B&W's And Bat's Corporate Structure

Brown and Williamson and its parent company, BAT Industries, have a close corporate relationship that has evolved over the years. The Brown and Williamson Tobacco Company was formed in 1906. It was purchased in 1927 by the British American Tobacco Company (BATCo), and its name was changed to the Brown and Williamson Tobacco Corporation {1006.01}. In 1976 BATCo merged with Tobacco Securities Trust to form BAT Industries.

BAT Industries is the parent company of many cigarette manufacturers throughout the world, including Brown and Williamson (US), BAT Cigarettenfabriken (Germany), Souza Cruz (Brazil), and British American Tobacco (which produces cigarettes in more than forty-five countries for domestic and export markets in Europe, Australia, Latin America, Asia, and Africa). In addition, BAT Industries is associated with Imasco in Canada, which is the parent company for Imperial Tobacco. BAT is also the parent company of several insurance and financial services, including Farmers Group (US), Eagle Star (UK), and Allied Dunbar (UK) (9).

Given B&W's status as a subsidiary of BAT, it was natural that the two companies would share information, not only about product development and sales and marketing strategies but also about their scientific research on the health dangers of cigarettes. As we discuss in chapter 2, B&W and the other domestic tobacco companies jointly formed an organization to study smoking and health issues in the mid-1950s, and British tobacco companies formed a similar group in England. In addition, as we discuss in chapter 3, BAT established research facilities (both internally and through contract laboratories) in Europe (England, Germany, and Switzerland) to study the health effects of smoking. The documents are replete with examples of information from all these research efforts, which was shared between B&W and BAT.

This sharing of information, although obviously of mutual benefit, also caused problems. As the evidence of the health dangers of smoking accumulated, B&W realized that it might become a defendant in products liability lawsuits by plaintiffs who claimed that their illnesses had been caused by cigarettes. Tobacco industry lawyers began to realize that the scientific research results that the companies were sharing could be

extremely damaging if they became accessible to plaintiffs through discovery procedures. Tobacco companies in the United States were particularly concerned about the potential for lawsuits because products liability laws had been significantly strengthened during the 1960s. B&W therefore began to explore ways to avoid receiving unwanted information (i.e., information useful to a plaintiff) or to protect such information from discovery. In the United Kingdom, on the other hand, products liability laws have not historically been as strong as in the United States. BAT has therefore been more concerned about being dragged into a US lawsuit, because of its status as B&W's parent company, than about products liability suits in the United Kingdom (see chapter 7). A further problem for both companies was the possibility that statements attributable to subsidiary companies, including nontobacco companies, might be harmful to them in products liability litigation.