over its appeal under the collateral order doctrine. See Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949). On the merits, BATCo argues that the district court erred by ruling that BATCo waived the attorney-client privilege, without first considering BATCo's pending objections to the request for the allegedly privileged document. Because we agree that BATCo has demonstrated jurisdiction under the collateral order doctrine and satisfied the requirements for a stay, we grant its motion for a stay and dismiss the petition for mandamus as moot.

I. Background

Appellee, the United States of America, initiated this lawsuit against BATCo and five other tobacco companies in September 1999 alleging that defendants violated the civil provisions of RICO, 18 U.S.C. §§ 1961-68 (2000), by engaging in "a pattern of racketeering activity" to "conceal the health risks of cigarette smoking and the addictiveness of nicotine." The government further alleges, in relevant part, that defendants have "destroy[ed] and conceal[ed] documents" and taken "other steps to shield documents and materials from discovery." As to remedy, the government seeks, inter alia, disgorgement of defendants' profits and recovery of the medical costs of the tobacco companies' customers.

The parties exchanged Comprehensive Requests for Production on August 22, 2000. The government requested that the defendants produce "[a]ll documents relating to record-creating, record-keeping, record-retention, record dissemination or distribution, and/or record-destruction policies, practices, and procedures ... in any part of your organization that has or had responsibility for ... research concerning smoking and health or addiction." On November 6, 2000, BATCo responded to the government's document requests, and objected, inter alia, to producing any documents created prior to August 19, 1994, except those contained in the Guildford Depository in England (the "Guildford objection"). The Depository was established in response to a parallel action filed against the same defendants by the State of Minnesota and contains over one million documents. State of Minnesota v. Philip Morris, Inc., No. C1-94-8565 (Minn.Super. Ct.1994). BATCo also objected to producing any documents in the possession of third parties if the documents were not also in BATCo's possession, custody, or control (the "third-party objection").

In March 2002, the Supreme Court of Victoria, Australia, publicly released a decision regarding discovery in a case involving W.D. & H.O. Wills ("Wills"), an Australian subsidiary of British American Tobacco Australia Services Limited ("BATAS"), in which BATCo has a minority ownership interest. McCabe v. Brit. Am. Tobacco Austl. Servs., Ltd., (2002) V.R. 73. The decision quotes extensively from a March 1990 memorandum prepared for Wills by an attorney at the British law firm Lovell, White & Durrant ("Lovell"), in its capacity as counsel for Wills and BATCo (the "Foyle Memorandum" or "the memo"). See id. The Foyle Memorandum advises Wills on modifying its document retention policy in light of increasing litigation against tobacco companies in the United States and Australia.

Subsequent to the McCabe decision's release, the government requested by letter that BATCo produce the Foyle Memorandum. BATCo responded that it had been "unable to locate the document[], or any evidence that plaintiff selected [it] for production."

On May 28, 2002, during the deposition of former BATCo CEO Ulrich Herter, government counsel requested the "immediate production" of the Foyle Memorandum so it could be used to refresh Herter's recollection. When BATCo's counsel declined, government counsel initiated an emergency teleconference with the district court to determine whether BATCo was required to immediately produce the Foyle Memorandum. During the teleconference, BATCo contended that the document was covered by the Guildford objection and informed the Court that it did not even know if the document was in its possession. Moreover, BATCo argued that the Foyle Memorandum was protected by the attorney-client privilege. The district court did not address BATCo's Guildford and third-party objections. Instead, the court ruled that BATCo had waived any claim of attorney-client privilege because the memo had not been listed in BATCo's privilege log. The court added that BATCo was free to re-litigate the underlying facts of the order before the Special Master in the case. The following day, the district court issued a written order memorializing the telephone ruling and requiring BATCo to produce the memo "if the document is in the control or possession of BATCo," and to make "all reasonable effort to locate" it. United States v. Philip Morris Inc., No. 99-2496 (D.D.C. May 29, 2002) ("Order 157").

On May 30, 2002, BATCo and the government twice appeared in telephonic conferences before the Special Master in which BATCo sought to attack Order 157. Although the argument in the first conference is not part of the record, BATCo appears to have raised its Guildford and third-party objections in this conference. See Oral Rep. and Recom. 56 at 35 (BATCo counsel raising objection in context of "reiterat[ing] what I said this morning"). It definitely raised them in the second conference. See id. at 35, 43. Like the district court, the Special Master did not address these objections. Instead he concluded that, because the Foyle Memorandum was in the possession of Lovell, it was "within the control and possession of BATCO" and thus required to be logged in the privilege log. Oral Rep. and Recom. 55 at 11. The Special Master therefore recommended that the district court issue an "order of further compliance" so that BATCo would immediately produce the memo. Id.

BATCo then submitted to the district court a sealed copy of the Foyle Memorandum and moved the district court to reconsider its orders compelling production. BATCo again urged the court to consider its Guildford and third-party objections before requiring BATCo to produce or log the Foyle Memorandum. See BATCo Br. in Supp. of Mot. for Recons. at 14. On July 2, 2002, the court denied the motion to reconsider and ordered BATCo to produce the memo within two days. United States v. Philip Morris Inc., No. 99-2496 (D.D.C. July 2, 2002) (order compelling production). The court held that because BATCo had "knowledge and possession" of the Foyle Memorandum "by at least February of 2002," BATCo was required under Federal Rule of Civil Procedure 26(e), to "identify and/or designate the document" as privileged at that time. Philip Morris, No. 99-2496, slip op. at 4 (D.D.C. July 2, 2002) (memorandum opinion accompanying order). Thus, the court concluded that BATCo's failure to list the memo on the privilege log waived BATCo's attorney-client privilege claim. Id. at 4-5. The court did not further address BATCo's objections.

BATCo requested that the district court stay its orders pending appeal. On July 10, 2002, the district court denied the motion for stay, reasoning that BATCo had not established appellate jurisdiction nor shown that it was likely to prevail on its challenge to the waiver ruling. Philip Morris, No. 99-2496, slip op. (D.D.C. July 10, 2002). The court also noted that BATCo would not suffer irreparable harm absent a stay, particularly given that many portions of the Foyle Memorandum have already been made public in McCabe. Id. at 2. By contrast, the district court found that a stay would substantially harm the government and undermine the public interest by jeopardizing the "extremely demanding" discovery schedule and July 15, 2003 trial date set by the court. Id. at 24.

BATCo timely filed this appeal and sought an emergency stay pending expedited review, claiming that the district court should have ruled on its pending objections to producing the Foyle Memorandum, and at that time, given BATCo a chance to log the memo.

II. Analysis

In seeking a stay pending appeal, BATCo must show (1) that it has a substantial likelihood of success on the merits; (2) that it will suffer irreparable injury if the stay is denied; (3) that issuance of the stay will not cause substantial harm to other parties; and (4) that the public interest will be served by issuance of the stay. Washington Metro. Area Transit Comm'n v. Holiday Tours, Inc., 559 F.2d 841, 843 (D.C.Cir.1977).

We first consider our jurisdiction over BATCo's appeal and...