- The Washington Times - Tuesday, January 7, 2003

WASHINGTON, Jan. 7 (UPI) — A divided U.S. appeals court Tuesday temporarily blocked the release of a key internal document sought by the federal government in its racketeering lawsuit against the big tobacco companies.

The Clinton administration filed the lawsuit against six of the largest tobacco companies, including Philip Morris Inc., in September 1999.

The suit alleges that the companies violated the civil provisions of the Racketeer Influenced and Corrupt Organizations Act, better known as RICO, by trying to "conceal the health risks of cigarette smoking and the addictiveness of nicotine."

The government also alleged that the companies have acted to "destroy and conceal documents," and have taken "other steps to shield documents and materials from discovery" — being revealed at trial.

As to damages, the government is seeking recovery of the profits generated by the companies' alleged activities and of the medical costs to the taxpayer.

If the tobacco companies lose the case, they could be liable for tens of billions of dollars in damages. The federal suit is separate from the $200-billion-plus settlement reached by most of the states with the major companies.

A federal judge hearing motions in the suit ordered one of the defendants, British American Tobacco (Investments) Ltd., or BATCo, to produce documents which the company argued were protected by attorney-client privilege.

The "work product" of attorneys working for a client is usually protected from "discovery" — the release of relevant information from each side before trial.

However, the judge ruled that BATCo. had waived that privilege because it had not earlier identified the information as privileged under the Federal Rules of Civil Procedure.

The information included a key memorandum by a lawyer working for an Australian subsidiary of BATCo., and addressed the company's policy of retaining records given the probability that such records might have to be produced in a U.S. lawsuit.

BATCo. then asked the U.S. Court of Appeals for the District of Columbia Circuit to block the judge's order.

In a 2-1 ruling Tuesday, an appeals court panel noted that BATCo. would suffer irreparable injury if a stay was not granted, and temporarily blocked the judge's order while BATCo. conducts an appeal.

The panel said it would hear BATCo.'s appeal on an expedited basis.

Writing in dissent, U.S. Circuit Judge Raymond Randolph argued the panel did not have the authority to block discovery orders.

Randolph said the dispute "has nothing to do with the elements of the attorney-client privilege and everything to do with BATCo.'s satisfaction of discovery rules. To decide whether the district court (judge) properly required production of the disputed memorandum we will not have to consider, as we would in a true privilege dispute, any of the elements of the privilege — under what conditions the memorandum was written, or for what purpose. Instead, this appeal will turn on whether BATCo.'s attorneys complied with (the Federal Rules on Civil Procedure)."

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