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A special master appointed by a federal court in tobacco litigation brought by the United States has ordered an Australian company to turn over a memo written by a lawyer that allegedly serves as a blueprint for destroying discoverable documents under the guise of document preservation. But the Australian company, British American Tobacco (Investments) Ltd. (BAT)�a defendant in the litigation brought by the U.S. Department of Justice�claims that the document is protected by attorney-client privilege and the work-product doctrine. The 1990 memo, known as the “Foyle Memorandum,” had been central in Australia’s own tobacco litigation. In March 2002, in a products liability suit brought by a smoker and his family, commonly known as the “Eames case,” Australian trial judge Justice Geoffrey Eames struck the defenses of BAT, in part because of the Foyle memo. A jury awarded 700,000 Australian dollars (about U.S. $500,000) in damages. That decision was overturned in December 2002 by the Supreme Appeal Court of Victoria, which said that the memo appeared fully and frankly to set out the difficulties facing tobacco companies in the wave of expected litigation. A unit of BAT, Brown and Williamson, is one of five defendants named by the United States in a suit brought under the Racketeer Influenced and Corrupt Organizations Act. The civil suit alleges that the tobacco companies conspired to hide the dangers of smoking, and destroyed and concealed documents to further that common enterprise. The government seeks $289 billion in damages. U.S. v. Philip Morris, No. 99-CV-2496 (D.D.C.). Testimony of the memo’s author, Andrew Foyle of London’s Lovells, is scheduled to begin on April 26, under rules of the Hague Convention for the taking of testimony abroad. Though Brown and Williamson’s U.S. attorney, New York’s Chadbourne and Parke, filed objections to the special master’s recommendations, the deposition is on schedule. U.S. District Judge Gladys Kessler has been ordering production of the Foyle memo for almost two years. According to court documents, BAT had once claimed that it did not know where the document was or if it ever existed. They now assert that its claim of privilege is covered by a more general privilege claim, and that comity ought to be accorded to Australia’s appeals court decision. BAT has twice appealed district court orders to produce the memo to the U.S. Circuit Court for the District of Columbia. In its last opinion, the D.C. Circuit sent the matter back to the district court to determine, among other things, whether BAT’s more general objections should cover the memo. BAT v. U.S., No. 02-5210 (D.C. Cir.) Among its other arguments, the U.S. government asserted that the defendant should be estopped from asserting its privilege under the crime-fraud exception because the memo allegedly proposed the commission of fraudulent acts. Special Master Richard A. Levie, in a finding issued earlier this month, dismissed each of defendant’s objections, then turned to the sanction issue. He said that BAT’s conduct was “inexcusable.” Notwithstanding that conclusion, Levie, in an in-camera review of the memo, found that such a document would ordinarily qualify for the attorney-client privilege and the work-product doctrine, but for the crime-fraud exception. Under that exception, otherwise privileged documents lose their protection if the client made or received the communication with the intent to further an unlawful or fraudulent act and that the act was carried out. (Under the work-product exception, the act needn’t be carried out.) As evidence of such acts, Levie pointed to an affidavit of a former in-house counsel of another Australian tobacco manufacturer, which was a co-recipient of the Foyle memo. The author stated that the industry’s policy was to destroy documents “under the guise of an innocent house keeping arrangement,” and that the Foyle memo was in furtherance of that policy. Chadbourne’s David Wallace asserted that the special master’s recommendation was “analytically flawed.” A Justice Department attorney declined to comment. Trial is set for mid-September.

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