Tobacco Documents Online

PAUL R. WATKINS (1699 - IO'i J) DANA UTXAM (1696 - IC741 -NICAGD GrFIEE SEARS TOWER. SUITE 5000 CHICAGO. ILLINDIS eDeD® PHONE /S12) 5-l6-7700, FAX 903-9'FO7 HONG KONG OFF CE SUITE 2205A. 22NO FLOOR NO. 9 OUE[N'S ROAD CENTRAL NoNC KONG PHONE + 652-2522-7666. FAX 2522-7000 LBI/DON OFC CE ONE ANGEL COURT LONDON EC2R TMJ ENGLAND PHONE + 44-IT1-374 4444. FAX 374 4400 - LO~ ANf~F^ OE, 433 WEST FIFTH STREET. SUITE 4000 LOS ANGELES. CALIFORNIA OCG-l/-2007 PHONE 12131 s6S-1234. FAX 691-6763 MOS^OW OFFICE ULITSA DASMEKA, 7, OTw FLnOw M05COW 123056. RUSSIA PHONE + 7-095 T63-1234. FAX 765-1225 . 6FW RS F~FY OGF CF ONE NEWARK CENTER, IOTN FLOOR NEWARK. NEW JERSEY 07101C174 PHONE I9T31 CO9-123I, FAX 639-)296 Stanley S. Arkin, Esq. Arkin Schaffer & Kaplan LLY 1370 Avenue of the Americas New York, New York 10019-4602 August 28,1998 Aaron H. Marks, Esq. Kasowitz, Benson, Torres & Friedman LLP 1301 Avenue of the Americas New York, New York 10019-6002 ORAnOF 1- UTY OFFICE 950 TOWMICENTER DRIVE, SUITE 2000 COSTA MESA. CALIFORNIA 926z6-1o26 PHONE (7141 640-1235. FAX 756-6290 S.N O 6G GFF, 701 '®' STREET. SUITE 2100 SAN DIEOO, CALIFORNIA 9 2101-610 7 PHONE (CI91 336-/t34, FAX OOC-7410 >AN FRANCISCO OrFIC'F 505 MONTOOMERY STREETSOITE IOCG SAN FRANCISCO. CALIFORNIA 041/1-2362 PHONE 14161 391-0600. PA2 306-6OG6 IL'ON VALLEY I TS WILLOW ROAD MENLO PARK. CALIFORNIA 94026-3060 PHONE /650) i23-4600, FAX 433-2600 S/NGAPORE OFFICE 2O CECIL STREET. SUITE 2S-C2 THE EXCHANGE. SINGAPORE 049705 PHONE + 96-SJ6-IIGI. FAX 606-IIT1 TOKYO OrrICE INFIMI A6A9AKA, 6-9-19, AKASAKA, MIMATO-KY TOKYO 10T-OC6C. JAPAN PMONE +613-3423-39T0. FAX 3423-3071 WA9MIMOTON. O L OFFIGF 1001 PENNSYLVANIA AVE.. N.W., SUITE 1300 WASNINOTON. D.C. 20004-2E05 PHONE 12GL1 637-2200, FAX 63C-[2O1 (Fi1E NO Gentlemen: I recently returned from vacation to find your letters of August 11 and 13, 1998. Having reviewed the full exchange of correspondence and the Saee Realtv decision, it occurred to me that it might be useful to outline the points on which we are in apparent agreement and the issues that still separate us. 1. 1 believe there is consensus that the materials you have requested contain the following: (i) documents to which you, as present counsel for Liggett, are entitled, (ii) documents containing attorney work product of prior counsel, which are entitled to certain protections under the circumstances, and (iii) documents that are either proprietary to, and/or LATHAM & WATKINS ATTORNEYS AT LAW 53RD ATTNIRD, SUr1E 1000 8e5 niiRD AvENUE NEW YORK, NEW YDRK 10022-4802 iELEPHONE (212) 9064200 FAX f212> 751-4854 NY_DOCS\2731261 2084223617

LATHAM & WA77SINS August 28, 1998 Page 2 subject to privilege claims of, third parties, to which you are not entitled. The practical difficulty is that, for the documents you have requested, there is a need for the above categories to be identified and separated out 2. With respect to the need, about which there also is consensus, to segregate items falling in categories (ii) and (iii) from material within category (i), you take the position that your firms should review all of the documents and cull from them the materials subject to the privilege claims of prior Liggett counsel and third parties. Our position is that this cannot be done by your firms because of the privacy interest of prior counsel in its work product and because of your client's present posture of adversity with the third party privilege holders. 3. Until recently, you have consistently stated the position that you would not compensate our law firm for the work required to respond to your request, despite the clear legal precedent that would require it. Now, for the first time, you have stated you would pay "reasonable costs," but at the same time, that you would not pay for privilege review. Your position, frankly, is unclear. In view of the existence of unpaid balances, and Liggett's prior payment history, we will require payment in advance. 4. To the extent that your request arises from, as Mr. Arkin has repeatedly stated, an obligation to produce documents responsive to grand jury subpoenas, we have suggested that we are prepared to deal directly with the government representatives on the issue of whether there are responsive documents in our possession. This proposal, which you have rejected, would have the benefit of perhaps reducing the need for a comprehensive privilege review of all the, - NY_DOCS5273126.2 00

IATHAM & W.4TKIN5 August 28, 1998 Page 3 documents. In addition, Mr. Marks' recent letter confirms that Liggett seeks access to a broader group of documents to provide them to unnamed third parties. 5. The Sage Realty decision, on which you apparently reyly as governing claims of successor counsel's need for access to client-related files in the possession of former counsel, suggests a procedural framework for moving forward. While recognizing successor counsel's right of access in pursuit of legitimate client needs, the Court of Appeals also recognizes (1) the legitimacy of nonaccess with respect to documents the disclosure of which "might violate a duty of nondisclosure owed to a third party," (2) the permissibility of nonaccess to preserve the confidentiality of attorney work product, and (3) that performance by the requested law firm in possession of such documents of the work necessary to respond to the successor counsel's request "is properly chargeable to the client under customary fee schedules of the firm." 91 N.Y. 2d 30, 37; 689 N.E. 2d 879, 883; 666 N.Y.S. 2d 985. I am prepared to discuss with you a protocol for our preparation of the documents for your inspection and copying on the principles endorsed by the Court of Appeals in Sage Realtv. This will require reconsideration of your position that your firms should conduct the necessary privilege review. I simply do not understand how this is possible.' Such a protocol would also require your client to reach an agreement with our firm to pay us according to our "customary fee schedules." i In the event you are able to obtain the consent of the third-party privilege holders to a review conducted by attorneys, such as yourselves, who represent a party with interests adverse to those privilege holders, then the only review our firm would have to perform would be limited to the task of separating out our attorneys' work product NY DOCS12731262

IATI-]AM & WA7HN5 August 28, 1998 Page 4 I trust that none of us wishes to prolong this tournament of letter writing. Consequently, I do hope we can reach an agreement along these lines, which seems to strike an appropriate balance of the legitimate interests implicated by your request. Very truly yours, WPL:ps 1YY_DOCS12731262