British American Tobacco Admits Destroying Files; Cancer Victim Wins Damages

A unit of giant British American Tobacco has admitted destroying thousands of internal documents, leading an Australian court to award damages to a lung cancer victim on grounds she was prevented from getting a fair trial.

The verdict Thursday, involving the biggest case of document destruction acknowledged by a tobacco company, is likely to trigger a surge in smoker lawsuits in Australia, along with deeper scrutiny of cigarette makers’ document retention policies worldwide.

The jury in Melbourne awarded $374,000 to Rolah Ann McCabe, 51, who is gravely ill with lung cancer, after Justice Geoffrey Eames barred British American Tobacco Australia Services Ltd. from offering a defense to McCabe’s claims. In a 133-page ruling, Eames said he was entering the default judgment against British American because it had improperly destroyed about 30,000 documents in 1998, along with “an untold number” in previous years.

Although modest by U.S. standards, the damage award was the first in Australia in a smoker injury case and one of the first outside the United States.

Ann Tradigo, a British American spokeswoman, said the destruction of documents was permitted under the firm’s record retention policy. She said the company will appeal.

The tobacco industry’s legal woes are due almost entirely to disclosure of incriminating papers--beginning with the theft and leaking of documents from a law firm for Brown & Williamson Tobacco Corp., British American’s U.S. subsidiary, in 1994.

Many of the industry documents show that tobacco executives knew about the hazards of smoking as long as 40 years ago, but disputed the evidence for decades.

The Australian case focused on the destruction of CD-ROMs containing research studies, reports, memos and other documents. After lawyers for McCabe, who were aware of the database, repeatedly tried to obtain it, defense attorneys were forced to admit that the documents had been destroyed.

It’s normal for firms to have record retention policies that allow the elimination of records as a housekeeping measure. But it’s improper to dispose of records that might be sought in litigation that is pending or anticipated.

According to court documents, British American’s Australian unit crafted its records policy in 1985--at the same time company lawyers in England and the U.S. were grappling with how to keep documents away from plaintiffs. In what critics say were euphemisms, a 1986 memo by top British American lawyers urged a “spring clean” of “loose papers.”

Through much of the 1990s, a “hold order” was placed on further document destruction because of lawsuits pending against the company. But according to the judge, the company began destroying documents in 1998 “as a matter of urgency” during a brief time when no suits were pending. According to the rationale explained by company lawyers, there was no pending litigation, nor were additional suits expected.

But British American knew better, Eames declared.

“There has never been a period when it did not have legal advisors engaged on legal work connected with the defense of actual or potential litigation,” he wrote.

“Not only does that continuous activity emphasize the absurdity of claims that the company ... did not anticipate further litigation,” he said. “It also reflects the very substantial extent to which it was lawyers who drove the company’s strategy with respect to ... document destruction.”