COMMONWEALTH OF MASSACHUSETTS

MIDDLESEX SS. SUPERIOR COURT

CIVIL ACTION

NO. 95-7378

***************************************

COMMONWEALTH OF MASSACHUSETTS, *

Plaintiff *

*

vs. *

*

PHILIP MORRIS INCORPORATED, R.J. *

REYNOLDS TOBACCO COMPANY, BROWN & *

WILLIAMSON TOBACCO CORPORATION, *

B.A.T. INDUSTRIES P.L.C., LORILLARD *

TOBACCO COMPANY, NEW ENGLAND *

WHOLESALE TOBACCO CO., INC., *

ALBERT H. NOTINI & SONS, INC., THE *

COUNCIL FOR TOBACCO RESEARCH-U.S.A., *

INC., and THE TOBACCO INSTITUTE, INC. *

Defendants *

***************************************

BEFORE: SOSMAN, J.

Thursday

May 28, 1998

Cambridge, Massachusetts

Patricia Bellusci

Official Court Reporter

APPEARANCES:

GEORGE K. WEBER, ESQ., Assistant Attorney General,

for the Commonwealth

RICHARD M. HEIMANN, RONALD L. MOTLEY, J. ANDERSON BERLY, III

JEFFREY D. WOOLF, ESQS., Special Assistant Attorneys

General, for the Commonwealth

THOMAS J. GRIFFIN, JR., KENNETH J. PARSIGIAN, BARBARA

ROBBINS, DAVID M. MURPHY, ESQS., for Philip Morris

MARJORIE PRESS LINDBLOM, PETER BELLACOSA and RAM

PADMANABHAN, ESQS., for Brown & Williamson

MARY ELIZABETH McGARRY, ESQ., for B.A.T. Industries

BRUCE G. MERRITT, ESQ., for CTR

DONALD J. WOOD, WILLIAM PLESEC and DENNIS MURPHY, ESQS,

for R.J. Reynolds

DAVID BROWN, ESQ., for the Tobacco Institute

Thursday

May 28, 1998

Cambridge, Massachusetts

(10:04 a.m.)

THE CLERK: May I call the case, your

Honor?

THE COURT: Please.

THE CLERK: Your Honor, this is Superior

Court case number 95-7378, Commonwealth of

Massachusetts versus Philip Morris, Inc., et. als.

It's here for a status conference.

Counsel, want to introduce yourselves for

the record.

MR. GRIFFIN: Good morning, your Honor.

For the record, Thomas Griffin, from Goodwin,

Procter, Hoar, counsel for Philip Morris and as

liaison counsel for the defendants. In addition to

the counsel who are about to identify themselves,

who are sitting with me at counsel table, I am sure

that there will be other counsel who will talk

for various defendants, depending upon the agenda

item, and we will also try to be sure that each of

those counsel identify themselves on the record

before they speak to the Court. Thank you, your

Honor.

MR. MURPHY: David Murphy, from Wachtell,

Lipton, Rosen & Katz for Philip Morris.

MS. ROBBINS: Good morning, your Honor.

Barbara Robbins; Wachtell, Lipton, Rosen & Katz

for Philip Morris.

MS. LINDBLOM: Marjorie Lindblom, Kirkland

and Ellis for Brown and Williamson.

MR. MOTLEY: Ron Motley for the

Commonwealth.

MR. WEBER: George Weber, Assistant

Attorney General. There will be other attorneys

also speaking for the Commonwealth.

MR. HEIMANN: Richard Heimann for the

Commonwealth, your Honor.

THE COURT: The agenda, which I believe I

got sometime during the day Tuesday, and just as

of this morning was notified that certain parties

wanted to put another item on, or some items

inadvertently left off, has left me in a bit of a

state of confusion as to exactly what's on the

agenda, or not on the agenda, and the order that we

are going in.

Unless the parties have a better idea, I

must say I would prefer to start with number

three, which to some extent is going to

incorporate some of the issues in number two, just

so I know where the overall discovery in the case

is going, and make sure we're set on that time

table.

We, obviously, have a lot of issues on the

continuing document examination, privilege, and

before we get into those, I want to know where we

stand on overall discovery.

I've seen the two status reports, and the

only specific action that appears to be requested

at this point is the defendants wanting a specific

approval of particular depositions to be taken

beyond the May 30th deadline.

There was some suggestion in the

Commonwealth's filing that some of this was

agreeable, but I couldn't tell what was agreeable

and what was not on that list. It's page 25 from

the defendant's status report. Which of these

items are -- have been worked out, which of them

are contested?

MR. MOTLEY: Your Honor, might I bring one

thing to your Honor's attention, and I don't

intend to insinuate myself into item number 3,

except that, yesterday, a discovery dispute

occurred, and at some point in time, I need to

address to your Honor. It's not on the agenda

because it didn't happen until yesterday. It was

a deposition that the plaintiffs were taking of a

corporate official of the Council for Tobacco

Research. It won't appear in any of the papers

that you have because it only happened yesterday.

THE COURT: Well, let's move on to item

number 3.

MR. GRIFFIN: If I could, your Honor, I

would bring up another attorney familiar with

that, and we'll rotate as needed, if you would

permit?

THE COURT: Certainly.

MS. LIM-EPSTEIN: Cerise Lim-Epstein.

It is my understanding, your Honor, that

with regard to the line items on page 25 and 26,

the Commonwealth only objects to item number 8,

which is the third day of deposition for both Dr.

Connolly and Commissioner Bullen, is that correct?

THE COURT: Is that a fair statement;

that's the one item that's still in dispute?

MR. WEBER: Your Honor, the Commonwealth

would prefer to go through the items one by one,

and there are some that we do not object to. I'll

be happy to point those out to you.

The request regarding the school boards,

we have no problem with that. The request

regarding the MBTA and MassPort, we have no

problem as well.

The others, we would like to be able to

comment.

THE COURT: Well, if it's not something

that I need to decide, we have a lot to do today. I

must say my own impression was that items 1, 2, 3

and 4, certainly looked fine to me. I was a little

bit concerned about the open-ended nature of 5 and

6. I gather the damages model is going to be

disclosed within a couple of more weeks and we

could perhaps then just identify it after you've

seen it. The subject matter of what you're looking

for is obviously a fair request, and a fair

concern, but it can be a little more focused

certainly by the next status conference. I would

recommend that we deal with that rather than my

writing a blank check for how many depositions you

can take of people in this category.

Seven I saw no problem with. I must say,

eight, I didn't see a problem with. And then,

obviously, 9 and 10 may open up other issues.

Are there any problems? What are the

particular problems you have?

MR. WEBER: Well, your Honor, would you

like to take them in order?

THE COURT: Yes. Just quickly.

MR. WEBER: Quickly, Dr. Cady, your Honor,

they have taken the depositions of -- they claim

that they need the deposition of Dr. Cady because

they need to show what the Commonwealth knew about

smoking and health, and what the public knew about

smoking and health.

They've taken the depositions of six

former commissioners of public health, the current

commissioner of public health, the deputy

commissioner of --

THE COURT: I ruled on the Motion for

Protective Order regarding Dr. Cady some time ago.

I'm not revisiting that. It's just -- this is just

about timing, of when his deposition is going to

be taken. It's being taken at the very end. And to

accommodate everybody's schedule, it's going to be

taken a little bit late. I see no problem with

that.

MR. WEBER: Your Honor, moving to the

additional depositions regarding damages. It's

open-ended.

THE COURT: Correct. And I agree. I think

we should revisit that. By the next status

conference they'll have the damages model in-hand

and we can talk in a more precise way about, once

you've seen it, exactly what it is you're looking

for. And we'll see how much of that can or can't

be agreed to. That will be deferred.

MR. WEBER: That's item 5 on the agenda.

THE COURT: Yeah.

MR. WEBER: As to the subpoenas to the

Commonwealth's consultants, your Honor, that could

have been done four, five months ago. They've

offered no justification as to why it hasn't been

done within the time limits set by your Honor in

this case.

THE COURT: These are, as I understand it,

what's being requested in six is consultants that

it might be necessary to check with once the

damages model -- the consultants on the subject of

the damages model?

MS. LIM-EPSTEIN: Yes, your Honor. Plus the

third-parties. And consistent with the Court's

concern, we've kept third parties until the end.

THE COURT: Again, let's revisit what's

really needed and looked for after the damages

model has been disclosed. To the extent the

damages model is defined or the same as something

that's been used in other states, and the same

expert witnesses, and the same people, there may

be less that's needed to the extent it has -- it

relies on work of people who haven't previously

cropped up, or studies that haven't previously

cropped up, that may be an issue. But let's deal

with that certainly on the next status conference.

MR. WEBER: The same with the Boston

Medical Center, your Honor. This could have been

done months ago. It's not a new issue. It's an

issue in all other cases. Why they didn't do it

within the time limits, they don't even offer an

explanation.

THE COURT: Again, it is a third party,

and I will allow that one to be done late.

MR. WEBER: Your Honor, related to Dr.

Connolly, we have two comments. One, they have

spent eleven hours already deposing this person,

and a lot of the time they've squandered, in our

view. They've spent time examining the man about

his personal smoking history; the smoking history

of his family. In their papers, they've offered no

justification for additional time. They never even

described one subject area that they intend to go

into. We believe that they've had more than

adequate opportunity to examine Dr. Connolly; that

Dr. Connolly plays a very important role in

protecting the public health in this Commonwealth,

and he should not be required to attend, without

some further showing, a third day of deposition.

As to Commissioner Bullen, again, they're

anticipating a third day without even offering any

justification for it.

THE COURT: His deposition has not started

yet, I gather?

MR. WEBER: It has not started. So our

suggestion would be, let's wait and see whether in

fact you need a third day.

MR. GRIFFIN: Your Honor, I have the

utmost respect for Assistant Attorney General

Weber. I took nine hours of the eleven hours of Dr.

Connolly's deposition. I don't think I squandered

it. I am personally disappointed that that's the

characterization made.

I've been taking depositions for a long

time. I think I was as efficient and as fast moving

and as accommodating as I possibly could be.

The justification for a further day,

rather than just that last hour that is owed to us

under the CMO, I think is really obvious. As your

Honor has stated, where there is a particularly

important fact witness that seems to suggest that

the predetermined limits should be adjusted, we

should identify them.

We're asking for that to be taken into

account for two witnesses, and only two. Dr.

Connolly is head of the Office of Non-Smoking and

Health since 1985, now known as the Tobacco

Control Program. He has been in the Department of

Public Health for eighteen years, and a public

health official for 25 years.

It seems to me, and I can elaborate on the

details of why we need him more and the subject

matter we intend to cover with him, but we did the

best we could in terms of the eleven hours

presented. We think it is critical, or I wouldn't

be before your Honor asking for it, to have at

least an additional day. One more day with Dr.

Connolly.

THE COURT: I am inclined to allow it.

This is a relatively modest list. I think the

parties have done a very good job of staying

within the limits, both in numbers of depositions,

time limits, and to request an exception for only

two people, both of whom are, clearly, important

witnesses, people who do have a lot of knowledge,

some checking into an important witness's

background as to his bias on the subject of

smoking, personal bias, is allowed and is

legitimate. So I'll certainly allow the third day

of deposition for Dr. Connolly.

It may turn out not to be necessary for

Commissioner Bullen, but again, it does appear to

be a sufficiently important witness that, as the

defendants articulate, rather than to somewhat

arbitrarily interrupt at the end of two days in

order to come back to see me, seems unwarranted.

If necessary, I will allow his deposition to

extend over into a third day.

So that's -- so everything here is fine

then, except for items 5 and 6, which we will take

up next time.

Now, the follow-up interrogatories, I'm a

little bit confused on, and obviously the damages

issue.

MR. LIM-EPSTEIN: Yes. It's the same

issue, your Honor. In other words, maybe we can

reserve that until the next time.

THE COURT: Yeah.

With regard to the damages period, I do

think I need appropriate briefing from both sides

one legal theories as to why one side thinks they

get it, and the other side thinks it doesn't.

Because that's -- we're getting at a somewhat

back-door route to do it under the guise of a

discovery motion. I realize, obviously, we're not

yet at the time for summary judgment motions, but

I don't see why this particular issue could not be

carved off, briefed for me separately, since it

does potentially have a very serious impact on

discovery issues, or remaining discovery issues.

Is there any reason why that couldn't be

done, for me to hear the merits of the statute of

limitations' issues by next time?

MR. PARSIGIAN: Your Honor, Ken Parsigian,

just for the record, representing Philip Morris.

You'll recall that on the question of

statute of limitations, we jousted for quite a

long time on the motion to dismiss. We submitted

very substantial papers on that, and while your

Honor didn't give us very much that day, your

Honor did make some very clear statements on the

record about the statute of limitations.

What you said was that -- with respect to

any effort to go back and use the mid-1980s -- let

me read you your quote: "I mean, there are some

things about this case that are barred by the

statute of limitations. I have no problem with

that. They can't turn the clock all the way back

and recover Medicaid expenses that they paid back

in the mid-eighties. That can't be done. That

can't be done."

We didn't believe there was anything left

on that issue. In fact, as we understood this

Court to rule --

THE COURT: I understand, but it seems to

me, at that time, what I was faced with was a

motion to dismiss the complaint in its entirety.

And I was satisfied in my own mind that there was

certainly some things that would survive a statute

of limitations' challenge. I did not -- and I

think even the transcript will reflect -- I did

not at that hearing attempt to fine-tune exactly

what the cutoff date was, or was the cutoff date

different for different counts of the complaint.

And it seems like we need to do that fine-tuning.

It certainly is, until I hear something

otherwise, my impression, quite frankly, would be

that the so-called budget riders, as the

defendants like to call the statutes, would bar

the statute of limitations from the relevant

theory of what the underlying wrongdoing is, and

that Medicaid costs incurred during that time

period, is my first- blush assessment of what

should still be allowed, and that anything before

that should be cut off. But that fine-tuning was

not the subject of the briefing that was before me

at that time. And what I announced there is

certainly my initial impression, and still is my

impression today. But it sounds like we need to do

the fine-tuning --

MR. PARSIGIAN: Well --

THE COURT: -- exactly what year is the

cutoff, how far back does it go. To the extent that

you're now saying, well, if it goes back further

than 1989, we've been taken by surprise and we

need more discovery. Let's find out. Well, do I

think that you're right and that it cuts off at

1989 so we don't need more discovery, or do I

think, well, there's a theory I'll buy that it

cuts off at 1985 as opposed to 1970, that the

Commonwealth wants. Let's now hone in on what's

the right cutoff year, and then with that in hand,

address, are there additional discovery issues,

discovery items that are now legitimately looked

for that weren't dealt with before.

But can the briefing on the fine-tuning of

the statute of limitations be done in time for me

to address that at the very next status

conference?

MR. PARSIGIAN: It can, your Honor, but I

just want to clarify one thing, and make sure I

understand.

What I thought, from reading the

transcript, was left open in terms of fine-tuning

was the question of whether it was a six-year

statute of limitations, a four year, or a three

year. So whether the cutoff was 1989, this is

based on the fact that they filed in '95, and we go

back six years, that's '89. Was it '89, was it

'92, was it '91?

If that's the only fine-tuning that's

left, it doesn't have any impact on discovery.

It's an issue that can be saved for summary

judgment, and that's how we understood your

ruling, that you hadn't fine-tuned it within the

framework of six years, which is the longest

statute of limitations they even argue could

apply.

What they're arguing now is a different

question that we thought you had resolved.

THE COURT: Well, I had expressed some

preliminary views on the subject, but I must say I

didn't need to fine-tune what year is it, how far

back does it go, for purposes of the Motion to

Dismiss. I only needed to be satisfied that there

was, at least from the face of the complaint, some

period that could go forward. I was satisfied of

that; expressed some preliminary views.

If the Commonwealth does now persuade me -- it seems like a big if to me -- but if they do

persuade me that we go back earlier than 1989, we

are, of course, then going to have to revisit the

discovery issues, and I gather the Commonwealth is

going to make an argument to me that they go all

the way back to 1970.

Sitting here, right here today, not having

seen your argument, I do find it a bit of a strange

argument, but I'll give them the opportunity to

articulate it before I finally decide it. I just

want to get it decided by the very next status

conference, because if it does have discovery

ramifications, I don't want this to be effectively

pushing back the schedule for the rest of the

case. We're going to fit that discovery in somehow

on top of the other things, so we need to know it

sooner rather than later.

MR. PARSIGIAN: Can we establish then that

they will brief first? Because I'm not sure what

they're going to argue on this point either.

THE COURT: I think the Commonwealth

should brief it first.

MR. WEBER: Your Honor, can I address the

question of whether or not we should brief it for

the next status conference?

Certainly we can do that, and certainly

we'll brief first if you would prefer. However,

some of the arguments we're making, for example,

fraudulent concealment, are very fact dependent,

and we have, as we've indicated in our status

report, still substantial discovery to obtain from

the defendants, and that discovery very much will

be related to issues like fraudulent concealment.

It seems to me that the issue is most

properly briefed as part of summary judgment, and

your Honor has already set a schedule for summary

judgment.

THE COURT: Well, I must say though, if we

wait until summary judgment time and you convince

me that you're going to go way back prior to 1989,

and we're then having to deal with potentially a

substantial volume of additional discovery, I am,

quite frankly, very concerned. That would

jeopardize our trial date, and that, I really do

not want to do.

I think it needs to be addressed now. I

must say -- again, I'm talking preliminary views;

not final rulings -- my understanding of the

doctrine of fraudulent concealment is that it has

to have in some sense misled or deceived the

particular plaintiff when you're talking about

fraudulent concealment for purposes of tolling the

statute of limitations. Then, that is, what's the

knowledge of that particular plaintiff. Was the

Commonwealth, itself, in the dark. And I'm a

little bit troubled by that.

This suit has been brought by the

Commonwealth for purposes of tolling the statute

of limitations on the Commonwealth's claims, I

think the Commonwealth would have to convince me

that the fraudulent concealment had prevented the

Commonwealth from appreciating that it had claims.

Now, I realize that there may be some more

recent revelations that have in a sense, arguably,

strengthened the Commonwealth's case. But I don't

think that's the same thing as fraudulent

concealment.

The Commonwealth has certainly been of the

view that cigarettes cause serious health

problems, and has certainly been of the view that

some portion of its Medicaid population suffers

from those smoking-related illnesses. The

Commonwealth has been of that view for a very very

long time.

MR. WEBER: Your Honor --

THE COURT: And I am dubious that we need

all the final details of alleged wrongdoing of the

defendants, because that strikes me as a -- you

get to that only after you get over the first

hurdle about fraudulent concealment, and that's

where I would recommend you focus in your

arguments. Explain to me how you get around that

first hurdle, and then if you do that, and you say

you need more discovery to convince me of just how

bad the concealment was, we can deal with it at

that time.

But I, quite frankly, I do not see

postponing this all the way to the summary

judgment motions unless the Commonwealth is

prepared to be -- prepared to let the trial date

slip. It's been my understanding, the Commonwealth

wants to move the trial date up if possible; not

let it slip.

MR. WEBER: Well, your Honor, the concern

you expressed regarding how this trial date might

slip is that discovery issues would be affected by

the ruling, and, frankly, we have given them

everything we have. We have given them all the

documents that we have related to damages back to

1970. Everything we have, we've given them. So

there will be no slippage. I mean, there's nothing

more to give --

THE COURT: Well, they say not. They say

not. I'm going to be facing summary judgment

motions that will be so huge later, it doesn't

hurt us to start attacking discrete issues

earlier. Let's get it briefed.

I'll have the Commonwealth's brief first,

and do it in time so that I can address the issue

and hear people on the merits at the next

conference.

Now, that means, since this has happened

for today's conference, I need to have the briefs,

including any oppositions, in-hand, you know, at

least, at the latest, a few days before the next

status conference.

Some things got filed with me late

yesterday, or things that didn't even get to me

until this morning, I mean, and I must have well

over a hundred pages of briefing that have landed

on me in the last couple of hours, and I can't deal

with that and be able to address issues

sufficiently at the status conference.

So we need a briefing schedule that gets

the Commonwealth's brief to me, obviously, well in

advance, and defendants' briefs to me, I would say

at least three days before the next status

conference if I'm going to address this, and

hopefully rule on it, at the next status

conference.

MR. PARSIGIAN: We can meet that schedule.

THE COURT: All right.

Now, I would, again, unless the parties

have some better idea, I would like to deal with

probably item five, and combine with item five,

everything else the other arguments having to do

with the remaining documents in the original

folder that was provided to me to at least get

those dealt with today. I've got another whole

stack of them that's come in, and we've got to

reach closure on this original binder sometime

soon.

MR. GRIFFIN: Your Honor, this is an

agenda item that there will be a number of

different counsel, so I've asked that they

identify themselves.

MR. BROWN: Your Honor, David Brown for

the Tobacco Institute, and I'll be arguing as to

some of the documents on agenda item number six.

That's the list of 54.

THE COURT: All right.

MR. GRIFFIN: Does it make sense to do

items 5 and 6 in unison, your Honor?

MR. WEBER: Can we clarification as to

which item we're taking about?

THE COURT: I have not had -- I've only

been able to look through the documents in item

number 6 in a much more superficial level. The

things in item 5 are the ones we've been working on

for some time and I want to get those dealt with

first both the rebuttal to the crime-fraud

arguments, and on those that I had found the

Commonwealth did not make its prima facie case;

the remaining other arguments about whether the

document is or isn't privileged in the first

place. In other words, I want to get everything in

this binder squared away. It's in or it's out

before I address yet another binder.

So everybody who's going to address any of

those issues, find a chair.

MR. MOTLEY: If it please the Court, I

understand what you want to accomplish. I would

only caution your Honor that in these rebuttal

matters, things outside that notebook are argued

about by their side to place them in context; and I

would likewise be discussing matters that are not

in that notebook in rebutting their rebuttal. I

know we're focusing on the notebook.

MS. LINDBLOM: Your Honor, I didn't hear

what just went on because I was getting the

documents, but Ms. McGarry tells me they were just

asking to put in new documents that we haven't

seen yet.

THE COURT: Let's just go through this.

MS. LINDBLOM: We're going to go through

the old notebook.

THE COURT: The old notebook, document by

document.

The very first thing we should probably

do, just to make sure we're all on the same score

sheet here, I gather that privilege claims have

been withdrawn as to a few items that has shrunk

this a little bit more.

MS. LINDBLOM: Yes, your Honor.

THE COURT: Okay.

MR. MOTLEY: Can we make it clear on the

record what has been withdrawn on privilege as to

the first notebook?

THE COURT: I would like to do that. Is

there's someone who can --

MR. BELLACOSA: Peter Bellacosa, your

Honor, from Kirkland and Ellis. I believe

document numbers 49 and 78, which were found prima

facie crime-fraud by your Honor, a claim of

privilege has been withdrawn as to those. So there

is no need for further proceedings as to those

documents.

And I believe -- I don't mean to jump

ahead of your Honor, but I believe in connection

with the documents that were not found prima facie

crime-fraud, document number 55 and document

number 91, are no longer subject to further

proceedings.

THE COURT: All right. I'll go in whatever

order the parties wish to proceed, but let's just

take it, by and large, document by document.

Where do you wish to start?

MS. LINDBLOM: We have two different

issues, your Honor. One is whether certain

documents are prima facie privilege -- or, excuse

me, are privileged that your Honor has already

found not to be crime-fraud, and the other is the

crime-fraud issue. I'll take them in whichever

order your Honor --

THE COURT: Why don't we start with the

first list first. It's a shorter list, and I think

it's simpler to deal with.

So that's 2, 28, 106, 107, 108 and 110.

MR. MOTLEY: Would you say that again, if

your Honor, please?

THE COURT: 2, 28, 106, 107, 108 and 110

seem to be the documents remaining where I've held

that the Commonwealth did not meet its burden of

making a prima facie showing of any crime-fraud

exception, and as to which a defendant or

defendants continue to assert a claim of

privilege.

Yes?

MS. McGARRY: Good morning, your Honor.

Mary Elizabeth McGarry from Simpson, Thacher &

Bartlett for B.A.T. Industries. I'll be addressing

documents 106 and 108.

THE COURT: Okay.

MS. McGARRY: I think we have sort of a

classic case here of let's throw everything out

there and see if anything sticks.

First the plaintiffs took a wholesale stab

at a group of documents, every single one is

crime-fraud; and then whichever one they lost that

argument on, they said, Well, actually it was

never privileged in the first place. It's not even

legal advice.

I don't think it could be more clear that

106 is in fact legal advice.

THE COURT: Let me interrupt you because

I'm inclined to agree with you. I think 106 and 108

look to me like they were the -- these are the

things from the law firm, Paul Weiss.

MS. McGARRY: Yes.

THE COURT: How is that not some classic

legal advice? What's discoverable? Does a

British blocking order protect us or not? What's

wrong with that?

MR. MOTLEY: Your Honor, may I introduce,

without being frivolous, my B.A.T. man, Andy

Berly, my expert on B.A.T. matters.

THE COURT: Certainly.

MR. MOTLEY: He's my law partner.

MR. BERLY: I'm not quite sure how to --

whether to wear a cape or not, Judge.

Your Honor, 106, 107 and 110, I believe,

in the notebook -- I'm sorry, 106 and 107, really

need to be looked at in connection with item

number 108, which is in here also. And also, item

number 102, to which your Honor has found crime-fraud, and, I believe, one other item. Item number

105.

THE COURT: No, I really -- I'm happy to

look at the other documents if something goes with

it in terms of what's its context. Sometimes that

helps explain what the other document is; why it's

being obtained. But I must say, as I understand

the chronology of events, the particular documents

we're now looking at, 106 and 108, are the

communications with Paul Weiss, the firm of Paul

Weiss, getting their opinion about discoverability

of documents overseas. And Paul Weiss comes back

with this opinion that says, they're discoverable

and don't count on this to protect you; don't

count on that, and don't count on that.

It's a request for advice. They get the

advice. Now, what they may do with that advice is

obviously another matter, but what's wrong; how is

it not attorney-client privileged when you're

going to ask somebody for their legal opinion

about whether a United Kingdom blocking order is

going to supersede and protect you from an

American court's discovery orders?

MR. BERLY: Well, Judge, this is a part of

the correspondence between B.A.T., the so-called

parent in Great Britain; Batus, the so-called

parent in America; B&W, the operating company in

America; and BATCo, wherein, as we've explained in

our briefs and has previously been argued to you,

they devised a means and method by which to keep

very incriminating documents that were being

generated in England from ever seeing the light of

day in the U.S. in courts.

This document, for example, number 108,

written on Batus letterhead by their vice-president and general counsel to a fellow at

B.A.T. Industries, this is in part background, it

is factual background for a number of documents

that your Honor has already found crime-fraud, but

other documents that will come before your Honor

later, wherein the B.A.T. group basically sought

to keep incriminating information out of the

American court systems; keep them from being

identified.

THE COURT: There's nothing wrong with

that if it's being done legally, number one. But

more importantly, as I -- what this set of

correspondence is about is an inquiry to a law

firm for an opinion.

You know, does this stuff have to be

produced under American discovery law, and British

laws, and treaties and all those complicated

international law issues, requesting, at the

outset, you know, are we going to have to produce

this. There's nothing wrong with anybody asking

that question, number one. And it is classic

request for an attorney's opinion.

As I say, what somebody then does if they

get an opinion from an attorney, when they don't

like that opinion, is another matter. But I must -- it seems to me, the analogy here is, if a man

goes to an attorney and says, "Can I divorce my

wife and still keep the house and get custody of

the kids?" And the lawyer says, "Your chance of

doing that is virtually zilch." And then the guy

says, "Well, now, since my chances of getting what

I want legally are zilch, will you help me find a

hit man to murder my wife?" We've then gone on

into something that's clearly both crime-fraud,

not privileged, etcetera.

But that, it seems to me, does not change

the fact that the initial set of questions: Can I

divorce my wife and keep my house, is a legitimate

question. And the response to that is the

attorney's opinion, the attorney's prediction,

what's the chances that you're going to be able to

get the outcome you want.

MS. McGARRY: Your Honor, I just want to

be clear that none of the defendants is waiving a

privilege claim to any one of these documents by

having them argued in this context in open court

here today.

THE COURT: I understand.

MR. BERLY: I guess, Judge, I guess my

thought to directly address that is, it seems to

meeting that 108 is nothing more than a letter or

transmittal. It's on Batus letterhead. It's being

written to the guy at B.A.T. It's being copied to

people at B & W and BATCo. It's nothing more than a

letter of transmittal.

I understand what your Honor is saying as

regards number 106 -- I'm sorry, yeah, number 106,

because that's the Rosdeitcher memo that's got the

so-called legal advice. That's one page of it. But

it seems to me that your Honor has a point as

regards the getting of the advice. As your Honor

says, what they do with it is a whole other story.

I see number 108 as being nothing more

than facially a memo of transmittal. And, yes,

it's authored by a lawyer, and yes, it's sent to

another lawyer. But it just says, "Enclosed is the

memo from Rosdeitcher concerning discovery." It

provides no advice of counsel. It gives no

opinion. It just simply sends it. And so, I see no

reason why that letter in itself should be

privileged.

THE COURT: Well, I must say the flip side

of it is, if you don't get 106, what good does 108

do you? It's -- I don't intend to spend a lot of

time on 108 because, I must say, it seems to me an

incredibly innocuous document.

MR. BERLY: Well, it ties back in, Judge,

with number 105, which your Honor has already

ruled is crime-fraud. There you see the reverse of

this letter.

THE COURT: Please be careful. All I've

done so far is said the plaintiff has made a prima

facie showing. I've not made any final rulings on

crime-fraud yet on any of these documents.

MS. McGARRY: Let me just clarify, because

we seem to be totally off track here. On 106 and

108, the Court found it was not crime-fraud. There

was a hearing at which the plaintiffs had the

opportunity to convince your Honor that your Honor

was wrong. Plaintiffs didn't even try with respect

to those two documents.

The purpose today is to decide whether

they were privileged in the first place. Mr. Berly

is now trying to have a third bite at arguing that

they were crime-fraud.

105, your Honor did find crime-fraud. And

I'm here to rebut that document. So all we're

talking is 106 and 108, are they in fact legal

advice; not whether it's crime-fraud. And then I'm

prepared to address 105, since it's my burden at

this point when you get there.

MR. BERLY: And our position is this is

simply a letter of transmittal and it directly

relates to number 105. This is the reverse. This

is Schechter writing Baker, rather than in 105,

where you have Baker writing Schechter on the same

issue, on the same issue of attribution, on this

same background scenario about the handling of

B.A.T. documents.

THE COURT: Well, I am satisfied that both

documents 106 and 108 are legitimately privileged.

They remain privileged documents.

What's the next?

MS. McGARRY: That then -- since 105 is so

highly related. That is the document in which your

Honor found a prima facie case, that is in fact the

request for the advice.

What's happening, we're in the mid-1980s

now. Tobacco litigation had been quiet in the U.S.

for awhile. The Cippollone case has been filed.

There's other cases in New Jersey. Tobacco

litigation in the U.S. is picking up.

B.A.T. Industries, as your Honor knows, is

a holding company that owns hundreds of companies

around the world, and its job is to manage its

interests. So in its capacity as a holding

company, it asks a very legitimate question: One

of my companies is a U.S. tobacco company facing

new, renewed tobacco litigation. Is that going to

have any affect on my other interests? My tobacco

interests, such as, BATCo; my non-tobacco

interests, such as the insurance company, Eagle

Star, are they going to be dragged into this? Are

they going to have to produce documents? Are they

going to become parties. If BATCo publishes

certain booklets, is it going to be suddenly

determined to be an expert and made an expert for

the plaintiffs in these cases?

This is a very legitimate in-house counsel

role: I want to know how this changed litigation

role is going to affect my subsidiaries'

interests. And then the advice comes back, these

documents are going to be discoverable, and

there's absolutely nothing wrong, if you look at

the documents, saying if one company makes a

statement, is that going to be an admission

against a sister company? There's nothing wrong

with soliciting the answer to that question.

Will we have to produce documents? This

is just typical, in-house lawyer work. They are

not seeking this advice in furtherance of a fraud.

There's no evidence that this advice is to

perpetrate a crime or a fraud.

And I would certainly object to any new

evidence coming in. There's already been the

Commonwealth's chance to put in their evidence on

this document. It's now rebuttal. They've had our

rebuttal papers for weeks. For them to have re-rebuttal papers now, or surrebuttal papers at the

hearing, without advance notice, is certainly

unfair.

THE COURT: Let me hear what they --

MR. MOTLEY: Your Honor, if I might? I'm

not going to argue this document, but on that

issue that she just raises, that is a problem

which will be vigorously contested by us in light

of all kinds of things, including the revelation

of documents since our original pleading. Plus,

with respect to these two, we obviously know,

since we've argued this around the country, what's

coming from that argument she just made.

THE COURT: We are jumping back and forth

between the two categories. This document is now

so tightly connected with 106 and 108, what is the

argument now on 105?

MR. BERLY: Your Honor, 105 is, again, it

is a part of a foundation, part of a background

piece of the story wherein B.A.T., the parent;

BATCo, the subsidiary; B & W, the subsidiary; and

Batus, come up with plans to keep documents out of

the courts and out of the public and out of the

federal regulatory groups in America, keep them

out of their possession.

We see them going through and looking at

the analysis as to the fact that they've got

documents that clearly show positions that are

contrary to what they're telling the public. This

document ties in with item number 45, to which

your Honor had found that we made or prima facie

showing, which goes go back in time to 1970, where

they first recognized that they have a serious

situation on their hands with documents that

internally say one thing while they take a public

view that is entirely contrary.

It ties in with document number 102, to

which your Honor found we met our burden of

showing crime-fraud, wherein all these folks from

B.A.T., BATCo, Batus and B & W, they sit down in a

meeting in Louisville, and they discuss how are

they going to keep this damning, incriminating

evidence that they had in their files, that

totally contradicts what they're telling the

federal regulators, what they're telling the

American public, what they're telling the American

courts, outside of their view.

And these documents go together as a part

of this scenario, so to speak. And there are many

many more documents that your Honor will see that

we will tee-up in time that relate to this.

It's also significant, Judge, because this

document appears on B.A.T. Industries letterhead,

number 105 does. And your Honor may recall that

there were motions dealing with B.A.T. and their

professions of uninvolvement in the tobacco -- in

the world of tobacco; that they were merely a

holding company.

This document shows that you have their

solicitor, their in-house person, sitting down,

meeting with the person from Batus, B & W, and

BATCo, in an overall global B.A.T. group effort to

keep these documents from being seen by the

public.

It's our view that this is strong evidence

of crime-fraud. You do need to look at some of

these sometimes together with other documents.

There's no question. You've got a piece of the

puzzle here, and a piece there, you do have to do

that. But that basically is our position on this

document and how it fits in.

THE COURT: Well let me ask you, I think

the problem that I have with some of the

Commonwealth's approach is, I don't think the

Commonwealth is appropriately applying the

requirement that a particular document must

itself, or a particular communication itself, must

be in furtherance of the crime or fraud. And what

we may have here is, we have sort of a spectrum,

what strikes me as some documents that are

completely innocent, i.e., they are requesting

legal advice on such things as corporate structure

and how to arrange their affairs. Legally, no

problem.

And then we may start sliding, where their

effort to keep documents away from other people

may be crossing the line into conduct that is no

longer legal; that is no longer proper or ethical

in some fashion. But the mere fact that you might

be able to point to, if you can, something down the

road when they found out they couldn't do this

legally they started doing the following illegal

things, I don't think that opens up the whole

sequence of communications.

What I may have to do -- and it's not

easy, I must say, looking at these documents -- is

find where's the cutoff point, where's the point

that -- it may be different or non-existent for

some defendants for that matter, but is there a

point where the investigation of, what can we do

to prevent attribution of statements between

affiliates, what can we do to avoid having to

produce documents, there may be at some point

where that inquiry steps over a line into taking

improper or unethical steps to prevent production,

but if a document is simply asking about legal

methods - legal methods of avoiding production, I

have a hard time seeing that as crime-fraud.

When I first read 105, standing alone,

most of it was completely innocuous. Here and

there it did start to have these glimmers of --

it's actually in some of the enclosures, which I

now understand to be enclosures, about, what it

is: for this reason documents likely to be sent to

B & W team must be subject to legal review before

originated. That started to step a lot closer to

the Commonwealth's theory that the attorneys at

some point stepped in and began doing things that

were improper.

But that, I must say, that's the only sort

of glimmer or hint that there might be something

improper being thought of that I see in this

document. And that's really the only reason I kept

it on the list of things that fit with the

Commonwealth's crime-fraud theory.

In context, now seeing -- its date so much

precedes the later letters, I wasn't positive

where this fit, but it does seem to me now, looking

at it, that that's a pretty minor glimmer, if

glimmer at all, and where the rest of it does tie

in to 106 and 108, there was just some months

delay, I guess, that I'm inclined to put this on

the side of the line that's the innocent side of

the line, I must say.

MS. LINDBLOM: That is exactly --

COURT REPORTER: Excuse me, counsel.

Thank you.

MR. MOTLEY: Your Honor, if I might? I'm

not objecting to what we did with 105, but I was

under the impression that we were going to deal

with: is it privileged in the first instance, then

go to crime-fraud. And all I want to say, at some

point in time, your Honor, I realize what your

Honor said at the last hearing about what "in

furtherance" meant. I would ask that we revisit

that, particularly now that your Honor sees some

of these things are very contextual in character

and relate back one to the other, and there is a

convexity that we need to argue.

And I have a case now that I didn't have

last time, that I want to advance. It's really not

relevant to 105, but if we're going to go back and

forth, at some point in time I need to make that --

THE COURT: The only reason we're going

back and forth is because 105 fits so closely to

106.

MR. MOTLEY: Yes, your Honor, and I

understand that.

THE COURT: And once we deal with that, I

intend to just go back --

MS. McGARRY: I can address that point. If

your Honor's ruled on 105 --

THE COURT: I'll hear anything further

from the Commonwealth's side on 105.

MR. BERLY: One thing I'd like to say, I

do think this fits within the in furtherance

concept because, again, you've got to look, we

think, at the time frame. What you have is,

beginning with document number 45, which is dated

August 20th, 1970, running through the eighties,

running well into the eighties, and indeed we have

some evidence in the nineties, but that will be

teed-up for a later hearing, what you have is an

ongoing, a continuum, all efforts being made in

furtherance of one common scheme, goal and plan,

which is to keep documents that they know will

reveal the fraud of their internal recognition of

harms, hazards, dangers, addictions and so forth,

from ever seeing the light of day in an American

court.

And it's not something they did, boom,

just like that at one point in time. We're talking

about something that went on over a period,

literally, of decades. And you see hot beds of

activity within certain periods of years. There

are a tremendous number of documents in the '84,

'85 time period.

You see the initial idea, the worry being

expressed back here on August 20th, 1970. So you

do have an in furtherance. And when you take one

document out that looks relatively innocuous on

its face, but as you say may have some glimmers of

wrongdoing in there, and you spread those

documents out, and you look at them as to what was

clearly a common scheme, motive, plan, then it

fits into context, and then I think it becomes

easy to see that they are in furtherance of one set

of goals and ideas.

THE COURT: The problem I have with that,

going back to my hypothetical of the man who first

wants to get the divorce on his terms and then

thinks of murder, the question about getting a

divorce is still privileged, even though the

answer to that becomes the predicate for, reason

for, and the motive for the later murder. I view

this exception as being a fairly tight one. It

does need to be in furtherance. And questions

being asked of counsel about legal ways - legal

ways to accomplish a particular objective, I think

remain privileged even if the client later resorts

to -- and the attorney resorts to -- some form of

crime or fraud as an alternative way of

accomplishing the same objective.

So I am satisfied that the defendants have

rebutted the prima facie case with regard to 105.

MS. McGARRY: Thank you, your Honor.

THE COURT: Now, can we go back to 228,

107 and 110. At least we'll be able to wrap up one

list of categories.

MS. LINDBLOM: We might as well start with

number 2, since it's second in the notebook. It

actually goes with document number 107. And 107 is

simply the transmittal letter, so that you know

who 102 was sent to. These documents are actually

a package; not two separate documents.

THE COURT: Again, let me turn to the

Commonwealth because item number 2 does look to me

like it's a lawyer's overview of litigation

options, prediction of likely outcomes, advice

about settlements, classic legal things. What's

not privileged about that kind of advice?

MR. BERLY: Judge, our reading of this

document is, while it is authored by their in-house counsel, Mr. Pepples, we know that from the

letter of transmittal, this seems to be more a

factual recitation of what B & W's environment in

which they're doing business is.

He seems to go through and say this is

what - this is the American society. This is what

we're confronted with. This is what we can expect

is going to happen. I don't see him rendering

legal advice telling an officer of the corporation

what to do, unless I'm missing out on some

sentences in here.

It basically just establishes their policy

and what they think they're going to be confronted

with for the next decade or so.

THE COURT: Well, it does talk some about

predictions about government regulation and taxes

and things like that, in not particular legal

context. But I must say, I think overall the memo

does seem to be focusing on litigation, risks,

options, likely outcomes.

Again, there's not a bright line on this:

is the thing predominately legal advice, or

predominately business advice. This one does look

to me to be predominately legal.

My notes, it includes advice sort of to

not settle, and then predicts, if we incur some

losses, we can revisit it. This is classic legal

advice, to settle or not settle a case. Classic.

It looks to me to be privileged in the

first place. So I don't see a problem with that. So

2 is still privileged.

And, again, 2 went with, remind me again?

MS. LINDBLOM: 107, your Honor.

THE COURT: And so 107 is still

privileged.

28 and 110.

MS. LINDBLOM: Right. Again, let's just go

in numerical order.

28 is the Addison Yeaman document that

your Honor discussed last time. Mr. Yeaman was, at

this point, the general counsel of the company.

And as we've described in our brief, this is --

it's an attorney think piece. It was kept strictly

private and confidential, as it says.

He is discussing the upcoming Surgeon

General's report, the implications for regulation,

legislation, litigation. It's classic attorney-related things. Now --

THE COURT: I must say on this one I would

tend to say this one strikes me as going on the

opposite side of the line. This is some

extraordinarily creative but cynical piece about a

recommendation of a very different shift in public

relations.

I mean, this is Mr. Yeaman's -- a think

piece about how to change our public image, and

coincidentally, he kind of throws in a few

comments that are sort of: By the way, don't

worry. This change in our public image won't hurt

us in our litigation and might even help us.

But predominately, this isn't advice to

settle. This isn't advice -- this isn't -- it

doesn't seem to be certainly generated by concerns

about the litigation. It's a thing about the

filter, and because of the filter we could put

warnings on, and we'll get there first before our

competitors do, and it's a marketing piece.

MS. LINDBLOM: No, your Honor, it's not a

marketing piece.

Now, let me just step back for a minute

and think about how attorneys function in

corporations. Certainly, as the Court has already

recognized, attorneys can give legal advice about

litigation, and that's clearly privileged.

A second thing that attorneys can, and

often do do, is give legal advice that relates to

non-litigation issues, where the legal side is one

component of what the corporation is doing.

And a third thing that attorneys can do is

give strictly business advice. They might say, you

know, Gee, we think this marketing plan will be

successful just because they've been around the

industry for a long time.

And Mr. Yeaman's memo falls, I think,

primarily within the second of these categories,

and partially even in the first.

He's talking about the steps that can be

taken in defense of the industry. He's talking

about it in the context of the litigation and what

will happen, because what's coming out is, you've

got the Surgeon General's report coming out, and

he's saying, What are we going to do? We have

these competing interests, really. You know, sure,

there are some public relations issues, but the

question is, what's going to happen, right in the

middle of page two, we might worsen our situation

in litigation.

This is -- he's looking at the legal side

of things and discussing what might happen. He

talks about how other litigation and regulation

are likely to come; how the company can meet those

threats. He, on page 3, again, he goes back to the

litigation, how would the posture that he's

talking about affect litigation.

And he talks later on page 3, the last

large paragraph, the third from the bottom, how a

jury might operate on a theory of comparative

negligence, whether or not they are instructed in

that respect.

And then he goes on to talk about what the

FTC might do, on the last page, where he says, you

know, what will happen if we do come up with this.

And he's talking about the FTC's right to

regulate.

So you've got him performing many of the

functions that a lawyer performs not just in

relationship to litigation, because a lawyer

legitimately gives legal advice in relation to

other things.

And this is well within what a lawyer

does.

THE COURT: Well, if someone in a company

comes up with, you know, a major suggested shift

in their way to handle public relations, or their

public image, obviously they can take that and run

it by their lawyer and say, "Is this going to get

us into regulatory problems; is this going to have

an impact on litigation?" And the lawyer's

response to that is clearly a privilege -- that

clearly is privileged.

But I must say, I don't see -- this memo

looks to be totally unsolicited. In other words,

this is Mr. Yeaman's taking the initiative: I got

this brilliant strategy to overhaul our public

image. And here's my brilliant strategy, and

because I'm a lawyer, by the way, don't worry, it

won't hurt your litigation. It won't get you in

trouble with the FTC.

It seems to me predominately this is his

creative piece about public image and public

relations, into which he tosses certain legal

opinions.

I don't see that anyone came to him and

said, "What do you as our lawyer think of this?" I

may be missing some context here, but this looks

to me like it is his think piece, and then it looks

like it's originated by him, putting on his hat as

the big picture man for the tobacco industry and

what they can do to sort of look better to the

outside world.

MS. LINDBLOM: Well, indeed it is his

think piece, and there isn't any indication that

somebody came to him and asked him to write it. But

he's the general counsel. He's operating in the

context of people asking him these questions, and

what he's doing, as near as we can tell, is sitting

down -- you know, this is 35 years ago now -- and

saying, you know, here are the issues that I see us

facing, and here's my thoughts. In a way, kind of

putting them together so that when the chairman

comes and asks him something, he will have thought

through it and written it down.

I don't know if your Honor ever does this,

but when I have the luxury of actually thinking

about cases instead of just reacting, I sometimes

do that. It may not be something that I need

immediately for a brief. It may not be something

that I need for years. And in fact, I was just

working on a case last week where I went back and

looked at some things I had done, unfortunately,

ten years ago. And that happens sometimes.

He's putting this legal advice -- what

your Honor correctly recognizes could be legal

advice that was given back -- if there were

something where he had -- you know, if he started

off this memo saying: You asked me for advice,

legal advice in connection with such and such, it

would be privileged. And the fact that that

doesn't appear at the beginning does not effect

the context -- or it does not effect what he's

doing. He is giving, primarily, legal advice

about the regulatory and litigation environment.

And let's look at it from the flip side.

If this is considered not to be privileged, then

what you're saying is, when a general counsel

writes a memorandum that talks about the effect of

a strategy on litigation, that talks about the

effect of the strategy on potential future

regulation, that that's somehow not privileged.

THE COURT: If that's what the memo either

predominately consisted of or focused on, that

would be one thing. But I look at this memo and

say, with the exception of a very few sentences in

here, you didn't need a law degree to write this.

It isn't -- it doesn't require legal

opinions, analysis, training. It's -- you know, a

lawyer can obviously sit down and jot down his

thoughts. Although let me say, this one looked

like it was intended to be read by somebody. He

sort of defends the position and says something

about: Before you tar and feather me for

suggesting this total about-face, please give me a

hearing.

It looks like this is written for somebody

else to read, although we can't tell -- I can't

tell from the document alone, who. It does not

just look like -- to be his little thoughts.

MS. LINDBLOM: I'd like to cite your Honor

to a case that was just given to me. United States

against United Shoe Machinery Corporation. It's a

District of Massachusetts case that's relied upon

by the plaintiffs in their papers.

And I'm reading from page, I'll start,

359, talking about communications between an

attorney and others. And it says, "The modern

lawyer almost invariably advises his client upon

not only what is permissible, but also what is

desirable. And it is in the time public" -- I think

there is a mistype here -- "it is in the public

interest that the lawyer should regard himself as

more than a predictor of legal consequences. His

duty to society, as well as to his client,

involves many relevant social, economic, political

and philosophical considerations, and the

privilege of non-disclosure is not lost merely

because relevant non-legal considerations are

expressly stated in a communication which also

includes legal advice."

And they go on to say, "It follows that

insofar as these letters to or from independent

lawyers were prepared to solicit or give an

opinion on law or legal services, they are

privileged."

THE COURT: That's the part where I think

you have a problem with this.

If a lawyer is the one that designs, say,

an ad campaign, and tosses into his newly designed

ad campaign: By the way, I'm satisfied that this

ad campaign complies with some regulatory

requirement, that doesn't change the fact that

what he's predominately doing is making a

recommendation about what he thinks to be an

effective ad campaign.

And it is the question of what

predominates - what predominates. I see this piece

as being predominately a recommendation about how

to overhaul the industry's public image, into

which he tosses a few legal observations more or

less to mollify people: Don't worry about the

legal ramifications of this. It's sort of, if

anything, it might help us.

MS. LINDBLOM: But it's not just talking

about that side of it.

First of all, this has nothing to do with

an ad campaign or anything like this. What he is

talking about is --

THE COURT: Public relations' campaign.

MS. LINDBLOM: It's not just public

relations. It's also, what is -- and it is an issue

of corporate strategy, and this is advising on the

legal component of that corporate strategy

primarily. He's talking, right on the first page,

about, you know, here we've got this problem.

Assume the Surgeon General concludes there is a

causal relation, then what do we do? We've got

these scientists and medical authorities who have

spoken. We either have to, A, disprove the theory

of causal relationship or discover the carcinogen

and demonstrate our ability to remove or

neutralize them. You know, here is what we have to

do. This is all in the context of this legal advice

regarding litigation and regulation.

This is a key part of what a general

counsel does. He gives advice about corporate

strategy from the legal perspective. And, yes,

maybe sometimes he's talking about what it will do

in other respects, but this is not him talking

about, oh, this will improve our sales, or you

know, here's something that I think consumers will

really bite on. This is talking about, you know,

what do we do in litigation, in regulation, what

coherent approach can we take that will satisfy

our legal objectives as well as other corporate

objectives in that regard.

I think the Court's trying to draw too

fine a line here, that you have to look at the

practicalities of what happens with lawyers, and I

come back to the notion that when you're deciding

on things like corporate strategies, legal advice

and the impact on the legal side is one component

of what you do. And he's advising on the strategy

in terms of that component.

THE COURT: What I -- where I think the

key of the piece is on page 2, where he goes, "Thus

to accept its responsibility would, I suggest,

free the industry to take a much more aggressive

posture to meet attack." But the attacks he talks

about are all kinds of attacks, not specifically

litigation - not specifically litigation, but a

whole range. He's talking about the industry's

taking a more aggressive posture.

And then, on page 3, "The question

immediately arises: how would such aggressive

posture affect litigation?" In other words, how

would this thing that I'm recommending you do,

would it have litigation consequences. It does not

change the fact that what he's doing is making a

recommendation: change your way of thinking so

that you are free to take this broad-based,

aggressive posture on all kinds of different

fronts.

MS. LINDBLOM: And, your Honor, keep going

on page 2, because I understand what the Court is

saying here, and look at the kind of attacks he's

talking about.

Item 2(b) ". harsher FTC rules in respect

of cigarette advertising." A classic subject for a

general counsel to give advice on.

Item C at the bottom of page 2, "'Content'

labeling or cautionary legends."

Item (d), "FTC ... powers of preliminary

injunction..."

Item E, "Repressive taxation."

It's true, litigation, individual

consumer litigation is only one aspect of it, but

almost all of what he cites as the attacks are

legally-related issues, issues where it's

perfectly legitimate for him to be giving advice.

THE COURT: You know, as we went through

last time, the bottom of page 4, the top of page 5,

he starts with sort of his technological approach.

MS. LINDBLOM: Well, he's talking about,

you know --

THE COURT: He finishes that with, "If we

do that first, what price Kent?" This is about

marketing.

MS. LINDBLOM: Sure.

THE COURT: This is about money. This is

about profits. This is about public relations.

MS. LINDBLOM: I'll admit that there is a

sentence in there where he talks about profits,

and that is part of the business. You know, this is

not a memo that strictly talks about, what are we

going to do in this lawsuit. It is a memo that

reflects the range of advice that a general

counsel properly gives, and he can take into

account business thoughts without losing the

privilege. This is what a general counsel does. He

thinks about larger corporate issues in the legal

context.

THE COURT: Well, I am satisfied that on

this particular document, non-legal considerations

predominate; that the thrust and purpose of the

document was not legal advice, legal strategy,

legal thinking; that some of that was thrown in,

but that its predominate purpose was the

recommendation about a change of the industry's

overall posture in terms of its overall public

relations.

Now, if, assuming when we try the case,

that this document is going to be introduced into

evidence, I could well see that it might be

appropriate to redact certain specific items that

do include the more specifically legal advice. We

can deal with that when we're doing that level of

fine-tuning, closer to trial. But I am satisfied

that the document itself is not privileged.

Turning then to item 110.

MS. LINDBLOM: This is the Chronology of

Brown & Williamson Smoking and Health Research.

And your Honor dealt with this the last time. We

submitted the affidavit of Mr. Willoughby

(phonetic spelling). This is something that was

put together by King and Spaulding as work

product, and the affidavit clearly says that's the

basis for the privilege. It seems to me it's

clear.

THE COURT: Does the Commonwealth have

anything --

MR. MOTLEY: Yes, your Honor. We don't

believe that this is protected because of the

doctrine of substantial need by the plaintiff in

this case.

Here you have a law firm that was given

access to millions of pages of documents who put

together a chronology from those millions of pages

of documents about research and development

matters.

And, your Honor, I would quote to you from

the Dow case, UpJohn versus -- excuse me a second.

Let me get the right cite. I'll give you the cite

in just a second. "Scientific inquiry regarding a

product is seldom predominately for the purposes

of litigation and attorney involvement does not

make it, the document, work product. To the extent

that the work product document provided a unique

source for the only evidence to support a party's

allegations, that party may have a substantial

need."

THE COURT: Isn't the simple answer here

though that some of the underlying raw material

from which this document was created, much of it

appears not to be privileged, and I assume has

been produced. And this is not a situation -- I

mean, if the underlying documents, because of them

are so old, were no longer in existence and this

was the only source of what they contain or

something, it would be different. But, you know,

here they seem to be carefully identified by

numbers so they can still be found and located and

produced; that the need for what does appear to be

work product --

MR. MOTLEY: They don't have them all.

We've asked for them. They haven't given us

everything that's identified in this chronology,

they have not given us. And their descriptions of

these documents that are missing, your Honor, are

priceless.

THE COURT: If you want to get back to me

and identify particular entries on here where the

-- you know, document 6500329 was not produced, I

can consider, then, specific, you know, specific

paragraphs perhaps, showing a substantial need.

But this is a long document. It cites an

awful lot of underlying source materials.

MR. MOTLEY: It certainly does, your

Honor.

THE COURT: Yeah. And I think the first

thing is, go to the source materials. Those do

appear in context not to be privileged by and

large themselves. They should be produced. If they

have been destroyed or cannot be located, I can

look at specific entries on this where perhaps

substantial need could be shown if the source

material is, for some reason, no longer available.

But other than that possibility, I view

this as work product. I see no reason to discredit

Mr. Willoughby's affidavit that the purpose was to

have a backdrop for educating people who were

working on various litigation. That's work

product, and for now, item 110 is still

privileged.

MR. MOTLEY: I understand that ruling,

your Honor. May I ask this question then? I would

like to have an opportunity -- and I won't do this

with every document -- but on this document, to

revisit -- at some point in time I hope to convince

you today that in furtherance doesn't mean you

isolate a document and look at it within its four

corners by itself, standing alone. And if I do, I

would like an opportunity to put this document in

proper context with respect to what we consider to

be the ongoing crime and fraud committed by the

Brown & Williamson --

THE COURT: The context that Mr.

Willoughby has put on it is, I had my people put

this together so that the various attorneys,

paralegals, etcetera, working on these cases,

would have a resource document, a place where they

could go to and find things and get oriented in a

chronology.

I'm happy to hear about context when we're

talking about crime-fraud. But the context that

Mr. Willoughby has put on this does not sound to me

like it's even remotely crime-fraud.

MR. MOTLEY: Well, your Honor, again,

standing alone, it may not be. But if I show you

answers to interrogatories in the federal court,

sworn to by Brown & Williamson in 1969, that they

conducted absolutely no biological research, and

then you look at Mr. Willoughby's work product,

and you see twelve such entries before 1969, I've

got to prove this case.

THE COURT: You get the underlying raw

documents that shows that. You don't need Mr.

Willoughby's document to show that. You need the

underlying reports, and I'm letting you have them.

MR. MOTLEY: Yes, your Honor.

THE COURT: I'm letting you have those.

MR. MOTLEY: Thank you, your Honor.

THE COURT: Okay.

Now, the remaining items are strictly

crime-fraud issues. Where do we start with those?

MS. LINDBLOM: Well, I think the easiest

thing to do is start with document number 1 and

that goes with document number 103.

Document number 103 shows -- that's the

letter from Kendrick Wells, who was Brown &

Williamson in-house counsel, to in-house counsel

at British-American Tobacco Company, and then it

describes what he has done, and refers to his

comments that are put on document number 1.

And this is a review by Mr. Wells, at the

author's request, of a paper by Dr. Blackman, that

he was proposing to send out to the public, and

essentially, they came to Mr. Wells and said: Is

there anything in here that, you know, we need to

be careful of? Especially when you've got the

British side and the American side, you know, they

have different views on what happens in

litigation, and this is just getting Mr. Wells'

take on: Is there anything in here that is not

phrased the way that it should be.

We submitted the Blackman affidavit which

explains that the report was intended for

circulation outside the company. The affidavit

shows that it was Mr. Blackman himself who sought

out advice as to the legal implications of the

document. We have Mr. Wells providing his legal

response to a fellow lawyer, and Mr. Blackman's

affidavit furthermore shows that he retained

authority for the contents of the documents; that

he asked the lawyer for suggestions, but he made

the decision as to what happened with it.

His affidavit also shows that the

publications that he worked on, including this

one, expressed his personal opinions as well as

the public stance of the company. And in addition,

we have testimony from experts that have been

retained in other Attorney General cases by Mr.

Motley's firm that specifically acknowledge that

it is permissible for an attorney to advise

clients as to how to be accurate and precise in the

wording of documents.

THE COURT: I understand that, but one of

the problems I have of the editing here sort of

goes beyond, you know, cleaning up a few words

that might be a little problematic.

He says things like, "Don't mention any

research by this person because this person thinks

cause has been proven, and we don't ever want you

to even mention his name."

MS. LINDBLOM: No, your Honor. If you read

the documents together, what they're saying is,

the author says -- it tries to use those people's

research to say that cause has not been proven,

and Mr. Wells' letter is saying, No, that's not

what these guys are saying. They're saying cause

has been proven so don't cite them for the

opposite proposition because that's not what it

means.

If your Honor would like to look at the

specific examples. I've unfortunately been through

this document in the past in all too much detail,

and that's precisely what's happening. He's

saying, don't misconstrue what's going on.

THE COURT: And so, what we're having is a

lawyer's reading of a scientific article,

quibbling with a scientist as to whether the

scientist has understood the science of the

article accurately. This is legal advice?

MS. LINDBLOM: He is not quibbling about

whether the author has understood the science of

the article. He's saying, I don't think that you

have read correctly what these other guys said,

and I don't think it's smart to try to take some of

their words out of context and to use them to mean

something that they don't mean.

I mean --

THE COURT: You've spent a lot more time

than I have, but I must say, I didn't see the

letter saying, you misread the particular article

you are citing. But saying, this person has in

other places taken the view that cause has been

proven, and I therefore don't want you mentioning

his name even in an article where it hasn't. Or,

you know, I don't want you mentioning anything

that has to do with mice or hamsters, whatever the

animal was, because we don't take the view that

hamsters are good enough, or whatever the problem

is.

This is about science not about law.

MS. LINDBLOM: Well, I mean, first of all,

this is a lawyer who is a product liability lawyer

and so he knows about science, it's true. And he's

writing here, for example, if you look at item

number 8 in document 103, he says, "Delete Doll

and Peto reference. Doll and Peto have published a

table which shows 'cancer of the lung' is caused

by cigarette smoking and have concluded ..." , and

he goes on.

Now, if you look at --

THE COURT: In other words, they published

some different article --

MS. LINDBLOM: Right.

THE COURT: -- other than the one you are

citing, and because we don't want the public to

even think about that other article, don't even

mention he did something else.

MS. LINDBLOM: No, that's not what he's

saying, your Honor, because look at item number 8

in document number 1. It says at that reference --

and this is the author's writing -- "Though

Professor Doll and Mr. Peto maintain that smoking

is a direct cause of certain illnesses, they

acknowledged in their publications that

statistical association does not imply causation.

Thus, apropos, the published" something "table of

diseases they stated: To say that these conditions

were related to smoking does not necessarily imply

that smoking caused (or prevented) them. The

relation may have been secondary in that smoking

was associated with some other factor."

So what's happened is -- and I guess

there's not page numbers on this -- the last

several digits are 548 in document number 1. What

the author did was quoted Doll and Peto to say

causation hasn't been proved.

Mr. Wells says: Wait a minute. You know,

that's not a fair representation of what they're

saying. Don't quote them for this because they've

said just the opposite in this other article.

That's a perfectly legitimate thing for a lawyer

to be doing. That's a perfectly legitimate thing

for anybody to be doing.

And if there's anything, you know, other

specific, I'll be happy to talk about that. But

you really do have to read these things together

to understand this.

THE COURT: It's quite detailed. For

example, looking at the letter that he writes, you

know, for example paragraph 17, is the kind of

thing a lawyer would do. "The quote is taken from a

private letter. Do you have permission from the

author?" That's obviously a legitimate,

appropriate thing for a lawyer to be doing. But is

this really -- is this really, you know, getting

the lawyer's advice to make sure your wording is

okay when in essence it deletes half of what

you've written because he doesn't like its public

relations ramifications?

MS. LINDBLOM: He hasn't deleted half of

what's written. When you look back you see he's

crossing out things like the reference that I just

showed. And the issue here is, is this in

furtherance of a crime or fraud. And it is clearly

not in furtherance of any fraud to say, you know,

you shouldn't misquote these guys.

I'm reading from the deposition of Father

Drinan, who is an expert hired by the other side.

The question, "Would you agree, Father, that one

of the roles that a lawyer should have who is

advising a company is that it is very important in

writing internal reports or documents or letters

to be careful and precise, that you convey

correctly what you intend to convey in that

letter?" "Yes," Father Drinan says.

Question, "And would you not have any

problem with a lawyer who gave advice to his

clients that all of the people in this company,

whether they're accountants, whether they're

engineers, whether they're scientists, have to be

very careful that they correctly and accurately

convey what they mean to convey in their

document?" And he says, "Yes."

And then reading from the deposition of

another one of their experts, Mr. Trotter, whose

first name I'm told is Cham, C-h-a-m, is,

question, "When you've got a document that is

going to be issued publicly by a tobacco company,

in other words like this one, and it relates to a

scientific matter like smoking and health,

wouldn't you agree that it would be appropriate

and proper for company lawyers to take a look at it

to see whether, A, it is consistent with the

company's position; B, whether it is inaccurate in

the sense that it overstates or understates, or is

unfair in some respect, and, C, whether it's going

to be misinterpreted by the layperson, wouldn't

those be all fair and appropriate things for the

company to review when it comes to a public

statement of that kind?"

Answer: "Sure. The company might want to

do that, yes. Yes, that's a fair statement."

And that's what's going on here. They are

contending it's crime or fraud to send an article

to a lawyer to be reviewed. The lawyer makes

comments on it. He says some things are unclear.

Have you got the guy's permission to quote a

private letter, and he also says, sometimes, you

know, you're misquoting these other scientists.

Delete that reference. Don't misuse what they say

in one context because you know that's not their

position in another.

And we've got Blackman's own affidavit

saying he made the decisions about what went in.

THE COURT: Well, I gather this brochure

never went out in final form? We don't have the

final version to compare and find out what it

ultimately did or didn't say.

MS. LINDBLOM: I'm told that's correct,

your Honor.

So, it's not in furtherance of a crime or

fraud to do that. I mean, that's really -- that's

the issue here. You've got the scientist himself

saying, "I asked for this advice on this and other

publications. I took it. I ignored it. You know, I

did what I thought was right."

THE COURT: Let me hear from the

Commonwealth on this one.

MR. BERLY: Judge, this is a classic

device of lawyers practicing science. What you

have here is the lawyer's superimposing,

rewriting, making material changes in an article,

imposing their, quote, scientific views, instead

of the scientists who should know what they're

doing and should be doing the research.

Your Honor is right, when you look at the

types of references in here that are getting

rewritten. For example, Wells writes in number 2:

"Delete Donald Gould reference. The article

identifies cigarettes as a drug." Of course,

that's the last thing they want cigarettes to be

identified as. They've done everything to avoid

getting under FDA jurisdiction, so you have the

lawyers making material changes in an article, or

in a brochure, to meet their party-line view. It

is just classic lawyers practicing science rather

than lawyers doing what they ought to be doing.

The next entry down here, it says they

want to delete a reference to somebody named Cain

because the article that they cite talks about the

pharmacological and physiological factors as

important in the derivations of habitual cigarette

smoking, which, of course, is the last thing they

ever want to be identified with as having accepted

or agreed to.

It's curious that they refer to an

affidavit of Mr. Blackman, that they have somehow

procured. We recently asked to depose him, and

we've been told they don't know where he is; he's

not under their control and he can't be available.

Yet, for the purposes, I guess of today's hearing,

they've managed to get an affidavit from him. I

don't quite understand that.

This Mr. Trotter they cite, we have

virtually half of a brief, your Honor, that

explains and puts back into context all of the

things that they take out of context to say that he

testified to. Suffice it to say that Cham Trotter,

who is an expert in the Mississippi Attorney

General case, not here, did not agree that the

conduct and behavior of what the tobacco industry

did was proper. I mean, he repudiated that time

and time again.

We think this is crime-fraud. It has

previously been found by a number of courts to be

crime-fraud. It is classic lawyer rewriting of

documents acting in the role of science. That's

not what they're supposed to be doing.

THE COURT: Well, there's nothing wrong

with them getting involved in science, but the

other, I think bigger question about this that

comes up in other documents, what is the

defendants' response to the argument -- the

underlying crime-fraud argument here is that this

kind of public relations' piece was such a

mischaracterization of the state of the science as

to have been fraudulent and deceptive, and done

intently to do so.

It seems to me in one sense what we have

is Blackman writing a piece that somewhat tows the

company line, and then a lawyer making it do even

more so. In other words, in a sense what Blackman

himself was trying to do, they would argue was

fraud, and that the lawyer just made it even more

so. What's your reaction to that?

MS. LINDBLOM: I think maybe the best way

to respond to that is to point out -- I mean,

that's not what was happening. What can I say?

That's the real answer. We've got the guy going

through what the science is, and then the lawyer

making sure that he's saying it right.

For example, the Court might wish to look

at document 103, page 6, item 35, which then of

course relates back to that number on document 1,

where, once again, the author was quoting

Professor Doll, and the lawyer says, "Doll's

conclusion that smoking causes lung cancer should

be stated as well as his opinion about low

delivery cigarettes. Doll's opinion about low

delivery cigarettes is that they reduce the

smoker's risk of lung cancer but do not reduce,

and may increase, the risk of mortality from CHD,"

which I believe is coronary heart disease.

So what you've got is the lawyer saying,

you know, be accurate here, and there is nothing

fraudulent about that. For the plaintiffs' view to

be accepted, you cannot reconcile that with what

is said in item 35, where he's saying, you know,

"say what they say."

And once again, you've got the affidavit

of the scientist himself who says, you know, I

decided what I was going to say in these things.

THE COURT: Then he goes on,

"Parenthetically, any reference to Doll must be

crafted carefully because he is a dedicated

advocate of the causal hypothesis." The overall

gist of what both Blackman and the attorney were

up to was crafting a -- crafting a piece to make

the science look, shall we say, a lot less

conclusive than it perhaps should have been viewed

as by this, you know, don't mention this person;

don't mention this article; don't put this in;

don't put that in.

MS. LINDBLOM: Well, first of all, your

Honor, the same people that they said don't

mention earlier, where I said he was clarifying,

it's the same document he's referring to in

paragraph 35. It's Professor Doll, where he says,

"Be sure to say what his position is."

What's really going on here is the company

is taking a position that the Court may not find

persuasive, but may not be popular -- certainly is

not popular today. But if there's support for it

in the science, and there clearly is from a

reading of this, that cannot be the basis of a

fraud claim. It is not fraudulent for someone to

be careful about what they're writing. It is not

fraudulent for the company to take a position on

science that is different from the Commonwealth's

view. That's not fraud.

THE COURT: It's not a question what the

Commonwealth's view is today. It's a question of,

when a document purports to be sort of an overview

of the science on the subject, and is the most

extraordinarily slanted and selective bits and

pieces of scientists, with much, either out-and-out censorship deletion of any reference to most

of the other people who are major in the field,

it's at least arguable that that's a fraudulent

purpose; that this has a deceptive purpose to try

to mask the mere theory that there was no longer

any controversy by the mid-eighties, or whether

there was a causal connection. And to be crafting

a document that's, by large part, the purpose was

to still make it look like there was, is a little

bit troublesome.

MS. LINDBLOM: Your Honor, I don't think

that you would find scientists who would say they

know exactly what the causation issue is.

Certainly -- and I'm not an expert on this -- but

there is room for debate in the science. There is

room for different opinions. I really don't think

that it's legitimate to be getting into a state of

mind. When you say by 1985 you had to think this,

and you had to say this, and if you didn't say what

the Commonwealth wants you to say, or what certain

scientists say, if you disagreed with them, then

that's fraud. I mean, that's big brother looking

down and saying this is the way you have to see

things.

THE COURT: No. Don't we have in here some

of the internal documents, the remarkable one of

Mr. Yeaman's that we were just reading, has --

contains acknowledgement: The jig is up on

challenging causation. We know it. And yet,

they're crafting this marvelous thing to still

prove that the jig is not up.

MS. LINDBLOM: Well, your Honor, may I

read a quote from the 1982 Surgeon General's

Report? It says, "The causal significance of an

association is a matter of judgment which goes

beyond any statement of statistical probability."

You have the Surgeon General, in 1975,

saying, statistical probability is not enough to

establish the causal nature of the relationship,

saying much the same thing in 1979, a statistical

correlation is not synonymous with causation. It

is important for the public to understand the

nature or character of the associations that have

been found.

And then saying in 1982 --

THE COURT: What I was just looking at is

document number 28 from the 1960s, Mr. Yeaman is

saying, "I would hope we're not going to keep

repeating this not proven argument." That's 20

years before the document we're now looking at is

being crafted. Twenty years before.

MS. LINDBLOM: Mr. Yeaman is a lawyer, not

a scientist. And certainly the Surgeon General

came out in 1965 --

MR. MOTLEY: Excuse me, your Honor. That

happens to be on point by the way.

MS. LINDBLOM: He came out in 1963 and

said there was a statistical association. I

certainly remember well when that report came out

and the huge public brouhaha that arose.

Now, what we're faced with here is really

an allegation that to disagree in any respect with

opponents of smoking is to commit a fraud. And

that is not what the law is.

There's is nothing about this proposed

article by Mr. Blackman, or by Mr. Wells'

comments, that suggests that any of the editorial

suggestions are bad science or misleading science,

or anything else.

THE COURT: But if your internal documents

have in fact -- your internal documents have in

fact already acknowledged - already acknowledged

that you have lost the scientific battle on the

subject of causation, what are you doing years

down the road, crafting a public relations piece

that says, "Oh, it's still a major, genuine

scientific controversy as to whether causation

exists."

That's the theory. That's the theory. And

I must say it gains, at least some support,

looking again, since this happens to be in the

folder in front of me, Mr. Yeaman's 1963 memo. Did

something happen between, in those twenty years,

to do an about-face about where science is?

MS. LINDBLOM: It is not an about-face,

your Honor. What he says is, assume the Surgeon

General's Committee concludes -- as I think it did

-- that there is real and compelling evidence of a

causal or even a strongly predisposing relation

between smoking and cancer. You know, let's assume

that that's what happened. That doesn't mean that

because the Surgeon General has concluded that

that anyone has proved the mechanism. I mean,

after all, just to jump ahead a little, and again,

to get into areas that I don't know about, a

hundred percent of smokers don't get lung cancer.

A hundred percent of lung cancer patients are not

smokers. And so, you don't have an iron-clad

scientific issue as to which there is no room for

dispute.

And if you have scientists who are

legitimately doing research and taking different

positions, even if they're within your company, an

executive can look at those and believe one person

instead of another. You don't have to adopt the

Commonwealth's view of science in order not to be

committing fraud.

THE COURT: Of course you don't. But if

the company internally - internally, has

recognized that science?

MS. LINDBLOM: But where? Where, your

Honor?

THE COURT: Well, I'll ask the

Commonwealth to point out to me, but I suspect

we'll be here for a long time if I ask Mr. Motley

to identify all the documents that he says make

those kinds of acknowledgements. Certainly, at the

very least, Mr. Yeaman's memo in 1963 strongly

suggests -- he says, "We still hope to prove

there's no etiological factor, but the odds are

greatly against success.

MS. LINDBLOM: Well, yeah. He's talking

about --

THE COURT: At the best, we'll be able to

show this." That's why he's recommending, in 1963,

doing it publicly now before you continue to do

damage. I saw similar documents looking in the

B.A.T. Motion to Dismiss.

I am satisfied that there's enough in

there about an internal recognition that the

battle on causation was already a lost cause long

before this thing is being crafted in the mid-1980s.

MS. LINDBLOM: But let's look, your Honor,

at that same memo, page 1, the last paragraph on

the page.

He says, Addison Yeaman, "We must, I

think, recognize that in defense of the industry

and on preservation of its present earnings

position, we must either, A, disprove the theory

of causal relationship, or B, discover the

carcinogen or carcinogens, cocarcinogens or

whatever, and demonstrate our ability to

neutralize them."

THE COURT: And he goes on to recommend

that you do B because your likelihood of

accomplishing A, the handwriting is on the wall

and you're not going to be able to do it. That's

why he recommends shifting to B: acknowledge a

causal relationship and prove to the world that we

can filter out the things that do it.

That's in 1963. I'm looking at that

document only because it happens to be in the

folder in front of me. But the Commonwealth's

theory that there are internal acknowledgements on

the subject of causation is sufficiently born out

at this stage to make the crafting of item 1

misleading and deceptive.

MS. LINDBLOM: Your Honor, the fact is

that B & W acknowledged the statistical

relationship. It's just what the Surgeon General

was talking about back a long time ago that's

reflected perhaps in this Yeaman memo. That does

not mean that once you acknowledge that there is a

statistical relationship that then you somehow

have to, you know, have your scientists, you know,

not talk about causation.

THE COURT: Mr. Yeaman is clearly not just

talking about a statistical relationship because

what he is recommending is, identify the thing in

smoke that is causing it. That's what our research

should focus on. We should leap-frog over this

causation issue, find the thing that is doing it,

be the first to discover what the true causal

mechanism is, and then prove to the world that by

this filter technology we can take it out. We can

make them safe. And what he's saying, in

substance, is you can't do that while you're still

fighting the war on causation. That's the whole

theory behind this extraordinarily creative theory

behind the Yeaman memo is, the filter.

What's to filter out other than

identifying the thing that is causing it. And this

is 1963.

MS. LINDBLOM: And the evidence will show

that the company spent a lot of time and a lot of

money trying to figure out what the problems were

and to filter them out. But that doesn't mean that

scientists have to take a position that is

consistent with what the Surgeon General says or

be --

THE COURT: No. If things they make as

public announcements on behalf of a company do

have to take a position that is reasonably

accurately reflective of what the company does

know, what a company does think at the time. And I

-- what is being argued here is a great distance

between the kinds of things that are being put in

exhibit 1 in this memo, and simultaneously, the

kinds of things that internal documents were

acknowledging on that same subject.

If the internal documents themselves were

supporting the view that the companies generally

still believed these things, our internal

scientists generally still believe that there is

no causal relationship, or that hasn't been

proven, then that's a legitimate difference about

the state of the science. But is it still a

legitimate difference about the state of the

science if the company's own internal scientists

think what we're seeing in all these memos about -- and we'll get to those in a little bit -- that

are, please prevent your internal scientists from

saying these things that suggest a cause has been

proven.

We have a series of memos that are here

about muzzle your internal scientists because

they're saying things we don't want the world to

hear. And it's precisely because of that, your

internal scientists are already saying these

things, and you're crafting a public relations

piece that is dramatically at odds with what your

own scientists internally are telling you. And

what you're doing here, arguably, is two things.

Crafting misleading pieces like exhibit 1, and

muzzling your scientists.

MS. LINDBLOM: Your Honor, first of all,

exhibit 1 is not misleading. I mean, I know the

Commonwealth likes to say that it is, but Mr.

Blackman's views are reflected in his affidavit,

and attachment A says, look, there's no merit in

arguing that it hasn't been proven that smoking is

harmful to health. You know, much the same as

Yeaman says.

You know, why bother? He says, "Even

though it is a fact that causation is impossible

to prove and that genuine debate continues among

experts in the field," that is Mr. Blackman's

view, and to say that he has to be saying something

else is simply wrong. Or to say that it's wrong --

THE COURT: Do I see anything in here to

suggest that Mr. Blackman was writing this piece

and intending to publish it on his own as his own

private project? No. It was clearly being

prepared on behalf of the company for which he

worked as their public statement, their intended

public statement -- I gather it never came out --

but their intended public statement on these

issues. He was speaking for the company, getting

ready for a piece that was going to be put out in

the name of the company --

MS. LINDBLOM: And reflecting his views.

THE COURT: -- at the time he wrote this.

MS. LINDBLOM: Also, you look at the

affidavit. I'm looking at paragraph 9.

THE COURT: Do I see a disclaimer on this?

"The views expressed herein are those of Dr.

Blackman and in no way reflect the views of Brown &

Williamson or its affiliate or parent?"

MS. LINDBLOM: Why do you have to have

that?

THE COURT: Well, you're trying to say

that this is something that is Dr. Blackman's own

personal view.

MS. LINDBLOM: But look at Dr. Blackman's

affidavit.

THE COURT: Dr. Blackman, as an

independent scientist, can express his own

personal view. That's fine. But this was written -- this was written for Brown & Williamson's

benefit. B.A.T.'s benefit and people like that.

MS. LINDBLOM: Actually it was written for

BATCo.

THE COURT: For BATCo then.

MS. LINDBLOM: So, I mean, that's okay.

You know, he's allowed to do that. Look at his

affidavit. He says, "The brochure grew out of

lectures given internally. It was intended for

circulation outside of the company. One aim was to

demonstrate further that these issues were neither

simple nor a matter of unanimous scientific

opinion, but rather, were complex and the subject

of genuine scientific debate." That is Mr.

Blackman's view. He is entitled to express that

view. He is entitled to submit it to a lawyer and

ask for legal advice in connection with expressing

that view. And it is not fraudulent, it is not in

furtherance of a fraud to assist him in that

regard.

If the Court finds that this document is a

furtherance of a fraud simply because it takes a

position that is contrary to a causation

hypothesis, then, you know, the Court is really

making this scientific finding which is contrary

to what the scientists say.

The scientist, who is the author, says it

was not simple or a matter of unanimous scientific

opinion, but rather, was complex and the subject

of genuine scientific debate. And it is not fraud

for the company to put out something that says

that where it is the belief B.A.T. scientists, or

other scientists within the company.

THE COURT: Well, for the reasons stated,

I am satisfied that 1 and 103, that the

Commonwealth has, despite the rebuttal, sustained

its burden of showing crime-fraud on those two.

All right. What combination of documents

go next?

MS. LINDBLOM: The next one, again, just

going in numerical order, is document number 34.

THE COURT: Let me actually turn to the

Commonwealth because this issue crops up in others

of the documents.

What I'm hearing from the defendants' side

on these things about so-called special projects

is that they were simply the lawyers asking that

research be done through CTR special projects that

would be of interest to them in the defense of

litigation. What's wrong with that?

MR. MOTLEY: Well, several things, your

Honor.

As most courts that have looked at this

have found this to be crime-fraud. And here, your

Honor, we've got to look outside this document and

look at what special projects are as a whole.

As Judge Sarokin found in the Haines'

case, reversed for procedural technicalities of

looking at what he had observed in the Cippollone

case, what the industry was about here was

representing that the CTR was a totally

independent, objective, at arms-length

organization that was set up to fund independent

research to solve the issue of whether cigarettes

caused, among other things, lung cancer. If I

could just focus on that one issue.

When in fact, as the documents demonstrate

-- and particularly the 58 documents that were

introduced, and which we have not submitted to

your Honor because we didn't get them until, what,

the last week or last two days of the trial in the

Minnesota case -- these documents demonstrate that

the industry was using special projects, they were

funding scientists. They would put them in special

projects, then they'd shift them over to the

Scientific Advisory Board grant procedures, and

then sometimes they'd put them back into what we

call special accounts number four, and yet, the

public, as four different courts have found now,

are sitting there thinking CTR is nothing but a

pure and pristine organization of independent

scientists, with no input from the industry, out

there grappling with the issue of whether

cigarette smoking caused lung cancer.

When, in fact, as one of the documents we

obtained from Minnesota demonstrates, the lawyers

to the cigarette companies were prescreening

documents before they even got to the independent

Scientific Advisory Board. They were using

special projects as seed money to get people to

apply for grants. If the granting agency didn't

grant it, then the lawyers would take it in.

Sometimes they would publish the results;

sometimes they wouldn't. And as one court found,

when they did publish the results, they only

published the results and said, this is a special

project of the Council for Tobacco Research.

Nothing on there that this is a special project

selected by the lawyers, funded by the lawyers,

edited by the lawyers, and it is not independent

and scientific.

In other words, your Honor, they were

abusing their charter for the Council for Tobacco

Research. They were publicizing that it was

totally independent. And this document

demonstrates the co-mingling of projects where the

lawyers are recommending that someone submit a

grant. What's wrong with that? Nothing wrong with

it on its face except for the fact that they had

represented to the Congress of the United States,

to the public, and in testimony in courts and in

answers to interrogatories, that nothing of the

kind occurred.

They claim that all the CTR was was a

scientific advisory board of totally independent,

hands-off, no-strings-attached scientists, who

went out and tried to find out if cigarette

smoking caused, among other things, cancer. They