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Lorillard

State of Washington, Plaintiff, V. American Tobacco Co., Defendants. Certain Defendants' Memorandum in Opposition to State's Motion Related to the Depositions of Mr. Meyer and Mr. Wald

Date: 02 Jul 1998
Length: 21 pages
86336091-86336111
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spider_lor 86336091_6111

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Author
C, W.J.
Schifferman, R.P.
Type
PLEA, PLEADING
Area
LEGAL DEPT. FILE/BASEMENT GMP
Document File
86335924/86336277/Litigation State of Washington V. American Court Papers - Vol. Ix
Date Loaded
06 Dec 2001
Site
N14
Copied
A, W.L.
B, A.E.
B, D.D.
B, K.T.
C, C.W.
C, J.M.
M, C.L.
N, R.E.
T, V.B.
V, G.E.
Z, Alk
Z, C.P.
Z, Dws
Z, W.G.
Characteristic
EXTR, EXTRA
ILLE, ILLEGIBLE
MARG, MARGINALIA
Request
R1-080
Named Organization
Amer, American Tobacco
Antitrust Division
Business Week
Bw, Brown & Williamson
Congress
Ftc, Federal Trade Commission
Hill Knowlton
House
Interstate + Foreign Commerce Comm
Justice Dept
Larus + Brother
Lig, Liggett
Lm, Liggett & Myers
Mn
PM, Philip Morris
RJR, R.J.Reynolds
Stephano Brothers
US
US Tobacco
Wa
Yale Univ
Litigation
Feda/Produced
Master ID
86335925/6276

Related Documents:
Recipient
Finkle, G.A.
Named Person
Burton
Cramer
Ferguson, J.
Gray, B.
Harris, O.
Kluger, R.
Loevinger, L.
Meyer, L.G.
Meyner, R.B.
Orrick, W.H., J.R.
Porter, P.A.
Proctor, C.E.
Schifferman, R.P.
Surgeon General
Wald, R.L.
Recipient (Organization)
Wa Superior Court King County
Author (Organization)
Lane Powell
Lor, Lorillard
UCSF Legacy ID
mtc78c00

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• Q11L 0 6 1998 t THE HONORABLE GEORGE A. FINKLE LOBI 47638 WA (ST)-AG RTG. SLIP ~ RS`CEIVED BY: . Ey,PEDITED COPIES . V7LR JP3C WGZ FTSL72 L'.i}PIES TQ: GEV itdW CWC CPZ KTB CLM DWSZ A&B ALKZ DDB VBT ist pg_ REN SUPERIOR COURT OF WAaHINGTON FOR KING COUNTY ) ) Plaintiff, ) No. 96-2-15D56-8 SEA } ) CERTAIN DEFENDANTS' } MEMORANDUM IN OPPOSITION TO OBACCO CO., e~ ) STATE'S MOTION RELATED TO THE } DEPOSITIONS OF MR. MEYER AND Defendants. ) MR. WALD I. INTRODUCTION The State's June 26 Motion Related to the Depositions of Lawrence G. Meyer and Robert L. Wald ("State's June 26 Motion") addresses two issues: (1) The State seeks to deprivilege three documents from the law firm files of Lorillard's former outside connsei, Robert L. Wald ("Wa[d"}, that the State has had in its possession for a of over four months. These three documents all address the same issue -- the Cigarette Code (sometimes referred to as "Code"); and (2) The State offers a proposed order addressing the protocol for the deposition for awrence G. Meyer ("Me}+er"). MEMORANDUM IN OPPOSITION TO MOTION RELATED TO LAti€ POW€LLSPEA{LS {.UB€RSKY w THE DEPOSITIONS OF MR. MEYER AND MR. WALD - i 11.'P £lFfH AYENVE 5I/ITG <I00 $EATFi.E.WA31tRdGTON 98101-1136 SEATTLE:}g745f v0i {F¢s3nz-~an
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1 IV. 2 STATEMENT OF ISSUES 3 A. Has Lorillard demonstrated that each of the three documents at issue is protected 4 from discovery pursuant to the attorney-client privilege or the work product doctrine? 5 B. Has the State failed to demonstrate by the requisite burden of proof for each 6 document at issue that Defendants were engaged in a future or on-going crime or fraud at the time 7 the communications in the documents were made, and that each of the communications at issue 8 was made i.i furtherance of the alleged crime or fraud % 9 V. 10 EVIDENCE UPON WHICH DEFENDANTS RELY 11 The evidence relied upon ineludes: (1) All Exhibits and Declarations attached to the State's 12 and Defendants' previous briefs regarding Defendants' June 17 Motion for Protective Order and the 13 State's June 26 Motion; and (2) Schifferman Declaration and Exhibits attached thereto. 14 VI. 15 AUTHORITY 16 A. Historu and General Description ofCiearette Advertising Code. 17 The following history of the Cigarette Advertising Code sets forth and crystallizes three 18 significant factors, all of which provide the significant underpinnings for, and at times are 19 dispositive of, l.orillard's claims that the three documents at issue are privileged and protected and 20 are not subject to the crime-fraud exception: 21 First during the 1950's and 1960's, Lorillard and other companies were under extensive 22 actual and contemplated legislative and regulatory control concerning advertising issues related to 23 alleged health claims. This deluge of regulatory activity, and the potential for overlapping and even 24 inconsistent legislative and regulatory promulgations, was the driving force behind the creation of 25 26 UM IN OPPOSITION TO MOTION RELATED TO POSITIONS OF MR. MEYER AND MA. WALD - 4 51 vfii Lu,'2 Pow[,e.SraetNS LUSZecSlcv vs IS26f4F'fF( Al+'ctd(iF SUSTE 6iOS SEAi"fl.E, WA$fiW6NN A4)01=J11 (2Q4) 22J-]m0
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I In addition, the parties agreed that the State would have the opportunity to challenge any of 2 Lorillard's privilege and protection claims in this round of briefing for 14 documents that come 3 from. the law firm files of Lorillard's former outside counsel, Robert Wald. Upon information and 4 belief, Wald provided certain documents prepared in connection with his representation of Lorillard 5 to Richard Kluger ("Kluger Documents"), to assist Kluger in writing a book about the tobacco industry entitled Ashes to Ashes: America's Hundred-Year Cigarette War, the Public Health, and the Unabashed Triumph of Philip Morris (1996) ("Ashes to Ashes"). These documents are publicly available at Yale University, and the State acquired a set of these documents at least as early as February 1998.' On February 5, 1998, the State sent a letter to counsel for Lorillard requesting privilege logs or 4(b) indices for 14 unidentified documents (later determined to be Kiuger Documents), a handfnl of which mention Wald. (See February 5 letter and Lorillard's June 9 response, both attached as 6 Motion). During a meet and confer on June 4, the State informed Lorillard that these 14 documents were ICluger Documents that it had obtained from the publicly available depository at Yale University. At the meet and confer, the State expanded the scope of its State's June 26 Motion challenges Lorillard's privilege and protection claims for three of these promised and.raised privilege and protection claims to six of the 14 Kluger Documents The protection claims, or authenticity objections, to these 14 documents. Lorillard responded on June 9 5 informal letter request and asked for Lorillard's position regarding privilege and enticity claims to these 14 documents. Lorillard agreed to assert by June 9 any privilege or 21 1 documents (State's Exhibit Nos. 4, 5 & 8, attached to its June 26 Motion). 'These documents were provided to Kluger without Lorillard's knowledge. OSITION TO MOTION RELATED TO DEPOSITIONS OF Ivt€:. MEYER AND MR. WALD - 3 SEAT'rLE:3&7451 vbi LANE POWEt(. SfCA2S LU6€fLSA'Y ~u H24 FfPi3i A V£HU£, SUfi£11 W SEATfLE, WASH3NGfffN 46191-3338
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I require Waia to divulge privileged or protected information. As a consequence, Defendants 2 June 25 protocol makes much more sense for Wa1d's deposition. Defendants` June 25 protocol 3 requires thorough briefing and argument on privilege and protection issues after a full record has 4 been made and after the State has elicited all of its proposed questions. This is in stark contrast to the State`s Meyer Protocol, which requires fuli briefing before the deposition. Defendants submit 6 that the Meyer procedure is unworkable for Wald and request that the Court, if the issue has not 7 been mooted, instead adopt Defendants' June 25 protocol for Wald.r` S YII. 9 CONCLUSiON 10 Defendants respectfully submit that this Court should deny the State's motion to deprivilege I1 the three documents from Wald's law firm files. In addition, if (but only if) this Court denies 12 13 14 15 16 Defendants' pending Motion for Protective Order, then this Court should adopt the State's proposed protocol for Meyer and Defendants' proposed protocol for Wald. DATED this -L day of July, 1998. LANE POWELL SPEARS LUBERSKY LLP 17 By VL.tw 3 Reed P. Schiffe 18 WSBA No. 11172 Attorneys for Defendant 19 1 Lorillard Tobacco Company _ 20 21 22 23 24 25 26 6Consistent with the arguments contained in their June 30 reply brief in support of their motion for protective order, Defendants also submit that even if this Court were to overrule Defendants' motion for protective order, the scope of any deposition and document production for Wald still must be limited to a single topic -- the Cigarette Advertising Code. 3TLE:387451 v01 MEMORANDUM IN OPPOSTI'ION TO MOTION RELATED TO THE DEPOSITIONS OF MR. MEYER AND MR. WALD-20 LfN£ PQW £tLSPEAAS L.f3fl£RShY tSs #i:a FtiT'i{ AVENJE,SNLE 3ILC 5£ATTL6 Wh5N1hGTON 98i9LBl& (zns)az3.xm
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! 9 1 cigarette manufacturers and several minor ones. See J.E. Calfee, "CiPrette Advertising, HeaIth 2 Information and Regulation Before 1970 . Working Paper No_ 134, Bureau of Economics, Federal 3 Trade Commission (Dec. 1985), pp. 15-17 (" 1985 Calfee Paper") (attached as Exhibit 2 to 4 Schifferman Declaration). By 1953, the FTC had issued complaints to four of the major cigarette manufacturers concerning health claims in campaigns for particular cigarette brands (most of the 6 cases involving tar and nicotine claims), all of which resulted in cease-and-desist orders. Id. (citing 7 cases). 8 in 1954, the FTC notified all ma;or U.S. cigarette manufacturers that it would require 9 compliance with a new set of cigarette advertising guides designed to eliminate health claims (1985 Calfee Paper at 26 (citing September 24, 1954 article from Business Week)). In 1955, the I I anticipated FTC Guides were issued. Id.; see also 6 Trade Reg. Rep. (CCH) 139,012 (Sept. 22, 12 1955) (providing text for 1955 Rule). 13 The FTC Guides were modified once again on March 25, 1966, to permit cigarette 14 manufacturers to include certain tar and nicotine measurements in cigarette advertising and on 15 product packages. 1985 Calfee Paper at 55. In announcing this change to the FTC Guides, the 16 FTC issued letters to the major U.S. cigarette manufacturers informing them that it would no longer 17 regard.tar and nicotine advertising as deceptive, provided that no express or implied collateral 18 health representations were made, and tar and nicotine statements in advertising were supported by 19 a designated testing methodology. Id. at 55 (citing F.T.C. "Letter to Cigarette Manufacturers"); see 20 also 6 Trade Reg. Rep. (CCH) T 39,012.70 (providing text for 1966 Rule); March 25; 1966 FTC 21 Press Release (attached as Exhibi 22 The Cigarette Advertising Guides, as modified on March 25, 1966, remain in effect today. 23 Id. at 139.012. 24 During the same time that the FTC was regulating alleged health claims (mid-1960's), the 25 historic 1964 Surgeon General's Report was released. The findings in the 1964 Surgeon General's 26 MEMORANDUM IN OPPOSITION TO MOTION RELATED TO THE DEPOSITIONS OF MR. MEYER AND MR. WALD - 6 387451 Ves LAHE PawFdd. SPEfvS LlIBERSILY ttr iajt5 fttF£( dVM2tUE SE3II£ U/N SEATfLE,WA5Ni1KaT653 9816i-1138 {2CK) 22].1~
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example, the Code had an Administrator who acted as Judge (Article 11), an adversarial system of presenting evidence and argument (Article 11, section 6) and liquidated damages provisions for ment (Article V). The major distinction, of course, was that the Code was privately independent Code Administrator, whereas the FTC and other government regulatory ies are public enforcement vehicles. The Administrator himself recognized these striking similarities. In his 1969 Congressional statement, Governor Meyner stated, "Actually, my function is quite simple. The Code is my statute d I, in a sense, am a judge to see that members` advertising complies." (Meyner Congressional Statement at 3). Meyner's Congressional Statement also demonstrates that the Code was not e of paper, but also had teeth, because it was enforced by the Administrator and certain advertisements were disapproved ("To illustrate the effectiveness of the Code's prior censorship, during the 27-month period, January 1, 1965, to April of 1967, the Code preview.;d some 16,500 advertising submissions and of these 1,325 were disapproved or withdrawn. During e 13 month period, April of 1967 and May of 1968, the Code previewed 4,944 submissions and 386 were disapproved or withdrawn.") Id. at 9. B. There Has Been Constant Antitrust and Other Regulatory Scrutiny Over the Cigarette 18 19 s constant oversight and scrutiny. The Department of Justice, the FTC and Congress all ing secret about the Code; nor was there any room for, or possibility of, antitrust violations, tant oversight and scrutiny from the FTC, the Department of Justice and Congress_ There was Advertisement Code. The Cigarette Advertisement Code was not only run by a quasi-judicial, independent nistrator, but the provisions of the Code and the actions undertaken pursuant to it received were apprised of the purpose, intent and operations of the Code before it became official, and were bilowing its approval. In fact, these regulatory bodies often expressly condoned the Code o instances (one before and one after the Code was formally enacted) the Justice DUM IN OPPOSITION TO MOTION RELATED TO OSITIONS OF MR. MEYER AND MR. WALD - 10 rQ! Uxz P©wxu. Secnxs Luscm3ce ue (~F[{y AyENUE, SUITE l I06 S~ WASHiA'6PON 481oi-1338 [3U172I3-]003
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communications that occurred between Code members and the FTC or the Code Administrator Governor Meyner). Thus, to demonstrate that these communications were "in fuc#herance of" any st crime or fraud, the State first must demonstrate that the FTC and the Code Administrator ere active participants in the antitrust fraud. The State, of course, did not even attempt to produce such evidence, for obvious reasons, and it thus has failed to satisfy its burden for this reason alone. Moreover, the communications at issue were all in furtherance of efforts to create, interpret orce the Cigarette Advertising Code. As mentioned before, such activities not only were closely scrutinized by the Department of Justi:° and other regulatory bodies, but the health claim rovisions of the Code themselves (and thus actions taken to implement them) were also in compliance with the FTC regulations (i.e., the taw and thus cannot be in furtherance of a crime or D. Pronosed Deposition Protocols for Wald and Meye r. Defendants reiterate and incorporate their objections to any deposition or document production from Meyer and Wald (see aenerally briefing on Motion for Protective Order). Nonethr.less, recognizing the impending September trial date and the need to expeditiously reach closure on outstanding privilege issues, Defendants offered to engage in a round of briefing concerning the proposed protocol for the depositions of Wald and Meyer. Defendants notified the State that they felt any such briefing was premature and, in any event, would be moot if their ion for Protective Order were granted, but agreed to participate in this round of briefing for the ons mentioned above, subject to their objections. The State offered a detailed, five-page proposed protocol for the deposition of Meyer, "Protocol Order for Mr. Meyer speaks for itself', and offered no further argument MEMORANDUM IN OPPOSITION TO MOTION RELATED TO HE DEPOSITIONS OF MR. MEYER AND MR. WALD - 18 EAITLE3$745k vDt LANE PpWELE.SPPAR.S LfJBEAShY 3si 1II0 FSFTR AVEYNE, SUSTE a i03 SEASIi.E, WhSXfNGTQN 9850i-I33i tzunr M-r~
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I the Cigarette Advertising Code. The Code, in fact, paralleled the already-existing regulatory 2 framework primarily created by the FTC, and added prohibitions regarding youth advertising. 3 Second the Department of Justice constantly and carefully serutinized potential antitrust 4 issues surrounding the Code. As a result, the industry requested, and twice received, criminal 5 antitrust clearance for activities involved in the creation, enforcement and implementation of the 6 Code 7 Third, the decisions, discussions and activities evidenced in documents pertaining to the 8 creation, i~terpretation and enforcement of thc, Code were subject to a constant threat of regulatory 9 action by the FTC, Congress and the Justice Department. As a result, the confidential 10 communications between lawyers and their clients concerning the creation, interpretation and 11 enforcement of the Code, as well as counsel's recordings of meetings where Code issues were 12 addressed, were by definition made in the context of threatened or actual litigation, legislative or 13 regulatory proceedings. Moreover, the constant interaction with the Department of Justice, the 14 FTC and Congress, and the Justice Department's pre- and post-clearance of the Cigarette 15 Advertising Code, all demonstrate with unequivocal clarity that the State's antitrust crime-fraud 16 theory is ntterly vritirDut merit. 17 1. Legislative and Regulatory Backdrop for Cigarette Advertising Code. A long, 18 complex history of federal regulatory and legislative oversight has continuously pervaded the 19 industry's advertising practices, including oversight of alleged health claims. This pervasive 20 regulatory backdrop was the driving force behind the creation of a voluntary Cigarette Advertising 21 Code in the mid-1960's, and the already-existing federal regulatory promulgations and intense 22 antitrust scrutiny prevalent during this time period dictated the scope and content of the advertising 23 provisions ultimately adopted in the Code. 24 25 26 In 1942, the Federal Trade Commission ("FTC") began a campaign against express and implied health c[aims in cigarette advertising, bringing a series of cases against most of the major SEAT(LE387451 01 'HE DEPOSITIONS OF MR. MEYER AND MR. WALD - 5 MEMORANDUM IN OPPOSITION TO MOTION RELATED TO LANE Poweu. Sr&ezs Lueeusuv ul €;# FIF£{t AVENUE, SUITE <tLd SEASTLE, W NSHINQSQNN 0lat-4332 Cmsl in_nwo
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Department will not bring a criminal prosecution under the antitrust laws on account of "adherence to the Code", subject to the condition that the clearance applies "until the views of Congress and the Federal Trade Commission have been made known" with respect to "standards for advertising dealing with the public health hazards." Relying upon the foregoing assurances from the Department of Justice, the cigarette manufacturers are taking steps promptly to effectuate the Advertising Code. Specifically, we are forming a non-profit membership and we are entering into a contract with Governor Meyner to act as the Administrator. As soon as these various organizational details are completed, the Administrator will begin his work. We are confident that the Det..ntment of Justice will notify us promptly should the occasion arise when the clearance is deemed by the Department to be no longer operative. I am sending a copy of this letter to Honorable WiIliam H. Orrick, Jr., Assistant Attorney General in charge of the Antitrust Division. See also July 7, 1964 response letter from Orrick to Gray, thanking Gray for sending him copy of letter to Congressman Harris (attached as Exhibit 14 to Schiffernzan Declaration). Moreover, during Governor Meyner's Congressional testimony on May 1, 1969, he presented Congress with yet another detailed report on the Cigarette Advertising Code. See Exhibit 4. Governor Meyner also notified Congress that he had discussed the.Code wit:z the FTC in early 1966. Id. at 4. Finally, one of the State's own Exhibits (Exhibit 8) addresses an April 27, 1964 meeting at hich industry members infbrmed the FTC of the contemplated scope, content and implementation of the Cigarette Advertising Code. Documents Evidencing Confidential Communications Pertaining to the Creation, Interpretation and Enforcement of the Cigarette Advertising Code are Privileged and Protected and are Not Subject to the Crime-Fraud Fxception. The State responds with near incredulity to Lorillard's claims that the three documents at e are privileged and protected and are not subject to the crime-fraud exception. The State, however, fails to point out that even in Minnesota, (a case that also contained antitrust allegations), MEMORANDUM IN OPPOSITION TO MOTION RELATED TO HE DEPOSITIONS OF MR MEYER AND MR. WALD - 13 r.+NegowectsFESSt.usE~w t<ZO PFSA AYElSUE, S01TE <ONI - Sfl WASH[NG£ON 4itQ 1Jls ~ . SEAlT4,E_787451 v01 ~ 1z¢6! zU-zttw
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I similar in scope and content to existing federal regulations, such as the FTC Guides concerning 2 alleged health claims. Article H created a Code Administrator, `who shall be a person of 3 recognized independence, integrity and intellectual achievement to the end that the decision by him 4 shall command public confidence and respect." -See Code, art. II at pp. 2-3. The Codes' first 5 Administrator was former New Jersey Governor Robert B. Meyner, who was appointed to that 6 position on July 1, 1964. See Meyner Congressional Statement at 2. The press release issued by 7 Hill & Knowlton on June 8, 1964 concerning Governor Meyner demonstrates that he was more 8 than quali~ied to fiilfi2l the mandate set forth in Article II of the Code. See June 8, 1964 Hill & 9 Knowlton press release, entitled, "Former Governor Robert B. Meyner Selected as Administrator of 10 Cigarette Advertising Code", at 2 & 3 (attached to Schifferman Declaration as Exhibit 7). 11 Article I, section I gave the Code Administrator "all of the powers and authority necessary 12 and proper to enable him to discharge effectively the responsibilities entrusted to him by this 13 Code." See Code, Exhibit 4. Article I, section 2 stated, "The Administrator shall have complete 14 and final authority to determine whether cigarette advertising complies with the standards of this 15 Code and, to enforce this Code in all other respects." Article I, section 6 required the Administrator 16 to set forth "regulation[s] [to] establish procedures for tne administration and enforcement of this 17 Code," including regulations addressing (1) the submission of all proposed cigarette 18 advertisements, along with supporting data for the company's claims; (2) the submission of protests 19 by the parties concerning any determinations; (3) hearings in connection with aII submissions and 20 protests; and (4) reconsideration by the Administrator of any determinations. Id. Finally, 21 Article V of the Code sets forth the "Procedures in Event of Violation of Code". Id. Article V, 22 section I gave the Code Administrator discretion to order the payment of up to $100,000 in 23 liquidated damages for any company he found to have violated the Code. Id. 24 The Cigarette Advertising Code was a quasi judiciai enforcement device that was in many respects strikingly similar to other regulatory schemes, such as Federal Trade Commission. For IN OPPOSITIO2•€'i'O MOTION RELATED TO 1'dTONS OF MR. MEI ER AND MR. WALD - 9 SEATfLE:387451 01 LANE YOW£llsP€ARS AAf8ER54'Y uS NP3 €[FFN T~, SURE ai W SEAiRE, WASHINGiON 9810I.1338 (ms) an.woo

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