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IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF NORTH CAROLINA WINSTON-SALEM DIVISION FLUE-CURED TOBACCO COOPERATIVE STABILIZATION CORPORATION, et al., Plaintiffs, v. ) Civil Action No. 6:93CV370 UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, et al., ) Defendants. PLAINTIFFS' MEMORANDUM IN OPPOSITION TO EPA'S MOTIONS FOR PARTIAL SUMMARY JUDGMENT AND FOR A PROTECTIVE ORDER Plaintiffs brought this action to invalidate the Environmental Protection Agency's (EPA) unlawful classification of environmental tobacco smoke (ETS) as a Group A (known human) carcinogen and the Risk Assessment on which the classification is based. On July 20, 1994, in an Order denying EPA's motion to dismiss the Complaint, the Court directed the parties to develop a factual record. Instead of cooperating on a reasonable plan of discovery, EPA filed five diversionary motions on September 30, 1994 to thwart the development of a factual record and impede plaintiffs' ability to prepare the litigation for a decision on the merits. In addition, EPA produced a so-called "administrative record" that is incomplete, raises more questions than it answers, and intentionally omits relevant Agency documents that do not support the Group A classification. This brief demonstrates that

plaintiffs are entitled to discovery so that we can develop a proper factual record for judicial review. Statement of the Case Background. The ETS Risk Assessment and classification decision was prepared by EPA's Office of Health and Environmental Assessment (OHEA) pursuant to authority claimed under the Radon Gas and Indoor Air Quality Research Act of 1986, Pub. L. No. 99-499, Title IV, §§ 401-405, 100 Stat. 1758, reprinted in 42 U.S.C. § 7401 note (Radon Act). Steven P. Bayard was the OHEA project manager for the ETS risk assessment. He reported on this project to OHEA's Director, William H. Farland. Then EPA Administrator William K. Reilly released the ETS Risk Assessment on January 7, 1993 (EPA/600/6-90/006F). Plaintiffs served the Complaint on June 22, 1993, and simultaneously filed Requests for Admission to narrow the issues for discovery and trial. Defendants moved to dismiss all four counts of the Complaint on July 20, 1993 on the grounds that EPA's decision on ETS was not judicially reviewable under the Administrative Procedure Act (APA) and that plaintiffs' due process count failed to state a claim. On June 14, 1994, plaintiffs served a Request for Production of Documents. Defendants' obligation to respond to plaintiffs' discovery was delayed by agreement while the motion to dismiss was pending. On July 20, 1994, the Court denied defendants' motion to dismiss the first three counts of the Complaint and determined - 2 -

that EPA's decision is judicially reviewable. The Court deferred ruling on defendants' motion to dismiss the due process claim "until a factual record has been developed." Memorandum Opinion (Mem. Op.) at 20. Current Motions. Despite having lost its motion to dismiss, EPA refuses to comply with its discovery obligations. On September 30, 1994, instead of cooperating in the Court's direction to develop a factual record, EPA moved the Court yet again to dismiss the due process count or, alternatively, for stay of that count. In a third motion, EPA seeks a protective order insulating defendants from any discovery, while refusing to answer the long-pending Requests for Admission and Request for Production of Documents. Finally, EPA challenges plaintiffs' standing to seek judicial review and seeks summary judgment to limit the scope of review to a purported "administrative record." No agency administrative record existed when EPA took its actions, when this case was filed, or even when defendants filed their motion to dismiss. It was only after the Court denied EPA's motion, and the Agency faced the prospect of having to respond to pending discovery requests, that the "administrative record" was created. EPA argues that neither the Court nor plaintiffs are entitled to look anywhere beyond that post-hoc compilation of materials the Agency selected to support its position. But plaintiffs already know that this "record" contains factual gaps and fails to include key Agency documents such as those that severely criticize EPA's position on ETS and 3

demonstrate that EPA knew the Group A classification could not be justified under its Guidelines for Carcinogen Risk Assessment. These internal critiques were purged from the "record" EPA constructed for the Court's review.l/ Discovery will assure that information like this, and other relevant information needed to explain EPA's decision and the complex information on which it is based, is available to the Court before it is asked to decide this case. Discovery will also permit plaintiffs to demonstrate EPA's bad faith more fully and prove EPA's due process violations. That is what the law requires. EPA's motions should be denied because there are material facts in dispute on which plaintiffs are entitled to take discovery.?/ 1/ Some of these documents were released to plaintiffs under the Freedom of Information Act (FOIA), but, curiously, were excluded from the "record" EPA certified to the Court. 2/ Plaintiffs are also filing today a motion to hold in abeyance EPA's motions to dismiss or stay the due process count, and to dismiss the Complaint on standing grounds. In addition, we have sent defendants a letter under Local Rule 204(c) detailing our specif ic concerns with EPA's non-responses to the pending Requests for Admission and Request for Production of Documents. This brief addresses plaintiffs' general right to discovery under applicable legal authorities. Upon a favorable ruling by the Court, specific discovery issues will be worked out, if possible, between the parties, as contemplated by the Local Rule. - 4 -

Argument I. EPA'S MOTION FOR SUMMARY JUDGMENT LIMITING THE SCOPE OF JUDICIAL REVIEW RAISES ISSUES OF MATERIAL FACT AND MUST BE DENIED EPA's motion for summary judgment to limit the scope of judicial review to the Agency's self-serving, post-hoc "record" can be quickly dispatched. Summary judgment is appropriate only in those cases where there is no genuine dispute as to a material fact and it appears that the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). In the Fourth Circuit, summary judgment should be granted only in cases "where it is perfectly clear that no issue of fact is involved and inquiry into the facts is not desirable to clarify the application of the law." Miller v. Federal Deposit Ins. Corp., 906 F.2d 972, 974 (4th Cir. 1990).3/ This is not such a case because EPA's motion raises a threshold issue of material fact: What is the administrative record? A. The Farland Declaration Demonstrates the Need for Discovery The "record" produced by EPA could hardly be more confusing. OHEA Director Farland acknowledges that EPA did not prepare "a formal docket, administrative record, or other comprehensive compilation of the materials considered in developing a risk assessment . . . in the usual course of business"; rather, EPA 3/ Any permissible inferences to be drawn from the underlying facts on review of a motion for summary judgment must be viewed in the light most favorable to the party opposing the motion. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88 (1986). - 5 -

waited to begin compiling its post-hoc "record" until after the government lost its motion to dismiss.4/ Farland Declaration 11 7, 10 EPA's "record" was not only an eleventh-hour affair, it was unilaterally and selectively compiled by the Agency.5/ The Farland Declaration tells us the "record" does not in fact contain all of the materials "considered" by EPA. It omits "[t]he vast majority of the deliberative materials that pre-date the issuance of the ETS Risk Assessment and that EPA considered in developing the Risk Assessment." Id. 1[ 14. The exclusion of such relevant materials raises an obvious question of material fact about the completeness of this "record." 4/ The Court's obligation to probe what facts were before the agency when it made its decision is particularly strong where, as here, "the 'contemporaneous' factual record came into existence only after the challenged decision." Hospital Ass'n of New York State, Inc. v. Toia, 473 F. Supp. 917, 927 (S.D.N.Y. 1979); accord Pension Benefit Guaranty Corp. v. LTV Steel Corp., 119 F.R.D. 339, 342 (S.D.N.Y. 1988). 5/ EPA "may not unilaterally determine what shall constitute the administrative record and thereby limit the scope of th[e] Court's inquiry." Tenneco Oil Co. v. Department of Energy, 475 F. Supp. 299, 317 (D. Del. 1979). This Court need not, and should not, simply accept EPA's "administrative record" as the "whole record." As the Ninth Circuit has explained: The whole administrative record, however, "is not necessarily those documents that the agency has compiled and submitted as 'the' administrative record." Thompson v. United States Dep't of Labor, 885 F.2d 551, 555 (9th Cir. 1989) (emphasis in original) (quoting Exxon Corp. v. Department of Energy, 91 F.R.D. 26, 32 (N.D. Tex. 1981)); see also Environmental Defense Fund v. Blum, 458 F. Supp. 650, 661 (D.D.C. 1978) ("The agency may not, however, skew the 'record' for review in its favor by excluding from the 'record' ~ information proceeding in in its own files which has great pertinence to the question."). ~ ~ - 6 - ~ ~ G't

EPA makes much of its last-minute file search for documents to put into the "record." But what offices in EPA were searched? While the Farland Declaration (Q1 7, 9) indicates that OHEA and SAB files were searched, it also says that "other offices within EPA" were searched. What other offices? Was the Administrator's office searched? After all, former Administrator Reilly personally released the ETS classification on January 7, 1993. Id. 1 16. Who searched the office of Assistant Administrator Erich Bretthauer, "the Agency official responsible for approval of significant risk assessments"? Id. What about the offices of the many consultants to EPA who were the principal authors of the Risk Assessment? The Farland Declaration attempts to endow EPA's "record" with a patina of normalcy it does not possess. EPA purports to follow its Uniform Rulemaking Docketing Guidance (Docketing Guidance), but the Farland Declaration is full of caveats about EPA's compliance with that Guidance. For example, in paragraph six, the Farland Declaration states that the recordmaking process followed the Guidance "in part"; in paragraph ten, the Farland Declaration again states the Guidance was relied upon "in part." What else was relied upon, and in what ways did EPA not rely on this Guidance document? For example, the Guidance document indicates EPA "shall include . [i]nformation considered by the Agency." Docketing Guidance at 6. Yet, we know from the Farland Declaration that the "vast majority of the deliberative materials . . . EPA considered" are - 7 -

excluded from the "record." Farland Declaration 1[ 14. We also know that some of the information excluded by EPA concludes the Agency could not follow its Guidelines and still classify ETS as a known human carcinogen. See pp. 13-16, infra. What we do not know without discovery is what other information that is relevant to this proceeding has been excluded from the "record" presented for judicial review by EPA. The question of whether judicial review should be limited to EPA's "record" cannot be decided until the composition of that "record" is settled. EPA's motion for partial summary judgment should therefore be denied. II. DISCOVERY IS WARRANTED IN THIS CASE EVEN UNDER AN APA ANALYSIS TO PROPERLY DEVELOP THE FACTUAL RECORD EPA's no-discovery theory boils down to a rote claim that discovery is not typical in administrative law cases. That argument does not wash here because there is nothing typical about EPA's actions. In addition, EPA has vastly overstated the limitations on discovery even in typical APA cases.6/ 6/ See generally Richard McMillan, Jr. and Todd D. Peterson, Permissible Scope of Hearings, Discovery, and Additional Factfinding During Judicial Review of Informal Agency Action, 1982 Duke L.J. 333; Steven Stark and Sarah Wald, Setting No Records: The Failed Attempts to Limit the Record in Review of Administrative Action, 36 Admin. L. Rev. 333 (1984). EPA's Brief for Judgment on the Pleadings plainly misstates the law when it asserts that there are only two narrowly drawn exceptions justifying consideration of extra-record materials. The Fourth Circuit authority cited by the government discusses the circumstances in which de novo review is appropriate. The issue before the Court here, however, is much more limited: whether discovery beyond the "record" proposed by the Agency is permissible. The question of de novo review can and should be reserved pending the results of discovery. - 8 -

A. APA Case Law Permits Discovery Beyond EPA's Post-hoc "Administrative Record" Under applicable case law, discovery is available where the agency's process was particularly informal or unstructured, see, e.g., Allick v. Lulan, 1990 U.S. Dist. LEXIS 9101 (D.D.C. July 16, 1990) (copy attached at Appendix Tab 1); where the record is incomplete, see, e.g., Dopico v. Goldschmidt, 687 F.2d 644, 654 (2d Cir. 1982); where the agency has not adequately explained its decision, see, e.g., Texas Steel Co. v. Donovan, 93 F.R.D. 619, 621, (N.D. Tex. 1982); where the record must be supplemented to explain technical or complex subject matters, see, e.g., United States v. Amtreco, 806 F.Supp. 1004, 1007 (M.D. Ga. 1992); and, where the agency allegedly engaged in bad faith or improper behavior, see, e.g., U.S. v. Shaffer Equip. Co., 11 F.3d 450, 460-61 (4th Cir. 1993). Each of these factors applies here. 1. EPA's Process on ETS Was Atypical and Warrants Discovery Where an agency does not follow the typical administrative process, courts recognize that discovery has an especially important role. In Allick v. Lulan, discovery was allowed against the National Park Service because the agency decision was "the result of a relatively informal, less structured process" where "the precise boundaries of the applicable administrative record may be less clear." Allick v. Lujan, 1990 U.S. Dist. LEXIS at *4-*5. See also Pension Benefit Guaranty Corp. v. LTV Steel Corp., 119 F.R.D. 339, 342 (S.D.N.Y. 1988) ("compelling - 9 -

reasons" to allow discovery in absence of formal agency proceeding); Hosp. Ass'n of New York State, Inc. v. Toia, 473 F. Supp. 917, 927 (S.D.N.Y. 1979) (where agency action consists of non-formal decisionmaking and there was no requirement for agency to compile contemporaneous record "the factual basis for [the] decision is itself a question of fact" resolved like any other question of fact). Discovery is needed here to reveal the extent of EPA's efforts to circumnavigate its limited statutory authority.2/ Discovery is also necessary because EPA did not establish anything close to a contemporaneous administrative record or public docket, and, by its own admission, excluded from its "record" the "vast majority" of deliberative materials it actually considered. EPA's "record" is not the typical compilation of all documents and materials before an agency when 7/ As the Court's Opinion noted, the Radon Act "expressly prohibited [EPA] from taking regulatory action." Mem. Op. at 16. The Court should be aware that at about the same time EPA took the position before this Court that the ETS risk assessment was just another "technical scientific report" without legal consequences, a contrary position was communicated to one of EPA's senior policymakers. "Briefing for Dick Morganstern on Environmental Tobacco Smoke," February 3, 1993; excerpt attached at Appendix Tab 2. On the page of the briefing entitled "Potential Implications of Risk Assessment," EPA stated that: the "Report [was] widely reported as the most significant event in tobacco control since the 1964 Surgeon General's report"; "Designation of ETS as a known human carcinogen dramatically increases potential liability of building owners/employers"; "Bills [are] being introduced at state and local level [and in Congress] to restrict smoking"; and "Could effect [sic] tobacco industry revenues." These revelations show the need for discovery to get at the truth behind EPA's intentions for its ETS actions.

the agency makes a judicially reviewable decision. It is a post-hoc rationalization that serves only the Agency's litigation interests. 2. Discovery Is Necessary Because EPA's "Record" Is Incomplete and Does Not Provide Adequate Explanation of the Agency's Decision The decision in this case should be made on "the full administrative record that was before the [Agency] at the time [it] made [its] decision." Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 420 (1971); see also Appalachian Power Co. v. EPA, 477 F.2d 495, 507 (4th Cir. 1973) ("in making its review, the Court must have . . . 'the whole record' on which the agency acted"). The "whole record" includes "all documents and materials directly or indirectly considered by the agency decision-makers and includes evidence contrary to the agency's position." Thompson v. United States Dep't of Labor, 885 F.2d at 555. Where, as here, the completeness of the record is an issue, the Fourth Circuit has allowed discovery after plaintiffs' preliminary showing that: [T]he administrative record as presented may be incomplete and . . . there may be evidence or documents which were available for review by the agency but not reviewed, or which were reviewed and not relied upon by the agency, or which were reviewed and relied upon by the agency but not contained in the "administrative record." Franklin Savings Ass'n. v. Ryan, 922 F.2d 209, 210 (4th Cir. 1991). In such circumstances, the plaintiff was permitted to - 11 -

obtain the production of documents and to take depositions of agency employees.8/ See also LTV Steel, 119 F.R.D. at 343 (court allowed deposition of agency's executive director as to "what matters, whether discussed orally or committed to writing, were considered in the course of the [agency's] deliberations"); Petrolane, Inc. v. Dept. of Eneray, 79 F.R.D. 115, 119 (C.D. Cal. 1978) (court allowed plaintiff to "discover any materials needed to complete the administrative record").9/ We already know from the Farland Declaration that the "record" which EPA would have the Court review does not contain all the information before EPA when it made its ETS decision. What follows are additional examples of what information and explanations we also know to be missing from EPA's inadequate "record." Only discovery will disclose whether there is other missing information. 8/ Discovery is the appropriate remedy here "to provide a record of all documents and materials directly or indirectly considered by the agency decisionmakers." Public Power Council v. Johnson, 674 F.2d 791, 794 (9th Cir. 1982) (Kennedy, J.) (citing, inter alia, Appalachian Power, 477 F.2d at 507); see also Dopico v. Goldschmidt, 687 F.2d 644, 654 (2d Cir. 1982) ("defendants' assurances that they have submitted the full record will not substitute for the Court's independent consideration of that issue after some opportunity for discovery"); Natural Resources Defense Council, Inc. v. Train, 519 F.2d 287, 292 (D.C. Cir. 1975) (parties challenging agency action are entitled to discovery to learn whether "documents which are properly part of the administrative record have been withheld"). 9/ To obtain discovery, plaintiffs need merely "demonstrate some reasonable basis for believing that the administrative record is incomplete." Texas Steel Co. v. Donovan, 93 F.R.D. 619, 621 (N.D. Tex. 1982); see also Petrolane, 79 F.R.D. at 119 n.12 (discovery may be obtained where "a showing is made that [the record] may not be complete").

a. ECAO-CIN Memoranda and Discussion of Group A Versus Group B. In an apparent effort to omit some particularly damaging documents from its "record," the Farland Declaration creates a self-serving distinction between materials EPA "relied upon" (1 11), which are in the "record," and the deliberative materials EPA merely "considered" (1j 14), which are not. By this maneuver, EPA banished from the "record" a series of internal memoranda that blow the whistle on EPA's Group A classification. The excluded memoranda were created by the Agency's own Environmental Criteria and Assessment Office in Cincinnati (ECAO-CIN). This office is responsible for reviewing, among other things, EPA's risk assessment documents on air pollution issues. See Declaration of Larry R. Glass, Ph.D. (Glass Declaration) 1 3, attached at Appendix Tab 3. When the ECAO-CIN office reviewed the 1990 and 1992 drafts of the ETS Risk Assessment, it concluded both times that EPA's Group A classification was not warranted. Though EPA excluded the 1990 and 1992 ECAO-CIN memoranda from its "record," we have provided them for the Court's consideration as Exhibits B and C to the Glass Declaration (Appendix Tab 3). EPA's "record" not only excludes these documents without even noting their existence, it also fails to provide responses to the criticisms raised and the suggestions made by these reviewers. EPA simply ignored them and would have the Court do so, also.

In 1990, Dr. Glass was the ECAO-CIN toxicologist charged with reviewing the draft Risk Assessment. He and other EPA professional reviewers expressed "concern with the classification of ETS as a Group A carcinogen." Glass Declaration 1 7. In fact, Dr. Glass specifically recommended against the Group A classification in 1990. Id. 1 6. In 1992, the ECAO-CIN office again challenged the Group A classification as failing to satisfy the Agency's Guidelines for Carcinogen Risk Assessment.lo1 ECAO-CIN told EPA headquarters to substantially revise the risk assessment and to incorporate: ... a full discussion of carcinogen category A vs. B, based on the absence of definitive data of [ETS] in humans. Like it or not, EPA should live within its own categorization framework or clearly explain why [it] chose not to do so. Glass Declaration ~[ 9. Despite these repeated admonitions, the final ETS Risk Assessment was not substantially revised. The document does not address or respond to ECAO-CIN's devastating criticisms. See Glass Declaration ~[ 10 ("There is no analysis in the final ETS document as to whether Group A versus Group B, for example, is the proper classification category for ETS ..."). We know ECAO-CIN's concerns registered in Washington, because Dr. Glass received an angry telephone call from Dr. 10/ The Guidelines stipulate that the Group A (known human) classification can be "used only when there is sufficient evidence from [human] epidemiologic studies to support a causal association between exposure to the agents and cancer." 51 Fed. Reg. 33992, 34000 (Sept. 24, 1986). - 14 -

Bayard, the ETS Project Manager. Id. 1 8. But there was never any substantive response. Id. Discovery will shed light on why and how Washington chose to ignore ECAO-CIN's comments. EPA's "record" also does not explain why the Agency failed to address these same concerns when they were raised by members of the Agency's Science Advisory Board (SAB). In 1990, Dr. Geoffrey Kabat, an SAB member, said that "classifying ETS as a Class A carcinogen is maybe a little rash." "Admin. Rec." I.SAB.16.2 at 15 (transcript of SAB public meeting, December 5, 1990). In 1992, he again said that he was "uncomfortable" with the Group A classification. "Admin. Rec." II.SAB.9.16 at 1 (comments of Geoffrey Kabat). Dr. Kabat also questioned EPA's completeness and its even-handedness. He commented as follows on the EPA 1992 draft: I am still uncomfortable with certain aspects of the treatment . . . of passive smoking and lung cancer, which, in my view could still be presented in a more even-handed manner. A number of inconsistencies in the epidemiologic studies are ignored, and other issues relevant to the assessment of the carcinogenicity of ETS go unmentioned. Id. Dr. Kabat was not alone on the SAB in questioning the propriety of the Group A classification. Dr. Victor G. Laties stated his opinion too that EPA had not yet demonstrated a justification for the Group A classification. "Admin. Rec." I.SAB.23.14 at 6 (comments of Victor G. Laties). These criticisms of EPA's classification decision paralleled Z\Z ~ those of ECAO-CIN, yet they were apparently also ignored by EPA. ~ F.~ - 15 - r> ~

EPA's response to these concerns, if any, must be examined in order to understand and evaluate the Agency's decision to classify ETS as a Group A carcinogen. Discovery will determine why EPA ignored the serious issues raised by these reviewers, including the all-important question of Group A versus Group B (or other Group) under the Risk Assessment Guidelines.ll/ b. 95% Versus 90% Confidence Interval. The 1990 draft of the ETS risk assessment employs the 95% "confidence interval" to evaluate the epidemiologic studies regarding a possible relationship between ETS and lung cancer.12/ This is the standard statistical model that scientists, EPA, and other agencies traditionally use to avoid the possibility that a perceived causal relationship is really due to chance.13/ In the 1992 draft, however, the confidence interval was relaxed to an unconventional 90% level. This statistical shift made it easier for EPA to claim a link between ETS and lung cancer. 11/ As the Court has noted, one of the major issues in this case is "whether EPA followed its internal guidelines in formulating the Report." Mem. Op. at 17. 12/ "Admin. Rec." ORD.B.2 at 1-4, 3-18 n.l, 3-19 (1990 Draft ETS Risk Assessment). 13/ See Rothman, K. J., Modern Epidemiolocty, "The Role of Statistics in Epidemiologic Analysis: Assessment of Random Variability," Little, Brown & Company, Boston, 1986, at 116-117; see also N. E. Breslow and N. E. Day, Statistical Methods in Cancer Research, International Agency for Research on Cancer (Lyon, France, 1980), at 128 ("conventional significance levels" are 99% or 95%). The ETS Risk Assessment references Breslow and Day as one of its principal statistical authorities. See, e.g., Final Risk Assessment at 5-14. - 16 -

The change in confidence intervals was not highlighted in any document or explained to any reviewers, including the SAB. Nonetheless, the SAB's Dr. Kabat saw the problem and admonished EPA that the use of a 90% confidence interval (instead of 95%) "is to be discouraged." "Admin. Rec." II.SAB.9.16 at 6 (comments of Geoffrey Kabat). Dr. Kabat characterized EPA's statistical sleight-of-hand as follows: "It looks like [an] attempt to achieve statistical significance for a result which otherwise would not achieve significance." Id. From the "record" EPA offers the Court, it appears that EPA did not address or respond to Dr. Kabat's concern. EPA went with the weak 90% confidence interval in the final ETS document without ever explaining the impact of relaxing the standard. In fact, EPA had to manipulate the underlying epidemiologic studies in order to compute their results at a weaker 90% level. Of 30 studies that EPA relied on, 27 reported their own results at the standard 95% level. Complaint 5 31; see also Final ETS Risk Assessment, Appendix A. The only place EPA reports its 95% to 90% "conversion" is in the second sentence of a footnote, n.3, to a table buried on page 5-27 of the final ETS Risk Assessment. It reads: "All corrected 95% confidence intervals have been converted to 90% confidence intervals." That is the extent of EPA's discussion of its statistical manipulation -- it fails to justify the change. While the "record" does not discuss this statistical legerdemain, EPA disclosed its motivation at a congressional - 17 -

hearing on July 21, 1993.14/ In response to a question from Congressman Rose, Dr. Bayard, EPA's ETS project manager, disclosed that when EPA applied the standard 95% confidence interval, it came up with a relative risk that included 0.99: this meant there was no statistically significant correlation between ETS and lung cancer.15/ Id. at 40. In order for Dr. Bayard to confess this fact to Congress, EPA obviously performed calculations with the 95% confidence interval that were not reflected in the Risk Assessment. But where are the relevant worksheets? We do not find them in EPA's "record." Because the Risk Assessment Guidelines require the Group A classification to be used "only when there is sufficient epidemiologic evidence," one can imagine why EPA is trying to sweep its 95% confidence interval information under the rug. Discovery will identify precisely how EPA's decision was influenced by its statistical manipulations. c. Relevant Studies Were Excluded. Another significant gap in the "record" EPA crafted for this litigation concerns EPA's choice of which epidemiologic studies 14/ Review of the U.S. Environmental Protection Agency's Tobacco and Smoke Study: Hearing Before the Subcomm. on Specialty Crops and Natural Resources of the Comm. on Agriculture, 103d Cong., 2d Sess.; excerpt attached at Appendix Tab 4. 15/ A relative risk of 1.0 or less means that there is no positive association between the risk factor and the disease. See, e.g., Breslow & Day, Statistical Methods in Cancer Research, supra, at 128. A confidence interval that includes 1.0 within the upper and lower bounds of its range is considered to be not statistically significant.

to include in its evaluation of ETS. The final Risk Assessment states that two studies, Brownson et al. and Stockwell et al., were excluded from EPA's consideration because they were published after EPA's arbitrary cut-off date, but well before the final Risk Assessment was completed. See Final ETS Risk Assessment, Addendum at ADD-i. Inclusion of these studies in EPA's analysis would have further weakened the alleged statistical correlation claimed between ETS and lung cancer. Complaint f 56. While EPA failed to consider the Brownson and Stockwell epidemiologic evidence, it went out of its way to include an incomplete study, by Fontham et al., whose results appeared to be more favorable to EPA's desired conclusion. Not only was the Fontham study incomplete when EPA included it, but the "record" reveals that EPA's consultant actually importuned the study's author to release data to the Agency. See "Admin. Rec." ORD.E.2.17 (Kenneth G. Brown letter to Elizabeth T. H. Fontham, October 12, 1991).16/ Why was it so important to press Dr. Fontham for her incomplete data, but not so important to postpone 16/ Mr. Brown's October letter to Dr. Fontham stated: ... your interim study report has created a lot of interest at EPA. They would like for me to include it in our report ... We are aware of your November publication date Id. - 19 -

the arbitrary cut-off date so that the results of Brownson and Stockwell could also be incorporated? The ECAO-CIN office also asked about missing studies in its 1992 critique: What is lacking is a clear statement of why these particular studies were selected for review. Was any attempt made to include non-published studies (which are likely to have non-positive findings) in the review? ...[I]t is not really clear to me how the process of data abstraction took place. * * * It seems that several studies were excluded a priori from the meta-analysis for evidently different reasons. It is mentioned that the study of Sandler et al. was excluded [due] to a small number of lung cancer cases -- I thought the purpose of pooling data was to include studies such as these. If it was totally useless, this should be more clearly stated. 17/ The "record" also contains one mysterious reference to a draft ETS risk assessment that was prepared by EPA in 1988. See "Admin. Rec." ORD.E.3.24 (letter to Hon. Thomas J. Bliley, Jr., from Gary J. Foley, Acting Assistant Administrator for Research and Development, undated, attaching copy of contractor "work assignment" form, February 14, 1989, accompanying memorandum at 7). This document, too, is neither included nor explained in the "record." 17/ ECAO-CIN Memorandum from Patricia A. Murphy to Lynn Papa, "Requested Review of OHEA documents on Passive Smoking Health Risk Assessment," March 23, 1992, at 4 (exhibit C to Glass Declaration at Appendix Tab 3). - 20 -

Discovery will determine how and why EPA cherry-picked the data it considered. In sum, because EPA's "record" is not the "whole record" and provides insufficient explanation for EPA's actions, plaintiffs are entitled to conduct discovery. Camp v. Pitts, 411 U.S. 138, 142 (1973); Arkla Exploration Co. v. Texas Oil & Gas Corp., 734 F.2d 347, 352 (8th Cir. 1984), cert. denied, 469 U.S. 1158, 105 S. Ct. 905, 83 L. Ed. 2d 920 (1985); see also Asarco, Inc. v. EPA, 616 F.2d 1153, 1158-59 (9th Cir. 1980); Texas Steel 93 F.R.D. at 621. 3. Discovery Should Be Permitted to Explore and Explain the Complex Technical Information Involved in this Agency Action This Court has already observed that the ETS classification involves the complex subject matter of risk assessment, including "complicated and highly technical scientific evidence." See Mem. Op. at 17. Discovery will help narrow and explain the complex and technical issues involved in this case and thereby assist the Court in its review.18/ Courts frequently allow discovery for this purpose. See Ethyl Corp. v. EPA, 541 F.2d 1, 36 (D.C. Cir.), cert. denied, 426 U.S. 941, 96 S. Ct. 2662, 49 L. Ed. 2d 18/ EPA's classification of ETS as a Group A carcinogen entailed a scientific decision by the Agency. The Fourth Circuit has suggested that administrative agencies may not be entitled to deliberative process protection from third-party discovery where scientific facts are at issue. See Cipollone v. Liggett Group, Inc., 812 F.2d 1400 (table), 1987 WL 36515 (4th Cir. 1987) (unpublished disposition); copy attached at Appendix Tab 5. In that case, the Department of Health and Human Services was ordered to comply with a subpoena seeking deliberative materials in connection with the Surgeon General's report on smoking. - 21 -

394 (1976); see also Asarco, 616 F.2d at 1160 (9th Cir. 1980); United States v. Amtreco Inc., 806 F. Supp. 1004, 1007 (M.D.Ga. 1992); Arkla Exploration Co., 734 F.2d at 357. 4. Plaintiffs Are Entitled to Discovery to Pursue Their Allegations of EPA's Bad Faith In United States v. Shaffer Equip. Co., 11 F.3d 450, 460 (4th Cir. 1993), the court found that evidence of bad faith or improper behavior justifies discovery beyond the documents compiled and submitted by the agency as the official administrative record.19/ In this case, plaintiffs have alleged that EPA's Risk Assessment and Group A classification result from a biased and result-oriented agency process. See, e.g., Complaint f 3. The SAB's Dr. Kabat reached the same conclusion. He stated that EPA's approach "is not the way to go about producing a balanced assessment of the lung cancer issue." Id. at 15. Even more starkly, he stated that the authors of the EPA Risk Assessment were "biased" to find an effect. "Admin. Rec." SAB.23.14 at 5 (SAB comments). The Group A classification violated EPA's guidelines and EPA knew it. As the Glass Declaration, the ECAO-CIN documents, and the SAB comments of Drs. Kabat and Laties all demonstrate, EPA 19/ See also Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 420 (1971); City of Mt. Clemens v. EPA, 917 F.2d 908, 918 (6th Cir. 1990); Apex Constr. Co. v. United States, 719 F. Supp. 1144, 1147 (D. Mass. 1989); Friends of the Shawanctunks, Inc. v. Watt, 97 F.R.D. 663, 668 (N.D.N.Y. 1983), rev'd on other grounds, 754 F.2d 446 (2d Cir. 1985). - 22 -

was specifically advised that the Agency did not have sufficient epidemiologic evidence to reach a Group A classification under EPA's Guidelines. EPA was aware of this problem, but deliberately ignored it. EPA further displayed its bad faith when it lowered the confidence interval, in midstream, from 95% to 90%, thereby violating established statistical methods. See Complaint 1 31. This was particularly egregious since EPA had apparently performed the calculations at the 95% level and knew that the traditional, higher confidence level would not produce a statistically significant association between ETS and lung cancer.?~/ See Bayard Congressional Testimony, Appendix Tab 4. In addition to manipulating the confidence interval, EPA rigged the numbers by excluding data from completed studies, while including an incomplete, but allegedly supportive study, and even pressing the author of that incomplete study to provide her preliminary data. EPA's bias is also demonstrated by its unprecedented reliance on the weak statistical association found in the ETS 20/ In testimony to the Subcommittee on Clean Air and Nuclear Regulation of the Senate Committee on Environment and Public Works, Drs. Jane G. Gravelle and Dennis Zimmerman of the Congressional Research Service observed that it is "unusual to return to a study after the fact, lower the required significance level, and declare its results to be supportive rather than unsupportive of the effect one's theory suggests should be present. ..." Hearing on Environmental Tobacco Smoke Before the Subcomm. on Clean Air and Nuclear Regulation of the Senate Comm. on Environment and Public Works, May 11, 1994, at CRS-5; copy attached at Appendix Tab 6. - 23 -

risk assessment. See Complaint 1 45. After downshifting to the 90% confidence level, EPA still managed to calculate a relative risk of only 1.19 in its "reinterpretation" of eleven U.S. epidemiologic studies. It is widely held that a relative risk under 1.5 is not considered evidence of a causal relationship.Zl/ Indeed, an EPA health scientist who contributed to the second draft risk assessment admitted that Agency staff had engaged in some "fancy statistical footwork" in order to "fashion [an] indictment" of ETS. Richard Stone, "Bad News on Second-Hand Smoke," 257 Science, July 31, 1992, at 607; copy attached at Appendix Tab 7. EPA's bad faith concerning ETS is also shown by the fact that EPA has refused to classify other substances as Group A carcinogens with substantially stronger associations.22/ It seems EPA actually "singled out" ETS for Group A treatment 21/ See Glass Declaration Q 10(c). 22/ See "Evaluation of the Potential Carcinogenicity of Electromagnetic Fields," U.S. E.P.A., Office of Health and Environmental Assessment, EPA/600/6-90/005A, Workshop Review Draft, June, 1990 (association between cancer and EMF fields is not strong enough to prove a causal relationship because the relative risks have seldom exceeded 3.0). Even Dr. Bayard's presentation to the SAB on December 4, 1990, noted that, under EPA's criterion for "strength of association," increased risks of cancer are "typically" associated with relative risks over 5.0. "Admin. Rec." I.SAB.13.2, page labelled "Other Criteria for Causality." - 24 -

despite such weak epidemiological evidence. See Glass Declaration Q 6.23/ Finally, much of EPA's case against ETS is built on a f lawed analogy based on alleged chemical similarities between mainstream smoke and ETS. See Complaint ][ 59. Yet, EPA is inconsistent within the four corners of its own document: it abandons the alleged similarities when that suits the Agency's purposes. For example, in rejecting the "cigarette-equivalent" model for ETS exposure, EPA relies heavily on differences between mainstream smoke and ETS. Final ETS Risk Assessment at 2-7-8. EPA even quoted the International Agency for Research on Cancer as saying it was "impossible to gauge the degree of similarity of [mainstream smoke] and ETS." Id. at 6-6. The SAB's Vice Chairman, Jan A. J. Stolwijk, caught EPA in its chemical mischief. He accused EPA of being "guilty of misleading" in describing the composition of mainstream smoke versus sidestream smoke. "Admin. Rec." I.SAB.16.2 at 153 (SAB transcript). He even said it was "not a defensible statement" for EPA to say sidestream smoke contained more carcinogens than mainstream smoke. Id. Nonetheless, EPA adheres to the flawed analogy. 23/ In the same vein, at a press conference following an SAB Executive Committee meeting, the Chairman of the SAB told the press that in his view the risk attributable to ETS exposure is "probably much less than you took to get here through Washington traffic." Ronald A. Taylor, "EPA Panel Reports Non-Smokers at Risk," Washington Times, April 19, 1991, at A3; copy attached at Appendix Tab 8. - 25 -

EPA allowed its regulatory agenda to influence its science, thereby knowingly violating the requirement of its own Guidelines to conduct risk assessment independent of policy. 51 Fed. Reg. at 33993. See also Complaint 11 25-26. Under these circumstances, there can be no question that discovery is necessary to go beyond EPA's "record" to assure that EPA's bad faith is probed and that the full record before EPA is presented to this Court when it decides this case. III. PLAINTIFFS ARE ENTITLED TO DISCOVERY ON THEIR DUE PROCESS CLAIM EPA's motion to stay discovery on the due process claims should be denied. Plaintiffs have a need for, and a right to, discovery on their constitutional claims. Moreover, the Court directed that the due process "claim can be adjudicated more accurately after the parties have developed the factual record." Mem. Op. at 19. Plaintiffs allege that EPA violated due process when it designated ETS as a Group A carcinogen, in violation of its own substantive rules -- the Carcinogen Risk Assessment and Exposure Assessment Guidelines -- with the knowledge that the designation was false and would injure plaintiffs' businesses. Plaintiffs also allege that they have a due process "entitlement" not to have their product (or by-product) classified as a Group A carcinogen unless EPA at least satisfies the "substantive predicates" embodied in the Guidelines. As set out in prior - 26 -

briefs,24/ courts have found due process violations under similar circumstances25/ and have frequently held that due process "demands" that an agency follow its own substantive guidelines.26/ Plaintiffs therefore need discovery on at least two issues: (1) whether the EPA's designation of ETS violated the Guidelines and (2) whether the EPA knew that the classification was false and violated the Guidelines when it was made.27/ EPA bases its stay motion on an assertion that, because both the APA and the due process claims concern EPA's compliance with the Guidelines, the due process claims are "duplicative." EPA Brief for Judgment 24/ A full explanation of plaintiffs' due process claims is set forth in Plaintiffs' Brief in Opposition to Defendants' Motion to Dismiss Complaint at 35-50 (filed 9/20/93), and Plaintiffs' Surreply in Opposition to Defendants' Motion to Dismiss Complaint at 1-6 (filed 11/2/93). Plaintiffs respectfully refer the Court to those papers for supporting authority. 25/ See, e.g., Pritchett v. Alford, 973 F.2d 307, 317 (4th Cir. 1992); Marrero v. City of Hialeah, 625 F.2d 499, 520 (5th Cir. 1980), cert. denied, 450 U.S. 913, 101 S. Ct. 1352, 67 L. Ed. 337 (1981). 26/ Kindred v. Spears, 894 F.2d 1477, 1482 (5th Cir. 1990); see also Spruytte v. Walters, 753 F.2d 498, 508-09 (6th Cir. 1985), cert. denied, 474 U.S. 1054, 106 S. Ct. 788, 88 L. Ed. 766 (1986); cf. Douglas v. Buder, 412 U.S. 430, 432 (1973) (New Mexico Board of Bar Examiners denied applicant's due process by refusing to qualify him for the practice of law); Schware v. Board of Bar Examiners, 353 U.S. 232, 247 (1957) (revocation of petitioner's probation for failure to report a traffic citation violated due process clause). 27/ The intent of the EPA is an element of plaintiffs' due process claim and thus is properly subject to discovery. See Daniels v. Williams, 474 U.S. 327, 335 (1986). Daniels is not a~ "substantive due process" claim, as EPA suggests. See EPA Brief ~ for Judgment on the Pleadings, Etc. at 30 n.24. ~ ~ ~ - 2 7 - 00 O ~ GJ~

on the Pleadings, Etc. at 38. But, as discussed below, courts in similar contexts have recognized the "independent vitality" of due process claims and have allowed discovery on those claims beyond the administrative record. A. Plaintiffs Are Legally Entitled to Discovery Under the Due Process Claims Beyond the Administrative Record It is well recognized that "[i]ndependent of any power of review that Congress granted to [the district courts] under the APA, this Court has the authority to examine and rule on any actions of a federal agency that allegedly violate the Constitution." Rydeen v. QuiQg, 748 F. Supp. 900, 905 (D.D.C. 1990), aff'd, 937 F.2d 623 (Fed. Cir. 1991), cert. denied, U.S. , 112 S. Ct. 974, 117 L. Ed. 2d 138 (1992). The reason for this rule is clear: courts, not agencies, are experts on constitutional issues. When adjudicating an APA claim, the Court functions as a reviewing tribunal and must determine whether the agency action was "arbitrary and capricious." By contrast, when adjudicating a due process claim, this Court is the factfinder and must determine whether agency action comported with constitutional guarantees. Thus, even in the administrative context, due process claims "are reviewed de novo by the Courts." McNary v. Haitian RefuQee Ctr., Inc., 498 U.S. 479, 493 (1991); see also Porter v. Califano, 592 F.2d 770, 782 (5th Cir. 1979). And the "chief" reason courts allow discovery beyond the administrative record is "a court's review - 28 -

of a constitutional claim." National Medical Enters., Inc. v. Shalala, 826 F. Supp. 558, 565 n.ll (D.D.C. 1993). For example, in Rydeen, plaintiff brought claims under the APA and the Constitution against the Commissioner of Patents and Trademarks. The Court did not go beyond the record for purposes of the APA claim, but did consider extra-record evidence with respect to the constitutional claims. The Court held: When reviewing constitutional challenges to agency decisionmaking, courts make an independent assessment of the facts and the law. Pickering v. Bd. of Educ. of Township High School Dist. 205, Will County, 391 U.S. 563, 578-79 n.2 (1968). Thus, we may consider the additional affidavits . . . even though they were not before the agency upon administrative review. Rydeen at 906. Similarly, in Allick v. Luian, the Court held that discovery was permissible on plaintiff's constitutional claim and ordered the defendant to respond to the plaintiff's discovery requests "permissible under the Federal Rules of Civil Procedure." 1990 U.S. Dist. LEXIS at *4.28/ 28/ See also National Medical Enters., Inc., 826 F. Supp. at 565 n.ll (denying motion to strike materials not in administrative record because they related to a due process claim, citing Rydeen); Stupak-Thrall v. United States, 843 F. Supp. 327, 330 (W.D. Mich. 1994) ("No deference need be shown to an agency decision . . . when the constitutionality of its action is questioned."). EPA errs in relying on Carson Products Co. v. Califano, 594 F.2d 453 (5th Cir. 1979). See EPA Brief in Support of Judgment on the Pleadings at 33. In Carson Products the court did not require "additional factfinding" because there was no disputed issue of fact between the parties. ("Resolution of (continued...) - 29 -

B. The Due Process Claim Is Not Duplicative The foregoing discussion demonstrates that, in reviewing plaintiffs' due process claims, the Court (1) must engage in a de novo review and (2) is not bound by the administrative record. Cast in this light, EPA's argument that the due process claim is duplicative cannot withstand scrutiny. Although both the APA and the due process counts allege that EPA violated its own Guidelines, the due process claim requires the Court to make an independent assessment of whether EPA violated those guidelines. Further, the assessment should include consideration of all relevant evidence subject to discovery and admissible under the applicable federal rules, not only the "administrative record." Because a due process claim may be successful even when an APA claim is not, the due process claim is not duplicative. Cf. Baker v. Bell, 630 F.2d 1046, 1056 n.24 (5th Cir. 1980). Baker set forth the principles that should govern de novo review. The case involved an APA claim and a cause of action implied under the Rehabilitation Act of 1973. The Fifth Circuit held that district court review of the Rehabilitation Act's implied cause of action is de novo, and is therefore not limited to the administrative record: 28/(...continued) Carson's due process complaint does not involve any disputed factual issues ..."). 594 F.2d at 457. Further, the due process claim at issue in Carson Products -- whether the FDA's Q adjudicative procedures comported with due process -- is far ~ different from those here. ~ ~ C~t - 30 - 00 ~ G~

The judicial appraisal of the plaintiffs' claim cannot properly be limited to review of the administrative record and the application of a restricted standard of.review ... Because review is not limited to the administrative record, such discovery as would normally be allowed should be permitted. Id. at 1056. The case at bar involves a constitutional claim that is also subject to de novo review. As such, it cannot be limited to the administrative record, and is not duplicative of the APA claims.29/ Finally, EPA has expressed concern that, if discovery is allowed on the due process claim, "this case could be prolonged indefinitely." EPA Brief in Support of at 38. Plaintiffs have no intention of indefinitely and would propose that the expeditiously as possible. If EPA has a or burden involved in complying with any requests, plaintiffs stand ready to meet Judgment on the Pleadings prolonging this case Court set a trial date as problem with the scope of plaintiffs' discovery and confer with the EPA. Plaintiffs submit, however, that the scope of discovery in this 29/ In support of its position, EPA cites only Stephens v. HHS, 901 F.2d 1571 (11th Cir. 1990). EPA disingenuously claims that Stephens stands for the proposition that "where APA provides [a] remedy, plaintiff may not simply recharacterize the basis of its APA claim as a constitutional violation." EPA Brief in Support of Judgment on the Pleadings at 30 n.23. In Stephens, the court held that Congress intended the Civil Service Reform Act of 1978 to be the exclusive remedy for federal employees denied promotion. The court dismissed both the APA claim and plaintiff's constitutional claim. The court did not hold that the APA was an exclusive remedy, as EPA suggests -- nor could the court without overruling Rydeen, Allick, Porter, Stupak-Thrall, and National Medical Enterprises.

case is best decided in the context of specific discovery demands and not in a vacuum as, in effect, proposed by EPA. Conclusion For the foregoing reasons, EPA's motions for summary judgment limiting judicial review to its "administrative record" and for a protective order staying discovery should be denied. Dated: November 1, 1994 Respectfully submitted, On behalf of Plaintiffs: & ~ Of Counsel: Dewey W. Wells <~l N.C. State Bar No. 4645 Keith W. Vaughan BEVERIDGE & DIAMOND, P.C. N.C. State Bar No. 6895 Suite 700 1350 I Street, N.W. Jeffrey L. Furr N.C. State Bar No. 14107 Washington, DC 20005-3311 ARNOLD & PORTER Lawrence Pierce Egerton N.C. State Bar No. 16617 WOMBLE CARLYLE SANDRIDGE 1200 New Hampshire Avenue, N.W. & RICE 1600 Southern National Washington, DC 20036-6885 Financial Center 200 W. Second Street SHOOK, HARDY & BACON Winston-Salem, NC 27102 One Kansas City Place 1200 Main Street (910) 721-3600 Kansas City, MO 64105-2118 Attorneys for Plaintiffs Universal Leaf Tobacco Attorneys for Philip Morris Company, Incorporated, Incorporated Philip Morris Incorporated, and R. J. Reynolds Tobacco Company JONES, DAY, REAVIS & POGUE North Point 901 Lakeside Avenue Cleveland, OH 44114 4 Attorneys for R. J. Reynolds ~ Tobacco Company ~ ~ - 32 -

James K. Dorsett, Jr. BERRY & FLOYD, P.S.C. N.C. State Bar No. 1212 407 N. Main Street James D. Blount Post Office Box 245 N.C. State Bar No. 378 New Castle, KY 40050 SMITH, ANDERSON, BLOUNT, Attorneys for The Council for Burley Tobacco, Inc. WILLIAMS, MULLEN, CHRISTIAN & DOBBINS 1021 E. Cary Street Richmond, VA 23219 Attorneys for Universal Leaf Tobacco Company, Incorporated DORSETT, MITCHELL & JERNIGAN 2500 First Union Capital Center Post Office Box 2611 Raleigh, NC 27602-2611 Attorneys for Plaintiffs Flue-Cured Tobacco Cooperative Stabilization Corporation and The Council for Burley Tobacco, Inc. W. Thomas White N.C. State Bar No. 005216 ALLMAN SPRY HUMPHREYS LEGGETT & HOWINGTON, P.A. Suite 700 380 Knollwood Street Winston-Salem, NC 27103 (910) 722-2300 Attorneys for Gallins Vending Company P:\CLI\10\73\2852\PLG\2852ACR.04 - 33 -