Tobacco Documents Online

2 SUPREME COURT OF THE STATE OF NEW YORK 3 COUNTY OF NEW YORK ----------------------------------x 4 S s DOUGLAS LEIGH, INC., : t Plaintiff s 6 , s Index No. Vs• : 13894-69 7 s RAILWAY EXPRESS AGENCY, _ 8 s 8 10 11 12 13 14 15 ls 17 18' 19 20 21 0 23 ' Defendant. : : -------------------- -x March 16, 1971. 4:45 P.M. Deposition of ROBERT AUGUST RECHHOLTZ, ~...... . a witness, taken by plaintiff, pursuant to Consent, at the offices of R. J. Reynolds Tobacco Co., R. J. Reynolds Building, Winston-Salem, North Carolina, before C. A. Michaelini, a Certified Shorthand Reporter and Notary Public of the State of New York. 24

0 2 3 4 S 6 cmb 2 A P P E A R A N C E S: WHITE & CASE, ESQS., Attorneys for plaintiff, 14 Wall Street, New York, New York. 10005 By: JOHN M. JOHNSTON, ESQ., and MISS LAURA BANFIELD,. , of Counsel. CAHILL, GORDON, SONNETT, REINDEL & OHL, ESQS., 7 Attorneys for defendant, 80 Pine Street, 8 New York, New York. 10005 By: THOMAS F. CURNIN, ESQ., and 9 ROGER S. FINE, ESQ., of Counsel. 10 11 ALSO PRESENT: MAX H. CROHN, JR., ESQ., 12 Attorney for the witness. 13 14 15 16 17 18 19 20 21 0 23 24 MR. JOHNSTON: it is our mutual under- standing that portions of this record may be read into evidence. However, all objections except as to the form of the question are reserved until the trial. MR. CURNIN: Yes. 25

2 3 4 5 8 7 9 10 11 12 13 14 15 ls 17 18 19 20 21 22 0 24 R 0 B E R T A U G U S T R E C H H O L T Z, residing at 3351 Paddington Lane, Winston- Salem, North Carolina, called as a witness, having been first duly sworn by the Notary Public, Kay A. Matthews, was examined and testi- fied as follows: EXAMINATION BY MR.JOHNSTON: Q Mr. Rechholtz, by whom are you employed? A R. J. Reynolds Tobacco Company. Q How long have you been employed by that company? - A Since May 1961. Q What is your position now, your title, job title? A Marketing manager and a vice-president of the company. Q When did you become a vice-president? A In June of 1970.. , { i Is that the same time you became marketing --y i what was it, manager? ~ 0 A . . 3 No, sir, I was appointed marketing manager ~ in December 1967. Q Prior to that time What was your capacity, or title? 25

1 cmb ltechholtz 4 2 3 4 S A Advertising manager. 0 How long did you hold that title? A Since March 1964. Q Is it the fact that ever since you have . . . 6 been connected with Reynolds since 1961 that you were 7 in the advertising field? I 8 A Yes that is correct but I be an a , . g s r 9 export advertising coordinator. 10 Q Would you please state what your func- 11 tions are as vice-president and marketing manager l 12 of advertising? f 1 ~ 13 A My function, my principal function today ~ 14 is to develop the total marketing program for the 15 R. J. Reynolds Tobacco Company,.and to oversee the 18 implementation and periodic evaluation of that ~ 17 program. ~ ~ 18 Q Would you state, what was your title f ~ ~ ~ 19 again during this period of time, assuming the title ~ 20 remained the same, May, June, July, August and ~ 21 September and October 1969? i ~ 22 A 'Marketing manager. 23 Q Were your duties primarily the same as 24 they are today? ~ A Yes, very much the same. I

1 cmb Rechholtz 5 2 Q Was there a Mr. Berger, Al Berger em- 3 ployed by R. J. Reynolds & Company during those months- 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18. 19 20 21 0 0 24 and that year? A Yes. Q What was his title? A Media manager. Q To whom did he report? A To me. Q Did there come a time when R. J. Reynolds or its advertising representatives approached you about an increase in rates during the period between August, the beginning of August and the end of September 1969? A ~ Yes. . Q Do you know who representing REA made tt~iis approach? MR. CURNIN: May we have it understood on the record that the reference either by Mr. Johnston or myself to REA means Railway Express Agency? , MR. JOHNSTON: Yes. Q Can you recall who on behalf of REA made this approach to increase the rates during those two months, August and September of 1969? ~ fl ~ ~ 0 ao 0 0

1 cmb .Rechholtz 6 2 A I don't recall the REA gentleman, because 3 the approach was not made directly to me, it was made C, 4 to Mr. Berger in a meeting down here. The representa- 5 tive for REA was Mr. Morrow, I believe that was his 8 name. 7 8 9 10 11 12 13 14 15 18 17 18 19 20 21 0 0 24 Q Did you meet him? A No, sir. Q Did Mr. Berger pass on to you the proposed increase in rates as made by Morrow and the REA gentleman? A He discussed it with me preparatory.to making a formal recommendation. Q Can you give us the substance of what he said and what you said during that conversation? Just generally. • It is a long time to remember. MR. CURNIN: Can we fix this as to point of time? MR. JOHNSTON: I fixed it as in August or September. Q • Can you be more precise? A Yes, as I recall it was early September, the 5th or 6th, right after the REA representative the REA representative and the executive, Morrow, __ 25 10 0

0 2 3 4 S 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 cmb - Rechholtz 7 visited Mr. Berger. Mr. Berger came in to see me, and he was quite surprised about the whole situation. Came in to see me and -- MR. CURNIN: I object to the character- ization , ization as to Mr. Berger. Q Well, did he say he was surprised in words or substance? A Yes, because it was a very substantial change in our previous arrangement in this medium, and he was quite concerned about it and wanted to discuss it with me before he made his formal recommenda tion. What was your reaction to Mr. Berger's MR. CURNIN: Objection as to form. I don't care if you ask him what he said 8 MR. JOHNSTON: I understand. I under- stand that your objection is noted. I ask that the witness answer the question. A I was shocked. Q Did you tell Mr. Berger that you were shocked? • A Yes. Q Was any decision made insofar as you were concerned when the meeting was concluded about

1 cmb ltechholtz 8 2 whether or not to recommend this rate increase 3 to the advertising committee? 4 A We decided to present the recommendation S in outline form to the advertising committee. . , 6 Q When you say you were shocked, did you 7 tell Mr. Berger why you were shocked? 8 A Yes. 9 MR. CURNIN: Well, are we clear that 10 the witness told m 11 MR. JOHNSTON: He just said it. He 12 said he told him he was shocked. 13 MR. CURNIN: Is that your testimony, 14 Mr. Rechholtz? • 1S THE WITNESS: Yes, that is correct. s ~ 16 MR. JOHNSTON: It is right on the l record Z 17 . 18 A I was shocked because in my experience, 19 I had never been involved in such a substantial per- 20 i centagewise rate increase that I could recall for 21 any particular medium, advertising medium. 0 Q..When was this recommendation proposed 0 to the advertising committee? za A It was presented formally to the committee ~ v+ 0 within a week. I don't recall exactly how many -- I o .F w t

0 2 3 4 S 6 7 8 9 10 11 12 13 14 1S 16 17 18 19 20 C 21 0 23 24 cmb Rechholtz 9 within a week of the time it was presented down here. Q Can you state at this point of whom the advertising committee consisted? A I will try to remember as best I can. At that time the advertising committee was comprised of myself, of course, Mr. W. S. Smith, who was executive vice-president of the company, was at that time. Mr. A. H. Galloway, president; B. R. Stewart, products manager at that time -- we are talking the period September 1969, is that correct?' Q That is right. A And our vice-president marketing was also a member of the committee. To the best of my knowledge these are the gentlemen that comprised the committee at that time. Q Insofar as you yourself were concerned, did you make any reference at this meeting to the then proposed ban on TV advertising of cigarettes? MR. CURNIN: Objection'as to form. MR. JOHNSTON: I will correct it if you will indicote to me how you think it is objectionable. MR. CURNIN: Well, you talk about a proposed ban, I don't think there has been any discussion about there being a proposed ban at this

0 cmb Rechholtz 10 ti 2 3 me. MR. JOHNSTON: You mean because it 4 hasn't been referred to? S MR. CURNIN: That's right. Q Well, Mr. Rechholtz, had you heard of 6 7 any proposed ban, or voluntary discontinuance by 8 the cigarette industry of TV advertising as of 9 September 1969? 10 MR. CURNIN: May I have the question,please? 11 (Question read.) MR. CURNIN: You mean that it was being ~" 12 ~ discussed in September of 1969? ~ 13 14 MR. JOHNSTON: Yes. That he had heard 1S of it. 16 A Yes. 17 Q Did you know that on or about July 22, . 1969, Mr. Cullman of Philip Morris on behalf of the 18 " 29 industry had made certain statements indicating that 20 under certain conditions the cigarette industry would voluntarily discontinue cigarette advertising? ~ 21 ~ A Yes. , 22 Q Cigarette advertising on radio and TV. 23 Do you want to add something? 1L^ 0 ^ ,. ., t A I just wanted to correct that point. ~~ 25 E o r m 0 LA

cmb Rechholtz 11 1 2 3 4 5 6 7 8 8 10 11 12 13 14 Q Now when I used the word "ban" that is what I am talking about. MR. CURNIN: Is this a voluntary suggestion? MR. JOHNSTON: Voluntary ban and statement on behalf of the industry that they would discontinue TV and radio adver tising under certain conditions. Q Incidentally, do you recall reading about this ban ori the front page of the New York Times on or around July 23, 1969? A No, I do not. Q Was this proposed ban, or voluntary discontinuance -- MR. JOHNSTON: Strike that. ; Q Was this proposed voluntary discontinuance ~ 15 of TV cigarette advertising discussed by you at ~ 16 s i this meeting? f. 17 A Yes. - 18' Q r Can you recall what you said in that ~ 19 ~ ,. regard? ;.... . ~ ~ 20 A To the best of my knowledge I recall our 21 discussing,that if the voluntary withdrawal agree- ~ 22 ment were to become a reality, or if we were in- 23 voluntarily banned from radio and television advertis- ing, that non-broadcast media would become proportion-`===~ ~ ZS - ~

1 cmb Rechholtz 12 2 3 4 5 6 7 8 9 10 11 12 13 14 iS - 16 17 18 19 20 ~, 21 0 0 24 ately more important to our company, and that REA truck advertising would fall into this category. Q Did any member of the committee express agreement with this thought? A Yes. Q Did each member express agreement with this thought? A I don't recall that it was a unanimous agreement with the thought, but there was general agreement.' Q Did this meeting of the advertising com- mittee conclude with the decision to accept the pro- posed increase of REA? A Yes, the committee decided to accept the media group's recommendation to purchase, to renew REA for 1970, on the basis of purchasing one- half of the previous commitment, but at the new asked for rate, which I believe was $11.50 for a four sheet panel. 0 Am I correct that you stated Mr. Berger reported to you? A That's correct. Q Can you recall that you decided to present REA's proposal with respect to increased rates because I

0 0 cmb _Rechholtz 13 2 of the TV ban? 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 MR. CURNINs Objection as to form. MR. JOHNSTON: In what way? MR. CURNIN: I think the question now . . is unintelligible. MR. JOHNSTON: Would you read it? (Question read.) MR. CURNIN: And it is argumentative. Why not ask him why he wanted to do such and such? MR. JOHNSTON: All right. Q Did you decide to present this proposal for nearly double increase in rates to the advertising committee because of the -- you personally, decide to pass this on to the -- this proposal on to the advertising committee because of the proposed ban? MR. CURNIN: Objection as to form. MR.JOHNSTON: You mean on the ground it is leading? 20 MR. CURNIN: The most simple way to 21 elicit the information_is to ask him why. 22 0 •MR. JOHNSTON: But there are a lot of ways to ask questions and more than one that is proper. ; MR. CURNIN: It could be presumed that that o 24 -+ is the only factor he considered. _ ~ 25 0 ap 0 0

0 2 3 4 5 6 7 8 10 11 12 13 14 1S 16 17 18 19 20 22 23 24 25 cmb _Rechholtz 14 MR. JOHNSTON: No, I am not saying that. I am saying -- 1KR. CURNIN: The question assumes it, that is why I object to it. THE WITNESS: It was a significant factor, but it was one of several factors. MR. JOHNSTON: Well, in view of that testimony I:will go on to something else. You have got an objection as to form here, and the witness has made an answer. Are you going to ask that that answer not be read into evidence? MR. CURNIN: May I have the witness's answer, please? (Record read.) MR. CURNIN: It is my understanding that it is the witness's testimony that the statements that have been made by the president of Philip Morris on behalf of the industry in July was considered by him and that that was one of the principal -- well, I think the best way to go about it, so we can have the witness's testimony on it, is to rephrase the question and permit the witness to answer. MR. JOHNSTON: All right. Q Will you tell me why you decided to pass

_ ......~..._....~._. .. 1 cmb - Rechholtz 15 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 CV, 0 0 24 on REA's proposal to the advertising committee? A Yes. Number 1, by form and company procedure I was required to submit for committee review any significant proposal, whether -that-.consti-P.:'• tuted an approval or a rejection. Point Number 1. In terms of the marketing rationale, there were three or four main reasons why it was submitfied, one being that we had been associated for a long period of time with the medium.. This constituted a significant investment in terms of exposure to the consumer. We had a desire to maintain this contin- uity. Another point was speculation which had to be speculation at that time, that at some point in the future our non-broadcast media would become proportionately more important. The REA trucks constituting one of several availabilities in this category, and another reason is that compared to other out of home media on a cost per unit basis, the REA panels, even at the new rate, were not totally out of line. Those were the main reasons. Q How long did this execu tive committee meeting that we referred to last?

-- __ _..............,__.._........., _ 1 cmb _Rechholtz 16 ~ A The advertising committee meeting? ~ ~ 2 ~ Q Yes, the advertising committee meeting 3 about a week after September 5 that discussed this 4 proposed rate? How long did that last? 5 . 10 A Gee, I honestly don't remember. We dis- 6 cussed several topics in these meetings. 7 Q Oh, you did. 8 A And the length would not be indicative 8 of this particular topic. 10 Q You couldn't recall how much time was 11 allocated to the discussion of the proposal? 12 A No, sir, it would be impossible. 13 MR. JOHNSTON: May I have the last 14 answer read -- well, rather than waste the time in 1S view of the hour and the plane schedule -- 16 Q You mentioned something about cost of com- 17 petitive media, did you? 18 A I mentioned the cost of other out of home 19 media. 20 Q Was this considered comparable to any 21 other type, by you, of any other out of home media? 22 A No, not directly comparable. 23 Q We had a discussion prior to the commence- ~, 24 =. ° ment of this deposition which I believe you used the ~ 25 o

_.,. _. .. . __..._ ~...... ~... 0 2 3 4 5 6 7 8 9 10 11 12 13 14 1S 16 17 18 19 20 0 0 24 cmb - Rechholtz 17 word "fringe' media, is that correct? A Yes. MR. CURNIN: Objection as to form. And objection as to the answer. Q What do you mean by the words "fringe media"? A Fringe in terms of our marketing program would mean supplementary, or minor, in relation to the total media program. Q Do I understand from that that these posters were considered fringe media? A Yes, Q During the course of the time that Railway Express advertised Reynolds' products, did you at any time consider discontinuing the use of that media? A Yes.. } MR. CURNIN: Excuse me, may I have the question and answer, please? (Record read.) Q • Why did you consider discontinuing the use of it? A We questioned its value in relation to other media availabilities in which we could have

1 cmb -Rechholtz 18 2 invested this money. 3 1 0 How much money are we talking about approx- 4 imately? S 6 7 8 8 10 11 12 13 14 15 16 17 18 19 20 Ar-, 21 WIWI 22 0 24 A $770,000. MR. CURNINs May we have a relation as to point of time here, Mr. Johnston? MR. JOHNSTON: I am coming to that. Q During your time, during the time that you were employed with Reynolds,. that is between 1961 and the date of this advertising committee meeting in September, approximately how many times did you consider discontinuing Railway Express as a media to advertise Reynolds' products? A I don't recall the number of times. Our media program was reviewed periodically, most renewals occurring on an annual basis. So I think it is reasonable to say that each major aspect of our media program was considered for renewal, or rejection, at least on an annual basis. Q Did I ask,-I can't remember in view of the interruptions, did I ask you -- and if I did, we will forget the question - why the Railway Express was subject to discontinuance? MR. CURNIN:- It was asked and answered. 25

1 cmb _Rechholtz 19 Q Prior to this meeting of the advertisin 2 g 3 committee in September of 1969, did any member of 4 the advertising committee, to your recollection, S urge that this money be placed elsewhere? . MR. CURNIN: What money? 8 7 Q This money being that money earmarked for 8 the Railway Express program? 8 A Not to my recollection. 10 Q You have listed certain reasons, Mr. 11 Rechholtz, why the members of the committee decided 12 to accept the proposed increase to $11.50 from 0._ . $6 13 14 MR. CURNIN: Objection as to form. I 15 don't think that is the witness's testimony. 18 Q Do you recall listing certain factors 17 which the advertising committee took into account 18 in deciding to go along with $11.50 increase? E t A Yes. ~ 19 20 Q From your observation, what was the most 21 important factor? ~ . MR. CURNIN: Objection as to form. 0 23 Q You may ans.wer. E A Probable broadcast ban. . ~ ~ 24 ~ ~ 25 MR. CURNIN: So the record will be clear,

0 2 3 4 S 6 7 8 9 10 form? 11 12 13 14 15 16 17 18 19 20 21 22 0 24 25 cmb _Rechholtz 20 it is as to that question and that answer that I raise an objection as to form. Q Did you personally, in words or substance, indicate that this was the most important factor why you were in favor of going along with the proposed increase? MR. CURNIN: Objection as to form. MR. JOHNSTON: What is'wrong with that MR. CURNIN: Why don't you ask him what he said or what he did? This "words or substance can you indicate," I mean I am not sure what that means. I am not sure that the witness knows what it means. Q Do you know the exact words you used at the meeting? A No, sir. Q Now, in words or substance did you state that you thought the probable ban on TV advertising was the most important reason why the advertising committee should accept the proposed increase? A . I don't recall my personally taking that position, that it was the most important reason. Q You indicated, I believe, over objection of counsel when you were permitted to testify, that

1 cmb Rechholt2 21 2 in your opinion this was the most -- this proposed 3 ban was the most significant factor. Do you recall 4 that? i ,' MR. CURNIN: Objection as t o the form of . 5 . ti th 6 on. e ques 7 Q You may answer. 8 MR. JOHNSTON: I am just asking if he remembers it. - i , 9 i MR. CURNIN: i Is this a statement or a ~ 10 11 question? ~ ! 12 MR. JOHNSTON: A question. I am asking if ~ ~ tement which ou i d t b h h 13 y , a ng ma e a s e remem ers av ~ objected to. ~ 14 ~ MR. CURNIN: I object to the question 15 ~ as to form. ~ 16 ~ ' , 17 . A Yes. I ~ 18 Q On what do you base that statement? 19 MR. CURNIN: Objection as to form. 20 Q On what do you base the statement that 21 this was the most significant factor? C 2 = A , Recollection of the consensus of reasoning 23 in the meeting. 24 Q And what was stated at the meeting? t N O ~ 25 J MR. CURNIN:. Objection as to the form of 0 ~ Co ~ o~

1 cmb _Rechholtz 22 2 the question. 3 4 5 6 7 8 8 10 11 12 13 14 15 16 17 18 19 20 21 A Yes. MR. JOHNSTON: You object as to what was stated at the meeting? . MR. CURNIN: No, objection as to the form of the question. MR. JOHNSTON: I am asking what was stated at the meeting. MR. CURNIN: I am objecting to this line of questioning as to form. MR. JOHNSTONs Can you specify in what respect the form is deficient? MR. CURNIN: You are not asking the witness what was said or what was done, you are asking the witness for his conclusion and his evaluation. MR. JOHNSTON: I just asked what was said. I just asked what was said. MR. CURNIN: Read back the last question, please. ~ > t (Question read.) , MR. CURNIN: I renew my objection as to ~. 22 . f . ~ t ~ 23 i 24 ~ p , p 25 _ t_ .. the form of those questions. MR. JOHNSTONs Do you want to be more recise so I can fix them u ?

1 cmb _Rechholtz 23 2 MR. CURNIN: No, I think you are asking 3 this witness now for speculation and conjecture. 4 MR. JOHNSTON: I am asking him what other 5 people at that meeting stated. 6 7 8 9 10 11 12 13 14 15 16 17 18 MR. CURNIN: I mean what you are trying to do is you are trying to get around an answer to a question that you don't like. MR. JOHNSTON: I ask that be stricken. Q Have you had a discussion with Mr. Berger in the last month on the subject of the rate increases which REA received pursuant to the decision of the advertising committee? In the course of another conversation this particular case came up. Q Did the question of the TV ban, was that discussed between you and Mr. Berger? MR. CURNIN: Before you answer, Mr. Rechholtz, I object to this question and this line of 19 ( I questioning, both on the grounds of form and clearly 20 as to the grounds of relevancy. ~ Ar.. 21 0 23 24 Mr. Berger . this? , MR. JOHNSTON: I understand you subpoenaed ~ . - MR. CURNIN: What has this got to do with U9

1 cmb _Rechholtz 24 2 3 4 5 6 7 8 8 10 11 12 13 14 15 18 17 18 19 C 21 22 23 24 MR. JOHNSTON: If Mr. Berger is going to state -- well, never mind. We have got the objection. Q Did you discuss the TV ban with Mr. Berger? . MR. CURNIN: Objection as to form. MR. JOHNSTON: All right, we have got it. A I don't recall the words "TV ban" being used in the conversation. Q Well , did you discuss anything about the discontinuance of the television advertising of cigarettes with Mr. Be rger, in relation to this increase in rates that went into effect pursuant to the decision of the committee? A Yes. - Q What was said by you and him in that regard? MR. CURNIN: Note my continuing objection to this line of questioning. MR. JOHNSTON: Right. A As I recall.the conversation, which was a secondary,conversation, we were discussing another business matter that had no relationship to this case, Mr. Berger mentioned that he may be asked to testify in this case, and he was expressing his 25

1 cmb _Rechholtz 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18. 19 20 21 0 0 25 memory on the subject as to actually what did happen. He seemed to be most interested in what my recollec- tion of the incident was, I would assume to provide some comfort for his own feelings on the subject. And as I remember, we discussed in a very quick and concise way many of the things that have been aired here this afternoon. Q Such as the discontinuance of the TV advertising of cigarettes? A That was one factor that was discussed. MR. CURNIN: Note my continuing objection to this line of questioning. 0 What was said in that particular regard? A Mr. Berger was attempting to recall the degree to which that was of significance in the decision. Q What did you say to him? A I recall MR. CURNIN: Continuing objection. A -- saying that my recollection was that it was a significant factor. Q And did Mr. Berger reply to that comment? Again, as I remember the conversation, MR. CURNIN: Continuing objection.

0 cmb Rechholtz 26 2 he did not remember it as a significant factor. 3 Q Prior to the discontinuance of cigarette 4 advertising on TV and radio S MR. JOHNSTON: Strike that. . 8 Q Prior to the discontinuance of the TV 7 advertising, what percentage of the advertising budget 8 went into TV and radio, approximately? 9 A Approximately 80 to 85 per cent. 10 MR. JOHNSTON: I have no further questions. 11 EXAMINATION BY MR. CURNIN: 12 Q Mr. Rechholtz, have you ever seen or 13 spoken to me prior to today? 14 A No, sir. 15 Q And to the best of your knowledge have 18 you ever spoken to or met with anyone from my firm to discuss any aspect of this Leigh-REA case? 1 17 18 A No, sir. 19 Q To the best of your recollection in 1969 20 was Reynolds through William Esty, paying $6 for a 21 four sheet poster on the side of an REA truck and $4.50 for the smaller two-sheet posters? ~ .. 0 ~ A Yes sir ~ , . ~ Q Was that price, to the best of your ~ o 24 ~ -+ knowledge, the same price that Reynolds had been to 25 o Y r OD ++ , ~

0 cmb _Rechholtz 27 2 paying for 4-sheet and 2-sheet REA posters since 1954? 3 A My memory doesn't go back to '54, but 4 I recall it being approximately the aame price that 5 we paid from the time'that I became involved with ' . 6 domestic advertising, which was the spring of 1963. 7 Q Was Reynolds advertising in other media ' 8 other than on the side of REA trucks during this pAriod a 10 of your familiarity, which would start some time in the spring of 1963 through the summer of 1969? 11 MR. JOHNSTON: I think it is 1961. 12 MR. CURNIN: No, it is 1963. 13 MR. JOHNSTON: May I have the question 14 back? I see. All right. Okay. 15 THE WITNESS: Pardon me, may I have the 16 question again? 17 MR. CURNIN: If you prefer, I will rephrase 18 it, Mr. Rechholtz. 19 THE WITNESS: Fine, ~ ~ 20 Q During the period 1963 through 1969, was ~ ~ ~~ 21 Reynolds using media other than REA to advertise ~ ~ 22 its tobacco.products? ~ 23 A Yes. ~ ~ u 25 Q Did it use television? A Yes. ~ ~

1 cmb _Rechholtz 28 2 Q Radio? 3 A Yes. 4 S 6 7 8 9 10 11 12 13 14 1S ls 17 18 _ 19 y 20 21 0 23 24 Q Newspapers? Magazines? A Yes. Q Trade publications? A Yes. . . Q You described, I believe, that the REA. poster program during Mr. Johnson's examination, as an out of home medium, is that correct? A Correct. Q Were you using other out of home medium at this time, and I am talking now during the period spring of 1963 through 1969? A Yes. Q Was it customary for these other media which Reynolds.was using to advertise its tobacco products during this period 1963 through 1969, to impose rate increases? A Generally, yes, although there were specific exceptions within a given medium. ,MR. JOHNSTON: Can we have what medium you are talking about? What out of home media? MR. CURNIN: No, I am not limiting it to out of home media. I am referring to out of home

0 3 4 S 6 7 8 8 10 11 12 13 14 1S 16 17 18' 19 20 21 0 0 24 25 cmb Rechholtz 29 media used by Reynolds as well as newspapers, maga- zines, trade publications. Q Did you understand that to be my question, Mr. Rechholtz? A Yes. Q Is it correct to say that late in 1969 you participated with others in the decision concerning whether Reynolds would continue to advertise on the side of REA trucks? A Yes. Q And then in reaching that decision you I had certain discussions with Mr. Berger, whose.reT6-.. • sponsibility was that of media buyerZ. A Yes, media manager. Q Media manager. In those negotiations did REA propose to increase rates approximately 100 per cent? A Approximately. Q Maybe we can be more specific. It is my understanding that they proposed a rate increase on four sheet posters from $6 to $11.50, and on the four sheet from $4.50 to $8.50, is that your recollection, sir? A Yes. i

1 cmb Rechholtz 30 f 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Q And am I correct that Reynolds ultimately did agree to this rate increase? A Yes, on half the showing that we pre- viously had. Q Did they ultimately agree to go to the same showing that they had which was a full half national at this rate increase? A Yes. Q Or, I think maybe it is properly described as a full national. Did you ultimately decide to go to a full national, which is one side of every REA poster-bearing vehicle, at this new rate increase? A Yes, which was approximately the package previously, contract. Q Was one of the factors you considered in agreeing to this rate increase the fact that there had not been an incre ase in the REA rates since 1954? 20 A It was a factor. Did you consider the absence of a rate 22 increase since 1954 for the REA poster program to be 23 in accordance with industry practice during this 24 period? - MR. JOHNSTON: Well, that is objected to

1 cmb - Rechholtz 31 2 on the ground that the witness has testified that 3 this is a fringe non-standard medium without an 4 industry practice to it. S MR. CURNIN: I don't think that is the 6 witness's testimony. Would you repeat the question? 7 (Question read.) 8 A Generally not. 9 Q During the period of your familiarity 10 with domestic advertising, if I have described it 11 correctly, I am talking now about the period 1963, 12 spring of 1963, through the end of 1969, was the REA 13 poster program the only national broad-reach out of 14 home medium being used by the Reynolds Tobacco 1S Company? 16 A Yes, it is the only one that I recall. 17 Q Prior to your agreeing to the contract 18. for advertising on the side of REA trucks which 19 went into effect, I believe, some time in 1970, 20 were your prior contracts for three-year periods? `., 21 MR.JOHNSTON: Well, I object on the ground 0 that it is really unnecessary. It is calling for 23 the contents of documents that we have already had 24 marked in evidence;under the best evidence rule the 25 document speaks for itself as to how long it is for

1 2 3 4 S 6 7 8 8 10 11 12 13 14 15 16 17 18 19 20 21 ~ 4 0 0 24 25 cmb _Rechholtz 32 duration. We have got the contracts in evidence. You are asking him what it in a document. We have already got the documents marked. MR. CURNIN: I didn't understand that to be my question, Mr. Johnston. . MR. JOHNSTON: Do you want to read the question back? MR. CURNIN: Let's not waste time. Q Mr. Rechholtz, is it your recollection that the contracts that Reynolds Tobacco Company had to advertise on the side of REA trucks through its advertising agency, William Esty, for a term of three years?~ MR. JOHNSTON: You are asking what the contract says. MR. CURNIN: I am asking him what his understanding was. MR. JOHNSTONs Oh, no, you are asking whether the contracts were for three-year terms. You have already got the contracts. What is the differ- ence what his understanding is? He knows -- you have got the contracts in evidence. You may answer, I don't think it proves anything. A Yes.

1 cmb _Rechholtz 33 2 Q During the period 1963 through 1969, did 3 Reynolds have any three-year contracts, advertising 4 contracts, which did not provide for a rate increase 5 over the term of the contract, and permitted only 10 6 Reynolds to cancel at the end of the first and second 7 year other than its contract with REA? 8 A I don't recall any three-year contracts. 9 Q Other than the REA contract? 10 A That's correct. 11 Q Do you recall any contracts of any ; f 12 longer duration for advertising purposes? ~ 13 A No. ~ ~ 14 Q It is my understanding, Mr. Rechholtz, 15 that in 1963 Douglas Leigh and/or William Esty 16 negotiated a new three-year contract for Reynolds to 17 advertise on the side of R EA trucks, commencing in 18 March of 1964, for a three-year period. Is that your 19 recollection, sir?: 20 A Yes. 21 Q At the time that the contract in 1963 was 22 negotiated,, did Leigh or anyone on its behalf, ask 23 Reynolds to pay a rate increase? A I don't recall. That contract was probably 1, ~" 24 E- . ., 25 possibly negotiated, or at least discussed, prior to %a o aD N r ~

0 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 cmb - Rechholtz 34 my direct involvement in domestic advertising. But to my recollection, no. Q In 1963, it is my understanding that Douglas Leigh and/or William Esty negotiated another three-year contract for Reynolds to advertise on the side of REA trucks, which contract was to start in March of 1967. Is that your understanding, s=r? A Yes. MR. CURNIN: Would you read back the question, please? (Question read.) MR. CURNIN: Mr. Fine points out that I misspoke myself. I want to rephrase the question, Mr. Rechholtz. Q It is my understanding that in 1966, Douglas Leigh and/or William Esty negotiated a new contract, a new three-year contract, for Reynolds for the advertising on the side of REA trucks. Is that your understanding, sir?-A Yes. . Q • Did you have anything to do with those negotiations in 1966? A I was not directly involved in the negotia- tion. I was involved in the committee decision.

0 2 4 S 6 7 8 8 10 cmb _Rechholtz 35 Q In connection with that decision did Douglas Leigh or anyone on his behalf ask for a rate increase in 1966, to your knowledge? A No. Q And no rate increase to your knowledge was proposed for acceptance to the advertising board? A That is my recollection. Q Did you have anything-to do with evaluating or planning Reynolds'.budgetary advertising 11 requirements during the period 1963 through 1969? 41 12 13 14 1S 16 17 18 19 20 21 22 23 24 25 A Yes. Q In that capacity did you have to figure and calculate what your advertising costs might be for the following year? A Yes. ' Q And in reaching such an estimate, or evaluation, did you include in your projection as to what your costs would be, a percentage rate increase ~ G ~ to cover normal inflationary increases? A Yes. Q What was that percentage which you would include in your budget estimate? A Approximately 5 per cent. e Q Going back, Mr. Rechholtz, to 1963, and V _• o ~ 0

1 2 3 4 S 6 7 8 9 10 11 12 13 14 1S 16 17 18 19 20 21 22 0 24 25 cmb _Rechholtz 36 I have reference now to Leigh's negotiations or the negotiations on Leigh's behalf for a new three-year contract with Reynolds for advertising on the side of REA trucks, if at that time Douglas Leigh or• . William Esty on its behalf had proposed a rate increase within this 5 per cent inflationary figure, which you calculated for the next year's budget, would such a rate increase have been given serious considera- tion - MR. JOHNSTON: Objection. It is a hypo- MR. JOHNSTON: Objection. Q -- by your advertising board? thetical question. Q You may answer, Mr. Rechholtze MR. JOHNSTON: The question is whether or not they -- what he would have done had they done something? MR. CURNIN: Your objection is on the record, Mr. Johnston. MR. JOHNSTON: That's right, I just wanted to make sure it was understood. A Yes. Q If in 1966 at the time that Douglas Leigh or William Esty was negotiating for the three-

0 2 3 4 S 6 7 8 9 10 11 12 13 14 15 16 Q Mr. Rechholtz, are you presently -- and.by 17 18 19 20 Q That being the case, is the REA poster 21 f r program of,less overall value and significance to the ; 22 l' 23 cmb Rechholtz 37 year contract to commence in March of 1967, if at that time Leigh and/or William Esty had proposed a rate increase within this 5 per cent inflationary figure, would it have-been given serious consideration by your advertising board? A Yes. MR. JOHNSTON: Well, that is objectionable. I want to note my objection as to what constitutes serious consideration. Q What do you mean by serious consideration, Mr. Rechholtz? A I would have taken the time of four or five senior executives to deliberate such a decision. MR. JOHNSTON: What was that date? MR. CURNIN: 1966. you, I mean Reynolds -- is Reynolds presently using out of home media that it was not using in 1969? A Yes. Reynolds Tobacco Company than it was in 1969? . 10 MR. JOHNSTON:. Objection. That calls 24 for an opinion, We have got facts here from.the 25 i

0 2 3 4 5 6 7 8 8 10 11 12 13 14 15 16 17 cmb -Rechholtz 38 witness. Are you making him your expert? Q MR. CURNIN: I will rephrase the question. You stated, I believe, Mr. Rechholtz, during your examination by Mr. Johnston, that you considered the REA poster program to be supplementary and by that am I correct in assuming that it is supple- mentary to your other advertising? A Yes. Q What out of home media are you using in 1971 that you were -- and by you, I mean Reynolds that Reynolds was not using in 1969? 0 Principally 30 and 24 sheet billboards. Is it your expectation that the use of these billboards will have an impact and effect on the out of home viewers? If you don't understand the question, Mr. Rechholtz, I will rephrase it for 18 * you. 19 20 21 22 23 24 25 THE WITNESS: If you would, please. MR. JOHNSTON: Well, they don't advertise, so it won't have an effect. Doesn't that go without having to ask? THE WITNESS: Yes. Q In your judgment, Mr. Rechholtz, is the REA poster program of as much importance today to

~ M ~ 0 oa ~ 0 ~ 1 2 3 4 C S 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 ® 0 0 Z4 ~.,.,.._. ,._..~ cmb Rechholtz 39 the Reynolds total advertising picture as it was in 1969? A Yes, to the total picture. Q To what extent has your dependence and reliance upon the REA poster program for advertising purposes changed since 1969? A Would you repeat the question, please? (Question read.) A If there is any change it is marginal. Q Are you using other - MR. CURNIN: Withdrawn. Q Would it be correct to say that you are using outdoor media, Reynolds is using outdoor media in 1971, that it was not using in 1969, to reach the viewing audience, that would otherwise have only been reached through the REA poster program? - gain, too. MR.JOHNSTON: Let me have that back. THE WITNESS: I would like to hear that r r i (Question read.) ! ~ A No. Q r Did yoti consider advertising on 'tho nid- of REA trucks to be unique ia 19c!)z A No. If I understand "ur:que" as being 25

1 cmb _Rechholtz 40 2 totally different from everything else,that exists. 3 Q I do. The contract that you entered 4 S 8 7 8 9 10 11 12 13 14 15 18 17 18 19 20 21 0 0 24 25 into in 1969 for the period starting in March of 1970, with Morrow Associates, I believe is for a one- year period, is that correct, Mr. Rechholtz? A Yes. Q Was there any objection by you or others here at Reynolds to a one-year contract? A I don't recall any. Q Are you able to tell me today, March 16, 1971, if Reynolds will continue to use the REA poster program through 1980? A No. Q Reynolds has been advertising on the REA poster program for over 25 years. Does that fact alone mean that it will continue to use the REA poster program through 1980? MR. JOHNSTON: He just said he had no reason to believe it would be used through1980, so how can this question be answered anything but the same way? MR. CURNIN: Repeat the question, please. (Record read.) Q You may answer, Mr. Rechholtz.- }

1 cmb -Rechholtz 2 3 4 S 6 7 8 9 10 11 12 13 14 A • No. Q How often do you and others who are responsible for developing a Reynolds advertising program review its needs and objectives? . 10 41 A At least quarterly. Q At that time will you consider the continua- tion or renewal of existing media use? A Yes, R Q And will your factor as to whether or not to continue with a particular medium be determined on the basis of facts and circumstances then existing? Q Partially. And partially on what else, sir? A On our projections of what the market 1S conditions will be at some point in future time. 16 17 Q Is it correct to say that that is constantly ~ r 18 changing and therefore it requires that you look at ~ 19 it quarterly? ` ~ A Yes. 20 21 0 23 24 25 Q If the Federal Trade Commission or local governments should put additional bans on tobacco advertising into effect, which would limit the extent and coverage that you would get out of the REA poster program, would that be a negative factor

1 cmb Rechholtz 42 to be considered in whether or not you should con- 2 tinue with the program? 3 MR. JOHNSTON: This is all hypothetical, 4 , ~..r in the first place, argumentative. Objection as 5 6 to form. 7 MR. CURNIN: What is the objection as 8 to form, Mr. Johnston? 8 • MR. JOHNSTON: It is hypothetical. You ~ ~ can't ask hypothetical questions except of an ~ 10 } 11 expert. ~ MR. CURNIN: Do you stipulate on the ~ 12 ~ 13 record that Mr. Rechholtz is an expert? ~ MR. JOHNSTON: If you want to make him I 14 your expert, you so testify. I am not going to 15 stipulate to anything. 16 MR. CURNIN: I will repeat the question, 17 MR. Rechholtz. 18 MR. JOHNSTON: All right, I will stipulate 19 that he is an expert. 20 MR. CURNIN: I do not so stipulate. 21 Let the record be clear that the time has passed, 0 I do not stipulate. 0 Q If during one of your quarterly analyses, 24 LM 0 Mr. Rechholtz, it should develop that the Federal ~ 25 0 w

1 cmb _ Rechholtz 43 i 2 3 4 S 6 7 8 8 10 11 12 13 14 16 Trade Commission or other local agencies have im- ; posed further restrictions on tobacco advertising which would have the result of limiting the exposure that you would get out of the REA poster program, would that be a•negative factor to be considered by you in whether or not to renew? MR. JOHNSTON: I object on the ground.it is a hypothetical question to be asked of an expert witness, and if you wish to make him an expert witness, he is yours. MR. CURNIN: Well, you have attempted to establish on the record here the views and opinions of this witness, and what he considered to be relevant and not relevant in deciding upon his use or non- use of the REA poster program. MR. JOHNSTON: On what was a state of 17 18 affairs which had already occurred, namely, an announce- ment of a voluntary ban. You are asking him what 19 if some other local ban comes into effect, we don't ZO ~ know what it is, what state it is, the extent of it, t ~, 21 ' ~ and the question is too vague. It is a hypothetical i 22 question. I asked nothing like that. 23 MR. CURNIN: All right. Are you willing 24 to stipulate on the record that it is not a fact in 25 , f~ , ~

0 2 3 4 S g cmb Rechholtz 44 this case whether or not Reynolds Tobacco Company will continue to use the REA poster program through 1980? MR. JOHNSTON: Didn't he just say -- what is that? MR. CURNINs Is that an issue in this 7 8 case or isn't it, Mr. Johnston? Is Reynolds' use 9 of the REA poster program through ],980 an issue 10 in this case, or is it not? 11 MR. JOHNSTON: The issues are posed by the pleadings. ~ 12 13 MR. CURNIN: Well, that is all very 14 relevant. Do the pleadings propose that issue? 15 I mean, there is no question, is there, Mr. Johnston, . 16 that that is an issue in this case, will Reynolds . ~ stay on the REA poster program through 1980? What ~ 17 ~ 18 is your view on that, Mr.Johnston? ~ 19 MR. JOHNSTON: I can not stipulate that ~ Reynolds -- nor assert without doubt that Reynolds ~ 20 ~ will be an advertiser in 1980. Reynolds could, God t > 21 22 forbid, go out of business, it could decide to 0 discontinue the REA media. •What do you want -- I 24 don't take -- I haven't made any affirmative statement c ~ 25 that Reynolds is going to advertise on REA trucks 0 E, w ~o

1 cmb _Rechholtz 45 2 until 1980. There is no statement in the complaint 3 to that effect.- Cl 4 MR. CURNIN: Is that an issue in this s case in your -- 6 7 pleading. 8 8 10 11 12 13 14 1S 16 17 18 19 20 21 0 0 u 25 MR. JOHNSTON: I don't see it in any MR. CURNIN: What about in the exhibit which your client prepared, Pace Exhib it L. MR. JOHNSTON: Well, that is an assumption but it is not a statement of fact. MR. CURNIN: But isn't that an issue in this case? MR. JOHNSTON: No, I don't say that is an issue in the case. We make no allegation that Reynold is going to stay on REA trucks until 1980. MR. CORNIN: All right. Let me repeat the question. Mr. Johnston's objection is noted. Q If at one of your quarterly meetings in 1971 or 1972, or thereafter, it should develop that the Federal Trade Commission or other local agencies have imposed further restrictions on tobacco advertising, which will limit the reach and exposure that you would get out of the REA poster program, would that be a negative factor considered by you

1 cmb _Rechholtz 46 2 3 4 5 6 7 8 9 10 11 12 13 14 1S 16 17 18 19 20 21 0 0 as to whether or notyou should renew and continue with the REA poster program? A Yes, it would be a factor. Q Will Reynolds continue to use the REA poster program through 1980 to keep a competitor off REA's trucks? MR. JOHNSTON: That is objected to. He• has already stated he doesn't know whether it is going to last until 1980. Q You may answer the question, Mr.Rechholtz. A Hypothetically, no. Q Will the decision to renew with REA be made by the Reynolds Tobacco Company or William Esty? A Reynolds. Q Is it your understanding, Mr. Rechholtz, that since 1969, the number of REA poster-bearing vehicles has declined? A It is my understanding. Q Should the number of trucks continue to decline would that be a negative factor to be considered by you in evaluating whether or not Reynolds should continue to use the REA poster program? A It could be. I Y+ 24 MR. CURNIN: I have no further questions. ~ w m js

1 cmb - Rechholtz 47 2 3 4 5 6 7 8 9 10 11 12 13 14 1S 16 17 18 19 20 21 0 0 BY MR. JOHNSTONt Q In answer to a question posed by Mr. Curnin, Mr. Rechholtz, you stated that REA was not completely, I believe, completely'unique, or totally not unique. . Can you elaborate on what you mean by totally not nnique, as opposed to some other conception you may have of unique? MR. CURNINs Objection as to form. Q What do you mean by "unique"? Forget totally. Was it unique? A Unique to me would mean one of a kind. With no meaningful comparison possible. Q Was there a meaningful comparison possible with REA's advertising of REA's posters? MR. CURNIN: Objection as to form. A Not in terms of net media value delivered. Q What do you mean by "net value delivered"? Do you mean it wasn't ascertainable precisely? A That is one factor. What I mean by that statement is that.how many people one can reach in a given.medium at a given expenditure during a given period in time, with a relevant impact. Q In other words, that wasn't possible with 24 the REA posters?

I 0 0 2 3 4 5 6 7 8 9 10 11 12 13 14 1S cmb Rechholtz - 48 A Not in my opinion. Q Am I correct in my recollection that you testified that as of 1969 the REA posters were the only out of home media used by REA? A No. Q Excuse me, used by Reynolds? A No, I don't believe so. Q What other out of home media were used? A In 1969? Q Yes. A Subway car card advertising. Q Is that interior? A Yes. Q Any exterior? A I don't recall any. We may have in a 18 17 small or selected group of markets used something, I just don't remember. We are constantly testing 18 19 things. 20 Q Was there any other out of home media used ! 21 by Reynolds as of that time in -- that is in 1969 -- ` ~ 22 23 24 25 other than the car cards in subways? A , Commuter end cards -- Q They are also inside the car? A That's correct.

1 cmb Rechholtz 49 3 4 Q Other than that? A I don't recall any, unless you could classify the advertising material placed by our field 5 sales force, at retail, as out of home media. 6 Q Without going into dollar values can 7 you tell me what percentage of out of home media, 8 excluding Railway Express posters, what.percentage~.- , 9 of the advertising budget consists of advertising 10 out of home media, leaving out Express posters? 11 MR. CURNIN: Objection as to form. 12 MR. CROHN: Are you talking about 13 1969? 14 MR. JOHNSTON: Today. 15 MR. CROHN: Then I.object to that, sir. 16 MR. JOHNSTON: There has been an awful 17 lot testified to a9 to what is going to happen after 18 19b9. - , 19 I have no further questions. Thank you, 20 very much, Mr. Rechholtz, 21 cooperating. ~ 23 of course? Z4 and I thank all of you for MR. CURNIN: That includes counsel, MR. JOHNSTON: Yes. 25 MR. CURNIN: I have one question for Mr.

1 cmb Rechholtz 50 2 Mr. Rechholtz. 3 BY MR. CURNINs 4 Q In what sense is the REA poster pro- 6 gram comparable to other media? A If there is any point of comparison it 7 would be in the cost per panel for another out of 8 home medium of proximate size and impression. 9 MR. CURNIN: Thank you. ~ 10 (Time noted 6:10 P.M.) ® 11 12 13 14 1S Sworn to and subsc ribed before me 16 17 18 this day of 7'~t~ 1971. 19 ~..n....n.wwo ..........................a ~" OFFICI : AL SEAL KAY A MATTHEWS : . 20 so ;v'7 NOTARY PUBLIC • NCRTh CARCUNA ~ COUNTY OFfI`R ED SYrM  I r , My Commissicn Expires Nnv:r^ber 'l2, I,i5 ; 21 0 0 24 r l„ ~ . .._.......~.,.,,e..,.~.-~. ,...,,~... . . ~

C, 1 CMB 51 ) 2 STATE OF NEW YORK ) ss. 3 COUNTY OF NEW YORK ) 4 S 6 7 8 9 10 11 12 13 14 1S 16 17 18 19 I, C. A. MICHAELINI, a Certified Shorthand Reporter and Notary Public within and for the State of New York,do hereby certify: That ROBERT AUGUST RECHHOLTZ, the witness whose deposition is hereinbefore set forth, was duly sworn by the Notary Public and that such deposition is a true record of the testimony given by such witness. I further certify that I am not related , to any of the parties to this action by ;.. ~ blood or marriage: and that I am in no way interested in the outcome of this matter. IN WITNESS WHEREOF, I have helceunto ~ ~ set my hand this ~~~~ day of 20 1971. 21 22 0 24 25 I QrE.4-'L, I C.A.Michaelini, CSR. ® -~-~~.+-~--

G SOUTHERN DISTRICT COURT REPORTERS UNITED STATES COURT HOUSE FOLEY SQUARE 7. NEw YORK T[L[PNON[: CORTLANDT 7.4.SBO