Judge Imposes $100,000 Fine on Tobacco Company

A Minnesota judge on Tuesday ordered Brown & Williamson Tobacco Corp. to pay a $100,000 penalty for “flagrant” violations of pretrial discovery orders, a penalty believed to be the first court sanction against a U.S. tobacco company in decades of health-related litigation.

The judge also threatened to issue a default judgment against the nation’s third-largest cigarette manufacturer in Minnesota’s massive case against the industry if the company fails to disclose potentially damaging documents.

The rulings mark the latest setback to the tobacco companies in a case considered to pose the greatest threat of industry defeat. That is because Minnesota has strong consumer protection and antitrust laws and its attorneys have done the most extensive discovery.

Fitzpatrick’s order comes just three weeks before jury selection is to begin in the case, in which the nation’s major tobacco companies and trade associations are being sued for huge damages for money spent by the state and Blue Cross Blue Shield of Minnesota in treating sick smokers and for alleged violations of antitrust and consumer fraud laws.

The ruling issued by Ramsey County District Judge Kenneth J. Fitzpatrick marked the first time in the history of U.S. tobacco litigation that a cigarette company has been ordered to pay sanctions to a court, according to Northeastern University law professor Richard Daynard, founder of the school’s Tobacco Products Liability Project.

Fitzpatrick also ordered Louisville, Ken.-based B&W; to turn over 1,114 documents within 10 working days or face additional sanctions of $100,000 a day. He also ordered B&W; and American Tobacco Corp., which B&W; acquired in 1994, to compensate attorneys for the plaintiffs by paying them for the fees they incurred in fighting appeals lodged by B&W; that the judge characterized as “frivolous.”

In his ruling, Fitzpatrick, at various points, said the two companies had “flaunted” the judicial system and impugned its integrity; “blatantly” disobeyed court orders; filed “evasive” responses “lacking in good faith”; made “highly suspect” and “disingenuous” arguments, including some that not even their own lawyers took seriously; and filed “frivolous appeals” that harmed the plaintiffs by causing at least a seven-month delay in producing relevant material.

He said that such bad behavior made it necessary to impose sanctions “sufficiently harsh to chill any further willful disregard of the judicial system.”

The judge also urged the other defendants in the case--including Philip Morris Inc., R.J. Reynolds Tobacco Co. and Lorillard Tobacco Co.--to encourage B&W; and American to comply with the court orders, “lest their disdainful violations be found to taint all defendants.”

B&W; attorneys and spokesmen did not return calls seeking comment. Thomas McCormack, an attorney for B&W;’s London-based affiliate, BAT Co., declined comment.

USC law school professor Erwin Chemerinsky, a sanctions expert, said it would be very rare for a court to award a default judgment in favor of a plaintiff because of a defendant’s discovery violations. However, he said, under U.S. Supreme Court precedents a judge clearly has the authority to impose such a sanction.

Fitzpatrick held out the possibility of a default as one of three additional sanctions that he might impose individually or in combination because of the harm the companies’ conduct caused the plaintiffs.

The other possible sanctions would be: permitting the plaintiffs to tell jurors that the companies’ failed to provide information and that a negative inference could be drawn from that, and ordering several of the plaintiffs’ major allegations against the companies--including those about suppressing the health hazards of smoking and using misleading advertising and marketing--to be established as true.

The order comes on the heels of a Dec. 16 ruling by the judge where he said the tobacco industry engaged in “a conspiracy of silence and suppression of scientific research” to conceal the dangers of its products.