Tobacco Firm Is Found in Contempt
A federal judge has cited a unit of giant British American Tobacco for contempt of court and ordered it to pay $25,000 a day in fines until it turns over documents sought by the U.S. Department of Justice in its $289-billion racketeering case against the tobacco industry.
The contempt order issued Monday by U.S. District Judge Gladys Kessler in Washington followed the repeated failure of one of the defendants, British American Tobacco Investments Ltd., known as Batco, to comply with orders to furnish records held by an Australian affiliate.
For the record:
12:00 a.m. Oct. 23, 2003 For The Record
Los Angeles Times Thursday October 23, 2003 Home Edition Main News Part A Page 2 National Desk 2 inches; 66 words Type of Material: Correction
Tobacco suit -- In some editions of Wednesday’s Business section, an article about tobacco litigation incorrectly stated that an Australian affiliate of British American Tobacco had been cited for contempt of court for failure to produce documents in the Justice Department’s lawsuit against the tobacco industry. In fact, the firm cited for contempt was British American Tobacco Investments Ltd., a defendant in the Justice Department’s case.
Discovery battles are common in high-stakes litigation but almost always resolved without contempt citations.
Batco was ordered in April to provide the documents to Justice Department lawyers. But the company told the court that it did not control its Australian affiliate and had been unable to gain its cooperation.
David Wallace, a New York-based lawyer for Batco, acknowledged Tuesday that Kessler had found the company “in contempt of court for failing to produce documents that belong to an affiliate that [Batco] does not have a majority interest in.” He declined to comment further.
Justice Department lawyers could not be reached.
The Justice Department suit accuses the tobacco industry of engaging in a decades-long conspiracy to deceive the public about the risks and addictiveness of smoking.
Since the case was filed by the Clinton administration in 1999, Kessler has thrown out government claims for repayment of smoking-related health care costs. But she has allowed the Justice Department to pursue its racketeering claim.
Kessler earlier this month found Batco “conditionally” in contempt, saying it had failed to make a “concerted or energetic effort” to get its Australian affiliate to comply. She set a deadline of last Friday to deliver the records and avoid a contempt citation and fines.
Instead, Batco that day submitted a copy of a letter to the court in which the Australian affiliate refused to budge.
The Oct. 16 letter from lawyers for British American Tobacco Australia Services noted that the firm had declined last spring to submit the papers because that “was not in [the firm’s] best interest.”
At the urging of Batco, the letter said, the Australian firm’s board met Thursday to reconsider. Again, it resolved “not to produce” the records, according to the letter.
Justice lawyers believe the records may shed light on whether Batco or its affiliates have been guilty of destroying sensitive documents.
The suspicion stems from a lawsuit in Australia by Rolah McCabe, a longtime smoker who died last year of lung cancer. In April 2002, before her death, McCabe was awarded $374,000 in damages when an Australian judge ruled that British American Tobacco Australia Services had destroyed documents, preventing her from getting a fair trial. The award later was reversed on appeal.
The Australian firm admitted that in 1998 it had destroyed CD-ROMs containing research studies, reports, memos and other documents.
Justice Department lawyers requested records of the McCabe case after learning of the document destruction.
How the stalemate will be resolved is uncertain. However, Batco lawyers said the Australian sister firm would seek to intervene in the Justice Department case to explain its position to the court.
Times staff writer Richard B. Schmitt in Washington contributed to this report.
