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Index of Pleadings / Discovery Case Name: State of Vermont, Chittenden County Court / Case Number: 744-97 Cnc Volume: I, II, III

Date: 11 Dec 1998 (est.)
Length: 363 pages
86315153-86315515
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0 0 VOLUME III 14 P1f Joint Motion for Approval of D: 12/02/98 Settlement Agreement and Entry of Consent Decree and Final Judgment 15 Parties Consolidation Order F: 12/11/98 16 Parties Joint Motion for Entry of F: 12/11/98 Consent Decree and Final Judgment and Approval of Settlement Agreement 17 Parties Motion for Entry of Order D: 12/11/98 Dismissing Claims with Prejudice 18 Parties Consent Decree and Final D: 12/11/98 Judgment
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. INDEX OF PLEADINGS/DISCOVERY CASE NAME: State of Vermont, Chittenden County COURT / CASE NUMBER: 744-97 CnC VOLUME: I, II, 111 NO. DOCUMENT NAME RECEIVED 7 7 FILED SERVED VOLUME I 1 LTC, Inc. Complaint F: 05/29/97 2 LTC, Inc. Summons R: 6/23/97 3 Pif State of Vermont's R: 01/07/98 Memorandum of Law in Opposition to Defts' Motion to Dismiss 4 Defts Defts' Motion to Dismiss R: 02/13/98 Dated: 10/16/97 5 Defts Memorandum of Law in R: 02/13/98 Support of Defts' Motion to Dated: 10/16/97 Dismiss 6 Defts Defts' Reply to State of Dated: 02/06/98 Vermont's Memorandum of Law in Opposition to Defts' Motion to Dismiss VOLUME II 7 Pif State of Vermont's Sur-Reply Dated: 3/6/98 Memorandum in Opposition to R: 03/18/97 Defts' Motion to Dismiss 8 Court Opinion and Order - (denying F: 03/25/98 defts' depositive motion) 9 LTC LTC's Answer to Plf's R: 04/29/98 Complaint 10 Pif Complaint Pursuant to 33 Dated: 07/06/98 V.S.A. § 1911 11 Pif Complaint Pursuant to 33 Filed: 07/07/98 V.S.A. § 1911 R: 08/12/98 12 Parties Joint Motion for Stay of F: 12/03/98 Proceedings 13 Court Entry Regarding Motion for F: 12/09/98 Stay of Proceedings Granted
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12 U-i V
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I DEC-03-98 THU 05:18 PM D0 e, Knapp & McAndreu FAX N0, jj 864 1967 P, 05/43 , Defense Counsel llATED:k~lU 3 , 1998, Attorney for: Philip Morris Incorporated Lorillard Tobacco Company R.J. Reynolds Tobacco Co. Brown & Williamson Tobacco Corp.(individunlly and as successor by merger to The American Tobacco Company) Karen McAndrew For Purposes of this Motion Only DINSE, KNAPP & MCANDREW P.O. Box 988 209 Battery Street. 2"`t Floor Burlington, VT 05401 (802)864-5751 m C1 vj I U1 ~ C1 0 AGREED MOTION FOR STAY OP PROCEEDINGS -3- 1116 12 1MMI STblbllC
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6EC. 9. 1996E10',09AM AM 9 se, Knapp & McAndreu FAX NO. 8069 1900. 11985 P. 2/3 02/02 ~ STATE OF VERMONT CxITTe'NDEN SUPF,RIOR COURT REGLl1/F_k) DEC 09 1998 INcANOftEW' P C. TI'PLL' OF MOTION: vs PhJ.llp Mortas, InC.,et a! ENTRY REG&Rr1INl+ NOTION JOINT MOTJON FOR =iTn7 OF phOCEEDINCS s DATr•. MOTTON FIr.EO: 12/03/98 CHIITFNAffV~ jjy~yC~lK Fld(U IN CLF'° • RE31PONuR pILL'D: J G[dANTED COMPLIANL'E SY DF,NI GD SCgEDUb6D FOR HEARING DN: ~ _ DTItL•'12 a COl'I1?S 3CNT TO: J'ulJ.e Dr11J, Esq. Scot L. Kline, f"tSfl. Mlr,hael D. Clapp, PSg. Karon McAndraw, Esq. Harry R- Cyan, III, Esq. R. Toseph O'P.ourke, Esq. Mar3ocie Fress Lindblom, NatiGnnJ C iaeler Hellacosa, Esq. Charieo Platto, fsquire Michaul Komar, Esq. Robert S. Pruyne, Esq_ 1laron Maricc, Natxnnal Counsel ~ r» 0 nc I DEC P. ~-^---4__ :T 1TIME ALLOTTED____ f77 R. Ja,fFray Aehm, E Gregory S. Mertz, sq, Esq. ST+ 4TPve W• 6erman, l; sq. ~ ThomaZ D. Andcraoa , kzq, J"i Satres L'. solfman, rsq. c ~ l7achael L. Duralc, Esq. ( 7-l WiJdlam J(. ;iDrTcll , Erq. . 01 Pdul E. NemSer % Laura E. F.11sWArLh, [:dvard C, Schmidt, t ©rtaa C. Castello', R Ecq. sq. sq. Gregarv ;,. Mertz, Es4• V-1
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f DEC-03-98 THU 05:18 PM DKnapp &McAndreu FflX NO, 4 869 1967 ~ DATED: , 1998. Attorney for Liggett Group, Inc. ZY Gregory Mertz 126 College Street, Suite 3B ~ P.O. Box 1045 Burlington, VT 05402-1045 (802) 660-4800 AGREED MOTION FOR STAY OF PROCEEDINGS i 129 IZ IXN I 5fN 0~ -4- P, 06/43
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0 any related claim which you may have against the plaintiff, or you will thereafter be barred from making such claim in any other action. DATED: -4- 1998. -r ' STATE OF VERMONT WILLIAM H. SORRELL a Jilii`e'Brill Assistant State Attorney General CC) O\ c:a ~ cSt ~ 0% -2- --1- I129.120039 BSC DOC
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DEC-03-98 THU 05:17 PM DKnapp & McAndreu FAX N0. jj 864 1967 , OFFICE OF ATTORNEY GENERAL 109 State Street Montpelier, Vermont 05609-1001 (802) 828-3171 HAGENS & BERMAN, P.S, Steve'4V. Berman James P. Solimano George W. Sampson Sean R. Matt Andrew M. Volk Jeniphr A.E. Breckenridge Christopher A. Jarvis 1301 Fifth Avenue, Suite 2929 Seattle, WA 98101 (206) 623-7292 NESS, MOTLEY, LOADHOLT, RICHARDSON & POOLE, P,A. Ronild L. Motley Susan Nial P.O. Box 1137 Charleston, SC 29402 SCRUGGS, MILLETTE, LAWSON, BOZEMAN & DENT Richard F. Scruggs 734 Delmas Avenue Post Office Drawer 1425 Pascagoula, MS 39568 NORTON & FRICKEY AND ASSOCIATES Robert B. Carey 2301 East Pikes Peak Colorado Springs, CO 80909 SHEEHEY BRUE GRAY & FURLONG, P.C. Thomas D. Anderson Gateway Square 30 Main Street Burlington VT 05402 MILLER EGGLESTON & CRAMER, Ltd. Scott L. Kline P.O. Box 1489 Burlington, VT 05402-1489 Special Assistant Attorneys General for the State of Vermont ' AGREED MOTION FOR STAY OF - 2- PROCLEDINCS P, 04/43 I I]N I]INMl STN D(X:
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DEC-03-98 THU 05;17 PPI ~se, Knapp & McAndreu ~ , . . ~ FAX NO,,$Q2 864 1967 STATE OF VERivIONT CHITTENDEN COUNTY, SS. STATE OF VERMONT, Plaintiff, V. PHILIP MORRIS, INCORPORATED; R.J. REYNOLDS TOBACCO CO.; RJR NABISCO HOLDING CORP.; RJR NABISCO, INC.; AMERICAN TOBACCO CORP.; BROWN & WILLIAMSON TOBACCO CORP.; LIGGETT & MYERS, INC.; LORILLARD TOBACCO CO., INC.; UNITED STATES TOBACCO CO,; B,A.T. INDUSTRIES, PLC; BRITISH AMERICAN TOBACCO COMPANY; THE COUNCIL FOR TOBACCO RESEARCH- U,S.A., INC.; and THE TOBACCO INSTITUTE, INC., Defendants. Chittenden Superior Court Docket No. 744-97 CnC JOINT MOTION FOR STAY OF PROCEEDINGS ' O FFl 1 0 1EIIEDDNCL~S P. 03/43 NOW COME the State of Vermont, by and through its Attorney General, William 13. Sorrell, and defendants; Brown & Williamson Tobacco Corp. (individually and as successor by merger to The American Tobacco Company); Lorillard Tobacco Company; Liggett Group, Inc.; Philip MoEris Incorporated; and R.J. Reynolds Tobacco Co., by and through their respective counsel, and jointly move this Court for entry of the annoxed proposed Order Granting Stay of Proceedings. DATED; 11998. WILLIAM H. SORRELL AttorneylGenerql of Ve_rmont Julie Brill Assistant Attorney General AGREED MOTION FOR STAY OF - 1- PROCL•EDINGS 1129 I31MMI S1:N DOC
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bQ JS8 SfOD i16L11 0 0
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# • 10. For years, the Tobacco Industry hid information about its wrongful conduct from the public. By transferring to lawyers information indicating that either smoking is harmful to human health or nicotine is addictive, defendants have improperly asserted attorney-client privileges, thereby concealing from the public and private litigants the truth about the Tobacco Industry's knowledge of the harmful effects of tobacco products, their manipulation of nicotine levels in order to promote addiction, and their suppression of safer tobacco products. 11. Through recent disclosure, the partial truth about the defendants' activities has been revealed. For example, in a recent settlement with certain Attorneys General, Liggett & Meyers made unprecedented admissions that nicotine is addictive, that the industry manipulates the nicotine levels in its products, that tobacco use causes cancer, and that the industry has been targeting adolescents for decades. Objectives of This Action 12. In this action, the Attorney General seeks to (i) recoup the millions of dollars in Medicaid costs annually inflicted upon the State of Vermont in providing health care to the indigent victims of tobacco-related illness and (ii) to change the way the tobacco industry does business in the State of Vermont in order to prevent the continuing infliction of unacceptable costs to the State Medicaid system and the public fisc by, among other things (a) halting the negligent or intentional marketing of tobacco products to adolescents; (b) requiring full and fair disclosure by the defendants of the nature and effects of their tobacco products and (c) ending the incustry's combination to suppress health-based competition and the development of safer products. II. JURISDICTION AND VENUE 13. This complaint is filed and these proceedings are instituted under 33 V.S.A. § 1911. -3- I IN 1'_ a01: 9SC DOC
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s . STATE OF VERMONT CHITTENDEN COUNTY, SS. STATE OF VERMONT, Plaintiff, Chittenden Superior Court V. PHILIP MORRIS, INCORPORATED; R.J. REYNOLDS TOBACCO CO.; AMERICAN TOBACCO CORP.; BROWN & WILLIAMSON TOBACCO CORP. LIGGETT & MYERS, INC.; LORILLARD TOBACCO CO., INC.; B.A.T. INDUSTRIES, PLC; and BRITISH AMERICAN TOBACCO, SUMMONS Defendants. TO: LORILLARD, INC., DEFENDANT One Park Avenue New York, NY 10016-5896 You are hereby summoned and required to serve upon Julie Brill, Assistant Attorney General, plaintiff's attorney, whose address is 109 State Street, Montpelier, Vermont 05609, an answer to the Complaint Pursuant to 33 V.S.A. § 1911 which is herewith served upon you, within 20 days after service of this Summons upon you, exclusive of the day of service. If you fail to do so, judgment by default can be taken against you for the relief demanded in the Complaint. Your answer must be filed with the court. Unless the relief demanded in the Complaint is for damage covered by a liability insurance policy under which the insurer has the right or obligation to conduct the defense, or unless otherwise provided in Rule 13(a), your answer must state as a counterclaim W rn "REG""'EV'~"cD JUL 2 2 i99s: -1- SGRVICE OF PROCESS N.G. SECRC fARY OF STATE (-n 1129.12 U019 BSC DOC
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0 J. Suppression and Concealment of Industry Knowledge ihat Smoking Is Harmful ...............................................................................................5'2 K. Industry Knowledge of the Addictive Nature of Nicotine .....................................57 L. Suppression and Concealment of Research on Nicotine Addiction ......................64 M. The Industry's Secret Manipulation of Nicotine Levels ........................................65 1. Leaf Growing .............................................................................................69 2. Leaf Purchasing .........................................................................................71 3. Leaf Blending .............................................................................................72 4. Additional Evidence of Nicotine Manipulation .........................................73 N. Maintaining the Market through Sales to Adolescents ..........................................77 1. The Increasing Addiction of Adolescents: A Predicate to Continuing Industry Profits .......................................................................77 2. Deceptive Conduct Directed at Adolescents ..............................................79 3. Reynolds: "Old Joe Camel"......................................................................81 4. Philip Morris's Admission that it has Targeted Adolescents .....................82 O. The Human Toll of Cigarette Smoking .................................................................83 1. Health Effects of Cigarette Smoking .........................................................83 P. Injury To The Public Fisc As A Direct And Foreseeable Consequence Q. Of Defendants' Conduct ........................................................................................88 Fraudulent Concealment .......................................... :....................................... ......88 VII. CLAIMS FOR RELIEF .................................................................................................... .90 Count One: Statutory Cause of Action Based on 33 V.S.A. ~ 1911(e) for Negligent Entrustment .................................................................................................... ...90 Count Two: Statutory Cause of Action Based on 33 V.S.A. § 1911(c) for Negligent and/or Intentional Breach of a Voluntarily Assumed Duty ...............................92 Count Three: Statutory Cause of Action Based on 33 V.S.A. § 191 l(c) for Negligence .................................................................................................... .....................93 Count Four: Statutory Cause of Action Based on 33 V.S.A. § 1911(c) for Defective Product Unreasonably Dangerous When Distributed to Adolescents ...............94 Count Five: Statutory Cause of Action Based on 33 V.S.A. § 1911(c) for Defectively Designed Product Unreasonably Dangerous to Consumers and User ..........95 112912OOl5BSCpOC
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• TABLE OF CONTENTS 0 I. INTRODUCTION .................................................................................................... ...........1 II. JURISDICTION AND VENUE ..........................................................................................3 III. PARTIES .................................................................................................... .........................4 IV. ADDITIONAL JURISDICTIONAL ALLEGATIONS REGARDING B.A.T INDU STRIES, P.L.C ....................................................:............................................... .......7 V. CONSPIRACY ALLEGATIONS ..................................................................................... i 5 VI. FACTUAL ALLEGATIONS ............................................................................................16 A. Background .................................................................................................... ........16 B. The Cartel's Pre-Conspiracy Advertising and Promotional Activities: False Claims of Health and Safety .........................................................................17 C. The 1953 "Big Scare" and Beginning of the Industry Conspiracy to Suppress the Truth and Curtail Competition .........................................................17 D. The Industry Assumes A Duty to Conduct Unbiased Scientific Research to "Safeguard rhe Public Health" ...........................................................22 E. Repeated False Promises to the Public ................................................................. . 24 F. The True Nature of the TIRC and the CTR: A"Front' for the Tobacco Cartel .................................................................................................... ...32 G. The Role of CTR "Special Projects" and Industry Lawyers in Concealing Information .........................................................................................3 S H. The Continuing Conspiracy to Prevent the Development of Safer Products.........41 1. The "Gentlemeri s Agreement.................................................................... ...41 2. Suppression of Liggett's "Safer" Cigarette ................................................43 3. Brown &`Villiamson's Efforts to Develop a "Safer" Cigarette ................45 4. Philip Morris: Avoiding an Industry Ws .................................................46 5. Reynolds's "Safer" Product .......................................................................47 6. The Industry Position on "°Safer" Cigarettes ..............................................47 I. History of Industry Knowledge that Smoking is Harmful .....................................48 1129 12 W35 85C COC
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0 0 STATE OF VERMONT CHITTENDEN COUNTY, SS. STATE OF VERMONT, Plaintiff, vs. PHILIP MORRIS, INCORPORATED.; R.J. REYNOLDS TOBACCO CO.; AMERICAN TOBACCO CORP.; BROWN & WILLIAMSON TOBACCO CORP.; LIGGETT & MYERS, INC.; LORILLARD TOBACCO CO.; B.A.T. INDUSTRIES,PLC; BRITISH AMERICAN TOBACCO COMPANY, Chittenden County Superior Court Docket No. CHIT7ENDEN COUNTY CLERK FILED IN CLERKS OEEICE JUl. - 7 1998 DIANE A LAVALLEE CLERK Defendants. COMPLAINT PURSUANT TO 33 V.S.A. § 1911 I co R E C"p, E 1 U4 .°1;L22 1995 , ~ .~ a\ SERVICE OF PROCESS N.C. SECRETARY OF STATE . I129 I7 Wl5 BSC DGC
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0 0 Lorillard manufactures, advertises and sells Old Gold, Kent, Triumph, Satin, Max, Spring, Newport and True cigarettes and other tobacco products throughout the United States. 21. In 1995, Lorillard's domestic tobacco revenues were $2.1 billion, generating profits of $363 million. 22. Defendant Philip Morris Inc. ("Philip Morris"), is a Virginia corporation whose principal place of business is 120 Park Avenue, New York, New York 10017. Philip Morris manufactures, advertises and sells Philip Morris, Merit, Cambridge, Marlboro, Benson & Hedges, Virginia Slims, Alpine, Dunhill, English Ovals, Galaxy, Players, Saratoga and Parliament cigarettes and other tobacco products throughout the United States. 23. Philip Morris is the world's largest tobacco company. In 1995, Philip Morris' domestic tobacco revenues were $11.5 billion, generating profits of $3.5 billion. 24. Defendant R.J. Reynolds Tobacco Company ("Reynolds") is a New Jersey corporation whose principal place of business is Fourth & Main Streets, Winston-Salem, North Carolina 27102. 25. In 1995, Reynolds' domestic tobacco revenues were $4.5 billion, generating profits of $954 million. 26. Defendant Brown & Williamson Tobacco Corporation ("Brown & Williamson' ) is a Delaware corporation whose principal place of business is 1500 Brown & Williamson Tower, Louisville, Kentucky 40202. Brown & Williamson manufactures, advertises and sells Kool, Pall Mall. Carlton, Lucky Strike, Raleigh, Barclay, BelAir, Capri, Richland, Laredo, Eli Cutter, Tareyton and Viceroy cigarettes and other tobacco products throughout the United States. 27. In 1995, Brown & Williamson had revenues from domestic tobacco sales of $2.3 billion, generating profits of $450 million for domestic tobacco sales alone. Brown & Williamson is or was a wholly-owned subsidiary or division of BATUS Holdings, Inc., and is a wholly-owned subsidiary or division of B.A.T. Industries plc. 28. B.A.T Industries plc ("B.A.T Industries" or "BAT II") is a British corporation whose principal place of business is Windsor House, 50 Victoria St., London, England SW1. -5- 11291'_ M135 6SC DOC
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0 0 homicide, suicide, automotive accidents, and alcohol and drug use combined. More Americans died of smoking related illnesses in 1990 than were killed in any war this century. 6. The use of tobacco is unique among consumer products. It is the only product which, if used as the manufacturer intends, will eventually cause addiction, disease and death. 7. It has been estimated that, in 1993, tobacco use cost the State of Vermont over $29 million in excess Medicaid costs. The State alleges that similar expenditures have been made in subsequent years. The defendants' conduct and the defective nature of their products as described in this complaint have been a substantial factor in the imposition of those costs, and the State seeks recovery of those costs as damages. 8. Tobacco-related disease places an unreasonable burden on the State Medicaid program and the public f:sc. Vermont brings this action to alleviate the present and future burden on public fisc caused by tobacco-related illness. Decades of Wrongful Conduct 9. Since the early 1950's, the Tobacco Industry has engaged in wrongful conduct that continues to this day. Defendants' conduct includes but is not limited to: a. publicly proclaiming that the industry accepted a "special responsibility" to discover and reveal the scientific truth about the health effects of tobacco, and then intentionally or negligently failing to perform the duty they assumed; b. aggressively marketing tobacco products which they knew to be unreasonably dangerous, notwithstanding their promises to the contrary, c. engaging in marketing activities which defendants knew or should have known to be likely to attract adolescents to the use of tobacco products; d. manipulating nicotine levels so as to increase the addictiveness, arid therefore the danger, of their products; e. conspiring to keep safer products off the market, though such products would have lessened the terrible costs of tobacco use. -2- ;l39121M1595CDOC
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9 • I. INTRODUCTION' 1. The State of Vermont, through its Attorney General, William H. Sorrell, files this complaint against the defendants to recover the Medicaid Expenditures caused by tobacco-related health condition. Pursuant to 33 V.S.A. § 1911, Vermont alleges that the defendants were negligent and produced defective products unreasonably dangerous to tobacco users who received or will receive medical assistance. Vermont seeks all damages caused by tobacco- related illnesses arising after the effective date of 33 V.S.A. § 1911. 2. The defendants' conduct and the defective nature of defendants' products complained of herein led the Legislature to enact 33 V.S.A. § 1911, and leads the State to bring this action to recoup the moneys the State has been forced to spend to treat indigent Vermonters suffering from disease caused by defendants' products. The Nature of the Industry 3. Th Tobaccc Industry in the United States is a highly profitable, highly concentrated industry. In 1996, the Tobacco Ind-ustty earned gross revenues in excess of $18 billion tl-.roughout the United States. In Vermont alone, the Tobacco Industry earned gross revenues in 1996 of $125 million from cigarette sales. 4. The U.S. Tobacco Industry is dominated by Brooke Group, Ltd., Liggett Group, Inc. (Liggett & Myers Tobacco Co.), Philip Morris Companies, Inc. (Philip Morris, Inc.). American Brands, Inc. (the American Tobacco Co.), British American Tobacco Company (Brown & Williamson Tobacco Company) and Lowes Corporation (Lorillard Tobacco Co.). The Human And Economic Toll 5. Tobacco use has created a national epidemic of tragic proportions. More than 400.000 deaths per year in the Unites States are tobacco related. In Vermont alone, the annual death toll from tobacco use is over 800. Nationally, tobacco causes more deaths than AIDS, ' This Section 1, Paragraphs 1-12, is intended to serve as an introduction to this complaint. It does not contain averments of claim pursuant to V.R.C.P. 10, and requires no answer from defendants. -1- 1129 12 W]5 BSC DQC
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i ! 34. On information and belief, Brown & Williamson sent to England research conducted in the United States on the topics of smoking, disease and addiction to remove sensitive and inculpatory documents from American jurisdictions. 35. BATCO is a participant in the conspiracy described herein and has caused harm and affected commerce in the State of Vermont. 36. Each of the defendant cigarette and tobacco manufacturers advertised, sold and promoted their tobacco products in Vermont. 37. The above-named defendants are sometimes collectively referred to herein as "Tobacco Industry," "Tobacco Companies" or "Tobacco Cartel." IV. ADDITIONAL JURISDICTIONAL ALLEGATIONS REGARDING B.A.T INDUSTRIES, P.L.C. 38. B.A.T Industries p1c, or'BAT-II," describes itself as "one of the U.K.'s leading business enterprises with interests principally in tobacco and financial services." "[B.A.T Industries] is the world's most international cigarette manufacturer," with an unrivaled range of both internatiot•.at and domestic brands. In 1995, the "B.A.T Industries Group "sold "more than 670 billion cigarettes ... achieving a 12.4% share of the world market [and] B.A.T Industries has the leading cigarette brand in over 30 markets." In 1995, BAT-II's total revenue amounted to about $38.8 billion, and pre-tax profit reached a record $4.6 billion. 39. The terms "BAT," the "BAT Group," and "BAT industries Group" shall be used to refer to BAT-II and its subsidiaries since this is usage adopted by BAT-I1 in its own documentation.2 2 The defendant, B.A.T Industries p.l.c. (or "BAT-II°) repeatedly refers to itself and its tobacco subsidiaries collectively as the `B.A.T Industries Group," or'`the BAT Group," "the Group" or simply "BAT' in publicly- required filings and promotional material. Bat-II and subsidiary annual reports are replete with references to BAT-II as being in the business of selling cigarettes. Of course, this is a clear indication of the close cooperation of the affiliated BAT-II companies worldwide. The term "BAT-[I;" as used here, refers to the corporate defendant, B.A.T Industries p.l.c. The term `BAT-I" refers to British American Tobacco Corporation Limited, an English corporation that, from 1902 until 1976, was the ultimate parent company for the BAT commercial enterprise. Since 1976, BAT-I has functioned largely as only one of many of the BAT Group's tobacco operating companies. The defendant has typically referred to BAT-[ simply as "BATCo." -7- 1139L'OOJ5BSCBCC
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9 0 b. The requirement that American tobacco operations participate in the "Tobacco Strategy Review Team" of the BAT Group; c. direction of marketing strategies; d. direction of legal and technical defense efforts; e. promotion of competing epidemiological scientific information; f. controlling Brown & Williamson personnel policy matters by having Brown & Williamson report directly to BAT Industries on personnel matters and investing authority in a BAT-II committee to approve Brown & Williamson executive salaries, bonus compensation, employment contract terms of VP's and above, as well as other personnel issues; and g. investing authority in a compensation committez, comprised of BAT-II and Brown & Williamson officers to approve appointments and employment contract terms of senior managers below vice president level. 56. BAT-Il acted in complicity not only with the corporate members of the BAT Group itself, but with the American tobacco industry as a whole, in connection with the wrongdoing alleged in this case. The promulgation and ettforcement of deceptive smoking and health policies, and the manipulation of nicotine levels of cigarettes to addict smokers, did not remain within the walls of BAT-II's Windsor House headquarters. These practices spread throughout the BAT Group and into BAT-II's American tobacco business. By combining with the wider tobacco industry in the United States, these policies were implemer,ted on an iz:dustr, - wide basis. 57. B.A.T-II also conspired directly and on its own with the United States tobacco industry to deceive the American public and the citizens of Vermont regarding the consequcnces of cigarette smoking and the addictive nature of nicotine. BAT-II's conspiratorial contact with the United States tobacco industry, independent of Brown & Williamson, includes, without limitation: -12- t J19 :z U1ls osc o0C
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0 i 63. BAT Industries' own publications proudly promote American investment in the company: "Shares of B.A.T Industries are traded in the American Stock Exchange in the United States ... and are often among the most actively traded on that exchange." 64. BAT-II solicits investors in the State of Vermont. One way BAT-II solicits Vermont investors is through advertisements contained in newspapers distributed in Vermont. 65. Upon information and belief, BAT-II's solicitations resulted in investment by Vermont investors. 66. The United States, including Vermont, has been central to BAT-II's global tobacco and financial businesses. 67. BAT-II's actions were intentional, and they were directed at the sale of cigarettes in Vermont (as well as other states). 68. BAT-II is the hub of the BAT Group industrial enterprise, which has sold millions of dollars worth of cigarettes in Vermont. 69. In short, BAT-II regularly does or solicits business in Vetmont. 70. BAT-II has purposely availed itself of the American economy, including the Vermont cigarette and financial markets. 71. BAT Group tobacco revenues in Vermont -- sales ultimately directed and controlled by BAT-II -- are hundreds of thousands of dollars annually. 72. The BAT Group recognizes substantial profits each day for the sale of its cigarettes in Vermont. 73. Over time, BAT-II has reaped millions of dollars of profits from Vermont consumers, upstreaming those profits to diversify its global commercial enterprise and pay dividends. V. CONSPIRACY ALLEGATIONS 74. In cotnmitting the wrongful acts alleged, all defendants and other entities and persons identified, with the assistance and knowledge of their counsel, have pursued a common -I5- u34uVCl56scIX1C
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0 0 14. Each defendant does business in the State of Vermont and each defendant regularly does or solicits business or derives substantial revenue or benefit from goods, materials or services used, consumed or rendered in this state. 15. The violations alleged herein have been and are being committed in whole or in part, and affect commerce in, and defendants do business in, Chittenden County and eisewhere throughout the State of Vermont. 16. Venue is proper in Chittenden County. III. PARTIES Plaintiff 17. The State of Vermont, through William H. Sorrell, Attorney General of Vermont, brings this action pursuant to 33 V.S.A. § 1911. Defendants 18. Defendant American Tobacco Company, Inc. ("American Tobacco") is a Delaware corporation whose prir.cipal place of business is Six Stamford Forum, Stamford, Connecticut 06904. American Tobacco, sometimes hereinafter referred to as "ATC," manufactured, advertised and sold Lucky Strike, Pall Mall, Tareyton, American, Malibu, Montclair, Newport, Misty, Iceberg, Silk Cut, Silva Thins, Sobrania, Bull Durham, and Carlton cigarettes and other tobacco products throughout the United States. In 1994, American Tobacco was sold to British American Tobacco Co., parent of dafendant Brown & Williamson Tobacco Corporation. 19. Defendant Liggett & Myers, Inc. ("Liggett") is a Delaware corporation whose principal place of business is Main and Fuller Street, Durham, North Carolina. Liggett manufactures, advertises and sells Chesterfield, Decade, L&M. Pyramid. Dorado, Eve, Stride, Generic and Lark cigarettes and other tobacco products throughout the United States. 20. Defendant Lorillard Tobacco Company, Inc. ("Lorillard"), is a Delaware corporation whose principal place of business is I Park Avenue, New York, New York 10016. iasroo;~sscux
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course of conduct. acted in concert with, aided, abetted and conspired with one another and other conspirators not yet named or known, in furtherance of their common plan and scheme outlined herein. VI. FACTUAL ALLEGATIONS A. Background 75. Today, some 50 million Americans smoke. According to current trends, 22 percent of adult Americans will still be smokers in the year 2000. 76. In the latter half of the 20th century, some 10 million Americans have been killed by smoking-related disease. This year (and every year into the foreseeable future), nearly half a million Americans will die prematurely due to disease caused by cigarette smoking. 77. Based upon current smoking trends, of the American children alive today, more than 5 million will be killed by cigarette disease during the 21 st century. 78. In the 1990's, thousands of Vermont residents died from smoking-related causes. 79. Several factors account for the persistence of cigarette smoking. 80. First, partly as a result of the Tobacco Industry's false and fraudulent advertising, smoking became socially acceptable before its deleterious effects were known. 81. Second, the long latency period between smoking initiation and disease contraction masked the causal relationship for decades. 82. Third, cigarettes contain large amounts of nicotine. 83. Nicotine is an addictive substance. 84. Nicotine in cigarettes makes it difficult for a person to stop smoking. 85. Through a variety of methods, defendants manipulate the levels of nicotine in their products in order to promote and sustain addiction. 86. Fourth, the Tobacco Industry has conspired not to compete on the basis of relative health risk. The tobacco industry conspired to restrict output in safer and alternate products. -16- 1129 t2 OOJS osc DOC
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0 0 117. The memorandum's reference to "every effort" referred to the Tobacco Industry's agreement not to compete on the basis of health claims for fear of stirring up any controversy regarding health and safety. 118. Defendants were keenly aware that the agreement creating the TIRC was a restraint on competition: "On the Continent individual companies and monopolies have agreed to pool research on the health question, thereby reducing it as a basis for competition." (Emphasis added.) 119. To further the existing conspiracy, a second trade group, the Tobacco Institute, was formed by cigarette manufacturers in 1958. It performs a variety of functions and provides opportunities for the conspirators to exchange information, to police the agreement and otherwise to coordinate activities. D. The Industry Assumes A Duty to Conduct Unbiased Scientific Research to "Safeguard the Public Health" 120. As the initial step of the conspiracy, the cigarette industry announced the formation of the TIRC on January 4, 1954, with newspaper advertisements nationwide, reaching a circulation of more than 43 million Americans. This ad appeared in newspapers circulated throughout Vermont. The advertisement was captioned "A Frank Statement to Cigarette Smokers" and was run under the auspices of the TIRC. 121. Listed as sponsors of this advertisement were, interalia, the American Tobacco Company, Brown & Williamson Tobacco Corporation, P. Lorillard Company, Philip Morris Co. Ltd., Inc., R.J. Reynolds Tobacco Company and United States Tobacco Company. 122. The advertisement stated as follows: "A Frank Statement to Cigarette Smokers" RECENT REPORTS on experiments with mice have given wide publicity to a theory that cigarette smoking is in some way linked with lung cancer in human beings. Although conducted by doctors of professional standing, these experiments are not regarded as conclusive in the field of cancer research. However, we do not believe that any serious medical 0 11:2¢0035 BSC DOC
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0 e. George Allen, president of the Tobacco Institute, issued a report pledging that the TI, for the benefit of the "public interest," would "encourage the kind of research that will provide the necessary facts." Further, Allen promised that this type of research "is what the industry has tried to do in the past" and "is what we shall do in the future, tmtil enough facts are known to provide solutions to the health questions involved." f. In 1962, the TIRC issued a release announcing it was in its ninth year of supporting research by independent scientists relevant to questions about tobacco and health. The release represented that "the tobacco industry continues its support of the search for truth and knowledge :" g• On May 28, 1962, the TIRC in a release confirmed that its purpose was to "make the facts known to the public." h. In 1964, the TIRC issued a°year end statement" representing that its research "will intensify," that $7.25 million had been apportioned to date involving 125 grants, and that the TIRC "is dedicated to support its program of research by independent scientists until all the answers are known." i. The Tobacco Institute ("TI"), the cigaretre industry's lobbying group, in the 1960's again confirmed and acknowledged the industry's "special responsibiliry" to report the truth: The tobacco industry supports and cooperates with all responsible efforts to find the facts and bring them to the public. ... We know we have a special responsibility to help scientists determine the facts about tobacco use and health. The industry accepted this responsibility in 1954 by establishing the Tobacco Industry Research Committee to provide research grants to scientists in recognized research institutions. This research program is continuing on an expanded and intensified scale. j. This special responsibility was also recognized in additional statements issued by TI. For example, TI stated: -26- 11?9 12 W)5 0SC DoC
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9 a progress of the utilization of Y-1 tobacco and Mr. Pritchard (BAT-II board member and CEO of Brown & Williamson) was responsible for Y-1 tobacco reporting. b. Project GREENDOT. The TSRT directed the BAT Group's Project GREENDOT, a nicotine manipulation scheme which had the specific aim of lowering tar, but having normal nicotine delivery. Project GREENDOT was later terminated by the BAT-II TSRT. c. Project AIRBUS. The TSRT dictated the direction, funding, and ultimate termination of Project AIRBUS. Project AIRBUS had been undertaken by Brown & Williamson in response to the development by R.J. Reynolds Tobacco Company of a smokeless and virtually tobacco-free cigarette. Once the R.J. Reynolds Tobacco Company product failed, the TSRT ordered the discontinuation of any further work of developing a smokeless cigarette as an alternative to its tobacco products. Research based on AIRBUS technology was later resu.med and continued, at TSRT direction, in England, as Project NOVA. d. Ammonia Treatment. The TSRT directed the BAT Group's global use of ammonia treatment for tobacco. During many TSRT meetings, the chairman of BAT-II exhorted the need to increase the BAT Group's use of ammonia treatment. Treating tobacco with ammonia increases the amount of "free" nicotine in cigarette smoke, and thereby increases the "impact" of the smoke. 55. BAT Industries' involvement in the day-to-day operations of its subsidiaries, especially Brown & Williamson, is frequently detailed and "hands-on". Examples of B.AT-lI's "hands-on" involvement in the day-to-day operations include, without limitation, the following: a. The promulgation of "guidelines" which are designed "to indicate the contribution" BAT-II is requiring from its United States and other operations. "botl-i ir nnansial terms and supporting B.A.T Industries' policies and strategies." Among many other tnings, BAT-II established guidelines requiring American tobacco operations to contribute with the other tobacco operations in the formulation and implementation of a gtoup-wide R&D program; 1 1-9 1^-0035 9SC DOC
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0 • c. induce some competitors to promote their own brands or denigrate competing brands on the basis of relative health risk, d. materially reduce their profits and market shares; e. increase the likelihood of government regulation. 93. In the early 1950s, scientists published two significant scientific studies warning of the health hazards of cigarettes. The first was published in 1952 by Dr. Richard Doll, a British researcher, who found that lung cancer was more common among people who smoked and that the risk of lung cancer was directly proportional to the number of cigarettes smoked. 94. A second study was published in December 1953 by Dr. Ernest Wynder and others of the Sloan-Kettering Institute. 95. Wynder's experiments with mice confirmed the cancer-causing I+roperties of cigarettes. 96. The widespread reporting of these studies caused what cigarette company officials called the "Big Scare." 97. By late 1953, the Big Scare had caused a decrease in consumption of tobacco products and in the stock prices of many of the Tobacco Companies. 98. The cigarette industry responded quickly to the Big Scare. 99. On December 14. 1953, as a result of the public's concern over the Wynder study, Brown & Williamson president Timothy V. Hartr:ett circulated a memorandtL•n to his counterparts at other def ndant Tobacco Companies and set out his proposals on how the industry should collectivelv deal with the "health issue." 100. Hartnett proposed a two-pronged collective response to his competitors "to get the industry out of this hole." 101. Hartnett proposed that the industry ostensibly offer "unstinted assistance to scientific research." The most difficult part of the "research" effott would he "how to handle significantly negative research results if, as. and when they develop." -18- I 12912 OU35 USC DOC
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• 40. BAT-II's United States interests are a significant part of the BAT-II empire. According to one BAT-II publication: "The North American operations of B.A.T. Industries are a key part of the Group's strategic and financial development. In 1987 they contributed 44 per cent of the Group's trading profit and accounted for 27 per cent of turnover worldwide. Nearly one-third of B.A.T Industries assets are held in North America." 41. Brown & Williamson, BAT-II's wholly-owned United States subsidiary, is by far BAT-II's most significant North American asset. It is BAT-II's largest operating group and the third largest tobacco company in the United States. 42. Throughout BAT history, BAT-II board members have acted to ensure that they dictate and control all significant smoking and health policies, research programs and marketing strategies of BAT tobacco operations, including Brown & Williamson. In addition to reserving for itself sufficient policy-making and decision-implementing power to establish and maintain the BAT Group's complicity in the tobacco industries' public health conspiracy, the BAT-Il board established, among others, the following five boards and committees, all reporting directly to the BAT-II board of directors, to assist in controlling every aspect of BAT Group tobacco operations: a. Chairman's Policy Committee (CPC) (later changed to Chief Executive Committee). The CPC was formed to act as "key executive body of the [BAT-II] Board." Management of all tobacco operating companies report directly to CPC. b. The Tobacco Division Board (TDB). The TDB is responsible for considering and referring directly to the board issues relating to smoking and health, research policy and marketing policy. c. The Tobacco Executive Committee (TEC). The TEC exists to give TDB time to "concentrate on policy matters in depth." It is "responsible for the execution of policies and objectives decided by TDB." d. The Tobacco Strategy Review Team (TSRT). The purpose of the TSRT was to "formulate overall strategic objectives" for the BAT Group relating to tobacco issues. -8- 11]9 12 0015 BSC DOC
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0 0 49. BAT-II has directly and substantially engaged in key decision-making for the research, development, design, manufacture and marketing of hundreds of millions of dollars of cigarettes sold in Vermont. 50. Through secret programs such as Project GHOST or Project BATTALION and through formal delegation of authority, BAT-II directly participated in fundamental, strategic, and implementive decisions leading to the sale of cigarettes in the United States by the BAT Group, and more particularly, its wholly-owned subsidiary, Brown & Williamson. 51. BAT-II's participation was detailed, and covered the political relations to accompany the business generally, and the administrative infrastructure to conduct research, development, manufacturing, design and marketing of cigarettes. 52. BAT-II controlled the initiation of new research and product development by the BAT Group, including Brown & Williamson. BAT-II also has dictated and controlled the termination of such development and research often before the original research objectives have been achieved. 53. One area in which BAT-11 control over research dnd product development has been exercised most pre-emptively is in the development of so-called "safer" cigarettes and other novel products. BAT-II, through the TSRT, has directly orchestrated the efforts of BAT operating companies in the United States, and across the globe, in this area. 54. Examples of BAT-II's direction and control of research and product development include, without limitation: a. Y-1 Tobacco. The TSRT directed the efforts of the BAT Group, and particularly its United States tobacco operations, with respect to the utilization of a genetically- engineered tobacco known as Y-1. The BAT Group secretly developed Y-1 tobacco with nicotine content more than twice the average found naturally in flu-cured tobacco. The TSRT organized efforts to grow Y-I tobacco in South America and ship it to the United States to be used by Brown & Williamson commercially in cigarettes sold in Vermont--and urged the use of Y-1 tobacco worldwide. The chairman of BAT-II expressed particular interest in reviewing the -10- I I29 I100]5 95C ~OC
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• TIRC's associate scientific director, "little is established scientifically about tobacco effects on the heart"; and tobacco has "even been reported as killing various harmful bacteria." The release represented that the TIRC "is supporting scientific investigation into many phases of tobacco use and human health in order to get the facts." b. On December 16, 1957, the TIRC issued a release representing that "Extensive scientific research now underway into tobacco use does not substantiate generalized charges against smoking as a cause of cancer." Reporting on the findings of Dr. Clarence Cook Little, "Scientific Director" of the TIRC, the release represented that "no substance has been found in tobacco smoke known to cause cancer." According to Dr. Little, the research program was designed "solely to obtain new information and to advance human knowledge in every possible phase of the tobacco and health relationship." c. On or about December 27, 1958, the TIRC issued a release representing that "during the past year many scientists of high professional standing have produced additional evidence and opinions that challenge the validity of broad charges made against tobacco use." According to the TIRC, its research had developed several "essential facts," including that "the cause or causes of lung cancer remain undetermined" and that "compelling doubts have been raised about statistics and their interpretations involving smoking and health." The release concluded with the following promise: At its formation in January 1954, the Tobacco Industry Research Committee stated its fundamental position: "We believe the products we make are not injurious to health. We are providing aid and assistance to research efforts into all phases of tobacco use and health." That statement and pledge are reaffirmed today by members of the Tobacco Industry Research Committee. d. On March 28, 1960, the TIRC issued a release challenging any link between smoking and lung cancer. In the release the TIRC repeated that "we have frankly accepted a responsibility for financing independent research into health problems, including lung cancer, in an effort to get needed facts and evidence." -25- I I?9 12 OGlS BSC WC
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• Initially, membership on the TSRT was confined to a very close circle of BAT-II Board members whose job on the TSRT was to dictate tobacco strategy of the entire BAT Group. Years later, membership was extended to include the Chief Executives of the four tobacco businesses, including Brown & Williamson. e. The Scientific Research Group (or "SRG"). The mission of the SRG was to "set group policies and issues related to additives, pesticide residues and smoking and health." The BAT-II board has acted through these groups to assure that its overall policies and strategic objectives relating to its tobacco business and smoking and health issues are followed on a global basis. 43. Both through these groups and in other ways, BAT-II has played a significant role in the BAT Group process that leads to the sale of hundreds of thousands of packs of cigarettes in Vermont annually. 44. BAT-11 exercises control over the day-to-day operations of its wholly-owned subsidiary Brown & Williamson, especially or. the critical issues of new product development, smoking and health, the addictiveness of nicotine and marketing tobacco products to American children. 45. BAT-11 has played the leading role in the research and development and design and marketing of cigarettes for the BAT Group, including Brown & Williamson. 46. The BAT-11 board and senior officers have established and enforced coordinated cigarette research, tobacco growth and other development policies for the BAT Groun. BAT-11 has also established and enforced policies and guidelines for the design and rnanufacture of addictive cigarettes in the United States. 47. BAT-11 established and enforced coordinated marketing and prlblirc relations policies for the BAT Group in the United States. 48. In sum, BAT-II is the ultimate decision-maker on all significant issues -- eesearch, tobacco agriculture, design, manufacture, marketing or administration -- that affect the BAT Group's sale of cigarettes in Vermont. -9- 112912 OUlS HSC IX1C
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0 0 109. Despite the dangers, the competitors met because they viewed the-current problem "as being extremely serious and worthy of drastic action." The problem was so serious "that salesmen in the industry are frantically alanned and ... the decline in tobacco stocks on the stock exchange market has caused grave concern." 110. The agreement reached at the Plaza Hotel, to conceal adverse information and to refrain from competition on the basis of health, became a permanent fixture of defendants' future relationship. 111. According to the Hill & Knowlton memorandum, "[e]ach of the company presidents attending emphasized the fact that they consider the program to be a long term one," and the meeting participants were "emphatic in saying that the entire activity is a lon -tg erm, continuing program, since they feel the problem is one of promoting ci.-arettes and protecting them from these and other attacks that may be expected in the future." (Emphasis added.) 112. The course of conduct agreed to at the December 15, 1953, meeting included but was not limited to: a. "The chief executive officers of all the leading companies - R.J. Reynolds, Philip Morris, Benson & Hedges, U.S. Tobacco Company, Brown & Williamson - have agreed to go along with a public relations program on the health issue." b. "Because of the antitrust background, the companies do not favor the incorporation of a formal association. Instead, they prefer strongly the organization of an informal committee which will be specifically charged with the public relations function and readily identified as such." c. Hill & Knowlton, a public relations firm, was to play a central role in the industry association. "The current plans are for Hill & Knowlton to serve as the operating agency of the companies, hiring all the staff and disbursing all funds." d. All of the leading manufacturers, except Liggett, agreed to join in the public-relations strategy. Liggett decided not to participate at that time '`because that company feels that the proper procedure is to ignore the whole controversy." -20- 1129 12 00I5 6SC GOC
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! i a. High level BAT-II executives initiated and maintained direct contact with their counterparts in American tobacco industry on topics related to smoking and health, nicotine. and other wrongdoings alleged in this case; b. BAT-II regularly conducted visits to the United States, independent of Brown & Williamson business, which included direct contact with the research directors of major American cigarette companies, including RJ Reynolds, Philip Morris, Liggett & Myers as well as the American Medical Association and the National Institutes of Health, on research aspects of smoking and health. c. BAT-II, through the United Kingdom Tobacco Institute. regularly shared research information on smoking and health issues with TiRC, CTR and other tobacco industry fronts in the United States. 58. For twenty years, BAT-II has controlled and directed the BAT C*roup's international campaign to suppress and conceal material information and to promote disinformation about the health consequences of smoking. From its corporate headquarters in England, BAT-II directed and controlled the manipulation of scientific research, non-disclosure of scientific research, suppression of product development and obstruction of the judicial process across the globe. The fraud was particularly acute with respect to the United States and Brown & Williamson. These actions resulted in widespread disease and death throughout Vermont and other states. Examples of BAT-II's efforts to ensure its market position by concealing sigmificant health and product information include without limitation: a. Establishing and enforcing strict guidelines for the mandatory d?str,bution of BAT Group scientific research to Brown & Williamson exclusively through certain Americzn lawyers with neither Brown & Williamson nor any Brown & Williamson employee r---veaLed on the distribution list; b. Implementing and enforcing BAT disciplinary policies for °careless" statements by employees about smoking and public health; -13- I 129 12 0015 RSC DOC
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• 0 research, even though its results are inconclusive should be disregarded or lightly dismissed. At the same time, we feel it is in the public interest to call attention to the fact that eminent doctors and research scientists have publicly questioned the claimed significance of these experiments. Distinguished authorities point out: l. That medical research of recent years indicates many possible causes of lung cancer. 2. That there is no agreement among the authorities regarding what the cause is. 3. That there is no proof that cigarette smoking is one of the causes. 4. That statistics purporting to link cigarette smoking with the disease could apply with equal force to any one of many other aspects of modem life. Indeed the validity of the statistics themselves is questioned by numerous scientists. We accept an interest in people's health as a basic responsibility. paramount to everv other consideration in our business. We believe the products we make are not injurious to health. We always have and always will cooperate closely with those whose task it is to safeeuard the public health. For more than 300 years tobacco has given solace, relaxation and enjoyment to mankind. At one time or another during these years critics have held it responsible for practically every disease of the human body. One by one these charges have been abandoned for lack of evidence. Regardless of the record of the past, the fact that cigarette smoking today should even be suspected as a cause of a serious disease is a matter of deep concern to us. Many people have asked us what we are doing to meet the public's concern aroused by the recent reports. Here is the answer: 1. We are pledging aid and assistance to the research effort into all phases of tobacco use and health. This joint financial aid will of course be in addition to what is already being contributed by individual companies. 2. For this purpose we are establishing a joint industry group consisting initially of the undersigned. This group will be known as TOBACCO INDUSTRY RESEARCH COMMITTEE. -23- 1i2912035 B5C OOC
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i • Through a holding company, B.A.T Industries is the sole shareholder of Brown & Williamson. B.A.T Industries exercises direct and detailed "hands on" control over day-to-day operations of its subsidiaries, especially Brown & Williamson. B.A.T Industries, directly and through its agent Brown & Williamson, has placed cigarettes into the stream of coi:unerce with the expectation that substantial sales of cigarettes would be made in the United States and in the State of Vermont. B.A.T Industries has also conducted, directly or through its agents, subsidiaries, associated companies and/or co-conspirators, significant research for Brow-n & Williamson on the topics of novel product development smoking, disease and addiction. B:A.T Industries surreptitiously sent that research to Brown & Williamson in the United States, and conspired with and directed Brown & Williamson to conceal the research and other shared information from discovery in United States lawsuits, which it did. 29. On information and belief, Brown & Williamson sent to B.A.T Industries in England research conducted in the United States on the topics of smoking, disease and addiction, in order to remove sensitive and culpatory documents from United States jurisdiction, and such documents were subject to B.A.T Industries' control. 30. B.A.T Industries is a participant in the conspiracy described herein and has caused harm and affected commerce in the State of Vermont. 31. Defendant British American Tobacco Company, Ltd. ("BATCO") is a British Corporation whose registered office is at Millbank, Knowle Green, Staines, Middlesex, England TW18 1DY. British American Tobacco Company, Ltd., is or was a related corporation of defendant Brown & Wiiliamson Tobacco Corporation. Both are owned by B.A.T. Industries. 32. At times pertinent to the complaint, BATCO, individually or through its affiliate, alter ego, subsidiary andlor divisi3n, defendant Brown & Williamson designed, tested, manufactured, marketed and sold cigarettes for use in the State of Vermont. 33. BATCO has also conducted, or through its associated companies, agents or subsidiaries has conducted, significant research for Brown & Williamson on the topics of smoking. disease. and addiction. co rn -6- t I3~ IZ OUJJ B}C C(K
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0 0 113. Nine days later, Hill & Knowlton presented a memorandum detailing its recommendation to the Tobacco Companies. The memorandum recognized the importance of gaining public trust, and avoiding the appearance of bias, if the industry's "pro-cigarette" public- relations strategy was to succeed. According to the memorandum: a. "[T]he grave nature of a number of recently highly publicized research reports on the effects of cigarette smoking ... have confronted the industry with a serious problem of public relations." b. "It is important that the industry do nothing to appear in the light of being callous to considerations of health or of belittling medical research which goes against cigarettes." c. "The situation is one of extreme delicacy. There is much at stake and the industry group, in moving into the field of public relations, needs to exercise gnat care not to add fuel to the flames." 114. John Hill suggested that the word "research" be included in the name of the Committee. An organization designed to pursue a very delicate "public relations function" was given the intentionally misleading name of the "Tobacco Industry Research Committee." 115. Five of the "Big Six" cigarette manufacturers were original members of the TIRC. Liggett did not join until 1964. In 1964, the TIRC changed its named to the Council for Tobacco Research (the "CTR"). 116. The agreement that the industry would not compete based on claims of health was documented and communicated in a number of ways. One example is a June 21, 1954 Hill & Knowlton memorandum: Early in the life of the Tobacco Industry Research Committee, it was accepted as a basic principle that every effort should be made to avoid stimulating more adverse publicity and controversy on the subject of tobacco and health. The principle has been and wi.ll continue to be carefully adhered to in the work carried on for the committee. -21 - I I79I^_ Cbl5 BSC ~
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140. An April 1962 memorandum of Hill & Knowlton reveals the real-purpose of the TIRC: "To date, the TIRC program has carried its fair share of the public relations load in providing materials to stamp out brush fires as they arose." 141. A 1972 internal document from a Tobacco Institute official to the group's president described the importance of using joint industry research to maintain public doubt about the link between smoking and disease: For nearly twenty years, this industry has employed a single strategy to defend itself on three major fronts - litigation, politics, and public opinion. While the strategy was brilliantly conceived and executed over the years helping us win important battles, it is only fair to say that it is not - nor was it ever intended to be - a vehicle for victory. On the contrary, it has always been a holding strategy, consisting of * creating doubt about the health charge without actually denying it * advocating the public's right to smoke, without actually urging them to take up the practice * encouraging objective scientific research as the only way to resolve the question of the health hazard. As an industry, therefore, we are committed to an ill-defined middle ground which is articulated by variations on the theme that, 'the case is not proven.' 142. A 1974 report to the CEO of Lorillard from a research executive described CTR's scientific projects as having not been selected using specific scientific goals, but rather for various purposes such as public relations, political relations and position for litigation. 143. The falsity of the "independent research" being conducted by the CTR is revealed by the following internal Philip Morris memo: It has been stated that CTR is a program to find out 'the truth about smoking and health.' What is truth to one is false to another. CTR and the Industry have publicly and frequently denied what others find as`truth.' Let's face it. We are interested in evidence which we believe denies the allegation that cigarette smoking causes disease. If the CTR program is aimed in this direction, it is in effect trying to prove the negative, that cigarette smoking does not cause disease. Both lawyers and scientists will agree that this task is extremely difficult, if not impossible. -33- 1129¢0035BSCDOC
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0 • 87. Fifth, the Tobacco Industry conspired to create confusion as to whether smoking is harmful and to make it appear that there is a legitimate, good-faith scientific dispute over the health impact of smoking. The industry presents cigarette smoking in an attractive, youthful and positive way. B. The Cartel's Pre-Conspiracy Advertising and Promotional Activities: False Claims of Health and Safety 88. Despite the growing body of evidence showing their cigarettes caused lung disease and cancer, the Tobacco Companies chose to promote their product with deceptive health claims. Starting in the 1930s and continuing until the mid-1950s, the Tobacco Companies made express claims and warranties as to the healthiness of their products with disregard of the falsity of their claims and the consequential adverse health impact on consumers. 89. Examples of these health warranties include the following: Old Gold: "Not a cough in a Carload"; Camel: "Not a single case of throat irritation due to smoking Camels"; Philip Morris: "The Throat-tested cigarette." 90. One of the key themes used t_o promote cigarette smoking during this ueriod was a promise that individual cigarette brands were either "less irritating" or that "harmful irritants" had been removed. At one point or another during this period every major cigarette brand made a false claim regarding health and/or irritation. 91. These pre-1954 advertisements and representations demonstrate defendants' understanding that consumers wanted safer products. As a result, prior to 1954, the Tobacco Companies engaged in vigorous competition on the basis of claims of health. C. The 1953 "Big Scare" and Beginning of the Industry Conspiracy to Suppress the Truth and Curtail Competition 92. The defendants knew that published information about health risks could a. decrease tobacco sales; b. increase consumer demand for safer tobacco products, -17- 12912 0055 BSC DOC
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c. Undertaking sensitive group research on smoking and health issues in England because BAT-11 would not "want it to leak back to the United States." 59. BAT-II has succeeded in its aggressive United States corporate acquisition plan, a plan that has had significant effects upon the Vermont economy. For example. in 1994 BAT-11 purchased the American Tobacco Company, then the fifth-largest tobacco operation in the country, for approximately $1 billion. 60. BAT-11 is also subject to personal jurisdiction for engaging in tortious conduct in Vermont. BAT-II has assured that substantial scientific and other knowledge not be disc)osed to Vermont and its citizens; has directed the research and design of cigarettes sent into Vermont for sale and consumption; and has assured the complicity of B&W and the other BAT-11 operating companies in the United States tobacco industry conspiracy alleged in the complaint. As a result, BAT-11 has directly or by an agent caused tortious injury by an act or omission in this State. 61. When it suits BAT-II's own purposes, BAT-II does not hesitate to subject itself to jurisdiction in the United States. For example, when it sought to consummate its $5.2 billion purchase of the Farmer's Group, BAT-11 subjected itself to jurisdiction in various states ir, undertaking the insurance approval process for that transaction. When it sought to purchase American Tobacco Company for $1 billion, it submitted to the jurisdiction of the Federal T rade Commission, and judicially admitted that it was involved in "commerce" between the various states. When it sought to raise hundreds of millions of dollars on the American financial markets through the sale of promissory notes through its United States subsidiary, BAT-Il submitted ta the jurisdiction of New York courts and unconditionally guaranteed payment on the notes. 62. BAT-Il regularly does and solicits business in the Amcrican financial markets. Over many years. BAT-11 representatives -- including the Chairman of the BAT-11 board -- ha.vee repeatedly canvassed the United States to solicit individual and institutional investment in BAT-11 securities and debt instruments. This solicitation was part of an aggressive marketing plan over years by BAT-11 to solicit greater American investment. -14- 1129 12 ql]5 BSC IJOC
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0 • 3. In charge of the research activities of the Committee will be a scientist of unimpeachable integrity and national repute. - In addition there will be an Advisory Board of scientists disinterested in the cigarette industry. A group of distinguished men from medicine, science, and education will be invited to serve on this Board. These scientists will advise the Committee on its research activities. This statement is being issued because we believe the people are entitled to know where we stand on this matter and what we intend to do about it. (Underlining added.) 123. By issuing this publication and others that followed, the industry affirmatively represented that it would conduct and disclose unbiased and authenticated research on the health risks of cigarette smoking. When they made these representations, defendants intended that the public and government regulators believe and rely upon it. 124. The issuance of the "Frank Statement" was an integral step in the conspiracy to suppress and conceal information that might reduce the industry's sale of tobacco products. E. Repeated False Promises to the Public 125. Despite increasing internal knowledge of the undisclosed dangers of cigarette smoking, defendants continued, renewed and repeated the representations and undertakings of the 1954 "Frank Statement to Cigarette Smokers." The cigarette industry continued to falsely represent the objectivity of industry research to the public to gain credence or, the one hand while misrepresenting, distorting and suppressing information to support its pro-cigarette position on the other. 126. Countless public statements issued after the 1954 Frank Statement by the Tobacco Industry through the TIRC, the CTR and the Tobacco Institute repeated severai themes: (i) that the industry was working to report the full and complete truth concerning tobacco and health, (2) that those working on reporting the truth were "independent" scientists and (3) that the results of this independent research cast grave doubt on any study linking tobacco use with health problems. a. On June 4, 1955, the TIRC issued a release entitled "Antismokin_g Theories Not Based on Scientific Knowledge." The release represented that according to the -24- 1129 12 UD)5 95r DOC
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reported this in a memo, where he wrote that he had been called by UST's general counsel, Jim Chapin. Pepples stated. "Chapin says the statements quoted were unauthorized and do not represent his company's views. He has asked me to extend U.S. Tobacco's apolo vg to each of the cigarette companies and advised me that the individual quoted in the article is no longer employed at U.S. Tobacco. Chapin says U.S. Tobacco has instituted smoking and health seminars throughout the company." (Emphasis added.) 195. This action by U.S. Tobacco is consistent with the conspiracy among defendants not to compete on the basis of safety and health. 196. In response to perceived growing demand, the companies researched the possibility of producing safer products. 197. Many of the companies developed products that would have greatly reduced or eliminated the health risks to tobacco users. 198. The companies did so in order to be ready with such safer products in case their co-conspirators broke ranks and marketed safar products. 199. Notwithstanding this defensive research, the fundamental agreement and understanding remained: information and activities deemed harmful to the unified, defensive posture of the industry or inconsistent with the non-competition conspiracy would be restrained, suppressed, and/or concealed. 2. Suppression of Liggett's "Safer" Cigarette 200. Liggett was successful in researching and actually developing a less-biologically- active cigarette. 201. However, in response to retaliation and threats from co-conspirators, Liggett agreed not to market this product. 202. Liggett initiated its "safer" cigarette project, called XA, in 1968. After a minimal expenditure of only $14 million, Liggett was able, internally, to proclaim the project a success in 1979. By applying an additive of palladium metal and magncsium nitrate to tobacco to act as a -43- 1129 IZ OU35 BSC DOC
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185. There has long been a market demand for safer products. . 186. Despite this demand, the Tobacco Companies agreed not to market safer products. 187. Defendants enforced their agreement by suppressing independent research and policing violators, as described below. 188. The "gentleman's agreement" was referenced in a 1968 internal Philip Morris draft memo, which stated, "We have reason to believe that in spite of gentlemans (sic) agreement from the tobacco industry in previous years that at least some of the major companies have been increasing bioloeical studies within their own facilities." (Emphasis added.) 189. The agreement not to compete was explicitly referenced in an October 1964 memorandum entitled "Reports on Policy Aspects of the Smoking and Health Situation in U.S.A.": The informal agreement between TRC members not to make health claims was explained to Philip Morris. 190. An internal Imperial Tobacco Company memorandum acknowledges that the tobacco companies had agreed to not compete on the basis of health: "It has always been agreed that smoking and health is not a proper field for commercial competition." 191. Defendants' activities in fartherance of the output-restriction/non-competition combination included restraining, suppressing and concealing research on the health effects of smoking, including the addictive properties of tobacco products, and restraining, concealing and suppressing the research and marketing of "safer" cigarettes. 192. Because it was understood within the combination that no company would characterize or promote a product as biologically "safer" the defendants did not market such products, except in limited test markets. 193. Defendants policed their conspiracy internally and externallv. 194. U.S. Tobacco went so far as to terminate an employee and apologize to the Big 6 cigarette companies when the employee was quoted in a NEW YORK PoST article referring to smokeless tobacco as less dangerous than smoking. Ernest Pepples of Brown & Williamson -42- 112912W)5 BSC 1)DC
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150. This presentation reiterated the strategy that had been followed by the industry for years. 151. On February 18, 1982, the TI published a review of the scientific evidence regarding smoking and cancer. The materials challenged any link between smoking and cancer. According to a TI press release on the review, the findings "raise serious question about the link between smoking and cancer." This publication was a direct result of the industry's strategy as outlined at the June 25, 1981 meeting. 152. In 1993, a former 24-year employee of CTR confirmed publicly that the joint industry research efforts were not objective: "When CTR researchers found out that cigarettes were bad and it was better not to smoke, we didn't publicize that. The CTR is just a lobbying thing. We were lobbying for cigarettes." 153. An industry official described in his personal notes a meeting that included high level officials from various Tobacco Companies: "CTR is the best & cheapest insurance the tobacco industry can buy and without it the Industry would have to invent CTR or would he dead." 154. Nonetheless, in its annual reports published between 1985 and 1992. CTR stated that its Scientific Advisory Board funded peer-reviewed research projects ` judging them solely on the basis of scientific merit and relevance °' In 1994, Dr. James F. Glenn, CEO of CTR, submitted testimony to a Congressional Subcommittee chaired by Representative Henry Waxman of California: a. The Council... sponsors research into questions of tobacco use and health and makes the results available to the public. b. [G]rantees are assured complete scientific freedom in conducting these studies ... [P]ublication [of research results] is encouraged in every instance. 00 155. In fact, CTR-sponsored research projects were directed away from research that o\ GI! might add to the evidence against the use of tobacco products. When CTR-sponsored research I crI did produce unfavorable results, the information was distorted or simply suppressed. N= O w -35- 1129.12 0035 95C DOC
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213. For example, Brown & Williamson's parent company B.A.T. developed "Batflake," a tobacco substitute. Laboratory tests showed that use of "Batflake" reduced a number of the harmful effects of smoking in direct proportion to the amount used in a cigarette. So far as is known, none of the substitute products was ever marketed in the United States. 214. In 1980, B.A.T. and Brown & Williamson abandoned the "safer" product search: "Dangerous area [research into irritation and smoke inhalation]. Please do not publish or circulate. No more work is needed on biological side." (Emphasis added.) 215. According to Brown & Williamson internal documents, no other member of the conspiracy broke ranks by competitively marketing products with improved biological performance despite individual competitive reasons for marketing such product. One such document states: "Within B & W, we have rarely attempted to develop new products specifically designed to deliver low CO [carbon monoxide]. except perhaps a prototype of FACT that was kept ready on a turn-key basis in the event of a marketing need for such product. This was done through a combination of filter ventilation, cigarette paper permeability, and appropriate cigarette paper additive. Needless to sav. such need did not arise." (Emphasis added.) 216. Despite increasing market demand, such innovative products were not marketed because of the agreement not to compete; i. e. to restrict output of alternative or safer products. 4. Philip Morris: Avoiding an Industry War 217. Philip Morris also explored research to develop cigarettes that were "safer" or, in the words of one memorandum to the board of directors, had "superior physiological performance." This memorandum noted competitive pressures to produce "less harmful" cigarettes. However, the memorandum was careful to state that, "[o]ur philosophy is not to start a war, but if war comes, we aim to fight well and to win." 218. Philip Morris never broadly marketed such a safer cigarette. Its documents recognize the strong market demand and state that "after much discussion we decided not to tell the physiological story which might have appealed :o a health conscious se¢ment of the market. -46- I¢9 1? 003; 6SC DpC
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The product as test marketed didn't have good taste and consequently was unacceptable to the public ignorant of its physiological superiority." (Emphasis added.) 219. Subsequently, taste was improved, and Philip Morris attempted to protnote the product. However, "The imposition of FTC rules and the industry advertisino code took the starch out of the program...." (Emphasis added.) 5. Reynolds's "Safer" Product 220. Reynolds also developed an alternative product with reduced physiological consequences. Except for a brief test in several cities, Reynolds did not market its safer product, "Premier," because of the intra-industry pact not to promote "safer" cigarettes. 6. The Industry Position on "Safer" Cigarettes 221. In furtherance of their conspiracy, defendants collectively denied that a "safer" cigarette could be produced. 222. A memorandum authored'nv an attorney at Shook, Hardy confirmed that there was an industry-wide position regarding the issue of a safer cigarette. 223. The 1987 memorandum was written in the context of the marketing by R.J. Reynolds of a smokeless cigarette, Premier, which heated rather than burned tobacco. The Shook. Hardy attorney wrote that the smokeless cigarette could "have significant effects on the tobacco industry's joint defense efforts" and that "[t]he industry position has always been that there is no alternative design for a cigarette as we know them." The attorney also noted, "Unfortunately, the Reynolds announcement ... seriously undercuts this component of industry's defense." 224. This fundamental position of the "industry" defense had been identified much earlier. In 1970, David Hardy of the Shook, Hardy flrn~ wrote to DeBaun Bryant, general counsel at Brown & Williamson, expressing concerns about some of the industry research into alternative products. -47- 1129 12 00)5 95C OOC
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• • 241. In 1962, Brown & Williamson's London-based parent company conducted a meeting of its worldwide subsidiaries in Southampton, England. A transcript of the meeting reveals the following remarks: a. One researcher stated that'`smoking is a habit of addiction" and that "[n]icotine is not only a very fine drug, but the technique of administration by smoking has considerable psychological advantages." (Several years later, in 1967, the researcher admitted that the company "is in the nicotine rather than the tobacco industry.") b. Another research executive "thought we should adopt the attitude that the causal link between smoking and lung cancer was proven because then at least we could not be any worse off." c. Another researcher stated that "no industry was going to accept that its product was toxic, or even believe it to be so, and naturally when the health question was first raisede we had to start denying it at the P.R. level. But by continuing that policy, we had got ourselves into a corner and left no room to maneuver. In other words, if we did get a breakthrough and were able to improve our product, we should have to about-face, and this was practically impossible at the P.R. level." d. The chairman of Brown & Williamson's British affiliate stated that it "was very difficult when you were asked as chairman of a tobacco company to discuss the health question on television. You had not only your own business to consider but the employees throughout the industry, retailers, consumers, farmers growing the leaf, and so on. And you were in much too responsible a position to get up and say, I accept that the product which we and all our competitors are putting on the market gives you cancer, whatever you might think privately." e. The chairman also stated that if the company manufactured safer brands, "how to justify continuing the sale of other brands? ... It would be admitting that some of its 03 products already on the market might be harmful. This would create a very difficult public ~ L.: ~ relations situation." cn r.; N U. 11219 I] 00]5 BSC DOC
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• ii. "For cigarette smokers who smoke regularly, excess mortality increases with current numbcr of cigarettes smoked. . . ." iii. "Lung cancer extremely rare among nonsmokers...." iv. As "reported by Hammond ... Excess Mortality [isj (1? higher for cigarette smokers than others and (2) :r:creases with daily cigarette consumption." v. "For both sexes, all chronic respiratory diseases, chronic bronchitis, irreversible obstructive lung diseases ... increased in prevalence with increasing current am.ount of smoking." (Emphasis in original.) 232. The report Liggett presented to the Surgeon General did not contain any of these conclusions and instead focused on alternative causes of disease, such as air pollution, coffee and alcohol consumption, diet, lack of exercise and genetics. Liggett criticized the known statistical association between smoking and mortality and various diseases as based upon °unreL'ably conducted" studies and "inadequately analyzed" data. The Lggett rel-ort concluded tha*t the association between smoking and disease was inconcf usive and due to other factors coincidentally associated with smokintr,. 233. Philip Morris also concealed from the public its actual -vie•,vs of the researcn conducted ouiside the influence of the industry. 234. A 1971 memorandum written by Dr. Helmut Wakeham, then vice president of research and development at Philip Morris, discussed a recent study that found cigaratte-sni ke inhalation caused lung cancer in beagles: 1970 might very properly be cailed the year oft:he beagle. A ariy in the year, the American Cancer Society amiotmced that they had finally demonstrated the formation of lung cancer ir, beagles by smoke inhalation in the now infamous Auerbach and Hammond study. I am sure all of you have read extensively about this in the newspapers, how the industry asked to have independent panel of pathologists review the histological sections shom-ing ca::cer, hcw the Society refused, how generally the ACS was put on the defensive, how publication was refused by two medicai journals and how the story was changed somewhat by the time it was published .... 235. The memorandum gocs on to describe ;,ow the industry publicly dismissed the mice cancer studies, such as the 1953 Wynder research. Dr. 'vVakeh arn explained that "mouse -5"3- ~~:v,:
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0 • skin is not human lung tissue," "smoke condensate has different chemical composition from inhaled smoke," and "painting is not the method of application practised by human smokers." 236. In contrast to the mice studies, however, Dr. Wakeham continued: The logical extension of these objections is that an inhalation test in which an animal breathed smoke like a human would be a better model system. Presumably, in such a test, the formation of lung cancers in the test animal would be strong evidence for the cigarette causation hypothesis. That is why the beagle test was a critical one.... So the test was not conclusive. But it was a lot closer than skin painting. The strong opposition of the industry to the beagle test is indicative of a new more aggressive stance on the part of the industry in the smoking and health controversy. We have gone over from what I have called the "vigorous denial" approach, the take it on the chin and keep quiet attitude, to the strongly voiced opposition and criticism. I personally think this counter-propaganda is a better stance than the former one. 237. Dr. Wakeham's memorandum demonstrates that the 1954 Frank Statement representations and later reaffirmations were deceptive. 238. A recently disclosed series of Brown & Williamson documents set forth the deceptive practices of that company in particular, and of the industry in general with respect to the harmful effects of smoking. 239. Brown & Williamson, like the other manufacturers, was aware early on of the dangers of cigarettes. Indeed, a Brown & Williamson review of published statistical research, including the 1952 report by Dr. Doll, noted that the studies offered "frightening testimony from epidemiological studies." 240. By 1957, one of Brown & Williamson's British affiliates, which conducted much of the health research for the U.S. company, was using the code-name "zephyr" for cancer. For example, in a March 1957 report, the British affiliate stated, "As a result of several statistical surveys, the idea has arisen that there is a causal relation between zephyr and tobacco smoking, particularly cigarette smoking." -54- t129 12 M15 BSC DOC
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0 • 256. For example, more than thirty years ago, a report was completed for BATCO that specifically addressed the mechanism of nicotine addiction in smokers. The researchers concluded that chronic intake of nicotine, such as that which occurs in regular smokers, creates a need for ever-increasing levels of nicotine to maintain the desired reaction: "[u]nlike other dopings, such as morphine, the rate of increasing demand for greater dose levels is relatively slow for nicotine." The report continues: A body left in this unbalanced state craves for renewed drug intake in order to restore the physiological equilibrium. This unconscious desire explains the addiction of the individual to nicotine. 257. Internal Tobacco Company documents reveal that all of this research has convinced company researchers and executives that nicotine in tobacco functions as a drug with powerful psychoactive effects. 258. For example, in 1962, even before much of this research had been completed, Charles Ellis, of BATCO, expressed his view that nicotine in tobacco functior.s as a drug much like stimulants and tranquilizers: It is my conviction that nicotine is a very remarkable beneficent drug that both helps the body to resist external stress and also can as a result show a pronounced tranquilising effect. You are all aware of the very great increase in the use of artificial controls, stimulants, tranquilisers, sleeping pills, and it is a fact that under modem conditions of life people find that they cannot depend just on their subconscious reactions to meet the various environmental strains with which they are confronted: they must have drugs available which they can take when they feel the need. Nicotine is not only a verv fine drue, but the techniques of administration by smoking has considerable psychological advantages and a built-in control against excessive absorption. (Emphasis added.) 259. In the decades that followed this statement, BATCO and Brown & Williamson held many research conferences, some of which were devoted entirely to discussing nicotine's pharmacological effects. 260. The records of these conferences demonstrate that, at almost every conference, Tobacco Company officials from around the world discussed the results of research on nicotine -58- 1 i'_9. t2 p)B5 BSC oOC
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• 268. A second purpose of the Project HIPPO study was to compare the effects of nicotine with those of then-new tranquilizers, "which might supersede tobacco habits in the near futtue." 269. Thus, these researchers believed that nicotine-containing tobacco and tranquilizers were used for the same purposes by consumers. 270. The Project HIPPO reports were disseminated to Brown & Williamson officials. 271. The exchange of information between BATCO and B&W is important because it demonstrates B&W's awareness of the results of studies such as Project HIPPO, which was just one of a number of studies commissioned by BATCO to study nicotine's physiological and pharmacological effects. 272. For example, a 1980 report addresses the critical rcle of nicotine's drug effects: Nicotine is an extremely biologically active compound capable of eliciting a range of pharmacological, biochemical. and physiological responses .... In some instances, the pharmacological response of smokers to nicotine is believed to be responsible for an individual's smoking behavior, providing the motivation for and the degree of satisfaction required by the smoker. 273. The BATCO documents include not only some of the research reports tlremselves. but also summaries or minutes of numerous BATCO research and development ("R&D") meetings at which nicotine's drug effects and importance to the industry were discussed. These papers demonstrate both the consistency and the extent of the industry's interest in and knowledge of nicotine as the primary pharmacological agent in tobacco. 274. For example, at a 1974 BATCO Group R&D Meeting, it was noted that: Nicotine (which has been assumed to be the main pharmacologically active component in smoke) may act in a bi- phasic manner, either as a stimulant (CNV increase) or depres>ant (CNV decrease). 275, Subsequent BATCO research conferences offer equally revealing statements about the drug effects of nicotine. A BATCO Group R&D Smoking Behavior-"+Iarketing Conference held in 1984 focused almost entirely on the role of nicotine pharmacology in -60- 1129 l2OOi5 BSC DOC
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0 0 242. The next year, 1963, Brown & Williamson engaged in an internal'debate over whether to disclose what it knew about the adverse effects of smoking to the Surgeon General, who was preparing his first official report on cigarettes. 243. It was decided that its information would not be disclosed. Some of the documents generated by Brown & Williamson as part of this process were shared with its London-based parent company, as well as other cigarette manufacturers and the TIRC/CTR. 244. Addison Yeaman, who was then general counsel at Brown & Williamson and who authored some of the most critical memoranda from this time, subsequently became a director of the CTR. 245. Yeaman wrote in a 1963 analysis that: a. "[N]icotine is addictive." b. "We are, then, in the business of selling nicotine, an addictive drug. . . ." c. Cigarettes "cause, or predispose, lung cancer .... d. "They contribute to certain cardiovascular disorders ... e. "They may well be truly causative in emphysema, etc." 246. Yeaman suggested that Brown & Williamson "accept its responsibility" and disclose the hazards of cigarettes to the Surgeon General. He noted that this would allow the company to openly research and develop a safer cigarette. 247. Yeaman warned, however, that one danger of candid disclosure was that jurors would learn that the cigarette companies knew of the hazards of their products and had the means to make safer cigarettes - but didn't. Yeaznan noted that this might cause an "emotional reaction" in jurors. 248. Ultimately, Yeaman's suggestion for full disclosure was rejected. 249. Subsequently, Brown & Williamson continued to conduct and conceal biological research. Some of these research projects confirmed causation between tobacco use and health hazards. -56- 11]9 12 W]5 ESC DOC
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0 j. A 1963 memorandum from Liggett's consulting resem•ch fum states: Basically, we accept the inference of a causal relationship between the chemical properties of ingested tobacco smoke and the development of carcinoma, which is suggested by the statistical association shown in the studies of Doll and Hill, Hom, and Dor.t with some reservations and qualifications and even estimate by how much the incidence of cancer may possibly be reduced if the carcinogenic matter can be diminished, by an appropriate filter, by a given percentage. k. A 1966 Philip Morris memorandum confirms the relationship between smoking and cardiovascular diseases as well as the success of the industry in hiding this relationship from the public: Although it is recognized as a prominent problem by medical authorities, the public is not fully aware of the relationship between cardiovascular disease and cigarette smoking. L A Philip Morris "temp report" from 1968, in which t.i;e author ref,orts on z, conversation with Drs. Felton and Hughes of BATCO: LVhen questioned where the English Industry technical personnel st~ ,od on smoking and health, it was stated that there was no doubt on anyone's mind that a smoking and lung cancer link was established ... nt. A 1971 Philip Morris internal memo to R. D. Carpenter from L. Weisbecker regarding Biological Evaluation of Smoke Condensate on human lung ceils. The study showed a considerable number of cells destroyed even though exposure was only 10 minutes. J. Suppression and Concealment of Industry Knowledge That Smoking Is Harmful 231. A document that Liggett's researchers and consultants prepared for the Surgeon General but the Company then withheld states:. A "Draft of an Outline for a Bacb:ground Paper on the Smoking Problem to be Used in Connection with a Presentation of Arguments Before the Surgeon General's Committee" states: i. "All Types of Smoking are Associated with Increased Mortality from all causes combined. ..." 1129 12 0035 RSC DOC
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0 0 250. The more sensitive research was often undertaken by Brown & Williamson's British affiliate, acting on behalf of both companies. Much of the work was performed at a British laboratory called Harrogate, which performed work for a number of cigarette manufacturers, and some of this research was shared with these other companies and the Tobacco Institute. 251. From 1965 to 1978, Battelle Memorial Laboratory conducted experiments for BATCO under the code name "Project Janus" The Battelle lab experiments used mouse skin paintings to determine the carcinogenicity of tobacco. These reports repeatedly found that tobacco caused tumors when painted on the skin of mice: a. A 1971 "Survey of the Janus Mouse Skin Painting Experiments" reported that more than 80 percent of the mice exposed to a blend of flue core tobacco developed tumors. b. A 1973 Janus Report shows 50 percent or more of the mice developing tumors. c. While publicly belittling the use and importance of mouse skin painting. BATCO in a 1970-71 "Project Janus Annual Report" conceded that mouse skin painting is likely to remain an important recognized test of carcinogenesis. K. Industry Knowledge of the Addictive Nature of Nicotine 252. As alleged above, the defendants continue to deny and conceal that tobacco products are addictive. 253. The evidence is clear that the Tobacco Industry has known and hidden for decades that tobacco products are addictive. 254. At the same time that the Tobacco Companies deny that their products are addictive, they secretly manipulate nicotine levels to promw: or maintain addiction. 255. Numerous Tobacco Company documents contain statements by company researchers and executives acknowledging that nicotine is addictive. _57_ 1129 1] CO)5 BSC DOC
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0 0 averaged about five pounds per quitter ... This is not the happy picture painted by the Cancer Society's anti-smoking commercial which shows an exuberant couple leaping into the air and kicking their heels with joy because they've kicked the habit. A more appropriate commercial would show a restless, nervous, constipated husband bickering viciously with his bitchy wife who is nagging him about his slothful behavior and growing waistline. 285. In 1988, during the case of Cipollone v. Liggett, Joseph Culiman 111, former CEO of Philip Morris, testified as follows: Q: Let me ask you the question, then, Mr. Cullman. Is nicotine a drug? A: Well it's so described in every book on pharmacology. Q: So then you agree that it's a drug? A: I have no reason to disagree with books on pharmacology. 286. A memorandum from a Philip Morris official in 1980 confirms the company's view that nicotine's pharmacological effects on the central nervous system are critical to the tobacco industrv's success: Nicotine is a powerful pharmacological agent with multiple sites of action and may be the most important component of cigarette smoke. Nicotine and an understanding of its oroperties are important to the continued well being of our cigarette business since this alkaloid has been cited often as the reason for smoking and theories have been advanced for nicotine titration by the smoker. Nicotine is known to have effects on the central and peripheral nervous system as well as influencing memory, learning, pain perception, response to stress and level of arousal. 287. In a research paper funded by the CTR, reporting on the "beneficial" pharmacological effects of nicotine in cigarettes, the authors said: Nicotine is recognized as the primary psychoactive compound in cigarette smoke. 288. Nicotine is addictive. 289. People use tobacco because of their addiction to nicotine. -63- 1t291JOOl5HSCpOC
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229. After the 1954 Frank Statement, the Tobacco Companies knew and acknowledged among themselves the veracity of scientific evidence of the health hazards of smoking. At the same time, they suppressed such evidence where they could and attacked it when it did appear. 230. Internal cigarette industry documents reveal, for example: a. In the 1950's, Hill & Knowlton interviewed the research directors of each company and forwarded their comments in a memorandum to the TIRC planning committee. In H&K's memorandum, summarizing the interviews, the researcrh directors revealed their knowledge of the relationship between smoking and health and addiction: One of the men said, "It's fortunate for us that cigarettes are a habit they can't break." Said another: "Boy, wouldn't it be wonderful if our company was first to produce a cancer-free cigarette." b. A 1956 memorandum from the vice president of Philip Morris's research- and-development department to top executives at the company regarding the advantages of ventilated cigarettes stated: "Decreased carbon monoxide and nicotine are related to decreased harm to the circulatory system as a result of, smoking.... Decreased irritation is desirable ... as a partial elimination of a potential cancer hazard." c. A 1958 memorandum from a Philip Morris researcher to the company's vice president of research, who later became a member of its board of directors, stated "the evidence ... is building up that heavy cigarette smoking contributes to lung cancer either alone or in association with physical and physiological factors. ..:" d. In a 1959 internal memorandum, RiR acknowledged the carcinogenic nature of smoking: In 1954 the first report of the presence of a carcinogenic (cancer-producing) polycyclic hydrocarbon 3,4-benzpyrene in cigarette smoke was published. Since then, approximately 60 similar compounds have been isolated from the smoke of cigarettes. Eight of the polycyclic hydrocarbons isolated from the smoke are known to produce cancer in mice. Another five or six are suspect as cancer-producing agents in laboratory animals. -49- i l_9 12 U035 BSC DOC
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! "carcinogens are found in practically every class of compounds in smoke," that smoking produces "pleasurable reactions or tranquillity and that this is due in part to nicotine," and then outlines an R&D for program to develop "a medically acceptable cigarette," which includes "reduction of the general level of carcinogenic substances in smoke (but without cnn:plete elimination of more than a handful.)" h. A 1961 "Confidential" memorandum from the consulting research firm hired by Liggett to do research for the company states: There are biologically active materials present in cigarette tobacco. They are: a) cancer causing b) cancer promoting c) poisonous d) stimulating, pleasurable, and _'i avor:9tl. i. A i 963 memorandum to Philip Morris's p"esiaect and CEO fTolY the c^.mpany's vice president of research describes a number of clas~es ot'comrounc:.; in c:Fa tfe smoke which are "known carcinogens: " The document goes on to dascribe tl:e link among smoking, bronchitis and emphysema: Irritation problems are now receiving greater attention because of the general medical belief that irritation leads to chronic bronchitis and emphysema. These are serious diseases invoiving millions cf people. Emphysema is often fatal either directly or through other respiratory complications. A number of experts have predir,tad that the cigarette industry ultimately may be in greazer troubl- in i~zis area than in the lung cancer feld. _51.. : u•> c y'l I BSC coc
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306. Dr. Kessler testified that "the cigarette industry has attempted to frame the debate on smoking as the right of each American to choose. The question we must ask is whether smokers really have that choice." Dr. Kessler stated: a. "Accumulating evidence suggests that cigarette manufacturers may intend this result - that they may be controlling smokers' choice by controlling the levels of nicotine in their products in a manner that creates and sustains an addiction in the vast majority of smokers." b. "We have information strongly suggesting that the amount of nicotine in a cigarette is there by design." c. "The public thinks of cigarettes as simply blended tobacco rolled in paper. But they are much more than that. Some of today's cigarettes may, in fact, qualify as high technology nicotine delivery systems that deliver nicotine in precisely calculated quantities - quantities that are more than sufficient to create and to sustain addiction in the vast majority of individuals who smoke regularly." d. "The history of the tobacco industry is a story of how a product that may at one time have been a simple agricultural commodity appears to have become a nicotine delivery system." e. "[T]he cigarette industry has developed enormously sophisticated methods for manipulating nicotine levels in cigarettes." £ "In many cigarettes today, the amount of nicotine present is a result of choice, not chance." g. "[Since] the technology apparently exists to reduce nicotine in cigarettes to insignificant levels, why, one is led to ask, does the industry keep nicotine in cigarettes at all?" 307. The Tobacco Industry has used techniques such as adding chemicals to increase nicotine potency. 308. In general, by increasing the alkalinity, or smoke pH, of tobacco blends, the industry car, deliver an enhanced "nicotine kick." -66- 1l+_9 [z 0035 68c nOC
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225. In critiquing the minutes of an industry conference, he stated: "It is our opinion that statements such as [references to research into safer products, products which are less biologically active, and to healthy cigarettes] constitute a real threat to the continued success in the defense of smoking and health litigation. Of course, we would make e•y ery effort to explain such statements if we were confronted with them during a trial, but I seriously doubt that the average juror would follow or accept the subtle distinctions and explanations we would be for,r,ed to urge....[E]mployees in both companies [Brown & Williamson and reitish American Tobacco] should be informed of the possible consequences of careless s?atements on this subject." 226. All defendants were keenly aware of the risk to the industr• if any of them soug:7t a competitive advantage by developing and marketing a"safer" product. Ti:e tisk was .voided by agreeing not to compete on that basis. As one industry representative testified: "[Ais a company, we cannot position our products as being healthy. We've afready a;urezd that they are a risk factor [the agreement referenced is the industn-'s l'la_*mlig labels on cigarette packages]. [W]e wouldn't run any advertising :nat positions any of our products as being healthier than others." I. History of Industry Knowledge that Snfoking is Harmful 227. Even before defendants represented i7•n the "Frank Staternen' that "I"nere is no proof that cigarette smoking is one of the causes" of lung cancer, an industry r~sca rc;:--r had reported the contrary. 228. As early as 1946, Lorillard chemist Ii.L-T. Pannele. who late: became'cic~ president of research and a member of Lorillard's board of directors, w_ote to his contpa;y's manufacturing cominittee: Certain scientists and medical authorities have clair..ed for many years that the use of tobacco eoPtr.butes to cancer development in susceptible peopie. Just enough eviderce has been presertt::d :o justify the possibility of such a presumpaon. _G8- 1129 1] Ctl]i 6SC [:+]f.
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smoking. Summaries of the presentations at that conference include numerous references to the pharmacological effects of nicotine and the importance of these effects in maintaining tobacco use. 276. For example, one presentation included the following observation: Smoking is then seen as a personal tool used by the smoker to refine his behavior and reactions to the world at large. It is apparent that nicotine largely underpins these contributions throueh its role as a generator of central physiological arousal effects which express themselves as changes in human performance and psychological well-being. (Emphasis added.) 277. Another BATCO conference focusing on nicotine was held in 1984. One of the presentations was characterized by a Brown & Williamson official: The presentation was concerned with summarizing and outlining the central role of nicotine in the smoking process and our business generally.... There are two areas of nicotine action that are of primary importance: (i) to identify to what extent the pharmacological properties or responses to nicotine are influenced by blood and tissue levels of nicotine. (ii) what is the significance and role of nicotine in eliciting the impact response and upper respiratory tract responses.. . (Emphasis added.) 278. Philip Morris researchers conducted extensive research on nicotine pharmacology from the late 1960s until at least the mid-1980s. 279. The nature and magnitude of the research, as well as statements made in internal documents, show that the Philip Morris researchers strongly believed that nicotine has potent psychoactive effects and that these effects provide a primary motivation for smoking. 280. In 1974, Philip Morris researchers began a study designed to test their theory that hyperkinetic children take up smoking in adolescence because nicotine may perform the same pharmacological fimction as prescription medications used to treat hyperkinesis: It has been found that amphetamines, which are strong stimulants, have the anomalous effect of quieting these children down ... Many children are therefore regularly administered amphetamines throughout grade school years.... We wonder whether such children mav not eventually become cigarette smokers in their teenage years as they discover the advantage of self-stimulation via nicotine. We have already collaborated with a local school system -61- 1U91]0J5BSCDDC
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0 0 pharmacology and agreed that nicotine had been shown to have pharmacological effects on tobacco users. 261. Researchers and executives from the other major Tobacco Companies and CTR have also made statements revealing their knowledge that nicotine is a psychoactive drug. 262. For example, the authors of a research paper funded by CTR reporting on the "beneficial" pharmacological effects of nicotine in cigarettes said that "[n]icotine is recognized as the primary psychoactive compound in cigarette smoke." 263. More than 30 years ago, in 1962-63, BATCO received the results of its Project HIPPO study (HIPPO I and HIPPO II). 264. One purpose of Project HIPPO was to "understand some of the activities of nicotine - those activities that could explain why smokers are so fond of their habit." 265. Many other industry documents refer to the central role of nicotine's drug effects for smokers and, therefore, for the industry. Nicotine is repeatedly identified as a primary reason consumers smoke or use other nicotine-containing products. 266. A "Proposal for Low Delivery Project for B&W" prepared by a B&W marketing firm in the late 1970s contained the following statement that a sufficient dose of nicotine is essential to sell cigarettes and, imolicitlv, to maintain market share based on nicotine addiction: Current market trends clearly indicate a major t md toward low-tar brands although current "ultra" low "tar" brands have had limited success because of their failure to deliver in that if a satisfying, low-nicotine cigarette were to be developed, it could represent an effective means of withdrawal. .. with severe implications for long-term market ¢rowth. (Emphasis added.) 267. A 1976 BATCO Conference on Smoking Behavior further underscores tobacco industry researchers' awareness of the fundamental importance (to the huge majority of smokers) of nicotine's effects on the brain: Some insight into the likely benefits of smoking follows from a consideration of the properties of nicotine, which is considered to be the reinforcing factor in the smoking habit for at least 80% of smokers.. . (Emphasis added.) -59- 11•5.12 OOJS BSC DOC
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` • 297. DeNoble subsequently told Jack Heningfield, Ph.D., chief of the Clinical Pharmacology Branch of the National Institute on Drug Abuse's Addiction Research Center, that Philip Morris officials had rightly interpreted the suppressed nicotine studies as showing that, in terms of addictiveness, "nicotine looked like heroin." 298. In April 1984, Philip Morris told DeNoble and Mele that the lab was being closed. 299. On information and belief, this was done to ensure that DeNoble and Mele's nicotine research remained suppressed and concealed. 300. In or about April 1984, DeNoble and Mele were forced abruptly to halt their studies, turn off their instruments, and turn in their security badges by morning. 301. Philip Morris executives threatened them with legal action if they published or talked about their nicotine research. 302. According to DeNoble, the lab literally vanished overnight. The animals were killed, the equipment was removed, and all traces of the former lab were eliminated. DeNoble recalled, "The lab was gone. everything was gone. The cages were gone, the animals were all gone, all the data was gone. It was empty rooms." 303. DeNoble testified to the Congressional Subcommittee chaired by Rep. Waxtnan that "senior research management in Richmond, Virginia, as well as top officials at the Philip Morris Company in New York continually reviewed our research and approved our research." DeNoble also stated that these officials were specifically told about nicotine's addictiveness. M. The Industry's Secret Manipulation of Nicotine Levels 304. The industry has developed sophisticated technology to control the levels of nicotine to maintain its market and guarantee that its customers become and remain addicted. 305. David A. Kessler, M.D., then-commissioner of the FDA, recently testified before a congressional committee that cigarette manufacturers can manipulate precisely nicotine levels in cigarettes, manipulate precisely the rate at which the nicotine is delivered in cigarettes, and add nicotine to any part of cigarettes. -65- n39 12 OoJ3 BSC eoC
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• • 1. Leaf Growing 315. The industry's control and manipulation of nicotine in the production of cigarettes begin long before the cured tobacco leaf reaches the manufacturing plant. 316. The characteristics of leaf tobacco, including nicotine content, are established by the genetic makeup of the plant, developed during growing, and fixed by post-harvest handling. Like other raw agricultural commodities, tobacco has physical and chemical properties, including nicotine, that can vary widely, depending on genetic differences, growing season conditions, and soil type. The tobacco industry uses these differences to control and manipulate nicotine through careful genetic breeding and agronomic practices. 317. Modem types of cultivated tobacco (Nicotiana tabacum L) have been selected for a relatively high level of nicotine. 318. Five major types of tobacco make up nearly all tobacco products marketed in the United States. 319. T he five major types are Burley, flue-cured, Maryland, the Dark tobaccos, and Oriental. 320. These tobaccos vary both in nicotine levels and in pH. 321. The pH of a tobacco can have a significant influence on the amount of nicotine, and the rate at which it is absorbed into the tobacco user's bloodstream and delivered to the brain. 322. American tobaccos of all types have undergone cumulative increases in total nicotine levels since the 1950s. 323. Nicotine levels in the most widely grown American tobaccos increased almost 10 percent for Burley and more than 50 percent for flue-cured between 1955 and 1980. 324. Two Tobacco Industry activities over the last several decades appear to be responsible for this increase: (1) the industry's active and controlling participation in the Minimum Standards Program, which ensures that nicotine levels of U.S.-grown-and-marketed tobacco are maintained within specified ranges; and (2) the industry's control over which -69- I I29 12 CU35 6SC DGC
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0 0 in identifying some such children in the third grade. (Emphasis added.) 281. In 1961, a presentation by Dr. Helmut Wakeham, a senior Philip Morris research scientist, to the company's Research and Development Committee noLed that: Low nicotine doses stimulate, but high doses depress functions ... It is also recognised that smoking produces pleasurable reactions or tranquillity, and that this is due at least in part to nicotine.... 282. Dr. Wakeham also noted that "nicotine is believed esser.tial to cigarette acceptability," a view later restated by William Dunn, 7r., another high-ranking Philip Morris official. In summarizing a 1972 conference sponsored by the Council for Tobacco Research, Dr. Dunn reported: Most of the conferees would agree with this proposition: The primary incentive to cigarette smoking is the immediate salutary effect of inhaled smoke upon body function. 283. After describing "the physiological effect" as "the primary incentive" for smoking, Dr. Dunn continued: The majority of the conferees would go even further and accept the proposition that nicotine is the active constituent of cigarette smoke. Without nicotine, the argument goes, there would be no smoking. Some strong evidence can be marshalled to support this argument: (1) No one has ever become a cigarette smoker by smoking cigarettes without nicotine. (2) Most of the physiological responses to inhaled smoke have been shown to be nicotine-related. (3) Despite many low nicotine brand entries in the market place, none of them have captured a substantial segment of the market ... 284. A 1971 secret internal report distributed to Philip Morris executives showed that tobacco executives knew the powerfully addictive nature of nicotine in cigarettes. The report studied persons who had tried to stop smoking and concluded that only 28 percent of those who tried to quit were still non-smokers eight months later: Even after eight months quitters were apt to report having neurotic symptoms, such as feeling depressed, being restless and tense, being ill-tempered, having a loss of energy, being apt to doze off. They were further troubled by constipation and weight gains which -62- 1129 12 0035 95C DOC
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0 0 L. Suppression and Concealment of Research on Nicotine Addietion 290. Rather than fulfilling their promise to the public to disclose material information about smoking and health, defendants chose a course of suppression, concealment, and disinformation about the true properties of nicotine and the addictiveness of smoking. 291. For example, Philip Morris hired Victor DeNoble in 1980 to study nicotine's effects on the behavior of rats and to research and test potential nicotine analogues. DeNoble, in turn, recruited Paul C. Mele, a behavioral pharmacologist. DeNoble and Mele discovered that nicotine met two of the hallmarks of potential addiction - self-administration (rats would press levers to inject themselves with a nicotine solution) and tolerance (a given dose of nicotine over time had a reduced effect). 292. However, Philip Morris instructed DeNoble and Mele to keep their work secret, even from fellow Philip Morris scientists. 293. Test animals were delivered at dawn and brought from the loading dock to the laboratory under cover. 294. DeNoble was later told by lawyers for Philip Morris that the data he and Mele were generating could be dangerous. Philip Morris executives began talking of killing the research or moving it outside of the company so Philip Morris would have more freedom to disavow the results. DeNoble recalled that Philip Morris discussed several possible scenarios, including having DeNoble and Mele leaving the company payroll and continuing as contractors, and shifting their work to a lab in Switzerland. 295. In August 1983, Philip Morris ordered DeNoble to withdraw from publication a research paper on nicotine that had already been accepted for publication after full peer review by the journal Psychopharmacology. 296. According to DeNoble, the company changed its mind because it did not want its own research showing nicotine was addictive or harmful to compromise the company's defense in litigation recently filed against it. IV -64- I129 12 00]5 BSC DOC
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0 practices, developed high-nicotine tobacco plants that provide higher-potency raw material, giving manufacturers greater flexibility in blending and in providing uniform and sufficient nicotine deliveries. b. Even without the selective breeding and cultivation of plants for nicotine content, careful tobacco leaf purchasing plans permit the manufacturers to control nicotine content in their products. For example, nicotine content varies among types of tobacco and from one crop year to the next. Awareness of these basic differences and monitoring of the nicotine levels in purchased tobacco allows the companies to produce cigarettes with nicotine deliveries consistent to a tenth of one percent, despite variations as high as 25 percent in the nicotine content of the raw material originating in the same area, from year to year. c. The primary control of nicotine delivery (the amount received by the smoker), however, is in the design and careful, sophisticated manufacture of the cigarette to ensure that the smoker obtains the precise amount of nicotine intended by the manufacturer. 311. According to the FDA's investigation, despite reductions in the amount of tar delivered by cigarettes over the past several decades, nicotine delivery in low-yield cigarettes has not fallen proportionately with the reductions in tar. 312. Instead, nicotine delivery has apparently risen over the last decade, a result that confirms that nicotine delivery is being independently and carefully manipulated by tobacco manufacturers. 313. The FDA found that "°this newly gathered information, together with the other evidence of the industry's breeding, purchasing, blending, and manufacturing practices, reveals that the tobacco manufacturers control the amount of r.icotine that is delivered to the consumer from cigarettes." 314. The Industry's manipulation of nicotine levels is accomplished, in part, as set forth below. -68- 11.912M35 B5C~
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0 i 335. The stalk position of a leaf can be determined by its appearance, shape, color, and thickness, even after harvest. Therefore, an experienced buyer, whose instructions are dictated by the manufacturer's chemists, need only be concerned with these physical characteristics in identifying leaves of high nicotine content. 336. In or around 1995, representatives of the Tobacco Industry described to FDA investigators the significant role that nicotine plays in the purchase of tobacco leaf. 337. Brown & Williamson informed the FDA that stalk position is the "first thing" they look for during leaf purchasing. 3. Leaf Blending 338. After p-Tchase, tobacco leaves are blended to attain target levels of nicotine and tar in the smoke. FDA's investigation noted particular attention on the part of manufacturers to the nicotine content of the leaf in the blending operation. 339. Blending practices by manufacturers are designed to: (1) control the naturally occurring variations in nicotine and other components caused by genetics, growir:g-season conditions, and soil type within a given type and grade; and (2) particularly for low-tar cigarettes, to increase nicotine concentrations and thereby maintain an acceptable nicotine level in the cigarettes. 340. Tobacco leaves are also blended to manipulate pH levels in cigarettes. 341. The pH of cigarette smoke directly affects the delivery of nicotine because it alters the amount of nicotine that is absorbed in the mouth or lungs. 342. The pH is controlled by the manufacturer in the selection of the type of tobacco used and blended. 343. For example, smoke-condensate pH is higher from certain tobacco varieties as well as from leaves at upper stalk positions. 344. According to the FDA, blending techniques have been used to finely control nicotine concentrations in marketed cigarettes. -7Z- 1 II9 12 OU35 8SC IIOC
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0 There is no evidence that any of these compounds will produce cancer in man. Nonetheiessythere is a distinct possibilitv that these substances would have a carcino2enic effect on the human respiratorv system. Medical experience has shown that man responds to various chemical substances in the same manner as experimental animals. It follows therefore that it would be better for the consumer if cigarette smoke were devoid of snci. compounds. As described in RDR, 1956, No. 9, we in the R. J. Reynolds Tobacco Company Research Department corroborated the published findings with respect to 3,4-benzlryrene. obtained this compound in crystalline form, and positively identified it as a constituent of cigarette smoke on the basis of its chemical and physical properties. Some thirty-odd polycyclic hydrocarbons have since been similarly characterized in these laboratories. Of these, eight are carcinogenic to mouse epidermis. Cholanthrene, a potent carcinogen, is one of three not yet reported by other investigators. (Emphasis added.) e. A 1961 document presented to the Philip Morris research-and- development committee by the company's vice president of research and development included a section entitled "Reduction of Carcinogens in Smoke." The document states, in part: To achieve this objective will require a rnaior xsrarch tifori, because Carcmo)uens are fowid in prac'ically cveaY c,ass of compowlds in s_no.e. "1 nis fact prohibits complete solution or'th~f problem by eliminating one or two classes of compounds. The best we can hope for is to reduce a particl.la_ly bad class.:.e., the polynuclear hydrocarbons, or phenols.... Flavor substances and carcinogenic substances come from the same classes, in many instances. f. An internal Lorillard study confirmed the hlmor produci;:zr tt_mar ^f tobacco: Tobacco Component Identi ication Data presently available indicates that a number of analyzable smoke components are positively correlated with tumor producing activity. We doubt that these compounds are responsible for the observed activity per se, bnt they may serve as valuable indices of the effect of changes in tobacco composition. Among the well correlated materials are Isprene, (ndole, Skatole, and several compounds i.t the formic acid frr.ctior,. g A 1961 internal Philip Mriris f2.&D preseetatian lists nw?:,.rous compounds in cigarette smoke that have beer: identified as carcinogens and notes that -50- 1129 .' b35 BSC DOC
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• varieties are suitable for growing in the United States and thereby eligible for federal price support. 325. One key objective of the Tobacco Industry's involvement in the Minimum Standards Program appears to be to ensure that nicotine levels in marketed tobacco do not fall below specified levels. The program was initiated in response to the emergence in the 1950s of several so-called "discount" varieties of tobacco (e.g., "Coker 139," "Coker 187-Golden Wilt," "Coker 282,"'`Coker 140;" "Coker 316," and "Reams 64") that failed to meet c m-rent industry specifications which were established, among other reasons, to control the amount ofnicotine delivery when used in manufacturing filtered cigarettes. 326. To insure the elimination of "discount" or IoW-nicotine varieties from the market, the industry obtained the necessary cooperation from USDA to eliminate these varieties from the price-support program. In fact, to be eligible under this program, growers must certify, even to this day, that "discount" varieties are not being grown. 327. While the Minimum Standards Program ensured that nicotine levels in marketed tobaccos c,id not fall, breeding and cultivation initiatives undertaken by the industry caused nicotine levels to increase. 328. In the 1960s and 70s, the industry turned to tobacco breeders to develop tobacco varieties that produced less tar. Breeders found that without intervention in the breeding of these varieties, nicotine levels were reduced along with tars. 329. Thus, the industry has long been able to grow low-tar and low-nicotine varieties of tobacco for use in manufacturing cigarettes. 330. By 1978, however, the industry had abandoned its interest in the development of low-tar!low-nicotine varieties of tobacco for manufacturing low-yield cigarettes, and instead turned to the development of higher-nicotine varieties. 331. In addition to breeding high-nicotine tobacco varieties, the Tobacco Industry engages in the following agronomic practices that increase nicotine levels in tobacco: -70- 119 12 M15 BSC OOC
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0 • 309. The FDA published the following findings concerning nicotine nianipulation in an August 1995 report entitled Nicotine In Cigarettes and Smokeless Tobacco Products: The information in the preceding sections demonstrates that cigarette manufacturers manipulate and control the delivery of nicotine in marketed products. Cigarettes are designed to supply nicotine at consistent levels despite the wide variations in the nicotine levels of the raw materials, the immensely complicated combustion chemistry, and the complex chemical flow properties of a modem cigarette. Manufacturers use many techniques to control nicotine deliveries. The application of these modifications in cigarette design and their interactive nature pose complex problems in maintaining brand uniformity and consistency regarding nicotine delivery. Yet, the nicotine content and delivery of each brand of cigarettes is remarkably consistent from batch-to-batch and year-to-year. This level of control is analogous to that of the pharmaceutical industry in the production of prescription drugs. In fact, to determine how well nicotine content is controlled in cigarettes, FDA laboratories compared the content uniformity of drugs in tablet or capsule form to the content uniformity of nicotine in cigarettes. The results showed that nicotine content varies from cigarette to cigarette no more than the content of active ingredients in marketed pharmaceuticals. FDA's investigation has also disclosed that the tobacco industry uses a number of methods to boost nicotine delivery in low-yield cigarettes. The cigarette industry has successfully used these methods to maintain adequate nicotine delivery from low-yield products. Without the independent maninulation of nicotine. many of the techniques used to reduce tar would also substantially reduce nicotine. Instead, regardless of differences in labeled/advertised FTC nicotine vields and manufacturers' claims of low-nicotine delivery for certain brands, all cigarettes contain approximatelv the same amount of nicotine in the rod, and deliver about 1 mg of nicotine, enough to produce pharmacological effects. Moreover, studies by FDA and others have demonstrated that the lowest-yield cigarettes have the highest concentrations of nicotine, demonstrating that nicotine delivery has been independently manipulated. The tobacco industry's control and manipulation of nicotine delivery from cigarettes provides additional evidence of the industry's intent to deliver pharmacologically satisfying levels of nicotine to smokers. (Emphasis added.) 310. In particular, the FDA based its findings, in part, on the following: a. The first manufacturing step in nicotine control is the development and selection of raw materials. The Tobacco Industty~ has, through breeding and cultivation -67- 11.1912 035 DSC DOC
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! • 393. Teague's view prevailed. 394. RJR developed the Joe Camel advertising campaign to attract adolescents. 395. The scheme was highly successful. 396. The work of Philip Morris in studying the smoking habits of adolescents also illustrates the Industry's efforts in this area. 397. In a 1982 internal Philip Morris memorandum, the company analyzed consumers' response to government marketing surveys and specifically discussed the incidence of smoking and consumption rate of 12-17 year olds and emphasized the importance of such smokers to the industry: [T]he loss of younger adult males and teenagers is more important to the long term, drying up the supply of new smokers to replace the old. 2. Deceptive Conduct Directed at Adolescents 398. Defendants have engaged in a course of conduct designed to promote cigarette smoking among young people. 399. Tobacco use begins primarily among youth who are not yet 18 years of age. 400. The Tobacco Companies are aware of this fact. 401. The three most used brands of cigarettes among adolescents are the most heavily advertised. 402. The defendants' conduct directed at adolescents includes but is not limited to: a. designing marketing and advertising campaigns that are intended and do appeal to adolescents, while at the same time the tobacco companies proclaim that they are not targeting adolescents; b. placing tobacco advertisements near schools and playgrounds and in youth-oriented publications; c. distributing logos and characters on promotional items such as baseball caps and t-shirts directly to adolescents or in areas known to be frequented by adolescents; -79- 1129 12 OU35 BSC DOC
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0 a. Heavy application of nitrogen fertilizers, early topping, and tight control of bud growth at the junction of stalk and leaves (known as the "sucker") have all acted in concert to push nicotine levels upward. b. Tobacco varieties have been selected for tolerance to brown spot, a leaf disease that makes early harvest necessary. Leaves of disease-resistant varieties tend to remain in the field lunger, resulting in ms..imum nicotine accumulation. c. Since the introduction in 1965 of the acreage-poundage control system, farmers have reduced the number of harvestable leaves per plant and have tended to increase plant spacing. Both of these practices tend to increase nicotine content in the lea£ d. Tobacco growers are transplanting tobacco crops earlier, which, coupled with the widespread use of pesticides in the soil, often results in slow early season growth, and also tends to increase nicotine content in the leaves. 332. The foregoing facts has led the FDA to conclude that: These nicotine-raising agronomic practices have been adopted by U.S. growers in recent years, even though over 50% of the U.S. cigarette market is now characterized as low delivery. Thus, the tobacco industry has developed a number of sophisticated methods for manipulating nicotine levels through breeding and cultivation of tobacco plants and has used these methods to maintain and increase concentrations of nicotine in tobacco leaves. These methods enable the industry to use high-nicotine leaf in low-tar cigarettes, so that, paradoxtcally, certain low-tar cigarettes now contain more of the higher nicotine tobacco in their blend than cigarettes with higher tar deliveries. The use of these methods demonstrates that the industry manipulates nicotine independently of other tobacco components to ensure that cigarettes contain sufficient nicotine to satisfy smokers. 2. Leaf Purchasing 3 3. Another method of nicotine manipulation is to consider stalk position of tobacco leaves when purchasing tobacco. The concentration of nicotine is lowest at the bottom of the plant and highest in the top leaves of flue-cured tobacco. Thus, the position of the leaf on the stalk determines how much nicotine the leaf will contain. 334. "Stalk position" is an industry euphemism for nicotine content. -71 - I¢9 12 M85 BSC I)OC
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0 345. The FDA to concluded: Significant evidence also demonstrates that tobacco manufacturers have used blending techniques to increase nicotine concentrations in low-tar cigarettes and thereby maintain nicotine delivery while reducing tar delivery. FDA has observed the industry's use of proportionately greater amounts of higher nicotine-containing Burley tobacco in the tobacco blends of the lowest-tar varieties of cigarettes. In fact, Thomas Sandefur, the chief executive officer of Brown and Williamson, admitted to Congress that nicotine levels can be adjusted "up or down" depending on the blend of tobaccos used in a particular cigarette. Industry scientists have also acknowledged that tobacco manufacturers blend high-nicotine tobaccos to compensate for the reductions in nicotine caused by innovations in cigarette design and manufacturing to reduce tar delivered. These examples demonstrate that tobacco manufacturers deliberately increase the proportion of high-nicotine delivery that would otherwise result in these products. 4. Additional Evidence of Nicotine Manipulation 346. Reconstituted tobacco is made from stalks and stems and other waste that cigarette companies used to discard and now use to make cigarettes more cheaply. Reconstituted tobacco ordinarily contains 25 percent or less of the nicotine in regular tobacco. 347. A former RJR manager who demanded anonymity told the ABC news program "Day One," that on the average, currently marketed brands contain about 22 percent reconstituted tobacco and that cut rate or generic brands typically contain about double that amount. 348. A laboratory analysis commissioned by "Day One" and conducted by the American Health Foundation confirmed the industry's heavy use of reconstituted tobacco. 349. One RJR brand had 25 percent and another had about 33 percent reconstittrted tobacco. Tested samples of the reconstituted tobacco implanted in RJR brands Winston, Salem, Magna and Now had up to 70 percent, rather than the expected 25 percent, of the nicotine that would be found in regular tobacco. 350. This laboratory analysis indicates that RJR had fortified the reconstituted tobacco with additional nicotine. -73- i Iln 12 ql'.5 tl.i0 DOC
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0 • 366. Edward A. Horrigan, Jr., chairman and CEO of Liggett Group, Inc., told Congress that "In all my years in this business worldwide, I have never known of a product-designed objective or goal that included even the notion of spiking the amount of nicotine in a cigarette to achieve a level that would hook or addict smokers." 367. Horrigan, however, as former chairman and CEO of RJR through the late 1980s, participated in developing and marketing Premier and other RJR cigarette brands whose manufacturing process included manipulating nicotine content and delivery. 368. Thomas E. Sandefur, Jr., former CEO of Brown & Williamson, in the face of overwhelming evidence to the contrary, denied secretly growing the high-nicotine tobacco plant. Y-1, in sworn testimony before Congress on June 23, 1994, and stated that his company was being "set up." He admitted that the company controlled nicotine, but stated that the company did so only for "taste." 369. Sandefur also testified before Congress that nicotine was not addictive and that Brown & Williamson scientists had concluded that none of Brown & Williamson's research indicated that nicotine was addictive. 370. These statements were false, as decades of BATCO and Brown & Williamson research indicated exactly the opposite. Sandefur further testified that "nicotine is a very important constituent in the cigarette smoke for taste." 371. In fact, nicotine tastes bad, and the industry has conducted htmdreds of tests to find a method of increasing nicotine without injecting a bad taste. 372. Sandefur, by making his representations to Congress, was continuing the industry's misrepresentation concerning nicotine. 373. T.F. Riehl, vice president for research and development at Brown & Williamson, denied that the company mixed the tobacco for the Barclay cigarette to have a higher concentration of nicotine, and told Congress, "No, sir. We blend for taste, not nicotine." 374. Internal documents from Brown & Williamson indicate that Riehi himself conducted research focusing on the adjustment of nicotine and tar levels without regard to taste. -76- I:?9 12 035 USC DOC
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! 0 358. The cigarette industry has also used a process called "denaturing" to add nicotine to cigarettes. Nearly-pure nicotine is combined with alcohol and then applied to tobacco during the manufacturing process. 359. Trucking records show that Philip Morris, for example, received thousands of gallons of this nicotine/alcohol mixture during the 1980s. 360. Against this mounting body of evidence that the cigarette industry manipulates and controls nicotine levels in cigarettes, the Tobacco Industry continues to deny to the public, ~zd in 1994 denied to Congress under oath, that the Industry manipulates and controls nicotine levels. 361. William I. Campbell, president and CEO of Philip Morris, told Congress on April 14, 1994, "Philip Morris does not manipulate nor independently control the level of nicotine in our products.... Cigarettes contain nicotine because it occurs naturally in tobacco." 362. James W. Johnston, president and CEO of RJR Nabisco, told Congress, "We do not add or otherwise manipulate nicotine to addict smokers." 363. Andrew J. Schindler, president and CEO of R.J. Reynolds Tobacco Company, told Congress, "We do not restore any nicotine anywhere in our process.... We lose nicotine, for example, in the reconstituted sheet process....[N]owhere in that process is any nicotine being incrementally added into the process." 364. Contradicting Johnston's and Schindler's statements, Dr. Robert Suber, a toxicologist with RJR, admitted that R.1R controls the nicotine in its products. He told CNN, "In order to deliver to the consumer a product that he wants, a consistent level of nicotine, we have to blend the tobaccos accordingly. So we do control it." 365. Andr-w H. Tisch, chairman and CEO of Lorillard, told Congress that "Lorillard does not take any steps to assure a minimum level of nicotine in our products. Lorillard does not add nicotine to cigarette tobacco for the purpose of manipulating or spiking the amount of nicotine received by the smoker." -75- o:
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0 • 351. Reconstituted tobacco has inferior taste and less nicotine, so the cigarette manufacturers or their agents apply a powerful tobacco extract either alone or as part of a solution of flavorings to the reconstituted tobacco. 352. RJR and the other cigarette manufacturers have the technology to add flavorings with or without nicotine. 353. The addition of nicotine to reconstituted tobacco is purely at the manufacturer's discretion. 354. Upon information and belief, a tobacco reconstitution process employed by Kimberly-Clark is used throughout the Tobacco Industry in a number of countries. 355. A Kimberly-Clark advertisement published in tobacco industry trade publications states: Nicotine levels are becoming a growing concern to the designers of modern cigarettes, particularly those with lower "tar" deliveries. The Kimberly-Clark tobacco reconstitution process used by LTR INDUSTRIES permits adjustments of nicotine to your exact requirements. These adjustments will not affect the other important properties of customised reconstituted tobacco produced at LTR INDUSTRIES: low tar delivery, high filling power, high yield and the flexibility to convey organoleptic modifications. We can help you control your tobacco. 356. Funhermore, the Tobacco Industry's own trade literature explains that the Kimberly-Clark process enables manufacturers to triple or even quadruple the nicotine content of reconstituted tobacco, thereby increasing the nicotine content of the final manufactured product. 357. Another enterprise quite explicitly specializes in the manipulation of nicotine and its use as an additive. This company does business under the name "The Tobacco Companies of the Contraf Group." An advertisement run by the Contraf Group in the international trade press states: "Don't Do Everything Yourself7 Let us do it More Efficiently!" Calling itself "The Niche Market Specialists," Contraf lists among its areas of specialization "Pure Nicotine and other special additives." -74- 111? I. QOiS 65C DCC
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* 375. At the 1984 Smoking Behavior-Marketing Conference, Riehl gave a presentation on Project Aries, Brown & Williamson's safer cigarette project, which emphasized tar reduction and nicotine enrichment in later puffs, but never addressed the issue of taste. 376. The newly discovered evidence of nicotine manipulation by the cigarette industry and the recent disclosures about nicotine addiction and manipulation made before Congress have not deterred the industry from its campaign of concealment and disinformation. 377. As recently as April 1994, the cigarette industry placed advertisements across the country denying that it "spikes" cigarettes with nicotine, denying that it believes cigarette smoking is addictive, and misleading the public about whether the cigarette companies deliberately control nicotine levels in their products. N. Maintaining the Market through Sales to Adolescents 1. The Increasing Addiction of Adolescents: A Predicate to Continuing Industry Profits 378. In addition to ensuring a captive market through the addiction of its customers. the cigarette industry has maintained its sales and replaced the hundreds of thousands of smokers who die each year by intentionally targeting marketing and promotional efforts at children and adolescents. 379. Every day, more than 1,200 cigarette smokers die of disease caused by smoking. 380. Twenty percent (or 800) of all deaths in Vermont annually can be attributed to smoking. 381. To prevent a precipitous decline in cigarette sales, the big cigarette companies must attract new smokers. 382. Children and teenagers are the industry's main target. Adolescents are targeted through unfair and deceptive marketing programs and advertising. 383. Such tactics are successful, because over 3,000 children begin smoking every day. CO a~. 384. The use of tobacco by adolescents continues to rise. The Centers for Disease G,? ~ Control and Pr evention ("CDC") announced on May'_4, 1996, that a study of high schoo CS+ -77- I t_p. 12 X]5 9SC DOC
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0 0 students showed a 35 percent higher incidence of tobacco use among high school students in 1995 than in 1993. The prevalence of cigarette smoking in recent years among 8th and 10th grade students has risen significantly. For example, among 8th grade students, 14.3 percent in 1991 and 18.6 percent in 1994 were current smokers; among IOth grade students, 20.8 percent in 1991 and 25.4 percent in 1994 were current smokers. 385. A 1995 survey revealed that 20 percent of Vermont high-school seniors smoke daily, and 45 percent had smoked during the previous month. 386. These percentages are dramatic increases from 1993, when 15% of Vermont high school seniors were daily smokers and 38% had smoked in the previous month. 387. Sales of tobacco products to adolescents is no accident - it is the intended result of a carefully orchestrated scheme which the Tobacco Industry knew or had reason to know was likely to attract and addict adolescents. 388. For example, despite the fact it is illegal to sell to adolescents in Vermont, each of the Tobacco Companies studies how to attract adolescents. 389. Each defendant engages in conduct to accomplish that goal. 390. Illustrative is RJIt, which repeatedly has generated reports "relating to teenage smokers," including an analysis of RJR's share of teenage smokers, defined as "14-17." 391. As early as 1973, Claude Teague, a marketing researcher at RJR, was writing internal memos stating that RJR should recognize that despite prohibitions on smoking, adolescents were smoking in increasing numbers, thus, "if this is to be so, there is certainly nothing immoral or unethical about our company attempting to attract smokers to our products." Teague stated that if RJR "is to survive and prosper ... we must get our share of the youth market." 392. This theme was repeated in a 1976 research department memorandum, labeled "SECRET" which stated "Evidence is now available to indicate that the 14 to 18 year old group is an increasing segment of the smoking population. P iR must soon establish a successful new brand in this market if our position in the industry is to be maintained over the long term." -78- 1129 12 4C15 BSC OOC
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d. advertising in video arcades; and e. sponsoring various sporting events, concerts and other events likely to attract extensive youth interest. 403. For many young people, the precipitating factor is being given a free pack of cigarettes by a Tobacco Company representative, or purchasing cigarettes to obtain an attractive T-shirt, baseball cap, or other gimmick used to promote cigarette smoking. 404. In addition to the selection of youth oriented advertising themes, the Industry- targets adolescents through the location of tobacco advertising. 405. During the 1980s cigarette advertising in youth-oriented publications increased. 406. Magazines with sexually oriented themes, and those concerning entertainment and sporting activities, have the highest concentration of cigarette ads. 407. For many of these magazines, teenagers comprise a quarter or more of the total readership. 408. Cigarette ads in these youth-oriented magazines were frequently multi-page, pop- up ads. 409. News magazines like TlMe and NEwswaiK, which have older audiences. had few cigarette ads. 410. Such advertisement placement evinces the industry's intent to target adolescents. 411. The companies also attracted adolescents by paying for product promotional appearances in movies. 412. Because of the subject matter or the actors in the films selected by the Tobacco Industry, the films are most likely to appeal to youth. 413. For example, Brown & Williamson agreed with the actor Sylvester Stallone that he would use the company's products in at least five feature films, in exchange for $500,000. 414. Philip Morris paid for the promotion of Marlboro in "Superman II," "Risky Business," and "Crocodile Dundee" and for promotion of Lark in "License to Kill." -80- 1 L9 12 CUJ5 BSC DCC
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0 437. Eight hundred Vermonters die each year from smoking related illnesses. 438. If an adolescent's tobacco use continues for a lifetime, there is a 50 percent chance that the person will die prematurely as a direct result of smoking. 439. The earlier a young person's smoking habit begins, the more likely he or she will become a heavy smoker and therefore suffer a greater risk of smoking-related diseases. 440. Smoking is responsible for about 90 percent of all lung cancer deaths. 441. Smoking is responsible for 87 percent of deaths from ehronic -obsinictit e pulmonary diseases. 442. Smoking is responsible for 21 percent of deaths from co.ronarp heart disease. .143. Smoking is responsible for 18 percent of deaths from stroke. 444. Epidemiologic studies provide overwhelming eviden::e that smoking causes lung cancer. The risk of getting lung cancer may be more than 20 times ~reater for neavy smokers than nonsmokers. 445. The t~elationship oetween smoking and lung cancer is due to the numerous carcinogens in cigarette smoke. 446. Cigarette smoking caused an estimated 117,i!i)0 dea.h frorrm h_szg cancer in 1990. 447. The risk of getting lung cancer increases with the number of cigarettes smoked and the duration of smoking, and decreases after cessation of smoking. -148. Starting smoking at an earlier age increases the FotFntiai years of smoking and increases the risk of lung cancer. 449. Studies have shown that lung-cancer mortality !s hignest among adults who beg .n smoking before the age of 15. 450. Cigarette smoking also causes cancer of the iar}•nx. mouth, and esophagjs. 451. According to current estimates, 82 percent of laryngeal cancers are due to CO smoking. rn c~a 452. About 80 percent of the 10 200 deaths from esopharea.l cancer in 1993 can be ~ attributed to smoking. L71 N -84- i 29 12 dll5 BSC OiC
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9 466. One study estimates that smoking causes 30 to 40 percent of all deaths due to coronary heart disease. 467. Smokers between the ages of 40 and 64 who smoked more than one pack a day were shown to have a risk of coronary heart disease that is 3.2 times higher than people who do not smoke. 468. Smoking also increases a person's risk of atherosclerotic peripheral vascular disease, especially if the smoker is diabetic. 469. Complications of this disease include decreased blood delivery to t.he periphera: tissues, gangrene, and ultimately loss of the affected limb. 470. Smoking cessation is the most important intervention in the management of peripheral vascular diseases. 471. Smoking is a cause oC stroke. 472. Stroke is the third leading cause of death in the Iinited States. 473. The association ~~:` smoking i:vith stroke is baieved to he medsated hy the rr.echanisms respons:ble for atherosclerosis natrowir.b and hardening of the arteries), thrombosis, and decreased cerebral blood flow in smokers. 474. Female smokers who use oral contraceptives are at an increased risk of having a stroke. 475. Cigarette smoking is the ]eading cause of chronic obstructive pwmonarv disease ("COPD") in the United States. 476. Approximately 84 percent of the COPD deaths in men and 79 percent of tha COPD deaths in women are attributable to cigarette smclcng. The risk of death front COPJ may depend on how many cigarettes a person smokes daily, how deeply the person irihaies, and tne age when the person began smoking. 477. The number of cigarettes smoked per day is a strong indicator for the presence of the principal symptoms of chronic respiratory illness, includin • chro,:ic cough. phlegm production, wheezing, and shortness of breath. -86- 1129.12 PJ> BSC WC
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478. Smoking's detrimental effect on lung structure and function appear within a few years after cigarette smoking begins. 479. Children who smoke are more likely to suffer from respiratory illnesses than children who do not smoke. 480. Adolescents who smoke may experience inflammatory changes in the lung, reduced lung growth, and may not achieve normal lung function as an adult. 481. Cigarette smoking is a probable cause of peptic ulcer disease. Peptic ulcer disease is more likely to occur in smokers than in nonsmokers, and the disease is less likely to heal, and more likely to cause death, in smokers than nonsmokers. Quitting smoking reduces the chances of getting peptic ulcer disease and is an important component of effective peptic ulcer treatment. 482. Studies also show that women who smoke have reduced fertility. One study showed that smokers were 3.4 times more likely than nonsmokers to ta ke more than 1 year to conceive. 483. Smoking has severe detrimentai eifects upon pregnancy and fetuses. 484. Women who smoke are twice as likely to have low bu th weight infants as women who do not smoke. Smoking also causes intrauterine growth retardation of the fetus. Mothers who smoke also have increased rates of premature delivery. 485. Smoking may lead to premature infant death. Babies of mothers who smoke are more likely to die than babies bortt to nonsmoking mothers. 486. A recent meta-analysis reported that use of tcbacco products by pregnant women results in 19,000 to 141,000 miscarriages per year, and 3.100 to 7,000 infant deaths per year. In addition, the meta-analysis attributed approximately two-thirds of deaths from sudden-infant- death syndrome to maternal smoking during pregnancy. 487. By another estimate, if all pregnant women stopped smoking, there would be 4,000 fewer infant deaths per year in the United States. -87- 1129 12 001195C DOC
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• 415. Philip Morris paid for or otherwise provided promotional material for 56 films in 1987-88. 416. Liggett paid for promotion of Eve, its brand designed especially to appeal to young women, in "Supergirl." 417. American Tobacco promoted Lucky Strike in "Beverly Hills Cop." 418. Reynolds paid for the promotion of Camel in "Who Framed Roger Rabbit," "Desperately Seeking Susan," and "Honey, I Shrunk the Kids." 3. Reynolds: "Old Joe Camel" 419. Another example of the industry's targeting of adolescents and its deceptive conduct is the "Joe Camel" advertising campaign conducted by Reynolds, in observance of the Camel brand's 75th anniversary. 420. As part of the initiation of the promotion, Reynolds included singing birthday cards in RollinzStunq magazine, a publication particulasly popular -.v;th ;; oung peolzlr, and offered premiums such r,s'1'-shirts, party mugs and wail posters. 421. When Reynolds began this cartoon campaign in 1988, Camel's share of the children's (under 18 years of age) market was only 0.5 petcent. 422. Camel's share of this illegal market has increased to 32.8 percent, representing sales estimated at $476 million per year. 423. Another indication of the phenomenal success of this marketing carnpaigr- is the fact that in a recent sur,(ey of six year-olds, 91 percent of the children could correctly nratch "Old Joe" with a picture of a cigarette. This recognition percentage was nearly equal to that of Mickey Mouse. 424. Reynolds studied the attributes of an advertising campaign that would most appeal to the group it carefully identified as "21 and under." Those attrioutes directly coincide with the "Joe Camel" campaign. -81- 1:29!i.MI5BCCDOC
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500. The joint actions of the conspiracy through the CTR and the Tobacco Institute have been similarly shielded from scrutiny. 501. Part of the document review undertaken by Brown & Williamson was an effort to conceal documents showing the true nature of the industry associations: "[In conducting document review] pay special attention to documents suggesting that TI [Ibbacco Institute] was used as a vehicle for the industry's alleged conspiracy to promote cigarettes through the open controversy PR program. . . ." 502. Defendants' conspiracy is ongoing and continues to this day. The defendants continue to deny that (i) nicotine is addictive, (ii) smoking causes cancer and other health problems, (iii) that they are illegally targeting adolescents and (iv) that they manipulate the level of nicotine in tobacco products to increase addiction. 503. This action is aimed at protecting the public ftsc, and is therefore in the public interest. VII. CLAIMS FOR RELIEF Count One: Statutory Cause of Action Based on 33 V.S.A. § 1911(c) for Negligent Entrustment 504. The State of Vermont realleges Paragraphs 1 through 503 as if fiilly set forth herein. 505. At all relevant times, defendants designed, manufactured, supplied and/or sold tobacco products. 506. Residents of the State of Vermont have, for many years, used and consumed. and continue to use and consume, defendants' tobacco products in the manner in which they were intended to be used, without any substantive alteration or change in the products. 507. Defendant tobacco companies, individually and in conspiracy with each other, distributed and marketed tobacco products through third persons in the State of Vermont for use by tobacco consutners, who defendant tobacco companies knew or had reason to know would -90- I 129 12 0035 BSC DOC
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0 425. Addressing those attributes, this statement was made: "Young people will continue to become smokers at or above the present rates during the projection period. The brands which these beginning smokers accept and use will become the dominant brands in future years. Evidence is now available to indicate that the 14 to 18 year old group is an increasing segment of the smoking population. RJR must soon establish a successful new brand in the market if our position in the industry is to be maintained over the long term" (Emphasis in original.) 426. Reynolds continued to use the "Old Joe" character in conjunction with other offers attractive to adolescents until July of 1997 when RJR retired the character under pressure from the FTC. 427. Reynolds has made numerous premiums available in exchange for coupons included in packages of Camel cigarettes. These premiums are deliberately designed to appeal primarily to adolescents. 428. Reynolds has expressly encouraged adolescents to circumvent laws related to tobacco use by adolescents. 429. For example, in one coupon offer for a free package of Camels, "Joe Camel" advised individuals that it would be a "smooth move" to have someone else redeem the coupon, thus suggesting the means to overcome prohibitions of sales to adolescents of tobacco products. 430. Other Reynolds campaigns have targeted stores and advertising locations close to high schools and other areas frequented by adolescents, and Reynolds concentrates advertising in publications read by large numbers of adolescents. 4. Philip Morris's Admission that it has Targeted Adolescents 431. The Tobacco Cartel is currently under intense scrutiny from state and federal officials. In an attempt to stave off FDA regulations, Philip Morris has proposed a series of changes to their marketing practices. _82_ 1129 12 fAl5 flSC DOC
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0 453. The risk of oral cancer among current smokers ranges from 2.0 to 18 • I times the risk in people who have never smoked and can be reduced more than 50 percent after quitting. 454. The risk of esophageal cancer among current smokers ranges from 1.7 to 6.4 times the risk in people who have never smoked and can also be reduced by_about 50 p:.rcent after quitting. 455. Epidemiological studies demonstrate that cigarette smoking contributes to the development of pancreatic cancer. _ 456. The reason for rhis relationship is unclear, but may be due to carcinogens or metabolites present in the bile or blood. 457. In 1985, the proportion of pancreatic cancer deaths in the United States attributable to smoking was estimated to be 29 percent in men and 34 percent in women. 458. Cigarette smeking accounts for an estimate 30 *o 110 percent of all bladder cancers and is a contributing factor fbr kidney cancer. 459. The increased risk of kidney and bladder cancer ma}• be reiated .o the number of cigarettes smoked per day, and the risk decreased following smoking cessativn. 460. Smoking is a contributing facior for cancer ef the cervl.Y. 461. The 1982 Surgeon General's Report concluded that stomach cancer is associared with cigarette smoking. 462. Smoking is a leading cause of heart disease. The 1964 Surgeon Gr.neral's Report noted that male cigarette smokers had higher deatn rates frorn corona y heart disease that, nonsmokers. 463. Subsequent reports have concluded that cigarette smoking contributes to the risk of heart attacks, chest pain, and even sudden death. 464. Overall, smokers have a 70 percent greater death rate from coronarv heart disease than nonsmokers. 465. Ischemic heart disease resulting from cigarette smoking c:aimed n::arly y9,000 lives in 1990. -85- 1120 1i.0035 BSC DOC
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0 • made after the effective date of Act No. 142 (1998) for health conditions caused by defendants' tobacco products; E. That, pursuant to 33 V.S.A. § 1911(a), and because the defendants' conduct as described in the Complaint has been oppressive, fraudulent and malicious, the State is entitled to an award of punitive damages against the defendants in an amount sufficient to punish defendants and to make an example of them; F. That, pursuant to 33 V.S.A. § 1911(a), the Court order defendants to pay the State's costs and reasonable attorneys' fees; and G. That, pursuant to 33 V.S.A. § 1911(a), the Court order such other relief as the Court deems appropriate. DATED: July 6, 1998 1&~ 13) LIAM H. SORRELL 1129120U35 HSC DOC Attorney General of Vermont Julie Brill Assistant Attorney General Rebecca Ellis Assistant Attorney General OFFICE OF ATTORNEY GENERAL 109 State Street Montpelier, Vermont 05609-1001 (802) 828-3171 -97-
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0 432. In a 1996 letter to several state attorneys general, Philip Morris atinounced a`'blue print which directly addresses the issue of youth smoking." Among its proposals are the following: a. Ban tobacco ads near schools and playgrounds and in youth oriented publications; b. Prohibit tobacco brand names, logos and characters on promotional items like t-shirts and caps; c. Ban cigarette vending machines: d. Limit tobacco brand name sponsorship to events with primarily adult audiences; e. Ban tobacco advertising in video arcades and family- oriented centers. 433. Through this 1996 letter, Philip Morris has admitted that the industry has attempted to attract adolescents, when ic a. nlaces tcbacco ads near schools, playgrounds, and in youth ori°ntcd publications: b. uses logos •attd characters that are intended to appeal to adolescents; c. sponsors events that have primarily youth audiences; d. places ads in places likely to reach adolescents such as video and family oriented centers. 434. Further evidence in this regard is the fact that two industry leaders, RJR and Philip Morris, repeatedly used third parties to survey the attitudes and likes and dislikes of children and teenagers. 435. These surveys would not have been commissioned if I:.iR and Philip Morris hao not intended to target minor children. O. The Human Toll of Cigarette Smoking 00 1. Health Effects of Cigarette Smoking ~ 436. Over 400,000 Americans die each year from tobacco-related illnesses. This equates to mor e than one of every five deaths in the United States. ~ -83- I1:9 IS W3.` BSC BOC
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0 0 the public fisc. - Count Two; Statutory Cause of Action Based on 33 V.S.A. § 1911(c) for Negligent and/or Intentional Breach of a Voluntarily Assumed Duty 514. The State of Vermont realleges and incorporates Paragraphs I through 503 as if set forth fully herein. 515. Beginning as early as 1954 with the publication of "A Frank Statement to Cigarette Smokers," and continuing to the present date, defendants voluntarily assumed a duty to both the State of Vermont and its citizens to research the effects of tobacco products on the human body and to disclose complete and accurate results of this research to the State of Vermont and its residents. 516. Defendants publicly represented that they would promote research efforts into all phases of tobacco use and health, cooperate closely with those who safeguard the public health. and provide complete and accurate information about the effects of tobacco products on the human body. 517. Defendants either intentionally or negligently breached their voluntarily assumed duty by failing to report honestly, accurately or completely the results of their tobacco-related research; by orchestrating the CTR fraud; by corrupting the scientific process through the knowing and active publication of fraudulent science and the suppression of unfavorable research data; and by perpetrating the "controversy" regarding the human health dangers of smoking. 518. Defendants conduct in undertaking and breaching their voluntarily assumed duty increased the risk that Vermonters would commence and continue using cigarettes, and thereby increased the risk of economic harm to the State of Vermont. Indeed, the very purpose of defendants' undertaking was to promote the use of cigarettes. 519. As a result of the consumption or use of defendants' tobacco products, numerous persons in Vermont have become addicted to defendants' tobacco products and have suffered physical harm. -92- 1 L9 12 Ool5 BSC DCC
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86~15273 0 0
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i P. Injury To The Public Fisc As A Direct And Foreseeable Consequence Of Defendants' Conduct 488. In addition to the human toll, the economic costs of tobacco use, and, in particular, health care expenditures from tobacco-attributable diseases, amount to an unacceptable burden on society and the State of Vennont. 489. The State spends millions of dollars each year to provide or pay for health care and other necessary facilities and services on behalf of low-income Vermonters. Increased healrii care costs for those individuals are directly caused by tebacco induced cardiovascu!ac disease. long cancer, emphysema, respiratory and other diseases. 490. In fulfilling its statutory duties, the State of Vermont has expended and will _-xpend substantial sums of money due to the increased cost of providing health care services for treatment of tobacco-caused diseases. These increased expenditures have been caused by the unlawful actions of the Tobacco Industry. 491. The Centers for Disease Control have deve loped information ort srr.oking-attr.b~utable deaehs and diseases and ti's:, c::onornic impact of smo?:ir. g. TY,:rir stud;- demonstrates that Q:ere is a direct and substantial cost :o Ve,raont State taxpayers ofincrea:ed health care attributabie to use of tobacco. 1Vationwide. the CDC data shows dtat tlre est:ma'c:d health care costs for smoking-attributable diseases are $50 bil±ion. These costs have been increasing at a precipitous rate, more than doubling in the period from 1987 to 1993. Vermont's Medicaid expenditures for 1993 were over $29 million. Q. Fraudulent Concealment 492. Until recently. Vermont was without knowledge of.aefend<mts' ecn:bination or conspiracy, or of any facts from which it might reasonably be concluded that defende.ats were illegally conspiring, or which would have led to the discovery thercaf. V ermunt was Li:>o unaware that defendants render their products defective by such methods as the manipuiation o'.' nicotine levels to increase the'`free" nicotine in cigarette smoke to promotF• addiction and by intentionally suppressing the production a.nd marketing of safer tobacco products. FlaiotiL•`couid -88- 111912UW5BSCDOC
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0 0 HAGF,NS & BERMAN Steve W. Berman James P. Solimano George W. Sampson Sean R. Matt Andrew M. Volk Jeniphr A.E. Breckenridge Christopher A. Jarvis 1301 Fifth Avenue, Suite 2929 Seattle, WA 98101 (206) 623-7292 -98- 1129 12 CVl5 BSC WC
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NESS, MOTLEY, LOADHOLT,_ RICHARDSON & POOLE, P.A. Ronald L. Motley Susan Nial P.O. Box 1137 Charleston, SC 29402 SCRUGGS, MILLETTE, LAWSON, BOZEMAN & DENT Richard F. Scruggs 734 Delmas Avenue Post Office Drawer 1425 Pascagoula, MS ;9568 NORTON & FRICKEY AND_ ASSOCIATES Robert B. Carey 2301 East Pikes Peak Colorado Springs, CO 80909 VAN O'STEEN & PARTNERS Steve C. Mitchell 3605 N. Seventh Avenue Phoenix, AZ 85013 SHEEHEY BRUE GRAY & FURLONG, P.C. Thomas D. Anderson Gateway Square 30 Main Street Burlington, VT 05402-1489 MILLER, EGGLESTON & CRAMER, LTD. Scott L. Kline P.O. Box 1489 Burlington, VT 05402-1489 Special Assistant Attorneys General for the State of Vermont
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9 not have discovered such facts or the alleged violations at an earlier time because defendants fraudulently concealed their course of conduct, and continue to do so. 493. Vermont is not aware of the methods used by defendants to conceal their activities. 494. Upon information and belief, the methods used by defendants in furtherance of their combination and conspiracy were by nature self-concealing and not of a type that could have reasonably been apparent to plaintiff. 495. For example, in 1985, a Brown & Williamson attorney recommended that much of its medical research be declared "deadwood" and shipped to England. 496. The attorney stated that, "I have marked with an X documents which I suggested were deadwood in the behavioral and biological studies area. I said that the B series are Janus series studies and should also be considered deadwood." The attorney further suggested that the research, development, and engineering department also "should undertake to remove the deadwood from its files." 497. Brown & Williamson attempted to control other documents so it could later claim an attorney-client privilege or work-product protection for documents its attorneys thought might later cause difficulties in product-liability actions. 498. Such documents included scientific reports the company sought to protect from discovery: [Scientific] material should come to you [corporate counselj under a policy statement between you and Southampton [B.A.T.] which describes the purpose of developing the documents for B & W and sending them to you as use for defense of potential litigation. It is possible that a system can be devised which would exempt the Engineering reports because it might be difficult to maintain a privilege for covering such reports under the potential litigation theory. [C]ontinued Law Department control is essential for the best argument for privilege. At the same time, control should be exercised with flexibility to allow access of the R & D staff to the documents. 499. The Brown & Williamson assertions of privilege are false and in bad faith. Other defendants have used similar tactics to conceal the activities of the conspiracy. -89- 1129120U35 BSC W~]
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0 0 542. The risk of danger in the design of the tobacco products outweighed any benefiis associated with tobacco use. 543. The failure to adopt reasonable alternative designs rendered defendants' tobacco products unreasonably dangerous. 544. Numerous Vermont citizens have become addicted to defer.dalts' tobacco prcducts and have suffered physical harm. 545. As a rr_sult of their tobacco-related injuries, many smokers have received or %cill receive Medicaid berefits from the State of Vermont, for which the State seeks reimbursement. WHEREFORE, the State of Vermont requests the following rei.ief: A. That the Court adjudge and decree that the defendarLs have engaged in thee conduct alleged here; B. That the Cotutt er.join and restrain defendants and thcir offacers, ag°nts, s:; rvants and employees, and those in active concert or participation with thera, from continuing or engaging in such conduct or other conduct having a similar pumoss Or effec?; C. 'l hat. ir< order to alleviate and prevent further harm to the public,tisc arising from the use of tobacco, the Court (i) order defendants to publicly disclose, disseminat:: and publish all research previously conducted directly or indirectly by themselves and their respective agents, affiliates, sen•ar.ts, officers, directors, employees, and all person acting in concert with them. that relates to the issue of smoking and tiealth; (ii) order defendants to Purtd a corrective public education campaign relating to the issue of smoking and health, to be administered and controlled by an independent third party, and (iii) order defendants to fiir.a clinical smoking cessation programs in the State of Vermont; D. That, pursuant to 33 V.S.A. § 1911, the Court order defendants to pay damages in an amount which is sufficient to reimburse the State of Vermont for expenditures rnade or to be -96- 11291?OOl5B5fU:X.'
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STATE OF VERMONT CHITTENDEN COUNTY, SS. STATE OF VERMONT, Plaintiff. vs. PHILIP MORRIS, NCORPORATED.; R.J. REYNOLDS TOBACCO CO.; ,ki N1ERICAIN TOBACCO CORP.; BROWN & WILLIANfSON TOBACCO CORP.; LIGGETT & MYERS, NC.; LORILLARD TOBACCO CO.; B.A.T. ItiDUSTRIES,PLC; BRITISH AMER[CAIN TOBACCO COMPANY, Defendants. Chittenden County Superior Court Docket No. :ENDE'd-COUNTY CLERK FLcD N CLERKS OFFICE IIANC,1 LAVALLEE CLERK COMPLAINT PURSUANT TO 33 V.S.A. S 1911 ;&L 16 }gg8 V O i I_9 1_ ml1 9SC 0U:
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MOMM tiFlIBORkllMW df MSI! pp p, SA11ggti1R'y STVW Z 587 844 366 'Mw,M xno"M Lorillard Tobacco Company „ 714 Green Valley Road •; Greensboro, NC 27408
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9 0 528. Many of those persons who have become addicted to defendants' tobac co products and have suffered physical harm either have received or will receive Medicaid benefits from the State of Vermont, for which the State seeks reimbursement. 529. Because the taxpayers of the State of Vermont should not bear the costs of treating tobacco-related illnesses when the tobacco companies were negligent, the Attorney General brings this claim to recoup those funds and protect the pubiic frsc. Count Four: Statutory Cause of Action Based on 33 V,S.A. § 1911(c) for Defective Product Unreasonably Dangerous When Distributed to Adolescents 530. The State of Vermont realleges and incorporates Paragraphs 1 through 503 as if fully set forth herein. 531. Residents of the State of Vermont have, for many years, used and consumed, and continue to use and consume, defendants' tobacco products in the manner in which they were intended to be used, without any substantive alteration or change in the products. 532. Defendaras had and continue to have the ability to design, test, nttmufact!:re. marKet, distribute and/or sell non- or less- addictive, carcinogendc and pathologic tobacco products. 533. Defendant tobacco companies, individually and in conspiracy with each other, distributed and marketed tobacco products through third persons in the State of ti emlont in such a manner that they knew or should have known that their tobacco products would be sold to and used by large numbers of adolescents :n Vermont, who defendant tobacco companies knetis or had reason to know would likely use the products in a manner involving unreasonable risk of physical harm to themselves including, but not limited to, the health risks of smoking and the risk of lddiction. 534. As also alleged above, defendant tobacco companies encouraged retailers to sell defendants' tobacco products to adolescents. Such sales of tobacc. products to children under the age of 18 years was and is in violation of state law. -94- 1i39 t_ WtJU$CLV.C
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! 0 520. Many of those persons who have become addicted to dzfendants' -tobacco products and have suffered physical harm either have received or wili re.ceive Medicaid benefits from the State of Vermont, for which the State seeks reimbursement. 521. Because the taxpayers of the State of Vermont should not bear the costs of treating tobacco-related illnesses when the tobacco companies have negligently breached their assumed duty, the Attorney General brings this claim to recoup those funds and protect the pubtic.fsc. Count Three: Statutory Cause of Action Based on 33 V.S.A. § 1911(e) for Negligence 522. The State of Vermont realleges and incorporates Paragraphs 1 through 503 ri.s if fully set forth herein. 523. As 33 V.S.A. § 1911 recognizes, the defendant: had a duty to zxercise r.eas:?na'b'_e care in the design. manufacture, s-ale and distribution of their tobacco products. 521. Defe,naants bresched th.att duty by, among other things, (i, failir.•, :o desit ~, manufacture and place on tn-, market producis that elnninated all or some carcirct+gens; failing to desigu, manufacture and place on the market products that were nct add:~tive; xnd (iii i designing "light," "ultra-light" and other cigarettes that generate low levels of "tar' and "nicotine" when "smoked" by the FTC testing m.achine, but under actual smoking conditions are no safer than other tobacco products. 525. Defendants' negligence has been a substantial factor in bringing about the u~;,- of cigarettes by residents of the State of Vermont. 526. Residents of the State of Vermont have, for many years, consumed or used the defendants' products in the manner in which they were intended to be ec•nsumed or used, ~=.itaout any substantial alteration or change in the product. 527. As a result of the consumption or use of defendants' tobacco products, numerous persons in Vermont have become addicted to defendants' tobacco products and have suffered physical harm. - 93 - I I2n 1 J UUi`. 13[C COC
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9 ! 535. The vast majority of adults currently addicted to defendants' tobacco products became addicted to those products when they were adolescents. at which time, as defendant tobacco companies knew or had reason to know, because of their youth, incompetence or inexperience, they were unable to use tobacco products in a manner that would avoid zddiction and that would not cause them an unreasonable and serious risk of physical harm. 536. The risks of addiction, health problems and death are unreasonably high when tobacco products are marketed, distributed arid/or sold to adolescents. 537. The resulting injury to Vermont's youth and the general public was foreseeable and far outweighed the utility of the tobacco products sold. 538. Numerous Vermont citizens who became addicted to defendants' tobacco products when they were adolescents have suffered physical harm. 539. .1s a result of their tobacco-related injuries, mar.}• ofthcse persons have rccei°; 3 or will receive Medicaid benen:s from the State of Vermont, tcr which the State seeks reimbursement. Count Five: Statutory Cause of Actiou Based on 33 V.5.4. § 1911(c) for Defectively Designed Product Unreasoriably Dangerous to Consumers and Users 540. The State of Vermont realleges and incorporates Paragraphs 1 through 503 as if fully set forth herein. 541. The defendants' cigarettes and tobacco products were unreasonably dangerous due to thei, design, because, inter alia, a. The defendants manipulate the nicotine levels in their tobacco products in order to promote and maintain addiction; b. The defendants ha;e conspired to suppress the marketi ng or safer, alternative products, including without limitation nicotine-free cigarettes, nicotine analogues, cinarettes that heat rather than b'.un tobacco, nitrosamine-free cigarettes, and cigarettes that seiec;;veiy filter carbon monoxide. -95- I i Jv 12 'ID 15 95i' JOC
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0 likely use the products in a manner involving unreasonable risk of physical har.n.to themselves including, but not limited to, the health risks of smoking and the risk of addiction. 508. Defendant tobacco companies knew or should have known that their tobacco products would be sold to and used by large numbers of adolescen_ts in Vennont; irdeed, as set forth above, they directed their marketing and promotional efforts knowing that there was a likelihood that such actions would be a factor in inducing adolescents to purchase and use their tobacco products. 509. Defendant tobacco companies encouraged retailers to sell defendants' tobacco products to adolescents, through such practices as (i) aggressive campaigns to purchase counter space and flashy displays for their cigarettes in convenience stores and in other loeations designed to attract the interest of adolescents, such as near candy counters in convenience stores and (ii) providing youth-friendly premiums for distribution where tobacco products are sold. and (iii) providing samples and promotional materials that would appeal to adolescents. The sale of tobacco products to persons ;mder the age of 18 years was and ls in violation of state t:-w. 510. The vast majority of adults currently addicted tr.o deietidants' tnbacco produL_:= became addicted to those products when they were adolescents, at which ti:ne, as def'encartt tobacco companies knew or had reason to know, because of their youth, or inexperience, they were unable to use tobacco products in a manner that would avoid addiction and that would not cause them an unreasonable and serious risk of physical hatm. 511. As a result of their use of tobacco companies' products. which co:umenced whery th.ey were adolescents, numerous persons in Vermon: have saifered physical harm. 512. As a result of their tobacco-related injuries, many of these persans have r:cei ~ ed or will receive Medicaid benefits from the Sta:e of Vermont, f:,r which the State seeks reimbursement. 513. Because the taxpayers of the State of Vermont should not bear the costs of treating tobacco-related illnesses when the tobacco eompatues have ne gligently eetrusted their product to adolescents, the A:tamey General br:ngs this claint to recoup those furds and protect -91- I:1~ :2 coi; 9Sf MX'
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14. Each defendant does business in the State of Vermont and each defendant regularly does or solicits business or derives substantial revenue or benefit from goods, materials or services used, consumed or rendered in this state. 15. The violations alleged herein have been and are being comr,iitted in whole or in part, and affect commerce in, and defendants do business in, Chittenden County and elsewhere throughout the State of Vermont. 16. Venue is proper in Chittenden Courtty. IIT. PARTIES Plaintiff 17. The State of Vermont, through William H. Sorrell, Attomey General of Vermont, brings this action pursuant to 33 V.S.A. § 1911. Defendants 13. Defendart American Tobacco Company, Inc. ("American Tobacco") is a Delaware corpo ration whose unncipal place of business is Six Stamford Forum, Stamford, Connecticut 06904. American Tobacco, sometimes hereinafter referred to as "ATC," manufactured, aavertised and sold Lucky Strike, Pall Mall, Tareyton, American, Malibu, Montclair, Newport, Misty, Iceberg, Silk Cut, Silva Thins, Sobrania, Bull Durham, and Carlton cigarettes and other tobacco products throughout the United States. In 1994, American Tobacco was sold to British American Tobacco Co., parent of defendant Brown & Williamson Tobacco Corporation. 19, Defendant Liggett & Myers, Inc. ("Liggett") is a Delaware corporation whose principal place of business is Main and Fuller Street, Durham, North Carolina. Liggett manufactures, advertises and sells Chesterfield, Decade, L&M. Pyramid. Dorado, Eve, Stride, Generic and Lark cigarettes and other tobacco products throughout the United States. 20. Defendant Lorillard Tobacco Company, Inc. ("Lorillard"), is a Delaware corporation whose principal place of business is I Park Avenue, New York, New York 10016. d_ iuer_cOl<sSr.;r.N:
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progress of the utilization of Y-1 tobacco and Mr. Pritchard (BAT-Il board member and CEO of Brown & Williamson) was responsible for Y-i tobacco reporting. b. Project GREENDOT. The TSRT directed the BAT Group's Project GREENDOT, a nicotine manipulation scheme which had the specific aim of lowering tar. but .having nomial nicotine delivery. Project GREENDOT was later terminated by the BAT-II TSRT. c. Project AIRBUS. The TSRT dictated the direction, funding, and ultimate termination of Project AIRBUS. Project AIRBUS had been undertaken by Brown & Williamson in response to the development by R.J. Reynolds Tobacco Company of a smokeless and virtuaily tobacco-free cigarette. Once the R.J. Reynolds Tobacco Company product failed, the TSRT ordered the discontinuation of any further work of developino a smokeless ciQar?tte as an alternative to its tobacco products. Research based on AIRBUS technology was later resa*ied and continued, at TSRT direction. in England, as Project NOVA. d. Ammonia Treatment. The TSRT directed :ite BAT Group's global use of ammonia treatment for tobacco. During many TSRT meetings, the chairman of BAT-II exhorted the need to increase the BAT Group's use of anunonia treatment. Treating tobacco with ammonia increases the amount of "free" nicotine in cigarette smoke, and thereby increases the "impact" of the smoke. 55. BAT Industries' involvement in the day-to-day operations of its subsidiaries, especially Brown & Williamson, is frequently detailed ar.d "hands-ori'. Examples oi BAT-II's "hands-on" involvement in the day-to-day operations include. without limitation, the followin:; a. 11 e promulgation of "guidelines" which are designed "to indica_e the contribution" BAT-II is requiring from its United States and other operations. "bott-i in financial terms and supporting B.A.T Industries' policies and strategies." Among many other things, BAT-II established guidelines requiring American tobacco operations to contribute with the other tobacco opcrations in the formulation aad impiementation of a group-wide R&D proeram; i1lJI.]WI5OSC~
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research 34. On information and belief, Brown & Williamson sent to England conducted in the United States on the topics of smoking, disease and addiction to remove sensitive and inculpatory documents &om American jurisdictions. 35. BATCO is a participant in the conspiracy described herein and has caused harm and affected commerce in the State of Vermont. 36. Each of the defendant cigarette and tobacco manufacturers advertised, sold and promoted their tobacco products in Vermont. 37. The above-named defendants are sometimes collectively referred to herein as "Tobacco Industry," "Tobacco Companies" or "Tobacco Cartel." IV. ADDITIONAL JURISDICTIONAL ALLEGATIONS REGARDING B.A.T INDUSTRIES, P.L.C. 38. B.A.T Industries plc, or "BAT-II," describes itself as °one of the U.K.'s leading business enterprises with interests principally in tobacco and Fna nctal services." '`[B.A.T Industries] is the world's most international cigarette manufacturer," ~cith an unrivaled range of both intemat-ior.ai and domestic brands. In 1995, the "B .A.T Industries Group "sold °more than 670 billion cigarettes ... achieving a 12.4% share of the world market [and] B. A.T Industries has the leading cigarette brand in over 30 markets." In 1995, BAT-II's total revenue amounted to about 538.8 billion, and pre-tax profit reached a record 54.6 billion. 39. The terms "BAT," the "BAT Group," and "BAT industries Group" shall be used to refer to BAT-II and its subsidiaries since this is usage adopted by BAT-II in its own documentation.2 2 The defendant, B.A.T Industries p.l.o. (or'BAT-II") repeatedly refers to itself and its tobacco subsidiaries collectively as the "B.A.T Industries Group," or''the BAT Group," "the Group" or simply'BAT' in publicly- required filings and promotional material. Bat-II and subsidiary annual reports are replete with references to BAT-II as being in the business of selling cigarettes. Of course, this is a clear indication of the close cooperation of the affiliated BAT-II companies worldwide. The term "BAT-II," as used here, refers to the corporate defendant, B.A.T Industries p.!.c. The term "BAT-I" refers to British American Tobacco Corporation Limited, an English corporation that, from i902 until 1976, was the ultimate parent company for the BAT commercial enterprise. Since 1976, BAT-[ has functioned largely as only one of many of the BAT Group's tobacco operating companies. The defendant has typically referred to BAT-[ simply as "BATCo' -7- 1129 12 035 asc CCc
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J. Suppression and Concealment of Industry Knowledge That - Smoking Is Harmful ...............................................................................................52 K. Industry Knowledge of the Addictive Nature of Nicottne .....................•...............57 L. Suppression and Concealment of Research on Nicotine Addiction......................64 M. The Industry's Secret Manipulation of Nicotine Leveis ........................................65 1. Leaf Growing .............................................................................................69 2. Leaf Purchasing ......................................................................................... 71 3. Leaf Blending ..................................................................................... 72 4. Additional Evidence of Nicotine tifanipulation..........._ ....................... 7" N. Maintaining the Market through Sales to Adolescents ..........................................77 1. The increasing Addiction ofAdolescents: A Predicate to Continuing Industry Profits .......................................................................77 ^. Deceptive Conduct Directed at Adolescents ..............................................79 3. Revnolds: °Old Joe CameP. ........................................................ _............ 81 •-:. Philip Morris's Admission that it has Targeted Adolescents .....................52 O. The Human Toll of Cigarette Smoking .................................................................83 .83 1. Health Effects of Cigarette Smoking ............. ............. -........... .............. P. Injury To The Public Fisc As A Direct And Foreseeable Consequence Of Defendants' Conduct ........................................................................................88 Fraudulent Concealment .......................................... :............................................. 88 VII. CLAIiviS FOR RELIEF .................................................................................................... .9Q Count One: Statutory Cause of Action Based on 33 V.S.A. § 1911(c) for Negligent Entrusttnent .................................................................................................... ...90 Count Two: Statutory Cause of Action Based on 33 V.S.A. § 1911(c) for Negligent and/or Intentional Breach of a Voluntarily Assumed Duty ...............................92 Count Three: Statutory Cause of Action Based on 33 V.S.A. § 1911(c) for Negligence .................................................................................................... .....................93 Count Four: Statutory Cause of Action Based on 33 V.S.A. § 1911(c) for Defective Product Unreasonably Dangerous When Distributed to Adolescents ...............94 Count Five: Statutory Cause of Action Based on 33 V.S.A. § 1911(c) for Defectively Designed Product Unreasonably Dangerous to Consumers and Users....... ..95 t
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TABLE OF CONTENTS I. INTRO DUCTION .................................................................................................... ...........1 II. JURISDICTION AND VENUE ..........................................................................................3 III. PARTIES .................................................................................................... .........................4 IV. ADDITIONAL JURISDICTIONAL ALLEGATIONS_REGARDING B.A.T ..........................................7 INDUSTRIES, P.L.C .................................................................................................... ..... V. CONSPIRACY ALLEGATIONS .....................................................................................i5 VI. FACTUAL ALLEGATIONS ............................................................................................16 A. Backeround .................................................................................................... ........16 B. The Cartel's Pre-Conspiracy Advertising and Promotional Activities: False Claims of Health and Safety .........................................................................17 C. The L953 "Big Scare" and Beginning of the Industry Conspiracy to Suppress the Truth and Curtail Competition ................ ........... .............................. 17 D. The Industry Assumes A Duty to Conduct Unbiased Scientific ....?? Research to "Safeguard the Public Health" ............................ ........................... E. Repeated False Promises to the Public ................................................ ............... ...?4 F. The True Nature of the TIRC and the CTR: A"Front' for the Tobacco Cartel .................................................................................................... ...32 G. The Role of CTR "Special Projects" and Industry Lawyers in Concealing Information .........................................................................................3 8 H. The Continuing Conspiracy to Prevent the Development of Safer Products......... 4: 1. The "Gentlemen's Agreement................... ........................ ............. ............ 41 2. Suppression of Liggett's "Safer" Cigarette .........................................••...-.43 3. Brown & Williamson's Efforts to Develop a"Safer' Cigarette ................45 4. Philip Morris: Avoiding an Ind,tstry W ar .................................................46 5. Reynolds's "Safer" Product .......................................................................47 6. The Industry Position on "Safer" Cigarettes ............ .............................. ..••47 I. History of Industry Knowledge that Smoking is Harmful ..................................•.• 48
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c Undertaking sensitive group research on smoking and health issues in England because BAT-11 would not "want it to leak back to the United States." 59. BAT-11 has succeeded in its aggressive United States corporate acquisition plan. a plan that has had significant effects upon the Vermont economy. For example. in 1994 BAT-11 purchased the American Tobacco Company, then the fifth-largest tobacco operation in the country, for approximately $1 billion. 60. B? T-II is also subject to personal jurisdiction for engaging in tortiotts conduct in Vermont. BAT-11 has assured that substantial scientific and other knowledge not be disc!osed to Vermont and its citizens; has directed the research and design of cigarettes sent into Vermont for sale and consumption; ard has assured the complicity of B& W and the other BAT-11 operating companies in the United States tobacco industry conspiracy alleged in the complaint. As a result. BAT-II has directly or by an agent caused tortious injury by an act or omission in this State. 6L Vi1:zn it suits BAT-II's own purposes, BAT-11 does not hesitate to subject it;elf tt, jurisdiction in the United States. For axample, when it sought to consummate its S5.2 biilion purchase of the Farmer's Group. BAT-iI subjected itself to jurisdiction in various states in undertaking the insurance approval process for that transaction. When it sought to purchase American Tobacco Company for S 1 billion, it submitted to the jurisdiction of the Federat T rade Commission, and judicially admitted that it was involved in "commerce" between the various states. When it sought to raise hundreds ofmillions of dotlars on the American financial markec• through the sale of promissory notes through its United States subsidiary, BAT-11 submitted to the jurisdiction of New York courts and uncondironally guaranteed payment on the notes. 62. BAT-II Pegularly does and solicits business in the American Fnancial markets. Over many years. BAT-II representatives -- including the Chairman of the BAT-11 board -- ha ac. repeatedly canvassed the United States to solicit individual and instirutional investment in BAT-11 securities and debt instruments. This solicitation was part of an aggressive :aarkeiing plan over years by BAT-11 to solicit greater American investment.
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63. BAT Industries' own publications proudly promote American investment in the company: "Shares of B.A.T Industries are traded in the American Stock Exchange in the United States ... and are often among the most actively traded on that exchange." 64. BAT-II solicits investors in the State of Vermont. One wav BAT-II solicits Vermont investors is through advertisements contained in newspapers distributed in Vermont. 65. Upon information and belief, BAT-II's solicitations resulted in investment by Vermont investors. 66. The United States, including Vermont, has been central to BAT-II's global tobacco and financial businesses. 67. BAT-II's actions were intentional, and they were directed at the sale of cigarettes in Vermont (as well as other states). 68. BAT-II is the hub of the BAT Group industrial enterprise. which has sold millions of dollars worth of ciRarettes in Vermont. 69. In short, B?.T-II regularly does or solicits business in Vermont. 70. BAT-II has purposely availed itself of the American economy, including the Vermont ciQarette and financial markets. 71. BAT Group tobacco revenues in Vermont-- sales ultimately directed and controlled by BAT-II -- are hundreds of thousands of dollars annually. 72. The BAT Group recognizes substantial profits each day for the sale of its cigarettes in Vermont. 73. Over time, BAT-II has reaped millions of dollars of profits from Vermont consumers, upstreaming those profits to diversify its global commercial enterprise and pay dividends. V. CONSPIR2,CY AL.LEGATIONS 74. In committing the wrongful acts alleged, all defendants and other entities and persons identined. with the assistance and knowledge of their counsel, have pursued a cormnon -IS- ir_~cscnnsc~rx
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102. Hartnett urged that the industry hire "the best obtainable" public-relations counsel since none "has ever been handed so real and yet so delicate a multimillion dollar problem." (Emphasis in original.) 103. The next day, December 15, 1953, acceptinU Hartnett's offer to conspire, the presidents of the leading Tobacco Companies met at an extraordinary gathering in the Plaza Hotel in New York City. The public relations firm Hill & Knowlton coordinated the meeting and was to play a major role in formulating and executing the industry's response. Present at the meeting were the presidents of American Tobacco, Benson & Hedges, Brown &Williantson, Lorillard, Philip Morris. R.J. Reynolds and U.S. Tobacco. 104. This gathering was unprecedented because it was the first time the Tobacco Companies had met together outside of occasional dinners. 105. According to a Hill & Knowlton memorm dt:m smnmarizing the meeting, ihe companies exchanged proprietary information and "voluntarily admitted" that "their ov, t advertising and [past] competitive practices have been z ptincipal factor in creating a he3lth problem." and acknowledged that they had'`informa?Iv talked over the yroblem and will trr and do somethins about it." (Emphasis added). 106. Defendants realized that the subject of doing something collectively about competitive advertising practices "is one of the important public relations activities that might very clearly fall within the purview of the antitrust act." Therefore, the defendants concluded, "it is doubtful that we will be able to make anv formal recommendation with regard to the advertising or selling practices and claims." (Emphasis added.) 107. At the Plaza Hotel meeting, the defendants entered into a combination and conspiracy to cease to compete on the basis of relative health risks. 108. Prior to the December 15. 1953 meeting, the cigarette industry did not havla a trade association. Moreover, the companies avoided formal business meetings of any kind in the wake of prohibitions stemming from a 1911 dissolution decree and criminal convictions for price fixing in 19;9. -19- IL'911rA1{6SCCd')
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49. BAT-II has directly and substantially engaged in key decision-making for the research, development. design, manufacture and marketing of hundreds of millions of dollars of cigarettes sold in Vermont. 50. Through secret programs such as Project GHOST or Project BATTALION and through formal delegation of authority, BAT-II directly participated in fundamental, strategic, and implementive decisions leading to the sale of cigarettes in the United States by the BAT Group, and more particularly, its wholly-owned subsidiary, Brown & Williamson. 51. BAT-II's participation was detailed, and covered the political relations to accompany the business generally, and the administrative infrastructure to conduct research, development, manufacturing, design and marketing of cigarettes. 52. BAT-II controlled the initiation of new research and product development by the BAT Group, including Brown & Williamson. BAT-II also has dictated and controlled the termination of such development and research often before the original research objectives have been achieved. 53. One area in which BAT-11 control over research and product development has been exercised most pre-emptively is in the development of so-called -'safer" cigarettes and other novel products. BAT-II, through the TSRT, has directly orchestrated the efforts of BAT operating companies in the United States, and across the globe, in this area. 54. Examples of BAT-II's direction and control of research and product development include, without limitation: a. Y-1 Tobacco. The TSRT directed the efforts of the BAT Group, and particularly its United States tobacco operations, with respect to the utilization of a genetically- engineered tobacco known as Y-1. The BAT Group secretly developed Y-I tobacco with nicotine content more than twice the average found naturally in flu-cured tobacco. The TSRT organized efforts to grow Y-I tobacco in South America and ship it to the United States to be used by Brown & Williamson commercially in cigarettes sold in Vermont--and urged the use of Y-1 tobacco worldwide. The chairman of BAT-II expressed particular interest in reviewing the -10- 11_9 U UO1595C~
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37. Finh, the Tobacco Industry conspired to create confusion as to whether smoking is harmful and to make it appear that there is a legitimate, good-faith scientific dispute over the health impact of smoking. The industry presents cigarette smoking in an attractive, youthfui and positive way. B. The Cartel's Pre-Conspiracy Advertising and Promotional Activities: False Claims of Health and Safety 88. Despite the growing body of evidence showing their cigarettes caused lung disease and cancer, the Tobacco Companies chose to promote their product with deceptive health claims. Starting in the 1930s and continuing until the mid-1950s, the Tobacco Companies made express claims and warranties as to the healthiness of their products with disregard of the falsity of their claims and the consequential adverse health impact on consumers. 89. Examples of these health warranties include the fol!e t. J: Old Gold: ":Vot a cough in a Carload"; Camel: "Not a single case of throat imtation due to smoking Cameis": Philip ? lorris: "The Throat-tested cisarette: - 90. One of the key themes used to promote cigarette smoking durine this eeriod was a promise that individual cigarette brands were either "less irr~.tatino" or that "harmful irritants" had been removed. At one point or another during this period e~'ery major cigarette brand made a false claim regarding health and/or irritation. 91. These pre-1954 advertisements and representations demonstrate defendants' understanding that consumers wanted safer products. As a result, prior to 1954, the Tobacco Companies engaged in vigorous competition on the basis of claims of health. C. The 1953 "Big Scare" and Beginning of the Industry Conspiracy to Suppress the Truth and CurtaiI Competition 92. The dLfendants knew that published information about health risks could a. decrease tobacco sales; b. increase consumer demand for safer tobacco products, 17_ ii_.::m:565CJOC
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a. High level BAT-II executives initiated and maintained direct contact with their counterparts in American tobacco industry on topics related to smoking and health, nicotine and other wrongdoings alleged in this case; b. BAT-II regularly conducted visits to the United States, independent of Brown & Williamson business, which included direct contact with the research directors of major American cigarette comparues, including RJ Reynolds. Philip Morris, Liggett & Myers as well as the American Medical Association and the National Institutes o` Health, on research aspects of smoking and health. c. BAT-rI, through the United Kingdom Tobacco Institute. regularly shared research information on smoking and health issues with TiRC, CTR and other tobacco industry fronts in the United States. 58. For twenty years, B?.T-II has controlled and directed the BAT Group's international campaign to suppress and conceal material information and tc promote disinformation about the health consequences of smoking. From its corporate headqttart-ers in England, B?.T-II directed and controlled the manipulation of scientific research, t:on-disclasure of scientific research, suppression of product development and obstruction of the judicial process across the globe. The fraud was particularly acute with respect to the United States and Brown & Williamson. These actions resulted in widespread disease and death throughout Vermont and other states. Examples of BAT-II's efforts to ensure its market position by concealing sigr:ifcant health and product information include without limitation: a. Establishing and enforcing strict guidelines for the mandatory d?str.hution of BAT Group scientifib research to Brown & Williamson exclusively through certain American lawvers with neither Brown & Williamson nor any Brown & Williamson employee _eroealed on the distribution list; b. Implementing and enforcing BAT disciplinary policies for "careless" statements by employees about smoking and public health; l3- I f_il_l(i]1RSC(TT.
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c. induce some competitors to promote their own brands or denigrate competing brands on the basis of relative health risk, d. materially reduce their profits and market shares: e. increase the likelihood of government regulation. 93. In the early 1950s, scientists published two significant scientific studies warning of the health hazards of cigarettes. The first was published in 1952 by Dr. Richard Doll. a British researcher, who found that lung cancer was more common among people who smoked and that the risk of lung cancer was directly proportional to the number of cigarettes smoked. 94. A second study was published in December 1953 by Dr. Eraest Wynder and others of the Sloan-Kettering Institute. 95. Wvnder's experiments with mice confirmed the cancer-causing properties of cigarettes. 96. The widespread reponing of these studies caused .-~hat cigar2tte company officials called the `'Big Scare." 97. By late 1953, the Big Scare had caused a decrease in consumption of tobacco products and in the stock prices of many of the Tobacco Companies. 98. The cigarette industry responded quickly to the Big Scare. 99. On December 14. 1953, as a result of the public's concern over the Wynder study, Brown & Williamson president Timothy V. Hartnett circulated a memorar-durn to his counterparts at other defendant Tobacco Companies and set out his proposals on how the industry should collectivelv deal with the "health issue." 100. Hartnett.proposed a two-pronged collective response to his competitors "to get the industry out of this hole." 101. Hartnett proposed that the industry ostensibly offer "unstinted assistance to scientific research." The most difficult part of the "research" effort would be "how to handle significantly negative research results if, as_ and when they develop." 18- i]]91]ool5BSCUOC
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40. BAT-II's United States interests are a significant part of the BAT-II empire. According to one BAT-II publication: "The North American operations of B__A.T. Industries are a key part of the Group's strategic and financial development. In 1987 they contributed 44 per cent of the Group's trading profit and accounted for 27 per cent of turnover worldwide. Nearly one-third of B.A.T Industries assets are held in North America." 41. Brown & Williamson, BAT-II's wholly-owned United States subsidiary, is by far BAT-II's most significant North American asset. It is BAT-II's largest operating group and the third largest tobacco company in the United States. 42. Throughout BAT history, BAT-II board members have acted to ensure that they dictate and control all significant smoking and health policies, research programs and marketing strategies of BAT tobacco operations, including Brown &;Villiamson. In addition to reserving for itself sufficient policy-making and decision-implementing power to establish and maintain the BAT Group's complicit}' in the tobacco industries' public health conspiracy, the BAT-Ii board established, among others, the following Eve boards and committees, all reporting directly to the BAT-II board of directors, to assist in controlling every aspect of BAT Group tobacco operations: a. Chairman's Policy Committee (CPC) (later changed to Chief Executive Committee). The CPC was formed to act as "key executive body of the [BAT-Ii] Board." Management of all tobacco operating companies report directly to CPC. b. The Tobacco Division Board (TDB). The TDB is responsible for considering and referring directly to the board issues relating to smoking and health, research policy and marketing pblicy. c. The Tobacco Executive Committee (TEC). The TEC exists to give TDB time to °concentrate on policy matters in depth." It is "responsible for the execution of policies and objectives decided by TDB." d. T1te Tobacco Strategy Review Team (TSRT). The purpose of the TSRT was to "formulate overall strategic objectives" f or the BAT Group relating to tobacco issues. -8- ~ ~-~ i- a:~s ©sc ~cc
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b. The requirement that American tobacco operations participate in the "Tobacco Stratesv Review Team" of the BAT Group; c. direction of marketing strategies; d. direction of legal and technical defense efforts: e. promotion of competing epidemiological scientific information; f. controlling Brown & Williamson personnel policy matters by having Brown & Williamson report directly to BAT Industries on personnel matters and investing authority in a BAT-II committee to approve Brown & Williamson executive salaries, bonus compensation, employment contract terms of VP's and above, as well as other personnel issues; and a_ investing authority in a compensation committee. comprised of BAT-II and Brown & Williamson officers to approve appointments and emplo}'meet contract terms of senior managers below vice president level. 56. BAT-II acted in complicity not only with the corporate members of the BAT Group itseif, but with the American tobacco industry as a whole, in connection with the wrongdoing alleged in this case. The promulgation and enforcement of decegtive smoking and health policies, and the manipulation of nicotine levels of cigarettes to addict smokers, did not remain within the walls of BAT-II's Windsor House headquarters. These practices spread throughout the BAT Group and into BAT-II's American tobacco business. By combining with the wider tobacco industry in the United States, these policies were implemented on an industr-.'- wide basis. 57. B.A.T-I3 also conspired directly and on its own with the United States tobacco industry to deceive the American public and the citizens of Vermont regarding the consequences of cigarette smoking and the addictive nature of nicotine. BAT-II's conspiratorial contact with the United States tobacco industry, independent of Brown & Vdilliamson, includes, without [imitation: -12- - C9:1WJ5oscGUC
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Initially, membership on the TSRT was confined to a very close circle of BAT-11 Board members whose job on the TSRT was to dictate tobacco strategy of the entire BAT Group. Years later, membership was extended to include the Chief Executives of the four tobacco businesses, including Brown & Williamson. e. The Scientific Research Group (or'`SRG"). The mission of the SRG was to "set group policies and issues related to additives, pesticide residues and smoking and health." The BAT-II board has acted through these groups to assure that its overall policies and strategic objectives relating to its tobacco business and smoking and health issues are followed on a global basis. 43. Both through these groups and in other ways, BAT-II has plaved a significant role in the BAT Group process that leads to the sale of hundreds of thousands of packs of ciga-re*.tes in Vermont atmuallv- 4d. BAT-11 exercises control over the day-to-day cperations of its• wholly-owned subsidiar,v Brown & Williamson, especially on the critical issues of new product development, smoking and health, the addictiveness of nicotine and marketi ,g tobacco products to American children. ~g. BAT-11 has played the leading role in the research and development and design and marketin_ of cigarettes for the BAT Group, including Brc•::,: & Williamson. 46. The BAT-II board and senior offic_rs have established and enforced coordinated cigarette research, tobacco growth and other development policies for the BAT Group. BAT-ti has also established and enforced policies and guidelines for che design and r: anufacture of addictive cigarettes in the United States. 47. BAT-II established and enforced coordinated r_iarketing and public relations policies for the BAT Group in the United States. 48. In sum. BAT-11 is the ultimate decision-maker on all significant issues -- research, tobacco agriculture. design, manufacture, marketing or administration -- that affec:t the BAT Group's sale of cigarettes in Vermont. -9- t l]9 R oClS 35C IX1C
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course of conduct, acted in concert with, aided, abetted and conspired with one another and other conspirators not yet named or known, in furtherance of their common plan and scheme outlined herein. VI. FACTUAL ALLEGATIONS A. Background 75. Today, some 50 million Americans smoke. According to current trends, 22 percent of adult Americans will still be smokers in the year 2000. 76. In the latter half of the 20th century, some 10 million Americans have been killed by smoking-related disease. This year (and every year into the foreseeable lftture), nearly half a million Americans will die prematurely due to disease caused by cigarette smoking. 77. Based upon current smoking trends, of the American children alive today, more than 5 million will be killed by cigarette disease during the 21st century. 78. In the i990's, thousands of Vermont residents died from smoking-re!ated causes. 79. Several factors account for the persistence of cigarette smoking. 80. First, partly as a result of the Tobacco Industry's false and fraudulent advertising, smoking became socially acceptable before its deleterious effects were known. 81. Second, the long latency period between smoking initiation and disease contraction masked the causal relationship for decades. 82. Third, cigarettes contain large amounts of nicotine. 83. Nicotine is an addictive substance. 84. Nicotine in cigarettes makes it difficult for a person to stop smoking. 35. Through a variety of methods, defendants manipulate the levels of nicotine in their products in order to promote and sustain addiction. 86. Fourth, the Tobacco Industry has conspired not to compete on [he basis of relative health risk. The tobacco industry conspired to restrict output in safer and alremate products. -16- ;i])_eol50SC00C
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109. Despite the dangers, the competitors met because they viewed the-current problem "as being extremely serious and worthy of drastic action." The problem was so serious "that salesmen in the industry are frantically alarmed and... the decline in tobacco stocks on the stock exchange market has caused grave concern." 110. The agreement reached at the Plaza Hotel, to conceal adverse information and to refrain from competition on the basis of health, became a permanent ilxt•_ue of defendants' future relationship. 111. According to the Hill & Knowlton memorandum, "[e]ach of the company presidents attending emphasized the fact that they consider the program to be a lone term one," and the meeting participants were "emphatic in saying that the entire activity is a Ione-term, continuine oroeram, since they feel the problem is one of promoting c.garettes and protecting them from these and other attacks that may be expected in the future." (Emphasis added.) 112. The course of conduct agreed to at the December 15. 1°53, meeting included but was not limited to: a. "The chief executive officers of all the leading companies -R.1. Reynolds, Philip Nfonis, Benson & Hedges, U.S. Tobacco Company, Brown & WilIiamson- have agreed to go along with a public relations program on the health issue." b. "Because of the antitrust background, the companies do not favor the incorporation of a formal association. Instead, they prefer strongly the organization of an informal committee which will be specifically charged with the public relations function and readily identified as such" c. Uill & Knowlton, a public relations firm, was to play a central role in the industry association. "'The current plans are for Hill & Knowlton to serve as the operating agency of the companies, hiring all the staff and disbursing all funds.' d. All of the leading manufacturers, except Liggett, agreed to join in the public-relations strategy. Liggett decided not to participate at that time -'because that company :`'eels that dte proper procedure is to ignore the whole controversy." -?0- 11.91]M)i9cCC-0C
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113. Nine days later, Hill & Knowlton presented a memorandum detailing its recommendation to the Tobacco Companies. The memorandum recognized the importance of gaining public trust, and avoiding the appearance of bias, if the industry's "pro-cigarette" public- relations strategy was to succeed. According to the memorandum: a. "[T]he grave nature of a number of recently highly publicized research reports on the effects of cigarette sn..,icirtg ... have confronted the industry with a serious problem of public relations." b. "It is important that the industry do nothing to appear in the light of being callous to considerations of health or of belittling medical research which goes against cigarettes." c. "The situation is one of extreme delicacy. There is much at stake and the industn• group. in moving into the field of public relations, needs to exercise-great care not to add fuel to the tlames." I L4. John Hill suggested that the word "research" be included in the natne of the Committee. An organization designed to pursue a very delicate "public relations funetiori ' was given the intentionally misleading name of the "Tobacco Industry Re<_ea_rch Co,-nmittee." 115. Five of the "Big Six" cigarette manufacturers were original members of the TIRC. Liggett did notjoin until 1964. In 1964, the TIRC changed its named to the Council for Tobacco Research (the "CTR"). 116. The agreement that the industry would not compete based on claims of health was documented and communicated in a number of ways. One example is a June ? L, 1954 Hill & Knowlton memorandum: Early in the life of the Tobacco Industry Research Committee, it was accepted as a basic principle that every effort should be made to avoid stimulating more adverse publicity and controversy on the subject of tobacco and health. - The principle has been and will continue to be carefully adhered to in the work carried on for the committee. -21- i;_e cm3s asc ~
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117. The memorandum's reference to "every effort" referred to the Tobacco Industry's agreement not to compete on the basis of health claims for fear of stirring up any controversy regarding health and safety. 113. Defendants were keenly aware that the agreement creating the TIRC was a restraint on competition: "On the Continent individual companies and monopolies have agreed to pool research on the health question, thereby reducing it as a basis for comDetition." (Emphasis added.) 119. To further the existing conspiracy, a second trade group, the Tobacco Institute, was formed by cigarette manufacturers in 1958. It performs a variety of functions and provides opportunities for the conspirators to exchange information, to police the agreement and otherwise to coordinate activities. D. The Industry Assumes A Duty to Conduct Unbiased Scientific Research to "Safeguard the Public Health" 120. As the initial step of the conspiracy, the cigarette industry announced the formation of the TIRC on January 4, 1954, with newspaper advertisements r•.ationwide, reaching a circulation of more than 43 m.illion Americans. This ad appeared in newspapers circulated throughout Vermont. The advertisement was captioned "A Frank Statement to Cigarette Smokers" and was run under the auspices of the TIRC. 121. Listed as sponsors of this advertisement were, inter alia, the American Tobacco Company, Brown & Williamson Tobacco Corporation, P. Lorillard Company, Philip Morris Co. Ltd., Inc., R.J. Reynolds Tobacco Company and United States Tobacco Company. 122. The advertisement stated as follows: "A Frank Statement to Cigarette Smokers" RECENT REPORTS on experiments with mice have given wide publicity to a theory that cigarette smoking is in some way linked with lung cancer in human beings. Although conducted by doctors of professional standing, these experiments are not regarded as conclusive in the field of cancer research. However, we do not believe that any serious medical _7_Z_ i i.~ r_ cros nsc oac
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TIRC's associate scientific director, "little is established scientifically about tobacco effects on the heart": and tobacco has "even been reported as killing various harmful bacteria." The release represented that the TIRC "is supporting scientific investigation into many phases of tobacco use and human health in order to get the facts." b. On December 16, 1957, the TIRC issued a release representing that "Extensive scientific research now underway into tobacco use does not substantiate generalized charges against smoking as a cause of cancer." Reporting on the findings of Dr. Clarence Cook Littlc, "Scientific Director" of the TIRC, the release represented that "no substance has been found in tobacco smoke known to cause cancer." According to Dr. Little, the research program was desianed "solely to obtain new information and to advance human knowledge in every possible phase of the tobacco and health relationship." c. On or about December 27, 1958, the TIRC issued a release representing that "during the past year many scientists of high professional standing have produced additional evidence and opinions that challenge the validity of broad charges made against tobacco use ° According to the TIRC, its research had developed several "essential facts," including that "the cause or causes of lung cancer remain undetermined" and that "compelling doubts have been raised about statistics and their interpretations involving smoking and health." The release concluded with the following promise: At its formation in January 1954, the Tobacco Industry Research Committee stated its fundamental position: "We believe the products we make are not injurious to health. We are providing aid and assistance to research efforts into all phases of tobacco use and health." That statement and pledge are reaffirmed today by members of the Tobacco Industry Research Committee. d. On March 28, 1960, the TIRC issued a release challenging any link between smoking and lung cancer. In the re!ease the TIRC repeated that "we have frankly accepted a responsibility for financing independent research into health problems, including luno cancer, in an effort to get needed facts and evidence." -25- 11'_9 17 OGiS BSC WC
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156. For example, Dr. Freddy Homburger, a resea rcher in Camyridge,.;Vfassachusetts, undertook a study of smoke exposure on hamsters. According to Dr. Homburger, he received a arant from CTR that was changed half-way through the study to a contract "so they could control publication-they were quite open about that." 157. Dr. Homburger has testified that when the study was completed in 1974, the scientific director of CTR and a CTR lawyer "didn't want us to call any -thing cancer" and that they threatened Dr. Homburger with "never ge:[ting] a penny more ' if his paper w•ere published without deleting the word cancer. 158. An internal CTR document describes how Dr. :Iomburger attempted to call a press conference about the incident and how CTR stopped it: He ... was to tell the press that the tobacco industry was attempting to suppress important scientific information about the harr:fui effects of smcking. He was going to point speciGcalit at CTR.... I arranged later that evening for it to be canceled. Hombureer was 2iven a cordial w'elcome and nicely hastened out the door.r. P.S. I doubt if you or Tom will %vant to retain this note. 159. Other internal industry documents a;so shed light on the true nature of the conspirators' associations, as the following additional quotations demonst.mte by way of example: a. "CTR began as an orgatuzation called Tobacco Industry Research Council (TIRC). It was set up as an industry shield in 1954. That was the year statistical accusations relating smoking to diseases were leveled at the industry; litigation began; and the WynderlGraham reports were issued. CTR has helped our legal counsel by giving advice and technical information, which was needed at court trials .... [T]he public relations value of CTR must be considered and continued .... It is very important that the industry continue to spend their dollars on research to show-that we don't agree that the case against smoking is closed." b. "Historically, the joint industry funded smoking and health research programs have not been selected against specific scientific goals, but rather for various purposes such as public relations, political relations, position for litigatton, etc.... In general, tht.-se -36- :1:9i3WltUS(~_
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140. An April 1962 memorandum of Hill & Knowlton reveals the real.purpose of the TIRC: "To date, the TIRC program has carried its fair share of the public relations load in providing materials to stamp out brush fires as they arose." 141. A 1972 internal document from a Tobacco Institute official to the group's president described the importance of using joint industry research to maintain public doubt about the link between smoking and disease: For nearly twenty years, this industry has employed a single strategy to defend itself on three major fronts - litigation, politics, and public opinion. While the strategy was brilliantly conceived and executed over the years helping us win important battles, it is only fair to say that it is not - nor was it ever intended to be - a vehicle for victory. On the contrary, it has always been a holding strategy, consisting of * creating doubt about the health charoe without actually denying it * advocating the public's right to smoke, without actually urging them to take up the practice * encouraging objective scientific research as the only way to resolve the question of the health hazard. As an industry, therefore, we are committed to an ill-defined middle ground which is articulated by variations on the theme that, 'the case is not proven.' 142. A 1974 report to the CEO of Lorillard from a research executive described CTR's scientific projects as having not been selected using specific scientific goals, but rather for various purposes such as public relations, political relations and position for litigation. 143. The falsity of the "independent research" being conducted by the CTR is revealed by the followine internal Philip Morris memo: It has been stated that CTR is a program to find out 'the truth about smoking and health_' What is truth to one is false to another. CTR and the Industry have publicly and frequently denied what others find as 'truth.' Let's face it. We are interested in evidence which we believe denies the allegation that cigarette smoking causes disease. If the CTR program is aimed in this direction, it is in effect trying to prove the negative, that cigarette smoking does not cause disease. Both lawyers and scientists will agree that this task is extremely difficult, if not impossible. I~[9L'CUI:ASCDOC
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reported this in a memo, where he wrote that he had been called by UST's general counsel, Jim Chapin. Pepples stated. "Chapin says the statements quoted were unauthorized and do not represent his company's views. He has asked me to extend U.S. Tobacco's auolouv to each of the cioarette comoanies and advised me that the individual ouoted in the article is no lonizer emploved at U S. Tobacco- Chapin says U.S. Tobacco has instituted smoking and health seminars throughout the company." (Emphasis added.) 195. This action by U.S. Tobacco is consistent with the conspiracy among defendants not to compete on the basis of safety and health. - 196. In response to perceived growing demand, the companies researched the possibility of producing safer products. 197. Many of the companies developed products that would have greatly reduced or eliminated the health risks to tobacco users. 198. The companies did so in order to be ready with such safer products in case their co-conspirators broke ranks and marketed safer products. 199. Notwithstanding this defensive research, the fundamental agreement and understanding remained: information and activities deemed harmful to the unified, defensive posture of the industry or inconsistent with the non-competition conspiracy would be restrained, suppressed, and/or concealed. 2. Suppression of Liggett's "Safer" Cigarette 200. Liggett was successful in researching and actually developing a less-biologically- active cigarette. 201. However, in response to retaliation and threats from co-conspirators, Liggett agreed not to market this product. 202. Liggett initiated its "safer" cigarette project, called XA, in 1968. After a minimal expenditure of only $14 million, Liggett was able, internally, to proclaim the project a success in 1979. By applying an additive of palladium metal and magnesium nitrate tosobacco to act as a -43- 1129 12035 9sc ~c
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Through a holding company, B.A.T Industries is the sole shareholder of Brown & Williamson. B.A.T Industries exercises direct and detailed "hands on" control over day-to-day operations of its subsidiaries. especially Brown & Williamson. B.A.T Industries, directly and throu-h its agent Brown & Williarnson, has placed cigarettes into the stream of cot unerce with the expectation that substantial sales of cigarettes would be made in the United States and in the State of Vermont. B.A.T Industries has also conducted, directly or through its agents, subsidiaries, associated companies and/or co-conspirators, significant research for Brown & Williamson on the topics of novel product development smoking, disease and addiction. B.A.T Industries surreptitiously sent that research to Brown & Williamson in the Uniwd States, and conspired with and directed Brow. & Williamson to conceal the research and other shared information from discovery in United States lawsuits, which it did. 29. On infb;mation and beiief, Brown & Williamson sent to B-A.T Industries in England researca conducted in the United States on the topics ot smokine. disease and addiction, in order to remove sensitive and culpatory documents from United States jurisdiction, and such documents were subject to B.A.T Industries' control. ~0. B.A.T Industries is a participant in the conspiracy described herein and has caused harm and affected commerce in the State of Vermont. 3 1. Defendant British American Tobacco Company, Ltd. ("BATCO") is a British Corporation whose registered office is at Millbank, Knowle Green, Staines, Middlesex, England TW18 i DY. British American Tobacco Company, Ltd., is or was a related corporation of defendant Brown & Williamson Tobacco Corporation. Both are owned by B.A.T. Industries. 32. At times pertinent to the complaint. BATCO, individually or through its affiliate, alter ego, subsidiary andror division, defendant Brown % Williamson designed, tested, manufactured, mar4:eted and sold cigarettes for use in the State of Vermont. )3. BATCO has also conducted. or through its associated companies, agents or subsidiar.es has conducccd, si«nificant research for Brown & Wiiliamson on the topics of smoking, disease. and addiction. -6- 1 C+~crossazc:c'C
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• programs have provided some buffer to public and political attack of the industry, as well as background for litigious (sic) strategy." c. "Historically, it would seem that the 1954 emergency was handled effectively. From this experience there arose a realization by the tobacco industry of a pubiic relations problem that must be solved for the self-preservation of the industrv." d. "To date, the TIRC program has carried its fair share of the public relations load in providing materials to stamp out brush fires as they arose. While effective in the past, this whole approach requires both revision and expansion. The public relations program ... was like the early symptoms of diabetes - certain dietary controls kept public opinion reasonably healthy. When some new symptom appeared, a shot of insulin in the way of a news release ... kept the patient going." e. "When the products of an industry are accused of causing hann to users. certainly it is the obligation of that industry to endeavor to determine whether such accusations are true or false. Money spent for such purpose should not be regarded as a charitable contribution but as a business expense - an expense necessary to keep that industry alive. In view of the billions of dollars of annual sales of our industry our expenditures for health research has been of a minimal order." f. "For nearly twenty years, this industry has employed a single strategy to defend itself on three major fronts - litigation, politics, and public opinion. While the strategy was brilliantly conceived and executed over the years helping us win imporrant battles, it is only fair to say that it is not - nor was it intended to be - a vehicle for victory. On the contrary, it has always been a holding strategy. consisting of creating doubt about the health charge without actually denying it.... In the cigarette controversy, the public - especially those who are present and potential supporters (e.g. tobacco state congressmen and heavy smokers) - must perceive, understand, and believe in evidence to sustain their opinions that smoking may not be the causal factor.- 37 I13SI]Ull59Sr!R~G
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160. Despite overwhelming scientific evidence, and the confirmation of this evidence by their own internal research, the cigarette manufacturers and their trade associations continue to deny uniformly that there is a causal connection between cigarette smoking and adverse health effects, or that nicotine is addictive. 161. As one industry representative testified: "[A company can't represent that] smoking doesn't cause cancer. You can't say that. But you can say it is a risk factor, and scientificallv it hasn't been established. And that's what the research is for.... I don't agree [that nicotine is addictive]. From what I've read on nicotine is that it contributes to the flavor, the taste of the product." (Emphasis added.) 162. Representations like these are misleading, tm.fair and deceptive. They are also a result of the industry's ongoing conspiracy and combination arising from the Plaza Hotel agreement, and are made to maintain the industry's market and profits from its product. G. The Role of CTR "Special Projects" and Industry Lawyers in Concealing Inti>rmation 163. in 1964, the year of the first Surgeon General's report on smoking. the CTR formed a"Special Projects" division to assist the industry in concealing unfavorable ir.formation. A series of research grants designated as CTR Special Projects were developed by defendants in a manner to appear to receive the protection of the attorney- client or attorney-work- product privilege. 164. The true purpose of the Special Projects division was to conceal damaging research regarding the links between smoking and disease, and to develop a number of e;cpert witnesses to defend tort suits against the Tobacco Industr;. 165. Consistent with this purpose, the Tobacco Industry's counsel were substantially involved in strategic and specific decision-making within the Special Projects division to withhold dangerous evidence from the public. 166. For example, the notes of one CTR meeting, written in 1981, state, "When we started the CTR Special Projects, the idea was that the scientiflc director of CTR would review a 3g- ~1'_9CNlsaSCIXK
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173. Shook, Hardy & Bacon undertook to coordinate the Tobacco Companies' CTR "special projects" subterfuge. 174. For example, in 1976, Donald K. Hoel of Shook, Hardy & Bacon wrote to in- house lawyers at the various Tobacco Companies that a study to measure environmental tobacco smoke should be modified so that the study would yield more favorable results for the Tobacco Companies' position. The study was subsequently modified to de-emphasize the role of second- hand tobacco smoke relating to indoor environmental quality. 175. In addition, aNfay 19, 1981 letter from Ernest Pepples, vice president and general counsel of Brown & Williamson, to Patrick Sirridge of Shook, Hardy & Bacon, requested that Sirridge evaluate the qualincations of various scientists seeking to conduct scientific studies for Brown & Williamson. Shook, Hardy responded by providing biographical sketches of potential consultants including whether they previously had taken a scientific position favorable to the industry's position. 176. Sirridge also cooperated %vith Pepples request in 1984 to transfer the funding of some helpful research by a cooperative scientist from a CTR account to a law-firm project: "I do not thin..k ... that we should continue burdening CTR with such programs, and instead suggest that they be handled as law firm projects." 177. In 1972, William Shinn of Shook, Hardy & Bacon wrote to Tobacco Company officials that a potentially favorable study should be secretly funded by the Tobacco Companies as a "special project (non-CTR)" to make the study appear independent of the industry aMl thus heighten its perception as unbiased and reliable. 178. By becoming intimately involved in the funding and deaign of these scientific studies, these lawyers attempted to fi.trther the conspiracy and fraud of the Tobacco Companies and CTR by clothing such studies in the attorney-client or work- product privilege to protect them from disclosure if their results were unfavorable. 179. Brown & Williamson used similar tactics in-house to suppress and avoid disclosure of its internal research on smoking and disease. -40- 1139 11C0)5 ON' DO[
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180. At a time when the company was resisting discovery in a number.of personal injury lawsuits. Brown & Williamson's general counsel, J. Kendrick Wel1s. recommended in a memorandum dated January 17, 1985, that most of the companv's biological research be declared "deadwood" and shipped to England. 181. Wells recommended that no notes, memoranda or lists be made about these documents. Wells stated, "I had marked certain of the document references with an X... which I suggested were deadwood in the behavioral and biological studies area. I said that the "B" ser.es are "lanus" series studies and should also be considered as deadwood." (`7anus" was the name of a project that attempted to isolate and remove the harmful elements of tobacco.) Wells further recommended that the research, development and engineering department also should undertake "to remove the deadwood from the files." 182. Thus, the Tobacco Companies and their laA:-,ers have misused claims of attorney- client privilege to insulate CTR-funded research projects and tnternai documents :rom disclosure to the pub& and to government ofncials. This conduct demonstrates the falsit}' of the Tobacco Companies' representations that they would jointly fund objective research and repor, the results of that research to the public. H. The Continuing Conspiracy to Prevent the Development of Safer Products 1. The "Gentlemen's Agreement" 183. The industry's 1953 combination and conspiacy were supplemented and aided by a commitment to conduct joint research because of "a general feeling that an industry approach as opposed to an individual company approach was highly desirable." This approach prevented competition on the basis of health-risk comparisons, among other things. 184. As part and in furtherance of the agreement not to compete to develop a"safer" cigarette, there was a "gentlemen's agreement" among the manufacturers to suppress independent research on the issue of smoking and health. This agreement was designed to, and in fact did, restrict product development. -41 - 1129 l3(IJ)58SC•JCC
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project. If he liked it. it was a CTR special project. If he did not like it, then it became a lawyers' special project.' 167. Another memorandum from 1981 explained, "Difference between CTR and Special Four (lawyers' projects). Director of CTR reviews special projects - if project was problem for CTR, use Special Four." 168. The industry has been successful in using the CTR Special Projects division to conceal harmful information. Research from the Special Projects division remains shielded from public scrutiny. - 169. in addition to CTR Special Projects, there are other instances where the industry used lawyers to shield the truth. For example, in 1984, B.A.T. began internally plotting how to shield documents produced by scientists from discovery. This plan included having B.A.T.'s scientific literature review publication ... set up as a Law Department function." 170. B.A.T. internally noted that'`Direct lawyer involvement is needed in all B.A_T. acti~ ities pertainu e to smokiug and health from conception tiiroueh every step of the activity ' This document further noted "the problem posed ... is d:fficult" due to "BAT scientists a,nd frequently used consultants who believe cause is proven." 171. The Kar:sas City law firm of Shook, Hardy & Bacon and other lawyers played a critical role in furthering the conspiracy to suppress and conceal information about the adverse health effects caused by the use of tobacco products. The lawyers attempted to protect damaging tobacco-related documents from disclosure under the attorney-client or work-product priviieges. 172. The lawyers asserted these privileges regardless of whether the documents were prepared in anticipation of litigation or represented confidential communications made between lawyer and client. Lawyers routinely provided a numb_~r of non-legal services to defendants such as deciding which CTR "special projects" should receive funding, dispensing funding to the "scientists" involved in such projects, and designing the scope and approach of the special project. -;9 - 1119 IS Oo3! 35C DOC
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m. Yet another announcement co-sponsored by the TIRC and- the Tobacco Institute, called "A Statement about Tobacco and Health." stated: We recoenize that we have a special resnonsibilitv to the public, to help scientists determine the facts about tobacco and heaith, and about certain diseases that have been associated with tobacco use. We accepted this responsibility in 1954 by establishing the Tobacco Industry Research Committee, which provides research grants to independent scientists. We pledge continued support of this program of research until the facts are known. *** Scientific advisors inform us that until much more is known about such diseases as lung cancer, medical science probably will not be able to determine whether tobacco or any other single factor plays a causative role, or whether such a role might be direct or indirect, incidental or important. We shall continue all possible effor'.s to brim* the facts to light. In that spirit we are cooperating with the Public Health Szrvice in its plan to have a special study group review all presentlv available research. (Emphasis added.) n. In 1977. Addison Yeanan, chairman and nresident of CTR, sta::.d during a speech that "[CTRj has no propaganda function of any .kind or any degree." o. In 1979, the Tobacco Institute issued a document entitled "Tobacco Industry Research on Smoking and Health." In it, TI represented that °[t]here are still eminent scientists who question whether a causal relationship has been proven between cigarette smoking and human disease." The report went on to claim that the industry had a great desire to "learn the truth": [A] major portiorn of this scientific inquiry has been financed by the people who knew the most about cigarettes and have a great desire to learn the truth-t5e tobacco industry. The industry has committed itself to this task in the most objective and scientific way possible. P. The 1979 report referred to above describes how the industry has spent $82 million in research "into all phases of tobacco use and health." Further the report -?8 - II]s i]COi59SCGGC
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The product as test marketed didn't have good taste and consequently was unacceptable to the public ignorant of its physiological superiority." (Emphasis added.) 219. Subsequently, taste was improved, and Philip Morris attempted to nromote the product. However, "The imposition of FTC rules and the industry advertising code took the starch out of the program ...." (Emphasis added.) 5. Reynolds's "Safer" Product 220. Reynolds also developed an alternative product with reduced physiological consequences. Except for a brief test in several cities, Reynolds did not market its safer product, "Premier," because of the intra-industry pact not to promote "safer' cigarettes. 6. The Industry Position on "Safer" Cigarettes 221. In furtherance of their conspiracy, defendants col'.ectiveiy denied that a"safer' cigarette could be produced. 222. A memorandum authored'ov an attomev at Shook. Hsdv coniirmed that there was an industry-wide position regarding the issue of a safer cigarette. 223. The 1987 memorandum was written in the context of the marketing by R.J. Reynolds of a smokeless cigarerte, Premier, which heated rather than burned tobacco. The Shook. Hardy attorney w-rote that the smokeless cigarette could"have signilicant effects on the tobacco industry's joint defense efforts" and that '-[t]he industry position has always been that there is no alternative design for a cigarette as we know them." The attorney aL-o noted, "Unfortunately, the Reynolds announcement ... seriously undercuts this component of industry's defense." 224. This fundamental position of the "industry" defense had been identified much earlier. In 1970, David Hardy of the Shook, Hardy frrm wrote to DeBaun Bryant, general 00 ~ counsel at Brown & Williamson, expressing concerns about some of the industry research into L.t ~ alternative products. Cr~ N O _a7_ ii]autl)50SC' C
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catalyst in the burning process, Liggett found that "[c]igarette tar has been neutralized," and that there was "[n]o evidence for new or increased hazard ...." 203. Using this process, Li ;gett was able to produce cigareaes "which are believed to be of commercial quality." These cigarettes, however, were never marketed. 204. Liggett abandoned its XA project in part because it faced retaliation from industry leader Philip Morris if Liggett broke ranks. 205. Another reason for abandoning the project was fear that the marketing of a"safer' cigarette would be, in essence, a confession that its (and the industry's) other cigarettes were not safe. Thus, one Li¢Qett executive wrote that, "Any domestic activity will increase risk of cancer litigation on existing products." 206. James Mold, who was assistant director of research at Liggett during the development of the'`safer" cigarette. the XA project, has provided testimony including the following overview of the :C-~ project and its abandonment: a. Mold stated that the XA project produced a safer cigare«e. He stared. "b`.'e produced a ci2arette which was, we felt, commercially acceptable as established by some consumer tests, which eliminated carcinogenic activitv. ...° (Emphasis added.) b. Mold testified that after 1975, all meetings on the project were attended by lawyers, lawyers collected all notes after the meetings, and all documents were directed to the law department to maintain the attorney-client privilege. He stated, "Whenever any problem came up on the project, the Legal Department would pounce upon that in an attempt to kill the project, and this happened time and time again." c. Mold testified that he was at a conference of scientists in Buenos Aires prepared to present his research regarding a less harmfitl cigarette when he received a"frantic call" from legal counsel and was told not to present the paper or issue the press release. He was instructed not to publish his results in the Journal of Preventative Medicine. d. Mold was asked why Liggett didn't market a safer cigarette. He answered. `Well. I can't give you, you know, a positive statement because I wasn't in the management _,}4_ n_9 i] Wl6 BSC DOC
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229. After the 1954 Frank Statement, the Tobacco Companies knew and acknowledged among themselves the veracity of scientific evidence of the health hazards of smoking. At the same time, they suppressed such evidence where they could and attacked it when it did appear. 230. Internal cigarette industry documents reveal, for example: a. In the 1950's. Hill & Knowlton interviewed the research directors of each company and forwarded their comments in a memorandum to the TIRC planning committee. In H&K's memorandum, summarizing the interviews, the research directors revealed their knowledge of the relationship between smoking and health and addiction: One of the men said, "It's fortunate for us that cigarettes are a habit they can't break." Said another: "Boy, wouldn't it be wonderftti if our company was first to produce a cancer-free cigarette." b. A 1956 memorandum from the vice president of Philip Morris's research- and-development deparment to top executives at the company regarding 1:e advantages of ventilated cigarettes stated:'`Decreased carbon monoxide and nicotine are related to decreased harm to the circulatory system as a result of, smoking.... Decrea-sed irritation is desirable ... as a partial elimination of a potential cancer hazard.° c. A 1958 memorandum from a Philip Morris researcher to the company's- vice president of research, who later became a member of its board of directors, stated "the evidence ... is building up that heavy cigarette smoking conuibutes to lung cancer either alone or in association with physical and physiological factors...... d. In a 1959•intemal memorandum, R_JR acknowledged the carcinogenic nature of smoking: In 1954 the first report of the presence of a carcinogenic (cancer-producing) polycyclic hydrocarbon 3,4-benzpyrene in cigarette smoke was published. Since thee, approxtmately 60 similar compounds have been isolated from the smoke of. cigarettes. Eight of the polycyclic hydrocarbons isolated from the smoke are known to produce cancer in mice. Another Pive or six are suspect as cancer-producing agents in laboratory animals. -49- 1121) I] UOI5 9SC PX
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The tobacco industry supports more scientific research into the problems than any other source.... - According to The relcase, "The tobacco industry continues to endure unfair and unjustified harassment from oovemment and private sources." Finally, the release asserted. "the cold hard fact remains that no clinical or biological evidence has been produced which demonstrates ho v cioarettes re!ate to cancer or any other disease in human beings." 129. RJR chairman Bowman Gray told Congress in 1964: "If it is proven that cigarettes are harmful. we want to do something about it regardless of what somebody else tells us to do. And we would do our level best. It's only human." 130. in 1982, RJR placed an editorial-style announcement in the NEw Yotuc TlNfes, stating: Studies which conclude that smoking causes disease have reaLlarly ignored sionificant evidence to the contrary. These scient.tic tindings come from research completelv independent of the tobacco industrv. 131. In 1088, after the Cioollor.e v. Lorillard trial, Lorillard :ssued3 press release on behalf of the industn•. sur_ur:arizing the evidence introduced dttrina the trial. The release reaffirmed that the industry "has funded independent researcii' to determine the cause of smoking and cancer and "has cotnn-iunicated the results of that and other research, whether thev cast a favorable or unfavorable light on tobacco, to the scientific community, the public and the government ° 132. According to Lorillard, documents introduced at the Cioollone ttial contained `-no evidence whatsoever that the companies suppress any infortnation or that they conspired among themselves to confuse the public about smoking and healih." 133. Brown & Williamson was responsible for Project Truth, an operation consisting „f artic:es and releases about the "smokinz'health controversy." Project Truth took issue with reports linkinv tobacco use and smoking, in part because certain of these studies use laboratory techniques such as painting the backs of mice with nicotine concentrates. While Project Truth 31- ~GOC^FJ59SCOOC
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185. There has long been a market demand for safer products. 186. Despite this demand, the Tobacco Companies agreed not to market safer products. 187. Defendants enforced their agreement by suppressing independent research and policing violators, as described below. 188. The "gentleman's agreement" was referenced in a 1968 internal Philip Morris draft memo, which stated, "We have reason to believe that in snite of oentlemans (sic) agreement from the tobacco industrv in nrevious cears that at least some of the maior comoanies have been increasing biological studies within their own facilities." (Emphasis added.) 189. The agreement not to compete was explicitly referenced in an October 1964 memorandum entitled "Reports on Policy Aspects of the Smoking and Health Situation in U.S.A.": The tnformal agreement between TRC members not to make health claims was explained to Philip Morris. 190. An internal Imperial Tobacco Company memorandum acknowledges that the tobacco companies had agreed to not compete on the basis of health: "It has always been agreed that smoking and health is not a proper field for commercial competition." 191. Defendants' activities in furtherance of the output-restric*.ion/non-competition combination included restraining, suppressing and concealing research on the health effects of smoking, including the addictive properties of tobacco products, and restraining, concealing and suppressing the research and marketing of "safer" cigarettes. 192. Because it was understood within the combination that no company would characterize or promote a product as biologically "safer" the defendants did not market such products. except in limited test markets. 193. Defendants policed their conspiracy internally and externally. 194. U.S. Tobacco went so far as to terminate an employee and apologize to the Big 6 cigarette companies when the employee was quoted in a NEW YORK POST ai'ticle referring to smokeless tobacco as less dangerous than smoking. Ernest Pepples of Brown &'JJiIliamson - 4? _ IL'ORWISBSCDOC
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242. The next year, 1963, Brown & Williamson engaged in an internaf debate over whether to disclose what it knew about the adverse effects of smoking to the Surgeon General, who was preparing his first official report on cigarettes. 243. It was decided that its information would not be disclosed. Some of the documents generated by Brown & Williamson as part of this process were shared with its London-based parent company, as well as other cigarette manufacturers and the TIRC/CTR. 244. Addison Yeaman, who was then general counsel at Brown & Williamson and who authored some of the most critical memoranda from this time, subsequently became a director of the CTR. 245. Yeaman wrote in a 1963 analysis that: a. "[N]icotine is addictive." b. "We are, then, in the business of selling nicotine, an addictive drug. . . ." c. Cigarettes "cause, or predispose, lung cancer .... d. "They contribute to certain cardio vascular disorders...." e. "They may well be truly causative in emphysema, etc." 246. Yeaman suggested that Brown & Williamson "accept its responsibility" and disclose the hazards of cigarettes to the Surgeon General. He noted that this would allow the company to openly research and develop a safer cigarette. 247. Yeaman warned, however, that one danger of candid disclosure was that jurors would learn that the cigarette companies knew of the hazards of their products and had the means to make safer cigarettes - but didn't. Yeaman noted that this might cause an "emotional reaction" in j urors. 248. Ultimately, Yeaman's suggestion for full disclosure was rejected. 249. Subsequently, Brown & Williamson continued to conduct and conceal biological research. Some of these research projects confirmed causation between tobacco use and health hazards. -56- 11]9 1] OOJS OSC WC
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213. For example, Brown & Williamson's parent company B.A.T. developed "Batflake," a tobacco substitute. Laboratory tests showed that use of "Batl9ake" reduced a number of the harmful effects of smoking in direct proportion to the amount used in a cigarette. So far as is known, none of the substitute products was ever marketed in the United States. 214. In 1980, B.A.T. and Brown & Williamson abandoned the °safer" product search: "Dangerous area [research into irritation and smoke inhalation]. Please do not publish or circulate. No more work is needed on bioloeical side." (Emphasis added.) 215. According to Brown & Williamson internal documents, no other member of the conspiracy broke ranks by competitively marketing products with improved biological performance despite individual competitive reasons for marketing such product. One such document states: "Within B & W, we have rarely attempted to develop new products specificaliy designed to deliver low CO [carbon monoxide]. except perhaps a prototype of FACT that was kept ready on a turn-key basis in the event of a marketing- need for such product. This was done through a combination of filter ventilation, cigarette paper permeability, and appropriate cigarena paper additive. Needless to sav, such need did not arise." (Emphasis added.) 216. Despite increasing market demand, such innovative products were not r^arketed, because of the agreement not to compete; i.e. to restrict output of alternative or safer products. 4. Philip Morris: Avoiding an Industry War 217. Philip Morris also explored research to develop cigarettes that were "safer" or, in the words of one memorandum to the board of directors, had "superior physiological performance." This memorandum noted competitive pressures to produce "less harmful" cigarettes. However, the memorandum was careful to state that, °[o]ur philosophy is not to start a war, but if war comes, we aim to fight well and to win." 218. Philip Morris never broadly marketed such a safer cigarette. Its documents recognize the strong market demand and state that "after much discussion we decided not to tell the physiological story which mi2ht have anpealed to a health conscious seemeat of the market. -46- ~ 1.1> t~ CU)S 95C DGC
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225. In critiauing the minutes ofan industry conference, he stated: "It is our opinion that statements such as [references to research into safer products, products which are less biologically active, and to healthy cigarettes] constitute a real threat to the continued success in the defense of srnokine and health litigation. Of course, we would make e•:ery effort to explain such statements if we were confronted with them during a trial, but Isenousty doubt that the averagejuror would follow or accept the subtle distinctions and explanations we would be forced to urge....[E]mplm ees in both companies [Brown & Willi:unson and British Aruerican Tobacco] should be informed of the possible consequences of careless s-,atements on this subject." 226. All defendants were keenly aware of the risk to the :ndustr•: if any of them sought a competitive advantage by developing and marketing a'`safer' product. was :;voided by agreeing not to compete on that basis. As one industr• repres::ntcnct, :cstiL_d: "j.yis a company. we catu:ot positioa our product,s as being heaith;.'<dcvc _,Lc e.:i yaerced that rhey are a rlsk faCCor [the aareeaient referenced is thc mdu3tP/ 5:=CC~~'.. v;<II?Pli;g labc'is on eigcl•ette packages]. [W]e wouldn't run any advertising tilat position, atv urour products as being healthier than others." 1. History of Industry Knowledge that Smoking is Harmful 227. Even before defendants represented irn the "Franv St-uemumt` that "t'Iere is no proof that cigarette smoking is one of the causes" of lung cancer, an industr, rescarc{:ar had reported the contrary. 228. As early as 1946, Lorillard chemist H.iJ. Yarmele. .%hu kaer becanle'ri:t president of research and a member of Lorillard's board of directors. v~rote :o ;us con-toany"s manufacturinz comtnittee: _ co Certain scientists and medical author:ties have clair.:ed f~)r msnv ~ GI years that the use of lobacco oCPPrljutes t: cLncer devc'1op.^aZnt in ~ susceptible people. just enough evidence has bcen prescrlt ~i to ~ justity ~he possibility ofsucia a t']reS,u:nptiCl. (pd N _Ss..
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"carcinogens are found in practically every class of compounds in stnoice:" that smoking produces "pleasurable reactions or tranquillity and that this is due in part to nicotine," and then outlines an R&D for program to develop "a medically acceptable cigarette," which includes "reduction of the general level of carcinogenic substances in smoke (but without com?lete elimination of more than a handful.)" h. A 1961 "Confidential" memorandum from the consulting research firm hired by Liggett to do research for the company states: There are biologically active materials present in cigareC,e tobacco. They are: a) cancer causing b) cancer promoting c) poisonous d) stimulating, pleasurable. and ~-tave-:il. i. A i9o3 memorandum to Philip Morrs's presid e;_t :u_o ',Ei) ~To.n the company's vice president of research describes a nun.ber of ciasscs o[ ::oa.rounus in c:-.a-•~ne smoke which are "known carcinogens." The document goes on to describe tl;e link among smokin_, bronchitis and emphysema: Irritation problems are now receiving greater attention because of the general medical belief that irritation leads to chronic bronchitis and emphysema. These are serious diseases involving n:i?lions cf people. Emphysema is often fatal eitherr directly or through other respiratory complications. A number of experts have predicted that the cigarette industry ultimately may be in greater trouble in this area than in the lung cancer field. - G9 .] O°,: aSC CLY:
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268. A second purpose of the Project HIPPO study was to compare the'effects of nicotine with those of then-new tranquilizers, "which might supersede tobacco habits in the near future." 269. Thus, these researchers believed that nicotine-containing tobacco and tranquilizers were used for the same purposes by consumers. 270. The Project HIPPO reports were disseminated to Brown & Williamson officials. 271. The exchange of information between BATCO and B&W is important because it demonstrates B&W's awareness of the results of studies such as Project HIPPO, which was just one of a number of studies corrunissioned by BATCO to study nicotine's physiological and pharmacological effects. 272. For example, a 1980 report addresses the critical role of nicotine's drug effects: Nicotine is an extremely biologically active compound capable of eliciting a range of pharmacological, biochemical. and physiological responses .... In some instances, the pharmacoloaical response of smokers to nicotine is believed to be responsible for an individual's smoking behavior, providing the motivation for and the degree of satisfaction required by the smoker. 273. The BATCO documents include not only some of the research reports themseive~. but also summaries or minutes of numerous BATCO research and development ("R&D") meetings at which nicotine's drug effects and importance to the industry were discussed. These papers demonstrate both the consistency and the extent of the industry's interest in and knowledge of nicotine as the primary pharmacological agent in tobacco. 274. For example, at a 1974 BATCO Group R&D ~feeting, it was noted that: Nicotine' (which has been assumed to be the main pharmacologically active component in smoke) may act in a bi- phasic manner, either as a stimulant (CNTV increase) or depressant (C, N decrease). 275. Subsequent BATCO research conferences offer equally revealing statements about the drug effects of nicotine. A BATCO Group R&D Smoking Behavior-'NIarketing Conference held in i984 focused almost entirely on the role of nicotine pharmacology in -60- ~ M 11 M;s asc ooc
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256. For example, more than thirty years ago, a report was completed for BATCO that specifically addressed the mechanism of nicotine addiction in smokers. The researchers concluded that chronic intake of nicotine, such as that which occurs in regular smokers, creates a need for ever-increasing levels of nicotine to maintain the desired reaction: "[u]nlike other dopings, such as morphine, the rate of increasing demand for greater dose levels is relatively slow for nicotine." The report continues: A bodv left in this unbalanced state craves for renewed drug intake in order to restore the physiological equilibrium. This unconscious desire explains the addiction of the individuaito nicotine. 257. Internal Tobacco Company documents reveal that all of this research has convinced company researchers and executives that nicotine in tobacco functions as a drug with powerful psychoactive effects. 2-58. For examp!e, in 1962, even before much of tYds research had been completed. Charles Ellis. of BATCO, expressed his view that nicotine in tobacco n:ncttoes as a drug much like stimulants and tranquilizers. It is my conviction that nicotine is a very remarkable beneficent drug that both helps the body to resist esternal.stress and also can as a result show a pronounced tranquilising effect. You are all aware of the very great increase in the use of artiiicial controls, stimulants, tranquilisers, sleeping pills, and it is a fact that under modem conditions of life people find that they cannot depend just on their subconscious reactions to meet the various environmental strains with which they are confronted: they must have drugs available which they can take when they feel the need. Nicotine is not onlv a verv fine druQ, but the techniques of administration by smoking has considerable psychological advantages and a built-in controi against excessive absorption. (Emphasis added.) 259. In the decades that followed this statement, BATCO and Brown & Williamson held many research conferences, some of which were devoted entirely to discussing nicotine's pharmacological effects. 260. The records of these conferences demonstrate that, at almost every conference, Tobacco Company officials from around the world discussed the results of research on nicotine _58- 11 :9 12 Qf]5 BSC DOC
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250. The more sensitive research was often undertaken by Brown & Williamson's British affiliate, acting on behalf of both companies. Much of the work was performed at a British laboratory called Harrogate, which performed work for a number of cigarette manufacturers, and some of this research was shared with these other companies and the Tobacco Institute. 251. From 1965 to 1978, Battelle Memorial Laboratorv conducted experiments for BATCO under the code name "Project Janus" The Battelle lab experiments used mouse skin paintings to determine the carcinogenicity of tobacco. These reports repeatedly found that tobacco caused tumors when painted on the skin of mice: a. A 1971 "Survey of the Janus Mouse Skin Painting Experiments" reported that more than 30 percent of the mice exposed to a blend of flue core tobacco developed tumors. b. A 1973 Janus Report shows 50 percent or more of the tnice developing tumors. c. While publicly belittling the use and importance of mouse skin painting. BATCO in a 1970-?1 "Project Janus Annual Report' conceded that mouse skin painting is likely to remain an important recognized test of carcinogenesis. K. Industry Knowledge of the Addictive Nature of Nicotine 252. As alleged above, the defendants continue to deny and conceal that tobacco products are addictive. 253. The evidence is clear that the Tobacco Industry has known and hidden for decades that tobacco products are addictive. 254. At the same time that the Tobacco Companies deny that their products are addictive, thev secretly manipulate nicotine levels to promotP or maintain addiction. 255. Numerous Tobacco Company documents contain statements by company researchers and executives acknowledging that nicotine is addictive. 5']_ 1[_912 W,.asc ~
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"'a1. In 1962. Brown & Williamson's London-based parent company conducted a meeting of its worldwide subsidiaries in Southampton, England. A transcript of the meeting reveals the following remarks: a. One researcher stated that'`smoking is a habit of addiction" and that "[n]icotine is not only a very fine drug, but the technique of administration by smoking has considerable psychological advantages." (Several years later, in 1967, the researcher admitted that the company "is in the nicotine rather than the tobacco industry.") b. Another research executive "thought we should adopt the attitude that the causal link between smoking and lung cancer was proven because then at least we could not be any worse off." c. Another researcher stated that "no industry was going to accept that its product was toxic, or even believe it to be so, and naturally when the health question was first raised, we had to start denying it at the P.R level. But by continuing that policy, we had got ourselves into a corner and left no room to maneuver. In other words, if we did get a breakthrough and were able to improve our product, we should have to about-face, and this was practically impossible at the P.R. level." d. The chairman of Brown & Williamson's British affiliate stated that it "was very difficult when you were asked as chairman of a tobacco company to discuss the health question on television. You had not only your own business to consider but the employees throuehout the industry, retailers, consumers, farmers growing the leaf, and so on, And you were in much too responsible a position to get up and say, I accept that the product which we and all our cotnpetitors are putfing on the market gives you cancer, whatever you might think privately." e. The chairman also stated that if the company manufactured safer brands, "how to justify continuing the sale of other brands? ... It would be admitting that some of its products already on the market might be harmful. This would create a very difficult public relations sttuation." jj- i121 uaissoscooc
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There is no evidence that any of these compounds will produce cancer in man. Nonetheiess• thetc is a distinct ooss:biliiv that these substances would have a carcinonenic effect on the human resuiratorv system. Medical experience has shown that man responds to various chemical substances in the same manner as experimental animals. It follows therefore that it would b,~ better for the consumer if cigarette smoke were devoid ot sncc compounds. As described in RDR, 1956, No. 9, we in the R. J. Re,vnolcLs Tobacco Company Research Department corroborated the published findings with respect to 3,4-benzvyrene, obtained this compound in crystalline form, and positive!y identified it as a constituent of ci-arette smoke on the basis of its chemical and physical properties. Some thim-odd polycyclic hydrocarbons have since been similarly characterized in these laboratories. O F these, eight are carcinogenic to mouse epidermis. Cholanthrene, a potent carcinogen, is one of thr~.-e not yet reported by other investigators. (Emphasis added.) e. A 1961 document presented to the Philip \4orris research-and- dtwelopment committee by the company's vice president of rese:u'ch aud c:veiepm at ;r.clud~d ~ section entitled "Reducdon of Carcinogens n Smoke." The document statc in part: To achieve >.his objective will require a rnaio; ;,-s?arch becauSe Carcinogens are found in .r£lctic:i!iY :VCr~ cia.iq G: compotmdc in s_noke. lnis fact prohibirs complete solution of tl__ problem by eliminating one or two classes of compounds. The best we can hope for is to reduce a par:iccla_ly bad c:ass. the polynuciear hydrocarbons, or phenols.... Flavor substances and carcinogenic substances come front the same classes, in many instances. f. An internal Lorillard study confirmed the tumor producis r aan.n ::` tobacco: Tobacco Component Identification Data presently available indicates tI at a nur*tber of analyzable smoke components are positively cerrelated with :.::nor producing activity. We dottbt thst t"ese ee*r,pounds are CO ~ responsible for the observed activity per se, b'lt they may serve as valuable indices of the effect of changes in tobacco composition. ~ t Among the well correlated materials are Isprene, Indole Skatole, ~ and several compounds i.z the formic acid frs.cti,,t•,. tn cr: ~. A 1961 internal Phiiip ytrtris MD cresucta:ion lists nun:.'rotts N W compounds in cigarette smoke that have been identit?ed a s c:zicini,gens an_notes ti•.a±
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297. DeNoble subsequently told Jack Heningfield. Ph.D., chief of the Clinical Pharmacology Branch of the National Institute on Drug Abuse's Addiction Research Center, that Philip Morris officials had rightly interpreted the suppressed nicotine studies as showing that, in terms of addictiveness, "nicotine looked like heroin." 298. In April 1984, Philip Morris told DeNoble and Mele that the lab was being closed. 299. On information and belief, this was done to ensure that DeNoble and ivfele's nicotine research remained suppressed and concealed. 300. In or about April 1984, DeNoble and Mele were forced abruptly to halt their studies, turn off their instruments, and turn in their security badges by morning. 301. Philip Morris executives threatened them with legal action if they published or talked about their nicotine research. 302. According to Dei`ioble, the lab literatly vanished overnight. The animals were killed, the equipment was rcmoved, and all traces of the former lab were eliminated. DeNoble recalled, °The lab was eone, everything was clone. The cages were gone, the animals were all gor.e, all the data was gone. It was empty rooms." 303. DeNoble testified to the Congressional Subcommittee chaired by Rep. Wasman- that'`senior research management in Richmond, V"irginia, as well as top officials at the Plulip Morris Company in New York continually reviewed our research and approved our research." DeNoble also stated that these officials were specifically told about nicotine's addictiveness. Nt. The Industry's Secret Manipulation of Nicotine Levels 304. The industry has developed sophisticated technology to control the levels of nicotine to maintain its market and guarantee that its customers become and remain addicted. 305. David A. Kessler, M.D., then-commissioner of the FDA, recently testified before a congressional committee that cigarette manufacturers can manipulate precisely nicotine levels in cigarettes, manipulate precisely the rate at which the nicotine is delivered in cigarettes, and add nicodne to any part of cigarettes. - 65 - 1r9 12 pR] aSC coc
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in identifying some such children in the third grade. (Emphasis added.) 281. In 1961, a presentation by Dr. Helmut Wakeham, a senior Philip Morris research scientist, to the company's Research and Development Committee noted that: Low nicotine doses stimulate, but high doses depress functions ... It is also recognised that smoking produces pleasurable reactions or tranquillity, and that this is due at least in part to nicotine.... 282. Dr. Wakeham also noted that "nicotine is believed essential to cigarette acceptability," a view later restated by William Dunn, Jr.. another high-ranking Philip Morris official. In summarizing a 1972 conference sponsored by the Council for Tobacco Research, Dr. Dunn reponed: Most of Lhe conferees would agree with this proposition: The primary incentive to cigarette smoking is the immediate salutary eff ct of inhaled smoke upon body function. 283. After describing'`the physiological effect" as 'the primary incentive" to smoking, Dr. Dunn continued: The majorirv of the conferees would go even further and accept the proposition that nicotine is the active constituent of cinarette smoke. Without nicotine, the argument goes, there would be no smoking. Some strong evidence can be marshalled to support this argument: (I) No one has ever become a cigarette smoker by smoking ciearettes without nicotine. (2) Most of the physiological responses to inhaled smoke have been shown to be nicotine-related. (3) Despite many low nicotine brand entries in the market place, none of them have captured a substantial segment of the market ... 284. A 1971 secret internal report distributed to Philip lvlorris executives showed that tobacco executives knew the powerfully addictive nature of nicotine in cigarettes. The report studied persons who had tried to stop smoking and concluded that only 28 percent of those who tried to quit were still non-smokers eight months later: Even after eight months quitters were apt to report having neurotic symptoms, such as feeling depressed, being restless and tense, being ill-tempered, having a loss of energy, being apt to doze off. They were Fu:ther troubled by constipation and weight gains which -62- 1129 IS W35 9:aC DOC
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practices, developed high-nicotine tobacco plants that provide higher-potency raw material, giving manufacturers greater flexibility in blending and in providing uniform and sufficient nicotine deliveries. o. Even without the selective breeding and cultivation of plants for nicotine content, careful tobacco leaf purchasing plans permit the manufacturers to control nicotine content in their products. For example, nicotine content varies among types of tobacco and from one crop year to the next. Awareness of these basic differences and monitoring of the nicotine levels in purchased tobacco allows the companies to produce cigarettes with nicotine deliveries consistent to a tenth of one percent, despite variations as high as 25 percent in the nicotine content of the raw material originating in the same area, from year to year. c. The primary control of nicotine delivery (the amount received by the smoker), however, is in the design and careful. sophisticated manufacture of-*.he -tgarette to ensure that the smoker obtains the precise amo mt of nicotine :ntended by ihe manufacturer. 311. According to the FDA's investigation, despite reductions in the amount of tar delivered by cigarettes over the past several decades, nicotine delivery in tow-yield cigarettes has not fallen proportionately with the reductions in tar. - 31 12. Instead, nicotine delivery has apparently risen over the last decade, a result that confirms that nicotine delivery is being independently and carefully manipulated by tobacco manufacturers. =13. The FDA found that'`this newly gathered information, together with the other evidence of the industry's breeding, purchasing, blending, and manufacturing practices, reveals that the tobacco manufacturers control the amount of nicotine that is delivered to the consumer from cigarettes." 314. The Industry's manipulation of nicotine levels is accomplished, in part; as set forth below. -68- I :~9 12 OO]] S5.: P'K
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306. Dr. Kessler testified that "the cigarette industry has attempted to frame the debate on smoking as the right of each American to choose. The question we must ask is whether smokers really have that choice." Dr. Kessler stated: a. "Accumulating evidence suggests that cigarette manufacturers may intend this result - that they may be controlling smokers' choice by controlling the levels of nicotine in their products in a manner that creates and sustains an addiction in the vast majority of smokers." b. "We have information strongly suggesting that the amount of nicotine in a cigarette is there by design." c. "The public thinks of cigarettes as simply blended tobacco rolled in paper. But they are much more than that- Some of today's cigarettes may, in fact, qualify as high technology nicotine delivery systems that deliver nicotine in precisel; calculated quantities - quantities that are more than sufficient to create and to sustain addiction in the vast majority of individuals who smoke regularly." d. "The history of the tobacco industry is a story of how a product that may at one time have been a simple agricultural commodity appears to have become a nicotine delivery system." e. °(T]he cigarette industry has developed enormously sophisticated methods for manipulating nicotine levels in cigarettes." f. "In many cigarettes today, the amount of nicotine present is a result of choice, not chance." g. "(Since] the technology apparently exists to reduce nicotine in cigarettes to insignificant levels, why, one is led to ask, does the industry keep nicotine in cigarettes at all?" 307. The Tobacco Industry has used techniques such as adding chemicals to increase nicotine potency. 308. In general, by increasing the alkalinity, or smoke pH, of tobacco blends, the industry can deliver an enhanced "nicotine kick." -66- I:_9i]COJ5OSCDOC
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309. The FDA published the following findinas concerning nicotine rrianipulation in an August 1995 report entitled Nicotine In Cigarettes and Smokeless Tobacco Products: The information in the preceding sections demonstrates that cigarette manufacturers manipulate and control the delivery of nicotine in marketed products. Cigarettes are designed to supply nicotine at consistent levels despite the wide variations in the nicotine levels of the raw materials, the immensely complicated combustion chemistry, and the complex chemical flow properties of a modem cigarette. Manufacturers use many techniques to control nicotine deliveries. The application of these modifications in cigarette design and their interactive nature pose complex problems in maintaining brand uniformity and consistency regarding nicotine delivery. Yet, the nicotine content and delivery of each brand of cigarettes is remarkably consistent from batch-to-batch and year-to-vear. This level of control is analogous to that of the pharmaceutical industry in the production of prescription drugs- In fact, to determine how well nicotine content is controlled in cigarettes, FDA laboratories compared the content uniformity of drugs in tablet or capsule form to the content uniformity of nicotine in cigarettes. The results showed that nicotine content varies from cigarette to cisarette no more than the content of active ingredients in marketedy pharmaceuticals. FDA's investigation has also disclosed that the tobacco industry uses a number of methods to boost nicotine delivery in low-yield cigarettes. The cigarette industry has successfully used these methods to maintain adequate nicotine delivery from low-yield products. Without the indeoendent maninuiation of nicotine. many of the techniques used to reduce tar would also substantiallv reduce nicotine. Instead. regardless of differences in labeled/advertised FTC nicotine vields and manufacturers' claims of low-nicotine deliverv for certain brands, all ciearettes contain anoroximatelv the same amount of nicotine in the rod and deliver about I mg of nicotine, enough to produce pharmacological effects. Moreover, studies by FDA and others have demonstrated that the lowest-yield cigarettes have the hie_hest concentrations of nicotine, demonstratine that nicotine delivery has been independentlv_ manipulated. The tobacco industry's control and manipulation of nicotine delivery from cigarettes provides additional evidence of the industry's intent to deliver pharmacologically satisfying levels of nicotine to smokers. (Emphasis added.) 310. In particular, the FDA based its findings. in part, on the following: a. The first manufacturing step in nicotine control is the development and selection of raw materials. The Tobacco Industty, has, through breeding and cultivation -6?- ~ 1]n I] l0)5 9;C GGC
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351. Reconstituted tobacco has inferior taste and less nicotine, so the cigarette manufacturers or their agents apply a powerful tobacco extract either alone or as part of a solution of flavorings to the reconstituted tobacco. 352. RJR and the other cigarette manufacturers have the technology to add flavorings with or without nicotine. 353. The addition of nicotine to reconstituted tobacco is purely at the manufacturer's discretion. 354. Upon information and belief, a tobacco reconstitution process employed by Kimberly-Clark is used throughout the Tobacco Industry in a number of countries. 355. A Kimberly-Clark advertisement published in tobacco industry trade publications states: Nicotine levels are becoming a growing concern to the designers of modem cigarettes, particularly those with lower "tar" deliveries. The Kimberly-Clark tobacco reconstitution process used by LTR hlDUSTRIES permits adjustments of nicotine to your exact requirements. These adjustments will not affect the other important properties of customised reconstituted tobacco produced at LTR INDUSTRIES: low tar delivery, high filling power, high yield and the flexibiliry to convey organoleptic modifications. We can help you control your tobacco. 356. Furthermore, the Tobacco Industry's own trade literature explains that the Kimberly-Clark process enables manufacturers to triple or even quadruple the nicotine content of reconstituted tobacco, thereby increasing the nicotine content of the final manufactured product. 357. Another enterprise quite explicitly specializes in the manipulation of nicotine and its use as an additive_ This company does business under the name "The Tobacco Companies of the Contraf Group." An advertisement run by the Contraf Group in the international trade press states: "Don't Do Everything Yourselfl Let us do it More Effrciently!" Calling itself "The Niche Market Specialists," Contraf lists among its areas of specialization "Pure Nicotine and other special additives." -74- 112, c ams nsc ac
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358. The cigarette industry has also used a process called "denaturing" to add nicotine to cigarettes. Nearly-pure nicotine is combined with alcohol and then applied to tobacco during the manufacturing process. 359. Trucking records show that Philip Ntorris, for example, received thousands of gallons of this nicotine/alcohol mixture during the 1980s. 360. Against this mounting body of evidence that the cigarette industry manipulates and controls nicotine levels in cigarettes, the Tobacco Industry continues to deny to the public. and in 1994 denied to Congress under oath, that the Industry manipulates and controls nicotine levels. 361. William I. Campbell, president and CEO of Philip Mocis, told Congress on April 14, 1994. "Philip N-Morris does not manipulate nor independently control the level of nicotine in our products.... Cigare ,es contain nicotine because it ece•.u-s naturally in tobacco." 362. James W. Johnston, president and CEO of RJR Nabisco. told Congress, "We do not add or otherwise :r.an_pulate nicotine to addict smokers." 363. Andrew I. Schindler, president and CEO of R..1. Reynolds Tobacco Company, told Congress, "We do not restore any nicotine anywhere in our process.... We'ose nicotine, for example, in the reconstituted sheet process....[N]owhere in that process is any nicotine being incrementally added into the process." 364. Contradicting Johnston's and Schindler's statements, Dr. Robert Suber, a tosicologist with RJR, admitted that RJR controls the nicotine in its products. He told CN\`, "In order to deliver to the consumer a product that he wants, a consistent level of nicotine, we have to blend the tobaccos accordingly. So we do control it." 365. Andrew H. Tisch, chairman and CEO of Lorillard, told Cor.gress that "Lorillird does not take any steps to assure a minimum level of nicotine in our products. Lorillard does not add nicotine to cigarette tobacco for the purpose of manipulating or spiking the amount of ~ ~ nicotine received by the smoker." 4- 00 -75- 1._^ ::'Mi5 B]I.XGC
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i ! 393. Teague's view prevailed. 394. RJR developed the Joe Camel advertising campaign to attract adolescents. 395. The scheme was highly successful. 396. The work of Philip Morris in studying the smoking habits of adolescents also illustrates the Industry's efforts in this area. 397. In a 1982 internal Philip Morris memorandum, the company analyzed consumers' response to government marketing surveys and specifically discussed the incidence of smoking and consumption rate of 12-17 year olds and emphasized the importance of such smokers to the industry: [T]he loss of younger adult males and teenaQers is more important to the long term, drying up the supply of new smokers to replace the old. 2. Deceptive Conduct Directed at Adolescents 398. Defendants have engaged in a course of conduct designed to promote cigarette smoking among young people. 399. Tobacco use begins primarily among youth who are not yet 18 years of age. 400. The Tobacco Companies are aware of this fact. 401. The three most used brands of cigarettes among adolescents are the most heavily advertised. 402. The defendants' conduct directed at adolescents includes but is not limited to: a. designing marketing and advertising campaigns that are intended and do appeal to adolescents, while at the same time the tobacco companies proclaim that they are not targeting adolescents; , b. placing tobacco advertisements near schools and playgrounds and in youth-oriented publications; c. distributing logos and characters on promotional items such as baseball caps and t-shirts directly to adolescents or in areas known to be f equented by adolescents; -79- 1 r9CW15ESCDOC
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115 J. The stalk position of a leaf can be determined by its appearance. shape, color, and thickness, even after harvest. Therefore, an experienced buyer, whose instructions are dictated by the manufacturer's chemists, need only be concerned with these physical characteristics in identifying leaves of high nicotine content. 336. In or around 1995, representatives of the Tobacco Industry described to FDA investigators the significant role that nicotine plays in the purchase of tobacco leaf. 337. Brown & Williamson informed the FDA that stalk positicn is the "first thing" they look for during leaf purchasing. I Leaf Blending 338. After purchase, tobacco leaves are blended to attain target levcis o'r nicotine and tar in the smoke. FDA's investigation noted particular attention on the part afmanufacturers to the nicotine content of the ieaf in the blending operation. 339. Blending practices by manufacturers are designed to: (i) control the natu,ally occucing variations in nicotine and other components c,^.used'ov genetics, ,rowir:g-season conditions, and soil type within a given type and grade; and (2) particu.arly for low-tar cigarettes. to increase nicotine concentrations and thereby maintain art acceptable nicotine level in the cigarettes. 340. Tobacco leaves are also blended to manipulate pH levels in cigarettes. 341. The pH of cigarette smoke directly affects the delivery of nicotine because it alters the amount of nicotine that is absorbed in the mouth or lungs. 342. The pH is controlled by the manufacturer in the selection of the type of tobacco used and blended. 343. For example, smoke-condensate pH is higher from certain tobacco varieties as well as from leaves at upper stalk positions. 344. Accordine to the FDA, blending techniques have been used to finely control nicotine concentrations in marketed cigarettes. -72_
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students showed a 35 percent higher incidence of tobacco use among high school students in 1995 than in 1993. The prevalence of cigarette smoking in recent years among 8th and 10th grade students has risen significantly. For example, among 8th grade students, 14.3 percent in 1991 and 18.6 percent in 1994 were current smokers; among 10th grade students, 20.8 percent in 1991 and 25.4 percent in 1994 were current smokers. 385. A 1995 survey revealed that 20 percent of Vermont high-school seniors smoke daily, and 45 percent had smoked during the previous month. 386. These percentages are dramatic increases from 1993, when 15% of Vermont high school seniors were daily smokers and 38% had smoked in the previous month. 387. Sales of tobacco products to adolescents is no accident- it is the intend--d result of a carefully orchestrated scheme which the Tobacco Industry knew or had reason to know was likely to attract and addict adolescents. 388. For example. despite the fact it is illegal to sell to adolescents in Vermont. each of the Tobacco Companies sa:dies':iow to st'tract adolescents. 389. Each defendant engages in conduct to accomplish that goal. 390. Illustrative is RJR, which repeatedly has generated reports "relating to teenage smokers," including an analysis of RJR's share of teenage smokers, defined as "14-17." 391. As early as 1973, Claude Teague, a marketing researcher at RJR, was writing internal memos stating that RJR should recognize that despite prohibitions on smoking, adolescents were smoking in increasing numbers, thus, "if this is to be so, there is certainly nothing immoral or unethical about our company attempting to attract smokers to our products." Teague stated that if R7R "is to survive and prosper ... we must get our share of the youth market." 392. This theme was repeated in a 1976 research department memorandum, labeled "SECRET" which stated'`Evidence is now available to indicate that the 14 to 18 year old group is an increasing segment of the smoking population. PJR must soon establish a successful new brand in this market if our posidon in the industry is to be maintained over the long term." -78- i rv ~_ a~s esc ooc
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averaged about five pounds per quitter ... This is not the happy picture painted by the Cancer Society's anti-smoking commercial which shows an exuberant couple leaping into the air and kicking their heels withjoy because they've kicked the habit. A more appropriate commercial would show a restless, nervous, constipated husband bickering viciously with his bitchv wife who is nagging him about his slothful behavior and growin, waistline. 23~. In 1988, during the case of Cinollone v. Ligsett. Joseph Cullman III, former CEO of Philip Morris, testified as follows: Q: Let me ask you the question, then, Mr. Culiman. Is nicotine a drug? A: Well it's so described in every book on pharmacology. Q: So then you agree that it's a drue? A: I have no reason to disagree with books on pharmacology. 236. A memorandum from a Philip Morris official in 1980 confirms the cornpany's view that nicotine's pharmacological effects on the central nervous system are critical to the tobacco industn•'s success: Mcotine is a powerful pharmacological agent with mulUpie sites of action and mav be the most important component of cigarette smoke. Nicotine and an understanding of its oropertles are important to the continued well being of our ciQarette business since this alkaloid has been cited often as the reason for smokina and theories have been advanced for nicotine titration by the smoker. Nicotine is known to have effects on the central and peripheral nervous system as well as influencing memory, leaming, pain perception, response to stress and level of arousal. 287. In a research paper funded by the CTR, reporting on the "beneficial" pharmacological effects of nicotine in cigarettes, the authors said: Nicotine is recognized as the primary psychoactive compound in cigarette smoke. 288. Nicotine is addictive. 289. People use tobacco because of their addiction to nicotine. -63) - ~I_):'_COl59SC'JOC
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i 0 d. advertising in video arcades; and " e. sponsoring various sporting events, concerts and ocher events likely to attract extensive youth interest. 403. For many young people, the precipitating factor is being given a free pack of cigarettes by a Tobacco Company representative, or purchasing cigarettes to obtain an attractive T-shirt, baseball cap, or other gimmick used to promote cigarette smoking. 404. In addition to the selection of youth oriented advertisinu themes, the Industry targets adolescents through the location of tobacco advertising. 405. During the 1980s cigarette advertising in youth-oriented publications increased. 406. Magazines with sexually oriented themes, and those concerning entertainment and sporting activities, have the highest concentration of cigarette ads. 407. For many of these magazines, teenagers comprise a quarter or more of the total readership. 408. Cigarette ads in these youth-oriented magazines were frequently multi-page. pop- up ads. 409. News magazines like T[1rtE and NFwsWEEK, which have older audiences. had few cigarette ads. 410. Such advertisement placement evinces the industry's intent to target adolescents. 411. The companies also attracted adolescents by paying for product promotional appearances in movies. 412. Because of the subject matter or the actors in the films selected by the Tobacco Industry, the films are most likely to appeal to youth. 413. For example, Brown & Williamson agreed with the actor Sylvester Stallone that he would use the company's products in at least five feature films, in exchange for 5500,000. 414. Philip Morris paid for the promotion of Marlboro in "Superman 11," "Risky Business," and "Crocodile Dundee" and for promotion of Lark in ""License to Kill." 11]9rWDeSrDCC
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1. Leaf Growing 315. The industry's control and manipulation of nicotine in the production of cigarettes begin (ong before the cured tobacco leaf reaches the manufacturing plant. 316. The characteristics of leaf tobacco, including nicotine content, are established by the genetic makeup of the plant, developed during growing, and fixed by post-harvest handling. Like other raw agricultural commodities, tobacco has physical and chemical properties, including nicotine, that can vary widely, depending on genetic differences, growing season conditions, and soil type. The tobacco industry uses these differences to control and manipulate nicotine through careful genetic breeding and agronomic practices. 317. Modem types of cultivated tobacco ( Iicotiana tabacum L) have been selected for a relatively high level of nicotine. 318. k• ive major types of tobacco make up nearly all tobacco products marketed in the United States. 319. The five major types are Burley, flue-cured, btaryland- the Dark tobaccos, and Oriental. 320. These tobaccos vary both in nicotine levels and in pH. 321. The pH of a tobacco can have a significant influence on the amount of nicotine, and the rate at which it is absorbed into the tobacco user's bloodstream and delivered to the brain. 322. American tobaccos of all types have undergone cumulative increases in total nicotine levels since the 1950s. 323. Nicotine levels in the most widely grown American tobaccos increased almost 10 percent for Burley and more than 50 percent for flue-cured between 1955 and 1980. 324. Two Tobacco Industry activities over the !ast several decades appear to be responsible for this increase: (1) the industry's active and controlling participation in the Minimum Standards Pro.aram, which ensures that nicotine levels of U.S.-grown-and-marketed tobacco are maintained within specified ranges; and (2) the industry's control over which -69- ~_~
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smoking. Summaries of the presentations at that conference include numerous references to the pharmacological effects of nicotine and the importance of these effects in maintaining tobacco use. 276. For example. one presentation included the following observation: Smoking is then seen as a personal tool used by the smoker to refine his behavior and reactions to the world at large. It is apparent that nicotine tareelv underoins these contn.butions throueh its role as a 2enerator of central nhvsioloeical arousal effects which express themselves as changes in human performance and psychological well-being. (Emphasis added.) 277. Another BATCO conference focusing on nicotine was held in 1984. One of the presentations was characterized by a Brown & Williamson official: The presentation was concerned with summarizing and outlining the central role of nicotine in the smoking process and our business Qenerallv.... There are two areas of nicotine action that are of primary importance: (i) to identify to what extent the pharmacological properties or responses to nicotine are influenced by blood and tissue levels ofnicotine. (ii) what is the significance and role of nicotine in eliciting the impact response and upper respiratory t:act responses.. . (Emphasis added.) 278. Philip Morris researchers conducted extensive research on nicotine pharmacoloUy from the late 1960s until at least the mid-1980s. 279. The nature and magnitude o f the research, as well as statements made in internal documents, show that the Philip Morris researchers strongly believed that nicotine has potent psychoactive effects and that these effects provide a primary motivation for smoking. 280. In 1974, Philip Morris researchers began a study designed to test their theory thatt hyperkinetic children take up smoking in adolescence because nicotine may perform the same pharmacological function as prescription medications used to treat hyperkinesis: It has been found that amphetamines, which are strong stimulants, have the anomalous effect of quieting these children down ... Many children are therefore regularly administered amphetamines throughout grade school years.... We wonder whether such children mav not eventuallv become cisarette smokers in their teenage vears as thev discover the advantaae of self sttmulation via nicotine. We have already collaborated with a local school system -61- I I _J1,M)S95CvOC
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pharmacology and agreed that nicotine had been shown to have pharmacological zffects on tobacco users. 261. Researchers and executives from the other major Tobacco Companies and CTR have also made statements revealing their knowledge that nicotine is a psychoactive drug. 262. For example, the authors of a research paper funded by CTR reporting on the "beneficial" pharmacological effects of nicotine in cigarettes said that'`[n]icotine is recognized as the primary psychoactive compound in cigarette smoke." 263. More than 30 years ago, in 1962-63, BATCO received the results of its Project HIPPO study (HIPPO I and HIPPO II). 264. One purpose of Project HIPPO was to "understand some of the activities of nicotine - those activities that could explain why smokers are so fond of their habit" 265. Many other industry documents refer to the central role of nicotine's drug effects for smokers and. therefore, for the industry. Nicotine is repeatedly identifiea as a primary reason const:mers smoke or use other nicotine-contair.ing products. 266. A "Proposal for Low Delivery Project for B&W" prepared by a B&W marketing firm in the late 1970s contained the following statement that a sufficient dose of nicotine is essential to sell ciearettes and, implicitly, to maintain market share based on nicotine addiction: Current market trends clearly indicate a major trend toward low-tar brands although current "ultra" low "tar" brands have had limited success because of their failure to deliver in that if a satisfying, low-nicotine cigarette were to be developed, it could represent an effective means of withdrawal... with severe imolications for long-term market growth. (Emphasis added.) 267. A 1976 BATCO Conference on Smoking Behavior further underscores tobacco industry researchers' awareness of the fundamental importance (to the huge majority of sntokers) of nicotine's effects on the brain: Some insight into the likely benefits of smoking follows from a consideration of the properties of nicotine which is considered to be the reinforcing factor in the smoking habit for at least 80% of' smokers.. . (Emphasis added.) -59- I 1_9 12 CO) 5 9SC OOf
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375. At the 1984 Smoking Behavior-Marketing Conference, Riehl gave a presentation on Project Aries. Brown & Williamson's safer cigarette project, which emphasized tar reduction and nicotine enrichment in later puffs, but never addressed the issue of taste. 376. The newly discovered evidence of nicotine manipulation by the cigarette industry and the recent disclosures about nicotine addiction and manipulation made before Congress have not deterred the industry from its :ampaign of concealment and disinformation. 377. As recently as April 1994, the cigarette industry placed advertisements across the country denying that it "spikes" cigarettes with nicotine, denying that it believes cigarette smoking is addictive, and misleading the public about whether the cigarette companies deliberately control nicotine levels in their products. N. Maintaining the Market through Sales to Adolescents 1. The Increasing Addiction of Adolescents: A Predicate to Continuing Industry Profits 373- in addition to ensuring a captive market through the addiction of its customers, the cigarette industry has maintained its sales and replaced the hundreds of thousands of smokers who die each year by intentionally targeting marketing and promotional efforts at children and adolescents_ 379. Every day, more than 1,200 cigarette smokers die of disease caused by smoking. 380. Twenty percent (or 800) of all deaths in Vermont annually can be attributed to smoking. 381. To prevent a precipitous decline in cigarette sales, the big cigarette companies must attract new smokers. 382. Children and teenagers are the industry's main target. Adolescents are targeted through unfair and deceptive marketing programs and advertising. 383. Such tactics are successful, because over 3,000 children begin smoking every day. 3&F. The use of tobacco by adolescents continues to rise. The Centers for Disease Control and Prevention ("CDC") announczd on May'_'4, 1996, that a study ofhigh school _77_ I i]a1'_xl+asc~c
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366. Edward A. Horrigan, Jr., chairman and CEO of Livgett Group, Inc., told Congress that'`In all my years in this business worldwide, I have never known of a product-designed objective or goal that included even the notion of spiking the amount of nicotine in a cigarette to achieve a level that would hook or addict smokers." 367. Horrigan, however, as former chairman and CEO of RJR through the late 1980s, participated in developing and marketing Premier and other RJR cigarette brands whose manufacturing process included manipulating nicotine content and delivery. 368. Thomas E. Sandefur, Jr., former CEO of Brown & Williamson, in the face of overwheiming evidence to the contrary, denied secretly growing the high-nicotine tobacco plant. Y-1, in sworn testimony before Congress on June 23, 1994, and stated that his company was being "set up." He admitted that the company controlled nicotine, but stated that the company did so only for "taste." 369. Sandefur also testified before Congress that nicotine was not addictive and that Brown & Williamson scientists had concluded that none of Brown & Williamson's research indicated that nicotine was addictive. 370. These statements were false, as decades of BATCO and Brown & Williamson research indicated exactly the opposite. Sandefur further testified that'`nicotine is a very important constituent in the cigarette smoke for taste." 371. In fact, nicotine tastes bad, and the industry has conducted hundreds of tests to find a method of increasing nicotine without injecting a bad taste. 372. Sandefur, by making his representations to Congress, was continuing the industry's misrepresentation concerning nicotine. 373. T.F. Riehl, vice president for research and development at Brown & Williamson, denied that the company mixed the tobacco for the Barclay cigarette to have a higher concentration of nicotine, and told Congress, "No, sir. We blend for taste, not nicotine." 374. Internal documents from Brown & Williamson indicate that Riehi himself conducted research focusing on the adjustment of nicotine and tar levels without regard to taste. ~10 -76- 1:'_'l :. CO15 BSC DOC
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345. The FDA to concluded: Sienificant evidence also demonstrates that tobacco manufacturers have used blending techniques to increase nicotine concentrations in !ow-tar cigarettes and thereby maintain nicotine delivery while reducine tar delivery. FDA has observed the industry's use of proportionately greater amounts of higher ntcotine-containing Burley tobacco in the tobacco blends of the lowest-tar varieties of cigarettes. In fact, Thomas Sandefur, the chief executive officer of Brown and Williamson. admitted to Congress that nicotine levels can be adjusted "up or down" depending on the blend of tobaccos used in a particular cigarette. Industry scientists have also acknowledged that tobacco manufacturers blend high-nicotine tobaccos to compensate for the reductions in nicotine caused by innovations in cigarette design and manufacturing to reduce tar delivered. These examples demonstrate that tobacco manufacturers deliberately increase the proportion of high-nicotine delivery that would otherwise result in these products. 4. Additional Evidence of Nicotine iVianipulation 346. Reconstituted tobacco is made from stalks and stems and other waste thc cigarette companies used to discard and now use to make cigarettes more cheaply. Reconstituted tobacco ordinarily contains 25 percent or less of the nicotine in regular tobac;.o. 347. A former RJR manager who demanded anonymity told the ABC news program "Day One;" that on the average, currently marketed brands contain about 22 percent reconstituted tobacco and that cut rate or generic brands typically contain about double that amount. 348. A laboratory analysis commissioned by "Day One" and conducted by the American Health Foundation confirmed the industry's heavy use of reconstituted tobacco. 3-19. One RJR brand had 25 percent and another had about 33 percent reconstituted tobacco. Tested samples of the reconstituted tobacco implanted in RJR brands Winston. Salem, Ma.-na and Now had up to 70 percent, rather than the expected 25 percent, of the nicotine that would be found in regular tobacco. 350. This laboratory analysis indicates that RJR had fortified the reconstituted tobacco with additional nicotine. 73 - I I]'~ I: W] i b5(' DOC
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varieties are suitable for arowing in the United States and thereby eligible for fedt:ral price support. 325. One key objective of the Tobacco Industry's involvement in the Minimum Standards Program appears to be to ensure that nicotine levels in marketed tobacco do not fali below specified levels. The program was initiated in response to the emergence in the 1950s of several so-called "discount" varieties of tobacco "Coker 139."'`Coker 187-Golden Wilt," "Coker 282," "Coker 140;" "Coker 316," and "Reams 64") that failed to meet c L-re;tt industy specifications which were established, among other reasons, to control the amount of nicotine delivery when used in manufacturing filtered cigarettes. 326. To insu:e the elimination of "discount" or low-nicotine varieties from the market, the industry obtained the necessary cooperation from USDA to eliminate these varieties from the price-support program. In fact. to be eligible tmder this program, growers must certifv. even to this day, that "discount' varieties are not being ero%vn. 327. While the Minimum Standards Proeratn ensured that nicotine levels it: marketed tobaccos c:id not fall, breeding and cultivation initiatives undertaken by the industry caused nicotine levels to increase. 328. In the 1960s and 70s, the industry turned to tobacco breeders to develop tobacco varieties that produced less tar. Breeders found that without intervention in the breeding of these varieties, nicotine levels were reduced along with tars. 329. Thus. the industry has long been able to grow low-tar and low-nicotine varieties of tobacco for use in manufacturing cigarettes. 330. By 1978', however, the industry had abandoned its interest in the development of low-tar/low-nicotine varieties of tobacco for manufactnring low-yield cigarettes, and instead turned to the development of higher-nicotine varieties. 331. In addition to breeding high-nicotine tobacco varieties, the Tobacco Industry engages in the following agronomic practices that increase nicotine levels in tobacco: -70- i~~~~_~,515~pOC
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0 425. Addressing those attributes, this statement was made: "Young people will continue to become smokers at or above the present rates during the projection period. The brands which these beginning smokers accept and use will become the dominant brands in future years. Evidence is now available to indicate that the 14 to l3 year old group is an increasing segment of the smoking population. RJR must soon establish a successful new brand in the market if our position in the industry is to be maintained over the long term" (Emphasis in original.) 426. Reynolds continued to use the "Old Joe" character in conjunction with other offers attractive to adolescents until July of 1997 when RJR retired the character under pressure from the FTC. 427. Reynolds has made numerous premiums available in exchange for coupons included in packages of Camel cigarettes. These premiums are deliberately designed to appeal orimarily to adolzscents. 428. Reynolds has expressly encouraged adolescents to circumvent laws related to tobacco use by adolescents. 429. For example, in one coupon offer for a free package of Camels, "Joe Camel" advised individuals that it would be a "smooth move" to have someone else redeem the coupon. thus suggesting the means to overcome prohibitions of sales to adolescents of tobacco products. 430. Other Reynolds campaigns have targeted stores and advertising locations close to high schools and other areas frequented by adolescents, and Reynolds concentrates advertising in publications read by large numbers of adolescents. 431. 4. Philip Morris's Admission that it has Targeted Adolescents The Tobacco Cartel is currently under intense scrutiny from state and federal ~ officials. In an attempt to stave off FDA regulations, Philip Morris has proposed a series of c.:.: ~ changes to thei r marketing practices. cr7 t..; tn U'7 _82_ ii:veco;~oux,c
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a. Heavy application of nitrogen fertilizers, early topping, and tight control of bud growth at the junction of stalk and leaves (known as the "sucker"j have all acted in concert to push nicotine levels upward. b. Tobacco varieties have been selected for tolerance to brown spot, a leaf disease that makes early harvest necessary. Leaves of disease-resistant varieties tend to remain in the field longer, resulting in maximum nicotine accumulation. c. Since the introduction in 1965 of the acreage-poundaga control system, farmers have reduced the number of harvestable leaves per plant and have tended to increase plant spacing. Both of these practices tend to increase nicotine content in the leaf. d. Tobacco arowers are transplanting tobacco crops earlier, which, coupled with the widespread use of pesticides in the soil, often results in slow early season arowth, and also tends to increase nicotine content in the leaves. 332. The foregoing facts has led the FDA to conclude that: These nicotine-raisinQ agronomic practices have been adopted by U.S. growers in recent years, even though over 50% of the U.S. cigarette market is now characterized as low delivery. Thus, the tobacco industry has developed a number of sophisticated methods for manipulatina nicotine levels throush breeding and cultivation of tobacco plants and has used these methods to maintain and increase concentrations of nicotine in tobacco leaves. These methods enable the industry to use high-nicotine leaf in low-tar cigarettes, so that, paradoxically, certain low-tar cigarettes now contain more of the higher nicotine tobacco in their blend than cigarettes with higher tar deliveries. The use of these methods demonstrates that the industry manipulates nicotine independently of other tobacco components to ensure that cigarettes contain sufficient nicotine to satisfy smokers- 2. Leaf Purchasing 333. Another method of nicotine manipulation is to consider stalk position nf tobacco leaves when purchasing tobacco. The concentration of nicotine is lowest at the bottom of the plant and highest in the top leaves of flue-cured tobacco. Thus. the position of the leaf on the stalk determines how much nicotine the leaf will contain. 33 1. "Stalk position" is an industry euphemism for nicotine content. -71- I 1291'_ M] 5 9SC:AC
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varieties are suitable for growing in the United States and thereby eligible for federal price support. 325. One key objective of the Tobacco Industry's involvement in the Minimum Standards Program appears to be to ensure that nicotine levels in marketed tobacco do not fall below specified levels. The program was initiated in response to the emergence in the 1950s of several so-called "diseount" varieties of tobacco (e.g., "Coker 139: "Coker 187-Golden Wilt," "Coker 282," "Coker 140,"'`Coker 316,° and "Reams 64") that failed to meet current industry specifications which were established, among other reasons, to control the amount ofnico?ine delivery when used in manufacturing filtered cigarettes. 326. To insn:e the elimination of "discount" or'.o•.v-nicotine varieties from the market. the industry obtained the necessary cooperation from USDA to eliminate these varieties from the price-support program. In fact. to be eligible tmder this proeram. =rowcrs mist certifv, even to this day, that "discouni' varieties are not being grown. 32 . W;ule the NSinimur.t Standards Proeram ensLred that nicotine levels in marketed tobaccos did not fall, breeding and cultivation initiatives undertaken by the industry caused nicotine levels to increase. 328. In the 1960s and 70s. the industry turned to tobacco breeders to develop tobacco varieties that produced less tar. Breeders found that without intervention in the breeding of these varieties, nicotine levels were reduced along with tars. 329. Thus, the industry has long been able to grow low-tar and low-nicotine varieties of tobacco for ttse in manufacturing cigarettes. 330. By 1978', however, the industry had abandoned its interest in the development of low-tarlow-nicotine varieties of tobacco for manufactt,ring Iow-yield cigarettes, and instead turned to the development of higher-nicotine varieties. 331. In addition to breeding high-nicotine tobacco varieties, the Tobacco Industry engaees in the following agronomic practices that increase nicotine levels in tobacco: -70- i 129 i: W I1 .l$C'JOC
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• 0 432. In a 1996 letter to several state attorneys general, Philip Morris atinounced a"blue print which directly addresses the issue of youth smoking.- Among its proposals are the following: a. Ban tobacco ads near schools and plavgrounds and in youth oriented pubiications; b. Prohibit tobacco brand names, logos and characters on promotional items like t-shirts and caps; c. Ban cigarette ver_ding machines: d. Limit tobacco brand name sponsorship to ev-mts with primarily adult audiences: e. Ban tobacco advertising in video arcades and farniIy - oriented centers. 43= Through this 1996 letter, Philip Morris has admitted that the industrv :nss attempted to ar.ract adolescents. when ic a. oiaces eebacco ads near schools, playgrounds, and m _: ot:th orimir_d 1:ubli:ations: h. uses itiCos :11d characters that are intended to appeal to adolescents; c. sponsors events that have primarily youth audi--nces: d. places ads in places likely to reach adolescens such as video and family oriented centers. 43~. Further evidence in this regard is the facc that two industry leaders. RJR and Philip Morris, repeatedly used third parties to survey the attitudes and likes and dislikes of children and te-nagers. 435. lhese surveys would not have been commissioned if RJR and Philip Morris had not intended to target minor children. O. The Human Toll of Cigarette Smoking 1. Health Effects of Cigarette Smoking 436. Over 400,000 Americans die each year from tobacco-related illnesses. This equates to more than one of every hve deaths in the United States. -g3- i:-/ 11 ©if 6SC[]OC
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s i 415. Philip Morris paid for or otherwise provided promotional material for 56 films in 1987-88. 416. Llagett paid for promotion of Eve, its brand designed especially to appeal to young women, in "Super.-irl." 417. A.merican Tobacco promoted Lucky S*.rike in "Bever;v Hills Cop.'' 418. Reynolds paid for the promotion of Camel in "Who Framed Roger Rabbit," '-Desperately Seeking Susan," and "Honey. I Shrunk the Kids." 3. Reynolds: "Old Joe Camel" 419. .-lnother example of the industry's targeting of adolescen:s and its deceptive conduct is the "Joe Camel" advertising campaign conducted by Reynolds, in observance of the Camel brand's 7-~,h anniversary. Y20. As oart of :he initiation of the promotion. Reyttolds ulcluded singing birtl':ds~ cards tP. :Zolllnv S[unc' ntq7aZInc', a publication pclticilla:lY poPulOS w;Li `, o:1nY pCol7l.'„ 'iP.A offered premiums such rs T-sltirts, oarty mugs and wail posters. 421. +l'hen Reynolds began this cartoon campaion in 1983, Carnel`s share cfthe children's (under 18 years of age) market was only 0.5 1:eccent. 422. Camel's share of this illegal market has increased to 32.8 percent, representing sales estimated at S476 million per year. r iltother indication ofthe phenomenal success of this marketing campaigr is tbee fact that in a recent survey of six year-olds, 91 percent of the children could correctly match"Gid Joe" with a picture of a cigarette. This recognition percentage was nearly equal to ,hat of Mickey Mouse. 424. Reynolds studied the attributes of an advertising camFaigrn that would most appeal to the aroup it carefully identified as "21 and under." Those attributes directly coincide with the "Joe Camel" campaign. -sl-
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0 0 made after the effective date of Act No. 142 (1998) for health conditions caused by defendants' tobacco products; E. That, pursuant to 33 V.S.A. § 1911(a), and because the defendants' conduct as described in the Complaint has been oppressive, fraudulent and malicious, the State is entitled to an award of punitive damages against the defendants in an amount sufficient to punish defendants and to make an example of them; F. That, pursuant to 33 V.S.A. § 1911(a), the Court order defendants to pay the State's costs and reasonable attorneys' fees; and G. That, pursuant to 33 V.S.A. § 1911(a), the Court order such other relief as the Court deems appropriate. DATED: July 6, 1998 WH.LIAM H. SORRELL Attorney General of Vermont Julie Brill Assistant Attorney General Rebecca Ellis Assistant Attorney General OFFICE OF ATTORNEY GENERAL 109 State Street Montpelier, Vermont 05609-1001 (802) 828-3171 -97- 1129110W59SCDOC
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0 0 437. Eight hundred Vennonters die each year from smoking related illnesses. 438. If an adolescent's tobacco use continues for a lifetime, there is a 50 percent chance that the person will die prematurely as a direct result of stnoking. 439. The earlier a young person's smoking habit begins, the more likely he or she v.-i:l become a heavy smoker and therefore suffer a greater risk of stnoking-related diseases. 440. Smoking is responsible for about 90 percent of ail lun cancer deaths. 441. Smoking is responsible for 87 percent of deaths iiom chroi:ic obstn.cm e pulmonary diseases. 442. Smoking is responsible fcr 21 percent of deaths from coronary hemt disease. 443. Smoking is responsible for 18 percent of deaths from stroke. 444. Epidemiologic studies provide overwhelming ev;den::e that smoking causes luna :ancer. 'Prn: risk of gettmg lun- cancer ;7lav be n:or0 thtL^, 20 Clnlcs S(rt~,tZ.' i0r 1.:14;: Jll^'lCerS than nonsmo'.~rs. 4=15. , ne '.'~lat:ORS}'.ip rietwef:n smokmg, and lung cancer is :I::e tn the nllP.i~-fL`t:sl carcinogens in cigarette smoke. 446. Cigarette smoking caused an estimated 117,000 d.c:hs frot : E.ng cancer in 1990. 447. The risk of getting lung cancer increases wittt th;~ number of cigarettes smoked and the duration of smoking, and decreases after cessation of smoking. 448. Starting smoking at an earlier age increases the pot;ntiai years of smoking and increases the risk of lung cancer. 449. Studies have shown that hmg-cancer mortality :s higitesr ar„onp adult.: vrrto begnn smoking before the age of 15. 450. Cigarette smoking also causes cancer of the itttyn.Y. mou[h, and esophasas. 451. According to current estimates, 82 perce nt of iaryngeal cancers are dne to smoking. 45'. About 80 percent of the 10.200 deaths from zsnphaee2.: carv.:er in 1993 can be attributed to smoking. 34_
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0 478. Smoking's detrimental effect on lung structure and function appear within a few years after cigarette smoking begins. 479. Children who smoke are more likely to suffer from respiratory illnesses than children who do not smoke. 480. Adolescents who smoke may experience inflammatory changes in the lung, reduced lung growth, and may not achieve normal lung function as an adult. 481. Cigarette smoking is a probable cause of peptic ulcer disease. Peptic ulcer disease is more likely to occur in smokers than in nonsmokers, and the disease is less likely to heal, and more likely to cause death, in smokers than nonsmokers. Quitting smoking reduces the chances of getting peptic ulcer disease and is an important component of effective peptic ulcer treatment. 482. Studies also show that women who smoke have reduced fertility. One study showed that smokers were 3.4 times more likely than nonsmokers to take mere than I year to conceive. 483. Smoking has severe detrimentai effects upon pregnancy and fetuses. 484. Women who smoke are twice as likely to have low bir-Lh weight infants as women who do not smoke. Smoking also causes intrauterine growth retardation of the fetus. \4others. who smoke also have increased rates of premature delivery. 485. Smoking may lead to premature infant death. Babies of mothers who smoke are more likely to die than babies born to nonsmoking mothers. 486. A recent meta-analysis reported that use of tcbacco products by pregnant women results in 19,000 to 141,000 miscarriages per year, and 3,100 to 7,000 infantt deaths per year. In addition, the meta-analysis attributed approximately two-thirds of deaths from sudden-infant- death syndrome to maternal smoking during pregnancy. 487. By another estimate, if all pregnant women stopped smoking, there would be 4,000 fewer infant deaths per year in the United States. _87- 11]^12W159SC~C
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HAGENS & BERMAN Steve W. Serman James P. Solimano George W. Sampson Sesn R. Man Andrew M. Volk Jeniphr A.E. Breckem-;dge Christopher A. Jarvis 1301 Fifth Avenue, Suite'_929 Seattle, WA 98101 (206) 623-7292
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NESS, MOTLEY, LOADHOLT,_ RICHARDSON & POOLE. P.A. Ronald L. Motley Susan Nial P.O. Box I 137 Charleston, SC 29402 SCRUGGS, MILLETTE, LAWSON, BOZEMAN & DENT Richard F.Scntggs 734 Delmas Avenue Post Office Drawer 1425 Pascagoula, MS 39568 NORTON & FRICKEY A 'vD ASSOCIATES Robert B. Carey 2301 East Pikes Peak Colorado Springs, CO 80909 VAN O'STEEN & P 1RTNERS Steve C. Mitchell 3605 N. Seventh Avenue PhoeniY. AZ 85013 SHEEHEY BRUE GRAY & FURLONG, P C. Thomas D. Anderson Gateway Square 30 Main Street Burlington, VT 05402-1489 MILLER, EGGLESTON & CRA.I~IER, LTD. Scott L. Kline P.O. Box 1489 Burlington, VT 05402-1489 Special Assistant Attorneys General for the State of Vermont
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9 the public fisc. . Count Two: Statutory Cause of Action Based on 33 V.S.A. § 1911(c) for i`(egligent and/or Intentional Breach of a Voluntarily Assumed Dutv 514. The State of Vermont realleges and incorporates Paragraphs I through 503 as if set forth fully herein. 515. Beginning as early as 1954 with the publication of "A Frank Statement to Cigarette Smokers," and continuing to the present date, defendants voluntarily assumed a duty to both the State of Vermont and its citizens to research the effects of tobacco products on the human body and to disclose complete and accurate results of this research to the State of Vermont and its residents. 516. Defendants publicly represented that they would promote research efforts into all phases of tobacco use and health, cooperate closely with those who safeguard the public health. and provide complete and accurate information about the effects of tobacco products on the human body. 517. Defendants either intentionally or negligently breached their voluntarily assumed duty by failing to report honestly, accurately or completely the results of their tobacco-related research; by orchestrating the CTR fraud; by corrupting the scientific process through the knowing and active publication of fraudulent science and the suppression of unfavorable research data; and by perpetrating the "controversy" regarding the human health dangers of smoking. 518. Defendants conduct in undertaking and breaching their voluntarily assumed duty increased the risk that Vermonters would commence and continue using cigarettes, and thereby increased the risk of economic harm to the State of Vezrtont Indeed, the very purpose of defendants' undertaking was to promote the use of cigarettes. 519. As a result of the consumption or use of defendants' tobacco products, munerous 00 ' o1~ tobacco products and have suffered persons in Vermont have become addicted to defendants G.: ~ physical harm. tr: U11 rn Un -92- 1129 1IWl39SCDCC
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466. One study estimates that smoking causes = 0 to 40 percent of all deaths aue to coronary heart disease. 467. Smokers between the ages of 40 and 64 who smoked more than one pack a day were shown to have a risk of coronary heart disease that is 3.2 timcs higher than peop:e who do not smoke. 468. Smoking also increases a person's risk of atherosclerot+,,: peripheral vascular disease, especially if the smoker is diabetic. 469. Complications of this disease include decreased blood delivery to t.he peripherai tissues, gangrene. and ultimately loss of the affected limb. 470. Smoking cessation is the most important intervetttion in the management of peripheral vascular diseases. 47L. Smakr~isacauseoCstroke. Stroke is the third leadi:.a, cause of death in the tinited _°•tzres. 472. 4/:. lti''' associatton : f;.n:okli3a w.t-strOke :s h: iieved to ~e n:edeQ ;lv ra2 rnechanisms responsible for atherosclerosis (narrowing and hardening of the arterie,), thrombosis, ard decreased cerebral blood flow in smoker~. 474. Female smokers who use oral contraceptives are at an increased risk of having a stroke. 475. Cigarette smoking is tl:c leading cause of chronic obstructive pulmonary disease ("COPD") in the United States. 476. Approximately 84 percent of the COPD deaths in men and 79 percent of th, COPD deaths in womeh are attributabie to cigarette smoking. The risk oi death &om CG?O n:ay depend on how many cigarettes a person smokes dailv, how d;.enly the person irl:aies, and tne age when the person began smoking. 477. The number of cigarettes smoked per day is a strong indicaror for tl:e presence of the principal symptoms of chronic respiratory :llness, includin~ chro,:ic couph. ahle_ra production, whee2ine, and shortness of breath. -36- I /'9'] O.:b e5C LY>C
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STATE OF VERMONT CHITTENDEN COUNTY, SS. STATE OF VERMONT, Plaintiff, v. PHILIP MORRIS, INCORPORATED; R.J. REYNOLDS TOBACCO CO., RJR NABISCO HOLDING CORP., RJR NABISCO, INC., AMERICAN TOBACCO CORP.; BROWN & WILLIAMSON TOBACCO CORP.; LIGGETT & MYERS, INC.; LORILLARD TOBACCO CO., INC.; UNITED STATES TOBACCO CO.; B.A.T. INDUSTRIES, PLC; BRITISH AMERICAN TOBACCO COMPANY; THE COUNCIL FOR TOBACCO RESEARCH- U.S.A., INC.; and THE TOBACCO INSTITUTE, INC., Defendants. CHITTENDEN SUPERIOR COURT DOCKET NO. 744-97 CnC DEFENDANT LORILLARD TOBACCO CO.. INC.'S ANSWER TO PLAINTIFF'S COMPLAINT NOW COMES Defendant Lorillard Tobacco Co., Inc. (hereinafter "Lorillard"), by and through its attorneys, and in response to Plaintiffs Complaint says as follows: PREFACE The Complaint improperly mixes factual allegations with inflammatory rhetoric so as to make it difficult or virtually impossible to respond meaningfully. The Complaint also selectively recites statistics, scientific conclusions, technical discussions, and medical conclusions, few of which are identified as to source or supported by relevant data making it difficult to respond meaningfully. Many of the allegations of the Complaint are vague or conclusory. The Complaint also includes terms which are undefined and which are susceptible of different meanings. The Complaint also contains many purported quotes from a number of sources, many of which are unidentified. A number of the quotes originate in documents protected by attorney-client privilege andlor the work product doctrine. Lorillard reserves the right to assert such privileges, hereby moves to strike such references, and demands return of any such documents that Plaintiff may have in its possession, custody, or control. The best evidence of the accuracy of any material quoted is the original source material from which it was quoted. In answering allegations consisting of quotes, admission that the material quoted was contained in a document or was uttered by the person or entity quoted shall not constitute an admission that the substantive content of the quote is or is not true. These comments and objections are incorporated, to the extent appropriate, into each numbered paragraph of this Answer. 0-
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0 not have discovered such facts or the alleged violations at an earlier time because defendants fraudulently concealed their course of conduct, and continue to do so. 493. Vermont is not ar0are of the methods used by defendants to conceal their activities. 494. Upon information and belief, the methods used bv defendants in fiurtherance of their combination and conspiracy were by nature self-concealing and not of a type that could have reasonably been apparent to plaintiff. 495. For example, in 1985, a Brown & Williamson attorney recommended that much of its medical research be declared "deadwood" and shipped to England. 496. The attorney stated that, "I have marked with an X documents which I suggested were deadwood in the behavioral and biological studies area. I said that the B series are Janus series studies and should also be considered deadwood-" The attomey further suggested that the research, development, and engineering department also "should undertake to remove the deadwood from its files." 497. Brown & Williamscn attempted to control other documents so it could later clait*m an attomey-client privilege or work-product protection for documents its attorneys thou;ht mightt later cause difficulties in product-liability actions. 498. Such documents included scientific reports the company sought to protect from discovery: [Scientific] material should come to you [corporate counsel] under a policy statement between you and Southampton [B.A.T.] which describes the purpose of developing the documents for B & W and sending them to you as use for defense of potential litigation. It is possible that a system can be devised which would exempt the Engineering reports because it might be difficult to maintain a privilege for covering such reports under the potential litigation theory. [C]ontinued Law Department control is essential for the best argument for privilege. At the same time, control should be exercised with flexibility to allow access of the R & D staff to the documents. 499. The Brown & Williamson assertions ofprivilege are false and in bad faith. Other defendants have used similar tactics to conceal the activities of the conspiracy. -89- 1179 ll W)s aSC WC
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• 0 535. The vast majority of adults currently addicted to defendants' tobacco products became addicted to those products when they were adolescents. at which time, as defendan: tobacco companies knew or had reason to know, because of their youth. incompetence or inexperience, they were unable to use tobacco products in a manner that would avoid addicaion and that would not cause them an unreasonable and serious risk of physical harm. 536. The risks of addiction, health problems and death are unreasonably high when tobacco products are marketed. distributed andlor sold to adolescents. 537. The resulting injury to Vermont's youth and the general public was foreseeabiP and far out-,~ei.ahed the utility of the tobacco products sold. ?3S. Numerous Vermont citizens who became addicted to def,°ndants' tobacco products when they were adolescents have suffered physical harm. 5 .i9 As a result of thetr tobacco••related Ln)urtes, tnanc ol these pFrzons have recervs t or will rece.`!e Medicaid benefts Cixn the State of `.'ermor.t, fr_r which rhe S-tatc se:;ks reimbursem--it. Count Five: Statutory Cause of Actiou Based on 33 V.S.A. § 1911(c) for Defectively Designed Product Unreasonably Dangerous to Consumers and Users 6a0. The State of Vermont realleges and incorporates Paragraphs I through 503 au; if fully set fonh herein. 541. T'e defendants' cigarettes and tobacco products were unreasonably dangerous due to their desien_ becx,se, inter a1:cz, a. The def7ndants manipulate the nicotine le vels in their tobacco preducts in order to promote a,nd maintain addictior.; h. The defendants have conspired to suppress _he maric,-ti-.^_ or_'s~rF r, alternative products, including without hmitation nicotine-free cigarette:., nicotine ana.iogues. cigaret?es that heat rather than b'.trn tobacco, nitrosamine-free cigarettes, and ciearettes that s le,.; :ei filter carbon monoxide. - 95 - r . _', r _]OJS 95, ::cC
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0 0 542. The risk of danger in the design of the tobacco products outweighed any benetits associated with tobacco use. 543. The failure to adopt reasonable alternative designs rendered defendants' tobacco products unreasonably dangerous. 544. Numerous Vermont citizens have become addicted to defendants' tobacco products and have su:fered physical harm. 5 4;. As a rrsult of their tobacco-related injuries, many smokers have recei-.•ed or «il! receive Medicaid becefits from the State of Vermont. for whioi: the State seeks reimbttr•emect. WHEREFORE, the State of Vermont requests the following reiief: A. That the Court adjudge and decree that the defend<,ris have en,~aaed in the conduct alleged here: B. That rhe Court enjoin and restrain detendants a:.d ti7cir or'ficers, agen_s, sc: : atas and cmpit.yee.,. -mid those in active concerrt or participation with :hen?. from r.ontinui nQ or cn;caging in such cond'.:i.'t or other Ci:nd'1c:t having a similar purpoSS ir C. :hat, ia order to alievia;e and prevent further ha:.nt to the publicfisc arising from the use of tobacco, the Court (i) order defendants to publicly disclose, disseminate and publish all research previously conducted directly or indirectly by themselves and their respective agents, af`iliates, sen•acts, officers, directors. employees, and all person acting in concert with them. that relates to the is-sue of smoking and health: (ii) order defendants to furtd a corrective public education campaign relating to the issue of smoking and healt4. to be administered and ccntrolled by an inaependent third party, and (iii) order defendants to fttrd clinical smoking cessatiorn programs in th:; State of V etznont: I). That, pursuant to 33 V.S.A. § i9; l, the Court order defendants to pay damages in an aril0unt whteh is sufficient to reimburse the State of Vermont t()C expenditures made or tC be -96- n -11 1_m3•ascv:r
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0 520. iVlany of those persons who have become addicted to defendants'-tohacco products and have suffered physical harm either have received or will receive Medicaid benefits from the State of Vermont, for which the State seeks reimbursement. 521. Because the taxpayers of the State of V ennont should not bear the costs of treating tobaccr,-related illnesses when the tobacco companies have neglioently breachzd their assumed dnty, the Attorney GenPral brings this claim to recoup those fuUnds and protect the public fsc. Count Three: Statutory Cause of?.ction Based on 33 V.S.A. § 1911(c) for Negligente 522. T ne State of Vermont realleges and incorporates Paragraphs I ttroug4 5i)3 as if :.:llv set forth herein. As ; 3 V.S.A. ~ 1911 recogmZesS the defend<u:;s ha:d a dutv to e.:crc'Sr r:'i_n, a? care in the iaesl'?n. m'L.^.ufactur°_ _+?lZ and dlstr:bntlon ot t;:eir (obacc,] products. _31 Defendaets brezched that duty ;;~•. amon other :iit=t_s. (i;1 faiiin; _o desi;.~. manLfacture ana place on ta~ market products tr,at eliminated aL or some carcinczn:; failing to desi_n, manufacture and place on the market products thai .~ere not addi;,tive; and (ii; i designing "iight ""uitra-light" and other cigarettes that generate low levels of"ta,'- and "nicotine° when "smoked" by the FTC testing machine, but under actual smoking conditions are no safer than other tobacco products. 525. Defendants' negligence has been a substantial factor in bringing about the use of cigarettes by res;oents of the State of Vermont. 526. Residen,ts of the State of Vermont have, for many J ears, consumed or .tsed the defendants' products in the manner in which they were intended to oe consumed or used. witcou* any substantial alteration or change in the product. 527. As a result of the consumption or use of defendants' tobacco products, numerous persons in Vermont have become addicted to defendans' tobacco products urtd;tave suf`ered physical harm. -93- ir~r_.w,:n:ccoc
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0 9 453. The risk of oral cancer among current smokers ranges frot^., 2.0 to'! 9. 1 times the risk in people who have never smoked and can be reduced more than 50 percent after quitting. 454. The risk of esophageal cancer among current smokers ranges from 1.7 to 6.4 times the risk in people who have never smoked and can also be reduced by about 50 p~trcent after quitting. 455. Epidemiological s:.idies demonstrate that cigarette smoking contributes to the development of pancreatic cancer. 456. The reason for this relationship is unclear, but may be due to carcinogens or metabolites present in the bile or blood. 457. In 1985, the proportion of pancreatic cancer deaths in the United States attdbutabte to smoking was estimated to be 29 percent in men and =-t percent in women. -355. Ci,arette sn2oi:ing accounts [or a:, esumete-: 30 to 4C percent of all biadder cancers and is a contributing factor tbr k.dney cancer. 459. The incre.Led rlsk of binnev z_"ld bladder c aticer tra}' be reiaLeu :o the nu.;lb;;r or cigarettes smoked per day, and d-.e risk decreased following smokin, cessation. 460. Smoking is a contributing factor for cancer c F the cervix. 461. The 1982 Surgeon General's Report concluded that stomach cancer is associated with cigarette smoking. 462. Smoking is a leading cause of heart disease_ The ! 96•-'. Surgeon G:tneral's Repoi-: noted that ntale cigarette smokers had higher death rates from coronary heart disease tha:: nonsmokers. 463. Subsequent reports have concluded that ciaarette smoking contributes to the risk of heart attacks, chest pain, and even sudden death. 464. Overall, smokers have a 70 percent greater death rate from coronar•v heart disease than nonsmokers. 465. Ischemic heart disease resulting from ciaarette smoking cfainted neari}' 99.000 lives in ! 990. ~1`1 -~;iascooc
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13. Lorillard admits that this Court may properly exercise subject matter jurisdiction over the claims against Lorillard set forth in the Complaint. Lorillard denies each and every remaining allegation contained in paragraph 13. 14. To the extent paragraph 14 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard admits that it has sold cigarettes in the State of Vermont and has received revenue from the sale of cigarettes in the State of Vermont. Lorillard denies each and every remaining allegation contained in paragraph 14. 15. To the extent paragraph 15 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard admits that it has sold cigarettes in Chittenden County and the State of Vermont and has received revenue from the sale of cigarettes in Chittenden County and the State of Vermont. Lorillard denies each and every remaining allegation contained in paragraph 15. 16. 16. Lorillard denies each and every allegation contained in paragraph 17. Lorillard admits venue is proper in Chittenden County, but expressly reserves its right to seek transfer of venue. 18. Upon information and belief, Lorillard admits only that William H. Sorrell is the Attorney General of the State of Vermont, and that Jan K. Carney is the Commissioner of Health of the State of Vermont, and that each is authorized to exercise the proper power of their office. Lorillard further admits that Plaintiff purports to bring this action pursuant to 3 V.S.A. Sections 152 and 157, 18 V.S.A. Section 130, and 9 V.S.A. Sections 2458(a) and (b) but denies that Plaintiff is entitled to any relief. Lorillard denies each and every remaining allegation contained in paragraph 18. 19. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 19 and, on that basis, denies the allegations. 20. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 20 and, on that basis, denies the allegations. 21. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 21 and, on that basis, denies the allegations. 00 22. Lorillard is without sufficient knowledge or information to form a ~ belief as to the truth of the allegations contained in paragraph 22 and, on that basis, ~ denies the allegations. V V 3
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35. Lorillard denies the existence of, and/or its participation in, any alleged "conspiracy." To the extent paragraph 35 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent the allegations contained in paragraph 35 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 35. 36. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 36 and, on that basis, denies the allegations. 37. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 37 and, on that basis, denies the allegations. 38. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 38 and, on that basis, denies the allegations. 39. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 39 and, on that basis, denies the allegations. 40. Lorillard denies the existence of, and/or its participation in, any alleged "conspiracy." To the extent paragraph 40 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent the allegations contained in paragraph 40 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 40. 41. To the extent paragraph 41 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard admits that it has advertised, sold and promoted its cigarettes throughout the United States including the State of Vermont. Lorillard denies each and every remaining allegation contained in paragraph 41. 42. Lorillard admits, upon information and belief, that the Council for Tobacco Research -- U.S.A., Inc. ("CTR"), formerly known as the Tobacco Industry Research Committee ("TIRC") is a New York not-for-profit corporation with a place of business located at 900 Third Avenue, New York, New York. Lorillard denies the existence of, and/or its participation in, any alleged "conspiracy." To the extent that the remaining allegations contained in paragraph 42 refer to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent the remaining allegations in paragraph 42 refer to knowledge, conduct, or actions of 5
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The Complaint improperly and repetitively refers to Lorillard and certain other Defendants on a collective basis, failing to plead with requisite particularity allegations against Lorillard or other Defendants. Intentionally ambiguous pleading is improper and insufficient to apprise Lorillard in any meaningful sense of the allegations asserted against it. Lorillard has nevertheless attempted to respond to Plaintiffs allegations to the extent possible under the circumstances. To the extent allegations refer to the knowledge, conduct, or actions of other Defendants, Lorillard would generally be without sufficient knowledge or information to form a belief as to the truth of those allegations and, on that basis, Lorillard would deny those allegations. Lorillard denies each and every allegation contained in the Complaint, except as specifically herein admitted, qualified, or otherwise answered, and any factual averment admitted is admitted only as to the specific facts and not as to any conclusions, characterizations, implications, innuendos, or speculations which are contained in any averment or in the Complaint as a whole. Moreover, Lorillard specifically denies any allegations contained in headings or unnumbered paragraphs in the Complaint or in the Table of Contents (pp. i-ii). Lorillard objects to and moves to strike Section I Introduction, Paragraphs 1-12 of Plaintiffs Complaint pursuant to 10 V.R.C.P. Plaintiff admits that Section I, incorrectly noted in footnote I of the Complaint as Paragraph 1-10 vice Paragraph 1-12, does not contain averments of claim nor are they short and simple statement of the claim as required by Rule 8. 1. To the extent paragraph 1 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent paragraph 1 refers to the knowledge, conduct, or actions of Lorillard, Lorillard admits that Plaintiff purports to bring this action to obtain certain monetary, injunctive and other relief but denies that Plaintiff is entitled to any relief from Lorillard. Lorillard denies each and every remaining allegation contained in paragraph 1. 2. To the extent paragraph 2 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard admits that, over the years and from time-to-time, it has received revenue from the sale of cigarettes. Lorillard denies each and every remaining allegation contained in paragraph 2. 3. Lorillard admits that Liggett & Myers Tobacco Co., Philip Morris, Inc., United States Tobacco, R.J. Reynolds Tobacco Co., Brown & Williamson Tobacco Company, and Lorillard Tobacco Co., during the past several years, have manufactured the majority of cigarettes sold in the United States. Lorillard denies each and every remaining allegation contained in paragraph 3. 4 Lorillard denies each and every allegation contained in paragraph . ~ 4. ~ 5. Lorillard denies each and every allegation contained in paragraph va ~ 5. Cn V Gr 1
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23. Lorillard admits that Lorillard Tobacco Company is a Delaware Corporation but states that its principal place of business is in Greensboro, North Carolina. Lorillard admits that it has at one time manufactured, advertised, and sold Old Gold, Kent, Triumph, Satin, Max, Spring, Newport, and True cigarettes throughout the United States. Lorillard denies each and every remaining allegation contained in paragraph 23. 24. Lorillard admits that the Loews Corporation 1995 Annual Report reported a cigarette business segment revenue of approximately $2.05 billion and net income of approximately $363 million. Lorillard denies each and every remaining allegation contained in paragraph 24. 25. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 25 and, on that basis, denies the allegations. 26. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 26 and, on that basis, denies the allegations. 27. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 27 and, on that basis, denies the allegations. 28. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 28 and, on that basis, denies the allegations. 29. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 29 and, on that basis, denies the allegations. 30. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 30 and, on that basis, denies the allegations. 31. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 31 and, on that basis, denies the allegations. 32. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 32 and, on that basis, denies the allegations. 33. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 33 and, on that basis, denies the allegations. 34. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 34 and, on that basis, denies the allegations. 4
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6. Lorillard denies each and every allegation contained in paragraph 6, including its subparts. 7. Lorillard does not believe that nicotine in cigarette smoke is addictive under a traditional pharmacological definition of that term. Lorillard admits that certain executives from tobacco companies provided testimony in April 1994 before the Subcommittee on Health and the Environment on the Committee on Energy and Commerce. Lorillard states that the complete and precise language of the testimony can be ascertained from the official transcript of the testimony itself. To the extent that paragraph 7 mischaracterizes, misquotes, or takes the language of the testimony out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the testimony. Lorillard denies each and every remaining allegation contained in paragraph 7. 8. Lorillard denies the allegation contained in the first sentence of paragraph 8. Lorillard admits that paragraph 8 purports to quote from and/or to characterize U.S. Centers for Disease Control and Prevention reports. Lorillard states that the complete and precise language of the alleged reports can be ascertained from the reports themselves. To the extent paragraph 8 mischaracterizes, misquotes, or takes the language of the alleged reports out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged reports. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations contained in paragraph 8 and, on that basis, denies the allegations. 9. To the extent paragraph 9 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge of information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent paragraph 9 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each and every allegation contained in the first and third sentences of paragraph 9. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations contained in paragraph 9 and, on that basis, denies those allegations. 10. Paragraph 10 does not require a response because it improperly asserts incorrect legal conclusions, rather than stating factual allegations. To the extent an answer is required, Lorillard denies each and every allegation contained in paragraph 10. 11. To the extent paragraph 11 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent paragraph 11 refers to the knowledge, conduct, or actions of Lorillard Tobacco Company, Lorillard denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 11. 12. Lorillard admits that Plaintiff purports to bring this action to obtain certain monetary and injunctive relief but denies that Plaintiff is entitled to any relief from Lorillard. Lorillard denies each and every remaining allegation contained in paragraph 12. -2-
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79. Lorillard admits that several factors account for the persistence of cigarette smoking. 80. Lorillard admits that cigarette smoking has been identified as a risk factor for certain chronic diseases. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of any such disease. Lorillard denies each and every remaining allegation contained in paragraph 80. 81. Lorillard admits that cigarette smoking has been identified as a risk factor for certain chronic diseases. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of any such disease. Lorillard denies each and every remaining allegation contained in paragraph 81. 82. Lorillard admits that nicotine is a naturally occurring constituent of the tobacco used in the manufacture of its cigarettes. Lorillard denies each and every remaining allegation contained in paragraph 82. 83. Lorillard does not believe that nicotine in cigarette smoke is addictive under a traditional pharmacological definition of that term. Lorillard denies each and every remaining allegation contained in paragraph 83. 84. Lorillard denies each and every allegation contained in paragraph 84. 85. Lorillard denies each and every allegation contained in paragraph 85. 86. Lorillard denies each and every allegation contained in paragraph 86. 87. Lorillard admits that it has advertised its cigarettes but denies Plaintiffs characterizations and implications regarding such advertising. Lorillard denies each and every remaining allegation contained in paragraph 87. 88. Lorillard admits that cigarette smoking has been identified as a risk factor for certain chronic diseases. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of any such disease. To the extent paragraph 88 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent paragraph 88 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 88. 89. Lorillard admits that paragraph 89 purports to quote from andlor to characterize several purported advertisements. Lorillard states that the complete and precise language of the alleged advertisements can be ascertained from the advertisements themselves. To the extent paragraph 89 mischaracterizes, misquotes, or takes the language of the alleged advertisements out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged advertisements. To the extent paragraph 89 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those 9
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117. 117. Lorillard denies each and every allegation contained in paragraph 118. Lorillard admits that paragraph 118 purports to quote from and/or to characterize an unidentified document. Lorillard states that the complete and precise language of the alleged document can be ascertained from the document itself. To the extent paragraph 118 mischaracterizes, misquotes, or takes the language of the alleged document out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged document. Lorillard denies each and every remaining allegation contained in paragraph 118. 119. Lorillard admits that The Tobacco Institute, a trade group, was formed in 1958 by certain cigarette manufacturers. Lorillard denies each and every remaining allegation contained in paragraph 119. 120. Lorillard admits that on or about January 4, 1964, a statement captioned "A Frank Statement to Cigarette Smokers" circulated in certain newspapers. Lorillard is without sufficient knowledge or information to form a belief regarding the circulation of the Statement and, on that basis, denies that allegation. Lorillard states that the complete and precise language of the Statement can be ascertained from the Statement itself. To the extent paragraph 120 mischaracterizes, misquotes, or takes the language of the Statement out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the Statement. Lorillard admits that the Statement was sponsored by the TIRC. Lorillard denies each and every remaining allegation contained in paragraph 120. 121. Lorillard admits that a statement captioned "A Frank Statement to Cigarette Smokers" was sponsored by the TIRC, that Lorillard and the other cigarette manufacturers (or their predecessors), excluding Liggett, were listed by name in the article. Lorillard denies each and every remaining allegation contained in paragraph 121. 122. Lorillard admits that paragraph 122, including its subparts, purports to quote selectively from A Frank Statement to Cigarette Smokers. Lorillard states that the complete and precise language of the Statement can be ascertained from the Statement itself. To the extent paragraph 122, including its subparts, mischaracterizes, misquotes, or takes the language of the Statement out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the Statement. Lorillard denies each and every remaining allegation contained in paragraph 122. 123. Lorillard denies each and every allegation contained in paragraph 123. 124. Lorillard denies each and every allegation contained in paragraph 124. 125. Lorillard denies each and every allegation contained in paragraph 125.
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allegations. To the extent paragraph 89 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 89. 90. Lorillard admits that paragraph 90 purports to quote from and/or to characterize several purported advertisements. Lorillard states that the complete and precise language of the alleged advertisements can be ascertained from the advertisements themselves. To the extent paragraph 90 mischaracterizes, misquotes, or takes the language of the alleged advertisements out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged advertisements. To the extent paragraph 90 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent paragraph 90 refers to the knowledge, conduct, or actions of Lorillard Tobacco Company, Lorillard denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 90. 91. To the extent paragraph 91 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent paragraph 91 refers to the knowledge, conduct, or actions of Lorillard Tobacco Company, Lorillard denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 91. 92. Lorillard denies each and every allegation contained in paragraph 92. 93. Lorillard admits that paragraph 93 purports to reference a study published by Dr. Richard Doll. Lorillard states that the complete and precise language of the study can be ascertained from the study itself. To the extent paragraph 93 mischaracterizes, misquotes, or takes the language of the study out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the study. Lorillard denies each and every remaining allegation contained in paragraph 93. 94. Lorillard admits that paragraph 94 purports to reference a study published by Dr. Ernest Wynder. Lorillard states that the complete and precise language of the study can be ascertained from the study itself. To the extent paragraph 94 mischaracterizes, misquotes, or takes the language of the study out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the study. Lorillard denies each and every remaining allegation contained in paragraph 94. 95. Lorillard admits that paragraph 95 purports to reference a study published by Dr. Ernest Wynder. Lorillard states that the complete and precise language of the study can be ascertained from the study itself. To the extent paragraph 95 mischaracterizes, misquotes, or takes the language of the study out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or - 10-
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111. Lorillard admits that paragraph 111 purports to quote from and/or to characterize a purported Hill & Knowlton memorandum. Lorillard states that the complete and precise language of the alleged memorandum can be ascertained from the memorandum itself. To the extent paragraph 111 mischaracterizes, misquotes, or takes the language of the alleged memorandum out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged memorandum. Lorillard denies each and every remaining allegation contained in paragraph 111. 112. Lorillard admits that paragraph 112, including its subparts, purports to quote from and/or to characterize one or more unidentified documents. Lorillard states that the complete and precise language of the alleged documents can be ascertained from the documents themselves. To the extent paragraph 112, including its subparts, mischaracterizes, misquotes, or takes the language of the alleged documents out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged documents. Lorillard denies each and every remaining allegation contained in paragraph 112, including its subparts. 113. Lorillard admits that paragraph 113, including its subparts, purports to quote from and/or to characterize a purported Hill & Knowlton memorandum. Lorillard states that the complete and precise language of the alleged memorandum can be ascertained from the memorandum itself. To the extent paragraph 113, including its subparts, mischaracterizes, misquotes, or takes the language of the alleged memorandum out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged memorandum. Lorillard denies each and every remaining allegation contained in paragraph 113, including its subparts. 114. Lorillard admits that paragraph 114 purports to quote from and/or to characterize a purported statement from John Hill. Lorillard states that the complete and precise language of the alleged statement can be ascertained from the statement itself. To the extent paragraph 114 mischaracterizes, misquotes, or takes the language of the alleged statement out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged statement. Lorillard denies each and every remaining allegation contained in paragraph 114. 115. Lorillard admits that five of the current U.S. manufacturers, or their predecessors, were original members of the TIRC. Lorillard further admits that Liggett joined the TIRC in 1964, and that the TIRC changed its name to the CTR in 1964. Lorillard denies each and every remaining allegation contained in paragraph 115. 116. Lorillard admits that paragraph 116 purports to quote from and/or to characterize a purported Hill & Knowlton memorandum. Lorillard states that the complete and precise language of the alleged memorandum can be ascertained from the memorandum itself. To the extent paragraph 116 mischaracterizes, misquotes, or takes the language of the alleged memorandum out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged memorandum. Lorillard denies each and every remaining allegation contained in paragraph 116. - 13-
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• 0 P. Injury To The Public Fisc As A Direct And Foreseeable Consequence Of Defendnnts' Conduct 488. In addition to the human toll, the economic costs of tobacco use, and• in particular, health care expenditures from tobacco-attributable diseases, amount to an unacceptable burden on society and the State of Vertnont. 489. The State spends millions of dollars each year to provide or pay for health care and other necessary facilities and services on behalf of low-income Vermonters. Increa=ed health care costs for those individuals are directly caused by tobacco induced cardiovascu!ar disease. lung cancer, emphysema, respiratory and other diseases. 490. In fulfilling its statutory duties, the State of Vermont has expended and will expend substantial sums of money due to the increased cost of providing health c.:re servlces for treatment of tobacco-caused diseases. These increased expenditures have been caused by the unlawful actions of the Tobacco ?ndusiry. 491. The Centers for Disease Coniroi have devsl.oped information on sIP.olLlrt.-attriF-ut.ablz dea:hs and diseases ar_d ti:e e-_~or:omic :i_PJaCt OI smti'SIFi_*. fht:''sAtGv ' demonstrates that there is a direct and substantial cost to Verraont State taxpayers of increased health care attributabie to use of tobacco. Nationwide. the CDC data sl-ows that the es-,:,nated_ health care costs for smokine-attributable diseases are S50 billion. These costs have been increasing at a precipitous rate, more than doubling in the period from 1987 to 199_. Vermont's Medicaid expenditures for 1993 were over $29 million. Q. Fraudulent Concealment 492. Until recently, Vermont was without knowledge of defendants' cembination or conspiracy, or of any facts from which it might reasonably be concluded that defendants w•ere illegally conspiring, or which would have led to the discovery thcrcof. Vermont s-vas elso unaware that defendants render their products defective by such methods as the manipuiati. r. o:' nicotine levels to increase the'`free" nicotine in cigarette smoke to promote addid;on and by intentionally suppressing the production titd mllr\ ttIl_T of Saif'r tilOaCCC E rodl!cis. PItti',7tiff{,•onjd - ~U - I 1:41]WJfosCWC
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65. Lorillard is without information or knowledge sufficient to form a belief as to the truth of the allegations contained in paragraph 65 and, on that basis, denies those allegations. 66. Lorillard is without information or knowledge sufficient to form a belief as to the truth of the allegations contained in paragraph 66 and, on that basis, denies those allegations. 67. Lorillard is without information or knowledge sufficient to form a belief as to the truth of the allegations contained in paragraph 67 and, on that basis, denies those allegations. 68. Lorillard denies the existence of, and/or its participation in, any alleged "conspiracy." Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations contained in paragraph 68 and, on that basis, denies those allegations. 69. Lorillard is without information or knowledge sufficient to form a belief as to the truth of the auegations contained in paragraph 69 and, on that basis, denies those allegations. 70. Lorillard is without information or knowledge sufficient to form a belief as to the truth of the allegations contained in paragraph 70 and, on that basis, denies those allegations. 71. Lorillard is without information or knowledge sufficient to form a belief as to the truth of the allegations contained in paragraph 71 and, on that basis, denies those allegations. 72. Lorillard is without information or knowledge sufficient to form a belief as to the truth of the allegations contained in paragraph 72 and, on that basis, denies those allegations. 73. Lorillard is without information or knowledge sufficient to form a belief as to the truth of the allegations contained in paragraph 73 and, on that basis, denies those allegations. 74. 74. Lorillard denies each and every allegation contained in paragraph 75. Lorillard is without information or knowledge sufficient to form a belief as to the truth of the allegations contained in paragraph 75 and, on that basis, denies those allegations. 76. Lorillard denies each and every allegation contained in paragraph 76. 77. Lorillard denies each and every allegation contained in paragraph cxi ~ 77. G! U-1 78. Lorillard denies each and every allegation contained in paragraph 78. U! CO N -8
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126. To the extent paragraph 126, including its subparts, refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard admits that paragraph 126, including its subparts, purports to quote from and/or to characterize numerous purported press releases, reports, and other purported TIRC and TI documents. Lorillard states that the complete and precise language of the alleged communications can be ascertained from the communications themselves. To the extent paragraph 126, including its subparts, mischaracterizes, misquotes, or takes the language of the alleged communications out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged communications. Lorillard denies each and every remaining allegation contained in paragraph 126, including its subparts. 127. To the extent paragraph 127 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent the allegations contained in paragraph 127 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies eac.n of those c;,agations. Lorillard denies each and every remaining allegation contained in paragraph 127. 128. To the extent paragraph 128, including its subparts, refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard admits that paragraph 128, including its subparts, purports to quote from andlor to characterize numerous purported press releases, reports, and other purported documents. Lorillard states that the complete and precise language of the alleged communications can be ascertained from the communications themselves. To the extent paragraph 128, including its subparts, mischaracterizes, misquotes, or takes the language of the alleged communications out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged communications. Lorillard denies each and every remaining allegation contained in paragraph 128, including its subparts. 129. Lorillard admits that paragraph 129 purports to quote from andlor to characterize purported congressional testimony of Bowman Gray. Lorillard states that the complete and precise language of the purported testimony can be ascertained from the official transcript of the testimony itself. To the extent paragraph 129 mischaracterizes, misquotes, or takes the language of the purported testimony out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the purported testimony. Lorillard denies each and every remaining allegation contained in paragraph 129. 130. Lorillard admits that paragraph 130 purports to quote from and/or to characterize a purported RJR announcement. Lorillard states that the complete and precise language of the purported announcement can be ascertained from the announcement itself. To the extent paragraph 130 mischaracterizes, misquotes, or takes the language of the purported RJR announcement out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the purported RJR announcement. Lorillard is without sufficient -15-
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Lorillard, Lorillard denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 42. 43. Lorillard admits, upon information and belief, that the Tobacco Institute, Inc. is a not-for-profit corporation with a place of business in Washington, D.C. Lorillard also states that the Tobacco Institute, like other trade associations, has engaged in activities protected by the First Amendment to the United States Constitution. Lorillard specifically denies the existence of, and/or its participation in, any alleged "conspiracy." To the extent that the remaining allegations contained in paragraph 43 refer to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent that the remaining allegations in paragraph 43 refer to knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 43. 44. Lorillard admits that paragraph 44 purports to define the Defendants collectively as the "Tobacco Industry," "Tobacco Companies" or "Tobacco Cartel." Lorillard denies Plaintiffs innuendo or implication regarding those terms. Lorillard denies each and every remaining allegation contained in paragraph 44. 45. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations in paragraph 45 and, on that basis, denies those allegations. 46. Lorillard is without information or knowledge sufficient to form a belief as to the truth of the allegations contained in paragraph 46 and, on that basis, denies those allegations. 47. Lorillard is without information or knowledge sufficient to form a belief as to the truth of the allegations contained in paragraph 47 and, on that basis, denies those allegations. 48. Lorillard is without information or knowledge sufficient to form a belief as to the truth of the allegations contained in paragraph 48 and, on that basis, denies those allegations. 49. Lorillard is without information or knowledge sufficient to form a belief as to the truth of the allegations contained in paragraph 49 and, on that basis, denies those allegations. 50. Lorillard is without information or knowledge sufficient to form a belief as to the truth of the allegations contained in paragraph 50 and, on that basis, denies those allegations. 51. Lorillard is without information or knowledge sufficient to form a belief as to the truth of the allegations contained in paragraph 51 and, on that basis, denies those allegations. 52. Lorillard is without information or knowledge sufficient to form a belief as to the truth of the allegations contained in paragraph 52 and, on that basis, denies those allegations. 6
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0 0 528. Many of those persons who have become addicted to defendants' tobacco products and have suffered physical harm either have received or ~tiill receive Medicaid benefrts from the State of Vermont, for which the State seeks reimbursemcnt 529. Because the taxpayers of the State of Ve;mont should not bear :he coats of treating tobacco-related illnesses when the tobacco companies were negligenl, the Attorney General brings this claim to recoup those funds and protect the pubiic jtsc. Count Four: Statutory Cause of Action Based on 33 '+'.S..a. § 1S`11(c) for Defective Product Unreasonably Dangerous Wben Distributed to Adolescents 530. The State of Vermont realieges and incorporates Psragr3phs I througn d0= e_: ii fully set forth herein. 531. Residents of the State of Vermont have, for man~- vza:s, as.:d and ccr.surned, an<i ccntinue to use and consune_ defendants' tobacco products in rhe namier ir wi i.:h t,iev intended to be :sed. ~Fitnout sny substantive .3her_ition or chanve in tL•c prc&_'cts. S3?. Defendants had ui:'i continue to have the ability to desian, tt;t. n.tanufacu:; -. :Yarxet, distribute and/or sell non- or less- addictive, carcinocenic and pathologic tobacco products. ~>;. Defendant tobacco companies, individually and in conspiracy wlth each other, distributed and marketed tobacco products through third persons in the State of Vermont in such a manner that they knew or should have known that their tobacco products would be sold to and used by large numbers of adolescents in Vermont, who defendant tobacco comuanies knew or had reason to know would likely use the products in a mauner involving unreasonable tisr: of physical hann to themselves inciuding, but not limited to, the health risks of smoking and the risk ot addtctton. 534. As also alleged above, defendant tobacco companies encoutaged retailers to sell defendants' tobacco products to adolescents. Such sales of tobacco products to ehiidren under the 2ge of 18 vears was and is in vioiation of state law. -9d- ~_~~. ~,~~ti
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53. Lorillard is without information or knowledge sufficient to form a belief as to the truth of the allegations contained in paragraph 53 and, on that basis, denies those allegations. 54. Lorillard is without information or knowledge sufficient to form a belief as to the truth of the allegations contained in paragraph 54 and, on that basis, denies those allegations. 55. Lorillard is without information or knowledge sufficient to form a belief as to the truth of the allegations contained in paragraph 55 and, on that basis, denies those allegations. 56. Lorillard is without information or knowledge sufficient to form a belief as to the truth of the allegations contained in paragraph 56 and, on that basis, denies those allegations. 57. Lorillard is without information or knowledge sufficient to form a belief as to the truth of the allegations contained in paragraph 57 and, on that basis, denies those allegations. 58. Lorillard is without information or knowledge sufficient to form a belief as to the truth of the allegations contained in paragraph 58, including its subparts, and, on that basis, denies those allegations. 59. Lorillard is without information or knowledge sufficient to form a belief as to the truth of the allegations contained in paragraph 59, including its subparts, and, on that basis, denies those allegations. 60. Lorillard denies each and every allegation contained in the first and last sentences of paragraph 60. Lorillard is without information or knowledge sufficient to form a belief as to the truth of the remaining allegations contained in paragraph 60 and, on that basis, denies those allegations. 61. Lorillard denies the existence of, and/or its participation in, any alleged "conspiracy." Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations contained in paragraph 61, including its subparts, and, on that basis, denies those allegations. 62. Lorillard is without information or knowledge sufficient to form a belief as to the truth of the allegations contained in paragraph 62 and, on that basis, denies those allegations. 63. Lorillard is without information or knowledge sufficient to form a belief as to the truth of the allegations contained in paragraph 63 and, on that basis, denies those allegations. 64. Lorillard is without information or knowledge sufficient to form a belief as to the truth of the allegations contained in paragraph 64 and, on that basis, denies those allegations. CO rn U,1 ~ Cri w cv ~ 7
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implication regarding the content or meaning of the study. Lorillard denies each and every remaining allegation contained in paragraph 95. 96. 97. 98. 96. Lorillard denies each and every allegation contained in paragraph 97. Lorillard denies each and every allegation contained in paragraph 98. Lorillard denies each and every allegation contained in paragraph 99. Lorillard admits that paragraph 99 purports to quote from and/or to characterize a purported B&W memorandum authored by Timothy V. Hartnett. Lorillard states that the complete and precise language of the alleged memorandum can be ascertained from the memorandum itself. To the extent paragraph 99 mischaracterizes, misquotes, or takes the language of the alleged memorandum out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged memorandum. Lorillard denies each and every remaining allegation contained in paragraph 99. 100. Lorillard admits that paragraph 100 purports to quote from and/or to characterize a purported B&W memorandum authored by Timothy V. Hartnett. Lorillard states that the complete and precise language of the alleged memorandum can be ascertained from the memorandum itself. To the extent paragraph 100 mischaracterizes, misquotes, or takes the language of the alleged memorandum out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged memorandum. Lorillard denies each and every remaining allegation contained in paragraph 100. 101. Lorillard admits that paragraph 101 purports to quote from and/or to characterize a purported B&W memorandum authored by Timothy V. Hartnett. Lorillard states that the complete and precise language of the alleged memorandum can be ascertained from the memorandum itself. To the extent paragraph 101 mischaracterizes, misquotes, or takes the language of the alleged memorandum out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged memorandum. Lorillard denies each and every remaining allegation contained in paragraph 101. 102. Lorillard admits that paragraph 102 purports to quote from and/or to characterize a purported B&W memorandum authored by Timothy V. Hartnett. Lorillard states that the complete and precise language of the alleged memorandum can be ascertained from the memorandum itself. To the extent paragraph 102 mischaracterizes, misquotes, or takes the language of the alleged memorandum out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged memorandum. Lorillard denies each and every remaining allegation contained in paragraph 102. 07 103. Lorillard admits that representatives of Lorillard and of certain other tobacco companies met at the Plaza Hotel in December of 1953 and that Hill & o\ ~.~ Knowlton was represented at the meeting. Lorillard denies the existence of, and/or its Cr7 w cn cr, -11-
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paragraph 138 mischaracterizes, misquotes, or takes the language of the purported quotation out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the purported quotation. Lorillard denies each and every remaining allegation contained in paragraph 138. 139. Lorillard denies each and every allegation contained in paragraph 139. 140. Lorillard admits that paragraph 140 purports to quote from and/or to characterize an April 1962 Hill & Knowlton memorandum. Lorillard states that the complete and precise language of the alleged document can be ascertained from the memorandum itself. To the extent paragraph 140 mischaracterizes, misquotes, or takes the language of the alleged memorandum out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged memorandum. Lorillard denies each and every remaining allegation contained in paragraph 140. 141. Lorillard admits that paragraph 141 purports to quote from and/or to characterize a purported internal document from an unidentified Tobacco Institute official. Lorillard states that the complete and precise language of the alleged document can be ascertained from the document itself. To the extent paragraph 141 mischaracterizes, misquotes, or takes the language of the alleged document out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged document. Lorillard denies each and every remaining allegation contained in paragraph 141. 142. Lorillard admits that paragraph 142 purports to quote from and/or to characterize a purported 1974 report to the CEO of Lorillard from a research executive. Lorillard states that the complete and precise language of the alleged document can be ascertained from the document itself. To the extent paragraph 142 mischaracterizes, misquotes, or takes the language of the alleged report out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged report. Lorillard denies each and every remaining allegation contained in paragraph 142. 143. Lorillard admits that paragraph 143 purports to quote from and/or to characterize an internal Philip Morris memo. Lorillard states that the complete and precise language of the alleged memo can be ascertained from the memo itself. To the extent paragraph 143 mischaracterizes, misquotes, or takes the language of the alleged memo out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged memo. Lorillard denies each and every remaining allegation contained in paragraph 143. 144. Lorillard admits that paragraph 144 purports to quote from and/or to characterize a purported 1977 letter to Addison Yeaman of the CTR. Lorillard states that the complete and precise language of the alleged letter can be ascertained from the letter itself. To the extent paragraph 144 mischaracterizes, misquotes, or takes the language of the alleged letter out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the - 17-
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participation in, any alleged "conspiracy." Lorillard denies each and every remaining allegation contained in paragraph 103. 104. 104. Lorillard denies each and every allegation contained in paragraph 105. To the extent paragraph 105 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard admits that paragraph 105 purports to quote from and/or to characterize a purported Hill & Knowlton memorandum. Lorillard states that the complete and precise language of the alleged memorandum can be ascertained from the memorandum itself. To the extent paragraph 105 mischaracterizes, misquotes, or takes the language of the alleged memorandum out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged memorandum. Lorillard denies each and every remaining allegation contained in paragraph 105. 106. To the extent paragraph 106 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard admits that paragraph 106 purports to quote from and/or to characterize a purported Hill & Knowlton memorandum. Lorillard states that the complete and precise language of the alleged memorandum can be ascertained from the memorandum itself. To the extent paragraph 106 mischaracterizes, misquotes, or takes the language of the alleged memorandum out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged memorandum. Lorillard denies each and every remaining allegation contained in paragraph 106. 107. 108. 107. Lorillard denies each and every allegation contained in paragraph 108. Lorillard denies each and every allegation contained in paragraph 109. To the extent paragraph 109 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard admits that paragraph 109 purports to quote from and/or to characterize an unidentified document. Lorillard states that the complete and precise language of the alleged document can be ascertained from the document itself. To the extent paragraph 109 mischaracterizes, misquotes, or takes the language of the alleged document out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged document. Lorillard denies each and every remaining allegation contained in paragraph 109. 110. 110. Lorillard denies each and every allegation contained in paragraph - 12-
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alleged letter. Lorillard denies each and every remaining allegation contained in paragraph 144. 145. Lorillard admits that paragraph 145 purports to quote from and/or to characterize a purported 1978 memo addressed to the CTR file from a Philip Morris official. Lorillard states that the complete and precise language of the alleged memo can be ascertained from the memo itself. To the extent paragraph 145 mischaracterizes, misquotes, or takes the language of the alleged memo out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged memo. Lorillard denies each and every remaining allegation contained in paragraph 145. 146. Lorillard admits that paragraph 146 purports to quote from and/or to characterize a purported T.S. Osdene memo. Lorillard states that the complete and precise language of the alleged memo can be ascertained from the memo itself. To the extent paragraph 146 mischaracterizes, misquotes, or takes the language of the alleged memo out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged memo. Lorillard denies each and every remaining allegation contained in paragraph 146. 147. Lorillard admits that paragraph 147 purports to quote from and/or to characterize a purported T.S. Osdene memo. Lorillard states that the complete and precise language of the alleged memo can be ascertained from the memo itself. To the extent paragraph 147 mischaracterizes, misquotes, or takes the language of the alleged memo out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged memo. Lorillard denies each and every remaining allegation contained in paragraph 147. 148. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 148 and, on that basis, denies those allegations. 149. Lorillard admits that paragraph 149 purports to quote from and/or to characterize a purported June 25, 1981, presentation by the TI staff to the TI Executive Committee. Lorillard states that the complete and precise language of the alleged presentation can be ascertained from the presentation itself. To the extent paragraph 149 mischaracterizes, misquotes, or takes the language of the alleged presentation out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged presentation. Lorillard denies each and every allegation contained in the first sentence of paragraph 149. Lorillard denies each and every remaining allegation contained in paragraph 149. 150. 150. Lorillard denies each and every allegation contained in paragraph 151. Lorillard admits that paragraph 151 purports to quote from and/or to characterize a purported TI publication and press release. Lorillard states that the complete and precise language of the alleged documents can be ascertained from the documents themselves. To the extent paragraph 151 mischaracterizes, misquotes, or takes the language of the alleged documents out of context, Lorillard denies the - 18-
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192. Lorillard denies each and every allegation contained in paragraph 192. 193. Lorillard denies each and every allegation contained in paragraph 193. 194. Lorillard admits that paragraph 194 purports to quote from and/or to characterize a purported statement from Mr. Pepples. Loriflard states that the complete and precise language of the alleged statement can be ascertained from the statement itself. To the extent paragraph 194 mischaracterizes, misquotes, or takes the language of the alleged statement out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged statement. To the extent the remaining allegations in paragraph 194 refer to the knowledge, conduct, or actions of the persons or entities other than Lorillard, Lorillard is without knowledge or information sufficient to form a belief as to the truth of the allegations set forth therein and, on that basis, denies those allegations. To the extent the remaining allegations in paragraph 194 refer to knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 194. 195. 195. Lorillard denies each and every allegation contained in paragraph 196. Lorillard states that Plaintiff has failed to define the term "safer" cigarette. Lorillard further states that no consensus exists with respect to what constitutes a"safer" cigarette. To the extent the remaining allegations in paragraph 196 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent the remaining allegations in paragraph 196 refer to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 196. 197. Lorillard admits that paragraph 197 purports to quote from and/or to characterize a purported statement from a 1968 internal Philip Morris draft memo. Lorillard states that the complete and precise language of the alleged memorandum can be ascertained from the memorandum itself. To the extent paragraph 197 mischaracterizes, misquotes, or takes the language of the alleged memorandum out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged memorandum. To the extent the remaining allegations contained in paragraph 197 refer to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent the remaining allegations in paragraph 197 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 197. 198. 198. Lorillard denies each and every allegation contained in paragraph -25-
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knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 130 and, on that basis, denies those allegations. 131. Lorillard admits that paragraph 131 purports to quote from and/or to characterize a purported Lorillard press release. Lorillard states that the complete and precise language of the purported announcement can be ascertained from the release itself. To the extent paragraph 131 mischaracterizes, misquotes, or takes the language of the purported Lorillard release out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the purported Lorillard release. Lorillard denies each and every remaining allegation contained in paragraph 131. 132. Lorillard admits that paragraph 132 purports to quote from and/or to characterize a purported Lorillard press release. Lorillard states that the complete and precise language of the purported release can be ascertained from the release itself. To the extent paragraph 132 mischaracterizes, misquotes, or takes the language of the purported Lorillard release out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the purported Lorillard release. Lorillard denies each and every remaining allegation contained in paragraph 132. 133. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 133 and, on that basis, denies each and every allegation set forth therein. 134. Lorillard admits that paragraph 134 purports to quote from and/or to characterize a purported RJR publication. Lorillard states that the complete and precise language of the purported publication can be ascertained from the publication itself. To the extent paragraph 134 mischaracterizes, misquotes, or takes the language of the purported publication out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the purported publication. Lorillard denies each and every remaining allegation contained in paragraph 134. 135. Lorillard admits that paragraph 135 purports to quote from purported testimony by Horace Kornegay. Lorillard states that the complete and precise language of the purported testimony can be ascertained from the official transcript of the testimony itself. To the extent paragraph 135 mischaracterizes, misquotes, or takes the language of the purported testimony out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the purported testimony. Lorillard denies each and every remaining allegation contained in paragraph 135. 136. 137. 136. Lorillard denies each and every allegation contained in paragraph 137. Lorillard denies each and every allegation contained in paragraph 138. Lorillard admits that paragraph 138 purports to quote from an unknown source. Lorillard states that the complete and precise language of the purported quotation can be ascertained from the "the document" itself. To the extent -16-
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information to form a belief as to the truth of the remaining allegations in paragraph 205, including its subparts, and, on that basis, denies those allegations. 206. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 206 and, on that basis, denies each and every allegation set forth therein. 207. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 207 and, on that basis, denies each and every allegation set forth therein. 208. Lorillard admits that paragraph 208 purports to quote from and/or to characterize alleged statements and testimony from Jeffrey Wigand. Lorillard states that the complete and precise language of the alleged statements and testimony can be ascertained from the statements and official transcript of the testimony themselves. To the extent paragraph 208 mischaracterizes, misquotes, or takes the language of the alleged statements and testimony out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged statements and testimony. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 208 and, on that basis, denies those allegations. 209. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 209 and, on that basis, denies each and every allegation set forth therein. 210. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 210 and, on that basis, denies each and every allegation set forth therein. 211. Lorillard admits that paragraph 211 purports to quote from and/or to characterize an unidentified document. Lorillard states that the complete and precise language of the alleged document can be ascertained from the document itself. To the extent paragraph 211 mischaracterizes, misquotes, or takes the language of the alleged document out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged document. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 211 and, on that basis, denies those allegations. 212. To the extent paragraph 212 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent paragraph 212 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 212. 213. Lorillard admits that paragraph 213 purports to quote from and/or to characterize Brown & Williamson internal documents. Lorillard states that the complete and precise language of the alleged documents can be ascertained from the documents themselves. To the extent paragraph 213 mischaracterizes, misquotes, or -27-
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takes the language of the alleged statements out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged statements. Lorillard denies each and every remaining allegation contained in paragraph 157. 158. Lorillard admits that paragraph 158 purports to quote from a purported internal CTR document. Lorillard states that the complete and precise language of the alleged document can be ascertained from the document itself. To the extent paragraph 158 mischaracterizes, misquotes, or takes the language of the alleged document out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged document. Lorillard denies each and every remaining allegation contained in paragraph 158. 159. Lorillard specifically denies the existence of, and/or any participation in, any alleged "conspiracy." Lorillard admits that paragraph 159, including its subparts, purports to quote from and/or to characterize several purported internal industry documents. Lorillard states that the complete and precise language of the alleged documents can be ascertained from the documents themselves. To the extent paragraph 159, including its subparts, mischaracterizes, misquotes, or takes the language of the alleged documents out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged documents. Lorillard denies each and every remaining allegation contained in paragraph 159, including its subparts. 160. To the extent the allegations in paragraph 160 refer to the knowledge, conduct or actions of Lorillard, Lorillard admits that it has stated its belief that cigarette smoking has been identified as a risk factor for certain chronic diseases. Lorillard admits that it has stated it does not believe that cigarette smoking has been scientifically proven to be the cause of any such disease. Lorillard admits that it has stated its belief that nicotine in cigarette smoke is not "addictive" under a traditional pharmacological definition of that term. To the extent the allegations in paragraph 160 refer to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 160. 161. Lorillard admits that paragraph 161 purports to quote from and/or to characterize purported testimony by an industry representative. Lorillard states that the complete and precise language of the alleged testimony can be ascertained from the official transcript of the testimony itself. To the extent paragraph 161 mischaracterizes, misquotes, or takes the language of the alleged testimony out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged testimony. Lorillard denies each and every remaining allegation contained in paragraph 161. 162. Lorillard denies each and every allegation contained in paragraph 162. CO 0~1 163. Lorillard admits that 1964 was the year the first Surgeon General's 0 1 report on smoking and health issues was released. Lorillard denies each and every remaining allegation contained in paragraph 163. -20-
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extent the document referred to in paragraph 176 is protected under the attorney-client privilege, the work product doctrine, and/or the joint defense privilege, Lorillard states that any reference to the document is improper and should be stricken from the record, and the document must be returned. To the extent that paragraph 176 mischaracterizes, misquotes, or takes the language of the document out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged document. Lorillard is without sufficient knowledge or information to identify the document referred to in paragraph 176 and, on that basis, denies each and every remaining allegation. 177. Lorillard admits that paragraph 177 purports to quote from and/or to characterize a purported 1972 letter by William Shinn. Lorillard states that the letter referred to in paragraph 177 is protected under the attorney-client privilege, the work product doctrine, and/or the joint defense privilege. Any reference to the letter is improper and should be stricken from the record, and the letter must be returned. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the letter. To the extent the remaining allegations in paragraph 177 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent the remaininc allegations in paragraph 177 refer to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 177. 178. 178. Lorillard denies each and every allegation contained in paragraph 179. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations in paragraph 179 and, on that basis, denies those allegations. 180. Lorillard admits that paragraph 180 purports to quote from a 1985 J. Kendrick Wells' memorandum. Lorillard states that the complete and precise language of the alleged memorandum can be ascertained from the memorandum itself. To the extent paragraph 180 mischaracterizes, misquotes, or takes the language of the alleged memorandum out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged memorandum. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 180 and, on that basis, denies those allegations. 181. Lorillard admits that paragraph 181 purports to quote from a 1985 J. Kendrick Wells' memorandum. Lorillard states that the complete and precise language of the alleged memorandum can be ascertained from the memorandum itself. To the extent paragraph 181 mischaracterizes, misquotes, or takes the language of the alleged memorandum out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged memorandum. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 181 and, on that basis, denies those allegations. 182. To the extent the first sentence of paragraph 182 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. -23-
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199. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 199 and, on that basis, denies each and every allegation set forth therein. 200. To the extent paragraph 200 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent paragraph 200 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 200. 201. Lorillard admits that paragraph 201 purports to quote from and/or to characterize an unidentified Liggett document. Lorillard states that the complete and precise language of the alleged document can be ascertained from the document itself. To the extent paragraph 201 mischaracterizes, misquotes, or takes the language of the alleged document out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged document. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 201 and, on that basis, denies those allegations. 202. Lorillard admits that paragraph 202 purports to quote from and/or to characterize an unidentified document. Lorillard states that the complete and precise language of the alleged document can be ascertained from the document itself. To the extent paragraph 202 mischaracterizes, misquotes, or takes the language of the alleged document out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged document. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 202 and, on that basis, denies those allegations. 203. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 203 and, on that basis, denies each and every allegation set forth therein. 204. Lorillard admits that paragraph 204 purports to quote from and/or to characterize an unidentified Liggett document. Lorillard states that the complete and precise language of the alleged document can be ascertained from the document itself. To the extent paragraph 204 mischaracterizes, misquotes, or takes the language of the alleged document out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged document. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 204 and, on that basis, denies those allegations. 205. Lorillard admits that paragraph 205 purports to quote from and/or to characterize a statement allegedly made by James Mold. Lorillard states that the complete and precise language of the alleged statement can be ascertained from the statement itself. To the extent paragraph 205 mischaracterizes, misquotes, or takes the language of the alleged statement out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged statement. Lorillard is without sufficient knowledge or -26-
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To the extent the remaining allegations in paragraph 220 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent the remaining allegations in paragraph 220 refer to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 220. 221. Lorillard admits that paragraph 221 purports to quote from and/or to characterize a letter purportedly authored by David Hardy to DeBaun Bryant. Lorillard states that the letter referred to in paragraph 221 is protected under the attorney-client privilege, the work product doctrine, and/or the joint defense privilege. Any reference to the letter is improper and should be stricken from the record, and the letter must be returned. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the letter. To the extent the remaining allegations in paragraph 221 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent the remaining allegations in paragraph 221 refer to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 221. 222. Lorillard admits that paragraph 222 purports to quote from and/or to characterize a letter purportedly authored by David Hardy. Lorillard states that the letter referred to in paragraph 222 is protected under the attorney-client privilege, the work product doctrine, and/or the joint defense privilege. Any reference to the letter is improper and should be stricken from the record, and the letter must be returned. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the letter. To the extent the remaining allegations in paragraph 222 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent the remaining allegations in paragraph 222 refer to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 222. 223. Lorillard denies each and every allegation contained in the first and second sentences of paragraph 223. Lorillard admits that paragraph 223 purports to quote from and/or to characterize alleged testimony of an unidentified industry representative. Lorillard states that the complete and precise language of the alleged testimony can be ascertained from the official transcript of the testimony itself. To the extent paragraph 223 mischaracterizes, misquotes, or takes the language of the alleged testimony out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged testimony. To the extent the remaining allegations in paragraph 223 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent the remaining allegations in paragraph 223 refer to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 223. -29-
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164. Lorillard denies each and every allegation contained in paragraph 164. 165. Lorillard denies each and every allegation contained in paragraph 165. 166. Lorillard admits that paragraph 166 purports to quote from and/or to characterize notes of a CTR meeting purportedly held in 1981 and a purported 1981 memorandum. Lorillard states that the complete and precise language of the alleged notes and/or memorandum can be ascertained from the documents themselves. To the extent paragraph 166 mischaracterizes, misquotes, or takes the language of the alleged notes and/or memorandum out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged notes and/or memorandum. Lorillard denies each and every remaining allegation contained in paragraph 166. 167. Lorillard admits that paragraph 167 purports to quote from and/or to characterize notes of a CTR meeting purportedly held in 1981 and a purported 1981 memorandum. Lorillard states that the complete and precise language of the alleged notes and/or memorandum can be ascertained from the documents themselves. To the extent paragraph 167 mischaracterizes, misquotes, or takes the language of the alleged notes and/or memorandum out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged notes and/or memorandum. To the extent paragraph 167 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each and every remaining allegation set forth therein. Lorillard denies each and every remaining allegation contained in paragraph 167. 168. 168. Lorillard denies each and every allegation contained in paragraph 169. Lbrillard admits that paragraph 169 purports to quote from and/or to characterize a purported 1984 B.A.T. document. Lorillard states that the complete and precise language of the alleged document can be ascertained from the document itself. To the extent paragraph 169 mischaracterizes, misquotes, or takes the language of the alleged document out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged document. To the extent the remaining allegations in paragraph 169 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent the remaining allegations in paragraph 169 refer to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 169. 170. Lorillard admits that paragraph 170 purports to quote from and/or to characterize a purported B.A.T. document. Lorillard states that the complete and precise language of the alleged document can be ascertained from the document itself. To the extent paragraph 170 mischaracterizes, misquotes, or takes the language of the alleged document out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the -21-
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alleged document. To the extent the remaining allegations in paragraph 170 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies each and every allegation set forth therein. To the extent the remaining allegations in paragraph 170 refer to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. 171. Lorillard admits that it has been represented by the law firm of Shook, Hardy & Bacon. Lorillard denies each and every remaining allegation contained in paragraph 171. 172. To the extent paragraph 172 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent paragraph 172 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 172. 173. Lorillard admits that it has been represented by the law firm of Shook, Hardy & Bacon. Lorillard denies each and every remaining allegation contained in paragraph 173. 174. Lorillard admits that paragraph 174 purports to characterize a purported 1976 letter from Donald K. Hoel. Lorillard states that the letter referred to in paragraph 174 is protected under the attorney-client privilege, the work product doctrine, and/or the joint defense privilege. Any reference to the letter is improper and should be stricken from the record, and the letter must be returned. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the letter. To the extent the remaining allegations in paragraph 174 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent the remaining allegations in paragraph 174 refer to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 174. 175. Lorillard admits that paragraph 175 purports to quote from and/or to characterize a purported May 19, 1981, letter from Ernest Pepples to Patrick Sirridge and, a document purportedly authored by Shook, Hardy & Bacon. To the extent the letter and/or the document referred to in paragraph 175 are protected under the attorney-client privilege, the work product doctrine, and/or the joint defense privilege, Lorillard states that any reference to the letter and/or the document is improper and should be stricken from the record, and the letter and/or document must be returned. To the extent that paragraph 175 mischaracterizes, misquotes, or takes the language of the letter and/or document out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged letter and/or document. Lorillard is without sufficient knowledge or information to identify the document referred to in paragraph 175 and, on that basis, denies each and every remaining allegation. 176. Lorillard admits that paragraph 176 purports to quote from and/or to characterize a purported 1984 request from Ernest Pepples to Patrick Sirridge. To the -22-
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allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged documents. Lorillard denies each and every remaining allegation contained in paragraph 151. 152. Lorillard admits that paragraph 152 purports to quote from and/or to characterize a purported 1993 statement from a CTR employee. Lorillard states that the complete and precise language of the alleged statement can be ascertained from the statement itself. To the extent paragraph 152 mischaracterizes, misquotes, or takes the language of the alleged statement out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged statement. Lorillard denies each and every remaining allegation contained in paragraph 152. 153. To the extent paragraph 153 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies the allegations set forth therein. Lorillard admits that paragraph 153 purports to quote from and/or to characterize purported notes from an industry official. Lorillard states that the complete and precise language of the alleged notes can be ascertained from the notes themselves. To the extent paragraph 153 mischaracterizes, misquotes, or takes the language of the alleged notes out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged notes. Lorillard denies each and every remaining allegation contained in paragraph 153. 154. Lorillard admits that paragraph 154, including its subparts, purports to quote from and/or to characterize CTR's Annual Reports from 1985 to 1992, and/or from 1994 congressional testimony from James Glenn. Lorillard states that the complete and precise language of the alleged testimony and/or the CTR Annual Reports can be ascertained from the official transcript of the testimony and the Annual Reports themselves. To the extent paragraph 154, including its subparts, mischaracterizes, misquotes, or takes the language of the alleged testimony and/or the CTR Annual Reports out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged testimony and/or the CTR Annual Reports. Lorillard denies each and every remaining allegation contained in paragraph 154. 155. 155. Lorillard denies each and every allegation contained in paragraph 156. Lorillard admits that Freddie Homburger conducted a study of cigarette smoke exposure on hamsters. Lorillard further admits that paragraph 156 purports to quote from and/or to characterize purported statements by Dr. Homburger. Lorillard states that the complete and precise language of the alleged statements can be ascertained from the statements themselves. To the extent paragraph 156 mischaracterizes, misquotes, or takes the language of the alleged statements out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged statements. Lorillard denies each and every remaining allegation contained in paragraph 156. 157. Lorillard admits that paragraph 157 purports to quote from and/or to characterize purported statements by Dr. Homburger. Lorillard states that the complete and precise language of the alleged statements can be ascertained from the statements themselves. To the extent paragraph 157 mischaracterizes, misquotes, or -19-
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To the extent the first sentence of paragraph 182 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paPagraph 182. 183. Lorillard denies each and every allegation contained in paragraph 183. 184. Lorillard denies each and every allegation contained in paragraph 184. 185. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 185 and, on that basis, denies those allegations. 186. Lorillard denies each and every allegation contained in paragraph 186. 187. Lorillard denies each and every allegation contained in paragraph 187. 188. Lorillard admits that paragraph 188 purports to quote from and/or to characterize a purported 1968 internal Philip Morris draft memo. Lorillard states that the complete and precise language of the alleged memo can be ascertained from the memo itself. To the extent paragraph 188 mischaracterizes, misquotes, or takes the language of the alleged memo out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged memo. Lorillard denies each and every remaining allegation contained in paragraph 188. 189. Lorillard admits that paragraph 189 purports to quote from and/or to characterize an October 1964 memorandum. Lorillard states that the complete and precise language of the alleged memorandum can be ascertained from the memorandum itself. To the extent paragraph 189 mischaracterizes, misquotes, or takes the language of the alleged memorandum out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged memorandum. Lorillard denies each and every remaining allegation contained in paragraph 189. 190. Lorillard admits that paragraph 190 purports to quote from and/or to characterize an internal Imperial Tobacco Company memorandum. Lorillard states that the complete and precise language of the alleged memorandum can be ascertained from the memorandum itself. To the extent paragraph 190 mischaracterizes, misquotes, or takes the language of the alleged memorandum out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged memorandum. Lorillard denies each and every remaining allegation contained in paragraph 190. 191. 191. Lorillard denies each and every allegation contained in paragraph -24-
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than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent the remaining allegations in paragraph 312 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 312. 313. To the extent paragraph 313 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent paragraph 313 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 313. 314. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 314 and, on that basis, denies each and every allegation set forth therein. 315. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 315 and, on that basis, denies each and every allegation set forth therein. 316. Lorillard admits that tobacco plants vary in nicotine content and pH measurements. Lorillard denies each and every remaining allegation contained in paragraph 316. 317. 317. Lorillard denies each and every allegation contained in paragraph 318. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 318 and, on that basis, denies each and every allegation set forth therein. 319. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 319 and, on that basis, denies each and every allegation set forth therein. 320. Lorillard admits that paragraph 320 purports to quote from and/or to characterize certain FDA statements. Lorillard states that the complete and precise language of the alleged statements can be ascertained from the statements themselves. To the extent paragraph 320 mischaracterizes, misquotes, or takes the language of the statements out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the basis for the statements. Lorillard denies each and every remaining allegation contained in paragraph 320. 321. To the extent paragraph 321 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent paragraph 321 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of -43-
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extent paragraph 272 mischaracterizes, misquotes, or takes the language of the alleged study out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged study. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 272 and, on that basis, denies those allegations. 273. Lorillard admits that paragraph 273 purports to quote from and/or to characterize a 1961 presentation by Dr. Helmut Wakeham. Lorillard states that the complete and precise language of the alleged presentation can be ascertained from the transcript of the presentation itself. To the extent paragraph 273 mischaracterizes, misquotes, or takes the language of the alleged presentation out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged presentation. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 273 and, on that basis, denies those allegations. 274. Lorillard admits that paragraph 274 purports to quote from and/or to characterize a purported statement by Dr. Helmut Wakeham and a purported 1972 memorandum by Dr. William Dunn, Jr. Lorillard states that the complete and precise language of the alleged statement and/or memorandum can be ascertained from the statement and memorandum themselves. To the extent paragraph 274 mischaracterizes, misquotes, or takes the language of the alleged statement and/or memorandum out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged statement and/or memorandum. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 274 and, on that basis, denies those allegations. 275. Lorillard admits that paragraph 275, including its subparts, purports to quote from and/or to characterize a purported 1972 memorandum by Dr. Dunn. Lorillard states that the complete and precise language of the alleged memorandum can be ascertained from the memorandum itself. To the extent paragraph 275, including its subparts, mischaracterizes, misquotes, or takes the language of the alleged memorandum out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged memorandum. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 275, including its subparts, and, on that basis, denies those allegations. 276. Lorillard admits that paragraph 276 purports to quote from and/or to characterize a 1971 internal report from Philip Morris. Lorillard states that the complete and precise language of the alleged report can be ascertained from the report itself. To the extent paragraph 276 mischaracterizes, misquotes, or takes the language of the alleged report out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged report. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 276 and, on that basis, denies those allegations. 277. Lorillard admits that paragraph 277 purports to quote from and/or to characterize a purported research paper funded by CTR. Lorillard states that the complete and precise language of the alleged research paper can be ascertained from the research paper itself. To the extent paragraph 277 mischaracterizes, misquotes, or -37-
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282. To the extent paragraph 282 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent paragraph 282 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 282. 283. To the extent paragraph 283 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent paragraph 283 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 283. 284. Lorillard does not believe that nicotine in cigarette smoke is addictive under a traditional pharmacological definition of that term. Lorillard denies each and every remaining a;I -yation contained in paragraph 284. 285. Lorillard does not believe that nicotine in cigarette smoke is addictive under a traditional pharmacological definition of that term. Lorillard denies each and every remaining allegation contained in paragraph 285. 286. 286. Lorillard denies each and every allegation contained in paragraph 287. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 287 and, on that basis, denies the allegations. 288. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 288 and, on that basis, denies the allegations. 289. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 289 and, on that basis, denies the allegations. 290. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 290 and, on that basis, denies the allegations. 291. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations in paragraph 291 and, on that basis, denies those allegations. 292. Lorillard admits that paragraph 292 purports to quote from statements allegedly made by Victor DeNoble. Lorillard states that the complete and precise language of the alleged statements can be ascertained from the statements itself. To the extent paragraph 292 mischaracterizes, misquotes, or takes the language of the alleged statements out of context, Lorillard denies the allegations. Lorillard -39-
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those allegations. Lorillard denies each and every remaining allegation contained in paragraph 321. 322. To the extent paragraph 322 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent paragraph 322 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 322. 323. To the extent paragraph 323 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent paragraph 323 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 323. 324. To the extent paragraph 324 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent paragraph 324 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 324. 325. To the extent paragraph 325 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent paragraph 325 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 325. 326. Lorillard admits certain agronomic practices may affect the chemical and physical properties of tobacco plants. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations contained in paragraph 326 and, on that basis, denies those allegations. 327. Lorillard admits that paragraph 327 purports to quote from and/or to characterize certain FDA conclusions and the "facts" leading to such conclusions. Lorillard states that the complete and precise language of conclusions and the "facts" leading to such conclusions can be ascertained from the FDA conclusions and "facts" themselves. To the extent paragraph 327 mischaracterizes, misquotes, or takes the language of the FDA's conclusions and facts out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the basis for the FDA's conclusions and "facts." Although Lorillard is aware of the public record in connection with the FDA rule making, Lorillard is without sufficient knowledge or information to form a belief as to the FDA's basis for its conclusions and "facts" leading to such conclusions alleged in paragraph 327 and, on that basis, denies those allegations. -44-
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those allegations. Lorillard denies each and every remaining allegation contained in paragraph 256. 257. Lorillard admits that paragraph 257 purports to characterize purported statements by unidentified researchers and executives. Lorillard states that the complete and precise language of the alleged statements and/or research paper can be ascertained from the documents themselves. To the extent paragraph 257 mischaracterizes, misquotes, or takes the language of the alleged statements out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged statements. To the extent the remaining allegations in paragraph 257 refer to the knowledge, conduct, or actions of persons or entities other than Lorillard, Loriliard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies those allegations. To the extent the remaining allegations in paragraph 257 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 257. 258. Lorillard admits that paragraph 258 purports to characterize purported statements by unidentified authors of a research paper. Lorillard states that the complete and precise language of the alleged statements and/or research paper can be ascertained from the statements and research paper themselves. To the extent paragraph 258 mischaracterizes, misquotes, or takes the language of the alleged statements and/or research paper out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged statements and/or research paper. Lorillard denies each and every remaining allegation contained in paragraph 258. 259. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 259 and, on that basis, denies those allegations. 260. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 260 and, on that basis, denies those allegations. 261. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 261 and, on that basis, denies those allegations. 262. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 262 and, on that basis, denies those allegations. 263. Lorillard admits that paragraph 263 purports to quote from and/or to characterize a purported unspecified report. Lorillard states that the complete and precise language of the alleged report can be ascertained from the report itself. To the extent paragraph 263 mischaracterizes, misquotes, or takes the language of the alleged report out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged report. Lorillard denies each and every remaining allegation contained in paragraph 263. -35-
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264. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations in paragraph 264 and, on that basis, denies those allegations. 265. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations in paragraph 265 and, on that basis, denies those allegations. 266. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations in paragraph 266 and, on that basis, denies those allegations. 267. Lorillard admits that paragraph 267 purports to quote from and/or to characterize a 1984 BATCO presentation. Lorillard states that the complete and precise language of the alleged presentation can be ascertained from the presentation itself. To the extent paragraph 267 mischaracterizes, misquotes, or takes the language of the alleged presentation out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged presentation. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 267 and, on that basis, denies those allegations. 268. Lorillard admits that paragraph 268 purports to quote from and/or to characterize an unspecified presentation. Lorillard states that the complete and precise language of the alleged presentation can be ascertained from the presentation itself. To the extent paragraph 268 mischaracterizes, misquotes, or takes the language of the alleged presentation out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged presentation. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 268 and, on that basis, denies those allegations. 269. Lorillard admits that paragraph 269 purports to quote from and/or to characterize a statement allegedly made by an unidentified Brown & Williamson official. Lorillard states that the complete and precise language of the alleged statement can be ascertained from the transcript of the statement itself. To the extent paragraph 269 mischaracterizes, misquotes, or takes the language of the alleged statement out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged statement. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 269 and, on that basis, denies those allegations. 270. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations in paragraph 270 and, on that basis, denies those allegations. 271. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations in paragraph 271 and, on that basis, denies those allegations. 272. Lorillard admits that paragraph 272 purports to quote from and/or to characterize an unidentified Philip Morris study. Lorillard states that the complete and precise language of the alleged study can be ascertained from the study itself. To the -36-
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300. To the extent paragraph 300 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent paragraph 300 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 300. 301. Lorillard admits that paragraph 301 purports to characterize congressional testimony by David A. Kessler. Lorillard states that the complete and precise language of Dr. Kessler's testimony can be ascertained from the official transcript of the testimony itself. To the extent paragraph 301 mischaracterizes, misquotes, or takes the language of Dr. Kessler's testimony out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of Dr. Kessler's testimony. To the extent the remaining allegations in paragraph 301 refer to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent the remaining allegations in paragraph 301 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 301. 302. Lorillard admits that paragraph 302, including its subparts, purports to quote from congressional testimony by David A. Kessler. Lorillard states that the complete and precise language of Dr. Kessler's testimony can be ascertained from the official transcript of the testimony itself. To the extent paragraph 302, including its subparts, mischaracterizes, misquotes, or takes the language of Dr. Kessler's testimony out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of Dr. Kessler's testimony. Lorillard denies each and every remaining allegation contained in paragraph 302, including its subparts. 303. The term "nicotine potency" is so vague and ambiguous that Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth in paragraph 303 and, on that basis, denies each of those allegations. 304. The term "nicotine kick" is so vague and ambiguous that Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth in paragraph 304 and, on that basis, denies each of those allegations. 305. Lorillard admits that paragraph 305 purports to quote from and/or to characterize certain FDA "findings". Lorillard states that the complete and precise language of the FDA's "findings" can be ascertained from the FDA publications themselves. To the extent paragraph 305 mischaracterizes, misquotes, or takes the language of the FDA's "findings" out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the FDA's "findings." Lorillard denies each and every remaining allegation contained in paragraph 305. -41 -
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takes the language of the alleged research paper out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged research paper. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 277 and, on that basis, denies those allegations. 278. Lorillard admits that paragraph 278 purports to characterize unidentified industry documents and to quote from and/or to characterize a document purportedly prepared for B&W. Lorillard states that the complete and precise language of the alleged documents can be ascertained from the documents themselves. To the extent paragraph 278 mischaracterizes, misquotes, or takes the language of the alleged documents out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged documents. To the extent the remaining allegations in paragraph 278 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent the remaining allegations in paragraph 278 refer to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 278. 279. Lorillard admits that paragraph 279 purports to quote from and/or to characterize a purported BATCO document. Lorillard states that the complete and precise language of the alleged document can be ascertained from the document itself. To the extent paragraph 279 mischaracterizes, misquotes, or takes the language of the alleged document out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged document. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 279 and, on that basis, denies those allegations. 280. Lorillard admits that paragraph 280 purports to quote from and/or to characterize testimony from Joseph Cullman Ill. Lorillard states that the complete and precise language of Mr. Cullman's testimony can be ascertained from the official transcript of the testimony itself. To the extent paragraph 280 mischaracterizes, misquotes, or takes the language of Mr. Cullman's testimony out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of Mr. Cullman's testimony. Lorillard denies each and every remaining allegations contained in paragraph 280. 281. Lorillard admits that paragraph 281 purports to quote from and/or to characterize an unidentified Philip Morris memorandum. Lorillard states that the complete and precise language of the alleged memorandum can be ascertained from the memorandum itself. To the extent paragraph 281 mischaracterizes, misquotes, or takes the language of the alleged memorandum out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged memorandum. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 281 and, on that basis, denies those allegations.
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of the alleged trade literature out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged trade literature. To the extent the remaining allegations in paragraph 350 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent the remaining allegations in paragraph 350 refer to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 350. 351. Lorillard admits that paragraph 351 purports to quote from and/or to characterize an advertisement allegedly run by "The Tobacco Companies of the Contraf Group." Lorillard states that the complete and precise language of the alleged advertisement can be ascertained from the advertisement itself. To the extent paragraph 351 mischaracterizes, misquotes, or takes the language of the alleged advertisement out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged advertisement. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 351 and, on that basis, denies those allegations. 352. Lorillard admits that it has purchased and used specially denatured alcohol (SDA No. 4) and specially denatured rum (SDR No. 4) in its cigarette manufacturing process but denies that these substances are used to add nicotine to cigarettes. Lorillard states that both ingredients are required by federal law to be denatured with nicotine. To the extent the remaining allegations in paragraph 352 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent the remaining allegations in paragraph 352 refer to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 352. 353. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 353 and, on that basis, denies each and every allegation set forth therein. 354. Lorillard admits that paragraph 354 purports to quote from and/or to characterize 1994 Congressional testimony. Lorillard states that the complete and precise language of the testimony can be ascertained from the official transcript of the testimony itself. To the extent paragraph 354 mischaracterizes, misquotes, or takes the language of the testimony out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the testimony. Lorillard does not believe that nicotine in cigarette smoke is addictive under a traditional pharmacological definition of that term. Lorillard further denies that it controls the nicotine yield independently of the tar yield of its cigarettes. To the extent paragraph 354 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 354.
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context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged announcement. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 377 and, on that basis, denies those allegations. 378. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 378 and, on that basis, denies each and every allegation set forth therein. 379. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 379 and, on that basis, denies each and every allegation set forth therein. 380. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 380 and, on that basis, denies each and every allegation set forth therein. 381. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 381, including its subparts, and, on that basis, denies those allegations. 382. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 382 and, on that basis, denies those allegations. 383. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 383 and, on that basis, denies those allegations. 384. Lorillard admits that paragraph 384 purports to reference and/or to characterize several unidentified studies and the Comprehensive Smokeless Tobacco Health Education Act ("ACT"). Lorillard states that the complete and precise language of the alleged studies and ACT can be ascertained from the studies and ACT themselves. To the extent paragraph 384 mischaracterizes, misquotes, or takes the language of the alleged studies and ACT out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged studies and ACT. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 384 and, on that basis, denies those allegations. 385. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 385 and, on that basis, denies those allegations. 386. Lorillard admits that paragraph 386, including its subparts, purports to reference and/or to characterize several unidentified studies. Lorillard states that the complete and precise language of the alleged studies can be ascertained from the studies themselves. To the extent paragraph 386, including its subparts, mischaracterizes, misquotes, or takes the language of the alleged studies out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged studies. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining -53-
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306. Lorillard admits that paragraph 306, including its subparts, purports to quote from and/or to characterize certain FDA "findings" and the basis for such "findings." Lorillard states that the complete and precise language of and basis for the FDA's "findings" can be ascertained from the FDA publications themselves. To the extent paragraph 306, including its subparts, mischaracterizes, misquotes, or takes the language of the FDA's "findings" (or their basis) out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the basis for the FDA's "findings." Although Lorillard is aware of the public record in connection with the FDA rule making, Lorillard is without sufficient knowledge or information to form a belief as to the FDA's basis for its "findings" alleged in paragraph 306, including its subparts, and, on that basis, denies those allegations. 307. Lorillard admits that paragraph 307 purports to quote from and/or to characterize certain FDA "findings" and the basis for such "findings." Lorillard states that the complete and precise language of and basis for the FDA's "findings" can be ascertained from the FDA publications themselves. To the extent paragraph 307 mischaracterizes, misquotes, or takes the language of the FDA's "findings" (or their basis) out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the basis for the FDA's "findings." Lorillard denies each and every remaining allegation contained in paragraph 307. 308. Lorillard denies each and every allegation contained in paragraph 308. 309. Lorillard admits that paragraph 309, including its subparts, purports to quote from and/or to characterize certain FDA "findings." Lorillard states that the complete and precise language of the FDA's "findings" can be ascertained from the FDA publications themselves. To the extent paragraph 309, including its subparts, mischaracterizes, misquotes, or takes the language of the FDA's "findings" out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the FDA's "findings." Lorillard denies each and every remaining allegation contained in paragraph 309. 310. To the extent paragraph 310 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent paragraph 310 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 310. 311. To the extent paragraph 311 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent paragraph 311 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 311. 312. Lorillard admits that tobacco plants have individual characteristics that are affected by numerous factors. To the extent the remaining allegations in paragraph 312 refer to the knowledge, conduct, or actions of persons or entities other -42-
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further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged statements. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 292 and, on that basis, denies those allegations. 293. Lorillard admits that paragraph 293 purports to quote from statements allegedly made by Victor DeNoble. Lorillard states that the complete and precise language of the alleged statements can be ascertained from the statements itself. To the extent paragraph 293 mischaracterizes, misquotes, or takes the language of the alleged statements out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged statements. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 293 and, on that basis, denies those allegations. 294. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations in paragraph 294 and, on that basis, denies those allegations. 295. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations in paragraph 295 and, on that basis, denies those allegations. 296. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations in paragraph 296 and, on that basis, denies those allegations. 297. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations in paragraph 297 and, on that basis, denies those allegations. 298. Lorillard admits that paragraph 298 purports to quote from statements allegedly made by Mr. DeNoble. Lorillard states that the complete and precise language of the alleged statements can be ascertained from the statements themselves. To the extent paragraph 298 mischaracterizes, misquotes, or takes the language of the alleged statements out of context, Lorillard denies the allegations with regard to Lorillard. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged statements. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 298 and, on that basis, denies those allegations. 299. Lorillard admits that paragraph 299 purports to quote from and/or to characterize congressional testimony by Mr. DeNoble. Lorillard states that the complete and precise language of Mr. DeNoble's testimony can be ascertained from the official transcript of the testimony itself. To the extent paragraph 299 mischaracterizes, misquotes, or takes the language of the Mr. DeNoble's testimony out of context, Lorillard denies the allegations with regard to Lorillard. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the Mr. DeNoble's testimony. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 299 and, on that basis, denies those allegations.
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belief as to the truth of the remaining allegations in paragraph 341 and, on that basis, denies those allegations. 342. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 342 and, on that basis, denies the allegations. 343. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 343 and, on that basis, denies the allegations. 344. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 344 and, on that basis, denies the allegations. 345. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations contained in paragraph 345 and, on that basis, denies those allegations. 346. To the extent paragraph 346 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent paragraph 346 refers to the knowledge, conduct, or actions of Lorillard, Lorillard admits it adds certain flavorants to its commercial cigarettes. Lorillard denies each and every remaining allegation contained in paragraph 346. 347. To the extent paragraph 347 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent paragraph 347 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 347. 348. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 348 and, on that basis, denies each and every allegation set forth therein. 349. Lorillard admits that paragraph 349 purports to quote from and/or to characterize an alleged Kimberly-Clark advertisement. Lorillard states that the complete and precise language of the alleged advertisement can be ascertained from the advertisement itself. To the extent paragraph 349 mischaracterizes, misquotes, or takes the language of the alleged advertisement out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged advertisement. Lorillard denies each and every remaining allegation contained in paragraph 349. 350. Lorillard admits that paragraph 350 purports to quote from and/or to characterize unidentified trade literature. Lorillard states that the complete and precise language of the alleged trade literature can be ascertained from the trade literature itself. To the extent paragraph 350 mischaracterizes, misquotes, or takes the language -47-
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those allegations. Lorillard denies each and every remaining allegation contained in paragraph 399. 400. Lorillard admits that it is engaged in various advertising and promotional activities to smokers who are of legal age to maintain brand loyalty, among other reasons. Lorillard also admits that certain tobacco companies have engaged in various advertising and promotional activities. Lorillard specifically denies it is engaged in advertising and promotional activity targeted toward minors. Lorillard denies each and every remaining allegation contained in paragraph 400. 401. To the extent paragraph 401 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent paragraph 401 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. paragraph 401. Lorillard denies each and every remaining allegation contained in 402. Lorillard denies each and every allegation contained in paragraph 402. 403. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 403 and, on that basis, denies each and every allegation set forth therein. 404. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 404 and, on that basis, denies each and every allegation set forth therein. 405. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 405 and, on that basis, denies each and every allegation set forth therein. 406. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 406 and, on that basis, denies each and every allegation set forth therein. 407. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 407 and, on that basis, denies each and every allegation set forth therein. 408. To the extent paragraph 408 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent paragraph 408 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 408. 409. To the extent paragraph 409 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent paragraph 409 refers to the knowledge, conduct, or actions of persons or entities other than -56-
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allegations in paragraph 386, including its subparts, and, on that basis, denies those allegations. 387. Lorillard denies the existence of any "carefully orchestrated scheme." To the extent paragraph 387 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent paragraph 387 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 387. 388. To the extent paragraph 388 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent paragraph 388 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 388. 389. To the extent paragraph 389 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent paragraph 389 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 389. 390. Lorillard admits that paragraph 390 purports to quote from and/or to characterize RJR reports. Lorillard states that the complete and precise language of the alleged reports can be ascertained from the reports themselves. To the extent paragraph 390 mischaracterizes, misquotes, or takes the language of the alleged reports out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged reports. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 390 and, on that basis, denies those allegations. 391. Lorillard admits that paragraph 391 purports to quote from and/or to characterize a memorandum allegedly authored by Claude Teague and other RJR reports. Lorillard states that the complete and precise language of the alleged memorandum and/or reports can be ascertained from the memorandum and/or reports themselves. To the extent paragraph 391 mischaracterizes, misquotes, or takes the language of the alleged memorandum and/or reports out of context, Lorillard denies the allegations. 44orillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged memorandum and/or reports. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 391 and, on that basis, denies each and every remaining allegation set forth therein. 392. Lorillard admits that paragraph 392 purports to quote from and/or to characterize a memorandum allegedly authored by Claude Teague and other RJR reports. Lorillard states that the complete and precise language of the alleged memorandum and/or reports can be ascertained from the memorandum and/or reports themselves. To the extent paragraph 392 mischaracterizes, misquotes, or takes the language of the alleged memorandum and/or reports out of context, Lorillard denies the -54-
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335. Lorillard denies each and every allegation contained in paragraph 335. 336. To the extent paragraph 336 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent paragraph 336 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 336. 337. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 337 and, on that basis, denies those allegations. 338. Lorillard admits that paragraph 338 purports to quote from and/or to characterize certain FDA conclusions. Lorillard states that the complete and precise language of and basis for the FDA's conclusions can be ascertained from the FDA conclusions themselves. To the extent paragraph 338 mischaracterizes, misquotes, or takes the language of the FDA's conclusions out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the basis for the FDA's conclusions or the conclusions. Lorillard denies each and every remaining allegation contained in paragraph 338. 339. Lorillard admits that paragraph 339 purports to quote from and/or to characterize certain FDA conclusions and the "facts" leading to such conclusions. Lorillard states that the complete and precise language of and basis for the FDA's conclusions can be ascertained from the FDA conclusions themselves. To the extent paragraph 339 mischaracterizes, misquotes, or takes the language of the FDA's conclusions out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the basis for the FDA's conclusions. Although Lorillard is aware of the public record in connection with the FDA rule making, Lorillard is without sufficient knowledge or information to form a belief as to the FDA's basis for its conclusions alleged in paragraph 339 and, on that basis, denies those allegations. 340. Lorillard states that it uses reconstituted tobacco sheet in its commercially manufactured cigarettes. To the extent the remaining allegations in paragraph 340 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent the remaining allegations in paragraph 340 refer to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 340. 341. Lorillard admits that paragraph 341 purports to characterize an alleged statement by a former RJR manager. Lorillard states that the complete and precise language of the alleged statement can be ascertained from the statement itself. To the extent paragraph 341 mischaracterizes, misquotes, or takes the language of the alleged statement out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged statement. Lorillard is without sufficient knowledge or information to form a -46-
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428. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 428 and, on that basis, denies the allegations. 429. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 429 and, on that basis, denies the allegations. 430. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations in paragraph 430 and, on that basis, denies those allegations. 431. Lorillard admits that paragraph 431 purports to quote from and/or to characterize certain unidentified Reynolds advertisements. Lorillard states that the complete and precise language of the alleged advertisements can be ascertained from the advertisements themselves. To the extent paragraph 431 mischaracterizes, misquotes, or takes the language of the alleged advertisements out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged advertisements. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 431 and, on that basis, denies those allegations. 432. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 432 and, on that basis, denies each and every allegation set forth therein. 433. Lorillard admits that paragraph 433 purports to quote from and/or characterize an alleged Philip Morris proposal to the FDA. Lorillard states that the complete and precise language of the alleged proposal can be ascertained from the proposal itself. To the extent paragraph 433 mischaracterizes, misquotes, or takes the language of the alleged proposal out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged proposal. To the extent the remaining allegations in paragraph 433 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent the remaining allegations in paragraph 433 refer to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 433. 434. Lorillard admits that paragraph 434 purports to quote from and/or characterize an alleged Philip Morris proposal to the FDA. Lorillard states that the complete and precise language of the alleged proposal can be ascertained from the proposal itself. To the extent paragraph 434 mischaracterizes, misquotes, or takes the language of the alleged proposal out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged proposal. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 434 and, on that basis, denies those allegations. 435. Lorillard admits that paragraph 435 purports to quote from and/or characterize an alleged Philip Morris proposal to the FDA. Lorillard states that the -59-
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355. Lorillard admits that paragraph 355 purports to quote from and/or to characterize 1994 Congressional testimony from William I. Campbell. Lorillard states that the complete and precise language of the testimony can be ascertained from the official transcript of the testimony itself. To the extent paragraph 355 mischaracterizes, misquotes, or takes the language of the testimony out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the testimony. To the extent the remaining allegations in paragraph 355 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent the remaining allegations in paragraph 355 refer to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 355. 356. Lorillard admits that paragraph 356 purports to quote from and/or to characterize 1994 Congressional testimony from James W. Johnston. Lorillard states that the complete and precise language of the testimony can be ascertained from the official transcript of the testimony itself. To the extent paragraph 356 mischaracterizes, misquotes, or takes the language of the testimony out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the testimony. To the extent the remaining allegations in paragraph 356 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent the remaining allegations in paragraph 356 refer to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 356. 357. Lorillard admits that paragraph 357 purports to quote from and/or to characterize 1994 Congressional testimony from Andrew J. Schindler. Lorillard states that the complete and precise language of the testimony can be ascertained from the official transcript of the testimony itself. To the extent paragraph 357 mischaracterizes, misquotes, or takes the language of the testimony out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the testimony. To the extent the remaining allegations in paragraph 357 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent the remaining allegations in paragraph 357 refer to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 357. 358. Lorillard admits that paragraph 358 purports to quote from and/or to characterize a statement by Robert Suber. Lorillard states that the complete and precise language of the testimony can be ascertained from the transcript of the statement itself. To the extent paragraph 358 mischaracterizes, misquotes, or takes the language of the statement out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the statement. To the extent the remaining allegations in paragraph 358 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent the remaining allegations in paragraph 358 refer to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set -49-
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allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged memorandum and/or reports. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 392 and, on that basis, denies each and every remaining allegation set forth therein. 393. Lorillard admits that paragraph 393 purports to quote from and/or to characterize an RJR memorandum. Lorillard states that the complete and precise language of the alleged memorandum can be ascertained from the memorandum itself. To the extent paragraph 393 mischaracterizes, misquotes, or takes the language of the alleged memorandum out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged memorandum. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 393 and, on that basis, denies each and every remaining allegation set forth therein. 394. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 394 and, on that basis, denies each and every allegation set forth therein. 395. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 395 and, on that basis, denies each and every allegation set forth therein. 396. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 396 and, on that basis, denies each and every allegation set forth therein. 397. To the extent paragraph 397 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent paragraph 397 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 397. 398. Lorillard admits that paragraph 398 purports to quote from and/or to characterize a Philip Morris memorandum. Lorillard states that the complete and precise language of the alleged memorandum can be ascertained from the memorandum itself. To the extent paragraph 398 mischaracterizes, misquotes, or takes the language of the alleged memorandum out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged memorandum. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 398 and, on that basis, denies each and every remaining allegation set forth therein. 399. To the extent paragraph 399 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent paragraph 399 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of -55-
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forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 358. 359. Lorillard admits that paragraph 359 purports to quote from and/or to characterize 1994 Congressional testimony from Andrew H. Tisch. Lorillard states that the complete and precise language of the testimony can be ascertained from the official transcript of the testimony itself. To the extent paragraph 359 mischaracterizes, misquotes, or takes the language of the testimony out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the testimony. To the extent the remaining allegations in paragraph 359 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent the remaining allegations in paragraph 359 refer to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 359. 360. Lorillard admits that paragraph 360 purports to quote from and/or to characterize 1994 Congressional testimony from Edward A. Horrigan, Jr. Lorillard states that the complete and precise language of the testimony can be ascertained from the official transcript of the testimony itself. To the extent paragraph 360 mischaracterizes, misquotes, or takes the language of the testimony out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the testimony. To the extent the remaining allegations in paragraph 360 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent the remaining allegations in paragraph 360 refer to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 360. 361. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 361 and, on that basis, denies each and every allegation set forth therein. 362. Lorillard admits that paragraph 362 purports to quote from and/or to characterize 1994 Congressional testimony from Thomas E. Sandefur, Jr. Lorillard states that the complete and precise language of the testimony can be ascertained from the official transcript of the testimony itself. To the extent paragraph 362 mischaracterizes, misquotes, or takes the language of the testimony out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the testimony. To the extent the remaining allegations in paragraph 362 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent the remaining allegations in paragraph 362 refer to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 362. 363. Lorillard admits that paragraph 363 purports to quote from and/or to characterize 1994 Congressional testimony from Thomas E. Sandefur. Lorillard states -50-
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Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 409. 410. To the extent paragraph 410 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent paragraph 410 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 410. 411. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 411 and, on that basis, denies each and every allegation set forth therein. 412. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 412 and, on that basis, denies each and every allegation set forth therein. 413. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 413 and, on that basis, denies each and every allegation set forth therein. 414. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 414 and, on that basis, denies each and every allegation set forth therein. 415. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations in paragraph 415 and, on that basis, denies those allegations. 416. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations in paragraph 416 and, on that basis, denies those allegations. 417. Lorillard admits that paragraph 417 purports to quote from and/or to characterize Joe Camel advertisements. Lorillard states that the complete and precise language of the alleged advertisements can be ascertained from the advertisements themselves. To the extent paragraph 417 mischaracterizes, misquotes, or takes the language of the alleged advertisements out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged advertisements. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 417 and, on that basis, denies those allegations. 418. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 418 and, on that basis, denies each and every allegation set forth therein. -57-
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419. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 419 and, on that basis, denies each and every remaining allegation set forth therein. 420. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations in paragraph 420 and, on that basis, denies those allegations. 421. Lorillard admits that paragraph 421 purports to quote from and/or to characterize an unidentified survey. Lorillard states that the complete and precise language of the alleged survey can be ascertained from the survey itself. To the extent paragraph 421 mischaracterizes, misquotes, or takes the language of the alleged survey out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged survey. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 421 and, on that basis, denies those allegations. 422. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 422 and, on that basis, denies each and every allegation set forth therein. 423. To the extent paragraph 423 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent paragraph 423 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 423. 424. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 424 and, on that basis, denies each and every allegation set forth therein. 425. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations in paragraph 425 and, on that basis, denies those allegations. 426. Lorillard admits that paragraph 426 purports to quote from and/or to characterize an unidentified document. Lorillard states that the complete and precise language of the alleged document can be ascertained from the document itself. To the extent paragraph 426 mischaracterizes, misquotes, or takes the language of the alleged document out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged document. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 426 and, on that basis, denies those allegations. 427. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 427 and, on that basis, denies the allegations. -58-
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454. Lorillard admits that cigarette smoking has been identified as a risk factor for stroke. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of stroke. Lorillard denies each and every remaining allegation contained in paragraph 454. 455. Lorillard admits that cigarette smoking has been identified as a risk factor for lung cancer. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of lung cancer. Lorillard denies each and every remaining allegation contained in paragraph 455. 456. Lorillard admits that cigarette smoking has been identified as a risk factor for certain chronic diseases. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of any such disease. Lorillard denies each and every remaining allegation contained in paragraph 456. 457. Lorillard admits that cigarette smoking has been identified as a risk factor for lung cancer. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of lung cancer. Lorillard denies each and every remaining allegation contained in paragraph 457. 458. Lorillard admits that certain epidemiological studies have reported a higher risk for certain diseases with earlier smoking initiation and greater cumulative consumption. Lorillard admits that cigarette smoking has been identified as a risk factor for lung cancer. However. Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of lung cancer. Lorillard denies each and every remaining allegation contained in paragraph 458. 459. Lorillard admits that certain epidemiological studies have reported a higher risk for certain diseases with earlier smoking initiation and greater cumulative consumption. Lorillard admits that cigarette smoking has been identified as a risk factor for lung cancer. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of lung cancer. Lorillard denies each and every remaining allegation contained in paragraph 459. 460. Lorillard admits that certain epidemiological studies have reported a higher risk for certain diseases with earlier smoking initiation and greater cumulative consumption. Lorillard admits that cigarette smoking has been identified as a risk factor for lung cancer. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of lung cancer. Lorillard denies each and every remaining allegation contained in paragraph 460. 461. Lorillard admits that cigarette smoking has been identified as a risk factor for certain chronic diseases. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of any such disease. Lorillard denies each and every remaining allegation contained in paragraph 461. 462. Lorillard admits that cigarette smoking has been identified as a risk factor for certain chronic diseases. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of any such disease. Lorillard denies each and every remaining allegation contained in paragraph 462. -62-
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that the complete and precise language of the testimony can be ascertained from the official transcript of the testimony itself. To the extent paragraph 363 mischaracterizes, misquotes, or takes the language of the testimony out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the testimony. To the extent the remaining allegations in paragraph 363 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent the remaining allegations in paragraph 363 refer to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 363. 364. Lorillard admits that paragraph 364 purports to quote from and/or to characterize 1994 Congressional testimony from Thomas E. Sandefur. Lorillard states that the complete and precise language of the testimony can be ascertained from the official transcript of the testimony itself. To the extent paragraph 364 mischaracterizes, misquotes, or takes the language of the testimony out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the testimony. To the extent the remaining allegations in paragraph 364 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent the remaining allegations in paragraph 364 refer to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 364. 365. To the extent paragraph 365 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent paragraph 365 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 365. 366. To the extent paragraph 366 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent paragraph 366 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 366. 367. Lorillard admits that paragraph 367 purports to quote from and/or to characterize 1994 Congressional testimony from T. F. Riehl. Lorillard states that the complete and precise language of the testimony can be ascertained from the official transcript of the testimony itself. To the extent paragraph 367 mischaracterizes, misquotes, or takes the language of the testimony out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the testimony. To the extent the remaining allegations in paragraph 367 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent the remaining allegations in paragraph 367 refer to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of -51-
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complete and precise language of the alleged proposal can be ascertained from the proposal itself. To the extent paragraph 435 mischaracterizes, misquotes, or takes the language of the alleged proposal out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged proposal. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 435 and, on that basis, denies those allegations. 436. 436. Lorillard denies each and every allegation contained in paragraph 437. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 437 and, on that basis, denies each and every allegation set forth therein. 438. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 438 and, on that basis, denies each and every allegation set forth therein. 439. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 439 and, on that basis, denies the allegations. 440. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 440 and, on that basis, denies the allegations. 441. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 441 and, on that basis, denies the allegations. 442. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 442 and, on that basis, denies the allegations. 443. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 443 and, on that basis, denies the allegations. 444. To the extent paragraph 444 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent paragraph 444 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 444. 445. To the extent paragraph 445 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent paragraph 445 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those -60-
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518. 518. Lorillard denies each and every allegation contained in paragraph 519. Lorillard incorporates herein its answers to the allegations contained in paragraphs 1 through 518 of the Complaint. 520. Paragraph 520 does not require a response because it improperly asserts incorrect legal conclusions, rather than stating factual allegations. To the extent an answer is required, Lorillard denies each and every allegation contained in paragraph 520. 521. Paragraph 521 does not require a response because it improperly asserts incorrect legal conclusions, rather than stating factual allegations. To the extent an answer is required, Lorillard denies each and every allegation contained in paragraph 521. 522. Lorillard admits that cigarettes and other tobacco products are advertised, available, and sold throughout the State of Vermont. 523. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 523 and, on that basis, denies each and every allegation set forth therein. 524. Lorillard denies each and every allegation contained in paragraph 524. 525. Lorillard denies each and every allegation contained in paragraph 525. 526. Paragraph 526 does not require a response because it improperly asserts incorrect legal conclusions, rather than stating factual allegations. To the extent an answer is required, Lorillard denies each and every allegation contained in paragraph 526. 527. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 527 and, on that basis, denies each and every allegation set forth therein. 528. Paragraph 528 does not require a response because it improperly asserts incorrect legal conclusions, rather than stating factual allegations. To the extent an answer is required, Lorillard denies each and every allegation contained in paragraph 528. Lorillard admits that Plaintiffs 'WHEREFORE" subsection purports to recite the relief Plaintiff requests. Lorillard denies that Plaintiff is entitled to any such requested relief. 529. Loriilard incorporates herein its answers to the allegations contained in paragraphs 1 through 528 of the Complaint. - 70 -
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the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 367. 368. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 368 and, on that basis, denies each and every allegation set forth therein. 369. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 369 and, on that basis, denies each and every allegation set forth therein. 370. Lorillard denies each and every allegation contained in paragraph 370. 371. Lorillard admits that paragraph 371 purports to quote from and/or to characterize certain unidentified advertisements. Lorillard states that the complete and precise language of the alleged advertisements can be ascertained from the advertisements themselves. To the extent paragraph 371 mischaracterizes, misquotes, or takes the language of the alleged advertisements out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged advertisements. Lorillard admits that it has stated its belief that nicotine in cigarette smoke is not "addictive" under a traditional pharmacological definition of that term. Lorillard further denies that it "controls" the nicotine yield independently of the tar yield of its cigarettes. Lorillard denies each and every remaining allegation contained in paragraph 371. 372. Lorillard denies each and every allegation contained in paragraph 372. 373. Lorillard denies each and every allegation contained in paragraph 373. 374. Lorillard denies each and every allegation contained in paragraph 374. 375. To the extent paragraph 375 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent paragraph 375 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 375. 376. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 376 and, on that basis, denies each and every allegation set forth therein. 377. Lorillard admits that paragraph 377 purports to characterize and/or to reference a Centers for Disease Control and Prevention announcement. Lorillard states that the complete and precise language of the alleged announcement can be ascertained from the announcement itself. To the extent paragraph 377 mischaracterizes, misquotes, or takes the language of the alleged announcement out of -52-
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539. Paragraph 539 does not require a response because it improperly asserts incorrect legal conclusions, rather than stating factual allegations. To the extent an answer is required, Lorillard denies each and every allegation contained in paragraph 539. 540. Paragraph 540 does not require a response because it improperly asserts incorrect legal conclusions, rather than stating factual allegations. To the extent an answer is required, Lorillard denies each and every allegation contained in paragraph 540. 541. Paragraph 541 does not require a response because it improperly asserts incorrect legal conclusions, rather than stating factual allegations. To the extent an answer is required, Lorillard denies each and every allegation contained in paragraph 541. Lorillard admits that Plaintiffs "WHEREFORE" subsection purports to recite the relief Plaintiff requests. Lorillard denies that Plaintiff is entitled to any such requested relief. 542. Lorillard incorporates herein its answers to the allegations contained in paragraphs 1 through 541 of the Complaint. 543. Paragraph 543 does not require a response because it improperly asserts incorrect legal conclusions, rather than stating factual allegations. To the extent an answer is required, Lorillard denies each and every allegation contained in paragraph 543. 544. Paragraph 544 does not require a response because it improperly asserts incorrect legal conclusions, rather than stating factual allegations. To the extent an answer is required, Lorillard denies each and every allegation contained in paragraph 544. 545. Paragraph 545 does not require a response because it improperly asserts incorrect legal conclusions, rather than stating factual allegations. To the extent an answer is required, Lorillard denies each and every allegation contained in paragraph 545. 546. Paragraph 546 does not require a response because it improperly asserts incorrect legal conclusions, rather than stating factual allegations. To the extent an answer is required, Lorillard denies each and every allegation contained in paragraph 546. Lorillard admits that Plaintiffs "WHEREFORE" subsection purports to recite the relief Plaintiff requests. Lorillard denies that Plaintiff is entitled to any such requested relief. 547. Lorillard incorporates herein its answers to the allegations contained in paragraphs 1 through 546 of the Complaint. 548. Paragraph 548 does not require a response because it improperly asserts incorrect legal conclusions, rather than stating factual allegations. To the extent an answer is required, Lorillard denies each and every allegation contained in paragraph 548. -72-
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479. Lorillard admits that cigarette smoking has been identified as a risk factor for atherosclerotic peripheral vascular disease. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of atherosclerotic peripheral vascular disease. Lorillard denies each and every remaining allegation contained in paragraph 479. 480. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 480 and, on that basis, denies each and every allegation set forth therein. 481. 481. Lorillard denies each and every allegation contained in paragraph 482. Lorillard admits that cigarette smoking has been identified as a risk factor for stroke. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of stroke. Lorillard denies each and every remaining allegation contained in paragraph 482. 483. Lorillard is without sufficient knowledge or information to form a belief 'as to the truth of the allegations contained in paragraph 483 and, on that basis, denies each and every allegation set forth therein. 484. Lorillard admits that cigarette smoking has been identified as a risk factor for stroke. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of stroke. Lorillard denies each and every remaining allegation contained in paragraph 484. 485. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 485 and, on that basis, denies each and every allegation set forth therein. 486. Lorillard admits that cigarette smoking has been identified as a risk factor for chronic obstructive pulmonary disease. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of chronic obstructive pulmonary disease. Lorillard denies each and every remaining allegation contained in paragraph 486. 487. Lorillard admits that cigarette smoking has been identified as a risk factor for chronic obstructive pulmonary disease. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of chronic obstructive pulmonary disease. Lorillard also admits that certain epidemiological studies have reported a higher risk for certain diseases with earlier smoking initiation and greater cumulative consumption. Lorillard denies each and every remaining allegation contained in paragraph 487. 488. Lorillard admits that cigarette smoking has been identified as a risk factor for certain chronic diseases. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of any such disease. Lorillard also admits that certain epidemiological studies have reported a higher risk for certain diseases with earlier smoking initiation and greater cumulative consumption. Lorillard denies each and every remaining allegation contained in paragraph 488. -65-
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However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of any such disease. Lorillard denies each and every remaining allegation contained in paragraph 472. 473. Lorillard admits that paragraph 473 purports to reference and/or to characterize the 1964 Surgeon General's Report. Lorillard states that the complete and precise language of the Report can be ascertained from the Report itself. To the extent paragraph 473 mischaracterizes, misquotes, or takes the language of the Report out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the Report. Lorillard admits that cigarette smoking has been identified as a risk factor for heart disease. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of heart disease. Lorillard denies each and every remaining allegation contained in paragraph 473. 474. Lorillard admits that paragraph 474 purports to reference and/or to characterize unspecified reports. Lorillard states that the complete and precise language of the reports can be ascertained from the reports themselves. To the extent paragraph 474 mischaracterizea, misquotes. or takes the language of the reports out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the reports. Lorillard admits that cigarette smoking has been identified as a risk factor for certain chronic diseases. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of any such disease. Lorillard denies each and every remaining allegation contained in paragraph 474. 475. Lorillard admits that cigarette smoking has been identified as a risk factor for certain chronic diseases. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of any such disease. Lorillard denies each and every remaining allegation contained in paragraph 475. 476. Lorillard admits that cigarette smoking has been identified as a risk factor for certain heart disease. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of heart disease. Lorillard denies each and every remaining allegation contained in paragraph 476. 477. Lorillard admits that paragraph 477 purports to reference andlor to characterize unspecified studies on heart disease. Lorillard states that the complete and precise language of the alleged studies can be ascertained from the studies themselves. To the extent paragraph 477 mischaracterizes, misquotes, or takes the language of the alleged studies out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged studies. Lorillard admits that cigarette smoking has been identified as a risk factor for heart disease. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of heart disease. Lorillard denies each and every remaining allegation contained in paragraph 477. 478. Lorillard admits that cigarette smoking has been identified as a risk factor for heart disease. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of heart disease. Lorillard denies each and every remaining allegation contained in paragraph 478. -64-
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allegations. Lorillard denies each and every remaining allegation contained in paragraph 445. 446. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 446 and, on that basis, denies the allegations. 447. Lorillard admits that paragraph 447 purports to quote from and/or to characterize an FDA "investigation" into nicotine. Lorillard states that the complete and precise language of the alleged investigation can be ascertained from the FDA report itself. To the extent paragraph 447 mischaracterizes, misquotes, or takes the language of the alleged investigation out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged investigation. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations contained in paragraph 447 and, on that basis, denies the allegations. 448. Lorillard admits that cigarette smoking has been identified as a risk factor for certain chronic diseases. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of any such disease. Lorillard denies each and every remaining allegation contained in paragraph 448. 449. Lorillard admits that certain epidemiological studies have reported a higher risk for certain diseases with earlier smoking initiation and greater cumulative consumption. Lorillard also admits that cigarette smoking has been identified as a risk factor for certain chronic diseases. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of any such disease. [Lorillard denies the accuracy of the estimate set forth in paragraph 449]. Lorillard denies each and every remaining allegation contained in paragraph 449. 450. Lorillard admits that certain epidemiological studies have reported a higher risk for certain diseases with earlier smoking initiation and greater cumulative consumption. Lorillard also admits that cigarette smoking has been identified as a risk factor for certain chronic diseases. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of any such disease. Lorillard denies each and every remaining allegation contained in paragraph 450. 451. Lorillard admits that cigarette smoking has been identified as a risk factor for lung cancer. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of lung cancer. Lorillard denies each and every remaining allegation contained in paragraph 451. 452. Lorillard admits that cigarette smoking has been identified as a risk factor for certain chronic obstructive pulmonary diseases, including chronic obstructive pulmonary disease. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of chronic obstructive pulmonary diseases. Lorillard denies each and every remaining allegation contained in paragraph 452. 453. Lorillard admits that cigarette smoking has been identified as a risk factor for heart disease. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of heart disease. Lorillard denies each and every remaining allegation contained in paragraph 453. -61-
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context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged studies. Lorillard is aware that in some studies smokeless tobacco has been identified as a risk factor for certain chronic diseases. However, Lorillard does not believe that smokeless tobacco has been scientifically proven to be the cause of any such disease. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 503 and, on that basis, denies those allegations. 504. Lorillard is aware that in some studies smokeless tobacco has been identified as a risk factor for certain chronic diseases. However, Lorillard does not believe that smokeless tobacco has been scientifically proven to be the cause of any such disease. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 504 and, on that basis, denies those allegations. 505. Lorillard is aware that in some studies smokeless tobacco has been identified as a risk factor for certain chronic diseases. However, Lorillard does not believe that smokeless tobacco has been scientifically proven to be the cause of any such disease. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 505 and, on that basis, denies those allegations. 506. Lorillard is aware that in some studies smokeless tobacco has been identified as a risk factor for certain chronic diseases. However, Lorillard does not believe that smokeless tobacco has been scientifically proven to be the cause of any such disease. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 506 and, on that basis, denies those allegations. 507. Lorillard denies each and every allegation contained in paragraph 507. 508. Lorillard denies each and every allegation contained in paragraph 508. 509. Lorillard denies each and every allegation contained in paragraph 509. 510. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations in paragraph 510 and, on that basis, denies those allegations. 511. Lorillard admits that paragraph 511 purports to quote from and/or to characterize a 1985 Brown & Williamson document. Lorillard states that the complete and precise language of the alleged document can be ascertained from the document itself. To the extent paragraph 511 mischaracterizes, misquotes, or takes the language of the alleged document out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged document. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 511 and, on that basis, denies those allegations.
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8 m rn L:3 ~ (_Tl ~ ~
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complete and precise language of the alleged studies can be ascertained from the studies themselves. To the extent paragraph 497 mischaracterizes, misquotes, or takes the language of the alleged studies out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged studies. Lorillard admits that cigarette smoking has been identified as a risk factor for certain reproductive complications. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of any such complication. Lorillard denies each and every remaining allegation contained in paragraph 497. 498. Lorillard admits that paragraph 498 purports to reference and/or to characterize certain studies on premature infant deaths. Lorillard states that the complete and precise language of the alleged studies can be ascertained from the studies themselves. To the extent paragraph 498 mischaracterizes, misquotes, or takes the language of the alleged studies out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged studies. Lorillard admits that cigarette smoking has been identified as a risk factor for certain reproductive complications. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of any such complication. Lorillard denies each and every remaining allegation contained in paragraph 498. 499. The allegations of paragraph 499 are not directed toward Lorillard and therefore, no response is required. To the extent an answer is required, Lorillard is aware that in some studies smokeless tobacco has been identified as a risk factor for certain chronic diseases. However, Lorillard does not believe that smokeless tobacco has been scientifically proven to be the cause of any such disease. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 499 and, on that basis, denies those allegations. 500. Lorillard is aware that in some studies smokeless tobacco has been identified as a risk factor for certain chronic diseases. However, Lorillard does not believe that smokeless tobacco has been scientifically proven to be the cause of any such disease. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 500 and, on that basis, denies those allegations. 501. Lorillard is aware that in some studies smokeless tobacco has been identified as a risk factor for certain chronic diseases. However, Lorillard does not believe that smokeless tobacco has been scientifically proven to be the cause of any such disease. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 501 and, on that basis, denies those allegations. 502. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations in paragraph 502 and, on that basis, denies those allegations. 503. Lorillard admits that paragraph 503 purports to characterize certain studies. Lorillard states that the complete and precise language of the alleged studies can be ascertained from the studies themselves. To the extent paragraph 503 mischaracterizes, misquotes, or takes the language of the alleged studies out of -67-
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512. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations in paragraph 512 and, on that basis, denies those allegations. 513. Lorillard admits that paragraph 513 purports to quote from and/or to characterize Brown & Williamson documents. Lorillard states that the complete and precise language of the alleged documents can be ascertained from the documents themselves. To the extent paragraph 513 mischaracterizes, misquotes, or takes the language of the alleged documents out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged documents. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 513 and, on that basis, denies those allegations. 514. Paragraph 514 does not require a response because it improperly asserts incorrect legal conclusions, rather than stating factual allegations. To the extent an answer is required, Lorillard denies the existence of, and/or its participation in, any alleged conspiracy. To the extent the remaining allegations in paragraph 514 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent the remaining allegations in paragraph 514 refer to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 514. 515. 515. Lorillard denies each and every allegation contained in paragraph 516. Lorillard specifically denies the existence of, and/or its participation in, any alleged "conspiracy." Lorillard admits that paragraph 516 purports to quote from and/or to characterize from certain unidentified documents. Lorillard states that the complete and precise language of the alleged documents can be ascertained from the documents themselves. To the extent paragraph 516 mischaracterizes, misquotes, or takes the language of the alleged documents out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged documents. To the extent the remaining allegations in paragraph 516 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent the remaining allegations in paragraph 516 refer to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 516. 517. Lorillard denies the existence of, and/or any participation in, any alleged "conspiracy." Lorillard does not believe that nicotine in cigarette smoke is addictive under a traditional pharmacological definition of that term. Lorillard admits that cigarette smoking has been identified as a risk factor for certain chronic diseases. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of any such disease. Lorillard states that the nicotine deliveries or yield of its commercial cigarettes are determined by the blend of tobaccos used in, and the design of, such cigarettes. Lorillard denies each and every remaining allegation contained in paragraph 517. -69-
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549. Lorillard denies each and every allegation contained in paragraph 549. 550. Lorillard denies each and every allegation contained in paragraph 550. 551. Lorillard denies each and every allegation contained in paragraph 551. 552. Paragraph 552 does not require a response because it improperly asserts incorrect legal conclusions, rather than stating factual allegations. To the extent an answer is required, Lorillard denies each and every allegation contained in paragraph 552. 553. Paragraph 553 does not require a response because it improperly asserts incorrect legal conclusions, rather than stating factual allegations. To the extent an answer is required, Lorillard denies each and every allegation contained in paragraph 553. Lorillard admits that Plaintiffs "WHEREFORE" subsection purports to recite the relief Plaintiff requests. Lorillard denies that Plaintiff is entitled to any such requested relief. AFFIRMATIVE DEFENSES FIRST AFFIRMATIVE DEFENSE The Complaint, and each claim, fail to state, in whole or in part, a claim upon which relief can be granted pursuant to Vermont Rule of Civil Procedures Rule 12(b)(6). SECOND AFFIRMATIVE DEFENSE Plaintiffs claims are barred, in whole or in part, by the operation of the Supremacy Clause, Art. VI, § 2, of the United States Constitution and by the Federal Cigarette Labeling & Advertising Act, as amended, 15 U.S.C. § 1331 et seg. THIRD AFFIRMATIVE DEFENSE The Complaint fails to comply with V.R.C.P. Rule 8, which requires that "[e]ach averment of a pleading shall be simple, concise, and direct." Instead, the 110-page Complaint is a prolix, repetitive amalgam of allegations copied from pleadings filed in other jurisdictions that quote from and paraphrase numerous writings that have no applicability to Plaintiff and to events in Vermont. FOURTH AFFIRMATIVE DEFENSE The Attorney General, on behalf of Plaintiff, lacks capacity and has no authority or standing to bring some or all of the claims raised in this suit. FIFTH AFFIRMATIVE DEFENSE Plaintiffs claim for civil penalties and disgorgement of profits cannot be sustained because such an award of damages or penalties would violate Lorillard's procedural and substantive due process rights and equal protection rights under the Fifth and Fourteenth Amendments to the United States Constitution and Chapter I, Articles 1, 4, 10, 12 and 18, and Chapter II, Section 39 of the Vermont Constitution. co rn SIXTH AFFIRMATIVE DEFENSE v,I The Attorney General, on behalf of Plaintiff, lacks authority to enter into an I agreement with outside counsel to prosecute this action on a contingency fee basis or cn X~ ~ -73-
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489. Lorillard admits that cigarette smoking has been identified as a risk factor for certain chronic diseases. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of any such disease. Lorillard also admits that certain epidemiological studies have reported a higher risk for certain diseases with earlier smoking initiation and greater cumulative consumption. Lorillard denies each and every remaining allegation contained in paragraph 489. 490. Lorillard admits that cigarette smoking has been identified as a risk factor for certain chronic diseases. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of any such disease. Lorillard denies each and every remaining allegation contained in paragraph 490. 491. Lorillard admits that cigarette smoking has been identified as a risk factor for certain chronic diseases. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of any such disease. Lorillard denies each and every remaining allegation contained in paragraph 491. 492. Lorillard admits that cigarette smoking has been identified as a risk factor for certain chronic diseases. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of any such disease. Lorillard denies each and every remaining allegation contained in paragraph 492. 493. Lorillard admits that paragraph 493 purports to reference and/or to characterize certain studies on fertility. Lorillard states that the complete and precise language of the alleged studies can be ascertained from the studies themselves. To the extent paragraph 493 mischaracterizes, misquotes, or takes the language of the alleged studies out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged studies. Lorillard admits that cigarette smoking has been identified as a risk factor for certain reproductive complications. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of any such complication. Lorillard denies each and every remaining allegation contained in paragraph 493. 494. Lorillard admits that cigarette smoking has been identified as a risk factor for certain reproductive complications. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of any such complication. Lorillard denies each and every remaining allegation contained in paragraph 494. 495. Lorillard admits that cigarette smoking has been identified as a risk factor for low-birthweight infants. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of low-birthweight. Lorillard denies each and every remaining allegation contained in paragraph 495. 496. Lorillard admits that cigarette smoking has been identified as a risk factor for certain reproductive complications. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of any such complication. Lorillard denies each and every remaining allegation contained in paragraph 496. 497. Lorillard admits that paragraph 497 purports to reference and/or to characterize certain studies on premature infant deaths. Lorillard states that the -66-
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463. Lorillard admits that cigarette smoking has been identified as a risk factor for certain chronic diseases. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of any such disease. Lorillard denies each and every remaining allegation contained in paragraph 463. 464. Lorillard admits that cigarette smoking has been identified as a risk factor for certain chronic diseases. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of any such disease. Lorillard denies each and every remaining allegation contained in paragraph 464. 465. Lorillard admits that cigarette smoking has been identified as a risk factor for certain chronic diseases. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of any such disease. Lorillard denies each and every remaining allegation contained in paragraph 465. 466. Lorillard admits that cigarette smoking has been identified as a risk factor for certain chronic diseases. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of any such disease. Lorillard denies each and every rema n ng allegatic^ contained in paragraph 466. 467. Lorillard admits that cigarette smoking has been identified as a risk factor for certain chronic diseases. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of any such disease. Lorillard denies each and every remaining allegation contained in paragraph 467. 468. Lorillard admits that cigarette smoking has been identified as a risk factor for certain chronic diseases. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of any such disease. Lorillard denies each and every remaining allegation contained in paragraph 468. 469. Lorillard admits that cigarette smoking has been identified as a risk factor for certain chronic diseases. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of any such disease. Lorillard denies each and every remaining allegation contained in paragraph 469. 470. Lorillard admits that cigarette smoking has been identified as a risk factor for certain chronic diseases. However, Lorillard does not befieve that cigarette smoking has been scientifically proven to be the cause of any such disease. Lorillard denies each and every remaining allegation contained in paragraph 470. 471. Lorillard admits that cigarette smoking has been identified as a risk factor for certain chronic diseases. However, Lorillard does not believe that cigarette smoking has been scientifically proven to be the cause of any such disease. Lorillard denies each and every remaining allegation contained in paragraph 471. 472. Lorillard admits that paragraph 472 purports to reference and/or to characterize the 1982 Surgeon General's Report. Lorillard states that the complete and precise language of the Report can be ascertained from the Report itself. To the extent paragraph 472 mischaracterizes, misquotes, or takes the language of the Report out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the Report. Lorillard admits that cigarette smoking has been identified as a risk factor for certain chronic diseases. -63-
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530. Paragraph 530 does not require a response because it improperly asserts incorrect legal conclusions, rather than stating factual allegations. To the extent an answer is required, Lorillard denies each and every allegation contained in paragraph 530. 531. Paragraph 531 does not require a response because it improperly asserts incorrect legal conclusions, rather than stating factual allegations. To the extent an answer is required, Lorillard denies each and every allegation contained in paragraph 531. Lorillard admits that Plaintiffs WHEREFORE subsection purports to recite the relief Plaintiff requests. Lorillard denies that Plaintiff is entitled to any such requested relief. 532. Lorillard incorporates herein its answers to the allegations contained in paragraphs 1 through 531 of the Complaint. 533. Lorillard admits paragraph 533 purports to reference 7 V.S.A. § 1005( a) and 7 V.S.A. § 1007. Lorillard states that the complete and precise language of the 7 V.S.A. § 1005( a) and 7 V.S.A. § 1007 can be ascertained from the code itself. To the extent , aiagraph 533 mischaracterizes, misquotes, or takes the language of the code out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the code. 534. To the extent paragraph 534 refers to the knowledge, conduct, or actions of Lorillard, Lorillard admits that it has from time to time received revenue from the sale of its cigarettes. The second sentence of paragraph 534 does not require a response because it improperly asserts incorrect legal conclusions, rather than stating factual allegations. To the extent paragraph 534 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent an answer is required, Lorillard denies each and every remaining allegation contained in paragraph 534. 535. Paragraph 535 does not require a response because it improperly asserts incorrect legal conclusions, rather than stating factual allegations. To the extent an answer is required, Lorillard denies each and every allegation contained in paragraph 535. 536. Paragraph 536 does not require a response because it improperly asserts incorrect legal conclusions, rather than stating factual allegations. To the extent an answer is required, Lorillard denies each and every allegation contained in paragraph 536. 537. Paragraph 537 does not require a response because it improperly asserts incorrect legal conclusions, rather than stating factual allegations. To the extent an answer is required, Lorillard denies each and every allegation contained in paragraph 537. 538. Paragraph 538 does not require a response because it improperly asserts incorrect legal conclusions, rather than stating factual allegations. To the extent an answer is required. Lorillard denies each and every allegation contained in paragraph 538. -71-
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injunction issued under 9 V.S.A. § 2458, and Plaintiff makes no such allegation in the Complaint. FIFTY-FIFTH AFFIRMATIVE DEFENSE Plaintiffs claims, if any, for civil penalties and disgorgement of profits under the Public Health Act are barred because heither the Vermont Board of Health, nor any authorized officer acting under the authority thereof, has declared any of Defendants conduct as alleged in the Complaint to constitute a public health hazard and thus Plaintiffs claims of monetary liability are not authorized. FIFTY-SIXTH AFFIRMATIVE DEFENSE Plaintiffs claims, if any, under the Public Health Act are barred because the Public Health Act does not and was not intended to prohibit or regulate the conduct of Defendants as alleged in the Complaint. FIFTY-SEVENTH AFFIRMATIVE DEFENSE Lorillard adopts and incorporates by reference any affirmative defense asserted by any other defendant to this action to the extent that such affirmative defense applies to Lorillard and reserves the right to amend this Answer to raise and rely upon any defenses that become available or apparent during discovery in this action. PRAYER FOR RELIEF WHEREFORE, Lorillard respectfully requests and prays as follows. 1. That Plaintiff take nothing by its Complaint; 2. That this action be dismissed with prejudice as to Lorillard; 3. That Lorillard recover its costs of suit, including reasonable attorneys fees; and 4. For each other relief as the Court deems just and proper. JURY DEMAND Lorillard hereby demands a jury trial for all issues herein. DATED this 23rd day of April, 1998. P B Of Counsel: Gay L. Tedder, Esq. Shook, Hardy & Bacon, LLP One Kansas City Place 1200 Main Street Kansas City, MO 64105-2118 R . Josep RY_ 0 T P.O. Box 310 Rutland, VT 05702-0310 -79-
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Plaintiffs claim for civil penalties, on its face and as applied, violates the Excessive Fines and Penalties Clause of the United States Constitution and Chapter I, Article 18 and Chapter II, Section 39 of the Vermont Constitution. FORTY-SIXTH AFFIRMATIVE DEFENSE Plaintiffs claims are barred in whole or in part by the absence of any specific intent, conscious agreement, or common design or purpose on the part of Lorillard to join with other Defendants to injure the Plaintiff and the citizens of Vermont. FORTY-SEVENTH AFFIRMATIVE DEFENSE Plaintiffs claims are barred, in whole or in part, because any damage suffered by Plaintiff or facts giving rise to Plaintiffs claims for civil penalties were proximately caused by PlaintifPs own unreasonable conduct, including permitting use of Lorillard's products after the citizens of Vermont and Plaintiff became aware of any health risks which are alleged to have been or to be associated with Lorillard's products. FORTY-EIGHTH AFFIRMATIVE DEFENSE PlaintifPs warranty claims, if any, under the Consumer Fraud Act or the Public Health Act, are barred, in whole or in part, for failure to provide reasonable and adequate notice of any claimed breach of warranty. FORTY-NINTH AFFIRMATIVE DEFENSE PlaintifPs claims are barred, in whole or in part, because the proximate cause of any injury and damages allegedly sustained by Plaintiff and the citizens of Vermont or facts giving rise to Plaintiffs claims for civil penalties is Plaintiffs voluntary decision to sanction, permit and regulate the sale of cigarettes in the State of Vermont and the decision of the citizens to smoke. FIFTIETH AFFIRMATIVE DEFENSE To the extent that Plaintiffs claims are based in whole or in part on any allegation that Defendant's products were defective or unreasonably dangerous, Plaintiffs claims are barred, in whole or in part, by the principles embodied in Section 402A of the Restatement (Second) of Torts, comment (i). FIFTY-FIRST AFFIRMATIVE DEFENSE Plaintiffs claims seek an impermissible taking of property in violation of the Fifth and Fourteenth Amendments to the United States Constitution and Chapter I, Article 2 of the Vermont Constitution. FIFTY-SECOND AFFIRMATIVE DEFENSE Plaintiffs claims are barred because they infringe upon Lorillard's right to free speech under the First Amendment of the United States Constitution and Chapter I, Article 13 of the Vermont Constitution. FIFTY-THIRD AFFIRMATIVE DEFENSE Lorillard intends to rely upon, reserves its right to assert, and hereby pleads such other and related defenses as may become available in the event of a determination that the action, or some part thereof, is governed by the substantive law of a state other than Vermont or a foreign country. FIFTY-FOURTH AFFIRMATIVE DEFENSE Plaintiffs claims, if any, for civil penalties and disgorgement of profits under the Consumer Fraud Act are barred because Defendants have not violated any co rn ~ cn _P~ C3-1 rv -78-
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~ • PiP. B25 rl MAR.27,1598 12 46F M GOODI+~PROGTER & HO P.7i5z 10 4. The State's claims ara barred by the statute off limitations; 5. The PubLic Health Act was naver S.ntended to encompass the taarket3.ng and use of tobacco products; and 6, The claims must be disvissed to the extant that the Stato seeks to apply the Public Health Act and the Consumer Fraud Act to caqdllet allegedly occurring before the statutes became effective. Vor purposes oL this mokion, Defendants are represented by Karen HcA:fdzew, Esq,; Plaintiff is represented by Attorney General William H. Sotrell and Assi.stant Attorney General Julia Brill. T. INTRODUCTTON The purpose of Rule 12(b)(6) is to utsst the law of a claim, not the facts which support it." Levinsrcv v niamon8, L40 Vt. 595, 6qo (19a2). xn ordet to grant a V.A.C.P. 12(b) (6) motion to dismiss, it must be "beyohd doubt that there exist no cireumstances or facts which the plaintiff could prove about the claim made in his complaint mhicbL would entitle him to relief." AGSOe t~aysCa~lc PsoDG~y Owr~ers v SpUMQ, 145 Vt, 443, 446 (1465) (quoting r.ev nskv~ 140 Vt. at 600-601) ~ Where a novel or extreme theory of liability is presented, the court should be "especially reluctant to diemics," Z&. Furthermore, all factual allegations made by plaintiff in the pleadinq are assumed to be true, as are all reasanable inferences t#iat ean be d.tawn firom them, while all contrary assertions in the movaatl5 pleadings are 2 6~/~ d£i£Z.OH NQQUfl InHH }IQQHS AIdd9~Z 866i •LZ'aew
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IPi2.ZT.1998 12147PM GO[eN PROCTF3t & HO _ No.87S P.11i5E 2453(a). Count Three a].leges taat the Defendanta employed a host of unPair and deceptive practices designed to cause minors to z:se , tobacco and becotne addicted to tobacco. Count Four al],eges that Defendants have engagedd in countlsss misrepreaentations and omissions of material Eacts to the genaral public. Count Five alleges that Defendants have conspired to prevent the research, development and marketing aE nsafern tobacco products. befendants assert that the State's claims based on the Consumer Y'raud Act aro grounded i,A Defendants' alleged suppression of smoking and health information $nd alleged dissemination of disiniormation intended to minimi5e the impact of federal aarnings. As a rssult, Detendants contend, these ceuxtts ara preempted as well. 3. Injun.ctive Relief With regard to preemption, Defendants also raise the a.rgument that the State's prayers for injunctive relief constitute a reQuirem$nt lfbased on smaking and health ... with regard to the advertisinq and prqmotion ot cigarettes". Under each Count, the State seeks; (il an inyunction againsz llsture miseonduct; (ii) an order that tha Defendants "publioZy disclose, disseminate and publish all reseazeh prsaiously conducted" concerning sfioking and health issueso; and (iii) orders that the defendants fund "corrective public education and tobacco control campaigns" and ^community-betsed tobacco uee and prevention prdgrams." Defendants argue that the injunctive relief that the m ~ State requests constitute disczosure obligations that go beyond _.1 ts-~ 6. ~ c::) IdO3tlE hQdVH }IDOHS YId8S:Z 866j '6Z'aap( 6q/8 'd £I£Z '~N
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0 MGaR.27.1998 1Z*46PM GqODWI~N PROCTE2 & HO ~ ryp.82S p.Bi52 aesumed to be false. Nhite Current Corn v state. 140 Vt, 2so, 292 (1981). Tn this action, the Attorney Geineral of the State of Vermont has raised a],legations in an ezfart to halt what he describes as "a decades-long eampaign by the tobacco industry to engage in consumer fraud and deceptive practices, and to create a public health risk that has significantly harraed vermonters,^ (opp. to Dells. Motion to Dismiss at 1). The state's Complaint alleqes, among•osher things, that: a) the Defehdants agreed to Yalsely underxake to study and disclose the health effects of tobacco usa; b) the Defendants misrepresRnted and concealed evidence of the health affeets of tobacco usey C) the Defendants suppressed the research and marketing of "sager" cigarettes; d) the Detendants concealed their knowledge that nicotine is addictive; e) the tobacco companies inerease addiction by zani.pulatinq the lavele of nicotine in their prodUOts; and, f) the DaEendants targeted minors for addiction to tobacco products. As a result of all of Defendants' allegnd illegal conduct, the State ciaims that the eale and••eansuAptien of tobacco productp bas increased in the State at v'ermont, Defendants otter a nwaber of arguments as to why the state•s Complaint fails to state a claim Upon which relief may be granted. We will analyze each of these arguments in the order in rrhich the parties presented them to this Court. IS. VIABTyITX UNDER THE FEDERAL cIGARErPTE f.ABELING AND ADVERTISING ACT A. Background u/9 'd £j£Z.aN NOM hQBVH XDOHS Y(dL9:Z fl661'LZ'aeyy
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MpR.27.1998 12146PM fl00v PROCTFR & HO SWATE GF V$RMONT CO[ NZ+y OF C82TTSNDF,N, STAT7E OF VgRp40N',[+, ) ) Plaintiff ) ) v. ) ) PHILIP MORRIS, iNCORPaRATED; } R.J. REYNO7,DS TOBACCO CO., ) RJR NABISCO HOLDING CORP., ) RJR NABISCO, INC.; 11MRICAAT ) TOBACCO CORp.; BROWN s ) WILLIAHSON TOSACCO CORP.; ) LIGGETT & MYBFRS, INC. ; ) LORSkL5MI TOBACCO CO.,•zNC.; ) D'NITED STATES TOBACCO CO.; ) 8. A. T. INDUS'trRSTS, PLC; ) HRT'PISF[ AMERICAN '1.'09ACC0 ) C04lPANY; TxE coT1NCTL FOR ) TOSACCO RES8ARC8-v.S.A., INC.;) and THE TOaACCO INSTI'1'tFr$, ) ZNc., ) ) DQfendants. ) ss. M0.9Z5 P.6/52 RECEIVED NAR 2 6 1998 OINSE, KNAPP S MratmRew, P.C. CHITTVNDB.N SIIpERIOR COURT DOCKET NO. S 744-97 Cne OPTN ON MM ORDER This action is before the Cout'k ori Derendant's Ration to Dislniss pursuant to V.R,C.P. 12(,5)(6). The motion 6eeka to dismiss the Colaplaint filed by t;a.e State oi Vermerit (the "Stats") on the fo3.],oeVing grounds; ].. The $tatets claiips under the Publie Health Act and the consumet Fraud Act are preempted by the Federal Cigarette Labeling and Advertising Act; 2. Neither the Ptsblic Hea;,th Act nor the Consumer Fraud Act authorizes the pehalties demanded by the State; 3. Tba Statefs claims for relief, if impased as requested, violate the Due Process ClaUse and the gg 2= Facto Clause; p/£ 'd £I£Z'ON NOOtlH hQHtlH XOOHS WdGS:Z 866I'LZ'asK
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,~ l \ Il:t l %ERYUO\r c In I l I.\D1 -N Ccrl \TY. SS " I VI L M, V~LR\IO\1. Plaintilt: k PHILIP MORRIS. INCORPORATED: R J REYNOLDS TOBACCO CO.. RJR NABISCO I IOLDI\G C'ORP . RJR NABISCO. INC.: .\MERIC.aV TOBACCO CORP.: BROWN & \\ ILLIA:viSON TOBACCO CORP.; LIGGETT A `fYERS. INC.: LORILLARD TOBACCO CO.. ItiC: UNITED STATES TOBACCO CO.: B.A.T. INDUSTRIES. PLC: BRITISH AMERICAN TOBACCO COMPANY: THE COCNC[L FOR TOBACCO RESEARCH- l' S A. INC : and THE TOBACCO I\STITI'TE. I\C. I Chittenden Super or Court Docket Na._7-1-{-97 CnC Defendants. ~ ~ STATE OF VERti]ONT'S SUR-REPLY MEMORANDUM IN OPPOSITION TO DEFE\DANTS' MOTION TO DISMISS wq9'998
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. ~ N0 MRR.27.1996 12'46PPt GOODW*ROCTER 8 F10 625 P. 9/52 By its terms, the Labeling Act, 15 O.S.C. $ 1331 et a=., establishes a"camprehansi.ve Pederal prqgram to deal with cigarette labeling and advertisinq with respect to any relationship betweert smoking a.nd health.1' 15 U.S.C_ § 1331. As part of the Labeling Act, congrgss, among other things, mandated the now tamiliar health warnings which appear an every brand of cigarettes and on every advertisear.ent that promotes their sale, 15 U.S.C. $ 1333, banned all broadcast advertisefient of cigarettes, 15 U.S.C. S 1335, and di.rected the establishment of federal 6mok3,ng education prograas, 35 [f.S.c. 9 1347._ To this end, Defendants contend that Coragress broadly preempted state latas that would bave the ®£fect of impaaing "diverse, nonuniform, and conEusing cigaratte labaling'and advertising regulations witt respect to any relationship betw0en smoking and health." 15 U,S.C. g 1331. Accarding2y, Defendants claim that r.be state•s Complaint should be diemissed on federal preemption grounds. specifically, the Defendants argue that all at the State0s claims are predicated on the alleged existence of a duty, imposed by sithefi the puYolia Health Act or the tonsumer iPraud Act, to either disclose information coneerning smqking and health that the Defendants arE alleged to have eoneealed, or to refrain from making statements that give smokers a false settse of security despitA the unautbiguoUe warning on, every pack. Defsndants posit that because the imposition of such duties by state law constitute a"requS.rement or prohibition based on smoking and health ... with respect to the advertis3.ng or promotion oE" 4 61/9 'd EIEZ 'aK K06yg m8dH XQ6HS Ntd85~Z 866i'LZ'aeK
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IW.27.1996 12~47PM 6fl0*, PROCTFJ2 & HO ~ N0.825 p.14i5Z 2. Conenmer Fraud Act Similarly, the Consuaier Fraud Act alaims do not seek to regulate advertising "based on smajting and health" aa the Labeling Act requirss. Rather, these cla).ms axe premised on the duty not to commit deceptive or u,ngair txade practices. The deEendants' eonduct is an unfair trqda practice because it violates vermonzfs clear public policy against the use ot Tobaceo by minors. See 7 V.s,A. Si 1007, Th addition, alieqations of misrepresentation ot deceptive conduct are not preempted, even if such allegations challenge advertising- cjbo 1 n, 505 tT.s, at 524, 528-29. The state ie chaZlengiMg Defendants' alleged,ly ,false and misleading stataments, arid attempts to enEorce DePendants' duty not to deceive. Therefore, the Labeling Act's preemption clause does not apply. F),nally, claims based op, the duty not to conspire in restraint aS trade aze, clearly not premised on smoking and betllth, and are therefore also viable when directed at advertising. After cinellone, geveral courts have he).d that consumer protection claims, like the 9tate'p Consumer Fraud Act claims here, are not preexpted becatise t}sey are based on the state law duties not to deceive or commit ott,er unPair trade practices. see, e.g. Hurton-v. R.J. Re+molds Tabaeco Co., 8Sa F. &upp. 1515 (D. Kan. 1995); castar,o V,~A~+-iaa? Tabacco Co., $70 F. 3upp- 14a5 (B.D. La. 1994) j Manaini v. _It ,L.?._R_eyno}.ds Jobacco Cg_, B'l5 P.ad 73 (Cal. 1994). 9 Wfi ~4dYH IOOHS Y4d65:Z 8661 'LZ'ae1R 61/1 i 'd 6L6Z "N
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8 H0 MpR.z7.1996 SZ~47PM ~ prop6rly Yabeled cigarettes, alZ nf the 5tate's claims are preemptedl. a, PreeMption Tssues 2. Public Health Act P.19/52 Counts i and 2 of the State's Coxplai.nt are brought under the Vermottt Yublic 8ealth Act, SS V.S.A. S 130 = gag. These counts challenge the confluct of Defendants that has allegedly brouqht about widespread use of eiqarettes and tobacco products and thvs created a public hea].tts hazard (Count One) and a public health risk (count Two). Thia conduct includes: (i) Dofendants alleged failure to admit publicly that smoking is hazmrul and that nicatine is addictive; (ii) failure to diaclose results of reseafch concerni;ng the harsns of cigarette smoking and the developsqent of "sa£era cigarette Oesigns; aad (iii) failure to adopt advertising campaigns that were unappealing to minors. Defeudants argue that if the Public Hea],tla Act, a state law requirement, were read to impo6a the dutiGs as alleged by the Stata upon the Defendaats, it would impo6a "reguirOzent[s] or prohik:ition[s] ha3ed on smoki,ng aiad haaltb: ... with respect to the advertising and promotian of eigarettes." Tharefore, aceording to Defendants, these claims are preemptQd. 2. Consumer Fraud Act The remaining counts of the Complaint are predicated on alleged violations of the consuasser Fraud Act, 9 v.s.A. S 2451 et sea. That act prohibits unfair meLhods of co:apetition and "ungair or deceptive acts or practices" in commerce. s v,e_A. S 5 RdQyg ,IqgVfl }IQQHS Wd85 ~ Z 866t •LZ 'a ¢W 6fi/L 'd CIEZ 'oK
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~ MAR.27.1998 12'4HPi'7 G00 PROCh'7~ ~ Ho S.lp NO.BZS P. 16i~52 violating the Act has had adequat® advance notice that the conduct in question is prohibitad. nefendantQ conclude that because the Board ot i3ealth has never issued any rule or Yegulation that defines aePendants' con$uct as presenting any public health haaard, there can be no violation of the Act. Defendants make similar objactions for the penalties sought under the Consumer Fraud Act, nefeadantp; restate that, under the ACt, zemedi9s are available to the State only for the violation of an injunction issued pursuant to 9 V.H.A. 6 2458, The conduct in question, Defendants claim, must have been judicially determined to be uttlavfu7l before penalties cann be imposed and prof.Lts ordered disgorged. Because no such detasmi.nation has been made in this case, DefendarFts claim that the State cannot recover penalties under the Consumer Fraud Act. Both the Public sealth Act and tl'le Consumer Praud Act are remedial statutes designed, respectively, to protectt the public from health haxaxds and unfair trade practices. In determining whether a pxovxsiori is penal or remedial in natur®, we lock at whether the Legislature inteTio'ed ithat [the penalty] be civil and raaediai, and, it so, wheisher the statutoXy seheme was so punitiva either in purpose or et£ect as to negate that intention." St ta ~ v. Stronat 158 Vt. 56, 60 (1992)(quoting United States v Ward? 448 U.S. 242, 248 (1980)). The Legislature clearly intended that the penalty provisions of both Acts be civil, and not penal. see 9 V.S.A. § 2458(b)(1) ("cxvil penalty° undet the Consu3per Fxaud Act); 18 V.S.A. 5 130 ("civil 11 T100Vfi HHVH }IOOHS P(d69 :Z 866 l'6Z 'a 1W 6~IOl 'd £t£Z'ON
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F1PR.27.1998 12=d9PM f00~ PROCTER & HO • No.825 P.22i52 Defendants contond that the languaga, structure, and lagislative history of the Public Sealth Act demonstrate that the legislature intended to address only traditional environmental hazards, e.g., toxic waste and airborne pollutants. Delondants claim that the provisions of tha Act envision health hazards that are external, anvirotv4ental public health threats. They contend that to apply the statut.a to the markating and sale oS cigarettes is to strain it beyond its intended pusvi.ew. Additionally, Aefendautp argue that construing the public Health Act in the manner in which the State urges srouLd ef€ectively obliterate whoT,e areas of products liability law. Defendants claim that should this Court decide that the sale and marketing ot cigarettes constitutes a public health hazard, then every Vermont citizen allegedly 3;a,rmed by the product is endowed with a new cause of action under 18 V.S.A. § 122, thereby ciYeumventinal the entire body of produets liability law. Defendants conclude that because it ie inappropriate to extend section 122 to producta liability cases, tha sale and marketing af cigarettss cannot constiCute a public health hazard under the Public 8eaith Act. • The plain language oE the statute authorizes the Court to enjoin actions which lead to "harm to the public health by virtue of any ... bioloqical, chemical or physical agent." 18 v.S,A. 55 2(8), 13o(b)(Z)_(G]. Defendants' alleged conduct--denying - ~ that nicotine is addictive, manipuiating nicotine levels, suppzessing the production of safer products--has craate_d a 17 6~/6l 'd E16Z 'ON 9 N00VS IRVH }I00HS W6 :6 8661 'LZ
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9 1'r12,27.1998 12'47FM GOODWIN PROCTER & HO 0 h{p,e25 P.12i52 those which Congress considersd both necessary and sufficient to proteet publie health and commerce. Therefore, pagantlants claim, t.tse State's prayers for injunctive relief are praetapted. C. Legal standard Article VS at the Constitution provides that the Laws of the United States "shall be the supreme Law of the Land; .-. any Thing in the Constitution or Laws of any state to the Contrary notwit2t.standing." Art. vI, oi. 2. It is NeLl settled that state law that conflicts with feacral law is "arithout effeet." Mar.v2and v. raauisiana, 451 tr.S, 725 (1981). "'The purpose of congresa is the ultisnate touohstonar" of preemption analysis. o e v. wnite o Corn_, 435 T].S. 497, 504 (1978) (quotinq Ratail Clerks v, 9 hermerll4Yn, 375 tf.9. 96, 103 (1963)). CongXess' intent may b® "explicitly stated in the etatutQ's 1anguage ar ia,plicitly contained in its strn.cture and purpose." Tones v. Ruth Packing AQ-, 430 U.S. 519, 525 (1977). The United States Su.prew Couzt has already resolved the preaaptive scope of the Cigarette Labeling and AdvarkiBing Act is1 aiboj}one v, yiaerett ore~~, 505 L.S. 504 (1992). The C3g le lone Court sguarely held that claims based oa "the duty not to decaive" are hot "based on 6mokinq and health^ and are not preempted by the Labeling Act. Gibollene, 505 U.S. at 929-3a. In addition, "traudulent misrepresentation claims that do arise with respect to advertising and promotions" remain vittble. 1_d. at 52$. ~ Finally, the Act dees not pzeempt elaims that rely solely on CJ~ u.; 7 NOnB ,IWK XOOHS Y[d85~Z 866i LZ aE~ v16 'd £iEZ '09
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0 Np.BZS P.17i52 MAR. Z7.1998 iZ148PM Gqrzj FK& Tr K . dL. enYorcenment4a action for pQnaltiasy, Where the language of the statute is elaar, we rely on 'f.ha plain meaning of the statute "because we preeume the legislature 'statss what it intends." bASSAchu_s te ta Mun. Wholesale E1sc; _ co, v. state, !61 Vt. 346, 355 (1994). For this Court to find that the civil sanctions at 5.ssue are penal, we must characterize the sanction as only a deterrent or retribution. $trang, 158 Vt. at oZ. a(Tahe fact that a statute designed primarily to serve remedial purposes incidentally serves the purpose of punishment as rrell does not mean ttiat the statute resuLte ia punishment for dauble jeopardy purpceeis." XA. (quoting state_v. Ni,chols, 169 8riz. 409, 412 (M. App. 1991). We' theretore hold that tna statafs claims ara xamedial, not penal. The state has brought a civil entorcement action pursuant to 18 V.S.A. 5 130, in an e£fort Mto enforce the provisions oP this title, or the rules, permits or orders issued pursuant thereto including but not liritited to th® tsrms of nn assurance of discontissuance entered into undcr soction 3.25 of this title." L8 V.S.A. S 130(a). • Because ths tiord aviolation" is not defined in the Public Health Act, we will give that word its plain meaning within the cantext of the statute as a whole. ?1Qenev of Natural gesou±-css v. Riendeau, 157 Vt. 615, 620 (i991). The plain meaning of loviolation" is the infringettsent or breaah of a right, duty, or law. see Blackrs Law Dictionary (Fifth Edition 1979) at 1408. 00 , The creation of a public health haaard, Vhich the State alleges rn . ts~ 12 KO6@fi AQNVH 1OOHS P{d00 :£ 8661 'lZ 'a E~ 6fi1u 'a £t£Z'°N
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^rFR.Z7.1998 iZ:59PM GOAN PROCTER & HO . N0.825 P.23/52 publ3o health hassLdh with~n the plain meaning of the Publlc Health Act. Therefore, the LegiPlature clearly intended to encompass nePendantsr wrongful conduct as alleged in the Complaint. Ffnally, Defendants assertion that private plaintiffs maV now circumvent the terrain of Vermont tort law and naw may fila suit for damages undar 18 V.B.A. 5 122 is illogieal. The burden for a private plaintiff to demonstzttte that the pefendants, conduct has creatod a pubzic health ha2ard is far heavier than showing a d¢sigh defect in a product liability action. In determining rorhether a hazard is public or private, the Health Commissicner considers, among other thinga: (i) the number of persons at riskj (if) the cY;aractsristics of the persons at risk; (iii) the eharaetezistics of the condition or agent which is the source of potential harm; and, (iv) the aVailability of private remedies. is V.s.B. § 2(s)(a)-(d)- Thus, the very existence ef private remadi,ex would couneei a$;aiast linding a public health hazard. As a result, such parsons would likely not even be able to bring a public claim under section 122. OR= For the reasons stated above, Defendants' Motion to bismiss is DSN2ED. Dated at Burlington, Vermont, thisa~_ day of Mareh, 1B9S. Li da 7.evitt, Presiding Judqe is 6~/OZ 'd £i£Z'pN NOgH hQjtlH ~OOHS YtdiM 866I'LZ'aeW
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2
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,0n,ptrl:d to „urpre„ the de clupment ul ,.tl2r tuhacco pru lucti and pre\ent am health-hased -„mpetiuun I nunnL the ell-r,tahluhcd rule that the Complaint's allegations control the determtnauon uf a motion to dismiss. the defendants repeatedly ask the Court to ignore \'crmont"s :lleuattons. While the State challenges defendants' decepti\e and unfair trade practices in its CFA counts. the detendants clatm that Vermont "cannot hide the truth" about the5e claims they must be "based on amoking and health."' S%~ttching tacks on the Public Health \ct clatmn, the defendants argue that - despite the State's allegations to the contrarN - the clainis are not predicated "on the alleged misconduct" but on the defendants' "failure to disclose" this misconduct. E3ut in the end. Vermont's alle uauons are controllins here - and not defendants' ,uphtsuc %wrdplac. I-he C'omplatnt s actual allegations . ttiate the defendants' elaborate claim that the lacked notice that their eiareiatous misconduct %\as unla%\I'ul. As demonstrated helo%\. the .tllesatlons of unlawful conduct fall squarely \\ithin Vermont's prohibitions against committing unlair and decepti\e trade practices. and asainst contributing, to public health hazards. The dk:tendants' motion must be denied. ll. NONE OF THE STATE'S CLAIMS ARE PREEMPTED In pressing their preemption argument. the defendants distort Vermont's allegations and ,treuments tn an effort to confuse the issues before this Court. As the defendants cannot dispute. the Labeling Act preempts onl% a«r.• narro%% class of claims: namelN. those %\hich ~Wuld nnp ose a"reyuirement or prohibition hased on smoking and health ...N%ith respect to ... .td\cru,ing tr promotion.' w irns that cl.tube a thir hut narro« reading." l l Cipollone % . Lieaett ( iiOu .`Uj l.l 5U-1. 11 99'_I. \, none ut the State's claims are both 1 I 1 haxd on Ca ,m0{,me tnd he.tlth and t-, I Impo,e requtrement; on ad\ ertistn_ nr promotion. nune ofthe Statc(t);\ um, u'r l rcrmpt .l -' .F- V ~ 1\ I I ~~ I \ I I: V~~\ 1~,1 I:-K L I' I 1 I\ -_- 00 ~1PP, J•I 11( I\ It 1 l>I I I\It \\ I~ •.!~ ~ I li ~\ I t t UI~~11ti~
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0 MFR.27.1958 12: 4?PM GOOD4ILN PROCTER & HO r.a0.825 P.13i52 detendants' testing or research practices unrelated to advertising or promotio». jA. at 524-25. The cioollene Court decided that the preemp,~iva clause of the Labeling Act should be given a "fair but narrow, reading." Id. at $24. The Court stressed that "each phrase within that clause limits the universe of ... claims pze-empted by the statute." l.¢. The State contends that hecause none of the claitas fit within that narraw universe ot expresely preempted claims, they are all viable. We agree. 0. viability of Claims i. public Health Act The State's Public Health i+ct claiips attaek a variety af cotsduot that is not Vadvextising or promotion." as that phrase is narrowly construed. Indeed, the claims do not impose prohibitions or requirements based upon the content of Defendants' advertisi,ng. Rather, the Complaint cba7.ienges conduct elhich allegedly has contributed te the public haalth ltazard as1d, public health risk imposed by smokisig, tsamesly: (i) manipulatir_g l9vels of nicot.i.ne; (2) suppressing and concealing information regarding the addictive nature of nicotine, and (3) aoncealing information and research concerning the productien at safar tobacco products. Defendants cite eases in which p.laintiffs' preempted claims uouid have imposea requirements on defendantsr advortising ur promotio.p of cigarettes. 6eeause the statefs Public Health Act claims are not based as such, they survive the preemption attack. B NO% gBVH a106HS wd6°s: Z 8661 'LZ 'a ey~ vlDt 'd £I£Z'°N
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I he Ir.wdulcnt n.nure ol delendants ~:undurt. ,tn l the hroad remedral purposes of the titJfute} ~'Ik InL' rl~e tt) ihC llrhdatrll In,-, c.ILUC~ Ut action. tirrther support the conclusion that the sr.- .car herwd in 12 \ S.\ ;'1 I % rrn~ thls action. IX. COVCLCSIOV Iou the reasunti etated ahu e. as ~tell as those stated in Vermont'~ `[emorandum of La« tn Oppuvtton w Defendants' \lotion to Dismiss. the defendants- motion must be denied in its cnuretn DATED: March 6. 1998 WILLIAM H. SORRELL Attornec General of Vermont B% Julie Brill Assistant Attorne~ General OFFICE OF ATTORNEY GENERAL 109 State Street Montpelier. Vermont 05609-1001 (802) 828-3171 HAGENS & BER:vt.-\NN. P.S. Ste e W. Berman :\ndre%% \i. Volk 1301 Fifth Avenue. S-uite 2929 Seattle. WA 98101 (2061 623-7293 \ESS. O%ITLEY. LOADHOLT. RIC'H.-\RDSON & POOLE. P A. Ronald L. \Iotle~ 5usan Nial I' O Box 1117 Charleston. SC 0940"_' k V4 1\ I \. i II) I>iII\I) Vi~llirA It~171~~t1~~
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r I I\IRt l)I ( IlU\ . .... ....... ...I II \O\I OI 1I11:5] \Il. l C1..\I\1SARE PREE\IPTED-_ .........................................I [II \ ER\10\ I S P1 I31JC I IE.\L I II ACT CLAI.MS \~ 1LL NOT REGULATE OR I'ROH11311 CIG.\RE I l L.\DVI.R I ISI\G OR PRO\(OTION ........ ................................. I\' I 111: COVP[_:\l\T:\ CT:\C'[CS THE S:\NtE PATTERN OF \IISC'O\'D('C'T \:t IfICH 1i.\S GI\'E\ RISE TO:\LL THE REC'E\T.-\TTOR`EY (,E\ER:\L \C I IO\S \(;-\1Nti I 1-I IETO[3:\C'CO COMPA\IES ..... .... . . .. ... .............. . \ IN.II \CTIVli RELIEF IS CL.E:\RLY :1PPROPRIATE UNDER BOTH THE C O\Sf \IER FRAI.. D :\\D Pl BLIC' I IEALTH .-\C'TS...... ..._ ....... ........ . .. . . .. .... ... 7 \"L I I IE CONSUMER FRAUD ACT AND THE PUBLIC HEALTH ACT S(1['ARELY AUTHORIZE THE STATE'S CLAIMS ............................................. .. .. .8 :\ B C The Remedial Purposes ot Both Acts Undercuts Defendants' Tortured Construction of the Statutes ................................................................................. ...1 Vermont Alleges Clear Violations of the Consumer Fraud Act ............................ IO ihe Dclendants' Wroneful Conduct Has Created :\ Public Health Hazard In \'lolatlon Ot1The Public Health .-\ct.......... ............... ...............I? \'ll. 1-HERE IS NOTHING LtNC'ONSTITL'IONAL ABOUT.-\PPLYI\G THE L.-\WTO THE DEFENDANTS IN THIS CASE ..............................................................16 \'IIL \O\E OF THE ST:\TE'S CLAIMS ARE TIME-BARRED ......................................... .16 A The T%%u-Year Statute of Limitations Does Not Appl}' to Ci\ il Cases ................. 17 B Fhe Disco%er\ Rule Tolb The Statute oY Limitations Period Here .......................2 U C Ihe Fraudulent Nature ot Detendants' Wrongful Conduct and the Remedial Purposes ufthe Public Health Act and the CFA Counsel Stromsl\ in Fa\or ofthe Sts Year Limitations Period ............................ ............... '_1 IN CO\CLl SION ...... ................... ............ ...... ................................................................. 2, CN • I\ I 1''I \ i R-It i I' I 1 I\ )~I I P 1\ It I U I I I\ U\\ I• \I~'ll~~• ItiIH~\II~~
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\0 ,tatentcnt rel,uing, to ,ntol.tnc and health. other than the ,t,uement rcywred h% ticuton -1 o 1 tlu~ .\ct j I~ t..S_C. § ,hall he required on am cig.trette package. tii_mlicantl)m there is no stnttlar proluhmon a,-, atnst the tnjunctice reliefactually souLht bv the tit.ttr In thu case. In enti)rctrw the dutres not to deceive and not to commit unfair trade practices. the Court m.t% properlc grant the remedial, tn)unctne relief sought b\ the State. -S're C'ipollone. 505 [:.S at ~'_8-~29 (state maN rC_'ulate ad~erttbtn! %% hen defendants \iolate the dut} not to deceive). Thc Court need not craft such remedies. houever. until it hears the evidence at trial and is in a position to determine «hat relief is appropriate. V1. THE CONSUMER FRAUD ACT AND THE PUBLIC HEALTH ACT SQUARELY AUTHORIZE THE STATE'S CLAIMS -k. The Remedial Purposes of Both Acts Undercuts Defendants' Tortured Construction of the Statutes Fhe fact the State seeks cn it penalties here does not magically transform this cn it case into a criminal one- Incredibhy. having iust criticized the State for seeking remedial. injuncti\e reltet: the defendants then claim b'ermont "seeks only to impose civil penalties for alleged % tolattons - Reply at 9 The Injuncti%e relief sought by the State here is clearly tailored to etlcctuate the remedial purposes of both acts. to end the decades of deception and unfair trade practices. and to alle% iate the public health hazard created by the defendants' vrongtitl conduct. Llke%~ ue.'-(t1he primary purpose of ct% il penalties Is not punishment.... Rather, these penalties ,en e a rem dial purpox h% making noncompliance at least as costly as compliance." State \Uenc% ,1'\.ttur,tl Re;ource, % Riendeau. 1~7 \'t. 61 i. 6„_. 60? :a 'd 360. 36-1 11 991 ). \ recent l'ntted State, Supreme Court case Syuareh supPorts the StatC s position that the pcn,tlue, It ,eehs here are cn tl ti'C•r I lud,on %. l nited States. 118 S. Ct. 488- 1997 l.'.S. LLX1S ~ I\ I 7 ( 11 \ I IL V, )\ I~~I I.-Itl I'! 1 I\ 11,114 Itil l ltl\ II) I)I I I\U1\ Iti V( ) IRI\ Itll)I~\II~~
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1. I\TRODI CT[O\ In their repl% papers. the toh,tcco delendants repeatedl.\ mischaracterize both the State-s .tllceauons uid tts .trsuments in opposition to the defendants' motion to dismiss. In addition, the dctendants misrepresent controlling statutes and case la\\. \rcordingh. tfte State is compelled to ,ubmn this ,ur-repl} to hrlet7} respond to the delendants' misstatements. fhe defendants misleadlnel\ claim that Vennont's claims are "ditferent*" from those %\hlch ha.e been upheld In state after state. In fact, ho\\e\er. the State's Complaint arises from the ,arrn tort\-tne \ear conspiracy that has gi\en rise to all the recent state attorney general claims The onh difference is that. \\hile other states seek their Ntedicaid costs as part of their pra% er for rellef - in addition to Injuncti\e relief and ci~'il penalties - Vermont here seeks onh tnluncttte relief and cltil penaltlzs. Although the defendants are understandably unhapp} about the facts. Vermont's Consumer Fraud Act counts challenge the \er) same deceptive and unfair trade practices \~htch numerous state courts have upheld under virtually identical "mini-F.T.C."' acts LtLeulse. the predicate acts giving rise to the Public Health Act claims are the very same acts \\hlch form the basis oF the claims brouaht b\ all state attornevs aeneral. I-he defendants repeatedl\ mischaractertze the State's claims as merely challenging the ntarl.eung' of tohacco and 'lulling the public into a false sense of security' about tobacco use. In Iact. the Complaint actualF} alleges the defendants ha\e: (i) intentionally and unfairly targeted chlldren lor the ~ale ol tobacco product,: (ii ) lied about the atidicti~e qualit.. of their products: Ilii) Intrntlon,tlk manipulated lpulatcd ntcotlne Ie\eIs to promote addiction. \\htleden.in~~ that the% ha\e .i one sl. t I% 1 promised to fitnd Independent rCuarch to unCo% er and re\eal t3ie truth abottt the he.tlth rnl., ol'tohacco. hut tnstead rt,nducted a massi\e campaign of deception and .li,lnlornt.won. t\ 1,upprersxd studiCs demonstraung the adterse effects of tobacco: (\t) talsel. CA pIocLunted that "the yue,u n,Ihout,mohlm_ and health is ,ttll a yuestion" and t\ii) unla\ttLll_\• C" U-1 -~ I_ V , I 1 I I ~ il \ I li\1~ i\ I,~I I~Kt I'I 1 I\ V I II 1\ I(I UI I I\I)\\ I• .
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• i & HO N0•825 P•24i5Z • o~9da• ~kg~~IN PRCCTFR f-" 'ti ~ -, MichaeL nomar, En3• • ~ q RaFi~Linpton, Vt. 05402-0988 ' 611opso n TLSa tcher d ~inaton,~inaton Ave 425 {rr New Yorkj- NY 10017 ' R• Jo-4eph 0°hia4rkea, Esqh •, Robert S. PruYnil, Mi4• ChadhaurrlC3 & Part:e gax 310 30 14ackgfeLLrsr HLaxv RVtLarrdp Ut. 0670'1-O'„510 New Yark, NY 1901.2 • HarrY R. R7an, IIIr F_aq,. Aarcn'Clar'kis, Na•1 t ona l Coun:aeL P. o. rvak Ssa " 1307, Ave aP Amtiricas Ru; LAnd, UR 05701-o. +,LO 36th FLOor New York, NY 10019 Mar,iori-e Pregs L,irlctbLom, HationaL K:rLand L. /iLLtss ],53 Eat 53rt1 St New Yark, NY 10022 Peter H,eLlacasaa Er=q• Kirtand ts ELLIs LM Est 93rd Str N4w York, NY 10022 . NichamL 8+ CLopp, Esq. P.O. Box 5009 8uriin4ton. UT y 05402-E:009 CharLes PLatta, Enyuirc B Sesver MeadoW Road P. q• 9ox 200 Norwich. VT 05053-Oh0o R. Ja•FfreY Llehm, Esa. P. o. Fiox 46 GatewaY ,Stuara= DurLinqSOn, UT 05402-0066 Gragorr S. Mertz, Eu,L• 126 Callp4e fit.r Suite 38. PO Sx 1045 FarLfnetor, UT 0s402-104$ $cot L. KLiner E04• MILLar,rgQLettan,efc P. G. Box 1wq9 9urLinatan. UT D5ao2-1499 Stave W, 8erman, Es%. 3301 Flfth AVmnuar Suite 2929 SeAtLlB. Wa 98101 ~ JamGs P. SeLimBn. E3q. *i WfLLpam H, SorreLL, BskL. - SSOI Fi•Fth AvenuH Atty GenaraL 3ultr 29:>' seatt Lc,, WA 98101 t09 State .r"itrnret MantpeLierl 4t. G5609••1Q01 Thomas D. Andrarson, E°..q. PG 9ox 66 G.5tC+mGy S•yuA~re Bur L i ngton, V,' O".i4tlt"r,•--oO66 . ..a,:. 6~/IZ 'd £1£Z'oH HOOUB ~QHVH }I00HS YtdIO £ 8661'LZ"Pt
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MAR.2T.1996 12"49PM G0O*aPROCTER & HO I ~ NO.H25 P.18i5Z . l in this case, eonstitutes a"v:.clation" of the Public Health Act, which was expressly designed to prevent such hazards and risks, simia.arly, the Btatis may b-r3.ng an action under s V,s.A. 5 2458(a) whenever it "13aS tea6on to believe that any person is using or is about to use any atethod, act or practice declared by section 2453 of this title to be urnlaaful, .•• and that proceedings would be in the public interest ...". 9 V.S.A, § 2458(a). In addition to injunctive relief, section zase(b) autnori2es the court to xender any other temporary or permanent relief, including the impoSition of civil penalties far eacn violation. conseqaently, the State may obtain penalties under tha Consumez Praud A.ct for the pePendantsr alleged deceptive and unfair acts. IV. CONSTITQR`TONAZSTY QF THE PEt1ALTIL"S AT xSStTE Defendants next argue that due process protections of the Vermont an$ Pederal constitlttiona denand that the Stats give speeifio notiee that certain conduct will subjeot the actor to penaities. Moreover, Deteri@nnt$ claim, judicil2 construction of the Acts to prohibit Defendants~ a].leged coltduct would violate the constitaztion<31 pxohibitio.n against = p_qgt facto laws. Defendants assert that tte9.thex Act ever put them en notice that the Sale or marketing of cigarettes in vermoxtt could be considered unlawful. In fact, fsefendants ciaim, the State of Vermont has, by its legislative enaCt1pents over the course of many ysars, led those who sell and manufacture cigarettes to believe that tobacco is legal in Vermont if sold and used in 13 I100V& hdxtlH R60HS NId00~ £ 8661 -LZ 'a eW p/5l 'd £l£Z'ON
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tjRR,27.1999 12'4EPM G0II*11PROCSER & VO . ryp,~y P.SSi52 ~..1 The Labalinq A,ct does not aacempt defenda3its from liability for engaging in unfair methods ot competition. 3. Iniunative relief Much like the Supreme Cour:t of Calitornia's holding in Nanaini, we find that "the sola issue baSors us is whether the basis Ior the injunctive relief sought is preempted, It is not_ ... Any challenge to a particular remsdy, should plaintiff prevail an the merits, is premature." MancTit~, 875 P,Zd at 83. We decline to decide at this tim2 whether the prayers for injunctive.relieS are praempted. ISI. 219'hf3dR2ZA'IION DF T$E PE$ATtPTES UNDER TF1E Pt1aLIC HEALi'f£ ACT AND THZ CCNBSiME$ FRADD 71CT Defendants argue that even if the State's claims were not preempted by Eedezal law, neither the Public Health Act nor the Caiisumer Fraud Act could 9upport the state's claims. To this erid, DeEendaAts claim that eithex: Ca) the penalty provisions of both acts are perial in nature and therefore saust be strictly construed aqainst the state, or (b) the acts in qqestion do not permit the imposition of penalties for the prouotion and sale of a lawful product. Defendants assere that penalties are available under the Public Health Act only when the Defendant is shown to have eommitted a°violation,, of a specific statutory provision, rule, regulation, permit or order. They claim creation or maintenance of a "public health ha2ardw( doss not give rise to penalties. Defendants argue that the distinction between a "violation" and a "publie health hazard° ensures that the entity beinq punished for t0 myS hQBtlH 7IOOHS Nd65 ~ Z 966t '!.Z 'a M olZi 'd £I£Z'°K
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( I4^ \ t I2i). 1'_-1-'_> ( I(>ti) ) (yuottn_ Intern.uxmal I l.tr\e,ter Co . 104 F I.C. 949. l/ij6 I I I there mtut he a repre,entauon, practtce. or omisston likel\ to m,slcad Ithe] consunerj J. I21 the consumer( ] must he interpreting tfte messa gr reasonahl\ under the clrcumstances and ( ', ) the misleading efli:cts must he "material." that is. likel} to affect the constuner[' js conduct or decision \\ ith regard to a product. \, the Vermont Supreme Court later noted: "[A]ctual injury need not be sho\tin...... because "representations made [\\nh the] capacity or tendency to deceive" satisfy the ,,tandard. Peahud\. 1~J Vt. at 57 Iquoune Internatlonal Harnesttr Co . 104 P._T.C. at 10~6. Federal Trade C mmistiton \. Sterlinu Drue. fnc .3 17 F?d 669. 674 (?d Cir. 196) U. The detendants representations. practices and omissions as alleged in the Complaint are deceptt.e under this \\ell-established standard. The oft-repeated misrepresentations about the health effects of tobacco. for ezample, are likely to mislead the consumer into commencing or continuing smoking. and the statements clearly ha\e the "capaclt} or tendency to decei\e" consumers Lyuall. deceptt.e are false statements about the addicti\'eness of nicotine. and the t.tlse promises to find and promul gate the -'truth` about smoking and health. rhe Vermont Supreme Court has also set forth three factors to consider in determining \%hrd\er a det'endant s, ctuuns are "uN,ur " under the CFA: I 1 I\\hether the practice. \\tthout necessaril\ ha\tna been pre\ iotuh constdered tmla\\titl% oftends public polic% as it has heen established h\ sttuutes. the common I.n\. or othen\ise - %\ hether. in other ~\ord.~. it is \\nhin at least the penumbra of somc c0muni)n-la\t. st.uutor\. ur other established concept ol unfairness: i'i \.hcther it t, immor.tl, unethical, oppre,si\e or unscrupulous. .ut.1 \i R\1[I\I ~~t R-RI I'I 1 I\ - I I- ~~I'I'~ttllli~\ It~l)I II\I>\\I~ ~1~ ~ 11~ ~\ I c ~ Ul~~ll\\
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\ 11. THERE IS NOTHI\G L\'CO\ST1Ti'IOVAL +,13OCT APPLYING THE La~~ TO THE 1)EFE`DAYTS IN THIS CASE \ccurdlnL' tu the defendants. nu one,hould e\ er zo to trial for \ iolating a statute that has ne\ er becn apphe 3 to the prectae tactual Settinr~ hefore the Court. Reph at 19 A sellrr uf cumptuers cannot he charsed under the CF.\ fur misrepresenting a used computer as ne\\ unless the \ttorne} General adopts regulations spectficalh prohibiting that conduct. :\ eompan\ that lumps lethal %%aste into the to\\n \\ater ,uppl% cannot he charl'ed under the Public I-lealth Act tmlcss the Commissioner adopts regulatiotu. naming the specific \\aste incoh ed. after full notice to the detendants. This "one free \iolation rule"' -allo\\ina la\\breakers to avoid sanction throueh their Ingenwt. - has ne\er been adopted by arn Court construing the Vermont or l: nited States Constituttons. The defendants then resort - et aeain - to re\\nting the Complaint's allegations: "[i]f harm is cau~ed. it is caused nor b% the defendants' alleged kno\\ ledge and intentions. hut h\ the nature of the cigarettes themsel\es." Reply at 19. According to the Complaint's controlling allegauons. ho\\e\ er. it iti the defendants' conduct that created and contributed to the public h; alth hazard at issue here. The defendants' last-ditch 'constitutional' argument must be rejected VIII. NONE OF THE STATE'S CL.aINIS ARE TIME-BARRED Det~ndants arguntent diat the t%co-}ear limitations period for criminal actions contained In 1? V S..\ ;-4505 applies to \•ermont'~ claims is both false and irrele\ant. In fact. the six-}ear ,-r\ II lunrtauonn period In 12 \ S..\. ~~ I I o\ enu the State's ci\ il claims. But no matter \\hich ;,enud ,tpplte,, the dl,cm ern rule tulls the rele\.tnt ,tatute and all of the State's claims proceed in thetr rnurrt\ • I\ 1 1 ilI \ I li \ I~ i\ I•~ I k. K I I' I 1 I\ - I/, - J~I I It ~\ I~ r UI I I\I1 \~ I ~ VI~~l!f A It
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T I in.lll% . C I ,unt ; t: It.tllC n_e, tlhC d elI: nd.mt> cnn,plrar% to yuenh hcalth-haaed rt mpeutiun .trni the prudu tu,n (,t ,.Iler cte.trette, \, demncunt, ,tpparenth concede in then' repl} hnef: ,ueh tntttru,t .tlle ~I.wun, are not preemptesl-;t, the% are h.tsed un the dut\ not to conspire in uu n(trade and nut premned on snwhim_ and health. Indeed, it NWuld he odd it r the dcfenJtutts ta not~ claim otherttise _i%en the\ ha\e ne%er ei.en asserted preemption challen 2es .tc.unst am of the numCrous \ttnrnc% (;cneral antitrust claims based on identical allcuauons. Reco I-ntint~~ -.ts court after court has - that the tobacco companies' preemption .Irgwnents are doomed under the pIuraln% opinion in Cipollone. the tobacco companies resort to .tskimL thts Court to f6llo«' the reasonim, of Justice Scalia. «ho would have fi)und that ecer\' clatm in the C'tpullone case \%aspreempted. See. Repl}' at 5. The fallacy ot the defendants- posltwn is apparent from a re% re t of thz Justtces" opinions in Cipollone. I he fbur member pluralit} opinion held that se% eral claims %ere not preempted under the Cl_arette Labelinu Act but t~%o claims %%ere. -Che three jud_e concurrence b\ Justice Blackmun ~%ould hace preempted none of the plaintiff's claims. See. Cipollone. 505 U S. at b30-542. 1-heri, is simply no support for the tobacco cartel's position that Scalia's opinion - finding each uf platnttf f-s claims to be preempted -- pro\ ides "[tJhe proper construction" of the "based on ,mol.lm_ and health" Ianeuaue of the Labeling .-\ct.' Rel% ing on Scalia's opinion. the defendants clatm the State's allegations are irrelevant. \\ hlle the Complaint challenges the defendants' actions as "decepti\'e - and'-unFair." the delend,tnts .ts,ert that ihe-t 4.nox~ %%It. \'erntont r-eullt hrought its CFA claims. .S' •e. Repl} at 5-(t I the ~)t.uc `c.tnnut hide the truth Jhuut" In cl,umst. But these assertions ahout the subjectr.e I hr JelrnJent,.ire ~%nme tn Ihru.t,~rruwn Ihat Ju~uce 131.tL.hmwti concurrence a(Iuld ha.e relzcted the .•lurairn , IinJm_ 111,11 J.um, rt,:mi,eJ 1m the Jtm not Iu darene are , iable under the .\u Raph .u 5. Rather. 5 IS! n;.nwn ~k,uIJ ii.ne eone lunhrr .md.illu~~cd I.ulure n) %%.vn cl.om, to pruieeJ ,t, \%ell \',!r Cipuliune. ~0> t n r"+ n", 11 ti I Il [ 131. \C I.\II \ ,antrnd, dl.u t, .t maucr ol cumi,tenc,. ue houiJ wn,uue Lulure-lo-«.u n J.uni, nwt i, bawd on ntod.mc .md hr.ilth hut r.uher .n h.nrJ on the broader dut, 'tu intirnn comumers ol Lnomn CO ,nh, il , I IC I NC \1 I\,untend, th.u..m.un i, t m.mer ol irM,utenr,. x+e should construe IrauJulent ON .J.um, 1101 .n h.ncd I,n .t L'rnerJl dw% nnt to JeLei%e hut r,nher ,u'b.twd on ,mul.ine and hc.tlth ' C;.'. \.IniutcJl< C.i,.h ~.I thC,e poniuon, h.i, omtr umLcpm.d .utr.tCuun I loue\er. nur amhitiun here i, nut theureuc.ti -• rut i.uhm i : i,i urJcnl.inaim~ q ~om_io,.ion.tl I•urpo,r I (Ti ,I \ I! ~,I \ I k\ 1t ?\- IN • I I<- K I P I 1 I\ ',III,[\ It) UI II \I)\\1• IW\ it) tJl,\I I„ .4 .
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. tTAR.27.1999 SZ149PM GD6D1~ PROCTER & HO Np.925 P.21/52 \ 1 criminal offenses and not civil actions such as those brought under the Consumer Fraud Act and Public He$lth Act. As discussed earlier, both statutes are remedial In nature, so they must be construed nliberally so as to furnish all the remedy and accopplish all the purposes intended:O State v. Custom Poc Ls, 15a Vt. 533, 536 (1988) (eitations omitted) . A six year rather than two year statute of limitations better protects the puhlie and upbolds the remedial nature of the Acts. Regardless of their remedial charaeter, a six year statute of limitations for civil action$ is appropriate srhen the nature of the ha=m alleged is fraud, See sartels y. AI•qomuin Pro9erties Lt , 47i F. Supp. 113Z, 1147 (1979); 1Z V.S.A. $ 511. in this case, the harm alleged is fraudulently concealing the effects of tobacco, manipulation of nicotine levels, and fzaudulently and unfairly inducinq minors to smokc. Accordinglyt the general six year period for civil actions applies. In addition, the li7Dita.'tions period in this case is tolled due to the Defendants alleged fraudulent conduct, see LTM 2TgLv gf Verm y. tAi$, Grace fs Co:, 152 Vt. 287, 290 (19$9). The application of the discovery rule in this case permite the State's clailus to survive in their entirety. VI. LEGISLATIVE 2NTENT oS T$E PUBLIC HF,ALTFi ACT In their final argument, pefendants claim that the public Health Act was never intended to cover the inherently individuel decision to smo)ce ei9arettes or to encroach on the products liability laW oP Vexmont. 16 67/81 'd EIEZ'oPI Id06tlfl dQddH ?IOOHS NIdiF8 866I'LZ'aBYd
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\k„ulJ h.ne heew Impn„Ihlc .h the dctendants \ ell-I nu. . the State on1.% recentl\ became .r.~.trc ~,t thn practice. .tnd the del'enJant, continue tu dcn. it to this da\. I or ihe,e reau n,. the Lcutslature hroadl% delined a "public health hazard" as "the pouenual harm to the puhllc hcalth h~ \ trtue of an% condition or an} biolo&ical. chemical or ph ,lcal J'ent " I8 V.S.A ~~ -1(9). In an actton brou ght h% the Health Commissioner. the Court ma% "enlomj ] ILture acu\ lues Mhich ma} contribute to a public health risk." "order[] remedial acuon, to be taken to nuu_ate a public health risk or to remo\e or destroy a public health hazard. " and le\ y "cn il penalties not to exceed 510.000 tor each \i.olation.` 18 V.S.A § I30(h(. Fhese pro% isions clearl\ establish the rather unsurprisin g proposition that creating a public health hazard ~ lolates the Public Health Act. Indced- if a creating a public health hazard ~%ere not a , roluarm o1 the .\ct. then the Health Commissioner \sould not ha\e the authorit} to "rryoui tuture actr.lues \\htch ma} contribute to a public health hazard or a public health risk." 13 \' S.\ ~ 1=U(a)( I ) /emphasts added). I1 the Court has an}' doubt but that the legislature intended to make the creation of' public health hazards unla\tiful, it need look no further than the legislature's statement of purpose in en.tctlna the current \erston ot the Public Health Act: to protect the public Crorn such public health hazards- to preserce the tntegnt\ and components ol the human em ironment so as to pre\ent the creation of public health hazards. and to mitigate risks associated therz \ith." I o dcpn% e the Con)musioner of such a po\\erfitl enforcement de\ice as the civil enforcement ,lLunn pnt\ Idkd in 18 V S..\. ~ 130 \%ould he to ,eriouslh undermine that broad remedial 11urpu,r ~rr Riendeau. 157 Vt. at 6_'U-2l ("tl'r lr) nuw lind rlrut dte Le,Lnlunu•r uxencle !wurli i'1lPW)lc' c N/l%<'(/f!(')!ct's h'W)l l11c SrCrc'lm_t N 1u11trrr lu -ic•! "'I I "s~ \, '-n", \JI ycc% i: I ~ I\ I I , 11 \ 1 1<\1( 1\ IR-li1 f'I 1 I\ - I-l - .~Iq'~~\Ili~r\ It~l)III\I)\\I\ '.I~illi~\ I~IUI\\ll~~
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MAFt, 27.1998 12: 49PM GIIOVP PROCTER &HO P,26i52 virtue of ,.. any biological, chemical or physicaZ agent." 18 v.S.Al $S 2(e). 2(9)• In addit.ion, the Consumer Braud Act prohibits Mdeaeptive" trade practices. 9 V.S.A. S 34s3(a). Given the controJ.iing allegations of the Complaint, Defendants' argumant that they were not put on notios o# their alleged wrongddoing is specious and uaconvincing. Further, the Stats haS alleged contlnuislg violations of bath Acts, and does not seek to apply either statute rstroactively to conduct occurring prior to their effective dates. The allegations of conduct prior to the passage of the statutes at issue is appropriate to elucidate the alleged purpos® and character of Defendants' later actions. See, e.g., Federal Trade Comaissien w Cement rnstituta, 333 U.S. 623, 704 (1948). Consequently, De;<endants = PCB't Faeta argument is irrelevant. V. STATUTE Qa LTMITATIQNS Defendants argue that even if the State's claims are viable under either the Public Health Act or the Consnsaer Fraud Act, the vast majority of the claims would be barred by the applicable statute of h mitations. Defendants assert thax, in dermont, an action seeking the iatposition of statutory pes>alties are governed by a two year statute of limitations. See 13 V.S.A.. S 4502 gt s~ELj. Accordingly, DePendalRts azsue, all of the State's clains involving conduct occurring prior to May 29, 1995--two years before the Complaint in this cassa was filed--are barred. The statute relied upon by Defendants, 13 V.S.A. 5 4505, by its plain language and its codification in Title 13 refars to 15 8l16i 'd UEZ '°H HOOyg ~QHVH XOOHS Pid0M a661 LZ '1eK
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hFiR_27.1998 12%49PP1 G P`'aT~ & ~ i P rp,8Z5 P.19i"a2 compl'sance with the etatut.es. nefendattts argue that because there is nc allegation in the Cwdplaint that the Defendants failed to comply with varioqs statutes which regulated the sale and distribution of cigarettes, the state may not seek to collect penalties and damages when Defendants complied With and relied upon those laws. In addition, Defendants claim that if the mar7ceting and sale of cigarettes since 1953 in Vexmont violates the Public Health Act and the Consumer Praud Ace, the imposition of penaZties would violate the U ACS Ract4 Clause of the United States Constitution for two reasons. Pixst, Detendants indicate that the Consuwx 8raud Act tcok eEfect as of April 17j 1967, see 9 V.S.A. 5 2451, and the civil enforcement provisions of the Public Health Act became eE#eetive on July 1, 1986, sea 18 V.S.A. S 130. Therefoxe, any attempt to apply the Acts to•conduct occurring befoxe th.ose eflective dates would violate the XX F_M ac ClausU'. Moreovet, similar to the violation of due process, Defendants assert that x'etroactivee application of the Acts, o/hen the Defeadante never had any pfair warning" about the prohibit9.oa o# their conduct, would also violate the clause, The Statefs Complaint does not challenge the sale or marketing of cigarettes, but rather challenges the Derendants' alleged unlaWful conduet in engaging in unfair and deceptive trade practices and in centrib¢tinq to and creating a public health hazard. The Public Health Act clearly pxoscribes conduct which increases "the probability" og "harm.to the public by 3.4 6fi/9l 'd £i£Z'aN Roava haZVx xooHS -KaOo : £ 2661 U "M
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1; i«hether It CatnC, ,uh,tanual Inlur\ to cumumers . C hn,tlc % I)ulnue. Inc . 136 \ t ~97. ?9h \'d 1?85 1 19791 (quoting F.T C. \. Sperr\ X Ilutchln,,,n ( t,,-4U5 t.S 2;3.'-1-1 n.~ ( It)7'_)). I he State ,, allegations concernmi,, the detendanu' taraetine of minors meet this test. It is t,llcn,l\e to puhlic policN . gnen the Ia\\s a'aln~t the sale o/ tohacco to minors. It is also Imnulral. unethical. oppresst\ e and unscrupulous to target chtldren for addiction to tobacco product_~. and the result is certaul} substantial ilyur} to consumers, Siniilarl}"'unFair " under du, e5lahhshcd test is the defendants' alleLed antitrust conspiracy to suppress safer products- and the manipulation ot nicotine le\els in tobacco products to promote addiction. Faced «ith clear liabiln\ under 9 V.S.A. §s ?-L>>(a)'458(a)-(b). the defendants claim that onh b\ listim_ each and e\ en concer.'able unfatr and deceptive practice under the sun can the :\ttorne\ General enforce the fa\\ Reph at 17 But this interpretation is inconsistent \\ ith the plain IanguaLe otthe statute, and \\ould re\\ard the ingenuitn of decepti\e manufacturers nnd sellers throuehout the State of Vermont. Indeed. althoueh the Attorney General has adopted no re,ulattons on the particular conduct, the Vermont Supreme Court has found the following trade practices to he proscribed b\ 9 V.S.A. ~'_-l53(a): ( I) calling a vehicle a 1974 Saab \\hen some ol its parts came from a 1972 Saab: ('_) misrepresenting that a tractor engine \\as a 197?/-400 Cumnuns eneme \shen- in tact- it \\as a 197?1370 Cumn)ins enuinety (3) a time-share seller's inurepre,entation that he o\\ned the ski-mountain adjacent to the lodging and \\ould de\elop the ,Li area for the e\ctusi\e use oFdte tune-,harers:' (4) a seller's adcertisement t;tlsel\ ePrc,entu)i_, the .t\atlahlht) oI a taX credit for the product ad\ertised;"' and (5) renting out an 1>: \ t at 462 Lj , rrr,lt 1krnard ~ C entr,d C'aralln,t I ruc6 S.IIc, Inc .: 1-t S L'_d 582, >83-54 ( 1981) (dcclded wlder W "IliL h ii6e \ anwnl , C P\ tr,1~6, ihe I I C .1,[ , Lm_uauel ~Lne,V \ C[ rilotlt \ 11etJllldn. la~) \ I <y-1. "t3 I 19s11 \l:nlon% lodtn,on.\I)r\Iuritoro.!-)-\t'~h ~ I ` \_'d :'Illt)SGI ,I\ i l i11 \ I R\lt /\ I~~I K-I:! Pt l I\ I'I'll~l1ll \ II~I)I!I\I)\\I~ \I~ 11 I~ ~\ I ~ ~ UI~\II»
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0 0 Page 13 118 S Ct. 488, 1997 L S LEXIS 7497, '41, LEXSEE 139 L Ed 'd 450 66 l. S L W 4024 ,vme chat Halper was 'the rare case" in which there was an'overwhelmtngly 1`421 dtspropontonate' fine) But that is not what the Court there said. And nothtng in the majonty's optn- ton today explains why we should abandon this aspect of Halper's holding Indeed, in context, the language of Kennedy that suggests that the Court should consider the statute on its face does not suggest that there may not be further analysis of a penalty as it is applied in a particular case See 372 1J S. at 169 Most of the lower court confusion and criticism of Halper appears to have focused on the problem of characterizing -- by exam- ining the face of the statute -- the purposes of a civil penalty as punishment, not on the application of dou- ble )eopardy, analysts to the penalties that are imposed in particular cases. It seems to me quite possible that a statute that provides for a punishment that normally is civil in nature could nonetheless amount to a criminal punishment as applied in special circumstances. And I would not now hold to the contrary. That said, an analysis of the Kennedy factors still leads me to the conclusion that the statutory penalty in this case is not on its face a criminal penalty Nor, in my view, does the application of the statute (*43) to the petitioners in this case amount to criminal punishment. I therefore concur in the result. ~ LEXIS'• NEXIS' ~ LEXIS• NEXISS ~ LEXIS• NEXIS
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749 1 ( 1'>97) ( uphulJin_ et, il penalues and deharnlent [ix hank loan % iolattims against double I~!ttpard~ challcnee) \, the Cuurt noted \\ hether a particular pumshment is criminal or civil is. at least tnrttall\. a matter of statuturn cunstructton. ... A court must first a,l. %%hether the leLislature. "in establishing the penalizing nlechanlsm. indicated either eNpresslY or imphedly a preterence for one label or the other- 0 at * 1 1-1 _' 1-lere, the Legtslature has clearh determined that the penalties are ctniL See 9 V.S.A. ti2-1~8(b) (°cr% il penaltN- authorized tbr violations ofConsumer Fraud Act): 18 V.S.A. l30(b)(6) (°ci\il penalties " authorized for \iolauons of Public Health Act). Indeed. the civil penalties set forth in § li0(b)(6) of the Public Health Act stand in stark contrast to the criminal penalties set out in § 131(b). 18 V.S.A. Section 131(b). which is not a part ol the State's complaint. provides tines of535.000 and six months in prison for persons «hu elther refuse to ube} an order issued under the Act. kno«incl~ create a public health hazard. or Lnu. ingl} contribute to a st gntticant public health risk. As the Court held in Hudson. only in extreme situations will courts "override legislati\e intent and transform %hat has been denominated a ci\ II remedy into a criminal penaln•.- Ic( at * 13 " 1-he defendants can make no such sho\kine here. Sieniiicanth. the Supreme Court in Hudson rejected as "unworkable" the test it had proposed in l nited States \' Halper. 490 U.S. -436. 448 (1989). namely. that any deterrent or rctnbuuVe purpose makes a sanction "punitive"' or "criminal. The Court thus rejected the cery te,t relied upon b) the defendants in their opening brief. .See Defs. Opening .1v1em. at 20-21. As the I iud,un C urt noted. after tlalner: "lt e ha\c stnce recognized that all ci\ il penalties have ,ollld deterrent eltecl Ht1d1011 at *2I), Indeed. the Court ,trc'.ssed. "deterrence 'nla)' serve ci\il .t, %%cll t, crunulal 2oab ... Furthrrnwre. hi~toncall\. "nlone\ penalties" have not "heen \ ie\\ed \,.,,p\ ~rt th.rt Jecmmn n proN iJcJ ,n I\hihtl '_ fu thn hntt CO C7\ I ho,r .uu.wom..uc J~IineJ hk Ihe Lt,hon cluIiJatrJ in \\_trJ. 448 t: S.u _'48 I he Jakndants do not U t ~ ukm:,i i„ ..w.i, ~lir 1\ ira .w.a,.n herr rt0( "Iuld 010 CS7 ~ , I \ I I ~ ~I \ I I(\11 ~\ I • •I R-Itl I'I '1 1\ - 1) CO ~~I'I'ti,lll~iA I~~UI II AUVAI• V~~IIi~\ I~tUI,\II~~ CTt
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In their repl~. thc dc lend,tnt, c(mcede Vcrntont'~ dt;cu~sion of Ric ndeau is c:s5entialh .i,xur.ue ( 0n,truin LI the \ er. ,t.nutc th.tt «.t, the mude l for the Public I-Iealth Act, %rc• State's )pp at -l4. n 17. the Rtendeau ('twrt rejected the arsument that the Secretan must first define uh t.tnual N iolations" before the detendants could be assessed «ith the ci ii penalties under I I) V.S.:\. ~ I?7-11a1(6) While the defendants are correct that 10 V.S.A. I'_59(a) prohibits the dtschar_e of «aste %tuhout a permit. and the Riendeau detindants lacked such a permit. that nro% ision nla% ed no apparent role in [he Court's anal.sis. Riendeau counsels stronah in laor of the State's position here. finalh. the defendants \sould like to complete]y re-t+rite the la~c of due process and civil procedure so that no one could e\ er be sued or tried unless rhe t•erv rortclucr at issue was ,pectlicall} forbidden h% "prior legtslau\e% admmistrati\e. orJudicial pronottncement." Reply at I? It is not enou h. ~a% deflendants. to prohibit conduct %% htch creates a public health hazard. Rathcr. the State must list all such conduct - tncludin * poisoning the town .ell, spra} ing agent orange throu,hout the state. manipulating nicotine leiels in order to promote addiction, tar eting nunors tor addiction to tobacco. and errrr oncer inurs,>i)tcrhle ucr ncut rreares puhlic health I)rohlenm hnder the defendants' lo.gtc. it wuld not be enou_h to proscribe the intentional t.tktn, of human life: rather. under the defendants' the State must list every possible implement of death in the statute or the murderer «ill go free. Putting the State in such a straight jacket %wuld not be -'due process". u~\ould be no process at all- which is exactly what all def'endants desire. Portunateh for the citizens of Vermont. such is simpl} not the law. \ot\% nlutundtnu the detendant,' «rhal acrobatics. their conduct in creating a public health hazard learlx % wlatcs the Puhhc E lealth .aCt. , I\ I I ( )I \ I k\I(t\ I~.I k-RI I'1 1 1\ ~ 1I'Pt )\IIIli\ I, ~ I)I I I \U\\1~ \II )IIu\ It tUI~\II~ti
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o i irnteJ puhlrc.rtuon, tnd I~ r thc a,ncc.rlment tnd ,uppres lon ot mtimnation and research on nic ,trnc .rddictr rn ,rnd the harmfulne„ nf the defendants' tobacco products. .4re• C ipollone. ~0~ I 5.u ~'4 I"It)hr 1ct does not ... pre-rmpt petrtroner s claims that rely solely on respondents' te,un,-, or research practices or other acuons unrelated to advertising or promotion."): rel at 52= I the Lahelm_ Act "does not generalh pre-empt 'state-la%s obligations ... to use a demonstrabl} ,.ttcr alternati%e design lur ciLarettes.-) In their reply. the tobacco detendants urge this Court to ignore the Complaints' alle_attons. since rher someho%~ knotc in their heart ot hearts that "the State's clainu are predicated not on the alleged misconduct, but rather on the detendants* failure to disc(ose the misconduct." Replr at 6(emphasts in ormnal). But this is nonsense. No«here does the Complaint assert that it nould be tine for the defendants to quash health-based competition so I mg as the% informed the puhlic. It u eyualh preposterous (or defendants to ,uppose that it ould he all ri_ht for them to target mmors rf onl) the} «ould come right out admit the purpose oFthe Joe Camel campaign %%as to cause children to li6ht up. Furthermore. the Public Health Act does not sa} that "Defendants ma% la«fitll} cause a public health hazard so lon= as dler inform the public of their intent." The tobacco industrN 's attempt to re-write the Complaint and the la%% should not he allo«ed to pre\ail. Pi,. THE COMPLAINT ATTACKS THE SAME PATTERN OF MISCONDUCT \N HICH HAS GIVEN RISE TO ALL THE RECENT ATTORNEY GENERAL ACTIONS AGAINST THE TOBACCO COMPANIES 1~ ttchrm_ tacLs. detCndants assert the State'; Complaint is "ditterent" from the other Lnm, hroueht hN .\uornc% s GcnQral because the State here does not seek Medicaid dama,ts. Itepk .u 6. \\ hile tlus is true. Vermont is not "untyue-- in szeking "monetar} penalties and "„rrccti« intuncu e relie!" ba,ed on detendant misconduct. As defendants t ell kno c-- h,i~ in_ repe.nedl% lu,t in their elti,rt5 to dunu~s state consumer protection counts seeking civil _ n- • I 1 I I ( d \ I It V( A 1,~ I R,It I I'! ) 1\ ~~1'I'i N I1()N W I71iI\U\\ I•
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,t, hunnluncnt " IJ u '2t) I in.tll cll cn thc occupauonal debarment of thr hanhers tn%olved in I lud,on -,tlthou1-'h it ,cncd a deterrent purpo,e m that it \\as "intended to deter future ..n,npJoinl-l" - al~u ,erned a necessarN ci% il purpose in allo%%tng the Go ernrrrent "to eneage in C1fectt\e rruulatton ofinstituttons such as banks." Icl at *'_J The same is true of Vermont's need t rl.!eulate the tobacco industry In short. I ludson %iuates the dctendant,' ar uument that the ct\ tl penalties sousht b% ' \'ernwnt renders this entire action "punrti\e° or "cnnunal" in nature. Therefore. defendants' ",tnct construction" argument talls. as does their argument that a limitations period from the criminal procedure act applies to this action.. 13. Vermont Alleges Clear Violations of the Consumer Fraud Act (he Consumer Fraud Act ("CFA`) clearl\ states: L hfair methods of competition in commerce. and unfair or cleceptne acts or practices in commerce. are hereb% declared unla\k ful. 9 V S A. j 2453(a). There is no requirement that defendants first violate an tnjunction or a regulation in order to he ti und liable (or ci\ tl penalties. Under 9 V.S.A. y?-4~8(a), the Attornec General ma\ hring ,tn action to restrain am such un(air or decepu\e acts or practices. C'nder 9 V.S.A. § 3-3i8(b). °in 'ahlurnn tu the Iremedies authorized in § '_-i58(a)J: " the Court mav impose "a civil penalty of not nwre than S 1(1.U00 tix each \ tolation." Vermont la\\ is clear: "Vermont's Consumer Fraud Act makes it unl.M ful to emplo% 'unfair or deceptn e,tcts or practices in commerce.- Peabody \. P 1 " , \utn Inc. 1>3 \"t. 55,. 57. ~69 A.2d 460. 46'_ ( 1989). Doing \\hat the CFA makes unL.m tul n a"\ iolaUon" of the CF \ I hric n no great tm,ter\ as to %\ hat consututcs unl':ur or decepti\ e practices in \ tolauon 'lI the C I.\ I he elentents of,t " lecepu\ e act or practice" are set Ibrth in Poulin \. Ford M oto9~ C:d ~ ~ -f~ ,I\11~~I\IH\I~~\I~~,IR-Itii'llI\ -jll- ~~ ~~~~Pci~lll~i\ Itil)I II \I)\\I~ ~ `.1'l11(A Ill N"\tl\\ ~
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RC~VflIi1C tiI ohltl~catlUll. the dClelld.lilh Cl.lllll bI2CalhC the Public I lealth :\Ct Coltllts are h,t,ed on ,nu,hlne and health. and the ccm,unler lraud count, Imol\e advertisin, and promotion. l nf the counn.tre preempted. Repl} \1rm. at'-a Not.\Ithstandin g the delendants' sophlstn. thl u_h. C lpollone makes rnstal clear that states ma\ regulate false and deceptive ad\ertising. Crpollonr. 5Q~ f' S at 5'_8->;0. Furthermore. C'iyollone also makes clear that health-based requlrement> or prohibitions nlaN be imposed on conduct other than ad\ertislne or promotion h( [t Under these clear standards. none of the State s claims are preempted. .-\s the State has alread\ pointed out. the Cipollone court squarel}' held that claims based on the "dutn not to decene` are not preempted- e\.en \\hen the} seek to tmpose prohibitions hased on ad\trttslnc. 505 C.S_ at ~38-i?9. This holdmg tlo~+s directly from the language of the L.lhelul<_ Act itself' claims premised on the duty not to decel~e are not "based on smoking and health " Al at 530. In the present case. Count 4 o[ the Complaint is predicated on the dutn not tO decel\ e and the dut. not to commit unfair trade practices. lt is ~ Iable under the Cigarette L,lbeline Act. .\pph inL Cipollone. the California Supreme Court upt.eld an unfair trade practices ehallell!!e to R J. Re% nolds' notorious "Joe Camel" campaign. ~\hich had been inordinatel} ,ucceS,ILI in taruetine minors. Ivlaneint l. R.J. Re\nolds Tobacco Conlpanc. 875 P.2d 73 1 1994) The Ntarnulnl court held that targeun * minors \ iolated "[t1he predicate duty ... not to cn_age in unfair competition b} ad\ertisln g ille gal conduct or encouraging others to violate the l.ll\ " Ill at 80. Like the claim upheld in \tant-nni. the State's claim in Count 3 is \\holly LulhNCtll \Vth lhC l..theltlll ACt,, ptlrpole to promote interstate ttlllformlt\ in the R7_L'Ulatlon of Icar tt n1.mulacturers. since it l, based "'on u,imgle. uniform standard' do not tareet nlinors. " U u Stl. (llrl,rlm'C Ipollone. 5U~ ['.S lt 5'l1 \lllreo\er. the State also challenges the deceptl\c Il.ltlll"e 01' [he ilCtelldalttl CotlLjllCl in tarL'eUnL Iltln(m,. .\ccord111Cl\. Count 3 is not preempted. cx:) C\ (Jd ~ (Si ~!\Ii~~I\Ili\1(j\I~~tk-KII'I) I\ -•- -~ ~~!'I'~~\III~~\11~171II\I1\\I~ ~ \Ik ~ II"\ I( I UI~\I1~~ - ~10
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hcrtj lue, ,tnd Inluneu c reltrt tikrd hN other ,tate, - 111,111% t ther states hace brousht nearl\ Idcntle,)I clalm, ,crl.ui_~ nearl Idenucal rellef \, the delendants also \\ell Lno\\. \ ennont does not mereh• assert that the defendants' "marl.eun_ - han "lulled vnukers into a false sense of securtn concerninu smoktng.- Replvat 6- 7 Far from helm_ a"fwlure to disclose" claim. Vermont here alleoes that defendants have ,teu\el~ and Intentwnttlh ta-Leted mmors, del+beratel} quashed thedex elopment ofsater products- suppressed independent scientttic stud} and lied to the public for }ears about the .)ddtcu\eness and the deadl} effects of their products. Indeed. nearly identical allegations have led one Court to proclaim that The case at bar is certainlv not one alleeine °«arden variety" business fraud. In its Third Amended Complaint the State alleges a parade ot hornbles that would seem to make out asase for the "mother of all RICO actions." \tate of Florida \. The American Tobacco Cumoam•. et al. \o. CL 95-1-366 AH (Palm Beach Co.. Fla. Cir. Ct. Dec 6. 1996).' The defendants' claim that such flagrant misconduct is garden \arten' "marketin«" is disingenuous. V. INJUNCTIVE RELIEF IS CLEARLY APPROPRIATE UNDER BOTH THE CONSUMER FRAUD AND PUBLIC HEALTH ACTS \t thisjtuncture. Vermont seeks public disclosure of sttppressed research and funding oC correctt\ e anti-tobacco campaigns. The State does not seek "package u,arnings different from th )se ,pecttied b\ Congress." Repl}. at 9. That relief is squarely preempted by 15 U.S.C. $ I? ,-Na). \thtch reads as ti llo\\s C m,dh,nr duc, riot +upport the dctendant> .t„ernon that the Labelura Act presenes for the vtates onl. I•n"JuLt I+.ih+hn Ihranr, ~ InJeed m+nc ot the ')t.uey haxe e»mrd'~produet hab+hts-' ur "~ubrugauon° clavny dcicnd.+qo_ \,..• : e (- itn xCount, ol ti.m I rancnco , Philip \lorris. Inc . 957 F Supp I 1J01N D Cal I I publiL cnuue, do nut md nred not--.i„ert either ,ubro_at+on or product Iwb+l+tn CI1n1K to recover 00 \I~J+~.uJ ~,I+en,e,+ I Il+noi, , I'hilin \I,ari, Inv .\o U6L 13 146 +Coul. (. o. Cir. Ct. 111. Vov 1_. 1997). ¢ \mcn1.in I,~b.+«++Co-\„ 96-'--I~q~n-8tii..\ehin_C'o.0.'ash Super C[ Noe 19.1996)(samet C:J \.~~I„ .~+ th.u J«i,ian i..+u.+~hrd.n I~hihn I t,~ du, bnrl _r, CT) 4~- Gb ~ I\ I I ~~ I \ I I: \ 1~+\ I~~ I IL R I 1' 1 1 I\ - - C~,! ~)I'I'( N I It i\ I++ I)I I I\I) \\ I~ \I+ill++\ I++UI~~\11~~ -
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i c inloumrn ,t,uwht to pm,ecutc Itttlr Lnomn and obsolete %tulahons. Parltarnent IhCrrl„re ,0u1-1ht tu curb ahu,r. e qw nrcn acnom h.~ adopting a one-% ear statute of limttatlons.' Ltl.r I',trlismentI the \'rrniunt Ir Lt3latttre ~ought to curb ahu,nr yr i tanr actiuns b) .tdopun_ a,hurt statute of Itnmauons ti r acttons brought b} relators.'In 1797. the Legislattu-c tmpu,etl a onr-% ear statute of' Itmttattotu on actions brougfu b}• refators. and a mo-}ear statute hmitattuns on identical actions brought b% the State. In 1808. the Leuulature Iitrther diRerenttatecd betneen actions brou_ht h\ common tnformers. t\ho \%ere subject to a one- ear ,tatute of lirnttations. and aegrie%ed persons. nho benetited from a longer mo-}ear statute of limitations See Abbadessa % Teeu. 121 Vt. 2l?. 219, 154 A.3d 483. 486 (1959) (purpose of I YU8 Act \+as to make cienr' that an augriz%ed person ~%as to stand better than a common intrirmer "). The Lecislature's earlti' efli>rts to distinguish among actions brought b} ym Iaun ruiator:s .tnd those brou_ht h% a<<<urie%ed persons can still be obser%ed tn the statutes of lunrtar codtfled in the criminal title. Compare 13 V.S A. § 4i0-4 (one-year statute of limitanons \~ Ix qut tum relator collects entire penalty) ttuh 13 V.S.A. y-h05(t~s•o-cear statttte oC linutationa tthen yur rum relator collects part of penalq )Luxt 13 V.S.A. y a306 (four-year statute ot lunitattons fitr actions brought b% aegrteted person). [n 19';1. Vermont abolished all ytu lurrt suits, e\cept those brought for the reco\er. o: tkrt-Citures punuant to a specitic statute. as in Abbadessa. See 13 V.S.A. > 725"', as amendet. 1 t)~ 1.\ct No- i4. ;'_. To the extent that the ttt o-\ 'ear statute of limitations in 13 V.S.A. ;-f~ _ 1 I:li[ . c~. ,ect ~ t 1~8`>t P.uli,mxnt ,tdupIrJ u tou-\e,tr statute o( Innitattons for identical actron• hrou__ ht hr (ht C rusvi Id 1 he m.rr,2m nQ\t to,eLtwn I. Ch,ipter >Y m the I"(P ~ ermant Statuton C'ompilanon states. "Qw Tam ion„n, Imtned " I ha test ot 1Cction I re.td, 'It n hereb~ enacted b\ the Ganeral a»arnbh uf the State ut Vern: I h.u .JI mwns. ,un,. bdh. or mtorm.moro ,% lu.h ,h.tll hereaftcr be had. bruuLht. sued or commenced. ior en} :,mcrturc up0m m% pen,tt ,t,ase, ni.tde ur w h~ m.tde. the b<netit \0creoi is or shall be- b. the said stntute. Irmit, ,hoir n in part. to dw p•r m, r pcnun "h,1 •hall ma,rm and prosrcute m tha behalF, >hal! be had. brocht. u. .IImmen~eJ I„ im penun or panwn, ~% ho in.n Lto talh purnue ihe,arnr a, atorasaid u rthrn one %e,tr tront die .,i thi, t,t .m,l rn dei.uiit „t ,uln pw.uu then ih,! .une hel I tx had. brotrJn or prosecuted b% the v.ne .!t ,tn, , .duu i", • r.ir, , .nq' h.ni, .t.l,lrj I I"ItI Iattt.(,,tit-ICIIItiIL (,_ $b3154.0;jc ~~I~Pt,.llu~~ Irtulll.u~.l, ~ntll~~\ It,ui,\n„
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0 0 Page 3 I 18 S Ct. 488 printed in FULL format. JOHN HUDSON. LARRY BARESEL. AND JACK BUTLER RACKLEY, PETITIONERS v. UNITED STATES No 96-976 SUPREME COURT OF THE UNITED STATES I l8 S. Ct 488; 1997 U.S. LEXIS 7497; 139 L Ed. 2d 450; 66 U.S.L.W 4024; 97 Cal. Daily Op. Service 9228; 97 Daily Joumal DAR 14861; 11 Fla. Law W. Fed. S 265 October 8. 1997, Argued December 10, 1997, Decided PRIOR HISTORY [*l1 ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT. Reported at: 1996 US. .4pp LEXIS 19982. DISPOSITION. 92 F3d 1026, affirmed. SYLLABUS The Office of the Comptroller of the Currency (OCCI imposed monetary penalties and occu- pattonal debarment on petitioners for violatmg 12 US C ~§ 84(a)( l) and 375b by causing two banks m whtch they were officials to make certain loans in a manner that un- lawfully allowed petitioner Hudson to receive the loans' benefit When the Government later criminally mdicted petitioners for essentially the same conduct, they moved to dtsmtss under the Double Jeopardy Clause of the Fifth Amendment. The District Court ulttmately dismissed the ndtctments, but [he Court of Appeals reversed, rely- ine on L'ntted Stares t'. Halper. 490 U.S. 435. 448-449. 104 L Ed 2d 487. 109 S C1. 1892. Held The Double Jeopardy Clause is not a bar to pett- noners later criminal prosecution because the OCC ad- nunutrau%e proceedtngs were civil, not criminal. Pp. 1-1' i.u The Clause protects onlr against the 1"_] imposition ot multiple criminal punishments for the same offense Sec c~ . Helterrnp , Lfttchell, 303 L'S 391. 399. 81 !. F.d y17 =,ti' S Ct 630 Halper destared from this (uurt , lonest.mdme double ieupard' % doctrine in tuo Lcs rr,peLI, Fir,t. it h%patiud the traditional threshold yucwon %Ohcther the Icei+lature Intended the p.uticular .uL~c,.r.rpuni,hment tn he ~iail' or Innun,tl' in na- ture, see, e.g., Untted States v. N(zrd, 448 U.S. 242. 248. 65 L. Ed. 2d 742, 100 S. Cr. 2636, focusing instead on whether the sanction was so grossly dispro- portionate to the harm caused as to constitute "puntsh- ment." The Court thereby elevated to dispositive sta- tus one of the factors listed in Kennedy v. Mendoza- Martinez, 372 U S. 144, 168-169, 9 L. Ed. 2d 644, 83 S. Ct. 554, for determining whether a statute intended to be civil was so punitive as to transform it into a crimi- nal penalty. even though Kennedy itself emphasized that no one factor should be considered controlling, id., at 169. Second, Halper "assessed the character of the ac- mal sanctions tmposed," 490 U S. at 447, rather than, as Kennedy demanded, evaluating the "statute on its face" to determine whether it provided for what amounted to a criminal sanction, 372 U.S. at 169. [*31 Such de- viations were ill considered. Halper's test has proved unworkable, creating confusion by attempting to distin- owsh between "puntave" and "nonpunitive" penalties. Moreover, some of the ills at which it was directed are addressed bother constitutional provisions. Thus. this Court largely disavows Halper's method of analysis and reaffirms the previous rule exemplified in Ward. Pp. 4-9. (b) Applytng traditional principles to the facts, it is clear that petitioners' criminal prosecution would not violate double leopardy. The money penalties statutes' express destenanon of their sanctions as "ctvil," see §$ 93(b)(1) and 504(a). and the fact that the authority to issue debar- ment orders is conferred upon the "appropriate Federal h,mkmg agenctes." see §p J818(e)(I I-(3), establish that (-aneres+ intended these sanctions to be civil in nature. %h,reo%er. there n little e% idence -- much less the 'clear- 071/4 LEXIS• NEXIS' %/~ LEXIS'• NEX1S' %~ LEX1S• NEXIS'
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\. Thc T« u-1 c:tr Statute of Limitations Does Not Apph to C•iN il Cases I he delQndant~.ul, thlti Court to i„nure hoth the placement of 1? V.S.A. `45,05 in the i rnrrnul title. tnJ the plain laneuaer u(that ectton. t\htch ,tated that -li0j applies to utfrnse,." Rept\ at'_0. :\ccurding to t31ac}.'s La%\ Dic:ttunarn. an °ottense" is "[aj ti:lom or ml~demeanor: a breach ol the criminal lans.' Simpl} put. this is neither a crinunal, nor a puntu e action. and the detendants are not charged \\ith criminal "otienses." Theretbre. the nw- }e.tr lunltattons period in 13 V S.A. § 4505 does not apph here. I he defendants rel} on a series of outdated cases to suppon their assertion that this limitations period applies to ci\il actions. Rzpt} at 20. Neither Richardson v. Fletcher. 80 Vt 10, 69 A 135 ( 1908) nor Abbadessa \ Te'~u 1_ 1\'t. ? 1~. 154 A.Zd -183 (1959) e\ en addressed the issue of NN hether. 13 V.S.:\. ~-4~0> applied to ctx tl cases. Abbadessa and Richardson are there(ore not on point here. Indeed, the reason the parties in the delendants" ancient cases simply assumed the criminal fimitations period applied to actions seeking ciNil penalties most likely stemmed from the long-jettisoned notion that eten action tor civil penalties \\as in fact "punittce° and therefore not cr. )I. See Richardson. 80 Vt at ~ 1? (statute pro\•iding tor penalties ""Nas a penal statute'-). \e%sman ~. \\'aite. -l; \'t. 587. 591 ( 1371 ) (precursor to § 4505 applied to "criminal prosecutions and actl ns on penal statutes."l l; nder the modern rule. as discussed in Part VI.A. sttpr•u. Courts ,tre clear that "the primar} purpose oFci\il pznalties is not punishment." Riendeau. 157 Vt. G15. n'2 t 1t791 ): ui.curtl Ifudson. I 18 S. Ct. 488 :\ecordinul\. the detendants' argument cannot \ Ith,,tand xrutlm 13i %i ti, I \tt thi nu\ NIt\ Pp ~"S i~ I d I`t-q) tioinrnrne% the tenn u.ihu used to mclude aUuum ~ rnd, 1 .i ~nmut.ii ,t.itutr 61r ••' hiih the renied•• n meirlN .i On il uit to rc<<ner the pen,dt% "/,/ CNcn the lini, J~~ moi „nl:nJ ihiI ;h C''t ( I \m l ih 1' hh I Idth \ t r r l l . I c . c u ...L. .,• L , i e pu ~ Lnmmt c stuutae - I\ I I 1 11 \ I R\11 i\ 1~~I R-RI I'I S I\ . ~ I' I't ~~ i I I( '\ 1 ( i I) I I I\ U\\ I• \Itillit\ II il)I11\IIti\
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rtment ++hen thr I.lndlnrd Lne++ ihe .q',lrnnent + iul.uC+l health and ;afet\ cutlea." \; these r\.uni k illuItr.uc. the C I \ me,m, e\.lctl+ ++hat it a+~ deceptl+e and unfair acts in trade or ,ommrne lrr unLl++iul. 1 inall+- the detendants meo111-Iruousl+ sueIZeat. ++rthotn authorin. that the fact that \'Crnumt ,lllu++> and regulatc:s the sale of cicarettts sonxho\+ precludes the State's Ch:\ claima here DcfS.' Br. at 17-18. \\'hile the State allo++s the sale of tobacco. ho\+e+er. it has ne\er .unhorved the manlpulatton of mcotine le\ els, the destruction and suppression of the \ en ,clentilic e\tdence the defendants pledged to promulgate. the antitrust conspiracy to suppress health-based competition. or am of the other unfair and deceptive practices at issue here. The defendants' motion to dismiss the CFA claims must be denied. C. The Defendants' Wrongful Conduct Has Created A Public Health Hazard In Violation Of The Public Health Act I he Jefendants oamelt, a„crt the \ cn same argument against the State's 1'uhlic Health .\ct claims that the%• assert agalnst the C FA: they may create a public health crisis ++ith impunitn tmless and until the Health Comnussioner promulgates regulations specifically proscribing each and e.erN +vongful act the+ ha+e e+er committed. The defendants attempt to trivialize the 5tate'b claims - that the defendants ha+e intentionalh created the greatest public health crisis in the hi5ton of Vermont -- b+ falsek analo_tzing this case to regulations concerning the ,tpprupnaue dates for hunting turke\ s. Dets.' Br. at I 1-14. But unlike turkey hunting-"hich is Ia++tLl at certain tunes of the % rar and not at others -dte defendants' ts'ratgfitl cortrlerct is never lrntfrrl l urtlter. +\hile the taking offturke+s is a+erN specific acti\ itn amenable to precise rr_u!.wun,. puhhc health hazard~ can he hrouc'ht about tltrough a+ariet+ of inethods. Contrary !(, thc +ICle:n~dn[~ contentions, it +\oUl+l not merely ha\e been a"nulsancc tor the C omm]ssloner tt, h.ne dewrmin,:el that the defendant,' ntcoune- pll.m' contrthuted to a public health risk. it ISi-.,m ~ AA,uJ Iw i A 1 ', . . ~~ I , I`i`. . i •I \11 ~~I \I ItV~~\I ~~I R-Itl I'l l I\ ~ I'I'~~~III~~\ I~~I)III\U\\Iti \Ititl~,\ 1~~171~\II~ti
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w Indee 1. ul~ \el\ pollc\ cnnccln> that mou\ated the %\ R Grace court are e\en more .Ippllc,thle h~r~~ 10 ,,I\ thau a cause of action accrues [o a person or legal entity \\hen the person or cntn\ nla\ matntain an action thereon and. at the ~anle time. that it accrues hetore the person or entttN ' has or can rt:asonabl\ he expected to ha\ e Icnoti% ltdge of an} l\rone inflicted r, patentlN inconsistent and unrealistic. lh7e curn7oi nreruuuu7 ut7 u0xm hclorc' one knnn, Ihc're rs rtne. To sat to one %ho has been \\ron_ed. "You had a remed}. but before the ~~rong \tas ascertainable to \ou. the la\% stripped \ou of }our remedc." makes a moekerN of the la\~. .. I~~ Vt at 190 (citation omitted: emphasis added/. :\ecordtneiv. regardless of \,.hich limitations period applies, the State's claims sur\ ne in their enuret\. C. The Fraudulent Nature of Defendants' ~Nr rongful Conduct and the Remedial Purposes of the Public Health Act and the CFA Counsel Strongly in Favor of the Sis 1'ear Limitations Period As the\ ha~e throuthout the bneting. the defendants argue that the remedial purposes of the State's la\t,suit and the egregious and fraudulent nature of their alleeed misconduct should ha\e no hearln_ on this case. Reply at'_3-24. In fact. Vermont courts are clear that the nature of the harm alleged is an important factor in determining ~~hich limitations period to apply. Ptvicerald \ Com-leton. 155 Vt. 283.'_88. 58J A.?d j9~ (1990). %~ hlle defendants are correct that that C'onaleton involved a deterniination of ,tihether 12 V tiA ;~ 1 I or 12 V.S.A. ;512 applied to facts of that case, the Court clearl} held that the n.tture ufthe harm u the rele\ant Inyuir.. Indeed. both before and after Congleton courts ha\e hel l that the b\ ear period in 1-2 V S.A ~ I I_o\ erns in cases alle,in, fraud. Kine e. Federal I) nt ,u In, C'orn . 785 F Supp. 58. bl 11) \'t. 1992): Bartels \-\leonauin Properties Ltd..-171 I tiuhp I I;'. 1 149 (D. Vt 1979). ReLardle„ of detend;mts' mischaracterization of this action .I, crlmin,ll.- the "'Inj;uurc ol the harnt done tb the determining factor . . [and not[ the part\ 's ~I7,II.I~tC11/.ttl0ll ill t_I1C .lltittn ( i1IL"litttll. I`~ ~ t .It -`ii9 . QO 0`. ~ , 1 11 i t~l \ I lt\I~ ~\ I, til k-Kl l'I 1 I\ -' 1- (J-1 ~~I'I'~ ~~I I II I\ I I t Ul l l\U \\ I\' _ ~ \U~IPA ItIUI~\Ih` lp V
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I.~en mtve IundLtment,tlh. the defenddnt, .tretunent tgttores the historical purpuse ol the tstn-s car ,t.uute t,f Itnutatinn,. shieh «.ts to Itnut thustse ytrr )unr aettons. " Indeed. the cases ~ued hs Jrfcndann wppurt the arsument that the limitations in 13 \' S.:\ 4505 apply on}\ to yrrr ru+n acuuro. and not to modern-da\ ci% tl actions " \ hriel htbtor. of' yru (unt acttons cfanties tlte purpose oCthe n\ o-~etu ,tatute of Itmuattons- noss ctt ittied at 13 V S:\. ~-}>Oi Lno: lish Ia« afloued a"ct,mnwn tniormer- or "relator" - a prtvate ctttien -- to prosecute penal statutes on behalf of the state. .\s a re~bard tor brtm_tng suit, the Cro\% n paid a share ofthe penalty to the informer._ See,Kenera!!r Note, "The Ilistory and De~elopment of Qui Tani-" 1972 Wash. Univ. L.Q. 8L. 83-104. In time-overf} ' "t )en ra+n" is an abbreviation ot the phrase "qui tant pro domino rege yuam pro si ipso in hac pane sequnur." cchich means "\4ho sues on behalf of the Kme as «ell as for htmself" Blach's Lats-Dicuonars 1'_~ 1(6th ed 1990) ' A review of the cases cited by defendants reveals that the t.%o-year statute of limitations in 13 V 5 A g aSO~ is applied onl% on rare occasions Most of the cases cited bv defendants applied statutes other than 13 V S A See In re Kelton Motors. Inc. 130 B R. 170. 179 n 14 (I1krtcN. D Vt 19911 (dicta concernm~_ 13 V S A e J~U6). -\hhadessa s Te~uu. I' 1 Vt 21 s. 1>-7 A 2d 483 f 19>9) (ae_rieved parry• who shares forfeiture unh state is enutled to tour-}e-ar statute of limitations contained in ;-1506). Richardson v Fletcher. 80 Vt 510. 69 A 135 1 1908) lau-ne.ed pan. cchose action is goserned b} ,4>06 must bnn_ action w'rthm four years of the commission at utl'enset. School Dist c Bro%cn. _i Vt 61 (1883) (a__rmved pam. in this case the school dtstnct. is subject to ,tattne ot hmiwtions contained in ~ a~06). \e%.man r lk a«e. 43 Vt i87. 591 ( 1871 ) Iholdine that tcv o-year statute oI limitauun, cuntained in lormer .erston ot , A~Oi did not aonis to forfeiture action because former version of jeterred onh. m"pen,tlty"). \lontnelier % -\ndrens. 16 Vt 60-! ( I8-1-i) Icase does not specit% the controlling statute ,d Iunttauonv I Ite earlk cases msaA in_ precursors to ~4~0~ ttere all "qw tam" acnons Pollard v. Wilder. 17 Vt 48 (1843) ~ earl' % ~ersion ot ; J~0~s.tpplied to "qui tam" actruiv Dassance . Gates. 17 Vt.__75 (1841 )(same). Hubbell v Gale. ? \ t '_66 t 13301 (~,one) I he onlk modern ~ourt to apph e J>US to ,t cn d,tcuon brought bv the State c%as the Orange Supenor Cuurt. in \,.ne nt \ ennont .\,tldi. \o S 1-1-87 l)ec t I eb 17 1958 t i C ashman. J t lattached to Defendant's reply) This ,l"ieion ,c,u in error l he roun N, rom_h a»umed tha( the ntamte ol Imnwttons issue was controlled b~ Abbadesza. :%cn thou...,h \hh,tde,,,t addressed oni% tite ditlarence berneen 13 \S A. ~ a>05 and 4506. not the dtPference bcn.ren I3 \ti\; 15p> and 1'_ \ S.\ ;~I I Cc~ -\hh,tde+sa. 121 \'t. at'_16. \incc ~,ildi- ihe ~\ a,hin_aon ')upenor Coun and C'hntenden Superior Court hase both held that the two Near •t.itwr ut himt,wuns in 13 l ti 4;-1>0s does nut .tpplc to nwdern-d,n crl il actions State v Internauonal . t,~Ilc~u,m\rn ln, .\o Si:I-SY\\nC(\\,i,hmyton\up Ci Feb _5 .19c)))lylartm.l).Statev DtrectShces in: !\o C nl iChmendrn tiup Ci \larch I c). 19c>'t t I uher. J 1 (entn order) Contrary to detendants' ,u__c,Ciam oniter.ci,r Repk \lotwn ai '--'. the apphcahihn ot ; a>0~ cc.n raised bs the parties in Direct Sales Co Q Inicin.w"ail vcr vt.ne ot 1 rrmunt, Uppo,inan to Atuuun to DnmrsS tiled in that case. 12 2 96. ,tt 6-I 1(attachedW t h ' n I shd,u , 1 c ~ ~~wt in Uurtt ti.ilr, Intern,mun,il held th,u the si\-s e,lr statute ot Imuteu,ons m 1 _ V S A > I I _~ q•I,li..l :n \ ,1mnnt , ( "n,untcr I i.wd Wi"m Cyl -3~ ~ ,I\tl ~tl \tK\I~+\I~,I I:-I:II'll I\ I ti - 4- ~~I'I'~~~Illt)\ I~)UI II \U\\I~ \I~ i l ic r\ 1 ~~ 1)I~\II~~
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0 0 Paae 4 118 5 Ct a88. 1997 L' S LEXIS 7497. -3. -- LEXSEE 139 L Ed 2d 450. 66 L' S L W 4024 cst prool this Court requires, see Nard. 448 U S at 249 -- to suggest that the sancnons were so punitive in form and etfeci as to render them criminal despite Congress' coniran intent, see United States rUrsent 518 US 267. 1996 US LESIS 4256. 'l, 135 L. Ed 2d 549. /16 S 0 2135 Neither sanction has historically (*4J been viewed as puntshment. Hetvenng, supra, at 399, and n 2. 400, and neither involves an affirmative dis- ability or restraint, see Flemming v, 1Vestor, 363 US. 603. 617. 80 S Ct 1367. 4 L Ed 2d 1435. Neither comes into play "only" on a tinding of scienter, Kennedv, 372 US at 168, since penalties may be assessed un- der §0 93(b) and 504, and debarment imposed under § 1818(e)( I)(C)(u), without regard to the violator's will- fulness. That the conduct for which OCC sanctions are imposed may also be criminal, see ibid., is insufficient to render the sanctions criminally punitive, Ursery 518 U S 267. 1996 U S. LEXIS 4256, at *26, 135 L. Ed. 2d 549, 116 S. Ct. 2135, particularly in the double jeop- ardv context, see United States v Dixon. 509 US. 688. 704, 125 L Ed. 2d 556, 113 S. Ct. 2849. Finally, although the imposition of both sancttons will deter oth- ers from emulating petitioners' conduct, see Kennedv, supra, at 168, the mere presence of this traditional goal of criminal punishment is insufficient to render a sanc- non criminal, as deterrence "may serve civil as well as criminal goals." e.g., Ursery, 518 U.S. 267, 1996 US. LEXIS 4256, at *5, Pp. 9-11. 135 L. Ed. 2d 549, 116 S Ci. 2135 92 F.Jd 1026• affirmed. COUNSEL Bernard I Rothbaum argued the cause for pettnoners btichael R Dreeben argued the cause for respondent. JUDGES REHNQUIST, C. 1. delivered the opm- ion of the Court, in which O'CONNOR, SCALIA, I:ENNEDY. and THOMAS. Jl , 1'5) joined. SCALIA. J fled a concurring optnton, in which THOMAS, 1. totned STEVENS, J., and SOUTER. J.. filed opinions concurring in thejudgment. BREYER. J. filed an opm- tun concurring in the )udgment. in which GINSBURG. 1 . ioined OPI"v'IONBY REHNQLIST e)PISIO` CHIEF 1lSTICE REH`QIIST dehsered the opinion ut the Court ihe Gu~ernment adnumstramel} impuxd monetan pemduc, .u:d uccupatwnal deb.ument on petwunere for ~n teder,il h.ml.me st.twtes and Latcr cnnunall} indicted them for essenually the same conduct We hold that the Double Jeopardy Clause of the Fifth Amendment is not a bar to the later criminal prosecution because the administrative proceedings were ctvd, not criminal. Our reasons for so holding in large pan disavow the method of analysts used in United States i•. Halper, 490 U.S. 435, 448. 104 L. Ed. 2d 487. 109 S. Cr. 1892 (1989). and reaffirm the previously established rule exemplified in United Stares v. 6Sard, 448 US. 242, 248-249, 65 L. Ed. 2d 742. 100 S Ct. 2636 (1980) During the early and mtd-1980's, petitioner John Hudson was the chairman and controlling shareholder of the First National Bank of Tipton (Tipton) and the First National Bank of Hammon (Hammon). nl During the same period, petitioner [*61 Jack Rackley was pres- ident of Tipton and a member of the board of directors of Hammon, and petitioner Larry Baresel was a member of the board of directors of both Tipton and Harnmon. nl Tipton and Hammon are two very small towns in western Oklahoma. An examination of Ttpton and Hammon led the Office of the Comptroller of the Currency (OCC) to conclude that petitioners had used their bank positions to arrange a series of loans to third parties, in violation of various federal banking statutes and regulations. According to the OCC, those loans, while nominally made to third parties, were in reality made to Hudson in order to en- able him to redeem bank stock that he had pledged as collateral on defaulted loans. On February 13, 1989, OCC issued a "Notice of Assessment of Civil Money Penalty." The notice al- leged that petitioners had violated 12 US. C. §§ 84(a)(1) and 375b (1982) and 12 CFR §§ 31.2(b) and 215.4(b) (1986) by causing the banks with which they were as- sociated to make loans to nominee borrowers in a man- ner [*71 that unlawfully allowed Hudson to receive the benefit of the loans App. to Pet. for Cert. 89a. The notice also alleged that the illegal loans resulted in losses to Tipton and Hammon of almost S 900,000 and contributed to the failure of those banks. Id., at 97a However, the notice contained no allegation of any harm to the Government as a result of petittoners' con- duct "After taking into account the size of the financial resources and the good faith of [peutionersl, the gravity ut the violations, the htstorv of previous violations and other matters as justice may require, as required by 12 CSC 5§93tb)(2)and5041b)."OCCassessedpenalties ot S 100.000 against Hudson and S 50,000 each against both Rukte~ and Baresel Id . at 89a. On August 31. 1989. OCC aho issued a"\ouce of Intentton to Prohibit 0/1 LEXIS• NEXIS' ~ LEXIS• NEXIS ~ LEXIS'• NEXIS
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h.t~ LOntinurd % i,thilitN . it t, r"u-ieted h% tn plain lttnUuat_e. an l h} its codification in title 1;, to crnttmal .tcu ,n, and to yru Ium .tcuon~ tur reco rr% oi li retetures. I he JcIcnJant,' attempts to uupo,c the n~tt- ear period of li\' S..\. ~-4i0i is .tn.tchroni,uc u he,t and must he relected 13. The Diticucen Rule Tolls The Statute of Limitations Period Here \s c~ en Jefendants do not conte,t. the \'ermont Supreme Court has ~yuarel\ held that the ditico~ en rule applies to the st\ Near limitations period in 12 \'.S.A_ }5 11. l'ni,ersit.' of Vermont \\\'.R. Grace & Co.. 152 Vt. ?87. L'90. 565 A.-Id 1354 (1989). Therefore, upon finding that 1? V S A. § 511 goterns this action. this Court should simply den} defendants' motion on this point This rule of dtscos'en• also applies to the criminal limitations period in 1 3) V.S.A. § -}50~ \s the Cburt noted in \\' R(irace. "We no« reatfirm the -"umForm rule"' of iiscosery. Id at 190. The defendants' reliance on Leo \. Hillman. 164 Vt. 9-1. 98 ([996) is offthe mark. .4re Replo, at'_-3-36. In Leo. the Court merely held that the discovery rule did not apply to \~ronetitl death actions .S'ee 1-4 V.S.A. § 149?. The reason for this holding ssas that the statute of limitations for \\rongful death commences "on the occurrence oCa specitied e\•ent.- nameh. the death of the pltuntift. Leo. 164 \'t. at 99. When the plaintiff dies. the plaintiffs' estate is aware nf thu lact -.tnd- tndeedL in Leo the plaintiff had been murdered some l3 years before the suit t,tu tiled! Id at 9-i-97. As the Court stressed in Leo, the death in1-} V.S.A. § 1492 'is ncce;,.tnl% determinable NOcre facts are kno%%n and tndisputable.— Lo. 164 Vt. at 97. In ~tarl. contra,t. due tu the Jefendattts' Iraudttlent concealment of their ~~ron'tid ,_"nJuCt- \ Ctnwnt onh recentl\ became .n%are of the %Nron_s committed by defendants. Indeed. nckt te%cl.tuoiu.tre t«urnn' Jatl% ..tnd defendant>>till den} their tttonsadoing. Under these a n um,t.ui r,. unlil.e the plauut(1-, death in L=t. the tobacco tndustr% ''s \Nrongful conduct %tas p\ 'nnpk not a -Ln0Mn.mJ indi,pur.thle I,tct in the ~t.ue. I-en %%tll not help defendants here. (.,J -> (.n ~ ~ ,I\It ~~I ~.ItL\ui\I\.~ ~:-~L~1't\ I~ _'u- Ch N 111 ~\ 14 1 I)I I I \I)\\I1, \ti ~ l lt i\ I i~ Ul•\II~•
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0 0 Page 5 1 18 S Ct 488, 1997 L S LEXIS 7497. •7, - LEXSEE 139 L Ed 'd 350. 66 L S L W 4024 Further Participation' against each petitioner Id . at y9a These nottces. which were premised on the tden- ucal alleeauons that formed the basis for the previous nottces. informed petitioners that OCC intended to bar them from further participation in the conduct of "any insured depository institution " Id., at IoOa In October 1989• pettttoners resolved the [*8J OCC proceedings agamst them by each entering into a 'Stipulation and Consent Order.' These consent orders provtded that Hudson, Baresel• and Rackley would pay assessments of S 16.500, 5 15,000, and S 12,500 re- specttvely Id , at 130a, 140a, 135a. In addition, each petitioner agreed not to "pantctpate in any manner" in the affairs of any banking tnsutuuon without the written authorization of the OCC and all other relevant regula- tory agenctes n2 Id., at 131a, 141a, 136a. n2 The Consent Orders also contained language providing that they did not constitute "a waiver of any right, power. or authorny of any other represen- tatt~es of the United States, or agencies thereof, to bring other actions deemed approprtate." App. to Pet for Cert 133a, 143a, 138a. The Coun of Appeals ultimately held that thts provision was not a waiver of petitioners' double jeopardy claim. 14 F3d 536, 539 (C410 1996). In August 1992. petitioners were indicted in the Western District of Oklahoma in a 22-count indictment on charges (*9) of conspiracy. 18 US.C. § 371, mis- application of bank funds, §§ 656 and 2, and making lalse bank entries, § 1005. n3 The violations charged in Ihe indictment rested on the same lending transactions Ihat formed the basis for Ihe prior administrative actions brought bv OCC. Petitioners moved to dismiss the tn- dtctment on double jeopardy grounds, but the District Court denied the motions. The Court of Appeals af- ttrmed the District Court's holding on the nonpantcr pauon Sancnon tssue, but cacated and remanded to the District Court on the money sanction tssue. 14 F3d 536 ~CA10 1994) The Dtstrtct Court on remand granted pe- titioners motion to dismiss the indictments. This time the Government appealed. and the Court ol Appeals re- ~ersed 9? F3d 1026 rC.-i10 1996 That court held. tnllowtng Halper Ihat the actual tines imposed by the Gosernment ssere not }o grossh disproportional to the prnn en d.tmages to the Go%ernment as to render the sanc- non. 'punt+hment' lor double leopard} purposes. We "r.mted Leruar.trt >'-u L S i 1997t. because of con- ~crn. tbout thc wtde %arten ut no%ct double leopardN J.unt, .p.nkn,d in tlte wal.e on 1[alper n4 %k'e nou ,d- Ilrm, but for different reasons, ('l0J n3 Only petitioner Rackley was indicted for mak- mg false bank entrtes in violation of 18 US.C. § 1005 n4 E.g., Zukas v. Hinson, 124 F3d 1407, 1997 WL 623648 (CAl l, 1997) (challenge to FAA revo- cation of a commeretal _ptlot's license as violative of double jeopardy): E. B v bernaero, 119 F.3d 1077 (CA3 1997) (challenge to "Megan's Law" as violative of double jeopardy): Jones v. Securities & Exchange Comm'n, 115 E3d 1173 (CA4 1997) (challenge to SEC debarment proceeding as viola- tive of double jeopardy); United States v. Rice, 36 V. L 343, 109 F3d 151 (CA3 1997) (challenge to criminal drug prosecution following general mili- tary discharge for same conduct as violative of dou- ble jeopardy); United States v. Hatfield, 108 F.3d 67 (CA4 1997) (challenge to criminal fraud pros- ecution as foreclosed by previous debarment from government contracttng); Taylor v. Cisneros, 102 F3d 1334 (CA3 1996) (challenge to eviction from federally subsidized housing based on gutlty plea to possession of drug paraphemalia as violative of dou- ble jeopardy); Untred States v Golan, 82 F.3d 639 (CA5) (challenge to prosecution for prison escape following prison disciplinary proceeding as viola- tive of double jeopardy), cert. denied, 136 L. Ed. 2d 119, 117 S. Ct. 179 (1996). ("Il[ The Double Jeopardy Clause provides that no "person [shallJ be subject for the same offence to be twice put in jeopardy of life or limb." We have long recognized that the Double Jeopardy Clause does not prohibit the impo- sition of any additional sanction that could, "'in common parlance,"' be described as punishment. United States er ref. Marcus v. Hess. 317 U S. 537, 549, 87 L. Ed. 443, 63 S. Ct. 379 (19431(quottng Moore v. Illinois, 55 US 13, 14 HOW 13, 19. 14 L. Ed. 306 (1852)). The Clause protects only against the tmposttion of multiple criminal punishments for the same offense, Helvering v. Mitchell. 303 US. 391, 399. 82 L. Ed. 917, 58 S. Ct. 630 /I938): see also Hess, 317 U.S. at 548-549 ("Only" "crtmtnal punishment" "subjects the defendant to 'jeopardy' within the constitutional meaning"); Breed 1. Jones• 421 U. S. 519, 528. 44 L. Ed. 2d 346, 95 S. Ci 1779 0975) ("In the constitutional sense, jeopardy describes the risk that is traditionally associated with a criminal prosecution"), and then only when such occurs in .uccesst.e proceedings. see Missouri t: Hunter, 459 L' S3= 9. 366. 7.1 L Ed. 'd 535. 103 S. Ct. 673 - %~ LEXIS'•NEXIS ~ LEXIS'•NEXIS ~ LEXIS"•NEXIS~
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!IItC!lt i~l the lt.I1C drC .Ih,nlll..ll1J iiHltl.ll'\ tt) the \\CII-e,t.lhlbhelj statldard, -o% crninL, motlons t,, ,it,nln, the )t,ttr ,.11legatte)n,. and not the dctindants ,ophtstic \\ordpla% . control here. Ior the,c rca,un,. cuurt .tlter ctlurt has follo\\ed the Cipollone pluralit}. .See, r.,~.. \l,tn tnl \ R 1 Kc\ nuld, I t)hacco C unlP.tn\. 875 P2d 73 ( 1994) (sutt to enjoin Joe Camel .tJ\rrtnin L, campaign tar_eung nunors is \Iable under the Labeling Act): Rurton \. R.J. Rr\ nolds. S&1 F Supp at 15 2 1( upholdur_ consumer protection clatm tinder C^tpollone pluraht\ ). C.utano \:\merlcan Tobaccu Co. 870 F. Supp. 1425. 143 5 (E.D. La. 1994) (same): \nrona. Ma% 27. t997 Order on Dets.' Joint Motion 42 (den}'tng tobacco companies' motion to dunuss consumer fraud claim since it is "plainly based on a statutory dun' not to deceive"). In 5hort, the tobacco Industr}''s strained reading of Cipollone simply cannot be credited.' f3ccau,e the State's CF.-\ clatms are based on unfair and deceptive trade practices. they are un.tflected h\ the Lahelin_ \ct. 111. VERMONT'S PUBLIC HEALTH ACT CLAIMS WILL NOT REGULATE OR PROHIBIT CIGARETTE ADVERTISING OR PROMOTION The State's Public Health Act Counts are "based on smoking and health.° However, as theu claims do not seek to regulate `ad\ ertisjng or promotlor ' - fairly but narrowly construed - the\ are not preempted. Cipollone. 505 C'.S at 5'-4 tnstead, the Public Health Act Counts ch,tllcm_e acn\ e nllsconduct ,uch as ( 1) the manipulation of nicotine le\'els in order to create and u,t.un addiction: ("_') lies ctlncernine the health effects o[ tobacco and the addictiveness of ntctatne. told in non-promouunal lilrutns. such as the U.S. Congress: (3) the conspiracy to pre\ent the pmduction of,a(cr products: /4) the placement of tobacco ad\ertisements in }outh- ntr.!r. t,, the detrnd.mt,' contenuun, rleuher Philtn %tornb Incornorated \ IiarshbarLer. I?? F3d ?8 t ~r i mv \tedt.t \ C tn ol' \c,c 1 o»6. _ a F)d (i3. -: Cd Cir 1994/ purport to tolluI the reasonur_ hi,o, h.t Indred Ihe porut m el I I.a,hh.rruer. I'] F 3d at'o cned b} the defendants holds onl} that the ~ .iJdm\a,.L,clo,ure t,t ~k.h h.nad on ,rnol.ulg tnd health -Mhtch is not surpr!stn_• gr~un the \~t ,.t.ueinrnt tllet !t ,%,r, cneited tor the purpo,r ol proleLnng the puMre he.llh - r\N ior V.tm1o. 34 F 3d at 7:. ~ ,h.u e,•wi neld th.u .1 ~m. ~~rdm.ince rcyu!nnn a dnpl.t, ot pubitc he.lith nlessages about snlo6m_ \kas based on LJ •m„,, ut_ r,•f Itr.i!th li"ah the,e c.t,e,.uc.r I•u .n trom tlle ~tate , l0m,umer Fraud Act cl.unuhere. 1\htch ore ~ ,.n \ .:;n,,:u , I•t,mihu:,m ~~t mtt.ui m,l ,lc,el,ulc tr.tdc pr,tLu,c, and not on ,mu4.tnL and Ilealth ~ ~ W ~ I \ 1 I ~ ~I \ I IL\I~ :\ I • ,I I:-I<I PI 1 I\ . ~ - ~ ~~I~P~~,IIi!~\ I~~I1111\It\\I• \1!~II~1\ li~lll•\II~~ -
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• • 118 S Cl 488. 1997 [. S LEXIS 7497, -16. - Page 7 LEXSEE 139 L Ed '_d 450. 66 L: S L W-1023 Ed 2d 767 r19941. Untted States I L'rsen, 518 US 267. 1996 US LEX1S 4256. '30. n. 2. 135 L Ed 2d 549. 116 5 Ct 2135 (1996) n6 [f a sanction must be '.oleh" remedial u e., entirely nondeterrenU to avoid impltcatmg the Double Jeopardy Clause, then no civil penalties are beyond the scope of the Clause. Under Halper's method of analysis, a court must also look at the "sancuon actually imposed" to determine whether the Double Jeopardy Clause is implicated. Thus, it wlll not be possible to determine whether the Double Jeopardy Clause is violated until [*171 a defendant has proceeded through a trial to judgment. But in those cases where the civil proceeding follows the criminal proceeding, this approach fltes in the face of the notion that the Double Jeopardy Clause forbids the government from even "a[- tempting a second ume to punish crlminally." Helvermg, 303 U S. at 399 (emphasis added). n5 In his concurrence, JUSTICE STEVENS crit- icizes us for reexamining our Halper opinion rather than deciding the case on what he believes is the nar- rower Blockburger grounds. But the question upon which we granted certiorari in this case is "whether ihe imposition upon petitioners of monetary fines as in personam civil penalties by the Department of the Treasury, together with other sanctions, is 'punish- ment' for purposes of the Double Jeopardy Clause." Pet. for Cert. i. It is this question, and not the Blockburger issue, upon which there is a conflict among the Courts of Appeals. Indeed, the Court of Appeals for the Tenth Circuit in this case did not even pass upon the Blockburger question, finding it unnecessarv to do so. 92 F.3d at 1028, n. 3. 1'18~ n6 In Kunh Ranch. we held that the presence of a deterrent purpose or effect is not dispositive of the double)eopardy question. 511 US. at 781. Rather, we applied a Kennedy-ltke test, see 511 U.S at 780- 783. before concluding that Montana's dangerous drue lax was "the functional equivalent of a succes- sive criminal prosecutlon." Stmdarly, in Ursery, we rejected the notion lhat civil in rem forfeitures vt- olale the Double leopardv Clause 518 US. 267. 1996 U S LEXIS 4256, at '2, 135 L. Ed. 2d 549, 1/6 S 0 2135 U'e upheld such forfettures, rely- me on the historical support for the notion that such tnrteitures are civil and thus do not implicate double leopard} .i18 U.S 267, 1996 US. LEXJS 4256, at -6. 116 S Q. 1135. 135 L Ed 2d 5-19. P'm.dh, u~huuld be noted that sume ot the ills at w hich H.llper %s.i+ direcled .tre addre}sed h+ oihcr comtnu- nonal provisions. The Due Process and Equal Protection Clauses already protect indlviduals from sanctions which are downrtght irrational. Williamson v. Lee Optical of Okla., Inc., 348 US 483, 9_9 L Ed. 563, 75 S. Ct. 461 (1955) The Eighth Amendment protects against exces- sive civil fines, including forfeitures. Aleranderl*19/ v. United States. 509 US. 544, 125 L. Ed. 2d 441, 113 S. Cr. 2766 (1993); Austin v. United States, 509 U S. 602, 125 L. Ed. 2d 488, 113 S. Ct. 2801 (1993). The addi- uonal protection afforded by extending double jeopardy protections to proceedings heretofore thought to be civil is more than offset by the confusion created by attempt- ing to distinguish between "punitive" and "nonpunitive" penalties. Applying traditional double jeopardy principles to the facts of this case, it is clear that the criminal prosecu- tion of these petitioners would not violate the Double Jeopardy Clause. It is evident that Congress intended the OCC money penalties and debarment sanctions im- posed for violations of 12 U.S.C. §§ 84 and 375b to be civil in nature. As for the money penalties, both 12 U S. C. §§ 93(b)( I) and 504(a), which authorize the im- position of monetary penalties for violations of §§ 84 and 375b respectivel-v, expressly provide that such penalties are "clvil." While the provision authorizing debarment contains no language explicitly denommating the sanc- tion as civil, we think it significant that the authority to issue debarment orders is conferred upon the "appropri- ate Federal banking agencies." §§ 18i8(e)(l)-(3). That such authority was conferred upon [*201 administrative agencies is prima facie evidence that Congress intended to provide for a civil sanction. See Helvering, supra, at 402; United States v. Spector, 343 US. 169, 178, 96 L. Ed. 863, 72 S. Ct. 591 (1952) (Jackson, J., dis- senting) ("Administrattve determinations of liability to deportation have been sustained as constitutional only by considering them to be exclusively civil in nature, with no criminal consequences or connotations"); Nbng Wing v. United States, 163 U.S. 228. 235, 41 L. Ed. 140, 16 S. Ct. 977 (1896) (holding that quintessential criminal punishments may be imposed only "by ajudicial trial"). Turning to the second stage of the Ward test, we find that there is little evidence, much less the clear- est proof that we require, suggesting that either OCC monec penalties or debarment sanctions are "so punitive in form and effect as to render them criminal despite Congress' intent to the contrary." Ursery, supra, at (slip op., at 22). First, neither money penalties nor de- barment have histortcally been viewed as punishment. We have long recogmzed that "revocation of a privilege .-oluntanlc aranted." such as a debarment, "is charac- tertsucalh free of the punni~e criminal element." 1*2 11 Heliering. 303 US at 399, and rt. 2. Simdarly, "the %~ LEX1S ~ NEX1S' ~ LEXIS• NEXIS' ~ LEXIS'• NEXtS
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• • Page 10 I 18 S Ct_ 488. 1997 L' S LEXIS 7-397. +29- LEXSEE 139 L Ed 2d a50. 66 U.S.L W 4024 need to revtsu Halper. The Court also claims that two practical flaws in the Halper opinion warrant a prompt adjustment in our dou- ble jeopardy jurisprudence First, the Court asserts that Halper's test is unworkable because it permits only suc- cessive sancnons that are "solelv" remedtal. Ante, at 8. Though portions of Halper were consistent with such a reading, the express statement of its holding was much narrower n3 Of greater imponance, the Court has since clarified this very point n3 " We . . hold that under the Double Jeopardy Clause a defendant who already has been punished in a criminal prosecution may not be subjected to an additional civil sanctton to the extent that the second sanction may not fatrly be characterized as remedial, but only as a deterrent or retrtbution." United States v. Halper, 490 U S. 435, 448-449, 104 L. Ed. 2d 487. 109 S Ct 1892 (1989) "Whether a particular sanctton 'cannot fairly be satd solely ro serve J*30J a remedial purpose' is an inquiry radicallv different from that we have traditionally em- ployed in order to determtne whether, as a categorical matter, a civil sanction is subject to the Double Jeopardy Clause. Yet nowhere in Halper does the Court purport lo make such a sweeping change in the law, instead em- phasizing repeatedly the narrow scope of its dectston." United Stares v. Ursen•, 518 U.S. 267. 1996 US. LEXIS 4256, `30, 135 L. Ed. 2d 549. 116 S. Ct. 2135 (1996). Having )ust recently emphasized Halper's narrow rule in Ursery, it is quite odd for the Court now to suggest that its overbreadth has created some sort of judicial emergenc,v. Second, the Court expresses the concern that when a ci~ il proceeding follows a criminal punishment, Halper would require a court to wait until )udgment is imposed in the successive proceeding before dectdmg whether the latter sanction % 'tolates double jeopardy. Ante, at 8-9 That concern is wholly absent in this case, however, hecause the criminal tndtctment followed administrative sanctions There can be no doubt that any tine or sen- tence imposed on the criminal counts would be "pun- i,hment ' If the indictment charged the same offense tor which punishment ('31J had already been imposed. the prosecuuon uself would be barred by the Double Jeopard% Clause no matter how minor the criminal sanc- u0n ,nuLht in the second proceedmg. ChuN dte cuncerns Ihat the Court tdenuties merely emph,iwe the accurac} ol the comment in Halpcr it- 'eII ih,u il announced ',i rule lur the r.ire case where a ficed-penalty prov{ston subjects a prolific but small-gauge offender to a sanction overwhelmingly dis- proportionate to the damages he has caused." 490 U.S. at 449 III Despite my disagreement with the Court's dectsion to use thts case as a rather lame excuse for wrutng a gratuitous essay about puntshment, I do agree with its reaffirmation of the central holding of Halper and Department of Revenue of Mont. r: Kurth Ranch, 511 U. S. 767, 114 S Ct. 1937. 128 L. Ed. 2d 767 (1994). Both of those cases held that sanctions imposed in ctvil proceedings constituted "punishment" barred by the Double Jeopardy Clause. n4 Those holdings re- confirmed the settled propositton that the Government cannot use the "civtl" label to escape entirely the Double Jeopardy Clause's command, as we have recognized for at least six decades. See United States v La Franca, 282 U S. 568, 574-575, 75 L. Ed. 551, 51 S. Ct. 278 [*32/ (1931); Helvering v. Mitchell, 303 US. 391, 398-399, 82 L. Ed. 917, 58 S. Ct. 630 (1938). That propo- sition is extremely important because the States and the Federal Government have an enormous array of civil ad- ministrative sancttons at their disposal that are capable of being used to punish persons repeatedly for the same offense, violating the bedrock double jeopardy princi- ple of finality. "The underlying idea, one that is deeply ingrained in at least te Anglo-American system of ju- risprudence, is that the State with all its resources and power should not be allowed to make repeated attempts to convict an individual for an alleged offense, thereby subjecting him to embarrassment, expense and ordeal and compelling him to live in a continuing state of anx- iety and insecurity ..•." Green v United States, 355 U• S. 184, 187, 2 L. Ed. 2d 199, 78 S. Ct. 221 (1957). However the Court chooses to recalibrate the meaning of punishment for double jeopardy purposes, our doctrine still limits multiple sanctions of the rare sort contemplated by Halper. n4 Other recent double jeopardy decisions have also recognized that double jeopardy protection is not limited to multiple prosecutions. See United States t Ursen•, 518 US 267. 1996 U.S. LEXIS 4256, at ' 1. 0, 135 L. Ed. 2d 549, 116 S. Ct. 2135 (1996), Kansas v. Hendricks, 117 S. Ct. 2072, 1997 U S. LEXIS 3999. *6, 138 L. Ed. 2d 501. Otherwise, it would have been totally unnecessary to determine whether the civil forfeitures in Ursery and the m.oluntarv civil commitment in Hendricks im- posed "puntshment" for double jeopardy purposes, tnr neither sancuon was implemented via criminal 4/V LEX1S'• NEXIS ~ LEX1S'• NEXIS' ~ LEX(S'• NEX1S
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• Page l t I 18 5 Ci 488, 1997 l S LEXIS 7497. '31. LEXSEE 139 L Ed. 2d 450 66 (:.S L.W 4024 proceedmgs [ `331 I ~, ' Today, as it did in Halper itself, the Court relies on the son of mulu-factor approach to the detinttton of pun- ishment (hat we used in Kennedy v. Mendoza-Martinez, 372 U S. 144, 168-169, 9 L Ed. 2d 644, 83 S Ct. 554 t1963)• to identify sttuattons in which a civil sanction is punitive. Whether the Court's reformulation of Halper's test will actually affect the outcome of any cases remains to be seen. Perhaps it will not, since the Court recom- mends consideration of whether a sanctton's "'operation will promote the traditional aims of punishment -- retri- bution and deterrence,'" and "'whether it appears exces- sive tn relation to the alternative [non-punitive] purpose asstgned.'" Ante, at 5-6 (quoting Kennedv, 372 US. at 168-169). Those factors look awfully similar to the rea- soning in Halper. and while we are told that they are never by themselves dtsposnive, ante, at 7, they should be capable of tspptng the balance in extreme cases. The danger in changtng approaches midstream, rather than refining our established approach on an sncremental-ba- sis, is that the Government and lower courts may be unduly influenced by the Court's new attitude, rather than its spectfic prescribed [*34] test. It is. of course, entirely appropriate for the Court to perform a lawmaking function as a necessary incident to its Article III responsibility for the dectston of "Cases" and "Controverstes." In my judgment. however, a de- sire to reshape the law does not provide a legitimate basis for issuing what amounts to little more than an advisory opinion that, at best, will have the precedenttal value of pure dictum and may in time unduly restrict the pro- tecuons of the Double Jeopardy Clause. "[t is not the habit of the Court to decide questions of a constitutional nature unless absolutely necessary to a decision of the case " Burton r. United States, 196 U.S. 283, 295, 49 L Ed. 482. 25 S Ct. 243 (1905); see also Ashwander , T1:a, 797 U S. 288, 345-348. 80 L. Ed. 688. 56 S. Ct. 466 11936) tBrandets, J, concurring). Accordmgly, while I concur in the judgment of affirmance, I do not luin ihe Court's opinion JUSTICE SOhTER. concurnn_e in the judgment . I concur in the Court's judgment and with much of its opinson As the Court notes. ante. at 8, we have already recognized that Halper's statements of standards for idennl%me ahat is cnmmalk punrtt%e under the Fifth \mendment needed revsston; !.'nued States s /'35/ l'rsen. i18 C'S. -'67. 1996 L'S LE.rIS-l256, '13. 135 L- Ed 'd 549. 116 S Cr 2135 r1996t. and there is obvious sense in employing common criteria to point up the criminal nature of a statute for purposes of both the Ftfth and Sixth Amendments. See United States v. One Assortment of 89 Firearms, 465 U.S. 354, 362-366 (1984), United Stares r. Librd, 448 U.S. 242, 248-249, 65 L. Ed. 2d 742, 100 S. Ct. 2636 (1980): Kennedv v,Nendoza-Marttnez.37271S 144, 168-169, 9 L. Ed. 2d 644, 83 S. C1. 554 (1963); see also Ward, supra, at 254 ("It would be quite anomalous to hold that [the statute] created a criminal penalty for the purposes of the Self-[ncrimtnatton Clause but a civil penalty for other purposes"). Applying the Court's Kennedy-Ward criteria leads me directly to the conclusion of JUSTICE STEVENS's con- curring opinion. The fifth criterion calls for a court to determine whether "the behavior to which [the penalty] applies is already a crime." Kennedy v. Mendoza- Martinez. supra, at 168-169. The efficient starting point for identifying constitutionally relevant "behav- ior," when considering an objection to a successive pros- ecution, is simply to apply the same-elements test as originally stated in Blockburger v. United (*361 States, 284 U.S. 299, 76 L. Ed. 306, 52 S. Ct. 180 (1932) See United States s•, Dixon, 509 US. 688, 125 L. Ed. 2d 556, 113 S. Ct. 2849 (1993). When application of Blockburger under Kennedy-Ward shows that a succes- sive prosecution is permtssrble even on the assumption that each penalty is criminal, the issue is necessarily settled. Such is the case here, as JUSTICE STEVENS explatns. See ante, at 2 (STEVENS, J., concurring in judgment). Applying the Kennedy-Ward criteria, there- fore, I would stopjust where JUSTICE STEV ENS stops. My acceptance of the Kennedy-Ward analytical scheme is subject to caveats, however. As the Court points out, under Ward, once it is understood that a legislature tntended a penalty to be treated as civil in character, that penalty may be held criminal for Fifth Amendment purposes (and, for like reasons, under the Sixth Amendment) only on the "clearest proof" of its essentially criminal proporttons. While there are good and historically grounded reasons for usmg that phrase to impose a substantial burden on anyone claiming that an apparently civil penalty ts in truth criminal, what may be clear enough to be "clearest" is necessarily dependent on context, as indicated by the cases relied on [*37] as authority for adopting the standard in Arzrd. Flemmtng v. .Vestor, 363 U S. 603• 4 L. Ed 2d 1435• 80 S. Ct. 1367 (1960). used the quoted language to describe the burden uf persuasion necessary to demonstrate a criminal and punitive purpose unsupported bv "objective mantfesta- iions- ot legalau.e intent. Id . at 617. Rex Trailer Co. s C'ntted States. 950 U S. 148, 154. 100 L. Ed. 149, 76 S Ct 219 r1956i. cited as secondary authortty, required %~ LEXIS ~ NEXtS' ~ LEXIS'• NEXIS' ~ LEX1S'• NEXIS'
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0 • Page 6 I 18 S Ct 488. 1997 U S LEXIS 7497, •11 : LEXSEE 139 L Ed 'd-150. 66 L.S L W 4024 t 19831 Whether a particular punishment is criminal or cntl is. at least initiall_v. a matter of staturory constructton. Helvertng, supra, at 399 A[' 121 court must first ask whether the leetslature, "in establishing the penalizing mechanism, indicated either expressly or impliedly a preference for one label or the other." N6rd, 448 US at 248. Even in those cases where the legislature 'has in- dicated an intention to establish a civil penalty, we have inquired further whether the statutory scheme was so punitive either in purpose or effect,' td., at 248-249, as to 'transform what was clearly intended as a civil rem- edy tnto a criminal penalty," Rex Trailer Co. v United States, 350 U.S. 148, 154, 100 L. Ed. 149, 76S. Ct. 219 (1956). In making this latter determination, the factors ltsted in Kennedy v. Mendoza-Martinez. 372 US. 144, 168- 169. 9 L Ed 2d 644, 83 S. Ct. 554 (1963), provide useful guideposts, including: (1) -whether the sanc- tion involves an affirmative disability or restraint"; (2) "whether it has htsrorically been regarded as a punish- ment": (3) "whether it comes into play only on a finding of sctenter". (4) "whether its operation will promote the (radmonal aims of punishment -- retribution and deter- rence", (5) "whether the behavior to which it applies is already a crtme", (6) "whether an alternative purpose to which it may rationally be connected is (*13] assignable for u", and (7) "whether it appears excessive in relation to the alternauve purpose asstgned." It is important to note, however, that "these factors must be considered in relation to the statute on its face," id. at 169, and bnly the clearest proof" will suffice to override legtsla- tive intent and transform what has been denominated a ct~il remedy into a criminal penalty. Ward, supra, at 249 (tnternal quotation marks omitted). Our opinion in United States v. Halper marked the tirst time we applied the Double Jeopardy Clause to a ,ancuon without first determining that it was crimi- nal in nature In that case. Irwin Halper was convicted „I. inter .tlia. stolatmg the criminal false claims statute. 18 L' S C 6 2877 based on his submission of 65 tn- tlated Ntedtcare claims each of which overcharged the Government by S 9 He was sentenced to two years' imprisonment and fined S 5,000 The Government then hrought an action against Halper under the civil False Claims Act. 31 G S C 53 3729-3731 (1982 ed.- Supp. I Ii The remedial pro% isions of the False Claims Act pro- %ided that .t violation ot the Act rendered one -ltable to thc l nued Swies Go%ernment for I`11I ,t a%d penah% „i )' u0n tn ,tmount equal to 2 umes the amount ot .Lmt.iL,ee ihe Go.ernmcnt suaaim because ut the act ot ~h,n per.on .md ~ua+ ol Ihe U% II .Icuon ' Id . 3"9 Given Halper's 65 separate violations of the Act, he ap- peared to be liable for a penalty of S 130,000, despite the fact he actuallv defrauded the Govemment of less than 5 600. However, the District Court concluded that a penalty of this magnitude would violate the Double Jeopardy Clause in light of Halper's previous crimi- nal conviction. While explicitly recognizing that the statutory damages provision of the Act "was not itself a criminal puntshment," the District Court nonetheless concluded that application of the full penalty to Halper would constitute a second "puntshment" in violation of the Double Jeopardv Clause. 490 U.S. at 438-439. On direct appeal, this Court affirmed. As the Halper Court saw tt, the imposition of "punishment" of any kind was subject to double jeopardy constraints, and whether a sanction constituted "punishment" depended primarily on whether it served the traditional "goals of punish- ment," namely "retribution and deterrence." Id., at 448. Any sanction that was so (* 151 "overwhelmingly dispro- portionate" to the injury caused that it could not "fairly be said solely to serve [the] remedial purpose" of com- pensating the government for its loss, was thought to be explainable only as "servtng either retributive or deter- rent purposes." See rd., at 448-449 (emphasis added). The analysis applied by the Halper Court deviated from our traditional double jeopardy doctrine in two key respects. First, the Halper Court bypassed the threshold question: whether the successive punishment at issue is a"crtmtnal" punishment. Instead, it focused on whether the sanction, regardless of whether it was civil or crimi- nal, was so grossly disproportionate to the harm caused as to constitute "punishment." In so doing, the Court elevated a single Kennedy factor -- whether the sanction appeared excessive in relation to its nonpunitive pur- poses -- to dispositive status. But as we emphasized in Kennedy itself, no one factor should be considered con- trolling as they "may often point in differing directions." 372 U.S. at 169. The second significant departure in Halper was the Court's decision to "assess the charac- ter of the actual sanctions imposed." (*161 490 US. at 447, rather than, as Kennedy demanded, evaluating the "statute on its face" to determine whether it provided for what amounted to a criminal sanction, 372 U.S. at 169. We believe that Halper's deviation from longstanding double )eopardv principles was ill considered. n5 As subsequent cases have demonstrated, Halper's test for determtmng whether a particular sanction is "punittve," and thus subject to the strictures of the Double Jeopardy Clause, has pro~ed unworkable. We have since recog- nved that all civil penalties have some deterrent effect. See Departntent of Reienue of Mant r'. Kurth Ranch, ;11 US 767. 777. n 1-7. 11-J S Ct. 1937. 128 L %~ LEXIS'• NEXIS' %~ LEXIS'• NEXIS' ~ LEXIS'• NEXIS'
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• 0 Page 8 118 S Ct 488. 1997 C S LEXIS 7497. `21: LEXSEE 139 L Ed '_d 450, 66 U S.L W. -1024 payment of fixed or variable sums of money I is aI sanc- tion which has been recogmzed as entorceable by civil proceedmgs since the original revenue law of 1789.' Jd . ut 400 Second, ihe sanctions imposed do not involve an"af- tirmattve dtsabtlnv or restraint," as that term is nor- mally understood. While petitioners have been prohib- ited from further participating in the banking industry, this is "certatnly nothing approaching the 'infamous pun- tshment' of imprisonment " Flemming v. Nestar, 363 U S. 603, 617. 4 L. Ed. 2d 1435, 80 S. Ct. 1367 (1960). Third, neither sanction comes into play "only" on a find- ing of scienter. The provisions under which the money penalties were imposed, 12 U.S C. §§ 93(b) and 504, allow for the assessment of a penalty against any person "who violates" any of the underlying banking statutes, without regard to the violator's state of mind. "Good fatth" is considered by OCC in determining the amount of the penalty to be imposed, g 93(b)(2), but a penalty can be imposed even in the absence of bad faith. The fact that pettttoners' "good fatth" was considered in de- termining the amount of the penalty to be imposed in this case 1 '221 is irrelevant, as we look only to "the statute on its face" to determine whether a penalty is criminal in nature. Kennedv, 372 US. at 169. Similarly, while debarment may be imposed for a"willful" disregard "for the safety or soundness of [an[ insured depository msti- mtton," willfulness is not a prerequisite to debarment; it is sufficient that the disregard for the safety and sound- ness of the institution was "conttnutng." 12 US.C. § 1818(e)(L)(C)(t[). Fourth, the conduct for which OCC sanctions are im- posed may also be criminal (and in this case formed the basis for petitioners' indictments). This fact is in- sufficient to render the money penalties and debarment sanctions criminally punitive, Ursery, 518 U.S.. at (sltp op . at 23-25), particularly in the double jeopardy context, see Untied States v. Deron, 509 US. 688, 704, l?5 L Ed 2d 556, 113 S. Ct. 2849 (1993) (rejecting '•ameconduct" test for double jeopardy purposes). Finalh, we recognize that the imposition of both money penalties and debarment sanctions will deter oth- crs trom emulating petitioners' conduct, a traditional eoal ol criminal punishment But the mere presence of thn purpose is insufficient to render a sanction criminal, 1"_31 as deterrence 'mav serve civil as well as criminal enals ' Lrserv, supra. at (slip op.. at 24); see also Bennu i Ntc'htYan. 516 U S-J32. 452. 134 L. Ed. 2d n.1. 116 S Ct 994 11996) t'Fortettnre ser.es a deierrem purpose distinct from any pumttxe purpose"t I-,,rre.unpler the sancnons at issue here. while intended 10 Ll~ter iuture wrungduine. aho erne tu promotc Ihe stability of the banking industry. To hold that the mere presence of a deterrent purpose renders such sanctions "crtmtnal" for double jeopardy purposes would severely undermine the Gov'ernment s ability to engage in effec- uve regulation of institutions such as banks. In sum, there simply is very little showing, to say nothing of the "clearest proof" required by Ward, that OCC money penalties and debarment sanctions are crim- inal. The Double Jeopardy Clause is therefore no obsta- cle to their trial on the pending indictments, and it may proceed. The judgment of the Court of Appeals for the Tenth Circuit is accordingly Affirmed. CONCURBY: SCALIA; STEVENS; SOUTER; BREYER CONCUR JUSTICE SCALIA, with whom JUSTICE THOMAS joins, concurring. I wholly agree with the Court's conclusion that Halper's test for whether a sanction is [*24/ "puni- tive" was dl=constdered and unworkable. Ante, at 7- 8. Indeed, it was the absurdity of trying to force the Halper analysis upon the Montana tax scheme at issue in Department of Revenue of Mont. v, Kurth Ranch, 511 U S. 767, 114 S. Ct. 1937, 128 L. Ed. 2d 767 (1994), that prompted me to focus on the prior ques- tion of whether the Double Jeopardy Clause even con- tains a multiple-punishments prong. See id., at 802-803. That evaluation led me to the conclusion that the Double Jeopardy Clause prohibits successive prosecution, not successive punishment, and that we should therefore "put the Halper genie back in the bottle." Jd., at 803- 805. Today's opinion uses a somewhat different bottle than I would, returning the law to its state immediately prior to Halper -- which acknowledged a constitutional prohibition of multiple punishments but required succes- sive criminal prosecutions. So long as that requirement is maintained, our multiple punishments jurisprudence essentially duplicates what I believe to be the correct double-jeopardy law, and will be as harmless in the fu- ture as it was pre-Halper. Accordingly, I am pleased to concur. JUSTICE STEVENS, concurring in the judgment. The maxim 1 '25[ that "hard cases make bad law" may also apply to easy cases. As I shall explain, this case could east]y be decided by the straightforward applica- uon of well-estabhshed precedent. Neither such a dts- pu.itton, nor m%thtna in the opinion oP the Court of -vppe,rls wuuld require a reexamination of the central %7 LEXIS'• NEXlS' ~ LEXIS'• NEXIS %~ LEXIS• NEXIS
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s 0 118 S Ct 488. 1997 U S LEXIS 7.197, ''_5: 119 L Ed 2d -150. 66 ti S L W 4024 holding in L'nued States rHa(per. 490 US. 435. 104L Ed 'd 487, 109 S Cr /892 t19891. or of the language used in ihat unanimous opinion Any proper concern about the danger that that opinion might be interpreted too expanst~ely would be more approprtately addressed in a case that was etther incorrectly decided or that at least raised a close or difficult question In my judg- ment n is most unwise to use this case as a vehicle for the substitution of a rather open-ended attempt to define the concept of punishment for the portions of the opinion in Halper that trouble the Court. Accordingly, while I have no hesitation about concurring in the Court'sjudg- ment- I do not Jotn its opinion. I As is evident from the first sentence of the Court's opinion, this ts an extremely easy case. It has been set- tled since the decision in Blockburger v. United States, 284 US. 299, 76 L. Ed. 306. 52 S. Ct. 180 (1932), that the Double Jeopardy (*26[ Clause is not implicated simply because a criminal charge involves "essenttally the same conduct" for which a defendant has previously been punished. See, e.g , Untted States v. Dixon. 509 U S 688. 696, 704, 125 L Ed 2d 556. 113 S Cf. 2849 (1993). Rutledge v United States. 517 US. 292, 297. 134 L. Ed. 2d 419, 116 S. Ct. 1241 (1996). Unless a second proceeding involves the '-same offense" as the first, there is no double jeopardy. The two proceedings at issue here involved different offenses that were not even arguably the same under Blockburger. Under Blockburger's "same-elements" test, two pro- visions are not the "same offense" if each contains an el- ement not included in the other. Dixon, 509 U.S. at 696. The penalties imposed on the petitioners in 1989 were based on violations of 12 US.C. §§ 84(a)(1) and 375b ( 1982) and 12 CFR §§ 31 2(b) and 215.4(b) (1986). Each of these provisions required proof that extensions ot credit exceeding certain Itmtts were made, nl but did not require proof of an intent to defraud or the making ot an_% false entries in bank records. The 1992 indict- ment charged violations of 18 US.C. §§ 371. 656, and 1005 and alleged a conspuacy to wtll fully misapply bank tunds and to make false banking (*27( entrtes, as well as the makm_e of such entrtes: none of those charges re- quired proof that any lending limit had been exceeded n I Tttle 12 US C s 84(alt I1 prohibits total loans and extensions ot credit by a national bankmg asso- ~wuun to tm one borrower trom ecceedtng 15 per- ,cnt ut ihe bank's unimpaired capital and surplus 12 U S C ~ 375h and 12 CFR SS 31 2tbt and 215 4tbi , 19861 impose sunilar lending limits nn loans to bank ouliccn and other insiders Page 9 LEXSEE Thus, I think it would be dtff~cult to find a case rats- tng a double jeopardy claim that would be any easier to decide than this one. n2 n2 Petitioners challenge this conclusion by relying on dicta from Kansas v Hendricks, 138 L. Ed. 2d 501, 1997 US. LEXIS 3999, * 1, 117 S. Ct. 2072 (1997). There, after rejecting a double jeopardy challenge to Kansas' Sexually V iolent Predator Act, the Court added: "The Blockburger test, however, simply does not apply outside of the successive pros- ecution context." Id., at *4l. This statement, pure dictum, was unsupported by any authority and con- tradicts the earlier ruling in United States v Dixon, 509 U.S. 688, 704-705, 125 L. Ed. 2d 556, 113 S. Ct. 2849 (1993), that the Blockburger analysis applies to claims of successive punishment as well as successive prosecution. See also id., at 745-746 (SOUTER. J., concurring in judgment in part and dissenting in part) (explaining why the Blockburger test applies in the multiple punishments context). I cannot imagtne a good reason why Blockburger should not apply here. [*281 II The Court not only ignores the most obvious and straightforward basis for affirming the judgment of the Court of Appeals: tt also has nothing to say about that Court's explanation of why the reasoning in our opin- ton in United States v. Halper supported a rejection of petitioners' double jeopardy claim. Instead of grant- ing certiorart to consider a possible error in the Court of Appeals' reasoning or its judgment, the Court can- didly acknowledges that it was motivated by "concerns about the wide variety of novel double jeopardy claims spawned in the wake of Halper." Ante, at 4. The Court's opinton seriously exaggerates the signif- icance of those concerns. Its list of cases illustrating the problem cites seven cases decided in the last two years. Ante, at 4, n. 4. In every one of those cases, how- ever, the Court of Appeals rejected the double jeopardy clatm. The only ruling by any court favorable to any of these "novel" claims was a preliminary injunction en- tered by a Distrtct Court postponing implementation of New Jersey's nov'el, controversial "Megan's Law." E. B. r Poru-. 914 F Supp. 85 (rVJ 1996), reversed, E. B. t• bern+ero, 119 F3d 10771'291 (CA3 1997). Thus, the cases cited by the Court surely do not indicate any O&F LEXiS"• NEX1S' ~ LEXIS'• NEXIS' ~ LEX1S• NEX1S
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0 i Page 12 118 S Ct 488, 1997 U S LEXIS 7497, `37, LEXSEE 139 L Ed 2d 450. 66 U S L W 4024 a defendant to show that a"measure ot recovery' was 'unreasonable or excesstve" before "what was clearlv intended as a civil remedy (would be treated asi a crim- inal penalty." One Lot Emera[d Cut Stones r: United States, 409 U S 232, 237, 34 L Ed 2d 438. 93 S Ct 489 (1972). cited Rex Trailer for that standard and relied on the case as exemplifying a provision for Itqut- dated damages as distinct from criminal penalty. I read the requisite "clearest proof" of crtmtnal character, then, to be a function of the strength of the countervadtng in- dtcations of civil nature (including the presumption of constituttonaltty enjoyed by an ostensibly civil statute making no provision for the safeguards guaranteed to criminal defendants. See Flemming, supra, at 617). 1 add the further cautton, to be wary of reading ['38] the "clearest proof" requirement as a guarantee that such a demonstratton is likely to be as rare in the future as it has been in the past. See United States v Halper, 490 U S. 435, 449, 104 L. Ed. 2d 487, 109 S. Ci. 1892 (1989) ("What we announce now is a rule for the rare case"). We have noted elsewhere the expanding use of ostensibly civil forfeitures and penalties under the exi- gencies of the current drug problems, see Ursery, supra, at (sltp op., at 4) (STEVENS, J., concurring tn Judg- ment in part and dissenting in part) ("In recent years, both Congress and the state legislatures have armed their law enforcement authorities with new powers to forfeit property that vastly exceeded their traditional tools"); Unrted States v James Daniel Good Real Propertv. 510 U.S 43, 81-82, 126 L. Ed. 2d 490, 114 S Ct. 492 (1993) (THOMAS, J., concurring in part and dissenting tn part), a development doubtless spurred by the mcreas- mgly inviting prospect of its profit to the Government. See td, at 56, n. 2(optnton of the Court) (descrtbtng the i~overnment's financtal stake tn drug forfeiture); see also td , at 56 lctung Harmelin v Michigan. 501 US. 957, 979, it 9. 115 L. Ed. 2d 836, 111 S. Ct. 2680 (1991) (opinion of SCALIA, J.) for the proposttton [`39] that 'it makes sense to scrutinize govetnmental action more ciosehc when the State stands to benefit") Hence, on (he mlrequency of "clearest proof." history may not be repeutixe JUSTICE BREYER. with whom JUSTICE GINSBURG )otns, concurring in thejudgment. I agree with the majority and with JUSTICE SOUTER ihai United States s. Hulper, 490 U.S. 435. 104 L. Ed. 2d -t87, 109 S Ct 1892 l19491. does not provtde proper ewdance lor dtstmeurshma between criminal and non- ,nmmal ,mcuons and proceedmgs I also agrce that f tuted Stuter t lktrd. 448 CS. 242. 248. 65 L Ed 2d ;_'. 1l105 Q?636 r19801. and KennedN i Llendoca- lhvrtne-. f,' S 144 168-169. 9 L Ed _'d 644 8: 5 Ct. 554 (1963), set forth the proper approach. I do not join the Court's optnton, however, because I disaeree with its reasoning in two respects. First, unlike the Court I would not say that "'only the clearest proof "' will "transform" into a crtmtnal punishment what a leg- islature calls a"ctvtl remedy." Ante, at 6. 1 understand that the Court has taken this language from earlier cases. See Ltfsrd, supra, at 249 But the limitation that the lan- guage suggests is not consistent with what the Court has actually done. Rather, in fact if not in theory, the Court has simply [*40J applied factors of the Kennedy vari- ety to the matter at hand. In Department of Revenue of Monr- v. Kurth Ranch, 511 U S. 767, 114 S. Ct. 1937, 128 L. Ed. 2d 767 (1994), for example, the Court held that the collection of a state tax imposed on the posses- sion and storage of drugs was "the functional equivalent of a successive crimtnal prosecution" because, among other things, the tax was "remarkably high"; it had "an obvious deterrent purpose"; it was "conditioned on the commission of a crtme"; it was "exacted only after the taxpayer had been arrested for the prectse conduct that gives rise to the tax obligation": its altemative func- non of raising revenue could be equally well served by increasing the fine imposed on the activity: and it de- parted radtcally from "normal revenue laws" by taxing contraband goods perhaps destroyed before the tax was imposed. ld., at 781-784. This reasoning tracks the non-exclusive list of factors set forth in Kennedy, and it ts, I believe, the proper approach. The "clearest proof" language is consequently misleading, and I would con- sign it to the same legal limbo where Halper now rests. Second, I would not decide now that a court should evaluate a statute only "'on [*41] its face,'" ante, at 6 (quoting Kennedy, 372 U.S. at 169), rather than "as- sessing the character of the actual sanctions imposed." Halper. 490 US. ar 447: ante, at 7. Halper involved an ordinary civil-fine statute that as normally applied would not have created any "double jeopardy" problem. It was not the statute itself, but rather the disproportion- ate relation between fine and conduct as the statute was applied in the individual case that led this Court, unan- imously, to find that the "civil penalty" was, in those circumstances, a second "puntshment" that constituted double )eopardy. See 490 US- at 439, 452 (finding that S 130.000 penalty was "sufficiendy disproporttonate" to S 585 loss plus approximately S 16,000 in govemment expenses caused by Halper's fraud to constitute a second puntshment in ~iotatton of double jeopardy). Of course, the Court in Halper mteht have reached the same result ihrou-h application of the constttunonal prohibition of "excesst~e lines " See ante, at 9: Alexander e United States. 509 L' S 5-14, 558-559. 125 L Ed 2d 441. 113 S Ct '766 ~1993i, Halper. 490 US at 449 (empha- ~ LEXIS'• NEXIS' ~ LEXIS, '• NEXIS' ~ LEXIS'•.NEXI.S ~ _ - -
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3 6.Ii.N.AI Ax to Uw Icmemmt en¢kl by N. Dcfendenu upnnd,a Sui a civil NCO clcbN Ine Coua finds the Sule hu rvflklently pled ud tllctm Florlde R1CO vlolcilom to wlduund the Defendante' Modolv to Dtem W. hvue uLdN lo proxlmle uuey mey ba u{wA qaln on Mollnu foe Sl.nnury ludpnenl. N 1 "• ouA I e Inro m M1.natlen [,,..ror.dnn Sol U.5.23i, 1171E.L2d 532, tI2 S.Ct 1311 (1992) (IM "SI PC' cue) dllcuna the pmxlmYe owe Iutn u Icnple Flnl IMe Caun nola tlut $(PC duH with no SWC or Ooremmam ulna of utlon. Onee .{Jn, only pA.nep.niawerclnrolvW Sccand,'1wn.pxhulntcunomen"and"SIPCneverdultd4a11ywWlthe vlolllnr In ow we ellefxlIom Include dlrect deJlnp bcrween the Defcrldanu knd the Plalnllt(h or tMb epenu andre(uLICn. FhvllY. the Coun nolel the lv,{uery ef Jurtla Sulla Inlde concurtin[ opW om ., The. uldmau qanUonhen le euonory tundlnt: wAether the esulled naxav(maedatory lepla for'wmplan7 baween the hum of wtdeh tNe plalntlff amplJro ud the defendenfa toulled pl.dlau uu Ie of the eon tMt wlll euppon an actlon tmdrr elvli IUCO .., One of IM uwl cIemalu of 1uNlory ntndlnt Is ploalmm ouatllt}. It la mqulred In ucO... baam.lt hu dwah been the pnNce of cemmen.uw rnuM (and plobably of JI coluu, uMet Jl 1< 1,11 ynem/) to nqWn ur cordltloo of tuccvny, mdon d- Ictlrlnure eped(lally preaedba otheewia, dat the InJuy heve betn ploxtmeuly auled by Ue offendhl5 modoel... Yel uulMe. elemeln af elwtorl >undlet U compllena wIO what I d.tl all Ih.'wno-aPlnun+u' Imt wTlrb eeeb to dcutmine wbedle,.pcn Ifom IM dlmcmne of the InJloy, the p1JntIR4 within tb, elau of pcnnru outAt to be benefited by the pNvlxlon Y luu....ll xewl to me obvious that the pmxlmeleK.uw tal and tlu eonoaElnmmo lat Au wlll be epplled to IM vadova uwa ofwlon aeeted by II U.S.C 1964 ve not IIMfWm, butrer) acmNlnl to the mlve of the cAtnlnxl oRema upon w'Mch lhouwun of eedon ere buad...Il will vuy wilhlheundrAylnp.Ieleden.... Salfplnuc9npp.1327.1125. FLully. the Dcfendmt hu rJwd wneelm eban Ne eomplaiq of tM we, uu Aupuet 4.1997 trl.l Mnid9. dbwvcry pmblem.o eto. if the Caut pennlu the Third Amcnded ComplaNt to etand with Counu Five P+outh IiISN inuct. Flnl, Ne Coun noter Ihat the Sulo'e Inlentlon b add RICO enlmu has been Fnown to the defenee llru wly Ocsoba, 1996 el the lue>L I.e, at Itvt ta+montlu befon eM xheduled trlal dctc. Sacerd, rNl Coun hu tlpnd mon onlen In thle one we admlalN Iwyae pto hoe vlw Run In JI the Couli e prlar wa In all d1vlJeu put together ova dx put Iwenty yean. TM numba of lewryera workln9 on NI one wa for the defeme (and for 1},e Suu) II mind-bo9lllnt. To eWm. IaJt of abWty to prcpan between now and Auvrl 1997 luelm NIe Coun'e credullty. Third, for uvenl nonthe all paNa han buadllltendy prepulnt for the January 21, 1997 hculn5 ~ 0 Q 5L9 98 an tN SneY motion to elJm punltlve damqce on lu nc9115cnee end/or mfn Ileblllry clelnu. Recnld •vldcnac muet be proRered to Ihe Coun on lanuuy 24,1991 to eu)uln any clalma for puoltivo dunery. The rype of cvldenn eequlnd muu be nmllu, If not the tune, evidcnco reqviled 1o wtJn the Florlde IUCO clJmc I a, ulmmel-hpe aclldllev In euoce. In peeprt(nt for IM lanuary 24.1997 hut6p the defwe wlil be dlun.cnN d¢ Sute i RICO we u well The conurN axpmled by the defenee heve ban conddered by tTle Court but art found lo bs lar ntnldunl lhm d,. dphr nd cblllty of the Sule In pretem all Ne fau and IefJ Neadn utuabl. bued upen Iluu Atu Ilowovaq tM Coun will pennfi ne/vnAU N.rndmrul to the Third Amendcd CompleinL It o ORDCRYA AND ADNDOED thu the tdel of tMe we eTJI prooe W on the jh(ISlupend W ComplJm u ut IbM in tNx On1er betlnNnS Autuet e, 199 hwd by Ihe Coun durin{ tM week of lune 30, 1997 or an DONE AND ORDORHD n West P.Im Beatk Copy"hhed. T+IY,vW, n wmnn Rw, n. eP•LI M,rv. r o. eoemuu wmednl,eQvnnml RaMIM M.wee...>.n.lY+In f0 nr•.+tme W.,IJwevAn I1rG1 O.ve,e x.enM1L•IVIn Po.etna w,erJneuu.n I)eCi MIQ.,IM.r+.,ry.h M•t..Om.,. nunn to uuu•iw••. e.m )m anw.nvtm Mh a.e/. CN•N eane.un aNUe.,fCL/m 1ya•• 1 1WM.n 41dn lob.po waNne.•,A,n ))101 subject to Motlom fot, ll(r dale epxd t nrldedJef7dld nt to be •
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s 0 m. Yet another announcement co-sponsored by the TIRC and-the Tobacco Institute, called "A Statement about Tobacco and Health," stated: We recognize that we have a special responsibility to the public, to help scientists determine the facts about tobacco and health, and about certain diseases that have been associated with tobacco use. We accepted this responsibility in 1954 by establishing the Tobacco Industry Research Committee, which provides research grants to independent scientists. We pledge continued support of this program of research until the facts are known. *** Scientific advisors inform us that until much more is known about such diseases as lung cancer, medical science probably will not be able to determine whether tobacco or any other single factor plays a causative role, or whether such a role might be direct or indirect, incidental or important. We shall continue all possible efforts to bring the facts to light. In that spirit we are cooperating with the Public Heaith Service in its plan to have a special study group review all presently available research. (Emphasis added.) n. In 1977, Addison Yeama.n, chairman and president of CTR, stated during a speech that "[CTR] has no propaganda function of any kind or any degree." o. In 1979, the Tobacco Institute issued a document entitled "Tobacco Industry Research on Smoking and Health." In it, TI represented that "[t]here are still eminent scientists who question whether a causal relationship has been proven between cigarette smoking and human disease." The report went on to claim that the industry had a great desire to "learn the truth": [A] major portion of this scientific inquiry has been financedby the people who knew the most about cigarettes and have a great desire to learn the truth - the tobacco industry. The industry has committed itself to tnis task in the most objective and scientific way possible. p. The 1979 report referred to above describes how the industry has spent $82 million in research "into all phases of tobacco use and health." Further the report 11•9j_wl,HSc~
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'We are pledging aid and assistance to the research effort into all phases of tobacco use and health.' - We reaffirm that statement and pledge today. 127. Additional representations were made by the individual Tobacco Companies themselves, repeating the promise that they would investigate and report all facts relating to smoking and health. 128. For example, the American Tobacco Co. (ATC) made the following representations: a. On February 28, 1956, the president of ATC issued a release indicating that "many highly respected medical scientists challenge the anti-tobacco claims." b. On November 14, 1957, ATC issued a release representing that its own research produced "evidence directly contradicting the theory that smoking causes lung cancer or heart disease." c. On April 9, 1962, ATC issued a release indicating that research contradicting any statistical association between cigarettes and higher death rates was "very difficult to refute." d. On June 4, 1963, ATC issued a release, quoting Dr. Robert Heiman, assistant to the president and prime author of studies refuting any link between smoking and health. In the release, Heiman claimed that workers for the company smoked twice as much as the average person while having a mortality rate of 29 percent below average. e. On October 3, 1963, ATC again issued a release, this time citing Heiman for proof that the statistical association between smoking and lung cancer is "fallacious" and leads to "absurd consequences." f. In 1967, ATC issued a release describing a 46-page booklet prepared by the Tobacco Institute which "refutes anticigarette charges." The evidence on smoking and health posed "an open" question. The release refuted the studies linking smoking with cancer in mice, and claimed that "no one does more" about smoking and health than "The Tobacco People." -30- 11291ZOU15 BSCDOC
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The tobacco industry supports more scientific research into the problems than any other source.... According to the release, "The tobacco industry continues to endure unfair and unjustified harassment from government and private sources." Finally, the release asserted, "the cold hard fact remains that no clinical or biological evidence has been produced which demonstrates how cigarettes relate to cancer or any other disease in human beings." 129. P..IR chairman Bowm:..i Gray told Congress in 1964: "If it is proven that cigarettes are harmful, we want to do something about it regardless of what somebody else tells us to do, And we would do our level best. It's only human." 130. In 1984, RJR placed an editorial-style announcement in the N£w YORK TttvtES, stating: Studies which conclude that smoking causes disease have regularly ignored significant evidence to the contrary. Tnese scientific findings come from research completely independent of the tobacco industry. 131. in 1988, after the i ollone v. Lorillard trial, Lorillard issued a press release on behalf of the industry, summarizing the evidence introduced during the trial. T•ne release reaffirmed that the industry "has funded independent research" to determine the cause of smoking and cancer and "has communicated the results of that and other research, whether they cast a favorable or unfavorable light on tobacco, to the scientific community, the public and the government." - 132. According to Lorillard, documents introduced at the Cipollone trial contained "no evidence whatsoever that the companies suppress any information or that they conspired among themselves to confuse the public about smoking and health." 133. Brown & Williamson was responsible for Project Truth, an operation consisting of articles and releases about the "smoking/health controversy." Project Truth took issue with reports linking tobacco use and smoking. in part because certain of these studies use laboratory techniques such as painting the backs of mice with nicotine concentrates. While Project Truth -31- 112912 OCJ5 BSC ~
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156. For example, Dr. Freddy Homburger, a researcher in Cambridge,-Massachusetts, undertook a study of smoke exposure on hamsters. According to Dr. Homburger, he received a grant from CTR that was changed half-way through the study to a contract "so they could control publication-they were quite open about that." 157. Dr. Homburger has testified that when the study was completed in 1974, the scientific director of CTR and a CTR lawyer "didn't want us to call anything cancer" and that they threatened Dr. Homburger with "never get[ting] a penny more" if his paper Nvere published without deleting the word cancer. 158. An internal CTR document describes how Dr. Homburger attempted to call a press conference about the incident and how CTR stopped it: He ... was to tell the press that the tobacco industry was attempting to suppress important scientific information about the harmful effects of smcking. He was going to point specifically at CTR .... I arranged later that evening for it to be canceled. Homburger was given a cordial welcome and nicely hastened out the door. P.S. I doubt if you or Tom will want to retain this note. 159. Other internal industry documents also shed light on the true nature of the conspirators' associations, as the following additional quotations demonstrate by way of example: a. "CTR began as an organization called Tobacco Industry Research Council (TIRC). It was set up as an industry shield in 1954. That was the year statistical accusations relating smoking to diseases were leveled at the industry; litigation began; and the Wynder,'Graham reports were issued. CTR has helped our legal counsel by giving advice and technical information, which was needed at court trials ....[T]he public relations value of CTR must be considered and continued .... It is very important that the industry continue to spend their dollars on research to show that we don't agree that the case against smoking is closed." b. "Historically, the joint industry funded smoking and health researc:h ~ programs have not been selected against specific scientific goals, but rather for various purposes GJ _1 such as public relations, political relations, position for litigation. etc.... In general, these (}'I I`0 -36- 11.9 ~? W35 USC DOC
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0 0 Serious charges have been made about tobacco use. The tobacco industry has taken these charges seriously. We recognize that we have a special responsibility to the public to help scientists determine the facts about tobacco and health, and about certain diseases that have been associated with tobacco use. We accepted this responsibility in 1954 by establishing the Tobacco Industry Research Committee, which provides research grants to independent scientists. We pledge continued support of this program of research until the facts are known. *«* We shall continue all possible efforts to bring the facts to light. In that spirit we are cooperating with the Public Health Service in its plan to have a special study group review all presently available research. k. On or about December 1, 1970, TI issued a release entitled "The question about smoking and health is still a question." According to the release, "eminent scientists" question "whether any causal relationship has been proven between cigarette smoking and human disease." As for the research effott, the release asserted, "a major portion of this scientific inquiry has been financed by people who know the most about cigarettes and have a great desire to learn the truth ... the tobacco industry. Ar_d the industry has committed itself to this task in the most objective and scientific wav possible." The CTR continued to support research by `'independent scientists," the release claimed, and all of their work has been published. The release concluded with the following promises: From the beginning the tobacco industry has believed that American people deserve objective scientific answers. With this credo in mind, the tobacco industry stands ready today to make commitments for additional valid scientific research that offers to shed light on new facets of smoking and health. 1. Another industry publication in 1970 stated that the industry believed the American public is "entitled to complete, authenticated information about cigarette smoking and health. The tobacco industry recognizes and accepts a responsibility to promote the progress of independent scientific research in the field of tobacco and health." -L7- I 129 12 0035 BSC DOC
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circles that made the decision, but I certainly had a pretty fair idea why....[T]hey felt that such a cigarette, if put on the market, would seriously indict them for having sold other types of cigarettes that didn't contain this, for example. Also, there was a meeting we held in ... New Jersey at the Grand Met headquarters ... at which the various legal people involved and the management people involved and myself were present. At one point Mr. Dey who at that time, and I guess still is the president of Liggett Tobacco, made the statement that he was told by someone in the Philip Morris company that if we tried to market such a product that they would clobber us." (Emphasis added.) 3. Brown & Williamson's Efforts to Develop a "Safer" Cigarette 207. Brown & Williamson also developed "safer" cigarettes. 208. Despite promising test results, Brown & Williamson did not market the safer cigarettes because, among other reasons, such efforts would violate the conspiracy to suppress the marketing of safer products. 209. Brown & Williamson's Project'`Ariel" used a heating, as opposed to burning, system. 210. Brown & Williamson's Project "Janus" was intended to identify hazardous components of cigarette smoke so they could be removed. 211. Jeffrey Wigand, a former vice president for research and development for Brown & Williamson, has stated that he was instructed by the company president to abandon all efforts to develop a safer product. He has testified that he was told, generally, "That there can be no research on a safer cigarette. Any research on a safer cigarette would clearly expose every other product as being unsafe and, therefore, present a liability issue in terms of any type of litigation." 212. Brown & Williamson also conducted research on tobacco substitutes or analogues, as did a number of the other companies. These substitutes were sought as a means to duplicate some of the effects of nicotine without toxic or harmful effects. -45- 11'.9 13 035 BSC OOC
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! • 102. Hartnett urged that the industry hire "the best obtainable" public-relations counsel since none "has ever been handed so real and yet so delicate a multimillion dollar problem." (Emphasis in original.) 103. The next day, December 15, 1953. accepting Hartnett's offer to conspire, the presidents of the leading Tobacco Companies met at an extraordinary gathering in the Plaza Hotel in New York City. The public relations firm Hill & Knowlton coordinated the meeting and was to play a major role in formulating and executing the industry's response. Present at Ihe meeting were the presidents of American Tobacco, Benson & Hedges, Brown & Williamson, Lorillard, Philip Morris, R.J. Reynolds and U.S. Tobacco. 104. This gathering was unprecedented because it was the first time the Tobacco Companies had met together outside of occasional dinners. 105. According to a Hill & Knowlton memorandum summarizing the meeting, the companies exchanged proprietary information and "voluntarily admitted" that "their own advertising and [past] competitive practices have been a principal factor in creating a health problem," and acknowledged that they had "informally talked over the problem and will trr and do somethin2 about it." (Emphasis added). 106. Defendants realized that the subject of doing something collectively about competitive advertising practices "is one of the important pub;ic relations activities that might very clearly fall within the purview of the antitrust act." Therefore, the defendants conciuded, "it is doubtful that we will be able to make anv fo:mal recommendation with regard to the advertising or selling practices and claims." (Emphasis added.) 107. At the Plaza Hotel meeting, the defendants entered into a combination and conspiracy to cease to compete on the basis of relative health risks. 108. Prior to the December 15, 1953 meeting, the cigarette industry did not have a trade association. Moreover, the companies avoided formal business meetings of any kind in the wake of prohibitions stemming from a 1911 dissolution decree and criminal convictions for price fixing in 1939. -19- I¢9IZCOl555CDOC
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144. In a December 6, 19771etter, the President of American Brands wxote Addison Yeaman of the CTR reminding Yeaman that the 1954 Frank Statement constituted a"p]edge to the public of independent research." According to the author, "contract research," i.e., research carefully selected by the CTR, which had been the modus operandi of the TIRC and CTR, violated this pledge. 145. A 1978 memo addressed to the CTR file from a Philip Morris official characterized CTR as "an industry `shield."' The memorandum goes on to state: "the 'public relations' value of CTR must be considered and continued ... It is extremely important that the industry continue to spend their dollars on research to show that we don't agree that the case against smoking is closed for 'PR' purposes...." 146. In a "personal and confidential" memo, T.S. Osdene, a longtime Director of Research of Philip Morris. recommended that the company review its relationship to the CTR. He criticized the statements o€D. Ford, a CTR staffer, concerning the similarity of nicotine and opiates. 147. Osdene also criticized the work of CTR staffer Dr. Kreisher because it "starts from the point of view that smoking causes lung cancer." With this type of research, Osdene wrote, "we are digging our own grave. I believe that the program as set up has the potential of great damage to the industry ... I am very much afraid that the direction of the work being taken by CTR is totally detrimental to our position and undermines the public posture we have taken to outsiders." 148. T.S. Osdene recently refused to testify about his work on the CTR by invoking the Fifth Amendment. 149. A June 25, 1981 presentation by the TI staff to the TI Executive Committee. comprised of members of the major tobacco companies, made clear the industry's strategy in suppressing and misrepresenting the state of scientific research. "First and most important," the presentation stressed, "we must establish that there is no proof that smoking harms smokers or nonsmokers: " 34- In0 1_09I59SCDOC
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proclaimed that "the findings are not secret" and reaffirmed the commitment to the tobacco industry: From the beginning the tobacco industry has believed the American people deserve objective, scientific answers. With this credo in mind, the tobacco industry stands ready today to make new commitments for additional valid scientific research that may shed light on the question of smoking and health. q. On information and belief, in or about 1984 the industry jointly issued "Another Frank Statement to Smokers." In this modem version the industry claimed that "the intervening years have brought a stream of conflicting and confusing publicity about tobacco use, especially cigarette smoking, in relation to health." The industry then decided to "set forth the facts" which included the following: 1. Compelling doubts have been raised about son:e interpretations of the statistics relating to smoking and health_ 2 Laboratory and clinical findings have failed to establish the charges of a causal relationship between smoking and iung cancer. Experiments conducted in various institutions with animals inhaling tobacco smoke have consistently failed to show any iung cancer causation from the smoke. 3. The cause or causes of lung cancer remain undetennined and a large number of possible factors, including occupational exposures, specific air pollutants, nutrition and many others, are under continuing study. 4. Definite conclusions are not warranted by the present state of knowledge about ihis complex disease. The cause of cancer remains today as much a mystery as ever. Until the auestions now raised about tobacco are solved, the Tobacco Industry Research Committee will continue to support independent scientific research into all phases of tobacco use and health. At its formation in January 1954 the Tobacco Industry Research Committee stated: ' We believe the products we make are not injurious to health.' _29_ I1?9.ll WJ5 HSC DOC
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programs have provided some buffer to public and political attack of the industry, as well as background for litigious (sic) strategy." c. "Historically, it would seem that the 1954 emergency was handled effectively. From this experience there arose a realization by the tobacco industry of a public relations problem that must be solved for the seif-presen•ation of the industry." d. "To date, the TIRC program has carried its fair share of the public relations load in providing materials to stamp out brush fires as they arose. While effective in the past, this whole approach requires both revision and expansion. The public relations program ... was like the early symptoms of diabetes - certain dietary controls kept public opinion reasonably healthy. When some new symptom appeared, a shot of insulin in the way of a news release ... kept the patient going." e. "When the products of an industry are accused of causing harm to users. certainly it is the obligation of that industry to endeavor to determine whether such accusations are true or false. Money spent for such purpose should not be regarded as a charitable contribution but as a business expense - an expense necessary to keep that industry alive. In view of the billions of dollars of annual sales of our industry our expenditures for health research has been of a minimal order." f. "For nearly twenty years, this industry has employed a single strategy to defend itself on three major fronts - litigation, politics, and public opinion. While the strategy was brilliantly conceived and executed over the years helping us win important battles, it is only fair to say that it is not - nor was it intended to be -- a vehicle for victory. On the contrary, it has always been a holding strategy, consisting of creating doubt about the health charge without actually denying it.... In the cigarette controversy, the public - especially those who are present and potential supporters (e.g. tobacco state congressmen and heavy smokers) - must perceive, understand, and believe in evidence to sustain their opinions that smoking may not be Co C)1\ the causal factor." U•! 1 CM r~. 0 uM -37- 1135 110J15 3Sr DOC
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160. Despite overwhelming scientific evidence, and the confirmation of this evidence by their own internal research, the cigarette manufacturers and their trade associations continue to deny uniformly that there is a causal connection between cigarette smoking and adverse health effects, or that nicotine is addictive. 161. As one industry representative testified: "[A company can't represent that] smoking doesn't cause cancer. You can't say that. But you can say it is a risk factor, and scientificallv it hasn't been established. And that's what the research is for.... I don't agree [that nicotine is addictive]. From what I've read on nicotine is that it contributes to the flavor, the taste of the product." (Emphasis added.) 162. Representations like these are misleading, unfair and deceptive. They are also a result of the industry's ongoing conspiracy and combination arising from the Plaza Hotel agreement, and are made to maintain the industry's market and profits from its product. G. The Role of CTR "Special Projects" and Industry Lawyers in Concealing Information 163. in 1964, the year of the first Surgeon General's report on smoking. the CTR formed a "Special Projects" division to assist the industry in concealing unfavorable information. A series of research grants designated as CTR Special Projects were developed by defendants in a manner to appear to receive the protection of the attorney- client or attorney-work- product privilege. - 164. The true purpose of the Special Projects division was to conceal damaging research regarding the links between smoking and disease, and to develop a number of expert witnesses to defend tort suits against the Tobacco Industry. 165. Consistent with this purpose, the Tobacco Industry's counsel were substantially involved in strategic and specific decision-making within the Special Projects division to withhold dangerous evidence from the public. 166. For example, the notes of one CTR meeting, written in 1981, state, "When we started the CTR Special Projects, the idea was that the scientific director of CTR would review a - 38 - 11 ]9 12 035 9SC DOC
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Lorillard manufactures, advertises and sells Old Gold. Kent. Triumph. Satin. &1ax, Spring, Newport and True cigarettes and other tobacco products throughout the United States. 21. In 1995, Lorillard's domestic tobacco revenues were $2.1 billion, generating profits of $363 million. 22. Defendant Philip Morris Inc. ("Philip Morris"), is a Virginia corporation whose principal place of business is 120 Park Avenue, New York, New York 10017. Philip Morris manufacttues, advertises and sells Philip Morris, iMerit, Cambridge, Marlboro, Benson & Hedges, Virginia Slims, Alpine, Dunhill, English Ovals, Galaxy, Players, Saratoga and Parliament cigarettes and other tobacco products throughout the United States. 23. Philip Morris is the world's largest tobacco company. In 1995, Philip Morris' domestic tobacco revenues were S 11.5 billion, generating profits of SS.5 billion. 24. Defendant R.J. Reynolds Tobacco Company ("Reynolds") is aNew Jersey corporation whose principal place of business is Fourth & t\/Iain Streets. Winston-Salem. North Carolina 27102. 25. In 1995, Reynolds' domestic tobacco revenues were $Y.5 billion, generating profits of S954 million. 26. Defendant Brown & Williamson Tobacco Corporation ("Brown & Williamson' ) is a Delaware corporation whose principal place of business is 1500 Brown & Williamson Tower, Louisville, Kentucky 40202. Brown & Williamson manufactures, advertises and sells Kool, Pall Mall. Carfton, Lucky Strike, Raleigh, Barclay, BelAir, Capri, Richland, Laredo, Eli Cutter, Tareyton and Viceroy cigarettes and other tobacco products throughout the United States. 27. In 1995, Brown & Williamson had revenues from domestic tobacco sales of $2.3 billion, generating profits of $450 million for domestic tobacco sales alone. Brown & 00 Williamson is or was a wholly-owned subsidiary or division of BATUS Holdings, Inc., and is a G\ c~s ~ wholly-owned subsidiary or division of B.A.T. Industries plc. 23. B.A: f Indusr.ries pIc ("B.A.T Industries" or "BAT II") is a British corporation V ~ whose principal place of business is Windsor House. 50 Victoria St., London, England SW 1. - 5 -
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was ongoing, internally BATCO was conducting a project confirming the validity of linking smokers and cancer through the use of skin-painting tests. 134. In 1991, RJR issued a publication again reaffirming the work of the industry in funding and fully reporting the results of research. 135. The Tobacco Institute, through its executives, also sought to influence the government by using defendants' deceptive representations concerning tobacco and health. For example, in 1972, Tobacco Institute president Horace Kornegay testified before Congress: Let me state at the outset that the cigarette industry is as vitally concerned or more so than any other group in determining whether cigarette smoking causes human disease, whether there is some ingredient as found in cigarette smoke that is shown to be responsib!P and if so what it is. That is why the entire tobacco industry ... since 1954 has committed a total of $40 million for smoking and health research through grants to independent scientists and institutions. 136. Each of the representations to the public - that defendant Tobacco Companies were sponsoring independent objective research. that they were endeavoring to bring the truth to light, and that the public could therefore rely upon the statements made - were false. 137. These misrepresentations were designed to gain the trust of the public and public- health authorities to better distort and suppress substantive information about smoking and health. F. The True Nature of the TIRC and the CTR: A "Front" for the Tobacco Cartel 138. Industry executives and lawyers, both in-house and outside counsel, actually ran the TIRC. They, along with public relations counsel, "provided assistance in selecting" the Scientific Advisory Board of the TIRC. 139. The TIRC and CTR, as part of the conspiracy, influenced media and scientific reports to cloud the issue of smoking and health and to suppress all harmful information. -32- 11'9.12 OU3' 9SC ~O!'
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10. For years, the Tobacco Industry hid information about its w-roneful conduct from the public. By transferring to lawyers information indicating that either smoking is harmful to human health or nicotine is addictive, defendants have improperly asserted attorney-client privileges, thereby concealing from the public and private litigants the truth about the Tobacco Industry's knowledge of the harmful effects of tobacco products, their manipulation of nicotine levels in order to promote addiction, and their suppression of safer tobacco products. 11. Through recent disclosure, the partial truth about the defendants' activities has been revealed. For example, in a recent settlement with certain Attorneys General, Li~gett & 4levers made unprecedented admissions that nicotine is addictive, that the industry manipulates the nicotine levels in its products, that tobacco use causes cancer, and that the industry has been tareetinv adolescents for decades. Objectives of This Action 12. In this action, the Attorney General sec'ss to (i) recoup the mllions of dollars in Medicaid costs annually inflicted upon the State of Verr, ont in providing health care to the indigent victims of tobacco-related illness and (ii) to change the way the tobacco industry does business in the State of Vermont in order to prevent the continuing infliction of unacceptable costs to the State Medicaid system and the public fsc by, among other things (a) halting the negligent or intentional marketing of tobacco products to adolescents; (b) requiring fidl and fair disclosure by the defendants of the nature and effects of their tobacco products and (c) ending the industry's combination to suppress health-based competition and the development of safer products. II. JIJRISDICTION AND VENUE 13. This complaint is filed and these proceedings are instituted under 33 V.S.A.
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'We are pledging aid and assistance to the research effort into all phases of tobacco use and health.' We reafnrm that statement and pledge today. 127. Additional representations were made by the individual Tobacco Companies themselves, repeating the promise that they would investigate and report all facts relating to 'smoking and health. 128. For example, the American Tobacco Co. (ATC) made the following representations: a. On February 28, 1956, the president of ATC issued a release indicating that "many highly respected medical scientists challenge the anti-tobacco claims." b. On November 14, 1957, ATC issued a release representing that its own research produced "evidence directly contradicting the theory that smoking causes lung cancer or heart disease." c. On April 9, 1962, ATC issued a release indicating thaCresearch contradicting any statistical association between cigarettes and higher death rates was "very difficult to refute." d. On June 4, 1963, ATC issued a release, quoting Dr. Robert Heiman, assistant to the president and prime author of studies refuting any link between smoking and health. In the release, Heiman claimed that workers for the company smoked twice as much as the average person while having a mortality rate of 29 percent below average. e. On October 3, 1963, ATC again issued a release, this time citing Heiman for proof that the statistical association between smoking and lung cancer is "fallacious" and leadsto "absurd consequences." f. In 1967, ATC issued a release describing a 46-pagc booklet prepared by the Tobacco Institute which "refutes anticigarette charges." The evidence on smoking and health posed "an open" question. The release refuted the studies linking smoking with cancer in mice, and claimed that "no one does more" about smoking and health than "The Tobacco People." -30- II]v i]uul5 BSCDCC
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project. If he liked it, it was a CTR special project. If he did not like it, then it became a lawyers' special project." 167. Another memorandum from 1981 explained, "Difference between CTR and Special Four (lawyers' projects). Director of CTR reviews special projects - if project was problem for CTR, use Special Four." 168. The industry has been successful in using the CTR Special Projects division to conceal harmful information. Research from the Special Projects division remains shielded from public scrutiny. 169. In addition to CTR Special Projects, there are other instances where the industry used lawyers to shield the truth. For example, in 1984, B.A.T. began internally plotting how to shield documents produced by scientists from discovery. This plan included having B.A.T.'s "scientific literature review publication ... set up as a Law Department function.° 170. B.A.T. internally noted that "Direct lati<yer involvement is needed in all B.A.T. activities pertaining to smoking and health from conception through every step of the activity." This document further noted "the problem posed ... is difficult" due to "BAT scientists and frequently used consultants who believe cause is proven." 171. The Kansas City law firm of Shook, Hardy & Bacon and other lawyers played a critical role in furthering the conspiracy to suppress and conceal information about the adverse health effects caused by the use of tobacco products. The lawyers attempted to protect damaging tobacco-ralated documents from disclosure under the attorney-client or work-product privileges. 172. The la.vyers asserted these privileges regardless of whether the documents were prepared in anticipation of litigation or represented confidential communications made between lawyer and client. Lawyers routinely provided a number of non-legal services to defendants such as deciding which CTR "special projects" should receive funding, dispensing funding to the "scientists" involved in such projects, and designing the scope and approach of the special project. -39- 1~'91]00)595CDOC
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was ongoine, internally BATCO was conducting a project confirming the validity of linking smokers and cancer through the use of skin-painting tests. 134. In 1991, RJR issued a publication again reaffirming the work of the industry in funding and fully reporting the results of research. 135. The Tobacco Institute, through its executives, also sought to influence the government by using defendants' deceptive representations concerning tobacco and health. For example, in 1972, Tobacco Institute president Horace KomeQay testified before Congress: Let me state at the outset that the cigarette industry is as vitally concerned or more so than any other group in determining whether cigarette smoking causes human disease, whether there is some ingredient as found in cigarette smoke that is shown to be responsible and if so what it is. That is why the entire tobacco industry ... since 1954 has committed a total of $40 million for smoking and health research through grants to independent scientists and institutions. 136. Each of the representations to the public - that defendant Tobacco Companies were sponsoring independent objective research_ that they were endeavoring to bring the truth to light, and that the public could therefore rely upon the statements made - were false. 137. These misrepresentations were designed to gain the trust of the public and public- health authorities to better distort and suppress substantive information about smoking and health. F. The True Nature of the TIRC and the CTR: A "Front" for the Tobacco Cartel 133. Industry executives and lawyers, both in-house and outside counsel, actually ran the TIRC. They, along with public relations counsel, "provided assistance in selecting" the Scientif c Advisory Board of the TIRC. 139. The TIRC and CTR, as part of the conspiracy, influenced media and scientific reports to cloud the issue of smoking and health and to suppress all harmfitl information. 11'91]W)!ISCC9C
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180. At a time when the company was resisting discovery in a number.of personal injury lawsuits, Brown & Williamson's general counsel, J. Kendrick Wells, recommended in a memorandum dated January 17, 1985, that most of the company's biological research be declared "deadwood" and shipped to England. 181 Wells recommended that no notes, memoranda or lists be made about these documents. Wells stated, "I had marked certain of the document references with an X... which I suggested were deadwood in the behavioral and biological studies area. I said that the "B" series are "Janus" series studies and should also be considered as deadwood." ("7anus" was the name of a project that attempted to isolate and remove the harmful elements of tobacco.) Wells further recommended that the research, development and engineering department also should undertake "to remove the deadwood from the files." 182. Thus, the Tobacco Companies and their lawyers have misused claims of attorney- client privilege to insulate CTR-funded research projects and internal documents from disclosure to the public and to government officials. This conduct demonstrates the falsity, of the Tobacco Companies' representations that they would jointly fund objective research and report the results of that research to the public. H. The Continuing Conspiracy to Prevent the Development of Safer Products 1. The "Gentlemen's Agreement" 183. The industry's 1953 combination and conspiracy were supplemented and aided by a commitment to conduct joint research because of "a general feeling that an industt;: approach as opposed to an individual company approach was highly desirable." This approach prevented competition on the basis of health-risk comparisons, among other things. 184. As part and in furtherance of the agreement not to compete to develop a "safer" cigarette, there was a "gentlemen's agreement" among the manufacturers to suppress independent research on the issue of smoking and health. This agreement was designed to, and in fact did, restrict product development. -41- 112912a015Bii~
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173. Shook, Hardy & Bacon undertook to coordinate the Tobacco Companies' CTR "special projects" subterfuge. 174. For example, in 1976, Donald K. Hoel of Shook, Hardy & Bacon wrote to in- house lawyers at the various Tobacco Companies that a study to measure environmental tobacco smoke should be modified so that the study would yield more favorable results for the Tobacco Companies' position. The study was subsequently modified to de-emphasize the role of second- hand tobacco smoke relating to indoor environmental quality. 175. In addition, a May 19, 1981 letter from Ernest Pepples, vice president and general counsel of Brown & Williamson, to Patrick Sirridge of Shook, Hardy & Bacon, requested that Sirridge evaluate the qualifications of various scientists seeking to conduct scientific studies for Brown & Williamson. Shook, Hardy responded by providing biographical sketches of potential consultants including whether they previously had taken a scientific position favorable to the industry's position. 176. Sirridge also cooperated with Pepples' request in 1984 to transfer the funding of some helpful research by a cooperative scientist from a CTR account to a law-firm project: "I do not think ... that we should continue burdening CTR with such programs, and instead suggest that they be handled as law firm projects :" 177. In 1972, William Shinn of Shook, Hardy & Bacon wrote to Tobacco Company officials that a potentially favorable study should be secretly funded by the Tobacco Companies as a "special project (non-CTR)" to make the study appear independent of the industry and thus heighten its perception as unbiased and reliable. 178. By becoming intimately involved in the funding and design of these scientific studies, these lawyers attempted to further the conspiracy and fraud of the Tobacco Companies and CTR by clothing such studies in the attorney-client or work- product privilege to protect them from disclosure if their results were unfavorable. 179. Brown & Williamson used similar tactics in-house to suppress and avoid disclosure of its internal research on smoking and disease. -40- 1129 12 0035 BSC DOC
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catalyst in the burning process, Liggett found that "[c]igarette tar has been neutralized," and that there was "[n]o evidence for new or increased hazard ...." 203. Using this process, Liggett was able to produce cigarettes "which are believed to be of commercial quality." These cigarettes, however, were never marketed. 204. Liggett abandoned its XA project in part because it faced retaliation from industry leader Philip Morris if Liggett broke ranks. 205. Another reason for abandoning the project was fear that the marketing of a "safer" cigarette would be, in essence, a confession that its (and the industry's) other zigarettes were not safe. Thus, one Liggett executive wrote that, "Any domestic activity will increase risk of cancer litigation on existing products." 206. James Mold, who was assistant director of research at Liggett during the development of the "safer" cigarette, the XA project, has provided testimony including the following overview of the XA project and its abandonment: a. Mold stated that the XA project produced a safer cigarette. He stated, "We produced a cigarette which was, we felt, commercially acceptable as established by some consumer tests, which eliminated carcinogenic activity. .."(Emphasis added.) b. Mold testified that after 1975, all meetings on the project were attended by lawyers, lawyers collected all notes after the meetings, and all documents were directed to the law department to maintain the attorney-client privilege. He stated, "Whenever any problem came up on the project, the Legal Department would pounce upon that in an attempt to kill the project, and this happened time and time again." c. Mold testified that he was at a conference of scientists in Buenos Aires prepared to present his research regarding a less htrmfid cigarette when he received a`'frantic call" from legal counsel and was told not to present the paper or issue the press release. He was instructed not to publish his results in the Journal of Preventative Medicine. d. Mold was asked why Liggett didn't market a safer cigarette. He answered, "Well. I can't give you, you know, a positive statement because I wasn't in the management -44- i 1_^9. C WJ5 BSC ~
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In charge of the research activities of the Committee will be a scientist of unimpeachable integrity and national repute. - In addition there will be an Advisory Board of scientists disinterested in the ciQarette industrv. A group of distinguished men from medicine, science, and education will be invited to serve on this Board. These scientists will advise the Committee on its research activities. 123. This statement is being issued because we believe the people are entitled to know where we stand on this matter and what we intend to do about it. (Underlining added.) By issuing this publication and others that followed, the industry affirmatively represented that it would conduct and disclose unbiased and authenticated research on the health risks of cigarette smoking. When they made these representations, defendants intended that the public and government regulators believe and rely upon it. 124. The issuance of the "Frank Statement" was an integral step in the conspiracy to suppress and conceal information that might reduce the industry's sale of tobacco products. E. Repeated False Promises to the Public 125. Despite increasing internal knowledge of the undisclosed dangers of cigareue smoking, defendants continued. renewcd and repeated the representations and undertakings of the 1954 "Frank Statement to Cigarette Smokers." The cigarette industry continued to falsely represent the objectivity of industry research to the public to gain credence on the one hand while misrepresenting, distorting and suppressing information to support its pro-cigarette position on the other. 126. Countless public statements issued afrer the 1954 Frank Statement by the Tobacco Industry through the TIRC, the CTR and the Tobacco Institute repeated several themes: (1) that the industry was working to report the full and complete truth concerning tobacco and health, (2) that those working on reporting the truth were "independent" scientists and (3) that the results of this independent research cast grave doubt on any study linking tobacco use with heaith problems. a. On June 4, 1955, the TIRC issued a release entitled "-.antismoking Theories Not Based on Scientific Knowledge." The release represented that according to the _24- i I :5 i 3 ao]5 0SC DOC
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proclaimed that'`the findings are not secret" and reaffirmed the commitment to the tobacco industry: From the beginning the tobacco industry has believed the American people deserve objective, scientific answers. With this credo in mind, the tobacco industry stands ready today to make new commitments for additional valid scientific research that may shed light on the question of smoking and health. q. On information and belief, in or about 1984 the industry jointly issued "Another Frank Statement to Smokers." In this modem version the industry claimed that "the intervenin.a years have brought a stream of conflicting and confusing publicity about tobacco use, especially cigarette smoking, in relation to health." The industry then decided to "set forth the facts" which included the following: 1. Compelling doubts have been raised about some interpretations of the statistics relating to smoking and health. 2. Laboratory and clinicai findings ha~-e failed to establish the charges of a causal relationship between smoking and iung cancer. E.:periments conducted in variot>r instir.itions with animals inhaling tobacco smoke have consistently failed to show any ii-i.-tg cancer causation from the smoke. 3. The cause or causes of lung cancer remain undetermined and a large number of possible factors, including occupational exposures, specific air pollutants, nutrition and many others, are under continuing study. 4. Definite conclusions are not warranted by the present state of knowledge about this complex disease. The cause of cancer remains today as much a mystery as ever. Until the auestions ncw raised about tobacco are solved, the Tobacco' Industry Research Coaunittee w•ill continue to support independent scientific research into all phases of tobacco use and health. At its formation in Januar: 19d,-'~ the Tobacco industry Research Committee stated: ' We believe the products we make are not injurious to health.' -29- 11'_9 I]'ml5 OSC DOC
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homicide, suicide, automotive accidents, and alcohol and drug use combined. More Atnericans died ofsmoking related illnesses in 1990 than were killed in any war this century. 6. The use of tobacco is unique among consumer products. It is the only product which, if used as the manufacturer intends, will eventually cause addiction, disease and death. 7. It has been estimated that, in 1993, tobacco use cost the State of Vermont over S29 million in excess Medicaid costs. The State alleges that similar expenditures have been made in subsequent years. The defendants' conduct and the defective nature of their products as described in this complaint have been a substantial factor in the imposition of those costs, and the State seeks recovery of those costs as damages. 3. Tobacco-related disease places an unreasonable burden on the State Medicaid prooram and the public frsc. Vermont brings this action to alleviate the present and future burden on public fisc caused by tobacco-related illness. Decades of Wrongful Conduct 9. Since the early ! 950's, the Tobacco Industry has engaged in wrongful conduct that continues to this day. Defendants' conduct includes but is not limited to: a. publicly proclaiming that the industry accepted a "special responsibility" to discover and reveal the scientific truth about the health effects of tobacco, and then intentionally or negligently failing to perform the duty they assumed; b. aggressively marketing tobacco products which they knew to be unreasonably dangerous, notwithstanding their promises to the contrary, c. engaging in marketing activities which defendants knew or should have known to be likely to attract adolescents to the use of tobacco products; d. manipulating nicotine levels so as to increase the addictiveness, and therefore the danger, of their products; ,,. conspiring to keep safer products off the market, though such products would have le:sened the terrible costs of tobacco use.
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research, even though its results are inconclusive should be disregarded or lightly dismissed. ' At the same time, we feel it is in the public interest to call attention to the fact that eminent doctors and research scientists have publicly questioned the claimed significance of these experiments. Distinguished authorities point out: 1. That medical research of recent years indicates many possible causes of lung cancer. 2. That there is no agreement among the authorities regarding what the cause is. 3. That there is no proof that cigarette smoking is one of the causes. 4. That statistics purporting to link cigarette smoking with the disease could apply with equal force to any one of many other aspects of modem life. Indeed the validity of the statistics themselves is questioned'oy numerous scientists. We acceot an interest in oeoole's health as a basic resDonsibilitv. paramount to everv other consideration in our business. We believe the products we make are not injurious to health. We always have and always will coooerate closely with those whose task it is to safeauard the public health. For more than 300 years tobacco has given solace, relaxation and enjoyment to mankind. At one time or another during these years critics have held it responsible for practically every disease of the human body. One by one these charges have been abandoned for lack of evidence. Regardless of the record of the past, the fact that cigarette smoking today should even be suspected as a cause of a serious disease is a matter of deep concern to us. Many people have asked us what we are doing to meet the public's concern aroused by the recent reports. Here is the answer: 1. We are nledaine aid and assistance to the research effort into all ohases of tobacco use and health. This joint financial aid will of course be in addition to what is already being contributed by individual companies. 2. For this purpose we are establishing ajoint industry group consisting initially of the undersigned. This group will be known as TOBACCO INDUSTRY RESEARCH COivfMITTEE. -23- II:o c OaJ 5 a5c COC
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e. George Allen, president of the Tobacco Institute, issued a report pledging that the TI, for the benefit of the °public interest," would "encourage the kind of research that will provide the necessary facts." Further, Allen promised that this type of research "is what the industry has tried to do in the past" and "is what we shall do in the future, until enough facts are known to provide solutions to the health questions involved." f. In 1962, the TIRC issued a release announcing it was in its ninth year of supporting research by independent scientists relevant to questions about tobacco and health. The release represented that °the tobacco industry continues its support of the search for truth and knowledge." g- On May 28, 1962, the TIRC in a release confirmed that its purpose was to "make the facts known to the public." h. In 1964, the TIRC issued a "year end statement" xpresenting that its research "will intensify;" that S7 2~ million had been apportioned to date involving 125 _*rants, and that the TIRC "is dedicated to support its progratn of research by independent scientists until ail the answers are known." i. Tne Tobacco Institute ("U"), the cigarette industry's lobbying group, in the 1960's again confirmed and acknowledged the industry's "special responsibility" to report the truth: The tobacco industry supports and cooperates with all responsible efforts to find the facts and bring them to the public. We know we have a special responsibility to help scientists determine the facts about tobacco use and health. The industry accepted this responsibility in 1954 by establisiung the Tobacco Industry Research Committee to provide research grants to scientists in recognized research institutions. This research program is continuing on an expanded and intensified scale. j. This special responsibility was also recognized in additional statements issued by TI. For example, TI stated: -26- 1i_9Cwis eSCOrIC
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I. INTRODliCTIOivt l. The State of Vermont, through its Attorney General. William H. Sorrell, files this complaint against the defendants to recover the Medicaid Expenditures caused by tobacco-related health condition. Pursuant to 33 V.S.A. § 1911, Vermont alleges that the defendants were negligent and produced defective products unreasonably dangerous to tobacco users who received or will receive medical assistance. Vermont seeks all damages caused by tobacco- related illnesses arising after the effective date of 33 V.S.A. § 1911. 2. The defendants' conduct and the defective nature of defendants' products complained of herein led the Legislature to enact 33 V.S.A. § 1911, and leads the State to bring this action to recoup the moneys the State has been forced to spend to treat indigent Vermonters suffering Eom disease caused by defendants' producs. The Nature of the Industtv 3. The Tobacce Industry in the United Stztes is a highly profimble, hi_hiy concentrated industry. In 1996, the Tobacco Industry earned gross revenues in excess of S i S billion thLouehout the United States. In Vermont alone, the Tobacco Industry earned gross revenues in 1996 of 5125 million from cigarette sales. 4. The U.S. Tobacco Industry is dominated by Brooke Group, Ltd., Liggett Group. Inc. (Li.ggett & Myers Tobacco Co.), Philip Morris Companies, Inc. (Philip Nforris, Inc.). American Brands, Inc. (the American Tobacco Co.), British ~rrterican Tobacco Company (Brown & W illiamson Tobacco Company) and Lowes Corporation (Lorillard Tobacco Co.). The Human.And Economic Toll 5. Tobacco use has created a national epidemic of tragic proportions. More than 400.000 deaths per year in the Unites States are tobacco related. In Vermont alone, the anm:al death toll from tobacco use is over 800. Nationally, tobacco causes more deaths than AIDS, ' 'ihts Section I, Paragraphs t-L2, is intended to serie as an introduction to this complatnt. It does not contain avermeots oFclaizt pursuant to V.R.C.P. 10. and r°qutres ao ansver from defendants. 1
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While denying all averments of negligence, fault, or liability, Lorillard states that any monetary relief awarded to Plaintiff should be setoff against the revenues received by the State of Vermont, directly or indirectly, as a result of the regulation, sale, and distribution of tobacco and cigarettes. THIRTY-SEVENTH AFFIRMATIVE DEFENSE Plaintiffs claims are barred by the Equal Protection Clause of the United States Constitution and Chapter I, Articles 1, 3, 7, 9 and 18 of the Vermont Constitution because Plaintiff has selectively prosecuted only particular defendants within one industry, while not prosecuting other, similarly situated persons/entities. THIRTY-EIGHTH AFFIRMATIVE DEFENSE Plaintiffs warranty-based claims, if any, under the Consumer Fraud Act or the Public Health Act, are barred, in whole or in part, by any and all express conditions or disclaimers upon warranties made at the time of the original sale of Lorillard's products. THIRTY-NINTH AFFIRMATIVE DEFENSE Plaintiffs claims are barred, in whole or in part, because any damages incurred by Plaintiff are the result of intervening or superseding events, factors, occurrences, or conditions, which were in no way caused by Lorillard and for which Lorillard is not responsible. FORTIETH AFFIRMATIVE DEFENSE Plaintiffs claims violate Lorillard's procedural and substantive due process rights under the United States Constitution and the Vermont Constitution, to the extent Plaintiff seeks to hold Lorillard liable retroactively for conduct that was not actionable at the time it occurred. FORTY-FIRST AFFIRMATIVE DEFENSE Plaintiffs claims are barred, in whole or in part, because to the extent that Plaintiffs claims under the Consumer Fraud Act are based on implied warranties of fitness for a particular purpose, or for merchantability, no such warranties existed with respect to any transaction alleged to have been entered into by Lorillard, or in the alternative, such warranty or cause of action based upon such warranty was waived by Plaintiff and the citizens of Vermont. FORTY-SECOND AFFIRMATIVE DEFENSE Plaintiff is barred from recovery for some or all of the claims asserted against Lorillard because Lorillard did not owe any legal duty to Plaintiff and the citizens of Vermont, or, if Lorillard owed a legal duty to Plaintiff and the citizens of Vermont, Lorillard did not breach that duty. FORTY-THIRD AFFIRMATIVE DEFENSE Plaintiffs claims are barred, in whole or in part, because the damages sought are too speculative and remote. FORTY-FOURTH AFFIRMATIVE DEFENSE Plaintiff fails to state a claim for civil penalties upon which relief can be granted because the law of the State of Vermont, with respect to civil penalties, deprives Lorillard of the due process guarantees of the United States Constitution and the Vermont Constitution. FORTY-FIFTH AFFIRMATIVE DEFENSE -77-
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328. Lorillard denies each and every allegation contained in the first sentence of paragraph 328. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations contained in paragraph 328 and, on that basis, denies each and every remaining allegation set forth therein. 329. To the extent paragraph 329 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent paragraph 329 refers to the knowledge, conduct or actions of Lorillard, Lorillard denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 329. 330. To the extent paragraph 330 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent paragraph 330 refers to the knowledge, conduct or actions of Lorillard, Lorillard denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 330. 331. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 331 and, on that basis, denies each and every allegation set forth therein. 332. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 332 and, on that basis, denies each and every allegation set forth therein. 333. Lorillard admits that paragraph 333 purports to quote from andlor to characterize certain FDA conclusions and the "facts" leading to such conclusions. Lorillard states that the complete and precise language of and basis for the FDA's conclusions can be ascertained from the FDA conclusions themselves. To the extent paragraph 333 mischaracterizes, misquotes, or takes the language of the FDA's conclusions out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the basis for the FDA's conclusions. Lorillard denies each and every remaining allegation contained in paragraph 333. 334. Lorillard states that the selection and use of different tobaccos in a cigarette blend may have an effect on both the tar and nicotine deliveries of the cigarette. Lorillard admits that it blends tobaccos for the purpose of making commercial cigarettes with consistent quality and smoking characteristics. To the extent the remaining allegations in paragraph 334 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent the remaining allegations in paragraph 334 refer to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 334.
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to appropriate State monies to pay the fees of outside counsel retained to prosecute this action and is prohibited from accepting or using money offered by an individual, firm, partnership, corporation, or association for investigating or prosecuting a matter on behalf of the State pursuant to inter alia Chapter II, Section 27 of the Vermont Constitution. SEVENTH AFFIRMATIVE DEFENSE Plaintiffs claims are barred, in whole or in part, by application of the Noerr-Pennington doctrine. EIGHTH AFFIRMATIVE DEFENSE Plaintiffs claims are barred, in whole or in part, by the Commerce Clause of the United States Constitution because the civil penalties and disgorgement of profits demanded by the State of Vermont place an impermissible burden on interstate commerce and purport to regulate conduct occurring lawfully in other jurisdictions. NINTH AFFIRMATIVE DEFENSE Plaintiffs claims are barred, in whole or in part, because this action was filed without the requisite authorization or approval of proper government officials, government agency's and/or the Vermont legislature. TENTH AFFIRMATIVE DEFENSE Plaintiffs claims are barred, in whole or in part, by the doctrines of equitable estoppel and/or quasi estoppel in that, among other things, the State of Vermont has permitted, regulated and facilitated the sale and use of tobacco products and has reaped substantial tax revenues from the sale of tobacco products. ELEVENTH AFFIRMATIVE DEFENSE Plaintiffs claims are barred, in whole or in part, because the sole proximate, legal, efficient, and producing cause of any injury and damages allegedly sustained by Plaintiff and the citizens of Vermont is Plaintiffs own actions, or the actions of the citizens of Vermont or the actions of persons other than Lorillard. TWELFTH AFFIRMATIVE DEFENSE Plaintiffs claims are barred, in whole or in part, because the sale of tobacco products to adult consumers is a legal activity. THIRTEENTH AFFIRMATIVE DEFENSE Plaintiffs claims are barred because, to the extent Plaintiffs claims are based on an alleged duty to disclose the risks allegedly associated with cigarette smoking, those risks are and have been commonly known. FOURTEENTH AFFIRMATIVE DEFENSE Plaintiffs claims are barred, in whole or in part, because Plaintiff was warned or otherwise made aware of the alleged dangers of the product and that any dangers, if they existed, were not beyond that which would have been contemplated by an ordinary consumer of the product. FIFTEENTH AFFIRMATIVE DEFENSE Plaintiffs claims violate Lorillard's procedural and substantive due process rights under the United States Constitution and the Vermont Constitution. SIXTEENTH AFFIRMATIVE DEFENSE -74-
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ascertained from the memorandum itself. To the extent paragraph 231 mischaracterizes, misquotes, or takes the language of the alleged memorandum out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged memorandum. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 231 and, on that basis, denies those allegations. 232. Lorillard admits that paragraph 232 purports to quote from and/or to characterize a purported 1971 memorandum written by Dr. H. Wakeham. Lorillard states that the complete and precise language of the alleged memorandum can be ascertained from the memorandum itself. To the extent paragraph 232 mischaracterizes, misquotes, or takes the language of the alleged memorandum out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged memorandum. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 232 and, on that basis, denies those allegations. 233. Lorillard denies each and every allegation contained in paragraph 233. 234. To the extent paragraph 234 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent paragraph 234 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 234. 235. Lorillard admits that paragraph 235 purports to quote from and/or to characterize a purported Brown & Williamson review. Lorillard states that the complete and precise language of the alleged review can be ascertained from the review itself. To the extent paragraph 235 mischaracterizes, misquotes, or takes the language of the alleged review out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged review. To the extent the remaining allegations in paragraph 235 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent the remaining allegations in paragraph 235 refer to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 235. 236. Lorillard admits that paragraph 236 purports to quote from and/or to characterize a purported March 1957 report by a Brown & Williamson British affiliate. Lorillard states that the complete and precise language of the alleged report can be ascertained from the report itself. To the extent paragraph 236 mischaracterizes, misquotes, or takes the language of the alleged report out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged report. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 236 and, on that basis, denies those allegations. -31-
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TWENTY-SEVENTH AFFIRMATIVE DEFENSE PlaintifFs claims are barred, in whole or in part, because any cigarettes manufactured and sold by Lorillard, and which were smoked by Vermont residents, were at all material times consistent with available technological, medical, scientific, and industrial state of the art. TWENTY-EIGHTH AFFIRMATIVE DEFENSE Plaintiffs claims are barred, in whole or in part, by the voluntary assumption of the risk by Plaintiff and/or its citizens. TWENTY-NINTH AFFIRMATIVE DEFENSE Plaintiffs claims violate Lorillard's right to be free from retroactive or ex post facto laws as guaranteed by the United States Constitution and Chapter I, Articles 4 and 18 of the Vermont Constitution and Title 1 V.S.A. §§ 213, 214, to the extent Plaintiff seeks to hold Lorillard liable retroactively for conduct that was not actionable at the time it occurred. THIRTIETH AFFIRMATIVE DEFENSE While denying all averments of negligence, fault, or liability, Lorillard states that any injuries allegedly suffered by Plaintiff and/or its citizens were caused, in whole or in part, by the contributory or comparative negligence, fault, or failure to exercise reasonable care by Plaintiff and/or those citizens, and Plaintiffs recovery, if any, must be reduced in proportion to the percentage of responsibility of Plaintiff and/or those citizens. THIRTY-FIRST AFFIRMATIVE DEFENSE While denying all averments of negligence, fault, or liability, Lorillard states that Plaintiffs recovery is barred, in whole or in part, because Plaintiff failed to mitigate the alleged injuries or damages. THIRTY-SECOND AFFIRMATIVE DEFENSE Any damages, penalties or forfeitures if obtained by Plaintiff are subject to reduction and setoff based on tax and/or other revenues provided to Vermont or to its employees due, inter atia, directly or indirectly to the sale or use of tobacco products THIRTY-THIRD AFFIRMATIVE DEFENSE Plaintiffs claims are barred, in whole or in part, because Plaintiff cannot show that it relied on representations alleged in the Complaint. THIRTY-FOURTH AFFIRMATIVE DEFENSE To the extent that Plaintiff has sustained any injuries, such injuries and expenses were caused, in whole or in part, by the acts or omissions of others for whose conduct Lorillard is not responsible. THIRTY-FIFTH AFFIRMATIVE DEFENSE Plaintiffs claims for civil penalties cannot be sustained because Vermont's laws regarding the standards for determining liability for the amount of civil penalties fail to give Lorillard prior notice of the conduct for which civil penalties may be imposed and the severity of the penalty that may be imposed, and are void for vagueness in violation of Lorillard's due process rights guaranteed by the United States and Vermont Constitutions. THIRTY-SIXTH AFFIRMATIVE DEFENSE -76-
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the remaining allegations in paragraph 251 refer to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies those allegations. To the extent the remaining allegations in paragraph 251 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 251. 252. Lorillard does not believe that nicotine in cigarette smoke is "addictive" under a traditional pharmacological definition of that term. Lorillard admits that paragraph 252 purports to quote from and/or characterize a purported BATCO document. Lorillard states that the complete and precise language of the alleged document can be ascertained from the document itself. To the extent paragraph 252 mischaracterizes, misquotes, or takes the language of the alleged document out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged document. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations contained in paragraph 252 and, on that basis, denies those allegations. 253. Lorillard admits that paragraph 253 purports to characterize several purported internal tobacco company documents. Lorillard states that the complete and precise language of the alleged documents can be ascertained from the documents themselves. To the extent paragraph 253 mischaracterizes, misquotes, or takes the language of the alleged documents out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged documents. To the extent the remaining allegations in paragraph 253 refer to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent the remaining allegations in paragraph 253 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 253. 254. Lorillard admits that paragraph 254 purports to quote from and/or to characterize a purported 1962 document written by Charles Ellis. Lorillard states that the complete and precise language of the alleged document can be ascertained from the document itself. To the extent paragraph 254 mischaracterizes, misquotes, or takes the language of the alleged document out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged document. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 254 and, on that basis, denies those allegations. 255. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations in paragraph 255 and, on that basis, denies those allegations. 256. To the extent paragraph 256 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent paragraph 256 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of -34-
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skin is not human lun.- tissue." "smoke condensate has different chemical composition from inhaled smoke." and "painting is not the method of application practised by human smokers." 236. In contrast to the mice studies, however, Dr. Wakeham continued: The logical extension of these objections is that an inhalation test in which an animal breathed smoke like a human would be a better model system. Presumably, in such a test, the fotmation of lung cancers in the test animal would be strong evidence for the cigarette causation hypothesis. That is why the beagle test was a critical one.... So the test was not conclusive. But it was a lot closer than skin painting. The strong opposition of the industry to the beagle test is indicative of a new more aggressive stance on the part of the industry in the smoking and health controversy. We have gone over from what I have called the "vigorous denial" approach, the take it on the chin and keep quiet attitude, to the strongly voiced opposition and criticism. I personally think this counter-propaganda is a better stance than the former one. 237. Dr. Wakeham's memorandum demonstrates that the 1954 Frank Statement representations and later reaffirrnations were deceptive. 238. A recently disclosed series of Brown & Williamson documents set forth the deceptive practices of that company in particular, and of the industry in general with respect to the harmful effects of smoking. 239. Brown & Williamson, like the other manufacturers, was aware early on of the dangers of cigarettes. Indeed, a Brown & Williamson review of published statistical research, including the 1952 report by Dr. Doll, noted that the studies offered "frightening testimony from epidemiological studies." 240. By 1957, one of Brown & Williamson's British affiliates, which conducted much of the health research for the U.S. company, was using the code-name "zephyr" for cancer. For example, in a March 1957 report, the British affiliate sta.ed, "As a result of several statistical surveys, the idea has arisen that there is a causal relation between zephyr and tobacco smoking, particularly cigarette smoking." -54- 11]91]CU35 BSCDOC
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Plaintiffs claims, in whole or in part, violate Lorillard's procedural and substantive due process rights under the United States Constitution and the Vermont Constitution, to the extent they attempt to deprive Lorillard of appropriate procedural and substantive safeguards, including common law defenses to liability. SEVENTEENTH AFFIRMATIVE DEFENSE Plaintiffs claims are barred, in whole or in part, because they violate Lorillard's due process rights under the United States Constitution and the Vermont Constitution, to the extent that, among other things, they seek to deprive Lorillard of traditional means of proving cigarette smoking did not cause the illness of any particular individual. EIGHTEENTH AFFIRMATIVE DEFENSE Plaintiffs claims violate the principle of separation of powers to the extent it infringes on powers that can only be exercised by the Vermont legislature. NINETEENTH AFFIRMATIVE DEFENSE Plaintiffs claims violate Lorillard's right to a jury guaranteed by the United States Constitution and Chapter I, Articles 4 and 12, and Chapter II, Section 38 of the Vermont Constitution, in that they deprive Lorillard of the right to have a jury determine whether it is responsible for the injuries of the individuals which underlie Plaintiffs claims. TWENTIETH AFFIRMATIVE DEFENSE Plaintiffs claims, in whole or in part, violate Chapter I, Article 9 of the Vermont Constitution, because they violate the rule of uniform taxation. TWENTY-FIRST AFFIRMATIVE DEFENSE Plaintiffs conspiracy and fraud-based claims are barred because Plaintiff has failed to plead conspiracy and fraud with particularity, as required by V.R.C.P. 9(b). TWENTY-SECOND AFFIRMATIVE DEFENSE Plaintiffs claims against Lorillard are barred, in whole or in part, by the applicable statutes of limitations and/or statute of ultimate repose. TWENTY-THIRD AFFIRMATIVE DEFENSE Plaintiffs claims are barred, in whole or in part, by the doctrines of laches, waiver, estoppel, and/or ratification. TWENTY-FOURTH AFFIRMATIVE DEFENSE Plaintiffs claims are barred to the extent that the defenses of estoppel, laches, res judicata, collateral estoppel, statute of limitations or repose, assumption of risk, waiver, mitigation of damages, or any other defense would bar recovery by those persons whose alleged injuries underlie Plaintiffs claims. TWENTY-FIFTH AFFIRMATIVE DEFENSE Plaintiffs claims are barred, in whole or in part, by the doctrine of unclean hands in that the State of Vermont permits, regulates, facilitates, and reaps tax revenues from the sale of cigarettes to Vermont citizens; and the State of Vermont has agreed to accept the risk it now claims defendants should bear. TWENTY-SIXTH AFFIRMATIVE DEFENSE Plaintiffs claims are barred, in whole or in part, because Plaintiff has an adequate remedy at law. - -75-
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the language of the alleged document out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged document. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 243 and, on that basis, denies those allegations. 244. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 244 and, on that basis, denies the allegations. 245. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 245 and, on that basis, denies the allegations. 246. To the extent paragraph 246 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. To the extent paragraph 246 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 246. 247. Lorillard admits that paragraph 247 purports to quote from and/or to characterize purported BATCO and Battelle Memorial Laboratory documents. Lorillard states that the complete and precise language of the alleged documents can be ascertained from the documents themselves. To the extent paragraph 247 mischaracterizes, misquotes, or takes the language of the alleged documents out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged documents. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations contained in paragraph 247 and, on that basis, denies the allegations. 248. Lorillard admits that it has stated its belief that nicotine in cigarette smoke is not "addictive" under a traditional pharmacological definition of that term. Lorillard denies each and every remaining allegation contained in paragraph 248. 249. Lorillard does not believe that nicotine in cigarette smoke is ~ ~~ 'addictive under a traditional pharmacological definition of that term. Lorillard denies each and every remaining allegation contained in paragraph 249. 250. Lorillard denies each and every allegation contained in paragraph 250. 251. Lorillard does not believe that nicotine in cigarette smoke is "addictive" under a traditional pharmacological definition of that term. Lorillard admits that paragraph 251 purports to characterize purported tobacco company documents. Lorillard states that the complete and precise language of the alleged documents can be ascertained from the documents themselves. To the extent paragraph 251 mischaracterizes, misquotes, or takes the language of the alleged documents out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged documents. To the extent -33-
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237. Lorillard admits that paragraph 237, including its subparts, purports to quote from a purported 1962 transcript of a meeting conducted by Brown & Williamson's London-based parent company. Lorillard states that the complete and precise language of the alleged transcript can be ascertained from the transcript itself. To the extent paragraph 237, including its subparts, mischaracterizes, misquotes, or takes the language of the alleged transcript out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged transcript. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 237, including its subparts, and, on that basis, denies those allegations. 238. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 238 and, on that basis, denies the allegations. 239. To the extent paragraph 239 refers to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, den;es each of those allegations. To the extent paragraph 239 refers to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 239. 240. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 240 and, on that basis, denies the allegations. 241. Lorillard admits that paragraph 241, including its subparts, purports to quote from a purported 1963 analysis written by Addison Yeaman. Lorillard states that the complete and precise language of the alleged analysis can be ascertained from the analysis itself. To the extent paragraph 241, including its subparts, mischaracterizes, misquotes, or takes the language of the alleged analysis out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged analysis. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 241, including its subparts, and, on that basis, denies those allegations. 242. Lorillard admits that paragraph 242 purports to quote from and/or to characterize a purported document from Addison Yeaman. Lorillard states that the complete and precise language of the alleged document can be ascertained from the document itself. To the extent paragraph 242 mischaracterizes, misquotes, or takes the language of the alleged document out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged document. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 242 and, on that basis, denies those allegations. 243. Lorillard admits that paragraph 243 purports to quote from and/or to characterize a purported document from Addison Yeaman. Lorillard states that the complete and precise language of the alleged document can be ascertained from the document itself. To the extent paragraph 243 mischaracterizes, misquotes, or takes -32-
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~C Rl GGS. \1[LLG ITE. L.\\\'SOti. I3c)/_[\1,\\ &- DENT Ri harci F 5eruLLs 7_-} Delmas :\%enue P »t Ofticc Dra%~er I42~ Paxacuula. NIS 39~G8 NORTON K FRICKEY AND ASSOCIATES Robert B. Care~ 1301 East Pikes Peak Colorado Sprin gs. CO 80909 Special Assistant Attorneys General for the State of Vermont ~ 1~ I l ~~i \ I It~l~ ~~ l~•t N-RI PI 1 I\ I () I)I I I M) \\I •
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• 0 likely use the products in a manner involving unreasonable risk of physical hartn to themselves includine, but not limited to, the health risks of smoking and the risk of addiction. 508. Defendant tobacco companies knew or should have know ~t that their tobacco products would be sold to and used by large numbers of adolescents in Vennunt; indeed_ as set forth above, they directed their marketing and promotional efforts knowing that there was a likelihood that such actions would be a factor in inducing adolescents to purchase and use their tobacco products. 509. Defendant tobacco companies encouraged retailers to sell defendants' tobacco products to adolescents, through such practices as (i) aggressive campaizns to purchase counter space and flashy displays for their cigarettes in convenience sto: es ar.d in oti:er locations designed to attract the interest of adolescents, such as near candy counters in convenience stor?s and (ii) providing youth-friendly premiums for distribu:ion w'i.~rc tooacco products are sold. and (iii) providing samples and promotional mat::rials that would aepeal ;u ado!esce?:t;. "[ he :: _e or iobaCCo products to persons llnder the age o.` i8 y ears 1:'as ffi::I i-z IiI SiO:a`.1cn (,t st''`.2 1;iiC 51G. The vast majority ofadults currently addicted to de4'cidants' iobaceo prod"-s bec<ure addicted to those products when they were adolescents_ at which ti: :e. zs defenda?t tobacco companies knew or had reason to know, because of their youth, or inexperience, they were unable to use tobacco products in a manner that would avoid addiction and that would not cause them ar unreasonable and serious risk of physical harm. 511. As a result of their use of tobac;ro companies' prvducts. which co~ur.enced wht:. they were adolescents, numerous persons in Vermont :;ave suifered pi:ys!r,al itarm. 512. As a result of their tobacco-related injuries, many of t'riese persons have recei'.'ed or will receive Medicaid benefits from the State of Vermont, °c,r •)xh:clt the State seeks reimbursement. 513. Because the taxpayers of the State of Vermont st:ould not bear the costs of treating tobacco-reiated illnesses when the tobacco <:ompatnes ha•:e ne ;ligent!y entrusted their p:'oduct :o adolescents, the A,tomey General br:ngs this claim to recoup those funds and prottct -91- i
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FLORIDA n 0 > IN THE CIRCUfT COURT OF THB FIFTEENIH yUDICIAL CIRCUIT, IN IN AND FOR PALM BEACH COUNTY. FLORIDA CASBNO.' CL9Sde66 All T}{E STATE OF FLORIDA, LAV,'TON M. CHILES, fR., Indlvidully end u OOVFRNOR OF THB STATR OF FLORIDA. O EPARThOMT OF 8US WESS AND PROFESSIONAL REOULATION. uW THE AOENCY FOR HEALTH CAAH AD1.IMISTRAT)CN, P6lntlfltt), T7 (E AMERICAN TOBACCO COMPANY, 9111. De(endenqt). Q$QERDEh4 GDCPRri A_NTy MOTION TODLMLS OUmm "VE TffBOUGH£IfcH2.0L jjg,tFiran Ah^~:•: ^ C^P.i°LAR? Aem ORD[R DF'_rNM . DlIITmAHFS MDTIONF9$ F_I e RrFI~TIDN ON~OI>NT FOIi? THIS CAUSB cwe nn lu be heud berme me en tb.61h dey of DecunCa,1996 upon Ux Defendenu' Mouoru to fNuNn Counn Fow IWwlh BIgh1 of t91. Third ArnerMed CompltNr. At the hrarto{ In epee Cuun an Dcambu 6,1996 the Coun ruled u lo tM modon concemint Count Fow o f mc Thlyd Amcrded Comp Wm By t eryune Olda mlertd by the Cutet an Decelobct 11, 1996, the Coun hu urdacd poNone af Cevnl Four ttAeken (pnxeMnl cerlilo ev{denduy wnsldaWoru) end upheld t clnl eulon for demela u+du Floclde Sunne 6I7.41. The Defend.nu' MoUon for CLrl6udon or ReoonrldtnUOn of tld4 Cmet't Itnlint of Omemba 6, 1996, on Cau/ Pom be and Eu rwe Ir hereby DEMED The Court hcnhy ndflee and retfllrtm Iu rullng u to Coan Faw of the Third Amended Compl.lnt mtde In opon Coun on Dczcmba 6, 1996 uM In to Deeeaba 11,1996 Orda, It It M1nha ORDERED AND ADIUDOED the Defend.nu' Mndoru to Dlrlnlss Counu Five throu6h Eight of the Third Amended CompW nt be end the ume en hertby DFMED. It Ir Quther ORDERED AND ADRIDOED dal all rautinlng Defmdtnu In W e eaue thdl wwcr Counts Four nvcu9n EISht of the Third Amended Cornpl.lnl an or befcn Dwmber 71,,1996 topether wllh all omet pladlnp cnd/or aher doaunmu ep<ed to In opeqCaun to be cerved un Dceember 7.1,1996 rv{etdlae of the Dct this Decemter 11, 1996 fells on e Seturdty. All odSlnd pleadlnp ehJl be Ned wIN the Clerk afCarut on Monday. Dceember 31, 1996. By entering tNr Order the Court It perrnlalnl the Sum of Florlde lo melnWn civil eedaru for aoltclone of tlw Flodda RICO (Rukelar Influenced end Corrvpt Orpntudon) Act CMpler 195, Florida a,e. M rnN Mne.e M~LI,. a n.lrw An Suana. The Court Rndt the uurn oreulon tlle{ed In Counu Fln Nnvllr®I(be ere Indeperdenl end Rce. Nndly auru of ectlon na hued upon Chepler 409 of the flodde Sutma o cmmdeE in Ihe 199e Ace Howeveq eaavenblo duneRr ^uJ•o^•Irt, In pK of demqu tlmllu to uua roubht uda tht Act In uplue eeunu, Th, De(endenu have moved to dlrm W Counu flvv Ih1ou16 FJpM for four upenu leuon Flnt the Defcrndenu erµr Ihet ne plualmut auu ulf be thown or tlle[ed to 4uuln civil tcdolu by the Sute under Flortdi c RICO Aa. Second. the Defendenu argue thet ne deulmanul rellrnce hu been tllct<E by tM Sule (or ean be alleged by 6,e Sul¢ iNrd, Ihe Defenda,tc argue that they arnot be en'mterprln" wlthlnthemeanln1of71eFlorldeRlCOSWUIe. Flnally,IMDefendermuYuerhettneSuuccnrbcwnodunepe la t pmperty InteraL The perda Mvic enuulrely brlefed th<Iuua conamin{ Flulde't IUCO Act The Cm'o-t Bnde thu It It cleu wder Ne aee lew dnd tMt ePrAne peny tulnl fa nllef under Flodde't RICD An mum eBqe end plavepmilmmuwecddmtmeoulrcllenuwhmeackln`dvBderrmqoundmtheAdoneMudlheory (Ilt eqully deu met whcn the Sute or Oavcmment/rormmn undcr Floddi t RICO An for cr4n(ne( vloLdoru oLl detimenrel mllmee ne W oot be alleged uld/ar proven to convlct even when fnud forrv the bulr for the undalylnl ecu. Wlut It undeu and not specifically maolved by 0e ma ched In the memannde mbml6ed Ir whether or not the Sleu or Oarelnmmt mwl e11ep tndlor pmvt detrimemil relltnce whcn the 51ere (not e prlvenperry)brlnpurccdonforeh/Idemepraundaflorlde'eRICOAct Anelo6luhevebeenuSuedbutthii Coun on Md nn eue dlrealy on potnt Pellrtlcr v weled 911 F.2d 1465 (I ItA Cit. 1991) It Ihe exumlve flRyel/Tt pep opinion or Ne 11rhh ClrcuN dullng wltA RICO. The perdnnl eeuloos of pepa(¢ u In fonh bdow folm Uu buir o(UJr Cnun'4 condulom , Pt7rue Iltilenu c.n ncuver fcr rckcrccrlep Irtluria ~der I t U S C. { 1964 (c), but Ihelr lltlurla mmt 'Bow 6vm the commluloo of the pndlceu eN.'... TNr me.ru tlvl ePrfvue pLlnUff to wenu to rcoea under clvl I RICO mml ehow came 1nJury BovAnF Evm one or maro pmdiub tcu. A plelMlff anna elle9e menly dut an tct ofnckeueAn/ ourured vd IMt he lomt monry. He mwt thow a utoe5 rnruleplon baxmr his InJury and a , prodirale aL lfno Injury flownd frcm a p W cuier predluu ecL no lecorery Ila for dle <nmmluion of tlul eet.... Sea pelltll¢ ct p. 1497. (Emphmc eddad.) B ul Nm [slltl/G loa on la rule: ... A uheme lo defnud noed not be eurled oue la eomNum e violation o(the me9 and wire treud mnnm. Thue tlenrtee Q P.y'1 n r/ ~ u) J fq rn ry 0 6 b/• n (~ 6 y. .~ tn c ,rJ7-I n I"' ~ o b . g 0o O ~ n m ~ Q c9 J m ~ 0085~r98
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ow e[ A~n nn..,.e CrM,~- Clrr ,.,e nrr pwuh uneRKNCd, a[ w'[II a[ e[eMtd, [J%mte... ThIe meane wl J,e pcver[onent un wnrln a pneon for mJl or wln fnud evm If hle urpnad vlalm oem encmnumd Ow deupdon • or, If he enwunle[ed Il wu na decelred. luwd, Ihe court u[a e reuoneble per.on urt to detennine +hether, if the [drtme h[d been e.ccuud, the Inlended victim would h.vo atW on Ne mbnpruenudanr. wen Ne mhpramutlone "reuonrbl7 alcuht[d te Irnbr peaoru of otdlnery pmdenca cnd <ampreTenlon...: ThIe dou not mun, hawever. W t vw Ipek u. defendanr'e unoru In the abnnet: u Ihe worde'd.nlP [nd "rchemi Impl), Ihe [onnonnlt mwt [han, not only ISue the defmdanl'e aalone would hace deccind r nnonebly prudem penon, oueJwNnOndefmdanthdm.requlrhemeruru MNleaounhu held, tM dekndun mun han Ted a'ennulow kro.ln[ Inlenl b detreud^.. . TTIr men[ ne elemml dlrlpea, In pnttlu, Nu the perpewltae of the rcheme rnrktperr nllana. A defendem unrat ponibly Inlend m deeeln [omoane Ifhe don not belien tlut hle Intended N alm' wlll sa an N. duxpllcn. Mill end wln fraud,)wt IRe commondaw freud, thus mu0 "ul Intention tn Induce dle (Nalm) to ael or nfnln from ealon Innllenceuponlhe mlerepruenmlon... ' NAen a prlnu pla4rtlff nlln ann vioudon of the m.Il or wln Reud [ulNa u a predlcele ea for clrll A7CO,h. f.r.u an Wdltlonal hurdle befon he can obtaln recovny: he mwl ehow not ody Ihat the mJl or wlte Rwd rutuler haw bern vlohud, bN dra tlut he hu u[Rered In)Iq as a rau11 ef dw.lnlulon. Smdon Ip01( e) pm"Ido clvll remollu Ie Note penorb who en InfrbW -by nuon or rukeenetln( ectlvlty. Ae ere nors abave, whea the govmunent pmrecmee the defmdent unda dre mell and wlre fnod nuulee, lt le not rapoled Io ehuw Out the InnndW vlulm wae ecbully deeelved end.uRemd In)ury.... See pll(tlIG alpp 1/91•1/99. Thenforq for the purpota of pludlng md pnvinl a dril eWon for RICO bmught by Ne STrve • u oppo[rC t... lHl unon Ibr RICO brought by .prhve parny-N. Coun wlll trqu4. the euno rundud of plcedlnlandprvofrequLed InalminalpmteMlombytheSUleunlaeanduelllFlnrlda'eRICAeubdeIt Inlcrprcled by e hitnn Coun to mem otherwlre. TheSUtehuillqMudwlllEeraquL.4bpnr.crlminJlnlcmDYm•Defend.nu. The Dc(eraenu mwl ba pmvul m have made mlenprnmWlolb rumnebly alculatrn5 to decelve peuom ofordlnery awenc< and campnhcnlon Inlmdln f to Induu Ihae vlcdma to.et ur reAaln Rom aotlnll due to theu m urrprr+enwlmu. To requln the Suu In a clMl eetlon to tlle(. rnd pmre denliomul re0enu u If It rcn e pnvur peny would nepne the ability the Su4 to obtain my elrll relief forncketeeM[ aalvlry bu.d upon heud In urence, Ne Sute would be peemmltled te prmeMe, obtain caoNalom, ud Itek dneodm alminal pmJdu wnere pdnu penia were InJurtd wlthout belnf able to obuln eubrunrl[I eivll damqa IhmuN a rrpcnla cLI11UCO eNon whenthe Suu hselfle alleged to have been Injured. In Ihle reltrd It it tlto Interatlni la nme Florld.5utule 777.11 whleh rude: r1T• Prrne n,H~uweC..vn~ni Cee/~leN AN 6rroppr! JDr/rn4ne . A 0ml )udtmem ur d.... ndered In favor of the [un In mr criminal pnocrcdine cunumlry IM renducl cf Ne defendem which fonne 4n bule for e elvil urbe or uUnn under this chepur, u In .ny edntndpx.rfLq udrr Nrprrr ley. ehall aeop the defendant In enY acdon brwphl pvnuent to Ihu chepra u to JI menen n ta which [uch)udlment or dearw would be en enoppcl u If rhe p1e1mIRMd bem a p.rq In the alminl udan. /Fmphule eddcd.J Whbr nrd tafelhcr wlth Florlda Swute T77.102 (I)(e) (70), Flodd. Statute 777.107, and Florlda Sutute 712 10<, 11 eppun Net It du State wtp te abuln a comlalon for e nfmtnd rlol[Ilon of Florldi r RSCO tutNUdutNhwouldlnvdo(IbJfenop.defeMml frdndefcAinpacbURICOeNonbmuthlthemllu. In euence, rhe Svte eould pmn nfminel RICO, abuln a eqnvlalon, uld obuln a ehd remedy for a prlvete pury by haNnt pmven crf minal Inlall wlrhoN the nqultlu detrLnenul rellenn requbed by prM1nr panlu In prfvue civil ea/oru. Aa Ihe Flodde Supnme Coun ruu4In nrmr, 659 So ld 1061 (Fl. 1995) Sectlon 7711. Jnof~e Ne requtremmt etmuru.llry of paMa in the eunlut ofatrU ¢done broudht by crlme dnlme uMa cluplee 777 ... The run[u abm{uu IM nqu4amml by allowbq e plelnlllf In a chapur 772 N.G rvlt lo we u an ertoppd a"Mal)Iqpnent or decn< rmdered In Gvor of tbe rtrten In a pdar eAmWl procecdlne Ilu1 eenarrretLSe nnhrl Gr 4nu In the clvp udon .... Sce Stur Trme Inc. it p.1067. /Fmphul..dded.) The c.[r at bu I[ urtabdy not one Jlepin['fudm vu/ety' bwlnnf tnud. In lu TNrd Amendr4 Compl.int the Sute ellery a puade o(honlbin thet would uem ru m[te oN a eua for Ihe'molhrr of JI RICO aalan[.- 7Te State will be requlnd to prove by cleu end convindn f eNdexe the crlMnal and evil lnurn /1 hu atletod. Howeva,I[NeSuteunprurelurne,Ihedle=edln)urlamddalnafneou{htwoulddw[rt[ny pnvlawRlCOcWmr(publlc,nprlvale)fareventhemwtlydurlowofcommonMmee Theexvnordinvyand plnow drrnapee and Inlurla alleged to heve flowed Rom Defendanb' alleged murprl[er and allefed pnaru of ncketavnp eetlvlry ue ehe typc for whlch Un Lql[letun Imendcd Iha Flodd. RICO Aa lo be epphed VRut u Jlryo! h m fu~re¢hlnf rnd all mwmpupln~ thn If II[blllry le pmren appllculon ef pJCO clrll nllcf vd reanvery would undeubteAly be wunnuJ. Ho aaulne carlel, pmbllne emplrr, or wNr.-eolhr echrme hu even eppmaehed Ne dunaee elle.edly done ta IM S1ue u ellqed In the fWntllfe'rue Huwever, nw=nlalnj t)e rtljma an alleryed )UCO Nelulan <anln with IS Ihu Court nminde ell pudu Itnl rUqaebnr made and eleu and mnvlrwinp proef ve two very dUTerent NInP 'Xr reltllen U TAt enlerryM/ lell[ 2 ^ y S W ~F O Q ~ V COP!) P1 U [~-! o l a r,. > m w n n~, m O 4 ~ ~ (b O rp 3 tT tV Q) • IOSG'! 298
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Serious charges have been made about tobacco use. The tobacco industry has taken these charges seriously. We recognize that we have a special responsibility to the public to help scientists determine the facts about tobacco and health. and about certain diseases that have been associated with tobacco use. We accepted this responsibility in 1954 by establishing the Tobacco Industry Research Committee, which provides research grants to independent scientists. We pledge continued support of this program of research until the facts are known. ++. We shall continue all possible efforts to bring the facts to light. In that spirit we are cooperating with the Public Health Service in its plan to have a special study group review all presently available research. k. On or about December 1, 1970, TI issued a release entitled "The question about smoking and health is still a question." According to the release, "eminent scientists" question "whether any causal relationship has been proven between cigarette smoking and human disease." As for the research effor;, the release asserted, "a major portion of this scientific inquiry has been financed by people who know the most about cigarettes and have a great desire to learn the truth ... the tobacco industrv. And the indusuv has committed itself to this task in the most obiective and scientific way yossible." The CTR continued to support research by "independent scientists," the release claimed, and all of their work has been published. The release concluded with the following promises: From the beginning the tobacco industry has believed that American people deserve objective scientific answers. With this credo in mind, the tobacco industry stands ready today to make commitments for additional valid scientific research that offers to shed light on new facets of smoking and health. l. Another industry publication in 1970 stated that the industry believed the American public is "entitled to complete, authenticated information about cigarette smoking and health. The tobacco indust.y recognizes and accepts a responsibility to promote the progress of independent scientific research in the field of tobacco and health." I1_91l C035 HSC ~OC
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circles that made the decision, but I certainly had a pretty fair idea why....[T]hey felt that such a cigarette, if put on the market, would seriously indict them for having sold other types of cigarettes that didn't contain this, for example. Also, there was a meeting we held in ... New Jersey at the Grand Met headquarters ... at which the various Legal people involved and the management people involved and myself were present. At one point tIvIr. Dey who at that time, and I guess still is the president of I;agett Tobacco, made the statement that he was told bv someone in the Philin Morris comoanv that if we tried to market such a uroduct that thev would clobber us." (Emphasis added.) 3. Brown & Williamson's Efforts to Develop a'`Safer" Cigarette 207. Brown & Williamson also developed "safer" cigarettes 208. Despite promising test results, Brown & Williamson did not market the safer cigarettes because. among other reasons. such efforts would violate the conspiracy to suppress the marketing of safer products. 209. Brown & Williamson's Project':Ariel" used a heating, as opposed to bumins, system. 210. Brown & Williamson's Project "Janus" was intended to identify hazardous components of cigarette smoke so they could be removed. 211. Jeffrey Wigand, a former vicc president for research and development for Brown & Williamson, has stated that he was instructed by the company president to abandon all efforts to develop a safer product. He has testified that he was told, generally, "That there can be no research on a safer cigarette. Any research on a safer cigarette would clearly expose every other product as being unsafe and, therefore, present a liability issue in terms of any type of litigation." 212. Brown & Williamson also conducted research on tobacco substitutes or analogues, as did a number of the other companies. These substitutes were sought as a means to duplicate some of the effects of nicotine without toxic or harmful effects. -45 - 11:0I]W150SCG(H:
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150. This presentation reiterated the strategy that had been followed by the industry for years. 151. On February 18, 1983, the TI published a review of the scientific evidence regarding smoking and cancer. The materials challenged any link between smoking and cancer. According to a TI press release on the review, the findings "raise serious question about the link between smoking and cancer." This publication was a direct result of the industry's strategy as outlined at the June 23, 1981 meeting. 152. In 1993, a former 24-year employee of CTR confirmed publicly that the joint industry research efforts were not objective: "When CTR researchers found out that cigarettes were bad and it was better not to smoke, we didn't publicize that. The CTR is just a lobbying thing. We were lobbying for cigarettes." 153. An industry official described in his personal notes a meeting that included high level officials from various Tobacco Companies: "CTR is the best & cheapest insurance the tobacco industry can buy and without it the Industry would have to invent CTR or would br dead." 154. Nonetheless, in its annual reports published between 1985 and 1992, CTR stated that its Scientific Advisory Board funded peer-reviewed research projects "judeing, them solely on the basis of scientific merit and relevance." In 1994, Dr. James F. Glenn, CEO of CTR, submitted testimony to a Congressional Subcommittee chaired by Representative Henry Waxman of California: a. The Council ... sponsors research into questions of tobacco use and health and makes the results available to the public. b. [G]rantees are assured complete scientific freedom in conducting these studies ... [P]ublication [of research results] is encouraged in every instance. 155. In fact, CTR-sponsored research projects were directed away from research that might add to the evidence against the use of tobacco products. When CTR-sponsored research did produce unfavorable results, the information was distorted or simply suppressed. j5- ir^9 cw3nascooc
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144. In a December 6, 1977 letter, the President of American Brands wxote Addison Yeaman of the CTR reminding Yeaman that the 1954 Frank Statement constituted a"pledge to the public of independent research." According to the author, "contract research," i.e., research carefully selected by the CTR, which had been the modus operandi of the TIRC and CTR, violated this pledge. 145. A 1978 memo addressed to the CTR file from a Philip Morris official characterized CTR as "an industry `shieid."' The memorandum goes on to state: "the 'public relations' value of CTR must be considered and continued ... It is extremely important that the industry continue to spend their dollars on research to show that we don't agree that the case against smoking is closed for 'PR' purposes ...." 146. In a"personal and confidential" memo, T.S. Osdene. a longtime Director of Research of Philip Morrs, recommended that the company review its relationship to the CTR. He criticized he statements of D. Ford, a CTR staffer, concer.tinu the similarity of nicotine and opiates. 147. Osdene also criticized the work of CTR staffer Dr. Kreisher because it "starts from the point of view that smoking causes lung cancer." W ith this type of research, Osdene wrote, "we are digging our own grave. I believe that the program as set up has the potential of great damage to the industry ... I am very much afraid that the direction of the work being taken by CTR is totally detrimental to our position and undermines the public posture we have taken to outsiders." 148. T.S. Osdene recently refused to testify about his work on the-CTR by invoking the Fifth Amendment. 149. A June 25, 1981 presentation by the TI staff to the TI Executive Committee. comprised of members of the major tobacco companies, made clear the industry's strategy in suppressing and misrepresenting the state of scientific research. "First and most important," the presentation stressed, "we must establish that there is no proof that smoking harms smokers or nonsmokers." _34_ . ._vcCASuscOnc
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j. A 1963 memorandum from Liggett s consultine ; esearch ti-m states: Basically, we accept the inference of a causal relationship between the chemical properties of ingested tobacco smoke and the development of carcinoma, which is suggested by the statistical association shown in the studies of Doll and Hill, Horn, and Dorn with some reservations and qualifications and even estimate by how much the incidence of cancer may possibly be reduced if the carcinogenic matter can be diminished, by an appropriate filter, by a given percentage. k. A 1966 Philip Morris memorandum confirms the relationship betsveen smoking and cardiovascular diseases as well as the success of the indusrry irn hiding this relationship from the public: Although it is recognized as a prominent problem by medical authorities, the public is not fully aware of the relationship between cardiovascular disease and cigarette smoking. L A Philip Morris "temp repor " from 1968, in v0aca '•`.e author re,^.ort_ on =: conversation wtth Drs. Felton and Hughes of BATCO: YVhen questioned where the English [ndustry techntca! ; ers- r el ,rr od on smoking and hcalth, it was stated that there ctias no do!ibr nn anvone's mind that a smoking and lung cancer li 1: was cstablished ... m. A 1971 Philip Morris internal memo to R. D. Carpenter frem L. Weisbecker regarding Biological Evaluation of Smoke Condensate on httman lung ceils. The 10 study showed a considerable number of cells destroyed even though exposure was only minutes. J. Suppression and Concealment ollndustry Knowledge That SnaolGng is Harmful 231. A document that Liggett's researchers and consultants prepared for the 5z geon General but the Company then withheld states:. A"Draft of an Outline for a Background Paper on the Smokin2 Problem to be Used in Connection with a Presentation of Arguments Before the Surgeon General's Committee" states: i. "All Types of Smoking are Associated with Incre:r,e~ Mortality f.-om all causes combined. ..." ico;_a+'.,nsrucx
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• 500. The joint actions of the conspiracy through the CTR and the Tobacco Institute have been similarly shielded from scrutiny. 501. Part of the document review undertaken by Brown & Williamson was an effort to conceal documents showing the true nature of the industry associations: "[In conducting document review] pay special attention to documents suggesting that TI [Tobacco Institute] was used as a vehicle for the industry's alleged conspiracy to promote cigarettes through the open controversy PR program...... 502. Defendants' conspiracy is ongoing and continues to this day.- The defendants continue to deny that (i) nicotine is addictive, (ii) smoking causes cancer and other health problems, (iii) that they are illegally targeting adolescents and (iv) that they manipulate the level of nicotine in tobacco products to increase addiction. 503. This action is aimed at protecting the public frsc. and is therefore in the public interest. VII. CLAIMS FOR RELIEF Count One: Statutory Cause of Action Based on 33 V.S.A. § 191 1(c) for Negligent Entrustment 504. The State of Vermont realleges Paragraphs 1 through 503 as if fullv set forth herein. 505. At all relevant times, defendants designed, manufactured, supplied and/or sold tobacco products. 506. Residents of the State of Vermont have, for many years. used and consutned. and continue to use and consume, defendants' tobacco products in the manner in which they were intended to be used, without any substantive alteration or change in the products. 507. Defendant tobacco companies, individually and in conspiracy with each other_ distributed and marketed tobacco products through third persons in the State of Vermont for use by tobacco consumers, who defendant tobacco companies knew or had reason to know would -90- 11:9 i_LOt1 liSC DIJC
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takes the language of the alleged documents out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged documents. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 213 and, on that basis, denies those allegations. 214. Lorillard admits that paragraph 214 purports to quote from and/or to characterize unidentified Philip Morris documents. Lorillard states that the complete and precise language of the alleged documents can be ascertained from the documents themselves. To the extent paragraph 214 mischaracterizes, misquotes, or takes the language of the alleged documents out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged documents. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 214 and, on that basis, denies those allegations. 215. Loriilard admits that paragraph 215 purports to quote from and/or to characterize an unidentified document. Lorillard states that the complete and precise language of the alleged document can be ascertained from the document itself. To the extent paragraph 215 mischaracterizes, misquotes, or takes the language of the alleged document out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged document. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 215 and, on that basis, denies those allegations. 216. Lorillard admits that paragraph 216 purports to quote from and/or to characterize an unidentified document. Lorillard states that the complete and precise language of the alleged document can be ascertained from the document itself. To the extent paragraph 216 mischaracterizes, misquotes, or takes the language of the alleged document out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged document. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 216 and, on that basis, denies those allegations. 217. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations contained in paragraph 217 and, on that basis, denies the allegations. 218. Lorillard denies each and every allegation contained in paragraph 218. 219. Lorillard denies each and every allegation contained in paragraph 219. 220. Lorillard admits that paragraph 220 purports to quote from and/or to characterize a 1987 memorandum purportedly authored by an attorney from the law firm of Shook, Hardy & Bacon. Lorillard states that the letter referred to in paragraph 220 is protected under the work product doctrine Any reference to the letter is improper and should be stricken from the record, and the letter must be returned. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the letter. -28-
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ii. "For cigarette smokers who smoke regularly, exc :ss mortality tncreases with current numbcr ofcigaret;1-s smoked. . . ." iii. "Lung cancer extremely rare among nonsrnokers ...." !v. As'`reported by Hammond ... Excess Mortality [!s] (i) higher for cigarette smokers than others and (2) ir_creases with daily cigarette consumption." v. "For both se :_s, all chronic respiratory dis ases, chronic bronchitis, irreversible obstructive lung diseases ... increased in prevalence with increasing current arnuunt of smoking." (Emphasis in original.) 232. The report Liggett presented to the Surgeon General did not contain any of these conclusions and instead focused on alternative causes ofdisease, such as dir pollution, coffee and alcohei consurnption. diet, lack of exercise and genetics. Liggett criticized the known statistical association hetween smoking and mortalitv and various diseases ns ba;ed upon °unrel:ably conducted" studies and "inadequately analyzed" data. The Liggett r_rnn concbldzd ihat uhe a3soctat!on 'r,er3•een smoking and disease was inconclusive and due To other factors roincidentaay associated with smokin,?,. 233. Philip Morris also concealed from the oublic its actual views of the resea_rcn conducted outside the influence of the industTy. 23a. A. 1971 memorandum written by Dr. Helmut Wakeham, then vice presiden t af research and development at Philip Morris, discussed a recent study that found cigar>tte-sme•'xe inhalation caused lung cancer in beagles: 1970 might very properly be called the year of tne beagle. E^riy in the year, the American Cancer Society atmounced that they had finally demonstrated the formation of lung cancer in beagles by smoke inhalation in the now infamous Auerbach and Hammond study. I am sure all of you have read extensively about this in tl:e newspapers, how the ir.dustry asked to have independent panel of pathologists review the histological sectvDr.s snow-:ng •_a:,cer, hcw the Society refused, how generally the ACS was put on the defensive, how publication was refused by two medical journals and how the story was changed somewhat by the !ime i: was published .... 205. The memorandtun gocs on to de5cribe'r,ow ,he indLstry pt:blich; dismissed the mice cancer srudies, such as the 1953 Wynder research. Dr. Wakeham e;plai,ed that "mouse ~cc
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224. 224. Lorillard denies each and every allegation contained in paragraph 225. Lorillard admits that paragraph 225 purports to quote from a purported 1946 document from H. B. Parmele but denies the document is quoted in its context or entirety. Lorillard states that the complete and precise language of the alleged document can be ascertained from the document itself. To the extent paragraph 225 mischaracterizes, misquotes, or takes the language of the alleged document out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged document. Lorillard denies each and every remaining allegation contained in paragraph 225. 226. 226. Lorillard denies each and every allegation contained in paragraph 227. Lorillard admits that paragraph 227, including its subparts, purports to quote from and/or to characterize various memoranda. Lorillard states that the complete and precise language of the alleged memoranda can be ascertained from the memoranda themselves. To the extent paragraph 227, including its subparts, mischaracterizes, misquotes, or takes the language of the alleged memoranda out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged memoranda. To the extent the remaining allegations in paragraph 227 refer to the knowledge, conduct, or actions of persons or entities other than Lorillard, Lorillard is without sufficient knowledge or information to form a belief as to the truth of the allegations set forth therein and, on that basis, denies each of those allegations. To the extent the remaining allegations in paragraph 227 refer to the knowledge, conduct, or actions of Lorillard, Lorillard denies each of those allegations. Lorillard denies each and every remaining allegation contained in paragraph 227. 228. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 228 and, on that basis, denies those allegations. 229. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 229 and, on that basis, denies those allegations. 230. Lorillard admits that paragraph 230 purports to quote from and/or to characterize a purported 1971 memorandum written by Dr. H. Wakeham. Lorillard states that the complete and precise language of the alleged memorandum can be ascertained from the memorandum itself. To the extent paragraph 230 mischaracterizes, misquotes, or takes the language of the alleged memorandum out of context, Lorillard denies the allegations. Lorillard further denies Plaintiffs innuendo or implication regarding the content or meaning of the alleged memorandum. Lorillard is without sufficient knowledge or information to form a belief as to the truth of the remaining allegations in paragraph 230 and, on that basis, denies those allegations. 231. Lorillard admits that paragraph 231 purports to quote from and/or to characterize a purported 1971 memorandum written by Dr. H. Wakeham. Lorillard states that the complete and precise language of the alleged memorandum can be -30-
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