Tobacco Documents Online

PAUL, WEISS, R[FKIND, WHARTON & GARRISON ~615 k STREET N W WASHINGTON D C 20036 DATE July 8, 1985 MEMORANDUM David A. Schechter, Equire From Subject Sidney S. Rosdeitcher You have asked us to consider hypothetically whether documents in the possession of B.A.T Industries or its U.K. subsidiary, BATCo., could be discovered by a plain- tiff in a U.S. lawsuit againstBrown & Williamson. We will assume that the documents are relevant to the litigation. This memorandum explains our general conclusions that: You should not assume that discovery would be prevented by British law or a British govern- ment blocking order. Neither Brown & Williamson nor B.A.T could solicit the issuance of a blocking order without risking sanctions by the U.S. courts. Even if the British government issued a blocking order, a U.S. court would require Brown & Williamson to make a good-faith, affirmative effort to convince the U.K. government to waive the blocking order. If the U.S. court did not believe that such an effort had been made, or if it believed that Brown & Williamson or B.A.T had solicited the blocking order, it could impose severe sanc- tions against Brown & Williamson, such as adverse factual findings (i.e., finding facts favorable to the plaintiff on matters in dispute), fines, and a default judgment. You should act on the assumption that dis- covery of the documents would be available. In the Appleton case, B.A.T did not resist document demands from the FTC; B.A.T negoti- ated certain modifications in the scope of those demands, and then agreed to produce documents located in the U.K.

Background Just a brief word is in order regarding my experi- ence on this issue. For the last two and one-half years, I have been representing British Airways in the antitrust litigation growing-out of the demise of Laker Airways. These matters have involved discovery issues concerning documents and witnesses in the United Kingdom. We have faced numerous questions concerning the parties' obligations to produce documents from the U.K., the consequences of a failure to produce requested documents, the discovery methods available to obtain information from non-parties in the U.K., and the effect of the British government's orders blocking the production of U.K. documents. As an outgrowth of my work in the Laker case, I participated in a symposium on interna- tional discovery issues at New York University Law School and expanded my remarks into an article, which was published in the New York University Journal of International Law and Politics. Foreign Blocking Statutes and U.S. Discovery: A Conflict of National Policies, 16 N.Y.U.J. Int'l. L. & Pol. 1061 (1984). Discussion There is a very substantial likelihood that a hypothetical plaintiff against Brown & Williamson could obtain discovery of documents in the possession of B.A.T or BATCo. in the U.K. That is so for the following reasons: I. Brown & Williamson might be found by the U.S. court to be legally entitled to obtain the documents. Under these circumstances, Brown & Williamson would "control" the documents, and they would be an appropriate subject of a discovery request directed to Brown & Williamson, requiring Brown & Williamson to produce the documents, wherever they are located and regardless of their actual possession or custody. 2. Even if we assume that Brown & Williamson does not have legal "control" over the documents, discovery might be had directly from B.A.T or BATCo. under the Hague Conven- tion. The procedure established by the Hague Convention involves the submission by the plaintiff of a Letter of Request to the U.S. court, which in turn formally issues the

Letter to the appropriate authorities in the foreign country, who then transmit the Letter to the court or other agency in the foreign country competent to execute the request. In ratifying the Hague Convention, the U.K. imposed certain limits on the extent to which it would compel compli- ance with Letters of Request. These limits are intended to prevent broad "fi£hing expeditions;" they do not preclude enforcement of Letters requesting specific documents or documents in specific, well-defined categories. Although a Hague Convention letter obviously entails considerably more procedural hurdles than typical discovery, that is not a basis for concluding that the procedure would not ultimately succeed in producing the documents sought. The Convention authorizes a foreign state not to execute a Letter of Request if the state "considers that its sovereignty or security would be prejudiced," but your hypothetical gives me no reason to believe that such concerns would be implicated by a request for documents held by B.A.T or BATCo. 3. It is at least conceivable that the documents could be obtained either through a subpoena served on Brown & Williamson (on the theory that Brown & Williamson is acting in the U.S. as an agent of B.A.T or BATCo.) or through a subpoena served on a U.S. office of B.A.T or BATCo. You have said that we need not consider these possibilities here. I mention them merely for the sake of completeness. 4. You may not assume that the British "blocking" law (known as the Protection of Trading Interests Act 1980) would effectively prevent discovery of the documents. First, the statute is not self-executing. Unless and until the British government enters orders restricting compliance with foreign discovery in particular proceedings, the statute imposes no obstacle to the production of docu- ments. Your hypothetical does not suggest any reason why a request for B.A.T's or BATCo.'s documents would affect the British government's sovereign interests in such a way as to prompt the issuance of blocking orders. Moreover, for the reasons explained below, neither Brown & Williamson nor B A T • . ~ could safely seek the issuance of such orders. ~ Even if the British government issued blocking orders, that action would not necessarily relieve Brown & Williamson of its discovery obligations. Foreign restric- tions on U.S. discovery are a two-edged sword; although they

PAUL, WEISS, RIFKIND, WHARTON & GAR.I%ISON block compliance with U.S. discovery requests, they may also provide the occasion for U.S. courts to impose sanctions for a party's failure to comply with its U.S. discovery obliga- tions. That is because ultimate control over the discovery issue remains in the hands of the U.S. court, and the U.S. court would require Brown & Williamson to make a good-faith, affirmative effort-to convince the U.K. government to waive the blocking order. If the court did not believe that such an effort had been made, or if it believed that Brown & Williamson or B.A.T had solicited the blocking order, it could impose severe sanctions against Brown & Williamson, including, inter alia, adverse factual findings (i.e., findings of fact favorable to the plaintiff on matters in dispute), daily fines during the period of non-compliance, and a default judgment. 5. Finally, you asked us to compare this situa- tion with the Appleton antitrust case. There, B.A.T Indus- tries received document demands from the FTC, negotiated regarding the scope of those demands, and then agreed to produce documents from the U.K. in response to the FTC's revised requests. B.A.T did not contest the FTC's document demands, because, among other things, it wanted to avoid any possibility that the administrative law judge would draw an adverse inference regarding the facts contained in the U.K. documents. B.A.T followed this course even though the FTC may have more limited power to enforce international dis- covery requests than the U.S. courts in private lawsuits. S.S.R.