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 *

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BEFORE: SOSMAN, J.

Thursday

May 7, 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, REBECCA McINTYRE,

JEFFREY D. WOOLF and THOMAS M. SOBOL, ESQS., Special

Assistant Attorneys General, for the Commonwealth

THOMAS J. GRIFFIN, JR., KENNETH J. PARSIGIAN, BARBARA HEALY SMITH and BARBARA ROBBINS, ESQS., for Philip Morris

MARJORIE PRESS LINDBLOM, ESQ., for Brown & Williamson

Thursday

May 7, 1998

Cambridge, Massachusetts

(10:07 a.m.)

THE CLERK: May I call the case, your

Honor?

THE COURT: Please.

THE CLERK: Middlesex Superior Court

docket number 95-7378, Commonwealth of

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

The Honorable Martha Sosman presiding.

Will counsel, please identify themselves,

please.

MR. GRIFFIN: Good morning, your Honor.

Thomas Griffin for Philip Morris and liaison

counsel for the defendants. I expect other counsel

for the defendants will be speaking to your Honor

depending upon the agenda items reached.

MR. PARSIGIAN: Good morning, your Honor.

Ken Parsigian for Philip Morris, and speaking on

behalf of all defendants today.

MR. MOTLEY: Good morning, your Honor. Ron

Motley for the Commonwealth.

MR. WEBER: George Weber for the

Commonwealth, your Honor.

MS. McINTYRE: Rebecca McIntyre for the

Commonwealth.

MR. HEIMANN: And Richard Heimann for the

Commonwealth, your Honor.

THE COURT: I received the agenda only

yesterday, unfortunately, but I did get it. And it

seems to me we'll just go through the things in

order there. So we start first with the

Defendants' Motion Compelling Discovery of

Individual Medicaid Recipients.

May I ask the defendants, first, have you

done come calculation of how long it would take to

take all these depositions?

MR. PARSIGIAN: Well, your Honor, there are

two issues at stake, and that's whether we get all

Medicaid recipients, which we believe we're

entitled to as a matter of law, but which, frankly,

given your Honor's earlier rulings in this case, I

don't hold much hope out for. And you can correct

me if I'm wrong. But we've also proposed an

alternative possibility.

We preserve that right that we believe

we're entitled to all recipients, and we don't know

exactly how many recipients they claim yet,

because, just recently, your Honor, having led us

to believe they were only seeking damages back to

1989, in their interrogatory answers that we

received last week, the Commonwealth now tells us --

THE COURT: How many Medicaid recipients

are you proposing to depose?

MR. PARSIGIAN: We believe that a

sufficient number to have an expert draw

scientifically reliable inferences is in the range

of 1500 to 2000.

THE COURT: And have you made a calculation

of how long it would take to take 1500 to 2000

depositions of this nature?

MR. PARSIGIAN: Well, we are prepared to

triple, quadruple track them. They do not take

long. The depositions themselves do not take more

than a day, and can often be completed in half a

day. We're prepared to do them as expeditiously as

possible. It does take a little time to get the

medical records, but if you do four, six, eight a

day, we're prepared to do them as quickly as

possible.

I'm also at pains to note, your Honor, we

also proposed to the Commonwealth that if they

disagree with our experts' numbers about what is a

sufficient sample to allow an expert to draw a

scientifically reliable conclusion, back in

February we asked them to tell us what their

experts think. Give us a number that you will not

challenge; that you will say is enough. And they

wouldn't give us that number.

The best number we can come up with,

without having had their model yet in particular,

is a number in the range of 1500 to 2000.

But I note, your Honor, we started

deposition discovery in this case in about January

or February of this year. In a case with this much

at stake, the fact that it might take ten months to

do those depositions is not all that unusual. And

let me must give you one example --

THE COURT: I must say, I find it almost

impossible to imagine that this would be completed

in anything remotely resembling two months.

MR. PARSIGIAN: Ten, I said, your Honor.

THE COURT: Ten months even. There is --

you know, there's about 250 business days in a

year, and even if you had these scheduled every

single day without missing a single one, either

from witness problems, attorney problems, even if

you were doing two or three a day, that's not ten

months. And I don't think it's realistic to think

that you're going to get six to eight a day, every-single day, five days a week without missing a

single day or a single witness.

We're talking several years that it looks

to me, minimal, to take 1500 to 2000 depositions.

MR. PARSIGIAN: Well, let me respond to

that, your Honor.

First of all, there's a survey I'd like you

to take a look at. This is a survey that the

Commonwealth did. It's a survey that the

Commonwealth did of a subset of the Massachusetts

Medicaid population, The Primary Care Clinician

Plan Member Survey it's called.

Now, in this survey that they did -- if I

can hand up a copy to you -- this was a survey of a

subset of about 250,000 members of the

Massachusetts Medicaid population. And they felt,

with their statistical experts, not ours, that in

order to draw scientifically reliable conclusions

about that subset, they needed to take a thousand

respondents. They sent out two thousand surveys;

they got 1038 responses. That's what they thought

they needed to draw reliable inferences about a

small subset of the population.

Another example, from their brief, they

site the Marcos case. They say the Marcos case

shows that you can do these cases by statistical

evidence. Well, let's take a look at the Marcos

case.

Number one, it took nine years to try the

Marcos. They tried it in three phases. There were

ten thousand claimants, not hundreds of thousands,

as here - ten thousand. They took nine years to try

it. They did it in three phrases: liability,

compensatory damages, punitives.

Now, here's what they did in that case. The

Court appointed an expert to develop a model of how

many members of the actual group -- so in this

case, the actual Massachusetts Medicaid population

-- they needed to take depositions of in order to

draw scientifically reliable conclusions about the

9500 in the group.

They decided 137 would work. They gave

everyone an opportunity to depose those 137. They

also gave the defendants the names and identities

of all the other class members and gave them the

opportunity to depose all 9500. That's what they

felt was necessary as a matter of due process. Now,

they didn't depose all 9500 in that case because

their argument was, it doesn't matter. You can't do

it by 137. But that's what they say is enough for

us to draw reliable inferences.

We didn't aggregate hundreds of thousand

of claims. They did. It's not unusual for us to --

THE COURT: They're not -- I think the

problem is, they're not aggregating hundreds of

thousands of claims. They are, I gather, maybe -- I

haven't seen it yet, and again, this is not the

argument on the summary judgment motion. Everybody

needs to keep that very clear -- they are using a

statistical epidemiological model that, you know,

such and such percent of people in this age range

get this and that disease, and X percent of it has

been shown to be smoking related. It's that kind of

thing.

They're not taking hundreds of thousands

of specific people and adding them up. That's not

their approach.

Now, you certainly are entitled to

investigate your version of what's wrong with that

approach, how it can be attacked, undermined, how

its assumptions can be challenged. But I must say I

question whether deposing 1500 to 2000 people is a

terribly efficient way of doing that.

MR. PARSIGIAN: Well, let me respond to

that, your Honor.

First of all, let me tell you something

about what they intend to do, because now that we

have their interrogatories answers, we know a

little something about it.

What they're going to do - and they've done

this in every state - is they use a 1987 survey

that was done in the United States, done by the

Federal Government by the Agency for Health Care

Policy and Research. It's a 1987 survey throughout

the United States, 35,000 people were surveyed.

They weren't Medicaid recipients only --

THE COURT: This is not the summary

judgment motion.

MR. PARSIGIAN: I understand that, your

Honor, but in order to understand my point you need

to know --

THE COURT: I want to know why you need to

depose people as a means of criticizing the study

or the analysis of the Commonwealth?

MR. PARSIGIAN: There are a couple of

reasons.

First of all, we have to have an

opportunity to do more than simply criticize their

experts. We have to have an opportunity to put on a

defense.

The defense isn't just: Their experts are

wrong. The defense also has to be: We can show you

what's right by looking at the actual Massachusetts

Medicaid population. And if I just might for a

moment, show you from the NMES study. Now, this is

the study that they're going to rely on. It was

done in 1987. They're going to try to project

backward, apparently all the way to 1970 now, based

on their new answers, and forward all the way to

1998 from this study.

Now, let's take a look at what that study

itself says it was for. "The major components of

NMES II contain information to make national

estimates," okay, "of expenditures ... for the

entire civilian population of the United States

during the" year ... "1987." That's what they're

going to look at.

It doesn't do me any good to try to explain

to a jury or to this Court what's happening with

the Massachusetts Medicaid population by, again,

1998 and '97 and '96, to go back and look at a study

that is only designed to deal with the year 1987,

the civilian population of the United States --

THE COURT: Surely you have lots of sources

of information about what is different about

Massachusetts demographics, even the Massachusetts

Medicaid population as compared to a national

survey of everybody, short of deposing 1500 to 2000

people?

MR. PARSIGIAN: It's actually not true,

your Honor. And let me take that on, head on.

Last time I was before your Honor in

October 1997, you said a lot of things I didn't

want to hear, but you said one thing I did want to

hear. You said proximate cause is still a part of

this case.

THE COURT: Of course it is.

MR. PARSIGIAN: You also said that the

state has to show that a significant number of

Medicaid recipients actually relied on statements

by the cigarette companies.

Now, what they're going to have to show to

show that wrongful conduct by the defendants

proximately caused increased Medicaid expenditures

by the state - the state didn't smoke cigarettes.

They tell us that all the time. So that's not the

proximate link between us and the state. The link

is that what they allege we did wrong, the wrongful

conduct, caused recipients to start or continue

smoking; that that caused them to get injured; and

that that caused the Commonwealth to spend more

money on Medicaid expenses than it would have spent

without the smoking, without the wrongful conduct.

How can --

THE COURT: Can I ask it this way. Can your

clients investigate what causes people to use their

products, which is something I'm sure they look at

for purposes of marketing, product development,

etcetera, etcetera, do they run around and depose

people?

MR. PARSIGIAN: Well, first of all --

THE COURT: Of course they don't. You

gather data on these subjects in many different

ways, and depositions, I must say, seem to be the

most labor-intensive way of getting at --

MR. PARSIGIAN: Actually, it's not, and let

me tell you why.

THE COURT: -- the information you're

looking for.

MR. PARSIGIAN: Let me tell you why.

Again, I go back to the survey they're going to

rely on. We explored the possibility of trying to

do a survey, and I note that for us to do a survey

of Massachusetts Medicaid recipients, we need

information from them. However we're going to get

the info, from actual recipients, the actual people

they claim relied and were injured and smoked, we

will have to get those names from them, and those

medical records from them. And they refuse to give

them to us.

But let me tell you what happened with that

survey. That survey only looks to draw

scientifically reliable inferences about that

population, the civilian population of the United

States in 1987, because they didn't just mail out a

survey and take the first thousand that came back.

If you got that kind of response, it would be

statistically useless.

What they did is, they sent people out,

door-to-door, and they followed up every three

months for a year, and they'd say to people: If you

don't have the answers to number 16 through 21 on

the survey this time, I'll be back in three months.

That's the only way they could get an 80 percent

response rate which was needed to draw

scientifically reliable conclusions about the

population and fill in the blanks with the

necessary information.

We figure if we tried to do a survey like

that in order to garner this information, first,

we'd still have to have the same thing we're asking

for: the names and identities of the 2000

recipients, and all their medical records.

I'm not sure that it would be faster to go

to them every three months for a year and check up

on their answers to the survey, or to simply get

them in for a deposition where you can ask all

those questions.

But we were prepared to negotiate with the

Commonwealth about any possibility that would allow

us to reach our goal, which is, to actually put on

a defense in this case; not just criticize their

experts, but put on an affirmative case that's

based not on the national population from 1987, but

on the real people they claim were injured.

It has never happened anywhere in the

United States before, ever, that there has been a

case where the other side put on no evidence about

the actually injured people, only evidence about

some different group, in a different year, and then

tried to draw inferences from it. But even if they

are allowed to do that, surely defendants have to

be allowed some access to the real population. They

use the wrong people. We want to use the right

people. And they won't let us get at them. That's

not fair.

In Massachusetts there's a case -- we cite

it in our briefs -- called the Meunier's Case, 319

Mass 421. The Supreme Judicial Court said, "The

Massachusetts Constitution requires that a

defendant have, quote, a fair opportunity of

introducing all available material evidence in

support of, or defense against the claim, and to

have it considered and weighed by the trier of

fact."

We're not asking for all. I mean, we've

asked for it, but we know you're not going to give

it to us, so we've preserved that issue. But we're

prepared to try to put on some defense with less

than all, but it's got to be a sufficient number

that an expert can sit on the stand, raise his or

her hand and say, "As a matter of science, I can

draw a reliable inference about the whole

population." We can't rewrite the laws of

statistics; the laws of science. The truth is, it

takes a lot of people in order to draw a reliable

inference about the eight hundred thousand, one

million people -- I don't know how many, depending

on how far back they're going -- that they're

trying to claim smoked our products because of our

wrongful conduct; got injured because of our

wrongful conduct; and charged those expenses to the

state.

There's simply no other way to do it

effectively without some access to a sufficient

number of them that an expert can raise his or her

hand and say, "Yes, this is science. This is not

hocus-pocus. This is real science."

And I note for your Honor, a problem very

similar to this that occurred in the Florida case.

A number of times in this case we've talked about

analogies to other cases.

In Florida they tried to get depositions of

all the recipients, and the Court said no. And so

they asked for a more limited number so that they

could show the Court what kind of information they

would get so the Court would be able to see that we

really are entitled to all of them.

They got 45: 25 that were taken randomly,

20 that were volunteers, I believe. When they got

to the stage of trial and they wanted to try to use

those 45 depositions, the plaintiff said, "Wait a

minute, that's not a statistically reliable sample

of the whole Florida Medicaid population. Since

it's not a reliable sample of the whole population,

you can't use any of those depositions. That's not

relevant. It doesn't come in. Those are just

fluctuations, just oddities." And the Court

agreed. None of it got to be used.

I want to take a number that we can use,

that a scientist can use to persuade the jury that

their model, their model which produced the absurd

results in Minnesota that 50 percent of the

smoking-related expense was attributable to 19 to

34 year-old males, who have car accidents and

broken arms, that 87 million of it was attributable

to 94 year-old women in nursing homes who went in

because of broken hips and mental disorders, I want

to be able to say, not just: They're wrong. Their

math is bad. Their statistics are bad. But guess

what, let me show you what happens with the real

population.

They don't spend more. They don't cost more because

they're smokers. And guess why they started

smoking? They didn't rely on what we said.

How can I get that evidence without going

to the recipients themselves? There's simply no

way.

THE COURT: Anything further?

MR. PARSIGIAN: No, I'm not -- I thought

you were about to ask a question.

Now, what I'd like to do to have you

consider very seriously what would work when you're

talking about --

THE COURT: Let me -- I will interrupt you.

If we're going to look to other cases, I gather in

none of these other cases have you been allowed to

take anything more than something in the range of

35 to 45, or something like that, plaintiff's

depositions.

MR. PARSIGIAN: To my knowledge, there

isn't any state in which we've been allowed more

than 45.

THE COURT: Right.

MR. PARSIGIAN: But I can also tell you,

when we were allowed the 45, it was a waste of

time. The court didn't allow --

THE COURT: I would agree with that. It

seems to me that there is indeed no point in doing

a small handful because it doesn't do anything

useful for anybody. That's a total waste of time.

But no one has allowed you to do this. And I would

assume it's for the good and practical reason that

it would take years to do.

MR. PARSIGIAN: Well, your Honor, I don't

know if that's the reason. I think it denies us of

our due process rights. But, here's the important

point. I've been in cases in this court, this very

court, with 250 thousand dollars at stake that took

seven or eight years to get to trial. So the fact

that it might take a couple of years to do the

discovery when they want us to write a check for a

couple of billion dollars, should not surprise

anyone. Look at the cases they cite.

The Marcos case took nine years to try. If

we depose two thousand recipients, it would not

take nine years to try this case. It wouldn't take

seven. It wouldn't take five. And we're not

proposing that.

THE COURT: Well, this case --

MR. PARSIGIAN: We didn't put this at issue

--

THE COURT: -- this case was filed in late

1995. We're now into the spring of 1998 --

MR. PARSIGIAN: Well, your Honor, let me

respond to that.

THE COURT: -- and I am a little bit

concerned. It seems to me that one of the things

about doing studies and surveys in the usual way

that researchers in those areas do them is that

they never needed any permission from me, from the

plaintiffs, or anybody else, to go do investigative

studies, surveys, research in this area. And,

again, I suspect that they do variations on this

kind of work all the time for purposes of

marketing, product development, and those sorts of

things. This is not an arena that is foreign to

these defendants and the various scientists who

work with them.

And that if they, you know, wanted to spend

several years working on models and developing a

database about what is it that causes people to

smoke; what is it that causes people to continue to

smoke, they've had years already in which they

could have been working on it.

I am not impressed by the idea that you

need specifically to have Massachusetts Medicaid

patients to answer those questions: what does cause

people to smoke; what does cause people who are

already smokers to continue to smoke; what causes

them to fail when some of them try to quit and

don't end up quitting. Those are subjects that can

be investigated, and have been investigated, by

people without ever resorting to depositions or

this, and --

MR. PARSIGIAN: Well, your Honor --

THE COURT: -- we've had these kinds of

cases pending. Both the Attorney General-style

cases that match these; similar issues obviously

come up even in all the personal injury cases that

are brought by smokers where the defendants have

explained what is it that causes people to smoke;

what is it that cause people to continue to smoke.

There is nothing that novel about the

issues that are now being raised, and they are

amenable to various research techniques. I really

do not see why in the spring of 1998, we have to

tack on, what strikes me as a minimum three to four

years, absolute minimum, three to four years, just

to get the depositions done. Then, of course,

there's the time for the experts to do the

tabulation of the data, its coding, its

manipulation, that stuff. That would tack on more.

I mean, clearly, if I allowed anything

remotely resembling the kind of discovery you're

now asking for, we would not be trying this case

until something, you know, 2003, 2004, would be my

estimate.

MR. PARSIGIAN: Your Honor, let me respond

--

THE COURT: And I am not prepared to do

that over an issue where you have had ample

techniques at your disposal. The only thing you

haven't had at your disposal is the specific names

and medical records of specific Massachusetts

Medicaid patients, but you've had everything else

all along for years.

MR. PARSIGIAN: But, your Honor, what you

miss is the fact that what we're missing is

precisely what we need. And let me explain why.

It's very significant, your Honor.

The Massachusetts Medicaid population--

THE COURT: Do you think that Medicaid

recipients smoke for different reasons from other

people?

MR. PARSIGIAN: We think it's highly

possible, and there are other issues, your Honor,

many other issues.

THE COURT: Different reasons than people

of comparable economic, educational, social

backgrounds?

MR. PARSIGIAN: Your Honor --

THE COURT: In other words, you can't even

begin to get a handle on these things unless you

talk specifically to Medicaid

people --

MR. PARSIGIAN: No, that's not -- beginning

to get a handle on it for purposes of making some

marketing decisions is one thing. To stand up in

court and say, have an expert say to a 95 percent

confidence level, "I can draw the following

inferences about this precise population, the

Massachusetts Medicaid recipient population,"

that's a whole different thing than saying, "Can we

get some handle on it? Do we have some idea?" And

let me explore with you some of the issues that

would need to be looked at in order to get that

information.

It's not just, why did you start smoking.

In the Florida case, in Florida, you know, the

statute there created a number of presumptions; one

of them was that you weren't going to be allowed to

find out anything about the actual recipients. And

the Supreme Court of Florida struck that down. They

said: No, that's unconstitutional because without

access to the actual recipients, the Supreme Court

of Florida said without that access, we don't see

how you could possibly -- the current Act would

prevent a defendant from demonstrating the

impropriety of the individual payments, or whether

the Medicaid recipients --

THE COURT: I gather there were other

shortcuts in that statute that are not present in

the Massachusetts statutes, and I don't have to

deal with them. But my question is --

MR. PARSIGIAN: No, but, your Honor --

THE COURT: My question is, do you really

have any basis for believing that data taken from a

population pool that has some of the, at least

basic attributes of Medicaid people in terms of

educational level, income level, background, job

history and those sorts of things, do you really

feel that there's going to be this massive

difference as to why they smoke, or why they have

difficulty stopping smoking as opposed to why

someone else doesn't?

MR. PARSIGIAN: Your Honor, first of all,

it's not just why they smoke. There are lots of

other issues here about alternative causation,

about whether they actually used our products,

about whether the payments were appropriate, the

issue that the Florida Supreme Court went up on.

Number two, your Honor, in Massachusetts

we're not like the federal rules. Let me just note

something here. We don't say that an expert can get

up and rely on anything that an expert normally

would rely on even if it's not independently

admissible. We've cited the DYS case to your Honor

in our brief.

That case stands for the proposition that

in Massachusetts, an expert can only rely on

evidence that is independently admissible. Going

out and doing a survey of a bunch of people who we

think are low income, perhaps, nationwide, to try

to serve as a proxy for the Massachusetts Medicaid

population --

THE COURT: Do your survey low income,

Massachusetts. I mean, you can refine it pretty

well.

MR. PARSIGIAN: But it's inadmissible

under DYS because the survey itself is hearsay,

that answer is hearsay under the DYS case. It won't

be admissible just because an expert wants to rely

on another expert's word. You've got to have

independently admissible evidence. So even if a

survey could work, it couldn't get into evidence

because of the Massachusetts evidence rules, which

is another reason why we're looking at that

population.

THE COURT: Well, it seems to me, without

ruling on whether you're correct in that

interpretation, if you are, the Commonwealth isn't

going to get to first base anyway, so you don't

need to depose anybody.

I mean, if you're right, then you've

eliminated their -- you've eliminated their proof

without conducting any discovery at all, and I

certainly do not need to take on three, four, five

years worth of depositions simply to address this

issue.

MR. PARSIGIAN: Well, would your Honor be

prepared to have us brief the issue about whether,

right now, let's have a challenge to their model up

front, have a Lanigan-type hearing and find out

what evidence can go in.

THE COURT: We have a time period set for

summary judgment motions, and I anticipate these

sorts of issues --

MR. PARSIGIAN: But I won't be able to get

any discovery at that point. You'll only be telling

me then, "Why did you wait 'til now to ask me for

recipient discovery?"

THE COURT: No. I'm well-aware that you've

been wanting to take recipient discovery. I do not

see -- I do not see that the inordinate expense and

delay that would be involved in deposing these

people is at all warranted. It is a grossly

inefficient and impractical way of getting at the

subject matter that the defendants wish to get at.

MR. PARSIGIAN: Well, your Honor --

THE COURT: They are, of course, entitled

to investigate, gather data, work with experts to

either attack the Commonwealth's models, develop

their own models, refute the underlying assumptions

in the Commonwealth's models, or doing anything.

That does not mean that they get to depose

thousands of people.

I'm not surprised to hear that no state -

no state has allowed this to go forward in any of

these - in any of these actions, and I don't intend

to break ranks and be the first.

MR. PARSIGIAN: Your Honor, if I might for

just a minute with respect to that last point?

The fact that no state in these very

difficult and highly politicized cases has done

that shouldn't be the only thing you look at. There

is no case anywhere outside these recent tobacco

cases where any court has said that a plaintiff can

prove its case on causation and damages solely by

statistical evidence, and even when they have

allowed --

THE COURT: I will hear you on that issue

on the summary judgment motions.

MR. PARSIGIAN: But, your Honor, let me

finish.

THE COURT: It is a summary judgment issue.

MR. PARSIGIAN: This part of it is not.

This part of it is not.

THE COURT: No, I have --

MR. PARSIGIAN: Beyond that, your

Honor --

THE COURT: We have other things to move on

to in the agenda. The defendants have never

prevailed on this point in any state. I do not hear

anything --I have read the materials -- I do not

hear anything here that would cause me to reach a

different result.

I would also agree that since the

compromise position of letting you take 25, or

letting you take 40 or 45, is meaningless, because

your own scientists, everybody's scientists, will

say, "That's not enough to do us any good," that

that is, itself, a waste of time and resources on a

very tight schedule. I will not allow depositions

of individual Medicaid recipients.

MR. PARSIGIAN: Your Honor, can I ask one

question?

THE COURT: Mm-hmm.

MR. PARSIGIAN: Can we at least get the

names of recipients so we can go -- you suggested

we go out and do our own study. Can we at least get

them to identify the people who are in the actual

population so that we can go out on our own and try

to develop this evidence? They won't identify them

for us. They won't give us their records. If they

will identify them for us, at least we have some

remote hope of doing what you suggest that we do.

We can't do it without the names.

THE COURT: Well, I think you can do it on

a population that is not strictly Medicaid. After

all, they are taking a population, as you point

out, that is not at all strictly Medicaid. Not even

strictly Massachusetts, and not even today. So

surely, if they are putting on experts like that,

they cannot criticize it if you've done a study or

survey of people in Massachusetts today --

MR. PARSIGIAN: Oh, they certainly will

criticize it, your Honor. But should we be limited

to bad evidence because they choose to present

their case with bad evidence? We want to get the

best evidence, the really injured people. All they

have to do is give us the names to at least start

down that path. What is the resistance to giving us

the names?

THE COURT: Let me hear the Commonwealth's

position on that. I've ruled in the Commonwealth's

favor on all other aspects of the motion. I only

need you to address the issue of production of

names.

MS. McINTYRE: Your Honor, just permitting

that limited discovery would involve an invasion of

these recipient's privacy on a massive and

unprecedented scale.

The Commonwealth itself has disavowed any

need to invade the privacy of a single recipient

much less millions of them. And the reason that the

defendants are offering here is far from

compelling. They've been able to prepare a defense

in every other state case, including Minnesota,

where closing arguments are being given today,

without any specific recipient information.

I haven't heard anything that would

justify such an invasion of these people's privacy.

THE COURT: I would agree. The motion is

denied.

MS. McINTYRE: Thank you.

THE COURT: Now, next is Motion to Compel

Production of Documents Relating to the Same

Subject Matters as the Bliley Documents. Who's

going to be addressing that?

MR. PARSIGIAN: If we could just trade

seats.

THE COURT: Yeah.

MR. HEIMANN: Good morning, your Honor.

Richard Heimann on behalf of the Commonwealth on

this motion, your Honor.

This motion has two components to it, in

effect. One has to do with the subject of the

Bliley so-called disclosure, and the other

component has to do with Brown & Williamson

specifically, and concerns their disclosure of

documents on the Internet site they have.

I'll take up the Bliley matter first, and

then address the Brown & Williamson's second.

And with respect to Bliley, let me begin

with the law, and then I'm going to come to some

facts I think that are specific, and respond to

some of the arguments that the defendants have

made.

The defendants rely, to a great extent, on

a peculiarity of the law of the Second Circuit

Federal Court. It arises out of the von Bulow

decision, which created, for the first time at

least in reported decisions, something called an

extrajudicial disclosure of privileged documents.

The Second Circuit concluded that in those

situations where the disclosure is truly

extrajudicial, by which I think they mean entirely

unrelated to litigation of any sort, that the

waiver is only a limited one and only extends to

the documents or information actually disclosed and

not to other communications or documents which

concern the same subject matter.

That decision has been followed, I

suggest, your Honor, only in the Second Circuit.

Actually, you only find cases in the southern

district of New York that rely upon it. It has

never been, in 11 years since it was decided,

relied upon in any other federal circuit that we

can find for the extrajudicial notion. It has never

been relied upon or cited in state court

jurisprudence, or in the Commonwealth.

It is directly --

THE COURT: I understand it hasn't been

relied upon, but it hasn't been rejected either.

It's a somewhat unusual set of facts. It doesn't

come up that often, and so, therefore, you know, we

have a limited number of times that it comes up.

But when it comes up, von Bulow certainly has

dominated the field.

MR. HEIMANN: In the Second Circuit, in the

courts of the Second Circuit in two or three

decisions, and a half dozen or less decisions in

the southern district of New York.

In similar circumstances, the D.C. Court

of Appeals, without even discussing this doctrine,

has rejected it by holding that any disclosure of

privileged material results in a subject matter

waiver, even inadvertent disclosure.

But, be that as it may, whether the von

Bulow extrajudicial disclosure doctrine, as it

were, is a reasonable one or not, we don't have an

extrajudicial disclosure within the meaning of von

Bulow in this case.

Von Bulow itself referred to the Teachers

District Court decision that had predated von Bulow

as a situation that did not involve an

extrajudicial disclosure. That was a case in which

the disclosing party had voluntarily disclosed

certain information or documents to a regulatory

agency of the United States, the S.E.C. in that

case. And that disclosure had nothing whatsoever to

do with the civil litigation in which the party

plaintiff was asserting that the defendant's

disclosure in that prior S.E.C. matter had

constituted a waiver of the privilege for subject

matter purposes.

And the Second Circuit, in the von Bulow

opinion itself, agreed that that situation was

distinguishable; that the disclosure to the

regulatory agency was not extrajudicial, by which I

assume and take them to mean that disclosure

related, at least indirectly, to litigation that

was in existence, or was potential.

The same thing is true of the Kidder

decision; that's even stronger, I would suggest,

for us. That's a district court, Southern District

of New York decision that post-dates von Bulow,

that explicitly distinguishes von Bulow based upon

the Teachers case and based upon von Bulow's

analysis of the Teachers case

Kidder, again, was another situation where

the disclosing party had voluntarily disclosed

material to the S.E.C. in a circumstance where in

subsequent civil litigation, the plaintiff

contended that that disclosure was a subject matter

waiver. And the Court agreed. That's the situation

we have here.

The disclosure, as your Honor has

previously held, by the defendant Bliley, was

voluntary, but more important, it was undertaken

for the purpose of advantaging the defendants in

connection with this very litigation. The objective

of the defendants in voluntarily disclosing that

information was to achieve a settlement which would

effectively release the claims that are being

asserted in this very case.

Under those circumstances, it is clear

that the disclosures that were made were for

litigation purposes at least in part; I would say

in whole. Under those circumstances, under the von

Bulow decision, we do not deal here --

THE COURT: Let me ask you this, could you

conceivably characterize that though as a

litigation purpose that is in any way adverse to

the Commonwealth or the Commonwealth's interests?

Both sides, as I understand it, are committed

towards, working toward -- and cooperating towards

implementation of the national settlement. And,

you know, I don't know what the Attorney General

has told anybody in Congress, but I can't imagine

that he would tolerate somebody now arguing, "Well,

because you, you know, told your congressman about

this, you've now waived everything that has

anything to do with this lawsuit, and you've got to

produce it in discovery."

I would assume both sides have been talking

to the appropriate people in Congress, providing

them with information and arguments and positions.

Should I start interpreting that as a -- as a

waiver that now waives not just the specific things

that are said, but everything?

MR. HEIMANN: We haven't been revealing

confidential attorney-client communications to

politicians in Washington in connection with this

matter, your Honor. The defendants have for their

purposes.

THE COURT: Well, I must say there's an

underlying irony in this motion, and that is, as I

see it, the doctrine that there's been a waiver

that now opens up an entire subject matter of

privileged material is premised on the idea that

what was waived in the first place was a valid

privilege. And the defendants are the ones that are

claiming they have a valid privilege to these

materials. And the Commonwealth is the one that's

saying they never did have such a valid privilege.

And I've never ruled on that issue, one way or the

other, with respect to these Bliley documents. I

merely ruled that if they were privileged, that had

been waived as to those specific documents.

And it is, of course, also curious that the

Bliley subpoena itself was premised on a ruling

from Minnesota that these things were not

privileged. That's clearly what started that ball

rolling, or at least what identified the documents

that Congress wanted.

And so, for me now to declare that the

production of those materials is now a waiver of

all other privileged material on the same subject

would have to, first -- I'd have to first find that

they were privileged, that this was a waiver of an

actual privilege.

MR. HEIMANN: There are several points

there, your Honor. Let me take up the last one

first. It is not necessary for your Honor to

conclude ultimately that a document is privileged

in order to find that the disclosure of that

document waived any privilege as to that subject

matter. There's no case that so holds, I would

submit to the Court.

The situation here is, the defendants are

maintaining that all of those documents are subject

properly to attorney-client or work product

privilege. The fact of the matter is that we say, I

will concede, that some of them are not properly

subject to privilege, but we don't contend that

none of them are properly subject to attorney-client privilege at least in the first instance.

So I would submit to the Court that the

defendants should be hoisted on their own petard in

this situation. If they maintain that the documents

are privileged, which they do, not only at the time

that they litigated before, but right to this very

minute, then they should be held to that contention

for purposes of determining whether by voluntarily

disclosing them, they have waived the privilege as

not only to those documents but as to other

privileged communications relating to the same

subject matters.

As to the second point about the --

COURT REPORTER: One moment, please. Thank

you.

MR. HEIMANN: As to the second point

regarding the Minnesota Court's holding, it's true

that the Court held that they were not privileged,

but not because they weren't, at least within

facially the privileges, but rather because they

were subject to the crime-fraud exception. And I

would submit to the Court under those circumstances

that normal law that your Honor has referred to

that generally applies, that is to say, a document

or communication ought to be privileged before its

voluntary disclosure results in a waiver should not

pertain.

But let me go to one, and maybe even more

important point, because this really, at least in

my reading of this, is the most persuasive point I

thought the defendants made, and that was that we

don't suffer any prejudice or harm, nor are they

advantaged in any way in this litigation because

they disclosed these documents, and they support

that notion by arguing that they are maintaining

that they do not intend, and will not use, any of

those disclosed privileged documents in the defense

of the merits of this litigation. And that may be

true, that is to say, since those documents, and

the names to the extent that we've been able to

review them -- we haven't had a chance to review

them all yet -- but in the named -- they are

documents that are probative in favor of the

positions that we are asserting in this case. So I

would not expect the defendants to be running in

and presenting them as evidence in support of their

case in court.

But, two points. First of all, although

they didn't initially select which documents to

disclose, because that was done in effect by the

processes in the Minnesota court, when they did

disclose them, they knew which documents they were

disclosing, and more importantly, they knew which

documents that related to the same subject matters

they were still keeping under the covers of the

privilege. So they knew which ones were going to be

coming out and which ones relating to the subject

matter were not.

That at least in a sense is a selective

disclosure. It's their choice as to what documents

got disclosed in the end because they could have

disclosed none.

Secondly, we will use those documents,

some of them at least, in this case. But we know

now what the defendants will argue in large part

with respect to that use of those documents. They

will say they were aberrations; that they did not

reflect corporate policy; that they were

unauthorized statements; that they were not

intended to bind or speak for the corporation. They

will contend that they were not acted on in certain

instances. I have in mind specifically that the

"deadwood" document -- that's the document in which

the lawyer was planning how to conceal records from

the world by sending them overseas or otherwise

destroying them -- they will argue that, well, that

lawyer may have been thinking about doing that, or

planning it, but he didn't do it in the event.

They may have documents that show that he

did do it that they're keeping under wraps of

privilege right now. And they will also claim that

when we use a document, we're taking it out of

context, because if that document were seen in the

context of all of the other documents, you would

see it means something very much different than

what it says.

In fact, they have actually announced very

publicly that that's their very intent. R.J.R.

issued a press release on April 22 concerning the

documents that we're talking about, and said, among

other things, "While we anticipate that plaintiffs'

lawyers will now attempt to use the documents in

courts by taking them out of context and trying to

mischaracterize and misconstrue them, we will

respond as appropriate. R.J.R. Reynolds has

produced more than six million pages of documents

to lawyers representing the State of Minnesota in

connection with the State's Medicaid lawsuit

against the tobacco industry.

Taken as a whole and not selectively out of

context, these documents more than demonstrate that

our company responsibly researches, manufactures

and markets its products to adult smokers."

On May 2nd, a representative of Brown &

Williamson was quoted in the New York Times with

respect to the Bliley documents as follows. The

fellow's name is Mark Smith, by the way. "The

process of selectively picking out specific

documents is distorted. It is like looking at one

frame of feature-length film and trying to make a

statement about what the movie was about."

This is what they will, at the trial of

this case, argue when we offer into evidence the

privileged documents that they disclosed to

Congressman Bliley and then to the world, by

saying, "Look, if you had all the others, you'd see

these don't mean what they say." We will be

prejudiced as a result of that.

We ought to be entitled to obtain all of

the otherwise privileged documents that relate to

the same subject matters as the ones they chose,

for their own advantage, to disclose, when this

case comes to trial. That is the way we are

prejudiced.

Now, that is unusual in the factual

setting. It's not a typical situation, but that is

the circumstance we have before your Honor in this

instance. And that is why, notwithstanding the von

Bulow rule or doctrine, notwithstanding the fact

that perhaps both sides have some interest in

seeing a settlement of this case by the Legislative

process, but when they chose to advance that

interest by disclosing their privileged documents

and at the same time are going to argue that

they're an aberration; that they don't represent

corporate policy, we need to get the rest of those

documents in order to show that's not so; that

these documents do reflect corporate policy.

THE COURT: I understand your position, but

why shouldn't I wait until trial and see what use

of the documents is made, see what people actually

say about them? There's certainly times that things

happen in the course of trial that open up doors

and windows that weren't open before. But should I

sit here now and anticipate what arguments these

people will be making; what these witnesses will be

saying when they take the stand ten, twelve months

from now?

You know, I hear your point, but I must say

I think we have to wait and see what unfolds at

trial to see whether the defendants' own approach

to these documents at trial opens that particular

door.

MR. HEIMANN: You really don't need to wait

until this trial. They've already done it in other

-- in the Minnesota trial. I mean, we know based on

what they did there --

THE COURT: Maybe they will learn in

Minnesota how the approach backfires.

MR. HEIMANN: We know what --

THE COURT: We don't know.

MR. HEIMANN: We know what they have

publicly stated, beyond what they actually did in

Minnesota, they intend to do in these trials. But

more to the point, in ordinary circumstances your

Honor's approach would be perfectly correct. And,

in fact, it's the approach that has been taken in

reported decisions. But these aren't ordinary

circumstances.

We're talking about tens of thousands of

documents. If it were a number that would be

manageable to deal with when the issue arose at

trial, then it would be one thing. But when we're

talking about -- just in terms of sheer volume --

more than we could possibly digest in a trial

setting when the issue arises, I would submit to

the Court that that's not fair to us to use that

process. After all, we didn't create this problem;

they did. And they created it for their own

advantage as they saw at the time.

They should not be permitted to put us in a

situation where they're going to take advantage of

having engaged in that voluntary disclosure of

privileged material in that way.

THE COURT: Well, it seems to me, as I

recall, my own reasoning was, when I viewed it as a

deliberate waiver, was the advantage they sought

was not because the contents of the documents were

in any sense favorable to their case, but the

advantage they sought was the public relations

advantage of not appearing to be stonewalling the

very Committee, and Committee Chairman, who was

trying to help them with this legislation.

It was not that, "Gee, if we show

Congressman Bliley these documents, these are

really -- these documents themselves are really

going to help convince Congress to pass this

controversial legislation." Rather, it was, "If we

keep digging in our heels and don't turn these over

but fight Congress on this, where we've already

fought and lost in Minnesota and some other places,

we're just going to look bad for fighting over it,

and we're probably going to lose ultimately anyway.

And we'll look better if we just get the bad stuff

out on the table like Congressman Bliley is asking

us to do."

It's strategic. It's deliberate. It is, in

my view, a waiver. But it's not because the

contents of the documents help them. It was the

appearance of how they handled the disclosure that

seemed to be driving these arrangements with

Congressman Bliley and this decision.

Now, the fact that they're now going to

engage in some degree of damage control to explain

what might otherwise be viewed as unfavorable

information in the documents, still doesn't make

the disclosure helpful to them - certainly not to

the jury. I mean, a jury's going to be looking at

the contents of the documents themselves; what they

say or what they don't say. Not the history of how

they got turned over.

There'll be no advantage at trial to these

defendants. There was perhaps - perhaps some public

relations advantage in front of Congress that was

involved, but not an advantage based on the

contents.

I mean, does somebody anticipate that the

jury is going to hear how these documents were

turned over?

MR. HEIMANN: I don't. I would agree

entirely --

THE COURT: I didn't expect so. It would

not be relevant for them to hear that.

MR. HEIMANN: Your Honor, I agree. You've

certainly, as I understood it, accurately recounted

your reasoning, at least as stated in open court,

and I think that that is sound. Although I might

add that I think the tobacco industry had in mind

the public relations more general than just the

Congress when they did this. But that probably

doesn't matter in any event in terms of the point

that your Honor is making.

But the point I'm making is, they shouldn't

be permitted, having undertaken to -- having

disclosed their documents for their own advantage,

albeit not with respect to the content but for the

reasons that your Honor has articulated, they

shouldn't then be permitted to come in to court

when we use the documents and say, "Look, this is

an aberration." Or, "Look, that's not corporate

policy." Or, "Look, he was out on a lark of his own

when he said that in that memo, " when the other

documents that they're holding back show that

that's not true; that it was corporate policy; that

it wasn't an aberration. That's the point I'm

making.

And the practical point, I think, is the

tension between your Honor's suggested solution,

which is, hey, let's wait and see whether they

actually do it at trial, and when they do it, then

I'll make them cough up all the documents. Or

whether your Honor thinks that that's really not

fair to us --

THE COURT: No, I understand that there

could be a large volume of documents involved, but

there could also be a very small volume of

documents, depending on who the witness is. I mean,

it's one thing to say you've got to turn over other

documents that were authored by this witness, or

something that would help explain the context that

this witness is now putting on what he said, or

what he knew, or didn't know, as opposed to the

entire universe of these broad subject matters.

I mean, I am certainly concerned about, you

know, gamesmanship at trial with regard to a

specific witness. But I think we -- I know it's

going to complicate trial, but I must say I think I

can handle it more fairly on sort of a witness-by-witness, issue-by-issue basis. If things start

being done at trial that seek to take advantage of

the undisclosed documents, I'll be attuned to that

and try to deal with it. But I don't -- I am

troubled, I say, by the idea, particularly the

subject matters here are very broad. They cover an

enormous time period. We are talking a massive,

wholesale waiver - massive is what you're arguing

for.

MR. HEIMANN: I think --

THE COURT: Do we really need that kind of

massive wholesale production to deal with perhaps,

you know, a few witnesses that might try to bob and

weave a bit on the stand about a particular

document and what they knew or didn't know when

they wrote it, or things like that?

MR. HEIMANN: I think I'll answer that

question my saying, I've made my best case and I

think I haven't persuaded you.

THE COURT: No.

MR. HEIMANN: And I'm prepared to move on

to Brown & Williamson.

THE COURT: Well, let me deal with -- on

the Bliley document, I'm comfortable that I should

not allow the Motion to Compel same subject matters

as the Bliley documents for the reasons I've

already articulated.

The waiver doctrine, when it extends to --

you're talking about waiver of an entire subject

matter, is predicated on there having been a waiver

of a valid privilege. We don't know the answer here

whether there was ever a valid privilege. There's

some strong indications that there was not, but I

have not ruled on it, and I don't intend to for

purposes of this motion.

With regard to extrajudicial disclosures,

I have read the von Bulow case, and while it may be

unique to the Second Circuit, its overall reasoning

strikes me as sound, and reasoning that I would

certainly pay close attention to even if I am not

bound by it. I think, at the very least, the von

Bulow decision and the reasoning that went into it

supports a very cautious approach at least to

subject matter waivers when the partial waiver was

made in the extrajudicial context. So that would at

least reinforce my sense that I should approach

this with caution.

I am satisfied here that these defendants

have not, at this juncture at least, obtained any

litigation advantage by this particular disclosure.

The only advantage they sought was an advantage

with regard to legislation that the plaintiff

itself is committed to support. In other words,

they sought an advantage in the joint effort to get

the legislation passed that will implement the

national settlement.

There has also been no selective

disclosure. The defendants did not select the

documents that Congressman Bliley originally asked

for nor were the documents themselves and their

contents in any way favorable to the defendants

position. Those document, after all, had been

selected by the Minnesota court based on the

Minnesota court's determination that they revealed

crime-fraud, something highly damaging to the

defendants' case.

The strategic decision that was made was

not to fight an embarrassing and probably loosing

battle on the crime-fraud issue in front of the

very legislative body that was seeking to pass

legislation to protect them. It was a strategic

advantage based on a public relations perception;

not based on the specific contents of the documents

themselves. We do not have here a situation where

someone has disclosed communications and privileged

material that is itself favorable. Rather, it was

a disclosure of unfavorable material to avoid the

embarrassing appearance of continuing to conceal

it.

Therefore, where there's been no

underlying finding yet that these documents were

themselves privileged, where the plaintiff itself

claims that they are not privileged, where the

disclosure was extrajudicial, under circumstances

that do not in my view lead to any litigation

advantage, at least none that can be seen at this

juncture, the Motion to Compel Production of

Documents on the Same Subject Matter as the Bliley

Documents will be denied.

As I indicated, this ruling is obviously

without prejudice to hear issues that may come up

at trial with regard to how these documents, or any

other documents, actually get used. And I'll

certainly hear the parties then on a very focused

context about what a particular witness has said,

or an argument that a particular attorney has made.

So it's without prejudice to hearing those issues

at that time.

All right. Let's move on to the Brown &

Williamson, Merrill Williams' documents and the

posting on the Internet.

Let me just ask at the outset, I'm a little

bit confused from reading the materials as to

exactly what it is that Brown & Williamson has

placed on this Web site. Are these -- I take it

these are documents that are some of the documents

that were stolen by Merrill Williams?

MR. HEIMANN: That's my understanding.

THE COURT: All right.

MR. HEIMANN: Let me put it this way, they

certainly are -- they correspond with documents

that appear on the lists of documents that are the

Merrill Williams' documents.

THE COURT: All right. Now, I hear from the

defendants, they say that we have never claimed a

privilege as to the specific documents that we

posted on the Net. I need to hear whether you agree

if that is true. And if that is true, my next

question is, are they, however, indistinguishable

from the bases for claiming a privilege in other

documents where they have claimed a privilege?

You know, the mere fact that you don't

assert a privilege is a waiver if the document is

privileged. So the mere fact that they haven't

claimed a privilege does not necessarily mean that

it's not a waiver unless I can compare the

characteristics of the documents that have been

released in some fashion with the characteristics

of the documents they are claiming to be

privileged.

And I'm functioning a little bit in the

dark because I haven't had the opportunity to do

that kind of comparison between these documents. So

if you could first start by helping me out on what

set of documents are we looking at, and how do they

compare to other sets of documents that are out

there?

MR. HEIMANN: Let me begin by responding to

the very first point, which is, whether or not

Brown & Williamson have asserted claim of privilege

to any of the documents out of the Merrill

Williams' group that they put up on the Internet.

My understanding was that they had, in this

court, in response to the motion that we brought,

the Commonwealth brought with respect to the public

domain documents, the Merrill Williams' documents,

Brown & Williamson's response in this court was

that all of them were confidential. That was

determined both in writing and in oral argument

before the Court. And then they went on to discuss

the claim, in the context of saying they were

confidential, they went on to talk about attorney-client privilege and work product.

I drew from that -- and I think the Court

did as well -- that they were maintaining that all

of the documents were claimed to be privileged. And

it was a surprise indeed to us when we got, in

response to our motion, the position that, "Oh, no.

We didn't mean that all of them were privileged.

Only that some of them were. And the ones that we

put up on the Internet were among the group that

weren't."

Well, I don't know what to make of that in

terms of the position they took in this court. My

reading of what they wrote and what they said was

that they were maintaining that they were all

privileged. But let's pass that for the moment.

It is not true that they have never claimed

that these documents are subject to either

attorney-client or work product privilege. They

have in fact done so in all sorts of litigations in

this field. In fact, if I might hand up to the

Court, because I've undertaken to analyze this to

some extent -- and keep in mind one thing about

this whole subject matter, it is sometimes

difficult because of the fact that Brown &

Williamson frequently doesn't describe the

documents in privileged logs and other disclosures

with complete accuracy, and also, as the result of

the fact that they apply different Bates numbers to

different documents -- they're the same document

that they produce in one case that they produce in

another, and it is sometimes difficult to make sure

that you're correlating things exactly right.

But having said that, let me move on to

describe what I've provided to your Honor. This is

an effort to take a sample of the documents that

are the subject of this motion, that is to say,

Merrill Williams' documents that were posted by

Brown & Williamson on the Internet, and to see what

claims of privilege they have made, Brown &

Williamson has made as to those documents in

various litigations.

The litigations that are the subject of

this analysis are, first, the Castano case. That is

the punitive class action that was filed in early

1994 in the Federal Court in New Orleans, and in

which these documents first became the subject of

controversy.

The next case is the Butler case. That's an

individual, second-hand smoker case in Alabama or

Mississippi.

MR. MOTLEY: Mississippi.

MR. HEIMANN: Thank you.

MR. MOTLEY: It's part of the south.

MR. HEIMANN: In Mississippi, where these

documents were, almost simultaneously with the

Castano proceedings, the subject of similar

proceedings, and were also the subject of a motion

by the plaintiffs regarding the claims of

privilege.

The third case is the Florida Attorney

General case. The fourth, the Texas Attorney

General case. And the last the Hawaii Attorney

General case.

Now, the documents themselves are set

forth in the binder corresponding to the number in

the first column. So let me just start with the

first document. This is the document known amongst

the plaintiff's side of this case as the "deadwood"

document. This is counsel -- general counsel for

Brown & Williamson -- I believe he was general

counsel at the time, in any event, he was in their

general counsel's office in 1985 when he wrote this

memo in which he described conversations he had had

with a gentleman who is an employee at Brown &

Williamson, Mr. Kohnhorst, about what Wells

proposed to do with documents that he designated as

"X" documents which included the "Janus" series.

The "Janus" series was a series of documents

relating to some research done overseas by Brown &

Williamson having to do with smoking and cancer, I

think it was.

In any event, this document in the Castano

case, on a privilege log that was submitted in that

case at the direction of the Court, was claimed to

be subject to both the attorney-client privilege,

and to what they characterized as a work product

privilege based upon lawyer selection. I'll pass

what that means unless your Honor is interested in

hearing those details.

But the important point, I think, is, they

claimed it was attorney-client privilege. On its

face it would appear to be. It's a communication

relating to -- or it's a document relating to

communications between counsel and client. The

subject matter itself would indicate that it was

intended to be confidential. He's talking about

destroying, or putting beyond the jurisdiction of

the United States, documents that were deemed to be

damaging to the interests of Brown & Williamson.

The document was also submitted as a

privileged document in a privileged log submitted

to the Court in the Butler case. These are events

that took place, at least in the Castano case, in

early to mid-1995, and I believe in the Butler

case, at or about that time as well.

Now, in the Florida case, curiously

enough, which came just a little bit later in terms

of time, the document was produced without any

claim of privilege by Brown & Williamson. The same

is true in the Texas case: produced without any

claim of privilege.

Then lo and behold, two or three weeks ago

in Hawaii, Brown & Williamson claimed that this

document was privileged and confidential in

pleadings filed with that court.

The second document, and I think the

analysis becomes self-evident at this point in

terms of its meaning, the second document is a

communication between a Mr. McCormick, who I

believe at the time was associated with, employed

by, one of the B.A.T. English entities in England.

British American Tobacco Company, Limited is the

stationery on which he wrote, addressing Addison

Yeaman, who at that time was counsel for -- inside

house counsel in the general counsel's office,

perhaps the general counsel, I'm not sure, of Brown

& Williamson.

The document has to do with the subject of

some research, scientific research that was going

on at the time concerning the Battelle Reports.

This document was, in Castano, claimed to be

subject to attorney-client privilege. In the Butler

case it was claimed to be attorney-client

privilege. In the Florida case it was claimed to be

attorney-client privilege. I don't have,

unfortunately, information as to Texas or Hawaii.

And then we can go down the line, your Honor.

Most of these documents, by no means all,

appear on their face to be subject, at least

setting aside the crime-fraud exception, to one

claim of privilege or another. Some of them clearly

are not, at least in my judgment are not. For

example, there's a research report, that's item 6.

It's the minutes of a research conference that was

held in Southampton, England in 1962, entitled "The

Importance of Phenols To The Health Question and

Their Possible Elimination From Cigarette Smoke."

It involved participants from all across

the world, employees of various B.A.T. companies.

There's nothing on its face that would suggest, at

least in my reading, that it's privileged.

Nevertheless, it was claimed to be attorney-client

privileged in Castano; and claimed to be work

product in Butler.

The point I'm making, I suppose, your

Honor, is, it is not true if this is Brown &

Williamson's contention that they have not asserted

claims of privilege to any of the documents that

went up on the Internet.

Now, let me allude, or let me go back to

where I started, which was how difficult it is

sometimes to correlate things.

There are some 80 or 90 documents that we

have been able to identify that Brown & Williamson

has put up on the Internet that correspond with

Merrill Williams' documents. Then the next step was

to figure out which of those 80 or 90 had been the

subject of privilege claims on privilege logs, or

otherwise, in other cases. There, I've been only

able to identify some 20 to 25. And the difficulty

there is, the privilege logs are so concise, I'll

be generous, in their description of the documents

that we weren't able, at least up to now, to

identify the other 75 or so. But I am confident, as

I say that, that most if not all of them are on

there.

And the reason I can say that is, this is

the privileged log that was submitted in Castano.

It supposedly lists all of the Merrill Williams's

documents. I say supposedly - these are the ones

that were claimed to be privileged (indicating).

These are the ones they've acknowledged were not

(indicating). There are about seven or eight pages

here, and about 700 pages there. So the likelihood

is that most if not all of the other 70 or so

documents that we have identified as being Merrill

Williams' documents that are on the Internet, were

claimed to be privileged in the Castano privilege

log. We just haven't been able to find them. We've

only been able to find the 20 or 30.

Now, where does that take us? I guess the

point is, they have claimed privilege, contrary to

their assertions here, for many of these documents,

the Merrill Williams' documents that they've now

put up on the Internet. They claimed it in some

cases. They haven't in others, and they have in

others again. They have been, to put it generously,

cavalier in their treatment of these documents,

contrary to what the law requires when one is

espousing and seeking to preserve a claim of

privilege to what the party contends to be

privileged documents.

I would submit to the Court based on the

fashion in which Brown & Williamson dealt with

these documents that the Court would be treating

them fairly to find that they've waived the

privilege as to all of them, and as to the subject

matter, although that's another point I suppose.

I don't know -- it's difficult to try and

deal with this kind of a situation in a document-by-document fashion. It's difficult to deal with a

situation where a party claims privileged documents

in two or three cases and then decides, for

whatever reason, they're better off by not claiming

privilege in another case. I just am at a loss as

to what to say at this point, and I don't know,

maybe we need to hear from Brown & Williamson to

explain why they've done this. And maybe their

explanation will enlighten us as to what the

appropriate sanction, if any, is.

But at this point, we would submit to the

Court that your Honor ought to find that by

voluntarily putting up on the Internet this number

of what they previously asserted to be privileged

documents, they have waived the privilege not only

as to those documents they put up on the Internet,

but as to all other documents that relate to the

same subject matter.

MS. LINDBLOM: I find it very interesting in

listening to Mr. Heimann that he did not say that a

single one of the documents that Brown & Williamson

has put on the Internet was claimed to be

privileged in Massachusetts. And I notice that

that column is missing from the chart that he

submitted to this court. It seems to me --

THE COURT: He acknowledged at the outset

they have not been claimed to be privileged here.

MS. LINDBLOM: That's right.

THE COURT: But the question again, is, if,

you know, by definition - by definition,

voluntarily disclosing a document without asserting

a privilege is a waiver if the document was

privileged, that's what a waiver is. So the fact

that you haven't asserted a privilege about these

documents in this litigation does not mean that the

posting on the Internet was not a form of waiver.

MS. LINDBLOM: Let me make clear that the

posting on the Internet seems to have taken on some

kind of iconic status here. What was posted on the

Internet were documents that were produced to the

Commonwealth. Just so we're clear on that. What

started out with the posting was the so-called

Minnesota Select Set which was made available to

the Commonwealth ages ago. So it's not like

there's something new that has happened by these

documents being put on the Internet. These are

documents that were produced in this litigation

that have been in the Commonwealth's possession for

a long time. So there's nothing new and different

by being posted on the Internet than there was by

the production in this case.

So then the question becomes, well, is

there some kind of waiver? And you know, the easy

answer is that when you sit down and you look at

documents you can make judgments when a lawyer is

involved as to whether or not it is privileged. And

a judgment that may have been made ten years ago

about a document may no longer be the judgment we

make today.

THE COURT: Why did you decide that -- why

did you now decide that document number 1 in this

notebook was not privileged? How is it

distinguishable, in other words, from the other

documents that you are still withholding on the

claim of privilege? This is a -- I gather Mr.

Wells was a lawyer at the time, communicating with

someone within the company.

MS. LINDBLOM: It's, you know, how do I

distinguish this document from thousands of others?

I can't do that right here.

THE COURT: Let's keep matters a little bit

simpler. The first thing that strikes me is, I'm a

little bit concerned about what light this now

sheds on the analysis that I did when the issue of

the Merrill Williams' documents as a whole were

presented to me. I'm not accusing anybody of

anything. I'm just -- I was unaware - I was unaware

that we had things like this that were among the

ones taken by Merrill Williams that were in fact

being disclosed and now posted for the public.

You know, one way of dealing with this is

simply, does this change the analysis of the

Merrill Williams' scenario --

MS. LINDBLOM: Oh, not at all.

THE COURT: -- and that set of documents as

opposed to the subject matters of these documents

in the broader sense. So compare this document, if

you will, to -- we can talk about it relatively

openly since the Merrill Williams' documents are

out there also in the public through other people's

efforts, not yours -- how does this differ from the

other Merrill Williams' documents that Mr. Williams

took, disclosed through others as to which you are

still claiming a privilege?

MS. LINDBLOM: Well, the simple answer is

that Merrill Williams stole a lot of documents.

Some of them --

THE COURT: Eight hundred something,

right?

MS. LINDBLOM: I don't know the number

offhand.

THE COURT: All right.

MS. LINDBLOM: Some of them that he stole

were privileged, some were determined not to be

privileged. And, you know, I can't speak to the

precise reasons why this was determined not to be

privileged. I can tell the Court, however, that,

first of all, this is the same document that Mr.

Heimann cited earlier in talking about the Bliley

documents. It is not a document that was produced

in response to the Bliley subpoena. It is not a

document as to which we have claimed privilege. It

is a document that was produced to them ages ago.

They like to bring this document up a lot.

You know, I remember being in Texas when they

claimed that we hadn't produced this.

THE COURT: I still want to know. I am very

concerned, I am very concerned. I mean, the Merrill

Williams' documents which are out there, I can look

at if need be to make this comparison myself. But I

am troubled to see things in this notebook, which

were apparently taken by Merrill Williams, which at

least appear on their face to be subject -- there's

many of them at least -- to the same kinds of

privilege claims that you have been -- that you

have been making with regard to other documents,

and then ask, well, how -- how is this not a waiver

of whatever privilege you claimed on the Merrill

Williams's.

I mean, when it was presented to me, my

understanding was, and the impression I got, was

that Merrill Williams had taken incredibly

sensitive, highly protected, etcetera, etcetera,

stuff. And to now find that, well, yeah, but we've

been turning over some of it, withholding some of

it, and we've done it differently in different

litigations, how does that now measure up to the

kind of care that you're supposed to show when

you're saying that disclosure was not with our

permission; we did everything we could to prevent

it, etcetera, etcetera?

MS. LINDBLOM: Well, it's very simple. When

someone takes documents from a law firm or from a

lawyer's offices, those documents may be highly

protected and kept very secret. There may also be

documents in there that while they are just as

highly protected in the lawyer's office, are

determined not to be privileged upon careful

review. And the fact that he stole documents that

we determined we could validly claim privilege on,

and some that we determined we could not later, or

did not chose to, doesn't in any way affect the

care with which those documents were kept.

What's happened here is that Brown &

Williamson and its attorneys have carefully gone

over things and said, you know, let's be sure that

when we claim privilege, we are claiming it on

documents that we truly believe to be privileged.

The Court itself has indicated that there are times

when she wonders whether some of the documents were

subject to a careful claim of privilege.

This is exactly the kind of procedure, by

the way, that's contemplated by the Zolan case

(phonetic spelling), where, you know, you get to go

back and look and make sure that your privilege

claims are right. And if you think that maybe some

of them shouldn't be privileged, you say they're

not privileged. That doesn't in any way effect the

status of other privileged documents unless the

Court finds that there is some kind of a waiver,

and there is something else that is closely

connected.

On this Wells' document --

THE COURT: I am puzzled, as I look at

this, what was the basis for deciding that some of

these documents were not privileged but the other

Merrill Williams' documents that you're still

withholding on claims of privilege are?

MS. LINDBLOM: Well, it could be, for

example, whether they reflected legal advice or

whether they reflected more kinds of business

advice, the very argument that the plaintiff makes.

It -- a party cannot be put in the position

of either having to say that everything a lawyer

writes is privileged, or that you've waived if you

claim that some things that a lawyer writes are not

privileged.

Now, if they truly think that this document

is privileged, is properly claimed to be

privileged, then they can come into the court and

say, you know, this really was a privileged

document; therefore, they have waived other things

that directly relate to this particular document.

I note for the Court, by the way, that

every single one of the documents that was retained

in the Brown & Williamson files that this refers to

have been produced to the plaintiffs. And every

time they make a stink about this, the same answer

comes back: they have these documents. So while

they like to talk about it as though we're hiding

documents, in fact, we are not.

Now, the fact is Merrill Williams stole

documents. The Court was correct in finding that.

He stole some that we have determined were

privileged, many of them. He stole others on which

Brown & Williamson has not claimed a privilege. And

I don't know if this statement about Hawaii is

true. I haven't -- you know, about this document

being claimed privileged in Hawaii. If it is, it's

a mistake, because I know that the company does not

claim privilege on this document. But I don't know

if it's true or not.

And if they want to argue about whether

there would therefore be a waiver as to the

documents referred to in this memo, let them. Of

course, the problem is, they've already got the

documents so there's nothing there to waive.

You know, the real problem here is that

what the plaintiffs did is, they went out and said,

"Oh, well, some of the documents that you put on

the Internet are documents that showed up in the

University of California in San Francisco files

that were stolen by Merrill Williams." From that,

they automatically say, "Therefore, you must have

waived something." They didn't even go back and

look at the privilege logs to see if we were

claiming privilege on these documents.

And the fact, you know, the only documents

that Brown & Williamson put up are documents that

have been produced to the Commonwealth. There's

nothing magical about the documents that were put

on the Internet. There's no special waiver by them

having been put on the Internet. They're documents

that were produced in this litigation. And there is

no claim by the plaintiff that Brown & Williamson

has made any kind of disclosure, whether on the

Internet or otherwise, of privileged documents -

documents that are claimed to be privileged in this

case.

MR. HEIMANN: That's just not true. They

have claimed privilege as to the documents. Now,

they didn't claim privilege, at least according to

the privileged log they submitted in Minnesota to

these documents, but they claim privilege in

arguing this case to your Honor on the Brown &

Williamson documents when we had the motion.

Now, they didn't go through each document

and say that, but they said it generically to you.

And in fact, they have submitted to us recently, if

I may, a proposed stipulation having to do with

these documents.

Your Honor will recall that your Honor

ruled that the documents, because they're in the

public domain, while they may not be admissible in

evidence, they can be used in the course of

discovery. And then we got into the question of,

the defendants wanted a protective order to protect

their interests with respect to the documents. And

they submitted a proposed stipulation to us, which

the last sentence of which reads, in the context of

protecting their claim of privilege, "In addition,

any portion of a deposition transcript, or other

document, or pleading that uses, contains or

reveals any of the Brown & Williamson documents,

any portion thereof, or any of defendants'

responses thereto, shall be sealed until further

order of the Court."

This is what they proposed to us be done

with respect to the treatment of these documents.

Now, that only makes sense if they are maintaining

that all of the documents are privileged and

confidential. And now counsel is arguing just the

opposite. That's exactly what they've done in these

various litigations. In half of them they assert

attorney-client privilege as to documents; in the

other half, for whatever reason that they deem

appropriate for their advantage, they don't.

MS. LINDBLOM: Your Honor, I'm not arguing

just the opposite of anything. We don't make

generic claims of attorney-client privilege. We

make claims of attorney-client privilege based on

the privileged logs. It is the plaintiffs who come

up with a list of the privileged documents - what

the plaintiff represented to be documents that were

from the privileged log that should be de-privileged.

And Mr. Heimann neglected to read the first

portion of that order which specifically refers to

privileged documents. We claim privilege on the

documents that we claim privilege on. We don't

claim privilege on all of our documents. And that

should be no surprise to anybody.

And the only documents that we've put on

the Internet are documents we don't claim privilege

on.

THE COURT: So, in other words, at least

roughly ten percent of the documents Merrill

Williams took, you acknowledge are not privileged?

MS. LINDBLOM: I don't know the

percentages, your Honor. I could have somebody find

that out.

THE COURT: Well, if there's 80-something

documents on the Internet, and they're Merrill

Williams, and there were 800-something Merrill

Williams' documents, is my recollection, it's about

ten percent.

MR. HEIMANN: My guess is counsel doesn't

know how many documents of the Merrill Williams

they claim privilege to and how many they don't. My

guess is counsel doesn't even know which ones they

claim privilege to and which ones they don't of the

Merrill Williams' documents. We asked them in the

course of these dealings to identify them for us,

and they refused.

MS. LINDBLOM: They asked us to identify

which documents Merrill Williams had stolen. Now,

I'm not in a position to tell this Court or anybody

else which documents Merrill Williams stole.

THE COURT: I thought we -- well, at the

time I entertained that motion, we were not looking

at specific documents. We were looking at the

conduct --

MS. LINDBLOM: Right.

THE COURT: -- of Merrill Williams. I never

got into the details of the documents or the list.

My recollection is that everybody knew which ones

they were. I think the Ness, Motley firm had

submitted a list to me and there's 800-something.

MS. LINDBLOM: Here's what we know, your

Honor. We know which privileged documents were made

public through the UCSF. We know which documents we

claim privilege on. And it is my understanding that

the Commonwealth's list was a list of document on

which we claim privilege.

We also know that there are additional

documents that Merrill Williams must have stolen

because they show up on the UCSF that we don't

claim privilege on. And we don't know if there are

other documents that Merrill Williams stole.

So for them to come to us and say, "Which

documents did Merrill Williams steal," is a

meaningless question. We can tell you which are our

documents. We can tell you which documents we claim

privilege on. We could, if forced, even, I suppose,

do a comparison of the UCSF database to our

databases, although that would be complicated. But

that's meaningless. What counts is, which documents

are we claiming privilege on. And when we refer to

the Brown & Williamson stolen documents, stolen

privileged documents, we're talking about documents

we claim privilege on.

The fact that he might have stolen non-privileged things just is immaterial to the

question of waiver of privilege.

MR. MOTLEY: Your Honor, I took the

deposition -- Excuse me. Ron Motley for the

Commonwealth -- of J. Kendrick Wells two years ago,

and in that deposition, document number 1, they

claimed privilege to. I haven't looked at all of

them in detail to see which other ones they claimed

privilege to and instructed him not to answer

questions.

MS. LINDBLOM: Your Honor, where we are is,

there is no assertion by the Commonwealth that any

of the documents that they're talking about were

claimed to be privileged in this case. Period.

Number two, if they want to claim that

there is some particular document that we don't

claim privilege on; that they say really should

have been privileged, and therefore, there is a

waiver as to related privileged materials, then let

them bring a motion as to that particular document.

And, you know, the Court can determine whether we

have waived a privilege that we should have

claimed, and therefore, whether other closely

related documents should be produced.

But, I note with interest, first of all,

that this notebook they come up with is new and

doesn't correspond, as near as I can tell, to the

exhibits that they've submitted. So it makes it

difficult to deal with on that basis. But they do

not assert in the affidavit supporting their motion

that they even attempted to find out whether the

documents that were put on the Internet have been

claimed to be privileged.

THE COURT: There's no dispute they've not

been claimed to be privileged in this case. But

there does seem to be this somewhat erratic pattern

of how they are handled.

Let me, to try to move forward on this a

little bit, in terms of treating this Internet

posting, in terms of the subject matter waiver,

i.e., subject matters of the documents, I have the

same problem with some of that argument that I had

with regard to the Bliley documents. It's still

extrajudicial. It's not -- you know, it's not at

this point a trial use of the documents, and so,

for the same reasons, not be ordering any kind of

wholesale production of all documents on the same

subject matters.

With some of the confusion here today, I'm

not prepared to really rule on what impact, if any,

this should have on my prior ruling about the so-called Merrill Williams' documents as a category.

And that's not, quite frankly, specifically even

briefed to me in this particular motion. It was a

different motion.

I would simply say, or perhaps -- or maybe

all I should say, we should move on to the next

item -- that I would be willing at the next

conference, you know, with some appropriate

briefing and time for everybody to clarify exactly

what documents they're talking about, how they

compare to other documents of the Merrill Williams'

set of documents overall, to revisit that.

I had not looked at that recently. That was

back in January, I think, that we did that. So it's

been some months.

MR. MOTLEY: Your Honor, may I clarify

something for the record?

THE COURT: Yes.

MR. MOTLEY: I asked my co-counsel from the

State of Hawaii, Mr. Gallagher (phonetic spelling),

who's in court, to call and ask and confirm what

Mr. Heimann said, and that is, that just last week

Brown & Williamson claimed document number 1 to be

privileged.

THE COURT: Well, I think that given the

confusion, I'd give everybody a little time, if

they want to refine their analyses of exactly

what's been produced where, what's been claimed

privileged where, and how that compares -- how

those documents compare with the other Merrill

Williams' documents that are still being withheld,

because that's what's puzzling to me. That's what's

very puzzling to me. And I'm certainly willing to

sort of revisit my analysis of the Merrill

Williams' documents with a clearer understanding of

the handling of some of them. Not that that's

necessarily going to result in a different

decision. It just creates confusion in my mind

about that analysis. And I'd be happy to give

everybody an opportunity to clear up that confusion

at, I guess, the next conference.

MR. HEIMANN: This would be very helpful,

your Honor, if your Honor would order Brown &

Williamson's counsel to provide to us a list of

those Merrill Williams' documents that they now -

now, today, claim still are privileged, either

attorney-client or work product privilege. We

don't know what that is. We've asked them in the

past to provide that to us, as I understand it, and

they have declined to provide that list to us.

We need that list in order to do what your

Honor is asking us to do, that is to say, to

compare those documents that they previously

claimed to be privileged but have yet since

abandoned that claim of privilege with those that

they continue to maintain privilege --

THE COURT: Let me ask you, I don't see why

we can't do it in a slightly different direction.

We have Ness, Motley's list of what it has

identified as the Merrill Williams' documents. I

think people need to look carefully at that list

and update and correct and clarify what on that

list is still being claimed to be privileged, and

what is not.

MR. HEIMANN: That's what I want from Brown

& Williamson.

THE COURT: It's a cooperative venture.

MS. LINDBLOM: That's different than what

he asked a minute ago. Sure, I mean, we take that

list to be 887 documents, and we'll take another

look at it and make sure that all of those 887 are

still being claimed as privileged, and if they're

not, we'll let them know.

Now, that's different than saying, "Tell

us which documents he stole that you're not

claiming privilege" --

THE COURT: No. It's a matter of putting

the lists together and updating and clarifying.

MR. HEIMANN: So that should be a very

simple matter. Can we have that this week?

MS. LINDBLOM: I don't know how simple a

matter it is, your Honor. You know, I can't tell

you. I don't go back and compare them. I'll get it

to them as soon as I can.

MR. HEIMANN: We need it, obviously,

sufficiently in advance of the next hearing so that

we can submit briefs to inform your Honor of the

situation and our position on it.

THE COURT: Well, let me just leave it at

that. I expect it to be ready by the next status

conference. And if there's delay in people getting

back to others, I won't hear them on how we can't

take it up at that status conference. We're going

to take it up at the next status conference.

Everybody need to be ready to do it by then, all

steps involved. How you divide the time up is up to

you. But be ready to clarify this situation. And

I'll go back and look at the underlying briefs that

were submitted on the so-called Merrill Williams'

documents in the first place to refresh my memory

of the issues before that.

Now, the 39,000 documents. This particular

motion, having reviewed the briefs, I should make

clear, I do not intend to reinvent the wheel on

some of what we discussed on the first round of

Bliley documents.

It is my understanding that a party is not

required to go into contempt in order to avoid a

waiver; that a party must exhaust all options short

of contempt, or else their disclosure will be

deemed voluntary, and that is a waiver.

And to some extent, some of the things the

Commonwealth is now briefing seem to me to suggest

that, no, we should be requiring these people to

risk contempt of Congress.

I think I've already decided they don't

have to do that. And I think that's a correct

statement of the law. My question here is, as I now

look at the paper record, at least, that was

created about the production of these particular

sets of documents, is, did these defendants exhaust

all steps short of contempt?

Last time there wasn't even this kind of

correspondence to look at. Now, we have this

correspondence, and I perhaps need to know a little

bit more than I presently do about the technical

requirements of how Congressional Committees work,

and what their rules are. Some of the attached

materials about other proceedings to initiate

referrals and contempts on some of these other

recalcitrant witnesses were making reference -- I

think one of the ones that came from the Senate,

some Senate Resolution that outlined procedures for

handling privilege claims in front of Senate

Committees.

I don't know about those things with regard

to this House Committee at this time, and how this

exchange of correspondence compares with whatever

those technical requirements were. And that seems

to me to be the principal issue that I've now got

to decide: did this exchange of letters meet the

technical requirements to exhaust claims of

privilege short of going into contempt? That's the

principal issue. And the other possible issue,

depending upon how that one comes out, is, is there

any evidence to suggest that these letters, these

exchange of letters, were some kind of a

prearranged or collusive sham ruling, as it were;

and what evidence, if any, does the Commonwealth

have to support a claim that it was?

But, first, if you would, educate me on

technical requirements.

MR. HEIMANN: May I hand up to your Honor

an excerpt from the rules of the Commerce

Committee, and also some relevant rules from the

House itself.

[Documents handed to Court.]

MR. HEIMANN: I attempted to highlight in

the copy that I've given your Honor, some of those

that I think are most pertinent.

We start with the general provisions that

provide that the Rules of the House, or the Rules

of the Commerce Committee, and at some Committee,

so far is applicable, except for things that aren't

really relevant to our discussion.

And then if you move, your Honor, to the

subject of Rule 21, which is at page 6,

"Subpoenas." Are you with me?

THE COURT: Yeah.

MR. HEIMANN: That provides that the

Committee or any Subcommittee may authorize and

issue a subpoena under clause 2M 2A, at Rule 11 of

the House, if authorized by a majority of the

members voting of the Committee or Subcommittee, a

quorum being present.

So the Commerce Committee Rules require a

vote of a majority of the members of the Committee,

a quorum being present, to issue a subpoena.

Now, there are no specific rules that we

have been able to find that describe as the Senate

Rule, which your Honor made reference to, the

specific process by which the Committee would

consider, hear, and resolve a claim of privilege or

other refusal on the part of a witness to comply

with a subpoena.

But we do know that the rules -- bear with

me, your Honor -- concerning a related subject --

now I'm going to page 10, at the upper right-hand

portion. And this is -- this is from the Rules of

the House as distinguished from the Rules of the

Committee, I believe -- those rules deal with the

situation where it is claimed by a witness that a

hearing or the giving of testimony in open session

will, for whatever reason, be adverse to the

interest of the witness. And under investigative

hearing procedures, at paragraph 4, "The Chairman

my punish breaches of order and decorum and of

professional ethics on the part of counsel by

censure and exclusion from the hearings, and the

Committee may cite the offender to the House for

contempt." Not the Chairman. The Committee.

There's that authority.

Now, the next section, Section 5 deals with

at least an arguably analogous situation, that is

to say, whenever it is asserted that the evidence

or testimony may tend to defame or incriminate the

person, "such testimony shall be presented in

Executive Session provided that a majority of those

present" -- meaning of the members -- "vote to that

effect."

So, once again, it's the Committee, not the

Chairman who has that authority. And, again, "The

Committee shall proceed to receive such testimony

in Open Session only if the Committee, a majority

being present, determines that such evidence will

not tend to defame," etcetera. So in both

instances, the authority of the Chair is

distinguished from that of the Committee, and it's

the Committee, by majority vote, that holds the

authority over those matters.

Now, beyond those rules, and frankly, your

Honor, that's the best we've been able to ascertain

from the specific rules, you have before you in the

pleadings, the reports by the House in the case of

Ralph and Joseph Bernstein, and in the Senate in

the case of William Kennedy, a Senate report

relating to the very situation that we're talking

about and what is required.

And I would submit, your Honor, from the

report in the case of Bernstein, it is very clear

that the -- where a witness has declined to respond

to a subpoena -- in this case it was based in part

upon attorney-client privilege -- the determination

of whether to allow or to overrule that claim of

privilege is made by the Committee and not by the

Chair acting without the vote of the majority of

the Committee members.

Throughout the Bernstein report, you will

see references to the Committee having given every

consideration to the claim of privilege. The

Committee having held a formal hearing or hearings

at which to hear from the reluctant witness

regarding -- hear the case of the reluctant witness

regarding the claim of privilege.

And I might, in the sense I want to avert

back to what I thought your Honor had said back on

the hearing on February 26, when you ruled on that

matter, where your Honor was of the view, and

informed the defendants, that at a minimum the

convening of a formal hearing and the obtaining of

a formal ruling was required in order for the

defendants to have taken the necessary steps short

of actually being held in contempt to preserve

their claim of privilege.

And your Honor's observations at that

time, I think, are perfectly consistent with, and

in fact supported by, both the House Rules that we

just looked at, that vest in the Committee the

authority to issue subpoenas; not the Chair. And in

the reports in the Bernstein and William Kennedy

matters, where it is very clear that it was the

Committee itself, not the Chairman, who held the

hearings, who considered the claims, who discussed

them and who then indicated, by vote, what the

ruling would be.

The Chairman may have announced that

ruling, may have communicated that ruling, but the

communication of the ruling was based upon, in both

instances and according to, I think, the best

interpretation of the rules, the vote of the

Committee. And that only makes perfect sense when

you think about what's at stake here.

In both these instances, Bernstein and

Kennedy, a very serious claim of privilege is being

asserted to resist the efforts of the Committee to

obtain what the Committee believed to be important

information in connection with its investigation.

Now, that is exactly the situation we have here.

The Committee of Commerce determined that

the documents that they wished to obtain from the

defendants were very important to their

consideration of substantially important

litigation, substantially important to this nation,

that is under consideration, and they sought to

obtain the documents from the defendants. The

defendants objected, claiming very substantial

privileges on the grounds of attorney-client

privilege and work product, to that effort, and

were entitled to receive a full and fair hearing

from the Committee on those assertions and

privileges, and entitled to receive a ruling from

the Committee on those claims.

And, moreover, I would go even beyond that,

we're entitled, we would submit, to receive a

direct order from the Committee not only overruling

the claim of privilege, but direct incompliance

with the subpoena in the face of those claims of

privilege. That's what happened in both the

Bernstein and Kennedy matters.

And in both of those instances, they -- the

Bernstein and Kennedy claims were to the effect

that, look, we can't produce documents short of

that kind of a process. In fact, they even wanted

to go further and say that contempt was required.

And the Committee said, "No." And I want to turn

particularly to the Bernstein opinion, because the

defendants, for their purposes, seize on a single

sentence in that report to support their position.

Under the section that begins in the

Bernstein Report, "Claim regarding bar

requirements," the witnesses, according to the

report, contend that because voluntary disclosure

is that which has not been judicially compelled,

disclosure pursuant to Congressional subpoena could

be considered voluntary," in taking the position

that would have naturally flowed from that, that

the witness would have had to have submitted to

contempt and then brought into court to vindicate

his position.