BATCo Fined and Sanctioned over Foyle Witness Fiasco

March 28, 2005 11:45 pm by Gene Borio

EXCERPTS from Judge Kessler’s Order 904 Memorandum Opinion:

During the hearing on the Gulson testimony, the Court received evidence from which it found by clear and convincing evidence that:

BATCo violated the plain command of Order #341, as it later acknowledged in oral argument relating to these Objections – by failing to prepare its witness to comply with that Order’s requirement that she be able to testify about the publicly available portions of the Foyle Memorandum and document management issues discussed in McCabe.

. . . . As the facts set forth in Order #896 make clear, BATCo not only violated Order #341, but also misled the Court about whether or not it had told the Court of its intention to violate that Order. BATCo’s conscious choice of this course of action amounted to reckless misconduct and bad faith dealings with the Court.

Fourth, the sanction which the Government requests — preclusion of evidence on the subject matter specified in Order #341 for which BATCo failed to produce a knowledgeable 30(b)(6) witness — is entirely appropriate and “proportionate” to the conduct engaged in.

Finally, it must be noted that this is not the first time that BATCo has been sanctioned for failure to comply with the Court’s Orders. BATCo not only violated a Court Order, but also misled the Court in its submissions about whether it was going to comply with the Order, and then misrepresented the facts about what it had previously told the Court on that subject during oral argument on issues relating to the Gulson testimony . . . .

Taking these principles into account, as well as BATCo’s prior history, and in order to deter further non-compliance with mandates of this Court, the Court will impose a fine of $250,000, payable within thirty days from the date of this Order.

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EXCERPT from Order 904:

it is further

ORDERED that BATCo is precluded from introducing at trial any evidence or making any arguments relating to the publically available portions of the Foyle Memorandum and any document management practices or procedures described therein; and it is further

ORDERED that BATCo is precluded from introducing at trial any evidence or making any arguments relating to the document management issues addressed in the McCabe decision, specifically including any consideration, decision, policy, practice or procedure concerning the destruction, editing or management of documents at BATCo or any affiliate of BATCo, in Australia or elsewhere, for the purpose of avoiding discovery of such documents in United States litigation or preventing the public from learning the true effects of smoking.

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PDF file of Order 904 Memo

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UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

UNITED STATES OF AMERICA,

Plaintiff,

PHILIP MORRIS USA INC.,

f/k/a PHILIP MORRIS INC., et al.,

Defendants.

Civil Action No. v. : 99-2496 (GK)

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MEMORANDUM OPINION

The United States has filed a Motion for Sanctions Against BATCo and Motion for Reconsideration of Its Motion in Limine Precluding BATCo From Introducing at Trial Evidence on the Subject Matters Specified in Order No. 341 for Which it Failed to Produce a Knowledgeable 30(b)(6) Witness (“Motion for Sanctions”). Upon consideration of the Motion for Sanctions, BATCo’s Opposition, the United States’ Reply, and the entire record relating to the issues raised in the Motion for Sanctions, the Court concludes that the Motion should be granted.

On March 9, 2005, the Government filed the present Motion requesting (1) reconsideration of the denial of its motion in limine; (2) sanctions against BATCo (including an appropriate fine and reimbursement for the costs associated with the July 24, 2003 deposition of Alison Kay Kinnard); and (3) an Order precluding

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BATCo from introducing at trial any evidence or making any arguments relating to the publicly-available portions of the Foyle Memorandum and the document management policies and procedures addressed in the McCabe decision. On March 14, 2005, the Court issued Order #896, which set forth in great detail factual findings and conclusions regarding BATCo’s failure to comply with Order #341.

First, given the findings and conclusions reached in Order #896, there can be no doubt that there is “new evidence” which justifies reconsideration of the Government’s motion in limine.

United States v. Philip Morris USA Inc., 200 F.R.D. 109, 112 (D.D.C. 2004), quoting Pearson v. Thompson, 141 F. Supp.2d 105, 107 (D.D.C. 2001). During the hearing on the Gulson testimony, the Court received evidence from which it found by clear and convincing evidence that:

BATCo violated the plain command of Order #341, as it later acknowledged in oral argument relating to these Objections – by failing to prepare its witness to comply with that Order’s requirement that she be able to testify about the publicly available portions of the Foyle Memorandum and document management issues discussed in McCabe.

Mem. Op. accompanying Order #896 at 12.

Second, Fed. R. Civ. P. 37(b)(2) authorizes the trial court to impose such orders “as are just” to sanction a party that fails to obey an order to provide or permit discovery. Shepherd v. American

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Broadcasting Cos., 62 F.3d 1469, 1474 (D.C. Cir. 1995). In this case, BATCo violated Order #341.

Third, the Court possesses inherent authority, as our Court of Appeals recognized in Butera v. District of Columbia, 235 F.3d 637, 661 (D.C. Cir. 2001)(internal citations omitted), “to ‘protect [its] integrity and prevent abuses of the judicial process.’” See also Shepherd, supra, 62 F.3d at 1474-1475. As the facts set forth in Order #896 make clear, BATCo not only violated Order #341, but also misled the Court about whether or not it had told the Court of its intention to violate that Order. BATCo’s conscious choice of this course of action amounted to reckless misconduct and bad faith dealings with the Court.

Fourth, the sanction which the Government requests — preclusion of evidence on the subject matter specified in Order #341 for which BATCo failed to produce a knowledgeable 30(b)(6) witness — is entirely appropriate and “proportionate” to the conduct engaged in. See Shea v. Donohoe Constr. Co., 795 F.2d 1071, 1077 (D.C. Cir. 1986); Shepherd, supra, 62 F.3d at 1478 (approving use of issue related sanctions to correct and deter discovery misconduct).

Finally, it must be noted that this is not the first time that BATCo has been sanctioned for failure to comply with the Court’s Orders. On October 3, 2003 in Order #411, BATCo was held in

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contempt of Court for violation of Order #343 and ultimately sanctioned in Order #419. Pursuant to those Orders, BATCo paid $25,000 a day, totaling $1,400,000, into the Court registry. It would appear from BATCo’s egregious lack of candor regarding compliance with Order #341 that BATCo does not seem to have learned any lesson from that experience. In this instance, BATCo not only violated a Court Order, but also misled the Court in its submissions about whether it was going to comply with the Order, and then misrepresented the facts about what it had previously told the Court on that subject during oral argument on issues relating to the Gulson testimony, as described in detail in the Memorandum Opinion accompanying Order #896.

For all these reasons, sanctions are fully justified. The testimony precluding sanctions is directly related to the subject matter of Order #341. The requirement of reimbursement for the costs associated with the deposition of Ms. Kinnard is similarly related to the subject matter of Order #341.

A more difficult issue is the Government’s request for imposition of a fine. As noted earlier, BATCo has already paid a substantial fine into the Court registry for failing to comply with an earlier Court Order. In determining an appropriate fine for BATCo’s latest transgression, the Court can certainly consider that the previous fine did not serve to effectively deter BATCo’s non-

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compliance with Court Orders. “The district court’s interest in deterrence is a legitimate one, ‘not merely to penalize those whose conduct may be deemed to warrant such a sanction, but to deter those who might be tempted to such conduct in the absence of such a deterrent.’” Bonds v. District of Columbia, 93 F.3d 801, 808 (D.C. Cir. 1996) (internal citations omitted). The Court of Appeals in Bonds cautioned that sanctions based on principles of deterrence “‘call for careful evaluation to ensure that the proper individuals are being sanctioned (or deterred) and that the sanctions or deterrent measures are not overly harsh.’” Id.

(internal citations omitted). Taking these principles into account, as well as BATCo’s prior history, and in order to deter further non-compliance with mandates of this Court, the Court will impose a fine of $250,000, payable within thirty days from the date of this Order.

March 28, 2005 /s/

Gladys Kessler

United States District Judge

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PDF file of Order 904

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UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

UNITED STATES OF AMERICA,

Plaintiff,

PHILIP MORRIS USA INC.,

f/k/a PHILIP MORRIS INC., et al.,

Defendants.

Civil Action No. v. : 99-2496 (GK)

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ORDER #904

Upon consideration of the United States’ Motion for Sanctions Against BATCo and Motion for Reconsideration of its Motion in Limine Precluding BATCo from Introducing at Trial Evidence on the Subject Matters Specified in Order No. 341 for Which it Failed to Produce a Knowledgeable 30(b)(6) Witness, BATCo’s Opposition, the United States’ Reply, and the entire record herein, it is hereby

ORDERED that the United States’ Motion for Sanctions Against BATCo is granted; and it is further

ORDERED that within 30 days of the date of this Order, BATCo shall pay a monetary sanction of $250,000 to the Court’s Registry; and it is further

ORDERED that within 30 days of the date of this Order, counsel for BATCo shall by $10,015.33 to the United States as reimbursement

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for the costs associated with the Rule 30(b)(6) deposition of Alison Kay Kinnard, taken July 24, 2003; and it is further

ORDERED that the United States’ Motion for Reconsideration of its Motion in Limine Precluding BATCo from Introducing at Trial Evidence on the Subject Matters Specified in Order No. 341 for Which it Failed to Produce a Knowledgeable 30(b)(6) Witness is

granted; and it is further

ORDERED that BATCo is precluded from introducing at trial any evidence or making any arguments relating to the publically available portions of the Foyle Memorandum and any document management practices or procedures described therein; and it is further

ORDERED that BATCo is precluded from introducing at trial any evidence or making any arguments relating to the document management issues addressed in the McCabe decision, specifically including any consideration, decision, policy, practice or procedure concerning the destruction, editing or management of documents at BATCo or any affiliate of BATCo, in Australia or elsewhere, for the purpose of avoiding discovery of such documents in United States litigation or preventing the public from learning the true effects of smoking.

March 28, 2005 /s/

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Gladys Kessler

United States District Judge

Copies via ECF to all counsel record

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