Case 1:20-cv-00393-LO-TCB Document 1191 Filed 04/15/22 Page 1 of 21 PageID# 31624
`
`
`
`UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF VIRGINIA
`ALEXANDRIA DIVISION
`
`
`RAI STRATEGIC HOLDINGS, INC. and
`R.J. REYNOLDS VAPOR COMPANY
`
`
`Plaintiffs and
`Counterclaim Defendants,
`
`
`v.
`
`ALTRIA CLIENT SERVICES LLC; PHILIP
`MORRIS USA INC.; and PHILIP MORRIS
`PRODUCTS S.A.
`
`
`Defendants and
`Counterclaim Plaintiffs.
`
`Case No. 1:20-cv-00393-LO-TCB
`
`
`ORAL ARGUMENT REQUESTED
`
`
`
`
`
`PMI/ALTRIA’S OBJECTIONS TO MAGISTRATE JUDGE BUCHANAN’S ORDER ON
`PMI/ALTRIA’S MOTION TO SHOW CAUSE
`
`
`
`
`
`

`

`Case 1:20-cv-00393-LO-TCB Document 1191 Filed 04/15/22 Page 2 of 21 PageID# 31625
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`
`
`I.
`
`II.
`
`TABLE OF CONTENTS
`
`Page
`
`INTRODUCTION ...............................................................................................................1
`
`FACTUAL BACKGROUND ..............................................................................................2
`
`A.
`
`B.
`
`C.
`
`D.
`
`E.
`
`Mr. Meyer’s Damages Opinions ..............................................................................2
`
`RJR Withheld Documents And Blocked Information Regarding RJR’s
`Negotiations With Fontem That Is Highly Probative Of Damages .........................3
`
`
`RJR Moves To Exclude Mr. Meyer’s Opinions Relying On The
` As Factually Unsupported .................4
`
`Documents Produced By Fontem Show That RJR Violated Its Discovery
`Obligations And Made Material Misrepresentations To This Court .......................5
`
`Judge Buchanan Denies PMI/Altria’s Motion To Show Cause...............................6
`
`III.
`
`LEGAL STANDARD ..........................................................................................................7
`
`A.
`
`B.
`
`Legal Standard For Review Of Judge Buchanan’s Order ........................................7
`
`The Court’s Authority To Issue Sanctions...............................................................7
`
`IV.
`
`ARGUMENT .......................................................................................................................8
`
`A.
`
`Judge Buchanan’s Order Was Clearly Erroneous And Contrary To Law ...............8
`
`1.
`
`2.
`
`The Fontem-RJR Negotiations Are Highly Relevant To Damages .............8
`
`RJR’s Misrepresentations To The Court And Withholding Of
`Highly Probative Documents Are Sanctionable ........................................12
`
`B.
`
`The Court Should Modify Judge Buchanan’s Order .............................................14
`
`CONCLUSION ..................................................................................................................15
`
`V.
`
`
`
`i
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`

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`
`
`TABLE OF AUTHORITIES
`
`CASES
`
`Beach Mart, Inc. v. L&L Wings, Inc.,
`302 F.R.D. 396 (N.D.N.C. 2014) .................................................................................... 8, 11, 14
`
`Chambers v. NASCO, Inc.,
`501 U.S. 32 (1991) ...................................................................................................................... 7
`
`Clear with Computers, LLC v. Bergdorf Goodman, Inc.,
`753 F. Supp. 2d 662 (E.D. Tex. 2010) ........................................................................................ 9
`
`DE Techs., Inc. v. Dell, Inc.,
`No. 04-cv-00628, 2007 WL 128966 (W.D. Va. Jan. 12, 2007) ................................................ 14
`
`Ferrellgas, L.P. v. Best Choice Prod.,
`No. 16-cv-259, 2017 WL 3142044 (M.D.N.C. July 24, 2017) ................................................. 13
`
`In re MI Windows & Doors, Inc., Prod. Liab. Litig.,
`No. 12-MN-00001, 2013 WL 7801732 (D.S.C. June 21, 2013) ............................................... 12
`
`In re MSTG, Inc.,
`675 F.3d 1337 (Fed. Cir. 2012) ................................................................................................. 11
`
`Kajeet v. Qustodio, LLC,
`No. 18-cv-1519, 2019 WL 8060078 (C.D. Cal. Oct. 22, 2019) ................................................ 11
`
`Law Enforcement Alliance of Am., Inc. v. USA Direct, Inc.,
`61 F. App’x 822 (4th Cir. 2003) .................................................................................................. 8
`
`Montanile v. Botticelli,
`No. 08-cv-716, 2009 WL 2378684 (E.D. Va. July 28, 2009) ............................................... 7, 15
`
`Rothschild Mobile Imaging Innovations, LLC v. Mitek Sys., Inc.,
`No. 14-617, 2018 WL 3599359 (D. Del. July 27, 2018) ........................................................... 11
`
`Russell v. Absolute Collection Servs., Inc.,
`763 F.3d 385 (4th Cir. 2014) ..................................................................................................... 14
`
`Samsung Elecs. Co. v. NVIDIA Corp.,
`314 F.R.D. 190 (E.D. Va. Feb. 29, 2016) .............................................................................. 7, 15
`
`Southern States Rack & Fixture, Inc. v. Sherwin-Williams Co.,
`318 F.3d 592 (4th Cir. 2003) ................................................................................................. 8, 13
`
`Swimways Corp. v. Zuru, Inc.,
`No. 13-cv-334, 2014 WL 12603189 (E.D. Va. July 1, 2014) ..................................................... 9
`
`ii
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`

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`
`
`United States ex rel. Carter v. Halliburton,
`266 F.R.D. 130 (E.D. Va. 2010) .................................................................................................. 9
`
`Vir2us, Inc. v. Invincea, Inc.,
`235 F. Supp. 3d 766 (E.D. Va. 2017) .......................................................................................... 8
`
`Walker v. W. Pub. Corp.,
`No. 09-cv-00723, 2011 WL 3667613 (S.D.W. Va. Aug. 22, 2011).......................................... 10
`
`Zornes v. Specialty Indus., Inc.,
`No. 97-2337, 1998 WL 886997 (4th Cir. 1998) ........................................................................ 13
`
`RULES
`
`Fed. R. Civ. P. 26(e)(1)(a) .............................................................................................................. 7
`
`FED. R. CIV. P. 37(b)(2)(A)(i)-(vi) ............................................................................................ 8, 14
`
`Fed. R. Civ. P. 37(c)(1) ................................................................................................................... 8
`
`FED. R. CIV. P. 72(a) ............................................................................................................. 1, 7, 12
`
`iii
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`

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`
`
`I.
`
`INTRODUCTION
`
`RJR sought to exclude the opinions of PMI/Altria’s expert, Paul Meyer, based upon
`
`material misrepresentations about the supposed lack of evidence underlying his opinions on the
`
` in the prior Fontem licenses. Specifically, RJR argued that his opinions were
`
`supported by “no evidence,” pure “fiction,” and that
`
`
`
`”1 Dkt. 1163-1 (3/18/22 Hr’g Tr.) at 43:8.
`
`Documents subsequently produced by Fontem reveal that RJR and Fontem contemplated
`
`a
`
` during negotiations, and that
`
`
`
` confirming that Mr. Meyer properly used that
`
`. Dkt. 1174-1 § 5.1. And they show
`
`, all the while
`
`asserting in discovery and representing to the Court that it lacked knowledge of that
`
`.
`
`Worse, RJR affirmatively challenged and sought to exclude PMI/Altria’s damages theories on a
`
`basis refuted by the very information it concealed and misrepresented.
`
`Judge Buchanan erred by not ordering RJR to show cause why it failed to produce any
`
`documents or an educated 30(b)(6) witness on the negotiations, and repeatedly misrepresented the
`
`supposed lack of evidence. Judge Buchanan’s order was based on two underlying findings that
`
`are clearly erroneous and contrary to law. FED. R. CIV. P. 72(a). They should be set aside.
`
`First, Judge Buchanan erred by finding that the negotiations from the settlement on which
`
`RJR’s damages expert relies are irrelevant.
`
` (Dkt. 1174-1 § 5.1), (ii) show that
`
`and (iii) provide additional support for his reliance on
`
`
`
`
`
`,
`
`
`
`
`1 All emphasis added, and internal citations and quotation marks omitted, unless otherwise noted.
`
`1
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`

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`
`
`a
`
` They refute Dr. Sullivan’s opinions because they show RJR contemplated
`
` (not a
`
` as Dr. Sullivan opines) and
`
`
`
`(not between
`
`, as Dr. Sullivan does). Based on the claims and defenses
`
`asserted in this case, this evidence is highly probative of damages and should have been produced.
`
`Second, Judge Buchanan erred in finding that RJR’s false representations and failure to
`
`produce responsive documents was not sanctionable. RJR undisputedly had important relevant
`
`documents responsive to PMI/Altria’s requests regarding the
`
`. It
`
`withheld them, and proceeded to misrepresent that very evidence. That is sanctionable.
`
`While the Court would be correct to set aside the entirety of Judge Buchanan’s ruling and
`
`issue the sanctions that PMI/Altria originally requested (Dkt. 1158), PMI/Altria does not seek that
`
`remedy. Given the late stage of this case, PMI/Altria asks the Court to modify Judge Buchanan’s
`
`ruling in two narrow ways: (1) RJR should not be allowed to serve a supplemental damages report
`
`addressing evidence it knowingly withheld and misrepresented,2 and (2) the admissibility of five
`
`documents
`
` but produced by Fontem should be taken as
`
`established, or RJR should be compelled to produce a 30(b)(6) witness so that PMI/Altria can lay
`
`the foundation for authenticity and admissibility for trial. Any other result would unfairly
`
`prejudice PMI/Altria, reward RJR for its misconduct, and hinder a trial on the merits.
`
`II.
`
`FACTUAL BACKGROUND
`A. Mr. Meyer’s Damages Opinions
`
`Mr. Meyer derives a baseline royalty rate for three asserted patents using the
`
`
`
` in the Fontem-Nu Mark Agreement. Dkt. 1163-3 (Meyer Op.) ¶ 25. He explains this
`
` is
`
`
`2 Per Judge Buchanan’s order, RJR will likely serve Dr. Sullivan’s supplemental report before this
`motion gets fully briefed. PMI/Altria thus requests that any such report be ordered stricken.
`
`2
`
`

`

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`
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`a reliable starting point in part because
`
`. See Dkt. 1163-4 § 6.10.9.
`
`
`
`
`
`
`
`
`
`Meyer explains, that the
`
` Dkt. 1011-2 (Sullivan Dep.) at 214:22-215:10. As Mr.
`
`
`
`
`
`.3 Dkt. 1011-1 ¶ 195.
`
`B.
`
`RJR Withheld Documents And Blocked Information Regarding RJR’s
`Negotiations With Fontem That Is Highly Probative Of Damages
`
`Throughout this case, PMI/Altria repeatedly sought documents and testimony about the
`
`Fontem-RJR negotiations. But RJR failed to produce any documents or a prepared corporate
`
`witness on this topic, repeatedly and falsely stating such information was “irrelevant.”
`
`First, RJR failed to produce responsive documents regarding its communications and
`
`negotiations with Fontem. PMI/Altria served multiple requests seeking such documents, including
`
`a request (RFP No. 224) seeking: “all non-privileged documents related to Reynolds’s settlement
`
`with Fontem … including any communications with Fontem.” Dkt. 1159-1 (3/12/21 8th Set of
`
`RFPs) at 8; see also Dkt. 1159-7 (9/17/20 Resp. to 1st Set of RFPs) at 94-95 (RFP No. 102), 130
`
`(RFP No. 139), 137 (RFP No. 146); Dkt. 1159-8 (11/4/20 Resp. to 2nd Set of RFPs) at 4-5 (RFP
`
`No. 158). RJR responded that it “does not expect to produce Documents in response to this request
`
`beyond those already being produced in response to other requests.” Dkt. 1159-6 (4/12/21 Resp.
`
`
`3 The damages experts’ opinions are detailed in the Daubert motions and thus are not repeated in
`detail here. See Dkts. 915, 1011, 1093.
`
`3
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`

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`
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`to 8th Set of RFPs) at 4. In other words, RJR said it had produced all responsive documents. But
`
`RJR withheld, and never produced, any documents regarding its negotiations with Fontem. None.
`
`Second, RJR failed to produce a competent Rule 30(b)(6) witnesses on the negotiations.
`
`PMI/Altria propounded Topic 28, seeking a witness on
`
`
`
` Dkt. 547-3 at 12. RJR
`
`designated Nicholas Gilley, but he was undisputedly unprepared to testify on Topic 28. See Dkt.
`
`547 at 3-4, 7-10 & Dkt. 1163 at 6-8. Indeed, Mr. Gilley could not
`
`
`
`. Dkt. 1163-6 at 216:10-217:2.
`
`On April 9, 2021, PMI/Altria moved to compel RJR to produce a Rule 30(b)(6) witness on
`
`Topic 28. Dkt. 547 at 7-10. RJR opposed, arguing the damages experts only rely on the agreement
`
`and representing to Judge Buchanan seven times that: “
`
`
`
`.” Dkt. 555 at 1; see also id. at 4 (same). Judge Buchanan accepted RJR’s representations
`
`and denied the motion: “I believe that it’s not appropriate to get into negotiations or the
`
`considerations that they made internally as to this. I think the document speaks for itself.” Id.
`
`C.
`
`
`RJR Moves To Exclude Mr. Meyer’s Opinions Relying On The
` As Factually Unsupported
`
`RJR subsequently moved to exclude Mr. Meyer’s opinions. RJR argued that his opinions
`
`about the prior Fontem licenses rested on a “fictional foundation” that “lacked factual support”
`
`because “
`
`1090 at 4 (“Mr. Meyer speculates that
`
`.” Dkt. 892 at 18-19; Dkt.
`
`.”). RJR argued that Mr.
`
`Meyer’s opinions about
`
` were speculative and “contradicted by the limited
`
`evidence available” because there is “
`
`it is unknown “
`
`,” and
`
`:
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`4
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`

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`
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`Dkt. 1090 at 8, 11. RJR thus argued Mr. Meyer should be precluded from referencing the
`
`
`
` because his “opinions lack any factual support.” Dkt. 892 at
`
`19. RJR doubled down on this argument at the hearing, arguing: “
`
`
`
`.” Dkt. 1163-1 at 43:8. That statement, made in open court, was
`
`false. RJR and its lawyers “
`
`.
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`D.
`
`Documents Produced By Fontem Show That RJR Violated Its Discovery
`Obligations And Made Material Misrepresentations To This Court
`
`In the North Carolina patent case between Altria and RJR, third-party Fontem produced
`
`over 200 documents related to the Fontem-RJR negotiations in response to Altria’s subpoena. The
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`same law firm, Jones Day—and eleven of the same lawyers from that firm—represent RJR in the
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`North Carolina case and this case. Dkt. 1159-11. PMI/Altria’s counsel obtained these documents
`
`the evening before the Daubert hearing and the week after. Fontem’s production includes
`
`
`
`First,
`
`
`
`. Dkt. 1174-2. It shows that
`
`. See id. § 5.6.8.
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`—supporting Mr. Meyer’s opinions and refuting Dr. Sullivan’s opinions. See infra at 9.
`
`Second,
`
`
`
`
`
`
`
`
`
`
`
`
`
` Id. § 5.1 Here,
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`5
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`

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`
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`too, this confirms Mr. Meyer properly relied on a
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` and refutes Dr. Sullivan’s artificially
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`deflated
`
`. But, most relevant to this motion, it reveals the falsity of
`
`RJR’s representations to the Court (and Judge Buchanan) that
`
`
`
`
`
` Dkt. 1163-1 at 43:8. Worse, RJR relied
`
`on these very misrepresentations in its (now defeated) effort to exclude Mr. Meyer’s opinions.
`
`E.
`
`Judge Buchanan Denies PMI/Altria’s Motion To Show Cause
`
`As the Court will recall, counsel for PMI/Altria promptly raised this issue with the Court—
`
`the day after receiving Fontem’s consent to use two excerpts of the subject documents—at the
`
`Daubert hearing.4 Dkt. 1163-1 at 53:14-56:17. RJR nevertheless maintained its challenge to Mr.
`
`Meyer that was refuted by the evidence RJR continued to withhold. Dkt. 1163-5. PMI/Altria thus
`
`moved for an order compelling RJR to show cause why RJR withheld relevant documents and
`
`made material misrepresentations to the Court, and why sanctions should not issue. See Dkt. 1163.
`
`On April 1, 2022, Judge Buchanan denied PMI/Altria’s motion for two reasons. Dkt. 1177.
`
`First,
`
`Hr’g Tr.) at 12:25-13:5; see also id. at 13:6-10 (
`
`). Second,
`
`
`
`
`
` Ex. A (4/1/22
`
`
`
`
`
`
`4 Because Fontem had not consented to use of its full production in this case as of the Daubert
`hearing, PMI/Altria presented the Court with excerpts of the
` as shown in the
`expert report of James Malackowski from the North Carolina case. In the week after the hearing,
`PMI/Altria received the actual
` discussed at the hearing and above.
`
`6
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`

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`Case 1:20-cv-00393-LO-TCB Document 1191 Filed 04/15/22 Page 11 of 21 PageID# 31634
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`
`
`
`
`. Id. at 13:10-17.
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`Judge Buchanan granted PMI/Altria leave to serve a supplemental damages expert report and, over
`
`PMI/Altria’s objection, allowed RJR to serve a supplemental rebuttal report. Id. at 13:18-14:23.
`
`Because Judge Buchanan did not grant PMI/Altria’s request for a 30(b)(6) deposition on
`
`Topic 28, PMI/Altria asked RJR to agree not to challenge on authenticity or hearsay grounds the
`
`admissibility of the new documents
`
`. Ex. B. RJR refused. Id.
`
`III. LEGAL STANDARD
`A.
`
`Legal Standard For Review Of Judge Buchanan’s Order
`
`PMI/Altria may “file objections” to Judge Buchanan’s “order within 14 days after being
`
`served with a copy,” i.e., prior to April 15, 2022. FED. R. CIV. P. 72(a). The Court “must consider”
`
`PMI/Altria’s “objections and modify or set aside any part of the order that is clearly erroneous or
`
`contrary to law.” Id. A finding “is clearly erroneous when although there is evidence to support
`
`it,” the Court “is left with the definite and firm conviction that a mistake has been committed.”
`
`Montanile v. Botticelli, No. 08-cv-716, 2009 WL 2378684, at *2 (E.D. Va. July 28, 2009).
`
`B.
`
`The Court’s Authority To Issue Sanctions
`
`There is no dispute about the applicable legal standard or the Court’s authority to issue
`
`sanctions both under its inherent powers and the Federal Rules of Civil Procedure. See Dkt. 1163
`
`at 12-14. First, it is well-established that the Court has the power to impose sanctions “for bad-
`
`faith … conduct,” including misrepresentations to the Court. Chambers v. NASCO, Inc., 501 U.S.
`
`32, 50 (1991). Second, the Court has authority to impose sanctions under the federal rules.
`
`Samsung Elecs. Co. v. NVIDIA Corp., 314 F.R.D. 190, 195-96 (E.D. Va. Feb. 29, 2016).
`
`Under Rule 26(e)(1)(a), a party who has responded to “a request for production” must
`
`timely “supplement or correct its disclosure or response … if the party learns that in some material
`
`7
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`

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`
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`respect the disclosure or response is incomplete or incorrect.” If a party violates this rule, the
`
`Court determines whether the violation was substantially justified or harmless under the Fourth
`
`Circuit’s test set forth in Southern States Rack & Fixture, Inc. v. Sherwin-Williams Co., 318 F.3d
`
`592, 597 (4th Cir. 2003); FED. R. CIV. 37(c)(1). RJR has the burden of showing these factors. Id.
`
`If the violation was not substantially justified and harmless, the Court proceeds to impose
`
`sanctions, including any order listed in Rule 37(b)(2)(A)(i)-(vi). Rule 37(b)(2)(A)(ii) allows the
`
`Court to “(ii) prohibit[] the disobedient party from supporting or opposing designated claims or
`
`defenses, or from introducing designated matters in evidence.” When considering such sanctions,
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`courts apply a “four-part test” that considers: “(1) whether the non-complying party acted in bad
`
`faith, (2) the amount of prejudice that noncompliance caused the adversary, (3) the need for
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`deterrence of the particular sort of noncompliance, and (4) whether less drastic sanctions would
`
`have been effective.” Law Enforcement Alliance of Am., Inc. v. USA Direct, Inc., 61 F. App’x
`
`822, 830 (4th Cir. 2003). All four factors need not be present “to grant alternative sanctions,”
`
`Beach Mart, Inc. v. L&L Wings, Inc., 302 F.R.D. 396, 414 (M.D.N.C. 2014), and Rule 37(c)(1)
`
`does not require bad faith. Vir2us, Inc. v. Invincea, Inc., 235 F. Supp. 3d 766, 779 (E.D. Va. 2017).
`
`IV. ARGUMENT
`A.
`
`Judge Buchanan’s Order Was Clearly Erroneous And Contrary To Law
`
`Judge Buchanan found that settlement negotiations are irrelevant and RJR’s conduct was
`
`not sanctionable. Both findings are clearly erroneous and contrary to law. They should be vacated.
`
`1.
`
`The Fontem-RJR Negotiations Are Highly Relevant To Damages
`
`The Fontem-RJR negotiations are relevant, particularly given the position that RJR’s
`
`damages expert has taken for trial, as well as the broad scope of discoverable information, Rule
`
`26’s liberal standard of relevance, and RJR’s representations to the Court.
`
`8
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`Case 1:20-cv-00393-LO-TCB Document 1191 Filed 04/15/22 Page 13 of 21 PagelD# 31636
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`First, theP are relevant because they refute Dr. Sullivan’spo
`RES 20 60)s. theystow
`ee. which undermines Dr. Sullivan’s opinion that the
`Pe Second, the documents show thatP|
`ee. Dkt. 1174-3 at -098. Thati cannot be squared with
`theee. Regardless ofwhether the evidence
`
`actually belies Dr. Sullivan’s opinions(it does), PMI/Altria wasentitled to depose him on them.
`
`Clear with Computers, LLC v. BergdorfGoodman, Inc., 753 F. Supp. 2d 662, 664 (E.D. Tex. 2010)
`
`(ordering production of “settlement communications”that “will likely explain [] inconsistencies”).
`
`Second, the Fontem-RJR negotiations are facially relevant, particularly under“the liberal
`
`standard of relevance set forth in Rule 26(b)(1),” because they speak directly toP
`ee. Swimways Corp. v. Zuru, Inc., No. 13-cv-334, 2014 WL
`
`12603189, at *1 (E.D. Va. July 1, 2014). They are consistent with Mr. Meyer’s opinions because
`
`ae
`
`ee
`es 2h is
`
`alone sufficient to find this evidence relevant, and shows that Judge Buchanan’s findingis clearly
`
`erroneous. See United States ex rel. Carter v. Halliburton, 266 F.R.D. 130, 134 (E.D. Va. 2010)
`
`(reversing magistrate’s ruling that work product doctrine was pierced as “clearly erroneous”):
`
`
`
`> As discussed below, Judge Buchanan wrongly assumed that
`are irrelevant when an
`
`
`executed agreementis available. She thus failed to considerthat
`
`
`and could also lead to the
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`discovery of other relevant evidence that is not otherwise present in the executed agreement.
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`

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`Case 1:20-cv-00393-LO-TCB Document 1191 Filed 04/15/22 Page 14 of 21 PageID# 31637
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`
`
`Walker v. W. Pub. Corp., No. 09-cv-00723, 2011 WL 3667613, at *4 (S.D.W. Va. Aug. 22, 2011)
`
`(sustaining in part objection to magistrate’s order denying motion to strike as “clearly erroneous”).
`
`Judge Buchanan’s ruling did not include an explanation of why the evidence was irrelevant.
`
`Instead, she stated it may
`
`
`
`Ex. A (4/11/22 Hr’g Tr.) at 12:25-13:5. That argument, perhaps, could have been credited before
`
`RJR represented there is “no evidence” supporting Mr. Meyer’s opinions and that
`
`
`
` (Dkt. 1163-1 at 43:8), but no longer. Now the Court
`
`can be sure that this is not a rabbit hole—it is highly relevant discovery. That is confirmed because
`
`(i) RJR relies on the alleged
`
` of the Fontem-RJR Agreement and
`
`(ii) challenged Mr. Meyer’s reliance on the
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` as “fictional,”
`
`
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` supported by “no evidence,” and “contradicted by the limited evidence available.” See
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`supra at 4-5. While the Court correctly rejected these arguments in its Daubert order, PMI/Altria
`
`is entitled to use the underlying facts in RJR’s possession to refute those same arguments at trial.
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`Finally, to the extent Judge Buchanan’s finding relied on the arguments that RJR advanced
`
`in its brief, none of them show that the subject evidence is irrelevant.
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`First, RJR argued that the negotiations are irrelevant because the experts rely on the final
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`agreements, not negotiations. That does not excuse RJR’s misrepresentations about the underlying
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`evidence. Regardless, neither expert could rely on such evidence because RJR withheld it. RJR
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`cannot fault Mr. Meyer for not considering the very evidence it concealed, much less justify its
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`knowingly false argument that there is “
`
`.”
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`Dkt. 1090 at 11. And it is no surprise that Dr. Sullivan did not rely on such evidence, as it refutes
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`his unreliable methodology. Kajeet v. Qustodio, LLC, No. 18-cv-1519, 2019 WL 8060078, at *6-
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`10
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`

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`Case 1:20-cv-00393-LO-TCB Document 1191 Filed 04/15/22 Page 15 of 21 PageID# 31638
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`
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`8 (C.D. Cal. Oct. 22, 2019). Regardless, Mr. Meyer is relying on the negotiations, as detailed in
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`his forthcoming supplemental report, which should dispose of this strained argument.6
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`Second, RJR argued the statements on which PMI/Altria rely are
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`Dkt. 1167 at 15. That is irrelevant.
`
`
`
`
`
`.
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`RJR’s incorrect argument at most goes to weight, not discoverability of the underlying evidence.
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`Third, RJR argued this evidence is “inadmissible” under Rule 408. Dkt. 1167 at 12. Rule
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`408 does not bar materials from being used, for impeachment or otherwise, because “Rule 408
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`does not ban all evidence related to settlements.” Rothschild Mobile Imaging Innovations, LLC v.
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`Mitek Sys., Inc., No. 14-617, 2018 WL 3599359, at *4 n.3 (D. Del. July 27, 2018). It only bars a
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`party from using evidence of a compromise for two narrow purposes, neither of which apply here.
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`At bottom, as the Federal Circuit and Fourth Circuit have held, “settlement negotiations
`
`related to reasonable royalties and damage calculations are not protected by a settlement
`
`negotiation privilege.” In re MSTG, Inc., 675 F.3d 1337, 1346-48 (Fed. Cir. 2012) (affirming
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`order compelling production of documents underlying a settlement agreement because it “might
`
`contain information showing that the grounds [MSTG’s expert] relied on to reach his conclusion
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`are erroneous,” and the patentee should have “the ability to test the accuracy of [the expert’s]
`
`
`6 RJR attempted to blame PMI/Altria for its misconduct, falsely arguing that Altria knew about the
`documents in the North Carolina case and could have produced them. Opp. at 17. That argument
`strains credulity. Altria (the client) had no access to the documents because Fontem produced
`them as confidential-attorneys’ eyes only under the North Carolina protective order. Dkt. 1159-
`12. Counsel for PMI/Altria in this case (Latham & Watkins, LLP) had no access to any of these
`documents until March 17 and did not have access to Fontem’s full production until March 25.
`Dkt. 1159-12. And, while Altria’s counsel in the North Carolina case (Weil, Gotshal & Manges
`LLP) received these documents in that case, Weil did not appear in this case until this March 2022
`and, even then, could not use the documents in this case until Fontem consented. Regardless, RJR
`ignores that “the rule is that even where a requesting party already has documents in its possession
`… the disclosing party may not withhold those documents.” Beach Mart, 302 F.R.D. at 410.
`
`11
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`

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`Case 1:20-cv-00393-LO-TCB Document 1191 Filed 04/15/22 Page 16 of 21 PageID# 31639
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`
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`opinions and assumption”); In re MI Windows & Doors, Inc., Prod. Liab. Litig., No. 12-MN-
`
`00001, 2013 WL 7801732, at *1-2 (D.S.C. June 21, 2013) (“The Fourth Circuit has never
`
`recognized a settlement privilege.”). Any finding that rests on this legally-flawed argument is both
`
`clearly erroneous and contrary to law.7 FED. R. CIV. P. 72(a).
`
`2.
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`RJR’s Misrepresentations To The Court And Withholding Of Highly
`Probative Documents Are Sanctionable
`
`RJR’s repeated misrepresentations to the Court and failure to produce the Fontem-RJR
`
`negotiation documents are sanction worthy. There is no legitimate justification for failing to
`
`produce these documents or the repeated misrepresentations that RJR made to this Court.
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`First, because Judge Buchanan found the subject evidence irrelevant,
`
`
`
`account for the other misrepresentations in RJR’s briefing. Second, it rests on the clearly erroneous
`
`finding that the subject evidence is irrelevant. See supra § IV.A.1. Regardless, RJR’s explanation
`
`. Ex. A at 13:12-17. First, that does not
`
`for its misrepresentations—
`
`
`
`
`
`—are factually unsupported. Ex. A at 8:20-11:5. The documents are is undisputably new,
`
`RJR statements were false when made, and RJR’s representations were about the
`
`
`
`. Dkt. 1163-1 at 43:8. Even if true (it is not), that would not excuse RJR’s subsequent
`
`misrepresentations to the Court. Indeed, RJR’s counsel admitted that,
`
` Ex. A at 8:20-9:13
`
`
`
`
`
`
`
`. That should be dispositive.
`
`
`7 RJR argued that PMI/Altria’s motion was barred for procedural reasons. Judge Buchanan never
`credited these arguments at the hearing or in her order, so they are not addressed here.
`
`12
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`

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`Case 1:20-cv-00393-LO-TCB Document 1191 Filed 04/15/22 Page 17 of 21 PageID# 31640
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`
`
`There can be no credible dispute that RJR’s representations were central to discovery and
`
`the substantive damages issues in this case. After successfully blocking discovery on this issue by
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`misrepresenting that the subject evidence is
`
` (Dkt. 555 at 1), RJR moved to exclude
`
`Mr. Meyer’s opinions as “fictional,” telling the Court
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` Dkt. 892 at 18. RJR also argued that, while “
`
`
`
`
`
` his opinions are “contradicted by the limited evidence
`
`available” because it is unknown
`
` Dkt. 1090 at 4, 8. And RJR unequivocally represented that:
`
` Dkt. 1163-1 at 43:8. In view of the
`
`
`
`
`
`
`
`, RJR’s representations are unmistakably false and
`
`warrant sanctions under the Court’s “broad” inherent authority.8 Zornes v. Specialty Indus., Inc.,
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`No. 97-2337, 1998 WL 886997, at *7 (4th Cir. 1998) (unpublished) (“[The Fourth Circuit] will
`
`not circumscribe the district courts’ ability … to guard [z]ealously the court’s integrity” because
`
`“it is the court’s duty to protect the interests not only of the parties directly prejudiced by discovery
`
`abuse, but also those litigants indirectly prejudiced when the court’s resources are squandered due
`
`to an abusing party’s misconduct.”). They are “at the very least, reckless,” and thus sanctions are
`
`still warranted. Ferrellgas, L.P. v. Best Choice Prod., No. 16-cv-259, 2017 WL 3142044, at *11-
`
`12 (M.D.N.C. July 24, 2017) (finding “reckless” statements “constituted bad faith conduct
`
`warranting the imposition of sanctions under the Court’s inherent powers”).
`
`Second, RJR violated Rule 26(e) by failing to produce any, much less all, documents
`
`related to the Fontem-RJR negotiations. Before Judge Buchanan, RJR did not dispute that such
`
`
`8 Since Judge Buchanan’s order was not based on the test for deciding (i) whether a disclosure was
`harmless (Southern States) or (ii) the appropriate sanctions, PMI/Altria does not address those
`issues here but will submit additional briefing addressing these issues if helpful to the Court.
`
`13
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`

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`Case 1:20-cv-00393-LO-TCB Document 1191 Filed 04/15/22 Page 18 of 21 PageID# 31641
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`
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`documents are responsive to PMI/Altria’s requests. See supra at 3-4 (identifying RFP Nos. 102,
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`139, 146, 158, 224). Nor did RJR dispute that it had documents responsive to those requests since
`
`the start of this case. And RJR did not dispute that it failed to produce those documents—even
`
`after Fontem produced them in the North Carolina case to the same law firm (and 11 of the same
`
`lawyers) representing RJR in this case.9 Dkt. 1195-11. Thus, if the negotiations are relevant, there
`
`should be no dispute that RJR’s failure to produce these responsive documents violates Rule
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`26(e)(1)(A). See Russell v. Absolute Collection Servs., Inc., 763 F.3d 385, 396-97 (4th Cir. 2014);
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`Beach Mart, 302 F.R.D. at 408-09 (finding defendant “violated Rules 26 and 37 by … failing to
`
`find, identify, and disclose” documents it “had in its possession from the beginning of discovery”).
`
`RJR ignored its discovery obligations. Even after the fact, RJR refuses to produce all
`
`responsive documents or stipulate not to challenge the admissibility of documents that it prepared.
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`RJR’s conduct violates the Federal Rules and the spirit of good-faith litigation in this Court.
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`B.
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`The Court Should Modify Judge Buchanan’s Order
`
`P