Jump to:

Lorillard

Index of Pleadings Case Name: State of Maryland V. Philip Morris, Et Al. Court File No.: 96-122017 / 21101, Circuit Court, Baltimore City, Maryland

Date: 30 Dec 1999 (est.)
Length: 269 pages
86306142-86306410
Jump To Images
spider_lor 86306142_6410

Fields

Type
OUTL, OUTLINE
Document File
86306141/86306411/Litigation State of Maryland V. PM, Et Al. Court Papers - Vol. V
Site
N14
Master ID
86306142/6410

Related Documents:
Area
LEGAL DEPT. FILE/BASEMENT GMP
Date Loaded
07 Jan 2002
Litigation
Feda/Produced
Named Person
Brown
Minnemeyer, H.J.
Schickedantz, P.
Request
R1-027
Named Organization
Atc
Bw, Brown & Williamson
De Bene Esse
Lig, Liggett
Loews
Md
Md Circuit Court Baltimore City
Medicaid
PM, Philip Morris
RJR, R.J.Reynolds
Characteristic
PARE, PARENT
UCSF Legacy ID
mve62d00

Document Images

Text Control

Highlight Text:

OCR Text Alignment:

Image Control

Image Rotation:

Image Size:

Page 1: mve62d00
_;I J. I 70nPC_W 0
Page 2: mve62d00
41. Plaintiffs Motion for Preliminary 12(08199 Injunction; Memo in Support of Motion for Preliminary Injunction; Motion to Shorten Time for Defendant to Respond to Plaintiffs' Motion for Preliminary Injunction or, in the Alternative, for Temporary Restrainin Order 42. Plaintiffs C laint 12/08/99 43. Plaintiffs VOL Exhibits to Complai I 9 Court Order; Memorandum Opinion Order (denying motion for 1 12J34199 preliminary injunction); Escrow I
Page 3: mve62d00
0 STATE OF MARYLAND and d. JOSEPH CURRAN, JR. ATTORIYEY GENERAL, Ptaintiffs, THE LAW C}FFICES OF PETER G. AIYGEL4S, P.C. One Charles Center 100 North Charles Street Baltimore, Maryland 21201, Serve: Peter G. Angelos, Esquire One Charles Center, Suite 810 100 North Charles Street Baltimore, Maryland 212t} 1 Defendant. * CTRCUIT COURT * F()R * BALTIMORE CITY * Civil Case No.Q4T-L W6l~ f tJ.2 COMPLAINT The State of Maryland and J. Joseph Curran, Jr., Attorney General of Maryland, by an d through Attorney General J. Joseph Curran, Jr. and undersigned counsel, bring this action against The Law Offices of Peter G. Angelos, P.C. ("the Angelos Firm") and allege as follows: I. NATURE OF TI3E ACTION 1. The State and the Attorney General bring this action to resolve a dispute over the fee due the Angelos Firm for representing the State in the tobacco litigation in this Court. Ultimately, the Court must decide the amount of the fee that is due the Angelos Firm under a contract with the Attorney General, as qualified by the ethical command that "[a] lawyer's
Page 4: mve62d00
The arbitration mechanism does not require the Angefos Firm to surrender one penny of its contractual claim, and the ongoing stream of payments to the State ensures that there wi21 be ample funds to satisfy any remaining claim after the fee dispute is finally adjudicated. II. THE PARTIES 4. The plaintiffs are the State of Maryland and the Attorney General of Maryland, J. Joseph Curran, Jr. They bring this action at the direction of the Governor, Parris N. Glendening and pursuant to the Attorney General's constitutional and statutory authority under, inter alia, Md. Const. Art. V., § 3(a)(2) and Md. State Gov't Code Ann. §§ 6-101 et seq. 5. The Defendant, the Law Offices of Peter G. Angelos, P.C., is a professional corporation doing business at One Charles Center, 100 N. Charles Street, Baltimore, Maryland, and is comprised of, among others, attorneys licensed to practice law in the State of Maryland. IIL JURISDICTION AND VENUE 6. This Court has jurisdiction over the subject matter of this action pursuant to, irsferalia, the provisions of Maryland Courts and Judicial Proceedings Code Annotated §§ 1- 5fl1 and 3-4ti3. This Court has personal jurisdiction over the Defendant pursuant to, inter alia, the provisions of Maryland Courts and Judicial Proceedings Code Annotated §§ b-1 t}2 and 6-103. 7. Venue is proper in the Circuit Court for Baltimore City pursuant to, inter alia, the provisions of Maryland Courts and Judicial Proceedings Code Annotated §{r2(}1.
Page 5: mve62d00
0 27. Defts Memorandum in Support of Motion Regarding Discovery of and From Individual Medicaid Reci ients 28. Court Memorandum Opinion and D: 09117198 Order of Court (Iud e Brown) 29. P1f Plf s Opposition to Motion to D: 10108198 Dismiss Counts one and Five Through Fourteen of Second Amended Com laint 30. Court Order of Court - Denying D. 10107198 Motion of Certain Defts for Reconsideration (7ud e Brown) 31. Court Memorandum and Order D: 11/23/98 terlocnta Relief) 32. P1f Agreed Motion for Sta y on R: 11/25/98 Praceedin s 33. Court Order Granting Stay of D: 11/24/98 Proeeedin s 34. Court Consent Decree and Final D: 12101/98 Sud ent 35. Parties Motion for the Entry of the R: 12/02/98 A reed Dismissal Order 36. Parties Agreed Motion for Approval of R: 12/02/98 Settlement and Entry of Consent Decree and Final Iud ent 37. Court A eed Dismissal Order D: 12/(31/98 38. Transcri t Hearin on Motions for MSA D: 12/14/98 39. Court Order Approving General D: 12/Q1198 Liggett Replacement Agreement and Entry of Consent Decree and Final3udgment as to Li ett Grou , lnc. 40. Parties Motion for the Entry of the D: 12/10/98 Order Regarding Protective Orders
Page 6: mve62d00
is Exhibit 5 to this Complaint; the Report describes the procedures followed by the Panel and discusses the factors it took into consideration in making awards. 28. Unlike many other States, the State of Maryland, by action of both the Governor and the General Assembly, has committed to use the funds recovered from the tobacco industry for health-relatedpiuposes, including tobacco cessation programs and cancer research, as well assistance to Maryland farmers who convert tobacco acreage to other agricultural purposes. 29. In its 1999 Session, the General Assembly passed and the Governor signed 1999 Md. Laws, ch. 172, which creates a "Cigarette Restitution Fund," into which all funds received from the tobacco settlement must be deposited. Pursuant to this law, at least 50% of the amounts appropriated from the Fund must be made for the following purposes: • reduction of the use of tobacco products by minors and smoking cessation programs; • crop conversion programs for land currently used to grow t4bacco; • public and school education campaigns to decrease tobacco use; • enforcement of tobacco sales laws; • support of the Maryland Health Care Foundation; • primary rural health care; • prevention, treatment, and research concerning cancer, heart disease, lung disease, tobacco product use and control; • substance abuse treatment and prevention programs. 1999 Md. Laws, ch 172, Exhibit 6. 10
Page 7: mve62d00
! i 15. Defendants Memorandum of Law in Support of Defendants' Motion ~ to Dismiss Counts V and VI of First Amended Com laint 16. Plfs Plaintiff's Memorandum in Dated: 09108197 Opposition To: Defts' Motion R: 12117f97 to Dismiss Counts V and VI of First Amended C laint Y(?LUhIE IV 17. LTC Lorillard Tobacco Company's Verified: Answers to Plaintiff's 01/16/98 Interro atories to Defendants 18. Pif Cross Notice of De Bene Esse Dated: 05/08/98 Videotape Deposition Duces Tecum (Dr. H. J. Minneme er) 19. Plf Cross Notice of De Bene Esse Dated: 05/05/98 Videotape Deposition Duces Tecum (Dr. Paut D. Schickedantz) 20. Plf Notice of Taking Deposition Dated: 05/29198 Duces Tecum (RJR, B&W, ATC, PM, LTC) f:129-7/3 21. Plf Second Amended Complaint and Dated: Election for d Trial 22. PIf State of Maryland's Motion for Sanctions VOLUME V 23. Court Memorandum and Opinion of R: 08/06l98 Court (Judge Brown) - Ruling on Defts' Motion Seeking a Protective Order for Certain Privileged Documents and P1f Res nses Thereto 24. Certain Defts Certain Defis' Motion for D: 08105t98 Reconsideration of this Court's R: 08/25/98 Order of 815/98 25. Certain Defts Memorandum in Support of D: 08/05/98 Certain Defts' Motion for R: 08125/98 ~ Reconsideration of this Court's Order of 8f5198 26. Plfs Memorandum in Opposition to D: 09104/98 Certain Defendants' Motion for Reconsideration of this Court's Order of 8/5198
Page 8: mve62d00
9 IV. FACTS COMMON TO ALL COUNTS A. The Rep-pseIItatlon Contract $. On November 16, 1995, the State of Maryland, through its Governor and its Attorney General, announced its intention to bring suit against the tobacco industry. On the same day, the Attorney General issued a Request for Proposals for qualified legal counsel to assist the State and the Attorney General in the litigation. The potential lawsuit was to seek recovery of public funds, fly Medical Assistance fiucds, expended to provide health care for Maryland citizens with tobacco- related illnesses, as well as other appropriate relief, such as remedies for claims under the State Consumer Protection Act. 9. Six law firms, including the Angelos Firm, responded to the Request for Proposals, and the Angelos Firm was ultimately selected. 10. On March 27, 1996, the Attorney General, having received authorization from the Governor and the Board off'ublic Works, entered into the Contract that is the subject of this action. Exhibit 1 to this Complaint is a true and accurate copy of the Contract. 11. A group of tobacco manufacturers and tobacco-related companies filed an action in the Circuit Court for Talbot County challenging the Governor's and the Attorney General's authority to enter into the Contract. The Maryland Court of Appeals upheld the validity of the Contract against that challenge in Philip Morris Incorporated v. Glendening, 349 Md. 660 (1998). 12. The Contract requires the Angelos Fir^ to "provide legal counsel, representation, and litigation services to the Attorney General and the State of Maryland in connection with litigation against the tobacco industry." Contract 12.1 (Exhibit 1). The Angelos Firm must perform those services "with the standard of care, skill, and diligence 4
Page 9: mve62d00
9 INDEX OF PLEADINGS CASE NAME: State of Maryland v. PhiIip Morris, et aI. COURT FILE NO.: 96-122017/21101; Circuit Court, Baltimore City, Maryland TAB i PARTY DOCUMENT NAME FILED SEIiVED I VOLUME I 1. Lorillard, Inc. Not. of Svc. of Process, F: 511/96 Summons & Complaint & S: 5/21/96 Election for 7 Trial 2. L.T.C. Not. of 5vc. of Process, F: 5/1i96 Summons & Com laint S: 5121196 3. Loews Not. of Svc. of Process, F: 5/1/96 Summons & Cam Iaint S: 5121/96 VOLUME II 4. L.T.C. En of A arance S: 6/4l96 5. L.T.C. Pit's Mot, for Spec. Admission S: 6/5196 of Out-of-State A s 6. Lorillard, Inc. Plt's Mot. for Spec. Admission S: 6/5/96 of Out-of-State A s 7. Lorillard, Inc. En of A arance S: 6/6/96 8. Defendants Mation to Dismiss S: 9116196 ~ 9. Loews Def. Loews' Mot. to Dismiss F/S: 9/16/96 for Lack of Pers. Juridiction 10. Defendants Opinion and Order Ruling on Defts Motion to Dismiss for Lack of Personal Jurisdiction VOLUME III 11. Plf First Amended Complaint and S: 06117197 Election for J Trial 12. Court Opinion and Order of Court Ruling on Defendants' Motion to Dismiss 13. Lorillard, Inc. Answer and AfFirmative F: 10/22/97 Defenses of Deft. Lorillard, It: 1f7/28f97 i Inc. to Counts 1-4 of Pif's V Amended Complaint and Demand for 7ur Trial 14. LTC Answer and Affirmative F: 10/22/97 Defenses of Deft. LTC to R: 10128/97 Counts 1-4 of P1f s First ~ Amended Complaint and ' Demand for J Trial
Page 10: mve62d00
0 • 30. On June 3,1999, Governor Glendening announced his intention to use the bulk of the settlement money for four primary purposes, as follows: Yearly Purpose Cumulative 2001-2010 $8.35 million Tobacco Crop Conversion $83.5 million $30 million Anti-Smoking Efforts $300 million $ 10 million Anti-Addiction Programs $100 million $5© million Anti-Cancer Initiatives $500 million See Exhibit 7 to this Complaint, Affidavit of Donna L. Jacobs. 31. On the same day, the Governor issued Executive Order o 1.011998.17, creating three task forces to plan for the implementation of these programs. Exhibit 9 to this Complaint is a true and correct copy of the Executive Order. See Exhibit 8. The Governor is expected to announce the culmination of their work on December 10, 1999, and to adopt many oftheir recommendations in his proposed FY 2001 budget. The Governor must present his proposed budget to the General Assembly on the third Wednesday in January, i.e., January 19, 2001 . To be able to appropriate these funds in the 2001 budget in compliance with the terms of 1999 Md. Laws, ch. 172, and to submit a balanced budget proposal, as required by the Maryland Constitution, the Governor must know now the actual amounts that will be received from the settlement in FY 2001. Id. I?. The Separate Fund for Payment of Outside Counsel Fees and Expenses 32. Under the MSA, the Original Participating Manufacturers ("flPMs") agreed to pay the reasonable attorneys' fees and costs of private outside counsel retained by Settling States from funds separate from and in addition to the direct payments to the states. The MSA 11
Page 11: mve62d00
The Course of the Underlying Tobacco Litigation 17. On May 1, 1996, the State of Maryland, represented by the Attorney General and the Angelos Firm, filed a thirteen count complaint in this Court against the major tobacco manufacturers and several tobacco-related companies, alleging, inter alia, consumer protection and antitrust violations, unjust enrichment, fraud, breach of warranty, negligence, strict liability, and conspiracy, and seeking to recover, inter alia, the tobacco-related health care costs of the Medical Assistance program. State of Maryland v. Philip Morris Inc., Case No. 96I22417(CL21147. Maryland was the eighth state in the nation to file such a lawsuit; ultimately, all states filed similar lawsuits, although some did not do so until after entering into the MSA. 18. The case was actively litigated and vigorously defended by the tobacco industry. Motions to dismiss were filed and briefed by the parties, and extensive discovery was conducted. At the time of settlement, the docket contained more than 750 entries. The Court had set a firm April, 1999 trial date. 19. On May 21, 1997, the Court (Brown, J.) granted the defendant tobacco manufacturers' comprehensive motion to dismiss the original complaint in part, and denied Nine of the State's claims were dismissed, with leave to amend, and four claims remained for trial. On June 16, 1997, the State fated a First Amended Complaint. 20. At the initiative of the Attorney General and in response to the Court's dismissal of certain claims, the General Assembly passed legislation during its 1998 session that greatly increased the chances that the State would prevail, by reviving certain of the State's claims earlier dismissed. 1988 Md. Laws, ch. 122. (Exhibit 2).
Page 12: mve62d00
0 26. As projected at the time of settlement, Maryland's share of the direct payments over the first 25 years will be more than $4.4 billion, according to the following schedule: 1999 $54,250,967.50 2000 $144,934,850.37 2001 $156,506,355.69 2002 $387,918,452.52 2003 $189,695,897.43 2004 - 2007 $158,322,406.83 2008 - 2017 $161,464,442.03 2018 - 2025 $180,926,976.56 Total $4,428,657,383.58 Source: Calculations based on payment provisions in the MSA, including Exhibit A thereto, "State Allocation Percentages." 27. In addition to the basic payments to all of the states, the MSA also creates a Strategic Contribution Fund of $8.61 billion to reward states relative to their contribution to the overall litigation and ultimate settlement. Maryland has been awarded an additional $283,133,735.53 in payments from the Strategic Contribution Fund. The Committee awarded a portion of the fisnds based on each state's allocation of the total recovery (which was, in turn, based largely on size of population), and another portion of the funds based on the assumption that every Settling State should receive a minimum payment. Nevertheless, Maryland's award was the sixth highest award of all Settling States. A true and correct copy of the Final Report and Decision of the Strategic Contribution Fund Allocation Committee
Page 13: mve62d00
into account the totality of the circumstances." Exhibit 0 to the MSA at § 14. 46. Exhibit 0 to the MSA also provides the terms under which the funds for payment of Fee Awards are accumulated from the OPMs and allocated to Outside Counsel who obtain Fee Awards. This payment method confers an advantage on Outside Counsel who obtain Fee Awards earlier rather than later because the relative shares are larger when the tota2 amount of awards is smaller. 47. On the same day as the MSA was entered, the OPMs extended a "State Option to Enter Agreement for Payment of Attorneys' Fees." A true and correct copy of the "State Option" is attached to this Complaint as Exhibit 10. The option purports to permit a State to seek payment of fees to Outside Counsel directly from the OPMs, through the same Fee Award and Liquidated Fee mechanisms. The option is subj ect to several conditions, including (l) that the Outside Counsel has not entered into a Model 0 Fee Payment Agreement with the OPMs, and (2) that the Settling State has paid attorneys' fees or costs to Outside Counsel related to the tobacco litigation. Option, Section 3(a). The full option is available only during the period December 31, 1999 through December 31, 200 1. Option, Sections 1 and 3(a)(i). 48. In addition to the alternative processes available to award attorneys' fees, Exhibit 0 to the MSA provides a process for determining and awarding expenses and costs to Outside Counsel. The OPMs have agreed to pay those "reasonable costs and expenses" of Outside Counsel that are "of the same nature as costs and expenses for which the Original Participating Manu;aeturers ordinarily reimburse their own counsel or agents." Exhibit O to the MSA at § 19. 49. Cost Statements, once determined, are to be paid in the order they become payable, provided that the aggregate of Cost Statements payable by the (3PMs in any one year 16
Page 14: mve62d00
0 C. Shall prepare and submit to the Attorney General an itemized computation of the contingency fee and expenses, in a manner and form acceptable to the State auditors, in advance of the payment referred :o in paragraph B. above. Contract 13.3 (Exhibit 1). 15_ Inherent in the Contract is the requirement that the Angelos Firrn an attorneys conduct the tobacco litigation at all times in compliance with the Maryland Rules of Professional Conduct, including Rule 1.5(a), which provides that "[a] lawyer's fee shall be reasonable." The Angelos Firm thus is not entitled to claim or to receive a fee in excess of what this Court ultimately deterrnines to be reasonable. 16. In the course of the tobacco litigation, at the initiative of the Attorney General, the Maryland General Assembly passed 1998 Md. Laws, ch. 122. In addition to addressing d parts of the State's claim in the circuit court, the legislation also included the following uncodified sections relative to the Contract: Section 4. That the Law Offices of Peter G. Angelos and the Attorney General of the State of Maryland agree that the contract between those parties, dated iVlarch 27,1996, is modified to reduce the fee for legal services to 12.5%, and all other provisions of Paragraph 3 of the contract, including the provisions relating to reasonable litigation expenses, as well as other terms of the contract, remain in effect. Section 5. That this Act may not be construed to affect the application of Rule 1.5 of the Maryland Lawyers' Rules of Professional Conduct to the contract, dated March 27,1996, between the Law Offices of Peter G. Angelos and the Attorney General of the State of Maryland or to prohibit or limit a court of competent jurisdiction from applying Rule 1.5 to that contract. 1998 Md. Laws, ch. 122, §§ 4-5. Exhibit 2. This legislation modified the Contract to reduce the Angelos Firm's contingent fee to a maximum of 12.5°la of any recovery and confirmed co a1. that any fee recovery is subject to the reasonableness limitations of MRPC 1.5(a). ts ~. ~ r.>
Page 15: mve62d00
range from $355,000 accepted by counsel for American Samoa {which ifpaidfmm American Samoa's direct recovery rather than from the separate fund would be approximately 1.1% of its $30 million allocated share) to $80 million for counsel for the State of Washington (which corresponds to approximately 2.0% of Washington's allocated share of $4.02 billion). Expressed as a percentage of allocated share, the Liquidated Fees to date range from 0.44°l0 for counsel for Pennsylvania to 2.0% for counsel for Washington. On information and belief, Outside Counsel for five additional states have requested Liquidated Fee offers, and offers from the OPMs are under consideration; and Outside Counsel foranother eight states rejected the Liquidated Fee offered. Exhibit 9 to this Complaint presents the information currently known to plaintiffs' counsel concerning the status of each state's Outside Counsel's actions with respect to the fee provisions of the MSA. 41. As an alternative to the Liquidated Fee procedure, the MSA permits Outside Counsel to apply for a Fee Award to be determined by arbitration. Outside Counsel may seek arbitration after rejecting a Liquidated Fee offer or counsel may bypass the Liquidated Fee process altogether. The process for obtaining a Fee Award is set out in §§ 12-14 of the Model State Fee Payment Agreement, and the process for payment of a Fee Award is provided in §§ 16-18. 42. The most important difference between a Liquidated Fee and a Fee Award is that, unlike the Liquidated Fee condition, acceptance of a Fee Award from the arbitration Panel has no effect on the rights of Outside Counsel to pursue fee claims against the state, based on independent representation contracts, except for a dollar-for-dollar credit of the co t. 4 amount received from the OPMs against any independent claim. Exhibit 0 to the MSA ~ cr ~ provides: 0 14
Page 16: mve62d00
# amount of fees due: ( 3 J a "Liquidated Fee" negotiated directly between Outside Counsel and the OPMs, Exhibit Q§§ 6-9, or (2) a "Fee Award" to Outside Counsel Fmrr an Arbitration Panel, §§ 10-18. Outside Counsel's expenses are paid through a separate method resulting in a "Cost Statement." Exhibit O§ 19. 37. To trigger the process for negotiating a Liquidated Fee, an Outside Counsel may notify the OPMs that it seeks to be paid a Liquidated Fee. The OPMs must then make an offer of a fee amount within 60 business days. The Outside Counsel may accept, reject or counter the offer. The Liquidated Fee negotiations do not in any way prejudice an Outside Counsel's ability to seek an arbitrated Fee Award ifnegofiations are unsuccessfui. Exhibit O§7. 38. e fund created for that purpose by the OPMs. The OPMs will pay liquidated If Outside Counsel and the OPMs agree on a Liquidated F'ee, it is paid from an fees in a total amount not to exceed $ I,250,000,000, over the period from February 1, 2999 through the end of 2003. 39. ToqualifyforaLiquidatedFee,theOutsideCounse]mustreieaseclientsinthe underlying litigation, i.e., the State and the Attorney General, from any additional claims for attorneys' fees. Id. at § 4(b). Such a release, however, is not a pre-eond`ttion to negotiations, and (httside Counsel thus are able to negotiate and evaluate a possible Liquidated Fee without waiving any rights. If an offer of a Liquidated Fee is rejected, Outside Counsel are free to apply for fees through the alternate route of arbitration. Ict at § 7(d). 03 40. On information and belief, as of December 3, 1999, Outside Counsel for at least 15 states and territories (excluding the four states that settled before the MSA) have rn C:t 0 ~ _.. , accepted Liquidated Fees negotiated with the OPMs. The amounts of these Liquidated Fees . tr~ ~ 13
Page 17: mve62d00
0 fee shall be reasonable." Maryland Rule of Professional Conduct 1.5(a)("MRPC 1.5"). Immediately, plaintiffs ask this Court to dete (a) that the Angelos Firm has fiduciary and contractual duties to maximize its recovery by seeking a separate recovery of all or part of its fee and expenses directly from the tobacco manufacturers under an arbitration procedure established by the global tobacco settlement, and (b) that the Angelos Firm's ongoing breach of those fiduciary and contractual duties bars the Firm from impounding any of the settlement payments to the State which will begin on or about December 14, 1999. 2. A temporary restraining order and preliminary injunction are necessary to prevent the Angelos Firm from continuing to place its interest in maximizing its own fee recovery over the interests of its client, the State, in recovering the total payments the tobacco industry will pay the State under the Master Settlement Agreement {"MSA"~. The threat of harm to the public is immediate. The first payment ofsettlement funds to the State, exceeding $55 million, is due on December 14, 1999. If the Angelos Firm is permitted to enforce the contractual collection mechanism, while continuing to breach its duty to seek payment frorn the separate and additional funds available under the Master Settlement Agreement, the Firm will tie up as much as $20 million from that first payment pending ultimate adjudication of the fee dispute. The public witl be harmed by being deprived of the use and benef ts of those funds now. 3. The immediate threat ofha.tm to the public and the Angelos Firm's breach of its fiduciary duties are all the more serious because the arbitration procedure specified under the MSA involves absolutely no prejudice to the Angelos Firm's ultimate contractual claim. 2
Page 18: mve62d00
normally provided by nationally recognized plaintiffs' counsel in the performance ofservices similar to the services to be provided hereunder." Irl.17. Under the Contract, "{t]he Attorney General shall have the authority to control all aspects of the Contractor's handling of the litigation contemplated by this Contract ('the Tobacco Litigation'). Such authority shall he final, sole and unreviewable." Id 12.1; see also id. ¶ 2.l .F. 13. All compensation to the Angelos Firm under the Contract is contingent on a recovery in the tobacco litigation. Contract 132 (Exhibit 1.) In the event of recovery, the Contract provides for payment to the Angetos Firm of a fee of 25% of the recovered funds plus the reasonable expenses of litigation incuned by it Id. 13.1. The contract requires the Angelos Firm to bear all of the expenses of the tobacco litigation, with reimbursement only in the event of a recovery. Id. '$ 2. t.c. 14. The method of payment of tees and expenses is set out in13 of the Con'tract as follows: 3.3 The Contractor shall: A. Hold any monies received as a result of any settlement, legal final judgment, or as a bond, in an interest bearing account in a financial institution acceptable to the State having, at least five hundred million dollars in assets and in a joint account bearing the names of both Contractor and the State as account-holders. It is further understood and agreed that contingency fee payments and percentagess shall be computed solely on the basis of the total amount of monies actually recovered and transmitted together with all accrued interest; B. Withi., thirty (30) days of the earliest legally permissible date, release and transmit any and all monies recovered to the State to the Attorney General, net of costs and fees allowed under this Contract as determined by the Attorney General, pursuant to his instructions, including interest accrued thereon; and 5
Page 19: mve62d00
cannot exceed $75 million. Any Cost Statement not paid in the year it becomes payable remains payable in subsequent years until paid in fit11. Because of this sequencing of Cost Statements for payment, there is an advantage to Outside Counsel to obtain a payable Cost Statement as early as possible. 50. Under the MSA, Outside Counsel for three Settling States have completed the Panel arbitration process and received Fee Awards. On July 29, 1999, the Panel awarded Outside Counsel for Massachusetts a fee of $775 million, which would be approximately 9.8% of Massachusetts' allocated share of $ 7.9 billion if it were not paid by the OPMs separate from and in addition to that recovery by Massaehusetts. Outside Counsel for Hawaii received a Fee Award of $90.2 million on September 8, 1999. That amount would be approximately 7.6% of Hawaii's $1.2 billion allocated share if not paid separately by the OPMs. Outside Counsel for Itlinois received a Fee Award of $121 million on October 7, 1999. That amount would be approximately 1.30% of Illinois' $9.1 billion allocated share. 51. Although Exhibit 0 states that the Panel will not rely on an award to one Outside Counsel in determining the award to other Outside Counsel, a review of the manner in which the Panel has evaluated the fee claims it has considered is instructive in how it will apply them in the future_ Examination of the factors considered by the Panel in its Fee Awards to date indicates that the Angelos Firm can expect a fair hearing and an award of ample, reasonable fees. 52. Among the factors the Panel has considered as bearing on the reasonableness of the amount of fees are the factors set out in Johnson v. Georgia Highway Express, 488 F.2d 714 (5th Cir. 1974). These Johnson factors are substantially the same as the reasonableness factors prescribed by MRPC 1.5(a). 17
Page 20: mve62d00
BooWSER1E5 10% p.C.W 68 1 9V98
Page 21: mve62d00
# largest award, among 46 states, in recognition of its higher relative importance in the overall litigation strategy. Exhibit 5, at Figures I and 2. 55. If the Angelos Firm were to seek its fees from the Panel, the Attorney Generat would strongly support a generous fee award to the Firm. Neither the State of Maryland nor the Attorney General disputes that the Angelos Firm performed well in preparing Maryland's case for trial and devoted considerable effort to that preparation. The Attorney General is ready and willing to testify before the Panel in support of a Fee Award that recol,mizes the Angelos Firm's efforts and the importance ofMaryland's case tothe overall litigation success. 55. By all analyses, the Angelos Firm can expect to obtain a fair and even generous Fee Award by the Panel from the industry through the process established in Exhibit Q. Because of the identity between the factors this Court will consider in determining a reasonable fee under MRPC 1.5(a) and the factors considered by the Panel, the Fee Award from the Panel is likely to be the same as or very close to the fee this Court will award. E. The Angelos Firm's Failure to Seek Fees or Costs from the Tobacco Industry. 57. As of November 23, 1998, when the MSA was executed, and even before State-Specific Finality was reached in Maryland on December 31, 1998, the Angelos Firm could have executed a State Fee Payment Agreement and commenced the processes of seeking payment of its fees from the OPMs through either the Liquidated Fee or the Panel Fee Award mechanisms and of seeking its expenses through the Cost Statement mechanism. 58. If the Angelos Firm bad promptly initiated either means of obtaining payment of its fees and the mechanism for payment of expenses, the Angelos Firm today likely would have either a Liquidated Fee or a Fee Award as well as a payable Cost Statement. Indeed, the Angelos Firm would likely have begun to receive payments from the OPMs on such awards. 19
Page 22: mve62d00
thus explicitly allows each state's outside counsel to obtain compensation from an alternate source, leaving t.x-, state's direct recovery intact. 33. In the MSA, the OPMs agree to "pay reasonable fees to the private outside counsel ... in accordance with the terms described in the Model Fee Payment Agreement" attached as Exhibit 0 to the MSA. MSA § XVII(d)(Exhibit 3). The MSA requires those Settling States that engaged outside counsel to designate the Outside Counsel authorized to seek payment of fees and expenses, and the Attorney General has so designated the Angelos Firm. See Exhibit S to the MSA (Exhibit 3 to this Complaint), "Designation of Outside Counsel" at S-12. The MSA requires that State Outside Counsel which seek to obtain fee and cost recovery from the tobacco industry enter into the Model Agreement attached as Exhibit 0 to the MSA; that Agreement then governs the process by which Outside Connsel obtains fees and expenses from the OPMs. 34. The Model Fee Payment Agreement states that the industry will pay "reasonable" fees as provided in the Agreement, and subject to the Code of Professional Responsibility of the American Bar Association. Exhibit 0 to the MSA at § 2. Rule 1.5 of the Maryland Rules of Professional Conduct is identical to Rule 1.5 of the American Bar Association Model Rules of Professional Conduct.. 35. The OPMs' obtigation to pay attorneys' fees directly to Outside Counsel arises "upon the occurrence of State-Specific Finality in a Settling State." MSA § XVII(d)(Exhibit 3). Maryland achieved State-Specific Fina::.y when the time to appeal from the Judgment and Order entered by Judge Brown on December 1, 1998 expired. Maryland CO thus achieved State-Specific Finality on December 31, 1998. ~' ~ Cr\ 36. Exhibit 0 to the MSA provides two alternative methods to determine the - V1 co 12
Page 23: mve62d00
and the industry's willingness to enter into the MSA. Nevertheless, the impetus to settle derived from the overall state effort against the industry rather than the sole efforts of the Angelos Firm. The Angelos Firm was not directly involved in conducting the collective settlement negotiations to any significant degree. $1. The recovery for Maryland was achieved without trial and appeals and thus without the substantial risk of failure that trial against the tobacco industry presented. 82. The parties also d'sd not and could not have anticipated when they entered into the March 1996 Contract that an ultimate settlement would include billions o€doliars from the tobacco industry, separate from the recovery of each state, to be provided for payment of the plaintiffs' attorneys' fees and costs. 83. Assuming that the Angelos Firm cures its breach of its contractual and fiduciary duties, it is entitled to a reasonable fee substantially less than the original 25% contingent fee. That amount, estimated to be approximately $1.1 billion over the next 25 years, is unreasonable and excessive in all the circumstances. X- CAUSES OF ACTION COUNT I (Breach ofContract) 84. Plaintiffs incorporate paragraphs I through 83 above in this Count 85. Under the Contract, the Angelos Firm is obligated to act as the attorney for the State and the Attorney General in the tobacco litigation. Inherent in the attorney-client relationship and thus in the Contract is a fiduciary duty owed by the Angelos Firm to the State and the Attorney General. That contractual fiduciary duty includes a duty to seek to maximize the State's recovery and to minimize its expenses in the tobacco litigation. 25
Page 24: mve62d00
The rights and obligations, if any, of the respective parties to any contract between the State of STATE and STATE Outside Counsel shall be unaffected by this STATE Fee Payment Agreement, except (a) insofar as STATE Outside Counsel grant the release described in subsection (b) of Section 4 hereof [which is the release required to receive a Liquidated Fee]; and (b) to the extent that STATE Outside Counsel receive any payments in satisfaction of a Fee Award pursuant to section 16 hereof, any amount so received shall be credited, on a dollar-for-dollar basis, against any amount payable to STATE Outside Counsel by the State of STATE ... under any such contract. Exhibit 0 to the MSA at § 5. 43. The Arbitration Panel which makes Fee Awards has three members. Two Panel members are permanent and participate in the determination of all Fee Awards. One permanent member, the "neutral member," is appointed jointly by the OPMs and representatives of the plaintiffs and their counsel in the four states that settled before the MSA. A second permanent member is designated by ttie OPMs. The third member of the Panel is a "state-specific" member selected by the Outside Counsel for the state under consideration. Thus, if the Angelos Firm were to apply for a Fee Award, it would have the exclusive right to name the third Panel member. Exhibit 0 to the MSA at § 11. 44. The Panel arbitration process begins when Outside Counsel submits an application for a Fee Award. The MSA is designed to conclude the entire Fee Awardproeess within approximately six months. Exhibit 0 to the MSA at § 12. 45. The Panel is charged in each case to render a Fee Award "that fairly provides for full reasonable compensation of [a state's] Outside Counsel." The Panel must consider "all relevant information submitted to them," and is directed not to consider other Liquidated co ct Fees or Fee Awards made or any offers of or negotiations relating to proposed Liquidated CD Fees. "The Panel shall not be limited to an hourly-rate or lodestar analysis . . ., but shall take ~, 01~ 15
Page 25: mve62d00
Respectfully submi J. JOSEPH CL`RRAN, 3R. Attvrney General of Maryland WRENCE P. FLETCHER-HILL MAUREEN ArI.DQtVE Assistant Attorneys General 200 St. Paul Place, 20th Floor Baltimore, Maryland 21202 (410) 575-6324 Attorneys for Plaintiffs State of Maryland and Attorney General J. Joseph Curran, Jr.
Page 26: mve62d00
0 the Independent Auditor that Mr. Angelos's instructions e unauthorized and that the State of Marytand had not yet provided wiring instructions. This notice was confirmed in writing, with a copy to the Angelos Fi 74. Also on December 3, 1999, the Office of the Attorney General notified the Angelos Firtn that the Firm had no authori ty to give disbursement instructions and, again, that the Firm's continuing failure to obtain an award from the industry constituted a breach of the ontractual and fiduciary obligations. The Attorney General refused to provide the wiring instructions that the Angelos Firm had demanded in its December 2, 1999 letter, and also informed the Firm that, while the Firm's breach altered the Attorney General's obligations under the Contract, the Attorney General had no intention ofunilaterally directing transmission of the funds to any account without appro competent jurisdiction. Exhibit 20. of gu 75. The Angelos Firna has had the ability, since November 23, 1998, to apply for payment of its fees and costs from the tobacco industry. As o€the date of this Complaint, it has failed to do so and it has failed even to provide the Attorney General with written assurance, without conditions, that it will do so. 76. The first payment of settlement proceeds under the MSA is scheduled to be disbursed on December 14,1999. That payment is projected to exceed $55 million. A second payment will be disbursed in late December 1999 or January 2000 and is projected to be in excess of $48 million. A third payment will be disbursed in April 2000 anci is projected to be in excess of $88 million_ ' co : -~~te~ tai~tt~S af th~ F~ A~a[[tt11~~t Es ~~a ~ e c, 77. If the Angelos Firm cures its current and ongoing breach of its contractual and ~ \0 23
Page 27: mve62d00
9 53. In making Fee Awards, the Panel also has taken into account key factors regarding the particular state's and Outside Counsel's relative contribution to and extent of work performed toward the overall success of the states' effort. These factors include: a. The date the State first filed its lawsuit, which bears not only on the length of time the State and Outside Counsel worked on the case, but also on the amount of risk ed in being a "first" or "second" tier State to file, when the possibility of success was lower; b. The firmness and proximity of the State's scheduled trial date, which bears not only on the amount of effort expended by Outside Counsel to reach an advanced level of preparation, but, more importantly, on the risk to the industry of a well-prepared case ready to be tried; and c. The value of the State's overall strategic contribution to the litigation threat to the industry, as valued by the Committee determining Strategic Contribution awards. Exhibit 5, supra. 54. These factors are likely to weigh in favor of the Angelos Firm obtaining a substantial Fee Award from the Panel: a. When Maryland filed suit on May 1, 1996, it was the eighth state to file suit; b. As of the date of the MSA, Maryland had a firm trial date in April 1999, only five months away, and Maryland was scheduled to be the fifth case to go to trial after the settlement date; c. Maryland was prepared to go forward with a strong case in April 1999; and d. Despite Maryland's relatively small allocated share of direct recovery (2.2604570%), the Strategic Contribution Panel gave Maryland the sixth 18
Page 28: mve62d00
violation ofllule 1.5(a); e. Declaring that the payment procedure provided in 13.3 of the Contract is unnecessary in light of the MSA and the Angelos Firm's right to obtain its reasonable fee and expenses directly from the tobacco manufacturers under Exhibit 0 to the MSA; and £ Declaring the amount of the reasonable fee due the Angelos Firm c4nsistent with Rule 1.5(a) and the fuIl circumstances ofthe tobacco litigation and settlement; g. Containing such injunctive provisions as are necessary to carry into effect the declaratory and other relief appropriate at the time final judgment is entered; h. Awarding the State and the Attorney General monetary damages for the Angelos Firm's breaches of the Contract and its fiduciary duty; and i, Such additional relief as may be just and appropriate. Respectfully Submitted, J. JOSEPH CURRAN, JR. ATT(}RNEY GENERAL CARMEN M. SHEPARD Dq" Attorney General . Fletcher- Maureen M. Dove Assistant Attorneys General 200 Saint Paul Place Baltimore, Maryland 21202 410-576-6345 December 8, 1999 35
Page 29: mve62d00
Hartigan of Salomon Smith Barney in New York (the investment broker for the settlement escrow accounts) purporting to give Mr. Hartigan wiring instructions for deposit of Maryland's initial payment into an account established by the Angelos Firm in the jointnames of the Angeltrs Firm and the State of Maryland at Bank of America. Exhibit 16. 70. At the same time on December 2, I 999, Mr. Angelos transmitted a letter to the Attorney General in which he demanded that the Attorney General provide "adequate, acceptable assurances/confirmation that irrevocable instructions have been provided" to the appropriate entities that "the initial and all subsequent MSA payments" be deposited in a jcrint account. Exhibit 17. 71. Also late in the day on December 2, 1999, and crossing with Mr. Angelos's letter to the Attorney General, the Attorney General transmitted another letter to Messrs. Angelos and Smouse reiterating the Attorney General's demand that the Angelos Firm immediately seek payment of its fees and expenses from the tobacco industry through Exhibit 0 to the MSA and that it do so without any conditions. The Attorney General further demanded that Mr. Angelas provide an unconditional written assurance by Monday, December 6, 1999, of his Firm's intention to seek payment of its fees and expenses from the tobacco industry. Exhibit 18. 72. Mr. Angelos's attempt, on behalf of his Finn, to provide unilateral wiring instructions for the deposit of the initial payment to the State of Maryland on December 2, 1999 was unauthorized. Under the terms of the Escrow Agreement controlling the MSA Escrow Accounts in New York, only the State, by its Attorney General, is authorized to provide wiring instructions. See Attachment to 9/251etter, Exhibit 13. 73. On the morning of December 3, 1999, staff of the Attorney General informed 22
Page 30: mve62d00
COUNT III (Breaches of Contract and Fiduciary Duty-Forfeifure of Fee) 103. Plaintiffs incorporate paragraphs 1 through 83 above in this Count. 104. The breaches of contract and fiduciary duty alleged in Counts I and II above are particularly serious because the Angelos Firm has placed its interests in increasing the size of its fee ahead of its client's interests i . The Angelos Firm has delayed seeking relief of direct benefit to the State to gain a strategic benefit for itself in its fee claim. 105. The Angelos Firm's futl and prompt performance of its contractual and fiduciary obligations will not prejudice its fee claim in any way. Section 5 of Exhibit 0 of the MSA provides that an award of fees and expenses by the Arbitration Panel does not affect the Angelos Firm's contractual claim for fees or expenses against the State in any way, except that any amount actually received by the Angelos Firm directly from the tobacco manufacturers would be credited against any amount contractually due from the State. 106_ An attorney who commits serious misconduct in his representation ofa client is not entitled to a fee. 107. Although the Angelos Firm's delay to date in obtaining an award of fees and expenses under Exhibit 0 of the MSA is hannful to the plaintiffs, the breach can be cured and the harm mitigated by the Angelos Firm promptly obtaining such an award. If, however, the breaches of contract and fiduciary duty are not cured and the Angelos Firm fails altogether to obtain such an award, those breaches would implicate the serious misconduct of the Angelos Firm placing its interests in increasing the size of its fee ahead of its client's interests in the litigation. In those circumstances, the Angelos Firm would forfeit its entire claim to a fee. 30
Page 31: mve62d00
COLINT IY (Construction of Contract) 108. Plaintiffs incorporate paragraphs I through 83 above in this Count. 109. Under Rule 1.5(a) of the Maryland Rules of Professional Conduct, "[a} lawyer's fee shall be reasonable." 110. MRPC 1.5(a) qualifies every contingent fee agreement of a Maryland lawyer, including the Contract between the Attorney General and the Angelos Firm. The Angelos Firm is not contractually entitled to a fee greater than what is judicially determined to be reasonable in all the circumstances. I11. In accordance with 1998 Md. Laws, ch. 122, §§ 4-5, the Angelos Firm's contractual fee is also limited to no more that 12.5% of any recovery. 112. If the Angelos Firm were to receive 25% of the State's recovery under the MSA, as it has claimed, it would receive an estimated $1.1 billion over 25 years, with additional amounts in subsequent years. 113. The Angelos Finn has been reported in media accounts to have estimated that evoted approximately 5t3,(ltt{0 hours to the State's tobacco litigation. Based on that estimate, a$1.1 billion fee would amount to $22,000 per hour for every hour spent on the litigation by every lawyer of every level of skill and experience. Although a reasonable fee under MRPC 1.5(a) is based on multiple factors, not just the hours devoted to the litigation, a fee averaging $22,000 per hour of effort would be exorbitant and unconsUionable. 114. In all the circumstances of this case, a fee of 25% of the State's recovery would be plainly unreasonable and in violation of MRPC 1.5(a). 31
Page 32: mve62d00
b, Ordering that the Attorney General and the State have no obligation to perform further under 13.3 of the Contract until and unless the Angelos Firm obtains an award of its fees and expenses under Exhibit f# of the MSA and specifically that the Attomey General is authorized until and unless that condition is met to direct all payments under the MSA directly to the State treasury; and c. Enjoining the Angeios Firm from interfering in any way with payment directly to the State Treasury of any recovery to the State under the MSA; 2. A final judgment: a. Declaring that the Angetos Firm has breached the Contract and its fiduciary duty to the State and the Attorney General by failing to obtain an award of its fees and expenses from the tobacco manufacturers under Exhibit 0 of the MSA; Declaring that the Attorney General and the State have no obligation to perform further under13.3 of the Contract until and unless the Angelos Firm obtai award of its fees and expenses under Exhibit 0 of the MSA and specifically that the Attorney General is authorized until and unless that condition is met to direct all payments under the MSA directly to the State treasury; c. Declaring that, i f the Angelos Firm never obtains an award of its fees and expenses under Exhibit 0 of the MSA, it will have forfeited its entire claim to fees and expenses under the Contract by its breach of the Contract and its fiduciary duty to the State and the Attorney General; d. Declaring that the Angel m fee pursuant to Rule 1.5(a) of the Maryland Rules of Professional Conduct and that its claim for a contingent fee of 25% projected to be $1.1 billion over 25 years is unreasonable and in -k C-3 0 34
Page 33: mve62d00
fiduciary obligations by seeking payment of its fees and expenses under Exhibit 0 to the MSA, the Finn will be entitled to a reasonable fee in accordance with MRPC 1.5(a). This Court will be called upon to determine what fee is reasonable under all the circumstances. The determination of what is reasonable is made at the time the fee is paid, not when representation was commenced. 78. When the Attorney General entered into the Contract with the Angelos Firm in March 1996, a 25% contingency fee was not unreasonable. At that time, no p1a'sntiffhad ever prevailed against the recalcitrant and resource-rich tobacco industry in litigation of this type. Equally important, Maryland was only the eighth state to sue the tobacco industry, and a "critical mass" of suing states had not yet coalesced in opposition to the industry. The prospect for Maryland was that any recovery would follow only after intensive litigation, a Maryland trial, and subsequent appeals. The possibility of settlement was remote and not likely to occur outside of Maryland-specific proceedings and negotiations. 79. The final settlement achieved in November 1998 was the product of the concerted efforts of all the states, including the four states that had already settled individually, and the District of Columbia and territories. The terms and amount of the ultimate MSA were negotiated collectively by the Attorneys General, and the amount of Maryland's recovery was determined primarily by an allocation formula based on direct Medical Assistance costs and population, rather than through one-on-one negotiations between the Angetos Firm and the tobacco industry- 8d. The State of Maryland, with the able assistance and hard work of the Angefos Firm, litigated hard against the industry and was prepared for trial in April 1999. Those facts contributed toward the "critical mass" with which the industry was faced in November 1998 24
Page 34: mve62d00
3tg :3 av; STATE OF MARYLAND and J. JOSEPH CURRAN, JR. ATTORNEY GENERAL, * IIV' TI-IE * CIRCUIT COURT $ FOR * BALTIMORE CI'I`Y Plaintiffs, V. THE LAW OFFICES OF PETER G. ANGELOS, P.C. " One Charles Center 100 North Charles Street * ~( Baltimore, Maryland 2120 1, Civil Case No~"T- Serve: Peter G. Angelos, Esquire One Charles Center, Suite 8 €€} 100 North Charles Street Baltimore, Maryland 21201 Defendant. * PLr11 IYTI1n'FS' MEMOItA1YDUR'I IN SUPPORT OF THEIR MOTION FOR PRELIMINARY IYJLtNCTiON Plaintiffs, the State of Maryiand and Attorney Generai J. Joseph Curran, Jr., bring this action to resolve a dispute over the fee due to the Law Offices of Peter G. Angelos, P.C. for representing the State in the tobacco litigation in this Court. Under its representation contract with the Attorney Generat, the Angelos Firm claims a 25% contingent fee which, based on the State's projected recovery of $4.4 billion over the next Z5 years, would amount to $1.1 billion. The Angelos Firm's compensation, however, is governed by the ethical prescription that "[a] lawyer's fee shall be reasonable:" Maryland Rules of Professional Conduct 1.5(a). This Court ultimately must apply the factors prescribed by Rule 1.5(a) to determine the amount of reasonable compensation in these extraordinary circumstances.
Page 35: mve62d00
0 59. To date, however, the Angelos Firm has failed to i p Ce or expense recoverJ under Exhibit 0 to the MSA. The Angelos Firm has not requested a Liquidated Fee offer from the OPMs; it has not applied to the arbitration Panel for a Fee Award; and it has not submitted a Cost Statement. bd. Actual receipt of settlement payments under the MSA by the individual states depended on "final approval" of the Master Settlement, which is defined under the MSA as the later o€the date of final approval in both 80% of the states and in states whose allocated shares aggregate to at least 80% of the total award or June 30, 2000. 61. In September 1999, the Settling States were informed that the tiiresholdoffinat approval was approaching. The notice requested that the States provide wiring instructions for the initial payment. Exhibit 11. Because ofuncertainty regarding the Contract with the Angetos Firm in light of the Exhibit 0 provisions, Maryland provided no instructions at that time. 62. On September 25, 1999, the Attorney General wrote to Peter G. Angelos and H. Russell Smouse at the Angelos Firm, informing them that the date of final approval was approaching and requesting that they promptly submit a claim for recovery of fees and costs to the industry promptfy. Exhibit 12. 63. Discussions between the parties failed to produce agreement, and the Angelos Firm did not submit any claim during the next six weeks. 64. On November 5, 1999, the Attorney Genera'l wrote to Messrs. Angelos and Smouse again, informing the AngeIos Firm that the initial payment was imrninent. The Attorney General specifically asked the Firm to submit a claim for fees and costs no Iaterthan Wednesday, December 1, 1999, and to provide him with written assurance, no later than 20
Page 36: mve62d00
i STATE OF MARYLAND and J. JOSEPH CURRAN, JR. ATTOItNEY GENERAL, Plaintiffs, IN fiIIE * CIRCUIT COURT * FOR * BALTIMORE CITY * THE LAW OFFICES OF PETER G. ANGELOS, P.C. * One Charles Center, Suite 839 100 North Charles Street * Baltimore, Maryland 21201, Civil C'ase * Serve: Peter G. Angelos, Esquire One Charles Center, Suite 810 * 100 North Charles Street Baltimore, Maryland 21201 * Defendant. * * * * * * ,* * MOTION OF PLAINTIFFS, STATE OF MARYLAND AND ATTORNEY GENERAL J. JOSEPH CURRAN, JR., FOR PRELIMINARY INJUNCTION The State of Maryland and the Attorney General of Maryland, J. Joseph Curran, Jr., by and through the Office of the Attorney General and its undersigned attorneys, move, pursuant to Md. Rules §§ 15-501 et seq., for preliminary injunctive relief against the defendant, the Law Offices of Peter G. Angelos, P.C. Preliminary injunctive relief is appropriate because, as plaintiffs demonstrate in the attached memorandum in support of this motion: I. There is great likelihood that plaintiffs will succeed on the merits; 2. The balance of convenience favors the plaintiffs, in that greater injury wil
Page 37: mve62d00
difference between the amount awarded by the Arbitration Panel and the amount ultimately determined by this Court to be reasonable is likely to be small. 120. If, as can be expected, the Arbitration Panel awards the Angelos Firm a full and reasonable fee, the Angelos Firm will not be entitled to recover anything from the payments made to the State under the MSA and the payment procedure under13.3 of the Contract will be unnecessary. 121. Even if the Arbitration Panel awards the Angelos Firm an amount less than this Court ultimately determines to be reasonable, the payment procedure under13.3 of the Contract is unnecessary until that determination is made. '&ecause the payments to the State will continue long after that determination is made, there will be multiple large payments from which necessary adjustments can be made. 122. Enforcing the payment procedure under 1 3.3 of the Contract in these unanticipated circumstances would be contrary to the public interest. Until an arbitration Panel fee award is made to the Angelos Firm and the amount of the reasonable fee is determined by this Court, the public should not be denied the use of tens of millions of dollars to which the Angelos Firm is unlikely ever to Ize entitled. XL RELIEF REQUESTED WHEREFORE, the State of Maryland and the Attorney General respectfully request that this Court issue the following relief against the Angelos Firm: 1. A temporary restraining order and preliminary injunction: a. Enjoining the Angelos Firm to seek payment of its fees and expenses from the tobacco manufacturers without further delay under the terms of Exhibit 0 of the MSA; 33
Page 38: mve62d00
99. The Angelos Firm's failure to obtain an award of fees and expenses directly from the tobacco manufacturers under Exhibit 0 oftlse MSA will harm the State by directly reducing the size of the State's recovery. The MSA provides an entirely separate and additional source of funding for fee and expense awards. Any amount the State may ultimately be required to pay from its recovery to the Angelos Firm as a fee or for expenses would be reduced dollar-for-dollar by the Angelos Firm's recovery directly from the manufacturers under the MSA. 100. Even if the Angelos Firm ultimately obtains an award of fees and expenses under Exhibit 0 of the MSA, the State and the Attorney General have been harmed by the Angelos Firm's delay, to date, of more than one year in seeking such an award. The Angelos Firnt's delay in seeking an award has unnecessarily prolonged the fee dispute between the Angelos Firm and the State. If any disputed amounts must be retained in a joint account under 13.3 of the Contract, the State will be deprived of the use of those funds in the public interest until the dispute eventually is resolved. In addition, the Angelos Firm's delay may reduce the likelihood that it will be paid all of any award of fees and expenses it may later obtain under Exhibit 0 of the MSA. In addition to other reliefas requested in this action, the Attorney General and the State are entitled to ages for the Angelos Firm's breach of the Contract. The amount of damages will depend on whether and when the Angelos Firm ultimately performs its fiduciary duty to obtain a:= award of fees and expenses under Exhibit 0 of the MSA. 102. Under established principles of equity, this Court may enter an injunction requiring a fiduciary to perform its obligations. 29
Page 39: mve62d00
9 94. dispute eventually is resolved. Ir -iddition to other relief as requested in this action, the Attorney General and the State are entitled to damages for the Angelos Finn's breach of the Contract. The amount of damages will depend on whether and when the Angelos Firm ultimately performs its obligation under the Contract to obtain an award of fees and expenses under Exhibit 0 of the MSA. COUNT II (Breach of Fiduciary Duty) 95. Plaintiffs incorporate paragraphs I through 83 above in this Count, 96. As the attorneys for the State and the Attorney General, the Angelos Finnowes the State and the Attorney General a fiduciary duty independent of and in addition to the terms of the Contract. That fiduciary duty arising from the attorney-client relationship includes a duty to act at alt times in the State's interests, a duty to pursue the State's interests in a timely and diligent manner, and a duty to seek to maximize the State's recovery and to minimize its expenses in the tobacco litigation. 97. To date, the Angelos Firm has failed to submit or to prosecute in claim for its fees and expenses from the tobacco manufacturers under Exhibit t0 to the MSA. By its failure to submit and prosecute a claim for its fees and expenses under Exhibit 0 to the MSA, the Angelos Firrn has failed to maximize the State's recovery and minimize its expenses in the tobacco litigation. 98. By failing to submit or to prosecute in any way a claim for its fees and expenses from the tobacco manufacturers under Exhibit 0 to the MSA, the Angetos Firm has breached its fiduciary duty to the Attorney General and to the State. 28
Page 40: mve62d00
! 115. This Court must determine and declare the fee that is reasonable in the circumstances of this litigation. COUNT V (Construction of Contract) 116. Plaintiffs incorporate paragraphs I through 83 above in this Count. 117. When the Attorney General and the Angelos Firm entered into the Contract, they did not and could not anticipate that a settlement would be reached under which the tobacco manufacturers would be required to pay, in addition to more than $206 billion directly to the States, billions of separate and additional dollars in outside counsel's fees and expenses. The Attorney General and the Angelos Fi Iso did not and could not anticipate that a settlement would be rearhed under which regular payments would be made to the State for a period of 25 or more years. 118. The payment procedure provided in13.3 of the Contract assumes that the Angelos Finn's entire fee and expenses would have to be paid from any funds recovered by the State. The availability of an entirely separate source for payment of fees and expenses under Exhibit 0 of the MSA requires construction of 13.3 of the Contract in these new circumstances. 119. The Angelos Firm is likely to obtain from the Arbitration Panel a fiili award of its reasonable fee. Section 14 of Exhibit 0 to the MSA provides that the Arbitration Panel is to make fee awards that "fairly provide[ ] for fu11 reasonable compensation" and "which take into account the totality ofthe circumstances," and the Arbitration Panel is in fact taking into account the factors in Rule 1.5 of the American Bar Association Code of Professional Responsibility, which are the same factors as apply to this case under MRPC 1.5(a). Any 32
Page 41: mve62d00
9 0 On December 14, 1999, the State will receive the initial payment of more than $55 million under the Master Settlement Agreement. At stake immediately is whether tens of millions of dollars from that payment (and other payments which will be made before the ultimate fee dispute can be resolved) can be impounded because of the fee dispute. Plaintiffs ask this Court to determine: that the Angelos Firm has fiduciary and contractual duties to maximize the State's recovery from the tobacco litigation by seeking a separate recovery of all or part of its fees and expenses directly from the tobacco manufacturers under the arbitration procedure provided as part of the Master Settlement Agreement; and 2. that the Angelos Firm's ongoing failure to seek such an award, in b those fiduciary and contractual duties, bars the Firm from impoun the settlement payments to the State that will begin on December STATEMENT OF FACTS Plaintiffs will summarize the essential facts here. The facts are set forth in greater detail in the Complaint filed in this Court. Those facts are verified by the affidavit ofL3onna L. Jacobs, attached to the Complaint. To avoid unnecessary duplication, plaintiffs refer to the exhibits attached to the Complaint. A. The Representation Contract The Attorney General and the Law Offices of Peter G. Angelos, P.C. entered into a Contract dated March 27, 1995 under which the Angelos Firm agreed to provide legal advice and representation to the Attorney General and the State in the litigation the State was planning against the tohacco industry. The Contact provided that the Attorney General would "control all aspects of the Contractor's handling of the litigation °" Contract 12.1 (Exhibit I to the Complaint). All compensation to the Angelos Firm under the Contract is contingent on 2
Page 42: mve62d00
November 15, 1999, of their intention to do so. Exhibit 13. 65. On November 15, 1999, after further discussions, Mr. Ange.os wrote to the Attorney General, that he had explained verbally why he would not file a claim by December 1, but that "we have been and remain willing to go to the Panel on belra f of the 5'tate ...." Exhibit 14 (emphasis supplied). Mr. Angelos further suggested that additional discussions were required "on the timing and appropriate manner of mitigating the State's legal expense through a Fee Award." 66. By its statements in Mr. Angelos's November 15,19991etter, theAngelos Firm admits that a Panel Fee Award to the Firm from the OPMs will benefit the State by compensating the Firm with additional funds separate from the State's recovery, as alleged in this Complaint. But Mr. Angelos failed to acknowledge that application for a Fee Award or the submission of a Cost Statement is entirely within the ability and capacity of the Firm as designated Outside Counsel. 67. On November 29, 1999, the State was notified by the Independent Auditor for the MSA, PricewaterhouseCoopers, L. L. P., that the initial payments would be transmitted to the states in which settlement was final, including Maryland, on December 14, 1999. Exhibit 15_ Through earlier telephone conversations with the Independent Auditor, staf£of the Attorney General's Office had informed the Independent Auditor that Maryland was not yet prepared to submit wiring instructions for the initial payment. 68. During the aeeks immediately preceding December 2,1999, Mr. Angelos met or had telephone conversations with the Governor and the Attorney General and members of their staffs to discuss these issues. 69. Late in the day on December 2, 1999, Mr. Angelos transmitted a letter to John 21
Page 43: mve62d00
achievement of a recovery by the State in the iitigation, Contract ¶ 3,2. In the event of recovery, the Contract provides for payment to the Angelos Firm of a fee of 25% of the recovered funds plus the reasonable expenses of litigation incurred by it. Id. 1 3.1. The Angelos Firm was required to bear all of thes expenses of the tobacco litigation, with ment only in the event of a recovery. Id. 12, l.c. The method of payment of fees and expenses is set out in ¶ 3 of the Contract as follows: 3.3 The Contractor shal E: A. Hold any monies received as a result of any settlement, legal final judgment, or as a bond, in an interes: bearing account in a financial institution acceptable to the State having, at least five hundred million dollars in assets and in a joint account bearing the names of both Contractor and the State as account-holders. It is further understood and agreed that contingency fee payments and percentages shall be computed solely an the basis of the total amount of monies actually recovered and transmitted together with all accrued interest; B. Within thirty (30) days of the earliest legally permissible date, release and transmit any and all monies recovered to the State to the Attorney General, net of costs and fees allowed under this Contract as determined by the Attorney General, pursuant to his instructions, including interest accrued thereon; and C. Shall prepare and submit to the Attorney General an itemized computation of the contingency fee and expenses, in a manner and form acceptable to the State auditors, in advance of the payment referred to in paragraph B, above. Contract 13.3. ln the course of the tobacco litigation, at the initiative of the Attorney General, the Maryland General Assembly passed 1998 4[d. Laws, ch. 122, to address an issue held by the Circuit Court to bar parts ofthe State's recovery. That legislation also included the following uncodified sections: Section 4. That the Law Offices of Peter G. Angelos and the Attorney 3
Page 44: mve62d00
• i be done to the State without the injunction than would resu7t to the defendant from its refusal; 3. The State and the Attorney General will suffer irreparable injury unless the injunction is granted; and 4. The public interest will be served if the injunction is granted. Wherefore, plaintiffs request that preliminary injunctive relief be granted, as fotlows: a. Enjoining the Angelos Firm to seek payment of its fees and expenses from the tobacco manufacturers without further delay under the terms of Exhibit 0 of the MSA; b. Ordering that the Attorney General ,snd the State have no obligation to perform further under 13.3 of the Contract until and unless the Angelos Firm obtains an award of its fees and expenses under Exhibit 0 of the MSA and specifically that the Attorney General is authorized until and unless that condition is met to direct all payments under the MSA directly to the State treasury; and c. Enjoining the Angelos Firm from interfering in any way with payment of any MSA recovery directly to the State Treasury. 2
Page 45: mve62d00
0 86. Under the Contract, the Angelos Fi a ey, is obligated to represent the State's interests fully and competently in the tobacco litigation. Paragraph 7 of the Contract requires the Angelos Firm to perform the services required by the Contract "with the standard of care, skill, and diligence normally provided by nationally recognized plaintiffs' counsel in the performance of services similar to the services to be provided hereunder." That contractual duty to provide full and competent representation meeting the standard of care, skill, and diligence of nationally recognized plaintiffs' counsel includes a duty to seek to maximize the State's recovery and to minimize its expenses in the tobacco litigation. 87. Under 12.1 of the Contract, the Attorney General has "final, sole and unreviewable" authority "to control all aspects ofthe Contractor's handling of the litigation," and, underl 2.1. F of the Contract, the Angelos Firm has a duty to "[pjerform all legal services necessary, as determined by the Attorney General, to successfully litigate on behalf of the State, its claims against the tobacco industry." 88. The Attorney General has directed the Angelos Firm to submit and prosecute a claim for its fees and expenses to the Arbitration Panel under the MSA and to provide written assurances to the Attorney General that it will submit and prosecute such a claim. 89. To date, the Angelos Firm has failed to submit or to prosecute in any way a for its fees and expenses from the tobacco manufacturers under Exhibit 0 to the MSA. To date, the Angelos Firm has failed even to provide unconditional written assurances to the Attorney General that it will submit and prosecute a claim for its fees and expenses under Exhibit 0 to the MSA. By its failure to submit and prosecute a claim for its fees and expenses under Exhibit 0 to the MSA, the Angelos Firm has failed to maximize the State's recovery and minimize its expenses in the tobacco litigation. 26
Page 46: mve62d00
9E1. By failing to submit or to prosecute in any way a claim expenses from the tobacco manufacturers under Exhibit (3 to the MSA, the Angelos Firm has breached its Contract with the Attorney General. Specifically, the Angelos Firm has breached, inter alia, (a) its contractual fiduciary duty, (b) its duty to provide fu.t2 and competent representation at a high standard of care, skill, and diligence, (c) its covenant of good faith and €air dealing, and (d) its duty to obey the Attorney General's instructions. 91. Because of the Angelos Firm's ongoing breach of the Contract, the Attorney General is excused from performing further under the Contract. Specifically, the Attorney General is excused from depositing any recovery in accordance with the payment procedure provided in 13.3 of the Contract. 92. The Angelos Firm's failure to obtain an award of fees and expenses from the tobacco manufacturers under Exhibit 0 of the MSA will harm the State by directly reducing the size of the State's recovery. The MSA provides an entirely separate and additional source of funding for fee and expense awards. Any amount the State may ultimately be required to pay from its recovery to the Angelos Firm as a fee or for expenses would be reduced dollar-for-dollar by the Angelos Firm's recovery directly from the manuEacturers under the MSA. 93. Even if the Angelos Firm ultimately obtains an award of fees and expenses under Exhibit 0 of the MSA, the State and the Attorney General have been harmed by the Angelos Firm's delay, to date, of more than one year in seeking such an award. The Angelos Firm's delay in seeking an award has unnecessarily prolonged the fee dispute between the Angelos Firm and the State. If any disputed amounts must be retained in a joint account under 13.3 of the Contract, the State will be deprived of the use of those fiinds in the public 27
Page 47: mve62d00
0 from the tobacco industry to compensate outside counsel permits the states to preserve the payments directly to the states for public purposes. The procedure for determining and paying the fee and expense claims of outside counsel is provided in a Model State Fee Payment Agreement attached as Exhibit 0 to the MSA. That Agreement provides two alternative methods for determining a reasonable fee amount and a separate procedure for fixing the amount of costs to be reimbursed. The amounts awarded are paid directly by the Original Participating Manufacturers or "OPMs." To obtain payment of its fees, outside counsel may either ( i) negotiate with the OPMs e ced upon "Liquidated Fee," MSA, Exhibit O§§ 6-9, or (2) apply for a "Fee Award" determined by an arbitration Panel, irJ, §§ 1(1-18.' The alternative mechanisms are not exclusive. Outside counsel may attempt negotiations and, =f unsuccessfut, initiate Panel arbitration, or they may bypass the Liquidated Fee mechanism and proceed directly to arbitration. Both the Liquidata Fee and Fee Award processes have specific timelines. From start to finish, the arbitration process is designed to produce Fee Awards within about six months. One of the important distinctions between the Liquidated Fee and Panel Fee Award features is the effect each has on any separate contractual claim outside counsel may have ` The arbitration Panel has three members. I'w a Panel members are permanent and participate in the determination of all Fee Awards, One of the permanent members is appointed jointly by the OPMs and representatives of the plaintiffs and their counsel in the four states that settled before the MSA. Another permanent member is designated by the OPMs. The third member of the Panel is a"state-specific" member selected by the Outside Counsel for the state under consideration. Thus, if the Angelos Firm were to apply for a Fee Award, it would have the exclusive tight to name one of the Panel members. Exhibit 0 to the MSA at § 11.
Page 48: mve62d00
! L30°la o€Illinois' $9,1 billion allocated share. E. The Par'ies' Dispute Concerning the Initial MSA Payments On the day the MSA was announced, Peter G. Angelos announced at a press conference with the Governor and the Attorney General that he would attempt to obtain his fee directly from the tobacco industry. As of November 23, 1998, when the MSA was executed, and even before State-Specific Finality was reached in Maryland on December 3 1, 1998, the Angelos Firm could have executed a State Fee Payment Agreement and commenced the process of seeking payment of its fees and expenses from the OPMs under Exhibit O to the MSA. If the Angelos Firm had promptly initiated such efforts, the Angelos Firm today likely would have either a Liquidated Fee or a Fee Award as well as a payable Cost Statement, Indeed, the Firm likely would now be receiving payments from the OPMs on such awards. To date, however, the Angelos Firm has failed to initiate any process of fee or expense recovery under Exhibit 0 to the MSA. For the states, actual receipt of settlement payments under the MSA depended on "final approval" of the Master Settlement, which required final approval of the MSA in both 8C3°lo of the states and in states whose allocated shares aggregate to at least 80% of the total award. Those "final approval" thresholds were achieved in late November 2994, and the first payment to the states is to be disbursed on December 14, 1999, As Maryland received indications that the point of"final approval" was approaching, ti.e Attorney General cacouraged Mr. Angelas to submit claims for fees and expenses to the OPMs on behalf of his Firm. The Angelas Firm did not invoke the Panel arbitration or Cost Statement processes. On November 5, 1999, with the likely date of the first payment the Attorney General wrote to Mr. Angelos and specifically asked the Firm to 10
Page 49: mve62d00
! CONCLUSION For all these reasons, the State and the Attorney General respectfu(ty request that this Court grant their motion for a preliminary injunction in the form proposet(. Respectfully submitted, J. JOSEPH CURRAN, JR. Attorney General of Maryland CARMEN M. SHEPARD Deputy Attorney General ence P. Fletcher-Hi31 Maureen M. Dove Randolph Stuart Sergent Assistant Attorneys General 200 Saint Paul Place Baltimore, Maryland 21202 420-576-5345 31
Page 50: mve62d00
position that it has no obligation to seek its fees or expenses under the MSA, but that it may invoke the payment mechanism under 13.3 of the Contract with the Attorney General. If the State's first payment of $55 million is deposited in a joint account pursuant to thatprovision, the Attorney General anticipates that the Angelos Firm will seek to collect the 25% contingent fee it claims as well as the total of approximately $7 to $10 million in expenses the Finn claims. If it took those actions, the Firm would cotlect or at least impound $20.75 to $23.75 million due the State from this first payment alone. The Attorney General anticipates that the Firm would also claim 25% of each subsequent payment, including the scheduled second payment of approximately $48,095,555 in late December 1999 or January 2000 and the third payment of approximately $88,720,565 in April 2000. From those payments alone, ifnot restrained, the Angelos firm thus would freeze as much as $58 million of the State's recovery, not including the Firm's claims for costs. ARGI7N7ENT I. A PRELIMINARY INJUNCTION IS WARRANTED TO REQUIRE THE ANGELOS FIRM TO FULFILL ITS DUTY TO MAXIMIZE THE STATE'S RECOVERY AND TO ENJOIN OPERATION OF THE CONTRACTUAL ESCROW PROVISION, WHICH WOULD HARM THE STATE AND ITS CITIZENS IMMEDIATELY AND IRREPAI2ASLY. The Court must weigh four factors in considering whether to grant a preliminary ion: 1. the likelihood that the plaintiff will succeed on m its; 2. the balance of convenience determined by whether greater injury would be done to the defendant by granting the injunction than would result to the plaintifffrom denying it; 3. whether the plaintiff will suffer irreparable injury if the injunction is not granted; and 12
Page 51: mve62d00
them," and it is directed not to consider other Liquidated Fees or Fee Awards made or any offers of or negotiations relating to proposed Liquidated Fees. "The Panel shall not be I imited to an hourly-rate or lodestar analysis._., but shall take into account the totatity of the circumstances." Exhibit 0 to the MSA at § 14, Both Liquidated Fees and Fee Awards are payable by the tobacco companies over time, Exhibit 0 contains separate payment schedules and caps on the amount in each category the OPMs are required to pay in any one year. In both cases, outside counsel's recovery is enhanced by obtaining an earlier award. The funds available in any given year are generally allocated based on how many awards are outstanding. Outside counsel who obtain an early award thus should have a larger portion of the award paid in the early periods, before other outside counsel obtain their awards. In addition to the alternative processes available to award attorneys' fees, Exhibit 0 provides a process for determining and awarding expenses and costs to outside counsel. An outside counsel may submit a Cost Statement to the OPMs, who must accept or dispute it within 30 business days. If it is disputed, the Cost Statement is subject to an audit by examiners appointed by the OPMs. The audit must be completed within 120 days of initial submission of the Cost Statement. If the Outside Counsel and the OPMs still cannot agree on an amount following the audit, the dispute is submitted to arbitration, either by an independent panel if the Outside Counsel already has accepted a Liquidated Fee or by the same arbitration Panel that determines Fee Awards. Exhibit 0 to the MSA at 114. Cost Statements, once determined, are paid in the order they become payable, up to an aggregate maximum o€$75 million in any one year. Outside counsel who act promptly to settle a Cost Statement thus can expect payment of their costs in full and without delay.
Page 52: mve62d00
d) Plaintiffs' Motion to Shorten Time for Defendant to Respond to Plaintiffs' Motion for Preliminary Injunction or, in the Alternative, for Temporary Restraining Order, with proposed C3rders; and e) this Certificate of Service. LAWRENCE P. FLETCHER-HILL Assistant Attorney General Office of the Attorney General 200 St. Paul Place, 20th Floor Baltimore, Maryland 21202, (410) 575-5425 Attorneys for Plaintiffs State of Maryland and Attorney General J. Joseph Curran, Jr. 2
Page 53: mve62d00
allowed for recovery of attorney's fees). The results of the Fee Award arbitration process to date under Exhibit 0 to the MSA indicate that the Angeles Firm can expect to receive a generous reward from the Panel. In the first award to outside counsel for a state settling under the MSA, the Panel awarded Massachusetts's outside counsel a fee of $775 million. That amount is just under 10% of Massachusetts's recovery, although the Commonwealth's recovery will not be diminished because the Fee Award is paid by the tobacco companies separately. In many ways, Maryland is comparable, although Maryland's allocated share under the MSA, based on Medicaid expenditures, is roughly only half that of Massachusetts. Massachusetts and Maryland both filed their suits relatively early, in the so-called "second wave." And Massachusetts also had a relatively early trial date, so its preparations contributed to the threat of actual adjudications against the industry. Although not comparable in the same way, the Panel's Fee Award of $90.2 million to Hawaii's outside counsel also is instructive. In calculating the amount o f the award, the Panel accepted the outside counsel's estimate that it had devoted approximately 40,000 hours to the effort. The Panel then used a figure of $410 per hour, which it did not otherwise explain, to yield a lodestar amount of $I5-4 cnitEion. It then applied a multiplier of 5.5 to account for the risks taken by outside counsel and their contribution to the overall settlement effort. `rVhat is most important about the Panel's decisions is that it is applying the same factors this Court will be called upon to apply in its ultimate determination of reasonable compensation. Section 2 of the Model State Fee Payment Agreement, Exhibit 0, states that the industry will pay "reasonable" fees, subject to the Code of Professional Responsibility Eb of the American Bar Association, Rule 1.5 of the Maryland Code of Professional U f G 2$ ~ N Qq
Page 54: mve62d00
0 states- Mississippi, Florida, Texas, and Minnesota -- 3n the verge of or during trial of the tobacco cases in each of those states. Serious negotiations between the states whose cases had not settled and the tobacco industry then resumed in the summer of 1998. tOn November 22, 1998,46 states (including Maryland), the District ofColumbia, and five territories (the "Settling States") entered into an historic settlement agreement settling the tobacco litigation in all remaining states and}u€isdictions, including those which had yet to file suit. On December 1, 1998, this Court (Brown, ?. ) entered a Consent Decree and Final Judgment and an Agreed Dismissal Order pursuant to the 4tSA that ended the tobacco litigation in IViaryland. C. The Terms of the Settlement Under the terme of the Master Settlement Agreement, the tobacco manufacturers agreed to a series of injunctive provisions, including prohibitions designed to end the marketing of cigarettes to minors. The Settiing States also will receive annual payments in perpetuity from the tobacco manufacturers. Over the next 25 years, those payments are projected to total more than $206 biiiion- Maryland's share of the direct payments over the first 25 years is projected to be more than $4.4 billion. Maryland also subsequently received an additional award of $283 million tiom the Strategic Contribution Fund, intended to recognize the State's role as one of the early states fiting and pursuing litigation. Many states, like YSaryland, retained private outside counsel to assist their attorneys general in pressing the tobacco litigation. As part of the settlement, the tobacco companies agreed to pay - separate and in addition to the payments to the states - the reasonable fees and expenses of these outside counsel. MSA § XVII(d)(Exhibit 3 to the Complaint). This provision is of key importance to the states because the availability of entirely separate funds i
Page 55: mve62d00
General of the State ofhfaryland agree that the contract between those parties, dated March 27, 1996, is modified to reduce the fee for legal services to 12.5%, and all other provisions of Paragraph 3 of the contract, including the provisions relating to reasonab'.e litigation expenses, as well as other terms of the contract, remain in effect. Section 5. That this Act may not be construed to affect the application of Rule 1.5 of the Maryland Lawyers' Rules of Professional Conduct to the contract, dated March 27, 1996, between the Law Offices ofPeter G. Angetos and the Attorney General of the State of Maryland or to prohibit or limit a court of competent jurisdiction from applying Rule 1. 5 to that contract. 1998 PMd. Laws, ch. 122, §§ 4-5 (Exhibit 3€o the Complaint). Section 4 modified the Contract to reduce the Angelos Firm's contingent fee to a maximum of 12.5% of any recovery. Section 5 confirmed a limitation that was inherent in the Contract from its inception: that "[a] lawyer's fee shall be reasonable." MRPC 1.5(a). B. N1arySand's Tobacco Suit and the Settlement Negotiations The State of Maryland, represented by the Attorney General and the Angeios Firm, filed its suit against the tobacco industry in this Court on May 1, 1996. SState ofhfuryfand v. Philip Morris Ine., Case No. 96122017tCL.21147. Maryland was the eighth state in the nation to file such a lawsuit; ultimately, all states filed similar lawsuits, although some did not do so until after entering into the MSA. The case was actively litigated and vigorously defended. The Court established an April 1999 trial date. Beginning in August 1996, certain of the states met to discuss the possibility of a global settlement of all state Medicaid tobacco lawsuits. This "first round" of negotiations culminated in an agreement between the states and the tobacco industry on ]une 2{J, 1997. Congress, however, failed to pass legislation necessary to the settlement, and the potential settlement cotlapsed. Between June [997 and Iune 1998, the tobacco industry settled individuail y with four 4
Page 56: mve62d00
0 i against the State it represented. A Liquidated Fee is final and conctusive. To accept it, outside counsel must be willing to release its state client from any additional liability for fees. In sharp contrast, a Fee Award has no prejudicial effect on any separate contractual claim. Exhibit 0 to the MSA provides: The rights and obligations, if any, of the respective parties to any contract between the State of STATE and STATE Outside Counsel shall be unaffected by this STATE Fee Payment Agreement, except (a) insofar as STATE Outside Counsel grant the release described in subsection (b) of Section 4 hereof (which is the release required to receive a Liquidated Feej; and (b) to the extent that STATE Outside Counsel receive any payments in satisfaction of a Fee Award pursuant to section 16 hereof, any amount so received shall be credited, on a dollar-€or-dollar basis, against any amount payable to STATE Outside Counsel by the State of STATE ..- under any such contract. Exhibit 0 to the MSA at § 5.' Thus, the only consequence of outside counsel obtaining a Fee Award front the arbitration Panel is that any amount outside counsel actually receives in payment of the award from the tobacco companies is credited against counsel's separate claim against the state it represented. The Model Fee Payment Agreement states that theindustry will pay "reasonable" fees as provided in the Agreement, and subject to the Code ofProfessiona! Responsibility of the American BarAssociation.' Exhibit 0 to the MSA at § Z. The arbitration Panel is charged in each case to render a Fee Award "that fairly provides for full reasonable compensation of STATE Outside Counsel." The Panel must consider "all relevant information submitted to z Exhibit L0 is written as a model agreement to be adopted for each state. The designation "STATE" indicates a point where the name of the particular state is to be substituted. 3 Rule 1.5 of the Maryland Rules of Professional Conduct is identical to Rule 1.5 of the American Bar Association Code Model Rules of Professional Conduct. 7
Page 57: mve62d00
. 9 obligation to seek its fees and costs through the Exhibit 0 procedures. "(AI court of equity not only has the jurisdiction, but is bound to grant every kind of remedy necessary to its complete establishment, protection, and enforcement." Carrnfne v. Bowen, iQ4 tv4d. 198,207 (1906) (internal quotation omitted); see also Killen v. Houser, 239 Ivld. 79, 86 (1965) (holding that one trustee "can maintain suit against the other to compel him to perform his duties under the trust"); Restatement (Second) of Trusts § 199 (beneficiary of trust has an equitable remedy "to compel the trustee to perform his duties as trustee ), quoted in Kann v_ Kann, 344 Md. 6$9, 709 (t 997). Plaintiffs have demonstrated a clear breach of the Firm's fiduciary and contractual obligations, and "[sjpecific performance is within the sound discretion of a court of equity ...» f{orst v. Kraft, 247 Md. 455, 459 (1967). Specific performance is partirF1tarly appropriate here because a full opportunity remains to cure the breach without farther compounding any injury to the State. The Court accordingly should enjoin the Angelos Firm to pursue a Panel Fee Award and a Cost Statement under Exhibit 0 without delay. Second, as a corollary to specific performance, the Court should declare that the State has no duty to perform its obligations under 13.3 of the Contract until and unless the Firm fntiy cures the Fintt's breaches of its duties under the Contract. Under bedrock contract law, "it is a condition of each party's remaining duties to render performances [under a contract] .. that the:e be no uncured material failure by the other party to render any such performance due at an earlier time." Restatement (Second) of Contracts § 237; id., comment a ("a material failure of performance .., operates as the non-occurrence of a condition"); K & G Constr. Co. v. Harris, 223 Md. 305, 313 (1960). Here, the Angelos f`irm's duty to seek fees from the Panel is, by its very nature, a duty that must be performed 21
Page 58: mve62d00
0 the Angelos Firm, as Maryland's designated outside counsel, is the primary party able to access those adelitional funds. The Firm's failure to tap into those funds by applying for a Fee Award orsuhmitting a Cost Statement is a plain breach of its obligation to maximize the State's overall recovery, The Firm's refusal to invoke the Exhibit 0 processes is aggravated by the fact that those processes pose absolutely no prejudice to its ultimate fee claim. Although accepting a Liquidated Fee would require the Fimt to release the State from the Finn's Contract claim, that mechanism is entirely optional and the Panel arbitration process leading to a Fee Award requires no such release. Rather, after obtaining a Fee Award, the Firm will be perfectly free to pursue its fitlI claim to 25% of the State's recovery. Indeed, the only advantage to the Firm in not seeking a Fee Award appears to be tactical. With payments beginn to the State and the threat of fees being deducted from those payments, the Firm is able to seek a concession from the State as a condition to applying for a Fee Award. Thus, the Firm has sought, from the Governor and the Attorney General, a guarantee to an ultimate fee of a certain amount before agreeing to proceed before the Panel. That is a classic example of the attorney placing his interests before those of his client. The Angelos Firm has also breached the Contract in a more basic way. The Contract requires the Firm to represent and act on behalf of the State "in all legal and administrative matters ... arising out of or in conjunction with the Tobacco Litigation." Contract fi 2.I.B. The Attorney Gener::; retains fuil authority "to control all aspects of the Contractor's handling of the litigation" and the Contract requires the Firm to "[p]erform all legal s necessary, as determined by the Attorney General, to successfully litigate on behalf of the State." Contract TJ 2.1 and 2.1.F. The Attorney General has directed the Firm to seek 18
Page 59: mve62d00
9 2. This action involves a fee dispute between the State and the Attorney General, as plaintiffs, and the Law Offices of Peter C'r. Angelos, P.C., as defendant, over the amount of compensation due the Angelos Firm for representing the State in the tobacco litigation in this Court. The Angelos Firm claims a fee of 25% of the State's recovery or approximately $1.1 billion. The State asks this Court to determine whether that fee is reasonable, in light of Maryland Rule ofprofessional Conduct 1.5{a}, which provides that "(aJ lawyer's fee shatl be reasonable." 2. Plaintiffs have filed a motion for preliminary injunction. The immediate concern of that motion is the first payment of the State's settlement proceeds, in the amount of $55 million, which is scheduled to be disbursed on December 14, 1999. `The parties dispute whether any part of that payment must be placed in a joint account pursuant to the representation contract between them. 3. Plaintiffs seek to shorten the time for the Angelos Finn to respond to the motion for preliminary injunction so that that motion may be heard and decided by the Court by December 14, 1999. Plaintiffs respectfully request that defendant's opposition be filed and provided to plaintiffs' counsel by 10:00 a.m. on December 13, 1999, and that the Court conduct a hearing in the afternoon of December 13, 1999. 4. If it is not possible to have a full preliminary injunction he e December 14, 1999, then Plaintiffs respectfully request issuance of a temporary restraining order to preserve the status quo until a preliminary injunctiva hearing can be held. The State will suffer immediate and irreparable harm if a temporary restraining order is not issued because defendants seek to impound as much as $20 million of the first payment, thereby depriving the State of the application of that money to the public interest through the State's 2
Page 60: mve62d00
i approximately $10 million. A reasonable fee in these circumstances certainly would multiply this cost by a substantial factor to account for the risk that the °irm assumed in investing these human resources, but to reach $1.1 billion that multiplier would have to be t 1D. It is difficult to imagine even the most entrepreneurial activity where the reasonable expectation is that an investment ofcapital would produce an l 1,000°lo return on investment. The State has been able to find any judicial decision in which an attorney has been allowed to collect a contingency fee that would result in a rate that is even a significant fraction of $22,000 per hour. See, e.g., In re rf.H. Robins Ca_, 86 6'.3d 364 (4th Cir. 1996) (affirming reduction in fees awarded to plaintiffs' attorneys in Dalkon Shield class action litigation); Rosquist v. Soo Gine R. R., 692 F.2d 1107 (7th Cir. 1982) (trial court may compare attorney's potential hourly fee under contingency contract with customary hourly rate by dividing requested fee by hours worked; affirming trial court determination that resulting $813.57 hourly rate was unreasonable); Iowa,Supreme Court &d. ofPra.f"1 Ethics & Conduct v. Hoffman, 572 N. W:2d 904 (Iowa 1997) (upholding disciplinary action against attorney for charging excessive fee where attorney charged $37,000 for 20 hours of work, effectively recovering $€,850 perhour); T3'hite v. McBride, 937 S. W.2d 796,801 (Tenu.1996) ("Finally, and most dramatically, we note that if White [the attorney] were to be paid in accordance with the fee contract, he would have earned approximately $950 per hour. This figure is grossly in excess of the $150 hourly rate, which... we consider to be at the upper end of `the fee customarily charged in the locality for similar legal services."); Seminole County v. Delco Oil, Inc., 669 So.2d 1162, 1166-67 (Fla. App.), review denied, 682 So. 2d I 100 (Fla. 1996) (holding that 25% fee agreement averaging out to hourly rate of $2,303.75 was co unreasonable and clearly excessive, particularly in eminent domain matter where statute ~ C 27 ~ ~ N)
Page 61: mve62d00
i mechanism provided in 13.3 of the Contract is obsolete unless the Firm will ultimately receive fees and costs in addition to what it is entitled to recover directly from the tobacco industry under Exhibit (3. Making that determination, of course, {vi1l involve requiring the Firm Frstto obtain that separate recovery and then the application of the "reasonableness" standard under Rule 1.5(a), but it is possible now to forecast at least some of the outcome of that eventual analysis. The parties' representation Contract unquestionably is limited and controlled by the Maryland Rule of Professional Conduct. As stated above, those rules "constitute[ ] a statement ofpubtic policy by the only entity in this State having the Constitutional authority to make such a statement, and [they have] the force o€taw." Post v. Bregman, 349 Md. 142, 162-63, 164 (1998). Such "subsisting laws enter into and form part of a contract as if expressly referred to or incorporated in its terms." Department ofGenerul Servs. v. R. E. Holtrnan & Assoc., 296 Md. 403, 411 (1983); Denice v. Spotswood L Quinbv. Inc., 248 Md. 428, 433-34 (1968) (existing laws "including constitutional and statutory provisions and judicial precedents" are implied terms of a contract). In Post, in considering a fee-sharing agreement that violated MRPC t.5(e), the Court ntled that "the enforcement of Rule I.5(e) is not limited to disciplinary proceedings" and held that agreements in violation of that Rule may be held unenforceable. Id. at 168. "Whether regarded as an external defense [to a conhact] or as incorporated into the contract itself," the Rules may be raised as an equitable defense to prevent attorneys from enforcing contracts in a manner that would result in a violation of their professional responsibilities. IrL at 170. Contingency fee agreements "are of special concern to the courts and are not to be 00 enforced on the same basis as are ordinary commercial contracts." Allen v. Untted States, tT. 23
Page 62: mve62d00
co m 8 235 0
Page 63: mve62d00
! 0 before the Firm's remaining fees under the Contract, if any, can be determined. "Where a contractual duty is subject to a condition precedent, whether express or implied, there is no duty of performance and there can be no breach by nonperformance until the condition precedent is either performed or excused." ~`iriffitk v. Scheungrab, 219 Md. 27, 34 (1958). Because the Firm has failed to perform this duty, no payment to Firm or even to escrow under the Contract is due or appropriate at this time. Once the Firm has fulfilled '€ts duties fully by obtaining a Fee Award and a payable Cost Statement, the Court will be in a position to determine, as part ofttte ultimate resolution of this action, whether any additional amount is due to the Firm from the State. lf necessary, the payment mechanism of 13.3 of the Contract can then be reactivated with respect to future payments from the tobacco industry to Maryland. C. Plaintiffs Also Are Likely To Succeed In Establishing That The Reasonable Fee Due The Angelos Firm Will Never Require Payment To The Firm From The MSA Payments Being Made To The State. Separate from the breach of fiduciary and contractual duties discussed above, a preliminary injunction also is warranted because the Contract mustbe construed and applied now, in light of the change in circumstances from when it was executed, and in light of the ethical command that "[a] lawyer's fee must be reasonable." MRPC 1.5(a). When the parties entered into the Contract, the parties necessarily assumed that any recovery, whether by settlement or fol lowing trial, would come to the State as plainti ff, with the Firm's fees and expenses to be paid from those funds. That has not proved to be the case. The parties could not have predicted that the settlement ultimately achieved would feature separate streams of payment to the states and to outside counsel. tn the most practical sense, the payment 22
Page 64: mve62d00
(1965)}.' Although the ultimate issue in this action is the reasonable amount of com due the Angetos Firm, the immediate focus of this motion is the impending December 14, 1999 payment of approximately $55 million. The State and the Attorney General are likely to succeed in demonstrating that the Angelos Firm has a contractual and fiduciary duty to seek its fees and costs directly from the tobacco industry under Exhibit 0 of the MSA and that the Firm's refusal to pursue such recovery excuses the Attorney General from segregating any part ofthe State's payments until the Firm brings itself into compliance with those duties. Plaintiffs also are likely to succeed in demonstrating that the escrow mechanism in the Contract, conceived before anyone could have known that there would be a comprehensive settlement of this magnitude and that the industry would agree to pay billions ofdollars in fees separately as part the settlement, is unnecessary. The Angelos Firm is likely to collect its fee ultimately from the industry, not from the State's recovery, and the escrow procedure therefore should not be enforced. The balance of harms now tilts entirely in favor of the State. If the Angelos Firm is p to persist in refusing to seek its fees and costs from the tobacco industry and instead is allowed to begin collecting its disputed fee from the State's payments, the State and its citizens will suffer the immediate and irreparable injury of being deprived of having more than $20 million spent in the public interest. Against this harm to plaintiffs and the ' See alsa United States v. Akers, 785 F.2d 814,823 (9th Cir. 1985), cert. denied, 479 U.S. 828 (1986) (trial court has "considerable discretion to fashion appropriate injunctive relief, particularly where the public interest is involved'~; United States v. Link Flight Simulation Corp., 722 F. Supp. 1248, 1254 (D. Md. 1989) (granting government's request for preliminary injunction to freeze assets). 14
Page 65: mve62d00
budget process until this fee dispute is resolved. 5. In support ofthis motion, Plaintiffs incorporate their memorandum in support of their motion for preliminary injunction filed today. 6. On Wednesday, December 8, 1999, Lawrence P. Fletcher-Hill, Assistant Attorney General and counsel for the PSaintiffs, contacted William F_ Gately, Esquire, counsel for Defendant, by telephone. Pursuant to Maryland Rule 1-204(b), Mr. Fletcher-Hill discussed this request to shorten time or for a temporary restraining order, but the parties were unable to reach agreement_ Mr. Fletcher-Hill notified Mr. f`iately of his intention to confer with the Court on December 8 or December 9, 1999, depending on the availability of the Administrative Judge. WHEREFORE, Plaintiffs respectfully request that the Court either shorten the time for Defendant to respond to Plaintiffs' Motion for Preliminary Injunction or grant a temporary restraining order, in one of the alternative f'orms provided. Respectfully submitted, J. JOSEPH CURRAN, JR. Attorney General of Maryland CbRMEN M. SHEPARI) Llwrence P. kletcher-Hi a M. Dove Randolph Stuart Sergent Assistant Attorneys General 200 Saint Paul Place Baltimore, Maryland 21202 410-576-6345
Page 66: mve62d00
! i be directed to a variety of public health and agriculture-related projects designed to achieve real benefits for Maryland's residents. But those funds cannot be used and those projects funded until they are realized. Moreover, the State's budget process dictates that the Governor know now what funds will be available to be appropriated through a balanced budget proposal in the 2000 tlegislative session. Even holding the disputed funds in escrow, interes#, does not compensate frrrthe inability to put them to use in the public interest as soon as possible. is harm there is no injury whatsoever to the .4ngelos Firm. As explained above, requiring the Fi orm its duty to seek fees and costs from the industry through the meckanisms provided does not require the Firn2 to surrender one penny of its ultimate claim. Exhibit 0 provides explicitly that a Fee Award is conclusive ofthe tobacco industry's fee obligations but does not affect outside counsel's claims against its clients in any way. That aspect of the relief sought does not impair the Firm's rights at all. Nor does non-enforcement of$ 3.3 of the Contract burt the Angelos Firm. Ordinarily, placing a litigation recovery in escrow is designed to secure the attorney's claim until a fee dispute can be resolved. But here the recovery is not paid all at once. After this Court determines the final amount of compensation, there will be ample future funds paid to the State to ensure that the Angelos Firm is paidd in full. Indeed, it is the Firm itself that is harming its position. Had the Firm performed its obligations promptly, it might have started receiving payment of its costs and fees even before the State's payments began. The Firm cannot be rewarded for its attempt to gain a strategic advantage in the underlying fee dispute m by delaying performance of its obligations. cN c~j 0 rn N 30
Page 67: mve62d00
! } 9 Time: 09:29 24-C-93-005702 Date: SERVICE Name Text Issued Res_ise Served Returned Agency clarr.y -------- -------- ------- -------- -...--- -------_.... ...------------ ----.. Law Office 12/09/99 01FWo0 ?rtaate Prccess 0EF001 WRFF (Yr SlR'PiONS TICKLE Code Tickle Name Status Expires #Days ;~:,LdfxTve i~oN:ead Frinn iy;,e Num ~eq LSRV 120 Days Lack Of -3ur ©>3ER 9TtTd/dt 1"<0 no rv3 tafl ;aJfl TFHf Motaon To EztendlSho 41PEf? 12169199 I yes no M7ST !' 0,11, '-3t9 DIFF&RENTIATED CASE MANAGEMENT TRACKS AtdTS MILEST023k;S
Page 68: mve62d00
i 39
Page 69: mve62d00
s Firm thus seeks a clear advantage by refusing to invoke the process itself. If the Firm can force the State to proceed instead, a condition to the State proceeding is that it first must pay the Firm at least some portion of the disputed fees. Third and clear2y most important, the Firm concedes nothing in the fee dispute by seeking a Fee Award, but the State risks fundamental prejudice to its ultimate position. When the Angeios Firrn goes before the arbitration Panel, it will obviously argue both that it is entitled to a 25% fee under the Contract and that that €~e, projected to be $1.1 billion, is reasonable under the circumstances. If a lesser amount is awarded, the Firm to this Court to litigate the fee dispute, asserting the same position. If the State is forced to apply to the Panel, however, the State is placed in an untenable position. If the State advocates that a particular amount is reasonable and the Panel awards less, the Firm will portray the amount advocated as a concession of reasonableness in the ultimate proceedings before this Court. If the Panel awards the same amount as the State advocates, the Firm likely will argue later that more could have been obtained if the State had argued fora higher award. If the State avoids advocating any specific amount, the Firm will contend later that the State did not pursue the arbitration with sufficient vigor. In short, Panel arbitration for the Firm is a no-lose proposition; for the State it is potentially a no-win situation. The attempt to force the State to seek arbitration in its place is another instance of the Firm placing its own interest before those of its client. B. A Preliminary Injunction Is Appropriate Both To Require The Angelos Firm To Perform Its Fiduciary And Contractual Duties And To Prevent Enforcement Of The Contract Escrow Provision. The Angelos Firm's breach of its fiduciary and contractual duties warrants two immediate remedies. First, the Court should order specific performance of the Fitm's ~ ~. 20 O t.rl
Page 70: mve62d00
CIRCUIT COURT FOR BALTIMORE CITY Frank M. Conaway Clerk Courthouse East 111 North Calvert Street - Room 462 Room - 462 Baltimore, MD 2I2t}2- (4I0)-333-3722, TTY for Deaf: (410)-333-4389 12/09/99 Case Number: 24-C-99-005702 OG Date Filed: 12/08/1999 Status: Open/Active State Of Maryland, Judge Assigned: To Be Assigned, Et Al Vs Law flffices Of Peter G. Angelos, P.C. C A S F,' H I S T O R Y OTHER REFERENCE 2dIII+1BERS ©escription Number Case Folder ID C990(?57i#2V02 INVOLVED PARTIES Disposition Type Num NametLast,Fxrst.Mid,ditle) Au1dr Str/End Addr Updete Entered PLT 001 State Of Maryland 12/DB/~ Attorney: 43(74N78 F7etcher-H571. Lawrenc 12/09/99 286 St Paul St Baitimate,.MO 212N2 {410)576-6584 ?302714.1 Shepard, Carrzn Deputy Attorney Genera3 200 St. Paul Place Baltimare. MD 21202 (410}576-7291 12109/99 FLT 002 Curran. t Josegh, Jr. 12dth4/99 Capacity ; Attorney General Attorney: 0004078 F7etcher-Hill. Lawrenc 121091D9 200 St Paul St 8attimore. MD 21202 (410)576-6584
Page 71: mve62d00
0 i STATE OF MARYLAND * IN THE and * CIRCUIT COURT J. JOSEPH CURRAN, JR * FOR ATTORNEY GENERAL, Plaintiffs, V. 3p THE LAW OFFICES OF PETER G. ANGELOS, P.C. * One Charles Center, Suite 810 100 North Charles Street * , J_ {;~; ~7 Baltimore, Maryland 21201, Civil Case IYo. `~ ~!`7 "(~3 toZ * Serve: Peter G. Angelos, Esquire One Charles Center, Suite 810 * 100 North Charles Street Baltimore, Maryland 21201 * Defendant. PLAINTIFFS' MOTION'i'O SHORTEN TIME FOR DEFENDANT TO RESPOND TO PLAINTIFFS' MOTION FOR PRELIMINARY INJUNCTION OR, IN THE ALTERNATIVE, FOR TEMPORARY RESTRAINING ORDER State o€Maryland and the Attorney General of Maryland, J. Joseph Curran, Jr., by and through the Office of the Attorney General and its undersigned attorneys, move, pursuant to Maryland Rule l-2t}4, to shorten the time for the Law Offices of Peter G. Angelos, P.C. to respond to Plaintiffs' Motion for Preliminary Injunction or, in the alternative, pursuant to tvlary3andRule 15-504 foraTemporaryliestraining Orderto preserve the status quo until the Plaintiffs may obtain preliminary relief. In support of this Motion, Plaintiffs state as follows:
Page 72: mve62d00
0 payment of its fees and costs from the industry, but the Firm has simply disobeyed that direction, in derogation of its contractual duties. The Angelos Firm will argue that it has no obligation to pursue awards under Exhibit 0 to the MSA because the State can seek those awards on its own. On the day the MSA was signed, the tobacco manufacturers independently executed a"State Option to Enter Agreement for Payment of Attorneys' Fees." In at least three ways, however, the State's pursuit of a Fee Award or Cost Statement in its own right under the State Option is inferior to outside counsel's primary right to seek its fees and costs. First, the timing is different. 3'he Angelos Firm had a right to initiate the Exhibit 0 processes as soon as the MSA was signed, in November 1998, even before the settlement was final in Maryland. See DepartmentofGenerat Servs. v. Cherry ffill Sand cPc Gravel Ca., 51 Md. App. 299,3 10, cert. denied, 293 Md. 726 (1982) (delay in pertormance constitutes breach ofcontract even where obligation was eventually performed). The State Option, in contrast, requires that a State January 1, 2000. State Option § 3(a)(i). Had the Firm initiated the Exhibit processes promptly, it likely could have achieve awards by now, before the State is even authorized to begin the processes.° Second, the State cannot initiate the process under the State Option unless it has first paid attorneys' fees or costs to its outside counsel. State Option § 3(a)(ii). The Angelos `' The effect of the delay is well illustrated in the Cost Statement process. If the Angelos Firm had submitted a Cost Statement on January 4, 1999, the OPMs would have been required to respond to it within 30 business days or by February 15, I999. Exhibit 0 to the MSA § 19(b). Even if the OPMs disputed the Cost Statement, the audit would have been required to be completed within 120 business days of the initial submission or by June 21, 1999. Id. ifan agreement still could not be reached, arbitration would have been available, and that arbitration likely could have been completed by now. 19
Page 73: mve62d00
! STATE OF MARYLAND and J. JOSEPH CURRAN, JR. ATTOItiYEY GENERAL, Plaintiffs, V. CIRC[IFT COURT FOR BALTIMORE CITY THE LAW OFFICES OF PETER C. ANGELOS, P.C. * One Charles Center, Suite 810 100 North Charles Street * _,/ Baltimore, Maryland 21201, Civil Case No.°~C `~gQa,6-7 * Serve: Peter G. Angelos, Esquire One Charles Center, Suite 810 * 100 North Charles Street Baltimore, Maryland 21201 * Defendant. CERTIFICATE OF SERVICE I hereby certify that copies of the following documents were dispatched by messenger on this ~~is4 day of December, 1999, to William F. Gately, Esq., Howell & Gately, Court Towers, Suite 240, 210 West Pennsylvania Ave., Towson, MD 21204, Attorneys for Defendant: a) b) Complaint with exhibits; and Motion of Plaintiffs, State of Maryland anti Attorney General J. Joseph Curran, Jr., for Preliminary Inunction, with proposed Order; and m ~. ~., c) Plaintiffs' Memorandum In Support of Their Motion for Preliminary C ~ Injunction; and t.: r.~ CD
Page 74: mve62d00
! Responsibility is identical to Rule I.5 of the American Bar Association Code. The Panel is charged in each case to consider "all relevant information submitted to them," and it "shall not be limited to an hourly-rate or lodestar ana€ysis ..., but shali take into account the totality of the circumstances." Exhibit 0 to the MSA at §€4. In fact, the Panel has relied on the factors set out in Johnson v. Georgia Highway Express, 488 F.2d 714 (5th Cir. 1974), to guide its analysis. These factors are substantially the same as the reasonableness factors prescribed by MRPC (.5{a}. In practical terms, the MSA gives the Angelos Firm a separate avenue to recover its fees- which was not available or anticipated when the Contract was signed -and the factors and analysis which the Panel is applying are the same as this Court will apply to determine any limitations on the Firm's compensation. The likelihood is that the Firm can and will recover from entirely separate funds the entire amount to which it ultimately will be entitled. It will never be necessary to tap the State's recovery to compensate the Angelos Firm. In these new circumstances, this Court should not enforce the Contract to require that the State's recovery be diverted, even temporarily, from public use. I[I. THE BALANCE OF HARMS WEIGHS OVERWHELMINGLY IN FAVOR OF GRANTING THE REQUESTED PRELIMINARY INJUNCTION. The comparison of harms in this action is not c?ose. On the State's side, where the public interest is central, the ultimate threat of harm is that the Angelos Firrn's failure to obtain a Fee Award and Cost Statement will deprive the citizens of Maryland of part of its recovery. In the immediate term, that threat is real. Even if ISrtaryland ultimately gets all the money due it, impounding funds will prevent the government from putting that money to use now. The Governor and the General Assembly have pledged that the settlement funds will 29
Page 75: mve62d00
9 9 circumstances, in determining the reasonableness of a contingency fee. See Attorney Grievance Coin>n'n v. Korotki 318 141d. 646, 664 (1990) (decided under then-goveming Code of Professional Responsibility). Ultimately, the inquiry in this case will be sensitive and complex, but at this preliminary stage, two propositions may be adopted with confidence. First, it is very unlikely that the Court ultimately will determine that the fu1125°fo contingent fee claimed by the Firm is reasonable. Second, the Panel Fee Award process is designed to and is rendering awards based on the same factors. Thus, it is likely that the Fee Award process will produce an award at least close to what this Court ultimately will determine to be reasonabie. The most basic analysis leads to the conclusion that a$1.1 billion fee in this case is unlikely to be upheld as reasonable. The Angelos Firm has provided the Attorney General with no accounting of the time and resources it devoted to the tobacco litigation, but an estimate of 50,000 hours of attorney time has been attributed in the media to the Firm. Scott Shane,rSngelrrsSeeksF'ee `Insurnnce; WithMillionsat.StakeinTbbrrccoS'uit,LawyerFlirts With Arbitration, THE BALTIMORE SUN, Oct. 15, 1999, at IA. If that estimate is accurate, the claimed $1. 2 bil lion fee translates into lawyer compensation at a rate of$22,C30t} per hour for every hour of effort, without regard for the nature of the activity or the skill and experience level of the attorney. Rule 1.5 of course does not limit reasonable attorney compensation to an hourly rate for hours actually devoted to the cause, but a fee that values attorney time at a uniform rate of $22,000 per hour is manifestly unreasonable. Analyzed from another perspective, if it were assumed, for sake of simplicity, tttat the cost of the Angelos Firm's time averaged $200 per hour, then the cost of the 5tk,t}QQ hours of human resources devoted to the tobacco litigation by the firm would amount to 26
Page 76: mve62d00
37
Page 77: mve62d00
i
Page 78: mve62d00
• i tWABLE, BAETJER AND HOWARD, LLP 1900 Mercantile Bank & Truct Buitding Two Hopkins Ptsza Baltimore, Maryland 21201 James K. Archibald Marina Lolley Dame 3 Attorneys for Philip Morris, Incorporated f Genrge A. Nilson Ro6ert C. Douglas Raymond 0. Mullady, Jr. PIPER & MARBURY Charies Center South 36 South Ch$ries Street Baltimore, Maryland 21201 Attorneys for R.3. Iteynofds Tobacco Company !Sy-W Di111'd 4tt-1 BS84EYSZDZ Ea X 831#6d t QTMY :am3d tt;Zi 88-Yt-03Q
Page 79: mve62d00
i CHURCH & HOt3FF B & 0 BuiEding, Sutte 600 2 North Charles Street Baltimore, Maryland 21201 Stephen D. Susman, Esquire Eric Mayer, Esquite SUSMAN GODFREY, LLP. 2os}4 Louisiana Street Suite i 1(10 Houston, Texas 77002-5096 ! Gerard P. Martin, Esquire GCegg L. Bernstein, Esquire Kimberly Dunn Spellmaa, Esquire MARTIN, 3UNGHANS, SNYDER & BERNSTEIN, PA 217 East Redwood Street Suite 2000 BBaltimore, Maryland 21202 Mark G. Cunha. Esq Adam Stein, Esquire Jerry Coleman, Esquire Ronatd Neumaten, Esquire SIIvIPSt}N, 3`f3ACHER & BARTLETT 425 Lexington Avenue Ntew York New York iS3027-3945 Deborah L. Robinson, Esquire Peter A. WooLson, Esquire ROBTNSON, WOOLSON O'CONNELL, LLP Redwood Tower, Suite 1500 217 East Redwood Street Baltimore, Maryiand 21202 Aaron H. Marks, Esquire KASOWITZ, BENSON,?'ORILES & FRIEDMAN 1301 Avenue oPfhe Americas New York, New York 10019 Bruce Ginsberg, Esquire Yvonne Look, Esquire DAVIS & GILHERT 1740 Broadway New York, New York 10019 co ~ O ~ (A3 0 lHV-4aP YUEt'd 9t!'? HH6sZYEZtiZ ¢x M H312iDd 3 ff'S!lNY as}d 92.21 85')1'030
Page 80: mve62d00
• 606 F.2d 432,435 (4th Cir. 1979) (internal quotation omitted). Any fees collected under a contingency agreement must be objectively reasonable, see GEOFFREY C. HAZARD, JR., TrIE LAW oFLAwYERRvG, § I.5: I01, at 94(2d ed. 1990), and a fee agreement must be reasonable both at its inception and in its enforcement.3° An agreement that is "reasonable when made, may become unreasonable in light of changed facts and circumstances." Attorney Grievance Comtn'n v. Pennington, 355 Md. b i, , 733 A.2d 1029, 1036 (1999) ("jTjhe question of the reasonableness of a contingent fee agreement ... must be revisited after the fee is quantified or quantifiable and tested by the factors enumerated in Rule 1.5(a)."); see rzlsa Davidson, Meaux, Sonnier, blcEdligott & Swifr v. Bradhead, 613 So. 2d 1038, 1041 (La. App_ 1993) ("The resulting fee must be examined to determine whether it is commensurate with the actual legal services provided, and whether an ordinary prudent attorney would find the fee excessive. "}. An excessive fee "will not be enforced, and the court will reduce such a fee to what is fair and reasonable under the circumstances." .Sornuah v. Ftachs, 352 Md. 10 ° In determining whether the terms of a contingency fee contract are to be avoided or modified, the question is not whether the stated fee is so excessive as to constitute an ethical violation, but whether it is reasonable. As the Court stated in McKenzie Constr., 758 F.2d at 100, "in a civil action [challenging an attorney's fee), a fee may be found to be 'unreasonable' and therefore subject to appropriate reduction by a court without necessarily being so 'clearly excessive' to j ustify a finding of a breach ofethics." See atso In rt Falters, 889 F.2d 2C3, 22 (Ariz. App. 1994) (court's authority to reduce attorney's fee is not limited to "those cases with egregious facts ... where an attorney's attempt to collect the full contingent fee subjects him to discipline"). 24
Page 81: mve62d00
0 i OF MARYLAND, * IN TfFE Plaintiff, # CIRCUIT COURT . pOR PI-[ILIP MORRIS INCORPORATED, st aL, * BALTIMORE CITY defendant5. * CaseNo.:9b132a17rCLZ11487 MOTION FOR THE ENTRY aF THE ORDER REGARDING FR(?TECTt"VE ORDERS The State of Maryland. by and through its Attorney (}eneral, S. Joseph Curran,lr., and defendants 9rov.» & Williamson Tobacco Corporation; Liggett Group, Ineorporated; Lorilt®rd Tobacco Compsny; Philip Morris, Incorpotated; and R.3. Reynolds Tobacco Company, by and through their tespeCtive counsel. jointly move this Court fbr entry of the Order Regarding Protective Orders which is attached.he 3. Jase Attorney Geaieral of ibiaryland 200 St. Paul Place, 16th floor Baltimore, tvfarylend 21202 John B. Fio.vard, Jr., Deputy Carmen M. Sltepsrd, !6t-q~t tt154"d fltt-i 666Sit6Z6! EN 0Q 831dtld ! 61C10dY 1014 WSt B6-tt-~36
Page 82: mve62d00
35 co rn 0 rn ND .~ ~
Page 83: mve62d00
0 241, 252 (2998)." Attorney contingency fee agreements also differ from standard commercial contracts in that the attorney bears the burden of proving that his asserted fee is reasonable regardless of which party has brought the issue into court. As the United States Court of Appeals for the Third Circuit has stated: This allocation of the burden of proof is premised on the relationship of trust owed by a lawyer to his client, with a concomitant obligation to charge only a reasonable fee whether the arrangement be contingent or otherwise. This approach is at the very heart of the special relationship between attorney and client .... Nor do we think the essential burden is shifted to the plaintiff in this case because of the mere happeustance that the client was required to initiate the action. McKenzie Constr., Inc. v. tb(aynard, 758 F.2d 97, i0U (3d Cir. 1985); see Floltzman v. Fiola Blum, Inc., 125 Md. Agp. 602, 638 (1999); Tucker v. Dudley, 223 Md. 467, 473 (1960) (requiring attorney to bear the burden of showing that his fee was reasonable); in re A.H. Robins C'o., 86 F.3d 364,374 (4th Cir.), cert. denied, 519 U.S. 993 (1996) {citinglbfaynard and stating that "the burden ofproof remains with the attortiey to establish reasonableness"). There is no per se rule regarding the reasonableness of attorney's fees - each case must be examined individually and decided on its faets. Fraidin v. YI eft.aman, 93 Md. App. 168 (1993). Rule 1.5(a) mandates eight factors that must be considered, in the totality of the " See also Brtllhart v. Hudson, 455 P.2d 878, 881 (Coto. 1969) ("`vllbenever a contingent fee contract becomes a subject of litigatio: in the courts, the lawyer ... understands that the court under its general supervisory powers over attorneys ...will determine the reasonableness of the amount and will subject it to the test of quantum meruin; Rosquist v. .Soo Line Railroad, 692 F.2d 1107, 1111 (7' Cir. 1982) ("Even when the validity of the fee contract itself has not been challenged by the parties, it is within the court's inherent power of supervision over the bar to examine the attorney's fee for conformance with the reasonable standard of the Code of Ethics."). 25
Page 84: mve62d00
8uj- ii6 '2 51 0 <1cx
Page 85: mve62d00
D7Y'.cF,p2-98 15:22 FROH:ARHfl7~~.PORTER D1AfiH.- #22 ID.202 $Q2 5999 ~S° ~ ~s .,.kff K-A . /k, John Henry Lewin, Jr. James K. Archibald ` Marina Lolley Dame VENABLE, BAETJER AND HOWARD, LLP 1800 Mercantile Bank & Trust Building Two Hopkins Plaza Baltimore, Maryland 21201 Attorneys for Philip Morris, Incorporated George A. 23ii Robert C. Douglas Raymond G. Mullady, Jr. PIPER & MARBURY Charles Center South 36 South Charles Street Baltimore, Maryland 21201 PAGE 9f21 Attorneys for R.3. Reynolds Tobacco Company
Page 86: mve62d00
John P. Sweeney, Esquire Gregory L. Lockwood, Esquire MILES & STOCKBRIDGE 10 Light Street Baltimore, Nlaryland 21202-1487 R. Townsend Davis, Jr., Esquire Aime E. Cohen, Esquire DEBEVOFSE & PE.7MFTtTIY 875 Third Avenue New York, New York 10022 William F. Ryan, Jr.. Esquire WFi1TEFO1tD: TAYLOR & PRESTON, LLP. Seven Saint Paul Street, 12th Floor Baltimore, Maazyland 2f 2D2-1b2b Judy Bemstein-Gaetz Esquire James J. Sandman, Esquire Anne McBride Walker, Esquire ARNOLD & PORTER 555 l2th Street, N. W. Washington, D.C. 20004 Kenneth N. Bass, Esquire Kathleen Mullety, Esquire 1KIRKLAND & fiLL1S 655 15th Street, N.W. Washington., D-C. 200Q5 Thomas 1. McCormack, Esquire Robert S. Pruyne, Esquire CHAUBOtTRNE & PARKE, LLP 30 Rockefeller Plaza New York, New York 10112 Paul N. Farquharson, Esquire Robert E- Scott, Jr., Esquire SEMMES, BOWEN & SEMMES 250 West Pratt Sheet Baltimore, Maryland 21201 co ~ E.1}avid oskins cs rv Us 01 d 96i-1 6669ZV6ZflZ Et 30 S319[Fd 3 41DFEdY =a3 9t1Zl 96-Y1-330
Page 87: mve62d00
33
Page 88: mve62d00
-@2-98 15:22 FROM.ARND~ff.PDR7ER WASH.- #22 SD.202 9 5999 Peor G. Angefos H. Russell Smouse E. David Hoskins John C. M. Angelos THE LAW OFFICES OF PETER G. ANGELOS, P.C. 100 North Charles Street Baltimore, ivfaty land 21201 Attorneys for Plaintiffs e A. Nilson Robert C. Douglas ~Zx Raymond G. Mullady, Jr. PIPER & MARBURY Charles Center South 36 South Charles Street Baltimore, Maryland 21201 Attorneys for Brown & Williamson Tobacco Corporation ~4j1 a. r}` Debbs'alt L. It~nson Mer A. Woolson ~ ROBINSON WOOLSON O'CONNELL, LLP Redwood Tower, Suite 1500 217 E. Redwood Street Baltimore, MD 21202 Andrew Gendton / GOODELL, DEVRIES, LEECH 8t ORAY, LLP One South Street, 20th Floor Baltimore, Maryland 21202-3201 Attorneys for Lorillard Tobacco Company PAGE 8/21
Page 89: mve62d00
@2-96 75e22 FRaMeARNWPORTER WASH.- #12 ID:2@2 ''~~Q~ 5999 STATE OF MARYLAND, * IN THE Plaintiff, * CIRCUIT COURT v, * FOII PHILIP MORRIS INCORPORATED, et al., * BALTIMORE CITY Defendants. * Cast No.: 45122017/CL211487 i. A tr k 4 # * at ,t AGREED MOTION FOR APPROVAL OF SETTLEMENT AND ENTRY OF CONSENT DECREE AND FINAL.IidDGMEhiT The State of Maryland. by and through its Attorney General, J. Joseph Curran, Jr., and defendants Brown & Williamson Tobacco Corporation; Liggett Group, Incorporated; I.oriilard Tobacco Company; Philip Mortis, Incorporated; and R.J. Reynolds Tobacco Company, by and through their respective counsei, joinfly move this Court for entry of the Consent Decree and Final Judgment and approval of the Settlement Agreement, both attached hereto. J. Joseph GtSrran, Jr., Attg?hey Gen John B. Howard, Jr., Deputy Attorney Attorney General of Ttiiac}>land 200 St. Paul Ptace,1bih Floor Baltimore, Maryland 21202 Carmen M. Shepard, Deputy Attorne
Page 90: mve62d00
&EC,-02-98 15:27 PROMeliRNOI~7&PORTEft 4lASH<- #12 1D:2E2 942 5959 PAGE 5/21 George tL hTilson Robert C.I7ouglas Raymond G. Mullady, Jr. PIPER & MARBURY Charles Center Socuth 36 South Charles Street Baltimore, Maryland 21201 Attorneys for R.S. Reynolds Tobacco Company
Page 91: mve62d00
0 32
Page 92: mve62d00
I3E£,-02-SB 15:21 PROM:ARNOW PORTER WASH.- 4012 IL1e202 S+t2 5999 STATE OF MARYLAND, * IN THE Plaintiff, * CIRCUIT COURT , v. * F(}R PHILIP MORRIS INCORPORATED, et ai., * BALTIMORE CITY Defendants. * Case No.: 9b122fl1?1CL22I48? * * it i. fr * * * i • * # i MOTION FOR THE EIVTRY flF'CtiE AGREED DISMISSAL t3RDER The State of Maryland, by and through its Attorney General, J. Joseph Curran, Jr., and defendants Brown & Williamson Tobacco Corporation; Liggett Group, Incorporated; Lorillard Tobacco Company; Philip Morris, Incorporated; and R.J. Reynolds Tobacco Company, by and through their respective counsel, jointly move this Court for entry of the Agreed Dismissal Order which is attached hereto. J. Joseph C&ran, Jr., A ey General --- Carmen M. Shepard, eputy Attorney General John B. Howard, Jr., Deputy Attorney General Attorney General of Maryland 200 St. Paul Place, 16th Floor Baltimore, Maryiartd 21202 . Angelos H. Russell Smouse E. David Hoskins John C. M. Angelos THE LAW OFFICES OF PETER G. ANGELOS, P.C. 100 North Charles Street Baltimore, Maryland 21201 Attorneys for Plaintiffs
Page 93: mve62d00
24-C-99-005702 Date: i2j©9j99 Time: 09:29 027144 S#teperII i.arrren Deputy Attorney Ger=erai 200 St- Pau? Place Battimo-re, M© 2?202 (41E1)575-7291 92j~joiaa ~IsD35it10n Type Nwn Name(Last.f,rst,M,d.TZt)e) Aai,r StrvEna A.<,ua~ Update =scered '--- -'-' ----------- ----------------------- '------- ---'------------- --------------- -------- DEE 001 Law Offices Of Peter G. Angelos. P C. i>r08/ U9 Mail: One Charles Center, Suite 810 32i0El9g 1=/+.'9.z99 100 North Charles Sr_rw; 5altimESre, MD 2120i Serve On: Peter G. Angeloz. JUDGE HISTORY dtffiGE ASSIGNED Type Assvgn Date Reraaval RSN TBA To Be Assigned, J 12/N1'39 DOCUMENT TRACKING Page: 2 Num/Sey DescriAtlcn Filed Entered Party J@g Ru3ing Closed User ID ------ ------------------'---'----------------- -------- ------ - --~--- --- --------- -- - ----- -------- ---- - - DD-011M14 LotaR7aint for Iniunctive arc. rjec'aratory 13~,n -~ ?2=~~P~or PLTen! TOA PJY P,lY 3~5~ Retlef, 5 Exn~t~3t: Filed by PLTDOI-State Of Maryiarcl. , 7LT??Ll2-Lcr,an, J 3zr;epp. ,jr 77D02flDD Writ of Sumnons - Civi3 12r39/9? 12~iJrIi94 OEFDt11 T8A Mcot 121D9l99 PJY P,7Y D663QD6 Motion for PreY3minary Injunction 1270$1g9 72/09l99 PLT66i TBA P3y PJY 3f7 Filed by PLTOd}1-State Of Maryland. . PLTDDZ-Lurrnn. J.Joseyh. .lr 0003001 Memorandum in Support of Motion 12/0&99 12/ti9/55 PLTo01 T_. PJY PJY 31p Filed by PiT001-St.ate Of Marv3and, , PLTup2-Cerran, 3 Jaseph, .,r. DDD&fl66 Motion to Shorten Time for Defendant to 12l08/99 12109/99 ¢lT@DI T6A P3Y PJn" 3~ Respond to Pltfs' Motion for Preixminary )n-1uact:nn or, an the Alternative, for Temporary Restraining order Fileo by PLT0l2-State Of Marylarri, . PLTfl62-Lurran, 3.iusepn, Jr. DD054DQ Certificate of Service 1P168199 12/09/99 PLTODI T8A P.)v P3Y Filed by PL-f601-Staie Of Maryland, . PLTt#02-[;urran, 3.3ose0h, Jr_ CX) V\ c rn N) ND tr4
Page 94: mve62d00
30
Page 95: mve62d00
• DEC-02-98 15:27 FRQM:flRHQLp&FpRTER WASH.- #12 Me'2H2 5999 ~ TLISSI)AY. DSCEMBEK I, tYY7 $L6tC Of MRiJtL"tlld v. PMUj3 MOilU 1 D4kniwNr. Im i/Me Im Opaew.1y Y.nNni SnN sn apesenn~ xdli, iESE Smakein. j S'tAwoee, Yft t.Ni (f. SW*Ahg sapara* a ; 4 w.itrt4 p.b.* 6 c.np{kd, topafhfi.bh S a lm i t i.a...aD.yea.d up~.ier ~r I 1twn.rsA mlft . 7 fMED01Rh OSt.y. fine. zhaft i tN,ta%mN. N1FuSR! ! ML ilATt #M"s tt. (wdg., #er %day. 11ECCi1Rtt Olmr,llV. drq. hr mi* Qwrd, tlwr h.rr ba.a+l~L ML OM ffmatc yae, f.u. Nmsr. 14 Mi. fjMMbs tAa"ic yar.7m* NaMr. li Im flDSIRii ifn Cauet VA r.ww 17 }hrNP.I n! fettHe. ss11. (lfts..ilnlcMmdad*d--3:53 ".} 17 AL $E-LZ FiASBOCIATFS, WC. iId-752-I733 I EiUINq(AT# OF RPOR[ER ! 3 i #e a #ror.w} ~lpinle w.nw1p1 d0m r. S{Inqslbw in IFN aieramaHmnad malla i I 21 ! ~SO ANwi A. $.tr lu ~! rrita~.~.i Repe~.r II ~ AL bB'CL acAStpCIATEB, INC. iI0-751-I737 i At Betz &Associates, Inc. (410) 752-1733 PAGE 21121
Page 96: mve62d00
165999 PAGE 16123 BEG-H2-98 35:26 F&OM:ARNLIyp&POR7ER WRSH_- #72 SD:2H2 S I. Nothing in subsection V(A) or V(I) of this Consent Decree shall create a right to challenge the continuation, after the MSA Execution Date, of any advertising content, claim or slogan (other than use of a Cartoon) that was not tuilaw£ul prior to the MSA Execution Date. K. If the Agreement terminates in this State for any reason, then this Consent Decree and Final Judgment shall be void and of no further effect. YIf. FINAL DISPOSITION A. The Agreement, the settlement set forth therein, and the establishment of the escrow provided for ttterein are hereby approved in all respects, and all claims ace hereby dismissed with prejudice as provided therein. B. The Court finds that the person signing the Agreement have full and complete authority to enter into the binding and fully effective settlement of this action as set forth in the Agreement. The Court further finds that entering into this settlement is in the best interests of the State of Maryland. LET NDGMENT BE ENTERED ACCORDINGLY DATED this low day of 1999. J .JUDGE ROGER V. BROWN ~ The u ge s signature appears on the original document. .~CQEAWAY, t;3.E ;„ ikANi{ M
Page 97: mve62d00
• • CERTIFICATE Ofi SERVICE (MDAG) I HEFtBBY CERTIFY that on the 10 _ day af 1& Len~~1~, ~ 1498, a copy of the foregoing was hand delivered to the followiag Maryland counsel and mailed, Etrst class, postage pre-paid to the temaiuittg listed counsel: John H. Lewin, 3r., Esquire James K. Archibald, Esquire Marina Lolley Dame, Esquire VENABLE, BAETJER & HOWARD, LLP. ISU0 Mercantile Bank & Trust Bldg. 2 Hopkins Ptaza Baltimore, Maryland 21201 George A. htilson, Esquire Joseph G. Finnerty, Jr., Esquire Raymond G. Mullady, dr.. Esquire PIPER & MARBURY. LLI'• Charles Center South 36 South Charles Sttxet Baltimore, Maryland 21201 Donald Ayer, Esquire Robert McRamottt. Esquire Barbara McDowell. Esquire JONES. I)AY. REAVIS & P[X3t3E Metropotitan Square 1450 G Street Washington, Q.C. 24flG3 Robert E. ?*iorthrip, Esquire Samuel R. Watkins, Esquire SHOOK, HARDY & BACON, LLP. One Kansas City Place 1200 MMain 5tteet Kansas City, Missouri 64105 James E. Gtay, Esquire B;Slary D. Caplan, Esquire Andrew Gendrott. Esquire GQQBELL, DEVRiES, LEECH & GRAY. LLP. One South Street, 20th Floor Baltimore, Maryland 21202-3201 F. Ford Loker, Esquire teV-qol' YlJ2l-3 99l-1 6889EtSxaE Et x $3tad I il7L}&y .mnjd 92:2t EB-PI-M
Page 98: mve62d00
-82-98 15:26 FRfl34;ARN~p&PaRTER WASH_- #12 ~ TUESDAY, DECEMBER .Se taiC of Maryland v. Pl SDe262 5999 1, 1998~ ft (t2VIrIR 1 i3u taAet{ a[ 6tEfiduh Sullksd iae.. 7saliad I ae b.isif.fD.iudaaNllwatiitw~ t'La~cm ta~prsy: 4 1 3 Jk.t £ Q'00l1Fiit;„ tmoinr ~ ~ Y. iRFi, tit~itE 4 R.4in.ae W..1Na 4'CwMY, W S QO~f~il, CNPMt7, ta.r3 C Cry. LLF s tb iaH bLrrt, 2DCY 22aua 7 Ec2iiase., Hi. 212G2 S i 7 2i7R4dt.dwaatih wt SiAM 7Q6C R.wna.ryAm*"7s34s ; (;19i 7f3-iG0 ~ i41D16Fi4000 I IR n f fsbEETZ&ASSSlCGSTES, INC (410) 732•t733 105 h.4lt of fiHodut Sfu Carail fat TvCm 2 Wmai-O.tJ.. isa: RwCllt L. LOCRRffO. EWai" itiL€ L ltOdbC'idpE !6 SiQht itrert ssitinie, iid. 21202 t41Q) 72i-i/i! 2 © i 0 AL BE1Z6:.SSSdCGlTES. tAIC. (410) 752•1733 PAGE 18/2i AL BM Sr,tSSOCUTES. riC (410) 752-[733 I pR4tiR8INR;3 2 tNflGURTt ti.dahwfw~. Yw 7 eMiim AWIML i AII dqt. iEk k#it Sieh af S ldreyieeW ritwa #64 MMlhr iF eR, Aei 6 fhe a.m meebw it FH2ZQS7R=74if. 7 Gww1 tot tht iaarrl. i MLSN[MRQt BOid.1NeiMR,Ya.r I i4.eeu iisnn.e lFup"4 wi RenY UwN 34 iartirSi•ie.iR4mti~t. II MR OLO Jmnw E d-xyp ne brbiF 12 aEdeD.bni.wRrwslmfdwskmsm4 13 i3ryNF. tailLd ioha.. MMp M.e1., i eW R. J. RRperi+k. butadtli' hr 00 Ls pwpne.hhM pnsndlaR. S{ li/RQ(iiRtSt Okal. 1 iNi.!}iipAtD YaYrtheNr rNMa. !1 %dy s.".ef wlfLn. As we iI M yw hdeY..k wshov. r.achri s Woliet E .Rr.wu.+rdi63ArD.fw~d.ni~U/Mc..a 21 il7mt we inw #or Y.. ha. MisY Y Rxa ae AL $ECL &ABSQCSAIF$, INC. 42tb75&2793 Al Betz &Associates, Inc. (410) 752-1733 i  E0 mb'd 53idZ_xwv 9 Z130 `M tSBULHBLtr E6:88 86SIIL0I8S
Page 99: mve62d00
pEC-@2-98 15:22 PROM:RRNOi.~PORTER Wit57i.- #12 ~1 IDe2ID2 W 5999 STATE OF MAItI'LANi3, * TIV'TM P2aintltt', * CRiGIIIT COURT * F(3R F81LIP MoI2iLiS IIVCC}ItPORA1'EB, et a6, * BALTIMORE CI`T3t Defendants. * Case No.: 96122917JCL211a&? PtSGE y1IIEREAS, certain parties hereto have entered into a Master Settlement Agreement ("the NSSA"), pursuant to which, among other things, a Consent Decree and Final Judgment has been entered by this Court on the L day of 1998; and WFiEREAS, pursuant to the MSA, the State of Maryland, by and thttsugh its Attorney Generai, J. Joseph Curran, Jr., and defendants, by and through their respective counsel, have j ointly moved this Court for an order dismissing with prejudice all of plaintiff's claims herein against all defendants; The Court being fuUy advised in the prremises does hereby ORDER that all of the p3aiatiff's claims herein against all defendants are hereby dismissed with prejudice. Each party shall bear its own costs, except as may be provided in the MSA. Entered this day of .G JUDGE ROGER ii, EAftw THE JUDGE'S SIGAltTllRE APPfARS ON THE Oi#IGI1iA1 DOCUMENT ti;:7`A;iA'lI v1s'.ali 6/21 N.)
Page 100: mve62d00
OCT SQCTo121998 9:30A~ER * MRRPL{RY I B I IYff,_I655QsoP. A3sf0a ' Cntclmr cnmn ; FM : * HAL'lTiilflREC[CX 9i13~~1~L4it? . * e . . . . w . . : . . # ~ . tlam Ilp®m aoosdnatiaa af mmccsak ud baring, it is hecnby t1RPEB8t3, 00 day att&.1948, 90 de td=dot ltl_ ReYADW Tobrooa Gqqp.ay's Moaioa Fav =d cs Re.idan cdAaOass 5,1998 Msnonrmdoms snd 9pimioetie md is ~ ----ES~aee~e at,pe~es ~ ~inal deeummG only. ' .~ r_
Page 101: mve62d00
DEC-6T-98 i3:24 FrO:AiP W L2ti Y77lo~->., 1ntA9 i~3airc,tm+ ~uun sur. u ~~r.rrca. gQ29d2589 7-a5r P.iiua2 dutr5E8 IN THE CIEtCitll COURT FOR BALT1MflRg OI't'Y STATE OF MARYLAND, * PIs'~ s 951220171C1311487 PHILIP MORRIS INCORPORATED, ec a1., Defszdmtx . O&bER APP$OVM t~rMWRk3. T.1Cr('r$'YT REFLACIiMWT AGREEMM AND WIPRY t?F CONSF2VT 33ECRM AND -MUT. iUOGM1PNT AS TO LI~GEi~ 4ROL~'.-I21C. Wti&~F.AS 1. Pxvinuxly on h3arch 20, I997 Plaurtiff Siate of Maryland and Defendants Liggett Graug, Inc. & Liggzu & MY=, Inc. (tWther coliectivety rofecttd to as "Limgett") and Brooka Group Ltd. ("Brdo1©e') cntttad im a$t#Iemtit Agt=m (hacatnafter tefetrcd to a3 "LigBeit Seettemeut Ageeemeat') for rfispuupasc ssErcsoiving afi otttie State of 113aryIas~i's cdairrss against Ligpu Ia thia Eitigarina. Althnugh tfiai agreement cautetngtaicd tha tFttty of asopttated juagsnenc agaaiust T.iggen, no such judgment nas been u,csrnd fo'tlate. WHEREAS 2. On Novem6er been Judgmvji . W0ZrK.0i.a2Wi •.nD ticeem0ect.1498 faTyitad {"Stabe•} auw Cetl2in of .iha ` K.iLtciiie& FfS.--'r.^.. SN*Yfi Ii lFY3L33 propQw LU/lCGIIL Decree and f+n.al
Page 102: mve62d00
DEC-02-98 15:23 FROM:ARNOj~j&PORIER WASH_- #I2 IIIs202 9* 5999 III. APPLICABILITY PAGE 11/21 A. This Consent Decree and Final Judgment applies only to the Participating Manufacturers in their corporate capacity acting through their respective successors and assigns, directors, officers, employees, agents, subsidiaries, divisions or other internal organizational units of any kind or any other entities acting in concert or participation with them. The remedies, penalties and sanctions that may be imposed or assessed in connection with a violation of this Consent Decree and Final Judgment (or any order issued in connection herewith) shall only apply to the Participating Manufacturers, and shall not be imposed or assessed against any employee, officer or director of any Participating Manufacturer, or against any other person or entity as a consequence of such violation, and thera shall be no jurisdiction under this Consent Decree and Final Judgment to do so. B. This Consent Decree and Finai Judgment is not intended to and does not vest standing in any third party with resppect to the tetms hereo£ No portion of this Consent Decree and Final Judgment shall provide any rights to, or be enforceable by, any person or entity other than the State of Maryland or a Released Party. The State of Maryland may not assign or otherwise convey any right to enforce any provision of this Consent Decree and Final Judgment, IV. VOLUNTARY ACT OF THE PARTIES The parties hereto expressly acknowledge and agree that this Consent Decree and Final Judgment is voluntarily entered into as the result of arm's-length negotiation, and all parties hereto were represented by counsel in deciding to enter into this Consent Deeree and Final Judgment. INJUNCTIVE AND OTHER EQUITABLE RELIEF Each Participating Manufacturer is permanently enjoined from: tl. Taking any action, directly or indirectly, to target Youth within the State of Maryland in the advertising, promotion or marketing of Tobacco Products, or taking any action the primary purpose of which is to initiate, maintain or increase the incidence of Youth smoking within the State ofNtarylartti B. After 1$t0 days after the MSA Execution Date, using or causing to be used within the State of Maryland any Cartoon in the advertising, promoting, packaging or labeling of Tobacco Products. C. After 30 days after the MSA Execution Date, making or causing to be made any payment or other consideration to any other person or entity to use, display, make reference to or use as a prop within the State of Maryland any Tobacco Product. Tobacco Product package, advertisement for a Tobacco Product, or any other item bearing a Brand Name in any Media; provided, however, that the foregoing prohibition shall not apply to (1) Media where the audience or viewers are within an Adult-Only Facility (provided such Media are not visible to persons outside such Adult-Only 2
Page 103: mve62d00
ID2-99 15:22 FROM:ARNOLiI&PORTER NA9K.- 9tt2 ID:202 6 2 5999 STATE OF MARYLAND, * IN THE Plaintiff, * CIRCUIT COURT v. * FOR PHILIP MORRIS INCORPORATED, et al., * BALTIMORE CITY Defendants. * Cast 3ti'o.: 9bI22017/CL2124$? * CONSENT DE!QREE AND FINAL JUDGR3ENT PAGE 18/21 WHEREAS, Plaintiff, the State of Marylsnd, commenced this action on May 1, 1996, by and through its Attorney General, J. Joseph Curran, Jr., pursuant to his common law powers and the provisions of state law; WHEREAS, the State of Maryland asserted various claims for monetary, equitable and inj unctive relief on behalf of the State of Maryland against certain tobacco product manufacturers and other defendants; WHEREAS, Defendants have contested the claims in the State's complaint and amended complaints and denied the State's allegations and asserted affirmative defenses; WHEREAS, the parties desire to resolve this action in a manner which appropriately addresses the State's public health concerns, while conserving the parties' resources, as well as those of the Court, which would otherwise be expended in litigating a matter of this magnitude; and WHEREAS, the Court has made no determination of any violation of law, this Consent Decree and Final Judgment being entered prior to the ta(cing of any testimony and without trial or final adjudication of any issue of fact or law; NOW, TIIEREFt3RE, IT IS HEREBY ORDERED, ADJUDGED AND DECREED, AS FOLLOWS: I. JURISDICTION AND VENUE This Court has jurisdiction over the subject matter of this action and over each of the Participating Manufacturers. Venue is proper. co II. DEFINITIONS O The definitions set forth in the Agreement (a copy of which is attached hereto) are p\ herein by reference. tQ c3'i tV
Page 104: mve62d00
4CT, 14, 1998 1.34PM STATE f3 F MARYLAND Plaintiff Case ?Vo. 96122017/C' 211487 PHILIP MORRIS INCflt2PORATED, et aL * BALT[MORE CITI- ~fend+ants OURTEEN OF SECOND AMENDED COMPLAINT During the tast tegislative session, the Maryland Geneml Assembly enacted, over the intense lobbying of the tobacco industry and after a contentious debate. amendments to section 5-120 of the Health-General Article of the Maryland Code that apply to this litigation. The e General Assembly could hardly have been clearer: to relieve the State of the burden f proving its Medicaid damages recipient-by-recipient, to petmit the State to bring a direct Defendan NO, 5866 P. 2/49 I1 TIIE CIRCUIT CC}t;RT FOR ~ ~ w w * * t~ * ~ ,r t x * * ,r OSITION TO MOTION TO DISMISS COUNTS ONE AND FIVE ies spared no expense or effort in lobbying against the passage ol'tlus legislation. Now, the Defendants have filed a Motion asking this Court to disregard the manifest intent of the legislature and nsle that every single Medicaid recipient must individually be joinec in this action-despite the statutory direction that the State's may bring an action to recover its own monies "without proof of the causation or the amount of expenditures for any particular Program recipient or any other individual: " Moreover, despite the legislative understanding dtat the effect of its amendments would be to restore the State's dismissed common law claims, the SSsS$ HY: 17-filz- i.?Fd?ZTED COPIES 4Y)c 'rLTt& [08IES 'P6: GEV RI4S WLA JMC W6Z KT9 CWC IIHSZ GRtt! 3A8 ffiGS icaid expenditures retying on statistical ptoofof causation and damages, and to mmon law cfairas that had been dismissed by an eartier ruling of this Court. The
Page 105: mve62d00
11'Na 30. 199P10.59Ae ato~l#L q~„~~ ~ N0. 7234 P, §150~___ < TII. The Stay shati remain in efTec€ until the earEier ofthe fait4wing= (A) itze seutement has arhievad "srsfe Specific flnatity" (as aefimet in section u(ss) urche MSA) in the State of 2vturylsnd; or (9) the MSA has been terminattrl with xesgect to the State of Maryland pursssant ta suhseatian XVtII{u}(!} 4f tha MSA. IV. Nothing in this Order shslt prcvent aay party hareta fram instituting or partiripating in praeeedings hetein far tbe purpttse afeffecttsatiug the SeitleFaetrt cansistent with the terine of the MSA. 3o tudetWttsisstay af l)98. " IIi6 3~1D(~t+ S~
Page 106: mve62d00
6Et-67-SB 15:a3 FraacAtP1=t zsss423ss~ T-863 F.4slas Jeb-5s7 U:.C-~52-i~t ts_ss rrtura ts.u.,,ms3rv ~-. ,. WFEREAS 3. ~ On November 23, i99$, the Staze af Marytand and Lip,getr arni Iimoicc ezeeuted a Citaicra3 Liggett Rva=nent A.gEassment CRepbumu+ee~'Agse~nt"}, a copy of which is attacked hereto as Erhft A. Purwant to the &eplaomattAgmmeal, L.iggctt will 6ewme a "Subw4um Participatiag Manttfaeturer' as that term Is defweA under the MSA- WHMUAS 4. In aczouia:HZ with the Rqsiacement Apraawent, upon 'Statc-Spedifto Fimaiity' (av that terns 39 4efined in the MSA). the I,iggect St.#iuiunt Apeenent shall be rcndrzed au1l and va3d as to the S1ate, and the.rights and fltsiigatinns of T.iggett ,1x1 the ficste of Maryiarui ahaiW theceaCrur be governed by the MSA. S. In the evam the MSA a inrmicm#ad as tc the Statc of ivtacyiavrcl, the Liggat SatdemeIIt Agraaiiettt (suiajett to tht dciuinn of the fuhue A€Mia,te prnvistons in such Agreement), ffiba13 be reiasmtad as to the Stace of Maryiand. NOW, THEREFORE, IT 1S HEREBY ORI}EIfID AS FOLLOWS: Tiii Gcaecai liSgett AeFlartinemt Ageemerrt is APPROVED and the "ternm of the C.asusesu 33wr®a aiW Final Judgment entered an this day shall apply to L:iggett as a Suhs-;lTat Pa rdG4mft Manufacttste[. . UOPiS IN OPF.N COURT #E9s SaY day af JUDGE ROGER ii. BROWN ' THE .WSGE'S SIGNicTtSftE RFP£f1R5 : ON 7HE ORIGINAL QQClktE@IT ~ L=El11rQx9Fivi:PSxr Awomb" 1. ts4t
Page 107: mve62d00
-"'-4CT. 14, 1998 2:34PM ..* i Nt, 5868 F. 3/49 Defendants ask this Court to override that unmistakable legislatice intent. The General Assembly has expressed its will through the ordinan, democratic process~!sd and embodied that wili in constitutionally perntissib3e leaislation. as set forth below. The Statc respectfully urges this Court to implement this ctear legislative intent and deny the Aefendante' motion in all respects. { '9 INJURIES ARE NOT REMOTE- In their Motion to Dismiss Countr One and Five Through Fourteen of the Second ecover for its 3njtsries which are too remote, and which the Medicaid Amendments do not create wobbles on two unstable legs - first. that the State never had a common law right of action to omplaint ("SAC") are too "Yemraote" and must be dismissed as a matter of law.1'hfs argument mplaint (` Defendants' Motion"j, the defendattts again reiterate their argument that e common law claim insjuries alleged by the FEa'tntif~'in the State's Second Amended econd, that even if the General Assembly had created a new cause of action, the SAC claims w-nutd still fail for lack ofproxintate cause and other independent gtounds, including the "economic loss zuie; which appears to be another bite at the apple of remotettess. The defendants' logic is flawed for several tiasic reasons. First, if the plain language of Medicaid Rmendment is to be given any meaning at all, it must be possible for the State to ert a cognizable claim against these tobacco industry defendants under the common law of nullity. This cannot be the legislative intent of such a hard fought. controversial piece of ies; if it were, the amended § 15-12Q fB} of the Xeatth-General articte would be a tnere n of the legislature was clearly to revive the State's common law claims. 'LEte State cannot be too remote a plaintiff as a matter of law with respect to tobaceo-related 1) C i ~ z 1i .
Page 108: mve62d00
15:23 FROM:ARNDL~3&POR2ER Sa*ASff_- #12 ZO:282,62 59S9 PAGE 12121 Facility); (2) Media not intended for distribution or display to the public; (3) instructional Media concerning non-conventionai cigarettes viewed only by or provided only to smokers who are Adults; and (4) actions taken by any Participating Manufacturer in connection with a Brand Name Sponsorship permitted pursuant to subsections III(c)(2)(A) and III(c)(2)(B)(i) of the Agreement, and use of a Brand Name to 4dentify a Brand Name Sponsorship permitted by subsection III(c)(2)(B)(ii). D. Beginning July 1, 1999, marketing, distributing, offering, selling, licensing or causing to be marketed, distributed, offered, sold, or licensed (including, without titttitation, by catalogue or direct mail), within the State of Maryland, any apparel or other merchandise (other than Tobacco Products, items the sale function of which is to advertise Tobacco Products, or written or electronic publications) which bears a Brand Name. Provided, however, that nothing intltis section shall (1) require any Participating Manufacturer to breach or terminate any licensing agreement or other contract in existence as of June 20, 1997 (this exception shall not apply beyond the current term of any existing contract, without regard to any renewal or option term that may be exercised by such Participating Manufacturer); (2) prohibit the distribution to any Participating Manufacturer`s employee who is not Underage of any item described above that is intended for the personal use of such an employee; (3) require any Participating Manufacturer to retrieve, collect or otherwise recover any item that prior to the MSA Execution Date was marketed, distributed, offered, sold, licensed or caused to be marketed, distributed, offered, sold or licensed by such Participating Mattufacturer; (4) apply to coupons or other items used by Adults solely in"conneetion with the purchase of Tobacco Products; (5) apply to apparel or other merchandise used within an Adult-Only Facility that is not distributed (by sale or otherwise) to any member of the general public; or (6) apply to apparel or other merchandise (a) marketed, distributed, offered, sold, or licensed at the site of a$rand Name Sponsorship permitted pursuant to subsection III(c)(2)(A) or III(c) (2)(B)(i) of the Agreement by the person to which the relevant Participating Manufacturer has provided payment in exchange for the use of the relevant Brand Name in the Brand Name Sponsorship or a third-party that does not receive payment from the relevant Participating Manufacturer (or any Affiliate of such Participating Manufacturer) in connection with the marketing, distribution, ofT'er, sale or license of such apparel or other merchandise, or (b) used at the site of a$rand Name Sponsorship permitted pursuant to subsections fII(c)(2)(A) or III(c)(2)(B)(i) of the Agreement (during such event) that are not distributed (by sale or otherwise) to any member of the general public. E. After the MSA Execution Date, distributing or causing to be distributed within the State of Maryland any free samples of Tobacco Products except in an Adult- Only Facility. For purposes of this Consent Decree and Final Judgment, a "free saauple" does not include a Tobacco Product that is provided to an Adult in connection with ( I) the purchase, exchange or redemption for proof of purchase of any Tobacco Products (including, but not limited to, a free offer in connection with the purchase of Tobacco Products, such as a"two-for-one" offer), or (2) the conducting of consumer testing or evaluation of Tobacco Products with persons who certify that they are Adults. 3
Page 109: mve62d00
r.04Y, 25. 199&r11 ;52AMX 4iW M2 V~,YA$L$ • NU.2498 P, 4/5 'a""' STATE OF 14iARYLANII, * IN TBE Pisindff, * CIRCUIT COURT v. + FOR PHII,IP MORRiS 7ItiCORFOAATED, o# ai., + BALTIMOItz CITY Detcudznis. ` Caae No.: l61Z2{i17fCL211487 ~ i 3 a ~! • i f ~k Y aMJR GR4dYM STAY OF PRt)~ES}INCS WHEREAS, PlsintiZ the State of Mary3aml, by and through its AN~eytl Gcxuast, and 33efecdauss Brown & Y~'~Itiamso¢ Tobacco Curpntarion; LcritS.ard Tobacco Comisquy, Philip Morris, Iffeorporata3; and Rd. Feynollds Tobacco Comgaqy siguatories to a I+Qaste<ScttlemeritAvccment C`2+3SA`) (acapy ofwLioh Is annexed hereto as Fxhit)UA). grovld€ag for, arruoag ot}ur tfiugs, the Settltaact afaH c3aims pcnding in tlsis action (the "Satdcm=f'~, WH&UA% putstsnt to the MSP., certain parties to ihis aciion fiave jaiatly moved for a stay of proceedings hearoiatn permic the parties to scdcto effecMate i$e Sefttemea~ NOW,'CFFREFORB, ITIS IiEitEBYt}Ri3ERED AS FOLLOWS: L Th3s aotion and all sbims audgmmdiags lurein are stayed as among all parkes (the OScaY"). IL A2l sppliaabte ticae s¢tcodula under du CrnuYs Casa Maaegmunt Order co sha11 be tolted for the pcricd in whicEt ihe Stay ss in QffecL c. CD rn w
Page 110: mve62d00
~ ~ 5888 P. 4/49 Second, trhere. as here. the defendant controls a danaerous thinp- or othcn'ise crtatcs i risk of death or gersottal injury, and the injury to the plaintiff is hiahlt° likelz° to result front wrongful conduct of the defendant. "no... direct relationship between plaintiff and defenciana need be shown. and the nnncinal deterainanc afdu c+m r c hi itti-,° .;~~ +t~s i F;rsr 1Vaciflnal A s+k flf Mat;Eland. 307 Md. 527. 534-535, 515 A,?d 756. 760 (1986) (emphasis added), Moreover, where the defendant causes a su2sstantia( risk of death or personal 'tnjury. a foreseeable ill be petmitted to recover ecottc:nic Irises. In short, the greater the risk and the more etain the harm that will result if the risk is taken, the less remote any ptaintifL or class of ? plaintiffs becomes. Here, the risk of petsonai injury was a vianual certaincy, a certainty known to s i defendants, and the 3iketihood of eonsequent injury to the State was one hundred percent certain duty imposed upon the State. In addition, the economic loss rule obviously does not o fraud and ne,gligent misrepresentation. where the harm is almost ai.w= economic. Third, intended harm is always proximate. F. Harper. F. James, C3. Gray, The t.aw at' .ZaIIS, Section Cr. I at 270 (2d ed. I98G). 4ee stm;lartv id.. Section 20,5 at note I and id., tion 7.33 at note I. If the defendant knows that an act is substantially certain to result in erse consequences, and proceeds in the face of that knowledge, the defendant's intent is not fmited to desired consequences. but also extends to such substantially certain adverse onsequences. even if deemed undesirable. Comment b to Section BA. Restatement (Second) Torts. The State has alleged that defendants knew that their conduct was substantially certain to cause physical injury to smokers and consequent health care costs to the State. (SAC ff, 1, 2. 8, ~i 12-13, 39, 233-236. 240-242. 246-254. 259-261, 267, 273, 285-287, 29Q}. Such harm cannot, as ~` a matter of law, be too remote to preclude these claims by the State.
Page 111: mve62d00
NG. 5866 Th Amendments t t8e'31e Fcaid AcY 1€c€rly Rer_ngni:e rhe Ccate'c lai c galnct he'I'ohac,pn lndostr}_.Cann ; BeTno Remote a.ga ~ atter of LAtt: In direct response to this Louri s dismissal of the State's common law claims. the Gcntra? Assembly passed Senate Bill 652. the purpose of which was stated to be: FOR. the purpose of ctarifsing that the Department of Health and Siental Ftlpgiene's right of subrogation for payments relating to medical assistance reclpients is not an excittsia e right, remedy, or cause of action: provfdittg that in any action brought by the State against a manufacturer of a tobacco product the causation and the amon7tof medical assistance expenditures may be proved or disproved by evidence of statistical analysis without certain other proof.,. In light of this elariftcation..Plaintiff re-pled its previously dismissed common law causes of action. Defendants, however, continue to assen that these claims must be dismissed as a matter of law because they are too rernote. Flaindf4•attswers that its common law claims must now survit•c ion to dismiss because of the state of the law as clarified by the Legislature_ Seasate Si3l 652 states on its face that it applies to an action "brought by the State against a ufacturer of a tobacco product." Therefore, defertdants' claims of remoteness are ex negated by the Legislature's specific reference to an action between exactly the parties defendants ' ge are too remote as a matter of law. In fact, the statute again refers to litigation between ese parties when it states: Any actiotn brought under this section is not exclusive and is independent of and in addition to any rightL remedy, or cause of action available to the State, the AeparrmentL any other state agency, or a program recipient or any other individual. tabiished >3rinciole of statutotv construction that "a statute is to be read so that no word, clause. :~ eant to clarify this point of law, these sentences would not have been inciuded, it is a well- • L: i Thus the legislature explicitly recogaizcd that Plaintiff would be able to pursuo other causes I r ! action against the defendants, and even took care to preserve them. If the legislature hQd not =00 4 ~~
Page 112: mve62d00
BEC-®2-98 25:24 FROM:ARHOLII&PORFER Y3AHH.- 9t12 ID,202 9 S99H PAGE 14121 ~ Agreement. The State of Maryland andtor any Participating Manufacturer may apply to the Court at any time for further orders and directions as may be necessary or appropriate for the implementation and enforcement of this Consent Decree and Final Judgment. Provided, however, that with regard to subsections V(A) and V(I) of this Consent Decree and Final Judgment, the Attorney General shall issue a cease and desist demand to the Participating Manufacturer that the Attorney General believes is in violation o€either of such sections at least ten Business Days before the Attorney General applies to the Court for an order to enforce such subsections, unless the Attorney General reasonably determittes that either a compelling time-sensitive public health and safety concern requires more immediate action or the Court has previously issued an Enforcement Order to the Participating Manufacturer in question for the same or a substantially similar action or activity. For any claimed violation of this Consent Decree and Final Judgment, in determining whether to seek an order for monetary, civil contempt or criminal sanctions for any claimed violation, the Attorney General shall give good-faith consideration to whether: (I) the Participating Manufacturer that is claimed to have committed the violation has taken appropriate and reasonable steps to cause the claimed violation to be cured, unless that party has been guilty of a pattern of violations of like natun:; and (2) a legitimate, good-faith dispute exists as to the meaning of the terms in question of this Consent Decree and Final Judgment. The Court in any case in its discretion may detetmine not to enter an order for monetary, civil contempt or criminal sanctions. H. This Consent Decree and Final Judgment is not intended to be, and shall not in any event be construed as, or deemed to be, an adanission or concession or evidence o€(I) any liability or any wrongdoing whatsoever on the part of any Released Party or that any Released Party has engaged in any of the activities barred by this Consent Decree and Final Judgment; or (2) personal jurisdiction over any person or entity other than the Participating Manufacturers. Each Participating Manufacturer specifically disclaims and denies any liability or wrongdoing whatsoever with respect to the claims and allegations asserted against it in this action, and has stipulated to the entry of this Consent Decree and Final Judgment solely to avoid the further expense, inconvenience, burden and risk of titigation, C. Except as expressly provided otherwise in the Agreement, this Consent Decree and Final Judgment shall not be modified (by this Court, by any other court or by any other means) unless the party seeking modification demonstrates, by clear and convincing evidence, that it will suffer irreparable harm from new and unforeseen eonditions. Provided, however, that the provisions of sections III, V, VI and VII of this Consent Decree and Final Judgment shall in no event be subject to modification without the consent of the State of Maryland and all affected Participating Manufactttrers, In the event that any of the sections of this Consent Decree and Final Judgment enumerated in the preceding sentence are modified by this Court, by any other court or by any other tneans without the consent of the State of Maryland and all affected Participating Manufacturers, then this Consent Decree and Final Judgment shall be void and of no further effect. Changes in the economic conditions of the parties shall not be grounds for modification. It is intended that the Participating Manufacturers will comply with this Consent Decree and Final Judgment as originally entered, even if the Participating Manufacturers' obligations hereunder are greater than those imposed under current or
Page 113: mve62d00
~OCT, 14. l998 2:35PM • that defendants undertook special duties with regard to public health. that thosr and owed to Plaintiffs, and that the breach of those dutit> 0; caused direct injury to Plaintiffs by foreseeably increasing the plaintiffs health carc costs above and beyond what they would otherwise have been (SAC'"" 55. 56. S(}): + that Plaintiffs' payment of tobacco-reiated health care costs conferred benefits on defendants, specifically described in the SAC and foreseeable and known to defendanis (SAC'H233 236); and that defendants knew the Plaintiff was under an obligation imposed by law to pat medical benefits to stnokers, that the payment and discharge of this duty by Plainti ff was uiggered and caused by the fault ofdefendants, and that as between Plaintiffs and defendants, defendants should have paid those costs (SAC Iff 241 - 243). h I ; inion"}. is inapplicable to these claims. IIefendants derive the extraordinary proposition that alleged direct injury to the State as an entity, the authority relied upon by both the defendants in their Motions to Dismiss the Complaints, and by this Court in its Opinion and Order of May 30, 1997 ; assen that the State's common law claims are too remote. (I3efe. Ment. at 4). Because Plaintiff has Ignoring these clear allegations of ditect and intentianal injury to the State itself, defendants nr wtongfiil acts have caused serious ituuty to individual smokers, the State itself, which eeable victitn. can have suffered no compensable injury at defendants' hands. For example, in the Opinion, the Court relied heavify upon the opinion of the Supreme Court raatme nrv lnvector Pmtectinn i^ote , 503 U.S. 258, 268, 112 S.Ct. 1311, 1318 (1992) applying a"general" rule, indicating thr.re may be exceptions) which in turn relied upon its prior j} opin`3on in Associated G=ra3 t'nnrraccnrs n fCal nt v S,tgM Caurucit of C'alpenTP[R, 459 U.S_ 519 !r (1983)_ In fact, the Supreme Court made it clear in the latter case that there are 2a least three 7
Page 114: mve62d00
BEC-@2-H6 15,26 FRQ!lcARNQWPQRTER 41AS TMSDAY, I2 State of MaxyL x itats at "isqd `) ln ihi 2 Plsutiff } c3zcnit caszt 3 3 tffi ; n. ) latiaft citT 5 } iP I p Mcxr3r re } C.d. ##.r i #1t2017JCL2111Y7 I I2 1'}R s6UFO-aatitl.d tue oa1 m far h.M aq 13 b.fexs 21q yroozbu l.oQs f. 4swAt, SunQi14 Dwmbue 141, 1496, CaoMsai4g st 2:25 p.a., at tba cims4t tburt li-fos aatisot. citx, DLlti~a, xufl1". 11 4 aPesalaRCa4 3 Om DeWlt of 'Pdt P1.Sntitfas 1 3 C4A®E it. &apID, i.pnt7lttamn Ctoltal 6 OEffw of t.h. Lttan" Creetrl 7 200 i.ict Ptul P1Me 1 zalu"su, N.qlaad 2124Y 9 t<181 576-6334 14 12 s, xsASS, aoPR, bqui[s 12 Lsu ottlws of htQ C. 3sqllnt, i.C. 13 Qan marFat GCta 14 1441t. iTatcta rtr..t, rsitC 114 13 uitiaossf ft 21241 i (i14) 4{f-46i4 A. 4Mt, ksgi.tusd ioait 4rpoztsx AL BETZ &ASSOCIATES, INC. (41fl) 752.1733 2 AL BETZ & hSSOCIATES. ilVC. (410) 752-1733 Al Betz & Assodates, i tts Nh.lt oF n.t..do.t liilip ArsL, uaeqmy.dr 2lSfli.p tiorrl! PAIpi6Sfir ZW.: l 4 f f T JQDL2I lII0OTI8hQ1Rl4, Iydw 1RMM 411LRi7, itqUtz• SSO$d L Pat!{t Stf tMEYfth ptawt, i.f. IM} P!4•!M Sit0 L ?4=s1i, iwdtt Tasblt, 7es{jsx ud tewctr SL! 2/44 ttuaa[tis Ceet L 3sest bnildfa4 s.o .ogu.r Pi... U~ tt~f~ ~tt~f *. S234f 1i191 214-300 17/21 AL BETZ & ASSOCIAT'ES, iNC. (41Q) 752-1733 i W 4SYatL ai DKaduts ttw. i l[kIliww 3YYrw 2 Cospurditm: n. J. L}sei4s Ra6um Caprqt 3 4 AGCQS' C. DOCWA, iod,ts 5 Pip" iRubuy 5 36 S. Cmarls Ytxwt 7 1altiaoza, 14L 21202 ; (419) 539-I534 D 14 21 12 13 14 1S 1s 17 is i,lg ru AL BE3`L ScASSO(7A'PSS.IIVC. (410) 752-1733 752-1733 se ~A s:31srx~.ro s zim -m assasts21v EE:se ssS1rze/as
Page 115: mve62d00
OCT.14.3998 2:35?M ~ ~ NO, 9806 P. 7149. {1993}: see also Garn nSt~atr. 33'_ 11d. 571, 585. 53_' X2d 797. 804 114931. Crt}N'CEn !~=c FrnpjQgeae Irtc o. :- jnurranre Cnram'r, j3? iSd- 124. 131, b 3© A?d 71,i. ' 1- t 1993 i: EairB:ltlk5- 33(} Ivid& at 46. 622 A,2d at 125. The legislative history of Senate Bil165'? (disctsssed in detail in I(I B. betou-} provides morc than ample evidence that the statute was crafted in response to developments in Us case. The General tlssetnbty expressly recognized the need to clarify its original legislative intent u ith respett se's rights to recover damages :ir Medicaid expenditures fznm the tobacco irtdustn-. The e of the term "clarify" demonstrates that the provisions are intended to enable the courts to isting law in accord with legislative inteat. For the statute to fai I to enable vidence of prozimata cause. which is still snbject to proof. would directly thwart early expressed will of the legislature. B. The CAC States C.°taims of I}Lrert d~t r~' a hr~tisintit7 The SAC sets forth at length and in detail that defendants' acts have caused direct and eseeable harm to the Plaentlff. that defendants' misconduct was directed at the Plaintiff, and that ; Defendants acted willfnily and intentiottatty. knowing that their acts would impose excessive costs ; on Plaintiffs and benefit defendants at Plainriffs' ezpense, Plaintiffs have alleged , s that defendants made false and misleading represetttations to Ptaintiff and other , governmental entities, with intent to defzavd and with the intention that the State and I r others would rely upon them to their detriment tSAC 11, pp. 2-3); that defendants acted willfully, intentionally, and with evil motive, in the specific ! ~ tmowtedge that their actions would significantly increase health care costs payable i I00 259-281, 267, 39. 233-236, 24Q-24Z 246-254 by the State (SAC * 2 t E. 12-13 t7N , . , . , 9 L--' 272, 285-287. 290);
Page 116: mve62d00
ao N 86~(76320 0 0
Page 117: mve62d00
988 2.4fiPM 0 X , 5866 F. 49149 PaulN, Farquharson. Esquire Robert E. 5entt. Jr.. Esquire SEMMES, BOWEN & SEMMES 2541ti esc Prz€t Street Baltimore, Maryland 21201 48 \0
Page 118: mve62d00
VENABLE I •, - aa.N4V. 25. 1998 111; 52Ahla 41n7r4s K 2498 P. 5/5 '"""` t iII. The Stay st1aII reanain in e0'sci until the earlier crfsle fulio3a"sng: (A) &n Seutemeat has schiovcd "State 5gcc's6c Finality" (as defined in Section II(ss} of the MSA) in the Staze of ivtacylaud: or (B) the MSA has been tratninateQ wifn sspect to the Statc of tv{arylatzd pursuant to subseetioa XYtIt{n}(t) of the A+lSA. IV. hiothing in this Order shall grtvcnt any party hereto from iassitutiag or paTtiC.ig3l1IIg JI}n p[4c0cd1DgS herein for the P11T(idSC 6f CffCCt1iSglAg the Settlement c0[1SiSteiit'W7.ti the t8FR19 of the MSA. So urdurd this o'7 Yday of /6~'.1998. . AC= %- mm - W . . - . •rrm' _ . 4 i . = Sf.~. S@ YW ~` ! Wmam OLY. ~
Page 119: mve62d00
NO.586E F. 6I49 sentence or phrase shall be rendered surplusaue. superfluous. meaningiess& or nugatory." nlcltas t• Stace n'>rta and 277 Md, 314. 353 A?d 256. 258 (1975) citing 'nahan 4 Rd of Cun a'' EICC12AOS, 273 Md. 4()6. 415. 329 A. 2d 7D? ( 2974); A H Smi h Cand $ f rni"eJ rets't. _'7(4 "licl 652, 659, 313 A. 2d $24 (i974); and Theimas v Police CommissiQner. 211 Md. 357. 561, 1?7A. 625 (I956), If defendants' argument that Piaintiff's { port fctr dtis conclusion may be found in the equally well established con.tzttction that courts must consider the setting, purposes of the enaetmett4 ends aomglished, and the consequences that may result from alternate interpretations. I-Yse t. : R itimnrt cx~nnr 215 Md 135 140 I37 A 3d 156 158 ( t957)- see also Nn*nh k v e©m~~t t`n 9d n_,fEdNc, 295 Md. 597, 458 A.2d 758 (1983). It is the duty of the Court to cortsnve statntes such ! i 0o remote is e Cotat, the above.provision &otn Senate Bili 652 is without meaninq or effect. defendants' assertion that P:aintiffs common law claims should be dismissed due to is entirely withovt rner;t. Plaintiff maintains that the legislaeu'<re's clarification germits and recognizes its common lau able in light of.'°dte purpose. aim, or policies oft#te Legislature reflected in ; statute." Ta+tiera y. Malknx, 320 A•fd. 471. 480. 578 A.2d 761, 765 (199a); see also T ceu v. j ~~ TidC~sy, 328 Md. 380, 387, 614 A.Zd 544. 594 { i 492}; Mz tin ~gh ~A {min V¢hnder, 324 Md" : 4, 453, 597 A.2d 939, 943 (1991); WtLr++E y Pcitfce .rnrg 'c re,ntv, 319 Md. 597, 643, 573 A"2d , i 1346, 1348 (1990). To tr.ach this objective the court should seek, "evidence of the Legislature's !s ationship to earlier and subsequent Iegislation.•, r po glasP. 333 1 11 Md. 387. 393, 635 A.2d 427, 430 (1994) {(quoting Kaczomwski 309 Md. At 515. 525 A..2d at 632)" ; i e coutt atso'Yooicc to the context stttmuttding the enaemtent of a statute to deeemtine the intention ; nIIltiti9ttCC._QS mr 1 fea ateF4,1E;, 2 Md. 723, 733, 633 A.2d 93, 98 tp J 9, CT\ O1
Page 120: mve62d00
27
Page 121: mve62d00
PM is 0 NO. 5966 P. 45/49 J. JOSEPH CL#-ELXA.,':. JIt.Atraniee Geueezel CARMEN M. SHEPAItD, Ilepup'.4tton3:r General JOHN B. HOWARD. JR..dsststantAnoner GeJaerrl! Attorney General of Maryland 200 St. Paul PIacE, IbEh Floor Halttmore. MD 21202 (410)576-6300 PET G. AI~tCs H. RUSSELL SMOUSE E_ DAVID H(1SKINS JOHN C. M. ANGELOS The Law Offices ofPeter G. Angeios. P.C. 4ne Charles Center. 2IIth Ploor 100 North Charles Street Baltimore, Mazyiaud 21201 (410) 649-2140 Artotn~t°s for Plainti f
Page 122: mve62d00
OGT. 14.199$ 2.41PM a AIL NQ 5866 P. 31/49 inciuded a litigated determination, consistent with the Seventh Asnendment, of ri+e Tr.rtil-I,,n mundcnred issues of whether. as to each individual plaintiff. Pittsburth Cotnina's product Nvas a cwsc of his complained-of condition and. if so, the damages that plaintiff suffered as a result." Cituinc, 151 F.3d at314 (emphasis added);,stenisQid, at 313 ("To begin urith. it is contran to Fihretnoard. which plainly holds that under Texas su6sranrive law causation of plaintiffs injury by defendant`s t product and plaintiffs resultant damages must be determined as to 'individun3s. not groups.' Fihrehc.aTd's determination of Texas law s precedent which binds this panel ....[E]ven were we d damages are determined respecting plainti f('s as iduals, not grtwps.'? The issue under Maryland law. however, is completely different. Unlike the Texas law at y EibLehQ3rd we would reach the same conclusion it did. namely that under Texas of the amendments to 15-120 expressly rovide that causation and damages may be proven vithaut evidence relating to any individual. i ~ determinatio e. land law mandate, in this type of case, for the type ofittdividualized factual ' at Texas law required to be implemented. y d in Marntand ic Not Reaafred 8eraase ihe , The Defendants' third attempt to derail the properlY pleaded Count 14 invokes the specter joinder-in this action--of every Medicaid recipient in Maryland- Under Maryland Maryland case law, joinder is plainly not required, as the State has alleged that it is i i ptitted to recover irs own Medicaid expenditures through a statntorv claim that is separnYe and ~ claims that Maryland Medicaid recipients may have in their o il tobacco manufacturers. 30
Page 123: mve62d00
GGT. 14, 1998 2,4fiPM 9 M4.58bb P. 4$/d9 Bruce Ginsberg, Esquire Yvonne Look. Esquire DAVIS & GILBERT 1740 Broadwa_v New York. New YorL 10019 John P, Sweeney, Esquire Gregory L. Lockwood, Esquire MILES & STOCKBRIDGE 10 Light Street Baitimore, Maryland 21202-1487 R Towgsend I?aves, Jr., csquire Anne E. Cohen. Esquire DEBEVOISE & PLA9PTON $75 Third Avenue New York, New York 10022 William F. Ryan, Jr., Esquire WHITEFORD, TAYLOR & PRESTON. LLP. Seven Saint Paul Street, 12th Floor Baltimore, ,klacytand 2 1 2 02-1 62 6 Judy $emstein-Gaeta, Esquire 3ames J. Sandman, Esquire Anne McBride Walker, Esquire ARNOLD & PORTER 555 12th Sueet. N.W. Washington, D.C. 20004 Kenneth N. Bass. Esquire Kathleen Mullery, EsQuire KIRKLAND & ELLIS 655 1 itlt S¢ees, N. W. Washington, D.C. 20005 Thomas J. McCormack, Esquire Robert S. Pruyne, Esquire CHADBOURNE & PARKE. LLP 30 RockeFeller Ptaza New York. New York 10112 47 ~ i
Page 124: mve62d00
NO, 5$b6 P. 4-0I0 as the imposition of a gocemmental char 5 trarisacn SSIC had not hcYit completed when Ch. 6 was enacted." Chc1~L~, 306 Md. at 416. In stun, the General Assembly clearlv intended the Medicaid atnendments to applN retroactively, as expressed in the explicit retroactivity clause. and. because no final judgment has Heen reached, such application does not upset any vested rights, The amendments thus apph r oattiveiy to this litigation. NONE OF THE CLAI,kIS A.i3ERTED IN THE CONSUMER PROTECTION ACT COUNT A3 AY BE DISMISSED ON TfIE GROUND OF REMOTENESS A. $ In Count One of the Second Amended Complaint, the State alleges numerous violations by all Defendants ofMaty4and's Consumer Pmtecaon Act and seeks various forms ofreGe£ inciuding ; ties, and damages. I3efendants' motion to dismiss and proposed fortn of i order seeks the dismissal of Count One irt its entirety. However, that portion of the Defendant5' ncems Count One is limited to the cantention that the claim for pursuant to § t 3-408 of the Act should be dismissed on the ground of remoteness. The i affer no reason to dismiss the other claims for relief sought by the State in Count One. ; such as equitable relief and civil penalties. Accordingly, the Defendants' Motion to Dismiss all ims for relief other than damages ; should be summarily denied without further consideration. Plaintiff will resaict its argument ; # onceming Count One to the only issue raised which is whether the statutory actian for damages ~ ~ should be disntissed on the ground of remoteness. ' 39
Page 125: mve62d00
the State under the unjust eruichment count is simply a money judgtnent. not a coercive remed.:trtd therefore is not a disfavored remedy in comparison with ord3nary legal remedies. Moreover. an alternative remedy is not deemed `adequate" unless it is equally "cotnplete, practical and efficient.- To the extent that Defendants continue to press for victim-by-victim adjudication of the State's i subrogation claim, the subrogation action would be far motc cumbersome procedurally, and thtrebti fa- less "practical and efficient", than the unjust enricttment proceeding. Defendants rely on a questionable citation for the contention that "a legal remedy is noncaereive relief is ac•ailable."} (Emphasis added.): cL.id.. 44.1(1) at 557. The rzmedy sou,'ht 5 o' only if it provides relief that is different in kind from the relief plaintiff seeks in equity." emarkable assertion Defendants cite "I Dan B. Dobbs, Bs;ms.d'tes, § 2.5(l), at 226'- No N0.58B6 P. 22/49 s on thac page or, to the best of Plaintiff s knowledge, anywhere else. There e contrary, a reference on that gage to the requirement that "the legal remedy must be as and efficient as the equitabie remedy a:vailable:' While there are also references comparison of the "content" of the remedies, this is in the context of=elucting the comparison of offlrcarn ~+c fsuaditcos= not the efficiency of the underlying actions. Indeed the text quotes with note 13, an itlinois court's statement that `Yhe remedy must be clear, complete, in incorporated by reference. Then. at pages 1t3-13. Defendants contend a failure on the pan of 21 and as practical and efficient to the ends of justice and it.s pm= 24m=nisrntian as an equitable re edy." (Emphasis added.) Third, Defendants' Iw-titer contentions regat3in in Support of Defendant's Motion Surreply Memorandum in Opposition to Defendattts' Motion to Dismiss (December 13,1996) at 4-6, enrichment are based on its Eashibit iss at 7-23) and fall in several ~; categories. At pages 7-1©, defendants re-h;3sh the argument discussed above. See also Fiaitttiff`s
Page 126: mve62d00
ocr. i N4.586fi P. 20/49 €q4LdF7~ta:TS:rtIH It3c.. SSi :E.W~ 2d 490,494 (Minn. 1996) (tobacco defendants assumed special duty to Blue Crass and Blue Shield ofMinne$ota based upon virtually identical representations) ("uhen defendarst actuaIly beghts performance of the promise. courts are significantlt• more at ease in imposmS a Is Montana a- _ Philip t+r1ara tnc.. suptam at 21-26 (Exhibit D); an duly");,Crate nf Havaii v. 13rowm & ttliiliamennn supra. (Exhibit H). ~ 3t is also well established that "physicat hazm" resulting from the breach of an assumed ducy encompasses economic toss, evhich is the _',arm a`.leged by the State. Laka3re1.nca1 17. 7 F. Supp-. ! 2d 277, 292; CtationarT- Epg'tnrc_s slip op, at 33. As noted above, this is certainly true w•here, as i: a risk of physicai harm was caused by defendants' breach of duty. 'T~-t'ty;ssu±n. suiLa. THE COMMON LAW COUNTS ARE NOT SUBJECT TO DISMISSAL FOR OTIiEii, INDEPENDENT REASONS The Defendants simply incorporate by reference the argutttenis and supporting memoranda to the Court in support of their previous Motions to Dismiss the Complaint and nded Complaint (Appended as exhibits J through M. and additional tobacco related cases ~ ; , and responses to those motions. In addition. the State provides the following brief sutrunary of the ; identified in defendants' Appendix A). The State hereby incorporates by reference its oppositions i reasons" reiied upon in the defendants Exhibits J- MX and Plaintif£s response thereta. 3 i isted by defendants in their Supporting Memorandum at 1 T(t Ctst 's ni>:ct FnrEehment Ctaun im Neither R-nai whkNot' Pxer?nde€Lyi ~ Oth7I j=l es!±e[_i4e< ~ 1 3n their Exhibit I (at 15-29) deferdants address the State's unjust enrichment claim, which a Defenddartts discuss as "this equitable claim," ttoi as a"cotnmon law count." Defendants' argument as here, the its Exhibit J is based on the contention that "this rQ ,irahs claim is ttnavailable where 1 , 00 rn 19 ~ C.., Q CD
Page 127: mve62d00
4CT, 14, 199 8 2:45PM ~ 0 NO, 5866 F. Ford Loker, Esquire CIIL7ZCH & Hat1FF B & 0 Building. Suite 600 2 North Charles Street Haltimore, Matyfand 21201 Stephen D. Susman. Esquire Eric Mayer, Esquire SUSMAN GODFREY, LLP. 1€144 Louisiana Street Suite 5100 ` Houston, Texas 77002-5096 Geratd P. Martin, Esquire Gregg L. Bernstein, Esquire Kimberly Dunn Sgeiitnan, Esquire MARTIN, JUNCrHANS, SNYDER & BERNSTEIN. P.A. 217 East Redwood Street Suite 2000 Baitimore,114aryIand 21202 Mark G. Cunha, Esquire Adam Stein, Esquire Caroline L. Orlando, Esquire 7erey Coleman, Esquire Ronald Neumann, Esquire SI1vfPSf}N, THACHER & BARTLETT 425 Lexington Avenue New York. New York 10017-1a45 Deborah L. Robinsoss, Esqt ire Peter A. Woolson. Esquire ROBINSON, WOOLSON O'CONNELL. LLP Redwood Tower. Suite 1500 217 East Redwood Street Baltimore, Maryland ? 1 Z0Z Aaron H. Ivtarks, Esquire KAS4WI'f2, BENSON, TORRES & FRIEDMAN 1301 Avenue of the Americas New York. New York 10019 46
Page 128: mve62d00
OCT. 14. 3928 2:39PM 0 4t NO, 5866 P. 23/49 the State to plead properly enrichment or benefit to Defendants. In reply. the State incorporates tn reference Plaintiff's Memorandum in Opposition to Defendant's Motion to Dismiss (Noventtter :. 1996)at 24-28: Surrep€y Memorandum in Opposition to Defendants' Motion to Dismiss (December 23. 1998) at 7-8. Ivloreover. similar unjust enrichment claims aeainst many of these defendants bt Iafinnesota Blue Cross and Blue Shield ofMinnesota and Mississippi have already been upheld on ~ ntotious to dismiss.. i+ nsnta v Philip Mnz d__ tnc. C.A. No. CI-94-8555 (Minn. Dist. Ci.. May 18. 1995) (Exhibit F); Minnesota v Ph'"p Morri<_ Tnc supra 551 N.R'. 2d at 497-98 (upholdin,; Cross claim for unjust enriehment); hdiesic.cippi v. meric R Toharco o, No. 94-1429 (Chancery Ct. oflackson So., Feb.21, 1995) (Exhi€;it G)_ $_ The Retatfnexh(p Between t6 Ctat and the Defaedants'c 1Ynt Ton it .Dnte. At pages €3-( 8 of Defendants' Exhibit K defendants make a series of argt roents all claiming . efendants owed no tort "duty" to the State, all contending, baselessly, that the foreseeable hatm to the State from their tottious conduct was somehow excessively'temota" fnr tort liabiiity, efendants are immunized finm liability for their.vrongdoing by an asserted "economic loss" . , ru€e. These arguments ase reiterated in Section LA. of Defendants' Supporting Memorandum at ' ~ pages 4-8 and are addressed by i?taitttiffin Sectirn I above. See also Yla`sntiffs Memorandum in , position to Defendants' Motion to Dismiss at 35-37; Plaintiffs Surrcp3y Memorandum in { i to Defeztdants" Motion to dismiss at 9-1U. F E Defendants also repeat a series ofarguments against the adequacy ofthe State's strict liability j each of warranty claims on pages 18-22 of Defendants' Exhibit K. These are adequately 1 in Ptaintiff's Mcrnoraruium in Opposition to Defsandants' Motion to Dismiss at 37-45. + At pages 22-23 of Exhibit K. Defendants repeat arguments that they have made concerning 1 i elements of Plaintiffs claim for negligent and fraudulent misrepresentation. These ~ ?9
Page 129: mve62d00
X 1990jQ.594- 4IQv 42 STATE OF MARYLAND, Pla3ntiffs v. PHII.IP MORRIS INCORPO Aefcadaata. i WHEREAS, PiaiatA the Staw o YYxVf38LI: ~ N0.7234 P. 4/50 • IIV TBE ' CIRCUIT COURT + ROR , * 53tlL'i'iMOl.tE CITY . * Case No.: 96i2Zt1171G'E,2i i4&7 O STAY_ OF PROCLTDg+{G,S Generai, and Defenctanis Brown & Wii3i=nsou Tobawo CoFpocattoa; LoziISard Tobacco Compapy; Phi13p Ivfozzis, Iacarpazmted; and R3. lteystuids Tobutxi Campnay are 3{a copy ofwhioh is annexed hereto as Exbitit A}, pravidiz.Fg fow, auiong othrr#hangs, the 5ettle=t ofatl eleims pending in this actioa (the "S~-J;,., - WFIEREAS, putsusucto the mSA, eeriaiu pmties ta this aettoa havejoi€etly moved far a stay ofpxoceedingsheteinio permit dsc partias to srxkto cffectva#e the NOW, THSREFOTtB,1T IS DEREBY ORDERED AS FOLLOWS: -1 I. This action and all claims and pw=edmp herein are stayedos among all parties (the `$tay~ IL A3l applicable time scha3tslss ttndcr the Coust's Csso htanegemestt Order shsil be tolled for dte posiod in which dse Stay'ss iu effoct
Page 130: mve62d00
N0. 5866 P. i410 foteseeaEzie. intetttional harm to the State. both economic and to its socereiVn interest to the puhii: health as set forth above. C. The defendants also argue ttaat independent of the statutory amendments. tortfeasors who cause Ritysieal harm to third persons cannot be the proximate cause of economic damages or Co~spflt Damage to the fitste Were C ax=i.aar.it=;c d. 145, i56-t57, 647 A2d 405 (1994). Although recognizing that "ordinarily" torc recovery for purely economic losses has not been allowed in Maryland, the Court permitted recovery in tort and Section 402A strict liability tort remedieaj for purely economic damages sustained e City (which, like the Statc, cannot sn#f'tvphysical injury) in removing defective fireproofing i j from a public high schoof. "Even where a recovery, based on a defective product. is consitiered to economic loss, a plaintiff may stili recover in ton if the defect creates a substantial and nreasonabde risk of injury,,' fd. In so doing, the Court of Appeals solidified and expanded its r, even if their conduct is the cause in Facr of such (Defendanas' Memorandum at 5). This analysis is contradicted by the holding o f the 308 Md. 18, 517 A.24 336 (I9$6) in which it ', . 22. t998)(Exhibit I}). In a wetl-reasoned opinion, the Montana court held that where, as here, 13 applied by the court in denying these defendants' identica( arguments i i lly identical claims of the Siate of Montana by a similar motion to dismiss in Statesif I { 41antang v Fhilip tvtarrisTnc.. Case No. CDV-97-306 (First Dist. Ct., County of Lewis & Clark, for purely economic losses where the defendants' conduct created m
Page 131: mve62d00
QC:`. 14. 1~98 2.46P~ ~ ~ NO, 5866 P. 2V49 authority in Marytand, but is not the rute in those states. III. THE STATE HAS PROPERLY PLEADED A CLAIM FOR STATiTORI RECOVERY OF MEDICAID COSTS AND IS NOT REQUIRED TO JOIN EVERY MARYLAND MEDIC.IID RECIPIENT IN THIS INDEPENDENT CAUSE OF ACTION BROUGHT BY THE STATE { The Stare Has 4degnltP,ji- Ptradrd itc Statatna Recmc^rr laim Consistenr wfth the RtApiraments nf the ItFtedieaid Snhragstinn Ararndrttenzo tn Sectlnn 75- I7.4 In.chatienging the legal sufficiency of the allegations in Count tC, the Defendants have conveniently ignored the legal efFect of the passage of the amendments to section 15-120 of the Health-t;eneral article, which plainly permit the State to proceed on a claim withour drawing into issue questions of causatio f and damages as they relate to individual Medicaid re The fundamental contention in this regard is that the State has fallen short of the pleading requirements for its sta€utority-created recovery cIaim because the State has not identined by name, each and every Medicaid recipient on whose behalf it seeks recovery. Under section 15-13U(e). ired for the State to make out i s. and proof related to any individual claim, is simpSv ' For recovery. Subsection (e)('?)entirely , p removed from the State's burden of proof any issues relating to individualized causation and . damages: "In any action under this section ... brought by the State against a manufacturer of a; ~ tobacco product, the causation and amount of medical assistance expenditures tnay be proved or ! roved by evidence of statistical analysis without proof of the causatinn or the amount of t pendirures for any particutar Program recipient or any other individua3: ' Seeking to circumvent this clear Sanguage. the Defendants inaist that "the State must still } I blish that each recipient has a viable cause of action against the Defendants." Defendants' t emorandum at 17. This is a demonstrable rttisstatement ofwhat the statute rec;€tires, especially at ? 24
Page 132: mve62d00
LIEC~H2-98 I5:25 FRQM:HRTtOLD&PORT£R WASH.- #32 iDs202 965998 PAGE 15/21 future law (unless compliance with this Consent Decree and Final Judgment would violate such law). A change in law that results, directly or indirectly, in more favorable or beneficial treatment of any one or more of the Participating Manufacturers shall not support modification of this Consent Decree and Final Judgment. D, In any proceeding which results in a finding that a Participating Manufacturer violated this Consent Decree and Final Jttdgment, the Participating Manufacturer or Participating Manufacturers found to be in violation shall pay the State's costs and attomeys fees incurred by the State of Maryland in such proceeding. E. The remedies in this Consent Decree and Final Judgment are cumulative and in addition to any other remedies the State of Maryland may have at law or eguity, including but not limited to its rights under the Agreement. Nothing herein shall be construed to prevent the State from bringing an action with respect to conduct not released pursuant to the Agreement, even though that conduct may also violate this Consent Decree and Final Judgment. Nothing in this Consent Decree and Final Judgment is intended to create any right for Maryland to obtain any Cigarette product formula that it would not otherwise have under applicable law. F. No party shall be considered the drafter of this Consent Decree and Final Judgment for the purpose of any statute, case law or rule of interpretation or construction that would or might cause any provision to be construed against the drafter. Nothing in this Consent Decree and Final Judgment shall be construed as approval by the State of Maryland of the Participating Manufaoturers` busitee3s organizations, operations, acts or practices, and the Participating Manufacturers shall make no representation to the contrary. G. The settlement negotiations resulting in this Consent Decree and Final Judgment have been undertaken in good faith and for settlement purposes only, and no evidence of negotiations or discussions underlying this Consent Decree and Final Judgment shall be offered or received in evidence in any action or proceeding for any purpose. Neither this Consent Decree and Final Judgment nor any public discussions, public statements or public comments with respect to this Consent Decree and Final Judgment by the State of Maryland or any Participating Manufacturer or its agents shall be offered or received in evidence in any action or proceeding for any purpose other than in an action or proceeding arising under or relating to this Consent Decree and Final Judgment. H. All obligations of the Participating Manufacturers pursuant to this Consent Decree and Final Judgment (including, but not limited to, all payment obligations) are, and shall remain, several and not,joint. I. The provisions of this Consent Decree and Final Judgment are applicable only to actions taken (or omitted to be taken) within the States. Provided, however, that the preceding sentence shall not be construed as extending the territorial scope of any provision of this Consent Decree and Final Judgment whose scope is otherwise limited by the terms thereof 6
Page 133: mve62d00
SEP`2i}'98 17:13 FR P4PER flMRRBURY TO 7p4tti8l6A2iE7H8u P.0Sti4 STATE OF MARYLAND ' IlN TSE PT,AI{VZTFF * CIRCUIT COURT * FO32 VS. * BALTIMORE C3TY PHILI? MORRIS, ET AL * CASE Na: 96I220i7{CLZiiaB'T DEFENDANTS ~,r~ ~ x~ ~t x~ ****~.****+~#**~a~x,cxt: **~r,~x,~:t*~r*:,r~ x,t* ** «e,t..**.**,e~r****.* ORDER OF TH.E COURT .~ It is this ~~ day of hereby orderedd that the 1'Iaiutiffs, " the State of Maryland, produce to the defendants hereiu: the privilege log as it relates to the claim of privilege in response to RFP 33 in accordance with the Case Management Order No. 1 and the foregoing memorandum opinion. AIl subject to the further of order of the Court. Roger W. BrcFn Judge Signature appears on 0 docunent only. BaItimore City Circuit Ca
Page 134: mve62d00
OCfi. 14, 1998 0 0 NO. 58ss P. H/49 causation issues as to each ritrinr individuaffr." (Exhibit 0). To the same effect is a Legislative Positaon paper submitted by the Maryland Ch3tnher oi Commerce. which asserted that the bill would allow -'[t]he use of statistical evidence alone to pro% 'e the state's case without the party actually injured having to present themselves or their iniuries -- " {Exhibit P}. In shon, the legislative history,of the amendments to section 15-13G(e}{?) fully suppon the $_ Thfi Pjain Lanyrp_age nfthe men anenta to Secfiqn i9-12t# Leaves No Room for thg f oirt tn KAV idt/ the Nnnmeritnrinnc ConAriflifinnnS icc_ne of a Supposed R: tto.i I3eterminat[onofFachindividna3Med`.cs'sditeRipient'a .aucatinn anrt ttamsEM ; In their second contention, Defendants would have this Court disregard the unmistakable bill's plain meaning-that the State u ould be allowed to prove its claims without brinsi case each and every Medicaid recipient. ividualized causation and damages, under ; the broad principle that courts shoutd avoid constitutional issues. Though framed in several ways, titutionat issue taised is an illusory one of a supposed ittfringement of the right to jury trial. There is no substance to this argument. and no need , 3 to "avoid" the issue by giving the statute a construction other than that plainly intended by the ; , i id recipient's claim. t ondnn v firate 332 Md. 4&1. 491 J r : legislantre's true i ention. ... To do so, we look primariiy to the words of the statute.") ~ When the legislature removes from "the judicial atena; ' tz+t{ v Fdrr,flnU 325 Md. 342, < 373 (1992), subsidiary issues relating to a claim, there is no right to a jury trial on the issues so : 28 I : that causation and damages could be determined without inquiry into the ; ~
Page 135: mve62d00
# NO, 5866 P, ]9fA9 In StafiOn= Fripinrorc r nra_t'10 Health & Welfare T ect Fund of al V_ Philip Mrnris lne., ~ ' -97-02514 (I71J) (slip op) (I*d.D, CaI. Apr. 30,1998) at 32-35 (Exhibit E), the court allowed alleged the breach ofthe same assumed duty alleged here. r breach of special duty to proceed, based on allegations that the tobacco ~ presetu. Defendants have repeatedly acted in breach of their assumed duty to report objective facts on smoking and health. As evidence mounted. both through industrt research and truly independent studies, that cigarette smokzng causes cancer and other diseases, Defendants continued publicly to represent that nothing was proven aaainst smoking. Internat documents shoN% that the truth was very different, Defendants knew and acknowledged internally the veracity of scientific evidence of the health hazards of smoking, and at the same tiate suppressed such evidence where they couid, and attacked it when it did appear. "Ih4se allegations suffice to establish the State's claims in tort (negligence. negligent misrepresentatioit, strict liability, breach of warranties) and pursttant to the Maryland Consumer Protection Act, for breach of an assumed duty, ~; Siweral courts in other jurisdictions have sustained similar claims for breach o£speaia[ duty b: 0 3rt I,r,}tereri n ai t 7, supta, 7 F. Supp. 2d 277. 242-243, Judge j Scheindlin sustained a claim for breach of special duty, in favor of heahh and welfare benefit funds , defendants had undertaken to act for the beneCit o`ttEe suing medical plan, that the defendants had : so and that the breach of the assumed duty increased the risk of harm to the fund I i resulting in economic loss. See altg f`jt,y and Cbuntv of San Franctcrn v Phillip is , supra. 957 ?t ~ j I F.Supp at I I43-44 (sustaining similar claim by governmental entity against motion to dismiss where I l >> plaintiffs alleged that tobacco defendants made misrepresentations, fraudulently pledged to support seareh, and prevented government officials from taking immediate action); Sili o+e f.et are st J 887 F. Supp.. I455. 1460-62 (N.D.AIa. 1995) (upholding on iI ~+ summary judgment motion a special duty claim against silicone implant manufacturer); Statre of i s, 3 18
Page 136: mve62d00
4C'l. 14. 1998 12: N0. 45P~ 5865 P. 4fi/49 CERTIFICATE OESERN'It'E (MBAG) 1 HEREBY CEl2TIFY that on the ~"` day of ~' f . 199&, n copyoi thr foregoing was hand delivered to the following Maryland counsel and mailed. frrst class. postage pre- paid to the remainittg listed counsel: John H. Lewin, Jr.. Esquire James K. Archibald, Esqnire ~ Marina I,oltcy Dame, Esquire VENABLE, BAET3ER & HOWARD. LLP. ! 800 Mercantile Bank & Trust Bldg. 2 Hopkins Plaza Baltimore, Marylaad 21201 George A. i3itso-n. Esquire Joseph G. Finnerty, Jr., Esqttire Raymond G. Mu{Sady, Jr., Esquire PIPER & A+IABBL7ItY. LLP. Charles Center South 36 South Charles Sueet Baltimore, Marytand 21201 Donald Ayer, Esquire Robert PvicDermott, Esquire Barbara McDowell, Esquire JONES, DAY, REAVIS & POGt1E Metropolitan Square 1450 f'r Street Wash"sngtott, D.C. 20005 William I_ Craucpton, Esquire David W. Smith. Esquire SHOOK. HARI)Y & BACON, LLP. One Kansas City Place 2?tl0lvSain Street Kansas City, Missouri 64105 James E. Gray, Esquire Hilary D. Caplan, Esquire Andrew Gendron. Esquire G00I}ELL.1)EVRIES, LEECH & GRAY. LLP. One South Street, 20th Floor Saltimore, Maryland 21202-3201 45 i
Page 137: mve62d00
STATE OF ivi?,RYi.AND, Plaintiff, V. PHILIP MORRIS INCORPORATED, et al., Defendants. * IP3 TBE * CIRCUIT COURT * FOR " BALTIMORE CITY ' Case No.: 96122017fCL2i 1487 MEMORANDUM IN SUPPORT OF MOTION REGARDING DISCOVERY OF FROM INDIVIDUAL AND MEDI . T`,t'IP 1VTS M'~.n~{r~r~a..y~ .B~. ~{('iarss.~'t~c.{k~ E;. Robert 21. lYt{r`CRiiieli III Axtvat.D & PoRTSn Thunnan Arnold Building 555 Twelfih 3treet Wasfiington, D.C. 20004-1202 (202) 942-5000 John Henry I,ew-in, Jr. James K. Archibald Marina i,Qlley Dama VFNABLF,BAST3ERAND $OWARD, i.LP 1800 Memwtile Bank & Trust Building 2 Hopkins Plaza Baltimore, Maryland 21201 (410) 24A- 740d} Attorneys for Defendant Philip Morris 7ncorporated and on Behalf of Counsel for Other Defendants (See Appendix of Counsel)
Page 138: mve62d00
OCT, 14, 1996 2:38FM ND. 5866 P. 10/49 Slaid, 52 Mass. (I 1;w4et. ) 296. 291 i,1846). in which the relationship between t p ,j ured third party was by „speciat contract' and "not by means of any natural or legal rei:uionshEp.." all oCthe cases relied upon as authoriN for this proposition arose in the even more narro%v context ofconiracts of insurance s}.ttlaMttNRf17 f0.Yl4i:${y;~i $ailroad t'o25 Corin. 265.65 .41rt. Dec. 571 (1fl5ft), ing.h.arn Mut ua/Fir Ins Cp v Rncher 1 39 Maine R., 253 (1855). These cases cannot be extended to situations where the defendant is aw= of the contractual, or fegaL relatsons ep e injured third party which would o suffer damage, or where the defendant acts with the knowledge that such laintiff is virtually certain to resuft. 5=, Cheisea i~+toving , T trkin$ Co 280 Mass. 282, 2$b-&7, 182 N.E. 477 (1932) and Ke_r 1.f her a L+rI eventha3. 165 F.2d 815, 822 (1 st Cir. This very distinction was recognized by the United States Supreme Court in acco iated Cieneral Contractors of t. rn supra. SignificanLly, the Supreme Judicial Court of assachusetts subsequently timited iis own holding in the Slaid case in Dznis v. ('lark, 2 Cush. 47, 354-55 (Mass. 1848). in which that court found the defendant liable to the ptair#tiff father for • out of an injury to his child. The court rejected defendant's attempt to limit the parent's claim to loss of services. The court expressly distinguished SLsid on the grounds that liability there was denied because based upon a special contract between the plaintiff and the a"natural" or "legal relationship" as exists in the instant case. The same actsusetts court also emphasized this distinction in ThPtce7 Moving& Ixln--f'o.- supra., 280 : 1 , at 285-$7. In ttffumipg dismissaE of a claim by an employer seeking to recover disability i ployment contract with its employee, the court expressly declared e it alleged mere negligence, with no allegation 9 86S{}62u0
Page 139: mve62d00
OCT. 14, I998 2:412M 2d4.5865 P. 28/49 indirlduals in suits 6y individuals. But it also clarifies that the ro6acco ccrnrparucs can rrc t nce, ctr; from utt}'air/r stuck-ing the dsek bYgrotrp3ng all tiefenses atai/abte agaitrst trutic°rdsFUl setrt., ,tta,; goverttratentat suits in defending againsr a State sulc" Letter from I. Joseph Curran. Jr.. zt+ Honorable Joseph F. Vattario, Chairman. House Judiciary Committee. March 1:. S e9&. at ': Letter from 7. Joseph Curran, ]r.. to Honorable Waiter:41. Baker. Chairman, Senate Judicial Proceedings £ommittee, March 12. 1938. at 2 (emphasis supplied to both). The Fiscal Note accompanying SB .i52 further evidences the General Rssembly's understanding that the legislation would remove from the case issues of individualized prooE erftng to the provisions of the hiif allowing for use of statistical evidence, the Note ill "could reduce or eliminate the need to address damages and causation for each , s that the bill would indeed have the effect thrt the Defendants now deny that it has: , without pleading the name and particulars of each individual Medicaid recipient. . a Briefing Book submitted on behalf of the defendant Tobacco Institute and others plain reference to Florida's sunilar Medicaid amendments, which allowed that State €o seek ' ividual Medicaid recipient." The Bill Analysis (Exhibit M) notes that this part of the bill is "rrtodeled after a Florida 4aw; . ; '•Sectit+n (e) ... would ... allow the State to collect damages soletY on the basis of statistical correlations or retationships without any need to shoW caosation on an individual level." A-2(? ! is in originai){Exhibit N}. i Likewise, the Bill Analysis submitted by the Department of Health and Menta! Hygiene in i f rt of HB 972 made it clear that the effect of the bill was to remove issues of individualized ; proof from the case: "HB 972 facilitates pursuit of such claims by permitting the use of stadstical = , ;; evidence to establish causation and cost, ratker thart pernutfng the tobacco industr,r to litigate 27 C ' CD ~. ~ Go
Page 140: mve62d00
DEC-H2-9H 15t24 FRDM:ARHOV PORTER WASH_- #12 ID,282 5io 5999 PAGE I3/2t F. Using or causing to be used as a brand name of any Tobacco Product pursuant to any agreement requiring the payment of money or other valuable consideration, any nationally recognized or nationally established brand name or trade name of any non-tobacco item or service or any nationally recognized or nationally established sports team, entertainment group or individual celebrity. Provided, however, that the preceding sentence shall not apply to any Tobacco Product brand name in existence as of duly I, 1998. For the purposes of this provision, the term "other valuable consideration" shall not include an agreement between two entities who enter into such agreement for the sole purpose of avoiding infringement claims. G. ABer 60 days after the MSA Execution Date and through and including December 31, 2001, mmanufacturing or causing to be manufactured for sale within the State of Maryland any pack or other container of Cigarettes containing fewer than 20 Cigarettes (or, in the ease of roll-your-own tobacco, any package of roll-your-own tobacco containing less than 0.60 ounces of tobacco); and, after 150 days after the MSA Execution Date and through and including December 31, 2001, selling or distributing within the State of Maryland any pack or other container of Cigarettes containing fewer than 20 Cigarettes (or, in the case of rolI-your-own tobacco, any package of roll-your- own tobacco containing less than 0.60 ounces of tobacco). H. Entering into any contract, combination or conspiracy with any other Tobacco Product Manufacturer that has the purpose or effect of (1) limiting competition in the production or distribution of information about health hazards or other consequences of the use of their products; (2) limiting or suppressing research into smoking and health; or (3) limiting or suppressing research into the marketing or development of new products. Provided, however, that nothing in the preceding sentence shall be deemed to (1) require any Participating Manufacturer to produce, distribute or otherwise disclose any information that is subject to any privilege or protection; {2} preclude any Participating Manufacturer from entering into any jaint defense or joint legal interest agreement or arrangement (whether or not in writing), or from asserting any privilege pursuant thereto; or (3) impose any afftrmative obligation on any Participating Manufacturer to conduct any research. I. Making any material misrepresentation of fact regarding the health consequences of using any Tobacco Product, including any tobacco additives, filters, paper or other ingredients. Provided, however, that nothing in the preceding sentence shall limit the exercise of any First Amendment right or the assertion of any defense or position in any judicial, legislative or regulatory forum. VI. MISCELLANEOUS PROVISIONS A. Jurisdiction of this case is retained by the Court for the purposes of ing and enforcing the Agreement and this Consent Decree and Final Judgment and enabling the continuing proceedings contemplated herein- Whenever possible, the State of Maryland and the Participating Manufacturers shall seek to.resolve any issue that may exist as to compliance with this Consent Decree and Final Judgment by discussion among the appropriate designees named pursuant to subsection XVIII(m) of the
Page 141: mve62d00
OCT. 14. t99$ 2.36PM HO, 5866 P. 9149 exceptions to the general rule upon which defendants rely that an injury is too ren ote where titc plaintiff sustains injury frotn the defzndanf s conduct to a third person: if h nia ntiff c«tain¢ no th r hap a contract t,5E3ch n tfidrd pAtson, or is under contract obligation on his account. and the €n,}urn` consists only in impairing the ability or inclination of such person to perfotan his pan, or in increasing the plaintiffs expense or labor of fulfilling such contract, unless the wrongful act is willful for that purpose. aory duty imposed by the state Medicaid act as well as by the enabling federal statutes s. Second, baause the Plaintiff assetts injury arising out of szatutory. not contractual i duty, the injuries asserted cannot constitute expenses arising out of the performance of a contract. < Third. the SAC speciftcalty alleges, with supporting factual detail. that defetsdauts' wrongful acts L`.S. at 531 n.25 {4ll4i14$ 1 7 SutheTITatd. A reatice nn the t.2u• nf i3_ ~~m3ees 55-55 (1882) is supplied)). Viewed in its entirety, this `Yemoteness" rule contains at least three separate ich render the rute inapplicable to this case. First, the Plaintiffs dA have an "ctther thart a coturact° relation to participant smokers: the Accordingly, defendants' remoteness rule, by its own terms, does nffi apply to this case. 'ronal and contrnined with the knowledge that the conduct would injure persons and The importance of the distinction between damages resulting to a plaintiff from a purely ' contractual relationship (including contracts of insurance) between the ptaintiffand a third party, and ~ i ofrelationship. such as the statutory and sovereign relationships present here. cannot i e overemphasized. In fact, none of the cases relied upon by the defendants, and by the Court in its ar, (pp. 20-21) as authority for the proposition that a plaintiff has no common law right of recovery against tortfeasors for injuries to third parties, atise in any context other ihan a cosstractual '; relationship between the plaintiff and the tortfeasor defendant. With the exception of /+ethonv v.
Page 142: mve62d00
5?N 9 0 110.5365 P. 44I49 f Seafa[¢5. To the contrary. the Snafareu court also igni:red ~t,te by H+,mplt= v Pbii tn Li omc n, 551 NKW. 2d 490 fMlinn. 1946}, in which the Minnesota Supreme Court allowed Blue Cross and Blue Slaield of Minnesota to go forward a-itb a pris•ate action against the tobacco defendants for damages pursuant to a statutory prorision similar to Section l3-4(38. After ho1G€ng that Hlue Cross' common law ton claims were too remote. the Minnesota Supreme Court upheld the legal sufficiencc of Blue Cmss' claims arising under Minnesota's cansumer protection and antitnut staemes. recognizing that "(tJkte legislature may, oy srasue, expand the connection between conduct and necessary to pertnit suit." 3r1U at 495. The court held that each statute "creates a private cause of action for any party injured directly or indirectly by a violation of the statute. T3stse provisions refleet a clear le,gislative policy encouraging aggressive prosecution of statutory violatiorLs." J.dU same rationale applies to the statu€ory action for damages under Maryland's Consumer Prorection Act. For these reasons, this Cotut should deny the Defendants' 7viotion to Dismiss the Co Protection Act claim on rhe ground of remoteness. CONCLUSION , For the foregoing rcasons, the Defendants' Motion to Dismiss Counts One and Five through en of the Second Amended Complaint should lie denitd, and the State allowed to proceed i Respectfitlty Submitted, 43 ~
Page 143: mve62d00
OCT. 14, 199 3 2:43PM ~ to administer. HO, 5886 P. 38/49 tt', THERE IS NO COINSTITL"I'iOtiAl. I,'stPED['.t7E!S'T TO RETAOxCTIZ'E APPLICATION OF THE AMENDMENTS TO SECTION 15-120 Cenuayzo the snr,,.qestions in Defendants' Memorandntn, under Maryland law. "there is. of course, no absolute prohibition against retroactive appli of a StBtute." $tatr f omm'n nn H tmaniv Arn.ti-„m 'niv. . 278 Md 120,123 (1976)_ Indeed, Defendants' entire position on ipcrss the fact that the GenerrJ Assembly included an e•.rpress retrcaacaivitYproi i.riori shall apply to any ease pending or filed on or after the effective dnte of this Act ...." CL I.an sofv i iQl Film Fmdnrtc, 511 L'.5- 344, 272 (1994){describing as an "explicit retroactivity cotttmand" the language "shall apply to all i co anttitla " as found in the vetoed Civil Rights Act of 1990): ~1- ParRtr.reh;tt v. Ntnntvnmrn. ('niinn 337 Md. 15, 28 {'Yn analyzing the i retroactivity of a statute ar ordanance. a court must fitsr determine if the legislative body intended ' e statute zo be rctroaczive ..."}. The inciusion of an express retroactivi d's statute from the prospeetive-oaly application of Florida's statute. Finding no rettaa.ctivity provision in that statute, the Florida Supreme Court held that "jt)he law is clear in this ~ state that there can be no retroactive application of substartave law without a clear directive from the legislature." iit¢e Amaciated fidurn,ec 67& So. 2d at 1256. It is true that, generally speaking, there is a presumption against retroactive applicat:on when ; # the statute at issue contains no express retroactivity clause. But as long as statutory language + i 1i demonstrates that the question of retroactive application was considered by the legislature, the j irrspedimentstoretroxctiveaivillegislaturnarenowtnodest_° Iasu1graPv iT¢yUm ' , Psodttcis, 5 E l U.S. 244, 272 (1994). #'. 35
Page 144: mve62d00
Leverence v. FFS Comoration 532 N.W.2d 735 (Wis. 1995) .............. ....................... ........... ................................. 26 Tvf_ atti2tQjy v. Mattingly, 92 Md. App. 248, 607 A.2d 575 (1992) .................................................................20 Nails v_ S&R Inc., 334 Md. 398, 639 A.2d 660 (1994) .........................................................................8 Sheets v. BreLh_re.n_ MLt. Ins. Co., 342 Md. 634,679 A.2d 540 (1996) .........................................................................8 State of Minnesota v. Philip Morris Incomoreted_ Trial Transcript of Feb. 13, 1998 ............................. .......................................... ....25 Weems v. Na-ntiroke 13omes. nc., 37 Md. App. 544, 378 A.2d 194 (1977) ......... ................ _................. ....................... 9 STATUTES 42 C.F.R. § 433.145 (1998) ........................... _.......... .......... ...................... ........... ............. 27 42 C.F.Ii. § 433.147 (1998) ..............................................................................................28 42 U.S.C. § 1396a(a)(25) ........................................... _....................................... ............... 27 Md. Code Ann. Heaith-Gea. § 15-124(e)(2) ......................................................................14 Md. Healih Gen. § 15-12Q ........ .............. ............ ......_.......... ........... _........................... ..... 7 RULES Maryiand Rule 2-4t)2 ....... ........................ ................... ......»............... ......... .......... ............. 6 REGULATIONS 5 1). .._ ....................................................................28 iii
Page 145: mve62d00
1998 2:36Pm K 5868 P. 12149 note 1. More recently. the U.S. Disttict Court forthe?votthetn District of Ohio applied this pnnctph agairist these very defendants in (LfinS•nt'lters oc 1 t4o 17 inc zranee Fund t Pl•it'tpMorri< lnc , 1998 U.$. Dist Lexis 14340. at *33-33 (N.D. Ohio, Sept. 10. 1998); See also. City and nilnr;- ni Can fir.ancicco v. Phiitin Mtzrric_ 957 P.Stipp 1130. 1141-44 (N.D. Ca€. 1997): State of Arizona v. arnern 7Aha; j-o a, No. CV-96-€4769 (Super. Ct. Ariz., Maricopa Co.. Order on Defs' Joinz Motion No. 5, May 27, 1997) (Exhibit A) (defendants can be liable to state for economic violations, cor:.;pst•tcy and fraud"); State of Tllinnis v Fh+lin tvtnrris. No, 96L1314t4 (ili. Cir. Ct., Cook Cn., Nov. 13,1997) (Exhibit B); and ';tare_of Hawaii v_ wv 8 Wiltiamson Tobacrn CDnY, No. 97-0441-01 (Cu. Cs.lst Cir., Order Denying Defs' Motion to 3 1998) {Exhibit H). As set forth in Comment b to Section SR, Restatement (Second) Totxs: "In imited ta cottsequences which are '' desired. If the actor knows that the consequences are certain. or substatttial,ly, eertain. to result fiom oes ahead, he is treated by t}Fe law as if he had in fact desired ttn produce the result." j, Defendants knew the consequences of their harrttfitl product were certain to result in the payment ! I y Plaintiff of the medical costs of Medicaid recipients and injury to the public health and to the ' 's interest in protecting the public health. Therefore, their actions must be deemed intentfonal j atter of law. ~ Moreover, other courts have long recognized that a single ton can cause direct injury of s`es. In The Tntvama 7? F.2d 690 (2d Cir. 1934), a'$3€, din€e=e3ckahet 294 U_S. 394 (1935), the Court noted: It may be accepted generally tltat a tnrt to one person does not extend in legal consequence to a third person who has been harmed merely =a +. e he h d canincred with the one directly injured in person or property by the tort. But the tort of the Sucarseco was not tnereiy of that nature as it affected the Tolnma's cargo. It was a direct contributing cause of the loss which was sustained by the cargo. lt made 11
Page 146: mve62d00
DEC-H2-98 15:27 FROH.P.Rtt/]Ip&FORYER WASH.- #12 10 :2@2 5939 PAGE 28l21 ~ 'P(JE$I}AY, DEC:J:Mlft~,#i i, ,tYYlv StAte of Maryland v. Philig Moxris 13 1 A4l. SHM110: ble& ihat b a}i. 2 yet tNnn. 3 S}it COURft t qa badt to !be -- 1 whQo yaa+io se 4Nwiael, E yo batk to N+e S tsm af tho ifAT =i fRAM whsse de .+a f siepW wh lhtlt }loma.m fhe» wm a alsAare 7 to dserdse,OW M*esA e% ani i had no frufelwB. #o.. I Alf. SHEPARDs wf tsHl ke.m wutusl aNano osdr.eyei nHh bsth af iEmo 11eaUtln,"wrf4aerr. AsrresaNlkatwes4, 1 baHaw, fMrsvdit be as farfher 43 staptMM" Iwv". 7Nf C41lTs Row Okay. 7iwr b 15 IM ariNe Nlho TiFhookvp k{ thmbsrs. Au.miKw w.re q.Inp 1o asn tMii Mr. U Xnkin dld ki iYp we A one NMe. S li deahf *A»ihor arnat we wNt be iredkwl #mt .. Is aa4wo.r.. io igwss #a qa.ation bsaon+et '.. 2@ wiueywraeyoktg fsgai ffoW. ~ i~ SMONlfw YoYFHensr:IvriU- XL BET'Z Sc ASSfiCLiT'ES, IIdC. 410-752•1733 , I tn CDUR[t iir. SAaw,/ didn! 2 owssttpYt}pM- 3 1fL lISOtiSE: weV take ihet 4 vosponolkift: tow Haw• and as4l 5 twrdorNiu ihat fq.efrasr. i 711i CQ7RT.- Okals. Naar, ihrrs is T oaa atker Ndeq, aaWflwi: Mraa vras ihe !daft whime af ike aMdaF Arst.N to delh. f Mgdali doar.ryy tliat *Arg. I dsid kirw Ifdim IN.r ewM.r MiAs wl* r.pard to oalnnd/.r pepaant at~e spati.i araNr. Sr p .rlups smaay pav a=msfderibaf mai deass tE aaei kt me tmnw ismarrew. !Iusi 14 aeai #s know lhat dwYS poiap m be iS re.ehd. ~2f ApS. WAIPAlf6e We vrK 11 A!f MM Yw, Mr. 8m. ~li M!. OWi S wAi pnbafrty hrke ~1a iasr•v Mra lsmsaasr wsf fo flmt aR rdwi to de uaaa i., ww we bwe e."tiwkk4 21 wlM1 tiw speiN wmpH. We 1wr" pf)M p Mld ~ ,tt. $$IZ BcASSOG1ek7ES,1NC. 41tf-732-1733 14 a lane.e~eep. w.r~lps.»poefsru. ~! 13rr mb~r.atlyngrat~a,tapethn S aStb Amold i Paefuvho tisvs ist.e dntftn~ ; { wilh Ibrspadal.usier. Weil qataa i b apd+ie, 8qan aai wM» we an, bm fl r'sA ;i(aktlonWil*nan.dalr. j 7 TH6 CCUt'ft Thd'a aSk rigfet. N ! s didnY hesr Ia b. romw»w buM f d1dnY wwM i to taxAM i!. 10 f<Et6RAYr Na. iwkrfdmwitE! ~11 Owf. Aa4.ee'N meiu nrfein thelStlaken li am e sf, aed wf7) Qlroyswlkew a tepaw#. ~11 7HE tOllRt: Ftne. tlwse.wn a li nwabirsf Haaa flurt were sabniited mder 15 seei, raea tif wbkit ars sMt aad.r swE. It thas~s irqY! nwa bteelqakm 3a m7au 17 wont to make arran4am.ni+#o yei /hott Is whenwet. is Mi. S14iNkIEA: w4 YA he nrkwing 20 d)at, i aseped, Yatr 1Sora.: in sean.qiea tl rrkh #ia, the a+Miea sagatdtnq praiecilre J.1. HE7Z & ASSOCIIITHS. IAtC. {1tWS2-1735 2 &aof 1 leud. f T!E tOIiAT: Atl riy}e. Arrytb4sg i a~. cotenNT i hSR. 6i'AY: Ne, 7aut Hanar. 'z TIiE COttRT: Caansei,l hars a t n4upe of 7wy not tar arp.l but.athar on lbsb"ateqimrd.rff. }Nrneirsdasqrf 10 ef the selN.maat ap.aemeat fnm inst w"k ii oadln aardd iaca blwn Ibe attonwys ww ~13 inw Pw*jpawin "awFo s*kis it aW, aaf.#ragtu, N 1ron wfN. He 4 ncoous tiwt noa+e af 7on falk aae, iaw I-s+ dr Iast aame af t.ll., as {n 65 mllilew is d.Yarft.lM, but newr*afesm he wwwdd Aka i7 to fmve poa[ signa4ums iar ids « 31 !R!. #NEWIROt YYe vraa{d be pteand, sti p.w Naxwr. Yoar tianer, tAen w2ll be an. 60m s1 awieter' nu neceuerlEp lwrErbq Ibese 1S1 16 ~ AI. SE,7E 8c ASSOC7ATES, INC. 41(6752-1733 Al Beta SY.Asaociates, Inc. (410) 752-1733
Page 147: mve62d00
t3CT. ld. 1998 2:4DFM NO . 5868 P 24/49 ~ . 11 arguments are amply rebutted in Plaintiffs Memorandum in Opposition to Defendant's ltotfon w establish, that Maryland does not recognize restitution in circumstances where, according to the nefit" arguments discussed above att3 the same replies apply. They also assen, but do not Ameld Complaint. These arguments are a repetition of the "equitable remedy" and lack of Dismiss at 45-49. C. Restitution 15 Apnlie~ bie. Defendants then incotporate by reference argttmettts they made at pages 44 i3 of Exhibit L. their Memorandum of Law in Support of Defcudanu' Motion to Dismiss Counts V and VI of First fnotmal Defendants rencw the arguments from pages 1-8 of their Exhibit M, Defeadants' itution, it is traditional[y recognized. No reason is given for any such a lapse D, jjtljust Fnrirhanent Refterated otandum in Reply to PlaintiS's Opposition to Defendants' Motion to Dismiss Counts V and '+II of the First tSznended Complaint These are essentially a repetition of the implausible claim that 1 Defendants did not benefit from the extended campaign of deception and concealment in which they ; " engaged to the cost of the State for so many years, with immense investment, presumablv becattse ~ ~ they expected to benefit from it. There are also repetitions of the repetitive mischaracterization of 1: {i above, jt enriettntent relief claim as one for an equitable remedy, the fallacies in which are rebutted E E. Finally Defendants refer to cmair, recent opinions from othe i nese %' of which is that the b .ppendtx A). 1 aasons, one of the most obvious I iple of tlte Iacques case on scope of liability ?g applicable goveming { : tL W ~
Page 148: mve62d00
~ 6cT.14.1998 2.37Pk ~ H0.5886 the expenses necessary. n 72 F.2d at 693 (emphasis added). See also. I ah_ nrerc I ncal " Neskh 8• F3eneflc Fund I Phit, Motsis_ItL. 7 F. Supp. °Zd 27'. ?83-386 (S.D.N.Y. 1998) {rejectine remoteness atrument on motion to dismisa considering foresceability. intent. seriousness ofharm and "degree of moral wroug"). The State's interest in the public health of its population is not "solely econamic." The State { has a sovereign ~ est in the public health. central to the police powers of the State. For example_ !• the Secretary ofthe Depamnent ofHralth and Mentai Hygiene is charged by the General Assemblx i with responsibility "for the it=lt$ interests of the people of this Staze° and with general supervision of "the administration of the health laws of this State and its subdivisions." Md. Health-General ec. 2-105 (b). The yalyt of the invasiosi of that sovereigct. non-economic interest- may be measurnti in part State- just as the cost of bodily injury may be measured by a ;physical victim's medical bills. but that does not make the hazm to the State °solely eeottotttic." j ust ' monetary nature oftite victim's hospital bills does not convert his harm from bodily injury to i !' economic hazm. All the costs at issue in this case arose directly !'tom foreseeable bodily injury to i and directly and foreseeabiy impacted the State's tnulti-faceted sovereign interests in the ~ health. See Sta_te of?eeaa t The American Tohacco t omoany, No. 5-96CV-91 (slip op.) i .D. Tex. September 8, 1997) at 16 - 18 {Exhibit C) (finding that under the 33ttlm~s standard, the J efendants cannot be too remote because the state had asserted an independent injury based on its "quasi-sovereign interest in protecting the health, welfare and well- of the populous ofthe state.") Thus, although the defendants' tortious conduct herein undoubtedly caused serious bodily ham to large numbers of Mar,vtand residents, the SAC has clearly alleged that it a15tt caused direct, 12
Page 149: mve62d00
i11.T 1A tC3Qk 0.aMf 4Cfi.14.199B 2:d4PM ! lll3, 5866 !, 41/49 This ['ntyrr's Prior Opininn R;jecteai the rSr&nAants' Arp,pmenr that the Staze's f'laim for amao c nnrter ihs r'nacumer Prote,{xinn >cr sbo ~ld h i3 c ic5,rr# on tht Ground of R.mn€enr._, Relying solely on 'Reafarers Welfare Plan y Philip Mocric_ Inc jvo, h'1.]G-9?-22'_- (D. Nld. July 13. I998)(Defendants' Exhibit A). the Defendants contend that this Court has vet to ruie on wftetherizhe remoteness doctrine applies to the statutory action for damaees under the Consumer rotectiort, Act. This assertion is patently false. In support of their prior motion to dismiss Count Ctte. the Defendants clearly challenged the y describing the State's alleged injurie.s as'"indirect" the Defendants argued that the Act • inr for damages under § t3-40g on remoteness gro=ds. Ses Defetadanr,s' Es. s' at 34-36. "does not provide a remedy for alleged damages that are as far removed from any direct injury a: consumer may allegedly have incurred." Id. at 35. The Defendants maintained that "only a , eonsumer directky injured by a Defettdant's deceptive practice has a viable cause of action for ; ages under § I3-4fl&t a at 35-36. ~ This Court flatly rejected the Defendants' assertions and. after quoting the text of § t3- 4D8{a}, ruled that: Thus. neither the State nor any other plaintiff is required to be a consumer in order to assert a cause of action for damages under the CPA, The State must merely allege that it has sustained an injury or loss as a result of Deferidants' prohibitive conduct which, despite the difficulties of proof that may arise at trial, it has properly done in claiming that it lost millions of dollars due to the tortious acts of T3efettdanesm inion at 37-38. In so ruling, this Court refused to judicially impose the "remoteness doctrine," r any similar common law limitation, onto this statutory cause of action. This Court chose instead plain and unambiguous language of the ssatute, which merely requires a cause in fact 40
Page 150: mve62d00
OCT.14.1998 2.d1PM # 0 NO.5866 P, removed. This was pmcisel}• the situation in ~r- . 3?5 Md- 3-FZ, where plaintiffs challen~cd, A.< an inftingement of the right to have a jurr determination of factual issues. the General AssembE%'. 5350,000 cap on noneconomic damages in tozt suits. The Court of Appeals rejected the ial. because it found that the General AsseaablN, had removed the issue from consideration in a judicial proceeding; 1 if the General Assembly. had provided in § 11-108 of the Courts and Judicial Proceedings Article that the trial judge, rather than the jury. should determine the amount of noneconomic damages or the atnount of noneconomic damages in excess of 535(I,000K a substantial issue concerning the validity of the statute would be presented. The General Assembly, however, did not attempt to trattsfer what is traditionally a jury ftutction to the trial judge. Instead, the General Assembly abrogated any cause of action for noncconomic tort damages in excess of S350.000: it removed the issue from the judicial arena. No question exists concerning the role of the judge versus the jury with respect to noneconomic tort damages in excess of 5350,000. Tlterefore, no question concerning the constitutional right to a juty trial is presented. 335 Md. at 373. See a1so F3ranrh v. StatP, 156 Md. A$2, 486-88 (1<3Z9)(where the jury trial deterntines facts with regard to liability, but the statute itself fixes the damages, there is no interference with the constitutional right to a jury trial.) Because the General Assetitbly has clearly and unmistakably stated that individualized determinations of causation and damages are removed from the issues to be decided in this case, ' In rr F;Fse ut tr,r ,$g3 P.2d 706 (I490), is completely besides the point. Tellingly, Defendants ; note the Fifth Circuit in Ciminn "began its analysis with the propositinn tlmt cuusation nnd dnmages I issues"-a proposition of Texas law, but not one tenable under the Maryland aw applicable to this case. Defendants' Memorandum at 23. Indeed, the Fifth Circuit there was concerned with whether a trial plan cattied out the mandate of Texas law to provide an dualized determination of causation and damages; the questi 29 was "whether the tria p
Page 151: mve62d00
uU. 14, Mu Z:JorM qW Np 58&6 P 1114g of knowledge on the patt of the defendant of the contract betu-een [the empto}•eaj and the plaintiff or that the negtigence. .. had any relation to such knoscledge. There is no allegation of malice on the part of the defendant toward the plaintiff or toward any.hitdt. There was no negligent interference with a contract. There is no allegation of deliberate design by the defendant to accomplish a definite end regardless of consequences to others. If eleenenrs of that nature were p=srnr a c=it i£fer'at qstnctj n wDu!d 6 3 rese„~~,Ee~r1 (Emphasis added). t court also cited the CnnriPi'Ficm Mntnat I jfP inx. Cnn case. supra.. as supponing authoritt• for he general ntie that a tortfeasor is not';.ihle to another merely because the injured person was er oatt3ct wltn !llilf omer n111Cnt3Vfn to me a0l.r ot [rie wronG t :,; consequences to both the smokers and to the State, Another court sitting in and applying the law of Massachusetts also declined to apply Slatsi ' (Emphasis supplied). Here, the defendants acted wit deliberate design and lo~iowledge of ihe tlegittg damage as a result of intentional tortious conduct by the ` to whom it had extended credit with knowledge of the ' ionship between the creditors and the third party. The Court of Appeals for the First l ircuit distinguished $3aid because -'the d~laration contained no allegation that the defendant knew ' of this contract re3ationslup or intended to cassse thr resulting pecuniaty loss to the ptaintiff" Keen i ~ 1_ imMi.r C'n . supr.l, [fr5 F?d Ht 83?. SPC3254 Fol} ncher v R.n7en# e mr 1?Z Cal App. 2d 466. 365 ; P.2d 183 (1954) f allowing wife to recover costs of spouse's medical treatment from negligent third ' fn addition, proximate damages aro by definition not remote. "If the harm was intentionally tended consequences are proximate." F. Iiatper. F. James. O. Gray. Th aiv of Tor~. y the defendant, there is no difficulty about the problem of proximate ... causation, since ction b-1 at 270 f 3d ed. 1986). Ses,3im id., Section 24.5 at note I and id., Section 7.13 at 10 t.t C c3\ t,: Co ~
Page 152: mve62d00
OCT. 14. 1998 2:4 3faf ~ ~ N4. 5866 P. 3"r/49 Requiring clear legislaftve intent assures that Congress itself has affirmatively considered the potential unfairness of retroactive application and decerrnined that it is an acceptable price to pay for the counten•ailing benefits. Such a requirement allocates to Congress responsibility forfnndatnental poticy3udonents concerning the proper temporal reach of statxttes, and has the additional virtue of giving legislators a predictable background rule against which to Iegisiate. In view of its clear statement that the amendments would apply to pending cases, there can bc no serious c}uestion that the General Assembly meant for amendments to section 15-120 to app!} trdroactively in thia case. Nor, given the general authority in Title 15 of the tiealth-C•eneral Article i +' to administer the State's Medicaid Program, can theree be any doubt of the General Assetnbly's nthority to enact legislation of the type represented by the atnendrrtenes, subject to constitutional wsnere nttn_a 337IvId at 2$ (retrttactivity analysis also inquires into legislative power o enact the statute that is made retroacnve)- The only remaining question is whether retroactive application runs afoul of the 'modest" ' I ictures against retroaetivity--when the statute would upset'Yasted rig2tLs:' See { at 272; waters ndznc- 337 Md, at 29 („In the final patt of a retroactivity . is. a court must determine whether the retroactive application of the statute or ordinance would ' with vested righu."3. Under Maryland law, there is no impediment to retroactive lication of a newly enaeted statute, unkess that statute represents a change in legislative policy. i "An ordittance interferes with vested rights when it attempts `retroactively to change legislative • (T}he change-in-poticy test... generally represents the limit of a Legisiazure's power j to enact 'curative' statutes without impairing constitutionally protected rights."). The amendments to section 15-120 fait squarely within a clearly articulated and ng legislative policy under the [-Ieakth-General Article of the Maryland Code to "[ejstablish s for aggressively pursuing recoveries against third parties permitted under current law 36 CO L~ ~. j c7*• i Cr= p
Page 153: mve62d00
N4, 5866 F. 15Id9 the defendants assumed a special duty by their specific statements to the state and to the general concerning their tesponsibitit~uith respect to the facts about smoking and health, and tiac economic harm is alleged to arise out of injuty to the health and safety af stnolcers, the State has stated a claim in negligence. See StaiP of awaii v. Aromm 8 tsiiitiamccsn supra, (Exhibit H) Simitatty, the court's analysis of duty (and implicitly oPretnotene-ss) in lacquCs. supra .i0' ~ Md. 527. 515 A_2d 756, is instructive. There, the Court of Appeals held that the defendant bank owed a duty to the plaintiffs, who appiic.: for a mortgage loan after entering into an agreement to ~ purchase a home contingent upon obtaining satisfactory financing. The bank was found liable for , negligently ptocessiqg the loan application by advising the ptaintiffs that they did not quality for the had requested, but for a lesser amount. On appeal. the defendant bank argued that ould not be liable for negligence for the econommc damages it had caused because it owed no duty plaint'tffs, since it had no contractual obligation, or any other obligation to make any Soan. in ount to the Jacques. In finding that the bank did indeed owe a duty of care to those plaintifis, the Court first ] 3 recoenl2ed that the concept of duty, one of the four elements of negligence, is a somewhat i amorphous, flexible concept that is "an obligation m which the law will give effect and recognition j I , to conform m a particular standard oFconduct toward another." IacqyjPS. qqupm 307 Md. at 532. 515 { ~ at 75& (quoting 3. t)ootey,141o prn Tort a sec. 3.03 at I 8-19 (1982, 1985 Ctutt. Supp.}). The on 53 at 357 (1984) as autltarity , c"cssentiat question" is "whether the plaintiffs interests are entitled to legal protection I i against the defendant's conduct." 307 Md. at 532, 515 A.2d at 758. It also quoted with favor is in 3 F. F#atper. F. James and 0. Ciray. ThcJ,aw nETorts. Section 18.1. at 652 (2d ed. 1986} ; ~ ng the original detemtinants in the growth of the concept of duty is the defendant's "control I 14
Page 154: mve62d00
aG3', 14. 1998 Z:39PY ~ tIO.68fi& P. 21/49 ~ t has an adequate remedy at 1an" (referring to the State's potential remed y fn subro_;€tt. a under the state Medicaid statute). Defendants' position is fallacious for severaS reasQns. Firs., the State's unjust enrichment count is not an °equitable claim". Unjust enrichment is a basis for an action in law (as well as in equity and in restinttion). and classicaity is asserted in common ia+t actions of i qttasi contract, such as in assurnpsit and money had and received and quantum n1;IS`tt. D. Dobbs, I aw nft]aMagy § 4.2(3) (2d ed.1943). CL also id. at 556: "Restitution claims for monev d. App. 766, 775, 471 R.2d 1121. 126 (1984) (explicitly approving position en which the State here reiies: "[I'jt is clear that the escitution] action [for monetary recovery) is at law and the relief given is a simple moncy udgtr€ent"; quoting Palmer. supra, with approval). '(Iterefore the availability of a remedy in law on tneory is no ottst ai L'tw, Such taims can be pleaded in the alternative. Second, even if the unjust enrichment claim were recognized under equitable jurisp€udence, vaitabili€;r of a statutory subrogation remedy would not bar the unjust enrichment claim for al reasons. Since the merger of law and equity, there is no longer an issue ofiurisd: cianal etition between law and equity. It is nat equitable cl2ims that are barred if an adequate exists at law, but equitable rcmzdies, e.g., injunction, constructive trust, equitable lien, ace , profits. rescission, reformation. Cf.. e.g.. D. Dobbs, The Law of Aemeiies § 2.5(1 ) at 123 ~ plaintiff sought an aqs€itaG3a retnrd : for a right that had already been created or recognized by law caurts, the equity courts historically held that equitable relief would be denied intiff could show that the legal remedy was in some way i€€adequate."; id, at 125 ;("This section addresses the question whether sqerriy~ tpliaf is to be denied because sotne `atlaw."'; G. Paln.er, The Lasv of Restitution §§ I_t. i? (7978) (similar). See 20
Page 155: mve62d00
9 TABLE OF ALr'rHURiTTFs CASES ADM Par?aetshin v. Martin. 348 Md. 84, 702 A.2d 730 (1997) .....................................................................9,10 Au+ensy for ai ts ' tr A minissration v. A cnriated nchuetrses ofFlorida In; 996) .................. ...........................................................21 ,606 A.2d 295, ol1,. ; 612 A.2d 257 (1992) ............................................................... ....9 Bmdaky v. Princemont Constr. Co.. 30 Md Agp. 569,354 A.2d 440 (1976) ...............................................................6, 9 Broussard v. Meineke Discount Muffles Shtms Inc., Nos. 97-1808, 97-1848,1998 WL 512926 (4!' Cir. Aug. 19,1998) ...........8,16,17 Castaao v. The American TobacrA Co., 84 F3d 734 (5b Cir.1996) ....................................................................................10 Cimino v. Raymark Tn chdeg nr._. Nos. 93-4452-93-4611,1998 WL 480147 (5' Cir. Aug.17,1998) .......... 19,20,24 6, 580 A. Marcos_ Hilao v. Estate of 9.1998) ........................................................10 ................... .. _ .... ............................. . . . . . . 12, 3 103 F.3d 767 (9°i Cir. 1996) ............ ...................................................... ........ ...._..24 In re Fihrebmrd C.orncxratiort, 893 F.2d 706 (5h Cir. 1990) .......................................................................... In re Faol'i Rsilroad Yard PCB Litigatioc, 35 F.3d 717 (3d Gir.1994) ..................................................................._................17 3olmson v. t3roweat Foods Co., 785 P.2d 503 (4~' Cir. 1986) ...................................................................................9 Kamuter v. Youn~ 73 Md. App. 565, 535 A.2d 936 (1988) .................................................................21 ii
Page 156: mve62d00
TABLE OF CONTENTS PRELIlt+FIAIARY STATEMEAiT ................................ .................................. ....................... 1 ARGLTMET3T ................................. ............................................................................ ........»........... 4 I. This Court Should Determine The Appropriate Scope Of Individual I)iscovery Now .......................................................................... A II, The Defendants Are Entitled To Individual Discovery Of The State's Claims .......................... ............................................... ......... ............ fi A. Defendants Are Entitled to Individual Discovery on the State's Subrogated Claims ...............................................................7 3 . Medical Causation. .................. .............. ........ ......... ............ 7 2. Proximate Cause. .................»..............................................8 3. Iteliance .............................................. ....... .......................... 8 4. Affnmsti:ve I)efc.nses. ..........................................................8 5. Choice of Law ......................... ................... _............... ......... 9 B. Defendants Are Entitled to Individual Discovery on All of P iaintif€s' Ciaims ........................................................................... i l The State's proposed trial by statistics is contrary to Marytand law and would deprive defendants of due gmcess ................................................................................32 Denial of mdividualized discovery will deny defendants the right to x jnry tria1 ......................................18 The State's proposal would deny defendants the right to defend themselves .................................................2U III. At A Minimum, The Court Must Allow Defendants To Depose A Statistically Representative Sample ...........................................................23 The State Has No Countervailing Intaesf'I'hat Would V4rarrant The Denial Of Due Pros.ess ....................... ......... _............................................. 26 C©NCLt7SIQN .................................................................................................... ..............29
Page 157: mve62d00
:Fa 98 l7:32 FR PIPER RN~ MRRBt€RY TO 7G4piSi64Z12788tt P.BS/t4 STATE OF 14fARYT,AlYD * It`I'THE CIRCC3iT COURT '° ROR * BALTIMORE CITY PHILIP MORRIS, ET AL ' CIYIL * CASE No: 9S122U171CL2S1487 141EMORANBTJM OPINION AND ORDER OF COURT The above captioned matter came on for hearing August 7, 1998, before the Honorable Roger W. Brown pursuant to Plaiuti.Ts Memorandum Regarding Privileges Asserted as to certain Category III RFPs. FACTS In controversy is the Category III Request For Production of Documents #33 (hereafter "RFP 3.3 )"). The request states: For each and every year of the Damages Period, produce all mSnutes_ of all legislative or executive branch, or other entities, with oversight responsibility for the State's Medicaid Progr<un, such as a Medicaid Commission, including agenda packets distributed at or before meetings and all artachrnents to minutes. The State of Maryland has objected, on the grounds of legislative privilege, to the production of the fol3owing specific types of legislative materials: a. working files of legislators, auditors, and legislative r. b. unpublished research materials of tegislators, auditors, and legislative staff; c. Ieuers requesting the preparation of bills; and
Page 158: mve62d00
OCT, i4. 1998 2:45PM 9 ~ 90, 6866 of the statttte. As this Court has properly ruled. the plain language of Sectioni=-4Q8 only requirc' causation in fact. If t}te legislature had intended to incorporate common lau concepts sucit u> remoteness into the statut on, it would have done so b.• espressiv timitine recoverk:e damages to those directly resultiag from a violation of the Act, or by restricting the action to consvmers rather than persons. The absence of suc i lal nature of the which this Cotsrt has reco is consistent with the broad p upose Judge Garbis' appaten€ reliance cn tGe Aasaciared .enerai Contratars and Holmes opinions ! is misplacerl In both opinions, the United States Supreme Cotut oltsetved that s€atutory language # similar to that €ound in § 13-4UB could be consttued to merely require proof of "but for" causation. 459 U.S. at 529, 503 U.S& at 265-66. The Supreme Court incorporated common law principles of roximate causation into the respective statutes only after finding a congressional intent for such . ion ;n the legislative histories. 459 U.S. at 53I-34, 503 LCS, at 267-68. In contrast, the Sesfaters opinion contairzs no analysis of the legislative intent underlying the Consumer Protection ; Act and provides no reason to depart fmm the clear language ofSection73-d08. ~ Finaiiy, Judge Csarbis' aitation of Sack< v Phi Ii ttiio.ri=. inc . No. Civ. A. VVh4N-95-! $40. t(D- Md. Sept. 19, I996), °{Cd-. 139 F. 3d 892 Oth Cir. 1998) does not support J £; application ofthe remoteness doctrine to the statutorv action for damages_ In SackS. the issue was ( omplaint aileged a causal connection between a violation of the Act and the plaintiff's j i injury. Dismissal of the CPA claim was based on the court's straightfotward reading of the alleged that the injury was caused by defectively designed cigareues. not by a { violation of the Consumer Protection Act The holding in $aekS was not based on the proxitn.are ~ ~t cause concept of remoteness. ! ~; In fact, there was no authority for the dismissal of the Consumer Protection Act claim in 42 {
Page 159: mve62d00
ItU. ~bCp Y. 1 (14e OCT. 14, 3998 2:38FM i NU.5$66 P. 17/49 not duty but rather foresceabiiit}:") Hence. these cases teactt ,t•.a dte term "remoteness" is in rcaittx a meSdin¢ o€the concepts of dut}. standing, foreseeabitst% and proximate canse_ In the instant case. the defcndants owed the broad 4utti• by virtue of their productton and marketing of a dangerous product with knowledge of the scientitic facts relating to that danger. which they sottght to conceat. The tislc created by the product was not timited to an economic tisk: i the product catries with it a risk so high as to amount to a certainty of death and personal c the risk of all of the;e iztjtuies is so high as to amount to certainty. the "principal determinant of duty becomes fotcseeabiliry." Id. The injuries and damages to the State were c3earEy oeable, to the point of certainty, that the State would be statutorily obligated to pay tEu medical expenses of those injured. This combination of the highest risk, to both life, health and economic interests, coupled with the highest level of cenainty that the State would suffer injury as a result of efendants' conduct, compels the nnding that the ptaintifr's injuries were foreseeable. that the 0 care to the plaintiff, and that a jury could find that defendants' conduct of plaintiffs damages. Given the presence of foreseeability. and cottsequent er the ta case_ the State's claims against the defendants cannot be deemed too remote aner of law. 5se Lahot .*r n.at t 7. supra. 7 F. Supp.. 277. Indeed, the fact that defendants' actions were intentional renders this conclusion even more eiting, because as discussed above. intended conseciuences arc always proximate, and that 'sssue a precludes dismissal of these claims on grounds of remoteness. Moreover, this analysis is ftut}ter buttressed by the allegations in the Complaint that the defendants undertook, and breached oial, voluntarily assumed duty by virtue of express undertaking to assist in research and provide fotmation regarding the health hazards oftobacco. (See Sec. d, betow). Having done so, they did so fraudulently and neglisently. hence creating the requisite nexus to the ptaintiff 15
Page 160: mve62d00
SEP 28+'98 57:12 FR PIPER ANIi MARBURY TO 7aatzE8[64zfZ7HS# F.H7~f4 db ISSUE: Should PIaintiffs be compelled to produce the agendas, minutes, and like documents of the State of Maryland General Assembly's Joint Committee On Medicaid in response to RFP33? This court's decision, in large part, begins and ends with the Case Management Order No. 1_ The Order, sigaed and agreed to by all parties, secures the simple, fair and inexpensive determination of this action in accordance with Rule 1-2431 of the Maryland Rules. There should be no question, no resistance, no discussion of whether a privilege log should or should not be prodttced. ' The Case Management (?rder, in evant part, states the foltowing: "Arty document withheld by any party from any production of documents based upon a claim of privilege shall be identified in a privilege log which shall include, for each document: (a) Document number, (b) Date; (c) Author, (d) Addressees and recipients of copies; (e) Type of document; (f) Subject of document; and ("ature of claimed privilege (c,&, attomey-clien-t; work product)_ The privilege log shall include all documents withheld from production on grounds of privilege and that are otherwise responsive to a request for production." Case Management Order No. I. This court is also persuaded by Hamilton v.Verdow. 287 Md: 544,414 A.2d 914 {Md. 1980). "I he court noted that claims of executive privilege hade been dealt with through a balancing process, "weighmg the need for confidentiatity against the litigant's need for disclosure and the impact of uondi.scFosure upon the f.aiz' administration of jusiice." Id. at 563. There must first be a claim of executive privilege, made "with an affidavit stating that the demanded materials are of a type that fall within the scope of the priviiege." ~„iarniiton v. Verdow at 566. These documents are presumptively -3-
Page 161: mve62d00
6CP, 14, M8 2:38PM ~ ~ AO.58f8 P. 1$f48 ~ I}, '/'je SAC Ctates Ctaimc by; Alleging Breach of an ~snmed i?un The State also has stated cognizable claims in tort by its attegations that defendants acted ss} breach of an ass¢med duty. (S= SAC 190). In Maryland. breach of assumed dut~ has been tecosnized as a component of the negtigence element of duty. As such, it confers the requis ite nesus to establish an enforceable duty in tort which might otherwise be absent between the plaintiff and the def ndatit. See genttv lacques, 307 Md, at 539 n. 5, SI5 A.2d at 762 n.5; Willow Tree I tAYninC enter nc v P'n .e ,enrac'c - mtv 8$ hrjd. App. 508. 529. 5S4 A.2d I57. 163 (1991L Emdy v. Ralph M_ Parsons Co._ 327 Md- 275. 282 n.2. 609 A.2d. 297, 300 n.2 (1992). In other andants, by their afftrmative accions, created a duty o€care to the planttiff. and can be eir breach. r I•Tere, the defendants unquestionably undermok perfotmance of their special undertaking , ptuattant to their "Frank Statement" issued in 1954, even if their breach had been Iitaited, as it was = not, to economic and not physical ityttry,l2te assumption of such a duty eliminates the defense that ; the relationship between the parties is too remote. This basic principle was recognized by Judge { ; Cardozo itt Gi~n>er v Shep~ a case relied upon by the Court of Appeals of Maryland in the ; . ; rr : Tacquss opinion: "it is ancient Ieaming that one who assumes to act, even though gratuitously, may s (: t ,; thereby become subject to the duty of actinS carefuliy, if he acts at aI2." 233 N.Y. 236, 239,135 A}.E. 275,276 (19222). (It may be noted that the loss suffered in the GI3n2ei case was purely ccono I dgs Cardozo's statement was quoted in Kemp v rn+sm,ng 4p Md. App. 542, 392 A?d 115t. ! 164 (1978), in which the court stated, "having assurtesl that ducy, even though gratuitously, i Ilant7 was bound to act carefulty,° ld. The State aIleges in paragraph 8€7 n f the SAC that: In the years following the 1954 "Frank Statemettt," and continuing 17
Page 162: mve62d00
~ 2:42PM ! idO.56S6 P, 32/49 Lian9and fawon joinder under Mars'land Rule 2= 1 i is clear: joinder is itot reyuired wher separate parties assert distinct claims retating to a single hartn. CYaraT• .:_ D~ rk Itie_r. 3:' ild. ?~` (1493)(hoiding tltat pattnts' claim for medical expettses and the minor's claim fnr personal injuries are not required to be joined in a single action). Tbe court held unequivocally that separate parties. whose claims hav e independent legal bases, i need not be joined in a single action_ "VThen several tort actions tnstauted ly different persons arise out of the same incident. the complaining parties need not be joined in the suits brought by the others. For instance, in an action by a husband for personal injuriesm his wife's joinder may not be essential ifker claim for loss of consortium is whoflv independent under state law and she is free to asstrt it in a separate action." r, the court held, the prospect of potentially inconsistent ljudications does not justify requiring joinder. id. (`"fhe possibility of adjudications that are . f:aav, 332 Md, at 356 (quoting 7 C. Wright, et al., Federal Practice and Procedure § 1623, at ubstantial risk of incurring multiple or inconsistent obligations by reason of the person's claimed interest relating to the subject of the action or may leave persons already patties subject to a + (2) disposition of the action may impair or impede the persoi s ability to protect a claimed 'Md. Rule 2-211 provides in relevant part: "(a) Persons to be Joined.--Except as otherwise provided by law, a person who is subject to service of proeess shatl ae joiz;ed as a party in the action if in the person's absence (t) complete relief cannot be accorded among those already parties, or court shall order that the person be made a party if not joined as required by this section. If ' Rule cannot be made a party, the court shall determine whether the action should proceed among i i ~ i the parties before it or whether the action should be distnissed. Factors to be considered by the ~ I oourt include: to what extent a judgntecr rendered in the person's absence might be pre}udicial to j ~ that person or those already parties; to what extent the prejudice can be lessened or avoided by ~ ~; protective provisions in the j udgsnent or other measures; whether ajudgment rendered in the : ;, the person should join as a plainriff but refuses to do so, the person shall be made either a I defendant or, in a proper case, an involuntary piaintiff.... ~; "{c) Effect of Inability to Join.--If a person tneetin; the critetia of (1 ) ar (2) of section (a) of this i son's absence will be adequate; and finally, whether the plaintiff will have an adequate if the action is dismissed for nonjoinder," 31
Page 163: mve62d00
28,'48 l7:l3 FR PIPER RN MARBURY TO 7Ft42i131B4212708ri P.HSfSC S and an in camera inspection of the documents is arranged when the arty seeking production first makes a preliminary showing that the communications cxr doccuanents may not be privileged, or that there is a necessity for production. Id. 2'he court also recognized that in cases where the govetnment is a party, there i: the potential for sword and shield abuse of the privilege by "asserting or defending a claim while at the same time depriving its opponent of information needed to overcome the government's position." Irir at 569 (note 8). Here, the State's need for confidentiality is weighed against its opponent's need for inforrmation. Id. The State ofMaryland is a party in the instant case. Regardless of the balancing test used, the fact remains that the State of Maryland has yet to produce what it has agreed to. The State of Maryland has claimed a very broad and undefined privilege, and the potential for the "sword and shieid" privilege abuse is apparent The nature of the State of Maryland's ciaim that Philip Morris conspired to deceive the State and its citizens about the addictive properties of nicotine through misleading and misrepresentation-goes to the heart of the documents at issue here, and blanket privileges will not suffice. W hether the legislative or executive privilege applies to the State of Maryland General Assembly's Joint Committee on Medicaid legislative materials will be addressed should there be dispute between the parties on individual document,s.' Until that time, the court reserves judgment on the issue of privileges as it relates to RF"P 33, for furtirer consideration in accordance with this memorandum. '"[W]1zenever a formal claim of executive privilege is made in litigation, its is for the court to decide." Hamii gn v. Verc3ow, Z87 Md. 544 at 563. a licabilit m pp y 0 -4- rn t~: r.3
Page 164: mve62d00
0 NO, 5865 P. 33/49 merely as a maner of logic does not trigger the application of Rule 19tat [the fedcrs{ anatogue to Maryland Rule 2-211 ]- --, Thus when sever,tl persons are injured bt• the same ion cuaU proof of damage is individual, the fact that want of an estoppel may leave a defendant who has defended successfittly against one o€'the injured pttnies with the risk that he.vili be liable to another suit does not make it necessary that all the putative plaindffs bejoiaed in the same nting 3A James bti. Moore & Jo D. Lucas, Moore's Federal Practice 1I9.67-1 ["'.-21, t 19-123-24{1493}J. 13efendants' argument for required joinder fails for the simple reawrs that Co tatutory Recovery Pursuant to Health General Art 15-12(}-is separate and distinct from any claims that individual smokers might bring in their own right. W'hereas the unamended version to Health- ; General Article § 15-12Q merely gave the State a statutory tiett. by subrogation, on any judgrnent or . i of a Medicaid recipient, the amendments contained in § 1>-12f1(e) delineates a distinct cause of action "nnder this section.-. brought by the Staze against a tnanufacturer of a tobacco a ' product." Specifically, the stattttory claim uniquely permits the State to recover its Medicaid d expendinues by adducing statistical proof on the elements of causation and damages. Moreover, there can be no question that the cla€nt for damages belongs exclusively to the State of Maryland, ; ; i e preexisting statutoty assignment of those claims. S.ec Md. Healtkt-Generai Art. 15- ; 109(d)("As a condition of eligibility for medical assistance, a recipient is deemed to have assigttad ; to the Secretary of Health and Mental Hygiene or the Secretary's designee any rights to payment for i medical care services from any third party who has the legal liability to make payments for those e extent of any payments made by the Department on behalf of the recipients."). In ;; short, section 15-12©(c) created a new remedy for the State in seeking to recover its own claims t icaid payments. 32
Page 165: mve62d00
pGT. 14. 1998 2;37PM 0 ~ Ng.58fi8 of a dangerous thing" which has a3tvays imposed a duty to use care. 30; Md. at 53:. 51? a.'d I, 759. Hete, there can be no question that the defendants were in sole control of a"dangeroas €hini ' and concealed Imowledge in their possession about the nature and extent of that danger. front the Plaintiff as well as the smokers in the State. The Court further explained t3tat: ~ In datermitting whether a tort duty should be recognized in a particular context. two nxajor considerations are: the nature of the hatm likely to result ftom a failure to exercise due care, and the relaticsship that exists between the parties. Where the failure to exercise due care creates a risk of economic loss only. courts have generally required an intimate nexus between the garees as a condition to the imposition of tort liability. This intimate nexus is satisfied by conttactual priviry or its equivalent. By contrast, where the tisk created is one ofpersonat injury, no such direct relationship need be shown, and the principal determinant of duty becomes foreseeability. A$ePhrrson y-a3+U Motor £`Q , Sitpra. S9, also, t`'miry v Priace ,eu+rer c t'`~lrnN, 305 Md. 320, 503 A?d 1333 (1986) and Sratt vWaseon. 278 Md. 160. 359 A.2d 5ri8 (1976). d at534-35,5I3 A.2d at 759-760. The JAysµsys Court concluded that We disc= ftom our review of the development ofthe law of tort duty that an inverse correlation exists between the nature of the risk on one hand and the relationship of the parties on the other. As the magnitude of the risk increases, the requirement of privity is relaxed - thas jttstifying the imposition of the duty in favor of a large class of persons where the risk is of death or personal injury. 37, 761. The Maryland courts have continued to follow this general mode of analysis. E_g. VitlaQe 1ofj'rosa Kr,yc v t.C. .,ypsi irn , 315 Md. 741, 753, 556 A.2d 1126 (1989) (("We conclude that the r ;' determination of whether a duty will be imposed in this type of case sttatl depend on the risk i ~ j; generated by thc ctegtigent conduct zathe-t}tan upon the fotiuitous circumstance of the nature of the ~; resultant damages_"); SY ist* mv. onnam 312 Md. 428. "6, 540 A.2d 783 (13$8) n.3 ("As we ': stated in lacqttss, the determinant of liability in cases involving risk of personal injury ordinarily is 15 s
Page 166: mve62d00
i P F.i;MiNRY TA Nfi On October 29,1997, this Court entered an agreed Order granting discovery of 30 individual Medicaid recipients. That Order was designed to ensure that this Court would have a factual record - albeit a limited one - when it ultimately determined the appropriate scope of individualized discovery in this cast.1 Unfortunately, ten months after this Court entered the Order, the limited discovery has yet to be completed - or even really begun. With trial 7 months away, time is running out. Accordingly, defendants now move for a final determination on the appropriate scope of individualized discovery. This Court should make such a determination now for the following reasons: Fja this Court's prior Order of C}ctobea 29 has proven to be unmanageable anc#d the submitted the names and addresses of22fi individual recipients to the Special Master. Yet, in the ten months since this Court's Order, only four Medicaid recipients have volunteered to be deposed, and no deposition has actually been scheduled. The delay is no fault of the parties; rather, it is due to the unwillingness of individual Medicaid recipients to volunteer. Given the current pace ofpmceediags, the depositions contemplated by the Court may not be completed even by the end of this yesr. Accordingly, this Court should detennine now - not months from now on the eve of trial - the appropriate scope of individual discovery in this 1 $t&, zg., Transcript of August 7, 1997, at 25 (Counsel for the State) ("T'he position is let's start with 15 volunteer depositions, and then at the conclusion of the 15 volunteer depositions we'll agree to an expedited briefing so that the defendants, if they feel it is necessary, can make their case for additional depositions whether volunteer or nonvolnntar.').
Page 167: mve62d00
14.1998 2:40fM ~ ~ N4.588E P. 26/49 the pleading stage. It is true that the State must still allege a breach of duty as to the 11ar yiand Medicaid population as a whole, but the particulars of the name of each Ntedicaid reciptent, tEt= causation of each's injtsry. and the amount of damages caused, need only be "proved by evidencc of statistical ana3vsis: " The ailegations of Count 14 carefuJSy track the parameters of the tvpe of statutory claim deiineaied in section I5-124(e). Because the seetion dispenses with individualized proof. the State i• has adequately identified the persons on ti.'hose behalf it is seeking subrogation: "Indiv iduals who ~ have received and/or cominue to receive betefits under the Maryland Medical Assistance Praerani " econd Amended Complaint 129.5. With respect us these inaividaaia. the State has pleaded breaches 0 With respect to the remaining eletnettts of each underlying common law claim-causation and State has pleaded a statistically provable basis for recovery, i.e. all that is required tI] prepared to prove, `a statistical association between cigarette smoking and" the numerous under the amendments in section 15-I20(eX2). With respect to causatian, the State has assetted, and tate has alleged that it can prove the link, using permitted statistical evidence, between the diseases it causes, and between stnolting and "general poor and diminished health." V96. Similariy, otnmon law duties that are speciftcaliv pled in Counts 7-I3. breaches and the developments of these deleterious health effects. '1297_ Finally, section « I5-t20(e)(2) pertnits the State's statutory cost recovery action to proceed when the "amount of ; ~ medical assistance expenditures attributable to the use of a tobacco product" can be established by ! istical analysis. Here again, the State has made the requisite allegation: °tl,s the payor of I ~ ` Medicaid benet'tts, the Department of Health and Mental Hygiene has made significant Adedicad ;~ Assistance expetsdihues, in an amount that can be proven based on statistical anaiysis, as petmitted 1 i 5-I2U{e}{2) ~. 25 ~ i t ~ ~ t
Page 168: mve62d00
Ank NO. 5888 °. 27f49 OCT, i4. I9B& E!40PM Is 0 Remarkably, the Uefendant General Assembly's clear intent P c d lead to a result precisely vpPosae from the ents; to relieve the St2te 4€ the burden r: having to prove its Medicaid subrogation claim recipient-by-recipient. The General Assemblv was. of eoucse, well aware that its bill would accomplish this goal. For example. an opponent of the bill. while somewhat overstating its ef€ect. did indeed recognize that the legislation,vould remove front ~ the case the need to uy each Medicaid recipient's claim individually: "This bill, if it's passed, does ax ~y with subrogation, but it also says that the mere filing of that information, thac statistical analysis that they talk about, proves causation, and without proof, it peermits a recovery. Without pmof of the causation or the amount of the expenditures for any particnlar program [sic]. In effect the case is over when they file a motion for summary judgtnent .... jF)irst off, there can't be defenses of contributory negiigmce and assumption of risk against the State_ That doesn't apply. Subrogation's out, becausing they're bypassing subrogation here. They're saying this doesn't apply to subrogation. We don't have to bring all those people and take their deposilfor4. So there's only two pieces of a cause left, causation, who caused the injuries. Well, this thing says if we get something from the Center for Disease Control. that takes oare of causation, and that also takes care ; of the proo€ofdamages. You don't have much 2efr_ --- I think a simple motion for summary judgment would give the plaintiff a full verdict" ' Testimony of James Doyle, Esq., before the Senate Judicial Proceedings Committee, pages 59-62 (transcribed by Ethel M. Coates, Court Reporting Concepts)(Bxhibit I). The actual effect of the legislation wis set focth in letters from the Attorney General to the ; a Chairmen of the two committees considering the bills, Honorable Joseph F. Yaliario of the House Judiciary Committee and Ronorable Walter M. Baker ofthe Senate Judicial Proceedings Comntittee. ; ose committees were well aware that "[t}he essential purpose of the new legislation is to provide for the State o€ tularyland the same authority and rights to proceed against ; ; the tobacco companies as enacted in such states as Florida and Massachusetts. ... The proposed 1 j: legislation would allow the tobacco companies to raise any defenses applicable against the State in ' ie's suit, and it would allow the tobacco companies to raise all available defenses against 26
Page 169: mve62d00
OCT. 14, 1998 2;44Pk 0 binding on this Court Ia1 #1kr+ v. T)irntrfr Panurent InatltutorL 250 A.2d 281, 6 Md. App, 110 is no new circumstance which allows the Defendants to reopen a matter by this Court after extensive briefing and argurnettt. If the Defendants rruly believed that this Court's prior opinion did not address their remoteness argument concerning Count C?ne, the proper remedy was a timely motion for reconsideration. This Court should not reconsider ; its prior ruling at this late date_ In atty event, the SeafaLeLS opinion is substantively deficient in rnany respects and should not be followed by this Court. As previously discussed. Judge Garbis erroneously concluded that this ~ NO.5866 P. 42/49 relationship between the prohibited practice and the plaintiffs injury or lnss. fill: nSms= ¢ Etf T the oS1F u[31 rPr(t~PttiOn aPt. The Defendants essentially are requesting this Cour€ to reconsider its prior ruling on ahe State's Consumer Protection Act Count, in light of the Seafa[er5 op'tnioti. For procedural reasons alone„Pis Court should decline to do so. Count One of the Second Amended Complaint is identical to the Count One which this Court previously upheld, The Defendants do not contend that the C. rhit .o ii't tiant [Efl RStI1ttF Ihat Iltdto intervening legislation provides any new ground for dismissal. Judge Garbis' intervening opinion simply disregarded this Court's opinion on the CPA counts, stating that "irrespective of what the ` cotuis. C iiento v. R T. Credit Cn.. Inc. 424 F. Supp.. I(D,C. Md. 1977). In $zL&6, Judge Garbis ; tetpreting a state statute, a federal district court must give due regard to opinions of state trial i ourt's prior opinion "did not separately address the causation issue." Slip Dp. at 30 n.31. When , ~' State of Marvlar3d Court may or may not have been presented with, this Court concludes that j r intiffs have failed to state a claim." Slip t?p. at 30 n. 31. Judge Garbis' tonstructiott of Seatior,I3-4i)& is contrary to the language and legislative int 41 t
Page 170: mve62d00
individual recipients who receive medical care from the State are required by law to provide discovery in the State's third-psriy reimbursement actions. There is no question of undue prejudice here, and no insurmountable issue of recipient privacy. ARGUMENT URT SHOULD DETERMINE THE APPRfJPRIATE SCOPE UF INDIvIIiUAL NOW From the outset, both the State and defendants recognized that this Co;ut's Order of flctober 29, 1997, was an interim measure at best. It was designed to obtain individual discovery of a h.andful of recipients so that this Court would have a factual record upon which to decide the scope of individual discovery in this case. As the State recognized, at the conclusion of this interim discovery, the defendants would `~nske their case for additional depositions: ' Transcript of Aug. 7, 1997, at 25. Toward this end, this Coe}tt's Order provided that "Itjhe parties reserve all rights in this regard to any fntther Medicaid not provided for herein." Order at 7. To put it simply, this Court's Order of October 24 has not worked as exgected. 4b That Order, agreed upon and submitted by the parties, allowed defendants to depose up to ieaid recipients. The parties and the Court andetstandably sought to make the process as painless as possible for recipients. Thus, the flcder set forth an elaborate set of procedures geared toward eucouraging individual Medicaid recipients to volunteerto be deposed. The success of these procedures depended upon one faetor-the willingness of (rD individual Medicaid recipients to volunteer. Under the Order, the defeadants could not v3 ~ depose one single recipient until: ~ €s~ 4
Page 171: mve62d00
OC3`.14.I99& 2,42Fid ~ a NO.5$66 P. 35/49 40, 243_ Here, the obvious impracticality of joitting every Medicaid recipient and t , established approach of proceeding on separate tracks in this case and the Rlchurdson case--with the i- built-in protections that that approach ensures-would dictate that this Court should permit the State ' already parties: to what extent the prejudice can be lessened or avoided by protective pro. asusns I: the judgnzent or other measures: whether a judgment rendered in the person's absence u(lI h~: adequate; and finally, whether the plaintiff will have an adequate remedy if the action is dismissed for nonjoinder: - Under this analysis, ihe propriety of this Court proceeding without joinin; literally hundreds t of thousands of individuals is plain: because protective measures can be adopted to insure against iice to either the Defettdanis or the osent Medicaid recipients. Specifically, once aRechrrrrison hase III trial proceeds to judgment, the Defendants could move for protection against double overy of the medical assistance expenditures tion. Precisely this approach was adopted by the United States Court oCAppeals for the Second in laser «_ New York Pronertv: (I]t is true that the nondiverse Association members doubtless would be prejudiced by a judgment rakert against the Association in their absence because under Association rules they would still share proportionately in the loss. Yet, the district court need only provide in any final judgment that the total recovery is reduced by the amaunt attributable to the nondiverse (here Texas) metnbets, and rule that they should bear none of the casts. Under this procedure ... the potential prejudice to the nondiverse parties may easily be avoided. Additionally, the liability of remaining members would not be affected one iota L y this procedure since their share of the loss would not thereby be increased. As fc- the third factor, any judgment rendered in the nondiverse panics' absence will adequately compensate plaintiff because. as noted, laser has already agreed to accept a reduced recovery. Turning to the fourth factor, were we to affirm the district court and refuse to grant leave to Jaser to antend his complaint, he may be barred by the statute of limitations from bringing another action against the Association, leaving him without an adequate remedy as contemplated in Rule 19(b). h Count 14 without the "poison pill" of compulsory joinder that the Defendants seek 34
Page 172: mve62d00
N 2W 33 17:12 FR PIPER RPJj~ MRRBURY TO 7n4#18154212788# P.06it4 letters of transmittal, memoranda, notes of conversations, drafts or redrafts or proposed legislation, or other materials which consist of or reflect communications between or among Maryland legislators or their sta£fs or between Maryland legislators or staff and persons employed by the legislative branch. Defendants, Philip Morris Incorporated, et al. (hereafter "Defendants," "Philip Morris," or "Tobacco Industry"} assert their request to possibly reveal the State of Maryland`s awareness and knowledge of alleged health risles of tobacco consumption. This information, Defendants contend, bears directly upon their liability to the State of Maryland (hereafter "Plaintiffs" or "State") for alleged misleading and misrepresentation. Defendants state that their access to the GeneraI Assembly's minutes, agenda packets and like attachments will reveal the motives and thinking of Maryland's legislators. Further, Philip Morris believes production of these documents will illuminate any actions which suggest the State's knowledge of the dangers of tobacco consnnzption. At the very Ieast, Defendants argue, Plaintiffs should produce privilege logs so the court may determine the extent of the privilege, document by doctzmeni. The State is preserving the fu41 scope of the legislative privilege for the aforementioned materials, including testimony, production of documents, and third party communications. The privilege covers anything generally done in a session of the Legislature by any member in relation to business done before it and any matter that is an integral part of the deliberative and communicative process. Plaizf3aff's state that the executive privilege, with its b~sa is in the constitutional separation of powers, shields disclosure of the confidential advisory and deliberative communications between officials and those who assist them in formulating and deciding future government action. As to evidence of deception and misrepresentation by Philip Morris, the State suggests that the legislative history, statements to the world by the Tobacco Industry, and the extrinsic actions taken by the State in that infoimatian environment will provide sufficient proof. In the framework of these arguments comes the following issue for the court's determinarion:
Page 173: mve62d00
right to a jury trial on each of these individual issues - through the use and manipulation of statistics and "expert" conclusions. A. Defendants Are Entitled to Individual Discovery on the State's Subrogated Claims In Count Fourteen, the State does not even pretend to bring a "direct" action. There, the State invokes Md. Health Gen. § 15-120 to assert asubrog&d cause of action. The State thus alleges generically that unidentified Medicaid recipients "have legally cognizable ctaims against the Defendants, including, but not limited to, causes of action based on defendants' fraud and deceit, negligent misrepresentation, breach of express warranty, breach of implied warranty, negligence, strict liability, and conspiracy: ' 9econd?,m. Comp1. 1295. Here is the dispositive question: if a single Medicaid recipient with a"legally cognizable claim" sued the &Tendant, what would that triat look like? Would discovery of individuat Medicaid recipients be relevant to any factual issue in the case? The answer is obviously "yes." For example. 1. Medieat Causation. The Medicaid recipient would have to prove llsat smoking caused his disease. ,+ttthough he may be able to use statistios as one oomponent of his pmof: ttie issue would be whether his particular smoking caused his particular disease. Defendants would be entitled to discovery of the individual recipients' medical records and other possible risk factors to which the individual was exposed, such as alcohol use, lack of exercise, poor nutrition, family history, and stress. Defendants would be entitled to prove that other factors caused the disease or that the disease was misdiagnosed.
Page 174: mve62d00
4GT, id. 1988 2. d2F ~ N0, 5866 P. 34/49 Analyzing that state's comparable amendments to its Medicaid third-party Siabilit} statota. the Florida Supreme [otttt in Agt'n4 for Hesirh Care it~mi,n~~ 3szn .i3te d hid uc rlec of FSa, t}-N, So. 2d. 1239 (1996). concluded that those amendments had indeed created an tndependent causc oi action allowin$ the State to proceed in its owtt right against third-parties to recover llyiedicmd expenses. The court there reviewed the modifications enacted by Florida's 1994 atnendments-- t abrogation of affirmative defenses, lack of need to identify individual recipients. abrogation of statute of repose, authority to pursue all o"its claims in one pmceeding, use of maricet share liabiFitv in conjunction with joint and several liability, and the autbority to use statistical analysis in proving and damages. The court concluded that, given these amendments: °(Tjberc can be no , argttment after 1994 that the State's cause of action is derivative in the nature of a subrogat'son. ence or a defective prt+duet; f2) causation; and t3) danatges." h7& So. 2d at 1243. Although Maryland's new statute is not as sweeping as Flotida's. it plainly contemplates a separate cause of action in which the State can prove its case without reliance on proof of individual conduct or knowledge. i.e. the types of matters that would go to individtsal- or lien. Rather, ir is anew, Guffependent cau,re ofaction tttat requires the State to proxe; ative defenses, and bv using statistical analysis. Thus, for purposes of joinder. the statutory claim in Count 14 a im. brought wider independent statutoty authority. and brought by a party expressly authorized to bring an action exclusive of the claims of the Medicaid recipients. ; Under these circumstances. Maryland Rule 2-211 on required joinder does not apply. But even if the State's unique statutory claim under 1 s-I20(e) were not viewed as a claim ' k separate and distinct from those of individual smokers, joinder still would nor be appropriate under that permit a eoutt, in its discretion, to dispense with joinder. Those factors include "to c a jud$ment rettdered in the person's absence might be prejudiciat to that petson or those I 33 Q -!-
Page 175: mve62d00
statistics. Based on these statistics ional samples - the State hopes to estimate what percentage of Medicaid recipients had diseases allegedly due to smoking and how much those diseases cost the State. As the State would have it, defendants will never be permitted to go behind the statistics and look at the individual Medicaid recipients to see how many of tlhem really smoked, what brands they really smoked, how much they really smoked, what diseasts they really had, what other risks they encoantereti in their lives, whether their smoking was really caused by anything defendants did or did not say, or what costs were really incurred to treat their alleged smoking-related diseases. Defendants will never be permitted to rebut the accuracy ofihe information reported in the statistics - that is, - defendants will Ilever be permitted to show that the diagnoses as reported in the statistics were inaccurate, that the Medicaid payments were really the result offtand, or that the Medicaid payments were made for inappropriate trestment. Under the State's vasion of the law, all of these things will be conclusively presumed against defendants. No case in Maryland has ever held that proof at trial is limited to «gmup" evidence of injury and causation and damages. No case has ever barred a defendant from responding to group statistics with specific evide= relating to ihe allegedty fiacmed individuals. Such a limitation would deprive defendants of the basic due process right to be heard on the relevant facts. Such a limitation would also deprive defendants of the right to have a jury deteramine each factual issue in the case. EinBljX, the State can identify no countervailing reason sufficient to deny defendants this discovery. The State's desire for a pattisalar trial date is not moie important than defendants' due process rights or their right to trial by jury. Furthermore,
Page 176: mve62d00
QCT. 14. 1998 2:44FM 0 i NO, 5866 F. 39/49 an zgreetnent witb the State for favorable ta>< treatment iFit engaged in certain prohibcted practZ cesd and the club argued that the language "may not ntaite' did not suffice to make the law retroacn< < as it applied to existing contracts between clubs and the State. Looking to the circumstances of the law's passage, and its manifest purpose, however, the Court of Appeals held that the General Assembl y clearly knew and intended that the new law would apply retroactively: The Legislatures obvious zntent was to reenact the prohibition against sex discii€rtination and make it applicable to existing conaacts. Ifwe were to hold Clt. 334 inapplicable to existing cont.ects, no country club under a currntt "open spaces" convacr w:tuld be rquired to alter disetiminatory policies until its contract expiresl In the ease of Burning Tree, the club would continue to receive its tax beneftt until the year 2031. lt is implausible that the General Assambly would move with such alacrity to enact a ban on sex disctiminatEan Nhich would have no effect for such a long period. e could be said of the Medicaid amendments: it is inconceivable that tbe General Assembly would have passed the law it did if it did not intend it to apply fully in this case. of Appeals upheld the retroactive application of a change in law that had the effect + ~ f preventing Chevy Chase Savings and Loan from recovering rnonies it had contributed to the atyland Savings-Share Insurance Corporation ; MSSIC°J. After a statutory merger between cc Fund (°MAIF"}, the savings and loan attempted ; to withdraw its voluntary contribution under the law as it applied prior to the statutory revisions. A similar analysis was used in t't Trt+aee Cavinzq =d to. Ctato . 306 Md. 384 (19S6j, urt rejected the appeal, recognizing the effect on substantive rights, but nonetheless finding ?' a clear Iegislative judgr€tent to apply the law retroactively- The Court reasoned that "fo;bviously all egisla€ively imposed changes in existing contracts involve some retroactivity, but all such changes utional." As long as the changes did not upset vested rights or settled transactions, pending transacnons: "Even af MI3IFs use of the ... contributions could be viewed 38
Page 177: mve62d00
OGfi. (4. 1998 2:43PM ~ NO, 5866 P. 38149 and explorang additiotat method.t.lbr seeking to recoter other rrtones's erpendeti ht rttc• Pr(>Qrurs: .. Md. iiealih-CCien. Code Ann. §15-I4? 1 (etnphrccis added). The amendments undoubtedi.' nssist tEic State in aggressively pursuing recovery of Medicaid dollars from third parties on behalf of a1l Marylanders; as such, they do not represent a change in legislative poiicv, and thus do not upset "vested rights" within the meaning of Maxyland law. added). Indeed, even rigltts embodied in a jndiciaity enforaeabte consent decree have been held not ; udsments; importantly, both tuies apply on& when a ftnal jurlgmenr has been randered.`°}(cmphasis , a ftnal judgment. Plyler v tv4,nrr. 100 F.3d 365, 374 (4th Cir. 199b)("The vested-rights doctrine ` is ana7ogons to the separation-of-powers rnte that Congress may not mandate the reopening of final no "vested right" in the applicability of any particular law unleu that application would upset plicatzon of the previous, unatrtended Medicaid law. lt is we[l established, howevet. that a litigant gislation in any sense upset wested rights" as that term has been applied in ederal constitutional cases. Essentially, the Defendants here claim a'vested riglit" to the I "vested rights" immttne fto' ta legislative modification. as those rights were not pern anendy i fixed by a judgatent. Id. at 575. Moreover. as in this case, when the circumstances of the legislation's passage make it ' ~ at the General Assembly meant to address a particular problem by making a statute i i t continue to receive tax benefits because of the non-severability of the offending language in tke anti- j i1 ji 365 Md. 53 (19S5), which held that a club that discriminated on the basis o€sex could nonetheless a law enacted immediately following the Court of Appeals' ruling in B e.,nn T= t'3nh v_ A~a "n++.+. ~ Bt}n;naTreg 315 Md, 254 (1989), the Court e€Appeais considered the retroactive application of i etroactive, the case for retroactive application is all the more competling. For example. in Stztev. I iscrimination latv then in effect. The newly enacted law stated that a country club "may not make" 37 O
Page 178: mve62d00
2. Proximate Cause. Each Medicaid recipient would have to prove that defendants' alleged wran¢ful condu .t - not just smoking - caused the disease. Thus, if the "cognizable claim" is negligence, the recipient would have to prove that the negligence itself was the cause of the alleged injury. Again, defendants would be entitled to discovery to determine why a recipient smoked. Was it because of defendants' alleged misconduct? Or did the recipient smoke for reasons that had nothing to do with defendants' alleged misconduct? This question can only be answered on an individual basis. 3. ltellance. With respect to any claims of fraud, the recipient would have to prove both exposure to the fraud and detrimental reliance on the fraud. Si&, zg., Sheets v. Brethren Mut. 7ns. Co., 342 Md. 634, 657, 679 A.2d 540,551 (1996) (negiigent 334 Md. 398, 415, 639 A.2d 660,668 (1994) (fiaud and deceit). Defendants would be entitled to take detailed, uuiividuaiized discovery of what the recipient knew, what the recipient believed, and whether the recipient was in finet ever induced to act to his detriment because of any alleged fraud. Indeed, it is for fihis reason that courts have refuseci to certify a elass actian when one of the theories is ftsud. Smz Bmsssar~ 97-1808, 97-1848,199& WL 512926 9 m N iding that reliance element is "not readily susceptibte to class-wide groof~. 4. Afflrmattve Defenses. Defendants would be entitled to discovery in support of affirmative defeases. For example, defendants would be entitled to individual discovery to prove assumption of 8
Page 179: mve62d00
! sboes" of the injured Medicaid recipient and pursues the I 's ca 0 subject to any defenses that would be available against the recipient 5= ADM Fzjamhip, 348 Md. at 88 n 1, 702 A.2td at 733 n.l (holding that subrogor's assumption of risk applies to subrogee). The factual differences among smokers make a huge differr,nce in the imposition of liability. In reversing the certification of a class comprised of `nicotine-dependeart" smolceis, the Fifth Circuit made this exact point: The Castano eiass suffers from many of the difficulties that the C=gin court found dispositive. The class members were exposed to nicotine through different prvducts, for different amounts of time, and over different time periods. Each class member's knowledge about the effects of smoking differs, and each plaintiffbegaa smait!bftg for different reasons. Eaceb o hese fac++t ,at differen .es impa= the p,plication of legal rules such as causation- retisnce_ coMparative faull, and other affirmative defcesrs. Castar,n v. Thmere .+M Tobacco r., Co$4 F3d 734, 743 (5s` Cir.1995) (emphasis ' added). Simply put, because these individual difftsences make a huge difference with respect to "causation, reliance, comparative fault, and other affirmative defeases," defendants have a right to obtain discovery of those differeaces. The court iu!'i{,y ofl3irs_n_inyhm v. `f9u AmesirAn'1'obacro Co., NO. CV-97-P- 1449-S (D. Ala. Mar. 9, 199&} (Ez 1), recognized that subrogation claims must be adjudicated on an individual basis in holding that the plaintiff had to provide specific infoimation about each recipient There, the City of Birmingham brought a subrogation action seeking reimbursement for the cost of providing medical benefits to city employees and their dependents allegedly injured from tobacco use. The court nquired the city to replead the complaint, alleging facts about each Medicaid recipient: 10
Page 180: mve62d00
Any such amended complaint filed by the City must set forth 1) the time period(s) during which the City alleges tha11964 Ala. Act 518 provided it with authority to pursue reimbursement claims, 2) the identity of each City emptoyee for whom plaintiff seeks reimbursement of medical costs, 3) the date of each on-duty iujury for which plaintiffseeks compensation; 4) the identity of each hospital, physician, or other medical provider to whom the City made payments in conuectian with any injured employee as described in 2) above and injury as described in 3) above; 5) the amount and date of each payment described in 4) above; and 6) the paaz#icular defendant(s) liable for the employee's injury. Order at 2. Indeed, here, the State has not even identified the individual Medicaid recipients with "legally cognizable claims" against defendants. Assuming the State's motion somehow survives defendants' pending motion to dismiss, discovery of the identities of these particular Medicaid recipients would obviously be the first step in the discovery program to which defendants are entitled. The bottom line is ciear: all individual issues at play in an individ€tal recipient's suit also exist in the State's subrogation suit The State's choice to aggregate its subrogated claims, by itseIf: cannot deprive defendants of their rights to dispute individual causation, individual reliaace, and individual damages. Nor can the State's choice to use statistics impair the defendants' right to assert affirmative defecises (assumption of risk and contn'butory negligence defenses) with respect to rmh subrogated claim. B. Defendants Are Entitled to Individual Discovery on Aii of Ptaintifl`a' Cislma Defendants' right to individualized discovery applies to si1 of the State's claims. Whether derivative or not, each of the State's claims turns on the same basic fact 11
Page 181: mve62d00
allegations: (1) defendants engaged in wrongful conduct, (2) the wrongful conduct caused the smoker to smoke, (3) the smoker developed a disease because of smoking, and (4) the State incurred expenses in treating that disease. This causal chain would be broken if: (1) the individual recipient did not start or continue smoking because of any wrongfut conduct by defendants, (2) the individual recipient's injuries were caused by something other than smoking (3) the individual recipient was misdiagnosed and did not have a smoking-related disease, or (4) the health care paid for was unnecessary, inappropriate, or the result of fraud. These are all indiWttal issues that turn on individual evidence. The State's attempt to limit the tri.al of this caw to statistics and generalities would inevitably subsume these individual issues and deny defendants their constitutional rights. 1. The State's proposed trial by statistics is contrary to Maryland law:ad would depslve defendants of due process Iviaryland courts have repeatedly refnsad to allow plaintiffs to try cases solely by statistics. For example, in F neti v. Southern Maty and oxi al .enter. nc„ 320 Md. ?75, 584 A.2d 206 (1994), the Maryland Court ofAppeais could be awarded in a medical malpractice case for "loss of a chance." Under the loss of chance theory, a plaintiff would obtain damages by proving that the malpractice of the physician reduced the chance that a plaintiffmay zerover. Thus, if ffie patient had a 40efo chance ofreaovery, and negligent freatment reduced that chance to It3%, this theory of damages would allow plaintiff to recover for the 30°!a loss of a chance. The Court of Appeals rejected this theory because it would result in a trial dominated by statistics. The Court expressed great skepticism about the use of 12
Page 182: mve62d00
86~05W
Page 183: mve62d00
risk. To establish this defense, the defendant must show that a recipient (1) had SS2bjSc3iYe knowledge of the risk of the daztger, (2) subjectivelv appreciated that risk, and (3) voltazilv confronted the risk of danger. ADM Partnership v. Martin_ 348 Md. 84, 90-91, 702 A.2d 730, 734 {1497} (applying subrogor's assumption ofrislc against subrogee's claim). Each of these elements can only be proved through individualized evidence relating to each recipient. 5. Choice of Law. Befendanis would be entitled to discovery in order to determine which state's law should apply. In tort actions, Maryland follows the lex loci delicti choice of law rule. Black v. Leatherwood Motor Coach 92 Md. App. 27,37,606 A3d 295, 300, = dmiaL327 Md. 626, 612 A.2d 257 (1992). That rule reqimes the application of the law of the siate where the tortious injury was suffered. Iahnson v. Oroweat Foods Co., 785 F.2d 503, 511(4s` Cir.1986). As a resnlt, when the plaintiff's claim is based on illness or applies the law of the state in which the individual first became in}uttd. If individual discovery is absolutely essential with respect to a recipient's direct claim, such discovery is also absolutely essential with respect to the State's subrogated c3aim The right of subrogation u"derivative, and comes solely fmm the assured, and can only be enforced in his right." Weems v. Nanticoke Hames. Inc., 37 Md. App. 544, 548-44, 378 A.2d 190,193 (1977). Given that this right is derivative, the State suing in subrogation "can exercise no right not possessed by [its] predecmar, and can only exercise such right under the same conditions and limitations as were binding on his predecessor." Bmdsky, 30 Md. App. at 575, 354 A.2d at 444. Simply put, by bringing an action in subrogation to recover Medicaid expenditures, the State "steps into the 9
Page 184: mve62d00
S=g¢, there can no longer even be an issue that defendants are entitled to discovery of each Medicaid recipient on whose behalf the State is see3dng damages. Since this Court's tktober 29 Order, the State has purported to assert a subrogation claim in Count Fourteen of the Second Amended Complaint. In so doing, the State ignored this Court's May 20, 1997 Order which requires the State to assert such claims "in the name of each of the individually injured third party Medicaid program recipicnts." May 20 Order at 26. This requirement is not an empty exercise or a technicaiity; it is designed to ensure that defendants have the individualized discovery they need to prepare their defense. After all, the State's subrogation claim is a wholly derivative ciaim. The State must "step into the shoes" ofmh Medicaid recipient and prove -just like the individual recipient would have to pmve-that =ch recipient's claim is valid. Furthermore, the State's subrogated claims are subject to all of the substantive affirmative defenses applicable to the recipients' claims- affumstive defenses such as assumption of risk and contributory negligenee. Just as defendants would have an unquestionable right to discovery of each individual claim brought by an andividssal recipient, defendants are entitled to discovery of each of the.State's individual subrogated claims. ThitL even apart from Count Fourteen, defeadants have the right to individnat discovery with respect to the State's aggregated claims. The State asserts that defendants' cigarettes caused thousands of Medicaid recipients to become sick. The State also asserts that defendants should pay for the cost of the recipients' health cam. But the State insists that defendants may not take discovery of the great majority of individuals who were allegedly injured. The State says that the actual circumstances of the Medicaid recipients are completely irrelevant because the State intends to prove its case solely by
Page 185: mve62d00
The Fifth Circuit, on an extraordinary writ of mandamus, rejected the aggregation approach. Reviewing the approach "with a profound disquiet," the court held that the group aggregation procedure submerged the very individual claims and defenses that were to be tried: This type of proce+iuze does not allow proof that a particular defendant's asbestos "really" caused a particular plaintifFs disease; the only "fact" that can be proved is that in most cases the defendant's asbestos would have been the cause. This is the inevitable consequence of treating discrete claims as fungible claims. Commonality among class members on issues of causation and damages can be achieved only by lifting the description of the claims to a level of generality that tears them from their substantively requiredd moorings to actual causation and discrete injury. The plain3iffs suffer from different diseases, some of which are more libely to have been caused by asbestos than others. The plaintifls were exposed to asbestos in various manners and to varying degmes. The plaintiffs' lifestyles differai in material respects. To create the requisite commonality for trial, the discrete components of the class members' claims and the asbestos manufacturers' ckfenses must be submerged. Ida at 712 (footnote omitted). ?,s a result, the aggregation procedures proposed by plaintiffs would indeed impose a deprivation of defendants' rights: "the.procedures her® called for comprise somethiag other than a trial without our authority. It is called a trial, but it is rnrn~t." Id. The court found that "[t]he inescapable fact is that the individual ciaims ... will not be presented." jd. at 711. the State paid the medical bills of the injured parties. Suppose fiuther that the Attorney General sued the asbestos companies on the same legal theory to collect the same medical costs and proposed the same aggregation. The deprivation of defendants' rights still would have been exactly the same. 15
Page 186: mve62d00
to initiate contact with each of these individuals, asked them to volunteer, and offered them each $1,000 in the event that they are deposed. Only 24 recipients have responded to the Special Master. Only f521ti have volunteered. None has been deposed. As detailed below, although defendants had hoped to have examples of individual discovery before filing this motion, there is no need for further delay. The law is clear, and this Court should now determine the scope of discovery in this case. II. THE I?EFENDANTS ARE EIY2TTLEI7 To INDIYIDUAL I?ISCOVERY t38 TSE STATE'S CLAIIHS Under Maryland law, defendants are entitled to "obtain discovery regardiag any matter, not privileged, ... if the matter sought is relevant to the sub}ectpatter involved in the action, whether it relates to the claim or defense of the party seeking discovery or to the claim or defense of any other party." Maryland Rule 2-402. If that rule means anythiag, it means that defendants are entitled to take individual discover,y of the people they allegedly injured. First, the State has now asserted a subrogation claim which is derivative in nature. The State can only recover if it shows that the individual Medicaid recipients can recover. The State's right to recover can be no greater than the recipient's ' right to recover. Bmdsly v. Princanont t'.onstr. Co.. 3U Md. App. 569, 575, 354 A.2d 440, 444 {197G}. Accordingly, defendants are entitled to take the same discovery and offer the same evidence in connection with the subrogation claim that they would be entitled to take and offer in an individual recipient case. Second, with respect to all aggregated claims (sabrogated and non-suhmgated), the State's theories turn on the particular facts of particular Medicaid recipients. The State cannot subsume the individual issues - and deny defendants both due ptueess and a
Page 187: mve62d00
0 Nothing in the new Amendments to the Medicaid Act allows such a result. Section 15-12ae)(2) merely permits the State to use statistics to prove causation and damages - it does not limit the adjudication of this case to a"trial by statistics": In any action under this section or pursuant to any other right, remedy, or cause of action brought by the state against a manufacturer of a tobacco product, the causation and the amount ofinedical assistance expenditures attnbutable to the use of a tobacco product may be proved or disproved by evidence of statistical analysis, without proo€of the causation or the amount of expenditures for any particular Frogrant recipient or any other individuai. Md. Code Ann. Health-Gen. § I5-120(e)(2). Indeed, the verv next provision - section 15-120(3) - clearly contemplates that individuali?~ evidence will be admitted to rebut the statistics: Nothing contained in paragraph (2) of this subsection prohibits or limits the right of any party to introduce any other evidence, otherwise admissible, that supports or rebuts the evidence o€statistiW analysis described in paragiaph (2) of this subsection. Auy other result would be unconstitutionaL The Court offippeals for the Fiith Circuit deeided precisely this issue in In re Fibreboa?*d C~r,no*ation, 893 F.2d ?06 (5s` Cir. 1990). Thera, the trial judge, faced with three thousand consolidated asbestos cases, .r proposed that proof of injury, causation, and damages be presented in the aggregate based on sample evidence and expert testimony. As here, aggregation was hailed as the most efficient solution to a"csisis in the judicial system," and that "so long as their mode of proof eaatsles the jury to decide the total liability of defendants with reasonable accuracy, the loss of one-to-one engagement infringes no right of defendants." jdU at 709. 14
Page 188: mve62d00
25
Page 189: mve62d00
9 Sk Murray Gun Robert A. McCarfer, III ARNo[.D & PQR`IER Thurman Arnold Building 555 T'welfth Street Washington, D.C. 24()44-12C#2 {202} 942-5000 Marina Lolley Dame VEN.aBr,B, BnErjEst AND Howr.RD, r.LP 1800 Mercantile Bank & Trust Building 2 Flopldns Plaza Baltimore, Ivlaazyland 21201 (410) 244-7400 Attorneys for Defendant Philip Morris Incorporated and on Be2salfof Counsel for Other Defendants (See Appendix of Counsel) 30
Page 190: mve62d00
(1) the State provided defendants with computerized MMIS medical claims data for individual Medicaid recipients; (2) defendants selected the recipients whom they wish to depose from the computerized MMIS data provided to defendants by the State and obtained current mailing addresses for each selected reaipieut; (3) defendants submitted the names and addresses of the selected recipients to the Speciat Master; (4) the Special Iviaster initisted contact witfi each selected recipieat, invited each to volsmtew to be deposed by filling out various forms, queshionuaaes, and authorizations, and offered each $1,000 in the event that they were deposed; and (5) the selected and contacted recipient either volunteered to be deposed or declined to volunttrr. Order at 2. Only after all oftfiesa steps were completed and a recipientt declined to volunteer did the Order allow defendants to issue a subpoena compelling that recipient's degCSsltion. jC Aftart?*em hs.dnfen srnrs '7l..lsave aotok'li::nd'ylditi: afizrd ica_wrrvfrom igi=t. The Court issued its drder last October and appointed the in I)ecember. The State produeed its claims data for individual Medicaid recipients earlier this year. Defendants have submitted the names and addresses of 226 individual Medicaid recipients to the Special Ivlaster. The Special Master has attempted ` This is not all the Order required. Even after all of this was done, the Order still requfred defendants to obtain the recipient's authorization and medical records release forms from the Specisl Master, submit those forms to a third party agent designated to subpoena the recipient's medical records from his or her health care providers, and wait for the providers to comply with the subpoena. U at 4.
Page 191: mve62d00
Specifically, the .imino court found that, in both the sample and extrapolation cases, defendants were denied the opportunity to contest causation as to any particular plaintiff. Similarly, although damages were determined on an individual basis in the sample cases, damages in the extrapolation cases were based solely on averages determined in the sample cases. Such a practice violated defendants' "right to have the amount of the legally recoverable damages fixed and determined by a jucy" as to each pIa%n2iff. Id. at *17. The Court concluded: `I'he Judicial Branch can offer the trial of lawsuits. It has no power or competence to do more." ItlL at'° 18.3 Again, as with Fibreboard this case presents a far more egregious case than Cimino. In CiuiiIIg, defendants were afforded a full trial as to 10 plaintiffs and a partial trial as to another 160 plaintiffa. By contrast, here, the State seeks to block aEI individual trials and individualized discovecy. AII individuai issues are to be subsumed by statistics and generalities. Such a result would deny defendants their right to a jury trial on all factual issues in this case. 3. The State's proposal would deny defendants the right to defend themselves Finally, even when Maryland courts silow statistics to be used, no Maryland court has ever denied defendants the ri t to rebut statistical evidence with individualized ' Cimino was based on the Seventh Amendment right to a jury trial. A sunilar right exists under the Maryland Constitution. S= 1Vlattingiy v. Mattinelv. 92 Md. App. 248, 254-55, 607 A.2d 575,578 (2992) (®Article 23 of the Maryland Declaration of Rights, like the Seventh Amendment of the United States constitution, guarantees a right to a}ury trial in actions at iaw."). 20
Page 192: mve62d00
# case. According to the court, if the giaintif£s were going to use aggregate proof, the defendant must be able to look at the individual claims underlying that grooE In sum, plaintiffs portrayed the class at trial as a large, unified group that suffered a uniform, collective injury. And 1bleineke was often forced to defend againct a_ _ fictional tximoosite without the benefit of decwsing or cross- examining th„ d:,gjya:'}!e in +4; u^la behind the mZ,c_ite Id. (emphasis added). In the end, because "the class ice permitted plaiatifl`s to strike 1vleineke with selective allegations, which may or may not have been available to individual named glaiatif£s or franehisees," the trial court's judgment could not stand. jd. The Fourth Circuit's holding in Bra is instructive. In this case, as in B the State is seekiug to limit the trial of this eaw to statistics and expert generalities. If the State has its way, the jury will not see a single Medicaid recigieat, read a siugle medical record, or hear the testimony of a single treating physician. The State instead will introduce statistics to paint a picture of the Wect Medicaid recipienY' - a Medicaid recipient who (1) was exposed to defendants' alleged misrepresentations, (2) relied on those misrepresentations to his or her detriment, (3) contracted a disease eaused by smoksng, (4) was correctly diagnosed, and (5) recei from Medicaid. Absent iadividualized discovery, defendants would be forced to defend against such a fictional claim without ecamining the real people underlying the claim. Again, such a trial would be no trial at all. 90 AL-g ln re Paa iaiad Yard PCB Ufigad= 35 F.3d 717, 763-Cri (3d Cir. 1994) (upholding exclusion of expert's testimony based on "general reasoning" where the expert had not examined or questioned any injured person about potential alternative causes). 17
Page 193: mve62d00
This r,ase, however, is far more egregious than Fibreboard. Fi Fihr~7oard; defendants had the opportunity to depose every individnal plaintiff. Here, defendants to date have been allowed to take discovery of only a handful of recipients. Second, in Fibreboard. the claimants were involuntarily exposed to asbestos at their workplace. There was no serious issue of reliance or personal choice. Here, we do not even know if particular Medicaid recipients were reaFy smokers, much less why they smoked. Finally, here, the "disparities" are immensely greater, in terms of vumber of products, duration of eacpasure, different diseases, and competing risks. Other courts have also rejected aggregation when the inevitable result would submerge individual issues. Recently, the Fourth Circuit held that aggregation is clearly inappropriate in fraud and negligent misrepresentation cases because it allows the plaintiff to try a theoretically perfect case divorced from its factual undtrpinning. itro ussard v. Meineke Dicro +nt Muffler 4ho=, nr„ Nos. 97-18fl8, 47-1848,1998 WL 512926, at *14 (4th Cir. Aug.19,1998): In Bz=Ljmj the plaintiffs brought a class action against Meineke based on allegations of fraud and negligent misrepresentation. At trial, the plaiutiffs presented thejuryssot with the claims of any single class member, but with generalized evidence: ' Specifically, piaintiffs enjoyed the practical advantage ofbeing able to litigate not on behalf of themselves but on behalf of a "perfect plainfifY" pieced together for litigation. Plaintiffs were allowed to draw on the most dramatic alleged misrepresentations made to Meine#ce fianchisees, including those made in final review sessions with absent class members, with no proof that those "misrepresentations" reached them. 00 CZ ~ Equally problematic was the fact that the defen,dant, Meineke, was not allowed to ~' 0 rn cr look at the actual individuals whose claims were thrown together to mate the plaintiffs' -c'- c31 16
Page 194: mve62d00
! acknowledged, the Medicaid population is different from the general population. What may be true of the general population is not necessarily true for the Medicaid population. Consider the Minnesota trial testimony of one of plaintiffs' designated experts, Dr. Jonathan Samet: Q: And the Medicaid population is a socioeconomic specialpopulation;correct? A: That's correct. Q: And would you agree that empidemiologists (sic) have done apoor job of researching the risks of smoking in special populations? Q: 3835, 3936 (Ez 3). Well today such populations have not been well- studied for many, many diseases and many causes ofdiseases. *ss And isn't it important to look carefuIly at a special population when you're trying to draw epidemiological conclusions about that special population? Depends on the nature of the special population. In faCt, sometimes one finds unexpected associathons.when one deals with a special population; isn't that right? Might happen. isil'Ile)4V ~.yl/IKS)Is:.jH~ Sti'! Trial'Transcript of Feb. 13, 1998, at In light of the caselaw, defendants' due process r3ghts, and Dr. Samet's own testimony, defendants must be allowed depose a statistically representative te ofthe real population at issue in this case - the Maryland Medicaid population. And defendants 25
Page 195: mve62d00
If the State had brought a single claim to recover funds paid to treat a single Medicaid patient, there would be no question that the patient would be subject to discovery. Withont doubt, defendants would be entitled to obtain the patient's medical records, cross-examine the treating doctors, and depose the patient himself. The law governing access to such discovery does not depend on the number of claims that the State unilaterally chooses to join together. Both federal and state Medicaid regulations speak directly to the duty of the recipient to provide infotmation. Federal regulations require each Medicaid recipient to cooperate and provide information in reimbursement suits as a condition of eis 'bilitv. Federal regulations provide: (a) A State plan must provide that, as a condition of gligibijeach legally able applicant or recipient is required to: . . (3) Cgspe.rate in ideotifi~Lg and in - infarmation to assist the Medicaid a2encv in pursuing third pacties who may he liable to pav for care and services under the alan 42 C.F.it. § 433.245 (1998) (emphases added); = Si8d3 42 U.S.C. § 1346a(ax25}. Federai regulations further define "essentials of cooperatioII" to include providing testimony: (b) Essentials of cooperation. As part of a coo the agency may require an individual to - (2) Aanear as a ventness at a eourt or other v+xsaudatTrs (3) Provide informatian. or attest to lack of infnrmation_ o_der Ra9jtv ofnerPurv; ... (5) Take any other reasonable steps to assist in identifying and providing information to 27
Page 196: mve62d00
These provisions plainly apply here. As this Court has already recognized, the State's lawsuit "is for a purpose directly related to the administration of the Medical Assistance Program in 141aryland." Confidentiality Order Regarding Personal and Medical Information at I(C3ctobe€ 29,1947). As such, the State is suing under the very statutory scheme that requires the cooperation of Medication recipients. The State cannot have it both ways. The State cannot sue to recover Medicaid cost and then refuse to comply with the rules that the General Assembly and Congress have established for such suits. And the State - which itself placed at issue Medicaid recipients' medical condition, their use of defendants' products, their reliance on defendants' statements - cannot hide behind nonexistent privacy concerns in order to thwart defendants' discovery and defense of this litigation. CONCLUSION For the reasons stated herein, defendants ask this Court to grant the Motion and allow defendants to depose each Medicaid recipient whose alleged injuries form the basis of the State's claim. In the alternative, defendants ask the Court to permit depositions of a statistically representative sample ofIuIedicaid recipients. 29
Page 197: mve62d00
SEP. 8.1998 i 4 .39AM ' '8£FY-•~9-86 11=~9 FR4M+GDL 3t ( a ha.1134-"P.11f34 tA.47,8a76Z-4$4H PAGE t113 l i fL1 J. 1 ~il .Q~S L '~ K iLL 1 ~' ~ ~ ~~ ~, , ~ ~. y ~ Y<SM}Gfi S. ~J • ~4]ifp4 t ~Yuim CBAIIBOITWE & PARKE, LLP 30 RocYefcfkr Plsr.a New Yar3c, New YoFk 10112 5'-.i S, J-Or ~E.Ilavid iiaskias lU 00
Page 198: mve62d00
groof. In every instance where statistical evidence has been admitted, Maryland courts have also allowed defendants to admit individualized evidence obtained in discovery. For eaample, in Kammer v. Yosmg . 73 Md. App. 565, 535 A.2d 936 (1988), the defendant appealed a finding of paternity on the ground that the finding was based solely on a statistical probability of paternity derived from a testing of his blood. The defendant argued that the use of statistics created an irrebutable presumption of paternity in violation of due process. The court rejected this argument on the ground that the defendant was fr~ee at trial to offer individiWized evidence to rebut the statistics: Appellant was fr= to, and in fact did, gut on non-genetic evidence which not only disputed generally his paternity but, in effect, was an attack upon the use of the .5 prior probability figure. This llowal him an nrnxniimby to counterbalance arnsdllee's introduction of the htood test C: Ytlit.'laet.~lytC3.).Oli:7iei.f:{r1!!2~'L.Jr~.lti{attitt{y'~.'L-r[-~•Ft}g?t and served to grntect bis due qm= riahts. j41U at 577, 535 A..2d at 942 (etnghasis added). Defendants hete are asking for the same opportunity to "eountabalance" fhe State's statistical evidence with individualized fac#s relating to causation, inlury, and affirmative defenses. Indaed, the Florida Supreme Court rejected the very argument that the State is making in this case on the ground that refizsiag defendants the opportunity to rebut State's statistics with individualized proof would deny defendants' due process rights. or H 7 h Care Atiminisirntron y. Associated Industries of Florida f 6'78 So. 2d 1239 (Rla. 1996). Tlaere, the Florida legislature enacted a statute that gave the State of Florida far greater rights against the tobacco industry than the Maryland Assembly gave the State in the recent amendments to the Medicaid statute. Unlike those amendments, the Florida statute gave the state an express right not to identify individual Medicaid 21
Page 199: mve62d00
DEC-02-98 15e26 FROH:ARiQ &PORIER WASH.- $12 ID:202 5999 * T4~ST2AY, I}ECEMBER 1. 1948~ PAGE 29J2I $C2LC of mary2aitd V. P11lHP Morris i aqreNi Aiatbnfer Approval of 3art.maf and 2 Eatry aE a Canaenr 6erne In F€ne) iudpm.ni. I A.a.asP®.rr{ng that acefien, we imw inr 4 geu a H-A R{wfei E+HislntlNAgreemxd to S ise filed acc.ngaeqiny fir Madqe for c approval of 16r sHdemeae. 7 We f,v" as a seppraf..flrche+em tp it f the signatures on beftaH of the Def.rrd.at.. I And, fGwNy, tlrere.dif i.e a deird 1e pien af papar aHadsed te Ar+Mda is taNed a Etafr Option to EMer Agreeatent for 1t P+ryn4.ni oi AHorneTs iess, W" r.prnent. an aprsew-eat eri.m/ed 61* dae, ba&miy iqr st th.0:feaduntslo the Seare reealfiwp 13 aROtrieJri {eel. 16 TAe parHp han aynet8 os tD the 17 maHen and d,a csnrnu deaes in final 1T jvdgmenE whirh we`» snhmitNsp to ywr 33 Hoasr for Ms.ipewNUns p* 7HE COSNCis QkeT. f`""` inK. EHlPJi4Dt If yre enqr apprnech. AL BET2 6cA5SOC111TES,INC. 41D-753•1793 1 Z!!E COBE7t Ya, )pt wAiy ASiu 2 Sheperd. 7 AU partiesars in agr.uernt, rl~fn3 4 ML 6YAYi TiwF'. aarred, your 5 Hwwr. i, I fAS. SHSPASII: Yes, Taur Hatter. i i 7 iHE COttiFTs fl1taT. I ME. iHEItARD: Setarri,}?our Hsrwr, I f rs #ww,lsgeiher wFNcBart, a A{oHsn ke 10 fhe Eatry ai tlu Aqrted Liseiuoi Ordsr. A Ona eyain, we tave an ¢grs.d-m nNion aRd ~i 12 aen agreed•N Rrepaed dismis.d ardv. H 33 we could seMeB thot. 14 ?I!E COBfTf Okay. 15 ML EHEP#RD: fioeftT, for tedq, lG your FEaur, we haet 6eie a JeL#f tdnHen /ar 17 Approval of 6etrrai LipgeH Rspiearaeend It Aqewmeat. !tt aEs axpiain what " &. i! We Eanee not aued t.EqQefl In iMre iaaitliemetdagreamenF~LippeN. !Ye 2 f.e.a new agr..d wt1F1 ftpp.lf to rePlsp eb.r 7 aqiMlRem Wilh 06 Ma{f!r ENIUenfen! e Agra.wuw and m lTpoeR nar wift 6m nmit f ~ 5to beaa7qaplMlnethelAniwlHiafneat t Agwem.nt. Aed 1idrL an agreed•1e WRt a assden fo tilst rseif. s THECOUET:Oimp. ! i11E. SMPif:B: fin.YY paur H.mr, 10 re grepor: taebniit to tav huteiraw. N we fi malr, a matian far *a er" of at ardp 12 rpae#ng the PrafaHre trders eabrad 6de 11 Nr thir aua The perN.a hne, aetyet 1< agr.ed open 1FN imnt of tha order fo &&A jiS to}w lteeNr. 1tfe.W dr w ip ianwym Si H if eEr. faibeif* pem`bkr 1r.rr Herwe i17 dmtwe wiilsknulkweemarl ifwe`narofiia iii to agree an cer6oia issun reamding Lf dicdsswe In this sate, *e Sh" wRi be 2e vibmileg a amW a fw pu6Qc dbdowrs of 2t ceAain deami.eq. Ourssflhenesw aqnawaat AL BFTZ Sc A$Si1G7ATFS. INC. 4IIf-7S2-I733 1 sp0downf nfi.vn wlefue Nwf -'.I And NKn is a arr.at is tiw CokfY (wbdinba far Pueposes of dnidMg'R+et kaee. So we vfV be subndtNn" that faawrraw.Yow Hem. THE CtSURTt Md fiaeT iaeq ihe oppartanit)r to arpwl AFE. SHEMW TheT hare w.ry aFPart+rtiitT i. arvtae. TME OOLiRG I ieeked theanfl fM lFioy the aber ne.k.irn I Qat H, Nw 6tg eni sald adaf Okap, 1 had b M.k, f 13 4oaked at Hrt asd aoid Taah. eitq. ~26 pTateedings before 7rorx Hwmr. #fowewr, we 21 had entered lnta a. previousiy entered hdo , ACBETZ fiiASSOCIATY«S. INC. i1tf-752-1T33 ML sHEMMROt Your Hanw IE Al Betz &Associates, Inc. (410) 752-1733 i<8 3Dtd S31NIDDS6Y 2 ZL4H 'V LSBZSLf3CiIP E£=88 855TtZ®iZT
Page 200: mve62d00
i 24
Page 201: mve62d00
i 2l. Beginning in August 1996, certain of the states met to discuss the possibility of a global settlement of all state Medicaid tobacco lawsuits. This "first round" of negotiations culminated in an agreement between the states and the tobacco industry on June 20, 1997. iImplementation ofthis agreement required national legislation, but Congress failed to pass the necessary legislation and the potential settlement collapsed. 22. Between June 1997 and June 1998, tthe tobacco industry settled individually with four states - Mississippi, Florida, Texas, and Minnesota -- on the verge of or during trial of the tobacco cases in each of those states. 23. Serious negotiations between the states whose cases had not settled and the tobacco industry resumed in the summer of 1998. 24. On November 22, 1998, 46 states (including Maryland), the District of Columbia, and five territories (the "Settling States"} entered into an historic settlement agreement settling the tobacco litigation in all remaining states and jurisdictions, including those which had yet to file suit. Exhibit 3 to this Complaint is a true and accurate copy of excerpts from the Master Settlement Agreement. On December 1, 1998, this Court (Brown, J.) entered a Consent Decree and Final Judgment and an Agreed Dismissal Order pursuant to the MSA that ended the tobacco litigation in Maryland. Exhibit 4 to the Complaint contains true and accurate copies of those final orders in this Court. C. The Terms of the Settlement 25. Unde- the terms of the Master Settlement Agreement, the Settling States will receive annual payments in perpetuity from the tobacco manufacturers. Over the next 25 years, those payments are projected to total more than $206 billion. The payments to each individual state or jurisdiction are allocated on the basis of each state's Medicaid costs.
Page 202: mve62d00
pstpalation at issue (here, the Maryland Medicaid population). Consider, for example, ITiIao v. Estate of Mamos. 103 F.3d 767 (9s` Cir. 1996). At issue in $Wa.o was the trial court's attempt to deal in the aggregate with thousands of claims by Filipino vietims of the regime of dictator Ferdinand Marcos. Notably, the $i134 plaintiffs' statistical model was completely different than what the State purports to do in this ease - the Ell= plaintiffs actually based their model on a sample drawn from the real party at issue. But despite the relative strength of the plainfiffs' statistecal proof in j31jg4, the court still allowed the defendant to d ae li 137 cI imscr+fa w{a3 made un the ol intif€s' mocle . at 782.4 In this ease, defendants' need to obtain discovery at least from a statistically representative sample of the Maryland Medicaid population is even more eompeIling. Unlike the plaintiffs in HiLig, the State's model is based on national data from the general population, despite the ovetvvhelming di$arences between a Medicaid population and the II.S. general population. For example, the State's national and general statistics do not even take into account the fact that the State's own Medicaid population differs racially, educationally, and socioeeonomicaliy from the general population in ways that make the incidence of sickness and death from all causes snbstantially different in the Medicaid population. The differences between the national population and the Maryland Medicaid population potentially make a b3g differerice. As the State's own experts have ; Cimino specifically disagreed with the aggregated procedure used in Ilika - even taking into account the opportunity provided to defendants to take individualized discovery. Cimino also distinguished j;iIa4, noting that (1) I;jjW was not applying state law, and (2) Ell= did not address the right-to-jury-trial issue. Nor did HJAQ address the due process issue raised in Fibreboard. .i ino. 1998 WL 480147, at '" 17. 24
Page 203: mve62d00
s~SE?.,8,199$.,11:3$,~un.sco S i ~ N0. ,.339~ P, II34 -- IO.410793"4Q48 PACE 7/31 ~~ ~~.~~•,, ~S~i~l..~,.~~.,.~ ~il_ ~iVN..a.qQli~{.~_i~W~,/yl~il~a Li. David 6Eenpy~yi LAW t3FPICES flF PETER G. ANGELOS, PC Chae Charles CesM 100 N. C6aries, 20th Ftoor Satumore, MD a12ff1 (410) 649-2140 Amwnqpfbr?Wwff co CN CD 01%
Page 204: mve62d00
Indeed, the State's proposal of what evidence would be admissible to and causation demonstrates just how thoroughly the State seeks to subsume individual issues. In place of access to individual claimants or their personal medical records, the State offers the Medicaid claims files so that defendants can create their own statistical models. But those files do not reveal whether any particular recipient smoked; nor do they reveal why any particular recipient smoked or whether any particular recipient was exposed to other health risks. Further, the Medicaid fiks assume that the reported diagnoses are correct and that all fraud was in fact discovered by the State. In other words, in a case that turns on whether an individual sustained a particular injury from a particular cause, the State asserts that it will unilaterally define what record evidence is admissible. Never mind that personal medical records or a deposition of the may reveal a completely different pictune. The State brings the suit and only the State's records are admissible on the fundamental questions of injury and causation. 2. DeafaE of indfvidaalized dfacovery will deny defendants the right to a jury trial With respect to both subrogated and>ion-subrogated claims, every Medicaid benefit that the State provides to a recipient gives rise to aaZigits potential elaim. Each claim turns on particular facts: who the recipient is, why the recipient smoked, whether the recipient became ill because of s€uoking, whether the recipient was correctly diagnosed, whether the medical care was appropriate and proper. For each ciaim, defeadants have a right to have a jury consider these individual issues, weigh the iden h a verdict. The State's proposal to proceed in the aggregate without ding defendants individualized discovery (or even identify"mg the relevant 18
Page 205: mve62d00
0 23
Page 206: mve62d00
0 smoker cannot turn on the State's decision to assert its cl the aggregate. Whether the State asserts one claim or one thousand claims, defendants' due pmcess rights to defend themselves remain the same. This Court should allow defendants to obtain individualized discovery of every person on whose behaIfthe State seeks to recover. III. AT A Mtx[st[ard, THE CauaT MvsT ALZ.ow DEFmnnAivTS To DErosE A STATISCtCALLY REPRESENTAT1vE SAMPLE In the event that the Court denies defendants the right to depose all of the Medicaid en defendants must at least have the right to "fight fire with fire." That is, if defendants are to be unconstitutionally limited to statisticaI evidence, they must at least be given the opportunity to take discovery of a statistically valid sample of Maryland Medicaid recipients in order to rebut the State's proofs with respect to injury, causation, reliance, damages, and affirmative defenses. And defendants must be given sufficient time to obtain such evidence before trial. Defendants have submitted the affidavit of I3r. H. Daniel Roth {Ez. 2). As I)r. Roth testifies, the acinimai sample size required to conduct this type o€study ranges from apgroximateiy 250 to 2,000 individual recipients, depending upon the question asked. '-Roth Aff. at 17. If defeadants' motion for discovery of each recipient is denied, defendants propose that the Court and the parties work out an expedited schedule to allow defendants to take discovery, including depositions, of such a statistically valid sample of randomly selected, non-voluntary recipients. As discussed above, the vast majority of courts are in agreement that defendants are entitled to look behind the State's statistics by taking discovery of each individual at issue in this case. But_ even those few courts that have nermitted ag¢mgate statistical s ri. M f.-Is s 11"0-wi;F-+.w.Ti~le[sTiiYst~Ui.i-YNlt~,t4iY4.`HtNis![3t i 23
Page 207: mve62d00
i rxipients!) would not result in a"triai" in any ordinary sense, but in a quasi-legislative proceeding. Courts in otfier jurisdictions have found that such attempts to aggregate thousands of separate claims together in a single suit violates the defendants' right to a jury trial because individual issues are subsumtd.. In C'm v_Ray*tna& nd Fstri.. . inn., Nos. 93- 4452-93-46I i,1998 WL 480147 (5' Cir. Aug. I7,1998), the Fifth Circuit recently invalidated an attempt to dispense with individual proof of causation and damages in a ciass action of approximately 3,000 piaiatiffs clafming asbestos-related ir~uzies. Facing what it perceived as the "insutmountabie" task of trying each of these ptaintifTs' claims, the trial court had formulated a three-phase trial pian to resolve most of the claims in the aggregate. Id. at *3-4. The three phases consisted of, among other things, a complete jury trial of the claims of the 10 class regreseatatives as well as the trial of 160 individual the issue of damages. The results of the 160 "sample" damage trials were then extrapolated to the +e+ inin cases. It at *3-5. On appeal, the Fifth Circuit reversed and held that the trial court's plan had violated the defendants' right to a,puy triai. The court began its analysis with the proposition that causation and damages are tmiquely iadividual issues and, as such, are determined as to `Snc_ividuta not ero~s'under Texas law. U at *12 (emphasis added). Given that tort actions for damages are "a prototypical example of an action at lav"fur which the right to a jtuy applies, iL at * 10 (quotation omitted), defendants have a right to have a jury determine causation and damages for "m11 individual plaintiff." Id. at *ld (emphasis added). 19
Page 208: mve62d00
AUG. 25. 1998 1:I6PM 0 0 xO. 5667 P. 9/17 establishes that defendants did not waive their privileges; rather, the parties simply agreed to submit the issue of disclosure to the Minnesota court at a laterdate. Judge Levie had no tFouh€e reaching exactly this cottclusion in $=d. Turning to subsection YtS (C), which provides that the plaintiff may seek court approval for disclosing privileged documents, Judge Levic stated: I read the phrase "may seek court appmval" to be nothing morc than that, that the conseat, excuse me, the settlement a~ereetnent and the consent jad ent did not vest in the Min~plaintiifs a ur:ilatetal ahi(jly to make up blia any hich thP n}aenttfte could and mt.q eer back to the co~F?1 within the d5-dav `o1. Indeed, in Minnesota, the plaintiffs did go back within the 45-day period and that, of course, has resulted in an on going litigation. $sid Transcript at 59. Judge Levie also found support for his interpretation in subsection Ytl(G), which as noted above, requires defendants to produce into the Minnesota depository all documents produced in other smoking and health litigation provided defendants do not claim grivilege with respect to such docn.ments. Judge Levie found that this section gave defendants "ttte opportunity to argue that documents pzaduced in other litigation where their privilege claim may well have been ovonuled arguably can argue jaie] privilege in Minnesota before the documents am put in the depository.,° Id. at 60-61. 3
Page 209: mve62d00
BEP. 8. 1998 11 :38AM '= 9PP-®a-Se 11.08 F{dall.ag ~. "4d0. 1139'-P. 8134 20.4107034040 CETtTiFICA'iE {fF SERVICE (2vIDAG) i'AG& $f3! I IiEI2EBY CERTIFY dias on the_j day 1998, acopp of the 3ad counsel aud mailed, fust cla€s postage Jolut H. Lewin, Jr., Esquire Jasues K. Archibald, Esquae Yriatme Lcitey Dazae; Esquae vEKAHLE, $?,P"CIHR & HOWARD, LLP. I&{14 Met=dte Bassk & Ttnst Bidg. 2IiopZoas Plaza Baitimara, Maryland 21201 C=W A. t3awn, Esquire 7aseph G Pftatrty, Jr Esquire Itayataad CG.1Kuilady, Jr Esquire PIPER & IrfARBUItY, LLP. (harles CIearor SQutk 36 South ChasIes Street Baltaaoxe, Muylaad 21201 Donaid Ayrs. Esquize ' Itabat McDetaws4 F,sqnira, Bar~b~arnM~c~Dac~es~lt~. ~Gt1 • Esquire OL r.ey~{.~~ ~cuiA r Vtitii: IQ ,)YL'.. DAY, A. Mehopeticm Squarz 1450 t's 5hezt Wasfiingtan; D.G 20005 Mril3iaat 3. Q,asspton, Esquire David W. Smith, Fsquixe SfIC}OK, HARDY 8t BACON. I,LP. ons Kansa4 f "aay Piaca . 3200 MaiaStrozt Kaasas City, I+issalai G4i45 7
Page 210: mve62d00
0 must be able to conduct this analysis with respect to all issues in this cas I whe ther smokers were aware of the risks of smoking, (2) whether smokers relied on anything defendants said or did not say, (3) why smokers began smoking, (4) why smokess continued smoking, and (5) the extent to which undetected Medicaid frattdd and misdiagnosis inflated the State's damage claim. THE STATE HAS No Ct?t7NTERY.+iIL€Plc INTEREST THAT WUi1I D WAxBAN'r TH`E DLIVL43. OF DUE PROCESS In the end, this issue comes down to one question: does the State have any interest compelling enough to overruu defendants' due process rights? The answer is no. Neither the State's desire for a particular trial date, nor the Medicaid recipients' privacy interest, justifies denying defendants of their right to put on a defense. Clearly, any interest the State has in the current April trial date cannot stand in the way of defcndants' right to look at the =d facts relating to the md people involved in the Iawsuit. Defendants' due process rights demand more. 9= r,.E., Leverence v. pFS C=ration , 532 N.W.2d 735, 740 (Wis. 1995) ("the right to a jury t:ial... is not contingent upon (a) the amount of damages at stake in a given esse or (b) the burden litigation might place on the court systr.m'). If the State wants to proceed now and not wait, it must do so at its own- not defendants' - expense. Nor do Medicaid recipients' privacy rights somehow justify defendants' access to individualized discovery. The simple truth is that individuals, as a condition of receiving Medicaid benefits, have Aja(yag=d to V=de information - and even testify in coart, if neeessaay- in the State's third party reimbursement suits. Such persons have no right to resist discovery on the gronndd of privacy or otherwise. 26
Page 211: mve62d00
assist the State in pursuing any liable third party. 42 C.F.R. § 433.14? (1998) (emphases added). 2viaryland regulations impose similar obligations to coaperate. Regulation 1 Q.49.24.15(G}(1} provides that a recipient is deemed to have authorized the release of all information necessary in a third-party reirubcusement suit: A recipient of Medical Assistance is deemed to have ~FFrF{Ii~ .T~FS1r . e L3iiiF3Za[~?`~~slliL:3~ s., aa~e ai of all data. records, and infortnatioa ... necessary for the Department's pursuit of third-party reimbursement The authorization extends to all information relevant to third- party reimbursement or third-party health care coverage. Md. Regs. Code fit. 10 §.()9.24.15(GX1) (emphasis added). Regulation 1{?.Q4.24.15(G)(6) specifica3ty requires a recipient to cooperate in "obtaining medical care support and payments for himself and anyother individual for whom he can legally assign rights." jd. (G)(6j. Finally, the Maryland regulations provide that the failure of a recipient to cooperate results in the termination of eligibility: The Department, through the local department of social services ghali: (a) Deny or terminate eligibility for any applicant or recipient who refuses to cooperate as required under See. G(6) of this regulation wntess cooperation has lrew waived. jd. at §.Q4.24.15(G}(8}. Indeed, the application forms for Medicaid eligibility expressly inform the recipient that he or she is authorizing the release of "all data, record s, and information" that are "necessary for the Department's pursuit of third party reimbursement." Eligibility Form, DHMH 1158 (Ea. 4). 28
Page 212: mve62d00
AUG. 25. 1998 t:15PM 0 0 NO, 5667 P. 4/17 CERTIOCAT, oR >7)ME I TSEREBY CERWY that on this 18th day of August, 1998, a copy of the foregoing "Certain Defendants' Motion for Reconsideration of'fttis Court's Order of August 5,1998," "Memorandum in Support of Cettain Befendants' Motion for Reconsidention of This Court's Order of August 5,1998," Request for Hearing and proposed Order were sent via hand delivety to: J. Joseph Currntt, Attorney General Carmen M. Shepard, Deputy Attorney General John H. Howard, 7r. Offioe o€the Attorney General 200 Saint Paul Place 16th Floor Baltimore, MD 21202 and Peter G. Aagelos H. Russell Smouse E. David Hosldns John C. M. Angelos Law Offices o€Poter G. Ange#os, P.C. 20th klaor, One Charles C.eater 100 NorLh Charles Street Baltimore, MD 21201 Counsel for Plaintiff and sent via first-class mail, postsge prepaid, to all other Counsel of Record. sAa,oocssms9i.a0W
Page 213: mve62d00
' AUG, 25. 1998 1:15PM STATE OF WtAitYLANI?, PSaitttiff, V. PHILIP MORRIS INCORPORATED, et al., I?efend". ~ NO, 5667 P. 5IS7 • INTEIE • CIRCUIT COURT "` FOR * BALTIMORE CITY • Casc No.: 96122(}1?/CX211487 R * * . * r MEMOTtANDVM IN SUPPORT OF CERTAIN DEFEENpAN'f5' iFYU'I'Li)N FOR RECONSIDERATION i?tr'CHIS f'O[SR~,,'S ORDER OF AUGUST 1948 Certain defendants respectfuRy submit this Memorandum in Support of Motion for Reconsideration oftisis Cowl's Order of August 5,1598, dealing with certain privileged documents (`Yhdar").a PRF. ,TMfNARY fiTA'[EMENT On August 11, 1998, this Court entered a Memorandum Opinion and Order denying defendants' Motion for Protective Order and finding that defendants intent3onally waived the attorney-clienk andlor work product privilege for 37,000 documents by entering into a sottEement agreement and stipulating to a consent decree in State of Minrre.sota. eY al, v. Philip ;uria lneomoata et sL No. CI-94-8565. Certain defen,dagts seek reconsideration on two grounds; EitSt, read as a whole, the settlement agreement and the consent decree establish unequivocally that defendants did not intend to waive the attorney-client or work-product The defendants seeking reconsideration are: Philip Morris Lscorporated; R.7. Reynolds Tobacco Coupany; Brown & Williamson Tobacco Corporation; Lorillarst Tobacco Company; The Tobacco lmtitute, Inc.; and the Council for Tobacco Research- U.S.A., Inc. {collectively ••defendants"}. R.J. Reynolds Tobacco Company is also Iil'sag a separate motion for reconsideration with respect to Issue ITS of the Court's opinion.
Page 214: mve62d00
! at trial - specifically recognizing that statistical evidence "is subject to criticism as being unreliable, misleading, easily manipulated, and confusing to a jnry": Aaotthes factor weighing against adoption of a loss of chance damages approach is its practical application in civil jury trials. Probabilities and statistical evidence comprise a substantial portion of the evidence submitted to the trier of fact in loss of chance actions. This evidence will generaily be in the form of opinions based on statistics that show chance ofsnrvival of other individuals similarly situated to the victim. use The of statistics in triata i lj .ect to criticism as being m.w.ii.ahtr~ id in_- aettv ~qpulatcd_ and confusins to aiurv. When large damage awards wi113se based on the statistical chance of survival before the negligent treatmeut, minus the statistical chance of survival after the negligent tteatmeut, times the value of the lost life, we can imagine the bewildering sets of numbers with which the jury will be confronted, as well as the difficulties juries will have in assessing the comparative reliability of the divergent statistical evidence offered by each side. LL at 791, 580 A3d at 213-14 (emphasis added). What the State proposes Ixte goes far beyond anything ihe Court of Appeals could have imagined in Fennej1. Iiere, the State relies on statistics and untestable generalizations to prove more than simply a"loss chance." The State seeks to rely on statistics to prove medieal causation, reliance, and -proxiana#e cavse-as well as billions of dollars in damages. But Ehat is only the beginning. L3ltimately, the issue is not whetlua the State can use statistics to prove its case. Rather, the issue is whether the defendants will be denied individualized discovery to ie ravE the Sfatc's casa - in other words, whether this Court will limit hWh sides to statisHcs. 13
Page 215: mve62d00
' AUG. 25, 1998 1: i6PM 9 ~ N6. 666? P. 3/17 August 5, 1998 Order and enter an order granting Defendants' Motion for Protective Order Respectl`ufiy .submitted, Judit James 1. San ,A:Ravot.o & PoRTElt Vrxtns€.F, BASrER Thurman Aanold Building J.&I}D Mercantile Bank & Trust Building 555 Twelffit Stted 2 HoPkins Plaza Washington, D.C. 20004-1202 Baltfmmore, Maryland 21201 (202) 942-5000 (410) 244-7400 Attorneys for Defmdaat Piulip Iviorris Incorporated and on bdialf of Defendaats R,7. Reynolds Tobacco Company; Brawn & Williamscm Tobacco Corporation, iadividually and as successor by merger to The American Tobacco Company; Lorillard Tobaaco Company, sued in its own name and incoxrectly as "Lotillazd Corp.," a noneyisteat entity; Tha Council for Tobacco Researoh-U.S.A., Ine.; and The Tobacco Institute, Inc. CO S?'N tas C~) O. W CY7 2 00
Page 216: mve62d00
` AK 25. 1998 1:16PM STATE OF MARYLAND, P#aittt`tff, v. PHILIP MORRIS iNCORPQ1tA.TED, et a3., Defendants. ~ K 5667 P. 2/17 '" IN THE " CII2C(3IT CC}LTtT ' FOR • BALTIMORE CITY ' Case No.;46i22437tCL21i487 9 M Y~ A ~k i !~ ~R Y~ 4 f CERTAIN DEFENBANTS' A4tf3'[OlY FOR RECONSIDERATION OF THIS CUURT'S ORDER flE AUGUST 5,1448 Certain defendants move for reconsideration of this Court's August 5,1998 Chder denying their Motion for Pmtective Order preventing ptait+tiff s wholesale use of documents in this essa subject to the attornay-client and work praduet priviieges.' In support of this motion, defendants state as follows: I.. The terms of the settlement agreetttent and stipulated consent decree demonstrate that defendants did not waive the asserted privileges for these documents. 2. Negotiations surrouuding the entry of the consent decree evidence that defendants did not waive the privl2eges for the 37,000 documemts. 3. The conduct of the parties since entry of the consent decree shows no waiver. WfiEREPORE, for these teasons sad those ser forth in t?te ac memorandum in support, deFeaidants respectftilly res(uest that the Court reconsider its ' The defendants aecdcing reconsideration ara: Philip Morris Inaotporated; AJ. Reynolds Tobacco Company, Brown & Williamson Tobacco Corporation; Lorillard Tobacco Company; The Tobacco Inscitute, Inc.; and the Council for Tobacco Researcl:- U.S.A., Ine. (collectively <'de!`encEants!j. R.3. Reynolds Tobacco Company has also fcIed a separate motion for reconsideration with respect to Issue III of the Cotut's opiaion,
Page 217: mve62d00
~ AUG. 25. 1998 I:1 zFy i K 5687 P. 13/17 consistent with Mr. K.oplow's testimony that "Defendants made it quite clear that they would vigorously oppose any application to make the documents public." Koplow Aff. at 2, Ex, B. Needless to say, how the Minnesota trial court ruled on the merits ofplaintiffs' motion is irrelevant to waiver. The critical and dispositive fact is that the Order granting the motion did not contest defendants' right to oppose plaintiffs' motion. Indeed, although the Order references def=dants' opposition as "not well taken" the Order does not suggest that defendants had negotiated away the right to oppose the motion. Sm May 31, 1998 Order, Release of Documents for Public Access, attached to Plaintiff's Tviemorandum in Opposition to Defendartts' Motion for Protective Order as Exi. 1?. Nor is defendants' failure to reiitigate the privilege issue in opposing the disclosure motion evidence of waiver, as this Court suggess. 5= Order at i8. The issue raised by plaintiffs' motion was not the privileged status of the documents; that issue had already been decided by tlus Minnesota courts, including the Minnesoix Court of Appeals and the Minnesota Supreme Court (indeed, defendants had eve,n sought review by the U.S. Supreme Court). Ratlter, the issue raised by plain#iffs' motion was whether the documents should be released - documents over which defendants still asserted privilege throughout the countty. Defendants could not and did not waive their privileges by failing to invoke them a#tra the Minnesota court had already ruled against the privilege. Defendattts' actions after the May 31, 19=38 t}nder further detawnstrate that they did not intend to waive the privileges on these documents. Defettdants tited a motion to stay and vacate t3e May 31 Order. Then, defendants were able to enter into a stiputat€on cc7 ~ staying the Nlay 31 Order pending resolution of the motion to vacate. Again, there was i.+ ~
Page 218: mve62d00
SEP. $. 1948 { 1:3$AM ' SEP-09-9Q ii~08 FROH,GDL~ -41~NO. IM-F. 9/34- - {0-42$Ye3404$ PACE 8.131 3amcs E. Gray. EsQtsue HIuY D. Caplao, Esquire Andmw GeadrQa, Esquire Gt30I3ELL, DEYRITsS, LEECH & GRAY, LLP. t7ae Solub Snrta, 2ft Ft= Baltimore, Maryland 212Q2-32U1 F. Focd L.etrst; Esquire CHURCfT & HOUFP B& 0 Btn`tdaig, Suita 6t}Q 2 North Charles Street $akirmaze, MaFyIead 21201 Stejsiua D. Sumnan, EtiC 2+rfayer, Esquire SiJS.MAId GODFREY, IdP. 1000 i,ouisiana S#roet Setite 51t74 Floatsturn, Tem 77002-5096 GeratsiP. Maxfin. Esq Cmgg Il. 8=mIcia, Esquire Km)bciy IAmn SFeliman. Esquire MAILIIN. IIJNGxFTA1H$, SNYDER & BERPtS= F.A. 217 East Redwood Stxoot Srato 2000 Batdmom Maryland 21202 Zviadc Cl. CYmhR rSdaniStria, Fsquicc Cstoline I_ f2slando, Esquire leay Co3man, Esquire Rcnsfd Nauavng, Esqua'e SIMFSON, TFiACHEA & BAILT.LE7 425 Lexington Avenue New Yaric, kiaw York 10017-3945 Drhoc2h 1.. Robmscn, Esqmrc Fctcr A. Rtoca3soa, Esquito ROBI4M W4OI.SQN 0°COWPtELL, i.LP RedweodTower, Suite 1500 I ~ t ~ 0 217 East Redwood Strzet , ~ Baltimore, Maaylaod 21202 ( c.• . 0 w G-N .10
Page 219: mve62d00
AUG. 25. 1598 1;18PM STATE OF MAFLI'LAND, Plaintiff, v. PHILIP MORRIS lPICOR3'OILATEl3, et al., Defendants, i 0 ND.5667 P. 1U117 • Il+t TfiE • CIRCUIT COURT 4 FOR • BALTIMORE CITY " Case Na.- 96 1 22 0 1 71CL211487 RFO IFST FOR EAR'IN = Delendants request that a hearing he Dd oIl'tiexlalA Defe[}d3ntS' Motion for Reconsideration of This Court's Order of.August 5, 1998,,: and supporting Memoranducn. Respectfu3ly submiltad, Judith Bernsteun-GAta James I- Sandman ARNOLD & P4RTER Thurman Arnold Building 555 Twelfth Street Washington,l3.C. 20004-1202 {202) 942-5000 VEPIABLE, BAETIEA..id+fD How 1$G0Mercantile Bank & Trust 2 Hopkins Plaza Baltfmore, Msryland 21241 (410) 244-7400 Attorneys for Defendant Philip Marris Incorporated and on behalf of R.J. Reynolds Tobacco Company; Brown & Wtlltamson'Sobacco Corporation, individuslly and as successor by merger to The Arnetican Tobacco Company; Laarillard Tobacco Company, sued in its own ruun-. and incorrectly as "Lorillard Corp.," a nonexistent entl#y; The Council for Tobacco Research-U.S.A., Inc.; and The Tobacco Institute, Inc. s..WoCSI,ro00as.ot JamcsK Archibei na
Page 220: mve62d00
sss 1:ispy • 0 ti4.5s67 P, 7119 language of the consent judgment cited by the Court 'would not in any way waive Defendants' right to oppose the public release of such documents." Koplow Aff. at 2, Ex. B. Furthermore, the conduct of the parties since entry of the consent decree simply cannot be reconciled with any intent to waive. Defendants h.ave continued vigorously to assert and defend the privileged status of the 37,9W documents throughout the country. Under either a subjective or objective test, there has been no waivec ARt"~„tMir,T A. SlEFEHDANT9 PRESERvED THE58 PRIVILEGE CLAIAtS IN TH€ SETTLEMENT AGREEMENT AND CONSENT JUDGMENT Section VII of the Consent Judgment must be read in context. From the very beginning of the Minnesota litigation, hundreds of thousands of nonprivileged documents produced by defendants were covered by a protective order. Section VII addresses the qoestion ofwhet]ter the Minnes plaintiffs can release the produced documents to the public at the end of the case. Section YII(A) provides the answer: the Consent Judgment dissotves the protective order, but not with resnerr to the artviteged etMme4ts. Under Section VH(A), the only documents that can be released to the public ace those "for which Defendants have made no claim of privilege or Categozy IE trade secret protection" The provisEOn provide.C: The Court's previous Protective Orders are hereby dissolved with respect to all dacuments, including the 4A and 4B indices and the privilege logs, which have been produced to the P3aintiffs and fi±* wtfich Defenda.nte have Cn'~t made n(Lpjgim of i}TfvEtrve Bf I`.atP¢ON IT trade . UW=tion
Page 221: mve62d00
AU6. 6. 1998__1C__09AM ND 0635 F,?tl?1 FR PI htFR&N2Y LLR 410 539 0469 TO #731.aia r.24/c•. un,v,r.as ca.au srs r41t 0 .tyD6h it OftM --)9i1U5 4i Pg. IIi pr'svikage sa which +rds tivatved by R.I. Reyaofds as audinad in Sestiatt III o( thi8 MeRloraitdum snd Ogininn- AI1 subject to the Ftedw Order of tM CaRUt. Resp®ct(ulty subroitted, P~er W. Brnuu ,.~~.~ dacu=s anly. / PBgG ZO 1 Co C ft~. ~ OUG 05 ' 98 1G:48 ~:. n...+ . xac TQTAL FA;xE.34 ~wt
Page 222: mve62d00
g'-p•j ~u9~i. %~ia3i3tON.Ga P. 10 3 N0.1139 SG,4167i34~4~ PA{ig 30l31 1CRS H .1~8IiC,a ESCjIt~CS KASa~i~fTZ, BEI~TS~}IY, T4I212~5 & ~bfAAt 1301 Avmue of she Amaicas New Yarlc, New York 10019 Bruct Ginsbag, ~ Xvonae Look, Esquire DAVIS & GILBERT 1740 Broactway New Y+~c, NewYadc 100 19 Iot~a P. SweeaaY, EsCt~ Gregnry L Lockwood. Esquire ATii.FS & STfl~RXi)GB I4 Lig}u Strect Baltimor~ Mat}~arid 2I1A2-I48'I R Ta~wasmd Davis, Jr., Faqmra !uM ~. Coltea. Evquire I}FBEV43SE & i'J,tAdHTt?AI 875 ThirdAvenuo New York, New Xcrlc 10022 Baitimoi°e,Maryland212f3? I626 William A Ryaa. Jr., Ps~quico tiYHiTEFORD, TAYLOR & PRES'TON, T,LP. Sevess. Saiat Paai 5itat, I2t}t. Floor Judy B~steim-C~aesa, Esq~xn Jam~ L Saudutan, Esquire Aac~o 3+QrBrids Wailcer, Esq~Ata ARNOLD & PORTER 555 I2th ~ar., A~-V!. washin~n, D.C. 20004 ~nNB~,~~ xathtcea 1SduIIar, ~squiz~ ~.AAIn & EL3IS sss tsms~s,IVw. Wasi~gwa, D.C. 2U405 4 - 1 ' -'
Page 223: mve62d00
ssSEF. 8. 19 9 8 ,~ 11 ' i7xux.on N0, 1139`P. 4I35$-- 70340 PACE 413I Coeuc.` j# After cosuideriug dse exceasive tuisfiag of the partios on the Motion, eacamiaiag a12 ofrhe levant docauntnfs, inciuding the Consent Iudgment and the 5ettkment Apmm= haaring ? argumenrs frorrt both garrus reg+xdia,g the iatagrctstion of riusa dowmeut4, and taiciag iato ; : j atcount more argammc on the subject befoce Aidge Levie, ibi,s Court saa,de rhe d$termisat= was wqdvad iiyft ddcadaata in the Couseaxi}ectra entered on May an efis isnra dat bss been extensively azgued I aad considemd. gvecydsing in #IseirMotim elttsa was zaised, ormAae itapoztautEy, could have i (~ bres raised prior to ffie decision ofthis C=c Thns, thtbdotion fow Raroasidas@oa mast be This Cous€ paagctip acted witizitt mrlisscrartin ia itaMret~g Bteglain mraning oftese doctrntecSS. €Inie[ Iulaty3sad I,aw, tho Consent 3ndgunt is subjeet us cortstntetion as a CoilffaCl. Ramgw. TeC v S3nsrt; ;y 66 Md.A.I7p- 717, ?27, $05 A.2d. 999,904 (19$6} (citing $qgcd ., Ine y. EWIer.. 280 Md. 24&, 254, 372 A2d 1054 (1977) aand €flLantin.gn~V W;g»aca7n 271 hSd. i5S,1?3, 315 A.2d S2€i(1914). Whea the Court fiuds that language is plain and 3namgQs..^~~ the Court may not consider aocASnsic evsdtuce in att aftenipt to explain %e inteotitsn ofpart€ea. iCazren rnasc±+retcan a R.t nt..~md, 268 &Sd. 318, 328, 30€ R.Zd 12,18 (1973) 3md $CgPd, 280 Md. at 254. Ia araching the docisiom, tius Court wtat thmugFt tho rt€cvazzt dacom=313 setting forttt in acc€racr and concise mannes&e Court's infierprezation ofdae doutn9St oIl theitfLM 8at€ ` Aithoughnot redevz,t to aha dctetmiwictt of dsis Coum ItWV T.ovie d'sdnot caska am3* finding as to ihc ur,ivq ofprivilcgq or Consttving tbs meaumg of the subject d.ae=eut& 3 r~
Page 224: mve62d00
recipients. In strilcing the provision as fa i 1 y violating due Proces.~ the court held that the failure to identify individual recipients would impair the defendants' ability to respond to a claim: We find that this portion of the statute does in fact encroach upon due process guarantees of the Florida Constitution under article I, section 9. The State asserts that the challenged portion does not impact a defeadaut's ability to respond to a claim. We disagtee. We can find no wsv ia which this subsection would allow a defendant to chalIen¢e i~nmAer pavnients made to individual _rrr.irjents ... The current Act would preven a defendant BrQm demo csrafing the im~gjy ofind_ividzll p3}=re. Immm=iety=ld he the result a fn+ d . mi iagvasis of the natient'c cn ition_ or n* zz*st treat*±±entc. T'lie defendant's inability to detormiae individual Medicaid recipients would also preclude that defendant from proving that its product was never used by the zncipient. Hence, the statutory provision results in a conclusive presumption that every Medicaid payment is proper and necessitated by the defeadant's product. It iIlngjrRl and rra. Ie to call this afh?rmm=. A d.fen un 4^no rebut this pEtEmmitiaa because there iR no mec antsn for determining to whom the pav=ts were made. This tvgoe of conclusive pr=m3lytion is violmAve of the due grocess plgvisiotL of our ccrnatitutioa. . . Id. at 1254 (emphases added). Similarly, hese, defendants are entitled to iudn idualized discovery so they can "respond to a claim." The State's statistics assume the validity and propriety of every Medicaid payment made. A bar against individualized discovery "would preveIIt a defendant from demonstrating the impropriety of individual payments" as a result of "fiaud, misdiagnosis of the patient's condition, or unnecessary payments." Here, as in Florida, "[i)t is illogical and unreasonable to call this a fair process." In slwrf, defendants are entitled to individualized discovery at least to rebut the s 3tate's statistics. Defendants' right to review medical records and depose the injured 22
Page 225: mve62d00
S,EP. 8, i498 11;37AM ~ SEP-ee-SB ll+8it FROH.GDL4~/ 11 ~ -NO, l 139-?. 6/34 1D+6}H7834@48 PAG$ efenciauts did not intcttd to waive the prlvt7ege. By finding the t[ocnmeats to be smamhipuous, this Court is obligaied to disregazd t}us ==s'sn cvldeace of intrui. Nlore 3ov+'s sffid¢vit does noc address the key doeuur=t t Jtu'le 16 Stay Chdar, =dtfrazafare is inciec= to this Courc's inling. 8131 . As this Court correctly found, "the Stay Orcler a2s initiated at the reqtest of the Defendaats and tF1Ere is nothing contained in the {}cder orgresenced to the Court in atgslmesle to iDdicare tt>at the Order conrains anpttvng atbertbaathat which was sought by thehefeadaats; Thaz&re, any claim ofpsivitege as to tha dbcutaetus isltnafied in the June 16, M8 Order aftbe MiylIlGSoffi C81l2t, i2i1dCt SLCfloA I (a) and (b) is deeFtred wsived." M'a.tnnrantfirn. and OWnitsn c€ Caur~ at 19. Despite irlDSDg that "the tobacco 1YItIiiSQy WtU take every available GppoYhtAC1y: GopStstenK with good IaAyfSirig and the3ti1e8 of pRSC8duSe in MSnIICSOt3, to oppo8e ... the order requiriag telease ofchess documents, and if dlai requazs appeal4, ormanda=4 or a writ of itioa in Oldsc to protect ibore docnmeatt,.t5alwi-I3 mfict be done --." (Est. A at 21-22), no apge'al of the 7uue 16 Stay t3.tderhac been filed, and the time ferappeai has expirei. Moieover, it is mcanceivable dlat any appellate Mut umnld seriously rUtaiaia an appeal from an glderinitiaretl and stipulated to by ibeparty takiGgtfie apgeal. Ths, tbis Coutt's holding that the I}efendaats haveevusived theptivitege vv[tIxrespectsts the doctmmmta at issue is c.aa=t', and the D-efen3aars' Adodon Lo Recaasidet shoatd be deaied+ p irqvesss tbat the d3eftnUnts' Motion for g,esPeecfiltty submitced, 5
Page 226: mve62d00
' AUG, 25. l99$ l:1EPM Consent Jutigmen 0 NU, 6667 P. 8/17 0. CI-94-8565 at 5, attached to Reply Memorandum as Exh- A. Section YIi (A){1} further makes this clear by providing that "(tjhe public shall be given acoess to all non-pIlvileeed documents" Id. (Emphasis added-) Under Section Vl1(A), the question still remains: what to do with the privileged documents? Subsection V(I (C) addresses that question by providing that the plaintiffs may ask the conr€ for permission to disclose: For documents upon which a privilege was claimed and found not to ercist, including any briefs, memoranda and other pleadings filed by the parties which include reference to such documents, PlaintifFs may seek court approval to make such documents available to the public, provided that any such request be made to the Court within 45 days of the date of entry rrfthis Consent Judgmecett a at 6. In its Urder, this Court interpreted this provision as granqrtg plaintiffs an absolute right to disclose the privileged documents to the public. Order at 18. In so doing, this Court treated the requirement of a court order as nothing more than a technicality. But if the plaintiffs had an absolute right to disclose the privileged documents, there would be no need for any additional court order. There would be no need to trest privileged documents differentiy from nonprivilegged documents. Both sets of documents could and would have been made immediately available to the public under SEctiou VII(A), and there would have been no need for Section VIf(C) at all. Subsection VII ertpresaly provides, however, that the privileged documents ase = to be treated like the nonprivileged documents - that the privileged dascuments are noi to be placed automaticaliy into the depository. Far from evidencing vtaiver, this subsection
Page 227: mve62d00
' AK 25.1998 1:15FM ~ NO.56B7 P. 6117 privilege. Fn finding waiver, this Court overlooked severat important provisions of the documents that establish that, far from intending to waive the privilege, defeudants did evesyth.ang they reasonably coukl do to preset ve it. Indeed, the only other court to consider the issue found that the settlement agreement and consent decree did not constitute a waiver. In $gW v- Philip Mams IgcDIparated._e€ a(., No. 5070-96, at 59-51, the Honorable Richard Levie looked at the exact provision cited by this Court and came to the opposite conclusion, finding no waiver: I read the phrase `4nay seek court appravaE" to be nothing more than that, that t2ae ... settlement agreement and the consent judgment did not vest in the Nlitueesota ptaiatif£s a unilateral ability to make public any documents they wished but rather created a procedure by which the ptaiittiffs could and must go back to the court within the 45-day period- Jtute 25, 1998 TTranscript o€Iieazing, Reed v. Philip A.".oizi,y ft=qtaW-et a1-- No. 5070- 96, at 59-61 (the `$md 'i'ranscript"}, Ex. A. Judge Levids analysis is correct. Rather tban operating as a waiver the quoted prov ision of the cottsent derAce represents an agreement of the parties to let the Minnesota courts decide the issue. S=AJ as this Court has recognized, waiver requires "the intentional reliinquishtnent of a kno+un right." Order at 10 (citing Harrison v- State, 276 Md. 122, 137, 345 A.2d $34 (1975)). "Ia detecmining whether the privilege should be deemed ireumstatees surrounding the disclosure must be considered." Iil. Even a cursory review of the sutr itcumstanees reveals no intent to .vaive. Meyer Gr0 Koplow negotiated the settlement agreement and cotsent judgment on behalf of Philip Morris. In tus attached afftdavit, he testifies that "all the parties uttderstood" that the
Page 228: mve62d00
AUG.25.l993 i:iePm ! 9 NO.5667 F. i61t7 The Settlement Agreement also demonstrates that defendants did not waive their privilege claitns.2 Section IILA, of the Settlement Agreement states: This Agreement resolves all claims between the State and the De£endants, pe[tainin¢ tn the d%"=Wbiitv or nroducti n o f dan.h!?ents for which the Dgfendants reserve their right of oxid. Settletnent Agreement, attached to Reply Memorandum as Fixh. B„ at 12 (emphasis added). This subsection expressly reserves dcfendants' right to appeal any order of the tvlinttesota court, including orders regarding the 37,OOU documents. In short, there is no waiver here, no intentional relinquishment of a known right - even uttder "the clear and unambiguous language" of the consent decr°ee and the settietnent agreement. Order at 1g. The Settlement and Consent.iudgtaettts merely provide a procedure for the Minnesota trial court to consider whether documents over which defendants still claim privilege should be placed within the depository. 1'he consent decree and settlement agreement leave the privilege issua exactly where it was pre-settiement: within the trial coutt's jurisdiotion. This Court should reconsider its Order and grant defetulauts' motion for a protective atrlec H. THE PARTIES IN MIFFNESf3TA iNT€NBSTt'CO COri'CtNtt€ LITIGATING DEFENDANTS' CLAIMS OF PRt4'ILEGE I3e€etadarcts' actions during settlement discussions in Minnesota also demonsttatc no it.rteatioa to waivs ptivilege_ As this Court recognized, waiver is a matter of subjective intent. Defeadants' intent in negotiating the settlement agreement and the consent decree ` The stipulated Consent Judgtaent was attached as Exhibit A to the Settlement Agreement and represents the settlement teru€s for which the Consent 3ndgment was entered. 5= Settlement Agreetuent, attached to Reply Memorandum as Exh. B, at 3. 6
Page 229: mve62d00
AUC, 21 199$ l:t7PM i I& Nb. 5667 P. 12/17 In the ncgotiations on this sub,ject, Defendants make it quite clear that they would vigorousty oppose any application to make the documents public, aod I believe that all the parties understood that, if ptaintiffs sought such court approval, the above quoted Lzagnage oCthe Consent Tudgtnent did not and would not in any way waive Defendants' right to oppose the public release of such documenis. The Consent Judgment did not specifically state that Defendants could oppose plaintiffs seeking court approval because the parties never contemplated that there would be any argument that the language encompassed any waiver of Defendants' tight to so oppose. Simply put, the consent judgment does not provide that defendants could oppose the release of the privileged documents because the paeties never contemplated that anyone would even question defendants' right to oppose. C. 13EFENDANTS' CONDUCT AFTER ENTERiNG t1+iTY1 THE SETTLEMENT ACttEEME1V'T AND ST°tPULATt+,D CONSENT AGREEA4EN't' DEMONSTRATES THAT DEFESVDAdY'iS HAYE NOT WAIVED ANY PRIVILEGES Finally, as this Court itself recognized, the actions of the partfes after the Minnesota settlement is relevant in detemtining an intent to waive. 5= Order at 19. On May 12, 1998, the State of Minnesota sought, pursuant to subsection VH(C) of the Consent Judgment, coutt approval to make the privileged documents puhlie. What did defendants do in response to this motion? If the parties inteuded to give plaintiffs an absolute tight to disclose privileged documents, defendants would and could have done j i on hv nothing. But there was no such intent, and so defendsnta filed - wi lenut a6ee pjsintiffs or the 34ltnnraota caD-rt -- stt opposition motion asserting the pm itege and insisting that the Minnesota court continue treating the documents as confidential. S= Non-Liggett Defendants' Memorandum in Opposition to Plaintiffs Motion to Release Documents, attached to Reply Mernorsndumm as Exh. E. I3efendants' actions are entirely 8
Page 230: mve62d00
AUG, 25. 1996 1:17FM N0, 5557 P. 14/17 ! no intent to waive, no intent to reiinqttish the privilege. The stay stipulation prevented dgfen ant£' motio to vacate ®nld be dedded. 5=June I6, 1448 4rder Concerning Materials Identified in May 31, 1998 tOrder and Documents Placed in Neutral Privilege Facility, attached to Reply Memorandum as Exh. I. The stay stipulation presetved the privilege, not waived it. 3 Aa this Court noted in its Order, Minnesota Judge Cohen provided in his June 16 Order that he was not addressing the disclosure of admitted trial exhibits or documents already on the internet_ Order at 19. But that statement simply recognizes the reality that many of the privileged documents were already disclosed to the public and that nothing the Court could do would change that fact. The issue of whether the Court would allow the Minnesota plaintiffs to release tlte documents to the public was still unresolved. Again, Judge Levie correctly understood the intent hehind the June 36 Ckder: Frutn the representations of counsel, I understand that in the category of 1 A of Judge Cohen's June 15 order, it really includes documents that were used as trial exhibits and presumably some additional docvments posted on the Internet by Minnesota Blue Cross Blue Shield. .... I don't see those two paragraphs as being anytttirsg other, and here I'm being really asked to interpret what Judge Cohen had in mind, as anything other than a recognition by Chief Judge Cohen that with matters that were beyond ltis jurisdiction and already in the pu@lic domain, through no action of Judge Fitzpattick other thsn admitting the 54 or 59 exhibits at trial, that tfere's no basis to try and bar disclosure. rsD ~ Lkfendants also appealed the May 31, 1998 Order. Although plaiatiffs moved to dismiss the appeal on the ground that the May 31, 1998 EOrder was a non-final order of C 0~ the htinnesota trial court, defendants' right to invoke appellate remedies, if applicable, was not questioned. 1 cy-~ Go N 10
Page 231: mve62d00
A[1G. 6.1998 10:49AMFR P i~r~r~~r LLP 410 s~9 nvoafys taai s+,~ t11'L 1Uli6E R BROWN a # $I~ ~ t ~r~ ~ a TO 35~609#7ti 23d io'i a LSSE3E IY: Did t#sa Ddsndauts ..aivm t6t# prm`tw by emerio g ingo the Sestieftent Agredmmt and S4darion For Entry of Cousent dudguest in the Minnesocs action? During ugumcnu before this Court mt Jttae 23, 1998, counsel for the De&adiuss inclimted to the Court thu it was dsa defesse's intatmioa to argue the is,ue of ptiviiego as forcefully as Possibte wherever and wheqgver womary. 3 bz Ptaintifft, however, cwneessd that the Defendants waived the priviiege oattight and by imptication. The Consent7ttdgment i*nteted into by and between the State of Mintom and Minneiota Blue Crocstl3iue Shield and Defendants (Philip Morris lnmzporxed, at a1) is dispositlve on ft Se¢tion vit of the Consent Tu#smum {c} 'f4tdat.vmocus upon which a privifegewts claimed and fiaund not to eaist, .. Plaintiffs may atak Court approva3 to zlake such dotgmentv avaiiibie to I the puhlic gtovited that any stscb reqc" be mada to thz Court within 45 days nf catty nf this Conaent judgment." TF eCo4eac Judgment -as signed by )udgo Fi¢pitrick on May 5. 1998, aAd atamp®d oC) ~. A fair reading of the sppiicabte seotion of tite Conacnt Judtmenc YII (c) nsak,es it t*agc 17 c rn -~-
Page 232: mve62d00
1, g -p rf34 -- fl 3 . , S }K ~EP. 8. 2948 11: 3?AM ' SEP-0@-88 S7.eB PR4MscDL Ifl.418T884848 PACE 8f31 tiC not ambiguous. Once it is datCtltilIICd daf the t`oIIseat 1 1 dud-22neot wastwt smbiguons, the Court had to determine wh2t "a reasonable gasoa in the ! t j~ posisot~ ofdle parties wouldhavs thought it meat" gystcn, 2f:8 Md. at 328 329, 301 A.2d at I . E ;1fii 4N{iL4 4NiiYZ.F.iy LiTYiY3 YiiO.L the 4LI11= JiNlgm= was p(dil2 WlilHl4S}i~~~'4T~'e lfMYC The ti CM SCG.C judPu= C^'}i 91Qws 20 B8III2SM to =k Court :pptYlPaI to make the doCEin16R#s ~~ "5>Iion wtich a privilege was claimed aad fcund'noc to exie avaiilatzle to slae public. The June 16 ~ it does noC addiC~`s t7¢' iffCet the dL%ooffi}T'e of the Gi]1 rXIabil7€ or t1w €j Q4CRitlcntS or thQ 37,QM doCtltSSOIILS posted on [IS83AYGi71at tdeza8d in the May 31st QrdTZ, is k~ equally clear on ISs AsCG. TItiE$ this fiIIdiu$ af l2o iZabig W ty, by 13te: giao]ydCi the CoYiSt from 321y farlba eXtiRLSiC evldGtSce of sufe¢t of th0 pBLtLeB ]A entering this It is undinpixtcd tGat in the Consent 3adgmeot ttsD I}sfcndaata consented to sprocedure whiett the Fi*tiffs, atheirsolc dissaedon, could seek shcreloase ofttie dacumcm htre az issue: theriby voluaratilp zeleasissg tts= caatcol ov*r the desaome=. PMsuant tn tlsss proCCds>FO, the Plafati$s sought zr(ease of the dcutuaents, ft be€zaants objected and to Co=utauied ia favor ofttu PlaiaQ$S. Thel?tfindanLs.lxswevet; itutiasrd au.}-agtaedto the ratcyy oftfie 7una 16 Stay Order undrxzrhich cheDefmdaaks aYpttssly museoted.-ia waived ffixy reosaiuingzsght to oppose t}urclesse of rbe trial exFsibits an3tlxe 39,{20D 3ocuMMats an ft kb=et~ *uhish are rhe subjwt of thi.s Cotut's nshg. Tu other vwords, the I#efeadaat4latawmglg mbanged aay last ves4ge oftYcGbrclafm ofaoafide3s3ialitp as to the 37,904 documents for a Sssq Order as to the rcmajain,g dncumtea{s that werc Stil1 in &VISM The ]'3ofandants aitachad m aSdasPt ef'geyar Kogloev t:o suggoct th= soatentimt shai
Page 233: mve62d00
Ask Nfi Ilt'lti P iiif7l 14,66A~p~~ "~ Pi&F1H{2$Cfi2Y LLP dlid 539 8489 Tf5 350* NO. 0635 P, 10/21 09n7iYit3lb F'.13/2A v a conges3ianal proceeding cstAertuiaa the objectian, the peclod ahen the discineurs would be volunnry has passed'. Once the aubeommittee overruled rhnit ohjection, ctle Berrts4einf were bound to obey its direedan. and faitow its ruling as a cor4maa3mem of d4sGiosure. In another eonp,rreSSlonal proctOding. CoYllfet mde PreSident. MM. Clinton am the White kloUao wera maaertted thst dw production of documents pursuant to a congressional aubpoena would result in a waiver of ttte utarnay vtient privbge. 71u Special Commirme found assertion of, atu privilege, instead continued to object to the subpoena and produced the documents only after being ordered to do so, vae wouid rM emi&T ttte disclosure of dwA doouments to be volucsary.' SRrp, 96-122 atpagc 9(I99Et. The Cornaaiure futsW sremed rhac "a coun is likely to treat discloasre under oompulsian of a cflngcrasional order as involunwy and. themtsu e. not cffc+cring a waiver. First, a caErt oeder aud a congressional order str+nd on a similar juiisprudentiai footing: each is an order of a cumpetent t;ihunal with plena*y jurt9diotioa to rule on the privilege nssested. (4. at lDL Hence, Uefestd3aats production of documents to Chatrman Bliley, purcuene to a eongreasiomi aubpooaa, waf rot voluntary sxud ithus not a.vairer of their attortey-dtiant prlvilege. . 94 Gti.4 'w9 WL-VI m@. ZiG EXFC concern to be "whally ttn€onnded'. "1f a pacry tbat fust invuicrd, but theo Widtdtaw its LSSUE Ils Did 33sfendoets Properly Prastve tLe PrirAwl Nstnee of tlae Doonwaft A#ter 13cir Rebeau to Cfwirman Btifeyt ' The atwrne)-ctient privilege is not waived vthen dacumenrs are produced under Co ~ colApulsion. tlnued St4es v_ dglalara Si73F:2d 74 (C.h.9(CAl.) 1992) Clring, 7inns~ericc 3 ~~+ l ~ ~ - ~.~ : V ~ L~/ ~ 1V 1M [,O Ot '$d Sd41DtSt3ltdt-- Nqlp1H 1i 39ptlF ZI£1 S!5 12,21 M1SIllSfl
Page 234: mve62d00
6.1998 1fl;0OMM ~MARsRY UP 410 S'35 0489 TO ~I5599t~7dNi~`1o6r~12/~~+9l~~ seas es, se SM Page $"uutat the documon in qtuacion arc produced imrdfiaulv_ 1 intentl to proceed witPt a cantctnpt resolu#1on fot enfotcement of the subpoenaa by tqe Fiovso of Representatives." Winph"it ®dded}- Chairman $tttey as Chairman of the Commerce Committee, exercised his dist:retiunary authority anQ ovstnilyd the claiazs of privviiegs as acscrred by the Detendartss, Haute Su6 Convninre on Qvenigfit Wrd h:vrirffvciorts of dte C"tnnlffae Ca»mlute, 944 m i;Pagnrst. rtUOtnCy-Qiesu Ptieikge 2S, We 54, at 2(Co+nen, Print 1983). tt is well eatablished by cangresaionai ptaaice that acrrf,tance of a claim of atrotney-diPat or work product grivilsge before a committee rests in the sound discretion of that txsmmitnee. Prt<x' congressionai ptoeeedinga suggest that once 3elaim ofprivikge has becn ortrculed, the subpoenaed witnzss has no choice but to oaeapty with the iubponna or risk being sanctioned tot P+iIure sneotnply. Prxeeddr`rtgsrtgairtsrRaIA raaaloteplel3ernsrein. Xi-Rcp. loM.191 {79as}; Repon of Senate an r1u ltefiual of Wiftiane Xfenaedy to Prodtue A+nset Fmsresnt ta a Srbpneaa. .5-Itep. 9d-721 (2996); Watkins. In closed hearings on December li and 12, 1955, the SuboorGmittec an Asian and Pacific Affairs gnUtioted two wittiessm, Ralph Bernstein, a real asiate investor and his btothca Joseph 8®ttstein, a[awyes who asaisted with thou investtneius, njese two wime€us vrete ailaged to be at the center of a.veb of f,fse cotporatons shieiding the hoidings of Prrsident FadinetGd Marcos of the Phili,ppi= and his wife, (melda Marcos. The 8ormteins refused to answer the suboommicmds yuastiam abwu their invescnsent work in regards to iSse 1+Sascng' bued on the claim of atiorney, eclient privilege. The subcommittee ovetruled the priviiegc, 1Tw-8txsuteins esarianded that bera.uac vcttrmtsry disclosure is that which has mt bean judieially aompeilod. 3isolagum pttrsuastt to acongtesSiotaat subpocna could be considered voiuntaxy. The ycsriry c+pinian staEed that "onca the Chair in Page 5 69 '6d C6~JOJCiSIPFC._ Wo#C u annnr A.r: .•.n ne-r.
Page 235: mve62d00
{Ig}$ 10'0QAWR PS t'AR$URY ll.P 41@ 539 048s TO AIM j ueru3iYe£zs_ss a4b MY V JUDGE & 9AttWN °)P41o57b7645 Pg. 2Q Evon though the Honoimhte i.awces= D. Cohen. Chief Judge of the Minmeaora i3istrict C<wct, Second 7udioial Aisvct, issned an Order stayEstg the May 31, t448 Order of the Minnesota 4istr'scc court, u apgears clear to dtis court that ttt 5iay Order "13oss not asidtaa or at-fect the diseloaure tf: (&) those documeats identified in the by Coart Order In this aaion; or (bl fACUe docsmencs utentifud in the May 31st Order that have been posted on sho 1AlerneL - . Again, the Smy C3rdor wN initiated at dfe reqeest nf Dnfattda;+cs and thae is nothing contained in clse Order or presented to the Court in argument to indicate that the Order contains anything other thea that wh'u;h was sought by the Defendaw; Therofore, any claim of privilege as to the doauments identified in the luue 26, 1548 Order of the Minnsssota COUrt, tseder Section t ta) ind (b) is deemed vtaived. All documenss ixlndiarg 4A and 4B indices and ihe privilege logs produced ro the Plaintiffs in the Minamota action and for which Aefeadtnts hara made no claim of privilege, or category 1I Trade Secrets, and For chose documents produced in the Minisesata acsion, 'upon which a privilege was claimed and found nnc to exist'. Any claim of privilege assenexi thereon is hereby deemed waived by virtue of the Consent Decree enoered in the Mineesom action on May 8, t44st, and as to those docvmetnes the Pag,e 19 MM 05 `38 14143 $457312 RaaGE-2ti
Page 236: mve62d00
6.1998 I4:bbAMF;e Pi#MARBfRv t.lP Cxt.c. =F9 410 539 0489 TO 35~6®9u7a~die~~~1CN.z%+7/21 a£Iot 86, SB ffAi doeuments placed in thc M'itusesoa depnsisary for public conwumpdort. The I)efendanfs Efled a motion in opposition to the Pliintet2's' raqt4edt and ulqmatsty rhe Defendants were aitte to get fhe Chief Judge of the Minnesota Districe Court to issue an order staying dye release of the dotumetits pending fnrzher proceedings. The order having been sigtud on or about 3nne 12, 9 3t is against this luckdrop that the parties tiava For detertsdr,arson. owing issuea to ttte Court IS$YIF Tz Did the De€endaIIts Watee roeir 9tmrmy-Cl6rae sudlor Work Ptodaa Privitege of 37,000 Docomrnts by keksin tima to Chairman WAey Prusum to s Convesdabal subpee"? On February 19, 1998. the tiofwtatfle Two Bliley, Chairlar,a of the Comlrzerse Committee in the U.S. House of Represemajrr.s, satt afibpoenas to t4ae Chairman of Philip Motris Cosapanies ttfe., Chairman and Chief Executiva C?fficer of RtR Nabisco, ide., Ch+tktuan of Brown & Williamson Tobacao Corpotation. Co Ghairmafs and Co-Chief Executive Officer of Loews Corporatix+. Dr, James Glenn of the Coufrcit ffx Tobacco Aesearch - U-S.R.. Inc., and tle Ptesidcfst of the Tobacco dnstuufe. These subpoesns defsfu+ded the production of all "docomefsce [ j idcntifsed in the sea,ied tfs to ludge Fitzpatrick dueEl February 10, 1498 ifs Stam of A,tinsMota and' Slsu CM and Slue Shieid of M v Phitin Mturis (warnorated et al. for which Speasai matta Mark W. Gehan (] recomfaended that the claim of pilvilege should not be mairffained.' 'Clfe3e datvmenfs wese to submitted no later than 12 p.m. on tv#arch 12. 1998. ° On M-rrch 12, 1998, the €?efendanf9 failed ao produce the documenu demanded by oo ~ ~. Chairrnan Siilsy, ciaimittg that they were tusable ta comply on the basis of aunrncy r3ient seui t7Z Page 6 Jn 'Ba tdQrulCnf7ht-- t3aflriA H iRQilf zEP1 CtL C7:41 4bJC0'an
Page 237: mve62d00
AliG: 6. 1998__1Qi~4~"3 R Pi~Y l.LR 410 539 0489 TO 350~9a7nNO3Q~~~05T«~~~~ i T£;CS H6e So af4f WATE OF MARXi.AtYlt •!1H TM C.f.RCLIiT COURT ' FQS VS. ' BAl'.TiMOiiB QTY PHIa.IP moms, Er Az, * CIVIL * CASE No; 96322017tC1211d87 riil~FS#fAltii r~kikks~'t sM~iK~F+1i1HHItwRi.Rtaiki+u!*iiaqri',tff~Y4+4ka.wKtrt~N~r» 'nn Ito The above pgtioned matter came on fiu hearing on June 23, 2998 beitase the Honocalsie W_ 8rown, putYuat to dee I3efendanes' Motion Seeking a Fratective {Xdes for Certain Privileged I)oautstestts and ttre FlsitniEfs' Response checem. The gartres having been heard and exhibits received, the Coeut luid ite ruling sub suria pending review of the aurAorir.ies etioed. As most, if not all the intsabirdaca of the Uniad Scatcs are aware a number of stunes in dse Uniws Scacts +ewgh their reapeative AttprM Geuerals and ot2tecs have filed suits agaisst the Tobacco Cutnpanics, seeking Fmimbcrsamsnt for monics ezptnsttd ttuough tbeir respective madioai oam prograacs for treating citiam for smoking related itlncsm. $ddgoagh isvCt31 sflte.t and she Dcfendanss have segtled, a nvmber of attlu cases art tcill petding in various ssages of the litigavrsn process. AdditionatEy, theae xm s number of c,xs being filed agaitst the 13efrasdanes in various snzas in dbo fozm of class actions sealtiag reirn6ursemear for smoking related iiincsses and death far persons not covered by medieai me. Fsrcher Complieating the mauers during the pendency of the various uxioas, a number of States Actsnney Generafc as well ss 0 ^^ ZD '5d CtCf0lCiMrRt-- "nsv v rsaanr '+*, • ^-
Page 238: mve62d00
SEF. 8. 1998 1l .3bAM ~ 5&P-88-88 11,87 P&QT€.GQl7~ P. 2f34 , 1134 iII~4387634840 No PAGB 1l33 FI ~ SIAiL• OL MARYLAND tE ' IIY TRE ~~ lcIIflSt~ ~ C3RCi7IT COURT V. ~ FOR `j PHiLiP MORItIS 1NCORPORATED, et 3L i BAI,TIlKORE GZTY „ . D~ac~asu Case P+In.: 96123Q17/CT.2I148? 1 i the OpgosiGau to ~=t # • n ! fM * • 1k i * # 3 !r ik Court tbat ttuDe~ waived a~,y ciaim tegsvitegt by initiat~g aud agnecing to the I~e 14, 1998 Stay thdta, svhich expressly ~sad no affxt on Yhe d'esetastue of the a•is~t exhibits and 37,000 s~itetnet doaumeatS mandated by the May 31 Oiderioleasina ~tsse, and ottter d~cnmrntc 1VIEMO.RAND[TiK IN OPPOSTTION TO CERTASN DEPENDANTS' bLOTiOI`T VOR 1{',~~~JfR`]~eTrnxcSRT~TC rnr_~rc t~~tn~r tn~r rlE A,Ic4~c Flaiaiiffs, by nadessigned m~scf, submit this Mamannsdnm ~ Opposition to Certaia Defa~dau~' Iv#otioa fflr Reconsidezaam efzhis raturs t}rd~ of.4ugun 5,1998, and s#au: This Court has ieviewed p(t~tsive bne!ing, ®c~umeat and ~d all the iss~sas inisod m the Dsf'endamts' 2~2eetion to Recoasida, and thertfoto the Motion should be daned. Nar~uag ;•aised bytheel}af~ in the ivlatian akccts the ~at, ~d frec r~egeized by this and CCSII.4Gflt lt2~ in the ~ICilesat$ rti~liD- P~bEt f01t~11~S 7IIfE[pl`BS1I19Il Of these dxumaak~ atgumg that the documents on their Paco ctearly demenstrated that 6uehefendanrs' hadwaivai thegrivsisgewith rc.ga~ to tr~aI ~i~ aad dffeuments aheady posud-ou the j~}triSiEt. (~ ?L MCill. in O~t- Lc~ D8f ~1d€sL ~L Pt~t Qtd.., at 10-12). llefetsdBII~ etsdBII~ filed a it~ly to the P1ai~i~'s cqsgosikan, acgeung that ttae seulaucat agxexnmt avddue Co~nsent rudgment did -- " - -- t
Page 239: mve62d00
P.17121 NO. Q635 6. 1998 1fl:~$Ap# R Pi~ i14RBL~2Y !_LP 20iea 410 Si~3 Hd85 T6 3S0~4n?niato r. LL'3SHd 2tCL GP6 IgxvT 96. S@W#i doc«ent that has every 6e8p produced by R3. Reynolds Dr Oat {t8s bCen plsced on tie 1nw=. Disc3o= ot a privr7cged reutlmunieatteui waives tiu pfiviiege [enty] u'to all inforenation rola[ed an the same snbj= waztcr." V-6ed~swo er rd- Afiy-man v unrh W€srl_C-nro 88S F 3upp. I243, 2151 (1995). In the April 22, 1998 press mleaae, RI. Reynakls stamd that they have `ptnduced more than 6 million pagrs of documents to lawyers repr&Anting the $tm of Miruusota in conn®ctioe with the statc`s MadiMid itwsuit against ft Wbaccro indltsuy.' Then, they furt$cr stated that "3`aSenti as a whote - atd not selettively out of eoatract - these dawnents more than detturma're that our company resgtmslbly teseareba, tseannfut:ura aod marlcas tts pratucs to adult smokets." By mattiM the above stztentsnt. R3. Reynolds expanded the scope of the waiver beyond those docutrienrs tfisat speoi£icalty reSua to the subf ect mattar of whether tYiey rtsponsihly research the affecis of their ptoduc'cs and beyond those docuatents that specifically relata to the subject tnW= of whetlur they market art6 maantbcnue their products to adult smob;ecs. They have acparded the seW of tlie waiver to include any VA all documents that they produced in the St3re of Mintx.9nta's medicald reimbursement lawsuit against them and other memloet& of ft tobacco irninstry_ . Clearty, in thelr wpri122. 1998 press re#tase. R.l. Reynotds spe~tty s~ that dte docutnents they produced In the Minnesoia tisigadon must be 'raken as whole -- arsd acc sctocdYOty onr of context' to show daat they responsibly research, etmna€uxure and market ftr product to adult sttlokscs. Tbrae{ore, in 1igbt of the above, any and all claims of prtvitep that have.been asserted by 12.J. Reynolds swer any and all dnrutttentt thatt they produced during the Minnesota tobacco tititgatioa is hereby doamed .raEvo by vtrtue of thtir April 22, 19" press reiasse. Paye 16 11 '6d S6$GM(lfDSt-- 4EM(111& 1t Wnf 71 e) r,Osr .o•et n, mnrnn
Page 240: mve62d00
SEP, 8, 1998 11.31AM SEF~ml+-altl I i. id7 FRO!€=CII# . '1. - P, 3/34- - PAGE 3i31 ~ not asnouut to a wsimof their assessiaa of privileje. (S= De£ MemL in iteply, at 2-8). This G+urt hesrd argumeatss ou the Defndaats' Motion on 3nne 23,1998. Arvuia; oa ~ ( behalf ofthe Defm3smrs, 3ames E. Gray opened his argenteut by staang: What I want to addiess first is the al13iRelt that 1YilateYef bappened in MinIICSota was a ConSCRg by the t0b8C.."O Ind'i18ti j'to the publication, thawaiver of privi?.ege 2nci the use of these docuuseuts 6ecaase, t&-4, 7vde, is sieariy aluolutety 100 perc= Moa& ! TZ,14-82}. Two days aftc the hrazin.g, hefoTe th3s Cou'rt, the paltias agpeaced hefm Judga Levie itt the 5upeaorCouas farthe Disuict ofCoIumbis, to argae the mmi3armauon pending in thA Coittt. Thehe~ beforeladge Lcvie covcsrd the same topics, and was aigued.6y the same att=oys, fmt'hparties esseauityha.viag heard,the otherside's acgumen'ttwa days eazI`xer. As saan as the tm~ wa~s mado ava{labd4, ihe Plaiuoiffformirded a copy of the uanscript to tFfis ~~ Consent 3ud-8meat, 3udga Fitapa¢ieY's May 31 Qrder and Iudge Cohea`s Juue 16 Order. (Id& at ~~ 1G-2f). Mr. C`icay discassed the steps that wece sskta6y ti,e industry uxan attempt to pmect dW ~ pri*e[Tege (IdL at 2d3-Z7)L Mr. Czsayofftred lsss iabespsetsiian as whirh dacummts the stay order ~ t4zd reot have aa eff= upon. (IdL at 2d-23). Thus, Mr. GtaY raised alt i#se uguroeots dW the ianscript, Ex. A at 16). A4r. ta-aywett on to argue the rragect to the incecpxe#atiorr, ofthe documcaES, specificatly ffi e Settlesnent Agesmeat, the ~ Mr. Hoskins, argtuag for thc Plainta offered the PlamtiWs iutezpr;e%don of the retevatx '- , _i oC++MCEn {ILat 4"fi, 54-64, bfr7Q}. Af4er Ivk-Tioskias set foxth tha reasons the doo~ ~ 1 degeadauis mw seelc to r2ise agaiu ig thairMotion far R=0ngideradioa_ j ; zat the ~ wsived tb= p~viloge elaita~ Mr. Cvywas given ~ nggomstrity to ~
Page 241: mve62d00
~~segsr~uNay~635~s~PE1Zf2S ase 539 0489 TO r.~:ot es. 92 ae t}e[endanta pursued all ressona0le tneaaf. of psemvs% the caprmlentJslity of the 37.000 priviieged doauments_ A brief sumanazy of Defendaats eflocs to paeserva the pcivileged and confidential of the documents is xs follows; Pebtuary L 1, 1998 - Judge Fitzp7tErieSt luted that damusepts ue nat governed by attcuney-clienc privilep and ordered tbat they be turned over to 51ate of MiAtseoota for further mN February t9. 1998 - I3efendul;S recaive sutfpoenas fia>)t Congressman Bliley asSndacEn4 the production of tlse doalmeltM Mzrth 1?, 19% - Minndott Cou[t taf Agpeats refturd to overturn tritl ftidge iceeneeh Fiapa«ruic's order e>:iezsing 39.000 documents the tobacco industry ciaim nse pctrteat4d by at4orneyfii'lenn privilegn April 6, 1998 - tUnited 3tucs Supreme Caert rejects appeal ApriE 6, 1998 - CongresansAt Htfky sM a letDer to all invUlved Befendatns that he would net recognize tFiait olsirru of peivilega and the he would insvoHe orantempc proceedito If they did noc immeiiataly ccrmply with dte oongesiioaat atbpoana April b, 1998 - A repsesen=ve i'ur eactl eompeny suhlait a 1rm m CoWress= Bliley asidAg ttlat de docqments be iepc sontidenlial atoAg with tite scnd docttments tkfendant release documonCt pfasuanr to csngre"nrsa# April Er. 1998 - Press release issued by Philip Morris inc., R3. Roynoltl# Tebaeats Co., Bfo+va a i'fi"#iligatm Tohaco Corp., am LariI187tj TobaCro Co. Apt'il 14, 1998 - Fiowald S. LieFatgaod, Vice Ptrsidebt of {iovetnmeatt Afiairs, from Philip Morris sW a istrer to Cha4rMun Blifey uking ft eomlaines so'tnaimsin the noufident's:ilry• of all of ehe documen)s and wtserein Ms. Lalbnngood ssued "As you laeow, we coatinue to assect the privdege as to g!I the donumcnts prtaduced to your offica aad eoutirnx to 4sel" PttBt: 11 21 '8A CAQIOlCtIitiR<-- 1kAFE1lA E 7RRl1!' 21 fi OC C7;rt 0fi/ia1144S
Page 242: mve62d00
410 539 0d6@ aN4;.06,3509/P.5/21 £t:=v4 56. S2 fl[Yd documents `not votunrauSly bltt mt}y tititler tlse threat of conreeW of Ccngresc fae non compliance with dte sobgoetfas"--. Shortly after tha sursenc{cr of the disputed doouments to the Comtnarce Commitsan. many if not all of the documents wetc posted an che (qternet. The Minnerota cazc against tbe DefeudaaEts proceeded to trial aaut before the Plaintiff prescnird c&eir closing anurnena tc the jury, but atmr the DeEmdanss lsad caantuded their #laat summacion to Fhe jury, the paresrs anttred ituo a s~tagrtemnat culminating witlt a eanssnt .tudgment. Meanwhik, `bar7c hem at tAe raach"% the ease of Sute of tdarylasd vs. Ph4 iKetrris. et at, proceeded along. On April B. 1998, dduring a legular scheduted atqcus confarence. purs uant to [he caw ananagemcnc order, the Defendaats raised the issue of privilegeld doaumenss, claiming anerney client prlvilr.gC, anorney work product geivilega. When ahc issua was raised by che pefendazns, tttc Cosui indicated that ic tfioaght rho issuc bad been settled by the snling in The Minncsata Criura. DeFesfd,xtus tespo4ded by in3iqttsstg chat they wtae not in agreement wicA the Minnesota decis'san_ JU majority of dnessauenes Lad not bee4 raviewui and that they were stiit challenging the Minncsota Courts ruling. (Prior to the Minpastxa Apps3{ass and Supmim Court's refusal to iswa a Stay). They futther requested that they wanroed to prosetve the issue and asked for the opportunity to brief and argue tIe fiatoer before tlus CouM The PlaintifFs on the octa'r hand, wanted to proceed with deposition and wanted to ma{w use of the docuntanrs that had bean released cn the intacnit by Congressman Blilsy- At an Apri3 2[i, 1998 deyosirion. Plaiatiffx' and Defendanes' eoun'seI had a confererrca call with the Court after 8lainsiffs' cauiuei artempfesl sn use one of the priviieged documenrt with the dcponent over ig '3d Sd$l4fSB1?b<•- Nt44Vfl N Ht{V ZIiL S9s FZ:TS 9S16SU86
Page 243: mve62d00
~< i9j2~ ,~g AUG 6, 1992 iD.Q9fi% Pi MfdR&k2Y LLP 410 539 0469 TO n7n~9IU63~.. ilVilb/4e 13:7I 545 7312 ! JtUC6 8 9R#sldlt -•>9it557S7d95 Fs. !9 clear that the Ptainuffs may aff ly to the Cows wtthin d5 days of etstty of tbe Jwtgmeac to l3ave the documents disetosed to the public. There is no language tending to indicate that upan appiuation by die Ptaintiffs. the Defsndantt shstl or may have the opportunity to oppsu such an sppiicxtion. To duc conuary, the language on iu face n ettar and ccnambiguanu that the P~t intiifs may seetc Cwrt approvat... (Emphstia eddui) As the Maryland Court of ApprtSs sRtead in fta~d lna. a r~t vs. &4es, 2$Q Md. 248, 372 A2 1094 (t977), 'et the outset, it must be recognized that die Consegt I3eerzr wm die product of negotiations between the psrtits, if Is well seulerl that Maryland feilows the aia, jeaivs tes't in the iruerpsetatiou of cuaa~cts..{ciua oreifmd} sad thu the aplication of this test mearu that where the tangitage is plain and unambiguocs, thixe is rw mm for wnsauction, and it et= be preaumed that the pertiei meant wisit they expreased; not whst the parties intended the contract so meaz3, hut what a reaeonaDla gcnou in die pOsit3oc of the ps[tios wcsnld hsve thought it mesne..' The Caurt went on ta say, "we have e3ctondcd this principlc to ft intetpretat[on of judicial decrees, d~~fr~,rlto y llfanticrt/v ,271 Md. 169, 173, 3 15 A2 520, 523 {19%a). Sy cnrering into die CcnsentJutfgmcu, ttx Defendants waived the asserted prirriltgcs as to chme dacnmepts tigott which privi{ega was claimed and tcund not to exist. That the Non Legge[t D.eEeedam waived their useted priailege to the dispttted ducnenents in the Consenr Judgmeat is 6211" sWotteQ by the 8rst sentenco in die introduction of dse Non Leggetc Datrstdaans` Memoraralum in Opposition to P(aintiffs' Motion to Re4rnt Docaarcents, "'i'W Na# t.eg~est 23efaadants' OppwitiOR co the Motion to Reiea.e over 40,000 privilegcd docnmertts tc t!o public is not an nttempt to t`a-iitigate in this Court die privilege or sutctiun issues which underlay their Gpntt prQmd pradnetian to Piaintiffs for discovery Pagc 1& ~lY'i 05 ' 9S 241 A2 545 'T= PAGE.19
Page 244: mve62d00
ki4 A46~p ~lhy~ 6. I998 100SAMFR P* rAa$.xv u.F 410 sn 0489 Tn -.-AjNbSasnaniUifr p.asr'n L v et£z svs M:>fs E6E So orb seI SSda objection of deteae counsel. This Court du3s aNwed pta ftonent to answer qusseions about the do:uatanc, orderiag, however, that use of the document by the Plaintiff would not aaastztnto a waiver of the privilege by the Defendant, leaviog open tbe fssuo of privilege for briefing and argument. and fitrther ordering that the rsanscripi be kept under ual. Additiottally, the class udon cast of fiiehardsou, et a! vs. Philip Morri3, inc, et ai, itt the Circuit Court of Baltimore City under Cax A'96[b5lfSQ1CCE212596, wst proceeding atong. The law offices of Perrr C. Angelor is the attorney of rewrd representing the PEaintiff Rictri*rdsots. W#scn tha issue of privilege doaiments was raissd, ttte lianorabk Edwud AttfeEecti ruted ttw there was no longer a grivtiege a3 a result of the jmlbiic duclsSpn of the docMenfs rhat wefe rcleased <hs the inccrnet. The Court in the Richardson cam rafissed to sral at}y depuslaon in which the aHeged privileged doautnents were used in the Richardson sm• The Plaintiffs countered chac by providing Congress with 3T,OW documents and tbe'v subse41esent piacement on the intarAet, the f)efendanti vtaived the privilege c{aiat. Ptaintiffs further take the position that the I?efemdants waived rhe privilege when they sealed the N{itmesota cWe in sbat a gtavi4iort in the Consent Jstdgo>em gave the MlFtnesota 1'tainrifTs the option of requesdng the Court to place the documents in the Mienesoia degosit,oay for wnsumptton by the general public. Further, Ptaintiffs argue du'tr the Defendants waived the privilege by implicscion when they went on television toi3owuyg the reiesec of the documen[s by Chairman Bliley to explaain their posirion, Additiorofiy. following the aeceprrnea by the M3nnesoo Cosss of the Coanant 3ndpmem and within the zima aifowerJ. the Ptaintiffa in Minnesota filed a motion to have rite disputod 5 00 cn °5,1 Cs4t~~CtSCrt~t-- molt8 lt 99![i1C ZtFt 57S 9Z C1 mfCtltiill
Page 245: mve62d00
6, 1498__1Q ~SAM~ PtOraR~Y uP aze s3g 0489 TO as~asa'ruN41~!63,5~~4312i «.,vi tib. Sa aib 2s attorneys for the Tobacco Compauisa, ewurzd into W4at`rddm which resulrW in a proposad "globxt seu3emeru', which groposed glow seukwat was presemd to the President of ttte United 5rgtas and Congress for apPrapriato )ogistztive cons`Kietatian. There ware at sevaral events occurring during the tim lseriod under consitlerstion, which rhe case at b.r. First, was the ongoing 1`rcigatioa in case of the Stare of R6itsneaora arW Stue Cruas Blue Shield of Minzu:aora vs. i~'s1O btorr[a e[c., and the activities of the U.S. House of Represernative Commitcm on Commerte. The cuats of Pnvitega Ctaims and tkttnaFrarsd Exception was argued before the Minnesota Coure on April B, t9g7 and April 15, 1997. SubsG4uentiy, on May 9, 1997, the Minnesma Cours enstred an order regareing Privitegeand the Crinae Fnud Otteapriou and Settirtg forth the procedures to determine Prlvilogc. The isauea of privilege and taea of griv4legt based o$ the caime4freud exception wag den refeired to the SpeCW Mamer. The Special Hiastsr met wich rhe, paniea an several occasions and held several heitiitgs sad briefings and received aubtuiuat from the parties. Sabsequentty, on or about September 10, 1997, the Special Murar sLLOoriued his #t8t report; findings of €acts, c.onelusions of taw a¢d recomm.~ndations. Tisa Defmdatit4 raised o6Jectfons to the Special Masur'a report and a heeting was hetd by rhe Minnesota Courc on 9ewbcr 14, 1997. 1The Mioheson Court adopaed each retommendation of the Speciat Matter and issued its order date<i Ber.eruber !b, 1$97. Adalicional argurnenu end hearings wgre held ou other dotvmonts imt co+iered in 'ba Special Adasitr's fcrsr repox, whidt tesuited xi the igsaance of the Speciai MasCetr's second €sptirt of February to, 1998 which report r®urmmended tha aeksse of soon 30.000 documems chat the Non laggect DeFendan[s had placed in caregories I, 3, 46 and S. The Defen4srsts thao nised 2 C€i 'bd S64t4{9i1116t-- NflOFdB H B961t[ ZZSt C4e 7.2:Ct nstcMa
Page 246: mve62d00
4:Q7AMrR 410 s3s 0489 T© 35~669417u~toi96~51~~µ13f~1 ES•Med eact Ps - gg,:a4 Ss, 60 WM tdatnmof them #s apptt>wiacs for pubiicdiqcto9ura. Uader sueh circu~tan~a, we rtspeoduliy must decti»o to scnd a re;sresent4ciw to your atf'tce to engage in a meeting dtai, by deftoiticta, aniwt ia+ciude any discussion of the aoraAts of the particular doeuaaettu aad dse may result in unwarraztted ctaims of 'waaver' by our opponents in litigstioa.' April 16, 1998 , RR.J. Reynolds, Brown and Wi313arnson met with the Comu,itsze on Comtttsres va ddscuas maintaining the confidetetisi and privileged eaptre of tbe dacutnenra. April 17, E998 - R.i. tteynotds and Brown a3td WitEiemson, through dte law office of I<tnet, Day, Ru.ds Ac Pogtu, sent a fotiow-sp lcetsr to Chaictttan Bliley tlsatdcettg him for tttecring with them and urged continued iresetvatioa of the•sostfsdettcla! and privileged nature of tlae documents. April 22. 1998 Press release Issued by tbn tTe.fendants Adatiztiagiy, the steps taken by some of t!s`e i3efcadeats vssere stune Fsasonablg- than the Mcps this is noc m imply c}aac ehe actions takert by any of the 13efoedatrta unreasonabte. According to Siack's Law Dictionary, reasombie is "fair. proper, just. teaeei`ate, lndfor suitable under the circumstancrs. ... fiaviag tht faa€Ity of teason; rational; governed by rwon; uoder the influence of rrasmi; agtrrable to ceason. ... Not iminodetatc or =crossiv¢, being synonymous evitb nisonai, hotxat, aqnitabls, iait, syilable, modtaate, colerable." Gqng, Crccs v. Srau. 124 Trt,Gr,R. 209, 61 S.W.?d St70. Under the a¢avtnscancos, each F3afeqdW 6oo#c Sis aece.ssary and proper steps w¢issetve the confidentiality of the privileged doCtfiilt2[ts, As a group, iha Defendants proQerly ntiliaod Minnesota's appet3ate promdttras to have the ruling of the Minnesota trial cottrt, deprivitegltib the docnments, atayed andlor overWrned. When Defendants Spst all appeals in A#inaesou, they Page 12 rt -®d t[ffilYG %1 7$1t#J!' ]iRi R..P 29•AT Iit/},f1lRf1
Page 247: mve62d00
~ RA 5, 1995.,,W05AMFR p l ale s3s MS To NO10635 071GAA/21 ZE2trS 96, s@ VIA objection to the Special Mas[ei's second rrport which tnfentoaed in a hearing baforc ft klinn*,cora Court on February 16, 1998, On February 19, i948. Chairman Bliley of rStc Commerce CoaitrEitsee of tbe iinited Sraioa Hfluse of RepreaenaSivts issued subpoenat to the C${3's of each of ritc i3afendant Companies. 'ILe subpoeuas called for tEte pro6tu:tion of the doaumenb on Mach 12, t998, dcmanding production to CongXsss of the 39,000 documents rtcommnruied for rEdease by the Special Ma4ter in rlre Mitutesota er ai va. Phiiip Morris, et ai ease. On Mareh 7, 1938, the Court in ttu Minnesota action accepted each and every minendation of the Specsz! Masrec (Secoivd Rqsart). On April 6, i998„ Gongressmatr'tom'Biiiey. Chair of the Commerce Commkue, wrote to counsel for Defera3ants iodiratang ehat the assstud claim of ^uwrusy ciim privitege and or aLtosaey wark product privilege wouidsi r bc recegrtized', and 'further unitss ihe documents In question are produced tsrtAtediatety. I intend to proceed with a conteRept resotution for erttorcement of the subpoenas by the Hom of Rsprosentatives".. 't#,e letter fvrcher went en to stau. "i urge your clients to remedy their cutrent naa-comptiam stuas by itatrtedizecty produoiag the subpoerraed doeaunents_' Durinp the period of time between the Minnesota Court orders of Ilecetaber 16, 1997 and March ?. 1998, +ht Minoesoma Supreme Cotiut decimed to set aside the lower Caufis order and on Apei) 6. 1D98, the t7nited Srases Supreute Caua declined to issue a stay pending a Petitan, fer a writ of eertiausri. itt s+tbsequear vnesmicfli ie4rars to Chairman Siitey, each Dsfandnnz continued to asserc the artorney ciaat privikge as weti as the con€Sdent3ai nature of the documents, Additiorwliy, the ieoers from the Defendant staraf ttrai they were praducing the w G-~ c:= ~ ~. ~ ~ cJs )1if `s d CdFL4LCtitY6<-- NmitRB K aRE{44r zffl LaC 4T:ct iiAtCDJRf+
Page 248: mve62d00
AUG_ _G. 199$__10:48AVPR Pi Y N4. 0635 F, ;4121 410 539 0489 Td 35~G09is7pit3ab Y.1?i2b 4L`a'3b4 ZIfG Sa5 6C!bt 86. So +.3f1ti petitioued the United States Supreme Court to 16tetwaa awt r6ere6y pmtgct tW pnriEegai panue of the docusaeaa. When the U.S. Sugrema Court re}eettd duir petldon, Defendar:rs released the Documerut to the Rtinr{esata triat eaun pursuaeu co court order and Coagress pnrsrtaer bo coagrrssiouai setbpoeaas. A1oft wstb the releareof da documeaca to Congcesnmsr€ B#itey, each Deferulanr submitted a letter requeatsug rhu cke Commerce Committee asainrw€ft the snAfidentiai and griviicged aaatrc of the docuraetn. Wiihtnu stepping qutside rlee bounds of reasoa or becoming eucessive, Defendant% dfd ali they could do, withuut braakIag the law, to protect dse Sensitive nature o€ the docutamts. Severat of the ]3efsadacttt wera a srep or tvrrs llurhar, by wttriag additional ietters to Caagreuman 8titey andtOr maetft with merahe:s of the Committw on Conernerre, but the sceps Zakea up till this point were asore t$ea eisoltgh to protect the nasnre of the dccumen€s. IRSiJE i'tI: Did the Defandsats Waive Tleir Atteraey-Clcest Privlbge of t#tE 39,Q00 Whea 17:ey Lgstsed a Pre9s Re{eaae CenMwOft on Ckvkmm Uiey's PubGcatiaa of #he Docutaemn nn the Tatevan3 '1he Sure ctairns chat the Llefersdants waived any tSaisa€ to pzivilege by malang pub1!c st3tomenes {Yia press releases) oIl Becemiser I&. 1997; April 6, 19%, and April 22. 19" tLe privilegrd dornemeuu and rhet meaning. 'tt #s h5riy well esrabtished dat dinctosnre of a privileged cotatnuatcatioa is a wsiver af the privit=ge." UAiru! ~aru,,0~ ~ 5pd f.3rpp. 1331, 1334 (D.Md.,1986} ching ia Re Werss. 59S F:3d 11 E f4th Cir 1979). The attoraey-cliettt privslege may be wa[ved by any C¢ndusr which vuosild make the maiatenaare of cAe right unfait. Vnid 3Ynrec v k#tmstild. 500 F:Supp. 1391, 1334 (DMd- fage 13 yi -jIJ PiRaRSnnfa.ts urwaan a. a_.nn e.n. ..n.a ...-n. _e.wwI+f
Page 249: mve62d00
AU6, 6. 1998 10:08A~ h4. Q53 w~...~"FR ~ t49RaLA2Y !1P 4fH 539 0489 TO ~5Ekt9n?41t3i5 P.2 'Ji ~S3Qd ZT" $t~ ftitpt S6f SQ 91W coSfideiltWjty Catt be vt3ived by stmts3ary, pirdp$Iite or ct e8f Tefere{!Ce to thA3 suWi80CS of the commun~n." llntted Srsre,c « ret :idAymM v ssareia biQeaa C6a886 F.Supp. 1243, 17.50 (D.Md. 1995) (i:anphasir t+dded}. The srdtCCrteiit af A.7. Reynolds caft no[ be viewed in a vaeR[Yet. It is Ctltica( thit dtC mure and c=tastfnces unttet which this sntetnetst Was msde be takea into cansideration in order to determine the depth of the .waiver; Ficst, it ix itapormt to note that A.7. Reynolds released this sntemeut on lts own accord. This was not sbe coitecwe statement of aI1 of the ,datus_ The heading of d,e scaaemenf is captioned: °R.I. Reynolds Tobacco Co. Response on Internec". wlflt;n the :tasemettt, ttere are nmemuc semmpees furdter ledfcatiag that this is solely the sruement of R.I. Reeyrtolds: "Tbe-privilavd tobacco dosumenrs made public on the Internet soday ftw the attormys represettting R.1. Itaynotds Tobacco Co, were doing what 4rtwyers are suppme to do ..."; 'The lawyers nadet RJ. Reynotds have acud under the highest ethical snodsrds ..."; and R.l. Reynolds has been 1Dvahfed in siFbSGAiSal lititgailoA...°, =.,. °AIIhQei~lr trte atfAil+cy-cfieix pfisrii~e iS pefSWial to the client, it may be waived by counsel acxing with authority o!'the elienr." erd Smur,r er teL YsymM v. Marria Mari,ettc eflW~ 686 F.Sopp, ,t243, 1?S0 {!}.W. t395). R.3. Reynolds wr the attorneys for R.I. Reyndids acted with the authar'sty of or nn ft behalf of the ot3ser t3ofsadanes. R_7. lteyrwlds cannoc vnive a privilege, tltey do sat have the antjsurity or right to waive. The scatemem of April 22, 1998 is a waiver of privilege but only as it pertains to RJ RoYsmlds. Seeoed, it is fwndmenol that the natwt and scope of the waiver be e'ra3uated- The stacement of rlpril 22, 1998 is avt necessarily in all instusive waiver of each and every Page 15 91 '&d S69t4tSDl96<-- Nt9tiH8 1 39Qtii' 21tL STS It;£1 MlClftAII
Page 250: mve62d00
6. 1998__10:0bAfi1FR p mc =Joe ct}1. SvS N~.463§ P.8121 ~ 410 539 0489 TO 35`r@~tl7p1i316 ij. 11/2.4 :£spT 96. Sa afYd work jirodllCt Pt'lvllege. A fLdCIa(;C1{Stte goY4m diB law iGprd1iig tltC &iltire to Ci}Riply with congressioua[ sUbpocnas_ 2{ISC,C src. 192- Bt/'acnsi of Wisaest Av Testyy or Pradkte Pqpers. This Mr.nte explicitly snw; "every petson who having b= sumieoned as a wiulps by ft authority of either house of Cnngteas to gyvo testirrony or ro grod,m papers by either (tiouse of Congress or committee) who witlrssiiy makes dafauls, tf who, having appeurd, retYt.sas to answer any question ._. shall be deemed gttilty of a misdemeanoc, punishable by a fino- ... a>4 iaIKis0111TICnt ...°. rEP70taliS 4ddadJ- violacion ofthi3 slatue is g«tlrally refeeree tSi as C(D(e171Pf of CDngrCSS. YA1it Y. {!1!u!d SYQltS. 374 LJ$ 109, E.3 .S.Cf. 1824- Y~.Y,y. 7,tnf rr = .#b9 U.S 749. 8? S.fX.1f338; Flmrer e. tta(red SMttt. 358 tlS 14?; ?9 10. 191. In a promtstion for violation of rhPs smtute, the govermaese makes ouE a prima faale easa of wiilfisl default by introducing evidence tttat dts Defendant was validly terved witb a lawful subpoena and that on the day set " in the sttbpoeua, tbs Defendant inrentiottatly inlled to comply. Itnftdd l~Jfniz (ND 111) 193 F.3`sepp. 3?S (19b7). No quescions have been raised regarding the +a2idity of the servioa of the subpoetras or che landutr>#s of the subpoem. At issoe haee, is whether the 33efendauts inteacionatty failed ta comply V~rc6 dta subgoena_ 23efer,dams bad apgrmcimaidy 20 days to raise any ob,jecciczss to the suhpoanaa andtot raise any defeEtaes to che subpoena. Defendsncs delilre:ztety waited uatit the retucn datc of the suhpoettas to assert the ittorowl-nlietu and waic produet ptivileaes. Ergo, Defoiidatlt3 willfully defaulied on the Sitbpaenas and art guilty of contempt of Congress. After Defandants immncionally Eailed to comgCy with the svbpoicnas, Chairman BiitcY sent a letter tc taea of tlie subpoenaed Defendants. T7m letter, dated April 6, 1998, stated chu "the claim of yrfviiegc of the subpoemed docusnem will not be recegni3ed" and the letter fsudtor amted that Page 7 Rtt 'bi Cd9t41.Cttf4Rt-- }N9tsNlf 11 39AtiF ZITL Cb& CVfit A+S/CRJGt1
Page 251: mve62d00
6, 1498 14.07AMFR Pt~ rr~t' uF aia 539 Zaes zo ~~estrtttN0yQb351a/Fu11/21 '347Cd ZTCL SisS t£.YS 9fi s0 trY'W Gemuttr v- Lutm,wi BrcetyU 573,F-2d 544 651(9th Cir. 1978) However, the attomay ci"tent privilege tnay be waived by ituplirarion, even wtimt the disclosure of the prtvileged matter was invtsltintaty or inadvertent on v. Stare- 276 Md 121 (?ti75)_ In detumiAing wbnttter the privilege should be deetnui nrsisred, the circtttt5stanees surrounding tkye disclosure must be cottstdared. Lj "Since. a voluntary dWtuurE dwiva a subsequent ciaim of privilege bued upon confidetx9ality, and sirux padttionafly waiver is described as the intentional relinquishmont of ot known right", & ar l37 citing Johmssamv. Trrbsc 304 U-S. 458, 464, 58 S.Cr. 1ti19 (2993). in domminiag waiver by impl;ation 're{lud must be had m the double clemenis thaz ase predicated in every waiver, i.e., not only ths elettsent of implied inTttttion, but also the cietnenis of i:airrres. aW cprmiste&cy'- td georiryg 8.f. Rr'tqrnart, Es4detee, s2327 at d36; fiag~v-&WercarCeuta. Z75 CaL.App.1d at 502, 30 Cat.Rgrr, e1t 320. An implied inretuion to waive the attorneyslient privilege need not be cxpressed fa writing nor in any patticular fbrm, but, tht inteot to waive must be manift:sted by word, by act. utdtor by faiiure to speak out. ~+u 137- £)nce Conftlentiai material, ctoaked in privilege, has been disclosed, it is no longer zerset and rhe prooeatk+a of the privilege disappears. id ar t37 cirieg Qrort-TleaQt Ea&#Lv,. 7nc, v. k Djj4tnan- Inc . 258 2! 3Yrpp. 233, 234 (Wtl. Atecli. J966). Wkten the dsscloaure is involunury, the primilsge is preser*rod if the privilege holder has made reasonabie efforss "rmooably designed" to protect and preserve the privilege. tUlyrea Sra;eE v. ne ialan > 973 F 2d W 7s0 {c-t, 9 (car,.) 199z). artng r,wr,ramgrtcrr Conmurer v. 7iuennrr`rura( 8<&.s ldn_~E~~, S?3R 2AI64b, df1 fWhGFt: 1978'). liov+ever. the privilege wilt deemed to be waived if the privilege holder fails to punuc sil reasonable means uf preserving the catnfidential-uy of 3lto privileged matGr. Aa tssue here is whether the Page 10 it 'SI{ Ch4101£R14(iC_~ YRtrt14 1k '3NrtiSC ~,rr r.e ,a". ni .nn:nn
Page 252: mve62d00
.u LLp 410 535 nza~~1 4 6~ 51sr~U 15121 6[Ibi es. so ffk3 19B0). Pach public statement was issuad in girocx rejponse to actIons caScen oy the Srste of Mimusota and the United 5tM 5upreare Court {press release daned April fi, 1988) or in direct resgonse to at:tions raken by Chaixlnan Siiiey aed the House Catamercc Cotnmiccee Wess releases dated December 17. 1997 acai Agrit 22, 149&), The saterneus of December 18, 1997 and April 6, 1998 in no way mab reference to or oudiae the-subscance ef the privileged documents. In fact, the ataremeru of December 18, 1997, colbfCtively reteased by Philip Morrla tac., R.1. iteyrtc(ds Tob=o computy, 9rocoa & 9l+iltismso. Tobacco Carporation aact dit Lori#1ard Tobacco Cempany in raspcnse to the House Commetce Commirtes's releue of t{ae first set of pririteged doouments, explicitly stxEed ttut the `docunneara fwcrej privileged" a:ad that they '[contd not) eomment on the specifics of steir cwueat." The Apr16, l994press relsasa, focused on the }udicia[ ancd privilege review prncesses as they tetam to the deptivile" of the dCGttAenL4 in Mi31nesot2. However, the satements made in the Aprii 22, 1948 press release are questionable. This parciCutar press release is solely the rasponse of t3st &,!. Reynolds 1'obaccu Couspaay's regardiitg tlhe House Commerce Crtmarti3ies's release of "priv32eged tobacco documents at8de public on the iarerreeR -.." Uedoabredly, this document makes claar rofererece to the sum aad snb9rwce of many of the doccuments for which privilege is ataisfled: "'TaYra aa a whole - and not selectively ouc of ecntnxt• - dme dooasneeam more than detnDnstriw that our corepany respomibiy resraschss, manu&cttsses asid atari¢ts ft9 products to adult smokers." Aitisoug$ R.l. Reynolds did not gfve detaised aescriptions of ++rhar eseA and avery doaumem wttsa;ned. a wisver was effectuated by referencing and par+pkasing whac R.L tteyssod& batieved tlsa documents ani2is8d. "A gscty need not quote from a gutias4az oMsunicetian m walve privilegC; Page 14 ~4 91 'sd Sb4t4t94If6<^- N@108H g 19fl{{f 71r! CRC fiC'C7 ntlpilrtsm
Page 253: mve62d00
9 / Peter . Angelos H, Russell Smouse E. David Hoskins John C. M. Angelos THE LAW OFFICES OF PETER G. ANGELOS, P.C. 100 Nortii Charles Street Baltimore, Maryland 21201 Attorneys for Plainteffs Geor¢e A. Nilson Robet2 C. Douglas Raymond G. Mullady. Jr. PIPER & NIARBURY Charles Center South 36 South Charles Street Baltimore, Maryland 21201 Attorneys for Brown & Williamson Tobacco Corporation Peter A. Woolson Rt?BINSU't`3 WOOLSON O'CONNELL, LLP Redwood Tower, Suite 1500 217 E. Redwood Street Baltimore, MD 21202 Andrew Gendron Gt30DELL. DEVRIES, i.EE,CI3 Onc South Stteet, 20th Flooi Baltimore, Maryland 212Q2-3291 Attorneys for Lorillard Tobacco Company i8V-9flf 9€!fli'd 8ii-i BB65t96t02 E% 30 ]lHMd I 01D188Y :maJd tV21 88-YI-330
Page 254: mve62d00
0 G 29 c. ~
Page 255: mve62d00
D'ECz-H2-s8 i5e21 RROM:ARM07~7&PORTER WASH_- #12 iDn202 94i'2 5999 PAGE 4/21 Q t ~- trJ George A. Nilson Robert C. Douglas Raymond G. Mullady, Jr. PIPER & MARBURY Charles Center South 36 South Charles Street Baltimore, Maryland 21201 Attorneys for Brown & Williamson Tobacco Corporation t9- Ohinso er A. Woolson ROBINSON WOOLSON O'CC3NNGLL. LLP Redwood Tower, Suite 1500 217 E. Redwood Street Baltimore, MD 21202 Jame . Gray And w Gendron GOODELL, DEVRIES, LEE H& GRAY, LLP One South Street, 20th Floc+r Baltimore, Maryland 21202-3201 Attorneys for Lorillard Tobacco Company John Henry Lewin, Jr. James K. Archibald Marina Lolley Dame VENABLE, BAETJER AND HOWARD, LLP 1800 Mercantile Bank & Trust Building Two Hopkins Plaza Baltimore, Maryland 21201 Attorneys for Philip Morris, Incorporated
Page 256: mve62d00
* Ol ients would exist as a feature of the attorney-client relationship even i€there were no Contract, but it also is incorporated as an implied term of the Contract for representation. In this respect, it is like the ethical rules. The Maryland Rules of Professional Conduct are not merely "self-imposed internal regulations," but "constitute(j a statement of public policy by the only entity in this State having the Constitutional authority to make such a statement, and [they have] the force of law." Post v. Bregman, 349 Md. 142, 162-63, 164 (1998). "[S]ubsisting laws enter into and form part of a contract as if incorporated in its terms." Department of Generai,Servs. v. R. E. Holtrnan & Assoc., 296 Md. 403, 411 (1983); see also Denice v. Spotswood I Quinby, Inc., 248 Md. 428, 433-34 (1968) (existing laws "including constitutional and statutory provisions and judicial precedents" are implied terms of a contract). By the same token, "a contractual provision that is in violation of public policy, to the extent of the conflict, is invalid and unenforceable." Post, 349 Md. at 161; Department of General Servs., 296 Md. at 411 ovisions of letter agreement inconsistent with statute "must yield to the public policy expressed by the legislature"). "Whether regarded as an external defense [to a contract] or as incorporated into the contract itself," the Rules may be raised as an equitable defense to prevent attorneys from enforcing contracts in a manner that would result in a violation of theirprofessional responsibilities. Post, 349 Md. at 170; see also Son v. Margolius, 349 Md. 441, 465 (1998) (violation of MRPC Rules 5.4 or 7.2 may make a contract wholly or partly unenforceable). As a fiduciary and representative of his or her client, an attorney must seek to :i2e any legally available potential recovery for the client. See In re Elockett, 734 P.2d 877, 880 (Or. 1997) (in handling divorce proceeding, attorney's "duty was to maximize" 16
Page 257: mve62d00
award for client from dissolution of marital estate); Florida Bar v. Bern, 425 So.2d 526, 527 (Fla. 1983) (finding attorney "under a fiduciary duty to maximize and represent...[client's] best interests") (quoting findings of referee in disciplinary matter); In re Larson, 694 P.2d 1051, 1056 (Wash. 1985) (estate attorney owed fiduciary duty to heirs to maximize rate of retum on estate's assets); People v. Franklin, 387 N.E.2d 685,686 (111. 1979) (estate attorney had "duty to maximize" assets of the estate). Clearly the Firm, as the State's fiduciary, cannot benefit itself at the State's expense. See Roebuck v. Steuart, 76 Md. App. 298, 323 (1988), cert- denied, 303 Md. 114 (1985);Jones v. J.K HiserC'onstr. Co., 66IVId. App. 671, 677 (1984) (fiduciary may not "take selfish advantage of his trust, or deal with the subject matter of the trust in such a way as to benefit himself or prejudice the othei) (quoting Black's Law Dictionary (5th ed. 1979)). In addition, "in every contract there exists an implied covenant that each of the parties thereto will act in good faith and deal fnir3y with Food Fair Stores, Inc. v. Blumberg, 234 Md. 521, 534 (1963); Maryland National Bank v. Traenkle, 933 F. Supp. 1280, 1288-89 (D. Md. 1996). Without question, no matter what the size of the ultimate fee, requiring the Angelos Firm first to seek payment of its fees and costs directly from the tobacco companies before subtracting those fees from the State's recovery wiIt serve to maximize the State's recovery. As part of the settlement, the tobacco companies have been forced to contribute bitIions of dollars in funds over and above the payments to the states for the payment of outside counsel's fees and costs. Every dollar that the Firm fails ic gain from those funds and instead claims from the State's direct recovery is a dollar less for the State to devote to cancer research, smoking cessation programs, and a host of other public purposes. Those separate funds are readily available through the mechanisms created by Exhibit 0 to the MSA, and 17
Page 258: mve62d00
0 rest, the threatened with no harm at _;lt. The State does not seek to prejudice the Firm's ultimate fee claim a under the Master Settlement Agreement provides ample securi stream of payments any claim the Firm ultimately obtains will be paid. Plaintiffs thus satisfy all four factors to be weighed in considering a request for a preliminary injunction g IL THE STATE IS LIKELY TO SUCCEED IN SHOWING THAT THE ANGELOS FIRM IS IN BREACH OF ITS CONTRACTUAL AND FH?UCIARY DUTIES AND THAT THE CONTRACT PAYMENT PROCEDURE SHOULD NOT BE ENFORCED. A. The Angelos Firm Has Breached Its Duty To Maximize The State's Recovery. "The attomey-client relationship is of the highest fiduciary nature, and it calls for the utmost trust and confidence." Somuah v. Flachs, 352 Md. 241,254 ( I998); see alsrrAdvance Finance Cv, v. Trustees, 337 Ntd. 195 (1995); Homca v. FriendlyMobttetvfanor, Inc., 93 Md. App. 337, 346-47 (1992); cert. dismissed, 330 Md. 318 (1993); Archer v. Griffith, 390 S.W.2d 735, 739 (Tex. 1965) ("attorney's dealings with client are subject to the same scrutiny as a trustee and a cestui que trust). Indeed, the fiduciary duties owed by an attorney are the highest duties recognized by law. See Bank of Mill Creek v. Elk Horn Coal Corp., 57 S.E.2d 736, 747 (W.Va. 1950). This fiduciary relationship fundamentally requires the attorney, at al l times, to further the interests of his or her client, holding those interests above his own. The special fiduciary duty the Angelos Firm owes the State and the Attorney General 8$ecause the injunction is sought by the State of Maryland, this Court may and co ~. should dispense with the requirement of a bond otherwise required as a condition precedent to a grant of a preliminary injunction. Rule 15-503(b). ~ 15 CS~. P. ? 0 Gs
Page 259: mve62d00
AUG. 25. 1998 1:18PM 0 is K 5667 P. 17/17 STATE OF MARYLAND, * IN THE plsintA * CIRCUIT COURT v. * FOR PHILIP MORRIS INCORPORATED, et al., * BALTIMORE CITY Defendants. * CaseNo.:9b'l224171CI,2114$7 * * * * ~V ie k a Defendancs' Motion for Itecoasidcration of This Cffutt's Order of August 5, 1998 and the mcanorandum fited in sugpori, and any ftuther papers or oral argument in ssippoxt ofor in opposition to such Motion, it is this _ dey of ,1998, hereby ORDERED that 1. Certain Defeadants' Motion for Recansideracion of Tbis Court's LdcBer of August 5, 1998 is hereby GRAIYTED; 2. Issue IV (pages 17-20) of the Nlemorsndnm Opinion and Order denying defendants' Motion for Protective Order eneerct{ by this Court on August 11, 1998, is hereby YACA,TED; and 3. F}efeudauts' Motion for Protective Order is hereby GRANTED. Roger Brown, Judge £'ircuit Court for Saltimore City er.2oocs+M9;3sa.n)
Page 260: mve62d00
AUG. 25, 1998 1:17PM 0 NO, 5667 P, 11112 must therefore be considered. Pratt v. Cta_re. 39 Md. App. 442, 448,387 A.2d 779, 783 (1478) (court considers several factors when deciding whether party waived priv(kge "such as the client's intent to waive. fauness, and consistency of conduct must be considered") (emphasis added), aMj 284 Md. 516, 398 A2d 421 (1979); anicon v. St" 276 Md. 122, 139, 345 A.2d 830, 840 (7975) ("in detcfznining waivarby implication regard must be had to the double elements that are predicated in every waiver, i.c., not only the e3ement of imUliggi intention. but also the elem:ent of fairness and consistency"} (emphasis sdded}. Here, once again, the facts are clesr. Defendants have submitted herewith the affidavit of Meyer Cs. Koplow, the negotiator of the 1Nannesata consent decree snd settlement agreement on behalf ofPhilip Mortis. Mr. ICuplo.v testifies that defendants refused during the negotiations to take any action that miattt be cotastrued as a ivaiver: During settlement negotiations, the ivTnnesota ptaintiffs specifically sought Defendants' agreement to the public mTeasa of the 37,000 documents. auj= to t_h_is demae,aynreAaseiy == tht werr® unu:7lin¢ 0 J71YLgg{+ ciaims. Unable to reac1± a =enh, pwm--P-_c the jurisdiction of the Minnesota court. Thus p YTI C of the Consent Judgment provides that "Plainti€fs may seek court approval to make such documents available to the public" provided that any such request be made to the cotat"within 45 days" of the date of entry of the Consent Judgment. Both sides were left entirely frW to make whatever arguments they migtst wish to make to the Minnesota eourtt Koplow Aff. at 2, Ex. B. Mr. Koplow also testified that the cottsent}udgneent was never intended to be a waiver, either by plaintiffs or defestdants:
Page 261: mve62d00
AUG. 25. 1998 1:18PM 0 Is NO, 5867 P. 15/17 The true horse is out of the bam issue invoiving matters, presumably, at least as I see it, beyond judicial jurisdiction in the first place and the ambiguity in Judge Cohen`s document comes in paragraph four, which talks about the documents identified in the May 31 order to which the defendants have retained their privilege claims and the June 15 order not being viewed as a waiver of any of those claims. g&2d Trattscript at b2, Ex. A. Judge Levie is correct. Defendants pteserved their privilege claims in paragraph 4 of the June 16, 1998 Order. To hold otherwise eviscerates the Minnesota stay order. CONCL.[ISIpN For the foregoing reasons, defendants respectfully request that the Court reconsider its A ugust S, 1998 Order. The defendants never waived or intended to waive their attotney-eGent or work-product privileges. This Court should enter an order grautiug Defendants' Motion for Protective Order. Thurman Arnold Building 555 Twelfth Street Washington, D.C. 20004-1202 (202) 942-5000 Judith Betresteizt-Crieta James J. Sandman ARNDLD & PORTER urray 144-- John Trl*v 1-ewin, Jr. arina Lollcy Dame VENABLE, $AETSER AND $OWARD, LLP I844 Meacantile Bank & Tttlst Building 2 Tiopkins Plaza Baltimore, Malyland 21201 (410) 244-7400 Attorneys for Defendant Philip Morrts lueorporated and on behalf ofR.7. Reynolds Tobacco Cotnpaay; Brown & Williamson Tobacco Cotpoxatinn, individually and as successor by merger to The American Tobacco Company; Lorillard Tobacco Company. sued in its own name and incorrectly as "Lotiliard Corp.,'• a nonexistent entity, The Council for Tobacco Research-U.S.A., Inc'.; and The Tobacco Institute, Inc. HA2DOCSV6o413a6,0I 11
Page 262: mve62d00
! Outside counsel for other states have been active in obtaining fee determinations under the two mechanism created by the MSA. Maryland's best information to date is that outside counsel for at least 15 states and territories have accepted Liquidated Fees ranging from $355,000 (American Samoa) to $80 million (Washington State). Outside counsel for five additional states have requested Liquidated Fee offers and have them under consideration, and outside counsel for another eight states requested Liquidated Fee offers but rejected the offers.° Under the MSA, outside counsel for three states have completed the Panel arbitration process and received Fee Awards $ On July 29, 1999, the Panel awarded outside counsel for Massachusetts a fee of $775 million, which would be approximately 9.8% ofMassachusetts' allocated share of $ 7.4 billion if it were not paid by the OPMs separately.fi Outside counsel for Hawaii received a Fee Award of $90.2 million on September 8, 1999, which would be approximately 7.6% of Hawaii's $1.2 billion allocated share. Outside counsel for Illinois received a Fee Award of $121 million on October 7, 1999, which would be approximately 4 Exhibit 10 to the Complaint presents the ir.f-rmation currently known to plaintiffs' counsel concerning the status of each state's outside counsel's actions with respect to the fee MSA. 5 Before the MSA was reached, the same Panel arbitration process was used to establish fee awards for outside counsel in Mississippi, Florida, and Texas, three o€the four states that reached individual settlements on the eve of trials. In the fourth pre-MSA settlement state, Minnesota, the parties reached an agreeit3ent on the amount of fees for outside counsel. 6 The amounts of fee recoveries are often expressed as a percentage of the state's allocated share of direct payments under the MSA as a way of comparing the relative size of the recoveries, but it is crucial to recognize that the fees recovered from the C3PMs under Exhibit 0 are not paid from the states' MSA payments. 9
Page 263: mve62d00
# taim for fees and costs no later than Wednesday, December 1, 1999, and to provide him with written assurance, no later than November 15, 1999, o€the Fima' ; intention to do so. Exhibit 13. On November 15, 1999, after further discussions, Mr. Angelos wrote to the Attorney General, stating that "we have been and remain willing to go to the Panel on 6ehalJ' ofihe State..., ' Exhibit 14 (emphasis supplied), but suggesting that additional discussions were required "on the timing and appropriate manner of mitigating the State's legal expense through a Fee Award." Id. During the weeks immediately preceding December 2,1999, Mr. Angelos met or had telephone conversations with the Governor and members of his staff and with the Attorney General and members of his staff in which Mr. Angelos demanded that the State guarantee him recovery of a fee of some specific amount or percentage as a pre-condition to submitting an application for a Panel Fee Award. l'he State officials have refused to agree to this demand, noting both that the Angelos Firm has an unconditional opportunity and obligation to seek payment of its fees and expenses directly from the tobacco industry and that to seek such payment by a Panel Fee Award and an approved Cost Statement would in no way jeopardize its ability to claim additional payment from the State after the amount of the industry's award is determined. On December 2, 1999, the Attorney General wrote to Mr. Angelos, stating once more the Firm's unconditional fiduciary obligation to attempt to obtain fees and costs from the industry and stating that the Firm's continued failure to apply for an award constituted a breach of the Firm's fiduciary and contractual duties. The Attorney General demanded a condit'tonal assurance by December 6, 1999, that the Firm would submit a claim. Exhibit 16. No such assurance has been received. Instead, the Angelos Firm has taken the 11
Page 264: mve62d00
0 31
Page 265: mve62d00
4, the public interest. Department of Transportation v. Armacost, 299 Md. 392, 404-05 (1984) (footnote omitted)(citing State Dept. ofHealth andMentaf fkgiene v Nattimore Count,v, 28t lt3d. 548, 554-57 (I977)). "[T]he first step" of the analysis "is for the court to balance the 'likelihood' ofirreparable harm to the piaintiffagainst the `Iikelihood' of harm to the defendant." Lerner v. Lerner, 306 Md. 771, 783 (1986) ((quoting Stackwetder Furniture Co. v. Seilig Manufacturing Co., 550 F.2d 189, 194 (4th Cir, 1977)). The importance of the factors is relative, "[T]he importance of probability of success increases as the probability of ble injury diminishes." Lerner, 306 Md. at 784 (citations omitted). If the balance of hardships does not "tilt `decidediy"' in plaintiffs' favor, then plaintiffs must make "a strongshowingoflikelihoodofsuccess."DLrexlsrael,Ltd v.BreakthroughtLledicadCorp., 952 F.2d 802, 818 (4th Cir. 1991). T'he Court of Appeals has also recognized "that in litigation between the governrnent and a private party, or in cases in which injunctive relief directly impacts governmental ts, 'the court is not bound by the strict requirements oftraditional equity as developed in private (itigation. "' Fogle v. FI & G Restaurant, Inc., 337 Md. 441, 455 (1995) (quoting State Dept. of Health and &iental Hygieee v. Baltimore County, 281 Md. at 555); accord Virginia Surface Mining andReclamation Ass'n, Inc, v..4ndrus, 604 F.2d 312,315 (4th Cir. 1979)(Blackwelder criteria "were formulated for private litigation"). Where governmental e e implicated, "[c]ourts ofec3uity may, and frequently do, go much farther both to give and withhold relief in fuctherance of the public interest than they are accustomed to go when only private interests are involved." Fogte, 337 Md, at 456 (quoting Space Aero Products Co., Inc. v. R.E. Darling CQ.. Inc., 238 Md. 93, 128, cert. denied, 382 U.S. 843 13
Page 266: mve62d00
2§. 1998'11:51AM-1 ° • G1lbQLL' f STATE OF MARI'(.1tdiD: * IN T'HE PlAintim * CIRCiTtJ COURT * FOR K 2498 F, 2/5 pHILIP MORRIS II+ICflRF{}RATED, eE 91.l * BAT1TIMi3RE CT!°Y Defeadrints. !r * WA.?)57if 07ES{.7i>t;>Col tt * CaselYa: %IZ2817tC7.211487 The State of Maxy.mwy by and "'w"lS.a its J4tt0I]1ey General and 1ffidW'$tpad rma=, and dofCIIdsntS }}rcx•c~vVtt & WiIllBmsen TobeCaD CorpaastiaII; l.tukllsr'd TObBCCtt Company; Philip Moais, tnoocpcizated; and R.d. Reps>talds Tobacca Company, by and thmnght~eit nsPectivo couns41owtlY wwofa 8rua Court for eartry offt anaexad Fopaa Ordor {'uam3ug Stay ofP(noadiqa. 1- Foseph C.~acian, Tx., Atse»tey Geaeaat L~~a~r~m.p~en ~M~. ~S~W~a~r.d.. fD~o~p~rty A~tjf~cu~u~v~u~J as~ }C~o~n~~rca.,~t JV13YP. 12l~flYYl il') ~~C J Aw iiC~Ri AtC(mrey+ QenerSt of Maryland 200 St. Paut P1aca,16th Flaar Bai.dmata, H, Rmssedl Saaasisc E. David ficsidas Scshn C. M. Ange2os Y'FE LAW OF'FYCES OF PETEA 0. ANGELOS. P.C. 1{#Q North Cbarles Stteet Baidmore, Maryland 21201 P Attcsrneps for P}aiufiffs
Page 267: mve62d00
` li1NOV. 25. 1998;; 1; 52RM, d1fl~7zdz Charles Centex South 36 South Cherles Sme# Baldcnace, Ivtecylsnd 21201 PIPER & MARBUR t~.~nsti Ra.ymoud G. endtsoa 40 NO. 2498 P. 3/5 t}OOBELL, DEVRIES, LEECH & GRAY, LLP One South Sftct, IOrh F1uQr Balftore, Maryland 21Z02•33iT1 7r. K. I+QatiaaLottayDatme YEKABLE, BAETdERAND Fit)Wl+RD, LLP 1900 M=udte Bank & TisutBuildissg Two Hopkins Pia7a Haltimnre, A3aapismi 21201 AUcerneys far PhIlig 1,4oisis, Incorpoxatod .a., , .f ' GiMSA. xica Rnbeat C I}ouglas Raymond 0. 3sQuitady, Jr_ PIPEii & MARBURY Chsries Ctntcr South 36 South Chazles Stnet Baltimore, MasyIand 21201 co cr. Atta=ys for RJ. Reynolds Tobacco Company ~ <31, Pli rn ~
Page 268: mve62d00
~acx ySOCT.o12 199$ 9.33sR 0 n€~Psu&r ro0ecIsIN~~ib56g$P.213az/07 S7= Or KhRISAM " Iz 3si CZ7tCVi4 CTJGftT * 3/ OR Va. • liLSMIM axi't s gqiy P"n*'4 aG"1s, s'! Ar. * CUM No. asl=ai?JdL31t4i7• . C3007-Mg mvsMIDsar• S maxim s= ; or Cou"'S Gomm Cr Av4v2r s. il93 The above coptioned muLter E1&viaq ea.e ?+efore the Cairt On the lnotian oS Certsiu. tJetendau.t`a for Reconsideration of the Caurt's OXder of August 5, 3S4g, tht parti" haviag bean h+ard aud ex&ibits Yevieved., it is rlxia 7lom fty fld OC=*=. 33910, URNOT MMM, that tts ldotion loie Reconsideration is herewith to Philip Morris . Sne. ;@.S. 7tsysto).dii robaaao Caspaay°; Brown i ttilliisnson fioLaccc Carporection; 7asi13.sxd 'i'obaoco Cospdriy; The Tobacco Institute. Ine.; and the Cotu.Cil for Tobacco R.esesrt2s - U_S.A., Inc. R13 8ubjwct so t.bu puzttaar of the Coitst. Bow Si. LCram _--sipaWm apQears so origias7. ~ d0 '~1p7L amlg= A_
Page 269: mve62d00
---

Text Control

Highlight Text:

OCR Text Alignment:

Image Control

Image Rotation:

Image Size: