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United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 27, 2004 Decided November 2, 2004
No. 04-5207
UNITED STATES OF AMERICA,
APPELLEE
v.
BRITISH AMERICAN TOBACCO (INVESTMENTS) LTD.,
APPELLANT
PHILIP MORRIS USA INC., ET AL., F/K/A
PHILIP MORRIS INCORPORATED,
APPELLEES
Consolidated with
04-5208
Appeals from the United States District Court
for the District of Columbia
(No. 99cv02496)
–————
Bills of costs must be filed within 14 days after entry of judgment.
The court looks with disfavor upon motions to file bills of costs out
of time.
2
Jack McKay and Bruce G. Sheffler argued the causes for
appellants British American Tobacco Australia Services, Ltd.,
and British American Tobacco (Investments) Ltd. With
them on the briefs were Barry H. Gottfried, Alvin B. Dunn,
and Philip A. Pfeffer.
Sharon Y. Eubanks, Director, U.S. Department of Justice,
argued the cause for appellee the United States of America.
With her on the brief were Peter D. Keisler, Assistant
Attorney General, Stephen D. Brody, Deputy Director, Caro-
lyn Clark, Senior Trial Attorney, Meredith L. Burrell, Pat-
rick M. Klein, and Daniel K. Crane–Hirsch, Trial Attorneys.
Before: EDWARDS, RANDOLPH, and TATEL, Circuit Judges.
Opinion for the Court filed by Circuit Judge TATEL.
TATEL, Circuit Judge: For the third time, we consider the
district court’s determination that one of the defendants in
the United States’ RICO action against cigarette companies
waived its attorney-client privilege by failing to log a docu-
ment sought in discovery. As we emphasized the last time
around, ‘‘waiver of privilege is a serious sanction’’ that a court
should impose only if a party behaves unreasonably or worse.
See United States v. Philip Morris Inc., 347 F.3d 951, 954
(2003) (quoting First Sav. Bank, F.S.B. v. First Bank Sys.,
Inc., 902 F. Supp. 1356, 1361 (D. Kan. 1995)) (internal quota-
tion marks omitted). Because the record in this case does
not reflect the kind of behavior that would satisfy this de-
manding standard, we reverse and remand with instructions
to allow the defendant to log the document.
I.
In 1999, the United States sued several tobacco companies,
including appellant British American Tobacco (Investments)
Limited (‘‘BATCo’’), alleging in part that these companies had
violated civil provisions of the RICO statute, 18 U.S.C.
§§ 1961-1968, by conspiring to mislead the public about the
addictive nature and health risks of smoking. As part of its
comprehensive document production request, made in 2000,
the government sought all documents relating to the compa-
3
nies’ record-retention and record-destruction policies from
1954 to the present. In response, BATCo raised several
objections to various categories of documents. This interlocu-
tory appeal involves three of those objections—known as the
Guildford, third-party, and foreign objections—which we de-
scribe later.
BATCo owns a substantial minority of the other appellant,
British American Tobacco Australia Services, Limited (‘‘BA-
TAS’’). Until 1999, BATCo fully owned BATAS’s predeces-
sor, W.D. & H.O. Wills (‘‘Wills’’).
In April 2002, the government requested that BATCo turn
over a document referred to in an Australian court proceed-
ing, McCabe v. British American Tobacco Australia Services
Ltd., [2002] V.S.C. 73, to which BATAS was a party. Written
for BATCo and possibly Wills in 1990 by Andrew Foyle, a
solicitor in the London firm of Lovell, White & Durrant, this
memorandum—the Foyle memorandum—discussed Wills’s
document-retention policy with reference to possible future
litigation against BATCo and its affiliates in Australia and
other parts of the world, including the United States. BAT-
Co had neither produced this memorandum nor listed it on its
privilege log. In response to the government’s request,
BATCo wrote that it needed more information to locate the
memorandum.
Matters rested there until an emergency teleconference on
May 28, 2002, during which the district court found that
BATCo, by failing to log the document, had waived any
privilege in it. Although the court ordered BATCo to pro-
duce the memorandum, it gave the company permission to
relitigate the matter before the Special Master. During
proceedings before both the Special Master and the district
court, BATCo argued that it had no obligation to log the
memorandum in the first place. According to BATCo, three
of its general objections applied to the Foyle memorandum,
meaning that the company had to log the memorandum only
if the court overruled these objections. Without addressing
BATCo’s objections, the district court ruled that BATCo’s
failure to log the memorandum justified waiver of its attor-
4
ney-client privilege as a sanction. In the same opinion, the
district court noted that BATAS would ‘‘be deemed to have
waived any opportunity to present’’ privilege claims of its
own, since it was aware of the litigation and had ‘‘ample time’’
to intervene, yet had not done so. United States v. Philip
Morris Inc., No. 99-2496 (D.D.C. July 2, 2002).
BATCo appealed, arguing that the district court erred by
finding waiver of privilege before determining whether any of
BATCo’s three objections applied to the Foyle memorandum.
Noting that ‘‘there is no question that the objections were
timely raised,’’ United States v. Philip Morris Inc., 314 F.3d
612, 621 (D.C. Cir. 2003) (Philip Morris I), we granted a stay
pending appeal, id. at 622, and later vacated the district
court’s order, concluding that the court had erred by failing
to address whether any of the objections applied, United
States v. Philip Morris Inc., 347 F.3d 951, 954-55 (D.C. Cir.
2003) (Philip Morris II). We held that should the district
court determine that the objections did not apply, it must
‘‘then decide whether the party should be deemed to have
waived the privilege. Waiver is not automatic, particularly if
the party reasonably believed that its objections applied to
the document.’’ Id. at 954.
On remand, in a decision designated as ‘‘Order 557’’ and
issued in June 2004, the district court once again found that
BATCo had waived any privilege it held in the Foyle memo-
randum. United States v. Philip Morris USA Inc., 321 F.
Supp. 2d 87 (D.D.C. 2004). Specifically, the court determined
that BATCo’s three objections did not apply to the Foyle
memorandum, that ‘‘BATCo’s failure to locate, log, and object
in a timely fashion TTT was an intentional and knowing
attempt to evade its discovery obligations,’’ and that waiver of
privilege was an appropriate sanction. Id. at 90-93.
Meanwhile, the government had moved in 2003 to require
BATCo to turn over BATAS’s documents from the McCabe
proceedings. Reasoning that BATCo had sufficient control
over BATAS to require such production, the district court
granted this motion in Order 343. BATAS sought and re-
ceived permission to intervene ‘‘to assert and, if necessary,
5
litigate the privileges it holds in the documents in its posses-
sion that are the subject of the Court’s Order #343.’’ United
States v. Philip Morris USA Inc., No. 99-2496 (D.D.C. Dec. 5,
2003). As part of its intervention, BATAS served the govern-
ment with a log of McCabe documents over which it asserted
privilege. Even though BATAS never identified Foyle as the
author, this log included several entries for the Foyle memo-
randum—over which BATAS claimed to retain its attorney-
client privilege by virtue of a higher Australian court’s rever-
sal of the McCabe decision. See British American Tobacco
Australia Services Ltd. v. Cowell, [2002] V.S.C.A. 197, 2002
WL 31737235 (concluding that the judge in the McCabe
proceedings erred in deeming BATAS’s privilege in the mem-
orandum waived).
Although BATAS formally intervened in the Order 343
proceedings, it filed nothing in the proceedings relating exclu-
sively to the Foyle memorandum, i.e., the litigation that led to
Order 557, until after the district court entered that order.
At that point, BATAS sought an emergency stay, pointing to
its privilege interest in the Foyle memorandum. BATAS also
filed an appeal with this court, arguing that the district court
erred by requiring BATCo to produce the memorandum
without first addressing BATAS’s privilege claims regarding
the memorandum. Simultaneously, BATCo filed an appeal
challenging the substance of Order 557. Having consolidated
these appeals, we now must decide (1) whether BATAS’s
arguments are properly before us, and (2) whether the dis-
trict court correctly ruled that BATCo waived its asserted
privilege in the Foyle memorandum.
II.
We can easily dispose of BATAS’s appeal. Despite having
full notice of the ongoing discovery proceedings exclusive to
the Foyle memorandum, BATAS filed nothing in those pro-
ceedings until the district court entered Order 557—more
than two years after the discovery battle over the memoran-
dum began. BATAS now argues that the district court order
permitting it to intervene in Order 343 proceedings also
6
authorized its intervention with regard to any litigation relat-
ed to McCabe documents, including the proceedings specific
to the Foyle memorandum. Insisting that the authorized
intervention was limited in scope to proceedings related to
Order 343, the government responds that BATAS never
received permission to intervene in the proceedings specific to
the memorandum.
We need not decide which position is correct, for either way
we decline to consider BATAS’s appeal. If BATAS correctly
interprets the scope of its Order 343 intervention, then it
should have appeared in the proceedings specific to the Foyle
memorandum and raised its interests before the district court
entered Order 557. As we have repeatedly held, parties may
not raise claims for the first time on appeal. See, e.g.,
Krieger v. Fadely, 211 F.3d 134, 135-36 (D.C. Cir. 2000). If
the government is correct that BATAS’s intervention related
only to production obligations stemming from Order 343, then
BATAS is not a party to the Order 557 litigation and we lack
jurisdiction over its appeal. See Moten v. Bricklayers Int’l
Union of Am., 543 F.2d 224, 227 (D.C. Cir. 1976) (‘‘It has long
been settled that one who is not a party to a record and
judgment is not entitled to appeal therefrom.’’) (quoting Unit-
ed States v. Siegel, 168 F.2d 143, 144 (D.C. Cir. 1948))
(internal quotation marks omitted); cf. United States v.
AT&T, 642 F.2d 1285, 1290 (D.C. Cir. 1980) (permitting
appeal by party denied intervention ‘‘only if the district
court’s denial of intervention was erroneous’’). We thus
dismiss BATAS’s appeal.
III.
In Philip Morris II, we directed the district court to
‘‘decide whether any of BATCo’s three objections covered the
Foyle Memorandum; whether waiver was an appropriate
sanction if no objection applied; and whether, if an objection
did apply, it should be overruled.’’ 347 F.3d at 955. Follow-
ing this framework, the district court determined that none of
the three objections applied to the Foyle memorandum and
7
imposed privilege waiver as a sanction. 321 F. Supp. 2d at
90-93. We consider each of these determinations in turn.
The Objections
The Guildford objection relates to a depository, developed
by BATCo during an earlier lawsuit, which contains BATCo
documents written prior to August 18, 1994. BATCo object-
ed to the government’s discovery requests
to the extent that discovery sought is obtainable
from another source that is more convenient, less
burdensome and less expensive. This source is the
Guildford DepositoryTTTT
BATCO objects to the Comprehensive Requests
to the extent they may purport to require BATCo to
conduct an enormously expensive, duplicative and
unduly burdensome review of documents that BAT-
Co has already made available by production into
the Guildford Depository. BATCo will not produce
documents located in the Guildford Depository for
discovery and inspection outside of the Guildford
Depository.
BATCo concedes that the Guildford Depository does not
contain the Foyle memorandum. It nevertheless argues that
the Guildford objection, properly interpreted, applies to any
document, like the Foyle Memorandum, written before Au-
gust 18, 1994, regardless of whether the document is at
Guildford.
The district court rejected BATCo’s argument, noting that
‘‘the Guildford Objection, on its face, applies only to docu-
ments which actually were produced into the Depository.’’
321 F. Supp. 2d at 91. ‘‘As the Foyle Memorandum was not
‘obtainable from,’ ‘made available’ at, or ‘located in’ the Guild-
ford Depository—explicit requirements for application of the
Guildford Objection—it is clear that the Guildford objection
can not be read to cover the Foyle Memorandum.’’ Id. We
agree. As the district court aptly explained, BATCo’s inter-
pretation makes no sense in light of the objection’s plain
8
language—which BATCo itself drafted. Simply put, the
Guildford objection has no applicability to the Foyle memo-
randum because the memorandum is not at Guildford.
The plain language of BATCo’s third-party objection bears
an equally meager relationship to BATCo’s interpretation.
BATCo objected to the document request ‘‘to the extent that
[it] purports to require BATCo to produce documents in the
possession of a third party or non-party which are not in the
possession, custody or control of BATCo.’’ BATCo does not
claim that it lacks control over the memorandum; indeed, the
district court found that BATCo had control since February
2002. See 321 F. Supp. 2d at 91. Instead, BATCo interprets
the objection to apply to all documents in the hands of third
parties, regardless of whether those documents are within
BATCo’s control. Under BATCo’s interpretation, the objec-
tion would apply to the Foyle memorandum because BATCo’s
law firm possessed its only copy—even though the district
court had found that BATCo had control over this copy, see
id.
Once again, the district court rejected BATCo’s interpreta-
tion. Id. Once again, we readily agree. As the objection’s
plain language indicates, ‘‘a party’s possession, custody, or
control of a document is the crucial question for application of
the Objection.’’ Id. BATCo’s interpretation reads the
phrase ‘‘which are not in the possession, custody or control of
BATCo’’ out of the objection altogether. Cf. Mastrobuono v.
Shearson Lehman Hutton, Inc., 514 U.S. 52, 63 (1995) (‘‘A
document should be read to give effect to all its provisions
and to render them consistent with each other.’’). Because
BATCo has control over the Foyle memorandum, the third-
party objection does not apply.
The foreign objection poses a harder case. It states:
BATCo objects to these Comprehensive Requests on
the grounds that they are overly broad, unduly
burdensome and not reasonably calculated to lead to
the discovery of admissible evidence to the extent
that they purport to seek documents pertaining to
the manufacture, advertising, marketing, promotion
9
or sale of tobacco products not sold in the United
States or activities of any kind undertaken for mar-
kets outside the United States.
As we read the district court’s opinion, that court held that
the foreign objection deals with documents pertaining to
activities undertaken solely for foreign markets. See 321 F.
Supp. 2d at 92. Rejecting BATCo’s reading ‘‘that its Foreign
Objection covers documents having any relationship to a
market outside the United States,’’ the court observed that
this interpretation would ‘‘produce the untenable result that
virtually all of [BATCo’s] documents would be subject to the
Foreign Objection—BATCo is, after all, based in England.’’
Id.
Unlike the Guildford and third-party objections, the foreign
objection has several plausible interpretations. It could apply
to ‘‘documents pertaining to TTT activities of any kind under-
taken [solely] for markets outside the United States’’ (the
district court’s view), to ‘‘documents pertaining to TTT activi-
ties of any kind undertaken [to any degree] for markets
outside the United States’’ (BATCo’s view), or to something
in between. Standing alone, the second approach seems the
most natural, but it also creates tension with the objection’s
first part—BATCo’s stated reasons for objecting. BATCo
objected that production would be ‘‘overly broad, unduly
burdensome and not reasonably calculated to lead to the
discovery of admissible evidence to the extent’’ that it had to
produce such documents. If we read BATCo’s objection as
applying to all documents that reference a foreign market,
then the scope of this objection would sweep so far beyond
BATCo’s reasons for objecting as to create a near absurdity.
BATCo would have no obligation to produce documents that
would be admissible and highly relevant to the government’s
RICO charges as long as such documents also referred to
activities undertaken for foreign markets.
This internal contradiction makes it difficult to infer the
meaning of the foreign objection from its language alone. A
letter sent by the government to BATCo, however, helps shed
light upon the proper scope of the objection. Cf. Davis v.
10
Chevy Chase Fin., Ltd., 667 F.2d 160, 169-70 (D.C. Cir. 1981)
(noting that where provisions within a contract appear to
conflict, the court may look to extrinsic evidence in construing
it). In that letter, the government described BATCo’s repre-
sentations of the foreign objection as follows: ‘‘Our notes
reflect your statement that BATCo intends to search for and
produce documents responsive to the United States’ Compre-
hensive Requests that contain information that ‘reasonably
bears’ on the U.S. market or that ‘relates to core issues in
this case.’ ’’ The letter then gave examples of what ‘‘we
understand are TTT BATCo’s views on what is discoverable in
this action,’’ including ‘‘internal or external BATCo communi-
cations relating to the marketing of safer cigarettes anywhere
in the world’’ and ‘‘an overseas marketing campaign being
considered for use in the United States.’’ We think this
letter reveals the proper interpretation of the foreign objec-
tion—that it applies only to documents with at most a de
minimis relationship to U.S. markets and the core issues in
this case. Not only does this interpretation comport with the
objection’s purpose—limiting document production to ‘‘admis-
sible’’ materials—but when asked about the letter at oral
argument, counsel for BATCo stated, ‘‘I don’t think it’s
inconsistent with the foreign objection.’’ He went on to
concede, ‘‘If BATCo did undertake a marketing plan for
cigarettes that were to be sold in the United States as well as
others, BATCo wouldn’t take the position that that was an
activity for a foreign market and not produced [sic].’’
The district court concluded that given its interpretation of
the foreign objection, that objection did not apply to the
Foyle memorandum because ‘‘by providing legal advice about
document management policies undertaken to minimize litiga-
tion risks, particularly in the United States, the Memorandum
also addresses the United States’ market.’’ 321 F. Supp. 2d
at 92. We agree, although we think it a closer case than did
the district court. The Foyle memorandum raised concerns
about litigation in the United States. ‘‘ ‘BATCO has a more
general concern that any disclosures in Australia could be
used by plaintiffs who are interested in bringing product
liability actions against any member of the BAT Group,’ even
11
in the United States.’’ Cowell, [2002] V.S.C.A. 197, ¶ 87
(quoting the memorandum). While the activity at issue in the
memorandum—the document-retention policy at Wills—in-
volved only Australia, the memorandum suggests that this
activity was undertaken to reduce the risks that BATCo
research documents would fall into the hands of plaintiffs in
the United States, as well as plaintiffs in Australia and other
countries. The Foyle memorandum thus relates sufficiently
to the U.S. market and core issues in this case that it falls
outside the scope of the foreign objection.
The Sanction
Because none of BATCo’s three objections applies to the
Foyle memorandum, BATCo should have either produced or
logged the document. BATCo’s failure to log, however, does
not necessarily trigger waiver of privilege as a sanction. As
we stated in Philip Morris II, ‘‘[w]aiver is not automatic,
particularly if the party reasonably believed that its objec-
tions applied to the document. ‘As the federal rules, case law
and commentators suggest, waiver of privilege is a serious
sanction most suitable for cases of unjustified delay, inexcusa-
ble conduct, and bad faith.’ ’’ 347 F.3d at 954 (quoting First
Sav. Bank, F.S.B. v. First Bank Sys., Inc., 902 F. Supp. 1356,
1361 (D. Kan. 1995)). The district court found that BATCo
lacked reasonable belief that its objections applied to the
Foyle memorandum, a decision we review for abuse of discre-
tion. Cf. Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 401-
02 (1990) (determining that abuse of discretion is the proper
standard in the Rule 11 context for reviewing a district
court’s finding as to what constitutes reasonable inquiry).
In its analysis, the district court focused almost exclusively
on BATCo’s delay in raising the objections. According to the
court:
Upon [learning about the Foyle memorandum] in
March, 2002, the government made repeated re-
quests for production of the Memorandum. During
the next two months, despite its obligation to pro-
duce or log the Memorandum, BATCo did neither
12
and never raised any of its three current Objections
as a basis for its refusal to do so. Only when the
document was the subject of a teleconference with
the Court, at least two teleconferences with the
Special Master, and two Reports and Recommenda-
tions, did BATCo finally proffer these three Objec-
tions as a basis for refusing to produce or log the
Foyle MemorandumTTTT [T]his Court cannot con-
clude that BATCo’s behavior was simply that of a
litigant withholding a document based upon a rea-
sonable belief that it was covered by these Objec-
tions.
321 F. Supp. 2d at 93. Although a party’s failure to raise
objections in a timely manner may well justify an inference
that, rather than reasonably believing an objection applied,
the party has simply come up with a post hoc rationale for
withholding a document, we have two problems with the
district court’s reliance on delay in this case.
To begin with, we read the record quite differently from
the district court. The government first specifically request-
ed the Foyle memorandum in mid-April, not—as the district
court stated, see 321 F. Supp. 2d at 93 n.7—in March.
Moreover, BATCo delayed less in raising its objections than
the district court thought. As we noted in Philip Morris II,
BATCo first referenced the Guildford objection in the initial
teleconference with the court and the other two objections in
a teleconference with the Special Master two days later. 347
F.3d at 954-55. Indeed, in the initial teleconference, the
district court explicitly gave the parties the right to relitigate
its ruling before the Special Master. See id.
Second, and most critically for this appeal, our two prior
opinions in this case stand for the proposition that BATCo
raised its objections in a timely fashion. See Philip Morris I,
314 F.3d at 621 (stating that ‘‘there is no question that the
objections were timely raised’’); Philip Morris II, 347 F.3d at
954-55 (remanding for the district court to address the merits
of the three objections). Accordingly, the district court’s
waiver analysis should have turned exclusively on whether
13
BATCo had reason to believe its objections applied, not on
when BATCo raised the objections.
Taking timeliness off the table, we see no other basis in the
district court’s opinion for concluding that BATCo lacked
reasonable belief that at least one of its objections applied to
the Foyle memorandum. While the plain language of the
Guildford and third-party objections might justify a conclu-
sion that BATCo acted unreasonably in invoking them, we
cannot say the same about the foreign objection. As we
discussed earlier, the objection is far from clear and BATCo’s
interpretation finds support in the objection’s text. More-
over, the district court identified no extrinsic factors—such as
how BATCo applied the objection in relation to the produc-
tion of other documents—that might have suggested that
BATCo invoked the objection unreasonably. The govern-
ment argues that BATCo changed its interpretation of the
foreign objection over the course of the litigation, but because
the government failed to make this point to the district court,
it may not do so here. See, e.g., United States v. Hylton, 294
F.3d 130, 135-36 (D.C. Cir. 2002) (noting that, absent excep-
tional circumstances, arguments not made to the district
court are forfeited). Given that the district court had no
basis beyond its reliance on delay for believing that BATCo
unreasonably invoked the foreign objection, we conclude that
the court should not have imposed privilege waiver as a
sanction. As we have said, waiver of attorney-client privilege
is a serious sanction that requires, at the very least, a
showing that BATCo failed to log the memorandum without
reasonable belief that its objections applied to it. See Philip
Morris II, 347 F.3d at 954.
We reverse and remand so that BATCo can log the Foyle
memorandum, and the government may, if it chooses, chal-
lenge the merits of BATCo’s privilege claim.
So ordered.