SCHWAB v. PHILIP MORRIS USA, INC. (E.D.N.Y. 2006)

WEINSTEIN, Senior District Judge.

1190. In 1994, BATCo spokesperson Michael Prideful stated that BAT's current position on nicotine was that cigarette smoking was habit forming, but not addictive. British Tobacco Companies Hushed up Health Dangers, The Independent, June 19, 1994 502576028-6030 (US 86882).

1191. BATCo promulgated a company notice on January 4, 1997, in response to Liggett's settlement obligation with a group of state attorneys general. The notice contained the following:

As to addiction, of course you can construct a broad subjective definition of addiction that includes cigarette smoking. Equally, under a meaningful objective definition, cigarette smoking is not an addiction. Regardless of the definition, smokers who want to quit do.

321007259-7260 (US 85344).

1192. In a March 21, 1997 statement posted for its staff on the British American Tobacco electronic bulletin board, BATCo again criticized Liggett's concession that nicotine was addictive, stating that Liggett's CEO was "simply brokering this deal in a desperate attempt to force one of the cigarette manufacturers to take over his financially troubled and failing tobacco interests." The statement added that "Liggett's action is not based on any new scientific discovery and does not affect British American Tobacco's attitude to its defense of litigation in either the US or other parts of the world." 321007261-7262 (US 46651).

d. American Tobacco Company

1193. On April 14, 1994, the Chief Executive Officer of American, Donald S. Johnston, testified under penalty of perjury in a nationally televised hearing before the House Subcommittee on Health and the Environment. During this hearing, Johnston denied that nicotine is addictive: Rep. Ron Wyden: Let me ask you. . . . Do you believe that nicotine is not addictive? Mr. Johnston: And I too, believe that nicotine is not addictive. Regulation of Tobacco Products (Part I) Hearings before the Subcommittee on Health and the Environment of the Committee on Energy and Commerce, House of Representatives, 103rd Congress April 14, 1994, 2023195738-5892 at 5780-5781 (US 21990).

e. Brown Williamson

1194. While B W knew internally that smokers were addicts who smoked for nicotine, the company understood that the industry's "free choice" argument in litigation would be undermined by any suggestion that smoking and nicotine were addictive. In the words of long-time general counsel Ernest Pepples, in a February 14, 1973 "Confidential" memorandum to public relations director John Ballock, one of the "salient problems now facing the cigarette industry" was:

ADDICTION — Some emphasis is now being placed on the habit forming capacities of cigarette smoke. To some extent the argument revolving around "free choice" is being negated on the grounds of addiction. The threat is that this argument will increase significantly and lead to further restrictions on product specifications and greater danger in litigation.

696001196-1199 at 1198 (US 85346).

1195. On April 14, 1994, the Chairman and Chief Executive Officer of B W, Thomas Sandefur, also testified under penalty of perjury in a nationally televised hearing before the House Subcommittee on Health and the Environment. At this hearing, Sandefur, consistent with his fellow CEOs, denied that nicotine is addictive: Rep. Ron Wyden: Let me ask you. . . . Do you believe that nicotine is not addictive? Mr. Sandefur: I believe nicotine is not addictive. Regulation of Tobacco Products (Part I) Hearings before the Subcommittee on Health and the Environment of the Committee on Energy and Commerce, House of Representatives, 103rd Congress April 14, 1994, 2023195738-5892 at 5780-5781 (US 21990).

1196. In a 1994 press release titled "The Media Frenzy. Truth vs. Distortions," B W attacked the press coverage of its CEO's testimony before Congress, stating that he was merely providing his personal opinion that nicotine is not addictive. 800335973-5975 (US 31913).

1197. In its January 2, 1996 supplemental submission to the FDA in opposition to the FDA's assertion of jurisdiction over tobacco products, B W (speaking for itself and BATCo) denied addiction and the prominence of nicotine in the smoking habit. The supplemental comments, signed by B W's Director of Scientific and Regulatory Affairs Scott Appleton, stated, "[U]nder scientifically verifiable criteria, neither cigarette smoking nor the nicotine in smoke is addictive." 490107317-7366 at 7364 (US 87152).

1198. In 1999, B W posted on its website a document called "Hot Topics: Smoking and Health Issues." While this document did admit that "by some definitions, including that of the Surgeon General in 1988, cigarette smoking would be classified as addictive," it went on to state that:

Brown Williamson believes that the relevant issue should not be how or whether one chooses to define cigarette smoking as addictive based on an analysis of all definitions available. Rather, the issue should be whether consumers are aware that smoking may be difficult to quit (which they are) and whether there is anything in cigarette smoke that impairs smokers from reaching and implementing a decision to quit (which we believe there is not.)

Response of Brown Williamson Tobacco Corporation to the United States' First Set of Requests for Admission to All Defendants, RFA# 390, April 19, 2002, USX6390001-0400 at 0094 (US 89555).

f. Lorillard

1199. On April 14, 1994, the Chairman and CEO of Lorillard, Andrew H. Tisch, also testified under penalty of perjury in a nationally televised hearing before the House of Representatives Subcommittee on Health and the Environment. During this hearing, Tisch also denied that nicotine is addictive: Rep. Ron Wyden: Let me ask you. . . . Do you believe that nicotine is not addictive? Mr. Tisch: I believe that nicotine is not addictive. Regulation of Tobacco Products (Part I) Hearings before the Subcommittee on Health and the Environment of the Committee on Energy and Commerce, House of Representatives, 103rd Congress April 14, 1994, 2023195738-5892 at 5780-5781 (US 21990).

1200. In 1996, a group of shareholders filed a proposal with the Board of Directors of Loews Corporation, the parent company of Lorillard, stating, "virtually every major health organization in the United States of America as well as throughout the world has concluded that cigarette smoking and smokeless tobacco-use [sic] are addictive." In responding to the proposal, the Board countered, that "the use of the term `addiction' ignores the well-known fact that millions of people have stopped smoking in recent years." Schedule 14A of Loews Corp., — Proxy Statement, Dated 5/14/96, Disclosure, 91762567-2592 at 2586-2587 (US 22080).

1201. In an October 1, 1997 letter to Senators Edward Kennedy and Orrin Hatch, Lorillard Chairman and CEO Alexander Spears denied the need for a warning on cigarettes stating that cigarettes are addictive. Spears wrote, "Although Lorillard does not believe that cigarettes are `addictive' in a stricter pharmacological sense, as the use of cigarettes does not result in euphoric intoxicating effects, we have no desire to engage in a public debate over the definition of the word `addiction.'" 83699666-9668 (US 85348).

1202. According to Lorillard CEO Martin Orlowsky, Lorillard has recently "accepted" that cigarette smoking is addictive, but that "acceptance" is dependent on a loose definition that includes any "pleasurable activity that can be difficult to stop." Orlowsky WD, 116:14-23.

1203. With respect to nicotine, CEO Orlowsky stated that Lorillard does not "take a public position one way or the other" on whether nicotine is an addictive drug and that the company still does not know whether nicotine is addictive or not. Orlowsky WD, 121:15-22.

1204. Dr. Christopher Coggins, Lorillard's Senior Vice President of Science and Technology agreed that cigarette smoking falls only within the loose definition of addiction relied on by Orlowsky and added that cigarette smoking is only as addictive as "sugar and salt and Internet access." Coggins PD. United States v. Philip Morris, 8/16/01. 116:22-117:14.

1205. Coggins claimed the same lack of knowledge of whether nicotine was addictive, adding that nicotine may or may not be an addictive agent in tobacco. In fact, according to Dr. Coggins, the addictiveness of smoking may be the result of a "simple physical repetitive pleasurable activity." Coggins PD, United States v. Philip Morris, et al., 8/16/01, 117:15-120:11.

g. Liggett

1206. On April 14, 1994, the Chairman and Chief Executive Officer of the Liggett Group, Inc., Edward A. Horrigan (formerly of RJR), also testified under penalty of perjury in a nationally televised hearing before the House of Representatives Subcommittee on Health and the Environment. During this hearing, Horrigan denied that nicotine is addictive: Rep. Ron Wyden: Let me ask you. . . . Do you believe that nicotine is not addictive? Mr. Horrigan: I believe nicotine is not addictive.

Regulation of Tobacco Products (Part I) Hearings before the Subcommittee on Health and the Environment of the Committee on Energy and Commerce, House of Representatives, 103rd Congress April 14, 1994, 2023195738-5892 at 5780-5781 (US 21990).

h. Tobacco Institute

1207. The Tobacco Institute was by far the Defendants' most vocal spokesperson in the industry's campaign to deny addiction and conceal internal research and knowledge. Over the decades, the Tobacco Institute, on behalf of the cigarette company Defendants, publicly disseminated countless false, deceptive, or misleading statements denying the addictiveness of nicotine and cigarette smoking. The following instances exemplify the many statements made by TI employees in the organization's attempts to deceive and mislead the American public about smoking, the role nicotine played in smoking, why quitting was so difficult, and whether people who could not quit smoking merely lacked will-power.

1208. When the Director of NIDA, Dr. William Pollin, testified before the Senate Committee on Labor and Human Resources in 1982 that the agency had concluded that nicotine met all the standard criteria used by NIDA, the Drug Enforcement Administration ("DEA"), the FDA, and the WHO, to define a dependence-producing drug, Defendants did not come forward with their internal research, as detailed in the preceding Section, supporting NIDA's conclusion. Instead, Defendants, through the Tobacco Institute and outside counsel, sent representatives and paid researchers to testify that NIDA was wrong and that nicotine did not cause addiction or dependence. (US 58808); Henningfield WD, 132:10-134:22.

1209. One of the witnesses Defendants produced at the Congressional Committee hearing was Theodore Blau, who stated on behalf of the Tobacco Institute and its members that, "There is no scientific basis for a statement that cigarette smoking is addictive." 680584197-4204 at 4201 (US 85349); TIMN0170757-0765 (US 85351).

1210. On March 12, 1982, the Tobacco Institute's William D. Toohey issued a press release summarizing the tobacco company-funded testimony of Blau before a Congressional Subcommittee. According to the release, Blau criticized the characterization of smoking as addictive, claiming that he placed the "attachment" to smoking in the same category as "tennis, jogging, candy, rock music, Coca-cola, members of the opposite sex and hamburgers." The press release went on to claim that "removal of these activities, persons or objects can cause sleeplessness, irritation, depression and other uncomfortable symptoms, similar to those felt by some with abstinence from tobacco." TIMN0120729-0730 (US 65625).

1211. The March 1982 Tobacco Institute press release failed to state that Blau was paid by the cigarette company Defendants to testify and that he was a member of, in Tobacco Institute President Sam Chilcote's words, the "Tobacco Institute Team." Instead, the press release indicated only that Blau was a "Florida psychologist," leaving the false impression that he had no ties to the tobacco industry. TIMN0120729-0730 (US 65625).

1212. In fact, as noted earlier, Blau was a CTR Special Account 4-recipient of thousands of cigarette company Defendant dollars through the law firm of Shook, Hardy Bacon. Moreover, he was one of the many industry-funded scientists whose testimony was reviewed and approved by Shook, Hardy Bacon prior to presentation before Congress. 1005125796-5796 (US 36096); 01335087-5087 (US 85352); 01335086-5086 (US 26842); TIMN197541-7581 (US 85353); 1005064612-4612 (US 85354); 01335102-5102 (US 26483); 1005061616-1625 (US 35959); 03746309-6316 (US 85355); 503655215-5215 (US 85356); 1005125795-5795 (US 85357).

1213. The April 1982 edition of TI's newsletter, The Tobacco Observer, also quoted Dr. Blau's addiction denial before Congress in an article titled "Smoking Said Not Addictive." TIMN0126427-6438 (US 85358).

1214. When the Department of Health and Human Services' Office on Smoking and Health produced a pamphlet stating that cigarette smoking was addictive, the Tobacco Institute went to the media with a statement denying addiction. The Tobacco Institute President informed industry general counsel in a memorandum dated March 7, 1983, that the Tobacco Institute "drilled" the media with the industry message that cited "substantial refutation of the addiction claim," including the 1982 testimony of Blau. Once again, the Tobacco Institute press release failed to reveal that Blau was an industry paid spokesman for the Tobacco Institute and its members. TIMN0350773-0775 at 0773 (US 85359).

1215. The Tobacco Institute then sent Curtis Judge, Lorillard President and Chairman of the Tobacco Institute Executive Committee, to speak for the industry before the Senate Committee on Labor and Human Resources on March 12, 1983, in opposition to legislation that would require additional warnings on cigarette packages, including a warning that smoking was addictive. Accompanying Judge were several industry-paid scientists, including Blau, who once again denied and disputed addiction and the mounting scientific evidence behind the NIDA pamphlet and the basis for the warning. TIMN0049411-9548 (US 85360).

1216. On March 17, 1983, Blau submitted a written statement denying addiction to the House of Representatives Subcommittee on Health and the Environment considering the same issue. In the statement, he made no mention of his tobacco industry funding and ties. TIMN0384222-4231 (US 85361).

1217. On the same date, the Tobacco Institute distributed a press release to newspapers and other news outlets across the United States, quoting Blau, with no industry attribution, again denying the addictiveness of cigarette smoking. TIMN0138444-8446 (US 85362).

1218. A May 12, 1983 Tobacco Institute press release quoted Dr. Blau's apparently "independent" denial of addiction. He had again been paid by the industry to testify before a Senate Committee on Labor and Human Resources: "Dr. Theodore H. Blau, a clinical psychologist in Tampa, Florida, and past president of the American Psychological Association, sharply disputed an assertion in pending legislation that cigarette smoking is `addictive.'" The Tobacco Institute did not tell the general public that Blau had testified on behalf of the tobacco industry and the Tobacco Institute. TIMN0120772-0773 (US 85363).

1219. The Tobacco Institute also denied that smoking and nicotine are addictive in its submissions and testimony leading up to the 1988 Surgeon General's Report. Henningfield WD, 134:23-136:1.

1220. In 1988, the Surgeon General released a report titled "The Health Consequences of Smoking: Nicotine Addiction." While the issuance of the 1988 Surgeon General's Report certainly represented a consensus in the scientific and public health community, there can be no doubt that the industry had reached an internal consensus on the addictiveness of smoking decades earlier. See Section V(B)(3), supra. The Tobacco Institute quickly responded to the Report with a series of advertisements, press releases, and public statements attacking and denying the Surgeon General's findings, even though these findings reflected the overwhelming medical and scientific consensus on the subject. For example, on May 16, 1988, the Tobacco Institute, on behalf of the cigarette company Defendants, issued a press release stating:

CLAIMS THAT CIGARETTES ARE ADDICTIVE CONTRADICT COMMON SENSE . . . Smoking is truly a personal choice which can be stopped if and when a person decides to do so. . . . The claim that cigarette smoking causes physical dependence is simply an unproven attempt to find some way to differentiate smoking from other behaviors. In fact, any feelings persons might have upon giving up smoking are those that would be expected when one is frustrated by giving up any desired activity. . . . The claims that smokers are "addicts" defy common sense and contradict the fact that people quit smoking every day.

TIMN0019963-9963 (US 21239); Dawson WD, 38:18-23.

1221. A second Tobacco Institute press release dated May 16, 1988 carried the headline, "CLAIMS THAT CIGARETTES ARE ADDICTIVE IRRESPONSIBLE AND SCARE TACTICS." This press release also attacked the Surgeon General's Report and specifically denied any dependence on nicotine, stating:

After years of well-funded research, it has not been established that cigarette smoking produces a physical dependence to nicotine. In fact, it has been impossible to establish that the feelings persons have upon giving up smoking are anything but that which would be expected when one is frustrated by giving up any desired habit.

TIMN0019964-9965 at 9964 (US 85366).

1222. In a July 29, 1988 press release, the Tobacco Institute stated that the Surgeon General's declaration that smoking is an addiction was "[an escalation of anti smoking rhetoric . . . without medical or scientific foundation." TIMN0125189-5189 (US 77065).

1223. The 1988 press release also utilized Tobacco Institute spokesmen/scientists Blau and Stephen Raffle to deny addiction. For example, the Tobacco Institute quoted Raffle in the press release, stating, "Clinically, cigarette smoking does not result in addiction-like behavior." Blau was quoted in the press release as saying that the Surgeon General's report was "misleading and unfortunate." TIMN00125189-5189 (US 77065).

1224. Raffle also provided a statement to the House subcommittee denying addiction. The statement was made at the Tobacco Institute's request, but contained no mention of any Tobacco Institute connection or sponsorship. TIMN207378-7384 (JD-080049).

1225. The July 29, 1988 press release failed to indicate in any way that Raffle and Blau were industry selected, managed, and paid consultants to Defendants and their law firms. Nor did the press release mention that their statements to the House subcommittee had been reviewed by Covington Burling lawyers and several Defendants prior to being delivered to Congress. Instead, the press releases implied that both scientists testified independently before the House Subcommittee. TIMN0125189-5189 (US 77065); 506419103-9103 (US 85372); 87701893-1903 (US 32065); 2025875995-5997 (US 85375).

1226. In a 1989 nationally broadcast interview on "Good Morning America," Tobacco Institute spokesperson Brennan Dawson stated: "I can't allow the claim that smoking is addictive to go unchallenged. . . . The majority of people who smoke make that decision, they can quit if they want to do it. It's a matter of willpower." TIME 389474-9479 at 9476 (US 21286).

1227. The Tobacco Institute published a brochure in March 1989 titled "The Anti-Smoking Campaign: Enough is Enough." In this document, the Tobacco Institute denied that smoking is addictive, emphasizing that: "The fact is that there is nothing about smoking, or about the nicotine in cigarettes, that would prevent smokers from quitting. . . . If a smoker wants to quit, it may take will power, but that's all it takes." TIMN0130559-0578 at 0574 (US 85376).

1228. In another nationally-broadcast interview, in 1990 on "Larry King Live," Ms. Dawson stated on behalf of the Tobacco Institute:

About 95 percent of those people have quit cold turkey. They've walked away from cigarettes and they've not gone through formal treatment centers or anything else. It's not like alcoholism or drug abuse. It's not an addiction. . . .

There's nothing about nicotine that prevents you from quitting. And that's the whole difference.

TIMN341405-1422 at 1420 (US 21363).

1229. On February 20, 1990, the Tobacco Institute issued a press release stating that Charles Whitley had appeared before the Senate Committee on Labor and Human Resources on behalf of the Tobacco Institute, had criticized proposed legislation, and had stated that requiring an addiction warning label on cigarette packages and advertisements "defies all logic, when, according to the Surgeon General, nearly half of all Americans who ever smoked have quit and most of the 41 million smokers who quit did so without formal treatment programs or smoking cessation devices." TIMN341503-1504 (US 85377).

1230. During a February 27, 1990 appearance on the program, "Nightwatch," Ms. Dawson stated on behalf of the Tobacco Institute that

Well, the fact is that now in the United States there are as many ex-smokers as there are smokers. And 95 percent of the people who have quit smoking have done it cold turkey. That is, they've just put down their cigarettes and walked away. And that's not the picture of the addictive drugs that we see, at least certainly not with the illegal substances, much less alcohol, that we see in terms of problems in society.

CORTI1731-1738 (US 87735).

1231. The Tobacco Institute published another press release dated July 12, 1990, stating that Blau had once again testified before a House Subcommittee denying the addictiveness of cigarettes. The Tobacco Institute provided the following in its press release, once again omitting any mention of the tie between Blau and the cigarette manufacturer Defendants:

The proposed "addiction" warning label is likewise unjustified. Dr. Theodore H. Blau, a practicing clinical psychologist from Tampa, Florida, said that, "In my view, labeling tobacco use `addictive' is misleading and potentially harmful to the American public." Blau noted that — unlike heroin addicts, cocaine addicts and alcoholics who are in the process of giving up these drugs — the alleged "withdrawal symptoms" which some smokers report when giving up smoking are "generally the same kinds of frustrations that one would expect to see when someone discontinues any well-established and well liked habit. Such symptoms as missing the habit and mild irritability are similar to the reactions experienced by those who give up coffee or sweets.

TIMN0026755-6757 at 6757 (US 85379).

1232. The Tobacco Institute paid Dr. Raffle to speak out again in 1994 following the sworn testimony of FDA Commissioner Dr. David Kessler that smoking was addictive. In a March 25, 1994 Tobacco Institute press release, the Tobacco Institute Media Relations department restated Raffle's industry-funded and industry-prepared comments that smoking was not "truly addicting" and that "in order to include smoking as an addiction, one must redefine that term, water down its meaning, and ignore critical differences involving every aspect of these behaviors." The press release did not disclose any connection between Raffle and the Tobacco Institute or the cigarette manufacturer Defendants. TIMN328214-8215 (US 77090).

1233. During the nationally broadcast news show "Crossfire" on March 10, 1994, Brennan Dawson, Vice President of Public Affairs at the Tobacco Institute, was asked by host Michael Kinsley, "Is nicotine addictive?" Dawson responded, "Absolutely not. Nicotine is first of all — I mean nicotine occurs naturally in cigarettes. Nicotine is also found in things as scary as potatoes." TI10720452-0464 at 0455 (US 87155*).

1234. During this same interview, Ms. Dawson admitted making the following statement regarding the addictiveness of nicotine:

Well, first of all, let's understand that — that sometimes we use the word "addiction" in very broad terms. We talk about being, you know, news junkies. We talk about being chocoholics. We — you know, we — we put all these broad terms[.] . . . But when we talk about addiction in a classical sense, we're talking about things like, you know, heroin and alcohol, for example, where you're either intoxicated and you can't make a decent decision, or you're in such physical withdrawal that you're probably in the hospital. And there's nothing about nicotine specifically that classifies it as such.

Id. at 0459-0460; Dawson WD, 45:7-48:23.

1235. She added that "[t]here is no chemical addiction" to nicotine. TI10720452-0464 at 0460 (US 87155*), Dawson WD, 45:7-48:23.

1236. During the nationally broadcast news show "Face the Nation" on March 27, 1994, Ms. Dawson was asked by host Robert Schieffer, "[D]oes the industry take the position that cigarettes are not addictive?" She responded, "The industry does take that position." (US 89319).

1237. During an April 1, 1994 appearance on the "MacNeil/Lehrer Newshour," when asked, "[d]o you — do you, in the industry, concede that nicotine is an addictive drug?" Ms. Dawson responded, "[n]o we don't." (US 89300), Dawson WD, 45:7-48:23.

1238. On April 13, 1994, Dawson again appeared on the CNN program "Larry King Live." When she was asked whether nicotine was addictive, she responded, "No, nicotine is not addictive." TIMN0010649-0650 at 0650 (US 62778).

1239. In this litigation, Ms. Dawson testified that the Tobacco Institute's public position was that smoking and nicotine were not addictive and that this position remained unchanged over the years. Dawson WD, 36:8-13; Dawson TT, 1/12/05, 9938:3-9940:19.

1240. Dawson, on behalf of the Tobacco Institute, also admitted that there was no scientific basis for the public statements denying the addictiveness of nicotine, Dawson WD, 49:5-50:4, and that the cigarette manufacturer Defendants never provided the Tobacco Institute with information that nicotine was a drug with a variety of physiological effects and was thought to be responsible for the addictive properties of cigarette smoking. Dawson WD, 53:9-12, 54:8-12, 55:10-14; Dawson TT, 1/12/05, 9958:1-11.

1241. The Tobacco Institute joined Defendants Philip Morris, RJR, B W, Lorillard, and Liggett in opposing the Food and Drug Administration's assertion of jurisdiction over cigarettes as drug (nicotine) delivery devices in 1996. In Volume III of the filing prepared and submitted on behalf of the Tobacco Institute and the cigarette manufacturer Defendants, the group denied that nicotine in tobacco was addictive, denied any significant pharmacological effects of nicotine, denied that smokers smoke primarily for nicotine, denied any "threshold" amount of nicotine necessary for addiction, and denied compensation by smokers of low tar products. 2505597781-7998G (see, e.g. 7793-7795) (US 23028*).

1242. The submission of the Tobacco Institute and the five manufacturers named above was publicized at a Tobacco Institute press conference on the morning of January 2, 1996. While the Tobacco Institute's Brennan Dawson led the press briefing, she was accompanied by Philip Morris' Steven Parrish, RJR's Charles Blixt, and Lorillard's Arthur Stevens. TI01750819-0820 (US 87156).

i. CTR

1243. Sheldon Sommers, Research Director of CTR and member of CTR's Scientific Advisory Board, told a Congressional subcommittee in hearings held in April 1969 that "smoking tobacco is not considered an addiction." 500925974-5998 at 5976 (US 85382); BWX0007189-7297 (US 36237).

1244. Robert Hockett, a subsequent CTR Research Director, stated during Congressional hearings held October 5 and 6, 1978, that while "there is an adjustment" to smoking over time, the issue of tobacco dependence was "a very tough question." 500925974-5998 at 5976 (US 85382).

1245. Statements such as these were misleading and are contradicted by decades of scientific research conducted by or funded by Defendants, and by a myriad of internal statements by company representatives.

j. Defendants' Conduct Continues

1246. Even today, although certain Defendants have acknowledged, to varying degrees, the overwhelming evidence that smoking is addictive, no Defendant accepts the Surgeon General's definition of addiction, no Defendant admits that nicotine is the drug delivered by cigarettes that creates and sustains addiction, and no Defendant acknowledges that the reason quitting smoking is so difficult, and not simply a function of individual will power, is because of its addictive nature.

1247. In 1999, Philip Morris first posted on its website a statement that "[w]e agree with the overwhelming medical and scientific consensus that cigarette smoking is addictive" and that it can be difficult to quit smoking. However, there is no mention of the established fact that the nicotine in cigarettes is what causes the smoker's addiction. TLT0770066-0088 (US 72408); Szymanczyk WD, 63:3-7; Parrish TT, 1/25/05, 11038:23-11039:8.

1248. On its current website, BATCo states that "[w]e accept the common understanding today that smoking is addictive." Yet, when discussing quitting smoking, the company makes no mention of the role nicotine plays in maintaining the addiction, downplays the success of nicotine replacement therapy in helping smokers quit, and still states that the most important factor in successful quitting is "having the motivation and the self-belief that you can quit." http://www.bat.com/oneweb/sites/uk3mnfen.nsf/wwPageswebLive/BEDB4BB/FDD4F7CE80256BF4000ee157? open document, TLT0231984-1984 (US 86692); (US 89563).

1249. On its current website, RJR states that, "Many people believe that smoking is addictive, and as that term is commonly used, it is." However, RJR later equivocates on this statement, stating its disagreement with the opinion in the health and scientific communities that smoking is as addictive as heroin or cocaine. RJR does not disclose the role of nicotine in the addiction. TLT0770095-0128 (US 72410); Beasley WD, 67:16-23.

1250. On its current website, B W recites its new public position that it "agrees that, by current definitions of the term `addiction,' including that of the Surgeon General in 1988, cigarette smoking is addictive." Two paragraphs down from this, however, B W reverts to its former denials, omitting any reference to nicotine and stating the following:

Although smoking can be very difficult to quit, we do not believe that the term "addiction" should be used to imply that there is anything in cigarette smoke that prevents smokers from reaching and implementing a decision to quit. Smoking may indeed be difficult to quit, but people can quit and do so in large numbers. The scientific literature demonstrates that smokers who believe they can quit, and who believe that the benefits of quitting outweigh the enjoyment of continuing to smoke, can do so.

TLT1020158-0158 (US 87157); Ivey WD, 94:16-96:1.

1251. B W's current Nicotine and Addiction section does not even discuss nicotine or its effects on the human body. In sum, the B W current, post-MSA position continues to deny that any aspect of smoking "prevents" a smoker from quitting. Moreover, this position continues to confuse and distort the facts on addiction, namely that smoking is very difficult to quit primarily because of nicotine and that quitting is not simply a question of willpower and motivation. At the same time, the position refers to "the enjoyment of continuing to smoke," suggesting that smokers smoke simply for continued "enjoyment," as opposed to a physiological craving or need for nicotine. TLT1020158-0158 (US 87157); Ivey WD, 94:16-96:1.

1252. Susan Ivey, former president and CEO of B W and current CEO of RJR and Reynolds American, stated in 2004 that while B W believed that nicotine is a "significant contributor to addiction," the company would not agree that nicotine is an addictive drug. Ivey TT, 11/16/04, 6194:21-6195:5.

1253. Lorillard's current position, as of 2005, is that smoking is addictive but only in the same way as "repetitive pleasurable activities that can be difficult to stop." Lorillard believes that smoking is not addictive in a "pharmacological sense." Orlowsky WD, 116:14-117:18. With respect to nicotine, President and CEO Martin Orlowsky stated, on behalf of Lorillard, that the company does not take a public position" and does not know if nicotine is an addictive drug or not. Id. at 121:15-22.

1254. The Lorillard website has recently added a statement that includes the sentence, "Cigarette smoking can also be addictive." However, this statement does not define the term "addictive," and omits any reference to nicotine. (JD-024979).

1255. Martin Orlowsky agreed that Lorillard's position was that smoking is addictive, but he "did not know what a `drug addiction' is." Orlowsky WD, 119:21-121:6. Orlowsky would only say that "nicotine is an important part of smoking" and refused to accept the fact that nicotine was the ingredient in cigarettes that made cigarette smoking addictive. Orlowsky WD, 119:21-121:6, 121:15-122:6. Orlowsky was a particularly evasive and unresponsive witness in this litigation. His testimony was not credible.

1256. While Philip Morris now appears to have accepted that smoking and nicotine are addictive, that new position was not adopted until 2000, after the filing of this lawsuit. After decades of consistent public denials by different corporate executives, Philip Morris USA President and CEO Michael Szymanczyk first admitted in June 2000 that nicotine was addictive. Philip Morris USA subsequently added a statement to its website in October 2000 agreeing that "cigarette smoking is addictive, as that term is most commonly used today." That statement has since been modified to read, "We agree with the overwhelming medical and scientific consensus that cigarette smoking is addictive." However, the Philip Morris USA website still omits any information on nicotine. Szymanczyk PD, United States v. Philip Morris, et al., 6/13/02, 249:15-254:8, 267:10-270:3.

1257. Philip Morris International changed its public position to agree with the public health community's conclusions that smoking is addictive at the same time (October 2000) that Philip Morris USA did so. 2078850517 (US 45218).

1258. Philip Morris adopted its current position that nicotine when found in cigarette smoke is addictive for the first time in January 2003, in a pleading filed in this case. USX639001-0400 (US 89555). The company's present definition of addiction is "a repetitive behavior that's associated with an adverse outcome." The "adverse outcome" is disease associated with smoking. Philip Morris believes that if the risk of disease were eliminated, cigarette smoking would no longer be an addiction. In addition, Philip Morris continues to dispute that nicotine is in and of itself an addictive drug. Carchman PD,United States v. Philip Morris, et al., 6/6/03, 14:6-15:12, 22:3-23:3, 23:19-20, 25:4-26:24, 29:1-13, 85:17-86:10.

1259. According to Denise Keane, general counsel for Defendant Philip Morris USA, Philip Morris never publicly explained its position that cigarette smoking is not addictive because the company believes it should properly be characterized as a drug dependence. Keane TT, 1/18/05, 10447:23-10448:7.

1260. Ms. Keane also admitted that when Philip Morris purchased three Liggett brands in 1999, L M, Lark, and Chesterfield, it removed the pre-existing package labels stating that smoking is addictive. Keane TT, 1/18/05, 10457:5-10460:16.

1261. While Philip Morris replaced the pre-existing package labels with onserts, these onserts did not contain the statement that Philip Morris agrees that smoking is addictive, even though Philip Morris had publicly stated this view in 2000 as already noted. Keane TT, 1/18/05, 10460:17-10462:15.

1262. While Philip Morris told people that it agrees that cigarette smoking is addictive, it has not told the public that it agrees that it is the nicotine delivered in cigarette smoking that is addictive. Ms. Keane, Philip Morris' general counsel, admitted this was material information that the public should possess. Keane TT, 1/18/05, 10533:5-10534:4.

1263. In spite of the overwhelming medical and scientific evidence, only one cigarette manufacturer Defendant, Liggett, has placed a warning on its packages flatly and clearly stating that nicotine is addictive. Liggett advertising and packaging state, "Smoking is Addictive." LeBow TT, 2/7/05, 12375:21-12376:1.

1264. Moreover, no cigarette company Defendant other than Liggett and Philip Morris, has admitted that nicotine in cigarette smoke is addictive. Liggett is the only Defendant to do so publicly.

1265. Geoffrey Bible, former CEO of Philip Morris Companies, was the ultimate authority on the content of public statements on smoking and health made by Philip Morris Companies' subsidiaries, including Philip Morris USA. Bible PD, United States v. Philip Morris, et al., 8/22/02, 83:9-84:9, 85:22-86:25.

5. Defendants Concealed and Suppressed Research Data and Other Evidence that Nicotine Is Addictive

1266. As demonstrated, Defendants' internal documents reflect a sophisticated understanding of nicotine and its role in creating smoking addiction — an understanding that is totally inconsistent with their long-standing public denials that nicotine is addictive. In addition, it is clear that Defendants intentionally withheld from public dissemination, from the public health community, and from government authorities, accurate and important information regarding the addictiveness of nicotine in cigarettes. Henningfield WD, 87:10-88:20, 161:23-167:6.

1267. Defendants suppressed their own extensive research findings discussed in Section V(B)(3), supra, supporting the conclusion that nicotine is addictive, and fostered controversy about the extent of scientific knowledge concerning nicotine and its addictive effects that was publicly available. Henningfield WD, 134:23-136:9, 161:23-167:6.

1268. As that evidence shows, Defendants themselves possessed, from their own in-house and external research, information that led them to conclude, long before public health bodies did, that the primary reason people keep smoking cigarettes is to obtain the drug nicotine, which is addictive. Defendants intentionally withheld this data (including many of studies on the physiological effects of nicotine in animals and humans, and much of their research on the determinants of nicotine dosing in cigarettes) when there were major public efforts to review and synthesize all available information. This occurred with the preparation of both the 1964 and 1985 Surgeon General's Reports and numerous congressional investigations. Defendants also engaged in a decades-long, elaborate, sophisticated, well-funded public relations offensive, denying and attacking the consensus conclusion they had long ago reached internally, but that the less well-funded public health community was belatedly reaching, that smoking is addictive primarily because cigarettes effectively deliver nicotine. Henningfield WD, 87:10-103:13, 104:14-110:8, 134:23-136:1, 150:14-159:8, 161:23-167:6. See also 490010042-0044 at 0043 (US 79285) (presenting "Addiction Statement," prepared by Shook, Hardy Bacon, deciding the company's position must be that smoking is not addictive and that, "Statements in company documents cannot refute this conclusion.").

1269. A September 9, 1980 Tobacco Institute internal memorandum revealed the recognition by the member companies that a public admission that nicotine was addictive would undermine their litigation defense that a person's decision to smoke is a "free choice":

[T]he entire matter of addiction is the most potent weapon a prosecuting attorney could have in a lung cancer/cigarette case. We can't defend continued smoking as "free choice" if the person was "addicted." TIMN0107822-7823 at 7823 (US 21275).

1270. A second reason Defendants denied addiction was to avoid regulation by the FDA. None of the companies' internal research and evidence about addiction was submitted in 1996 when the FDA sought to assert jurisdiction over cigarettes as drug (nicotine) delivery devices. Instead, Defendants vigorously denied every aspect of addiction. 25055597781-7998G (US 23028*).

1271. The following are examples of the actions Defendants undertook to either block or limit the nature and dissemination of nicotine-related research, as well as any evidence suggesting addiction.

a. Philip Morris

1272. As already discussed, Philip Morris intensively studied nicotine and both its pharmacological and physiological effects on smokers (sometimes called addictive, dependence-producing, or reinforcing effects) in an effort to increase its market share within the industry. However, Philip Morris withheld from the public its internal knowledge and acceptance that smoking, because of nicotine, was addictive. Similarly, Philip Morris's research demonstrating the addictive impact of nicotine on the bodies of animals and humans was suppressed, and in some cases terminated.

1273. In a 1992 memorandum titled "Philip Morris Behavioral Research Program," the company's long-time outside counsel, Shook, Hardy Bacon, reviewed and summarized much of Philip Morris's nicotine research conducted from 1969 to 1984 under the direction of Principal Scientist William L. Dunn. The research into nervous system effects and smoking behavior was conducted both internally (by scientists such as Dunn, Berntson, Gullotta, DeNoble and others) and by outside researchers (including scientists Hutchinson, Abood, Egle and others). 2021423403-3497 at 3406-3409 (US 36743).

1274. The funding for the Behavioral Research Program, or Nicotine Program as it was sometimes called, was terminated without explanation in 1984. 2025768108-8166 at 8113 (US 36743).

1275. Discussing Philip Morris's research into the pharmacological effects of nicotine, Dr. Dunn wrote the following in a "CONFIDENTIAL" memorandum to Research Development Vice President Helmut Wakeham on February 19, 1969: `[D]o we really want to tout cigarette smoke as a drug? It is, of course, but there are dangerous F.D.A. implications to having such a conceptualization go beyond these walls." 1003289921-9922 at 9921 (US 20167).

1276. Dunn wrote a "CONFIDENTIAL" memorandum dated October 19, 1977 titled "Smoker Psychology Program Review" summarizing his program for Tom Osdene. Dunn made three observations that represented the Philip Morris position on smoker behavior and nicotine research. First, the mission of the Philip Morris program was to "study the psychology of the smoker in search of information that can increase corporate profits." Second, Dunn admitted that while "[t]here is a general realm of psychological inquiry that would not make our lawyers nervous were the findings to be made public," there is "legal concern" with any scientific inquiry into the dependency-producing compound, or "reinforcing mechanism," of smoking. Third, Dunn stated that his research assumed that nicotine was the compound in question, a compound without which "the cigarette market would collapse, P.M. would collapse, and we'd all lose our jobs and consulting fees." 1000046538-6546 at 6538-6542 (US 26074); 2021423403-3497 at 3488 (US 36743).

1277. Dunn also compared smokers seeking nicotine to Pavlov's dogs and to hungry laboratory rats who press levers seeking food pellet "rewards":

Consider the smoker. Smoking the cigarette is the lever press. The effect of that smoking act upon the person is the reward. That effect reinforces the smoking act. He comes to push the smoking lever 10 to 60 times per day.

1000046538-6546 at 6543 (US 26074); 2021423403-3497 at 3485 (US 36743).

1278. Shortly thereafter, in a November 3, 1977 memorandum, Dunn revealed his strategy for concealing any unfavorable nicotine research results. Regarding a proposed study of nicotine withdrawal in rats to be undertaken by Philip Morris scientist Carolyn Levy, Dunn stated that he approved it. However, he cautioned that, "If she is able to demonstrate, as she anticipates, no withdrawal effects of nicotine, we will want to pursue this with some vigor. If, however, the results with nicotine are similar to those gotten with morphine and caffeine, we will want to bury it." 1003293588-3588 (US 20168).

1279. The terms of Levy's "Proposed Study of Nicotine Withdrawal in Rats" are contained in a November 1, 1977 memorandum from her to Dunn, where Levy states her hypothesis that her research would show that there are no withdrawal symptoms associated with nicotine. Levy intended to compare known morphine and caffeine withdrawal symptoms to nicotine's effects. Levy stated, however, that while she predicted favorable results, she understood that "it is dangerous to set out to prove the null hypothesis." 1003293589-3591 (US 21421).

1280. Robert Seligman, Vice President of Research Development at Philip Morris, wrote a memorandum to company general counsel Alex Holtzman dated June 27, 1978, attaching Dunn's report of a conference Seligman and Dunn attended called "Cigarette Smoking as a Dependence Process." The conference was apparently put on by the National Institute on Drug Abuse. Seligman prophetically warned Holtzman that:

It is my impression that at some time in the future, nicotine will be listed as a dependency drug (or smoking will be listed as a dependence process). Thus, it might be wise to contemplate the future legal ramifications of such an inevitability. Additionally, you might want to consider some mode of action which might forestall such a designation by the drug abuse community.

1003726420-6420 (US 85384) (emphasis in original).

1281. A memorandum to Seligman from J.I. Seeman, dated March 18, 1980, provided additional commentary on the Philip Morris "Nicotine Receptor Program." In Seeman's memorandum, he implied that any outside scientist working with Philip Morris had to share the company's interest. He wrote that, "An additional, and perhaps fundamental, requirement was that the individual(s) chosen to work with us is acceptable from a `political' perspective." 1003289974-9975 (US 87078).

1282. Dunn wrote an internal memorandum to Seligman dated March 21, 1980, describing Philip Morris's "Nicotine Receptor Program," an internal company research program focusing on the psychopharmacology of nicotine. The research was "aimed at understanding that specific action of nicotine which causes the smoker to repeatedly introduce nicotine into his body." While Dunn stated that the nicotine research would likely produce "significant scientific developments," he noted that it was "a highly vexatious topic" that company lawyers did not want to become public because nicotine's drug properties, if known, would support regulation of tobacco by the FDA. Dunn wrote, "Yet this is where our attorneys least want us to be." Moreover, lawyers were concerned that new "knowledge of nicotine" might permit "therapeutic breakthroughs to reduce the incidence of smoking." 0000127789-7792 (US 35152).

1283. Consequently, Dunn observed that while Philip Morris would continue its research program "to study the drug nicotine, we must not be visible about it." And while the program depended on a "heavy commitment" by Philip Morris, Dunn wrote that "our attorneys, however, will likely continue to insist on a clandestine effort in order to keep nicotine the drug in low profile." Dunn mentioned Shook, Hardy Bacon's Don Hoel and Jacob Medinger's Ed Jacob by name in his memorandum. 0000127789-7790 (US 21794).

1284. A March 16, 1983 memorandum from researchers James Charles and Victor DeNoble concerning their critiques of the Public Health Service's Report titled "Why People Smoke" acknowledged that Philip Morris had research results with implications contrary to the company's publicly stated opinions on nicotine, but that Philip Morris had not disseminated those findings publicly: "Recent experiments in Vic's [DeNoble's] project have shown that there is a behavioral component to tolerance (a learned phenomenon), but this work has not been published." 1005061346-1346 (US 20199). This was the work, described below, led by Drs. DeNoble and Mele. Mele WD, 11:6-15:4.

1285. Under the guidance of Drs. DeNoble and Mele, the Philip Morris Biochemical Research Division developed an important method for demonstrating that rats press levers and will work for nicotine. Such studies had been done earlier with monkeys, but there had not previously been a good rat model. Philip Morris was one of the first to develop a valid rat model for nicotine intravenous self-administration. As outlined infra. Philip Morris prevented the publication and presentation of this important new work, claiming the methodology was flawed. Henningfield WD, 161:23-167:6; DeNoble WD, 17:1-18:6, 22:6-23:18, 39:12-45:11; Mele WD, 20:3-22:12, 28:13-32:4.

1286. Drs. DeNoble and Mele had also demonstrated, by administering nicotine to rats, the existence of both physiological and behavioral tolerance to nicotine. Mele WD, 11:6-13:5. Behavioral tolerance — when tolerance develops to a behavioral effect of a drug — had not been shown prior to this research. Id. at 12:16-13:10. When Dr. Mele sought to publish this groundbreaking research in 1983, Philip Morris informed him that the tolerance study could not be published "because the study showed tolerance and physical dependence to nicotine." Id. at 14:2-10. Instead, Philip Morris would only allow Dr. Mele to write for internal consumption. Id.; 1000413881-3964 (US 20100).

1287. Shook, Hardy Bacon commented on an unpublished manuscript from Drs. DeNoble and Mele titled "Development of Behavioral Tolerance Following Chronic Nicotine Administration," that "[t]he bottom line is that the authors are maintaining that there is tolerance to nicotine, which involves both behavioral and physiological factors." The memorandum noted that such a finding would be detrimental to the cigarette industry:

It is obvious that such a report has undesirable implications for smoking and health litigation. Tolerance is frequently cited as one of the hallmarks of addiction. It is the industry's position that one of the classic criteria for addiction is tolerance, and that such has not been demonstrated in the case of nicotine. While it is true that the Mele and DeNoble paper does not discuss smoking in particular or attempt to extrapolate their experimental findings beyond the laboratory, there is nevertheless the implication simply by the fact that Philip Morris is doing this research, that it is viewing this research as relevant to smoking behavior.

2021424402-4412 at 4404-4405 (US 22847).

1288. In the same memorandum, Shook, Hardy Bacon pointed out the legal implications of the "unfavorable" Philip Morris internal nicotine research:

Research engaged in, as well as some possibly under consideration, by Philip Morris has undesirable and dangerous implications for litigation positions the industry takes in regard to smoking behavior. The pharmacological nature of the research implies strongly a view of the importance of nicotine. What is worse, research reports under Philip Morris' sponsorship contain claims of unequivocal demonstrations of reinforcement by nicotine in animals. This kind of research is a major tool of our adversaries on the addiction issue; the irony is that industry-sponsored research is honing that tool. In the final analysis, the performing and publishing of nicotine related research clearly seems ill-advised from a litigation point of view.

2021424402-4412 at 4412 (US 22847); 2021423403-3461 at 3422 (US 87038*).

1289. The intravenous self-administration rat model is considered a classic indicator that a substance has abuse potential. Using that model, and the same procedure that NIDA used to demonstrate abuse potential, the Philip Morris DeNoble study demonstrated the abuse potential of nicotine. DeNoble WD, 17:9-20:2; See also, 2023963269-3341 at 3312-2213 (US 20398) (DeNoble testimony at 1994 Waxman hearings).

1290. DeNoble's rat studies on self-administration and tolerance succeeded where others had failed and clearly were very significant at that point in history. DeNoble WD, 17:9-18:6. As DeNoble explained in his testimony before the Waxman Subcommittee in 1994:

The work that we did with nicotine was clearly some years ahead of the external community, scientific community. It wasn't until 1989 that Bill Corgal (sp) demonstrated that nicotine would function as an intravenously delivered reinforcer for rats, using the same models that I used — that Paul [Mele] and I used. The work that we did on self administration, on dependence, on tolerance, on frustration, clearly would have moved the scientific community much further along than it had been moved by that work not getting out.

2023963269-3341 at 3285 (US 20398). This assessment echoes Dr. Henningfield's view about the adverse impact that Philip Morris's concealment had on the scientific research community. Henningfield WD, 162:10-167:6.

1291. DeNoble's research colleague at Philip Morris, Dr. Paul Mele, also agreed with this analysis in his testimony before the Waxman Subcommittee in 1994:

. . . [S]ome of these studies were the first to be done with nicotine. I have no doubt that other people would have performed these studies subsequently just as has been done recently in Toronto. But they weren't being done at the time, and to quote a recent review article in Science . . . it basically took six or seven years for the nicotine self-administration model to be developed and come out. Whereas, it would have been out much earlier had this work been allowed to go out and stay out.

2023963269-3341 at 3286 (US 20398).

1292. Philip Morris management fully appreciated the scientific significance of the DeNoble rat self-administration nicotine study. At first, Dr. DeNoble obtained approval to submit it to a leading peer review scientific journal, Psychopharmacology, and there were plans to present results of the study at the 1983 American Psychological Association meeting in Anaheim, California. 2023963269-3341 at 3303 (US 20398).

1293. Prior to publication, at a 1982 presentation at corporate headquarters on the activities of the behavioral pharmacology laboratory including the results of the rat self-administration nicotine study, DeNoble was asked only one question, by the President and CEO of Philip Morris, Ross Millhiser: "Why should I risk a billion-dollar industry on rats pressing a lever to get nicotine?" DeNoble WD, 24:8-25:1.

1294. The saga of the Philip Morris Nicotine Program is summarized in detail in a lengthy 1992 document prepared by outside counsel Shook, Hardy Bacon titled "Philip Morris Behavioral Research Program." In this report, counsel describe many aspects of the program and cite specific documents showing a major internal research initiative that lasted from 1969 to 1984, involving many scientists, including DeNoble and Mele. The report makes clear that the program generated results and was still generating data in 1984 related to nicotine receptors, analogs, peripheral nervous system effects, central nervous system effects, effects on animal behavior, and differences between high nicotine delivery and low nicotine delivery cigarettes. 2021423403-3497 at 3408-3409 (US 36743).

1295. In a July 27, 1983 letter to the head of Philip Morris, Shook, Hardy Bacon attorney Patrick Sigrid summarized the nicotine research being conducted by DeNoble and recommended its suppression. 2046754720-4731 (US 20476).

1296. In April 1984, a few months after a top Philip Morris executive and lawyer visited the behavioral pharmacology lab, DeNoble's laboratory was suddenly, with no warning, preparation, or explanation, shut down and the animals killed. DeNoble WD, 38:4-16, 39:3-9; Mele WD, 25:19-26:21. In DeNoble's own words, "[O]ur laboratory was terminated in one day." 2504099642-9666 at 9660 (US 22708).

1297. Subsequently, DeNoble was told by several representatives of Philip Morris management that his lab was producing information that the company did not want generated internally. As DeNoble testified at a Congressional hearing:

Apparently, at that same time, some litigation had come out, some law suits, and we were told that the data we were generating, the types of studies that we were doing would not be favorable in that litigation. . . . They just said that if the work were removed from the company connecting it back to the company would be, you know, more difficult to do than if it's being done right in the company itself.

2023963269-3341 at 3305-3306 (US 20398); See also, DeNoble WD, 38:12-14.

1298. In 1986, Dr. DeNoble and Dr. Mele presented their findings on behavioral tolerance development to nicotine in rats to the Federation of American Societies for Experimental Biology in St. Louis, Missouri. In April that year, Philip Morris Companies Assistant General Counsel Eric A. Taussig sent each scientist a letter which stated in part:

As you are aware, upon your employment at Philip Morris . . . you signed an agreement (a copy of which is enclosed) requiring you to keep confidential, unless expressly permitted otherwise, research developed while an employee of the Company. The disclosure of such information as a result of your employment at Philip Morris without permission constitutes a breach of your agreement with the Company. In the future, you are expected to comply with the terms of the agreement.

DeNoble WD, 39:12-42:20; Mele WD, 28:13-30:22; 2047340350-0350 (US 22772); 2077541354-1354 (US 44603).

1299. DeNoble perceived this letter to be a threat of future litigation. In a September 10, 1986 letter, Taussig again threatened DeNoble and Mele with litigation if they published, or presented, their findings on nicotine self-administration and brain effects, accusing DeNoble of disclosing "information relating to research on a project titled `Brain Sites Involved in the Mediation of Behavioral Effects of Intraventricularly Administered Nicotine." Taussig wrote that Philip Morris was aware that they had on two occasions already presented the results of their nicotine research, allegedly in violation of their employment termination agreement. He informed them that "the Company cannot tolerate this type of conduct," and reiterated that "if you wish to publish or otherwise utilize research from Philip Morris, you must request and receive permission from the Company." He ended the letter by stating that "[a]ny further breach of your agreement will result in action being taken." 2023192361-2362 (US 20380). DeNoble was released from his confidentiality agreement with Philip Morris in 1994. DeNoble TT, 1/6/05, 9043:19-23.

1300. An April 1994 Shook, Hardy Bacon report titled "Philip Morris Research of Nicotine Pharmacology and Human Smoking Behavior" pinpoints exactly which research was never made public and the relationship of that research to Philip Morris products. When describing the "Nicotine/Acetaldehyde" research conducted by DeNoble in 1982, research that showed that acetaldehyde and nicotine functioned as "positive reinforcers," the Shook, Hardy Bacon report admitted that the research was never published:

CAVEAT: This research has never been published. There is nothing in the literature regarding the synergistic effects of nicotine and acetaldehyde. In addition, see description below re: Frank Ryan data on predicting sales.

Upon learning that acetaldehyde functions as a positive reinforcer, they endeavored to study the combined effects of nicotine and acetaldehyde on self-administration. Results indicated that reinforcing effects of these agents are additive.

Research done by Frank Ryan indicated that acetaldehyde and nicotine data could be used to predict cigarette sales at a 96% accuracy. . . . Frank Ryan ran a program and was able to predict blindly which cigarettes would sell and which wouldn't based on the combination of nicotine and acetaldehyde delivery.

2046819241-9268 at 9249-9250 (US 85265*).

1301. In a later section of the 1994 report, Shook, Hardy Bacon described how nicotine research undermined Philip Morris's public position denying addiction, and could invite regulation by the FDA:

D. Why Was Research Stopped

1. Sensitivity. [CAVEAT: Significance is self-evident.]

According to DeNoble, "we were the only tobacco company that I knew of, or that anybody else knew of, doing work with whole animals, live whole animals, and because of the nature of the research, that is, looking at self-administration, looking at the effects of nicotine on the brain function, the research was held restricted to upper management only."

DeNoble discussed the effect of his research on the company with Dr. Charles, Dr. Osdene, Dr. Pages, Mr. McDow, Max Hausermann, Mr. Pollock, and Jim Remington. . . . "The downside was that we were doing whole animal research, which looked to them like we were doing Federal Drug Administration [sic] research."

DeNoble understood that the research he was doing could undermine the public posture Philip Morris was taking with outsiders.

DeNoble discussed with Jim Charles and Tom Osdene the potential damage to the company of continuing animal research.

2046819241-9268 at 9256-9257 (US 85265*) (citations omitted).

1302. The 1994 Shook, Hardy Bacon report also acknowledged the sudden DeNoble "Laboratory Shutdown," adding "[CAVEAT: Significance is self-evident.]." The report then acknowledges that DeNoble's research was suppressed: "[H]e was not allowed to publish the research regarding the effects of nicotine and acetaldehyde." This occurred "after a letter from Shook, Hardy to the Philip Morris Legal Department and discussions between [attorney] Alex Holtzman and [scientist] Jim Charles." 2046819241-9268 at 9258-961 (US 85265*).

1303. None of the results or conclusions from the Philip Morris Nicotine Program or Behavioral Research Program were made public or were included in Philip Morris's and the industry's collective submission to the FDA in 1996. In fact, Volume III of the industry's "Comments" deny FDA assertions that research existed showing that nicotine is addictive. 2505597781-7998G (US 23028*).

1304. Philip Morris was not only interested in suppressing research that suggested nicotine addiction, but consumer products that combated nicotine addiction as well. In 1984, Philip Morris became aware that one of its major suppliers of a humectant (a chemical added to tobacco to keep it moist), Merrell Dow Pharmaceuticals, was marketing a new smoking cessation gum called Nicorette. Philip Morris understood the threat Nicorette posed, namely allowing nicotine-addicted smokers to quit, and took action:

Dow was told that we were discontinuing all humectant purchases because of Dow-Merrell's attack on cigarette smoking associated with the introduction of Nicorette, a nicotine-containing prescription chewing gum which reportedly aids patients in quitting smoking. . . .

Through a series of meetings over the past few years, Dow had been repeatedly advised of our displeasure over the anti-smoking nature of Dow-Merrell's Nicorette Program. . . . Dow was informed that the recent spate of activity can only be interpreted as a conscious corporate decision that Nicorette is more important than the Philip Morris (and other tobacco) business. That is, they cannot realistically expect a customer to spend millions of dollars for materials, when the profits from those sales, directly or indirectly, are used to attack that customer's product and perhaps reduce the customer's sales.

2023799799-9800 at 9799 (US 26801).

1305. Philip Morris's representatives met with Merrell Dow on several occasions and attempted to shut down the marketing and sale of Nicorette. An October 25, 1984 Philip Morris document recorded the following threat at one of the Philip Morris/Dow meetings: "It was reiterated that Dow had been a superior supplier and that we desired to maintain our relationship. However, future purchases would be predicated on Dow's performance as a supplier as well as the course of the Nicorette program." 2023799801-9802 at 9802 (US 37048); Henningfield WD, 167:7-168:22. See also 2023799804-9804 (US 26802); 2023799803-9803 (US 37049).

b. BATCo

1306. BATCo's efforts to conceal the nicotine research it carried out at Battelle Labs dates back to at least 1963. In a May 29, 1963 letter to the Tobacco Research Council ("TRC"), the English equivalent of CTR, Sir Charles Ellis enclosed several nicotine research reports, but stated that the BATCo Board "wish me to ask you that these reports should be kept strictly confidential" by the TRC executive committee. Ellis's letter is marked "STRICTLY PERSONAL AND CONFIDENTIAL." 105620759-0761 (US 85387).

1307. In an October 25, 1978 memorandum titled "Notes on BAT/ITL Joint Meeting," Ed Jacob, a longtime tobacco industry counsel in the United States, advised that there be "a total embargo on all work associated with the pharmacology of nicotine and the benefits conferred by smoking for three reasons," including "a pending California lawsuit which indicted nicotine as an addictive substance," and another lawsuit "against [HHS Secretary] Califano to show cause why tobacco should not be brought under the powers of the FDA." 110083647-3650 at 3649-3650 (US 76174).

1308. At a February 16, 1983 meeting of tobacco company directors, attended by Manny Bourlas of Philip Morris, L.C.F. Blackman, a BATCo board member and former head of research, and representatives from several European tobacco companies, the participants discussed how to respond to the impending Independent Scientific Committee on Smoking and Health ("ISC") Report. The participants agreed that the tobacco industry should not cooperate with the ISC and should respond to government requests by falsely stating that it had no relevant expertise. The participants agreed on the need to avoid any "sensitive" studies, including research into nicotine's role in "perpetuating the smoking habit":

3. The effect of nicotine at the levels achieved through smoking. While animal experiments could probably be designed to study the effect of nicotine (either by itself or as `spiked' additions) our response to the ISC should be that we have nothing to offer. The little information we have is already in the public domain, and we have no idea as to a worthwhile research programme . . .

5. The role of nicotine, at the relevant lower range of nicotine dosage, in perpetuating the smoking habit. While much information already exists in the literature (Russell, Ashton and Stepney etc) this is a particularly sensitive area for the industry.

If any future study showed that nicotine either was, or was not, associated with perpetuating the smoking habit, industry could well be called upon to reduce or eliminate nicotine from the product. (A heads we lose, tails we cannot win situation!)

We must not become involved in any collaborative study with the ISC.

109840698-0702 at 0699-0700 (US 21733) (emphasis in original).

c. Brown Williamson

1309. In 1963, as the following facts demonstrate, B W, acting in concert with its parent BATCo and RJR, concealed nicotine and addiction research from the Surgeon General's Advisory Committee, which was then in the process of preparing the Surgeon General's 1984 Report on smoking and health.

1310. The 1959-1964 BATCo nicotine research, carried out under code names "MAD HATTER," "HIPPO," and "ARIEL," was provided to B W. This was research that, in the words of BATCo's lead scientist Sir Charles Ellis, was designed to determine "what constitutes the hold of smoking, that is, to understand addiction." 301083820-3835 at 3826 (JE-46579). Ellis also acknowledged that the BATCo secret nicotine research gave the industry "knowledge of the effects of nicotine far more extensive than exists in published scientific literature." 301083820-3835 at 3828 (JE-46579).

1311. Moreover, B W executives were present at a 1962 BAT research conference where Ellis declared the group's position that "smoking is a habit of addiction." This copy of the conference report is stamped "Property of Brown Williamson Research Department." 650344433-4493 at 4439 (US 53468).

1312. PROJECT HIPPO I was completed in January 1962, finding that rats developed tolerance to nicotine and that nicotine shared many similarities with tranquillizers. The final report on PROJECT HIPPO II, dated March 1963, concluded that nicotine had many more beneficial physiological effects than tranquillizers, benefits that support "the pleasure of smoking" and lead to withdrawal. 105620620-0683 (US 20247); 105620569-0605 (US 20246).

1313. General Counsel Addison Yeaman, in a "STRICTLY PRIVATE AND CONFIDENTIAL" memorandum dated July 17, 1963, reviewing PROJECT HIPPO I and II, agreed that "nicotine is addictive" and that "we are in the business of selling nicotine, an addictive drug." Yeaman also advised that the company should develop filtered products that still delivered the necessary "nice jolt of nicotine." 682764441-4461 at 4455 (US 21030).

1314. On May 14, 1963, B W's President William S. Cutchins received a request for information from the Surgeon General's Advisory Committee regarding smoking and health matters. In a response to the Assistant Surgeon General James Hundley, Cutchins simply stated that B W contributed to smoking and health research via its contributions to the TIRC. 680249780-9781 (US 85390); See also, 680249799-9799 (US 85389). No information about PROJECT HIPPO I or II was supplied.

1315. Cutchins' letter was the carefully crafted product of industry legal advice. In a letter dated May 6, 1963, to B W in-house counsel DeBaun Bryant, outside counsel J.M. Johnson recommended that the company respond to the Surgeon General's Advisory Committee in an intentionally vague and confusing manner:

I am of the further opinion that any description in the letter to the Committee of the methods and steps involved in the various scientific research programs conducted by Brown Williamson must necessarily be so vague and incomplete as to be irksome to the reader. . . . Therefore, it is my suggestion that we state simply that we have conducted no medical research, having left that to TIRC. . . . I repeat it is unfortunate that Brown Williamson must submit anything, but this approach seems to me to be the most innocuous of the alternatives.

680249785-9786 (US 85391)).

1316. Johnson concluded his letter with the advice that B W's submission to the Surgeon General's Advisory Committee must protect the company's litigation position, and must contain only material that had already been published: "From a litigation standpoint I believe it is axiomatic that it is best to submit the least scientific material possible consonant with the objective of not irritating the Committee. As I mentioned on the telephone I would prefer to see only previously published material submitted. . . ." 680249785-9786 (US 85391).

1317. In a June 19, 1963 document titled "Note for Mr. Cutchins," BATCo president Ed Finch told his counterpart at B W that BATCo had sent B W copies of all the BATCo-sponsored nicotine research conducted at the Battelle Labs. Finch stated that because the reports were "sound piece[s] of research . . . it might be desirable to get them submitted to the U.S. Surgeon General's Committee." Finch also informed Cutchins that the Tobacco Research Council in Britain was sending copies of the nicotine research reports to the TIRC (CTR's predecessor) as well, "with a request that they consider whether it would help the U.S. industry for these reports to be passed on to the Surgeon General's Committee." 689033429-3429 (US 54274).

1318. A letter from BATCo's Sir Charles Ellis to B W's Yeaman, dated June 28, 1963, recalled that B W had already received the "HIPPO" research reports, and enclosed the May 1963 BATCo report from Dr. Haselbach titled "A Tentative Hypothesis on Nicotine Addiction." MTP0013569-3569 (US 76159).

1319. The "Tentative Hypothesis" document, quoted in detail at Section V(B)(3)(c)(¶ 1009), supra, closed with the following: "In conclusion, a tentative hypothesis for the explanation of nicotine addiction would be that of an unconscious desire to restore the normal physiological equilibrium of the corticotropin releasing system in a body in which the normal functioning of the system has been weakened by the chronic intake of nicotine." 536480912-0914 (US 20928).

1320. BATCo also forwarded its report titled "The Fate of Nicotine in the Body" to B W under cover letter from Sir Charles Ellis to chairman Bill Cutchins (stamped "Received") on July 1, 1963. In his cover letter, Ellis wrote:

I feel sure you will agree that a knowledge of the fate of nicotine in the body is a necessary accompaniment to studying the physiological effects that nicotine can produce. I hope you will be interested in the experiments which in my opinion add considerably to the published knowledge in this subject.

689033419-3419 (US 54271).

1321. At some point in 1963, B W was considering providing BATCo-funded Battelle Labs research on the addictiveness of nicotine to the Surgeon General prior to the first Report on Smoking and Health in 1964. B W changed its mind, as evidenced by a July 3, 1963 cable to BATCo Chairman A.D. McCormick, in which B W General Counsel Addison Yeaman stated his intention to withhold the research results from the Surgeon General:

Hoyt of TIRC agreed to withhold disclosure Battelle report to TIRC members or SAB until further notice from me. Finch agrees submission Battelle or Griffith developments to Surgeon General undesirable and we agree continuance of Battelle work useful but disturbed at its implications re cardiovascular disorders. . . . We believe combination Battelle work and Griffith's developments have implication which increase desirability [of] reevaluation [of] TIRC and reassessment fundamental policy re health.

689033422-3422 (US 22734).

1322. BATCo and B W shared their PROJECT HIPPO I and II reports with RJR General Counsel Henry Ramm and outside industry counsel Ed Jacob. In an August 5, 1963 letter from B W General Counsel Addison Yeaman to Ramm and Jacob, B W enclosed "herewith the three volumes of "Project HIPPO I and II." 689033411-3416 (US 31044).

1323. There is no evidence that the report or its findings were ever shared with the Surgeon General's Advisory Committee. Despite BATCo and B W's keen interest in nicotine and its impact on smokers' bodies and the extensive research Battelle Labs had conducted for BATCo, B W never disclosed to the Surgeon General its knowledge that nicotine was addictive, or the research it possessed showing craving, tolerance, withdrawal, and the many physiological effects of nicotine on the body.

1324. The Surgeon General's Report was published in January 1964. The Report did not identify nicotine as an "addiction," finding instead that nicotine was a "habit." This finding was based on the Surgeon General's Advisory Committee's conclusion (1) that smoking created a "desire" but not a "compulsion;" (2) that smoking did not result in a "tendency to increase the dose;" and (3) that smoking did not create a psychological and physical dependence on nicotine. Report of the Surgeon General (1964) at 350-51, VXA1601844-2232 (US 64057).

1325. These findings of the Surgeon General's Advisory Committee, and the Report's ultimate characterization of smoking as a "habit" instead of an "addiction," were in direct conflict with the extensive and sophisticated nicotine research in the possession of B W in 1963 — research which was intentionally kept from the Advisory Committee. Moreover, the 1964 finding of "habituation" is in conflict with the internal consensus of opinion at both BATCo and B W, as stated by Sir Charles Ellis, Addison Yeaman, and company scientists, that nicotine and smoking produced an "addiction," not a mere "habit."

1326. There is certainly a possibility, although it is impossible to say from hindsight, that had the Surgeon General's Advisory Committee had full knowledge of Defendants' research and the conclusions to be drawn from such research, his 1964 Report may have accurately identified nicotine as addictive long before that conclusion was reached 14 years later in 1988. Henningfield WD, 114:13-122:19.

1327. In later years, B W limited its involvement in nicotine research to studying the effects of nicotine on the central nervous system, work done in Europe under BATCo's supervision. This was done, as the following facts show, because of B W's concern that research demonstrating nicotine addiction or dependence contradicted the industry's public position and might lead to regulation.

1328. Following a visit to B W in October 1979, BATCo scientist D.G. Felton described the situation as follows:

There is said to be a general nervousness in the U.S. Tobacco Industry (apart from Philip Morris) in working on the effects of nicotine, because of the risk of demonstrating nicotine dependence or addiction. There are fears that this would result in the Industry coming under the Food and Drug Administration. This view was given me both by the CTR administration and separately by [outside industry counsel] Mr. Tim Finnegan. In the latter's opinion, any work concerned with the central effects of smoking or of nicotine would run this risk legally.

650032772-2786 at 2783-2784 (US 85385).

1329. In an August 16, 1984 memorandum to BATCo counsel Earl Kohnhorst, B W Senior Vice President and General Counsel Ernest Pepples advised against the use of a report by BATCo scientist R.P. Ferris titled "The Functional Significance of Smoking in Every Day Life" because of the report's concession that "many potential criteria for addiction identification are met by smoking behavior," and its reference to smoking as "one form of `drug usage', `psychoactive substance usage,' or `psychoactive drug usage.'" Pepples called any use of the report by the company "not appropriate or advisable." 682015254-5255 at 5254 (US 23022); 650000563-0740 (US 85393).

1330. In his memorandum to Kohnhorst, Pepples described the "more serious problems" with the Ferris report, which referred to nicotine as a drug, admitted "tolerance and withdrawal," and concluded that the pharmacological effect of nicotine is the "primary motivation" for smoking. Overall, Pepples was very concerned that the report would be used in litigation as evidence that cigarette smoking is addictive, and as a basis for regulation by the FDA. 682015254-5255 (US 23022).

1331. B W's efforts to block the presentation or use of Ferris's study went further. Soon after, in an August 28, 1984 letter to BATCo deputy chairman Ray Pritchard, Pepples expressed B W's objection to using the study, its concern that the Ferris study could seriously harm the industry, and its recommendation that BATCo legal counsel be involved in the planning of further research and drafting of reports related to nicotine and addiction. In his letter, Pepples implicitly asked Pritchard to conceal the Ferris study, and stop Ferris from making a presentation on the report at an upcoming research conference, in light of "the current legislative and litigation environment in the U.S." and "the possibility for involvement by the U.S. Food and Drug Administration." Pepples explained that the industry needed to oppose any concessions that nicotine and smoking are addictive "in order not to give a claimant an unjustified weapon to use against the company or the industry." 680583069-3070 (US 23024).

1332. As in his earlier memorandum to Kohnhorst, Pepples' letter to Pritchard expressed "great concern" about Ferris's report because it conceded that smoking is addictive. Pepples did not deny any of Ferris' observations or conclusions regarding nicotine and smoking; indeed, he admitted that Ferris' use of authorities and references was "generally accurate." Fearing involvement by the FDA, Pepples then recommended closer involvement by lawyers in scientific projects in the future. He wrote:

[T]he report seems to concede that many potential criteria for addiction identification are met by smoking behavior. For example, the report urges the position that the primary motivation for smoking is ultimately tied to a pharmacological "psychoactive" function of nicotine. . . .

Throughout the report, unfortunate concessions appear regarding "tolerance and withdrawal." The report frequently expresses that smoking has certain "therapeutic properties" and nicotine is compared to the action of tranquilizers, alcohol, etc. In addition, smoking is referred to as one form of "drug usage," psychoactive substance usage," or "psychoactive drug usage."

As you know in the current legislative and litigation environment in the U.S., claims of addiction have been and will be used against Brown Williamson by our adversaries. Such claims have been vigorously opposed in order not to give a claimant an unjustified weapon to use against the company or the industry.

In addition, the possibility for involvement by the U.S. Food and Drug Administration would be heightened by company or industry promotion of the theme of this report, as it will be generally perceived.

If such matters as the "Functional Significance" document and the Conference binders, enclosed herewith, are not already routinely vetted with BATCo lawyers, you may want to consider involving them more closely in both the conceptual and the drafting stages of these projects. Thank you very much for your help in this area of great concern for us.

521016786-6786 (US 22129).

1333. With respect to the Ferris report, B W attorney J. Kendrick Wells emphasized in a November 12, 1984 letter to BAT attorney Anne Johnson why the BAT study must not be publicized:

A plaintiff in a smoking and health products liability lawsuit in the U.S. could use the paper to support its argument that smoking is difficult to quit ("Addiction"). The plaintiff could argue that the paper contradicts the voluntary assumption of risk defense. It is doubtful whether editing can transform the paper into one which would not be helpful to the plaintiff in a products liability action.

680583045-3045 (US 85395).

1334. Around this same time, B W intervened to edit adverse references to addiction out of another BATCo report, titled "The Controversy on Smoking and Health — Some Facts and Anomalies" by BAT scientist Dr. L.C.F. Blackman. By letter dated October 25, 1984, B W attorney J. Kendrick Wells wrote BATCo counsel Alec Morini that "review" of BATCo publications by B W was necessary in light of ongoing smoking and health litigation; Wells went on to provide 45 paragraphs of revisions to Blackman's draft report in a marked-up report These included:

2. Delete Donald Gould reference. The article identifies cigarettes as a drug.

3. Delete reference to Dr. W.S. Cain. The article identifies short term and longer term pharmacological and physiological factors as important in the derivation of "habitual cigarette smoking". . . .

5. Delete. The point made here might be said to run counter to arguments that cigarette smoking is not addictive. . . .

680582499-2507 at 2500 (US 54052).

1335. The three paragraphs referenced above bearing adversely on the company's position on addiction were ultimately stricken from the report. 107332541-2574 at 2545 (US 26281); compare to 680582512-2512 (US 85396).

1336. In a May 10, 1994 B W press release, the company made the following claims — claims that are patently false in light of the company's pre-1964 acknowledgment that nicotine is addictive and the company's decision not to disclose to the Surgeon General BATCo's internal nicotine research showing addiction prior to the 1964 report:

It has always been B W's position — and still is — that cigarette smoking is not addictive under the standards set forth in the 1964 Surgeon General's Report. Calculated misrepresentations of the company's position merely encourage ill-informed grandstanding.

Brown Williamson was acknowledged by the Surgeon General for its "substantial cooperation and assistance" in connection with the 1964 Report. Contrary to the recent media reports, B W had not concluded that cigarette smoking was addictive prior to the release of the 1964 Report.

202337394-7394 (US 21965).

d. American Tobacco Company

1337. American attempted to keep its limited nicotine research hidden as well. For example, in a September 16, 1938 letter, H.R. Hanmer of American's R D Department informed George W. Hill, an American Vice President, that research performed on dogs had demonstrated an increase in blood pressure due to the cigarette's nicotine. Mr. Hanmer added that while this was "very clear-cut biological evidence," "nothing of this sort could ever be used in presenting facts to the public." MNAT00115492-5499 (US 21401).

e. Tobacco Institute

1338. The Tobacco Institute attempted to ensure that any potentially adverse nicotine and addiction research would not be performed. In a May 17, 1983 memorandum from Fred Panzer to David Henderson, Panzer wrote that certain legislation needed to be amended to make it favorable to the industry by preventing addiction research: "We need language for a rider to the appropriation bill for the National Institute on Drug Abuse (NIDA) that would prevent the use of appropriated funds for a study of the addictive properties of tobacco." TIME 370968-0968 (US 62769).

f. CTR and Other Defendant Funded Research Groups

1339. CTR-selected and funded nicotine research was intended to be favorable to the industry. See Sections III(C)(2) and III(E)(2-3), supra. Lawyers played an important part in carefully considering all nicotine and "psychopharmacology" research before it was started to insure it would stay "pro-industry." Id. Nicotine/behavioral research was discussed by the CTR Director and industry counsel at a July 28, 1976 meeting of the industry Research Liaison Committee, where long-time industry counsel Dave Hardy (of Shook, Hardy Bacon), American Tobacco counsel Cyril Hetsko, and others commented:

Hetsko: Concerned that such a study [on the benefits of smoking] might play into hands of F.T.C. subpoena fishing for information [regarding] smoker motivation. Would like to see conference proposal checked out before we go ahead. This program goes beyond the organizing committee and should be considered by "committee of counsel."

Hardy: Smoking behavior should be part of C.T.R. program as long as it is not "pro-company" but is kept "pro-industry."

Hetsko: No problem if it is generated by SAB. This is a totally different area from what SAB has been dealing with. Doesn't want another book "to haunt us," as the one from the "Caribbean Caper" did.

Yeaman: We take our direction from our members — the industry members. C.T.R. so far is clean of F.T.C. investigation, except possibly for the St. Martin conference.

Hardy: Dr. Gardner should proceed with planning but not take any action.

Hetsko: Decision for action should be made by lawyers, not C.T.R. or Organizing Committee. Chronologically, this meeting might be occurring just at a time that some of these experts are also being questioned by F.T.C. about motivation. This convergence might result in intensification of the conflict. Suggests Dr. Gardner present his program for review by all the lawyers. No records of such a review are to be kept.

1003719175-9179 (US 86406).

1340. The book from the "Caribbean Caper" that, according to Hetsko, "haunted" the tobacco industry, was a book edited by Philip Morris's Dunn and titled "Smoking Behavior: Motives and Incentives." The book was the result of the 1972 nicotine conference on the Caribbean island of St. Martin, where Dunn recalled that, "The majority of the conferees would go even further and accept the proposition that nicotine is the active constituent of cigarette smoke. Without nicotine, the argument goes, there would be no smoking." 2023193286-3304 at 3289 (US 22967). See discussion at Sections III(E)(2)(b)(¶ 264-265) and V(B)(3)(a)(¶ 903-905), supra.

1341. The book contained some outside researchers' views that smoking and nicotine had characteristics suggesting addiction. For example, Murray Jarvik's article in the book acknowledged evidence that nicotine was "the chemical underlying the smoking habit," and stated his personal opinion that "nicotine is the reinforcing agent in smoking." Another writer, Caroline Thomas, recognized "addictive smoking" as one type of smoking. A third author, Neal Miller, alluded to "anecdotal evidence" that nicotine administration in rats leads to withdrawal symptoms. The conference and the book were sponsored by CTR. LD90011031-0330 (US 87320).

1342. In November 22, 1977, CTR Associate Research Director Donald H. Ford stated the following with respect to nicotine in a proposal for in-depth CTR-funded nicotine research:

[I]t now seems evident that nicotine, like narcotics, influences the CNS in multiple ways involving effects related to most known neurotransmitters Further, the dependence which develops tobacco in humans (and withdrawal symptoms during the cessation of smoking) and the degree of tolerance to nicotine which occurs in certain animal paradigms strongly suggest that nicotine is a habituating agent.

1000041912-1918 at 1912 (US 20073).

1343. Dr. Ford presented his nicotine observations at a November 1977 CTR meeting. His proposed avenues of research related to "Receptors and sites of nicotine action," neurochemical studies, the effects of nicotine on fetal development, neuroendocrinology, and behavioral responses to nicotine. Id.

1344. In response to Dr. Ford's presentation and other CTR nicotine research, Philip Morris's Tom Osdene wrote to Robert Seligman on November 29, 1977, that "we are in the process of digging our own grave." He wrote further: "I am very much afraid that the direction of the work being taken by CTR is totally detrimental to our position and undermines the posture we have taken to outsiders." 2022246952-4952 (US 36865).

1345. Janet Brown, long-time outside industry counsel for American, reported on Ford's CTR research in her minutes of a February 1, 1978 meeting of industry counsel. Her detailed notes of the meeting revealed Defendants' knowledge about the importance of nicotine for smoking, and the importance of stopping Ford's nicotine research, when she discussed her opposition to Ford's central nervous system study. She wrote that while CTR President Addison Yeaman told her that Ford's nicotine research, which included the goal of finding a "nicotine blocker or substitute," was "mere speculation," she nonetheless responded as follows:

I said the "speculation" was dangerous and the work had some important commercial implications. A nicotine "blocker" or "substitute" could put the industry out of business overnight. Any information about it, or about CNS reasons "why people smoke," reaching one member before the others could give that member an enormous competitive advantage in developing a `blocker' for the "blocker," or in producing a "substitute" product, or a purely "tranquilizing" or purely stimulant product. I do not know what all the commercial ramifications are, but they suggest themselves to me as vast. These are arenas that CTR has traditionally steered well clear of and it must continue to do so.

968148608-8639 (US 88840).

1346. Industry counsel quickly made sure that Dr. Ford's proposal never received funding. As recited in the May 10, 1978 notes of the Industry Technical Committee Chairman Preston Leake (scientific director for American) to Arnold Henson (General Counsel for American), the proposed nicotine work was "ruled out" by outside counsel Ed Jacob. 955017148-7154 at 7149-7150 (US 87172).

1347. Philip Morris's Osdene and Seligman met with CTR Directors Gardner and Hockett at CTR in New York on January 5, 1978. Osdene's memorandum of the January 5 meeting states:

Dr. Seligman brought up the [CTR] grant by Dr. Abood in which one of the stated aims was to make a clinically acceptable antagonist [or blocker] to nicotine. This goal would have the potential of putting the tobacco manufacturers out of business.

1000286213-6214 at 6213 (US 35204).

1348. A series of CTR documents illustrate the attempts, and ultimate failure, of Dr. Avram Goldstein and Dr. Leonard Cornell to obtain CTR funding for a new addiction research facility. Dr. Goldstein's and Dr. Cornell's research specifically proposed an investigation by his Addiction Research Foundation of "nicotine receptors in the brain" and "the mechanism(s) of dependence on nicotine." It was the opinion of CTR chairman Addison Yeaman that "Dr. Goldstein's scientific credentials are of the highest." Dr. Seligman of Philip Morris was impressed by Dr. Goldstein's objectivity and intelligence. 03740559-0567 (US 88548); 686052326-2335 (US 88549); 686052262-2263 (US 88550); 026474-6475 (US 88551); 1003177412-7413 (US 88552); 1003728001-8007 (US 88554); 686052267-2289 (US 88555); 85681034-1034 (US 88556); 686052258-2259 (US 88557); 686052293-2296 (US 88558).

1349. Despite these views of the scientists' abilities, the industry decided to give no support to Dr. Goldstein, Dr. Cornell, and the Addiction Research Foundation. The rationale for the decision was spelled out in a September 19, 1978 memorandum from C.I. Waite to H.R. Kornegay (of the Tobacco Institute), with copies to Bill Shinn (of Shook, Hardy Bacon) and Ernie Pepples (of B W):

Mr. Cornell's foundation actually assumes tobacco (nicotine) is addictive and costs the U.S. citizen 42 billion dollars a year.

He also believes tobacco causes 300,000 premature deaths each year.

And he wonders if this is why we might not be interested. 686052246-2246

(US 88559).

1350. BATCo scientist D.G. Felton visited CTR in October 1979, where he was escorted by industry counsel Tim Finnegan from Jacob Medinger. In his typed notes of the trip to CTR, Felton recorded the following:

I then asked about possible legal problems arising from work on beneficial effects of smoking. In Mr. Finnegan's opinion, any work concerned with central effects of smoking or nicotine would run the risk that FDA would become involved with tobacco, something that was to be avoided, if possible.

100651251-1312 at 1299 (US 85402*).

1351. Shortly thereafter, in a larger meeting with CTR President Yeaman, Scientific Director Gardner, and CTR scientists, Felton also inquired into Leo Abood's nicotine work. He was told of the Defendants' decision to terminate his research given the risk of demonstrating addiction:

The discussion passed to effects of nicotine and the reasons why CTR did not continue their grant to Leo Abood. There is a general nervousness in the US Industry (apart from Philip Morris) in working on the effects of nicotine, because of the risk of demonstrating nicotine dependence or addiction.

100651251-1312 at 1299-1300 (US 85402*).

1352. A June 20, 1984 memorandum written by Shook, Hardy Bacon attorney Wendell L. Stone chronicled much of the CTR-funded nicotine research, and concluded that Defendants' termination of Abood's "nicotine receptor" work could be used by plaintiffs "to make a point regarding CTR that when research by its grantees appeared to be incriminating of smoking, then the CTR grants were terminated." 515709297-9340 at 9299 (US 20866).

1353. On the other side of the Atlantic, the industry's Tobacco Advisory Council (TAC), which was the European counterpart of the Tobacco Institute, was also screening research results to ensure that "anti-industry conclusions" were not made public. One particular example will suffice.

1354. Long-time tobacco industry-affiliated/funded scientists Francis Roe and Jeffrey Cohen were asked to prepare a "Nicotine Monograph" in 1977 for the member companies of the Tobacco Advisory Council (including Philip Morris, RJR, and BATCo). 2501160364-0371 at 0369 (US 87173).

1355. Dr. Roe forwarded the first draft of the monograph to D.H. Beese at the TAC under cover letter dated July 30, 1979, for review by the member companies; BATCo produced a copy of the draft "monograph" and Roe's letter, which stated that "It may well be that parts of the text will need to be expanded and the `conclusions' section given a new title or omitted. . . . I shall look forward to hearing from you and having a reaction from the Companies in due course." 1000138177-8237 at 8177 (US 87174).

1356. Roe and Cohen stated the following in a draft "Monograph" section titled "Smoking Behaviour: Role of Nicotine in the Smoking Habit":

There is now increasing evidence that the presence of nicotine may be the major factor responsible for the widespread use of tobacco in all human societies. . . . Whilst smoking fulfils a psychological need in certain individuals it is only the inhaling cigarette smoker who is likely to gain psychopharmacological satisfaction from nicotine and become dependent on it. Nicotine has been described as a psychoactive agent with tranquillizing, antianxiety, stimulant, depressant, antiagression, mood stabilizing and stress-attenuating properties.

1000138177-8234 at 8219 (US 87174).

1357. In the "Conclusions" section of Roe and Cohen's draft "Nicotine Monograph," the authors emphasized that:

The present worldwide campaign toward low-tar, low nicotine cigarettes faces the problem that nicotine-seeking smokers will need to inhale more smoke to obtain their nicotine requirement and in doing so inhale more tar. . . . Because of the weak absorption of nicotine from buccal and alimentary systems, chewing nicotine gum as a possible alternative vehicle to smoke inhalation would prove much less satisfying to the craving cigarette inhaler.

1000138177-8234 at 8221 (US 87174).

1358. These observations and conclusions did not survive review by the TAC and its member companies. Roe and Cohen's "Nicotine Monograph" was eventually published in 1981 by the TAC on behalf of the tobacco industry under the title "Monograph on the Pharmacology and Toxicology of Nicotine." In the published version of the "Monograph, the "Smoking Behaviour" section quoted above was edited dramatically. The statement that nicotine may be the "major factor responsible for the widespread use of tobacco in all human societies" was deleted entirely. The fact that an "inhaling cigarette smoker" will become "dependent" on smoking was deleted. In the "Conclusions" section, there is no mention of "nicotine-seeking smokers" or the "craving cigarette inhaler." The TAC and its member companies controlled the "Monograph" scientific review, and made sure that Roe and Cohen's document was industry-favorable on the issues of nicotine and addiction. 2021585328-5378 at 5365-5368 (US 87175).

6. Conclusions

1359. For approximately forty years, Defendants publicly, vehemently, and repeatedly denied the addictiveness of smoking and nicotine's central role in smoking. They made these denials out of fear that public acknowledgment of what was so well documented and widely accepted internally within their corporate offices and scientific laboratories could result in governmental (i.e., FDA) regulation, adverse liability judgments from addicted smokers suffering the adverse health effects of smoking, loss of social acceptability of smoking, and the ultimate loss of corporate profits. The evidence spelled out above is simply overwhelming that Defendants knew that smoking is addictive and knew that nicotine is the agent creating and sustaining that addiction. There is also overwhelming evidence that even though Defendants have known internally about addiction for decades, they have endeavored to keep the extensive research and data they had accumulated out of the public domain and out of the hands of the public health community by denying that such data existed, by refusing to disclose it, and by shutting down or censoring laboratories and research projects which were investigating the mechanisms of nicotine.

1360. Defendants assert that the public health community and the public itself has known for decades that nicotine produced dependence. For example, Defendants cite to the 1962 publication of the well respected Larson, Haag and Silvette compendium, Tobacco Experimental and Clinical Studies, which described nicotine's effects on the human nervous system and summarized existing research suggesting that people smoke to obtain nicotine, that nicotine has pharmacological effects, and that nicotine is addictive or habituating. (no bates) (JD-000500). Defendants also cite to the United States Supreme Court comment that, when Congress enacted the Federal Cigarette Labeling Act in 1965, "the adverse health consequences of tobacco were well known, as were nicotine's pharmacological effects." Food and Drug Admin. v. Brown Williamson Tobacco Corp., 529 U.S. 120, 138 (2000). Even if there is truth to Defendants' speculation that "everyone knew" of nicotine's addictiveness, there is no question that the public health community lacked the substantial and sophisticated understanding of nicotine's effects and role that Defendants possessed. Put quite simply, if the Surgeon General of the United States possessed the information and data Defendants possessed prior to publication of his 1964 Report, it is simply not possible that he would have ignored it.

1361. Moreover, there is a basic inconsistency in Defendants' position. If, in fact, "everybody knew" that smoking and nicotine were addictive, then why were Defendants publicly, vehemently, and repeatedly denying it?

1362. Defendants' denials misled the public about why quitting smoking is so difficult, exactly how difficult it is, and about why failure to quit is not simply a function of personal weakness or lack of willpower. In short, after reassuring the smoker that smoking was not bad for her health, and was not addictive, Defendants then blamed her for being unable to stop using the product they had so successfully marketed with false information.

1363. Defendants did not simply deny that smoking warranted the label "addiction"; they denied the entire concept of physiological dependence. The semantic battle Defendants have waged in the public realm and at trial is a distraction from the fact that, whether using the word "dependence" or "addiction," the core concept is the compulsive and uncontrollable use of nicotine reflected in drug-seeking and drug-taking behavior, all of which Defendants deny exist.

1364. Based on the extensive individual Findings of Fact set forth in this Section, the Court finds that Defendants have known for decades that cigarette smoking was addictive, and that nicotine is the addicting element in smoking behavior. Defendants' false and misleading statements relating to addiction continue even today.

1365. Moreover, Defendants deliberately and intentionally hid this information from the public and closed down research laboratories and on-going projects in order to ensure secrecy. Time and time again, Defendants falsely denied these facts to smokers and potential smokers, to government regulatory authorities, to the public health community and to the American public.

* * * *

E. Defendants Falsely Marketed and Promoted Low Tar/Light Cigarettes as Less Harmful than Full-Flavor Cigarettes in Order to Keep People Smoking and Sustain Corporate Revenues

2023. For several decades, Defendants have marketed and promoted their low tar brands as being less harmful than conventional cigarettes. That claim is false, as these Findings of Fact demonstrate. By making these false claims, Defendants have given smokers an acceptable alternative to quitting smoking, as well as an excuse for not quitting.

2024. Defendants used a combination of techniques to market and promote their low tar brands. Defendants' marketing has emphasized claims of low tar and nicotine delivery accompanied by statements that smoking these brands would reduce exposure to the "controversial" elements of cigarette smoke (i.e., tar). Since the 1970s, Defendants also have used so-called brand descriptors such as "light" and "ultra light" to communicate reassuring messages that these are healthier cigarettes and to suggest that smoking low tar cigarettes is an acceptable alternative to quitting. In addition to appealing advertising and easily-remembered brand descriptors, Defendants have used sophisticated marketing imagery such as lighter color cigarette packaging and white tipping paper to reinforce the same message that these brands were low in tar and therefore less harmful. See Section V(E)(5), infra (Defendants' deceptive marketing of low tar cigarettes).

2025. Even as they engaged in a campaign to market and promote filtered and low tar cigarettes as less harmful than conventional ones, Defendants either lacked evidence to substantiate their claims or knew them to be false. Indeed, internal industry documents reveal Defendants' awareness by the late 1960s/early 1970s that, because low tar cigarettes do not actually deliver the low levels of tar and nicotine which are advertised, they are unlikely to provide any clear health benefit to human smokers, as opposed to the FTC smoking machine, when compared to regular, full flavor cigarettes.

2026. As Defendants have long been aware, nicotine delivered by cigarettes is addictive (see Section V(B)(3), supra (addiction)). Defendants' internal documents demonstrate their understanding that, in order to obtain an amount of nicotine sufficient to satisfy their addiction, smokers of low tar cigarettes modify their smoking behavior, or "compensate," for the reduced nicotine yields by taking more frequent puffs, inhaling smoke more deeply, holding smoke in their lungs longer, covering cigarette ventilation holes with fingers or lips, and/or smoking more cigarettes. See Section V(E)(2)(b), infra (smoker compensation). As a result of this nicotine-driven smoker behavior, smokers of light cigarettes boost their intake of tar, thus negating what Defendants have long promoted as the primary health-related benefit of light cigarettes: lower tar intake.

2027. Defendants did not disclose the full extent and depth of their knowledge and understanding of smoker compensation to the public health community or to government regulators.

2028. Defendants' conduct relating to low tar cigarettes was intended to further their overarching economic goal: to keep smokers smoking; to stop smokers from quitting; to encourage people, especially young people, to start smoking; and to maintain or increase corporate profits.

1. Low Tar/Light Cigarettes Offer No Clear Health Benefit over Regular Cigarettes

a. History of Health Claims

2029. In the early 1950s, on the heels of a series of studies linking smoking and disease, the Defendant cigarette manufacturers began making health claims, often using models in doctors' white coats, in their advertising:

• American Tobacco Co. made representations "that its cigarettes were less irritating to the throat than competing brands, offered one's throat protection, were easy on one's throat, and provided protection against throat irritation and coughing. . . ." Federal Trade Commission, In the Matter of American Tobacco Co., Complaint, Findings, and Order in Regard to the Alleged Violation of Sec. 5 of an Act of Congress Approved Sept. 26, 1914 ( 47 F.T.C. 1393), decided June 20, 1951.

• R.J. Reynolds Tobacco Co. "represented to the public . . . that the smoking of such cigarettes . . . aided digestion"; "represented that the wind and physical condition of athletes would not be impaired by the smoking of as many Camel cigarettes as desired"; and "represented that the smoking of Camel cigarettes was soothing, restful, and comforting to the nerves, and protected one against becoming `jittery' or `unsure' when subjected to intense nerve strain. . . ." Federal Trade Commission, In the Matter of R.J. Reynolds Tobacco Co., Complaint, Findings, and Order in Regard to the Alleged Violation of Sec. 5 of an Act of Congress Approved Sept. 26, 1914 ( 46 F.T.C. 706), decided March 31, 1950.

• Liggett Myers Tobacco Co. represented "`directly or by implication, that Chesterfield cigarettes can be smoked by an [sic] smoker without inducing any adverse affect upon the nose, throat and accessory organs of the smoker.'" FTC v. Liggett Myers Tobacco Co., 108 F. Supp. 573 (S.D.N.Y. 1952).

• Lorillard made comparisons between the tar and nicotine yields of its cigarettes and those of its competitors. For example, Old Gold advertisements included statements that Old Gold was "lowest in nicotine and throat irritating tars and resins when compared with 6 other leading brands." Langenfeld WD at 42:5-10 (citing In the Matter of P. Lorillard Co., 46 F.T.C. 735 (1950)).

2030. As discussed in great detail in section V(E)(1)(a),infra, the FTC successfully prosecuted the Defendant cigarette manufacturers' for some of these health claims. See In the Matter of American Tobacco Co., 47 F.T.C. 1393 (F.T.C. 1951); R.J. Reynolds Tobacco Co., 46 F.T.C. 706 (1950), modified, 192 F.2d 535 (7th Cir. 1951), on remand, 48 F.T.C. 682 (1952); Federal Trade Commission v. Liggett Myers Tobacco Co., 108 F. Supp. 573 (S.D.N.Y. 1952), affirmed on opinion below, 203 F.2d 955 (2d Cir. 1953); P. Lorillard Co. v. Federal Trade Commission, 186 F.2d 52, 56-57 (4th Cir. 1950).

2031. Those prosecutions led to public calls for a ban on advertisements containing such health claims. (no bates) (JD 043377) (Advertising Age (Dec. 21, 1953)) ("Cigarette advertisers were urged today by the National Better Business Bureau to adopt an eight point code to eliminate unfounded health claims in cigarette advertising.").

2032. Given the public's concern over tar and lung cancer, the "White Coat" ads of the 1940s and early 1950s gradually disappeared, and a wave of ads featuring claims about filtration and tar reduction became the new basis for competition. See (no bates) (JD 000636 at 5) (1981 Surgeon General's Report) ("In the 1950s, cigarette manufacturers introduced cigarette filters as `health protection' and advertised them widely."); Harris TT, 10/18/04, 2783:15-18.

2033. Defendants competed through comparative filtration ads in the period following 1953. (no bates) (US 58700 at 199) (NCI Monograph 13) ("Companies initially responded to this health scare by introducing filtered products that were accompanied by advertisements with explicit health-related statements.").

2034. In 1954, the FTC issued a letter to all tobacco companies announcing its intention to adopt uniform standards for cigarette advertising "to prevent the use of false or misleading claims." (no bates) (JD 000332 at 276) (False Misleading Advertising (Filter-Tip Cigarettes), Hearings before the House Subcomm. of the Comm. on Gov't Operations, 85th Cong. (1957)). During the ensuing negotiations with cigarette manufacturers, the FTC advised the industry to conform its advertising with FTC decisions, "including decisions finding that comparisons of tar and nicotine between brands were false and misleading." Id.

2035. In 1955, the FTC adopted the "Cigarette Advertising Guides," proscribing any implicit or explicit health claims in cigarette advertising. The Guides did, however, provide a limited exception to this general rule, for what the FTC believed were implicit health claims. This exception allowed comparative ads claiming that a cigarette was "low in nicotine or tars," provided it has "been established by competent scientific proof applicable at the time of dissemination that the claim is true, and if true, that such difference or differences are significant." 50202 3956-57 (JD 003616 at 2) (FTC Press Release of 9/22/55 (Cigarette Advertising Guides)); (no bates) (JD 021949) (4 Trade Reg. (CCH) ¶ 39,012 (1995)). At the same time, some members of the public health community urged the development and adoption of cigarettes with reduced tar yields. Harris TT, 10/18/04, 2782:7-13; Burns TT, 2/15/05, 13357:8-16; Townsend WD, 80:22-81:10.

2036. By the mid to late 1950s, the American cigarette manufacturers responded with a heated "tar derby" of competing claims about the effectiveness of various filters: "[C]igarette companies advertised that certain brands were lower in `tar' and nicotine and, by implication, less dangerous." (no bates) (JD 001032 at 1-49, n. 174) (FTC Staff Report on the Cigarette Advertising Investigation (May 1981)); see also (no bates) (JD 004344 at 8343) (Unfair or Deceptive Advertising Labeling of Cigarettes in Relation to the Health Hazards of Smoking, 29 Fed. Reg. 8324 (June 22, 1964)).

2037. Smokers responded too, switching in droves to filtered cigarettes. Krugman TT, 12/15/04, 8603:8-14; (no bates) (US 58700 Fig. 4-3, at 93).

2038. However, Congress and the FTC perceived that the resulting competition was confusing since different cigarette manufacturers sought to substantiate their "low tar" claims based on different "scientific" testing methods. (no bates) (JD 000332 at 276) (False Misleading Advertising (Filter-Tip Cigarettes), Hearings Before a Subcomm. of the House Comm. on Gov't Operations, 85th Cong. (1957)) (discussing lack of standardized test method). Faced with the "tar derby" and perceived consumer confusion, the FTC concluded that, "[i]n the absence of uniform testing procedures, it was impossible to make claims about `tar' and nicotine levels that could be substantiated. . . ." (no bates) (JD 001032 at 1-49, n. 174) (FTC Staff Report on the Cigarette Advertising Investigation (May 1981)). Accordingly, in 1959, the FTC called a halt to the "tar derby" and "reiterated its view that tar and nicotine claims would be regarded as conveying the additional claim that lower levels of tar and nicotine reduced health risks." (no bates) (JD 000435 at 41) (J. Calfee, Cigarette Advertising, Health Information and Regulation Before 1970, Working Paper No. 134 (Dec. 1985)).

2039. "[T]he position taken by the FTC at this time was that the simple fact of listing tar and nicotine deliveries . . . constituted an implied health claim," because the "implication was that these cigarettes would be less hazardous or less harmful." Harris TT, 10/19/04, 2902:19-2903:3. On December 17, 1959, the FTC informed tobacco manufacturers that it henceforth would bar all health claims in advertising, including "all representations of low or reduced tar or nicotine, whether by filtration or otherwise." 1005150070 (JD 004534). The FTC further "inform[ed] the industry that in its opinion the evidence then available would support a complaint against any marketer who made any reference to tar or nicotine content, charging that such a reference was false and misleading." 670310575-588 (JD 040931 at 3).

2040. A month later, the FTC requested that the cigarette manufacturers agree to make no references to tar and nicotine in their advertising, and the manufacturers agreed. 1005150056-57 (JD 004535); 1005150051-52 (JD 003617).

b. The FTC Method

2041. The FTC thought the 1964 Surgeon General's Report provided "an evidentiary foundation to support a Rule requiring a positive statement [of average `tar' and nicotine yields] in [cigarette] labeling and advertising." Letter of 4/11/66 from Paul Rand Dixon, FTC Chairman, to Sen. Warren Magnuson (670310575-588), JD 040931 (at 3).

2042. Within a week of the issuance of the 1964 Surgeon General's Report, the FTC proposed a Trade Regulation Rule that, among other things, would permit the advertising of tar and nicotine yields, provided that such advertising was "verified in accordance with a uniform and reliable testing procedure approved by the Federal Trade Commission." 29 Fed. Reg. 530, (no bates) (JD 040184 at 532); 29 Fed. Reg. 8324 (1964), (no bates) (JD 004344 at 8355-56).

2043. According to the FTC, "[c]onfusion can be obviated, and the ability of consumers to make an intelligent choice among competing brands protected, only if the measurement of cigarette-smoke ingredients accords with a uniform, fully reliable and approved testing procedure." 670310575-588 (JD 040931 at 4).

2044. "[T]here was substantial support for the proposition that an accurate statement of tar and nicotine content would be in the public interest. . . ." 0002905512 (JD 004537 at 5512).

2045. The National Interagency Council on Smoking and Health "hope[d] that [the FTC would] take the steps necessary to make it permissible for cigarette manufacturers to list tar and nicotine content on the labels of cigarette packages." 670310575-588 (JD 040931 at 8); 1002905514 (JD 004537).

2046. The American Cancer Society, the American College Health Association, the Roswell Park Memorial Institute, and others expressed support for the proposed rule. 1002905512-5519 at 5514-5519 (JD-004537).

2047. On March 24, 1966, the FTC notified cigarette manufacturers that they would be permitted to advertise tar and nicotine yields provided they used the Cambridge Filter Method, as published by Dr. C.L. Ogg of the U.S. Department of Agriculture, to substantiate any yield claims, and so long as "no collateral representations" were made as to the "reduction or elimination of health hazards" from lower yield cigarettes. (no bates) (JD 004538); see also 680236589 (JD 004612); (no bates) (JD 001032 at 4-3).

2048. The FTC Cambridge Filter Method uses a machine to "smoke" the cigarette for a designated puff volume at a designated interval for a designated period of time. As the smoke is drawn into the machine, it passes over a filter known as a Cambridge pad, on which the particulate tar matter is collected. That accumulated matter is measured to calculate the tar and nicotine yields for the cigarette. The FTC Method was developed to provide consumers with a relative ranking of nicotine, tar, and carbon monoxide yields from any cigarettes that were tested. Henningfield WD, 47:11-48:2; Henningfield TT, 11/22/04, 6794:8-6796:6.

2049. When the FTC gave manufacturers permission to make disclosures of tar and nicotine yields, it "recognized that the result would be that consumers would, in fact, believe that lowered delivery cigarettes were less hazardous and less harmful." Harris TT, 10/19/04, 2913:20-24.

2050. The FTC's change in policy to permit these claims was designed to achieve two goals: provide consumers with an incentive to smoke the lower tar/nicotine cigarettes rather than the higher tar/conventional cigarettes and give manufacturers a competitive incentive to produce cigarettes with low levels of tar and nicotine. Harris TT, 10/19/04, 2909:1-25.

2051. The federal government wanted to provide consumers with information that they could use to compare brands. See, e.g., FTCDOCS 0259-1751-1793 (JD 004353 at 1) ("The `tar' and nicotine testing program was intended to provide smokers seeking to switch to lower `tar' cigarettes with a single, standardized measurement with which to choose among the then-existing brands.").

2052. In addition, given the premise of a dose-response relationship — i.e., more tar equals more disease risk — the FTC wanted to encourage competition among the cigarette manufacturers, thereby increasing the research, development, and production of cigarettes with lower FTC-measured tar yields. See, e.g., (no bates) (JD 043418 at 17) ("Based upon the proposition that lower yield cigarettes present a lessened hazard to the American public," the FTC has acted to "prompt cigarette manufacturers to develop less hazardous cigarettes."); see also (no bates) (JD 004615 at 1) (Sen. Warren G. Magnuson, News Release, Nov. 27, 1967) ("The results of the first government tests ranking cigarette brands by tar and nicotine levels were released today. . . . Hopefully, the wide dissemination of this information and the growing awareness of its significance among the smoking public will channel competition in the cigarette industry toward the marketing of cigarettes of progressively lower tar and nicotine content.").

2053. The theory was that the public would shift its consumption away from higher tar products, and toward lower tar products, just as it had done with the advent of filter-tipped cigarettes. In this way, it was anticipated that the national sales-weighted-average tar yields of cigarettes sold in the United States would decline, and the public health would benefit. (no bates) (JD 053570 at 1).

2054. On July 31, 1967, the FTC directed its staff to commence "formal test[ing]" of cigarettes using the Cambridge Filter Test. (no bates) (JD 002477 at 2064360211); (no bates) (JD 004348 at 1).

2055. On August 8, 1970, the FTC proposed a rule to mandate disclosure of tar and nicotine ratings in all cigarette advertising. (no bates) (JD 004350).

2056. The FTC also invited the cigarette manufacturers to submit a voluntary proposal, in lieu of the proposed rule, for such disclosures in cigarette advertising. 2023098316 (JD 040304) ("If the industry can devise a voluntary plan that is feasible and appropriate, the Commission is willing to consider it.").

2057. The tobacco companies complied, (no bates) (JD 040305), and the FTC solicited public comment on the industry plan. 1005045883-84 (JD 041337); (no bates) (JD 002066).

2058. Ultimately, the FTC agreed to allow tobacco companies make certain disclosures about tar and nicotine content in cigarette advertising instead of issuing a formal rule. On December 22, 1970, the FTC formally adopted a revised version of the cigarette manufacturers' proposal for displaying FTC tar and nicotine ratings in all advertising. The agreement was implemented by the FTC on January 13, 1971, as a substitute for its proposed trade regulation rule requiring such disclosure. 1005045883-84 (JD 041337); (no bates) (JD 003634).

2059. The FTC concluded that the voluntary agreement to provide "tar and nicotine disclosure and the voluntary agreement . . . to put the Surgeon General's health warning on the side of the pack in advertisements . . . [were] highly responsible activit[ies] by" the cigarette manufacturers. Public Health Cigarette Amendments of 1971, Hearings on S. 1454 before the Consumer Subcomm. of the Senate Comm. on Commerce, 92nd Cong. (1972) (statement of Robert Pitofsky, Dir., Bureau of Consumer Protection); (no bates) (JD 042276 at 58).

c. The FTC Method Does Not Measure Actual Tar and Nicotine Delivery

2060. Within months after it notified cigarette manufacturers on March 24, 1996 of its decision to allow advertising of tar and nicotine yields so long as the Cambridge Filter Method was used, the FTC invited cigarette manufacturers to comment in detail on the precise method to be used to measure tar and nicotine yields.See, e.g., (no bates) (JD 040780); (no bates) (JD 003620).

2061. Defendants "initially resisted imposition of the Cambridge testing method and claimed it would be inaccurate" because different smokers "smoke differently — and even smoke differently at different times." Henningfield WD, 48:3-50:12. This is known as smoker variation. Early in the FTC process of developing a standard testing method, Defendants advised the Agency that, because of smoker variation, the Cambridge Filter Method would not measure the tar or nicotine that a human being would ingest from smoking any particular cigarette:

No two human smokers smoke in the same way. No individual smoker always smokes in the same fashion. The speed at which one smokes varies both among smokers, and usually also varies with the same individual under different circumstances even within the same day. Some take long puffs (or draws); some take short puffs. That variation affects the [tar and nicotine] quantity in the smoke generated.

(no bates) (JD 004362 at 2). See also United States' Obj. and Answers to Joint Defs' Modified Eleventh Set of Req. for Admis. to the Pl. United States, RFA Resp. 5, 49-50, 54 (4/12/02) (The Government admits that in 1966, during the comment period for discussion of the Cambridge method, certain tobacco companies stated that the FTC method would only be an effective measurement for certain conditions of smoking behavior).

2062. The FTC also heard from, among others, Clyde L. Ogg, Ph.D., of USDA, who developed the method initially adopted by the FTC. He admitted that: "Since smokers vary so greatly in their smoking habits, the proposed . . . method will not tell a smoker how much tar and nicotine he will get from any given cigarette. It will indicate, however, whether he will get more from one than from another cigarette if there is a significant difference between the two and if he smokes the two in the same manner." (no bates) (JD 004748 at 38).

2063. The FTC's press release announcing its decision clearly described the limitations of the standardized test method it was adopting. (no bates) (JE 061264 at 1-2). The FTC stated:

No test can precisely duplicate conditions of actual human smoking and, within fairly wide limits, no one method can be said to be either "right" or "wrong." The Commission considers it most important that the test results be based on a reasonable standardized method and that they be capable of being presented to the public in a manner that is readily understandable. . . . [T]he public interest requires that all test results presented to the public be based on a uniform method used by all laboratories. Use of more than one testing method would produce different results which would only serve to confuse or mislead the public.

The Cambridge Filter Method does not and cannot measure these many variations in human smoking habits. . . . It does not measure all of the tar and nicotine in any cigarette, but only that in the smoke drawn in the standardized machine smoking according to the prescribed method. Thus, the purpose of testing is not to determine the amount of tar and nicotine inhaled by any human smoker, but rather to determine the amount of tar and nicotine generated when a cigarette is smoked by machine in accordance with the prescribed method.

(no bates) (JE 061264 at 1-2).

2064. On that same day, the Tobacco Institute issued a press release stating that the FTC method was "unsound" and declaring that the "`tar' and nicotine results" produced by the FTC method "may be inaccurate [and] misleading" to consumers. Tobacco Institute Press Release, Tobacco Institute Says FTC Chose Unsound Test Methods: `Tar' and Nicotine Results May Be Inaccurate, Misleading, Aug. 1, 1967, 500031952-1955 (JD 047658 at 1). Among other things, the press release pointed out that humans smoke cigarettes differently and that "per cigarette" tar and nicotine yields therefore would be "useless and misleading" to smokers who do not smoke within the FTC parameters. (no bates) (JD 047658 at 1).

2065. Defendants did not, however, disclose their knowledge that smokers would ultimately ingest as much if not more nicotine and tar from low-delivery cigarettes as they would from full-flavor products. Defendants knew that the phenomenon of smoker compensation, discussed in greater detail infra, would cause smokers to smoke low-delivery products more intensely and more frequently in order to obtain their desired level of nicotine. To feed their addiction, therefore, these smokers would defeat the stated purpose of the lower-delivery products. Henningfield WD, 48:3-50:12. Nor did Defendants disclose to the FTC that "a major reason that the method could yield misleading data was that nicotine addiction would drive smokers to achieve relatively stable nicotine intakes" and that smokers' "physiological need to obtain nicotine substantially lessens the accuracy of the FTC ratings." Henningfield WD, 48-14-49:7. According to Dr. Farone, Defendants did not inform the FTC in 1966 "that smokers alter their smoking behavior to get nicotine." Nor did Defendants tell the FTC that people's "smoking behavior was driven by the need to satisfy their nicotine addiction." Farone TT, 10/12/04, 2170:5-23.

2066. There is a dose-response relationship between smoking and lung cancer. That is, the less smoke to which smokers are exposed, the lower their lung cancer risk. Benowitz TT, 11/1/04, 4521:13-16; Townsend WD, 80:9-18. The predicate for the development and marketing of lower FTC-yield cigarettes was the expectation that, as a group, smokers of lower FTC-yield cigarettes would be exposed to less smoke. Townsend WD, 80:9-18.

2067. Because of compensation and the need of smokers to obtain a desired dose of nicotine, they may offset the decrease in their cigarettes' FTC tar and nicotine yields, in whole or in part, by one of two means. First, smokers may engage in so-called "puff" or "within cigarette compensation." This is done by smoking individual, lower FTC-yield cigarettes more intensively by taking bigger puffs, taking more frequent puffs, smoking the cigarette closer to the butt, blocking ventilation holes placed in the filter that dilute the smoke, or other means. Second, they may simply smoke more cigarettes. Benowitz TT, 11/1/04, 4512:11-4513:1; Dixon WD, 16:13-21.

2068. The issue of compensation has been discussed in the scientific literature since at least the 1940s. Benowitz TT, 11/1/04, 4526:19-4527:3. The early literature on nicotine, including compensation, was summarized in a well respected compendium of articles collected by Larson, P.S. et al., in Tobacco: Experimental and Clinical Studies: A Comprehensive Account of the World Literature (Baltimore, Williams Wilkins Co. 1961). (no bates) (JD 000500); Rowell WD, 17:4-17. This useful research tool was cited repeatedly in the 1964 Surgeon General's Report. Rowell WD, 18:1-18. The Larson volume was funded by TIRC. McAllister WD, 102:9-22; Rowell WD, 17:18-20.

2069. It was a "common concern" in the early 1960s that smokers who switched to filtered cigarettes might "compensate" by smoking more cigarettes each day. Burns TT, 2/16/05, 13580:18-13581:7; see also Samet TT, 9/29/04, 1183:5-9.

2070. "Compensatory smoking behavior is a manifestation of nicotine addiction," and "occurs primarily due to nicotine." Dr. Benowitz described "the consensus in the medical and scientific fields" regarding compensation: "The concept of smoking to obtain desired levels of nicotine and the concept of nicotine titration with associated compensation is widely accepted by the scientific and public health communities." Methods of smoker compensation include taking "bigger puffs," taking "more frequent puffs," "block[ing] the ventilation holes in the filter," and smoking more cigarettes. Benowitz WD, 55:11-22, 56:22-23, 57:5-9, 57:23-1; Benowitz TT, 11/2/04, 4762:23-24, 4763:14-16. Even as to ultra low tar cigarettes, where a smoker switching down may not be able to compensate fully "on a per cigarette basis[,] . . . that smoker could always smoke more cigarettes." Farone WD, 103:18-104:1; accord Farone TT, 10/12/04, 2169:18-19 (testifying that "the requirement for nicotine" drives smoker compensation).

2071. Because each smoker smokes to obtain his or her own particular nicotine quota, smokers end up inhaling essentially the same amount of nicotine — and tar — from so-called "low tar and nicotine" cigarettes as they would inhale from regular, "full flavor" cigarettes. This is referred to as "complete" compensation. Virtually all smokers, over 95%, compensate for nicotine. Benowitz WD, 59:6-17; 61:15-62:13; Benowitz TT, 11/2/04, 4769:25-4770:4; (no bates) (US 58700 at 10) (Monograph 13); accord Burns WD, 1:10-15, 12:10-11, 43:19-45:2; Burns TT, 2/15/05, 13311:9-15; Burns TT, 2/16/05, 13537:6-9.

2072. The amount of nicotine that smokers need to sustain their nicotine addiction does not change over time. Therefore, compensation for reduced deliveries is permanent, and occurs for as long as the smoker smokes the low tar product. Benowitz WD, 70:25-71:10; see generally DXA0310399-0650 at 0452-0476 (US 58700) (Monograph 13) (indicating no evidence to warrant conclusion that there is reduction in compensation over time).

2073. Because compensation is essentially complete, low tar cigarette smokers inhale essentially the same amount of tar and nicotine as they would from full flavor cigarettes, thereby eliminating any purported health benefit from low tar cigarettes. In short, "light and ultra-light cigarettes" do not, in actuality, "reduce the risks of smoking":

Considering the overall exposure data for individuals selecting their own brand, there is little reason to expect that smokers of cigarettes with low machine measured yields will have a lower risk of disease than those who smoke higher yield cigarettes.

Benowitz WD, 72:9-14; (no bates) (US 58700 at 60); see also Benowitz WD, 61:6-13 (explaining the conclusions of Chapter 3 of NCI Monograph 13).

2074. As Dr. Benowitz pointed out,

Compensation explains why smoking of light cigarettes has not been associated with a reduction of smoking-induced disease risks. One would think, looking at the FTC yield data, that toxic exposures would be substantially reduced if one switches to light cigarettes; however, because of compensation, resulting toxic exposures are similar for light and regular cigarettes.

Benowitz WD, 60:23-61:14.

2075. Despite the fact that tar deliveries, as measured by the FTC Method, decreased by more than two-thirds between 1954 and 1994, lung cancer in smokers actually increased. (no bates) (US 58700) (Monograph 13); (no bates) (US 76212) (1997 CDC MMWR article); see also (no bates) (US 88626) (1995 Thun et al. article).

2076. Compensation behavior is distinct from "individual smoker variation":

Individual smoker variation refers to the fact that one smoker may smoke cigarettes — either regular or low tar — differently than another smoker, and that the same person may smoke the same cigarette differently on different occasions. . . . Individual smoker variability relates to the fact that cigarettes are smoked differently by different individuals. This type of variability is separate and distinct from the issue of compensation, which relates to the phenomenon of smokers smoking purportedly low-delivery cigarettes more intensely in order to achieve their particular desired level of nicotine intake.

Benowitz WD, 56:6-23.

2077. In its August 1, 1967 press release, the FTC set forth the Commission's understanding of smoker variation:

No two human smokers smoke in the same way. No individual smoker always smokes in the same fashion. The speed at which one smokes varies both among smokers, and usually also varies with the same individual under different circumstances even within the same day. Some take long puffs (or draws); some take short puffs. That variation affects the tar and nicotine quantity in the smoke generated.

Even with the same type of cigarette, individual smokers take a different number of puffs per cigarette depending upon the circumstances. When concentrating, or talking, the number of puffs is usually less. When listening, or required to listen to another person talking, the number of puffs per cigarette, as well as duration of each puff, usually increases. Smoking rates while reading a book may differ from smoking rates while viewing a television program. The number of puffs and puff duration (as well as butt length) will vary according to emotional state. Some smokers customarily put their cigarettes down in an ashtray where they burn between puffs; other smokers constantly hold cigarettes in their mouths; others hold them between their fingers.

(no bates) (JD 040254 at 2); 03573029-3030 at 3029 (US 22244).

2078. Significantly, the August 1, 1967 press release does not demonstrate a similar understanding of nicotine or addiction. It does not even mention nicotine and does not discuss the fact that nicotine addiction would lead smokers to obtain essentially the same amount of nicotine from so-called low tar cigarettes as they would from regular cigarettes. (no bates) (JD 040254); Farone TT, 10/12/04, 2170:5-23.

2079. Public service announcements of the Office on Smoking and Health from the early 1980s relating to the potential for compensation reflected a similarly incomplete and ultimately incorrect view of compensation. Rather, they "implie[d] that the individual has within [his/her] ability automatically not to compensate; that is, that the compensation is not driven by the addictive process. That was the understanding we had in the early 1980s. . . . It was only after that that we understood with precision and specificity how the nicotine drives that smoking change." Burns TT, 2/16/05, 13565:8-13566:4.

2080. Defendants suggested an analogy between the FTC tar and nicotine yields and automobile gas mileage estimates, intimating that they are both useful, albeit imperfect. As Dr. Henningfield explained, this comparison is not valid:

[W]e know through that [gas mileage] rating system that if you buy a car with a better gas mileage rating, virtually no matter how you drive it, you're going to get better mileage than a car with a worse rating. But in cigarettes, by just subtle changes in the way you smoke and things that most people don't even know about, the ventilation and the channels and the burn accelerants and all these different tricks, makes those two cigarettes look the same. Thus, for example, when humans smoke Marlboro cigarettes . . . Marlboro Lights can yield approximately twice as much nicotine as the Regulars are claimed to deliver by the standard FTC method. Marlboro Ultra Lights can deliver three times their advertised rating and most of the Carlton brands can deliver seven or more times their advertised rating.

Henningfield WD, 83:14-84:10.

2081. Light cigarette descriptors also "are totally different" from the information on food labels and drug labels, because "if you eat the listed serving size of [foods], you will receive the amount of [the constituents] listed on the label. . . . By contrast, . . . the advertised FTC tar and nicotine ratings for cigarettes bear very little relation to the actual dose a smoker can and, in most instances, does receive from smoking that cigarette. The inaccuracy in the FTC ratings is especially pronounced for cigarettes sold as `light' or `low tar' by the tobacco companies. This discrepancy is especially serious because it is in the direction of more toxins than advertised." Henningfield WD, 84:11-85:3.

2082. Dr. Whidby, a scientist, former employee, and consultant for Philip Morris USA, agreed that: "[m]easurements of tar and nicotine yields using the FTC method do not offer smokers meaningful information on the amount of tar and nicotine they will receive from a cigarette . . . [or about] the relative amounts of tar and nicotine exposure likely to be received from smoking different brands of cigarettes." Whidby TT, 2/22/05, 13993:14-19; DXA0310399-0650 at 0423, 0452-0476 (US 58700).

2083. Compensation has been documented by various scientific methods. Three different kinds of studies are generally used to conduct research on compensation: (1) spontaneous brand switching studies, (2) forced brand switching studies, and (3) cross-sectional studies. Benowitz WD, 62:14-20.

2084. First, spontaneous brand switching studies are longitudinal studies that follow the same group of smokers over a specific period of time. At the start, the study measures the smokers' daily smoke exposure and records the FTC-yield of the smokers' usual brand. Later, at follow-up, the same smokers are re-contacted, at which time the study observes any change in the FTC-yield of the smokers' usual cigarette and again measures the smokers' daily smoke exposure. Benowitz WD, 62:21-63:4; Benowitz TT, 11/1/04, 4513:2-4514:3, especially 4513:13-21; (no bates) (US 58700 at 45) (Monograph 13).

2085. Such a study permits estimation of the changes in the daily smoke exposure of those smokers who, over the course of the study, spontaneously and voluntarily switched to cigarette brands with higher or lower FTC yields, as well as any changes in the daily smoke exposure of those smokers who did not change the FTC yield of their cigarette. Benowitz WD, 63:22-64:2; Benowitz TT, 11/1/04, 4513:2-4514:3, especially 4513:13-21.

2086. Spontaneous brand switching studies, like randomized experiments, may be long term or short term. Dixon TT, 3/9/05, 15051:14-15052:5.

2087. Spontaneous brand switching studies "are more informative of smokers' exposure in the real world when switching from higher to lower yield cigarettes," because "the brand of cigarette has been selected by the smoker and not by the researchers." Benowitz WD, 63:22-64:2. "[S]pontaneous brand switching studies generally show that there is no reduction in smoke intake [including nicotine and tar intake] per cigarette. . . . The per cigarette figure [is important because it] shows what an individual can take in from a particular cigarette. Thus, it provides information on the delivery characteristics of the product." Id. at 64:8-16, 66:3-5.

2088. There is only one complete, peer-reviewed long-term spontaneous brand switching study, Lynch and Benowitz 1987, "Spontaneous Cigarette Brand Switching: Consequences for Nicotine and Carbon Monoxide Exposure," J. Public Health, 78(9): 1191-1194, (no bates) (JD 063010); Benowitz TT, 11/2/04, 4753:11-4755:5. The study found:

a. per cigarette nicotine intake was about the same, comparing smokers who switched to lower FTC-yield cigarettes during the course of the study to their own baseline per cigarette nicotine intake. (no bates) (JD 063010 at 1192).

b. per cigarette nicotine intake was lower, comparing smokers who switched to lower FTC-yield cigarettes during the course of the study to a similar "control group" of full-flavor smokers who did not switch. Benowitz TT, 11/2/04, 4758:25-4760:13; (no bates) (JD 063010 at 1192).

2089. Only daily nicotine intake was actually measured in the study. The per cigarette nicotine values were calculated by dividing daily nicotine intake by the number of cigarettes the smokers reported they smoked per day. Benowitz TT, 11/2/04, 4758:12-18; Wecker WD, 9:9-10:3.

2090. Dr. Benowitz drew this conclusion from his study:

For smokers who switched to lower yield cigarettes, the analysis of cotinine concentration or carbon monoxide per cigarette showed no change despite the reduction in nominal machine measured yield. Therefore, these smokers obtained the same dose of nicotine and carbon monoxide from each cigarette even though the machine measured yield was lower.

Benowitz WD, 63:22-64:2. The Benowitz study demonstrated that: "For spontaneous brand switchers, there is complete compensation for each cigarette smoked. As a result, for these smokers, switching from higher to lower yield cigarettes is not likely to reduce the risk of smoking." Id. at 64:14-65:6, 65:14-17. The evidence that there is no reduction per cigarette by switching to lower tar cigarettes is particularly compelling in light of Dr. Benowitz's testimony that "we do know that on average people who are smoking lower-yield cigarettes smoke the same or even slightly more than higher-yield cigarettes." Benowitz WD, 63:22-64:2; 64:14-65:6; 65:14-17; Benowitz TT, 11/2/04, 4762:23-24; 4763:14-16; see also Benowitz WD, 63:5-10 (explaining that "[c]otinine is a major breakdown product of nicotine" that "is metabolized . . . by the liver" in humans, and therefore "has become the accepted marker for looking at nicotine exposure measurement from tobacco products").

2091. Based on this study, Monograph 13 concluded:

For spontaneous brand switchers, there appears to be complete compensation for nicotine delivery, reflecting more intensive smoking of lower-yield cigarettes.

* * *

Spontaneous brand-switching studies suggest that there is no reduction in smoke intake per cigarette. . . .

(no bates) (US 58700 at 10 and 60); see also Dixon TT, 3/9/05, 15046:7-15047:7.

2092. There are also short-term spontaneous brand switching studies on compensation. Dixon TT, 3/9/05, 15051:14-15052:05; Dixon WD, 40:7-13.

2093. The peer-reviewed literature contains a 1999 meta-analysis of the brand switching studies that employed nicotine biomarker data. The mean estimate of the extent of compensation in that article was about 50-60%. Dixon WD, 40:14-20; see also (no bates) (JD 000547 at 1).

2094. Second, in experimental studies for forced brand switching, smokers are randomly assigned to smoke cigarettes with higher or lower FTC yields. The smokers' daily smoke exposure, as measured by various biologic markers, is compared to see if the smokers assigned to smoke lower FTC-yield cigarettes have a lower daily smoke exposure than smokers assigned to smoke higher FTC-yield cigarettes. Benowitz WD, 68:6-9.

2095. Daily smoke exposure takes into account both forms of potential compensation — the tendency of smokers of lower FTC-yield cigarettes to smoke individual cigarettes more intensively, as well as the tendency of smokers of lower FTC-yield cigarettes to smoke more cigarettes. Benowitz TT, 11/2/04, 4739:13-4740:3; Wecker WD, 5:22-6:7.

2096. In these long-term randomized experiments on forced brand switching, smokers randomly assigned to smoke lower tar cigarettes were exposed to less smoke each day than the smokers randomly assigned to smoke higher tar cigarettes. The estimated compensation is about 75-80%, suggesting substantial but incomplete compensation. Benowitz WD, 70:19-21; Benowitz TT, 11/2/04, 4751:1-7; Wecker WD, 5:10-17.

2097. Dr. Benowitz explained that the substantial but incomplete compensation shown in the forced switching compensation studies is likely due to the act of forcing participants to switch brands:

[S]mokers are switched only for the purpose of the research. Motivation and cigarette acceptability differ from the natural situation of brand switching. . . . The forced brand switching studies show on average about eighty percent compensation. . . . Presumably compensation is not complete because the smokers have been switched to cigarettes that were not of their own choosing.

Benowitz WD, 68:6-21; 70:19-24.

2098. Third, in cross-sectional studies, the daily nicotine intake of smokers smoking their usual, voluntarily-selected brand is measured, typically using biologic markers for exposure to cigarette smoke, such as cotinine in the blood or saliva, and compared with the FTC-yield of the smokers' cigarettes. Benowitz TT, 11/2/04, 4742:25-4743:11.

2099. Cross-sectional studies also lead to the conclusion that compensation is essentially complete:

Cross-sectional studies involve sampling smokers in the general population who are smoking their own chosen brand of cigarettes . . . show that there is very little difference in tobacco smoke exposure in people smoking cigarettes with different machine-determined yields. . . . There have been many cross-sectional studies performed, and overall they demonstrate that while there are some differences in nicotine exposure when high- and low-yield cigarette brands are compared, these differences are quite small. . . . Cross-sectional studies show nearly 100 percent compensation.

Benowitz WD, 66:9-68:5.

2100. In cross-sectional studies where the participants themselves choose the tar level of their cigarettes, there is a "very shallow slope" or "very tiny slope across the range of tar and nicotine" comparing the nicotine intake of smokers of various tar levels, demonstrating that smokers who smoke cigarettes of widely varied FTC tar levels are ingesting similar amounts of nicotine. This data indicates that compensation is essentially complete. As Dr. Burns explained, the fact that lower tar smokers may show, on the whole, slightly lower levels of nicotine than higher tar smokers does not mean that the lower levels are the result of the type of cigarette, but rather that the nicotine quota of smokers able to smoke lower tar cigarettes is customarily lower:

The effect is one that one would expect to be present as a small slope, since one would expect that high yield smokers would be likely to have higher nicotine levels and that the very lowest yield cigarette smokers would be there because they don't need much nicotine. That's independent of the brand of cigarettes they smoke. That's why they chose those brands. It's not an effect of the brand that they smoke. And so you would expect to see a small slope. The fact that the slope is as small as it is suggests that . . . there is full compensation on a population level when people in the natural setting move from one brand to another.

Dr. Benowitz's 1983 study, which showed this "very shallow slope," has been "replicated [in]numerable times by other scientists," and "those studies show basically the same picture, that there's a very shallow slope between the machine yield and cotinine levels." Burns TT, 2/16/05, 13541:8-13542:14; Benowitz WD, 67:10-18 (discussing his 1983 cross-sectional study); Benowitz TT, 11/1/04, 4564:13-15; Benowitz TT, 11/2/04, 4826:13-4827:5; see also Burns TT, 2/16/05, 13547:7-11 (indicating that the Gori and Lynch compensation study "was presented and examined in [Monograph 13] by Dr. Benowitz and was part of the data that was examined in that chapter that reached the conclusion that compensation was essentially complete"). [To rebut the testimony of Drs. Benowitz, Burns, Henningfield, and Farone regarding smoker compensation, Defendants relied upon tobacco industry scientist Michael Dixon, Ph.D., an employee of Defendant BATCo, to testify as an expert in "human smoking behavior." Dr. Dixon testified that compensation is not complete because smokers compensate for tar not nicotine. Dr. Dixon is neither a medical doctor nor an epidemiologist; he holds a Ph.D. in respiratory physiology. Dr. Dixon further admitted that nowhere in his written direct examination did he even mention the subject of nicotine addiction. He has not published any articles on the subject of nicotine addiction, and there is nothing in the record to suggest that he has published a single peer-reviewed publication on any subject. Without any expertise in nicotine addiction, Dr. Dixon's testimony as to whether nicotine addiction drives smokers to compensate is not credible, especially when compared to the totally contrary evidence of government experts Benowitz, Burns, and Henningfield, each of whom has enormous expertise in the fields of nicotine addiction and smoking and health, have written numerous peer reviewed articles on these subjects, and have participated in the rigorous process of writing different Surgeon General's Reports on smoking and health. Dixon WD, 2:1-8, 3:1-9; Dixon TT, 3/9/05, 14917:5-9, 14960:16-14961:7, 14997:6-15001:11.]

2101. The cross-sectional studies as a whole suggested that compensation is not complete but substantial. Benowitz TT, 11/2/04, 4737:22-4738:9, 4738:15-18; Dixon WD, 44:23-45:18; Mulholland WD, 19:18-20:13.

2102. Evaluating all the types of studies as a whole, the evidence demonstrates, at a minimum, that compensation for daily nicotine is substantial if not complete. Benowitz TT, 11/2/04, 4737:22-4738:9, 4738:15-18 (cross-sectional studies); 4751:1-7 (randomized experiments); 4757:4-8, 4757:19-23, 4766:24-4767:3 (spontaneous brand switching, daily nicotine intake); Wecker WD, 15:19-16:5; Dixon TT, 3/9/05, 14942:5-14943:14; Mulholland WD, 57:12-22; Mulholland TT, 4/25/05, 19943:12-19945:19.

d. The Public Health Community Has Concluded that Low Tar Cigarettes Offer No Clear Health Benefit

2103. Low tar cigarettes have not reduced the risks of smoking relative to full-flavor cigarettes. Burns WD, 1:10-15; 12:10-11; 30:5-12 ("I have concluded that the changes in cigarettes that resulted in a lowering of the FTC tar and nicotine yields over the past 50 years have not resulted in a reduction in the disease risks of smoking cigarettes for the smokers who use these cigarettes."); Burns TT, 2/15/05, 13311:9-15. Dr. Jonathan Samet, a Government expert with extraordinary qualifications, is a physician and epidemiologist with extensive experience treating patients with lung cancer and COPD. He is the Chair of the Department of Epidemiology at the Johns Hopkins University Bloomberg School of Public Health and has served as author and/or editor of several Surgeon Generals' Reports over more than 25 years, contributed to several National Cancer Institute Tobacco Control Monographs, and served as an author of Chapter 4 of Monograph 13. As an expert in the science of tobacco smoking and health, including epidemiology, pulmonary medicine, and internal medicine, he concluded that the use of lower tar and lower nicotine cigarettes "has had no clear benefit on the health risks of active smoking." Samet WD, 1:3-12, 2:20-3:3, 3:7-11, 3:19-23, 10:15-12:16, 14:1-15:13, 18:12-16, 168:17-19; Samet TT, 9/29/04, 10-18. Similarly, Dr. William Farone, fact and expert witness and former Director of Applied Research at Philip Morris, concluded that, based on his training and experience, "`light' cigarettes — because they generally permit easy compensation and employ levels of dilution that increase the mutagenicity of the tar — are not any less hazardous than their full flavor versions." Farone WD, 123:21-124:4. The Court credits the testimony of these three experts.

2104. The 1981 Surgeon General's Report concluded, referring to the FTC Method of measuring tar and nicotine:

[T]he smoking-machine model is limited in accurately reproducing human smoking behavior. . . . Smokers, however, are able to take larger, more frequent, and higher velocity puffs than the machines do. It appears that such compensatory adjustments often turn nominally lower `tar' and nicotine cigarettes into higher `tar' and nicotine cigarettes. . . . Even if the compensations made in smoking a single cigarette are small or nonexistent, smokers can increase their intake of `tar' and nicotine by smoking more cigarettes.

(no bates) (JD 000636 at 180) (1981 Surgeon General's Report).

2105. The 1981 Report recognized that there are still "smokers who are unwilling or as yet unable to quit." As to them, the Report concluded that they "are well advised to switch to cigarettes yielding less `tar' and nicotine, provided they do not increase their smoking or change their smoking in other ways."Id. at v.

2106. Dr. Burns, an editor of the 1981 Surgeon General's Report as well as "an author, editor or reviewer for each of the annual Reports of the U.S. Surgeon General on the Health Consequences of Smoking since 1975," concluded that, in his expert opinion,

had the information available to the tobacco industry been available to the scientists preparing the 1981 Surgeon General's Report, that Report would not have drawn the erroneous conclusion that lower tar cigarettes produced lower risk or have made the recommendation that smokers who could not quit were "well advised to switch to cigarettes yielding less `tar' and nicotine."

Burns WD, 1:10-15, 12:10-11, 36:3-37:12, 55:17-56:13, 56:21-57:17; Burns TT, 2/15/05, 13311:9-15; Burns TT, 2/16/05, 13666:25-13667:24 ("Had that information been available to us, we would not have then offered the recommendation to the population of the United States that it would be a good idea to shift to these products."); see also Burns WD, 56:14-20 ("The Surgeon General clearly expressed a concern [in the 1981 Report] about reduced yield smoking leading to compensatory increases in smoking behaviors; but, at that time, the public health community was not aware of the role of nicotine addiction in altering puffing behavior, the elasticity of delivery designed into cigarettes then on the market which facilitated compensation on the part of the smoker, or the observations made by the industry that showed compensation was essentially complete for some `light' cigarettes. Had we known that, the recommendation would not have been made."); Burns WD, 38:10-13 (indicating that "some of the same concerns [relating to the lack of a health benefit to lower tar cigarettes] were expressed in the 1989 Surgeon General's Report").

2107. The 1981 Report

did not fully take into consideration the phenomenon of compensation, and how smokers smoke to get a certain amount of nicotine, and will even adjust their smoking behavior to get the amount of nicotine they seek or are accustomed to . . . we didn't know in 1981 the extent to which smokers would compensate after switching to a `low tar' and low nicotine yield product.

Samet WD, 164:15-165:5.

2108. Dr. Burns provided the "three principal reasons" that "the traditional epidemiological approaches that were employed at the time of the 1981 Surgeon General's Report" yielded results erroneously suggesting that lower tar cigarettes provided less lung cancer risk:

(1) "[T]hat people who smoked low-tar and nicotine cigarettes" were smoking them largely "based on the understanding that these cigarettes . . . offered less risk." As a result, the people who choose these cigarettes "have different health behaviors" and often "different smoking characteristics" than smokers of higher tar cigarettes, leading to different expectations of health outcomes.

(2) That "very few people in the epidemiologic studies started out smoking low tar and nicotine or even filtered cigarettes." Most smokers who smoke the high-tar cigarettes very intensely are not able to switch down to lower tar cigarettes, whereas people who do not smoke the higher tar cigarettes very intensely, "when they switched to a low-tar cigarette . . . may be successful because they didn't have much nicotine intake that they needed to satisfy, and correspondingly they didn't have much tar intake. So the process of switching to low tar and nicotine starts to separate individuals who have different intensities of smoking, different amounts of tar that they are ingesting and, therefore, will have different risks."

(3) That "a substantial fraction of people who switch from high-tar and nicotine cigarettes to low-tar and nicotine cigarettes use increased numbers of cigarettes . . . as a mechanism of compensation. . . . In order to control for intensity of smoking, the epidemiologic studies used the number of cigarettes smoked per day as a measure of intensity with the mistaken assumption that people wouldn't change the number of cigarettes they smoked per day. That leads us to underestimate the actual number of cigarettes smoked per day as a measure of exposure in low-tar and nicotine cigarette smokers," because the epidemiological analysis compares people who smoke a higher number of cigarettes per day after switching to a lower tar cigarette to people who smoked this higher number of cigarettes per day of the higher tar cigarette. "That produces an erroneous, or incorrect, perception that switching to [the lower tar] cigarette lowered your lung cancer risk as an individual."

Burns TT, 2/15/05, 13327:21-13331:3; 13334:6-13337:5.

2109. Moreover, epidemiological studies may underestimate the risks for lower tar smokers because these smokers may have other characteristics — such as healthier lifestyles — that contribute to a reduction in risk regardless of the type of cigarette smoked:

Epidemiological studies often assume that smokers who switch to low-yield products are similar to smokers who do not. There is evidence that this may not be true. For example, switchers may smoke their cigarettes differently, they may have started smoking later as teenagers, they may attempt to quit more often. Switchers may have smoked less intensely before they switched, when compared to their high-yield, non-switching counterparts. Switchers may have smoked less at younger ages. When these aspects of smoking behavior are not accounted for, study results may be misleading. In addition, switchers are [a] generally healthier group in terms of diet, exercise, and lifestyle in comparison to smokers who do not switch to a low yield product. The cumulative effect of these group differences is that any reduction in the risks among switchers may be the result of these differences, rather than the fact that they switched to a low yield product. This was also an observation in Monograph 13.

Samet WD, 167:13-168:2.

2110. Recent studies, including the National Cancer Institute's Monograph 13 and the 2004 Surgeon General's Report, have confirmed that low tar and filtered cigarettes are no less harmful than conventional delivery and unfiltered cigarettes. The 2001 NCI Monograph 13, "Risks Associated With Smoking Cigarettes With Low Machine Measured Yields of Tar and Nicotine" ("Monograph 13") concluded:

Epidemiological and other scientific evidence, including patterns of mortality from smoking-caused diseases, does not indicate a benefit to the public health from changes in cigarette design and manufacturing over the last fifty years. . . . Widespread adoption of lower yield cigarettes in the United States has not prevented the sustained increase in lung cancer among older smokers. . . . Considering the overall exposure data for individuals selecting their own brands, there is little reason to expect that smokers of low yield cigarettes will have a lower risk of disease than those who smoked higher yield cigarettes.

DXA0310399-0650 at 0422-0423, 0473 (US 58700).

2111. Dr. Samet testified that: "The evidence is clear. We have tracked the risk of lung cancer closely and not seen a fall in relative risks to smokers." Samet WD, 169:14-16.

2112. The 2004 Surgeon General's Report reached the definitive conclusion: "[C]igarettes with lower machine-measured yields of tar and nicotine (i.e., low-tar/nicotine cigarettes) have not produced a lower risk of smoking-related diseases." In addition, the Report concluded that "[s]moking cigarettes with lower machine-measured yields of tar and nicotine provides no clear benefit to health" and that, "[a]lthough characteristics of cigarettes have changed during the last 50 years and yields of tar and nicotine have declined substantially, as assessed by the Federal Trade Commission's test protocol, the risk of lung cancer in smokers has not declined." TLT0930001-0949 at 0042, 0340, 0911 (US 88621). See also VXA100001-0604 (US 77217) (NCI Monograph 8); MTP0032477-2481 (US 76212) (11/7/97 CDC MMWR article); VXA1611681-1689 (US 77222) (1996 Samet et al. article); VXA1601456-1742 (US 64059) (1984 Surgeon General's Report).

2113. Both the 2004 Surgeon General's Report and the NCI's Monograph 13 were based on evidence "derived from research on human behavior and exposures, cigarette design and yields, smoke chemistry, epidemiological [and other] population-based data on human disease risk." DXA0310399-0650 at 0422-0423 (US 58700).

2114. Extensive research into the relationship between research of biomarkers of nicotine in humans and FTC tar and nicotine yields demonstrates that lower tar cigarettes do not provide a reduction in harm:

Generally speaking, research using these biomarkers has indicated little, if any, correlation between the FTC-yield of tar or nicotine, and the levels of the biomarkers measured in smokers. . . . These results suggest that there is little difference in the levels of biomarkers comparing smokers of higher yield tar/nicotine cigarettes and lower yield tar/nicotine cigarettes, as measured by the FTC method. This implies that doses of carcinogens or other toxic materials that smokers ingest have little relationship, if any, to the FTC tar yield. This, in turn, suggests that the gradual reduction in tar yield over the past several decades has not resulted in a reduction in smokers' exposure to carcinogens, and that the FTC test method is not informative with respect to lung cancer risk or to the risk of smoking-caused diseases generally. . . . In fact, evidence with respect to smoker compensation and biomarkers shows that those smokers who switch to "Low Tar" cigarettes modify their pattern of smoking to obtain the same or similar amounts of tar and nicotine as from the "High Tar" cigarettes they used to smoke. The bottom line is that a "Low Tar" label-based brand under the FTC protocol does not mean that a smoker is actually ingesting "Lower Tar" than from any other cigarette.

Samet WD, 147:11-148:21; 149:23-150:4.

2115. The conclusions of Monograph 13 and the 2004 Surgeon General's Report — that lower tar cigarettes do not provide a health benefit — "represent the consensus view of the scientific community on this issue." Burns WD, 1:10-15; 31:6-9; 41:12-18; 58:20-61:13 (discussing Monograph 13 (US 58700); IOM Report (US 20919); WHO Sactob Report (US 86658); and 2004 Surgeon General's Report (US 88621)); Burns TT, 2/15/05, 13311:9-15; 13668:1-8; see also Benowitz WD, 72:21-24 ("Most authorities are now convinced that there is little if any benefit with respect to health risk to smoking low yield versus regular cigarettes"); (no bates) (US 86657) (Canadian Expert Panel, Putting an End to Deception: Proceedings of the International Expert Panel on Cigarette Descriptors. A report to the Canadian Minister of Health from the Ministerial Advisory Council on Tobacco Control 9) (2001) ("There is no convincing evidence of a meaningful health benefit to either individuals nor to the whole population resulting from cigarettes marketed as `light' or mild'").

2116. In 2001, the Institute of Medicine published "Clearing the Smoke: Assessing the Science Base for Tobacco Harm Reduction," which concluded that "the public health of PREPs [potential reduced-exposure products] is unknown." The IOM report went on:

The major concern for public health is that tobacco users who might otherwise quit will use PREPs instead, or others may initiate smoking, feeling that PREPs are safe. That will lead to less harm reduction for a population (as well as less risk reduction for that individual) than would occur without the PREP, and possibly to an adverse effect on the population.

(US 20919).

2117. In 2001, the World Health Organization Scientific Advisory Committee on Tobacco Product Regulation issued a report that concluded:

1. Tar, nicotine, and CO numerical ratings based upon current FTC methods and presented on cigarette packages and in advertising . . . are misleading and should not be displayed. . . . 4. Banned terms should include light, ultra-light, mild and low-tar, and may be extended to other misleading terms. The ban should include not only misleading terms and claims but also, names, trademarks, imagery and other means of conveying the impression that the product provides a health benefit.

TLT1010692-0699, 0695 (US 86658).

2118. In 2004, the World Health Organization International Agency for Research on Cancer ("IARC") released its Monograph 83, "Tobacco Smoke and Involuntary Smoking," which concluded that "changes in cigarettes since the 1950s have probably tended to reduce the risk for lung cancer associated with the smoking of particular numbers of cigarettes at particular ages." However, the IARC Monograph attributed any reduced risk largely to the shift from unfiltered to filtered cigarettes which occurred in the 1950s, not the shift from high yield to low yield cigarettes which occurred in the last few decades. Moreover, the IARC's conclusion did not apply to individuals who increased the number of cigarettes they consumed as they shifted to low yield cigarettes. 1000861953-1953 (US 35484) (Wakeham 3/24/61) ("As we know, all too often the smoker who switches to a hi-fi cigarette winds up smoking more units in order to provide himself with the delivery which he had before."). The IARC Monograph went on: "the introduction of cigarettes that can be misperceived as `safe' may well have adversely affected smoking uptake rates, cessation rates, and consumption per smoker." TLT0970001-1455, 0180 (US 86746)

2119. All the major scientific bodies that have addressed this question in recent years have clearly concluded that lower tar cigarettes provide "no clear benefit" to health:

I think there's no evidence of clear benefit. . . . I think the state of the evidence has been well summarized in the reports of the Surgeon General, IARC, the Institute of Medicine, each group that's looked at the question of whether today's lower yield cigarettes are likely to produce — are likely to produce lower risk of lung cancer, has said, you know, no clear benefit.

Samet TT, 11/29/04, 1168:12-16; 1169:2-18.

2120. Echoing the conclusions of Monograph 13 and the 2004 Surgeon General's Report, a January 2004 article in the British Medical Journal reported on a study intended "to assess the risk of lung cancer in smokers of medium tar filter cigarettes compared with smokers of low tar and very low tar cigarettes":

There was no difference in risk among men who smoked brands rated as very low tar . . . or low tar . . . compared with those who smoked medium tar brands. The same was seen for women. . . . Men and women who smoked very low tar . . . and low tar . . . brands had risks of lung cancer indistinguishable from those who smoked medium tar . . . brands. . . . Our finding that there was no difference in the risk of lung cancer between people who smoked medium tar filter, low tar filter, and very low tar filter cigarettes is consistent with evidence of compensatory smoking.

TLT1020160-0167 at 0160, 0164, 0166 (US 88622).

2121. Two very large American Cancer Society's Cancer Prevention Studies ("CPS"), "conducted approximately 20 years apart," which show that lung cancer death rates have not gone down as a result of the introduction of low-tar cigarettes, provide powerful confirmatory evidence. CPS-I was conducted in the late 1950s and early 1960s, and CPS-II was conducted in the 1980s. Because of this 20 year gap, the smokers in the CPS-I study were smoking mostly high-tar, unfiltered cigarettes, and the "vast majority" of the smokers in the CPS-II study were smoking filtered cigarettes with much lower machine-measured tar and nicotine yields. CPS-I and CPS-II are "the two largest studies of smoking and disease risks;" they included "over a million men and women each," and "followed those individuals for" 12 to 18 years. The results of these studies showed that, "[d]espite the substantive reduction in tar yield of the cigarettes smoked in CPS-II, lung cancer disease risks increased rather than decreased in comparison to CPS-I." Burns WD, 1:10-15, 12:10-11, 33:18-34:6, 35:14-35:9; Burns TT, 2/15/05, 13311:9-15, 13313:9-13314:6, 13316:19-13317:15, 13322:9-10.

2122. Despite the dramatic shift to filtered and "light" cigarettes in the last 50 years, the effect the public health community was expecting to see from a change in the type of cigarettes smoked in the U.S never materialized. To the contrary, health risks increased significantly. With reference to the CPS-I and CPS-II studies, Dr. Burns explained:

For males, when you look at the risk of smoking, you see that it just about doubled between CPS-I and CPS-II. . . . For females, it went up almost fourfold. . . . [E]ven after adjustment for differences in number of cigarettes smoked and the duration of smoking, the rates increased for males and increased for females between these two studies that were conducted over a period of time when there was approximately a 50 to 60 percent decline in the tar value of the cigarettes being smoked and a dramatic increase in the number of smokers who were smoking filtered cigarettes. So, instead of seeing a reduction in the risk of smoking with the introduction of these products, we have seen the risk of smoking actually increase over that interval. . . . we had watched and waited for the decline in lung cancer to occur. It did not.

Burns TT, 2/15/05, 13322:22-13323:22, 13325:6-13326:22; (no bates) (U.S. 17802) (depicting the "sales-weighted tar and nicotine values for U.S. cigarettes" over time); (no bates) (U.S. 17803) (depicting data from the CPS-I study); (no bates) U.S. 17804 (comparison of lung cancer risk for nonsmokers and smokers based on CPS-I and CPS-II data); (no bates) (U.S. 17806) (graph showing that risk of lung cancer from smoking has not declined, notwithstanding the drastic shift to filtered cigarettes and those with lower machine-measured tar and nicotine deliveries).

2123. As Dr. Samet explained, "[i]f there were substantial benefits of the change in tar yield over the 20 years between [CPS-I in the 1960s and CPS-II in the 1980s], we would expect lower relative risks; instead they increased." Dr. Samet also explained that the British Physician's study, which was conducted over two 20-year periods, also "shows that the relative risk values [for lung cancer] have gone up comparing the first 20 years (1951-1971) to the second 20 years (1972-1991)." Samet WD, 154:21-156:4, 156:5-12, 157:20-158:15; VXA1601833-1843 (US 64058) (published article on British Physician's Study, cited in Samet Written Direct).

2124. Even if it were true that lower tar cigarettes result in some minor incremental reduction in tar, they do not provide any meaningful health benefit relative to higher tar cigarettes "from the perspective of human exposure . . . or meaningful exposure." Henningfield TT, 11/3/04, 7295:2-7298:2. As Dr. Henningfield explained:

It would be a little bit like low fat cheese has 100 grams, lets say, of X, and then there is another type that gave you 98 grams, and you could say, yes, that's lower, and the next lower one is 97 grams, but that's a meaningless difference, even though it's accurate and reliable by a machine test and you can say it does go down, it's a meaningless difference. . . . In this case, what Benowitz['s] study, and then many other studies showed, is that if you looked at actual intake of people, there was virtually no difference at all in intake. And it wasn't just that the ranking was off a little bit, it was that, for example, the Marlboro Light, according to the Massachusetts data can get — give you about three times as much nicotine as it was rated, and more than twice as much as the Marlboro regular, so it's off by several orders of magnitude, but most importantly, it is just — if [a] consumer says, okay, I want to get lower tar and nicotine and they pick a light versus a regular, they're not getting biologically meaningful lower tar and nicotine. . . . There is no meaningful difference in exposure to people. . . . what U.K. realizes now, what U.S. realizes, the World Health Organization realizes is that it is still a meaningless difference. And that's why . . . the resistance to even using the . . . label "light" cigarettes.

Id.; see also Henningfield TT, 12/1/04, 7535:12-7536:23 (explaining that the "light cigarette debacle" centers around the fact that the historical reduction in machine-measured tar "was biologically meaningless," citing NCI Monograph 13).

2125. Dr. Samet echoed these conclusions, stating that "while some earlier studies suggested a modest benefit in terms of lung cancer risk, late, more recent evidence suggests otherwise, namely that there is no benefit." He pointed out that, even excluding the more recent evidence and postulating some reduction in risk, the "overall risk [of smoking these cigarettes] is so high that even a small reduction is of no public health or medical significance." Samet WD, 170:11-23.

2126. Notwithstanding the widespread acceptance and independent validation in the scientific community of Monograph 13 and its conclusions, Defendants tried to challenge its conclusions and methodology, including the selection of its contributors. Defendants criticized the authors of Monograph 13 for not acknowledging the few scientists who expressed skepticism about its results. In addition, Defendants challenged NCI's selection of contributors to the Monograph, namely, that the scientists chosen were biased in favor of concluding that low tar cigarettes yield no clear benefit. However, as Dr. Burns noted, many of the contributors to Monograph 13 "represent some of the more distinguished scientists and experts on this issue in the country" and:

[T]he consensus statement of the organization, that is the NCI. . . . prevents individual opinion from being presented as the consensus of scientific thought. . . . The way that you know that [collective biases are not influencing the final document] is by taking it through a series of reviews by the governmental organization. . . . The organization that then produces the volume and puts its seal of consensus approval on it, that is the National Cancer Institute, that undergoes a series of reviews that it takes to ensure that the data contained in the volume are scientifically accurate and represent the consensus of scientific thought.

Burns TT, 2/15/05, 13383:1-13389:4.

2127. Defendants' scientists were not involved with the production of Monograph 13 because:

At the time which this was undertaken, the tobacco industry's position was still that . . . there were no disease risks that were causally associated with cigarette smoking. . . . For that reason, the tobacco industry has not been included in the Surgeon General's Report process and various other processes because they weren't part of the consensus of scientific thought at that point in time. They were perceived as adopting positions that had so little scientific credibility that they could not be meaningfully utilized in the formation of a consensus.

Burns TT, 2/15/05, 13389:11-13391:21 (explaining also that Monograph 7, in which RJR scientists participated, "was not a consensus document, it was simply the results of the proceedings of a meeting. Those proceedings come out under the author's name, are understood to be the individual opinions of the authors. That was not what was being requested with Monograph 13").

2128. The Court finds that the testimony of Dr. Burns is totally credible and persuasive on each of the issues which he discussed, including low tar cigarettes and their relative health effects. Dr. Burns, qualified by the Court without objection as an expert in "[t]he science of tobacco and health, including disease causation," is a medical doctor and professor of family and preventive medicine with 30 years' experience studying the health consequences of smoking. Dr. Burns has extensive experience, including as a teacher, in various medical areas, including smoking and health, and has studied epidemiology, addiction, nicotine, cigarette design and ETS in the context of smoking and health. He has over 200 publications, most of which are peer-reviewed, in the area of smoking and health, including chapters in two of the leading medical textbooks. Furthermore, Dr. Burns has studied and taught extensively in the area of lung diseases, including lung cancer, and has personally participated in the treatment of thousands of patients with lung disease. In addition, he has served as "an author, editor or reviewer for each of the annual Reports of the U.S. Surgeon General on the Health Consequences of Smoking since 1975," and has served as contributing author and Senior Scientific Editor for several of the National Cancer Institute Tobacco Control Monographs. Dr. Burns has also received numerous award and honors for his work in the area of smoking and health, including the Surgeon General's Medallion. Finally, Dr. Burns's demeanor during his testimony, which spanned nearly two full days and consisted mostly of cross-examination, further demonstrated his credibility. He fully answered the questions posed to him by well-prepared counsel, he was totally versed in the complex scientific areas about which he was questioned, he was neither evasive nor combative, and demonstrated an enormous familiarity with the science of smoking and lung cancer, the history of the issue in this country as scientists learned more and more about the subject, and the manner in which preparation of the Surgeon General's Reports represented the most up-to-date scientific consensus on the topic being studied. Burns WD, 1:3-5; 1:10-15; 12:10-11; (no bates) (US 78526).

2129. For the reasons set forth at length in previous Sections, the Court also finds that the testimony of Drs. Samet, Henningfield, Benowitz, and Farone is also highly credible and persuasive.

2130. To rebut the compelling testimony of Drs. Burns, Samet, Henningfield, Benowitz, and Farone, Defendants called a statistician, William Wecker, who, by his own admission, has "never been qualified by a Court as an expert in the subject of smoking and health." Wecker TT, 3/15/05, 15650:5-7. Because he is a statistician, and neither an epidemiologist nor a medical doctor, Dr. Wecker is "not able to offer opinions as to causation" relating to the relative health effects of low tar cigarettes. Wecker TT, 3/15/05, 15666:6-15667:2, 15670:20-15671:8. Moreover, Dr. Wecker's statistical analyses are unconvincing because they are flawed in several ways.

2131. First, Dr. Wecker's core opinion — that smokers who switch to lower delivery cigarettes do not increase the number of cigarettes per day that they smoke — is flatly contradicted by Defendants' voluminous research reports and other documents, spanning decades, which demonstrate that smokers who switch to lower deliveries do smoke more cigarettes per day. 1000861953-1953 (US 35484) (1961 PM); 2022244449-4450 at 4449-4450 (US 36855) (1970 PM); 1000350158-0188 at 0161-0162 (US 20176) (1971 PM); 1003285403-5416 at 5403 (US 20159) (1972 PM); 1003285403-5416 at 5403 (US 20159) (same); 1003293476-3493 at 3480 (US 85073) (1974 PM); 2040066740-6766 at 6750-6751, 6754-6755 (US 20435) (1979 PM); 2071376833-6834 at 6833 (US 27273) (1992 PM); 501525355-5366 at 5360-5361 (US 29531) (1974-1976 RJR); 679009843-9867 at 9843 (US 85055) (1977 B W); 775036039-6067 at 6050 (US 21053) (same); 536000000-0090 at 0050 (US 22338) (1984 B W); 760008596-8803 at 8760 (US 54588) (Confidential) (1998 BAT); 00044522-4523 at 4522 (US 22012) (1976 Lorillard).

2132. Second, Dr. Wecker testified that, in forming his opinion on this issue: "I don't reach my opinion by weighing all the evidence, but mainly on my own statistical work replicating and correcting figure 4-5" of NCI Monograph 13. Wecker TT, 3/15/05, 15656:22-15657:14. Figure 4-5 illustrates one of the new statistical analyses of CPS-I data that were performed as part of the production of NCI Monograph 13 relating to change in number of cigarettes smoked per day by smokers switching down to obtain lower tar yield. However, the Conclusions of Chapter 4 of Monograph 13 did not rely on the new analyses. Burns WD, 30:13-18, 58:4-19; Burns TT, 2/16/05, 13498:1-9; DXA0310399-0650 at 0509-0510 (US 58700).

2133. Dr. Burns explained that the issue of "increases in number of cigarettes per day smoked by those who switch to lower tar brands of cigarettes" is "not the only [reason and], for that matter, it's not the princip[al] one" for Monograph 13's conclusion that lower tar cigarettes provide no reduction in harm relative to higher tar cigarettes.

2134. The first sentence in the Monograph under the heading for these new analyses of CPS-I data clearly states that the new analyses of cigarettes per day were inconclusive and, as such, were not the basis for Monograph 13's conclusions:

A reexamination of the CPS-I data set was inconclusive as to whether compensatory changes in the number of cigarettes smoked per day when smokers switched to a lower nicotine cigarette introduce a bias sufficient to explain the observed increased lung cancer risk among smokers of high yield cigarettes.

DXA0310399-0650 at 0509 (US 58700); Wecker TT, 3/15/05, 15683:5-15687:14. Consequently, Dr. Wecker's testimony, which relied on his critique of the new CPS-I analyses, was basically irrelevant since Monograph 13 did not rely on that data in reaching its conclusion.

2135. Third, Dr. Wecker's analysis failed to refute, or even consider, the conclusions reached by several other prominent scientific bodies — including the 2004 Surgeon General's Report, the 2002 publication of the Scientific Advisory Committee on Tobacco Regulation to the World Health Organization, and the 2001 report to the Canadian Minister of Health from the Ministerial Advisory Counsel on Tobacco Control in Canada — which all reached the same conclusion as did the NCI in Monograph 13, namely that lower tar cigarettes provide no significant reduction in lung cancer or other health benefit — in direct contrast to Dr. Wecker's conclusions. Wecker TT, 3/15/05, 15661:11-15664:23. Since Dr. Wecker was only a statistician and not qualified to address the subject of smoking and health, he could not have addressed the substance of NCI's scientific conclusions in Monograph 13.

2136. Fourth, Dr. Wecker made several changes to the analyses in Monograph 13 that reflected his lack of understanding of the relevant subject matter. For instance, he included women in his analysis of Figure 4-5 and was unaware that the contributors to Monograph 13 excluded women because the later increase in smoking prevalence among women resulted in the lack of a valid baseline dose-response relationship. Wecker TT, 3/15/05, 15691:18-15695:11; Burns TT, 2/15/05, 13323:23-13325:4 (explaining the temporal differences in the rise of prevalence of male and female smoking, which led to exclusion of women in graph); 13342:8-20 (explaining the gender differences in prevalence in the United States and France).

2137. Fifth, Dr. Wecker acknowledged that many of his reanalyses of Figure 4-5 showed no statistically significant difference in risk for smokers at the various tar levels, which is entirely consistent with the conclusion of the authors of Monograph 13, quoted above, that the results on this issue were "inconclusive." Burns TT, 2/16/05, 13526:4-6; Wecker TT, 3/15/05, 15687:15-15691:17.

2138. Sixth, Dr. Burns explained that studies done by Garfinkelet al. reported in the 1980 Banbury Product Liability and Health Risks report, which Dr. Wecker claimed were "consistent with [his] conclusions," were not "consistent with Dr. Wecker's findings . . . because it's a different analysis." Dr. Burns also noted: "We cited both of the [Garfinkel] studies that examined cigarettes per day in Monograph 13. We looked at them carefully." Burns TT, 2/16/05, 13517:11-13518:23; Wecker WD, 31:10-14.

2139. Dr. Samet explained that comparing Dr. Garfinkel's calculations, published more than 20 years ago, to those performed for Monograph 13, is a case of comparing apples to oranges, as the analyses sought to answer markedly different questions:

They're very different. . . . Dr. Garfinkel said: If people changed their brand, did they smoke more, the same or less? Just those three bins [categories], if you will. What [the Monograph 13] analysis says is: Let's look at whether there's a relationship between the reported numbers of cigarettes smoked on the first brand and on the second brand and the difference in nicotine yield on the first brand and the second brand. So [the Monograph 13 analysis] is a more quantitative analysis and Dr. Garfinkel's was more sort of: Did people change from smoking more than they used to [or] to less than they used to?

Samet TT, 9/29/04, 1185:11-1186:19; 1191:12-16; 1193:8-1195:11.

2140. Dr. Wecker maintained that examining lower tar and higher tar smokers' lung cancer rates, without controlling for cigarettes per day, provides "other empirical support" for his claim that epidemiological studies of the relative health effects of low tar cigarettes are not biased by controlling for cigarettes per day. Wecker WD, 49:5-11. However, Dr. Burns explained that neglecting to control for cigarettes per day fails to resolve "the core issue" necessary to have a reliable analysis, because it "introduce[s] other biases that are equally important":

The core issue is having comparable groups, that is, having groups [where] you can adjust for those characteristics other than the type of cigarettes that they smoke. If you include numbers of cigarettes for controlling, you over control. If you don't, then you're left with the two populations likely to have differences in intensity of smoking and no method by which you can control for that difference. Then you can't tell whether the difference you're seeing is due to a difference in intensity of smoking, i.e. completely independent of the type of cigarette or is a characteristic of the cigarette that you've chosen to smoke.

Burns TT, 2/16/05, 13661:14-13662:6; see also Burns TT, 2/16/05, 13484:18-13485:10; 13486:8-21 ("If you don't control for cigarettes per day, you have two different groups of individuals who have different intensities of smoking and, therefore, you can't compare their exposures without looking at intensity.").

2141. Finally, Dr. Wecker's analysis of actual versus predicted death rates was not done in the manner utilized in Monograph 13. He admitted on cross-examination that there were several discrepancies between his analysis and that described in Monograph 13. The discrepancies included the fact that Dr. Wecker used mortality data, taken from the National Health Interview Survey, from 1993 to 2000, that was not contained in the calculations in Monograph 13. Again, Dr. Wecker was unaware of a critical fact, namely that the contributors to Monograph 13 specifically excluded data after 1992 because the National Health Interview Survey "changed the definition of smoker in 1992," making the post-1992 data inconsistent with the pre-1992 data. Wecker WD, 51:3-21; Wecker TT, 3/15/05, 15698:14-15701:18.

2142. Dr. Wecker also acknowledged that, while Monograph 13 discussed a chart examining lung cancer death rates at ages under 50, he attempted to create the chart described in the Monograph but only included people aged 40-50, excluding death rates for all ages under 40. Wecker TT, 3/15/05, 15702:5-15706:2.

2143. Dr. Burns testified, upon review of a chart based on Dr. Wecker's calculations of actual versus predicted death rates, purportedly based on Monograph 13: "The data presented in this graph have essentially no meaning whatsoever. This is not the analysis that Sir Richard Doll was suggesting be done and it is not an analysis that has any valid, scientific or technical meaning." Burns TT, 2/16/05, 13666:20-23; see also Burns TT, 2/16/05, 13664:10-24 (testifying that, to his knowledge, the chart has never "appeared in published peer reviewed literature").

2144. In sum, there is an overwhelming consensus in the public health and scientific community, both here and abroad, that low tar cigarettes offer no clear health benefit to smokers, have not reduced the risk of lung cancer and heart disease for smokers using them, and have not produced any decrease in the incidence of lung cancer. Moreover, because of the misleading nature of the advertising for low tar cigarettes, smokers who might have quit have refrained from doing so in the belief that such cigarettes reduced their health risks.

2. Based on Their Sophisticated Understanding of Compensation, Defendants Internally Recognized that Low Tar/Light Cigarettes Offer No Clear Health Benefit

a. Defendants Internally Recognized that Low Tar Cigarettes Are Not Less Harmful Than Full-Flavor Cigarettes

(1) Philip Morris

2145. A March 1, 1977 Philip Morris memorandum by industry-funded scientist Stanley Schachter to Thomas Osdene, Director of Research, concluded that low tar/low nicotine cigarettes are not less harmful:

[I]t would certainly seem that the campaign for low nicotine cigarettes is misguided and rests on a set of fallacious premises. . . . The question is crucial and particularly so in light of . . . Ross's evidence that carbon monoxide, hydrogen cyanide, and nitrogen oxide delivery is considerably greater in most of the popular brands of low nicotine filter, [sic] cigarettes than in high nicotine, non-filter cigarettes. . . . It is . . . clear . . . that the major body of data that has been used to justify the campaign for low nicotine cigarettes does nothing of the sort.

1000046626-6661 at 6655, 6660 (US 20074).

2146. Dr. Farone stated that Philip Morris's Marlboro full-flavor and Marlboro Lights cigarettes are "essentially identical except for dilution" — i.e., that Marlboro Lights have more dilution, dilution referring to ventilation that dilutes the smoke, particularly when machine-smoked by the FTC method, with ambient air. "[A]s you increase dilution, the toxicity in [the Ames] test increases, which is more likely than not associated with a toxicity increase in smokers." Farone TT, 10/7/04, 1888:2-1889:5; 1891:17-19.

2147. In fact, Dr. Farone explained that the very Ames mutagenicity testing that Philip Morris has conducted for the past 25 years, and that "Philip Morris has concluded . . . predicts carcinogenicity" has indicated that Philip Morris's Marlboro Lights cigarettes are, as designed, more mutagenic than Marlboro full-flavor cigarettes:

[I]n the case of Marlboro Lights, the Philip Morris test data that I have reviewed on that level of dilution for equivalent blends indicated that the product design for their Light cigarettes was more mutagenic than the full flavor Marlboro, Marlboro Reds, and therefore predictive of more potential cancer risk. These studies were repeated multiple times over the past 20 years and continue to be repeated to this day. The Philip Morris data, as was used by Philip Morris, was a strong warning that their product design change between a Marlboro Red and a Marlboro Light — increased ventilation — resulted in a potentially more dangerous product.

Farone WD, 119:7-120:15; Farone TT, 10/7/04, 1866:2-17. Philip Morris has not "changed the design of `Light' cigarettes in response to its studies and knowledge concerning mutagenicity." Farone WD, 121:3-9.

2148. Philip Morris consultant and former employee Dr. Whidby agreed with Dr. Farone's basic analysis and acknowledged that "increased filter dilution," one of the techniques Philip Morris uses to lower the FTC tar yield of its cigarettes, "is associated with increased biological activity." Dr. Whidby explained that biological activity in the context of Philip Morris's biochemical testing reports generally refers to biological reactions such as tumor growth, cell mutations, and toxic reactions, and that it was "a bad thing" that should be reduced. Whidby TT, 2/22/05, 13964:18-25; 13967:22-13968:19. Helmut Wakeham, of Philip Morris, acknowledged the same phenomenon as far back as March 1, 1974. 1003293476-3493 at 3492 (US 85073).

2149. A November 1977 Philip Morris memorandum to Dr. Robert Pages from J. Booker and S. Drew about Ames testing stated: "The take home lesson from this experiment is that dilution of a cigarette appears to increase the activity of the WSC [whole smoke condensate] (more dramatically for some cigarettes than for others)." 1002978361-8363 at 8362 (U.S. 35635).

2150. By 1978, Philip Morris had substantial evidence that "filter dilution [which Philip Morris used to reduce FTC tar and nicotine yields] was somehow acting to increase" the "activity" of the whole smoke condensate ("WSC") collected from its cigarettes. Further experiments confirmed that the tar from ventilated low tar reference cigarettes, i.e., cigarettes used for research purposes and not actually sold in stores, measured higher on mutagenicity tests than non-ventilated products. Additional research conducted in 1979 yielded the same result. 2001243600-3673 at 3610-11 (US 20298); accord 2022180219 (US 21479).

2151. A May 11, 1982 Philip Morris document from INBIFO (Philip Morris's overseas research facility in Switzerland) revealed that Philip Morris learned from its testing of low tar reference laboratory cigarettes in Europe that these cigarettes registered higher in standard biological tests than the full-flavor delivery reference cigarettes — i.e., were "more active" — and thus were more likely to cause cancer: "Low tar reference cigarette . . . [m]ay be slightly more active than [the regular delivery reference cigarette] as a complete carcinogen." 1003121638-1643 at 1638 (US 20153).

2152. A January 28, 1994 report from INBIFO to Philip Morris in Richmond, Virginia stated that increased cigarette filtration, porosity, and ventilation (primary methods used by Philip Morris to reduce the FTC Method tar and nicotine yields in its cigarettes) would result in an increase in the degree to which cigarette smoke was toxic to living cells (i.e., cytotoxicity), the irritation it caused to smokers, and the likelihood that the smoke would generate mutations such as tumors and/or cancer (i.e., mutagenicity). The document stated: "Increased filtration will result in a relative enrichment of gas phase constituents, leading to increased cytotoxicity and irritancy. . . . Increased porosity and ventilation will . . . increase the specific mutagenicity." 2024005509-5512 at 5509-5510 (US 20399); Farone WD, 122:1-14 (citing to, and agreeing with, INBIFO conclusions).

2153. In this case, A. Clifton Lilly, Senior Vice President of Technology, confirmed that data from tests run at Philip Morris's INBIFO facility showed that the Ames test for mutagenicity from Marlboro Lights produces significantly higher results than the tar from Marlboro full flavor products. 2001243600-3673 at 3610-11 (US 20298); 2022180219-0219 (US 21479); 1000135419-5439 (US 20078); Lilly PD, United States v. Philip Morris, 5/14/02, 229:17-231:21.

2154. A 2001 document about Ames mutagenicity testing from Philip Morris's INBIFO laboratory in Germany demonstrated that, in every case, the mutagenicity of Marlboro Lights is higher than the mutagenicity of Marlboro full-flavor. 2505913831-3836 (US 46079).

2155. James Morgan, former President and CEO of Philip Morris, conceded in 2002 that, in his opinion, lower tar cigarettes are not any safer than higher tar cigarettes. Morgan PD, Price v. Philip Morris, Inc., 6/5/02, 75:3-15.

2156. According to Nancy Brennan-Lund, Philip Morris Senior Vice President of Marketing, "what we say on our web site we believe to be true." Philip Morris's position is that low tar cigarettes are no less harmful than full-flavor cigarettes, "based on what the Monograph 13 came out with." Lund later qualified her statement: it has "not been proven" that light cigarettes are less harmful, so one cannot assume they are less harmful. Brennan-Lund PD, Price v. Philip Morris, Inc., 9/20/02, 107:22-108:14; 109:16-110:22; 114:9-114:10.

2157. Ellen Merlo, then Philip Morris USA Senior Vice President of Corporate Affairs, agreed that in 2002 that Philip Morris's policy at the time was that lights or low tar cigarettes are not safe or safer than any other cigarettes. Merlo PD, Price v. Philip Morris, Inc., 10/2/02, 80:3-80:15.

(2) R.J. Reynolds

2158. RJR's internal documents show that it, like the other Defendants, has long known that it has evidence that low tar cigarettes are no safer than regular cigarettes.

2159. In May 1980, RJR scientist C.T. Mansfield performed the Ames test for mutagenicity "on the tars from twenty-four domestic brands of cigarettes with various [FTC] `tar' deliveries," and found "a trend for low `tar' cigarettes to show higher numbers per mg [of] `tar,'" indicating that the low `tar' cigarettes caused more mutations. 514903578-3610 at 3579 (US 20863).

2160. A September 29, 1992 RJR internal presentation reported that lower tar cigarettes were more likely to cause mutations such as tumors and cancer than higher tar cigarettes. The presentation stated: "Higher tar cigarettes tend to have lower Ames activity . . . than lower tar cigarettes." 509643825-3832 at 3825 (US 20830).

2161. In 2003, Arnold Mosberg, an RJR scientist, and other RJR scientists (Doolittle and Morgan) reviewed "data [they] have had for decades" (some for more than two decades) to conduct a comparison of the relative harmfulness of lights and full flavor cigarettes, using various tests, including animal skin painting tumorgenicity, rodent inhalation, and Ames mutagenicity studies. The results of these studies indicated that low tar cigarettes do not reduce risk relative to full-flavor cigarettes. Mosberg PD,Turner v. R.J. Reynolds, 8/19/03, 2:12-16, 6:7-12:4, 14:21-15:19, 15:24-16:1, 16:13-24, 19:3-5, 21:20-22:10, 22:19-26:8, 55:1-11, 57:15-58:16, 97:15-100:12, 103:23-104:1 (discussing in part Deposition Exhibit 2).

(3) Brown Williamson

2162. A February 4, 1976 memorandum from Ernest Pepples, B W Senior Vice President, titled "Industry Response to Cigarette/Health Controversy," reveals Defendants' knowledge that the low tar and filter cigarettes they were marketing as less harmful were not producing less tar and less nicotine to the smoker and were not likely to actually be less harmful:

The industry has moved strongly toward filtered cigarettes, which have increased from 0.6% in 1950 to 87% in 1975. . . . This became known as the `tar derby' of the late 1950's. It was characterized by sharply intensified advertising competition. . . . The new filter brands vying for a piece of the growing filter market made extraordinary claims. . . . It was important to have the most filter traps. Some claimed to possess the least tars. In most cases, however, the smoker of a filter cigarette was getting as much or more nicotine and tar as he would have gotten from a regular cigarette. He had abandoned the regular cigarette, however, on the ground of reduced risk to health. . . . The manufacturers' marketing strategy has been to overcome and even to make marketing use of the smoking/health connection. . . . Thus the `tar derby' in the United States resulted from industry efforts to cater to the public's concern and to attract consumers to the new filtered brands. . . . The current duel between True and Vantage and between Carlton and Now are other examples of competitive efforts to capitalize on the smoking/health controversy.

170042567-2574 at 2568, 2574 (US 20292); Smith WD, 79:5-22.

2163. An August 5, 1980 B W document signed by J. Kendrick Wells III, B W Assistant General Counsel, acknowledged that "[t]here was question about the degree of support . . . at the present time" for the "scientific opinion that certain low levels of `tar' consumption are relatively safe to the smoker," and that "for the longer term the support may be quickly eroding." 680050983-1001 at 0990 (US 20981).

2164. An October 31, 1989 B W internal memorandum, titled "Objections to Product Innovation Strategy," from Wells to RJ Pritchard, B W executive and member of the Tobacco Institute's Executive Committee, conceded that "it is not established that the reduction or removal of specific smoke constituents or of smoke constituents across the board, such as in low tar cigarettes, is significant for smoking and health." 680701034-1038 at 1035 (US 21010); Wells WD, 60:3-61:10.

2165. Sharon Blackie Boyse, Director of Scientific Communications and a spokesperson for B W on scientific issues as late as 1998, acknowledged that, "based on [her] experience as an employee within the cigarette industry, [she has] been aware for some time that some smokers believe that low tar cigarettes are less hazardous to their health [and that] some smokers believe that by switching to low tar cigarettes, they will achieve a health benefit." From at least as early as 1998, B W acknowledged that the company "did not know whether low tar cigarettes were, in fact, less hazardous," and "was not confident that the science showed any health benefit from low tar cigarettes." Blackie WD, 184:22-185:5.

2166. As of 2005, B W's website admits that low tar cigarettes are not safer than regular cigarettes. It states that "despite a dramatic lessening of tar yields, the hoped-for reduction of smoking-related illnesses has not been conclusively demonstrated." Furthermore, the website directs the reader to the National Cancer Institute's Monograph 13, citing its conclusions that "[e]pidemiological and other scientific evidence, including patterns of mortality from smoking-caused diseases, does not indicate a benefit to public health from changes in cigarette design and manufacturing over the last fifty years," and that "[w]idespread adoption of lower-yield cigarettes in the United States has not prevented the sustained increase in lung cancer among older smokers." The website further states: "[W]e continue to believe that smokers should rely on the public health authorities' views on low tar cigarettes and other smoking issues." Ivey WD, 63:9-16; (no bates) (US 86656).

(4) BATCo

2167. A 1976 BATCo document from S.J. Green to P.L. Short and P. Sheehy revealed both that BATCo planned to market low tar cigarettes as safer and that BATCo did not have a sufficient basis to believe that low tar cigarettes were safer, stating: "Before we do work aimed to sell low delivery cigarettes, unless we are already satisfied, we should do some work to establish that in fact they are safer." 110076428-6432 at 6430 (US 34957).

2168. A June 9, 1982 BATCo document, "Technical Exchange Meeting," noted that Ames testing revealed that "[t]he specific activity [a measure of mutagenicity] of a plain cigarette was found to be lower than that of a ventilated filter cigarette." 109883189-3192 at 3191 (US 20265).

2169. A February 18, 1988 BATCo study of cigarette mutagenicity from the B W Research Development Library's E.D. Massey found that the "lighter" the purported delivery of the cigarette, the higher the mutagenicity. Using Philip Morris cigarettes as an example, Merit cigarettes had higher mutagenicity than Marlboro Lights, which in turn had more mutagenicity than regular Marlboro cigarettes. 620000021-0032 at 0027, 0030 (US 20944).

(5) Lorillard

2170. Asked whether low tar/low nicotine cigarettes are any safer than conventional, full-flavor cigarettes, Christopher Coggins, Senior Vice President of Science and Technology at Lorillard, stated: "[O]ur policy is that cigarettes can cause cancer and that goes for all cigarettes." Coggins PD, United States v. Philip Morris, 8/16/01, 115:22-116:4.

(6) Liggett

2171. Comments by Liggett scientists on a "Memorandum of June 13, 1966; C.F. Woodward and C.L. Ogg to P.A. Wells" acknowledged that there was no basis to conclude that reductions in tar and nicotine and/or the use of filters reduced the harmfulness of cigarettes:

Although the public does have a right to know what it is buying, extreme care must be exercised to avoid leading a non-technically oriented public to erroneous conclusions regarding the relative merits of one brand versus another based on minimal differences in "tar" or nicotine — to neither of which can be attached any quantitative measure of health hazard. . . . We would question if any differences between any filter brands would show correlation with tumorgenicity. We know of no correlation of tar delivery among filter brands with tumor production in mice — or for that matter, even among non-filter cigarettes. The level of uncertainty in current biological testing is so great that distinction between cigarettes is not possible on this basis.

LWDOJ00068944-8949 at 8944-45 (US 21214) (emphasis in original).

b. Internally, Defendants Had an Extensive and Sophisticated Understanding of Smoker Compensation

2172. Defendants have known since at least the 1950s that the central component that drives the smoking habit is nicotine, an addictive substance. Accordingly, Defendants also have long been aware that the reason people smoke cigarettes is to obtain a sufficient "dose" of nicotine to sustain their addiction. 1003287880-7890 at 7884 (US 20163); accord 500380562-0564 (US 20630); 100515899-5910 (US 20230); 1003285403-5416 (US 20159); 500917468-7476 at 7474-76 (US 20660); 105553905-3914 (US 34799).

2173. Defendants also have known since the 1960s and 1970s that, because smokers smoke to obtain the desired effects of nicotine, smokers of lower-yield cigarettes tend to adjust their smoking behavior to titrate (i.e., control) their nicotine intake of nicotine to achieve the necessary levels of nicotine. That adjustment or titration of nicotine levels is called compensation. Defendants' internal understanding of compensation was decades ahead of that of employees and scientists of the Government and the scientific community. See Section V(B)(2)(b),supra. According to Dr. William Farone, Philip Morris employee from 1976 to 1984, who served as Director of Applied Research, and was accepted as an expert in "the chemistry and biochemistry of alkaloids and addictive drugs, the chemistry and physics of cigarette smoke, cigarette design and technology, and the chemistry and biochemistry of toxic substances and how they interact with living systems," during his employment at Philip Morris, the company had "a greater understanding of compensation than the outside scientific community," and, in his expert opinion, "the same is true for the other tobacco company Defendants." In 1966, when the FTC was considering the FTC Method, Defendants knew "that smokers smoked for nicotine" and "that smokers alter their smoking behavior to get nicotine." Farone WD, 2:2-8, 2:15-19, 117:15-118:8; Farone TT, 10/12/04, 2169:18-22, 2170:5-11, 2171:25-2172:8, 2182:11-2190:7; Wigand WD, 8:11-17; 120:5-17.

2174. When Dr. Farone was Director of Applied Research, Philip Morris's own research found that "if we adjusted the design to reduce the nicotine delivery, or if people were given a cigarette of lower nicotine delivery than their usual brand, smokers would `compensate' — change how they smoked — to get the amount of nicotine they need." Farone WD, 102:2-14; see also Farone WD, 104:7-15 (testifying that he knows Philip Morris was aware of compensation for nicotine "[f]rom conversations that I had with many of my colleagues at Philip Morris while I was working there, including people working under Dr. Dunn in his behavioral research group," and that this knowledge "is evident from the company's own documents").

(1) Philip Morris

2175. In a March 24, 1961 Philip Morris memorandum from Wakeham to Hugh Cullman, "Trends of Tar and Nicotine Deliveries over the last 5 Years," Wakeham stated: "As we know, all too often the smoker who switches to a hi-fi cigarette winds up smoking more units in order to provide himself with the delivery which he had before." 1000861953-1953 (US 35484); see also Farone WD, 104:16-105:9 ("[T]his research into and understanding of compensation influence[d] how Philip Morris designed cigarettes").

2176. As Philip Morris marketing researcher Myron E. Johnston noted in a June 1966 Philip Morris report titled "Market Potential for a Health Cigarette":

[A]ny health cigarette must compromise between health implications on the one hand and flavor and nicotine on the other. It seems clear from the performance of existing health cigarette entries that flavor and nicotine are both necessary to sell a cigarette. A cigarette that does not deliver nicotine cannot satisfy the habituated smoker and cannot lead to habituation, and would therefore almost certainly fail.

1001913853-3878 at 3860 (US 20123).

2177. A July 28, 1967 Philip Morris USA memorandum from W.L. Dunn, Jr., then Associate Principal Scientist, to R.B. Seligman, Director of Development, discussed ventilation holes and compensation:

An earlier study (Memo of June 27, 1967) established that lip contact with the tipping paper extended to 9.96 mm from the outer end of the tipping paper for the average smokers. Since the air dilution holes are located in a band from 8.0 to 9.7 mm from the outer end of the tipping paper, it follows that some of these holes are likely to be occluded under normal smoking conditions, whereas no occlusion is likely to occur when the cigarettes are machine smoked for analysis.

The memorandum also documents that "[s]mokers adjust puff intake in order to maintain TPM [total particulate matter] and/or nicotine constancy." 1003295500-5502 at 5500, 5502 (US 88627).

2178. An August 11, 1967 Philip Morris USA document from Helmut Wakeham, Vice President of Corporate Research and Development, to Paul D. Smith, Vice President and General Counsel, stated that human smokers increased their smoke intake when switching from non-filter to filter cigarettes:

Two tests conducted at Product Opinion Laboratories demonstrate that in smoking a dilution filter cigaret [sic], the smoker adjusts his puff to receive about the same amount of "undiluted" smoke in each case. . . . In the smoking machine the puff volume is constant so that with dilution the quantity of "equivalent undiluted smoke" delivered to the Cambridge filter is reduced. Not so with the human smoker who appears to adjust to the diluted smoke by taking a larger puff so that he still gets about the same amount of equivalent undiluted smoke. . . . The smoker is, thus, apparently defeating the purpose of dilution to give him less "smoke" per puff. He is certainly not performing like the standard smoking machine; and to this extent the smoking machine data appear to be erroneous and misleading. It has probably always been so for diluted smoke cigarettes, whether dilution is obtained by porous paper or holes in the filter.

1000322554-2555 (US 35224) (emphasis in original); see also Dr. Jerry Whidby WD, 17:16-19:11 (testifying that "Product Opinion Laboratories was a facility established by Philip Morris to evaluate smokers' reaction to the cigarette brands Philip Morris was selling, as well as to Philip Morris's prototype cigarettes," and that he is not "aware of any instance, at any time between when Dr. Wakeham wrote this document in 1967 and when [Dr. Whidby] left the company in 1998, in which Philip Morris informed the American public directly of Wakeham's conclusions that the FTC tar and nicotine yields are apparently `erroneous and misleading,'" and "dilution filter cigarettes generated lower FTC yields than non-dilution cigarettes, but delivered about the same amount of smoke to smokers").

2179. Dr. Farone explained the extraordinary significance of Wakeham's statements in this document:

It shows that Philip Morris understood the puff compensation phenomenon. This document shows that by 1967, Philip Morris recognized that when you have dilution or ventilation, the mechanism for compensation is puff adjustment . . . this document [also] shows that Philip Morris knew in 1967 that human smokers compensated by increasing their smoke intake when switching from non-filter to filter cigarettes, and in doing so, smokers received the same amount of tar and nicotine from their filter cigarettes as from non-filter cigarettes. It also shows Wakeham's understanding that the FTC tar and nicotine yields for low tar cigarettes are erroneous and misleading.

Farone WD, 111:5-112:15.

2180. Since roughly the mid-1970s, the "vast majority of the low tar and ultra-low tar cigarettes sold by Philip Morris in the United States . . . are dilution cigarettes." Whidby WD, 19:16-18.

2181. In an August 25, 1967 Report on Project 1600, William Dunn, Senior Scientist, outlined an additional study performed by Philip Morris on puffing, with findings that provided "further support to the postulate that smokers adjust puff intake in order to maintain constant smoke intake." 1003288337-8338 at 8337 (US 85049).

2182. In a Fall 1969 speech, William Dunn reported to the Board of Philip Morris: "It would appear that smokers do modify their smoking habits in order to obtain a preferred [nicotine] intake level." 1003287880-7890 at 7884 (US 20163).

2183. Helmut Wakeham presented a November 26, 1969 internal industry paper, titled "Smoker Psychology Research," to the Philip Morris Board of Directors stating:

This great variability among smokers results from the fact that a smoker tends to seek his own level of intake. Even while smoking a single cigaret [sic], he adjusts the volume of his puff as he goes down to the rod, compensating for the change in the density of the available smoke. . . . A smoker's intake level is determined by the smoker himself, not by the manufacturers of the cigarettes.

1000273741-3771 at 3748 (US 26080).

2184. A September 2, 1970 Philip Morris memorandum from Ray Fagan to Wakeham confirmed Philip Morris's understanding that smokers compensated for lower deliveries by smoking more cigarettes:

In the last 15 years particulates in cigarette smoke have declined by 33%; however, the number of cigarettes per smoker has increased. Furthermore, experimental studies have shown that a smoker will increase the number of cigarets he smokes if the cigaret he is offered contains less particulates and less nicotine.

2022244449-4450 at 4449-4450 (US 36855); Farone WD, 110:6-14; 118:9-23.

2185. A November 1971 Philip Morris Special Research Report written by Tom Schori also addressed compensation by increasing the number of cigarettes smoked. The last sentence of the abstract of this report stated: "These findings support the hypothesis that the smoker does have daily intake quotas for tar and/or nicotine and that he titrates his smoke intake to meet these quotas." 1000350158-0188 at 0161-0162 (US 20176).

2186. A January 1972 document from Philip Morris Research Center, written by Tom Schori and William Dunn, reviewed Philip Morris's evidence indicating that smokers compensated when smoking brands supplying less nicotine in order to receive their "daily nicotine intake quota," stating:

Cigarette consumption rate, i.e., number of cigarettes smoked per day, was found to vary as a function of the nicotine delivery of these cigarettes. Specifically, as nicotine increased, cigarette consumption decreased. These findings support the notion that smokers develop a daily nicotine intake quota and that when smoking cigarettes differing in nicotine delivery from that which they are accustomed they tend to modify their consumption rate in order to maintain their normal quota. No support was found for the analogous notion of a daily tar intake quota, however.

1003285403-5416 at 5403 (US 20159); 2062951266-1279 at 1266 (US 39723); Farone WD, 111:1-4 (referring to US 20159); Henningfield WD, 94:14-21 (referring to US 39723 as "significant in terms of Defendants' knowledge and understanding of the addictiveness of nicotine from the 1970s").

2187. A May 14, 1975 Philip Morris memorandum from William Dunn to Robert Seligman, Vice President for Tobacco Science and Research, stated:

Underlying all of our work in this area is the conviction what the smoker gets in the way of smoke is independent of smoke concentration levels as delivered within the range of commercially available cigarettes. He has a variety of regulatory maneuvers at his disposal for accommodating supply to a fairly constant need [for nicotine]. To monitor all of these maneuvers simultaneously is a major objective of our behavioral research program.

1000024914-4920 at 4915 (US 26072).

2188. An August 19, 1977 Special Report from the Philip Morris USA Research Center written by Barbara Goodman, a Research Scientist, described Philip Morris's "Human Smoker Simulator," a mechanism the company used to replicate human smoking behavior. The Simulator recorded how smokers smoked particular cigarettes by measuring their puffing behavior, then played back the recording into a smoking machine so the machine could replicate — and then measure — the amount of smoke constituents and the chemical composition obtained from a cigarette when smoked the same way the human had smoked it. The document states: "The Smoker Simulator program has the instrumentation to measure those smoker variations that constitute a smoker's puffing profile and a programmable smoking machine to measure the resulting tar, nicotine, and water deliveries." 1003728025-8039 at 8027 (US 20179); Whidby WD, 21:19-28:9; Whidby TT, 2/22/05, 13989:19-13991:6; see also 1003293476-3493 at 3484 (US 85073) ("The cassette tape impulses an electronic smoking machine which duplicates exactly the smoking behavior of a given individual with a given cigarette. Delivery of tar, nicotine, and other smoke components can then be determined at the same conditions.").

2189. A Philip Morris Report dated July 20, 1981, written by Frank Gullotta and J.A. Jones and sent to William Dunn and 40 others, including Dr. Whidby, described Philip Morris's Human Smoker Simulator program as "a system . . . which permits relatively unobtrusive monitoring of a smoker's inhalation patterns outside the laboratory setting," and indicated that "the system's accuracy was highly satisfactory throughout the experiment" and had "a mean accuracy reading of 96% . . . for 70 experimental sessions." The Report also indicated:

A major barrier to investigations on smoke-laden inhalation patterns has been the lack of instrumentation which would accurately measure inhalation parameters, and yet be unobtrusive to the smoker. The system we have acquired breaks this barrier by permitting accurate and relatively unobtrusive monitoring of inhalation patterns under natural smoking conditions.

2025986350-6401 at 6352-6353, 6382 (US 87080).

2190. The July 20, 1981 Report includes a number of statements reflecting Philip Morris's understanding of smoker compensation:

That roughly 20% or less of smokers take puffs equal to or smaller to those taken by the FTC Method machine smoking protocol.

"The varying puff sizes in turn also give increased deliveries above those of" the FTC Method.

"Smoker profile characteristics have been found to be affected by the cigarette design parameters to varying degrees."

"A cigarette designed such that it causes the smoker to take larger puffs than the compared model could easily be perceived as having more impact (desirable or undesirable as the case may be)"

Lists low resistance to draw and "high filter dilution" as the top two "physical cigarette designs that have the effect of increasing a smoker's puff volumes."

"In conclusion, when a smoker is presented with a cigarette other than his normal brand, it is possible to estimate the maximum flow rate to a certain degree. The puff duration will increase with increasing RTD [resistance to draw] and/or filter dilution. Since the volume is based on both flow and duration, the puff volume will change accordingly."

Test results showing that smokers of full-flavor, light and ultra light cigarettes all took larger puffs than in the FTC Method, and that the smokers' puffs were increasingly large for lower tar cigarettes, so that, for full-flavor smokers, "average tar deliveries were 45% higher than" the FTC yields, low tar smokers' "showed a higher rate of increase, 81%," and, for ultra light cigarettes, "[t]he average tar delivery" was "more than three times that of" the FTC yield.

1003728025-8039 at 8027, 8028, 8032, 8034, 8036, 8037 (US 20179); Whidby WD, 22:18-23:9, 23:17-21, 24:6-13, 25:14-18, 26:21-27:5, 27:15-28:9; see also 2025986350-6401 at 6353, 6384 (US 87080); Whidby WD, 53:10-55:21 ("Preliminary results suggest that inhalation patterns are modified in response to changes in the available nicotine in the cigarette smoked. . . . The results from studies which analyze blood plasma and urine nicotine concentrations . . . suggest that nicotine compensation is fairly complete.").

2191. A September 17, 1975 Philip Morris document from Goodman to Leo F. Meyer, Philip Morris Director of Research, reflecting results of Philip Morris's studies with its Human Smoker Simulator, reported that, due to compensation, smokers got as much tar and nicotine from Marlboro Lights as from full-flavor Marlboros:

Marlboro Lights cigarettes were not smoked like regular Marlboros. There were differences in the size and frequency of the puffs, with larger volumes taken on Marlboro Lights by both regular Marlboro Smokers and Marlboro Lights smokers. . . . The panelists smoked the cigarettes according to physical properties; i.e., the dilution and the lower RTD of Marlboro Lights caused the smokers to take larger puffs on that cigarette than on Marlboro 85's. The larger puffs, in turn, increased the delivery of Marlboro lights proportionally. In effect, the Marlboro 85 smokers in this study did not achieve any reduction in smoke intake by smoking a cigarette (Marlboro Lights) normally considered lower in delivery.

The report's "Conclusions" section noted that "[t]he smoker data collected in this study are in agreement with results found in other project studies." 2021544486-4496 at 4486-4488 (US 20348);see also Whidby WD, 45:11-12 (noting, in the context of this exhibit, that "Marlboro 85's" refers to Marlboro Reds, a full-flavor cigarette brand).

2192. As Dr. Burns explained, "there are three things that are powerfully significant in this document":

(1) It "very clearly demonstrates that, in contrast to what we believed six years later when we wrote the 1981 Surgeon General's Report, smokers who smoked brands of cigarettes on the market in 1975 were not getting different yields when they smoked those products. We [in the public health community] believed they were."

(2) "[T]his is dated 1975, six years prior to the time the [1981] Surgeon General's Report reached its conclusion. And we did not have access to this information or comparable information."

(3) "[T]his study was done on a machine that mimicked actual smoking behaviors, that actually matched the behavior of the individual when the machine smoked the cigarette. In 1981, one of the recommendations that we made . . . was that this type of machine should be developed so that we could develop a better understanding of the relationship between delivery of tar and nicotine of these cigarettes when they were actually smoked. So . . . six years prior to the time we were reviewing that evidence for the Surgeon General, this information was available to Philip Morris."

Burns WD, 52:15-53:12.

2193. One other Philip Morris Human Smoker Simulator report compared the deliveries of the full flavor and light versions of brands Philip Morris was selling. That report, dated September 23, 1976, measured the smoking behavior — and resulting tar and nicotine deliveries — of 150 full-flavor cigarette smokers for several years. This Human Smoker study's results revealed that, while Marlboro 100s are both full-flavor cigarettes and longer in length than Marlboro Lights, "the tar and nicotine yields for these two brands are basically identical." Whidby TT, 2/22/05, 14099:12-14106:6, 14106:15-14107:1; 1003727277-7298 at 7280, 7281, 7290 (JD 040539).

2194. Philip Morris stopped all testing with the Human Smoker Simulator in 1981. WhidbyTT, 2/22/05, 13991:15-13992:13.

2195. A March 1, 1977 Philip Morris memorandum from Stanley Schachter to Thomas Osdene, Director of Research, concluded: "Serious smokers smoke to prevent withdrawal. Smokers regulate nicotine intake. . . . The smoker who fails to regulate suffers withdrawal." 1000046626-6661 at 6654-6655 (US 35105).

2196. An October 16, 1981 memorandum from Jan Jones to William Dunn, titled "Nicotine Retention Research Proposal," stated:

Research on smoke-laden inhalation patterns, using the ambulatory monitoring instrumentation, has provided preliminary evidence that inhalation behavior is modifiable, and is altered as a function of changes in the nicotine delivery of the cigarette. We are observing changes in inhalation parameters in the direction which would suggest compensation for increases or decreases in nicotine relative to the subject's usual brand.

1000136372-6373 at 6372 (US 35162).

2197. In a November 29, 1982 report, "The Effect of Cigarette Nicotine Content on Smoker Puff Parameters and Deliveries," Philip Morris scientists reported the results of their study of "puff number, puff volumes, puff durations, flow rates and puff intervals," which showed smokers "generally tended to decrease puff duration, puff number and puff volume and increase puff interval as the nicotine level of the cigarette increased." 1000408760-8809 at 8762, 8764, 8771 (US 35272).

2198. Carolyn Levy, a research scientist for Philip Morris in its Behavioral Research Group from 1975-1980, testified that she "worked on the issue of whether individuals regulated the amount of nicotine they obtained from smoke," and as part of that work she "monitored how smokers inhaled smoke from cigarettes with varying tar and nicotine deliveries." Levy further testified that, as a result of this research, she was able to "gather evidence that some people change their smoking behavior in response to cigarettes with differing tar and nicotine deliveries." When Levy requested publication, she "was told not to publish or was not given approval to publish by the manuscript review board." Levy WD, 10:16-11:15.

2199. A November 1999 presentation, titled "PM USA Discount Brands," given to Geoffrey Bible, Chairman of the Board and CEO of Philip Morris Companies, noted in a Product Comparison chart that Ultra Light products have a higher puff count than Full Flavor products. 2070662118-2389 at 2176 (US 87914*).

(2) R.J. Reynolds

2200. In a March 28, 1972 memorandum marked "RJR SECRET" from Claude Teague to E.A. Vassallo and Murray Senkus, titled "A Gap in Present Cigarette Product Lines and an Opportunity to Market a New Type of Product," Teague stated: "I believe that for the typical smoker nicotine satisfaction is the dominant desire, as opposed to flavor and other satisfactions." The document went on to state:

Given a cigarette that delivers less nicotine than he desires, the smoker will subconsciously adjust his puff volume and frequency, and smoking frequency, so as to obtain and maintain his per hour and per day requirement for nicotine (or, more likely, will change to a brand delivering his desired per cigarette level of nicotine).

Teague further stated:

[R]egardless of which cigarette the smoker chooses, in obtaining his daily nicotine requirement he will receive about the same daily amount of tar. If, as claimed by some anti-tobacco critics, the alleged health hazard of smoking is directly related to the amount of tar to which the smoker is exposed per day, and the smoker bases his consumption on nicotine, then a present "low tar, low nicotine" cigarette offers zero advantage to the smoker over a regular filter cigarette, but simply costs him more money and exposes him to substantially increased amounts of allegedly harmful gas phase components in obtaining his desired daily amount of nicotine.

The document ends with the statement that "[t]he thoughts and philosophies expressed above come from many sources and certainly are not solely those of the writer." 500790776-0784 at 0778, 0782-0784 (US 29473).

2201. A document titled "Smoking Satisfaction" and labeled as a "[t]alk delivered to RJR Tobacco Company management, June 23, 1974 and RJR Tobacco International management, August 4, 1976" by Murray Senkus, Director of Scientific Affairs for RJR until 1979, stated

[T]he amount of nicotine that one can get in the lungs from low tar cigarettes is much less. So the smoker then resorts to other means to get the nicotine he needs in the blood from low tar cigarettes by longer puffs, by bigger puffs, by more frequent puffs, and also by smoking more cigarettes each day. It has been observed that as one switches from a non-filter to a filter, one smokes more cigarettes per day. But eventually one can change his style of smoking so one can get enough nicotine in the blood during the inhaling step by changing the smoking style; i.e. longer puffs, bigger puffs, and more frequent puffs. Surveys have shown that in switching to lower tar cigarettes, smokers have not necessarily increased the number of cigarettes per day.

501525355-5366 at 5360-5361 (US 29531).

2202. Senkus, in a speech he gave at RJR in both late 1976 and early 1977, "Some Effects of Smoking," demonstrated RJR's knowledge that smokers compensate for lower delivery cigarettes to obtain their required nicotine level, and confirmed that the other Defendants also knew this:

[T]here are ways to increase or decrease the amount of nicotine one can obtain by smoking a single cigarette: One can take a deeper puff or shallower puff. . . . One can puff more frequently or less frequently. . . . One can take a deeper puff and hold the smoke in the lungs longer before exhaling to assure complete transfer of nicotine into the body fluids. Without any question, the desire to smoke is based on the effect of nicotine on the body. . . . [T]he amount of nicotine that one can get in the lungs from low tar cigarettes is much less. So the smoker then resorts to other means to get the nicotine he needs in the blood from low tar cigarettes, by longer puffs, by larger puffs, by more frequent puffs, and also by smoking more cigarettes each day. One can get enough nicotine into the blood during the inhaling step by changing the smoking style; i.e., longer puffs, bigger puffs, and more frequent puffs. . . . It is worth noting that our competitors are aware of the significance of the quality and quantity attributes of nicotine. Moreover, they are fully aware of the advisability of maintaining a low tar value and also maintaining the nicotine as high as possible [referring to Philip Morris's Marlboro and Merit, and Lorillard's True brand].

500251711-1722 at 1714, 1718, 1720 (US 48076).

2203. In an April 5, 1982 RJR report from J.H. Robinson and J.H. Reynolds to Dr. D. Werner, the authors admitted that the nicotine delivered under human smoking conditions was "more than 200%" of that advertised, stating that "the smoker can adjust his puffing characteristics to obtain the same level of nicotine from different cigarettes. This represents the first concrete evidence that smokers compensate to obtain a consistent amount of nicotine. Relevant to this, it should be noted that all cigarettes experienced a marked reduction in nicotine filter efficiency under human smoking conditions compared to the nicotine filter efficiencies obtained under standard FTC conditions." 508028982-8984 at 8983 (US 85053).

2204. John Robinson, RJR's Principal Scientist in psychopharmacology, wrote a July 25, 1983 memorandum to Alan Rodgman, titled "Critique of Smokers of Low-Yield Cigarettes Do Not Consume Less Nicotine," which essentially agreed with the conclusions in an article written by Dr. Neal Benowitz showing that smokers compensate to obtain a stable nicotine dose in their bloodstream. The article stated:

The paper itself expresses what we, in behavioral, have "felt" for quite some time. That is, smokers smoke differently than the FTC machine and may very well smoke to obtain a certain level of nicotine in their bloodstream. If a given level of nicotine in the blood is the final goal of a smoker, one would predict that he would smoke an FFT [full-flavor tar] and ULT [ultra low tar] cigarette differently. If the smoker could obtain the same nicotine in his bloodstream from an FFT and ULT cigarette by modifying his puffing/inhaling pattern, it would be expected that the blood cotinine level would be the same after smoking either cigarette on a regular basis . . . the data reported in this paper remind us of the HMSM experiment done with the German Camel and Marlboro cigarettes. While there were certain imperfections in this experiment, you may recall that the smokers apparently obtained almost exactly the same amount of nicotine no matter which of the four cigarettes they smoked. This was one of the first indications that smokers may, in fact, smoke to obtain a certain level of nicotine in their bloodstream. Data like these made me feel that the data reported in this current publication are probably correct.

502680871-0871 (US 49198); see also 508978013-8025 at 8014 (US 20819) (acknowledging that smokers who switched to low-tar products typically "compensated," and indicating that a smoker "has his or her own nicotine requirement from each cigarette" and "adjusts [his/her] smoking maneuver" to obtain the desired level of nicotine").

(3) Brown Williamson

2205. Minutes from a January 12-18, 1974 B W/BATCo conference stated: "[W]hatever the characteristics of cigarettes as determined by smoking machines, the smoker adjusts his pattern to deliver his own nicotine requirements." 109882674-2679 at 2675 (US 21507).

2206. B W's scientific research on compensation was confirmed by its consumer research on low tar cigarettes, in which smokers reported compensating for the reduced deliveries. For instance, a February 23, 1977 consumer research report, "Consumer Discussions of Low Delivery Cigarettes," written by R.F. Brotzge and W.H. Deines, demonstrates B W's awareness that low tar smokers were compensating by smoking more cigarettes, stating:

Findings, in order of importance, to participants in the five focus groups were: 1. Health — Participants expressed general fears about cancer, emphysema, other lung diseases, etc. Despite these fears, they stated their determination to continue smoking. . . . 5. Compensation — Participants noted they smoked more low tar cigarettes and received less satisfaction.

679009843-9867 at 9843 (US 85055).

2207. Similarly, a July 25, 1977 B W Internal Marketing Study, titled "Low `Tar' Satisfaction, Step 1 Identification of Perceived and Underperceived Consumer Needs," analyzed smokers' satisfaction with low tar cigarettes with regard to switching behavior, and stated: "It was noted earlier that new arrivals to the Hi-Fi category realize that they are smoking more cigarettes [quoting a study participant]: `You can also go down to the lower tar, but increase your smoking. So you're right back where you were.'" The study further noted that "Cigarette consumption, as reported in a 1976 Consumption Study, increases as nicotine (satisfaction per cigarette) decreases." 775036039-6067 at 6050 (US 21053).

2208. A report bearing the stamp "Brown Williamson June 24, 1980 R D Library" prepared by BATCo on April 23, 1980, titled "Compensation: A Review [of] the Relationship Between Compensation and Changes in Cigarette Design," stated that studies indicated that compensation was a permanent phenomenon: "On the basis of the German studies, compensation would therefore be seen as a long-term tendency to permanently adjust towards some preferred (or minimum) level [of nicotine]." 650032329-2385 at 2356 (US 53429); Ivey WD, 68:1-10.

2209. A July 1983 B W report by W. Wiethaup and W. Schneider, "Filter effects on smoke and smoke effects," stated:

One factor, which may be responsible for a relatively intensive "strength" impression within a given tar segment, is the "smoke elasticity." The smoke elasticity describes the potential of a cigarette, to provide the smoker with more smoke, if he draws harder. This becomes relevant at least for the first few puffs of a low tar cigarette, as all recent investigations show.

512107109-7120 at 7110 (US 85056).

2210. A March 26, 1999 e-mail from Hugh Honeycutt to Mike Dixon and numerous other BATCo employees referenced B W's "Atlanta Study," which was conducted by scientist Kelly St. Charles, to examine smoking behavior and puffing profiles for low tar cigarettes. Honeycutt's email expressed concern that "B W had just made a big splash in the US touting Carlton as the `1' for you," — a marketing slogan indicating that Carlton delivered only one milligram of tar — in light of research finding that "smokers of ultra low tar brands like our Carlton 1 mg appeared to actually get 3 mg." of tar. 321155579-5580 at 5579 (US 46683); 2073168412-8414 (US 22024). As of June, 2004, B W admits that smoker compensation causes Carlton 1 mg smokers, on average, to inhale 5 to 6 times the amount of tar that B W has advertised. (no bates) (US 88628) (stating "a Carlton 1 mg. smoker will, on average, get 5 to 6 milligrams of tar").

(4) BATCo

2211. A BATCo document from the late 1970s, "Why do People Smoke?," reflects BATCo's understanding of compensation, stating that "[n]icotine sustains smoking behaviour," that "smoking behaviour is highly responsive to cigarette design," and that "[a] key determinant of product preference will be the design `Effort-Reward Gradient,'" i.e., elasticity of delivery. The document added: "Increase in Cigarette Consumption [is] Related to Change in Nicotine Yields," noting that "[m]ost compensation must occur at the individual cigarette level." 403626692-6802 at 6729, 6731, 6734, 6762, 6768 (US 85018*).

2212. An undated BATCo document by Dr. S.J. Green, a Senior Scientist for BATCo Research and Development, titled "Ranking Cigarette Brands on Smoke Deliveries," discussed compensation to equalize nicotine intake in several contexts, including smokers "increas[ing] puff volume to receive the same nicotine" when smoking a lower tar cigarette and smokers "adjust[ing] their smoking behaviour on the basis of nicotine intake." 110077247-7268, at 7247-7250 (US 88643).

2213. A March 11, 1971 report written by D. Creighton, BATCo R D Research Scientist, and L.M. McGillivray, titled "The Effect of Changed Deliveries at Constant Pressure Drop on Human Smoking Pattern," stated:

It was found that there is indeed a degree of compensation for the reduced delivery. The panel as a whole took larger puffs from the lower delivery cigarette, inhaled the smoke more deeply and held the smoke in the lungs for a longer time. The six individual panel members compensated for changed delivery in different ways, some by increased volumes, and others by increased number of puffs on the lower delivery cigarette.

The report also stated: "An increase in puff volume, but not puff duration, means that subjects must have drawn harder on the lower delivery cigarettes, and that the flow rate was greater during puffing. This implies that smokers are willing to work harder to achieve an optimum delivery from a lower delivery cigarette." The report further stated:

The fact that the panel compensated for the lower delivery by increasing the depth of inhalation, the depth of exhalation and the total time for which the smoke was held within the body is of particular interest in the light of the finding that more is retained from a puff of smoke that is inhaled deeper, and held within the lungs longer.

757001173-1185 at 1174, 1180 (US 85058); see also 102793967-3980 at 3969 (US 34698).

2214. A June 17, 1975 BATCo document, "Compensation for Changed Delivery," sent to several BATCo employees, including David Geoff Felton, Senior Scientist for BATCo Ltd.'s Research and Development Department, acknowledged that smokers compensate to achieve a stable dose of nicotine:

A number of experiments . . . have been interpreted as showing that compensation for changed delivery does occur. . . . Our own results showed that when the [tar] to nicotine ratio was changed more smoke was taken from the lower delivery cigarette. . . . My own view is that compensation for changed delivery of nicotine does occur. . . . The weight of evidence at present available is for nicotine compensation [referring to several studies].

105658168-8179, 8168, 8178 (US 85418).

2215. A June 1, 1976 BATCo report, also titled "Compensation for Changed Delivery," written by D. Creighton, R D Research Scientist, concluded that

the evidence is strongly in support of the hypothesis that many smokers do change the way they smoke in response to cigarette design changes that affect nicotine delivery. . . . The tendency amongst the majority of established smokers is to attempt to equalise nicotine delivery if the cigarette design allows them to do so.

The study further concluded that "[d]ue to the differences in the delivery of individual cigarettes from the same brand . . . and the differences between subjects and within a subject" "[e]qualisation [of nicotine levels] within the range + 20%" was expected. The report stated that "there are eight suggested methods by which a subject may regulate his nicotine intake; any number of which may be used simultaneously or at different times," namely by varying puff volume, puff number, puff distribution, cigarette butt length, puff interval, puff profile, inhalation pattern, and number of cigarettes smoked. 650008449-8480 at 8470, 8460-8462, 8469, 8464 (US 76192).

2216. A June 27, 1978 BATCo memorandum, also titled "Compensation for Changed Delivery," written by Creighton, confirmed BATCo's knowledge that compensation is not temporary, and occurs as a result of a need for nicotine, and contradicted "the advice of Health Authorities" that smokers who would not or could not quit should switch to a lower delivery cigarette:

It is difficult to ignore the advice of Health Authorities who advise smokers to give up smoking or change to a lower delivery brand but there is now sufficient evidence to challenge the advice to change to a lower delivery brand, at least in the short-term. Numerous experiments have been carried out in Hamburg, Montreal, and Southampton within the company as well as many other experiments by research workers in independent organizations, that show that generally smokers do change their smoking patterns in response to changes in the machine smoked deliveries of cigarettes. . . . Further findings from these results were that the modified smoking patterns used to smoke the changed delivery brands were maintained for the month during which they were smoked. This shows that there was no adaptation during that time. . . . In general, a majority of habitual smokers compensate for changed delivery, if they change to a lower delivery brand than their usual brand. . . . If they choose lower delivery brand which has a higher tar to nicotine ratio than their usual brand (which is often the case with lower delivery products) the smokers will in fact increase the amounts of tar and gas phase that they take in, in order to take the same amount of nicotine.

105553905-3914 at 3905, 3907, 3913 (US 34799); Ivey WD, 69:14-70:1.

2217. A June 29, 1979 study written by Creighton, "A Comparison of Smoking Surveys Separated by Four Years," compared the smoking behavior of a group of smokers in 1974 of a cigarette with 1.7 mg nicotine and 27 mg TPM to their behavior in 1978 when smoking a cigarette with a slight reduction in nicotine (by 17% to 1.4 mg) and virtually identical TPM delivery (26 mg). The study found that the group smoked the reduced nicotine cigarette "more intensely" (i.e., increased their puff volume), which likely "equalised" the nicotine delivery of the two cigarettes. The study concluded that "it is probable that as a result of the changes in smoking behaviour observed in this study, subjects took about the same amount of nicotine from the two different cigarettes but, because of changes in TPM to nicotine ratios, received more TPM from the [reduced nicotine cigarette]." The study further found that

[t]he fact that smokers have changed their smoking patterns to take more smoke from a cigarette with lower nicotine delivery but similar TPM delivery adds support to the contention that nicotine is a major determinant of smoking behavior, and that TPM, as long as it is delivered in sufficient quantity, plays a lesser role.

650008946-8960 at 8948, 8953-8955 (US 85059).

2218. An April 27, 1981 memorandum by Martin Oldman, an employee in BATCo's Research Development department, to L.C.F. Blackman, Director of BATCo, stated that "[s]ome people appear to smoke for nicotine, others don't . . . nicotine dependent smokers . . . are more likely to compensate for nicotine than others." 105399692-9693 at 9693 (US 85060).

2219. A July 9, 1984 document by Imperial Tobacco Limited, sister company to B W, was distributed to various B W and BATCo employees, including: Blackman; A.M. Heath, BATCo Executive Director of Marketing; Erhard Koehn, BATCo Manager of Product Development; Rainier Wernitz, BATCo Manager, Market Research; Tilford Riehl, B W Division Head of Product Development; A. Mellman, B W Director of Marketing Research; T. Wilson; Brennan; C.I. Ayers; and G.O. Brooks, BATCo scientist. It acknowledged that smokers who switch to low tar brands increase the number and intensity of puffs taken and number of cigarettes smoked to achieve a higher dose of nicotine: "BRANDS SWITCHING DOWN DELIVERY: increase in puffing parameters — increase in numbers of cigs. smoked — more puffs taken means to achieve a higher dose." 536000000-0090 at 0050 (US 22338).

2220. A January 24, 1985 BATCo letter from Charles H. Keith to Lance Reynolds stated:

[H]uman smokers, even though they ingest much more Nicotine and Tar than is indicated by the FTC values, get about the same amount of Tar and one and a half times the Nicotine from Barclay, Carlton and Cambridge. . . . [I]t is clearly apparent that the human smokers are ingesting much more nicotine and tar than the nominal values obtained by FTC tests. The human levels are six to eight times higher than the normal values.

621096298-6300 at 6298, 6300 (US 76191).

2221. A BATCo document dated October 12, 1987 sent by M.L. Reynolds to H.F. Dymond (researcher) and H. Ibig, under the heading "Easily Achieved Tar Deliveries from Low Tar Cigarettes," displays a chart depicting the increased tar deliveries of RJR's Now cigarette, and Philip Morris's Merit and Merit Ultra cigarettes, caused by the compensatory behaviors of vent hole blocking, taking more puffs, and taking bigger puffs. This chart shows that these behaviors in combination caused a thirteen-fold increase of tar inhaled for Now cigarettes, a nearly three-fold increase for Merit, and a four-fold increase for Merit Ultima. 400015695-5696 at 5696 (US 85063).

2222. A December 21, 1987 BATCo document with subject heading "Notes on Meeting With Dr. Eicher" written by "HFD" (H.F. Dymond, researcher) and sent to Nick Cannar and several B W and BATCo personnel, stated: "BAT acknowledged the discussion on compensation and described how channel ventilation was an alternative form of ventilation, both systems could be manipulated by a consumer. Other companies were also beginning to acknowledge compensation, but they were reluctant to debate the issue in public." 400015634-5635 at 5634 (US 85064).

2223. A May 6, 1992 BATCo report, titled "Topics In Smoking and Health `Bible'" stated:

[T]he expression of product smoke deliveries in the form of a league table, while understandable, can be misleading. There can be no guarantee that a smoker who switches from one product to another delivering a lower "tar" value will thereby reduce his intake of "tar." He may well alter the way he smokes the second product in some subtle fashion and so adjust his intake of smoke to fit his needs. In this way, he may inadvertently increase his intake of other substances in the smoke. League tables and delivery data on products may, therefore, be misleading to the consumer, who will be unaware of the sub-conscious ways in which he manipulates his own behaviour . . . smokers of higher delivery cigarettes may find that they need to smoke more low delivery cigarettes to achieve the same satisfaction. . . . Increasingly smokers will accept the alleged harmfulness of smoking, and while wishing to continue will look for health reassurance brands. . . . Smoking behaviour is also of importance. For example research into the effects of low tar and nicotine cigarettes on ease of quitting smoking will be undertaken.

500887584-7709 at 7606-7607, 7614, 7679, 7704 (US 20656).

(5) American Tobacco

2224. A November 11, 1976 report prepared by Fay Ennis Creative Research Services for F. William Free Company, an advertising agency used by American, demonstrates American's awareness that smokers of low tar cigarettes employed several different methods of smoker compensation. The report summarized focus group sessions relating to low tar cigarettes. When asked about Now and Carlton cigarettes, the panelists "concluded that you would smoke twice as much of this type of cigarette in order to get any satisfaction. One man said that he didn't like the draw on these cigarettes because he had to puff so hard, his throat tickled." When asked to define a low tar cigarette, some panelists stated: "You have to drag on the cigarette `real' hard to get any satisfaction out of it." ATC0137310-7324 at 7319-7320 (US 87916).

(6) Lorillard

2225. A July 16, 1976 Lorillard memorandum from M.S. Ireland to H.J. Minnemeyer on the subject of "Research Proposal — Development of Assay for Free Nicotine" revealed Lorillard's awareness of smoker compensation:

Cigarette sales are made for one reason. The customer is satisfied with the product either from the taste or the physiological satisfaction derived from the smoke. The consensus of opinion derived from a review of the literature on the subject indicates the most probable reason for the addictive properties of the smoke is the nicotine. Indications are that the smoker adjusts his smoking habits to satisfy the desire for nicotine either by frequent or large puffs on the cigarette, or smoking a large number of cigarettes.

00044522-4523 at 4522 (US 22012); 94937037-7038 at 7037 (US 56775).

2226. A December 10, 1976 document by H.S. Tong, which included a review of the scientific literature, reached several conclusions confirming Lorillard's understanding that smokers compensate to receive their desired level of nicotine:

It seems that, within limits, smokers can and do control their nicotine intake from smoke by varying their smoking techniques. . . . Smokers were known to smoke more when offered low nicotine cigarettes. . . . It would seem desirable to have a low tar cigarette with a nicotine content between the threshold and optimum doses level.

00045061-5071 at 5061-5063, 5068 (US 34210).

2227. A July 30, 1980 Lorillard memorandum, "A Review of Behavioral and Psychopharmacological Factors in Smoking," from S.T. Jones (Product Design), included conclusions by Lorillard personnel based on review of scientific articles in the literature, including the following: "The evidence to date clearly indicates that smokers titrate or regulate their intake of nicotine, e.g. smokers of cigarettes which deliver large amounts of nicotine will adjust — when given low nicotine cigarettes — their smoking to get a larger nicotine dose than the machine determined values indicate." Lorillard also independently acknowledged that, in the 1980s, it knew that smokers of low tar/low nicotine cigarettes would compensate by altering their smoking habits in order to obtain a higher level of nicotine. 01105000-5021 at 5010 (US 20030); Spears PD, State of Minnesota v. Philip Morris Inc., 9/23/97, 62:29-65:11.

2228. An August 21, 1984 Lorillard memorandum from E-Chung Wu to W.R. Deaton, reporting on a "puff profile study of 15 brands of cigarettes . . . with 5 smoking panel members" acknowledged smoker compensation: "The general trend shows that puff volume increases with the decrease of both TPM or nicotine. . . . Obviously, the higher dilution of smoke needs larger volume to compensate for the decrease of the flavor or nicotine." 89213491-3501 at 3491 (US 56466).

3. Defendants Internally Recognized that Smokers Switch to Low Tar/Light Cigarettes, Rather than Quit Smoking, Because They Believe They Are Less Harmful

2229. The evidence shows that even though low tar smokers may have a greater desire to quit, the misperception of increased safety associated with low tar cigarettes persuades them to avoid quitting. Research shows that most low tar cigarette smokers have made a greater number of quit attempts than smokers of full flavor cigarettes, or were more likely to have considered quitting. (Weinstein WD, 56:21-57:8 (citing Giovino, et al., 1996)).

2230. Many smokers who were concerned about the risks of smoking responded by switching to low tar cigarettes instead of quitting. Burns WD, 46:21-47:9.

2231. "There is profound harm" for people who smoke low tar cigarettes. As Dr. Burns explained:

The vast majority of people who smoke are addicted. They're interested in quitting but are unable to do so. . . . To provide smokers an alternative that says you don't have to quit, you can use this other type of cigarette, to intercept them on the way to quitting smoking is a profound harm because they continue to smoke longer than they might have otherwise. Some of those people who switched might have . . . been successful in quitting, and when they did that, they would have in actuality reduced their disease risks. And those individuals have been profoundly harmed.

Burns WD, 1:10-15; 12:10-11; 61:14-62:4; Burns TT, 2/15/05, 13311:9-15.

2232. The 2004 Report of the Surgeon General noted that "[r]esearch has demonstrated that with the expectation of reducing risk, many smokers switched to low machine-measured tar/nicotine cigarettes, and may thus have been deterred from quitting". TLT0930001-0949 at 0911 (US 88621). NCI Monograph 13 noted that "substantial numbers of smokers" switched to cigarettes with lower machine-measured tar yields "in an effort to reduce their disease risks," and that "[t]he switch to low machine-measured-yield cigarettes with the illusion of risk reduction was, therefore, substituted for a real risk reduction that would have occurred had the smoker quit smoking altogether." DXA0310399-0650 at 0418 (US 58700).

2233. As demonstrated below, Defendants conducted extensive research on quitting to help them identify and understand potential quitters (i.e., smokers who were "concerned" and "uncomfortable" with the fact that they smoke) and design marketing that would dissuade them from quitting. Defendants' internal documents demonstrate their recognition that smokers interested in quitting smoking were instead switching to low tar cigarettes under the mistaken belief that doing so would either help them quit or be better for their health.

2234. For example, a 1987 National Health Interview Survey showed that 44% of current smokers had, at some point, switched to low tar cigarettes to reduce their health risk. Weinstein WD, 53:19-22 (citing, Giovino, et al., 1996). Correspondingly, another national survey showed that 58% of ultra light smokers and 39% of light smokers chose those cigarettes to reduce their health risks without having to quit. Furthermore, 49% of ultra light smokers and 30% of light smokers did so as a step toward quitting. Weinstein WD, 53:23-54:7 (citing, Kozlowski, Goldberg,et al., 1998). Finally, the 1993 Teenage Attitudes and Practices Survey showed that 21% of light or ultra light cigarette smokers chose those brands because they perceived them to be healthier. Weinstein WD, 54:13-15 (citing Giovino, et al., 1996).

2235. According to Dr. William Farone, former Director of Applied Research at Philip Morris, one reason that low tar cigarettes "are more dangerous" than full-flavor cigarettes is that "they lead people to believe they are [safer] so that they smoke them in manners that cause them to get just as much toxins." Farone WD, 2:2-8; 2:15-19; Farone TT, 10/7/04, 1878:16-22; Farone TT, 10/12/04, 2171:25-2172:8; 2182:11-2190:7.

2236. Dr. Farone explained that:

The problem is that when people see that word "light," it is my opinion that they believe it's safer and, in fact, it isn't, so that's what this is all about . . . they are more dangerous because people are smoking them thinking they are doing themselves some good, they think they are safer . . . there is no benefit to a smoker from Marlboro Lights compared to Marlboro. That's the main point. So that makes it more dangerous.

Farone TT, 10/7/04, 1865:9-23.

2237. Smokers of light and ultra light cigarettes are more concerned about the risks of smoking than smokers of full flavor cigarettes. A 1986 CDC control study showed that 85% of those who switched from full flavored cigarettes to light or ultra light cigarettes were concerned about the health risks of smoking, as compared to 70% of full flavor smokers. Weinstein WD, 56:13-20 (citing Giovino, et al., 1996). Ultra light smokers are also more likely to use tar numbers in judging the relative risk of cigarettes. A study showed that 56% of ultra light smokers rely on tar numbers to determine cigarette safety, as compared to 14% of the overall sample. Moreover, 83% of the ultra light smokers believed that switching from a 20 mg to a 5 mg cigarette would significantly reduce health risks, whereas 50% of other smokers shared that same belief. Weinstein WD, 56:3-12 (citing Cohen, J.B., Ch. 9 of Monograph 7, "Consumer/smoker Perceptions of Federal Trade Commission Tar Ratings").

a. Defendants Recognized that Smokers Choose Light/Low Tar Cigarettes for a Perceived Health Benefit

2238. Defendants have stated publicly that they produce low tar cigarettes only to accommodate consumer taste preferences for "lighter," "milder" tasting cigarettes, and that they do not intend their use of brand descriptors or their marketing of low tar cigarettes to imply a less harmful product. See Section V(E)(5), infra (discussing Defendants' false statements regarding their low tar cigarette marketing). Contrary to their public statements, however, Defendants' internal marketing documents establish that Defendants have known for decades that even though consumers prefer the taste of regular cigarettes to low tar cigarettes, they are willing to forgo them and smoke low tar cigarettes, which are less enjoyable and have a less appealing taste, because they believe low tar cigarettes are better for their health.

(1) Philip Morris

2239. According to Jeanne Bonhomme, Director of Consumer Insights for Philip Morris, in her experience, "there is a general perception among consumers that as you go down in tar, cigarettes have less taste." For this reason, Philip Morris planned to produce a low tar Merit cigarette that tasted like a cigarette with higher tar. A June 30, 1993 document from a Philip Morris USA New Products Meeting, titled "Marlboro New Product Development," stated that the "Project" was to "[b]uild the Merit business by introducing a 3 mg product that tastes like a 5 mg." Philip Morris also planned to "[d]evelop a 6 mg Tar Cigarette with the Sensory Attributes of an 8-9 mg Tar Cigarette." Bonhomme WD, 56:13-57:6; 2041453659-3754 at 3681, 3743 (US 23906); see also 2021323470-3540 at 3478 (US 85034*) (Philip Morris's 1992 R D Operational Plans for the Product Development Department issued to Cliff Lilly of Philip Morris USA included the following objectives: "Design and develop an 3 mg [Merit] product with the subjective attributes of a 6 mg cigarette. . . . Design and develop a 6 mg [Merit] product with the subjective attributes of a [sic] 8 mg cigarette. . . . Develop 6 mg [Marlboro Ultra Lights] line extension . . . providing enhanced subjective quality and Marlboro character. . . . LOW TAR HIGH FLAVOR Objective: Develop new technologies which will allow us, within the next two to four years, to produce `Ultra Low' tar, 2 to 4 mg, cigarettes with the sensorial experience of `Lights' or `Full Flavored' cigarettes").

2240. Bonhomme added that "Philip Morris's own marketing research shows that there are consumers who switch to low tar cigarettes even though they do not prefer the taste or flavor, because they believe it is better for them," and that "for those people the reason for switching to a low tar brand is not taste or flavor, but perceived health benefits." Bonhomme admitted that these smokers are willing to sacrifice taste for perceived health benefits. Bonhomme WD, 56:6-12; 60:21-61:1; 63:13-18.

2241. Bonhomme explained that Philip Morris's Merit brand of cigarettes utilized a marketing strategy, titled "Merit Solutions," that was intended to communicate to consumers that "Merit was a solution to the problem of finding a low tar brand with good taste." Bonhomme WD, 59:10-17.

2242. Defendants' own expert, A. Clifton Lilly, Vice President of Technology and Research for Philip Morris, demonstrated that Philip Morris did not intend to market Merit as a "lighter tasting" cigarette, but rather as one that tasted just like a full flavor cigarette, yet with a health benefit. Lilly testified that:

The Merit brand, as I remember, came out in 1976. . . . R D did a lot of basic research on taking tobacco and actually getting compounds for a flavor system that were the most flavorful ones in smoke, so that the cigarette would be lower tar but taste like it was more like the popular cigarettes, and they were all at that time full flavor.

Lilly PD, Engle v. R.J. Reynolds Tobacco Co., 5/7/98, 34:3-39:2.

2243. An undated Philip Morris document, titled "Background Information on Philip Morris Brands," included "Benefit Statements" for Philip Morris's various "light" brands that revealed Philip Morris's intent was not to market these cigarettes as "lighter" tasting, but rather as cigarettes that taste like full-flavor cigarettes with the extra purported benefit of low tar and nicotine:

• Marlboro Medium: "gives you a flavorful smoke in a low tar cigarette" and "bridges the flavor gap between low tar and full flavor cigarettes."

• Benson Hedges 100's Lights: "premium tobacco flavor in a satisfying low tar smoke."

• Benson Hedges 100's Deluxe Ultralights: "only 5 mg tar, yet is rich enough to be called Deluxe . . . is an ultra low tar cigarette that gives you satisfying taste . . . delivers cool, rich taste with only 5 mg tar."

• Merit: "You'll enjoy low tar and good flavor. . . . At only 7 mg tar, Merit delivers the rich flavor of leading cigarettes with twice the tar . . . get rich menthol flavor at only 8 mg tar."

• Merit 100's: "flavor that makes low tar and good taste a reality for 100's smokers."

• Merit Ultra Lights: "cool, flavorful smoke with only 5mg tar."

• Merit Ultra Lights 100's: "an ultra light with flavor."

• Virginia Slims Ultra Lights: "gives flavor and taste — and is an ultra low tar smoke."

• Parliament Lights: "enjoyable taste in a low tar cigarette."

2070143183-4433 at 3209, 3211-3212, 3214-3215, 3219, 3222 (US 40253).

2244. A November 15, 1971 document to James Morgan, former CEO of Philip Morris, from the Marketing Research Department, bearing the letterhead "Philip Morris U.S.A. Inter-Office Correspondence," set forth results of a Philip Morris consumer research study on Marlboro Lights. Under the heading "Likes and Dislikes," the report stated: "Complaints continued to center around taste mentions (23%) and too mild (22%)." 1000292744-2762 at 2745 (US 35205).

2245. According to Morgan, Philip Morris did not intend for the name Marlboro Lights to communicate that it had light or lighter taste:

I have trouble in describing what light taste really means. . . . Light taste, first of all, is not a positive attribute if it does mean anything . . . in my judgment, light taste is really a meaningless and nebulous claim . . . the bigger proposition is the lower tar and nicotine. . . . We are not talking, in my judgment, talking about light . . . as a taste. It's not a term that means anything in terms of taste, and the name Marlboro Lights as I said before, a word which we feel has appeal in a different sense than suggesting what the cigarette even tastes like.

Morgan PD, Philip Morris Inc., 10/15/74, 82:25-83:13; 85:9-15; 85:17-86:4.

2246. Around the time of the launch of Marlboro Lights in 1974, a marketing dilemma existed for Philip Morris: on the one hand, the fact that a cigarette had a "lighter taste" was a negative limitation in the minds of consumers that made the cigarettes more difficult to sell, but, on the other hand, the term "light" also conveyed the beneficial message of low tar. Morgan PD, Price, 6/5/02, 39:19-25, 40:2-25, 41:2.

2247. Philip Morris's Marketing and Research and Development departments held regularly scheduled meetings where they discussed, among other things, how to increase the market for low tar cigarettes through research and development. Many discussions focused on the poor taste of low tar cigarettes:

marketing . . . kept saying people don't like the taste of a low tar cigarette. They are finding it unsatisfactory. . . . What can we do to develop a low tar cigarette that really tastes good. That to me looks like the great market opportunity. I remember lots of discussions about that.

Morgan PD, Price, 6/5/02, 95:13-25, 96:2-25, 97:2-25, 98:2-25, 99:2-25.

2248. According to Ellen Merlo, then Senior Vice President of Corporate Affairs at Philip Morris USA, "there was a general perception that low tar cigarettes did not taste as good as full flavor cigarettes." Merlo added that Philip Morris's Merit cigarette "was the first free standing cigarette entry in the light category that was positioned as tasting good." Merlo PD,Price v. Philip Morris, 10/2/02, 152:12-153:10.

2249. An October 1975 Philip Morris USA Special Report distributed widely throughout the Research Center, titled "Low Delivery Cigarettes and Increased Nicotine/Tar Ratios, a Replication," urged development of a "low delivery cigarette that will both look and taste like a regular filter cigarette and thus will appeal to current regular filter smokers." The document further stated:

If a low delivery cigarette with impact and flavor were developed, it may cause the segment of current regular filter smokers who are concerned about their health but demand a flavorful cigarette to voluntarily switch to the low delivery cigarette. . . . Furthermore, some portion of current low delivery smokers may desire to switch to a more flavorful cigarette and others may follow as consumer experience results in changing the image of low delivery cigarettes so that smokers believe a flavorful cigarette can really be `healthy'.

1003288950-8967 at 8951, 8954, 8952 (US 20166).

2250. Draft remarks of the Philip Morris Merit cigarette team, dated January 7, 1976, acknowledged explicitly that low tar cigarettes appealed to smokers because of their purported reduced harmfulness:

Undoubtedly because of the health allegations against cigarettes, many smokers have clearly wanted cigarettes that deliver less and less tar. . . . [D]espite the intense promotion efforts and the strong interest among smokers, . . . [t]hey have been tried and rejected by the overwhelming majority of smokers. Obviously, there has been a conflict between the desire for low tar and the desire for the rich, satisfying taste that until now has been associated with higher tar delivery.

PM3000136418-6422 at 6420-6421 (US 61504).

2251. A 1979 Philip Morris Merit advertisement, titled "Merit Taste Eases Low Tar Decision," appeared in national magazines, stating:

"Enriched Flavor" tobacco proving real alternative to high tar smoking. . . . Confirmed: Majority of high tar smokers rate MERIT taste equal to — or better than — leading high tar cigarettes tested! Cigarettes having up to twice the tar. [Merit's] ability to satisfy over long periods of time could be the most important evidence to date that MERIT science has produced what it claims: The first real alternative for high tar smokers.

1002325022-5022 (US 21510) (emphasis in original).

2252. A January 1979 study prepared for Philip Morris by Goldstein/Krall Marketing Resources, Inc., discusses consumers' perception of light cigarettes: "There appears to be a concept involved that might be called `limiting.' They have moved to limit their tar and nicotine intake. At the same time they have accepted a limit on taste." 2040066740-6766 at 6755 (US 20435).

2253. According to Nancy Lund, Senior Vice President of Marketing for Philip Morris, when light cigarettes were first introduced, their largest drawback was that consumers disliked their taste. In fact, nine out of ten consumers reported dissatisfaction with the taste of light/low tar cigarettes. She acknowledged that smokers were buying them, nonetheless, because they were perceived to be less harmful. An April 20, 1987 memorandum on Leo Burnett letterhead from Elinor Bowen of Leo Burnett and Carolyn Levy of Philip Morris addressed to Nancy Brennan (later Nancy Brennan-Lund) of Philip Morris, among others, commented on light cigarettes generally: "Thus far in the cigarette category, lightness has been associated with low tar or ultra low tar products which represent, for many smokers, an absence of taste and an avoidance of problems associated with smoking." Brennan-Lund PD, Price, 9/20/02, 140:14-144:11, 186:12-189:19; 2040904809-4811 at 4809 (US 85035).

2254. A Philip Morris document circa 1979 prepared by Judy John and Helmut Wakeham, titled "Breakthrough of the High Taste, Low Tar Cigarette: A Case History of Innovation," stated that although consumer demand for low tar cigarettes was spurred by indications that cigarette smoking caused disease in humans, "market research analysis ha[d] shown that nine out of ten smokers had tried low-tar brands, but had failed to accept them as their choice of cigarette." The document also stated: "Apparently not enough smokers could adapt to the diminished `flavor' of the highly filtered low-tar cigarettes available at that time." 1000208603-8625 at 8605 (US 85010) (internal citation omitted).

2255. A September 1991 Philip Morris document, titled "Background Information on PM Brands," stated that, notwithstanding the introduction of Marlboro Lights in 1972 and the introduction of several variations on Marlboro Lights in 1978, 1980 and 1984, when Marlboro Medium was introduced in 1991, "consumers [were] still looking for a satisfying low tar cigarette with flavor." Marlboro Medium apparently "was successful in bridging the flavor gap between full flavor Marlboro and Marlboro Lights." 2070143183-4433 at 3206 (US 40253).

2256. A June 1, 1994 document prepared for Philip Morris by Kane, Bortree Associates, Inc., in its "Conclusions Product/Positionings" section, reported that Merit's "We Lowered The Tar . . . But Kept The Taste" slogan "generated interest among male Low Tar Seekers because of the fact that they are committed to lowering their tar consumption." The concept of lowering the tar, but keeping the taste, was referred to as a "product improvement." 2045629674-9712 at 9696 (US 88630).

2257. A March 26, 1996 memorandum from Shari Teitelbaum, to Jodi Sansone, then Brand Manager for Merit cigarettes, accompanying a consumer research report commissioned by Philip Morris, explained that once consumers made the decision to switch down to the category of low tar cigarettes based on health concerns, they then select their low tar brand within that category based on taste preference. Under the heading "Reasons for and Perceived Benefits of Smoking Lowest Brands," the document stated: "Although many of these smokers made the decision to go lighter based on perceived health concerns, taste seemed the major reason to choose or stay within a particular brand." 2045628312-8328 at 8312, 8321 (US 22217).

2258. A February 9, 1998 draft research report prepared for Philip Morris by the research firm Kane, Bortree Associates, titled "Merit Strategic Revitalization Plan, Stage I Learnings," analyzed ways to "build Merit's share of the low tar segment." The report labeled as "Taste Compromisers" low tar smokers who find the taste of light cigarettes unsatisfying but feel comfortable smoking them because of perceived health benefits. An example of their thought process is the following:

I feel that I can really taste the difference between cigarettes. I try to smoke the best tasting light since I know that smoking a light is better for me. I feel that smoking a light is a huge tradeoff but I know that it's worth it. I much prefer full flavor taste and do not think it's too strong. I choose my brand on taste. I feel like I am on a permanent "diet" because I smoke a light.

The report listed Winston Lights, Marlboro Lights, and Camel Lights as brands for taste compromisers. 2063687348-7527 at 7362, 7357 (US 39820*); Bonhomme WD, 45:1-22; see also, 2063686921-6942 at 6924 (US 88629) (indicating that a goal of Kane Bortree was to "[i]dentify marketable positioning opportunity(ies) for revitalizing Merit via low tar technology (3 mg tar cigarette that smokes like a 5 mg tar or possibly higher levels)").

2259. Under the heading "Consumer Learnings," the February 1998 draft report noted that "Merit can secondarily target Taste Compromisers by promoting taste," and under the heading "Preliminary Recommendations," the report recommended that Merit "[p]romote the benefits of light flavor rather than `apologizing' for the fact that it is less than full flavor." Under the heading "Positioning Learnings" and the subheading "Exploratory Positionings," the report stated: "`Low tar' should not be highlighted, but may be needed as reassurance to more health conscious smokers." 2063687348-7527 at 7352, 7354, 7376 (US 39820*).

2260. An October 5, 1998 internal Philip Morris presentation regarding Philip Morris's premium cigarette brands discussed the Merit brand's positioning. Under the heading "Merit — Brand Essence," the document stated that "[s]ince the brand's introduction twenty-two years ago, the core Merit proposition has been low tar with satisfying good taste. Merit is the brand that understands the desire to seek a lower tar alternative." Under the heading "Merit — Brand Strategy," the document said that Merit's strategy was to "Convince: Smokers who want to switch to a low tar alternative, but won't sacrifice taste completely, That: With Merit, you can switch down to lower tar and still enjoy smoking Because: Merit delivers satisfying taste at every level of low tar." 2063690668-0687 at 0675-76 (US 39825).

(2) R.J. Reynolds

2261. An April 1974 Qualitative Consumer Evaluation for four Winston Lights Positionings noted that those who liked Winston Lights believed that a low tar cigarette was a "`safe' cigarette." Consumers were excited by the possibility of having full flavor and low tar simultaneously because it offered "a `safe' cigarette with a taste if not exactly the same at least similar to their current brand." The report stated that "[t]hey were generally skeptical that a less harmful cigarette could give them what they want in a cigarette — taste — or would the taste be sacrificed in some way." Communications with smokers indicated that the target audience was "concerned about the harmful effects of smoking and would be glad to switch to a brand which could deliver good taste with low tar and nicotine." 502041366-1415 at 1373, 1383, 1385-1386 (US 22147).

2262. A 1975 report, titled "An Evaluation of the 120MM Market and Its Potential for RJR," recognized that "smokers of High Filtration brands . . . feel the low tar and nicotine brands are much safer and much less of a health hazard. They are readily willing to sacrifice taste for a `longer life.'" 500671364-1454 at 1436-1437 (US 22158).

2263. A circa 1976 Doral Brand Performance report noted, in a section titled "Other Brand Measurements Psychographics," that with respect to lifestyle, Doral smokers (relative to smokers overall) were "more conscious and anxious about health" and, with respect to attitudes and needs, would "sacrifice taste to get lowest `tar' and nicotine." 501229581-9590 at 9589 (US 22118).

2264. A 1979 study related to Camel Lights indicates that the marketing campaign stressed that Camel Lights provided a product to individuals who wanted to smoke a low tar cigarette, but did not want to compromise on "rich taste and smoking satisfaction." The message itself was "a specific low tar message." 500731672-1707 (US 22168).

2265. A June 21, 1982 Product Research Report on Non-Menthol Ultra Low Tar Consumer Probes, published by the RJR Marketing Development Department, classified ultra low tar non-menthol smokers into two groups: (1) smokers who are extremely concerned about tar levels and (2) smokers who are moderately concerned about tar levels. The report went on to explain that "extremely concerned" smokers "primarily seek products that are lowest in tar. These smokers are willing to trade-off such smoking benefits as strength, taste/flavor and ease of draw for brands which may not deliver these benefits but which are lowest in tar." The report also explained that as compared to smokers of higher tar brands, "respondents generally characterized ULT cigarettes as having a harder draw, reduced smoke density — which they expressed as `smoking air,' less taste/strength/flavor, and less smoking sensation." 503394459-4485 at 4460-4461, 4463, 4467 (US 85036); Schindler WD, 75:14-76:16.

2266. A 1984 Vantage Family "Moderation" Situation Analysis explained that "relative to other segments, `Moderator' smokers realize there are both positive and negative aspects of smoking, resulting in a desire to resolve the conflict by compromising/moderating on their brand choice." This process was depicted as adding the positives of smoking (personal ritual, anxiety reduction, social confidence) to the negatives of smoking (alleged health hazards and smoker image), compromising on the idea of taste and satisfaction with low tar products, and the image that they are "doing something positive." 502118237-8267 at 8241 (US 22119).

2267. A December 16, 1988 RJR marketing presentation stated that: "For a successful product the perceived health benefit must balance any sacrifice that must be made in terms of taste, satisfaction and traditional smoking pleasures." 650900829-0849 at 0831 (US 20951).

2268. In 1990, RJR undertook a marketing campaign promoting the fact that Now cigarettes had the lowest tar and nicotine levels of any product in the industry. The campaign focused solely on the fact of Now's "lowest" tar and nicotine levels not on taste. Some of the advertisements implicitly admitted that good "flavor" or "taste" was intuitively less likely in a low tar cigarette. For example, one advertisement asked, "Merit Ultra Lights Smokers: Is there a way to get 60% less tar and nicotine and still get flavor in a cigarette? NOW is the way." Similarly, another advertisement asked, "Benson Hedges Deluxe Ultra Lights Smokers: Can you get 50% less tar and nicotine and still get taste in a cigarette? NOW you can." Still another advertisement asked, "True Smokers: How can you get 67% less tar and nicotine and still get real cigarette taste? NOW is how." Finally, an advertisement in this campaign asked, "Carlton Smokers: Can a cigarette have just 2 mgs. of tar and still be satisfying to smoke? NOW can." Along those same lines, one of the advertisements indicated, "THE LOWEST IN TAR NICOTINE. Try Now. Surprisingly good taste." 2070717114-7436 at 7334, 7336, 7408, 7410, 7432 (US 22172*).

2269. A May 1991 consumer research report prepared for RJR, titled "R.J. Reynolds Project XB," stated: "Most respondents are interested in a new cigarette that could deliver the great taste and easy draw of current brands, with low tar equivalent to Carlton or NOW. They recognize Carlton and NOW are very low tar, but they perceive the taste and draw to be disappointing." The document further stated that "[r]espondents suspect there is a correlation between reducing the amount of tar and weakening the taste." As a "positive" of a proposed marketing concept, the document stated: "There is interest in an extra low tar cigarette that tastes great and has an easy draw. There is a consensus a lower tar product would be better for them." As a "positive" of a different proposed marketing concept, the document stated: "Respondents, especially women, feel this cigarette could alleviate their concerns about tar levels. They expect the cigarette to be better for them." 514343517-3566 at 3559 (US 51848).

(3) Brown Williamson

2270. According to Sharon Smith, former B W Director of Marketing Services and Operations, internal B W research documents "indicate that some smokers are willing to smoke low tar cigarettes, even though these smokers feel they don't taste as good." Smith WD, 52:7-16, 55:16-22.

2271. A January 1977 report prepared for B W by Post Keyes Gardner, Inc., stated that "health" was the most important driver of consumer trends, compared to mildness, which would not, of itself, cause smokers to switch brands:

" Health": In our opinion, this is by far the most important factor and trend in the market. All major shifts in smoking habits seem to be a function of "health" concerns, as they pose a deep psychological question that every smoker must somehow answer. The manifestation of "health" concerns can be seen in the filter revolution of the 1950's, the emergence of menthol, as well as new hifi's in the 1960's and today. . . . Mildness: This is more or less a taste experience. It is best characterized by the acceptance of filter cigarettes — not the reason for them. In our view, mildness is not a dominant trend, and thus does not cause major shifts in smoking habits. . . . It, therefore, is unlikely that smokers would switch to milder cigarettes primarily because they are milder. We suspect that the deeper concern of "health" is the dominant motivator to mildness. . . . Some smokers will seek justification (rationalization) for staying with a full taste brand, others will move on to the continuing compromise of less satisfaction while continuing to smoke [by switching to low tar cigarettes] . . . the latest compromise between taste and tar.

Sharon Smith admitted that this document shows that some smokers "were choosing their cigarette not due to a preference for a "milder" tasting cigarette, but out of health concerns." 776158413-8426 at 8418, 8419, 8425 (US 22339); Smith WD, 54:21-56:15.

2272. A July 25, 1977 B W internal marketing study stated: "It must be assumed that Full Taste smokers come down to `low tar' expecting less taste . . . [t]hey are willing to compromise taste expectations for health reassurance." 775036039-6067 at 6052 (US 21053); Ivey WD, 57:11-58:11.

2273. An October 1979 B W "History and Key Trends in the U.S. Cigarette Market" compiled by E.T. Parrack, Vice President of Brand Management, stated that some of the then "new products" such as Merit and Real "seem to be capable of attracting some smokers from the Full Taste segment, thus drastically changing the terms of the basic tradeoff between taste and low tar in effect for 25 years." The paper added:

Viceroy [is] perceived as smooth and perhaps mellow, but it is not significantly weak, mild, bland or light as are the Hi-Fi brands. . . . STRATEGIC ALTERNATIVE Increase Viceroy share of market by positioning Viceroy between full-filter flavor and Hi-Fi as the ideal compromise between the need for full taste and the need for low tar.

The document added that some smokers "have struck a compromise between taste/satisfaction and personal concerns. They smoke low `tar' line extensions hoping for the full taste of high `tar' brands and the relative benefits of lower `tar.'" 670624932-5364 at 4942, 5102, 5157, 5240 (US 53869). Again, Sharon Smith admitted that "this document indicates that Brown Williamson was aware that some smokers smoke lower tar cigarettes even though they prefer the taste of higher tar cigarettes because they wish to lower their tar intake." Smith WD, 52:17-53:21.

2274. A March 12, 1981 B W memorandum from Sue Finley to B.L. McCafferty, titled "Apollo Strategy Recommendation," revealed that consumers were smoking ultra low tar cigarettes because they wanted to lower their tar intake, despite the fact that they disliked the taste:

In 1980 the number of ultra low "tar" (1-6 mg `tar') cigarette brand styles on the market went from 24 to 38 and the segment's share grew from 6.28% in 1979 to 8.73% in the 4th Quarter of 1980. . . . The segment's growth has been generated primarily by smokers' "tar" concerns, as most of the ULT products have no other perceivable consumer benefits. The products are considered extremely hard to draw and weak tasting. In qualitative research, smokers have said that drawing on ultra low products could "cause hernias" and that they taste like "sucking straws" and "there's nothing to them. . . ." While cigarette marketing has historically been image oriented, initial ultra low "tar" cigarette advertising was very clinical. All ULT brands advertised extremely low "tar" with little, if any, taste support or smoker imagery.

Discussing the marketing for the proposed new ultra low tar cigarette, APOLLO, the Memorandum stated:

Smokers are subjected to relentless pressures to quit smoking or reduce "tar." They continue to smoke because they derive pleasure from the experience and, while they may trade down in "tar," they view "tar" reductions as pleasure reductions. To make the switch to low "tar" a more satisfying experience, APOLLO should be presented in a positive, warm and enjoyable manner.

Sharon Smith explained that "this document states that people were smoking ultra lights because they wanted to lower their tar intake, despite the fact that they viewed it as a pleasure reduction." 670635571-5593 at 5571, 5576 (US 85037).

2275. An April 1985 consumer research report prepared for B W by ADI Research, Inc., titled "Brown Williamson Tobacco Corporation Light and Ultra Light Smokers Concept Reaction Study" stated: "The light and ultra light categories are problematic to consumers because of problems with taste and inhaling and drawing. There is overwhelming agreement by all groups." The report discussed how Barclay's position was succeeding at getting consumers to believe that Barclay provided a solution to taste and draw problems. The report also noted, however, that "[t]hose in the minority that did not perceive a solution thought there would be drawbacks. If Barclay is better tasting and drawing, then it would have to be higher in tar and nicotine, hence, less safe and more harmful." 465626645-6722 at 6647, 6656-6657 (US 87911).

2276. A B W document circa 1996-1997, titled "Carlton Creative Plans," stated that "CARLTON is the trademark of choice for smokers who have made an intellectual decision to seek the `lowest' in tar and nicotine without unduly compromising taste." Carlton's "TARGET AUDIENCE" was described as: "Smokers who want to cut down in tar and nicotine as much as possible and are willing to sacrifice some product performance." The first "Primary" trait of the target audience was "Health conscious." The then-current brand positioning of Carlton as "The Lowest" was said to "satisf[y] the brand positioning." 176020783-0800 at 0783-0786 (US 23351).

2277. A B W document, titled "B W 1997-1999 Plan," indicated that consumers "switch down" in tar primarily for health reasons, and that this switch down in tar represents a sacrifice in terms of cigarette taste. "Carlton Target Markets" were identified as

Smokers Who Want To Cut Down In Tar And Nicotine As Much As Possible And Are Willing To Sacrifice Some Product Performance — Primary — health conscious. . . . CARLTON Is The Trademark Of Choice For Smokers Who Have Made An Intellectual Decision To Seek The `Lowest' In Tar And Nicotine Without Unduly Compromising Taste.

The document even discussed plans to reduce the emphasis on taste indicated by Carlton packaging to ensure that the message that Carlton had lowest tar and nicotine was conveyed: "CARLTON's Packaging May Contribute To The Low Awareness Of The `Lowest' Tar Positioning By Communicating A Higher Level Of Tar And Taste Than The Product Actually Delivers." 462224560-4766 at 4706, 4709-4711 (US 22085) (emphasis in original).

2278. A B W document faxed from "Marketing Operations" on January 20, 1999, titled "Current Trends in Lights and Ultra Lights," stated under the heading "Learnings": "Consumers were ready for low tar before Marlboro Lights. Health concerns. . . . First low tar cigarettes failed due to: Lack of flavor and smoking satisfaction. . . . Smokability is critical for success." 430403186-3194 at 3193-3194 (US 22084); Ivey WD, 58:11-22.

(4) BATCo

2279. A September 1992 BATCo Business Review prepared by Norma Simamane, BATCo Lights Project Manager, stated, regarding low tar cigarettes, that consumers felt that "`[t]he lower the [tar and nicotine] numbers, the higher the sacrifice on smoking pleasure.'" Lights represented "a total compromise," and negative aspects included: "`It's like smoking hot air'" and "`Deprive you of a true smoking experience.'" Lights were perceived as "for people who . . . want to quit but can not." The aspects of the "Inadequate product performance" of low tar cigarettes were: "lack of satisfaction/not satisfying"; "lack of smoking quality"; "poor quality of flavor"; "not strong enough"; and "need to smoke more." 321683062-3099 at 3087, 3090 (US 28586).

2280. A BATCo document circa 1996 titled "Lights Segment Project Consumer Insight Into Smoking Lights" stated, under the heading "Benefits of Smoking," that "[l]ight smokers criticized Ultra's as bad tasting . . . but accept this lost taste characteristic." The document further stated "light cigarettes (especially ultra) = pleasure sacrifice." The document further stated that "Ultra smokers find it necessary to explain to others and themselves why they consume a product that provides hardly any pleasure (taste)" which led to the "negative cliche" of a `weak willed addict.'" The document stated that to counter this, "we need to reassure light/ultra smokers that it is okay to smoke lights through communication." 321546706-6724 at 6707, 6708, 6709 (US 22052).

2281. A BATCo document, titled "Barclay Business Review 1996," discussed low tar smoker motivation:

The results of the 1MG smokers motivations study in Belgium show that the key drivers to the [ultra light] segment are health concern and peer/family pressure. Consumers expect a reduction of negative aspects. . . . As amount of taste is the main consumer indicator for strength, 1mg. products are expected to have the least taste among all cigarettes.

700767443-7457 at 7448 (US 22123).

2282. A BATCo document, titled "Firefish Kent in Dublin Qualitative Research Debrief July 2000," concluded that, with respect to Kent's charcoal filter, consumers found communications providing health reassurance "more appealing" than communications about taste: "`Kent Taste System' The Charcoal Filter communication was appreciated. . . . However, they felt the emphasis should be on Filter — rather than taste — help filtering out the `crap' was more appealing than advantages in taste." 321626872-6906 at 6901 (US 22059).

2283. In a document, titled "What is a Light Cigarette," dated September 29, 1998, BATCo scientist David Creighton described two "main types of Lights smokers[:] Those who start smoking Lights . . . and those who have been smoking a full flavour product and wish to switch down to a Lights." Creighton explicitly acknowledged that Lights smokers who "switch down" do so because they believe it is a "conscious . . . exchange" of taste for "the reassurance of the lower tar delivery":

[T]he down switcher, who has been used to a higher taste level[,] would prefer to maintain as much taste as possible with the reassurance of the lower tar delivery of a Lights. . . . The down switcher makes a conscious decision to give up some taste satisfaction in exchange for the lower delivery potential.

770009958-9964 at 9962 (US 78253).

2284. A January 15, 2001 BATCo document written by Steven Coburn, titled "Project Balcony," which referenced Santa Monica, California marketing studies related to proposed campaigns, reported that smokers prefer the taste of higher tar cigarettes, but smoke lower tar cigarettes because they believe lower tar cigarettes are less harmful: "[L]ights don't satisfy as much as a heavier cig when trading down . . . less tar less nic — less harmful." 325239017-9018 at 9017 (US 22082). A January 17, 2001 document with the same author and title that also referenced Santa Monica smokers, stated under the heading "Benefit": "Has carcinogens of a lights but taste of full flavor[.] May be not as harmful — which is why some people smoke lights." 325239023-9024 at 9023 (US 22082). An additional document with the same date, title, and author, referencing Santa Monica smokers stated: "Benefit . . . Lights that smoke like a full flavor — not sacrificing anything[.] Lights with a full flavour — important — lights better for you but still taste like a cig." 325239025-9026 at 9026 (US 22082).

(5) American Tobacco

2285. A 1967 Annual Report prepared by American, describing American's Carlton cigarettes, defined a "light cigarette" as "one that is low in `tar' and nicotine yield," and made no mention of any particular taste characteristics. MNAT00029170-9201 at 9176 (US 21222).

2286. A March 2, 1976 American document, titled "Background and Product Positioning Recommendation Project LOTC," predicted that:

[T]he most significant growth will take place in the "middle ground" where taste claims prevail, yet where the perception of a "health benefit" is still strong. In other words a compromise between low-tar and taste (which is unmistakable to consumers) may not represent as traumatic a change for full flavor smokers as a change to "super" low tar.

ATC0494235-4235 (US 87912).

2287. A January 1984 document from American Tobacco's files prepared by Andrew Thurm Associates titled "`NO ADDITIVES' CONCEPT TEST" concludes that low tar cigarettes are associated with weak taste and that Carlton cigarettes have a weak, negative taste perception with consumers:

"Carlton . . . shows traces of an additional impediment — weak taste perceptions. . . . Carlton's weak taste image acts as a secondary impediment. . . . In a certain sense, being low in tar peripherally suggests a flavor identity because of its connotations to mildness at the expense of taste strength.

970384072-4111 at 4076-4078 (US 85121).

2288. A February 29, 1988 American Tobacco memorandum from Richard E. Smith, Director of Brand Management, to K.P. Noone, Product Manager, stated:

If the switching motivation is better taste, [smokers] . . . will certainly not switch to Carlton, a brand which their experience has often taught them is lower taste. . . . [M]ost smokers will continue to seek lower tar. . . . They have demonstrated a disciplined willingness to sacrifice taste. . . . Carlton brings less than nothing to the better/stronger tasting party.

991216857-6858 (US 85115).

2289. A February 29, 1988 American Tobacco memorandum from J.M. Murray, Assistant Product Manager, to T.M. Keane, Senior Product Manager, stated:

The Carlton and Now Groups almost unanimously cited "Lowest in Tar" as the single most important motivating factor in brand selection. . . . Importantly, the 0-3 mg. groups identify "Lowest" as the driving force — they seem to have been prepared to make a taste compromise. There is nothing to indicate that [ultra light smokers] won't become available to Carlton. At present, they aren't ready to make a taste compromise. . . . As these people become prepared to step down, they will be ready to give up some level of taste and seek the "Lowest in Tar" (e.g. Carlton or Now) . . . present Carlton smokers . . . have already made the taste compromise and focus primarily on "Lowest. . . ." In conclusion, I believe we should focus our efforts on developing suitable advertisements which single mindedly communicate our "Lowest" positioning.

980355176-5177 (US 85122).

(6) Lorillard

2290. A December 1976 report prepared for Lorillard by the Nowland Organization, Inc., stated: "Those who do not now smoke SHF [super-high filtration] cigarettes perceive low tar and nicotine cigarettes in very much the same way as do current smokers — i.e., as `better for you' but not as enjoyable." 84053616-3706 at 3638 (US 55997).

2291. A June 1978 Report prepared for Lorillard by Foote, Cone Belding Advertising, Inc., "to assist Lorillard in understanding the . . . attitudes of reduced-tar smokers and their motivations in selecting brands" relayed smokers' beliefs that lower tar cigarettes had an unsatisfying lack of taste, and indicated that a low tar cigarette "with good taste" had not yet been developed, stating:

The major problem with [ultra low tar] brands was decided lack of taste/smoking impact. "Sucking on a straw in an empty glass — nothing" was a typical reference to such brands. In point of fact, this was probably very close to the truth. . . . There is every reason to believe that ultimate technological breakthroughs will yield a tobacco product that is low in tar, with good taste. In that event, ultra low-tar products will serve as a viable net for all smokers who desire reduced tar plus the satisfaction of good taste.

03297227-7249 at 7229, 7233, 7246 (US 88631).

2292. This document, discussing one of Lorillard's competitors' brands, added:

Carlton's success was all the more surprising in light of the fact that it was totally unable to offer any taste benefits to the consumers. Apparently, there existed a strong need among a subsection of reduced-tar smokers for a cigarette that was `as low as you can go' in its tar and nicotine levels.

03297227-7249 at 7240 (US 88631).

b. Defendants Internally Recognized that Smokers Rely on the Claims Made for Low Tar/Light Cigarettes as an Excuse/Rationale for Not Quitting Smoking

(1) Tobacco Institute

2293. A May 1978 Tobacco Institute document, titled "A Study of Public Attitudes Toward Cigarette Smoking and the Tobacco Industry in 1978 Volume I," prepared for the Tobacco Institute by the Roper Organization stated that

low tar cigarette smokers . . . are potential cigarette quitters. . . . And more of them than the average have tried to quit smoking. Since low tar smokers are an expanding share of the market, their greater desire to quit smoking poses a special problem for the cigarette industry.

501565967-6019 at 6008 (US 21866).

(2) Philip Morris

2294. Philip Morris conducted research on former smokers to assist it in marketing purportedly less harmful cigarettes to draw them back into the market and to dissuade potential quitters from actually quitting. According to Carolyn Levy, who worked as a research scientist for Philip Morris in its Behavioral Research Group from 1975-1980 and as the Assistant Director and later Director of Consumer Research from 1986-1991, when she was in the Consumer Research Department, she "performed research on quitting on behalf of Philip Morris," and when she was in the Behavioral Research Department in the late 1970s, "[q]uitting was also a subject of interest and research to Philip Morris."

2295. A report titled "Exit-Brand Cigarettes: A Study of Ex-Smokers," written by F.J. Ryan and approved by Dr. William Dunn, dated March 1978 and distributed to certain Philip Morris employees, including Levy, stated: "If the industry's introduction of acceptable low-nicotine products does make it easier for dedicated smokers to quit, then the wisdom of the introduction is open to debate." The report further stated that "experience in dealing with `quitters' suggests that most people who quit smoking will resume after a while. Hunt and Matarazzo show data suggesting that 50% of quitters resume smoking within 3 months and 70% resume within a year." Levy said that she was "aware when [she was] studying quitters that most quitters resume smoking." Levy WD, 26:1-5, 26:20-28:10; 1000368057-8081 at 8060, 8066 (US 20098*) (emphasis in original).

2296. Levy stated that Philip Morris was "studying the factors that influence quitting," including whether "people quit because of health concerns," so that Philip Morris could "design products or line extensions of existing brands that addressed those factors." Levy testified that "[t]o the extent we determined that people quit because of health concerns, that would be very important in reaffirming Philip Morris' commitment to develop cigarettes with lower harm or risk." Asked if the purpose was "[s]o that people would keep smoking Philip Morris cigarettes rather than quitting," Levy answered: "Yes, if Philip Morris could design new products to address those concerns." Levy WD, 31:9-22.

2297. An August 14, 1978 consumer research report prepared for Philip Morris by Wells, Rich, Greene, Inc. regarding Benson Hedges stated:

Those who are currently smoking "Lights" do so because ". . . they are better for you . . ." than full flavor cigarettes. Although some experience that they actually smoke more Lights, they perceive that they are cutting down and it is an alternative to quitting — which most cannot accomplish.

1004888470-8484 at 8480 (US 85009).

2298. A January 1979 study prepared for Philip Morris stated:

[W]ith respect to ultra low tar brands there appear to be particular additional motivations for smoking this type of cigarette . . . [h]ealth problem forcing a change to a safer cigarette (as an alternative to not being able to quit) . . . [p]eer and family pressure to smoke a safer cigarette (as an alternative to not being able to stop smoking). . . . Characteristics of ultra low tar smokers were: people who want to quit. . . . In point of fact, smoking an ultra low tar cigarette seems to relieve some of the guilt of smoking and provide an excuse not to quit. All of these smokers expressed an awareness of a health hazard from smoking, but felt that they had alleviated some of this hazard by smoking an ultra low tar brand. They described these cigarettes as `safer'. . . . With these justifications, there may be less of a compulsion to quit smoking. . . .

2040066740-6766 at 6747, 6751-52, 6754, 6755 (US 20435).

2299. A March 1979 report prepared for Philip Morris, titled "A Study of Smokers' Habits and Attitudes With Special Emphasis on Low Tar and Menthol Cigarettes," stated:

The percentage of adults who smoke has stabilized for the first time since 1965 — at 34%. This could well be due to the greater perceived safety of low tar cigarettes and their resultant neutralization of the health threat. . . . The number of cigarettes smoked per day per smoker continues to climb, in part at least because low tar cigarettes seem to cause people to increase the number of cigarettes they smoke.

2049455309-5318 at 5313 (US 22218); Bonhomme WD, 25:15-26:1, 46:19-47:7.

2300. In a September 28, 1987 inter-office memorandum written by Levy and sent to David Dangoor, Executive Vice President at Philip Morris, titled "Critical Consumer Research Issues," Levy outlined what she called "the most important consumer-related questions which should be addressed in 1988." This document contained "information about some of the types of research that Philip Morris planned to conduct in the upcoming year." Among the questions Levy posed in the memorandum were: "Can we determine the relative importance of various factors which influencequitting?"; "What are the factors which influence brand choice of smokers reentering the market? Can we capitalize on these?"; and "Which new product options will . . . appeal to former smokers?" 2080009516-9522 at 9517, 9520 (US 88155) (emphasis in original); Levy WD, 28:20-30:8, 31:5-22.

2301. Philip Morris conducted a "major study" on quitting in 1988, titled "Critical Issues — 1988 Progress Report," which Levy described in a September 26, 1988 memorandum she sent to John Zoler, then Director of Market Research. Under the heading "Smoker Dynamics," Levy wrote: "Conducted a major study on quitting showing: demographics of quitters, quitting by brand, reasons for quitting, methods used to quit, substitutes used for cigarettes." There were 506 people surveyed in the Philip Morris study, and "[t]he research results indicated that the number one reason for people quitting smoking was health concerns." Levy WD, 32:2-33:8; 2080009523-9529 at 9524 (US 88156).

2302. A June 20, 1988 memorandum on Philip Morris USA letterhead from consumer researcher Jan Jones to Dr. Ed Gee, titled "Statement of Position on the Social Pressures Construct," discussed Philip Morris's goal of introducing a "socially acceptable cigarette" that "could capture the trend-setters who might find such a product preferred over current cigarettes, be a welcomed alternative to quitting, and might attract new smokers who would not otherwise choose to become product users." The memorandum further stated:

With the recent attrition rate of smokers, attaining "new" smokers is no longer synonymous with capturing young smokers. We already have Marlboro as the brand of choice for young smokers entering the market. We do not have a product that meets the needs [sic] of the growing population of ex-smokers. Many of these ex-smokers will resume smoking, and the product that they choose could cause a swing in market share. These quitters (and those who are soon to become quitters) are dissatisfied with certain aspects of a product that previously met their needs. . . . These consumers have not yet as a group found a satisfactory replacement for their previous product — a textbook example of a market opportunity.

2050801835-1853 at 1845 (US 38763); Bonhomme TT, 2/10/05, 12936:6-12939:7.

2303. A March 1993 Philip Morris document, titled "Quitting Dynamics," showed statistics from "Smoker Tracking" that indicated that more Low Tar smokers did not try to quit (53.5%) compared to Full Flavor smokers (43.2%). 2062362453-2474 at 2473 (US 39555).

2304. In a July 1993 Philip Morris presentation, titled "Merit Franchise," prepared by Norma Suter Drew, Brand Manager and Marketing Director for Merit cigarettes from 1992-1994, she reported that the "Intended Audience" of Merit advertising was "self-conscious low tar smokers who want to cut down on tar and nicotine but who won't sacrifice taste completely." 2070661683-1727 at 1714 (US 40337); accord 2041453659-3754 at 3678 (US 23906) ("Merit's consumers are self-described `Uncomfortable Smokers' who tell us they are self-conscious about the fact that they smoke"); 2063690017-0018 (US 85002); LeVan PD,United States v. Philip Morris, 6/25/02, 178:13-181:2.

2305. In November 1994, Philip Morris commissioned a study from the research firm Guiles Associates, titled "B H Qualitative Research Exploring Out-Switching," to "understand more about how Benson Hedges smokers exit the franchise." One of the conclusions reported in the study was:

For many smokers, the ultimate ramification of all the anti-smoking rhetoric has been their heightened commitment to quit (or at least reduce) their smoking. For these, the greatest evidence of this commitment has been in shifting tar levels (even to different brands, as necessary). . . . For many, lowering tar levels is the next best thing to quitting.

2072622442-2451 at 2444, 2445, 2449 (US 41562); see also 2063688212-8284 at 8226 (US 39823) (Jan. 18, 1994 document prepared for Philip Morris USA indicating that Merit is perceived as a "quitters brand"); Bonhomme WD, 41:4-44:5.

2306. Philip Morris's 1994-1998 Plan Overview stated:

If ultra low tar segment growth accelerates, we will launch Marlboro Ultra Lights to prevent Marlboro from losing smokers. Marlboro Ultra Lights will reinforce Marlboro's appeal among tar `conscious' Lights smokers and improve Marlboro's ability to retain smokers as they age.

2071032180-2206 at 2188 (US 21964); Bible PD, United States v. Philip Morris, 8/22/02, 163:8-165:2.

2307. An internal July 1995 draft presentation, titled "Marlboro Women," bearing the handwritten notation "Approved as Revised, VMM [Virginia Murphy, a Philip Morris attorney] 8/9/95," includes a section titled "The Marlboro Lights Female." The presentation stated that "[p]opularity and low tar are why they initially smoke the brand." The presentation further noted that for female Marlboro Lights smokers, 27% of 18-24 year olds, 29% of 25-29 year olds, and 34% of 30-39 year olds were "Under Pressure To Not Smoke," and that 21%, 16%, and 30% of each age group, respectively, "Intends to Quit." 2071373667-3751 at 3709, 3750 (US 27272).

2308. In a March 26, 1996 cover memorandum, Shari Teitelbaum delivered to Jodi Sansone, then Brand Manager for Merit cigarettes, a consumer research report commissioned by Philip Morris to "gain an understanding of consumers perceptions of the lowest category, as well as the motivations and wants of smokers of Carlton, Now, and Merit Ultima, and potential down-switchers to this category." Under the heading "The Decision to Enter the Lowest Category," the attached consumer research report found:

At some point in their smoking histories, these smokers decided or became more receptive to the idea of a lighter or lower brand than the one they were currently smoking. Some cited perceived health concerns. Others had been "bugged" by family members at home to cut down, or stop smoking.

2045628312-8328 at 8320, 8326 (US 22217).

2309. In August 1996, Natalie Ellis, Senior Manager at Philip Morris, and Urvashi Kohli distributed a June 1996 consumer research study, titled "Marlboro Ultra Lights: A History," to a long list of Philip Morris employees, including Norma Suter Drew, then Director of New Products for Marlboro, gauging consumer reactions to the contemplated launch of Marlboro Ultra Lights. The study found that Marlboro Red smokers see Marlboro Ultra Lights as "a brand for quitters and people who are trying to cut down." 2071535027-5090 at 5090 (US 22020).

2310. In an October 4, 1999 letter, titled "Schedule for Merit Competitive Lights and Ultra Lights Study," Beth Hooper of Leo Burnett discussed an upcoming Philip Morris study being conducted to "[e]xplore adult smoker attitudes toward the Lights/Ultra Lights category" and to "[b]etter understand the impact of Marlboro Ultra Lights on the category overall." Under the heading "Background," Hooper noted:

The dynamics of the Lights/Ultra Lights category have changed significantly over the past several years, particularly with the entry of Marlboro Ultra Lights. In the past, Lights and Ultra Lights were stops on the way to leaving the tobacco category. However, today, we are seeing that both segments are the destination of choice for many adult smokers.

2080929561-9562 at 9561 (US 27786).

2311. According to Jeanne Bonhomme, Director of Consumer Insights for Philip Morris, the company was aware that some "consumers who wanted to quit were switching to several of its light cigarette brands instead of quitting." Bonhomme WD, 45:17-19.

(3) R.J. Reynolds

2312. A 1969 RJR Survey of Cigarette Smoking Behavior and Attitudes recognized that "[a]s a group filter cigarette smokers were more conscious of a possible relationship between smoking and health," and recognized the "willingness of an increasing number of smokers to compromise — to smoke what they considered to be a less harmful cigarette rather than give up smoking entirely." 650340129-0193 at 0180, 0183 (US 20948).

2313. RJR's advertisements for Vantage cigarettes employed signed testimonials by smokers who claimed to have considered the risks of smoking and decided not to quit smoking, but rather to switch to Vantage. The Vantage advertisements included the following: 1971: "You don't cop out. Why should your cigarette? Vantage doesn't cop out. It's the only full-flavor cigarette with low `tar' and nicotine." (no bates) (US 3545). 1974: "Instead of telling us not to smoke, maybe they should tell us what to smoke. For years, a lot of people have been telling the smoking public not to smoke cigarettes, especially cigarettes with high `tar' and nicotine. But the simple fact is that now more Americans are smoking than ever before. Evidently many people like to smoke and will keep on . . . no matter what anyone says or how many times they say it. Since the cigarette critics are concerned about high `tar' and nicotine, we would like to offer a constructive proposal. Perhaps instead of telling us not to smoke cigarettes, they can tell us what to smoke. For instance, perhaps they ought to recommend that the American public smoke Vantage cigarettes." (no bates) (US 4403); Schindler WD, 79:9-23. 1976: "To smoke or not to smoke. That is the question. With all the slings and arrows that have been aimed at smoking, you may well be wondering why you smoke at all." (no bates) (US 5198); Schindler WD, 78:18-79:8. 1975: "Out of the last 6 years of smoking, I've only enjoyed the last 5 months. I started to pay attention to all the fuss about smoking about 6 years ago. That's when the uproar about `tar' and nicotine started to get in the way of my pleasure. For me, it made the real difference between just liking smoking and really enjoying it. I thought of quitting, but I really didn't want to. So I decided to switch to a low `tar' and nicotine cigarette." (no bates) (US 4954); Schindler WD, 79:24-80:9. 1976: "How many times have you decided to give up smoking? If you're like a lot of smokers these days, it probably isn't smoking that you want to give up. It's some of that `tar' and nicotine that you've been hearing about." (no bates) (US 4998); Biglan WD, 377:12-379:22. 2314. A June 1975 RJR marketing plan stated that the introduction of a Salem high filtration line extension was, in part, to "[p]rotect the current Salem franchise from quitting and switching losses." The introduction was to "[t]erminate the trend toward reduced consumption currently in evidence among the Salem Brand franchise." RJR recognized that Salem King smokers were reducing their daily cigarette consumption "at least partly due to concerns about the alleged health hazards of smoking." 502313230-3308 at 3235, 3240 (US 22151).

2315. In discussing RJR's Limit, a new low tar cigarette, a 1976 memorandum noted that "LIMIT will satisfy the needs of smokers who wish for the ultimate in low `tar' assurance — providing the strongest health reassurances available in cigarettes today." Under the heading "Target Audience," the memorandum stated:

The extreme worriers. That large group of smokers on the fringe of quitting who are on the verge of that final step: quitting smoking all together. This enormous group of smokers of various ages who have unsuccessfully tried to quit. Our target group will also include smokers whose concern with the health implications of smoking surpass their needs for full flavor in a cigarette.

502784092-4100 at 4097 (US 22153); Schindler WD, 77:11-78:11.

2316. An August 19, 1976 RJR document, titled "New Product/Merchandising Directions," stated that the

"worrier" segment of the market (17% of smokers are so classified) . . . seek products with tangible/visible features to assuage their "concern" about smoking. "Numbers" products have a growing appeal to these smokers. Products in the 1-6 mg. "tar" range will continue to build successful long-term franchises (e.g., Carlton's growth rate, NOW's immediate acceptance).

500672011-2172 at 2069 (US 20645).

2317. An August 5, 1980 RJR memorandum marked "RJR SECRET" from M. D. Shannon to Dr. W.M. Henly and Dr. R.A. Lloyd (all three were RJR researchers), titled "Project HR," stated:

ULT ["Ultra Low Tar"] smokers. . . . Very health conscious — These smokers are well aware of the smoking and health controversy and have switched to ULT products in an effort to decrease "tar" intake. Many of these smokers are victims of pressure from peers and loved ones to quit or reduce smoking. Therefore, they smoke ULT brands to "get people off their backs. . . ." Feelings of guilt about smoking are very strong. . . . Many would like to quit smoking but cannot. This tends to fuel their low self-esteem. . . . These smokers do not feel good about themselves. [S]everal concepts were developed to appeal to these smokers: 1. To convince the HR target that the new brand represents a payoff or reward for his forced decision to sacrifice by going down in "tar" level. . . . 2. To convince the HR target that the new brand is a reflection of his rational, sensible decision to switch to a low "tar. . . ." Again an attempt is made to make him feel better about smoking. . . . Advertisements were developed . . . to address these concepts and present them in a manner that would be positively received by the target audience.

500251567-1570 at 1567-1569 (US 21563).

2318. An August 1981 report prepared for RJR by the Beaumont Organization advised that ultra low tar brands, such as Now, Carlton, Cambridge and Barclay, can cause smokers who seek to eliminate the "danger" of smoking to keep smoking, because these smokers believe the ultra low tar brands "reduce the alleged health risks" of smoking "to an acceptable — minimal — level":

Some smokers have been strongly alarmed by the extensive publicity concerning alleged health hazards of smoking, to the extent that they seek not merely to moderate their smoking but to eliminate entirely the "danger" that it may present. Such a smoker has two options. Firstly, he may simply cease smoking altogether. However, in some cases, the smoker does not wish totally to elimate [sic] the benefits of smoking. His second option is to seek a cigarette which he perceives to reduce the alleged health risks to an acceptable — minimal — level. Within this second option, the smoker essentially seeks a brand that will protect him from the dangers that are alleged to attend smoking. He is often prepared to sacrifice most of the benefits he previously derived from smoking to achieve this. Such a brand provides the consoling sense that the smoker has eliminated the risks of smoking by "quitting," while continuing to engage in ritualized behaviors associated with cigarettes. An increasing number of brands addressed this benefit, including Now, Carlton, Cambridge and, perhaps, Barclay.

503972013-2063 at 2038 (US 66448); Orlowsky WD, 86:4-7.

2319. A 1983 NOW Brand Image report prepared for RJR recognized that

[a] major motivation in brand switching has been concern over health. . . . Most people chastise themselves for continuing with what they refer to as a "bad habit." They are aware of mounting pressures and criticism from non-smoking groups. They speculate about planning to quit, but they are not sure if they will be able to do so. . . . The typical solution to this dilemma is the two pronged approach of trying to cut down and/or moving to a lower tar brand.

The report further stated:

Respondents were asked what the words "low" and "lowest" in the ads meant to them. At the literal level they say this means that the two brands are very low or lowest in the amount of tar and nicotine they contain. They interpret this to mean that the two brands are "safer" and pose less of a health hazard. Consequently, they reason, this would make the brands more appealing to younger people who are very health conscious or to older, long-time smokers who are concerned about the long-range effects of tobacco.

506671319-1418 at 1326, 1379 (US 22160); Orlowsky WD, 85:8-19.

2320. A November 3, 1998 e-mail from Mario Possamai to Randy Tompson, then Director of Issues and Information Management for RJR, discussed the results of an October 20, 1998 Gallup Survey regarding quitting behaviors and motivations. The survey found that "the number of smokers who are very interested in quitting has increased dramatically in the last five years," specifically noting that 36% of all current smokers are "very interested" in quitting. Health concerns were cited as the primary reason smokers want to quit, with 43% of smokers reporting that they were more concerned about health than they were five years earlier. Although 77% of smokers had tried to quit an average number of seven times each, more than half (54%) of smokers reported resuming smoking within one month. Over half of all smokers (53%) smoked light, low-tar or ultra-light cigarettes. According to the survey, "many of these smokers believe that they will get some health benefit from smoking non-regular cigarettes, including: `to be healthier/improve health' (11 percent), `reduce exposure to toxins/tar' (10 percent), and `reduce exposure to nicotine' (9 percent)." 700173214-3217 at 3214-3217 (US 22121).

(4) Brown Williamson

2321. A January 19, 1978 memorandum from Dr. E.F. Litzinger to E.T. Parrack, with copies to Dr. R.A. Sanford and M.L. Reynolds, titled "Social Smoking Studies," stated:

We search for answers to the questions "Why do people smoke?" and "Why do people stop smoking?" to provide us with direction in developing new products. Perhaps answers to another question "How do people stop smoking?" could lend insight into the creation of new products. Having answers to this latter question we might then design products to "intercept" people who are trying to give up smoking.

650510607-0607 (US 87138); Smith WD, 63:10-64:7.

2322. A February 7, 1979 letter from Stephen D. Schwartz of Grey Advertising Inc., stated that ultra low tar smokers of brands like B W's Carlton and RJR's Now, have "consciously decided to sacrifice taste for low tar," and that these smokers "want a way to quit smoking." 774138538-8545 at 8539 (US 54613).

2323. A "confidential" March 5, 1980 report prepared for B W by Hawkins, McCain Blumenthal discussed marketing strategies for a proposed new B W brand pursuant to its "Project Omega." The report stated: "The objective of all advertising and promotion will be to convince low `tar' smokers that this new brand is the only one that combines the two most important qualities a contemporary cigarette should have — a satisfying taste and the lowest `tar.'" The report further stated, under the heading "Conclusions":

2) Low tar and ultra low tar smokers share personal "concern." The difference between them lies in the depth of the concern. . . . 3) Most of these smokers would quit if they could. The pressure to quit is omnipresent from all sources. . . . 5) To reach these smokers we must acknowledge their concerns. 6) This acknowledgment must make them more comfortable (at ease) about smoking the Omega cigarette.

The report further stated: "These executions are built on an expanded strategy which includes an understanding of the target audience and the need to create a maximum ease or comfort level that addresses the concept of `cognitive dissonance.'" 660026713-6718 at 6714, 6717-6718 (US 85030); Smith WD, 64:19-65:14.

2324. A May 7, 1982 report prepared by a consultant for Imperial Tobacco Ltd. (the Canadian sister company of B W) stated that youth believed the "truly light brands" were

false safety brands for the older worried smoker who cannot quit. . . . Of course, they knew this because some . . . had tried to go very low for exactly the same reasons as smokers two or three times their age do so. All they found was increased consumption and frustration.

Statements from young smokers included: "I think all the stuff coming out the past couple of years about how bad smoking is for you made a lot of people go down to a light cigarette to sort of ease their own conscience." 566627751-7824 at 7817-7818 (US 20938).

2325. A 1984 B W internal marketing research document, titled "Why People Smoke, Brand Imagery and New Product Opportunities," stated that both smokers of B W's Barclay cigarettes and smokers of other brands "perceive BARCLAY to be for one who wishes not to smoke." 670132512-2597 at 2566 (US 20964).

2326. A 1986 B W document stated: "Quitters may be discouraged from quitting, or at least kept in the market longer. . . . A less irritating cigarette is one route. . . . (Indeed, the practice of switching to lower tar cigarettes and sometimes menthol in the quitting process tacitly recognize this). The safe cigarette would have wide appeal." 566628004-8083 at 8015 (US 20940).

2327. A December 16, 1999 "Presentation of Findings" for "STAR Tobacco Focus Groups" prepared for B W by "Rabid Research" identified "4 segments of light/ultra smokers (segmented based on motivation for smoking light/ultra variant)." One of the four segments was identified as "those who switched to lights/ultras because they were attempting to quit." It also noted that some consumers "started smoking lights after making an attempt to quit." The document also shows that Defendants intended that their claims of reduced harm regarding low tar cigarettes lessen the social pressure on smokers to quit:

The benefits of switching to this new cigarette are not just health related[.] Would reduce the pressure on them from friends and family members to quit[.] Would allow them to feel better about themselves[.] At least I'm smoking a cigarette that isn't as bad for me[.] Maybe people wouldn't be as worried about me smoking around them cause it's a better cigarette.

190200047-0116 at 0061, 0071, 0106 (US 22162); Ivey WD, 59:1-10.

2328. A July 27, 2000 document prepared for B W by Kay Harwood Marketing Analysts, Inc., titled "Topline Report of Findings for Carlton Advertising Research," reported that smokers view Carlton cigarettes as a less harmful alternative to quitting smoking:

As participants described their transition from heavier to lighter (i.e., higher tar to lower tar) cigarettes, they frequently used phrases like "working my way down" and being "that much closer to quitting." Ultra light cigarettes were frequently associated with trying to quit smoking. . . . [M]any participants intimated that ultra lights already represent a sacrifice (i.e., less taste for a cigarette lower in tar and nicotine).

A "summary of the most common perceptions/images associated with" Carlton and Merit Ultra Light included descriptions of Carlton as for "[s]omeone trying to quit/cut back/smoke lighter" and descriptions of Merit Ultra Light as a "[c]igarette used to quit smoking/almost ready to quit/cutting back." Among the Report's "Key Findings" were the statements from the focus groups describing their perceptions of several Carlton campaigns. The statements included:

Trying to quit/cut down . . . to change/cut down. . . . If you can't stop smoking, smoke Carlton — it's better for you if you can't quit. . . . Cut down on smoking — better for you. . . . Diet restrictions/quitting/cutting back. . . . The least you could do . . . if you have to smoke . . . smoke the less harmful cigarette. . . . If you've got to smoke, smoke this one. . . . Cut down on your smoking. . . . Directed to someone who wants to cut down is better for you if you cannot quit. — Quit smoking, or smoke less nicotine cigarettes. . . . Don't feel bad if you can't stop smoking; if you smoke Carltons, you have accomplished something. . . . Use these in case of emergency nicotine fit while quitting. . . . Smoke when trying to quit — emergency cigarette. — Switch to Carlton when quitting.

250255336-5347 at 5339, 5343-47 (US 22031). These statements were repeated in an August 8, 2000 document prepared for B W by Kay Harwood, Marketing Analysts, Inc., titled "Carlton Advertising Research: Report of Key Findings." 250255060-5075 (US 22170); Ivey WD, 60:13-62:22; Smith WD, 62:9-63:6.

(5) BATCo

2329. A March 22, 1979 internal BATCo document written by Terry Hanby, who researched "Smoking Health reassurance" for BATCo, concluded that the sale of low tar cigarettes as "health reassurance" products would stem the decline in cigarette sales:

It is quite clear that the emergence of Hi-Fi products has been welcomed by much of the smoking community and their use is emerging as an important health reassurance mechanism for many smokers. . . . [T]he growth of Hi-Fi brands will increasingly ensure that up-market smokers will turn to them as a health reassurance mechanism. . . . [W]e feel that in the markets of `developed nations' the incidence of smoking may continue to decline but that the various reassurance mechanisms listed above will ensure that this decline will eventually plateau at a level not too far removed from current incidence levels.

109883112-3117 at 3115, 3117 (US 20264); 105657908-7909 (US 20248).

2330. A BATCo memorandum dated April 4, 1979, titled "Year 2000," contained predictions for the future of the tobacco industry:

Low tar products will eventually and substantially define the tobacco business. This will serve as an important mechanism for reassuring smokers. . . . Quitting rates will also not increase as existing smokers become increasingly reassured by the growth of Low Tar brands. . . . the ready availability of Low Tar brands will supply high reassurance.

109883101-3103 at 3101, 3102 (US 21518).

2331. An April 23, 1979 BATCo Research Report concluded that "most smokers wish to quit smoking." 105562110-2189 at 2114 (US 21516).

2332. An April 28, 1981 memorandum by Dr. Martin Oldman, titled "Low Delivery Cigarettes and Quitting" and delivered to Dr. L.C.F. Blackman, Director of Millbank, stated:

The role of low delivery cigarettes in a health-conscious market, and for the health concerned individual, can probably be best explained in terms of a simple balance model. This would suggest that the individual smoker seeks to reduce the tension arising from the perceived incompatibility between his health concern and continuing to smoke by making various psychological and behavioural adjustments. For some the tension will only be sufficiently reduced by quitting. For others, an adequate discharge will be achieved by reducing the number of cigarettes smoked and, for yet others, a switch to lower delivery cigarettes is the appropriate modification. In all cases, the model would suggest, the individual makes only that change in his smoking behaviour which is sufficient to offset to a tolerable level the tension arising from the perceived conflict between smoking and his health concern.

105399687-9689 at 9688-9689 (US 85032).

2333. Notes of a July 12, 1983 meeting of BATCo's newly established "Sidestream Working Party" stated: "Smokers who are concerned about the smoking and health aspect but who have not given up, have done all they can (by moving to lower tar brands) to avoid the pressure to quit." The notes continue, recognizing that

[m]arket research undertaken in the US and the UK indicates that smokers would welcome a reduction in the visible smoke they are creating as it would ease the social pressures being increasingly placed upon them and provide a degree of solace, in that they themselves can do no more — short of quitting — having already moved down the tar scale.

109881462-1467 at 1462-1463 (US 26230).

2334. A circa 1984 BATCo "R D/Marketing Conference" report stated: "It is useful to consider lights more as a third alternative to quitting and cutting down — a branded hybrid of smokers' unsuccessful attempts to modify their habit on their own." This document also stated that lights "offered one solution to the smokers dilemma" regarding the adverse health effects of smoking. 100501581-1657 at 1593 (US 20187) (emphasis in original).

2335. An internal document from Imperial Tobacco Ltd., the Canadian sister company of B W, and a subsidiary of BATCo, stated that the company viewed the promotion of light cigarettes as the "ability to reassure smokers, to keep them in the franchise for as long as possible." 689466032-6789 at 6351 (US 31053).

2336. A BATCo document bearing the heading "Barclay Business Review 1996" reported that ultra light cigarettes are particularly attractive to people who may start smoking again after quitting. The document stated that, due to its packaging, the Barclay cigarette (in the Netherlands) was "not clearly perceived as an ultra light and consequently lost attractiveness particularly amongst re-starters who look for an ultra light offer." This appeared under the heading "The core positioning of the brand needs to be clarified in the minds of the consumer." 700767443-7457 at 7446 (US 22123) (emphasis in original); Ivey WD, 79:5-22.

2337. A January 2001 BATCo file, titled "Consumer Concept Trial Notes Jan 2001 Project Baltec II," contained a section dated January 10-12, 2001, titled "Philadelphia — General Impressions and Summary," that detailed the results of consumer research on low tar cigarette smokers, stating: "General feeling that lights are healthier. . . . Who the consumers of the product might be — . . . Smokers who don't want to quit but are concerned about their health[;] Step toward quitting[;] Trading down to lights." 325238922-8994 at 8992-8993 (US 22079) (Confidential).

2338. A January 15, 2001 BATCo document written by Steven Coburn, titled "Project Balcony," that referenced California marketing studies related to proposed advertising campaigns, acknowledged that low tar cigarettes are smoked by people who want to quit: "3rd board highlights low nic/tar aspect — quitters cig." 325239014-9022 at 9015 (US 22082). A document with the same author, title and date that also referenced California smokers stated "less tar less nic — less harmful. . . . 2nd board implies a cigarette to be used as a substitute for quitting." 325239014-9027 at 9017 (US 22082).

(6) American Tobacco

2339. A November 11, 1976 report prepared by Fay Ennis Creative Research Services for F. William Free Company, an advertising agency used by American Tobacco, summarized focus group sessions relating to low tar cigarettes. The report stated: "By changing to a lower tar cigarette, [the panelists] felt less guilty about continuing to smoke and eventually hoped to stop smoking completely." The report stated that "[s]ome of the panelists actually tried smoking brands of low tar in a downward progression of milligrams in order to quit smoking entirely." ATC037310-7324 at 7318, 7320 (US 87890).

2340. A May 25, 1977 report, titled "Tareyton Lights Field Trip Report," prepared for American by SSC B Advertising, reported results of focus group research conducted on Tareyton Lights, stating:

In general, most people who smoke would like to quit. Primary reasons for smoking low tars are: It is a means of cutting down on the amount of tar ingested. It is a first step in quitting; people step down in stages to a lower tar cigarette until finally they are smoking the lowest tar. Even among those who enjoy smoking low tars help alleviate their concern.

ATC0136995-7017 at 7005, 7006 (US 87906).

(7) Lorillard

2341. Lorillard's internal marketing documents demonstrate that Lorillard commissioned extensive consumer research on its cigarettes. For instance, an August 4, 1975 presentation given to Lorillard by a marketing research consultant, titled "Cigarette Advertising 1974-1975," showed that several of the respondents concluded that Lorillard's "Quit or smoke True" advertisements communicated that True cigarettes are "LESS HARMFUL/BETTER FOR YOU." 03496228-6630 at 6277, 6280 (US 20057).

2342. A December 1976 report prepared for Lorillard by the Nowland Organization, Inc. "to develop market information useful to Lorillard in strengthening its position in the SHF [super high filtration]/low T N [tar nicotine] cigarette market," titled "SHF Cigarette Marketplace Opportunities Search and Situation Analysis Volume I," stated: "As would be expected, the advantages of low tar and nicotine cigarettes are seen as health related." The document further stated:

On the more positive side, many SHF [super-high filtration] smokers note that the existence of low tar and nicotine cigarettes, and their switch to such cigarettes, has alleviated some of their health concerns. . . . A number of SHF smokers note that they turned to this "compromise" smoke because, while they felt they should quit smoking (a few on doctors' advice), they were unwilling or unable to do so . . . yet. They see smoking low tar and nicotine cigarettes both as a way to cut back on the intake of harmful substances without cutting back on the number of cigarettes habitually smoked; and (in some cases) . . . so that they will be able to quit more easily at some future time. The fact that many SHF smokers (women especially) now find themselves smoking more than when they smoked regular cigarettes works to defeat their purpose in switching, and is a source of considerable annoyance to them.

Under the heading "Reasons for Prior Brand Switching The Switch to SHF," the document stated:

As discussed, most SHF smokers deliberately chose to switch to low tar and nicotine cigarettes because of health concerns — to get less tar and nicotine, for a milder/gentler smoke, and/or to relieve specific smoking-related symptoms. Often, the actual switch was precipitated by. . . .

— experiencing or becoming more aware of, or more concerned about personal ill-effects from smoking (e.g., cough, throat irritation, difficulty breathing)

* * *

— a failed attempt to quit, or a (perceived) inability to quit, coupled with the heightened perception that one `should' quit

The main advantages which they feel they experienced in this switch are . . . they have less (or no) smoking irritation . . . they like knowing they are getting less tar and nicotine.

84053616-3706 at 3618, 3628, 3632, 3637, 3678-3679 (US 55997).

2343. Volume II of this Report contained the following "Key Highlights":

Health concerns are the usual reason for switching to a low T N brand. Such cigarettes are "better for you" — milder and less irritating (now) as well as less likely to cause serious problems (later). . . . To many SHF smokers, a low T N cigarette represents a compromise smoke between a more satisfying smoke and not smoking at all.

The report also stated: "Those who smoke low tar and nicotine cigarettes generally do so because they believe such cigarettes are `better for you' . . . there is less tar and nicotine to do long-term damage . . . reduces smoking anxiety, guilt." 84053709-3744 at 3712-3713, 3716-3719 (US 21073).

(8) Liggett

2344. In a December 2, 1968 letter from Max Samfield, Senior Assistant Director of the Liggett Research Department, to Copeland Robinson, New Products Manager at Liggett, Samfield discussed the importance of releasing Dorset brand cigarettes, citing: "The obvious void in the 4-6 mgm range for a low tar cigarette with acceptable taste. I firmly believe that those who switch to Marvels, Carltons, or Life cigarettes are in the last stages of quitting smoking. The Dorset, however, is a low tar cigarette one can `live' with." LWDOJ8006760-6760 (US 87909).

4. Despite Their Internal Knowledge, Defendants Publicly Denied that Compensation Is Nearly Complete and that the FTC Method is Flawed

2345. Despite evidence spanning multiple decades showing Defendants' extensive knowledge of compensation, Defendants concealed that knowledge and disseminated false and misleading statements to downplay its existence and prevalence. As part of their attempt to portray low tar cigarettes as less harmful, Defendants publicly endorsed retaining the FTC Method well into the 1990s because of its usefulness to consumers. Henningfield WD, 48:14-49:7; 54:7-15; 55:6-12; 2041186475-6517 at 6475, 6486-95, 6498-04 (US 22181*) (1994 — B W, American Tobacco, Lorillard and Liggett defending the validity and usefulness of the FTC Method to consumers); 2048381972-2310 at 1975 (US 22190); 521321297-1301 at 1297 (US 22137); 520011445-1480 at 1445, 1457-58 (US 22101) (1994 — various public statements by RJR employees defending the validity of the FTC Method); 2505597781-7998B at 7968-87 (US 23028*) (1996 — Defendants' statements defending the utility to consumers of the FTC Method).

2346. As Defendants knew, the smoking regimen used in the FTC Method was designed to approximate smoking behavior in the 1930s, when cigarettes were relatively simple devices: few had filters, and perforated filter ventilation cigarettes were not in production. Henningfield WD, 47:11-21.

2347. When the FTC Method was adopted, it was understood that, while it was intended to provide a useful measure of the amount of tar and nicotine that particular brands generate when smoked in a uniform fashion, so that smokers could compare brands, the standardized FTC Method — or any standardized testing procedure for that matter — would not totally accurately represent the amount of tar and nicotine that any particular smoker would ingest. 03531981-1986 (US 22243); (no bates) (JD 040254); (no bates) (JD 048746).

2348. As noted in Section V(E)(1)(c), supra, while the FTC contemplated at the time it adopted its Method that numerous potential variations among individuals in everyday smoking behavior could have some effect on tar and nicotine yields, it did not have a full understanding of smoker compensation — that smokers' addiction to nicotine would cause them to smoke low tar cigarettes more intensely to satisfy their nicotine addiction, and thereby inhale amounts of tar and nicotine comparable to those inhaled by smokers of full flavor cigarettes. Defendants withheld their long-held knowledge that the primary reason the FTC Method could yield misleading data was that nicotine addiction would drive smokers to obtain relatively stable nicotine intakes through smoker compensation. Henningfield WD, 48:3-49:7.

2349. When the FTC Method was adopted, the Tobacco Institute offered several criticisms in an August 1, 1967 press release, but none of those criticisms related to smoker compensation. Instead, the Tobacco Institute criticized the number of cigarettes tested, the length of the cigarette smoked, and the lack of dissemination of tar yields per cigarette puff. The Tobacco Institute stated that "there is no valid scientific evidence to show that . . . `tar' and nicotine are responsible for any human illness" and then proposed several changes to the FTC Method, most of which were based on claims that FTC tar and nicotine yields were inaccurately high. The Tobacco Institute argued that twice as many sample cigarettes should be tested to arrive at FTC yields, that the FTC Method should use a longer butt-length (which would have lowered FTC tar and nicotine yields by smoking less of the cigarette), and that tar and nicotine yields should be disclosed on a per-puff, as well as a per-cigarette, basis. For these reasons, the Tobacco Institute claimed that the FTC Method "may be deceptive because a smoker may assume his cigarette is delivering the amount of `tar' and nicotine reported by the FTC when in fact it will be delivering much less, the way he smokes." TIMN0120846-0849 at 0847-0848 (US 87967).

2350. Even at the time it was developed, scientists understood that the FTC method, like any standardized method, would provide an imperfect measure of the exact amount of tar and nicotine that a particular smoker would ingest from a particular cigarette. Instead, the method was intended to give representative approximations of the amounts of tar and nicotine generated by different brand cigarettes when smoked under identical conditions. Those approximations could then provide a useful comparison of the tar and nicotine a human smoker would receive from smoking different brands. For example, the FTC stated in 1983: "If consumers avoid blocking ventilation holes, cigarettes smoked in the same fashion will yield `tar', nicotine, and carbon monoxide in general accordance with their relative FTC rankings." 03573029-3030 at 3029 (US 22244); 48 Fed. Reg. 15,953 at 15,954 (Commission Determination Re Barclay Cigarettes; Amendment of Report of "Tar," Nicotine, and Carbon Monoxide Content of 208 Varieties of Cigarettes; Request for Comment on Possible Testing Modifications). While the FTC Method does provide a means by which to compare brands, the comparison does not meaningfully relate to the reality of smoking.

2351. In a November 29, 1994 written statement submitted for the December 5-6, 1994 NCI Conference on the FTC Cigarette Test Method, B W, American Tobacco, Lorillard, and Liggett defended the FTC Method, stating that "The FTC's Test Method Provides Useful and Reliable Information About the Relative `Tar' and Nicotine Yields of Cigarettes," and contending that FTC yields are a "useful predictor" of the amount of tar and nicotine smokers will inhale. 2041186475-6517 at 6475, 6486-95, 6498-6504 (US 22181*).

2352. RJR employees, David Townsend and Donald de Bethizy, maintained at the same Conference, in both their written and oral statements, that the FTC Method was a valid and accurate test method that approximates human smoking. 2048381972-2310 at 1975 (US 22190).

2353. In his written statement, Townsend asserted that the FTC Method "provides accurate and reliable information" that "is a key factor for consumers to make objective choices in the marketplace" and stated that "implementation of the FTC testing for `tar' and nicotine . . . was an important step in providing data for the consumer to use to make an informed decision in the marketplace." 521321297-1301 at 1297 (US 22137). Townsend further stated that

it is clear from the information, I believe, that the FTC test method does provide accurate and reliable information for the consumer to use in the marketplace; that is, to compare yields of various brands and make objective choices. The consumer makes choices based on the FTC information, or the rankings derived from that information. . . . The FTC method was established to provide accurate and reliable comparative smoke yield information, and has been very successful in doing that.

2048381972-2310 at 2252, 2256 (US 22190).

2354. De Bethizy stated: "The FTC method provides an accurate and meaningful ranking of cigarettes. . . . On average, smokers absorb approximately the yield of nicotine predicted by the FTC method, and smokers of lower yielding products absorb less nicotine. . . ." 520011445-1480 at 1445, 1457-58 (US 22101). He also stated: "The FTC method provides an accurate and meaningful ranking of cigarettes. . . . [T]he compensation phenomenon does not undermine the FTC method." 2048381972-2310 at 2264, 2267 (US 22190).

2355. In their 1996 comments on the FDA's proposed tobacco Rule, Defendants continued to maintain that there is a meaningful relationship between the FTC ratings and smoker tar and nicotine exposure. 2505597781-7998B at 7968-87 (US 23028*).

2356. While defending the FTC Method and resisting proposed changes to it, Defendants have made repeated public assertions that they have substantially reduced the tar and nicotine deliveries of cigarettes, citing the FTC ratings as their primary support for this assertion. 2505597781-7998B at 7987-88 (US 23028*) (1996 Comments of B W, Liggett, Lorillard, Philip Morris, Inc., RJR Tobacco Institute before the U.S. FDA, Vol. III) (claiming that "over the years, the average yield of cigarettes generally has declined markedly. . . . The fact is that from 1950 to the present, U.S. cigarette manufacturers have reduced `tar' and nicotine yields by more than 60 percent"); 2046932308-2363 at 2314-2315 (US 85067) (Philip Morris 1994 submission to NCI regarding the FTC Method, asserting "an overall decrease in the `tar' and nicotine intake of smokers" as a result of reduced FTC yields); 521321297-1301 at 1299 (US 22137) (1994 RJR employee's statement that "all cigarettes are substantially lower in `tar' yields than they were in past years" and his claim that "[c]igarette design changes have resulted in an overall major reduction in smoke yields.").

2357. A February 7, 1996 Covington Burling memorandum, from Tobacco Institute attorney David H. Remes to attorneys and senior employees from Philip Morris and B W and attorneys from the law firms of Arnold Porter and Collier Shannon, summarized a meeting held earlier that day between Remes and C. Lee Peeler, Director of Advertising Practices in the Bureau of Consumer Protection at the FTC. At this meeting, Remes relayed to Peeler the industry's claim that low tar cigarettes actually do deliver less tar and nicotine to smokers, and that consumers need not be informed about changes in smoking behavior related to smoker compensation. Remes communicated his "observation that in many cases low-yield brands contain so much less tobacco than higher-yield brands that any compensation could not begin to erase the difference." Remes also said that he had made a "suggestion that smokers do not need to have it explained to them that smoking a lot of low-yield cigarettes will result in greater T N deliveries, just as people do not need to be told that eating a lot of low-fat cookies can make them fat." Remes noted that Mr. Peeler "responded that the analogy does not hold because we know how much fat is `delivered' in each cookie but not how much T N is delivered by each cigarette." 92613896-3899 (US 87919); Wells WD, 63:1-64:16.

2358. Over the years, there has been discussion in the scientific community about revising the FTC Method to make it a more accurate measure of the tar and nicotine that human smokers actually ingest. Defendants have opposed changing the FTC Method, arguing that it provides a way for consumers to choose cigarettes and meaningfully compare them in terms of the tar and nicotine exposure from smoking. Henningfield WD, 55:6-12.

2359. For instance, in September 1997, the FTC solicited public comment on a proposal to replace the existing FTC test method with a methodology that would "provide information on the tar, nicotine, and carbon monoxide yields obtained under two different smoking conditions" to provide "a range of yields for individual cigarettes smoked under less intensive and more intensive smoking conditions," and to convey to smokers that "a cigarette's yield depends on how it is smoked." FTC Cigarette Testing; Request for Public Comment, 62 Fed. Reg. 48,158, 48,159 (Sept. 12, 1997) (US 88618). In response, Philip Morris, RJR, B W, and Lorillard submitted joint comments to the agency defending the current FTC Method and opposing the proposed change, stating: "The manufacturers believe that the current test method should continue to be used. They are not convinced that it should be supplemented with a second test method." Comments of Philip Morris Inc., R.J. Reynolds Tobacco Co., Brown Williamson Tobacco Corp., and Lorillard Tobacco Co. on the Proposal Titled FTC Cigarette Testing Methodology Request for Public Comment ( 62 Fed. Reg. 48,158) at 2-3, (no bates) (US 88618) ("Joint Comments").

2360. The comments further stated that: "Smokers are familiar with the ratings produced by the current test method, and continued use of the current test method assures historical continuity of the data. For these reasons, testing under the current FTC test method should continue." Id. at 4. The comments referred to compensation as a "hypothesized" and "weakly documented phenomenon" and stated: "The testing protocol should not be modified to reflect `compensatory' smoking, in part because "current knowledge about these behaviors is too sparse to be usable for modeling purposes." Id. at 43.

2361. Defendants' comments urged that "[t]he protocol should not be modified to incorporate a vent-blocking condition." In response to the FTC's question: "What kinds of consumer education messages should be created to inform smokers of the presence of filter vents and the importance of not blocking them with their fingers or lips?" Defendants' 1998 comments stated: "The manufacturers are not convinced that vent-blocking is a sufficiently common or documented phenomenon that smokers should be alerted to the presence of filter vents and instructed not to block the vents." Id. at 60, 82.

2362. In response to the FTC's question: "If the effect of compensatory smoking behavior is not incorporated in the tar and nicotine ratings, should a disclosure warning smokers about compensatory smoking behavior be required in all advertisements?" Defendants' 1998 comments stated: "The manufacturers are not convinced that compensatory smoking behavior is a sufficiently common or documented phenomenon that consumers should be alerted to its existence. . . ." Id. at 89.

a. Tobacco Institute

2363. In anticipation of the 1981 Surgeon General's Report, the Scientific Affairs Division of the Tobacco Institute drafted a December 15, 1980 memorandum to Horace Kornegay, President of the Tobacco Institute, warning that, among other issues, the Report was expected to include a discussion of smoker compensation. Rather than recommending disclosure of full and complete information on the subject to the public, the "Response" section of the memorandum stated:

[I]t is suggested that the TI take the following position on the report and that on receipt of any queries from the press, staff be instructed to respond as follows: "The results of research in the past are so mixed that it is impossible to reach and support a firm conclusion at the present time. All one has to do is be aware of and appreciate the call for more research to realize that the Surgeon General's Office cannot objectively have a strong position supported by research. The office is looking for more money in order to support the current campaign against the tobacco industry."

TIMN0073798-3799 at 3799 (US 85127).

b. Philip Morris

2364. In a June 29, 1988 "Statement of Philip Morris, U.S.A." to Congress, Philip Morris made statements equating machine measured tar and nicotine deliveries with actual smoker intake:

From the 1940s to today, Philip Morris has similarly spent millions on its own research program to modify its cigarettes. As a result, the "tar" and nicotine yields of today's cigarettes — the principal concern of the scientists who believe cigarettes pose health risks — have been reduced as much as 95% from the 1957 averages. . . . [I]t was Philip Morris scientists who perfected the instrument that was used for many years by the Federal Trade Commission and other groups around the world for the measurement of "tar" and nicotine yielded by cigarettes . . . [filter] ventilation techniques also contributed to an overall reduction in `tar' and nicotine levels. . . . As a result of these advances in filtration and ventilation, Philip Morris and the other cigarette companies were able to reduce "tar" and nicotine levels substantially in the late 1950s. . . . As a result of these dramatic reductions in the "tar" and nicotine levels of the leading brands, as well as the introduction of entirely new low-delivery cigarettes, the overall intake of "tar" and nicotine by American smokers decreased dramatically even before the Surgeon General's Report against smoking in 1964. . . . As a result of all this research, Philip Morris succeeded in reducing "tar" and nicotine levels even more in the years following the 1964 Surgeon General's Report.

TI01770431-0458 at 0433, 0439, 0441-0443, 0451 (US 85065).

2365. In his April 14, 1994 written Statement before the House of Representatives Subcommittee on Health and the Environment of the House of Representatives Energy and Commerce Committee, William Campbell, President and CEO of Philip Morris USA, stated, contrary to extensive information developed by and known to Philip Morris USA, that "consumers are not misled by the published nicotine deliveries as measured by the FTC method." Campbell also claimed that "tar and nicotine levels have decreased dramatically over the past 40 years. Today, the market is populated with a number of `ultra low' brands which deliver less than 5% of the tar and nicotine of popular brands 20 years ago." In a statement carefully worded to refer only to the number of cigarettes smoked, ignoring all other methods of smoker compensation, Campbell both misrepresented the evidence about whether downswitchers smoke more cigarettes per day and denied that smoker compensation rendered the FTC tar and nicotine yields misleading:

Commissioner [David] Kessler suggested that the FTC figures were misleading because smokers might "compensate" for lower tar and lower nicotine brands by smoking those cigarettes differently. In fact, the data indicates that, despite the dramatic reductions in tar and nicotine levels over the past decades, the number of cigarettes smoked by an individual has remained constant, and even declined slightly. More importantly, the data shows no difference in the number of cigarettes smoked by those who favor higher and lower yield brands.

ATC2746877-6887 at 6877, 6878, 6887 (US 59009); compare with 1000861953-1953 (US 35484) (Wakeham 3/24/61) ("As we know, all too often the smoker who switches to a hi-fi cigarette winds up smoking more units in order to provide himself with the delivery which he had before.").

2366. An October 1994 document that Philip Morris submitted to the United States National Cancer Institute, titled "Submission of Philip Morris Incorporated to the National Cancer Institute Consensus Conference on the FTC Cigarette Testing Methodology and Rating System," stated:

A number of the FTC's questions . . . relate to "compensation," a term used to suggest that some smokers of lower yield cigarettes may sometimes alter their smoking behavior in ways that may tend to reduce the differences in yields among brands and styles implied by their relative FTC method ratings. While there is a fair amount of recent literature on compensation, few studies have been performed that provide reliable data to establish the occurrence of this suggested phenomenon. We appreciate the interest people have in possible compensation. But there can be no real dispute that, to date, the scientific literature on compensation is limited and inconclusive. . . . [W]hatever conclusions may be reached about compensation, the FTC method remains an appropriate standard for measuring cigarette properties. The reporting of FTC method yields . . . remains a useful source of information to consumers choosing among cigarette brands and styles.

2046932308-2363 at 2312, 2362-2363 (US 85067).

2367. A document, titled "Philip Morris Management Corp., Worldwide Regulatory Affairs Department, 1996 Core Issues Plan," discussed under the topic of "Core Issue #2 Federal Trade Commission," Philip Morris's response to an NCI Conference recommendation to change the FTC Method and to provide more information to consumers: "Preserv[ing] our ability to . . . advertise low tar/light and ultra low tar/ultra light cigarettes as such; avoid changes in the FTC method for as long as possible; [and] minimize changes in the FTC method to the extent possible. . . ." 2046266224-6268 at 6234 (US 23936).

c. R.J. Reynolds

2368. In a July 2, 1984 letter to the FTC from Samuel B. Witt III, RJR Vice President, General Counsel, and Secretary, Witt stated:

[T]he Commission has also asked for comment on broad questions concerning "smoker compensation. . . ." In their submissions [in response,] health organizations take the position (which is not correct) that the average smoker will get the same amount of "tar" and nicotine from higher and lower "tar" cigarettes, therefore making the Commission's numbers irrelevant to the consumer. RJRT, on the other hand, maintains that the average smoker will get less "tar" from smoking a low "tar" cigarette than he or she will receive from smoking a higher "tar" product, and that the average smoker of low "tar" cigarettes does not smoke more cigarettes than the average smoker of higher "tar" cigarettes.

2025045756-5761 at 5760 (US 22247).

2369. In an April 14, 1994 statement to the House of Representatives Subcommittee on Health and the Environment of the House Energy and Commerce Committee regarding the potential regulation of cigarettes by the FDA, RJR stated:

Since the 1950s, Reynolds tobacco has pursued . . . development of new technologies to reduce yields of "tar" and nicotine generally . . . [this] line of research has been remarkably successful. . . . The important point is that in spite of broad variations in how individual smokers may smoke any given cigarette, the fact remains that the lower the yield by FTC numbers, the lower the yield will be to any given smoker. The yield for any given smoker will probably be different from the FTC yield; for some smokers it will be higher, for some it will be lower, but overall, the FTC yields are generally predictive of the yield to smokers as a group. The statement, however, that "in reality" low yield cigarettes do not yield low "tar" and nicotine, is not true.

516962199-2227 at 2203-2204 (US 85128).

d. Brown Williamson

2370. In the mid-1990s, Tommy Sandefur, B W CEO, submitted a written statement to Congress defending the FTC Method: "We also vigorously dispute the suggestion of [David] Kessler and [John] Slade that the `tar' and nicotine ratings produced using the FTC test method are meaningless or misleading." More than ten years earlier, on March 19, 1984, Ernest Pepples, B W Senior Vice President and General Counsel, wrote a letter to Howard Liebengood of the Tobacco Institute acknowledging that FTC tar and nicotine ratings "may be misleading to consumers" and bear no relation to actual consumer intake. Compare 682637627-7629 at 7629 (US 22946) with 521060910-0912 (US 20892).

2371. Susan Ivey, President and CEO of B W, admitted at trial that B W "has been aware for many years" that some smokers compensate when smoking low tar cigarettes. B W takes a different position on its website, which states that "[t]he question of why compensation occurs is still the subject of scientific research, and the relative importance of tar versus nicotine in determining compensation is unclear." The website also states that "how much smokers alter their behavior when they switch to lower tar products, and for how long, is still unclear." The website also states that "our studies show that, as actually smoked by consumers, lower tar cigarettes will generally deliver less tar and nicotine than higher tar cigarettes, and cigarette deliveries generally align with the ranges associated with the descriptors: ultra lights, lights, and full flavor." Ivey WD, 67:19-21; TLT1040050-0055 at 0052-0054 (US 88620); Ivey WD, 64:1-67:11.

e. BATCo

2372. In an October 1999 Memorandum by British American Tobacco to the U.K. House of Commons Health Committee, titled "The Tobacco Industry and the Health Risks of Smoking," BATCo discussed compensation:

It is clear that compensation does occur, but that . . . despite compensation, smokers receive less tar on average when switching to a lower tar cigarette. . . . The evidence suggests that increasing the number of cigarettes consumed, blocking of ventilation holes and increasing inhalation depth, are not common compensation mechanisms. . . . The limited evidence of which we are aware, suggests that switched smokers either revert gradually to their former, non-compensatory behaviour (which results in lower overall intake of smoke), or change again to a brand which they prefer and which does not require the extra "effort" of taking larger puffs (which may or may not result in lower intake).

322017057-7142 at 7108-09 (US 22068); Ivey WD, 69:4-13.

f. American Tobacco

2373. Eric Gesell stated, on behalf of American Tobacco, that the company did not believe that smokers smoke for a certain level of nicotine and adjust their level of smoking when switching between different types of cigarettes to ensure that they get the same amount of nicotine. Gesell PD, Minnesota, 9/18/97, 5:8-25; 6:10-17; 98:21-100:6.

2374. Gesell also said on behalf of American that the FTC Method tar and nicotine yield data "is meaningful, and it was meaningful, and probably still is today." Gesell PD, Minnesota, 9/18/97, 5:8-25; 6:10-17; 107:7-108:6.

g. Lorillard

2375. In 1999, Alexander Spears, CEO of Lorillard, stated publicly that the FTC tar and nicotine numbers did not need to be explained to smokers because it was "very obvious" that they were meaningless due to smoker compensation. Spears PD, Minnesota, 9/23/97, 70:2-72:2.

5. Despite Their Internal Knowledge, Defendants' Marketing and Public Statements About Low Tar Cigarettes Continue to Suggest that They Are Less Harmful than Full-Flavor Cigarettes

2376. As detailed below, Defendants made, and continue to make, false and misleading statements regarding low tar cigarettes in order to reassure smokers and dissuade them from quitting. These actions include: assertions that low tar cigarettes deliver "low," "lower," or "less" tar and nicotine than full-flavor cigarettes; claims that low tar cigarettes are "mild" or deliver "clean" taste; and use of brand names with descriptors such as "light" and "ultra light," with full knowledge that consumers interpret these claims and descriptors to convey reduced risk of harm.

2377. Low tar cigarettes have captured an enormous share of the total cigarette market. The percentage of low tar cigarettes (i.e., cigarettes with an FTC-reported tar yield of 15 mg. or less) has increased from 2% in 1967 to 81.9% of total cigarette sales in 1998. (no bates) (US 86655) (FTC, 1994 Report at Table 6A, Table 7); 92382035-2095 at 2057 (US 57179); (no bates) (US 87925 at 8) (FTC, 1979 Report); (no bates) (US 60434 at 22-26) (FTC, 1998 Report).

2378. From the 1960s to the present, Defendants' marketing of their health reassurance brands has featured claims of lowered tar and nicotine accompanied by written statements that implied a health benefit as a result of the lowered tar levels. Defendants have also used marketing imagery, such as lighter color cigarette packaging and white tipping paper, to communicate to smokers that Defendants' health reassurance brands were "lighter" and lower in tar.

2379. Over the last five decades, Defendants have not only introduced numerous stand-alone cigarette brands that purport to be low in tar (e.g., Merit, Vantage, and Carlton), but have also introduced low tar "brand extensions" of existing full flavor cigarette brands (e.g., Marlboro Lights and Ultra Lights as extensions of the full flavor Marlboro brand). Defendants have used so-called brand descriptors such as "light," "medium," "mild," and "ultra light" to market both their new brands, as well as their brand extensions as low in tar. Virtually every major brand undertook line extensions and by 1980 over 50% of cigarettes sold were "low tar" (with an FTC Method tar yield of 15 mg or less). Dolan WD, 123:21-124:7. Defendants acknowledge that, today, every major manufacturer continues to manufacture and sell low tar brands and brand extensions in both the `light' and `ultra light' categories. Ivey WD, 54:6-17; Bonhomme WD, 8:13-9:18.

2380. Although the FTC does not formally classify cigarettes according to tar or nicotine yield, industry practice, according to Denise Keane, Philip Morris General Counsel, has long been to apply the `light' descriptor to cigarettes with 7 to 14 milligrams of tar, and the `ultra light' descriptor to cigarettes with fewer than 7 milligrams of tar." These brand descriptors "have been developed by cigarette manufacturers through their advertising." Keane WD, 56:14-23; Mulholland WD, 26:4-27:9;accord Henningfield WD, 56:8-11 (testifying that the FTC has no "control over which cigarettes Defendants advertise as `light' or `ultra light'").

2381. The terms "Light" and "Low Tar," as they are used by Defendants, are essentially "meaningless" and "arbitrary." As Dr. Farone explained:

[T]here are lights of certain brands with higher tar levels than regulars of other brands from the same company, and there are also lights and regulars of the same brand that have the same FTC tar rating. So therefore the term "light" is not related to tar or taste. For example, according to the most recent FTC report of tar and nicotine yields, Philip Morris sells versions of Virginia Slims and Virginia Slims Lights that both deliver 15 mg of tar by the FTC method.

Farone WD, 116:3-14; 525311179-1223 at 1185, 1207-1208, 1222 (US 52977).

2382. The FTC's 1967 report to Congress concluded that Defendants were using the word "mild" in advertising "as a euphemism for cloaking the dangers of increased cigarette smoking." The Report noted, in particular, the following ads:

Carlton filters have "Good mild taste . . . created for those who are interested in the amount of tar and nicotine in the smoke of their cigarette. . . ." "Montclair (menthol filter) cigarettes are made especially for smokers who seek exceptional mildness. . . ." "You get Pall Mall's famous extra length of fine tobaccos . . . and a filter tip. Result? A new longer length, a full 100 millimeters long and a new milder taste . . ." and "(Chesterfield kings) made to taste even milder through longer length."

92382035-2095 at 2058-2059 (US 57179).

2383. In its 1968 report, the FTC concluded that Defendants' use of the phrase "mild taste" in advertising is just another way to communicate the term "less harmful" to smokers:

Advertising in 1966 featured the phrase "mild taste" to describe the satisfactions obtained from smoking and also as a euphemism to cloak the dangers of cigarette smoking. The euphemistic effect derives from the possibility that the public assumes "mild" tasting cigarettes to be less strong, i.e. lower in tar and nicotine than many cigarettes, and hence less hazardous.

TIMN288040-8122 at 8055-8056 (JD 043418).

2384. The 1971 FTC report noted that "[r]elieving anxieties about the risks to health posed by cigarette smoking" was among Defendants' three main advertising themes and that "[c]laims of low tar and nicotine content present yet another appeal to relieve concern about the dangers to health associated with cigarette smoking." In 1975 and 1976 reports, the FTC reported that this theme, used separately or with themes regarding taste or desirable personality characteristics, "continued to predominate in 1975," and "continued to dominate in 1976, with little variation in format and copy except in the greatly increased promotional emphasis given to the lower and lowered `tar' varieties." 680043553-3595 at 3564, 3567 (US 87922);1005121108-1119 at 1114 (US 87921); (no bates) (JD 003563 at 4-5) (FTC, 1976 Report).

2385. The 1981 FTC report on cigarette advertising noted, many of Defendants' advertising campaigns had, over the course of the preceding four decades, "impl[ied] that smoking a particular brand solves the health problem or at least minimizes the risk." The report noted that Philip Morris's Parliament and American Tobacco's (subsequently B W's) Tareyton cigarettes "imply that their special filters minimize the risks of smoking." The report also cited the advertisements for RJR's Vantage, B W's Viceroy, and Lorillard's True cigarettes as examples of advertising campaigns implying that the brands marketed are either not harmful or less harmful. (no bates) (JD 004744 at 2-12) (FTC, 1981 Report).

2386. Similarly, the 2001 Institute of Medicine report cited the advertisements of Defendants Philip Morris, RJR, B W, American Tobacco, Lorillard, and Liggett as examples of advertisements that relate health benefits to particular low tar cigarette brands. (no bates) (US 20919) (Institute of Medicine, Clearing the Smoke: Assessing the Science Base for Tobacco Harm Reduction) (K. Stratton, et al., eds., National Academy Press 2001); 99053048-3558 at 3124-27 (US 57494).

2387. The FTC noted in a 1976 report that "[t]he lower and lowered `tar' and nicotine cigarettes have in the last year been the subject of an intensive promotional effort by cigarette manufacturers." Defendants' spending on the advertising and marketing of low tar cigarettes (i.e., cigarettes yielding 15 mg. or less tar per the FTC Method) has been disproportionately high compared to their domestic market share. The FTC's report for 1997 revealed that for every single year from 1967 to 1992. Defendants' advertising and promotional spending for low tar cigarettes exceeded their domestic market share. According to one marketing expert, low tar cigarettes came to "substantially reshape and define the cigarette market," explaining that:

[T]he real "boom: time for these cigarettes is the late 1970s. In 1974, manufacturers devoted about 15% of their advertising and promotion dollars to these products. By 1979, this spending grew to 67%. At the time, the percent of sales represented by low tar was only 30%, so spending was disproportionately high on these "health reassurance" brands. These products, which accounted for less than 15% of cigarette sales in 1975 came to hold the majority of the market by 1981.

It was not until the mid-1990s that the percentage of sales made by low tar brands finally equaled the amount that Defendants were spending to promote them, which was about 70% of the industry total. HHS1311770-1805 at 1799 (US 76080); Dolan WD, 125:6-126:7.

2388. According to Dr. Henningfield, who among his many other credentials headed the National Institute of Drug Abuse from 1994 to 1996, smokers are not always familiar with the FTC rating of their cigarette, but are aware of whether their cigarettes are "light" cigarettes or "regular." There is little, if any, dispute that consumers believe that "light" cigarettes deliver less tar and nicotine than regular cigarettes, and that consumers believe that regular cigarettes are more hazardous than "light" cigarettes. Henningfield WD, 56:12-57:10.

2389. Relatively few people understand that smoking low tar or light cigarettes can be — and often is — just as dangerous as smoking full flavor cigarettes. Weinstein WD, 54:21-55:20. A peer-reviewed, published study showed that 70% of low tar cigarette smokers believe that such cigarettes decrease one's daily intake of tar. Weinstein WD, 55:5-8 (citing Kozlowski et al., Smoker reactions to a "radio message" that Light cigarettes are as dangerous as regular cigarettes. Nicotine Tobacco Research, 1(1);67-76 (1999)). Similarly, another study showed that approximately half of all respondents did not know how many light cigarettes would have to be smoked to get the same level of tar intake as from one full flavor cigarette. Fewer than 10% believed that it would be one light cigarette. Weinstein WD, 55:12-15 (citing Kozlowski, L.T., Goldberg, M.E., Yost, B.A., White, E.L., Sweeney, C.T., Pillitteri, J.L. Smokers' misperceptions of light and ultra-light cigarettes may keep them smoking. American Journal of Preventive Medicine, 15, 9-16 (1998) ("Kozlowski, Goldberg, et al., 1998")).

2390. Defendants have used this misperception to their advantage. A 1996 article in the American Journal of Public Health cited a 1993 Gallup survey in which 56% of smokers believed use of the term "low tar" conveyed relative safety compared to full-flavor cigarettes. The American Journal of Public Health article also cited a 1987 National Health Interview Survey finding that 46% of smokers of cigarettes with tar yields of 6 mg. or lower (per the FTC Method) believed they had reduced cancer risk compared with smokers of cigarettes with higher FTC tar yields. 2074759740-9746 at 9741 (US 43526); accord 99053048-3558 at 3112 (US 57494) (2001 Institute of Medicine study stating "When filtered and low-yield cigarettes were introduced into U.S. markets, they were heavily promoted and marketed with both explicit and implicit claims of reducing the risk of smoking. Even as data accumulated, albeit slowly, that these products did not result in much — if any — decrease in risk, consumers have continued to believe otherwise. . . . Consumer misunderstanding is explained in part by the ways in which these products are marketed. . . . [T]he tobacco companies have appealed to health concerns of smokers at least since 1927. Claims about tar and nicotine levels appeared as early as 1942").

2391. Defendants continue to disseminate false and misleading public statements regarding their true intent in marketing low tar cigarettes. For example, Defendants Philip Morris, RJR, B W, and Lorillard jointly stated to the FTC in February 1998: "The manufacturers do not claim that lower-yield cigarettes are `safe' or are `safer' than higher yield cigarettes." Comments of Philip Morris Inc., RJR Tobacco Co., Brown Williamson Tobacco Corp., and Lorillard Tobacco Co. on the Proposal Titled FTC Cigarette Testing Methodology Request for Public Comment ( 62 Fed. Reg. 48,158) at 3, 94 ("Joint Comments") (US 88618).

2392. Defendants have publicly committed to refrain from marketing with implied health claims. In April 1964, the Cigarette Company Defendants adopted the Cigarette Advertising and Promotion Code ("Code"), which includes provisions prohibiting "advertising which makes a representation with respect to health." The Cigarette Company Defendants have claimed publicly that they have obeyed and continue to obey the 1964 Code, last revised in December 1990. Krugman WD, 164:6-21. Each cigarette company Defendant continues to state on its website and in other public statements that it has adopted the Code and that it follows the Code in planning and executing its cigarette marketing. 2070557699-7702 (US 20519). 2025345360-5362 (US 20414); MNAT00608606-8614 (US 78779); TIMN0102493-2494 (US 21271); TIMN0015615-5617 (US 21265); 2022976326-6335 (US 20370); ATX040294056-4056 (US 58599). See Section V(F)(7)(a)((1)) regarding the total lack of enforcement of the Code. More recently, Defendants agreed in the 1998 Master Settlement Agreement not to make "any material misrepresentation of fact regarding the health consequences of using any tobacco product." Section III(r) of the Agreement states:

Prohibition on Material Misrepresentations. No Participating Manufacturer may make any material misrepresentation of fact regarding the health consequences of using any Tobacco Product, including any tobacco additives, filters, paper or other ingredients.

(no bates) (JD-045158) (Master Settlement Agreement, § III(r)).

2393. Defendants also told the FTC in their 1998 testimony: "Smokers are familiar with the ratings produced by the current test method, and continued use of the current test method assures historical continuity of the data. For these reasons, testing under the current FTC test method should continue." Joint Comments at 4.

2394. In response to the FTC's question regarding the need for official guidance on brand descriptors, Defendants stated: "The manufacturers are not convinced that there is a need for official guidance with respect to the terms used in marketing lower rated cigarettes." As to terms, such as "light" and "ultra light," "[t]he manufacturers believe smokers understand that these descriptors are terms of comparison rather than signifiers of absolute value." Joint Comments at 94.

2395. In response to the following FTC query:

What data, evidence, or other relevant information on consumer interpretation and understanding of terms such as "ultra low tar," "ultra light," "low tar," "light," "medium," "extra light," and "ultima," as used in the context of cigarettes exists? Do consumers believe they will get significantly less tar from cigarettes described as "light" or "low tar" than from regular full flavor cigarettes, and do they believe they will get significantly less tar from cigarettes described as "ultra low tar" or "ultra light" than from "light" or "low tar" cigarettes? Do the brand descriptors convey implied health claims?

Defendants Philip Morris, RJR, B W, and Lorillard jointly stated in their joint comments to the FTC:

The manufacturers believe that consumers choose "light" or "ultra" products for a variety of reasons, including lighter flavor, lighter taste, less menthol (or other flavor) taste, and smoother smoking characteristics. Some consumers may choose such products for other reasons. The manufacturers do not intend the descriptors to convey any level of `safety' with regard to their products.

Defendants' joint comments further stated: "The manufacturers are not aware of evidence that consumers use descriptors in lieu of the FTC numbers as their primary source of information about the `tar' and nicotine yields of different brand styles." Joint Comments at 95.

2396. In response to the FTC's question:

What available evidence exists concerning how consumers view cigarettes with relatively low tar and nicotine ratings and their perception of the relative risks of smoking such cigarettes rather than full flavor cigarettes?

Defendants Philip Morris, RJR, B W, and Lorillard jointly stated:

The manufacturers are unaware of evidence concerning such consumer views and perceptions except to the extent that such evidence is presented in [the National Cancer Institute's Smoking and Tobacco Control Monograph No. 7].

Joint Comments at 89.

2397. Defendants' testimony to the FTC fails to make any reference to the vast amounts of consumer research Defendants conducted, and had conducted for them by their numerous advertising and marketing consultants, that expressly found that many consumers strongly disliked the taste of low tar cigarettes, but were smoking them because they believed they were healthier for them. Accord 2041186475-6517 at 6478, 6504 (US 22181*) (November 29, 1994 submission to the National Cancer Institute on behalf of B W, American Tobacco, Lorillard, and Liggett contending that smokers use FTC tar and nicotine ratings primarily for information relating to taste considerations, referring to what Defendants called "the well-established significance of the FTC's machine-determined yields for comparing the flavor, richness and satisfaction of different brands of cigarettes," and predicting that if modifications to the FTC Method occurred, "[c]onsumers . . . would be deprived of important information about the flavor, taste and feel of cigarettes — information consumers consider to be highly relevant in distinguishing among" brands).

2398. As detailed below, Defendants' public statements about low tar cigarettes on their websites, the statements of their executives, and their internal documents are false and misleading.

a. Philip Morris

(1) Philip Morris's Low Tar Cigarette Marketing Techniques

2399. Over the last 50 years Philip Morris has used a variety of marketing techniques to reassure smokers that certain brands and types of cigarettes would reduce their health risk from smoking by reducing their exposure to tar. Philip Morris advertisements in the early 1950s made explicit claims of reduced harm, such as the following: 1952: "If, like millions today, you are turning to filter cigarettes for pleasure plus protection . . . it's important that you know the Parliament Story." 696000888-0916 at 0894, 0905, 0908 (US 21387); Harris WD, 70:3-6. 1952: "Parliament's exclusive Filter Mouthpiece gives you the important extra protection of the Parliament `Safety-Zone' Construction. . . . As the irritants, brown tars and colorless nicotine are trapped, they remain where they belong — in the recessed filter, completely out of contact with your lips." 696000888-0916 at 0894, 0905, 0908 (US 21387) 1954: "You're So Smart to Smoke Parliaments." (US 2731) (emphasis in original); see also (US 2756) (1956 Parliament advertisement in Sports Illustrated magazine noting same). 1954: "The cigarette that takes the FEAR out of smoking!" 696000888-0916 at 0908 (US 21387). 2400. In addition to making explicit health claims, since the 1970s Philip Morris has used brand descriptors such as "light" and "ultra light" to communicate that certain brands of cigarettes are low in tar and nicotine. James Morgan, who was Brand Manager of Marlboro from 1969 to 1972, during the time when Philip Morris introduced Marlboro Lights, its first "light" cigarette, explained the intended meaning of the "lights" descriptor. Morgan stated that, from the very beginning, the "lights" descriptor was intended to communicate that the brand was low in tar — as opposed to a brand that was lighter in taste:

From the very beginning the phrase, "Lowered tar and nicotine" was going to be on the package [of Marlboro Lights]. That was the phrase that described to the consumer what the product was in our judgment. . . . We felt the brand name, Marlboro Lights, was a real help in terms of the description of the product being low in tar and nicotine which appeared on the pack from the inception of the project. . . . We are not talking, in my judgment, talking about light . . . as a taste. It's not a term that means anything in terms of taste, and the name Marlboro Lights as I said before, a word which we feel has appeal in a different sense than suggesting what the cigarette even tastes like. . . . It was our desire in this entire Marlboro Lights brand project to constantly position Marlboro Lights as being — as having lower tar and nicotine from Marlboro [Reds].

Morgan PD, Philip Morris Inc. v. R.J. Reynolds Industries, Inc., 10/15/74, 4:9-10; 10:15-11:4; 78:20-79:14; 79:25-80:5; 81:8-12; 85:23-86:4; Morgan PD, Philip Morris Inc., 11/25/74, 247:11-14.

2401. According to Morgan, Philip Morris made a calculated decision to use the phrase "lower tar and nicotine" even though its own marketing research indicated that consumers interpreted that phrase as meaning that the cigarettes not only contained comparatively less tar and nicotine, but also that they were a healthier option. Morgan PD, Price v. Philip Morris, Inc., 6/15/02, 45:2-45:25, 45:2-46:25, 47:2-47:25, 48:2-48:25, 49:2-49:25, 50:2-50:25, 51:2-51:5, 52:15-52:20.

2402. Morgan, who later became CEO of Philip Morris, further explained in 2002 that rather than relying on the tar and nicotine numbers from the FTC Method, "the major influence in people's perceptions in the tar of a cigarette would have come from the marketing positioning of a brand as opposed to people literally reading the FTC [tar and nicotine figures]." Morgan also stated that,

if you took the advertising, the point of sale, whatever may have been said on the racks or the cartons, the whole panoply of what the consumer saw about a cigarette brand would be more influential in that consumer's perception of the tar of that brand . . . than the fact that they may or may not have sat down and looked at a newspaper that had the latest Federal Trade Commission report.

Part of the image that Philip Morris was marketing was the concept of lowered tar and nicotine. Morgan PD, Philip Morris Inc., 11/25/74, 174:10-175:4; 175:16-175:25.

2403. Jeanne Bonhomme, Director of Consumer Insights for Philip Morris, echoed these views:

Philip Morris aims its low tar cigarette marketing at least in part at smokers of regular cigarettes who are concerned about the amount of tar they are inhaling and want to reduce it. . . . Philip Morris was aware that consumers understood the "lights" brand descriptor from its advertising and marketing pieces to be equated with low tar.

Bonhomme WD, 12:6-11; 13:17-19; 15:1-4; 16:1-7; 43:11-14.

2404. In or around 1995, Philip Morris considered changing the name of Merit to Merit Lights, because "Philip Morris was concerned that consumer research showed that Merit marketing no longer effectively conveyed to consumers that Merit was low in tar." Bonhomme WD, 13:1-22.

2405. This contemplated name change is documented in a June 23, 1995 internal Philip Morris memorandum, titled "Merit `Filter' vs. `Lights' Test — Research Proposal," from Lauren Schwed, Philip Morris Analyst, to Jodi Sansone, then Brand Manager for Merit at Philip Morris USA, and Rebecca Gordon, a Philip Morris USA Assistant Brand Manager under Sansone. The memorandum described the motivation behind an attached consumer research study as follows:

Merit is considering changing the name on the Parent pack from "Filter" to "Lights" in order to clarify the tar level of the cigarette. There is a thought that changing the wording on the pack to replace the word "Filter" with the word "Lights" would help clarify what the true tar level is for Merit Parent. However, there is some concern that changing the name to "Lights" could possibly detract from the brand's flavor heritage.

2045628330-8330 (US 26955).

2406. In a memorandum dated November 27, 1995, Shari Teitelbaum, a consumer researcher for Philip Morris, summarized the results of the "Merit `Filter' vs `Lights' — Final Report" for Sansone. Teitelbaum noted that the name change affected Merit smokers' perceptions: "Before tasting the cigarette, Merit smokers seemed to think that Merit Lights was lower in tar than Merit Filter." Teitelbaum noted that changing the name to Merit Lights caused one third of current Merit smokers to "alter their perception of Merit in terms of taste and tar level." The study also confirmed Philip Morris's fear that changing the name to Merit Lights would imply a poor-tasting cigarette: for current Merit smokers, "[t]he name change did seem to have a significantly adverse impact on perceptions of the brand's taste." 2045596010-6012 at 6011 (US 26952); 2045596013-6040 at 6032 (US 26953); Bonhomme WD, 14:1-15:4.

2407. Philip Morris did finally change the name of Merit Filters to Merit Lights, even though there was no difference in the cigarette. Brennan-Lund PD, Price v. Philip Morris, Inc., 9/20/02, 157:15-22.

2408. Similarly, Philip Morris marketed a 15 mg. cigarette as both Virginia Slims and Virginia Slims Lights. 525311179-1223 at 1222 (US 52977).

2409. Jeanne Bonhomme verified that Philip Morris has known for years from its consumer research that some smokers "interpret brand descriptors as communicating a less hazardous cigarette than full-flavor brands." Bonhomme WD, 20:3-6.

2410. In an October 21, 1994 memorandum, titled "Marlboro Medium Smoker Image Study," Marian Halpern, an employee in the Philip Morris consumer marketing research department, reported to Tom Keim, a Philip Morris brand manager, that the "Reasons for Smoking Medium" were as follows:

Most smokers said they chose Medium because of its perceived health benefit. Over half of the Medium smokers said they started smoking Medium because they wanted a cigarette with lower tar and nicotine (56%). For many respondents, the name "Medium" communicated information on this product feature, with almost one quarter (24%) of these smokers saying that `Medium' refers to the cigarette's lower tar and nicotine.

2063731671-1688 at 1672 (US 22222); Bonhomme WD, 18:1-19:5.

2411. Philip Morris tries to create marketing pieces that communicate certain brands are low in tar, not just with words like the "lights" brand descriptors, but also with the imagery they present to consumers, such as the color it selects for the cigarette pack and tipping paper. When packaging decisions are made at Philip Morris, it is recognized that the color influences peoples' perception of the strength and tar level of the product. Bonhomme WD, 20:10-17; 22:1-4.

2412. For example, Philip Morris knows that consumers perceive a blue cigarette pack and white tipping paper as an indication that a cigarette is low in tar, and that generally speaking, the lighter the cigarette package color, the lower its tar content is perceived to be by consumers. Philip Morris continues to this day to market and sell Marlboro Lights and Marlboro Ultra Lights with lighter color packaging and tipping paper. Bonhomme WD, 21:13-18; 23:20-22.

2413. Nancy Brennan-Lund, Philip Morris Senior VP of Marketing, confirmed that, in order to communicate low tar in cigarettes, Philip Morris USA has used a "lighter, more white background" and a "white filter as opposed to a cork colored filter." Susan Norris, Marlboro Brand Manager from 1995-1999, also noted that, in her experience, colors such as silver and light blue communicate to consumers that a cigarette is an ultra light brand. Brennan-Lund PD, Price, 9/20/02, 179:6-17; Norris PD,United States v. Philip Morris, 7/31/03, 162:6-165:8, 179:17-184:19.

2414. Over the last five decades, Philip Morris has conducted extensive consumer research to perfect the delivery of its "light" and low tar cigarette brand marketing message to ensure it provided smokers with health reassurance and offered an alternative to quitting.

2415. Marlboro Lights. With respect to Marlboro Lights, Philip Morris designs the packaging to distinguish it from Marlboro Red and communicate to consumers that it provides "the best of both worlds," — low tar and good taste. Bonhomme WD, 22:5-18.

2416. A November 15, 1971 "Philip Morris U.S.A. Inter-Office Correspondence" to James Morgan from the Philip Morris USA Marketing Research Department set forth results of a Philip Morris consumer study on Marlboro Lights. Under the heading "Advertising Awareness," the report stated that "[l]ow tar and nicotine remained the most frequently mentioned comment." 1000292744-2762, 2745 (US 35205).

2417. A December 1971 Marlboro Lights "Product Promotion Plan" distributed to the Philip Morris sales force discussed the introduction of Marlboro Lights and ways to market and maximize sales of the brand. It stated:

The introduction of Marlboro Lights is a very timely move on the part of your company. The consumer is becoming increasingly aware of tar and nicotine contents in cigarettes and many are searching for one with low tar and nicotine content and full flavor. Marlboro Lights fill this need.

2045404133-4163 at 4141 (US 85000).

2418. A retrospective Philip Morris document dated September 1991, titled "Background Information on PM Brands," stated:

To capitalize on the booming low tar market, Marlboro Lights was introduced in 1972. It became the first successful low tar line extension in the industry . . . Marlboro further broadened its appeal to low tar smokers with the addition of Marlboro Lights 100's in 1978, Marlboro Lights King Size Flip-Top Box in 1980 and Marlboro Lights 100's Flip-Top Box in 1984.

2070143190-4433 at 3206 (US 27257).

2419. James Morgan, former President and CEO of Philip Morris USA, confirmed that Marlboro Lights were positioned as "lower in tar and lighter in taste than Marlboro Red" and were marketed to people seeking a low tar and nicotine cigarette, including smokers of both high and low tar cigarettes. A 1974-1975 Philip Morris magazine advertisement for Marlboro Lights stated: "Marlboro Lights. The spirit of a Marlboro in a low tar cigarette." Philip Morris has used the phrases "lowered tar and nicotine" and "Lights" in association with Marlboro Lights for over 30 years. Morgan PD, Price, 6/5/02, 20:13-25, 21:2-6, 32:22-25, 33:2-25, 34:2-11; 2045404133-4163 (US 85000); 03496228-6630 at 6323 (US 20057); Morgan TT, Price v. Philip Morris, Inc., 2/18/03, 64:4-7.

2420. A May 31, 1988 Philip Morris USA Marketing Research Department report from Philip Morris's primary advertising agency, Leo Burnett, and Philip Morris consumer researchers Karen Eisen and Jeanne Bonhomme, recited focus group results and stating that "many felt that Marlboro Lights was gaining in favor because of health concerns." 2044743883-3891 at 3885 (US 85001); Brennan-Lund PD, Price, 9/20/02, 190:1-192:11; Bonhomme WD, 23:5-19.

2421. Benson Hedges. A 1974-1975 advertisement for Philip Morris's Benson Hedges Multifilter brand stated: "Today people not only want a great tasting cigarette, but one that's low in `tar' and nicotine. Nothing's simple anymore . . . [w]e've managed to lower the `tar' and nicotine and still give you a cigarette with full rich flavor for you to enjoy." (US 87184);see also 03496228-6630 at 6326 (US 20057).

2422. A September 1991 Philip Morris document, titled "Background Information on PM Brands," stated:

Benson Hedges 100's Lights and Lights Menthol were introduced in 1977 in response to consumer preference for a milder, lower tar cigarette . . . today Benson Hedges is among the leading low tar cigarettes. In mid-1982, Benson Hedges Deluxe Ultra Lights was launched to take advantage of dynamic growth in both the 100mm and ultra low tar markets. The regular and menthol packings, both at 5mg tar, were instant successes. Fueled by distinctive packaging and taste richer than that of other ultra low (hence the ad slogan "rich enough to be called deluxe"), Deluxe Ultra Lights is a major contributor to the image and sales strength of Benson Hedges.

2070143190-4433, 3211-3214 (US 27257); see also ADV004 1118-1120 (US 745) (1982 advertisement).

2423. Cambridge. Tom Goodale's handwritten notes from an October 15, 1979 meeting, the regular "new products" meeting of Philip Morris scientists, reflect Philip Morris's plan to create an impression in consumers' minds of Cambridge as being extremely low in tar. The plan was to introduce Cambridge with a tar level below the then-lowest FTC tar brand sold — Carlton — and then to raise the tar level over time. The notes reveal, under the heading Project Trinity (Cambridge's project name prior to commercial introduction), "Hit mkt [market] below Carlton tar — afterwards can drift higher." 1001507595-7596 at 7595 (US 85102).

2424. According to Dr. Farone, former Director of Applied Research at Philip Morris USA, based on his participation in numerous monthly meetings in 1979 relating to Cambridge:

The long-range plan [for marketing Cambridge] was to introduce the product as a low tar product and then eventually to increase the tar of the product. . . . [I]t was anticipated that the product would not sell very well at that low tar and eventually they would increase the tar, and having sold it as a low tar product people still would think of it as a low tar product. In my view, and from my experience, the lowest yielding version of many brands, including the original Cambridge, but also B W's Carlton, RJR's NOW, etc., were created to give the brands a lowest tar image, while the sales are in the higher tar and nicotine versions of those brands. Those lowest yield versions of the brand are very hard to find in stores.

Farone WD, 2:2-8; 2:15-19; 128:4-128:22.

2425. In 1979, Philip Morris promoted Cambridge as a low tar brand yielding 0.0 mg tar (less than 0.1 mg tar) on the FTC test. The 0.0 mg tar Cambridge cigarette was removed from the market and replaced by Cambridge light and ultra light brands, all of which had considerably more tar than the original Cambridge cigarette. Dr. Farone made it clear that:

The plan all along was to deceive the public into thinking that the Cambridge Light cigarette was a low tar cigarette, when in fact it was not . . . the trend to increasing tar deliveries in the product is very clear and there is no advertising that says that such increases are being made.

Farone WD, 129:18-132:17; 2024983860-3862 at 3860 (US 20015).

2426. Dr. Farone explained that "Philip Morris never even bothered to consumer test the 0.0 mg [Cambridge] version against the similar variant of Carlton and this is a major piece of evidence that they had no plans to keep it on the market." A September 20, 1979 Philip Morris memorandum, titled "Project Trinity," states that with respect to the 0.0 mg tar version of Cambridge: "Consumer testing is not required for this model." Farone WD, 128:23-129:17; 1000774422-4422 (US 35306).

2427. Nancy Brennan-Lund, Senior Vice President of Marketing at Philip Morris, admitted that Cambridge Lights had more tar and nicotine than the original Cambridge. She further admitted that, as the tar and nicotine numbers were not identified on the packs of Cambridge Lights cigarettes, the only way consumers could possibly know that Cambridge Lights had more tar than Cambridge regular was by a perceived taste difference. Brennan-Lund PD,Price, 9/20/02, 145:5-154:16.

2428. Merit. In 1976, Philip Morris introduced a new brand, Merit, at 9 milligrams tar with "enriched flavor." Merit formed the basis for line extensions to Merit Ultra at 4 milligrams and later Merit Ultima at 1 milligram. The three were jointly advertised in a "low, lower, lowest" presentation of the product line. Dolan WD, 124:1-4; 1002325022-5022 (US 21510).

2429. Philip Morris's marketing for some of its low tar cigarette brands, including Merit, "encouraged consumers [whom Philip Morris referred to as potential "down-switchers"] to switch from regular cigarettes to low tar cigarettes." Historically, "Philip Morris targeted potential down-switchers with its marketing for Merit," and "Merit [consumer] research is used to target potential down-switchers." Bonhomme WD, 13:4-5; 27:16-21; 29:3-30:5.

2430. Philip Morris's marketing for Merit cigarettes targeted "self-conscious" and "uncomfortable" smokers. A Philip Morris memorandum, titled "The Uncomfortable Merit Smoker," dated January 6, 1993, stated: "`Self-conscious' smokers are defined as people who are uneasy with their status as smokers. They see smoking as a sign of personal weakness and are starting to feel ashamed that they smoke." 2044905001-5007 at 5001 (US 20454); Bonhomme WD, 49:1-3:47:8-11; see also, Teitelbaum PD, United States v. Philip Morris, 4/16/02, 132:21-137:21.

2431. According to Suzanne LeVan, Philip Morris Vice-President of Premium Brands from 1991-2001 with responsibility for Merit, "the Merit strategy is to convince smokers who are switching down [in tar levels] and who are looking for a good tasting cigarette that Merit is a brand that they should try." LeVan PD, United States v. Philip Morris, 6/25/02, 178:13-181:2; accord 2063690017-0018 (US 85002).

2432. According to a retrospective Philip Morris document dated September 1991 and titled "Background Information on PM Brands," the "Benefits Statement" of Merit was: "You'll enjoy low tar and good flavor with Merit." "At only 7 mg. of tar, Merit delivers the rich flavor of leading cigarettes with twice the tar." "With Merit Menthol you get rich menthol flavor at only 8 mg tar." The document indicated that Merit Ultra Lights and Merit Ultra Lights 100's were introduced in 1981. 2070143190-4433 at 3211:3214 (US 27257); accord 2063724711-4714 (US 39838) (Confidential).

2433. Philip Morris's targeting strategy was recorded in a retrospective June 13, 1995 document from Leo Burnett — Philip Morris USA's long-time marketing agency — titled "Merit Advertising Overview Historical and Current for Jodi Sansone." Under the heading "Merit — Current `You've Got Merit' Campaign," the document stated: "Strategy: Convince Self-conscious and uncomfortable smokers who want to switch to a low tar alternative but won't sacrifice taste completely," "With Merit, you can switch down to lower tar and still enjoy smoking," "Because: Merit delivers satisfying taste at every level of low tar." The document described the "Merit Brand Essence" as follows: "Since the brand's introduction twenty years ago, the core Merit proposition has been low tar with good taste. Once a smoker has made the decision to switch to a lower tar product, they are faced with the challenge of finding one that delivers on taste. Merit offers a positive solution — they can switch down to lower tar and still get satisfying taste." 2048200699-0727 at 0708 (US 38648) (emphasis in original); Bonhomme WD, 48:12-49:3.

2434. Philip Morris's strategy for Merit was successful. Norma Suter Drew, Philip Morris Vice President for Portfolio Brands and former Brand Manager and Marketing Director for Merit cigarettes from 1992-1994, delivered a July 1993 presentation, titled "Merit Franchise," in which she reported that "Merit is a brand smokers switch to in order to reduce tar/nicotine." Elsewhere in the presentation, Drew wrote that one of the top two "Goals" for Merit advertising was to achieve a "[s]ignificant increase in Merit's highest brand image statement, `Are among the lowest in tar/nicotine', versus Carlton and Now." The presentation also noted that "70% of industry switching is between tar levels." Under the heading "Merit Advertising," the presentation noted that "Merit smokers tell us that they come to the franchise because they desire a lower tar cigarette that still tastes good — switching down makes them feel better about the fact that they smoke." Bonhomme WD, 49:4-14; 2070661683-1727 at 1685, 1687, 1713, 1716 (US 40337) (emphasis added).

2435. The following Merit advertisements, in conformity with the internal marketing documents detailed above, communicated to consumers that, with Merit, they could reduce their tar intake and thus reduce their health risk, without sacrificing taste: 1976: "New Low Tar Entry Packs Taste of Cigarettes Having 60% More Tar." (no bates) (US 5087). 1976: "The greatest challenge to cigarette-makers in the last two decades has been how to make a low tar cigarette that wasn't `low'; in taste. It seemed impossible. Until now. After twelve long, hard, often frustrating years, Philip Morris has developed the way to do it. The cigarette is called MERIT. It delivers only 9 mg. tar. One of the lowest tar levels in smoking today." (no bates) (US 4981); Biglan WD, 203:17-207:3. 1977: "New MERIT 100's. Only 12 mg. of tar. Yet packed with extra flavor. The kind of flavor that makes `low tar, good taste' a reality for 100's smokers." (no bates) (US 5342); Biglan WD, 203:17-207:3. 1978: "Merit Solving Smoker Dilemma." (US 5704); Biglan WD, 203:17-207:3; (no bates) (US 5483). 1978: "`Best Move Yet.' MERIT['s]. . . . ability to satisfy over long periods of time could be the most important evidence to date that MERIT is what it claims to be: The first real alternative for high tar smokers." (no bates) (US 5951); see also (no bates) (US 6112); (no bates) (US 6131); Biglan WD, 203:17-207:3. 1978: "Research concludes MERIT taste makes move from high tar to low tar smoking unexpectedly easy." (no bates) (US 5803); Biglan WD, 203:17-207:3. 1988: "You Won't Miss What You'll Miss." (no bates) (US 8505). 1988: "Our Less Is Your Gain." (no bates) (US 8556). 1989: "Smoke This Page. If That Reminds You of Your Ultra Lights, Read This Ad." (no bates) (US 8711). 1994: "You can do it! You really can switch down to lower tar and enjoy satisfying taste." (no bates) (US 12892); Biglan WD, 203:17-207:3; 970469347-9474 at 9421; (no bates) (US 85104). 1994: "Yes you can! You can switch down to lower tar and still get satisfying taste. You've got MERIT." (no bates) (US 9241) (emphasis in original); Bonhomme WD, 30:6-18. 2436. A September 16, 1987 Leo Burnett U.S.A. research report for Philip Morris, titled "Merit Brand Image Study," noted in the section "Attitudes Toward Smoking" that "[w]hile health concerns are motivating factor, taste/enjoyment are still key." A summary at the end of the report stated: "Merit smokers we sampled are committed smokers . . . However, they have mixed feelings about smoking — health concerns/loss of control . . ." and their switching to Merit "provides health reassurance." 2072735414-5500 at 5431, 5492 (US 41598); Bonhomme WD, 27:22-28:17.

2437. A January 1991 document, titled "Merit Positioning Study," assessed "perceptions of Merit's positioning within the low tar category." Under the heading "What Down Switchers want in a cigarette," the document noted that approximately half of downswitchers found "very low tar" (50%) and "very low nicotine" (48%) to be "absolutely essential." 2048976844-6906 at 6850, 6890, 6892 (US 85004).

2438. Consumer feedback confirmed the successful delivery of Philip Morris's intended message. An August 1991 report prepared for Philip Morris, titled "Merit Positioning Strategy Development," observed that, "[i]n addition to advantages associated with lesser tar and nicotine delivery, low tar users note that such brands allow higher volume, deeper inhalation smoking with few tradeoffs." The report also commented that Ultra Light users "note their further downswitching to ultralights from lights for health benefits primarily." The report noted that Merit users "like perceiving [Merit cigarettes] as rather safe, sensible, middle-of-the-road, non-threatening, and generating the feeling that they aren't doing anything wrong." 2072735123-5247 at 5131, 5132 (US 41596).

2439. An internal Philip Morris memorandum dated May 16, 1995 from Lauren Herman, an employee in the market information and planning group, to Norma Suter Drew, then acting Brand Manager for Merit cigarettes, titled "Merit Alternative Campaign Qualitative Exploratory — Final Report," discussed the results of research conducted to gauge consumer interest and appeal of Merit marketing campaigns. Under the heading "Key Findings," Herman reported that "Competitive smokers appear to be most likely to respond to the concepts that offer the clearest product cues. These smokers require the most rational reason why they should smoke Merit, (e.g. lower tar)." Under the heading "Implications," Herman recommended that "[s]ince low tar is essentially the core of these alternative concepts, the low tar message should be more pronounced." 2063724960-4962 at 4960, 4962 (US 39842).

2440. A September 4, 1996 Leo Burnett document reported on an August 27, 1996 meeting held in New York between Leo Burnett and Philip Morris (Jose de Castro, Suzanne LeVan, and Jodi Sansone) to discuss Merit marketing for 1997. The document acknowledged that past Merit marketing focused more heavily on communicating that it is low in tar, and less on sending a message about the brand's taste. Under the heading "Discussion/Agreements Reached," the document stated: "Client/agency agreed that we need to move the bar forward in terms of taste communication, as currently it is not as recognizable/prominent as low tar in Merit awareness ratings, yet it is a key driver of consumer choice/purchase." 2071522201-2203 at 2201 (US 27299).

2441. A February 9, 1998 draft research report prepared for Philip Morris by the research firm Kane, Bortree Associates, titled "Merit Strategic Revitalization Plan, Stage I Learnings," analyzed ways to "build Merit's share of the low tar segment." 2063687348-7527 at 7350, 7353-7356 (US 39820*); see also 2063686921-6942 at 6934 (US 88629) ("Kane Bortree makes use of a variety of innovative, psychologically derived techniques. These techniques allow us to get inside the consumers' heads"). The 1998 report discussed two types of low tar smokers who find the taste of light cigarettes unsatisfying and do not feel comfortable smoking: "Quitters" and "Validation Seekers." The report cited Merit Ultima, Merit Ultra Lights, Camel Lights, and Marlboro Ultra Lights as brands for those who do not feel comfortable smoking. 2063687348-7527 at 7356, 7357, 7359 (US 39820*).

2442. The February 1998 draft research report was followed by a March 31, 1998 draft report by Kane, Bortree Associates, titled "Merit Strategic Revitalization Plan, Stage II Learnings/Stage III Recommendations." Under the heading "Positioning Learnings to Date," the March report noted that "`Light' is a bigger promise than low-tar with opportunity for broad appeal" because it conveys "Tastes light," "Feels light," "Low tar," and "Better for you." The report recommended that Merit's "positioning should convey acceptability of smoking." The report further discussed a contemplated "Additive Free" Merit line extension, and noted that: "Additive-free is an excellent fit with `light'" because it "[r]einforces `better for you.'" 2080486996-7108 at 7010-12 (US 45330); Bonhomme WD, 17:2-16.

2443. A May 14, 1998 internal Philip Morris document, titled "Merit Brand Initiatives," incorporated the findings of the March 31, 1998 Kane, Bortree Associates study, recreating that study's representation of the four segments of the lights market and stated, under the heading "Merit Strategic Positioning Copy Strategy": "What we would like smokers to believe — Merit offers a viable alternative to Light brands with full flavor heritage." 2070657640-7650 at 7644, 7646 (US 22015).

2444. Marlboro Ultra Lights. A June 1979 draft report prepared for Philip Morris by Goldstein/Krall Marketing Resources, Inc., titled "Smokers' Reactions to an Ultra Light Brand Extension for Marlboro," discloses that Philip Morris began conducting consumer marketing research on a new cigarette line extension of the Marlboro brand, Marlboro Ultra Lights, as early as 1979. Discussing the reactions of Marlboro Red smokers to the concept of Marlboro Ultra Lights, the report stated:

The introduction of a Marlboro Ultra Light brand appeared to be viewed in the following manner: . . . An attempt to produce a safer cigarette for those interested in cutting down their smoking and in a lighter cigarette. . . . A "smart" way to prevent the loss of or switching of Marlboro smokers to other brands if they are currently unsatisfied in their quest for a lighter/safer cigarette.

2041097977-7999 at 7984 (US 85006); Bonhomme WD, 31:10-34:17.

2445. Under the heading "How Marlboro Ultra Lights Were Positioned," the report stated:

The following is a description of a brand image developed from the discussions [with consumers] in all three groups: . . . Safer cigarette — less tar and nicotine. . . . Probably a better/innovative filter." The report further stated: "With regard to smoker image, respondents suggested: . . . People cutting down for health reasons/people trying to quit. More concerned people (about health). More aware people (those reading the numbers in the ads)." 2041097977-7999 at 7987 (US 85006).

2446. On May 1, 1989, Philip Morris began test marketing Marlboro Ultra Lights, which it positioned as delivering 6 mg. of tar (per the FTC Method). In a February 8, 1989 internal Philip Morris memorandum, Richard Camisa delivered to colleagues at Philip Morris the "Marlboro Ultra Lights Marketing Plan Overview." The overview set forth the target audience for Marlboro Ultra Lights, noting that

[c]onsumer research suggests that there are vast numbers of smokers, including Marlboro smokers, who are seeking lower tar but who are also unwilling to sacrifice flavor and/or smoking satisfaction in return. The opportunity for Marlboro lies in its ability to offer smokers the lower tar they seek with less trade off in taste.

2070624747-4763 at 4748 (US 22014).

2447. The document further stated: "A blue/gray pack with white tipping . . . provides traditional ultra low tar reassurance." Jeanne Bonhomme, Director of Consumer Insights for Philip Morris, confirmed that "low tar reassurance," as used in the document, referred to the fact that:

Within the context of selecting a pack color for Marlboro Ultra Lights there was discussion about what pack color would make it readily apparent that the brand was an ultra low tar. Many of the lights and low tar products used blue packaging as a signal of being lower tar, so there were discussions about making sure that advertising and packaging easily communicated that Marlboro Ultra Lights was an ultra low tar.

2070624747-4763 at 4748 (US 22014); Bonhomme WD, 64:1-6.

2448. Philip Morris conducted research to determine how cigarette pack and tipping color influenced consumer perceptions of Marlboro Ultra Lights' strength and tar level. In a June 25, 1990 memorandum from Jeanne Bonhomme, then a contract consumer marketing researcher for Philip Morris, to Richard Camisa, titled "Marlboro Ultra Lights Portfolio Test," Bonhomme reported the results of a cigarette ad pack test conducted on consumers for Marlboro Ultra Lights. Bonhomme reported that for consumers tested, "[p]redictably, expectations about [Marlboro Ultra Lights'] strength and tar level were influenced by the pack and tipping color. Red/Cork was viewed as being strongest tasting and higher in tar than the two white tipped options, particularly Blue/White." 2070197338-7340 at 7338 (US 40255); Bonhomme WD, 21:4-22:4; see also 2071535027-5090 at 5033, 5043 (US 22020).

2449. Marlboro Ultra Lights was launched nationally on January 28, 1998, and Philip Morris continues to market and sell Marlboro Ultra Lights to this day. Philip Morris targeted all Marlboro smokers with Marlboro Ultra Lights, not just current low tar smokers. Norris PD, United States v. Philip Morris, 7/31/03, 132:17-23, 162:6-165:8, 121:13-125:11; Bonhomme WD, 34:15-17.

2450. Marlboro Medium. In June 1991, Philip Morris launched Marlboro Medium, a lower tar line extension of the Marlboro brand. A September 1991 Philip Morris document, titled "Background Information on PM Brands," stated that Marlboro Medium was aimed at "consumers still looking for a satisfying low tar cigarette with flavor." 2070143190-4433 at 3206 (US 27257).

2451. Philip Morris's November 1994 continuous smoker tracking survey (a random smoker phone survey Philip Morris has conducted continuously since the 1980s) discusses Philip Morris's targeting of health-conscious smokers. The document stated that male smokers of Marlboro Medium age 18-24 "need affirmation as smokers" and may be candidates for ultra lights. In this survey, Philip Morris created a profile of 18-24 year old male Marlboro Flavor Low (Marlboro Medium) smokers as individuals who are less comfortable with smoking, feel pressure to quit, and do not enjoy some of the "image benefits" to the same degree as other smokers. The Marlboro Flavor Low (Marlboro Medium) male smokers age 18-24 are more likely to cite the low tar level as influential in determining their regular brand. 2048735500-5604 at 5562, 5543, 5548-5549 (US 21971).

2452. An internal February 10, 1995 Philip Morris memorandum from Marian Wood to Tom Keim, titled "Marlboro Medium Brand Imagery," revealed that in 1991, Philip Morris spent $50 million on advertising for Marlboro Medium, 36% of Marlboro's total advertising budget for that year. 2063731689-1710 at 1695 (US 79820).

2453. Philip Morris continues to sell Marlboro Medium. Bonhomme WD, 20:1-2.

2454. Parliament. Philip Morris marketed the Parliament brand as a low tar brand featuring a "recessed" filter. A Philip Morris document, titled "Background Information on PM Brands," dated September 1991, stated:

It was during the proliferation of filtered cigarettes in the 1950's that Philip Morris gave Parliament its hallmark of today — the recessed filter. Unlike ordinary filter tip cigarettes, Parliament's famous recessed filter kept tar from touching the smoker's lips. Since the addition of this unique filter, Parliament smokers have enjoyed their brand's approach to smoking: clean, sophisticated, and distinctive. In 1979, Parliament's name was changed to Parliament Lights. This change reflected the brand's low tar status and helped capitalize on a growing low tar trend.

A "Benefit Statement" in the document was: "Parliament Lights — since tar on the filter tip never touches your lips, the taste is refreshingly light." 2070143190-4433 at 3217-3218, 3222 (US 27257).

2455. A 1975 Parliament advertisement in Sports Illustrated magazine stated that, although cigarette holders gave "cleaner taste," there was "[n]o need for a cigarette holder today. Parliament's filter is recessed, so you taste only rich, clean tobacco flavor. It's the neatest trick in smoking." (US 4709);see also (no bates) (US 4885).

2456. A 1977 Parliament advertisement in Cosmopolitan magazine stated:

As you smoke, tar builds up on the tip of your cigarette filter. That's "filter feedback." Ordinary flush-tipped cigarettes put that tar build-up against your lips. And that's where Parliament has the advantage. Parliament's filter is recessed to keep tar buildup from touching your lips.

ADV029 0247-0249 (US 10614).

2457. As noted in the 1981 FTC Report on cigarette advertising, Philip Morris's Parliament advertisements from the time period preceding the Report (i.e., late 1970s-1981) implied that its "special filters minimize the risks of smoking." FTC, 1981 Report at 2-12 (JD 004744).

2458. Jeanne Bonhomme observed that although the recessed nature of the filter did not further reduce the tar delivery or make the cigarette any less harmful, she could "recall learning that some consumers believed that a recessed filter produced a cigarette that was better for you because it reduced tar and less tar was perceived to be less of a health risk." A November 23, 1988 Philip Morris USA memorandum co-written by Bonhomme and Karen Eisen, with the subject heading "Parliament Super Lights In-Depths," confirmed that "[f]or many, the recessed filter implied a health benefit — `keeps tar away.'" Bonhomme WD, 34:18-35:1; 35:20-36:15; 2071388176-8178 at 8178 (US 40452).

(2) Philip Morris's Research on the Low Tar Cigarette Category

2459. Internal Philip Morris documents show that Philip Morris conducted consumer marketing research not just on individual low tar cigarette brands, but on low tar cigarettes as a category. These documents establish that Philip Morris has long known and intended that its advertisements and marketing for low tar cigarettes, featuring claims of lowered tar and nicotine and "light" and "ultra light" brand descriptors, contributed to and reinforced consumers' mistaken belief that low tar cigarettes are better for their health, and encouraged consumers to smoke them for this reason.

2460. According to Nancy Lund, Senior Vice President of Marketing at Philip Morris, Philip Morris was aware in the 1970s and 1980s that some consumers believed that light/low tar cigarettes were safer than full-flavored cigarettes. She also noted that, during this time period, Philip Morris marketed such cigarettes to these consumers and profited from those sales. Brennan-Lund PD, Price, 9/20/02, 158:6-161:15.

2461. James Morgan, the former CEO of Philip Morris, acknowledged that the trend in the 1970s toward low tar cigarettes was due in large part to consumer perception that they were less hazardous to health than higher tar cigarettes, and specifically admitted that "the consumer was perceiving in the 1970s lower tar as tied to less hazardous." Although Morgan conceded that "we were aware of that," he admitted that, despite being armed with this knowledge, Philip Morris took no additional steps to counter that mistaken perception. Morgan PD, Price, 6/5/02, 42:16-42:25; 43:2-43:25; 44:2-44:25; 45:2 — 45:25; 63:10-63:25; 64:2-64:25; 65:2-65:21; 1004888470-8484 (US 85009); 502641641-1646 (US 85008).

2462. A May 1976 study prepared for Philip Morris by The Roper Organization, titled "A Study of Smokers' Habits and Attitudes With Special Emphasis on Low Tar Cigarettes," stated:

[T]his study shows that the smoking public is convinced that to the extent any brands are better for health, it is the low tar brands that are. . . . Low tar brand smokers cite as the most liked characteristic of their brand . . . as compared with smokers of flavor filters, they say it is "better for your health" and cite its "more effective filter. . . ." Brands Thought Better For Health — The low tar brands have cornered opinion that to the extent any brands are better for your health, they are. . . . Three in ten of all smokers said some brands were better for health than others, and almost half of the low tar brand smokers said this. . . . Furthermore, it is the lower tar content of these brands that make people say they are better for your health.

2024921314-1612 at 1333, 1348, 1352-1353 (US 20403).

2463. A January 1979 study prepared for Philip Morris stated:

These ultra low tar smokers indicated that they are aware of the low tar levels in their brands and that they switched to them specifically because of advertising calling this fact to their attention. . . . As lower and lower tar brands become available, it would appear smokers are subject to advertising pressure and brand availability, and the opportunity for switching obviously occurs. . . . Characteristics of ultra low tar smokers were: people who want to quit . . . more interested in health. . . . When asked how they happened to switch to the brand they are now smoking many of the Carlton smokers cited advertising and tar and nicotine ratings. . . . When Carlton ads were shown in the groups, it was obvious that most respondents had seen them and were aware of the copy claims. It was these claims and other Carlton ads to which smokers referred prior to exposure and when discussing the fact that advertising had been one of the factors causing them to try the brand. This would seem to indicate that ultra low tar smokers are paying attention to and being attracted by the advertising. Respondents . . . appeared to react favorably to the Triumph ads. They said that 3 mg. tar was within the ultra low tar range implying that it represented a safer cigarette.

2040066740-6766 at 6747, 6748, 6751-52, 6754, 6756, 6757 (US 20435).

2464. A March 1979 report prepared for Philip Morris, titled "A Study of Smokers' Habits and Attitudes With Special Emphasis on Low Tar and Menthol Cigarettes," stated:

The appeal of low tars is simple and single — better for you, less harmful, easier on the lungs, throat, etc. The weakness or objection to low tars is also simple — tasteless, lacking in satisfaction, and the related factor of hard to draw on. At the same time there is clear evidence that if the appeal — safety — is strong enough, people can over time grow used to, and in some cases come to actually like, the main objection to low tars — low taste.

2049455309-5318 at 5315 (US 22218).

2465. A June 1979 draft report prepared for Philip Morris by Goldstein/Krall Marketing Resources, Inc., titled "Smokers' Reactions to an Ultra Light Brand Extension for Marlboro," stated, under the heading "Awareness of Tar and Nicotine Levels":

One of the points on which respondents were probed when first shown the array of packs used as stimuli was their awareness of tar and nicotine levels for the brands. While most smokers in the groups could not give correct tar figures for each brand, they seemed to know a general range in which brands fell. . . . Respondents attributed their knowledge . . . to advertising. Evidently, the heavy weight of advertising concentrated against tar claims has penetrated these various groups of smokers to some extent.

2041097977-7999 at 7990 (US 85006).

2466. A July 27, 1987 Philip Morris Asia letter from Joe Tcheng to Cecil Yow stated:

The mild/lights segment is the fastest growing segment in the Hong Kong market. . . . There is definitely a growing health consciousness in the market due to regular Government anti-smoking campaign. . . . Research shows that Lights = Mild = Less Harmful. Government's anti-smoking measures will intensify and . . . [t]his may further increase health concern and it is very likely that the mild/lights segment will continue its rapid growth.

2504046594-6601 at 6594 (US 85012).

2467. A 1990 Philip Morris transcript of a conversation between Richard Carchman, then Principal Scientist, and John Tindall acknowledged that Philip Morris had used filters and claims of low tar as health reassurance mechanisms and that cigarette sales were tied to health concerns. Tindall stated:

[T]he things that happened in the market in the past I put under basically three groups. One has to do with people's health concerns which we addressed first through filters and then through low tar and ultra low tar. . . . The main thing that has happened in the market over which we have some control is that we have addressed peoples' health concerns through the number of steps I have mentioned. . . . the[re] are opportunities in the market now in the area of smoking and health. People's perceptions of cigarettes with regard to their effects on them. . . . [I]f we are going to do something significant enough to possibly even reverse the declining sales in the market, we're going to have to make advances in the area of people's health.

2023148544-8550 at 8545 (US 85098).

2468. A 1990 Philip Morris document relating to "New Brand Development" in Pakistan revealed Philip Morris's knowledge that cigarette packaging can communicate "mildness" to consumers anxious about the "health/safety issue":

There was little doubt that the pack design with its reliance upon the central gold panel against a white background effectively projected the impression of a very mild cigarette. . . . The evidence as a whole seemed to indicate, in fact, that anxiety about the health safety issue had not yet reached the level where avowedly very mild cigarettes . . . could expect an extensive franchise. . . . Over time, anxiety levels would rise, as they have done in other markets and when this happened mild/light brands . . . would begin to achieve respectable sales.

2504008471-8519 at 8478, 8518 (US 85013).

2469. Philip Morris USA's 1992-1996 Strategic Plan for Research and Development stated, under the heading "Perceived Health Concerns," that: "An analysis of the cigarette market over the last 50 years suggests that there have been only two major influences on smokers buying patterns; namely smokers seeking to address their perceived health concerns and smokers seeking price relief." The document further stated:

The development of products which address perceived health concerns . . . is very much an R D issue. Previous product changes driven by "perceived health concerns" were the growth of filtered products from 3 to 70% of the market between 1945 and 1953, and the growth of the low tar segment to nearly 50% of the market by 1985. . . . Filtered cigarettes now make up over 96% of the market.

2021529528-9638 at 9608 (US 85084).

(3) Philip Morris's Public Statements About Low Tar Cigarettes

2470. Jeanne Bonhomme, Director of Consumer Insights for Philip Morris, stated that to her knowledge:

• "Philip Morris has always denied publicly that it markets low tar cigarettes as safe or safer than full-flavor brands;" and

• "Philip Morris has always denied publicly that it uses brand descriptors such as `light' and `ultra light' to communicate they are safe or safer than full-flavor brands."

Bonhomme WD, 11:18-20; 12:12-15.

2471. A November 14, 1994 fax from Censydiam USA to Philip Morris advised that with respect to the "Health Fitness" trend: "Outside pressures have made consumers more concerned about health and fitness. They are interested in finding `user friendly' ways of making their lives healthier without making dramatic changes in their current lifestyles." As examples of the consumer health trend, the document noted increased consumer interest in package labeling that included references to "low/no fat/salt" and "all natural," as well as an increase in the sale of products considered "good for you" such as fruits and vegetables. A 1994 Strategic Trend Analysis prepared for Philip Morris by Censydiam USA illustrating the "Health Fitness" trend recognized how Defendants had capitalized on this trend, noting that: "Implications for Tobacco Companies: While the trend toward health and fitness is still alive, it has tapered off from its rage in the 1980's. The 1990's focus on moderation. The importance of low/ultra low products should continue in the near future." 2063704131-4132 (US 39829); 2063704088-4091 at 4090-4091 (US 39827); 2063704135-4136 (US 27135).

2472. Faxes dated November 17, 1994 and December 7, 1994 from Thomas R. Keen of the consumer research company Censydiam USA to Marian Halpern, an employee in the Philip Morris consumer marketing research department, described an agreement with Philip Morris whereby Censydiam would produce "write-ups" to Philip Morris on consumer "trends," including, among others, "Health Fitness," "Delusions of Youth Beauty," "Dieting Dilemma," and "Quality of Life."

2473. In May 1996, representatives from Philip Morris, including Philip Morris General Counsel, Denise Keane, RJR, B W, and Lorillard met with the FTC to discuss in part "how Philip Morris and other tobacco companies use FTC test results in their advertising," and "whether the FTC test method could be modified to more accurately reflect actual smoker intake." At that meeting, "the FTC referred to published research showing that smokers believe brand descriptors like `low tar' and `light' convey relative safety messages." The FTC requested that the industry representatives provide the FTC with "any information the companies had concerning the issue of consumer perception of low tar, so-called "light" cigarettes." Despite the decades of consumer and marketing research conducted or commissioned by Philip Morris concerning consumers' interpretation of these terms (see Section V(E)(3)(a), supra), Keane testified that "Philip Morris did not provide any such information" to the FTC. Keane WD, 46:18-48:23; Keane TT, 1/18/05, 10369:20-10370:25; 2048216131-6135 at 6134 (US 38655).

2474. A September 10, 1999 Davis Polk Wardwell memorandum to Mark Berlind of Philip Morris includes "a series of questions that might arise, as well as possible answers, relating to low delivery cigarettes and brand descriptors." In answer to the question "If the brand descriptors do not indicate what smokers actually inhale or serve as a point of comparison among competing brands, what purpose do they serve?," the memorandum proposed responding that Philip Morris's brand descriptors do communicate that Philip Morris's lower tar brands deliver less tar and nicotine than full-flavor brands: "For example, the `Lights' in Marlboro Lights indicates that the smoke yields for Marlboro Lights is lower than that for Marlboro, and Marlboro Ultra Lights delivers less smoke `tar' and nicotine than Marlboro Lights." 2072675414-5417 at 5415 (US 27347).

2475. This document's proposed response to the question whether "Philip Morris ever intend[ed] to or propose[d] to take advantage of" the "perception" of consumers that "lower-yielding brands [are] `safe' or `safer' than full-flavor brands" was that "Philip Morris has never intended [to] or proposed to take advantage of this perception. (although over time various individuals in the Company may have suggested that the Company do so)[.]" 2072675414-5417 at 5415-5416 (US 27347) (bracketed material in original).

2476. Following publication of the NCI's Monograph 13 in November 2001, ABC News.com requested information from Philip Morris regarding low tar cigarettes and, as stated in a November 26, 2001 email from Philip Morris employee Christina Malito, "whether or not there are real health benefits to them." In an internal e-mail reply sent that same day, Ellen Merlo, then Senior Vice President of Corporate Affairs at Philip Morris and a decades-long Philip Morris employee, wrote that Philip Morris's response to the inquiry should be: "[W]e make no claims. Started producing them in response to consumer demand for lighter tasting cigarettes." 2085802175-2176A at 2175B (US 85123*).

2477. Merlo later stated:

[A]s far as Philip Morris's position publicly, we would advise people not to in any way infer that light or lighter cigarettes are any safer than full flavor cigarettes . . . my communication, both through our website and in any public statements that I make, would be that the general public should not in any way infer that light or lighter means that that cigarette is safer than a full-flavor cigarette.

Merlo PD, Price, 10/2/02, 96:24-101:24.

2478. According to Nancy Brennan-Lund, then Senior Vice President of Marketing at Philip Morris USA, Philip Morris's use of the word "lights" in its marketing of low tar cigarettes is intended to mean a lighter tasting cigarette. Brennan-Lund PD,Price, 9/20/02, 19:21-24.

2479. As recently as 2003 and 2004, the Board of Directors of Altria (formerly known as Philip Morris Companies), publicly made misleading statements to its shareholders and to the U.S. Securities and Exchange Commission ("SEC") in documents filed with the SEC. In a March 17, 2003 Proxy Statement, a group of Altria shareholders proposed to the Altria Board of Directors that "the Board find appropriate ways of informing our customers about the actual health risks of smoking `light and ultra light' cigarettes to disassociate them from any belief that such products are safer and deliver less tar and nicotine." The shareholder proposal cited Monograph 13 which found that "most smokers believe `Lights' and `Ultra Lights' are less harsh and deliver less tar and nicotine," and that, "on average, smokers believe that Lights afford a 25% reduction in risk, and Ultra Lights a 33% reduction in risk;" the Canadian Government's conclusion that the terms low tar, light and ultra light are deceptive to the consumer; and the World Health Organization's recommendation that the terms light and ultra light be banned as misleading. The Board of Directors of Altria recommended that shareholders vote against this proposal, stating: "for those adults who choose to smoke, PM USA and PMI believe descriptors such as `low-tar,' `mild,' and `light' serve as useful points of comparison for cigarette brands regarding characteristics such as strength of taste and reported tar yield." (no bates) (US 87741).

2480. In May 2004, Philip Morris placed the following statement on its website: "Philip Morris USA does not imply in its marketing, and smokers should not assume, that lower-yielding brands are safe or safer than full-flavor brands. There is no safe cigarette." TLT0770066-0088 at 0077 (US 72408); accord TT, 2/24/05, 14340:19-20 (counsel for Defendants referring to Philip Morris website and stating "we don't tell people that these cigarettes are safer"); see also PM3000185282-5319 at 5289, 5291-92 (US 88095).

2481. Philip Morris further states on its website:

Because smokers have varying preferences, Philip Morris USA offers products with differing yields of tar and nicotine, as measured by machine methods. We believe that it is appropriate to continue to differentiate our brands on this basis and that descriptors such as "lights," "ultra-lights," "medium" and "mild" help communicate these differences to adult smokers.

TLT0770066-0088 at 0077 (US 72408); see also PM3000185282-5319 at 5289 (June 2003 Philip Morris website stating same and further stating "we believe that [low tar brand] descriptors serve as useful points of comparison for cigarette brands regarding characteristics such as strength of taste and reported tar yields . . .") (US 88095).

2482. Similarly, on August 22, 2002, although Geoffrey Bible, former CEO of Philip Morris Companies, claimed he had never been presented with any data as to how consumers actually perceive brand descriptors, he testified that he believes that they "simply convey taste preferences." Bible PD, United States v. Philip Morris, 8/22/02, 165:3-166:7.

b. R.J. Reynolds

(1) R.J. Reynolds's Low Tar Marketing Techniques

2483. Camel Lights advertisements in the 1980s offered the "solution" of low tar cigarettes that offered "[s]atisfaction" by providing acceptable "taste," which was lacking in low tar cigarettes: 1980: "Discover Camel Lights. Satisfaction. Low tar." 1980: "Discover satisfaction. Camel Lights. The Camel World of satisfaction comes to low tar smoking. . . . Camel Lights brings the solution to taste in low tar." 1981: "Camel Lights. Low tar. Camel taste." 1981: "Camel Lights. . . . Same low tar, same Camel taste." 519315781-5797 at 5788-5789, 5792-5793, 5795, 5796 (US 79583).

2484. RJR's 1994 marketing research on Camel Special Lights advertising ("Concept #17: The Special Lights Filter. Takes out impurities other filters can't touch") included the following statements from smokers that the advertisement conveyed to them:

"It sounds like it's taking the poison out of the cigarette."

"Takes out the impurities — makes it sound like a healthier cigarette."

"The special filter would clean the cigarette and make it a healthier cigarette to smoke."

"It makes me feel I can enjoy smoking without harming myself because the filter takes out impurities. It sounds safer to smoke." "[I]t's safer for you."

"Sounds like it would save your lungs."

509619620-9625 at 9620, 9622, 9624, 9625 (US 85015).

2485. RJR marketed Doral as a low tar cigarette brand in the 1970s. A January 1972 Doral advertisement in Newsweek magazine stated: "Doral, the low `tar' and nicotine cigarette . . . [t]he filter system you'd need a scientist to explain. . . . But Doral says it in two words: `taste me.'" (US 87452); Schindler WD, 68:12-13.

2486. A June 1975 RJR Doral advertisement in Sports Illustrated magazine analogized smoking low tar cigarettes to a "Doral Diet." The advertisement, depicting a man lighting a cigarette, stated:

How I lost 700 mg. of "tar" the first week . . . without losing out on taste. I'm not too big in the willpower department. But I lost 700 milligrams of "tar" the first week on what I call "The Doral Diet." Now I can still enjoy smoking, and cut down on `tar' and nicotine, too. . . . For a pack a day smoker like me, my Doral Diet really ads up.

(US 4746); Schindler WD, 68:14-69:9; 03496228-6630 at 6329 (US 20057).

2487. A June 24, 1975 advertising research report for the Doral "Diet Filter" advertising campaign prepared by Reynolds's Marketing Research Department and "conducted to aid in evaluating six `Doral Filter' executions in recall impact and communication," recorded smokers' impressions and perceptions of Doral advertisements. 501457575-7706 at 7576 (US 22150). Consumers had the following perceptions of the campaign:

The ad said something about a diet of tar and nicotine. My impression was that they had less tar and nicotine than other brands. The main idea was that they're better for you because of the cut-down in tar and nicotine. ( Id. at 7581).

My impression was that they claim it's safer to smoke Doral than other cigarettes. ( Id. at 7585).

The main idea was that it's safer to smoke. ( Id. at 7586).

I got the impression that they want you to switch to Dorals and save your health. ( Id. at 7587).

They brought out the idea that it might be a good cigarette to try if you're worried about the amount of "tar" and nicotine your lungs are absorbing. The main idea was to save your health, but if you still want to smoke, smoke Doral. ( Id. at 7588).

It showed a man sitting in a chair and lighting up a Doral. It said that it had less "tar," but the taste didn't change. The impression it brought out was just the fact that it's a safer cigarette for your health, if you have to smoke. They were trying to get across that it has less "tar," and is still as good in taste as the other cigarettes. ( Id. at 7591).

The main idea was that it's less dangerous to your health than any other cigarette. ( Id. at 7593).

A man was smoking a cigarette. The ad said that Doral is lower in tar and nicotine than any other cigarette. The impression that came across was that they would be less harmful if you smoked them. There's a lower tar and nicotine count. The main idea of the ad was that smoking Doral is better for your health. ( Id. at 7608).

Their main idea was that they would still taste good, but they're low in tar and nicotine and would consequently be better for you. ( Id. at 7611).

The main idea was you have less chance of danger to your health with Doral than another brand. ( Id. at 7613).

My impression was it's much less of a health risk. ( Id. at 7613).

Schindler WD, 69:14-71:21.

2488. Two months after this Doral Diet research report, RJR placed another Doral Diet advertisement in the August 4, 1975 edition of Sports Illustrated magazine that doubled the claimed loss of tar — to 1400 mg. — compared to the June 1975 advertisement, (US 4746). The August 1975 advertisement featured the headline: "How I lost 1400 mg. of `tar' the first week . . . without losing out on taste." (no bates) (US 4789); Schindler WD, 72:5-17.

2489. A 1975 study regarding the effectiveness of another Doral advertising campaign found that: "Attitude diagnostics indicated that smokers had no problem understanding the `Wise Up' campaign. Respondents felt that `Wise Up's' main point was a low tar and nicotine claim (84%) with some taste mentions (24%)." By way of example, some of the respondents noted:

The main idea they were trying to get across was it's less dangerous to the health and better tasting.

I guess the idea is that Doral is safer to smoke, as it has less tar and nicotine than others.

My impression was that Doral is less harmful.

The main idea they were trying to get across was to smarten up because the cigarettes have less tar.

The main point of the ad was you can have good taste and be a little less harmful, too.

501719738-9761 at 9738, 9748-49, 9752, 9755 (US 22075); Schindler WD, 72:18-73:19.

2490. A July 27, 1976 letter to RJR employee Ed Blackmer discussed Doral's market positioning. The letter noted that the

smoker we are going after must be concerned about the health controversy. It is understood that we cannot necessarily target our media against "concerned" smokers, but that this must be accomplished via creative. Nevertheless, we believe it is an important factor in further "segmenting" our target audience.

50224143-4151 at 4147-4148 (US 22103).

2491. In discussing a Doral 4 advertising research proposal in June 1977, the copy strategy was described as: "Convince the Prime Prospect that new Doral 4 is the solution to his concern about the smoking controversy because it offers the optimum combination of ultra-low tar and taste satisfaction." As a result, the advertising was to be addressed to smokers "seriously concerned about the alleged hazards of smoking," and who, "because of [their] concern, seek one of the lowest tar levels available (or an ultra-low level)." 501533008-3011 (US 22107); Orlowsky WD, 69:1-23.

2492. Martin Orlowsky, former Executive Vice President of Marketing and Sales for RJR, admitted that RJR's advertisements for Vantage were targeted toward smokers who, due to their concerns about health risks, were seeking a low-tar cigarette. Orlowsky TT, 10/13/04, 2288:24-2289:19.

2493. Vantage advertisements from the 1970s used purported testimonials characterizing Vantage as delivering low tar to smokers and thereby reducing the health risk from smoking: 1972: "Why I smoke Vantage. I read the papers. I watch TV. I hear the things some of them are saying about smoking. . . . And then, frankly, all that the critics say about `tar' and nicotine has to make an impression. Fact is, they don't make me feel guilty about smoking Vantage." (no bates) (US 3683); Biglan WD, 377:12-379:22. 1977: "Smoking. Here's what I'm doing about it . . . like a lot of people I'm . . . aware of what's being said [about the harm of cigarette smoking]. And like a lot of people I began searching for a cigarette that could give me the taste I like with less tar. . . . Vantage. It's everything the ads say it is. . . . What am I doing about smoking? I'm smoking Vantage." (no bates) (US 5578); see also (no bates) (US 324) (1978 Vantage advertisement in Rolling Stone magazine noting same). 1977: "Vantage is solving a lot of my problems about smoking. (no bates) (US 239). 1977: "Vantage is changing a lot of my feelings about smoking. . . . I'm not living in some ivory tower. I hear the things being said against high-tar smoking as well as the next guy. And so I started looking for a low-tar smoke that had some honest-to-goodness cigarette taste. . . . As far as I'm concerned, when I switched to Vantage, I changed to a cigarette I could enjoy." (no bates) (US 87456). 1977: "My wife got me to switch to Vantage. . . . My wife . . . would remind me of the stories being told about high-tar cigarettes. Well, I began looking into those new low-tar cigarettes. . . . [Vantage] tasted really good and they actually had less than half the tar of my old brand. . . . So now, I smoke Vantage. I get the taste I want and the low tar. . . ." (no bates) (US 87457). 1978: "`Why I choose to smoke. . . . I'm not deaf to what's being said about tar. So I searched out a cigarette that would give me taste with low tar. . . . Vantage has all the taste I enjoy yet, surprisingly, much less tar than my old brand." ADV017 1589-1591 (US 5756). 1978: "`Vantage gives us more taste and less to argue about. My husband and I . . . [are] both aware of the things being said against high tar. So there we were facing each other every day, smoking our high-tar cigarettes and daring each other to switch to something lower. . . . Today, we both smoke Vantage. You could say we're getting less tar and we're getting along — with Vantage." ADV108 0001-0003 (US 87504). 1978: "These days, why do I smoke?. . . . With all the talk about smoking and high tar, it didn't take much imagination for me to conclude that the cigarette of the future would taste good and probably be low in tar as well. . . . Then I discovered Vantage. It was my kind of cigarette. It gave me taste. Pleasure. And the low tar I was looking for." (no bates) (US 295). 1979: "New Vantage Ultra Lights. Ultra taste. Never-before, silky smooth, truly satisfying taste — in an ultra low tar cigarette! (And we do mean ultra low. At only 6 mg of tar, it's lower than 90% of all the cigarettes that people buy.) How is it possible? Through a unique blend of very select, very flavorful tobaccos. That's the Ultra Cigarette — new Vantage Ultra Lights from Vantage." (no bates) (US 6255); (no bates) (US 6286); Biglan WD, 377:12-379:22. 1988: "Vantage Ultra Lights. How can anything so ultra light taste so ultra good? Find out for yourself. Try a pack today." (no bates) (US 1613); Biglan WD, 377:12-379:22. See also Orlowsky WD, 73:1-76:22 (discussing US 5578; 324; 239; 87456; 87457; and 295); 76:23-77:11 (discussing US 6255); 77:12-78:21 (discussing US 5756 and 87504); Orlowsky TT, 10/13/04 2284:14-2285:20 (discussing US 87504).

2494. The following advertisements for Vantage from the 1970s are clearly encouraging health conscious smokers to switch to Vantage: 1974: "Maybe the people who criticize smoking should stare the facts in the face. Then they might recommend that if you've decided to smoke, but are concerned about `tar' and nicotine, you might smoke Vantage. Vantage offers smokers the rich, tobacco flavor they've come to appreciate. With a substantial cut in `tar' and nicotine. So if you're one of those smokers who is now deciding between high `tar' and nicotine cigarettes that taste good, and low `tar' and nicotine cigarettes that taste like nothing, you might appreciate Vantage. . . . Vantage is both high in flavor and low in `tar' and nicotine." 03496228-6630 at 6313 (US 20057). 1976: "Are you still smoking? In the years since the criticism against smoking first appeared, many people have given up cigarettes. But many more people haven't. . . . [W]e'd like to talk to. . . . [t]hat even larger group of people who are still smoking today. If you're a smoker, you've probably heard the charges leveled against `tar' and nicotine. You may have become concerned. And chances are you even tried to do something about it. Like trying . . . low `tar' and nicotine cigarettes. . . . Vantage cuts down substantially on the `tar' and nicotine you may have become concerned about. . . . So, if you still smoke, but would like to cut down on `tar' and nicotine, Vantage is one cigarette you should seriously consider." 500713420-3420 (US 48350).

2495. An internal February 11, 1975 B W memorandum by "J.V.B." commenting on RJR's Vantage advertisements stated that RJR's advertisement ("Why do you smoke? With what you've been hearing about smoking these days, you probably wonder sometimes why you smoke at all") was "address[ing] the health issue for competitive purposes." 690007757-7760 at 7759 (US 21039).

2496. An April 19, 1978 memorandum states that "Vantage has traditionally limited its target market to `concerned' full flavor smokers." 500210073-0075 (US 22108).

2497. In a 1981 memorandum to M.M. Sheridan, titled "Reactions to the VANTAGE/Merit Image Study," K.A. Schmitt reported that, based upon the study, "smokers in our target category have two primary product desires: a lower tar product which addresses their safety/health concerns, and a product which provides taste satisfaction." The memorandum further reported that "VANTAGE is seen as not dealing as directly or effectively with the health/safety concerns of the consumer as Merit. Our current advertising approach focuses much more heavily upon the taste/pleasure aspects of our brand than on the safety/health aspects." As a result, the memorandum recommended that Vantage marketing be modified to better "target" smokers with health concerns: "Perhaps a more balanced approach is needed, both to tone down the perceptions of harshness and to renew the belief that VANTAGE does indeed address the target consumer's health/safety concerns." 523474848-4851 at 4848 (US 22156); Orlowsky WD, 71:15-72:16.

2498. An August 1981 consumer research study, titled "Vantage Personalities," prepared for RJR by Social Research, Inc., noted that people in the Vantage target market "have very definite concerns about the alleged health hazards connected with smoking. It is these qualms that have prompted many of them to seek out lower tar brands." That report likewise noted that the target market

abandoned harsher brands in search of milder brands with lowered tar and nicotine. This movement was almost always prompted by health concerns. In some cases, people were experiencing actual problems such as coughing, throat irritation, and shortness of breath. Others may not have experienced actual symptoms, but were worried about the publicized alleged health hazards associated with stronger cigarettes.

503148009-8077 at 8006, 8070 (US 22159).

2499. An April 1982 research study, titled "Vantage and Merit Smokers," prepared for RJR by Social Research, Inc., stated:

Both Vantage and Merit smokers have similar early smoking histories . . . switching to lighter cigarettes to relieve physical symptoms and as an acknowledgment of increased concerns about alleged health hazards. . . . [Quoting a Vantage smoker]: "They are lighter, lower in tar and nicotine. . . . They are satisfying like a full-tar cigarette, but they are better for my health. . . . The filter seems strong and effective as a trap for `harmful' ingredients." Vantage smokers believe that the filter itself is strong enough to catch these impurities. . . . These ideas make them think the end product is a milder and more "healthful" smoke. . . . [Quoting a Vantage smoker]: "I like the filter because there's a lot of it, like it's filtering out a lot of the harmful things, like the tar."

511469097-9250 at 9105, 9116 (US 20842) (emphasis in original); Orlowsky WD, 72:17-23; 81:4-8.

2500. A 1979 study prepared for RJR, titled "An Exploratory Study of Smokers' Comprehension of and Reaction to Several Proposed Winston Lights Campaigns," noted that with respect to one of the Winston Lights advertisements, consumers typically reported that they understood the advertisement to mean: "A low tar cigarette that tastes good, is satisfying and safer." 501071439-1530 at 1453 (US 22110); Orlowsky WD, 83:7-12.

2501. Advertisements for RJR's Now cigarette in the late 1970s and 1980s described Now as "the lowest," "lowest in tar," and "lowest tar champion," and included the following:

Now. It's a Satisfying Decision.

LOWEST TAR CHAMPION. NOW MENTHOL IS LOWEST By U.S. Gov't. testing method.

NOW is LOWEST Of All Softpack 100's. Pick the Lowest. NOW IS LOWEST By U.S. Gov't Testing Method.

WHEN IT COMES TO THE LOWEST IN TAR, ONLY ONE MEASURES UP. NOW IS LOWEST Of All Soft Pack 100s. By U.S. Gov't. testing method.

(no bates) (US 5852) (1978); 970469347-9474 at 9430, 9429, 9427, 9431 (US 85104).

2502. A 1983 Now Brand Image report, prepared for RJR, concluded that health concerns heavily influenced a smoker's decision to choose one brand over another and that smokers perceived lower tar cigarettes as healthier than their full-flavor counterparts. It stated that "[a] major motivation in brand switching has been concern over health. . . . The typical solution to this dilemma is the two pronged approach of trying to cut down and/or moving to a lower tar brand." The report went on to indicate that, when respondents were asked what the words "low" and "lowest" in the advertisements meant to them, "[t]hey interpret this to mean that the two brands are `safer' and pose less of a health hazard. Consequently, they reason, this would make the brands more appealing to younger people who are very health conscious or to older, long-time smokers who are concerned about the long-range effects of tobacco." 506671319-1418 at 1379 (US 22160).

(2) R.J. Reynolds's Research on the Low Tar Cigarette Category

2503. Internal RJR documents show that RJR conducted research not just on individual low tar cigarette brands, but on low tar cigarettes as a category. These documents demonstrate that RJR has long known and intended that its advertisements and marketing for low tar cigarettes, featuring claims of lowered tar and nicotine and "light" and "ultra light" brand descriptors, contributed to and reinforced consumers' belief that low tar cigarettes are better for their health, and caused consumers to smoke them for this reason.

2504. A 1974 survey showed that "a substantial majority of smokers said they agreed with the statement, `low tar and nicotine cigarettes are a major step in making smoking less harmful to their health.'" 501238259-8269 at 8265, 8269, 8271 (US 22072); 501238270-8357 (US 48736).

2505. As part of a 1975 marketing plan to introduce a new low tar Salem product, RJR recognized that "[l]ow numbers are the primary benefit/feature which can solve the concerned smoker's anxiety about health." 50231320-3308 at 3253 (US 22151).

2506. A November 17, 1975 report prepared for RJR by Rosenfeld, Sirowitz Lawson, Inc., titled "An Evaluation of the 120MM Market and Its Potential for RJR," stated:

Currently RJR divides the total cigarette market into three basic categories: Full Flavor; Medium Flavor; High Filtration. However, the recent rapid growth of the High Filtration segment, may be a signal that the consumer is beginning to be more health conscious than ever before, and will be even more so as time goes on. If this is the case, we believe that consumers will ultimately divide the market into three categories which in their minds would be categorized as: "Least Safe Brands" "Safer Brands" "Safest Brands."

The RJR report defined the "Safer" and "Safest" brand categories as follows:

Safer Brands: These are brands which are perceived to combine an acceptable level of taste with mildness. Smokers of these cigarettes, while not overtly concerned with health, do switch to them after feeling some physical discomfort from their previous brand. Although they are not aware of T N numbers, they know they are "moving down" to a milder cigarette.

Safest Brands: Cigarettes in this category are perceived to have a mild taste. Smokers of these brands are very concerned about health and quite aware of T N numbers. Their concern — more than any physical discomfort — causes them to switch to brands with low T N numbers.

2507. The report further concluded: "We believe that the most dramatic evidence of the growing interest in Safer Cigarettes may be seen in the growth of the various Lights/Milds line extension products." 500671364-1454 at 1402, 1403, 1405 (US 22158) (emphasis in original). The report also stated: "As previous research has indicated, Smokers of Lights/Milds products (designated in this report as Safer Brands) are not aware of T N numbers. Hence, the fact that a 120MM Lights entry will have high T N numbers (on a total cigarette basis) should not impede its progress." 500671364-1454 at 1408, 1436-37 (US 22158); Schindler WD, 75:5-13.

2508. A November 16, 1976 RJR document, titled "New Brand Development," recommended introducing a "New, Single-Minded Advertising Campaign" that would "convey our lowest `tar' benefit." In terms of future plans, the document stated "[f]or example, in the new and special wants area, there is style and value which we met with MORE, extreme health concerns which we are meeting with NOW [brand cigarettes], and with the evolution of the market toward low `tar', many more opportunities will be present in this area. . . ." A section of the document titled "Super Low `Tar' Products" stated: "We will also be working on super low tar products which address the wants of very concerned smokers. A growing number of smokers seek products with tangible/visible features to assuage their concern about smoking." 501282466-2513 at 2480-2481, 2488, 2496, 2502 (US 48813).

2509. A June 21, 1982 Product Research Report on Non-Menthol Ultra Low Tar Consumer Probes, written by RJR's Marketing Development Department, stated: "Most respondents [ultra low tar smokers] preferred a white filter to a cork filter because they considered white to be more indicative of ULT cigarettes. The white filter generated strong associations with gentleness, purity, cleanliness, modernization, and innovativeness." 503394459-4485 at 4464 (US 85036).

2510. The 1982 report also stated: "Women are more optimistic about new brands that could offer lower tar. They are more willing to compromise on taste if they feel a cigarette has more personal benefits, although `It would be great if it has good taste, too.'" The report further stated that ultra low tar smokers "want as little tar as possible, but they want taste to be at least on par with current ULT brands. They feel they have made taste trade-offs by smoking a ULT." The report continued: "It is unlikely ULT smokers would switch brands if the tar level of the new cigarette is equivalent to their current brand. Lower tar is a strong motivating factor." The report also recognized that smokers perceive low tar cigarettes as having less desirable taste, stating: "The main obstacle appears to be to convince smokers the new cigarette delivers a more flavorful, richer taste, and lowering the tar does not reduce taste and smoking satisfaction." The report also noted:

Women seem to be more accustomed to moderation in their lifestyles. For example, they are inclined to trade-off some taste for the weight control and health benefits of low calorie and low fat foods. They want some taste assurance, but are open to compromise. They are willing to tolerate an adjustment period as they become acclimated to a new product they perceive to be better for them.

The document further stated: "ULT smokers perceive low tar claims to be credible. They try to balance their desire to smoke and personal concerns." 514343517-3566 at 3522, 3524-26, 3530, 3540 (US 51848).

2511. According to Gary Burger, RJR Senior President of Research Development, RJR was aware that consumers smoke low tar cigarettes for the perceived health benefit. Burger observed that "[c]ertainly, smokers perceive lower tar cigarettes in some ways to be better for them and therefore they want them." He noted that consumers "have that impression that there are higher levels of bad stuff in high tar cigarettes and lower levels of bad stuff in low tar cigarettes." Burger PD, Arch v. American Tobacco Co., 8/21/97, 226:9-243:18.

(3) R.J. Reynolds's Public Statements About Low Tar Cigarettes

2512. In May 2004, RJR's website stated: "Reynolds Tobacco is not interested in trying to persuade any nonsmokers to begin smoking or in persuading any smokers not to quit." Andrew Schindler, Executive Chairman of Reynolds American Inc., testified that "Reynolds Tobacco is not interested in trying to talk any smokers out of quitting." TLT0770095-0128 (US 72410); Schindler WD, 76:17-77:5.

2513. RJR's website further stated:

Our company, like other cigarette manufacturers, uses brand descriptors such as "full flavor," "lights" and "ultra lights" to differentiate cigarette brand-styles in terms of such characteristics as strength of taste, and reported "tar" and nicotine yield. These terms do not, and are not meant to, imply that any cigarette brand-style or any category of cigarettes is safer than any other.

TLT0770095-0128 at 0111 (US 72410); Schindler WD, 64:19-65:3.

2514. A March 21, 2003 RJR statement to stockholders presented a proposal "to find appropriate ways of informing our customers about the actual health risks of smoking `light and ultra light' cigarettes to disassociate them from any belief that such products are safer and deliver less tar and nicotine." This proposal cited the conclusions of NCI Monograph 13 that low tar cigarettes present no significant reduction in harmfulness relative to full-flavor cigarettes, and that "`many smokers choose these products as an alternative to cessation'" out of a mistaken belief that they are less harmful. The proposal also referenced several pending lawsuits against one or more of the Defendants alleging fraudulent marketing of low tar cigarettes as less harmful. The Board of Directors of RJR recommended a vote against this proposal. One of the reasons given by RJR for rejecting this proposal was that, "if implemented, this proposal could significantly interfere with RJR's defense of pending litigation." TLT0960025-0029 at 0027-0028 (US 87993); Schindler WD, 66:4-67:16.

c. Brown Williamson

(1) Brown Williamson's Marketing of Low Tar Cigarettes

2515. A B W document, titled "Kool Family Utopian Objectives 1979-1985," stated that "Kool must move into the health reassurance segment so that 45% of KOOL business will be in the perceived product safety arena by 1982 which will approximate the 45% of total smokers who will be smoking hi-fi products by 1982." Under the heading "Strategies," the document stated: "Provide product safety reassurance while enhance [sic] the satisfaction and refreshment perception of the appropriate KOOL styles through the successful national launch in 1979 of either: 1. Low `tar' parent [or] 2. Repositioned KOOL Milds." 680559149-9162 at 9149-9150 (US 54048).

2516. An internal March 25, 1983 B W memorandum from A.J. Mellman, a B W marketing employee, to R.A. Blott, B W Senior Vice President of Domestic Marketing, regarding current cigarette project ideas for the Kool brand family, including low tar brands, stated: "KOOL maintained a three share level for over 30 years (through mid-60's) while positioning itself as a specialty cigarette to be smoked only for remedial or medicinal purposes." The fourth project idea was: "Improve health aspect: Anything that can be done to decrease the risks associated with cigarettes is a positive to most consumers." 514110006-0009 at 0007-0008 (US 21745).

2517. An April 28, 1998 document prepared for B W, titled "Kool Natural Lights Round I II Focus Groups: Presentation of Findings Prepared for Brown Williamson," under the heading "Highlights: Natural Lights Idea," stated: "Respondents assumed that a natural light cigarette would be less harmful than a regular cigarette, they did not assume it would be `healthy.'" 210430297-0396 at 0322 (US 67711); Smith WD, 83:18-84:20, 85:6-8.

2518. B W's objectives for the 1957-1961 Viceroy advertisements were to "[a]ttract smokers . . . promising . . . implied health benefits because of filter" and "with substantial health benefit implications, because of blend and filter." Ivey WD, 51:15-52:13; Smith WD, 71:18-72:1; 670001750-1766 at 1754-1755 (US 20962).

2519. A 1975 B W document, titled "Viceroy Marketing Strategy," identified the "Problem Advertising Must Solve": "[A]dvertising must . . . cope with consumer attitudes about smoking, providing either a rationale or a means of repressing the health concern." 680113760-3763 at 3762 (US 20987); accord 680116947-6968 at 6959, 6961 (US 21877) (1975 document, titled "Viceroy Agency Orientation Outline," stating "Test Market Campaigns: Strategy-Given consumers awareness of the smoking and health issue, full flavor smokers must deal with their illogical behavior. Therefore, we attempted to communicate Viceroy's flavor/satisfaction benefits by providing consumers a rationalization for smoking or a repression of the health concern"); Smith WD, 73:2-17.

2520. The memorandum noted that, in 1953-1954, Viceroy's advertising campaign slogan was "VICEROY's double barreled health protection" and "Better Your Health," with the "objective and creative strategy" being to "[a]ttract smokers of all other cigarette brands by promising superior health protection because of more effective filtration from both a new filter and a longer length." The memorandum concluded that "[t]hese two product changes firmly positioned VICEROY as a high-filtration, healthier cigarette and attracted smokers in droves." The same theme continued in 1955-56, when one of the "Objectives and Creative Strategies" listed was to "Attract smokers of non-filter brands and the new filter brands by promising good taste equivalent to non-filter brands and superior health protection because of blend and filter." 670001750-1766 at 1752-1754 (US 20962); see also (US 87468); (US 87469); (US 87470) (1953 magazine advertisements featuring claim of Viceroy's "double barreled health protection").

2521. Carlton is a low tar brand that was originally manufactured by American Tobacco until that brand was acquired by B W in 1994, along with American Tobacco's Lucky Strikes, Pall Mall, Tareyton brands. Gesell PD, State of Minnesota v. Philip Morris Inc., 9/18/97, 6:10-17; 117:3-15; 25:23-26:3; 93:2-13.

2522. According to Sharon Smith, former Director of Marketing Services and Operations at B W, "Carlton advertising focused on tar delivery." She explained:

For Carlton, it's not an imagery campaign. It's more communication of tar levels. I'm familiar with consumers of competitive brands to Carlton saying in focus groups that to convince them to switch from their brand to Carlton, an understanding of what the tar levels are is more important to them.

Smith further explained that, for those smokers, her research has found that their understanding of the tar and nicotine numbers is based "certainly on our advertising." Smith WD, 69:10-14; 75:3-23.

2523. A B W document circa 1996-1997, titled "Carlton Creative Plans," disclosed that the first "Primary" trait of Carlton's target audience was "Health Conscious." With respect to print advertisements, the report stated: "Magazine [advertisements for Carlton] Will be Driven by Editorial That is: `Health Conscious.'" Carlton's "brand strategy" was "to continue to defend the franchise while communicating its `lowest' positioning to maintain switching inflows from those smokers trading down in tar levels." The document went on to state that "CARLTON packaging issues will be explored to determine how best to communicate ultra light product cues . . . hype its increased communication of ultra low tar." 176020783-0800 at 0785, 0792, 0798 (US 23351); accord 176020856-0926 at 0868-0869 (US 23357).

2524. In 1999, B W began a promotional campaign emphasizing that Carlton cigarettes were Ultra Ultra Light, including package statements that Carlton delivered only "1 mg." of tar. B W's advertisements featured the slogan "Isn't it time you started thinking about number one?" According to Susan Ivey, "many factors drove consumers' preference for Carlton, and for some smokers, one of those factors was a belief that ultra low tar could reduce one's risk." Ivey WD, 52:14-53:15; ADV027 0780-0782 (US 9846); ADV045 0468-0470 (US 11362) (1999 advertisement); ADV027 0924-0926 (US 9892); ADV032 0011-0013 (US 10678).

2525. In March 1999, Nicholas Brookes, B W Chairman and CEO from 1995 to 2000, became aware of a discrepancy in the tar delivery of Carlton cigarettes. The cigarette, when smoked by human smokers, delivered three milligrams instead of the advertised one milligram of tar. Because B W had just introduced a new advertising campaign "touting Carlton as the `1' for you," Brookes attempted to delay the publication of a study that would have alerted the public to the new findings. Brookes did not direct B W's marketing department to discontinue the "Carlton is the `1' for you" campaign, even though he acknowledged that it might cause confusion for consumers. 190245079-5080 (US 85018); Brookes PD, United States v. Philip Morris, 3/31/03, 146:18-148:12; 149:3-149:20; 150:14-150:18.

2526. A July 27, 2000 document prepared for B W by Kay Harwood Marketing Analysts, Inc., titled "Topline Report of Findings for Carlton Advertising Research," indicated that smokers continue to view Carlton cigarettes as healthier, stating: "Focus groups were allowed to submit two words in addition to those suggested by the group hosts. Among the words independently chosen to describe Carlton cigarettes were `feeling healthier' and `healthier.'" Among the Report's `Key Findings' are the statements from the focus groups in response to several Carlton campaigns. The statements include:

Healthier — trying to sell a healthy cigarette — Very few people have realized that Ultra is better . . . Purity/better for you. . . . Fewer people have health problems smoking this brand. . . . This cigarette is best for you . . . better for you. . . . Clean improved — healthier brand; less nicotine. . . . Healthier living. . . . Carlton is healthier for you. . . . Gives next to nothing harmful — means healthier — Carlton is healthier for you . . . safe cigarette. . . . They are much better for you — A healthier cigarette. . . . Healthier. . . . This is the best for you — lowest in bad stuff. . . . Better for you, lighter smoke. . . . Carlton will make you happier and healthier. . . . Health-minded, concerned people (get healthier). . . . The safe cigarette — Cut down your risk — Light and less harmful. . . . This will save you — this is the solution you have been waiting for.

250255336-5347 at 5340, 5343-5347 (US 22031). These statements were repeated in an August 8, 2000 document prepared for B W by Kay Harwood, Marketing Analysts, Inc. titled "Carlton Advertising Research: Report of Key Findings." 250255060-5075 at 5064, 5066-5068, 5071-5075 (US 22170).

2527. A document, titled "Carlton Advertising Research: Four Focus Groups," bearing MAI (Marketing Analysts, Inc.) and B W insignia on the cover, discussed July 2000 focus groups stating that smokers of both Carlton and competitive Carlton Ultra light associated Carlton cigarettes with being "[b]etter for you/[h]ealthier." The Report concluded that the Carlton "It's the Least You Can Do" campaign (labeled the "U" campaign) created the impression that "Carlton is better for you." The Report's "Key Recommendations" include: "If the primary objective of the advertising campaign is to position Carlton as a lower/the lowest tar and nicotine cigarette, the current research suggests the "U" campaign (It's the least you can do) effectively conveys this positioning." 250221262-1294 at 1275, 1277, 1287 (US 22030); Ivey WD, 59:20-6060:12.

(2) Brown Williamson's Research on the Low Tar Cigarette Category

2528. Susan Ivey acknowledged that she is aware that "some smokers choose lights because they perceive a health benefit," and that "Brown Williamson's consumer research . . . indicates that certain smokers switch to low tar cigarettes because they believe that these cigarettes are `less harmful' than regular cigarettes." As demonstrated below, these consumer research documents establish that B W has long known and intended that its advertisements and marketing for low tar cigarettes, featuring claims of lowered tar and nicotine and "light" and "ultra light" brand descriptors, contributed to and reinforced consumers' mistaken belief that low tar cigarettes are better for their health, and caused consumers to smoke them for this reason.

2529. For instance, a 1967 B W advertising and marketing strategy for high-filtration/low tar products describes B W's marketing strategies:

[Vanguard brand strategy:] "To capitalize upon a prevalent smoker desire to lessen the health risk involved in his smoking via a switch to a low tar cigarette. . . . Advertising Objective — Communicate a dual smoker benefit: low tar and satisfying taste."

Modified LIFE "Marketing Strategy — To fully capitalize on health vs. cigarette smoking publicity and publishing of tar/nicotine data by marketing LIFE as the lowest tar cigarette in the filter 85 segment."

Filter 70's "Marketing Strategy — To capitalize on smoker concern of `smoking too much' by offering a means for reducing smoking without . . . cutting down on number of cigarettes smoked. . . . Advertising — Filter 70's would offer smokers the opportunity to smoke up to one-third less (shorter tobacco section), but they can light up as often."

Ivey WD, 57:22-58:10, 63:1-8; 670186789-6824 at 6790, 6792, 6798, 6802, 6804 (US 21431).

2530. An August 1967 B W document, titled "A Psychological Map of the Cigarette World," stated that

PEOPLE WHO SMOKE FILTER CIGARETTES . . . ARE MORE CONSCIOUSLY IN CONFLICT ABOUT SMOKING. . . . THEY CAN'T COMPLETELY ENJOY SMOKING BECAUSE THEY KNOW IT IS NOT HEALTHY. . . . THEY MAY BE RECEPTIVE TO ADVERTISING WHICH HELPS THEM ESCAPE FROM THEIR INNER CONFLICTS ABOUT SMOKING.

680282619-2668 at 2642 (US 85305).

2531. A 1969 marketing document from B W's files prepared by a consultant for Imperial Tobacco, the sister company of B W, stated that the smoker "seeks a new covenant between himself and the tobacco industry" and has "trust" that the industry "is going to provide him with a product that he can enjoy without fear of physical or psychological reprisal." 680082943-3125 at 2959-2960 (US 20983).

2532. An October 21, 1971 Philip Morris document acknowledged that it "was abundantly clear" that manufacturers in the United States, and B W in particular, "are concentrating on the low TPM [total particulate matter] and Nicotine segment in order to create brands with distinctive product features which aim . . . to reassure the consumer that these brands are relatively more `healthy'" than regular full-delivery cigarettes. "Hence B W is devoting its efforts entirely to the Hi-Fi ["high filtration"] segment, and its two major projects . . . demonstrate this strategy." 100028935-8937 at 8935 (US 20089).

2533. A September 1974 B W marketing research study, titled "The `New' Smoker," examined the "Behavioral Factors" of new smokers and concluded that new smokers are "mis-informed on cigarette strengths." The study concluded that new smokers believed that low tar cigarettes were "better for you." 779217794-7833 at 7822-7823 (US 21055).

2534. A November 29, 1976 B W memorandum from F.E. Latimer to B.L. Broecker and M.J. McCue, all B W marketing employees, described the role cigarette advertising plays in allaying smokers' fears of the health consequences of smoking:

[B]ecause such large numbers of the institutions and leaders he believes in are against smoking, the average smoker often seeks self-justification for smoking. Good cigarette advertising in the past has given the average smoker a means of justification on the two dimensions typically used in anti-smoking arguments. . . . All good cigarette advertising has either directly addressed the anti-smoking arguments prevalent at the time or has created a strong, attractive image into which the besieged smoker could withdraw.

680086039-6044 at 6039-6040 (US 20984).

2535. A January 1977 report prepared for B W by Post Keyes Gardner, Inc., discussed successful cigarette marketing in similar terms:

The fundamental long term trends in the business are for smokers to move gradually to products that represent benefits of " health" and modernity. . . . Successful brands have offered "real" or "perceived to be real" products benefits that are founded on smokers' needs for "health" and modernity. . . . Successful advertising in the cigarette business is achieved by establishing a brand image based on a product benefit that fulfills consumers' needs for taste, "health" and modernity. . . . Historically, brands that have achieved the most success are those that offer taste within the confines of "health. . . ." [T]he real "action: is in products that deliver, or are perceived to deliver, taste while representing the most reasonably "safe" product available . . . products have evolved along the long term continuum toward "health" and modernity. Those that have capitalized on these trends with a point-of-difference are the ones that have been the most successful. . . . Viceroy was the first brand to directly capitalize on [the perceived health benefits of filters] by featuring its filter benefit, and sales were dramatic for the brand. . . . [In 1965,] Carlton was introduced — the first real response to the "health" issue as we see it today. . . . Three hifi [high filtration] brands, True, Doral and Vantage (with new, more modern filters) were successfully introduced [in the late 1960's], capitalizing on the "health" atmosphere that the anti-smoking forces were creating. . . . FORECAST FOR THE FUTURE. . . . In sum, the dynamics of "health" and modernity trends will be dominant. The smoker appears to be ready to make another major shift, losing gratification and obtaining a "safer" product, to a new generation of products with single digit tar numbers. . . . The smoker will be inundated with `health' oriented advertising.

776158413-8426 at 8416, 8419, 8422-8423, 8425 (US 22339) (emphasis in original).

2536. B W's 1977 New Products Annual Marketing Plan reviewed marketing strategies for new "health oriented" low tar brands to be directed at "the extremely health conscious (worried) segment of the market." According to the plan, the "Overall Objective" was "[t]o develop and successfully launch a product which distinctively positions itself as being the `safest' alternative in smoking." In a review of Savannah brand cigarettes, the plan noted that the "Hi-Fi [high filtration] segment stems directly from the increasing concern over the smoking and health issue." The Savannah brand was to be "positioned against those consumers with serious health concerns who continue to smoke full flavor brands." 670156293-6424 at 6303, 6323-6324, 6342 (US 53746*).

2537. This same 1977 Marketing Plan recommended that the:

[a]dvertising copy should assume the tone of objectivity and genuine importance. The authenticity and frankness of the copy must be arresting enough to gain the attention of those consumers concerned about their health. Taste reassurance for the brand should be subordinated in efforts to play up health reassurance claims.

In a section titled "Market Review," the plan went on to say that "[t]he appeal of the brands competing in this segment [enriched flavor ultra low tar] is solely on the basis of implied health claims." 670156293-6296 (US 53745); 670156297-6242 at 6324, 6327 (US 53746*).

2538. A July 25, 1977 B W Internal Marketing Study, titled "Low `Tar' Satisfaction, Step 1: Identification of Perceived and Underperceived Consumer Needs," recited the percentage of starters and quitters from 1969-1976, and stated:

[A]s the dynamic proportion of quitters continues to be larger than the proportion of starters, actual smoking incidence has declined about ten percentage points over the last ten years. . . . Increases in per capita consumption are assumed to correlate with lowered "tar" delivery as well as other factors. . . . HEALTH REASSURANCE: Almost all smokers agree that the primary reason for the increasing acceptance of low `tar' brands is based on the health reassurance they seem to offer. . . . It must be assumed that Full Taste smokers come down to "low tar" expecting less taste . . . [t]hey are willing to compromise taste expectations for health reassurance.

775036039-6067 at 6043-6044, 6047, 6052 (US 21053).

2539. A 1977 document bearing the B W seal discusses B W's Belair low tar cigarette:

Does Belair have growth opportunities? — Increasing "health"-orientation of cigarette marketing and the correspondingly greater potential for `lighter' cigarettes.

To realize this growth opportunity, Belair must: . . . — compete directly in the low `tar' segment where greatest potential is. . . .

Current Positioning Objective: To reestablish and maintain the relevancy of Belair's heritage as a cigarette which provides a light, yet, satisfying menthol alternative and a `health' reassurance relative to full-taste brands. . . .

July 1977 `tar' reduction . . . will allow for specific low "tar" support of the important "health" reassurance element of this brand positioning. . . .

Overall Belair Operating Strategy: — Through advertising, make the Belair historical image/positioning as a "light" cigarette more relevant to the current `tar' conscious environment. . . .

Belair Copy Strategy: To position Belair as a cigarette which offers . . . lower "tar" reassurance relative to full-taste brands. . . .

Belair Prime Prospect: The current Belair smoker with whom the reassurance of the lower "tar" positioning addresses possible concerns which might otherwise prompt the user to switch to a competitive low `tar' cigarette.

779027336-7360 at 7339-40, 7350-51, 7354-55 (US 22163).

2540. A September 26, 1977 letter from P.J. Tighe, B W Senior Brand Manager of New Products, to colleague Don Johnson discussed additions to Low Tar Brand Plans. The letter stated that the "Low `Tar' Menthol Plan" needed to provide "Health Reassurance." 660093935-3935 (US 53576).

2541. A document, titled "Fact Operational Plan for Fourth Quarter 1977 and 1978," noted that "[t]o the extent that health reassurance equates with smoking fewer of less `harmful' cigarettes, the reassurance must be handled carefully, since consumers clearly consume low `tar' cigarettes in greater quantities." The document also concluded that "[t]he greatest need in the marketplace is for a cigarette that promises and delivers: 1) Taste/Flavor, 2) Product Quality, and 3) Health Reassurance." 676038502-8796 at 8573, 8578, 8590 (US 53923).

2542. A 1978 B W document, titled "Purite Filter," acknowledged that the "common area of leverage" of successful brands was implied health benefits due to low tar:

The move to hi-fi cigarettes is continuing, motivated by consumers who demonstrate personal concerns towards smoking in either the health, social areas, or both. To capitalize upon these perceived consumer needs, three successful positionings have emerged in hi-fi: health reassurance, taste reassurance, and social acceptability. All three positionings use low "tar" as a common thread. . . . To stem the continued decline in smoking incidence, the industry must rapidly move to a point where it can address cigarettes in a totally positive light. . . . The modern hi-fi segment . . . has been growing dramatically over the last five years. This growth has been spurred by the consumer desire for health protection, as achieved through particulate matter reduction and the industry response in offering low "tar" brands with heavy marketing support. . . . Although the hi-fi segment is continuing its rapid expansion to a projected 50% by 1982, only three positionings are demonstrating vitality and durability among the freestanding low "tars": low "tar"/implied health, i.e. Carlton, True; extra flavor, i.e. Merit; social acceptability, i.e. Vantage. . . . Low "tar"/implied health is the common area of leverage with all these entries.

680559100-9124 at 9100, 9101, 9110, 9120 (US 21003).

2543. A November 14, 1978 document, titled "Low Delivery Cigarette Project For Brown Williamson Tobacco Corp.," reported that, between 1974 and 1976, 60-74% of consumers believed that "`low tar and nicotine cigarettes represent a major step in making smoking less harmful.'" Under the heading "`Health' vs. Image/Taste/Satisfaction," the document stated that B W's marketing plan included "using acceptably Low Delivery numbers to provide assurance that the brand is at least at parity with its health-oriented competitors." 670133560-3690, 3572, 3581 (US 87887).

2544. An October 1979 "History and Key Trends in the U.S. Cigarette Market," compiled by E.T. Parrack, B W Vice President of Brand Management, confirmed B W's knowledge that smokers turn to low tar cigarettes in response to health, not taste, concerns. 670624932-5364 at 4935 (US 53869). The document contains the following statements, reflecting B W's knowledge that the increase in filtered and low tar cigarette sales from the 1950s through the 1980s resulted from consumers' belief that these products were less harmful, as a result of Defendants' extensive marketing of these products:

The success of hi-fi brands is due in part to the large sums being spent to advertise them. Id. at 5279.

[Between 1957 and 1960] the consumer was bombarded with messages regarding high filtration. Id. at 5036.

1964-1975 — Emergence of brands using low "tar" as primary appeal . . . appearance of brands which actually based their appeal on low tar and nicotine numbers. Id. at 5275, 5277.

Two forces are driving the current high rates of brand switching: Smoker concern about personal health [and] Smoker concern about social censure. . . . successful new brand development would have to be aimed at and satisfy the smoker needs arising out of these two key forces. Id. at 5165.

Regarding the perceived health benefits of menthol cigarettes, the compilation stated:

[T]he split between menthol and Hi-Fi continued. Smokers were forced into a trade off of Hi-Fi vs. menthol. But was it indeed a trade-off? As we have noted, Salem was perceived as a relatively mild cigarette, and menthol itself had been promoted for years for soothing throats irritated by smoking and was the cigarette used by many when they had colds. Thus Salem and other menthols could be regarded as equivalent to a Hi-Fi. Id. at 5036-5037.

670624932-5364 (US 53869).

2545. A June 2, 1980 B W memorandum from Brian R. O'Hare to J.F. Roberts stated:

It now becomes necessary, in light of the increasing importance of the smoking and health issue and Kent's repositioning as the health reassurance brand[,]" to implement the remaining phases of B W's plan to position Kent as a less harmful brand. The memorandum noted the importance of implementing this plan" as the smoking and health issue becomes more important on a worldwide basis.

660942115-2116 at 2115 (US 53580) (emphasis in original).

2546. In a July 2, 1982 B W report, titled "What Are the Obstacles/Enemies of a Swing to Low `Tar' and What Action Should We Take?," B W Assistant General Counsel J. Kendrick Wells gave his views that B W should respond to attacks on low delivery cigarettes in the following manner:

B W will undertake activities designed to generate statements by public health opinion leaders which will indicate tolerance for smoking and improve the consumer's perception of ultra low "tar" cigarettes (5 mg. or less). The first step will be the identification of attractive scientists not previously involved in the low delivery controversy who would produce studies re-emphasizing the lower delivery, less risk concept. Through political and scientific friends, B W will attempt to elicit from the administrative and legislative branches of the federal government, and perhaps voluntary health groups, statements sympathetic to the concept that generally less health risk is associated with ultra low delivery cigarette consumption. The program is designed to produce statements of sufficient news interest to reach the public through the media. In addition, B W would seek to generate spontaneous mainstream media articles dealing with component deliveries, much as the old Readers Digest articles. . . . B W will urge the industry to sponsor research in the ultra low delivery cigarette area which turns the principles used against the industry to positive use. . . . Industry positions favoring the low delivery cigarette can be effectively presented, but must be carefully structured.

680592164-2169 at 2164-2168 (US 21009); (no bates) (US 76213); Wells WD, 46:11-49:3.

2547. A March 27, 1985 B W memorandum from E.T. Parrack, Jr., Vice President of Domestic Marketing, to Thomas E. Sandefur, Jr., B W's CEO, stated that "health reassurance" is one of the "`rational' benefits" that have been grafted on to the two "basic benefits" that cigarettes have always offered to consumers. The two basic benefits are: "physical smoking satisfaction" and "Emotional (image/social) reinforcement: `The me I want to be.'" 528010755-0759 at 0755, 0757 (US 20926).

2548. A 1999 B W document, "Current Trends in Lights and Ultra Lights," stated under the heading "Learnings": "Consumers were ready for low tar before Marlboro Lights. Health concerns. . . . Anti-smoking pressure and PM's initiative ignited the process. Manufacturers' focus on Lights accelerated the growth." 430403186-3194 at 3193-94 (US 22084).

2549. According to Sharon Smith, former B W Director of Marketing Services and Operations, her consumer research indicated that smokers of light cigarettes, as compared to ultra light smokers, "did not have the same level of understanding of the tar numbers, and instead spoke in terms of full flavor versus lights," and as a result "rely primarily on brand descriptors like `light,' `medium,' and `ultra light' as relative indicators of the cigarette's tar level," and that they "think of light and ultra light cigarettes as being lower in tar and nicotine." Smith WD, 76:4-12.

(3) Brown Williamson's Public Statements About Low Tar Cigarettes

2550. Since at least 1981, Brown Williamson's public position has been that "it has never marketed filtered or low tar cigarettes as less harmful than regular cigarettes." Similarly, Sharon Smith, former Director of Marketing Services and Operations at B W, denied that the words "low tar" communicates any health benefit, stating that "I would not say that low tar implies any sort of benefit, other than it's lower in tar." Ivey WD, 51:9-13; Smith WD, 66:19-22.

2551. A June 17, 1999 B W Question Answer ("Q A"), labeled a "working document," stated that B W did not lower the tar and nicotine in its cigarettes for health reasons and that B W does not "claim that [low tar] cigarettes are any better/safer for you than any other cigarette on the market." 127030138-0138 (US 22113).

2552. In March 1999, Nicholas Brookes, B W Chairman and CEO from 1995 to 2000, denied that B W had conducted research on consumer perception of light cigarettes and whether reduced risk was associated with these cigarettes. Brookes PD, United States v. Philip Morris, 3/31/03, 162:13-163:9.

2553. Sharon Smith has claimed that "Brown Williamson has only used the terms `low tar' or `light' with respect to its cigarettes to communicate lighter taste — lighter taste and nothing else," and that "consumers have overwhelmingly responded that lighter taste is the only benefit that Brown Williamson's advertising for its low tar brands has indicated." Similarly, Susan Ivey has also said that "[m]y experience is that most consumers choose lights for taste, because they prefer a lighter tasting cigarette." Smith WD, 50:7-51:2; Ivey WD, 57:18-21.

2554. B W states on its website: "We do not believe that people who are concerned about the health risks of smoking should view lower tar products as an alternative to quitting." TLT1040050-0055 at 0055 (US 88620); Ivey WD, 63:9-16, 64:1-6; Smith WD, 61:19-23.

2555. Despite the substantial evidence already referred to,supra, that B W was aware that consumers interpreted its low tar brand descriptors to be indicative of a less harmful cigarette, in May 2004, B W stated on its website that brand descriptors were intended only to communicate taste:

Cigarette brands in the U.S. are usually identified on packs, cartons and advertising as belonging to the following categories: "Ultra Lights" or "Ultra Low Tar," "Lights" or "Low Tar," and "Full Flavor. . . ." Recent published studies suggest that the majority of smokers use descriptors to guide their product selection based on taste. . . . It is not Brown Williamson's intention to suggest that any individual brand, regardless of the category descriptor terminology used, or tar yield, is safer than any other.

TLT1040056-0062 at 0061 (US 88628); Ivey WD, 70:5-14.

d. BATCo

(1) BATCo's Research on the Low Tar Cigarette Category

2556. BATCo's research documents establish that the company has long known and intended that its advertisements and marketing for low tar cigarettes, featuring claims of lowered tar and nicotine and "light" and "ultra light" brand descriptors, contributed to and reinforced consumers' mistaken belief that low tar cigarettes are better for their health, and caused consumers to smoke them for this reason.

2557. A 1972 BATCo memorandum pointed out that health reassurances usually result in increased sales:

Over the years manufacturers have provided the public with a variety of platforms to . . . "enhance the association in smokers minds between the benefits of smoking and our cigarette products." Increasingly, by implication, these claims have turned to a health orientation and very often the closer these have come to relating the smoking benefit to being one of "health" the more successful has been the brand.

100006864-6868 at 6864 (US 20076).

2558. A May 3, 1974 note from Anthony D. McCormick of BATCo's Legal Department "[t]o all Members of the Conference" enclosed a document for discussion by BATCo employees at an upcoming company conference. Under the heading "SMOKING AND HEALTH ASSUMPTIONS," the discussion document stated: "On legal grounds alone it will continue to be to the industry's advantage not to make explicit health claims. The industry will make increasingly competitive use of products for which health claims are implied." 100428581-8599 at 8581, 8583, 8599 (US 34649).

2559. A March 29, 1976 BATCo report, titled "The Product in the Early 1980s," stated that "opportunities exist for filter and cigarette design which offer the image of `health reassurance.'" 11069974-9982 at 9974, 9979 (US 20268).

2560. An internal April 14, 1977 BATCo memorandum by P.L. Short, Manager of BATCo's Marketing Department, describing BATCo's marketing plan, stated that "[a]ll work" would be

directed toward providing consumer reassurance about cigarettes and the smoking habit . . . provided . . . by claimed low deliveries, by the perception of low deliveries and by the perception of "mildness." Furthermore, advertising for low delivery or traditional brands should be constructed in ways so as not to provoke anxiety about health, but to alleviate it, and enable the smoker to feel assured about the habit and confident in maintaining it over time.

100427791-7800 at 7794 (US 34641) (emphasis in original).

2561. An April 1982 document, titled "Conference on Marketing Low Delivery Products: January 1982," stated: "The BATCo.'s Board policy stated in the Market Expansion document is to lead the industry in the trend towards lowering deliveries. . . . [C]onsumers will probably believe that lower deliveries mean less `risky' products." 690120722-0756 at 0726, 0728 (US 21043); Ivey WD, 80:14-81:9.

2562. An undated BATCo document, titled "Lights Segment Project Consumer Insight Into Smoking Lights," listed under the heading, "How to Create a Positive Lights Culture," the following three ways to "differentiate the lights from full flavor smoking . . . Color, Cues e.g. Blues Whites . . . Lighter Lifestyles e.g., water related outdoor fun activities . . . Light symbols e.g. Bubbles[;] Air balloons[;] Light winds." 321546706-6724 at 6719 (US 46770).

2563. Susan Ivey, who worked in marketing for BATCo from 1990 to 1999, admitted that, in her experience, "while many smokers know they are buying a lights product, their actual understanding of what the specific delivery numbers are is quite limited. For example, consumers might know they are smoking a lights version of a brand, but they wouldn't know what the machine-measured tar yield was for that cigarette."

2564. Similarly, a September 1992 BATCo Business Review prepared by Norma Simamane, BATCo Lights Project Manager, stated that "[g]enerally, the specific meaning of Tar and Nicotine is not understood by consumers. However, they perceive a strong association between the numbers with `perceived health effects.' Basic understanding is that `the higher the numbers, the stronger the negative health effects.'" Instead of precluding use of advertisements intimating that low tar cigarettes are healthier, the document stated: "Reference to overt communication of health related issues must be avoided." The document also advocated using brand descriptors such as "`Light,'" "`Ultra'" and "`Suave (indicating Lights)'" as opposed to tar and nicotine yields, because "T N numbers . . . tend to highlight negatives and to remind consumers of the negatives of smoking thereby increasing the `guilt' feeling." The document further stated: "The importance of the Lights segment is demonstrated by the growth trend that is 5 times faster than total world cigarettes volume. . . . In addition to being profitable, future projections indicate an even faster growth of lights." Ivey WD, 76:10-12. Ivey WD, 82:4-11, 76:10-18; 321683062-3099 at 3087, 3090, 3065 (US 28586).

2565. A January 1995 research report prepared for BATCo, titled "Silk Cut Brand Status Check Concept Evaluation," stated, under the heading "Attitudes to LTN [low tar and nicotine]":

There was universal agreement . . . amongst ff [full flavor] smokers that they would switch to LTN if and only if a lights brand with taste could be produced. But that seemed almost a contradiction in terms for many of them as many ff [full flavor] smokers described a direct correlation between tar and nicotine levels and taste. Regular lights brands smokers — even Marlboro Lights — were reassured about health concerns by choosing to smoke such brands.

800056515-6581 at 6526 (US 31643).

2566. A BATCo document bearing the heading "Barclay Business Review 1996" concludes both that consumers rely on product packaging and marketing (as opposed to FTC tar and nicotine deliveries) to indicate low tar level and that reduced tar level significantly increases purchase interest:

Consumers — with the exception of 1MG [tar cigarette] smokers — are not able to quote correct tar/nic deliveries of the brand they are smoking currently. This means that the consumer does not segment the market in terms of deliveries but he uses colour coding and descriptors to distinguish FF, Lights and Ultra Lights . . . shelving according to [FTC tar and nicotine] deliveries has a positive impact on the awareness of the Lights category in general. The willingness to try Barclay increased significantly.

700767443-7457 at 7452 (US 22123); accord 321184656-4672 (US 22045).

2567. In a BATCo Kent Super Lights Brand Plan, BATCo discussed ways in which to "accelerate its lights segment growth." Under the heading of "Key Insights from 1997," the plan reported that "[l]ights franchise is skewed towards upscale 35+ female smokers, this is consistent with associated smoker (who is assumed to be health conscious)" and that "`[h]ealth conscious' brand choice is seen by ASU [adult smokers under] 30s as a purchase pattern for 40+ smokers." 321551304-1323 at 1304, 1305 (US 22057); Ivey WD, 78:1-13.

2568. A "Qualitative Research Report on Light Cigarette Brand Perceptions" dated January-February 1997, stated, under the heading "Benefits Sought From Lights":

Most older males pointed out that the main benefits of Lights was the fact they were less harmful. This factor was also very important for younger females, who often said they "had to think of the future." Some of the girls were sure Lights didn't form so strong smoking habits, [believing that] "it's easier to give up smoking if one smokes lights."

The "Conclusions" Section stated: "Light brands are primarily perceived as . . . less harmful for one's health (easier breathing, better physical state in general). . . . Some of the females perceive the concept of ULTRA LIGHTS as . . . the last step before giving up smoking," and noted that 18-24 year olds "ranked health care features of lights most highly." 760008596-8803 at 8686, 8692-8693 (US 54588) (Confidential).

2569. A 1999 BATCo document, titled "Lightning — Extreme Smoking Regimes Testing Results and Implications for IT and The Light-Mild Issue," cited a "Smokers' attitudes report" which showed that more smokers perceive the terms "light" and "mild" to indicate low tar than to connote taste or any other characteristic. 321989078-9276 at 9121-9122 (US 28819).

2570. A 1999 BATCo presentation on marketing in Europe bearing the headings "Research" and "Heathrow Proposition" stated that many smokers want to "trade down" in tar in order to minimize risk and harm caused by their cigarettes:

[S]trong potential for a new low tar brand — many smokers looking to trade down. . . . Low tar Minimise Risk, Maximise Pleasure. . . . New Product Proposition Low tar product with smoother yet fuller smoking experience[.] All, bar quitters, welcome proposition — more fun/enjoyment, less harm.

321628040-8076 at 8056, 8059, 8061 (US 22060).

2571. A January 2001 BATCo file, titled "Consumer Concept Trial Notes Jan 2001 Project Baltec II," contains a section dated January 10-12, 2001, titled "Philadelphia — General Impressions and Summary," that revealed the results of consumer research on low tar cigarette smokers. The document stated: "There was some guilt over smoking . . . some had switched to lights with the belief that lights are better for them. . . . General feeling that lights are healthier." 325238922-8994 at 8981, 8991-8994 (US 22079) (Confidential).

2572. A January 10, 2001 BATCo document written by Steven Coburn, titled "Project Balcony," that referenced Philadelphia, Pennsylvania marketing studies related to proposed campaigns, stated "3rd board impresses the low nic/tar idea — appears to imply healthier though no cig is healthy." 325239028-9036 at 9029 (US 22083). An identically titled document from the same author dated January 11, 2001, stated under the heading "Benefit": "Lights are supposed to be more healthy." 325239035-9036 at 9035 (US 22083). A BATCo document dated January 15, 2001 with the same title and author, but which referenced Santa Monica, California marketing studies related to proposed campaigns, stated "less tar nic — less harmful." 325239014-9027 at 9015 (US 22082).

(2) BATCo's Public Statements About Low Tar Cigarettes

2573. Susan Ivey claimed that BATCo's public position was that the use of low tar brand descriptors was "not intended to make any health claims," and was "not meant to imply that light or ultra-light cigarettes are less harmful." Ivey WD, 71:20-72:3.

e. American Tobacco Marketing of Low Tar Cigarettes

2574. American Tobacco's brands included Carlton, Lucky Strikes, Pall Mall, and Tareyton, until they were acquired by B W in 1995. Gesell PD, State of Minnesota v. Philip Morris Inc., 9/18/97, 6:10-17; 117:3-15; 25:23-26:3; 93:2-13. Like the other Defendants, American Tobacco used descriptive terms and low FTC tar ratings to convey misleading and unsubstantiated health messages to the public regarding their low tar cigarettes.

2575. For nearly 30 years, American placed advertisements in nationally-circulated magazines that emphasized Carlton's purportedly low tar. For instance, American's advertisements in Time and Newsweek in 1964 for Carlton cigarettes stated:

Everything about Carlton is selected and crafted to produce this one result: A cigarette that is low in `tar' and nicotine — yet high in smoking pleasure. Carlton is so low in `tar' and nicotine that we print test results on all packs, on all cartons. . . . Carlton — lightest smoke of all. See for yourself.

ATX040070514-0519 at 0514 (US 21125); see also ADV011 1575-1579 (US 3028); ADV107 0020-0022 (US 88689); ADV107 0023-0027 (US 88690) (1964 Carlton advertisements).

2576. A June 8, 1964 report prepared by Gardner Advertising Company for American Tobacco, titled "A Summary Report of Two Carlton Research Studies," summarized "Carlton Concept Research" and "Carlton Penetration Research." The report stated as a "Highlight" that "Based on Ad Exposure Before Product Availability," smokers "[s]aw CARLTON as a high filtration cigarette, low in tar and nicotine. Although the advertisement made no mention of it, there was a tendency to interpret CARLTON as lower in tar and nicotine, safer, less harmful." ATC2503644-3706 at 3650 (US 87891) (emphasis in original).

2577. A 1967 Annual Report of American Tobacco shows that its Carlton cigarette, which "was developed to appeal to those smokers preferring a light cigarette — one that is low in `tar' — and nicotine yield," achieved "sizeable sales increases in 1967" resulting from "favorable publicity" as a low tar, low nicotine cigarette. MNAT00029170-9201 at 9176 (US 21222).

2578. In 1968, American's Carlton advertising stressed the fact that it was found lowest in `tar' by U.S. Government testing and cited its "unique Air-Stream Filter" as the source of its ability to reduce tar to 4 mg. (as compared to what was then the industry average of over 20 mg.). ATX40397140-7141 (US 85020); MNAT00386652-6652 (US 85112); Dolan WD, 124:12-17.

2579. American Tobacco's Carlton advertisements in the 1970s emphasized FTC machine test yields to support the company's "low tar" health claim: 1973: "For 1 Oth straight published Gov't Report Carlton. Still lowest in `tar' of all regular filter kings tested. . . . For the last 10 consecutive Government Reports. Carlton has been found lowest in `tar' of all regular filter kings tested. That's every Report since October 1968." ATX040070514-0519 at 0515 (US 21125). 1974: "Of all filter kings tested: Carlton is lowest. For the 12th straight time, the U.S. Government has reported Carlton to be the lowest in tar of all filter kings tested." (US 87178). 1975: "Of all filter kings tested: Carlton is lowest. Look at the latest U.S. Government figures for other brands that call themselves low in tar." US 4605; Biglan WD, 281:17-283:22; (US 87183). 1975: "U.S. Government Report shows only one is lowest . . . Carlton." (US 88691). 1978: "U.S. GOVERNMENT REPORT: CARLTON LOWEST. Carlton claim confirmed. Many cigarettes are using national advertising to identify themselves as `low tar.' Consumers, however, should find out just how low these brands are-or aren't. Based on U.S. Government Report: 14 Carltons, Box or Menthol, have less tar than one Vantage. 11 Carltons, Box or Menthol, have less tar than one Merit. 11 Carltons, Box or Menthol, have less tar than one Kent Golden Lights. 6 Carltons, Box or Menthol, have less tar than one True. . . . This same report confirms of all brands, Carlton Box to be the lowest with less than 0.5 mg. tar and 0.05 mg. nicotine." (US 5961); (US 5978). 1978: "Carlton is lowest. See how Carlton stacks down in tar. Look at the latest U.S. Government figures [table comparing Carlton favorably with Winston Lights, Vantage, Salem Lights, Kent Golden Lights, Merit and True cigarettes]" (US 5811); (US 5707). 1978: "Based on latest U.S. Government Report: Carlton is lowest. See how Carlton stacks down in tar. Look at the latest U.S. Government figures [referring to table indicating Carlton has lower tar than Winston Lights, Vantage, Salem Lights, Kent Golden Lights, Merit and True cigarettes]." (US 5948). 1983: "Read the numbers on the pack. Carlton is lowest." (US 7637); Biglan WD, 281:17-283:22. ATX040070514-0519 (US 21125); 03496228-6630 at 6309, 6310, 6580 (US 20057).

2580. A September 1973 report prepared for American, titled "Tareyton, Iceberg 10, Carlton," discussed marketing strategies for these three brands. In the "Advertising Strategy Statement" for Carlton, the report noted that in focus group interviews "the `health' problem is most frequently mentioned, but people tend to ignore the negatives and continue to smoke out of pleasure or habit." The report went on to say that "Carlton's copy strategy for 1973/1974 will continue to be straight forward and factual, appealing to those smokers whose concern for `health' hazards leads them to seek out a cigarette with truly low `tar' and nicotine content." ATC2472182-2243 at 2216, 2225 (US 87892).

2581. When Eric Gesell, who worked for American from 1963-1994, was asked what American intended by its Carlton cigarette advertisements from 1974 and 1978 with the slogans "Carlton is lowest" and "Carlton lowest," he admitted that, "[w]hat [American is] doing in this ad is using the FTC figures in order to try to sell a cigarette." Gesell PD, State of Minnesota v. Philip Morris Inc., 9/18/97, 5:8-25, 6:5-6, 6:10-17, 115:19-118:14; ATX040070514-0519 (US 21125).

2582. When Gesell was asked what the significance was of a cigarette being lower in tar, he answered that: "It's lighter, lighter taste." When asked: "Isn't there also an implied health claim there?," he denied it: "No, there isn't." Gesell also claimed that the company "didn't have an understanding that people tended to smoke low-tar cigarettes because they were concerned about their health." Gesell PD, Minnesota, 9/18/87, 5:8-25, 6:10-17, 97:8-13, 130:25-131:4.

2583. Carlton's 1981 Marketing Plan, dated August 18, 1980, discussed ways to make Carlton cigarettes "the brand of the 1980's." The forward to the plan noted that "[t]he Ultra Low segment of the market is continuing to grow rapidly as more and more smokers search for smoking pleasure at tar levels more in tune with the mores of the times. Carlton, as innovator and category leader, is well poised to capitalize on this trend by its inherent positioning." ATC0735197-5261 at 5199 (US 87893) (emphasis in original).

2584. A 1983 letter to H.W. Bahrenburg, American Tobacco Product Manager, from Tom Keane of Laurence, Charles Free, Inc., discussed advertisements for American's Carlton cigarettes, stating that American would proceed with the advertisement that best communicated that Carlton was "`lowest'" in tar and nicotine:

Our recommendation was to go with the Bad — "Compare" with the "U.S. Gov't Report." This ad did very well in the general low-tar area and in fact it was the only ad which showed a "lowest" playback on the primary question — "What do you get out of this ad?". . . . [W]e are proceeding with "Compare" and "U.S. Gov't" on the new . . . ad.

The advertisements attached to the letter stated: "Compare to your brand. . . . Box King — lowest of all brands — less than 0.01 mg. tar, 0.002 mg. nic. Carlton is lowest. . . . U.S. Gov't Report — no brand lower than Carlton Box King — less than 0.5 mg. tar, 0.05 mg. nic. . . . FTC Report Mar. `83." 991034809-4816 at 4809, 4816 (US 85113); see also (US 7536) (1983 Carlton advertisement that appeared in Sports Illustrated magazine).

2585. An August 4, 1983 American Tobacco memorandum from John A. McGinn, Product Manager, to W.J. Moore, Marketing Director, titled "CARLTON Slims," stated: "At a 6 mg. tar level, this 100 mm product would be responsive to those consumers seeking low tar. . . . It would also extend CARLTON's `lowest' position to yet another cigarette category." 991341428-1440 at 1428 (US 85114).

2586. A February 1987 magazine advertising campaign for Carlton also prominently featured claims for tar and nicotine reduction:

If you smoke. . . . Compare your cigarette to Carlton. If you're interested in smoking an ultra low tar and nicotine cigarette, you should compare the tar and nicotine content of your cigarette to Carlton. Most cigarettes sold today have 10 times the tar and nicotine of Carlton Box Kings Box 100's.

Another Carlton advertisement campaign from the late 1980s also had lowest tar as its centerpiece and implied a United States Government endorsement, listing Carlton as having lower tar than Philip Morris's Merit and RJR's Vantage cigarettes:

If you smoke. . . . Here's the latest comparative information for smokers who want lower tar nicotine. . . . CARLTON became the first brand to put these figures right on the pack. . . . In the last 21 reports issued by the U.S. Government, no cigarette has tested lower than Carlton. . . . If you are interested in the tar content of your cigarette, you should compare the tar content of your cigarette vs CARLTON. If you are interested in the lowest . . . LATEST U.S. GOV'T REPORT CONFIRMS: no brand lower than Carlton Box King.

MNAT00746229-6229 (US 21230); (US 8246) (1986 Carlton advertisement that appeared in Sports Illustrated magazine).

2587. A February 29, 1988 American Tobacco memorandum from R.E. Smith, Director of Brand Management, to K.P. Noone, Product Manager, stated:

The singular objective of all consumer communication should be registering Carlton's lowest positioning. We must continue to hammer this lowest message home to our current franchise. It's why they came to Carlton. As switching losses to Now show, it's the best way to lure them away. . . . It is my belief that most smokers will continue to seek lower tar. They have switched for it in the past, often several times.

991216857-6858 at 6857 (US 85115).

2588. In the 1990s, American's advertisements for Carlton also featured purported testimonials of smokers who claimed to have reduced their exposure to tar by switching to Carlton, including the following: 1994: "I switched to less tar. Like many other smokers, I wanted less tar. But I thought I'd have to sacrifice flavor . . . and isn't that what smoking's all about? Then I tried Carlton . . . and I switched! Carlton is the lowest in tar. . . . I figure if you're going to switch to less tar, why not go the distance!" (US 9257); ATX040268971-8971 (US 21127). 1994: "I switched to lowest tar." (US 9285). 1994: "If you want less tar please try Carlton. . . . U.S. Gov't. Test Method confirms of all king soft packs: Carlton is lowest in tar and nicotine." 970469347-9474 at 9460 (US 85104). See also 970469347-9474 at 9452-9457 (US 88612) ("Carlton Creative" collection of advertisements including Carlton's "I Switched To Lowest Tar" advertisements); 970557462-7465 (US 85116) (Dec. 6, 1993 letter on American Tobacco letterhead from James M. Murray to Nancy Gavlick attaching similar "print ad comps" for Carlton).

2589. American Tobacco also placed advertisements for Carlton in the 1990s claiming that smokers could smoke ten packs of Carlton and still receive less tar than they would from smoking one pack of Marlboro, Camel, Winston, Kent, or Viceroy. (no bates) (US 9182) (1993 advertisement in Sports Illustrated magazine stating: "10 packs of Carlton Menthol have less tar than 1 pack of these brands"); (no bates) (US 9122) (1992 advertisement noting same); Biglan WD, 281:17-283:22; (no bates) (US 9093) (1992 Carlton advertisement stating same); 970469347-9474 at 9464-9466 (US 85104) (1990s Carlton advertisements stating same); (no bates) (US 9186) (1993 advertisement stating: "A WHOLE CARTON OF CARLTON . . . HAS LESS TAR THAN 1 PACK OF THESE BRANDS. . . . Carlton is lowest in tar and nicotine"); Smith WD, 68:15-21.

2590. A September 13, 1994 document prepared for American Tobacco, titled "LCF L Agency Orientation Handbook," describes American's print advertising strategy to

[p]rompt competitive target smokers to question their Brands Tar Level and present CARLTON as a contemporary, satisfying answer for those smokers seeking lower tar. The strategy and presentation should start and build from a common `truth' in our prime prospects mindset — to serve as a reminder that they too want less tar.

The "Positioning Statement" was: "Carlton is the brand chosen to `switch' to in the ULT category because it is the lowest in tar and nicotine, as confirmed by the U.S. government FTC method. By smoking Carlton you get the lowest and you do not have to sacrifice flavor." 970469347-9474 at 9354, 9411 (US 85104).

2591. In 1974, American Tobacco advertised that by switching to Lucky Strikes, smokers could: "Cut your `tar' in half with Lucky 100's." (no bates) (US 4405); (US 4415); Smith WD, 74:3-14; Ivey WD, 52:4-8.

2592. American Tobacco advertisements for Pall Mall Gold cigarettes in the 1950s and 1960s featured claims of "mildness" and lowered tar and nicotine, and stated: "You make out better at both ends." (no bates) (US 88720) (1953 Life magazine advertisement); (no bates) (US 87209) (1969 Life magazine advertisement); ATX040696413-6413 (US 88613*) (1968 Time magazine advertisement); (no bates) (US 87476) (1968 Time magazine advertisement); MNAT00282147-2147 (US 88614) (1969 Life magazine advertisement).

2593. A 1976 advertisement for American's Pall Mall Extra Mild cigarettes published in Sports Illustrated magazine stated: "Lower in tar than 95% of all cigarettes sold. De-tarred but not de-tasted." (US 5232); MNAT00742048-2048 (US 21229) (1976 New York Post advertisement stating same).

2594. A 1954 Tareyton advertisement explicitly stated that its cork filter provided health protection, stating: "Tareyton's genuine cork tip protects your lips." 696000888-0916 at 0913 (US 21387).

f. Lorillard

(1) Lorillard's Marketing of Low Tar Cigarettes

2595. In a May 20, 1958 letter to Morgan J. Cramer, Lorillard's Director of Export Government Operations, the General Manager of a Venezuelan distributor of Kent cigarettes noted that "the health angle" had been "our main selling and advertising point" for Kent advertising in the United States. The letter added: "We have succeeded in covering a good part of the American colony who are by far the majority of people who are sticking to Kent. No doubt they are influenced by American advertising and no doubt the mildness of Kent chimes in with the `protection' angle." 95508397-8398 (US 32365).

2596. A July 31, 1963 Lorillard memorandum from R.F. Kieling, Director of Market Research, to M.J. Kramer, President of Lorillard, with the subject heading "1963 Gallup Attitude Survey on Smoking," reached the following conclusions concerning the public's perception of the "safest" cigarette brand based on Gallup polling:

As in the past two studies (1959 and 1962) Kent leads the field here, with 18% of all cigarette smokers saying this brand is "safest" to smoke. Among filter smokers, Kent rates even higher (21%). . . . Winston and Salem are second and third choice brands, although considerably below KENT. . . . Filter and mentholated cigarettes are considered most favorably, with most people voting them "very safe" or `moderately safe. . . ."

The "General Wrap-Up" stated: "Although the American public is considerably more antagonistic towards the cigarette industry this year, the Kent brand continues to stand alone as the one brand believed `safest' by a significant proportion of other brand smokers, as well as among Kent smokers themselves." 89836071-6076 at 6074-6076 (US 32095).

2597. A September 15, 1964 Lorillard memorandum from M. Yellen to Morgan J. Cramer, President and CEO, concerning Lorillard's marketing and sales policies, stated that, for several months before the release of the first Surgeon General's Report in January 1964, "LARK [a Liggett cigarette brand] was setting a base for future sales activities through the use of hospitals via rumors or otherwise . . . that medical scientists endorse LARK as the safest cigarette. This marketing technique on the part of LARK proved successful." This memorandum also acknowledged that Lorillard's marketing of Kent cigarettes as a less harmful brand contributed to its increased sales:

As all of us are aware, KENT was marketed as a "safer" cigarette for the smoker who was concerned about smoking and health. In 1956 when an innocent third party (Reader's Digest) created an awareness to the consumer that KENT was the "safest" of all popular cigarettes, Lorillard exploited this advantage so that within a short period of two years the KENT volume grew from less than four billion cigarettes to thirty-eight billion annually. . . . I feel we were successful in accomplishing our objective and maintaining the safety image of KENT among consumers sensitive to health.

01124257-4265 at 4259, 4257-4258 (US 20033).

2598. In the early 1970s, Lorillard returned to the Micronite filter, redirecting its efforts to the product feature it had promoted for decades as providing health benefits to smokers. With respect to Kent's "marketing strategy," the "Lorillard Brand Reviews Projections 1970/71" report stated: "Losses sustained as a result of moves to higher filtration brands will be stemmed through revitalization of the Kent health assurance heritage provided by the `Micronite' Filter." 04105292-5384 at 5296 (US 29394).

2599. A May 1971 Report prepared for Lorillard, titled "A Study of the Meaning of the Micronite Filter to Smokers Today," demonstrated that Lorillard targeted "health-anxious" smokers with "health reassurance:"

The marketing strategy has been to hold on to its current Kent smokers and to attract lo-fi [low tar] smokers by promising taste satisfaction plus health reassurance. With the growth of the hi-fi [full-flavor] segment, a third target is those health-anxious hi-fi smokers who are looking for more taste satisfaction than these current hi-fi brands can deliver.

The report added that

Kent and micronite filter may be, after years of advertising, strongly associated in smokers minds. . . . Prior research suggests that dropping micronite for five years had little effect on Kent's health filter image. This does not mean, however, that if Kent had not dropped micronite for those 5 years that Kent might not have been even more strongly perceived as a health brand.

03340192-0201 at 0195-0196 (US 29265) (emphasis in original).

2600. A Lorillard document circa 1972, titled "Kent Status," stated:

Kent became a major brand after the 1957 Reader's Digest article had proclaimed it as the brand with the most effective filter. In the next years of gains and consolidation, the micronite filter was advertised as a unique Kent benefit, giving health reassurance to its growing franchise of older, better-educated, health concerned smokers.

03300409-0418 at 0411 (US 29263).

2601. A document, titled "Kent Local Newspaper Support Summary Apr/August `73," under the heading "Kent Creative Strategy," stated: "1) Consumer Benefit To convince smokers that Kent offers a combination of satisfying taste. . . . With health reassurance through superior filtration." 03078097-8110 at 8100 (US 74705*) (emphasis in original).

2602. A March 21, 1978 "Kent Advertising Brief" was prepared for the consumer research firm Foote, Cone and Belding, to provide "the background and brand information necessary to develop a global creative strategy for the Kent brand." In a section titled, "Brand Positioning," the brief recommended that "[a]dvertising and support materials should emphasize Kent's mildness in taste and health terms. The white pack and tipping will be exploited to reinforce this positioning." Also in this section, it was noted that "Kent Deluxe will present an image consistent with the King Size styles in offering health reassurance." In a section, titled "Target Audience," the brief stated that "[a]s the Smoking and Health controversy expands, it is assumed that some smokers from all socio-economic and age groups will be prepared to switch to milder, healthier brands which provide an acceptable taste and prestige." The brief maintained that "we wish to try and develop advertising for the Kent parent brands which clearly offers the smoker health reassurance. . . . The Come/Stay campaign goes some way to projecting a health image for Kent while retaining a taste message and communicating prestige." 661076440-6453 at 6445, 6446 (US 53620).

2603. On March 21, 1978, a "Kent Golden Lights Advertising Brief" was prepared for Foote, Cone and Belding, to provide advertising guidelines for Kent Golden Lights, that stated: "In industrialized nations the target consumer is unlikely to need education on the benefits of smoking low deliver [sic] products in general terms. . . . Prospective Golden Lights' consumers will know and understand the vocabulary of mildness, low tar and nicotine." 464012420-2429 at 2424 (US 47672).

2604. Lorillard's implicit health claims in Kent advertisements from the 1970s and 1980s included the following: 1972: "Micronite filter. Mild, smooth taste. For all the right reasons. Kent." (US 3785); (US 87460); (US 3837); (US 10229); (US 3797); (US 3816); see also (US 10257); (US 3932); (US 3949) (1973 magazine advertisements noting same). 1982: "Kent. When you know what counts." (US 7275); (US 7379) (1983 magazine advertisement noting same); (US 7504); (US 7702); (US 7746) (1984 magazine advertisements noting same). 2605. In 1966, Lorillard introduced True brand cigarettes. Martin Orlowsky, Chairman, President, and Chief Executive Officer of the Lorillard Tobacco Company, admitted that Lorillard's True advertisements were targeted toward smokers who, due to their concerns about health risks, were seeking a low-tar cigarette. Orlowsky TT, 10/13/04, 2288:24-2289:19.

2606. A report, titled "Lorillard Brand Reviews Projections 1970/71," stated that one of True's "marketing objectives" was to "[s]eek out highly health-conscious smokers from all filter brands." One of True's "marketing strategies" was to "[p]roject TRUE's low tar and nicotine benefit in a way that is compelling to health oriented smokers." The report also listed the following as the "copy strategies" for True: "1. Capitalize on the basic True low tar and nicotine image and the thought that health-conscious smokers have devoted to the cigarette/health issue [and] 2. Switch to True characterized as being the logical, appropriate and popular thing to do." 04105292-5384 at 5328-5329 (US 29394).

2607. Lorillard's True advertisements in the early 1970s made the following statements, which implied that switching to True brand cigarettes would provide health benefits: 1971: "Think about it. Doesn't it all add up to True?" (no bates) (US 3436). 1973: "U.S. Government tests show True lower in both tar and nicotine than 98% of all other cigarettes sold . . . Think About It." (no bates) (US 4029); see also (no bates) (US 3846) (1972 True advertisement); Biglan WD, 233:20-235:22; (no bates) (US 4221) (1974 True advertisement). 1974: "True. Easy on your mind. Easy on your taste . . . because True is so low in tar and nicotine, every cigarette is as easy on your mind as it is on your taste. Think about it." (no bates) (US 4491); see also 03496228-6630 at 6271 (US 20057) (circa 1974 True advertisement noting same). 2608. Lorillard's True advertisements from the mid-1970s portrayed True as an acceptable alternative to quitting smoking, as the following examples show: 1974: "My wife bugged me into it, would you believe it? It seemed every time I'd light up a cigarette, my wife would put on that look . . . So, we had one of our little talks. . . . Look hon, I said . . . would it make you feel better if I changed to a low tar and nicotine cigarette? She smiled. So I bought a pack of True next morning." 01767161-7161 (US 74702). 1975: "Considering all I'd heard, I decided to either quit or smoke True. I smoke True." (no bates) (US 4853); (no bates) (US 4939); (no bates) (US 5000) (1976 advertisement in Sports Illustrated magazine noting same); Biglan WD, 233:20-235:22. 1975: "With all the talk about smoking I decided I'd either quit or smoke True. I smoke True." (no bates) (US 87206). 1975: "With all I've read about smoking and things I decided to: 1. Play as hard as I work. 2. Cut out the heavy lunches. 3. And either quit smoking or smoke True. I smoke True. The low tar, low nicotine cigarette. Think about it." 03496228-6630 at 6268 (US 20057). 1975: "I thought about all I'd read and said to myself, either quit or smoke True. I smoke True." (no bates) (US 10447); 03061394-1394 (US 21700). 1975: "I'd heard enough to make me decide one of two things: quit or smoke True. I smoke True." (no bates) (US 87462); 01408237-8237 (US 21808); 03496228-6630 at 6269 (US 20057). Dolan WD, 125:1-5.

2609. As a 1981 FTC Report on cigarette advertising noted, Lorillard's True advertisements "incorrectly impl[y] that when the alternatives of quitting smoking or smoking a low `tar' cigarette are weighed, the low `tar' cigarette is the healthier option." FTC, 1981 Report at 2-12 to 2-13 (JD 004744).

2610. Several other True advertisements from 1974-1975 emphasized True's FTC method tar and nicotine measurements:

U.S. Govt. tests show True is lower in both tar and nicotine than 98% of all other cigarettes sold. That means True is not only gentle on your mind, it's gentle on your taste.

No other cigarette can make this statement: U.S. Government tests of all cigarettes show True is lowest in both tar and nicotine of the 20 best-selling cigarettes. In fact, True is lower than 99% of all cigarettes sold. . . . Doesn't it all add up to True?

03496228-6630 at 6272, 6274 (US 20057).

2611. A May 1987 report prepared for Lorillard, titled "AN EXPLORATORY STUDY — AN OVERVIEW OF THE TRUE BRAND," discussed smokers' perceptions of Lorillard's True cigarette. The report contained the following statements:

Use of the True brand or consideration of it via trial is viewed as an expression of health concern. . . . Both True smokers and those who smoke other brands expressed awareness of the way True has been advertised. It was not uncommon to attribute initial trial of the brand to being attracted by that presentation of the brand. Respondents specified having noticed the emphasis on tar count and filter. . . . Based on these findings, it would appear important to continue to stress True as a low tar brand with taste, and the "specialness" of the filter, since those are clearly important factors in motivating trial, and in conversion to the brand. . . . The respondents were also asked whether they think the image of True has changed over a period of time. Most felt unable to answer this, but it was suggested that True stood alone originally, as the brand for the health concerned.

93359378-9437 at 9378, 9385, 9387, 9420 (US 57295).

(2) Lorillard's Research on the Low Tar Cigarette Category

2612. Lorillard's internal research documents demonstrate that Lorillard conducted research not just on individual low tar cigarette brands, but on low tar cigarettes as a category. These documents establish that Lorillard has long known and intended that its advertisements and marketing for low tar cigarettes, featuring claims of lowered tar and nicotine and "light" and "ultra light" brand descriptors, contributed to and reinforced consumers' mistaken belief that low tar cigarettes are better for their health, and caused consumers to smoke them for this reason.

2613. A November 13, 1973 presentation by Alexander Spears, a Lorillard scientist and later Lorillard's CEO, noted in a discussion of "Health psychology" that smokers' concern about the health effects of smoking "has been used to an advantage in marketing both the KENT and TRUE brands." The document stated: "Clearly the consumer is concerned about smoking and health, and is convinced in varying degrees that smoking is a possible detriment to his health. Presently, this factor is of active interest to R D, since it has been used to an advantage in marketing both the KENT and TRUE brands." 80634635-4642 at 4639 (US 21063).

2614. Lorillard was well aware in 1976 that consumers perceived its low tar brands as less harmful. A November 30, 1976 Lorillard memorandum from R.E. Smith to fellow Lorillard marketing executive J.R. Ave, with the subject heading "1976 Switching Study," stated:

I share MCA's overall conclusion that the Switching Study confirms the rightness of our 5 Year Plan; focussing [sic] Company effort against smokers' health concerns. . . . This view suggests sensible positionings for those Lorillard brands that directly address smokers' health concerns. (I believe these are totally compatible with ongoing work).

03918494-8495 at 8494 (US 74777), 03296482-6544 at 6485 (US 64511).

2615. Lorillard's "CONFIDENTIAL" 1976 "DOMESTIC CIGARETTE MARKETING 5 YEAR PLAN 1976-1980" stated:

Consumer preferences have shown a dramatic shift since World War II away from non-filter brands towards brands more responsive to the cigarette smoking and health controversy, and less harsh, filtered cigarettes, and, most recently, towards filtered brands offering low tar and nicotine.

The document further stated: "The most recent 6 year period has followed the traditional pattern in many essential characteristics . . . 2) impressive gains by brands offering a perceived solution to health concerns." 03357128-7178 at 7137 (US 85023); Orlowsky WD, 65:10-19; 65:20-66:2.

2616. Lorillard's Five Year Plan for 1977-1981 stated: "The structure of the market is changing in the direction we forecast in 1976 — toward brands responsive to the cigarette controversy." The plan further pointed out: "The success rate of new products . . . is again on the uptrend with the emergence of products responsive to very specific and tightly focused concerns about the cigarette controversy." 904100641-0706 at 0642, 0646 (US 74853).

2617. A January 26, 1977 Lorillard memorandum from Dick Smith to J.R. Ave stated:

The Nowland Research strongly confirms the rightness of Lorillard's marketing concentration in the area of health concern. Smokers are extremely and increasingly health concerned. And these smokers are actively interested in better ways to lessen/eliminate this concern — while continuing to smoke. More specifically, our going projects are on target. . . . I suggest that both the Kent and TRUE Brand Groups analyze the complete Nowland Report. Our established health concern brands should be able to develop specific strategic and executional actions from this rich, diagnostic research.

01244406-4408 (US 74669); Orlowsky WD, 66:10-67:5.

2618. A June 14, 1978 Lorillard document stated:

There is a major opportunity for a brand which can simultaneously satisfy smokers and address the concerns arising from the cigarette controversy. 1. Very low tar products — line extensions and independent brands — have been the fastest growing cigarette segment during the last two years which indicates that an ever increasing number of `concerned' smokers are striving to go as low in tar as possible while still getting acceptable taste. There is no reason to believe that these smokers have found their ultimate reduced tar brand. More likely, they are prime candidates to move even lower over time. Comparing 1976 with 1977 sales, the ultra low tar segment grew 14% and is now accounting for a total of 24 billion units. We project that by 1981, the category will increase to 47 billion units, a growth of 96%."

00138232-8233 at 8232 (US 74655) (emphasis in original).

2619. A January 31, 1980 Lorillard memorandum from Larry DuLude to fellow consumer researcher Gordon Flinn stated, under the heading "Consumer Attitudes toward Smoking": "Increasing interest in Low Tar . . . Increased number of health-concerned smokers." 01782312-2322 at 2313 (US 74959).

2620. A Lorillard document circa 1984 reported that Laurence Tisch, who served on Lorillard's Board of Directors in 1969 and 1985, and who from 1959 was the Chairman of the Board of Loew's which merged with Lorillard in 1968, stated at a New York State Department of Insurance hearing:

Lorillard was the leader in the so-called health cigarettes, the low tar, the low nicotine cigarettes. They first introduced Kent with the micronite filter ten or fifteen years ago. It was a very successful entry because that was when the health scare first came into vogue. They followed that with the successful entry of True by Lorillard. . . . We feel that we make cigarettes that are healthier than other cigarettes — low in tar and nicotine.

91780361-0398 at 0362-0363, 0375, 0394 (US 85024).

2621. A Lorillard document discussing its three-year plan for 1985-1987 stated, below the "Influence of Low Tar" heading: "More smokers will continue to see low tar brands as a way of dealing with the smoking controversy. Reduced Tar volume now represents 48% of the total industry, up from 37% in 1979." 80403362-3376 at 3362 (US 55377).

2622. According to Stephen Jones, a Lorillard chemist who worked for Lorillard for more than twenty-eight years and participated in the design of almost all the Lorillard cigarette brands, including Newport, Kent Golden Lights, Kent III, Triumph, Maverick, Style, Old Gold, and Max, Lorillard's marketing plans sought to address what the company thought consumer preferences would be. Jones believed that consumers felt that there was a health advantage to smoking reduced tar or filtered cigarettes and that, by and large, smokers of all ultra low tar cigarettes, including Lorillard's True brand, perceived such cigarettes to be more healthy. Jones PD, Reed v. Philip Morris, 4/22/97, 136:5-139:21; Jones PD, Reed, 4/27/97, 141:12-141:18; 143:12-143:15.

g. Liggett

2623. On September 5, 2001, Dr. Anthony Albino, Executive Vice President, Strategy, Communication and Consumer Contact at Vector Tobacco, Inc., sent an e-mail to a number of recipients, including Bennett LeBow, Chairman of the Board and Chief Executive Officer of Vector Group, Ltd., and VGR Holding Inc., admitting that: "the adoption of `light' cigarettes over the past 25 years was mainly due to the PERCEPTION of safety." VDOJ6743-6744 at 6743 (US 64727) (emphasis in original); LeBow TT, 4/4/05, 17594:24-17596:17.

2624. Liggett sold its Chesterfield, Lark, and L M brands to Philip Morris in 1998. The Liggett Group Inc. continues to market light cigarettes under its brands Class A, Eve, Jade, Liggett Select, Montego, Pyramid, and under a generic Private Label. Bennett LeBow admitted that his company continues to market light cigarettes under these brand names because Liggett could not cease marketing light cigarettes and remain in business. LeBow asserted that every cigarette manufacturer in the industry must continue to sell light cigarettes in order to survive. (no bates) (US 93254); LeBow WD, 66:10-12; LeBow TT, 4/4/05, 17597:6-17598:16, 17600:4-17603:2.

6. Conclusions

2625. The evidence set forth above overwhelmingly establishes the following facts.

2626. It is clear, based on their internal research documents, reports, memoranda, and letters, that Defendants have known for decades that there is no clear health benefit from smoking low tar/low nicotine cigarettes as opposed to conventional full-flavor cigarettes. It is also clear that while Defendants knew that the FTC Method for measuring tar and nicotine accurately compared the nicotine/tar percentages of different cigarettes, they also knew that that Method was totally unreliable for measuring the actual nicotine and tar any real-life smoker would absorb because it did not take into account the phenomenon of smoker compensation. Defendants also knew that many smokers were concerned and anxious about the health effects of smoking, that a significant percentage of those smokers were willing to trade flavor for reassurance that their brands carried lower health risks, and that many smokers who were concerned and anxious about the health risks from smoking would rely on the health claims made for low tar cigarettes as a reason, or excuse, for not quitting smoking.

2627. Despite this knowledge, Defendants extensively — and successfully — marketed and promoted their low tar/light cigarettes as less harmful alternatives to full-flavor cigarettes. Moreover, Defendants opposed any changes in the FTC Method which would more accurately reflect the effects of compensation on the actual tar and nicotine received by smokers, denied that they were making any health claims for their low tar/light cigarettes, and claimed that their marketing for these cigarettes was based on smokers' preference for a "lighter," "cleaner" taste.

2628. By engaging in this deception, Defendants dramatically increased their sales of low tar/light cigarettes, assuaged the fears of smokers about the health risks of smoking, and sustained corporate revenues in the face of mounting evidence about the health dangers of smoking.

* * * *

H. At Various Times, Defendants Attempted to and Did Suppress and Conceal Scientific Research and Destroy Documents Relevant to Their Public and Litigation Positions

3863. Defendants attempted to and, at times, did prevent/stop ongoing research, hide existing research, and destroy sensitive documents in order to protect their public positions on smoking and health, avoid or limit liability for smoking and health related claims in litigation, and prevent regulatory limitations on the cigarette industry.

3864. The evidence of Defendants' suppression of research and destruction of documents consists of events which often seem to be unrelated and to lack a unifying thread. Defendants claim these facts, most of which are undisputed, amount to no more than a string of isolated instances which prove nothing. This explanation misses the point. The evidence is clear that on a significant number of occasions, Defendants did in fact suppress research and destroy documents to protect themselves and the industry. The fact that much additional evidence may be lacking because Defendants were successful in their efforts to suppress, conceal, and destroy materials that would have reflected adversely on their corporate interests is hardly a justification for ignoring the evidence that does exist. Moreover, in those instances where Defendants did successfully suppress, conceal, and destroy materials, it is most unlikely that there would be any evidence to reflect that since it would no longer exist. By destroying evidence, Defendants make it virtually impossible to know what materials existed prior to their destruction.

1. Suppression and Concealment of Scientific Research

3864. At various times, Defendants suppressed or otherwise concealed documents and information adverse to their public or litigation positions. For example, notes of a November 5, 1975 CTR meeting of a subcommittee of the Research Liaison Committee reveal that Ed Jacobs of Jacobs Medinger directed that "no further formal minutes be made — also all should remove notes previous minutes from corporate files." 1003294811-4811 (US 20171).

3865. In 1978, Sheldon Sommers, Chairman of the CTR Scientific Advisory Board ("SAB"), complained to William Gardner, the Scientific Director of CTR, that he (Sommers) was concerned that the CTR lawyers were controlling tobacco research by CTR based upon legal considerations. Sommers stated: "I think CTR should be renamed Council for Legally Permitted Tobacco Research, CLIPT for short." Indeed, the lawyer control of CTR had become so pervasive that Sommers concluded that "[m]y considered opinion is that the time for me to sever connections with CTR is near." 11319256-9256 (US 20281). He resigned as Chairman of SAB in 1980.

3866. In 1981, Robert Northrip, a Shook, Hardy Bacon attorney who at various times represented Philip Morris and B W, explained at a Committee of Counsel meeting that lawyers' Special Project funding was used to allow adverse research findings to be hidden from the public. 521038287-8291 at 8289 (US 30481).

a. R.J. Reynolds

3867. To its credit, R.J. Reynolds ("RJR") disclosed large portions of its scientific research. RJR scientists have published more than 800 manuscripts since 1980 in the fields of chemistry, biology and toxicology. Townsend WD, 196:13-16 (discussing (no bates) (JD 067970)). Likewise, Reynolds scientists have made over 800 scientific presentations at scientific conferences like the Society of Toxicology and the Tobacco Science Research Conference, among others, since 1980. Townsend WD, 196:17-20.

3868. Once the Vice President of R D decided that scientists should do certain research, they were allowed to conduct the research, freely discuss it with each other, and freely write memoranda about it. DiMarco, Burton Dep., 8/14/01, 205:1-12; Townsend WD, 193:10-24, 194:1-7.

3869. No one at RJR prevented R D scientists from publishing material once the Vice President of R D decided it should be published. DiMarco, Burton Dep., 8/14/01, 205:13-18; see also Mosberg, United States Dep., 4/23/02, 45:21-48:12 ("[c]ertainly nobody impeded us from publishing, but in some instances where no new findings were observed, we didn't publish that work.").

3870. Despite that history, RJR's lawyers — both inside and outside counsel — had significant influence on the actual research conducted by the company. A 1985 "fact memorandum" from RJR's outside counsel, Jones, Day, Reavis Pogue, described RJR's research and development activities. The Law Department and R D Management exerted control to "prevent the distribution or production of certain reports," including a 1953 literature survey by Claude Teague that "indicted" cigarette smoking. 515873805-3929 at 3896-3897 (US 21922). Another company scientist, Jim Fredrickson, who was working on identifying nitrosamines (carcinogens) in smoke in approximately 1965-67, was told "not to prepare a final report on his research but merely to record the work in his laboratory notebooks." 515873805-3929 at 3898-3899 (US 21922).

3871. A December 31, 1985 memorandum from Jones Day makes clear that "[a]fter the 1964 Surgeon General's report came out, the Law Department, according to Ralph Rowland, did influence research objectives to a degree, because the lawyers did not want anyone performing research that would appear to acknowledge that cigarettes or cigarette smoke contained harmful constituents or posed a health problem." The memorandum also noted that "the Law Department did participate in setting the guidelines for testing of additives," and "[s]ince Sam Witt became General Counsel of R.J. Reynolds Tobacco ("RJRT") in 1981, the Company lawyers have played a major role in reviewing research protocols relating to smoking and health and drafting R D mission statements . . . [I]t was understood that the lawyers controlled things in this area." The memorandum acknowledged that "the Law Department through the years has had a great deal of influence over RJRT-sponsored outside research," and that "Jacob, Medinger has played a major role in reviewing and choosing foreign research projects to be funded by RJRT." It also stated that "Peter Van Every (an attorney in the Law Department of RJRT) . . . [had a] `New York Times principle,' . . . by which [he meant that] `things should not be written that could not be published in theNew York Times.'" 515873805-3929 at 3870, 3875, 3878, 3879, 3886, 3893 (US 21922).

3872. In December 1982, RJR attorneys (both those within the company and outside) became very concerned about positions taken and statements made by Robert DiMarco, the head of RJR's Research Department. Those concerns are discussed in detail in a December 13, 1982 memorandum from Wayne Juchatz, who later would become RJR's General Counsel, to Sam Witt, who was then RJR's General Counsel. The memorandum discusses a lengthy meeting between Juchatz and DiMarco in which DiMarco stated that it was "essential" that RJR try to develop a "less mutagenic [carcinogenic] cigarette," but said that he had been told by Ed Jacob, an outside counsel, that he could not do that. When Juchatz explained to DiMarco his concerns from a product liability standpoint, DiMarco "refused to accept it as a rationale for not doing what he felt [RJR] had an obligation to do (as a responsible manufacturer)." Juchatz stressed the need for "close cooperation" between the R D Department and counsel. 505741150-1153 at 1150-1151 (US 23009).

3873. At that meeting, DiMarco readily acknowledged that his scientific views were in "direct contradiction" to RJR's legal positions and stated that over the prior twenty years knowledge about "cancer causation . . . had developed . . . to the point where . . . [RJR's] legal defense [that there was no causation] had been rendered (or was perilously close to being rendered) obsolete." DiMarco further told Juchatz that RJR's medical/scientific witnesses "lacked credibility and integrity." 505741150-1153 at 1151 (US 23009).

3874. DiMarco also told Juchatz that he was so concerned about the "rigid legal positions" taken by RJR outside legal counsel — "which had restricted the proper functioning of the R D Department" — that he would seek "`second opinions' [either from RJR's Legal Department or, if necessary, from outside counsel of his own choosing] on past legal advice restricting R D activities." 505741150-1153 at 1151 (US 23009).

3875. Finally, at the December 1982 meeting, DiMarco advised Juchatz that, contrary to RJR's official legal position, he would not oppose FDA regulation of the tobacco industry. Juchatz, in his memorandum, concluded that "[t]his statement reflected an insensitivity to the legal and political issues inherent in FDA regulation of our business." DiMarco also disagreed with the Legal Department's efforts to remove ammonia from the list of ingredients required to be supplied to the Department of Health and Human Services. After further pressure from the Legal Department, DiMarco "reluctantly" agreed to the proposed removal. 505741150-1153 at 1151-1153 (US 23009).

3876. Following the December 1982 meeting between DiMarco and Juchatz, RJR attorneys, principally its outside counsel, became so concerned about DiMarco and the possibility that his views, if made known outside of RJR, would create great litigation risk for RJR, that the lawyers discussed the possibility of terminating him. The Legal Department met for a full day with outside counsel to discuss how to handle DiMarco. The lawyers concluded that "[w]e [counsel] will, therefore, be required to maintain close surveillance of [DiMarco's] R D work in order to minimize the risk that [DiMarco's] `beliefs' find their way into documents or projects which create unnecessary legal risks." 505741143-1147 at 1146 (US 20747); Juchatz TT, 11/18/04, 6611:12-6611:22. In a subsequent memorandum on the same issue, the lawyers reiterated that DiMarco's beliefs created legal risks for RJR:

[W]e have advised management based upon our own and outside counsel's opinion that there are substantial litigative risks associated with having an individual as head of R D who believes that smoking causes disease. . . . We have further advised management that while this risk can be reduced, it cannot be eliminated.

They reiterated that they would be required to "closely [monitor] what is in fact going on in the R D department." 505745988-5992 at 5991 (US 20748).

3877. In 1982, outside counsel Ed Jacob advised RJR and its Research Development Department that: (a) RJR could not make a "safer" cigarette, as that would create substantial legal concerns; (b) Research Development would have to work closely with the Legal Department if RJR were to allow Research Development to try to develop a safer cigarette; and (c) one of the serious legal concerns that RJR had was that any work on a safer cigarette would amount to an implicit admission that existing RJR products are unsafe. Juchatz TT, 11/18/04, 6575:18-6576:25, 6583:4-6584:14, 6585:4-6586:5, 6590:19-6591:20, 6592:23-6593:21, 6594:25-6595:23, 6597:6-6598:1, 6599:8-6599:19.

3878. Despite the concerns raised by RJR counsel and what appears to be the close scrutiny of DiMarco's activities, he himself does not appear to have felt that his operation of the R D department was compromised. Dr. DiMarco, an RJR employee for over thirty years, stated in 1999 that his discussions with RJR lawyers were simply to make sure that he was going to run the research and that the company was committed to his research. DiMarco, Falise Dep., 10/29/99, 193:18-194:14. Indeed, he emphasized that, at all times, he controlled his department. DiMarco, Falise Dep., 10/27/99, 57:25-58:22. In a 2001 deposition, Dr. DiMarco indicated that he did not recall feeling, during January 1983, that he was not in control of the R D Department or that he was frustrated. DiMarco, Burton Dep, 8/14/01, 65:11-66:5. Dr. DiMarco did not recall an occasion on which he was told by the president of RJR what research he could or could not perform. DiMarco, Burton Dep., 8/14/01, 202:9-202:15; 203:2-17. For more detail on DiMarco, see Section V(D)(5)(b)((2))((a)), supra.

b. BAT Group

3879. BAT Industries plc (which became BAT plc in 1998) was a vast empire of frequently-shifting companies in the United Kingdom, the United States, and Australia. Throughout the 1980s and most of the 1990s, BAT Industries was the parent company of Defendant B W in the United States and Defendant BATCo in the United Kingdom. BATCo is the former parent of B W, but was a sister corporation from 1979 to 2004. BATUS, a holding company, is now the immediate parent company of B W. These many far-flung corporate entities, along with numerous other operating companies owned by BAT Industries, including British American Tobacco Australia Services Limited ("BATAS"), formerly W.D. H.O. Wills, cooperated and coordinated their activities and policies to prevent documents from being discovered in United States litigation and federal regulatory proceedings, and from being disclosed to the American public.

3880. Shortly after joining B W as Vice President of Research and Development in 1989, Jeffrey Wigand, as part of his orientation, was required to go to Kansas City, Missouri to meet for three days with lawyers from the law firm of Shook Hardy Bacon for an orientation session. Id. at 30:16-31:2.

3881. At the session Wigand was "coached by lawyers regarding the company line on smoking and health, and addiction." The company line was "[t]hat causation had not been proven and that nicotine had not been shown to be addictive." Id. at 30:10-30:15. Wigand described the orientation session as follows:

Lawyers were instructing me, a scientist, how to interpret epidemiological studies. In every instance, I was instructed that the evidence in the public health domain had not satisfactorily proven causation. I was told that studies that demonstrated a link between smoking and cancer were fraught with errors. Moreover, I was told that epidemiology could not be relied upon because it was just statisticians doing guess work.

Id. at 32:5-33:6.

3882. Scott Appleton, a scientist who specialized in toxicology and was hired by Wigand while he was head of Research and Development at B W, was also required to attend a similar lawyer training session at Shook Hardy Bacon. Wigand WD, 34:11-35:10; 680901663-1665 (US 79219).

3883. In September 1989 the Brown Williamson Research Policy Group ("RPG") met for several days in Vancouver British Columbia. Wigand WD, 35:21-23; see also 901096811-6811 (US 89367) (memorandum from Jeffrey Wigand to Alan Heard listing recommended agenda items for the meeting); 620202422-2432 (US 89368) (meeting agenda). The RPG was comprised of the top scientists from each of the BAT Group's cigarette companies, including B W, BATCo, Imperial Tobacco of Canada, W.D. H.O. Wills of Australia and others. Wigand WD, 36:1-17.

3884. Several sensitive issues were discussed at the Vancouver meeting including

nicotine analogues, biological assays and biological testing methodologies (including NTP protocol), environmental tobacco smoke (ETS), Y-1 genetically enhanced-nicotine tobacco, how to selectively reduce the particular noxae that were in tobacco smoke, fire safe cigarettes, and FDA regulation.

Wigand WD, 39:3-40:13; see also 620202422-2432 (US 89368). Following the meeting, BATCo scientist Ray Thornton prepared a detailed thirteen-page set of minutes, "which summarized the discussion and the actions of the meeting." Wigand WD, 41:9-18; 401034784-4796 (JD 011303).

3885. The Court does not credit the testimony of either J. Kendrick Wells or Jeffrey Wigand about what happened to the Vancouver conference minutes. Wells' testimony was simply not credible and Wigand's was unreliable, contradictory, and impeached on a number of points. However, a comparison of the thirteen-page draft minutes and the three-page final minutes demonstrates that significant material was deleted from the longer draft. Compare 401034784-4796 (JD 011303) and AA0374-0374 (JD 011304).

3886. After the Vancouver conference, there was concern amongst the BAT Group executives that scientists' statements would contradict the public statements and legal positions being taken by the company. As a result, Patrick Sheehy, then Chairman and CEO of BAT Industries, ordered BAT Group lawyers to bring the scientists together for a meeting to "solidify a method by which records related to scientific meetings and scientific research would be handled in the future." Wigand WD, 54:2-55:16; 202347085-7086 (US 22032).

3887. The meeting was convened by Stuart Chalfen, the Chief Solicitor of BAT Industries. The meeting was held in New York City in January 1990 (the "NYC meeting"). It was run by Nick Cannar, head of BATCo's legal department, who also prepared the meeting agenda. 202347085-7086 (US 22032).

3888. At the meeting, BAT representatives discussed litigation concerns:

Concern about volume of research documentation spread around the Group; Discovery; Difficulties faced by author company in explaining documents in a foreign court particularly if it is not even a party to the proceedings in which those documents are to be produced. . . .

202347085-7086 (US 22032); Wells WD, 46:1-5.

3889. The NYC meeting agenda also set forth procedures to ensure that minutes from future scientific meetings would not contain "contentious" material. The agenda states:

2. Improve quality of [scientific] documents by:

a) Educating scientists in each research centre about document writing/document creation.

b) Regular lawyer reviews and audits of scientific documents produced in each company.

c) Arrange a system to ensure that all research related conference minutes involving representatives of more than one Group company are vetted by the lawyer for the company issuing the minutes before the minutes are sent out.

202347085-7086 (US 22032).

3890. As suggested at the meeting, BAT thereafter held a series of mandatory training sessions about writing and document creation for company scientists. "The sessions were called `caution in writing' seminars and at Brown Williamson they were presented by lawyers, predominantly from Shook, Hardy Bacon." Wigand WD, 59:13-23. At the seminars, scientists were instructed by lawyers "on how to sanitize the documents they created." Id. at 60:1-6. The scientists were told "how to avoid writing documents with contentious words and topics." The contentious words included words like "safer," "addictive," "disease," and "cancer." Id. at 64:15-23.

3891. As a follow-up to the New York City meeting, BAT also implemented "lawyers' reviews" whereby, company scientists could only send documents containing sensitive information to sister companies if the document was first "reviewed and approved by a company lawyer." Wigand WD, 60:7-14.

3892. As also suggested at the NYC meeting, BAT implemented a policy to have lawyers vet research-related conference minutes. The word vetting as used within the BAT Group of companies meant "[d]eliberately and consciously removing contentious and controversial information from company documents that would benefit an adversary in litigation." Wigand WD, 35:15-20. As Wigand testified:

Nick Cannar told us that before meeting minutes could be circulated, they would be reviewed by the lawyers and, if necessary, the lawyers would remove contentious information before the minutes could be circulated.

Id. at 61:3-6.

3893. At the NYC meeting, lawyers Nick Cannar and Kendrick Wells:

agreed that the cost sharing agreement would be revised to specifically state that BATCo owned the documents that it created and that it could demand them back at any time. So, for example, the thought was that if lawsuits in the United States were seeking documents created by the Fundamental Research Center, then BATCo could demand all copies of the documents back from the United States and Brown Williamson would be saved from having to produce them in litigation.

Wigand WD, 28:14-29:4.

3894. Following the NYC meeting the agreement was changed "so that now documents were the property of BATCo and BATCo could demand the return of the documents at any time." Id. at 27:23-28:2. The BAT Group companies' cost-sharing agreements were re-written to "recognize [each] company's claim to ownership/confidentiality of its research reports" and to provide for the "return of all copies of these [research] documents upon demand." 202347085-7086 (US 22032). "[T]he cost sharing agreement set forth an arrangement by which the various Cigarette Affiliated Companies (CAC) shared the cost for the Fundamental Research Center in Southampton, England." Wigand WD, 27:5-8, 27:9-18. In 1992, Brown Williamson wrote BATCo a letter regarding the revised Cost Sharing Agreement, in which it stated that it would "not . . . return documents if returning the documents would be inconsistent with Brown Williamson's discovery obligations in pending litigation." (no bates) (JE 021689 at 682508295); (no bates) (JD 012922 at 682010312-17).

3895. In a May 1991 memorandum from Kendrick Wells to Mick McGraw, B W General Counsel, Wells wrote:

Jeff [Wigand] believes that he now sends me a copy of all documents from BATCo . . . in the nature of meeting reports and scientific memos. He also sends appropriate scientific research reports. I told him that it was important that we had an opportunity to review the BATCo. materials. As a case in point, I recommended that we should follow up with BATCo. on statements made in a set of studies done for BATCo. at Harwell. They include statements that means are available which will remove minute foreign materials from tobacco. B W R D looked at this question a year or so ago and decided that no such means existed. The question could be involved in a safer product claim. Thus, we should communicate with BATCo. to discuss their assertion that such means are available.

680901663-1665 at 1664 (US 79219); see also Wigand WD, 76:25-77:28.

3896. Brown Williamson itself suppressed certain scientific research particularly through lawyer oversight and vetting. In an August 1980 memorandum, Kendrick Wells, at that time corporate counsel to B W, listed numerous edits that would be required before BAT scientist, Dr. Lionel Blackman could publish "Change of Stance on Public Smoking and Health," which Blackman had drafted. In justifying the edits, Wells wrote:

The successful defense of product liability litigation and opposition to adverse legislation in the United States depends upon two essential arguments: (1) The scientific evidence does not prove a causal relationship between smoking and health and (2) the smoker voluntarily encounters the known risks of smoking.

A concession by a cigarette manufacturer to the charge that cigarettes cause human disease or a statement which contradicts the concept of voluntary choice of smoking by the consumer could cripple or destroy B W's defense to smoking and health lawsuits and opposition to legislative attacks. This would be true even though the statements were made by BAT.

680050985-1001 at 0986 (JD 053700). "Change of Stance on Smoking and Health" as originally drafted by Blackman was never released to the public. Wells WD, 21:6-8.

3897. Wells also advised Dr. Blackman to remove the statement that "cigarettes are harmful to health in proportion to delivery" from a presentation he gave to INFOTAB in 1981 called "Basic Approach to Government and Medical Authorities," because such a statement "would abandon, in effect, all substantive arguments that the relationship of smoking and health is unproven." After speaking directly to Wells, Blackman removed that language based on Wells's legal advice. 680585041-4042 (US 21006); 680585063-5064 (US 21007); 2024954637 (US 37176); 2024954638 (US 37177). No evidence was offered as to what came of this presentation after it was given to INFOTAB.

3898. B W edited adverse references to addiction out of another BAT report written by Dr. Blackman, titled "The Controversy on Smoking and Health: Some Facts and Anomalies." By letter dated October 25, 1984, B W attorney J. Kendrick Wells wrote BAT counsel Alec Morini that "review" of BAT publications by B W was necessary in light of ongoing smoking and health litigation. Wells went on to provide forty-five paragraphs of revisions to Blackman's draft and a marked-up report, including:

2. Delete Donald Gould reference. The article identifies cigarettes as a drug.

3. Delete reference to Dr. W.S. Cain. The article identifies short terms and longer term pharmacological and physiological factors as important in the derivation of "habitual cigarette smoking. . . ."

5. Delete. The point made here might be said to run counter to arguments that cigarette smoking is not addictive. . . .

680582499-2507 at 2499-2500 (US 54052).

3899. Wells attached a marked-up copy of Blackman's report to his October 25 cover letter, where he indicated his edits and the corresponding paragraph numbers from his letter. The three paragraphs quoted above were ultimately removed from the report. 680582512-2512 (US 85396).

3900. On May 29 and 30, 1984, attorneys from B W and BATCo held a conference on United States products liability litigation. During the course of that conference, "Project Rio," a biological testing program to develop cigarettes with less biological activity, was discussed. According to a memorandum written by Wells, the attorneys

were able to hold significant discussions about implications for U.S. products liability litigation . . . regarding Project Rio. BAT Legal acknowledged the needs for lawyer involvement in the project and for possible restructuring, but there was not enough time to plot a course of action.

Wells considered follow-up and further summarized the meetings in a June 12, 1984 file note:

[W]e should arrange a meeting in London with BAT Legal . . . to delineate more specific counsel to BAT, including proposals for the structure and organization of BAT programs and statements which would hold to the minimum feasible level their potential impact upon U.S. products liability litigation. . . . For example, if Project Rio must continue, restructuring probably will be required to control the risk of generating adverse evidence admissible in U.S. lawsuits.

* * *

Direct lawyer involvement is needed on all BAT activities pertaining to smoking and health from conception through every step of the activity.

The problem posed by BAT scientists and frequently used consultants, who believe cause is proven [i.e., that smoking causes disease] is difficult.

685092972-2974 at 2973 (US 31031).

3901. Wells edited many more scientific documents to remove material that might be damaging to B W in litigation. 680583045-3045 (US 85395); 690128746-8921 (US 25461); 680858743-8743 (US 21723); 682000188-0188 (US 89376); see also 680585135-5135 (US 22976).

3902. The Legal Department at B W generally reviewed scientists' statements on smoking and health before they were made public. The review was conducted in part so that the Law Department could tell the scientists that these sorts of statements could have adverse consequences for the company in product litigation. Wells WD, 16:4-19.

3903. On some occasions, the legal department at BATCo similarly worked with scientists. On September 18, 1991, Sharon Boyse, Manager of the Smoking Issues Corporate Affairs Department at BATCo, wrote to G. Symmes of W.D. H.O. Wills in Australia instructing him that the scientific content of a document prepared by the Tobacco Institute of Australia was "NOT acceptable to BAT until those changes are made!" In the letter, Boyse instructed scientists at Wills to remove any suggestion from a document that scientific articles had "claimed a statistical association between ETS exposure and the development of lung cancer." The letter went on to require removal of any suggestion that tobacco smoke contained carcinogens because the studies that suggested that tobacco smoke contained carcinogens "are animal studies. . . ." 750075351-5352 (US 16182); 304002839-2840 (US 16183); 304002839-2840 (US 79027).

3904. Richard Binns, the former Manager of BATCo's Group Research Development Centre at Southampton, complained of the expansive role of lawyers in BATCo's science, writing that:

I am being asked to make significant and sometimes swingeing [sic] changes in documents produced recently by R D staff. It is suggested that this must be done by finding a "managerial explanation" for the changes, without reference to the involvement of Legal Department. I will find this impossible to do. Senior R D staff will not be so easily deceived. Personally, I am not prepared to lie to staff for very doubtful reasons. Therefore, the current lack of clarity about the relationship between R D and Legal Dept. has raised questions which for me are ethically disturbing, particularly if extended beyond the present localized situation.

109878083-8089 at 8089 (US 21767); Read PD, United States v. Philip Morris, 07/25/03, 157:20-159:3.

3905. As Defendants note, it is both reasonable and legitimate for lawyers to advise their clients about the potential use of documents in litigation against them. However, the totality of the Factual Findings demonstrate a pattern of behavior amongst all BAT Group Defendants in which legal considerations and lawyers' strategies dominated both the direction and disclosure of scientific research.

c. Philip Morris

3906. Defendant Philip Morris suppressed and concealed many scientific research documents, even going so far as to send them to a foreign affiliate in order to prevent the disclosure of documents in litigation and in federal regulatory proceedings.

3907. In 1970, Helmut Wakeham, Philip Morris's Vice President for Research Development, recommended that Philip Morris purchase INBIFO, a research facility in Cologne Germany, arguing that Germany "is a locale where we might do some of the things which we are reluctant to do in this country. . . ." 2022244451-4453 at 4451 (US 20361).

3908. Philip Morris did in fact purchase INBIFO to conduct its smoking and health research. A 1970 memorandum from Joseph Cullman, President of Philip Morris, discusses the benefits of conducting research overseas: "The possibility of getting answers to certain problems on a contractual basis in Europe appeals to me and I feel presents an opportunity that is relatively lacking in risk and unattractive repercussions in this country." 1000216742-6742 (US 20081). In addition, "[e]xperiments can be terminated at will as required without delay." 1003123055-3094 at 3058 (US 20154).

3909. After acquiring INBIFO, Philip Morris tried to avoid any direct contact with the research results that it produced or worked on. Handwritten notes of Thomas Osdene, a senior Philip Morris research official who acted as primary liaison with INBIFO, laid out the method for handling documents related to health and smoking. His notes state as follows:

(1) Ship all documents to Cologne. . . .

(2) Keep in Cologne.

(3) OK to phone telex (these will be destroyed).

(4) Please make available File Cabinet. Jim will put into shape by end of August or beginning of Sept.

(5) We will monitor in person every 2-3 months.

(6) If important letters have to be sent please send to home — I will act on them + destroy.

1000130803-0803 (US 34424). Despite this process, "plenty of telexes" and "lots of communications" went back and forth between INBIFO in Cologne, Germany and Philip Morris USA in Richmond, Virginia. Farone TT, 10/7/04, 1943:18-1944:4.

3910. In 1977 in a letter to Max Hausermann, Philip Morris Vice President of Research Development in Switzerland, Robert Seligman, Philip Morris Vice President of Research Development in the United States, confirmed the company's policy of prohibiting direct contact with INBIFO. Seligman wrote:

We have gone to great pains to eliminate any written contact with INBIFO and I would like to maintain that structure.

* * *

Therefore, I am advising Jerry Osmalov to continue sending samples to Neuchatel for transshipment to INBIFO. If this procedure is unacceptable to you, perhaps we should consider a "dummy" mailing address in Koln for the receipt of samples. The written analytical data will still have to be routed through FTR if we are to avoid direct contact with INBIFO and Philip Morris U.S.A.

2000512794-2795 (US 20295).

3911. In the 1977 letter from Robert Seligman to Max Hausermann, Seligman discusses a letter that had breached the Philip Morris policy. Seligman suggested to Hausermann that he "retrieve [and presumably destroy] the March 24 letter Helmut Gaisch sent to Jerry, including all copies. My copy is returned herewith." 2000512794-2795 (US 20295).

3912. As recently as 1993, Philip Morris maintained a system whereby research documents were "sent to Richmond for a review and then returned to INBIFO" with all "[s]upporting data and documents . . . kept at INBIFO." 2043725390-5391 (US 20449).

3913. Philip Morris did not want "to have results of animal research in its domestic facilities — particularly research conducted at a Philip Morris-owned lab — lest that information get out and undercut Philip Morris' public position that cigarettes were not a health threat." Farone WD, 149:10-152:15.

3914. Dr. DeNoble was hired to establish a behavioral pharmacology laboratory at Philip Morris USA to support the nicotine analogue program. DeNoble WD, 4:23-5:2. The goal of the nicotine analogue program was to develop a substitute for nicotine that would retain the physiological and behavioral effects of nicotine on the central nervous system, specifically nicotine's reinforcing qualities, but would not retain nicotine's adverse effects on the cardiovascular system. Id. at 5:7-11; see also Section V(D)(5)(a)((3)), supra, for more detailed discussion about Philip Morris's nicotine analogue program. In connection with the analogue program, the behavioral pharmacology laboratory "needed to develop a variety of tests that could be used in the characterization of the behavioral effects of nicotine in rats." DeNoble WD, 15:13-22. These test procedures that Drs. DeNoble and Mele developed, and the results of their experiments using them, were written up in various reports. They also sought permission to submit some of their studies to various journals for publication. Philip Morris USA permitted some of these studies to be published, but forbade publication of others. For example, Dr. DeNoble published a paper, titled Behavioral Effects of Intraventricularly Administered (-)-Nicotine on Fixed Ratio Schedules of Food Presentation in Rats, which appeared in Psychopharmacology in 1982. (no bates) (JD 040124).

3915. However, Philip Morris prevented publication of DeNoble's and Mele's research results which were unfavorable to their public positions on nicotine and addiction. One of the studies that Philip Morris USA did not allow to be published demonstrated that rats will self-administer nicotine. Self-administration studies establish whether a stimulus is reinforcing. DeNoble TT, 1/6/05, 9013:8-9014:9. Given the substantial credible evidence that DeNoble's results were noteworthy and significant, the Court does not find that Philip Morris's explanation, that it chose not to publish the report because other scientists had previously shown the same results, to be credible. Henningfield WD, 161:23-165:15.

3916. When Victor DeNoble, former Associate Senior Scientist at Philip Morris, and his fellow researcher, Paul Mele, performed research on rats demonstrating that nicotine caused self-administration and induced tolerance, they initially received Philip Morris's approval to publish their research results. However, following DeNoble's presentation of those results to Philip Morris senior management in New York City, the approval to publish was withdrawn. Farone TT, 10/7/04, 1947:19-1950:20; Farone WD, 156:3-15; Rowell TT, 3/23/05, 16645:15-16646:1, 16654:12-16655:15. DeNoble explained that it was clear from a comment made to him at the presentation that Philip Morris senior management would not allow the research results to be disclosed. Ross Millhiser, a Philip Morris executive stated: "Why should I risk a billion-dollar industry on rats pressing a lever to get nicotine?" DeNoble WD, 13:20-15:7, 22:6-25:12; Mele WD, 14:2-14:14, 20:3-22:12.

3917. Philip Morris also denied Drs. DeNoble and Mele permission to publish a paper regarding studies which demonstrated both pharmacological and behavioral tolerance to nicotine in rats. DeNoble WD, 27:1-28:13; Mele WD, 11:13-14:10; (no bates) (US 20100 at 38) (tolerance develops to the behavioral effects of nicotine following chronic administration). Tolerance can demonstrate dependence on a drug. Mele WD, 13:16-14:1. Again, the Court finds Philip Morris's claims that it chose not to publish these results because tolerance to nicotine had already been demonstrated in the same fashion and to the same degree, despite the evidence to the contrary, not credible. Henningfield WD, 161:23-165:15.

3918. Philip Morris also did not allow DeNoble and Mele to publish the results of a study demonstrating that nicotine affects the vestibular nucleus — the area of the brain that affects balance and coordination. DeNoble WD, 14:11-15:7. Their research demonstrated why nicotine often makes people dizzy when they first start smoking. Id. Philip Morris was the first to make this discovery, but did not allow DeNoble and Mele to publish a paper on the particular brain sites responsible for producing this effect from ingesting nicotine. Id.

3919. Patrick Sirridge of Shook, Hardy Bacon wrote to Philip Morris's Assistant General Counsel Fredric Newman transmitting an analysis of DeNoble's published literature, unpublished manuscripts, and in-press manuscripts. The analysis concluded that

research engaged in, as well as some possibly under consideration, by Philip Morris has undesirable and dangerous implications for litigation positions the industry takes in regards to smoking behavior. . . . In the final analysis, the performing and publishing of nicotine related research seems ill-advised from a litigation point of view. . . .

2021423403-3461 at 3422 (US 87038*); DeNoble WD, 25:2-25:12, 38:1-39:11.

3920. Ultimately, in 1984, Philip Morris abruptly, with only one day's warning, shut down DeNoble's laboratory, ordering the researchers to terminate their work immediately and to kill the remaining rats that were the subjects of ongoing research. DeNoble was informed that the lab was closed because of the threat their work posed in litigation against Philip Morris. DeNoble WD, 25:2-25:12, 38:1-39:11. William Farone, former Director of Applied Research, was told by Fred Newman, Philip Morris's Assistant General Counsel, that the DeNoble laboratory was shut down because Philip Morris wanted to bury "any research that showed smoke caused disease or nicotine was addictive." Farone TT, 10/12/04, 2091:23-2092:14; Farone WD, 156:3-15.

3921. Philip Morris's claim that shutting down DeNoble's lab and ending the research was merely a business decision is simply not credible.

3922. After DeNoble and Mele left Philip Morris in 1984, they renewed their attempts to publish their research results concerning nicotine addiction. In 1985, Philip Morris denied DeNoble the permission to publish. Notwithstanding that denial, DeNoble and Mele submitted two papers concerning nicotine addiction for publication. After the first paper was published, DeNoble received a threatening letter from Philip Morris attorneys in April 1986. In August 1986, DeNoble and Mele spoke at an American Psychological Association convention concerning other work that they had done at Philip Morris. Thereafter, in September 1986, DeNoble received a second threatening letter from Altria in-house counsel Eric Tausig. Following receipt of that letter, he called the journal to which he had submitted two papers for publication and sought to have them withdrawn from publication. He was able to pull back only one of them. To the present day, his paper on nicotine self-administration in rats has never been published in a scientific or medical journal. DeNoble WD, 39:12-45:19; DeNoble TT, 01/06/05, 9081:20-9082:14. DeNoble was released from his confidentiality agreement with Philip Morris in 1994. DeNoble TT, 1/6/05, 9043:19-23.

3923. Philip Morris's lawyers exerted significant control over research into nicotine. William L. Dunn, a Philip Morris scientist, wrote in a 1980 document titled "The Nicotine Receptor Program" that, despite the fact that the psychopharmacology of nicotine is "where the action is for those doing fundamental research on smoking," and where "most likely will come significant scientific developments profoundly influencing the industry, . . . it is where our attorneys least want us to be. . . ." 1000127789-7790 at 7789 (US 34442).

3924. According to Dunn, there were two reasons why Philip Morris's lawyers did not want nicotine research conducted. The first reason was so the tobacco companies could claim ignorance "of any relationship between smoking and disease." Such an approach was "implicit in the legal strategy employed over the years in defending corporations within the industry from the claims of heirs and estates of deceased smokers." The second reason for not engaging in nicotine research was that any action by the tobacco industry, including research, that treated nicotine as a drug "could well be viewed as a tacit acknowledgment that nicotine is a drug," which could impact any future regulation of tobacco by the government. 1000127789-7790 at 7789 (US 34422). While nicotine research was permitted, the Company did not want to "be visible about it." 1000127789-7790 at 7789 (US 34422). Because of the commercial necessity of research into nicotine, Dunn acknowledged that "our attorneys . . . will likely continue to insist upon a clandestine effort in order to keep nicotine the drug in low profile." 1000127789-7790 at 7790 (US 34422).

3925. Philip Morris consultants also suppressed certain scientific research. On January 15, 2003, in an appeal from a criminal defamation conviction, a Swiss court sustained two allegations of fraud against Ragnar Rylander, and concluded that he was a covert consultant for Philip Morris and that he had suppressed research findings that were adverse to the tobacco industry. In its findings, the court stated:

Concerning the allegation that the respondent was "secretly employed by Philip Morris," exhibits show that he had entered into a consulting agreement with Philip Morris in 1972 and that he had not made this fact public. Indeed, . . . the respondent did everything not to let his ties to Philip Morris become publicly known in order to, in his own words, "retain as far as possible the image as an independent scientist." In addition, following the publication of an article in the "European Journal of Public Health," he attempted to conceal the existence of a formal contract with Philip Morris, and this led the journal's Committee on Publication Ethics to take an unfavourable decision in his regard.

* * *

The respondent has had frequent contacts with Philip Morris for many years. These contacts are troubling for several reasons. In 1991, within the framework of a study on respiratory diseases in children, the respondent modified a data base so that no link could be made between passive smoking and the frequency of respiratory infections. At an international conference in May 1992 he affirmed that no relation had been found between respiratory infections in children and their exposure to smoke. . . . Two months earlier, however, he had agreed to have his name on a document distributed to participants in a meeting of epidemiologists and indicating that a correlation had been found between passive smoking and the frequency of bronchitis in children.

TLT1050091-0101 at 0099-0100 (US 88744).

d. Lorillard

3926. At times, Lorillard suppressed scientific research on smoking and health. In 1977, Alexander Spears of Lorillard told a scientist that he would not be permitted to deliver a research paper unless he deleted data from a study related to human smoking habits. 01416267-6267 (US 20287); Spears PD, Texas v. American Tobacco, 07/24/97, 216:11-218:23.

3927. In a 1978 handwritten note related to the industry's Scientific Liaison Research Committee, Curtis Judge, Lorillard's Chief Executive Officer, complained that "[w]e have again `abdicated' the scientific research directional management of the Industry to the `Lawyers' with virtually no involvement on the part of the scientific or business management side of the business." The note further argued that a reconstituted scientific and policy leadership committee should not "report to the Committee of Counsel. . . ." 01346204-6205 (US 34532) (emphasis in original).

2. Document Destruction Policies

3928. At various times, different Defendants attempted to and did destroy documents which were adverse to their public and litigation positions on smoking and health. While these efforts were often part of larger, legitimate institutional document retention policies, at other times — as with the BAT Group — they were clearly intended to render unavailable written materials which could prove damaging to or inconsistent with Defendants' litigation position and public relations stance.

a. BAT Group

3929. For decades, Brown Williamson implemented permanent retention policies and placed "legal holds" on documents in its possession related to smoking and health litigation because of its extensive involvement in such proceedings. (no bates) (JD 012740 at 680081625); (no bates) (JD 012741 at 680260666); (no bates) (JD 012742); (no bates) (JD 012743); (no bates) (JD 011283); (no bates) (US 76154); (no bates) (JD 011288); (no bates) (JD 013217). These legal holds required individual departments, including Research Development and Marketing, among others, to preserve documents in connection with litigation filed against the company, and they superseded all other retention policies. (no bates) (JD 011281).

3930. For example, in 1977, after receiving an FTC subpoena, Brown Williamson employees were instructed to retain all documents responsive to that subpoena. See, e.g., (no bates) (JD 011282 at 679006817-18).

3931. In 1994, Brown Williamson was named as a defendant in the Castano litigation and ordered to retain certain documents pre-dating March 1994. Castano v. American Tobacco, Civil Action No. 94-1044A (E.D. La. 1994); (no bates) (JD 011288). In accordance with its policy, Brown Williamson again issued a broad legal hold on documents as required by the Court in Castano. (no bates) (JD 011288); (no bates) (JD 012747).

3932. Despite these benign document retention policies, B W allowed destruction of certain documents to prevent the disclosure of adverse information. For example, in a 1981 memorandum, titled "thinkpiece on additives issue," Kendrick Wells, then corporate counsel for Defendant B W, quoted Robert Northrip of Shook, Hardy Bacon: "If company testing began to show adverse results pertaining to a particular additive, the company control would enable the company to terminate the research, remove the additive, and destroy the data." 682764441-4461 at 4458 (US 21030).

3933. Outside of B W itself, BAT Group documents demonstrate that the companies' document management policies were motivated, in substantial part, by a concern that BATCo and other BAT Group research might be attributed to B W in smoking and health litigation in the United States. As early as 1970, attorneys at Shook, Hardy Bacon wrote a seven-page letter to B W's General Counsel expressing concern that BAT Group research documents would be subject to discovery and that these documents "constitute a real threat to the continued success in the defense of smoking and health litigation." 301097079-7085 at 7081 (US 46580); see also Cannar TT, 06/17/04, 260:10-262:30, 263:4-15, 264:26-265:3; 680800858-0865 (US 30917); Wells WD, 64:17-65:16; Wells WD, 5:15-6:18, 109870594-0596 (US 34873). Although the letter never instructs B W as to what should be kept in its files, it stated that "employees in both companies [BATCo and Brown Williamson] should be informed of the possible consequences of careless statements on this subject." 301097079-7085 at 7085 (US 46580).

3934. On May 29-30, 1984, Kendrick Wells, Robert Northrip, David Schechter, BATUS General Counsel, BAT executives and in house attorneys, and trial counsel met in New York to discuss United States product liability litigation. 521015673-5675 (US 52687). The group noted that "developments have rendered products liability actions against tobacco manufacturers more difficult to defend in the 1980's and that adverse evidence which could be attributed to the defendants is a serious problem." 521015673-5675 at 5673 (US 52687). At that meeting, trial counsel concluded that it "is likely that statements by a tobacco affiliate of B W would be admitted and smoking and health research done in-house or by contract by any company owned by the BAT certainly would be admissible." 521015673-5675 at 5673 (US 52687); Schechter WD, 10:3-10:9. The group also decided that "[d]irect lawyer involvement is needed in all BAT activities pertaining to smoking and health from conception through every step of the activity." 521015673-5675 at 5674 (US 52687); Schechter WD, 12:4-12:8.

3935. In February 1985, BAT Industries directed David Schechter to investigate the "attribution issue" — whether statements and positions of affiliates of B W could be attributable to it in litigation. Schechter WD, 12:20-14:17; 680582454-2462 (US 54049*); see also 516003172-3172 (US 21732).

3936. In 1985, Schechter retained the firm of Simpson, Thatcher Bartlett, to explore the bases on which BAT Group research could be discovered in litigation in the United States against B W, and on which knowledge of such research could be attributed to B W. Schechter WD, 20:12-22:5; 301060827-0855 (US 28152).

3937. Later that year, Schechter also asked the New York firm Paul, Weiss, Rifkind, Wharton Garrison to "consider hypothetically whether documents in the possession of B.A.T. Industries or its United Kingdom subsidiary, BATCo, could be discovered by a plaintiff in a U.S. lawsuit against Brown Williamson." 521015579-5582 at 5579 (US 52686); Schechter WD, 28:15-29:17; see also Wells WD, 6:19-8:4.

3938. Paul Weiss concluded in a memorandum that "[y]ou should act on the assumption that discovery of the documents would be available." Schechter WD, 29:18-30:2; 521015579-5582 at 5579 (US 52686).

3939. Thus, by 1985, outside counsel from Paul, Weiss and Simpson, Thacher had both concluded that research reports in the possession of BAT Industries and BATCo could be discovered in litigation brought in the United States against B W. Schechter WD, 30:18-32:5, 32:9-33:3, 33:14-20, 38:16-39:3; 521015578-5578 (US 52685).

3940. In 1985, Nicholas Cannar became Head of BATCo's Legal Department. At the direction of Richard Baker, the BAT Industries Chief Solicitor, Cannar became responsible for the document retention policies for BAT companies worldwide. Gulson WD, 22:22-24. Alison Kay Kinnard was also involved in the design and management of the document management programs. 325351561-1562-1562 (US 29245). Those programs required, in general, that all BAT Group operating companies institute a records management policy requiring destruction of documents, including research and development documents, if they had already been retained for a certain period of time. Cannar TT, 06/21/04, 340:35-341:4, 356:77-358:27, 360:1-364:6; see also 202347085-7086 (US 22032); Schechter WD, 45:11-48:10.

3941. BATCo's legal department had already become concerned, in early 1985, that the circulation of documents from its Group Research and Development Centre ("GR DC," one of the BAT entities which held meetings all over the globe) to B W, might expose those documents to production in United States litigation. B W had expressed the concern that ". . . some of the broad-ranging initiatives being pursued in [GR DC] might be misinterpreted . . . in a way which would require [B W] to explain why they didn't think that research was relevant to litigation in the United States" and that "the group's research effort might be misinterpreted in the context of litigation in the United States." Cannar TT, 06/21/04, 386:40-387:2, 412:35-413:12, 415:27-416:34.

3942. During the process of constructing what became the 1985 Document Retention Policy, BATCo asked its outside counsel, Lovell, White King ("Lovell"), to perform a review of BAT Group smoking and health documents located at BATCo's Southampton, England GR DC in order "to place [it] in such a position as to be able to answer any Requests for Production or Interrogatories emanating from U.S. Courts. . . ." (no bates) (US 34839 at 107443681); 202313482-3483 (US 92077). The impact that sensitive documents might have on smoking and health litigation in the United States was a primary concern driving BAT Group document retention policies. B W, the American company, paid for the document review at BATCo, the British company. 301156374-6374 (US 16004); 301157557-7557 (US 16005); 301156376-6376 (US 16006).

3943. On May 15, 1986, at a meeting at its research facility in Millbank, England, BATCo legal personnel instructed the leadership of the GR DC to dispose of documents under the rubric of "spring cleaning" before the GR DC files were copied for possible production in health and smoking litigation in the United States.

[Nick Cannar of the BAT legal department] said that Mr. [Patrick] Sheehy [Chairman of BAT Industries] did not wish it to be seen that BATCO had instituted a destruction policy only when the possibility of their being involved in litigation became real and after they had instructed solicitors. Thus, it was decided that no destruction policy should be adopted, rather that R DC [Research Development Centre] would tidy up the loose papers held by individuals, which "spring clean" could involve the destruction of documents such as previous drafts.

* * *

It was agreed that such a "spring clean" of all of the loose papers held outside the official filing systems is essential to enable L.W. K.'s [BATCo's lawyers Lovell, White King] "task force" to carry out stages I and III (the listing and reviewing of the files).

107443680-3689 at 3682 (US 34839).

3944. During his trial testimony in this case in Australia in 2004, Cannar invoked the Australian self-incrimination statute (referred to in the Cannar transcript as "Section 128" of the Evidence Act of 1995) to avoid answering over one hundred questions relevant to his role in document management polices of BAT Group companies, including BATCo, B W, and Wills. For example, Cannar asserted the self-incrimination privilege in response to numerous questions concerning the importance of document retention policies to BATCo and the BAT Group, the purpose of Wills's document retention policy, the circumstances leading to preparation of the Foyle Memorandum, as well as many other related topics. Cannar TT, 06/16/04, 150:11-21, 151:14-15, 151:37-152:1, 167:29-168:8; Cannar TT, 06/17/04, 194:47-195:39, 202:5-39; Cannar TT, 06/24/04, 619:15-19.

3945. Cannar's testimony in this case about his role in BAT's document management policies was remarkably evasive and uninformative. Until 2003, when he retired, Mr. Cannar worked for BAT in various high level legal and executive capacities, including serving as Head of Legal for BATCo and the Director of Legal Services for Wills. Cannar played a central role in BAT document management projects and policies. Nevertheless, when faced with substantive and specific questions, Cannar, whose legal representation in this litigation was paid for by the BAT Group, repeatedly could not remember or refused to answer questions on the grounds that the answer might incriminate him. Indeed, Justice Brownie, the Australian court official overseeing the Cannar testimony for introduction in this case, made specific findings regarding Cannar's credibility in the context of a motion to treat Cannar as a hostile witness. In general, with respect to Cannar's testimony, Justice Brownie stated:

I think it is abundantly clear that Mr Cannar may reasonably be supposed to have knowledge about a wide range of matters . . . listed in the letter of request and that, generally speaking, he has not been making a genuine attempt to give evidence about them.

* * *

He gave evidence, in a fragmented way, over four days last week . . . looking back now, and considering the transcript, it is noteworthy that he really has not said very much at all. . . .

Cannar TT, 06/21/04 order (US 16236), 3:16-21, 4:9-14. With respect to Cannar's repeated assertions against self-incrimination, Justice Brownie found the assertions "spectacularly" suspect given that when the self-incrimination claim was overruled, Cannar would simply assert a lack of memory. In this regard, Justice Brownie stated:

some of the objections can scarcely be regarded as reasonably taken. For example, he did not commence to work for any tobacco company until 1981, but he claimed privilege against self-incrimination in respect of such matters as his graduating in law in 1969 and the details of his legal career before 1981. These are merely the most spectacularly unimpressive claims for privilege.

* * *

He repeatedly claimed privilege and then, upon being directed to answer, said that he could not remember. It was not just his asserted lack of memory that seemed to me to be significant, but rather the combination of the claim for privilege followed by a ruling that he should answer the question, followed immediately by an assertion of non-recollection.

There was also the manner in which this happened repeatedly, as if he was fencing for time or delaying the inevitable or both.

Cannar TT, 06/21/04 order (US 16236), 5:1-7, 5:20-30. This Court agrees with and accepts Justice Brownie's findings. As a witness, Nick Cannar was not credible. For decades, he had worked for BAT and had every reason to lie in order to protect his client. Moreover, on the stand, he was so evasive and asserted Section 128 privilege so often that his testimony, credible or not, was of no value.

3946. In the late 1980s, executives at B W became concerned over statements being written by company scientists in minutes of scientific meetings, as discussed in the previous section. See ¶¶ 3942. Andrew Foyle, a solicitor at Lovell, met with Wills's chief scientists Graham McGregor and Tas Wilson in Australia to learn how the Wills 1985 document management policy had been implemented by the Wills Research Department. McCabe at ¶ 25. Wilson and McGregor informed Foyle that unpublished enclosures to letters distributed by BAT's GR DC had been destroyed and ". . . the 1985 retention policy had been applied and, consistent with that policy, documents would be destroyed when they reached the end of their retention period." Foyle TT, 04/28/04, 22:1-23:6, 24:9-25:11, 49:11-50:18, 57:9-20.

3947. Following that meeting in Australia and pursuant to instructions from Nick Cannar at BATCo, Foyle prepared the Foyle Memorandum in 1990, and sent it to Fred Gulson in Australia, who was Wills in-house Solicitor and Company Secretary from 1989-1990. Foyle TT, 04/28/04, 17:10-14, 18:7-19:4. Gulson was the original recipient of the Foyle Memorandum. That Memorandum included a review of Wills's 1985 Document Retention Policy in light of ongoing product liability litigation and expressed concern that discovery requests against B W might extend to BATCo's documents. McCabe at ¶ 22.

3948. The March 1990 Memorandum written by Foyle confirmed that W.D. H.O. Wills (Australia) Limited ("Wills"), now known as BATAS, a subsidiary of both BAT plc and BATCo, had adopted a Document Retention Policy in December 1985 with the aid of Clayton Utz, an Australian law firm, after Cannar had issued his instructions to the BAT operating companies. Foyle wrote:

Wills' current document retention policy was introduced on the 30th December [sic] 1985 at a time when the tobacco companies in Australia anticipated the possibility of product liability litigation, although no case had actually been brought against any company. Clayton Utz [Wills's counsel] had previously been instructed to take steps to prepare the Industry, and Wills in particular, for litigation. One of their first actions was to review the document retention policy of the Company, hence the new policy.

(3/90 Foyle Memorandum excerpted in McCabe v. British Am. Tobacco Australia (Svcs.) Ltd., (2002) V.S.C. 73 at ¶ 23 (Supr. Ct. of Victoria at Melbourne Mar. 22, 2002) (Austl.), reversed on appeal; subsequent history omitted. According to Gulson, this statement from the Foyle Memorandum accords with his understanding of the genesis of the Wills Document Retention Policy. Gulson WD, 14:14-21. In addition, Gulson noted that "the facts relating to my tenure at Wills are set forth accurately," in the McCabe decisions' findings. Gulson WD, 13:19-23, 26:5-11. Upon observation at trial, the Court found Mr. Gulson's demeanor and testimony credible. His testimony was clear, internally consistent, and not impeached. Mr. Gulson had no reason to lie and demonstrated no affirmative bias against the Defendants. In addition, it is significant that he agreed to come to the United States to be a witness in this case without any compensation, other than his travel expenses, only to face inconvenience and cross-examination. For all these reasons, the Court fully credits Mr. Gulson's testimony.

3949. Gulson explained that Wills's 1985 Document Retention Policy was comprised of two components, the written policy and the un-written purpose and application of the policy which were not reduced to paper for fear of discovery. Regarding the two distinct components of the document management policy, Gulson testified:

The written document's primary purpose was to provide cover for the actual document destruction enterprise, to ascribe an innocent housekeeping justification for the widespread destruction of sensitive documents. The Document Retention Policy wasn't simply the written policy itself, but the corporate knowledge of how the Policy was to be applied apart from the written language. My recollection of the Document Retention Policy comes not from the written document, but how it was explained to me by Nick Cannar, Andrew Foyle, Brian Wilson, a partner at Clayton Utz, and others, rather than from the document itself, since the written document was incomplete in terms of describing the actual workings and purpose of the Document Retention Policy.

Gulson WD, 16:21-17:7, 17:24-18:6.

3950. When he received the Foyle Memorandum, Gulson sent it, at Foyle's direction, to Brian Wilson, a lawyer at the Australian law firm of Clayton Utz, for answers to the questions Foyle raised regarding the use and implementation of the Document Retention Policy. Gulson WD, 32:18-33:9; McCabe at ¶ 22. Foyle wanted Gulson to direct these questions to Wilson because:

There were serious concerns at BATCo that Wills' Document Retention Policy might leave the BAT Group vulnerable. Foyle was trying to strike the proper balance between destroying more documents, thereby risking an adverse inference against the companies; and not destroying more documents, thereby risking their discovery and use against companies in litigation.

Gulson WD, 29:20-30:5. Foyle also wrote:

For purposes of this exercise it can be assumed that, over the years, Wills has received copies of most of the sensitive documents generated by BATCo but that most of these (with the exception of the research reports) will have been destroyed as a result of the [1985] retention policy. It should also be assumed that a number of Wills employees have a detailed knowledge of the subjects to which many of the sensitive documents referred.

McCabe at ¶ 98.

3951. In the Memorandum, Foyle sought advice from Clayton Utz, the Australian law firm, which had drafted the 1985 Document Retention Policy, on the issue of whether the destruction of documents by Wills could result in a finding of adverse inference if litigation did actually commence. In the Memorandum he wrote:

1. To what extent is there a risk that the destruction of documents in accordance with the 1985 retention policy will cause the Court to apply the adverse inference principle, taking into account:

(a) the wording of the policy,

(b) the circumstances prevailing at the time it was introduced (e.g., whether product liability actions had been threatened against Wills or the industry generally),

(c) the extent to which Wills will need to claim privilege for documents produced in 1985 and later, on the grounds that the documents were produced in contemplation of anticipated proceedings.

Id. at ¶ 29.

3952. Foyle was also concerned about BATCo research which was destroyed by Wills: "Might BATCO's documents be more at risk? For example might the Court order Wills to retrieve from BATCO copies of the BATCO documents destroyed by Wills?" Id. at ¶ 31.

3953. In his memorandum, Foyle expressed numerous problems with Wills's 1985 Document Retention Policy in light of anticipated litigation. His first concern was that: "(a) The wording of the policy (coupled with timing of its introduction) might lead to the inference that the real purpose of the policy was to destroy sensitive smoking and health documents." McCabe at ¶ 27. Gulson confirmed this concern as "particularly pressing . . . since the real purpose of the Policy was, in fact to destroy sensitive smoking and health documents." Gulson WD, 27:2-9.

3954. Foyle next expressed the concern that:

(b) Aspects of the implementation of the policy might support that inference, for example the immediate destruction of the unpublished enclosures to the SRG [Wills's Scientific Research Group] letters.

(c) The retention of a set of the BATCO research reports means that a plaintiff will have access to much sensitive BATCO research. The information in the reports is enough to prompt searching questions about the underlying research policy and also questions about what follow up action was taken by BATCO in the light of the research results.

(d) The retention of the BATCO reports might encourage a plaintiff to seek discovery of BATCO's documents, either by asserting that Wills has control over documents in the possession of BATCO, or by using the Hague Convention. The research reports might enable a plaintiff to frame a Hague Convention request for documents with the requisite degree of specificity and/or to identify the BATCO employee from whom oral testimony is required.

(e) Wills's access to the BATCO computer gives them the de facto right to details of results of BATCO's research. The summaries of the reports which are on the database are sufficiently informative to be of real interest to a plaintiff's lawyer.

(f) The knowledge that Wills' senior scientists have of BATCO research could rule them out as a witness at any trial in Australia.

McCabe at ¶ 27. These additional concerns expressed by Foyle in his memorandum were also confirmed by Gulson, who explained that the computer link with the GR DC in Southampton was actually severed because of BATCo's concern that its scientific documents might be made available to plaintiffs in Australian litigation. Gulson WD, 27:3-28:15.

3955. In view of all of these concerns, Foyle proposed a new document management policy for Wills, making the following observations:

1. It is understood that the destruction of documents now or in the past by Wills contravenes no law or rule in Australia and that, in that sense, Wills can do what it likes with its documents. Presumably, if a court disapproved strongly of the destruction of the documents, then it might draw adverse inferences from that fact.

2. It should be assumed that Wills' documents (what is in them and what has happened to them) will be a matter of great interest to a plaintiff's lawyer in a product liability action. How Wills responds to questions about its documents will require careful thought, especially because of the implications which the answers may have for the BAT group as a whole. It would be sensible, therefore, to assess the nature and extent of any problems which the current document retention policy may pose and to take appropriate remedial action now, rather than wait for the litigation to begin. Generally, what is needed is a strategy for handling the documents issue in litigation.

McCabe at ¶ 28; Gulson WD, 28:17-19:9. Gulson explained that when Foyle wrote in his Memorandum — that "Wills' documents (what is in them and what has happened to them) will be a matter of great interest to a plaintiff's lawyer in a product liability action" — he was referring to the fact that some documents would be harmful to the BAT Group, if produced in litigation, because the "documents may raise questions regarding what happened to the other, destroyed documents." Gulson WD, 29:1-9.

3956. Finally, Foyle posed the following questions to Clayton Utz regarding the specifics of a revised document management policy:

3. Should changes be made to the way in which the policy is currently being applied, for example, in relation to the SRG documents?

4. What should be done about the copies of the BATCO research reports held by Wills? In this connection:

(a) Would the continued retention of these reports compromise Wills position via a vis the destruction of its other [scientific] documents? This question should be answered on the basis of the information given in this memorandum on the content of the reports. If more information is needed it can be supplied by LWD [Lovell, White, Durrant]. It would be undesirable for Clayton UTZ to seek information from Wills about the reports.

(b) Is there any reason why Wills should not now destroy its copies of most of the reports, if the motive for doing so were that the information in the reports is not relevant to Wills' Current "research mission"?

(c) Would the termination, or the restriction, of Wills' access to the reports database on the BATCO computer cause any problems?

5. Would implementation of the proposed new retention policy hinder or help Wills' position on the documents issue?

McCabe at ¶ 32; Gulson WD, 29:10-32:17.

3957. In a March 29, 1990 letter responding to the questions raised in the Foyle Memorandum, Clayton Utz attorney Brian Wilson wrote to Gulson:

Wills' destruction of documents has not occurred during litigation in relation to which those documents might be relevant. If it had, that would be extremely strong evidence of an intention "to do something likely to interfere with the course of justice. . . ."

The destruction has occurred, instead, in a situation where litigation has been, and still is, contemplated. But it can be said that it has not occurred only because of that fact and in order adversely to affect the litigation. This is where the wording of the 1985 retention policy statement [for which Clayton Utz had been the architect] becomes very important.

McCabe at ¶ 38 (excerpting Letter from Brian Wilson to Fred Gulson (Mar. 29, 1990)); see also Gulson WD, 33:10-20 (indicating that the text of the Wilson letter was accurately reproduced in the McCabe decision). Wilson followed this statement with a list of justifications for a document management policy — including cost efficiency, litigation support, and sabotage prevention — which could be offered as "clear evidence of an intention which is the complete opposite of an intention `to do something likely to interfere with the course of justice.' This positive intention cancels out the negative impression created by destruction per se." Gulson WD, 33:10-20. The thrust of Wilson's advice was that as long as an excuse for destruction could be found, then BATCo could destroy documents without fear of an adverse inference in future litigation. Gulson WD, 33:25-34:2. Gulson believed that, in reality, the documents were actually being destroyed "due to litigation concerns," id. at 34:3-6, and the Court credits his testimony on this point.

3958. In early April 1990, Gulson arranged a meeting with Brian Wilson, John Oxland, and other lawyers from Clayton Utz to discuss their advice. 501582007-2008 (US 89419). In a letter pre-dating the meeting, Nick Cannar wrote to Gulson with a list of items to discuss during his visit including: "2. Document retention policy — We have developed a draft research document retention policy for the B.A.T. Industries Group and a copy is enclosed. I would like to discuss this proposed policy with you and how it might be applied in Australia." 501582007-2008 (US 89419).

3959. At the meeting, Cannar, Wilson, Oxland and Gulson discussed Wills's Document Retention Policy in the context

of a larger, BAT Group wide review of the document retention policy. All of the BAT Group companies' document retention polices were kept in lock step as much as possible, to ensure that no company would leave an opening through which damaging documents could be discovered and used against the rest of the BAT Group.

Gulson WD, 35:11-22.

3960. According to John Oxland's minutes of the April 1990 meeting, Wilson advised Wills and BATCo that Wills should "[k]eep all research docs which became part of the public domain and discover them. As to other documents, get rid of them, and let the other side rely on verbal evidence of people who used to handle such documents." McCabe at ¶ 42 (excerpting April 1990 Oxland minutes). Gulson's recollection is consistent with the meeting notes. Gulson WD, 36:7-16 ("to keep research documents that were in the public domain, and to destroy adverse research documents that the public or plaintiff's counsel would not be aware of").

3961. Wilson's recommendation was accepted and implemented by Wills. Id. at 36:16-18. In short, it was determined that the existing "Wills Document Retention Policy should be continued, that potentially damaging documents should continue to be destroyed, and that an innocent explanation should be provided for destruction." Id. at 36:18-23.

3962. Cannar, Gulson and the Clayton Utz lawyers had another meeting that same day in April 1990. At the second meeting, the lawyers discussed the ability of potential plaintiffs to discover a database maintained by Clayton Utz for the Tobacco Institute of Australia, which included "scientific documents from [TIA] member companies, profiles of likely witnesses, [and] information on judges." Because this database was maintained by a law firm, Cannar, Gulson and the Clayton Utz lawyers concluded that the documents could be withheld on grounds of privilege and that the member companies could destroy their copies to avoid production in litigation. Id. at 38:3-43:23; 304003742-3742 (US 89400); 304003686-3690 (US 89418).

3963. Following the meetings in April 1990 with Clayton Utz, Gulson wrote to S.J. Walker, a lawyer at the Australian law firm of Allen Allen Hemsley, to seek a second opinion. Gulson sought the second opinion "[b]ecause the Document Retention Policy was a ruse." Gulson WD, 44:10-20, 32:20-24.

3964. Gulson was particularly concerned that the selective destruction of documents, which had occurred, could ultimately provide a roadmap for future plaintiffs to Wills's destruction of documents. Gulson expressed this concern in a May 16, 1990 letter to Walker: "The retention by Wills on a selective basis of certain reports may highlight the fact that other documents have been destroyed and could well compromise the position of Wills with respect to the practice and operation of the Document Retention Policy." McCabe at ¶ 46 (excerpting Letter from Fred Gulson to S.J. Walker (May 16, 1990)); see also Gulson WD, 45:14-46:2.

3965. As the foregoing Findings of Fact demonstrate, one purpose of Wills's 1985 Document Retention Policy was to destroy sensitive documents under the guise of well-accepted, good business practices. According to Gulson: "When I arrived at Wills, the Document Retention Policy had been to destroy damaging documents while keeping those that were beneficial to the company, and that remained the Policy at the time I departed Wills." Gulson WD, 47:15-17. Gulson emphasized that "[t]he Document Retention Policy wasn't simply the written policy itself, but the corporate knowledge of how the Policy was to be applied apart from the written language." Id. at 16:23-17:2.

3966. When asked to describe the Document Retention Policy, Gulson answered:

It was the official title for what was more commonly known as the "Document Destruction Policy." The Policy was a program to ensure that all sensitive documents, all documents that if made public or discovered in litigation could potentially damage Wills, or Wills' affiliate companies in the BAT group, were sanitized.

Id. at 9:18-21. To "sanitize" Wills's documents meant to "destroy them or otherwise make them undiscoverable." Id. at 9:22-23.

3967. When asked about the purpose of the Document Retention Policy, Gulson responded that the Legal Department has responsibility for implementing it, and that

[t]he purpose of the Document Retention Policy was twofold, to protect the litigation position of Wills, and to protect the litigation positions of other BAT Group companies, especially our US affiliate Brown and Williamson, by ensuring that potentially damaging documents would not be discovered from Australia.

Id. at 9:24-10:1-4.

3968. Gulson explained that, while it was unusual to place control and direction in the Legal Department, it

was consistent with the purpose of Wills Document Retention Policy, since it was actually a document destruction policy. While it was important that the Document Retention Policy appear to be a rote housekeeping measure, of the kind that would normally be run by an audit or accounting department, the purpose of the Document Retention Policy was to protect Wills and the BAT Group from litigation by ensuring that potentially damaging documents were destroyed.

Id. at 12:15-24. In short,

[t]he written document's primary purpose was to provide cover for the actual document destruction enterprise, to ascribe an innocent housekeeping justification for the widespread destruction of sensitive documents.

Id. at 16:22-24.

3969. When questioned very directly on the impact of the 1985 Document Retention Policy, Gulson confirmed that pursuant to that policy, "Wills was in fact destroying potentially damaging reports, while retaining favorable ones," although he personally never witnessed any such destruction. Id. at 45:24-46:2; Gulson TT, 2/17/05, 13824:1-6.

3970. Indeed, after the flurry of advice Gulson received in 1990 from Foyle, Wilson, and Allen Allen Hemsley regarding Wills's Document Retention Policy, the written policy at Wills was revised only slightly "to ensure that from the outside the Document Retention Policy appeared to be an innocuous housekeeping process. . . ." Id. at 47:3-18.

3971. A primary focus of the Wills Document Retention Policy and the related policies at other BAT Group operating companies was to prevent any weak links in terms of the production of scientific documents in litigation by one BAT Group company that would come back to haunt, by attribution, another BAT Group company. The concern was explained by Wills in-house counsel, Frederick Gulson as follows:

The central research facility for the various BAT Group operating companies around the world was located at Southampton in England. Research from Southampton would be distributed to the other BAT Group companies around the world, including Wills. In addition, other BAT operating companies had their own research departments and facilities of varying sizes. The facility at Wills was not particularly big, but there were more significant research facilities at some of the larger operating companies, including Brown Williamson in the United States, and BAT Germany's operating company in Hamburg. The companies all shared research. If incriminating smoking and health research documents were discovered by the public or a plaintiff in Australia, not only would the documents have been shared with the rest of the BAT Group companies, it probably came from one of the other BAT Group companies. As a result, a failure by Wills to safeguard sensitive documents in Australia, would threaten BAT operating companies across the globe. It was for this reason that the Document Retention Policy received such attention.

Id. at 6:4-24, 9:24-10:16.

3972. Andrew Foyle reiterated this concern to Gulson in both conversations and in the Foyle Memorandum. Foyle told Gulson that

the importance of having and strictly adhering to the Document Retention Policy was to prevent potentially damaging documents from being discovered that could damage not only Wills, but also its parent and sister companies, in light of Will's possession and access to documents from Southampton and elsewhere in the BAT Group. There was a particular concern that Brown Williamson would be vulnerable in litigation in the United States, and that the documents could be very damaging for it.

Id. at 26:12-17:1.

3973. This concern was echoed in a contemporaneous letter prepared by Gulson and sent to S.J. Walker, a lawyer at Allen Allen Hemsley. At the time Gulson wrote about:

the potential and substantial problem that would face our major shareholder in the event that any discovery made in Australia of BATCo's research could be used by future plaintiffs in other jurisdictions especially in the USA.

Gulson WD, 44:23-45:5.

3974. Because scientific documents were shared throughout the BAT Group of companies, Cannar and Foyle had a "grave concern" that "if a document were discovered from Wills it could be used against BATCo or Brown Williamson or another operating company." Id. at 45:5-13.

3975. The BAT document management program taught employees that "retained documents could have an effect on litigation, potentially the outcome of the litigation." Schechter WD, 53:7-10. The program encouraged employees to "limit the creation of documents" and to "avoid retaining any document longer than was needed for the operation of the business." Schechter WD, 53:11-14.

3976. In March, 1990, Brown Williamson implemented a new document retention policy. See, e.g., (no bates) (JD 012743); (no bates) (JD 012744). The 1990 policy set forth, among other things, the requirement that departments follow retention schedules specifying the documents that needed to be retained, the period of retention, and the types of documents that could or should be discarded. (no bates) (JD 012743); (no bates) (JD 012744). When the 1990 policy was implemented, the decision was made to not discard any document dated earlier than 1988, regardless of subject matter and regardless of whether the document had any relation to smoking and health. (no bates) (JD 012743); (no bates) (JD 012744).

3977. Under the 1990 policy recipients were permitted to discard unaltered copies. (no bates) (JD 012743); (no bates) (JD 012744). Any documents that were otherwise scheduled to be discarded under the 1990 policy had to be retained if the Law Department placed a legal hold on them. (no bates) (JD 011288 at 334004672). In addition, all R D reports were scheduled for permanent retention. Honeycutt, United States Dep., 4/23/02, 24:3-25:14; (no bates) (JD 012743); (no bates) (JD 012744); (no bates) (JD 013217).

3978. In 1990, B W mandated similar training sessions. 681000002-0002 (US 88651) (memorandum from B W President Tommie Sandefur to all B W employees telling them that "[d]uring the fourth quarter of 1990, employee meetings will be held to discuss records management at B W and your role in the process.").

3979. The training materials used at the document handling sessions encouraged company employees to use oral rather than written communications. Wigand WD, 67:8-23; 503119213-9241 at 9216 (US 29646*) ("Another aspect is the `sensitivity' of what we need to communicate. This is not just a matter of sensitivity from a legal point of view but there's also a matter of commercial sensitivity. Only put it on paper if you really need to. If you are in doubt, verbal communication is likely to be best.").

3980. As part of its efforts to conceal information and reduce its litigation exposure, BATCo sought to reduce the amount of documents its employees generated. As described in its "Records Management: Creation Retention" manual, BATCo repeatedly preached to its employees to use the "mental copy" rule. The "mental copy" rule asks employees to "imagine that the memo, note or letter you are about to write will be seen by the person that you would least like to read it." The employee is then to "send a `mental copy' of your document to a newspaper, one of your competitors, a government agency, or potential plaintiff. Now: would you still write the memo? If so — would you still write it the same way?" 325274431-4448 at 4434 (US 87012). That same document asked employees to "Think before you write," and to question "does it really need to be in writing to do the job?" 325274431-4448 at 4434 (US 87012) (emphasis in original); see also 321667716-7716 (US 88345); 325274431-4448 at 4433 (US 87012) ("Memos and notes can be barriers to effective communications and often need additional verbal explanation. Talking to someone face-to-face or on the phone is often the better way."); 325274431-4448 at 4435 (US 87012) ("Remember that verbal communication is best if you are dealing with a sensitive subject."); see also 503119213-9241 at 9230 (US 29646*) ("In order to help your [sic] decided how to write something, having decided it really needs to be a writing, we suggest that you use what we call the `mental copy rule.' Imagine that what you are about to write will be seen by the person you would least like to see it. Send a mental copy (not to the real one of course!) of your record to the newspaper, to Philip Morris, to the Government or to a potential opponent in a court case.").

3981. In a 1990 B W records management video, Tommy Sandefur states that before writing a memorandum or letter, an employee should ask "is it necessary," "where will that piece of paper end up? Would you feel comfortable if a competitor, the government or the news media saw a copy of your document?" and "does it really need to be in writing? A phone call or face-to-face meeting is usually more effective." "Verbal communication is also the best way to share sensitive or confidential information." 632150212-0222 at 0214-0215 (US 87019).

3982. At a January 1990, meeting in New York City of representatives from various BAT Group components, including B W and BATCo, participants were encouraged to establish document retention policies that would purge company files of any documents not currently subject to a document request in ongoing litigation because of the "[d]ifficulties faced by author company in explaining documents in a foreign court. . . ." Each company was expected to "[t]ighten the document retention policy . . . to the extent permitted by current litigation/discovery requests." 202347085-7086 (US 22032); 536489722-9722 (US 79172).

3983. On June 29, 1992, Sharon (Blackie) Boyse, a BATCo scientist, sent a facsimile to Jorge Basso Dastugue, a manager at BATCo's Argentine company Nobleza-Piccardo. The facsimile included a price quote from Healthy Buildings International ("HBI") to prepare information and materials for a public relations program on Indoor Air Quality in Buenos Aires. In the facsimile cover sheet, Boyse instructed Dastugue to keep HBI's involvement in the project quiet:

Please also note, more importantly, that this an extremely sensitive document! HBI are [sic] currently under a considerable amount of investigation in the US about their connections with the industry. All references to companies in the quote has [sic] therefore been removed. Please do not copy or circulate this in any way and please destroy this fax cover sheet after reading! I know this sounds a little like James Bond, but this is an extremely serious issue for HBI.

304058260-8263 at 8260 (US 85632) (emphasis in original).

3984. In the summer of 1992, Simon Potter, an attorney with the law firm Ogilvy Renault in Montreal, which represented BAT's Canadian affiliate, Imperial Tobacco Limited, sent a letter to Stuart Chalfen, Solicitor of BAT Industries [the equivalent of General Counsel]; David Schechter, General Counsel of BATUS, which was B W's immediate holding company; and John Meltzer, a lawyer at BAT's outside counsel Lovell, White, Durrant. The letter indicates that unless he received instructions to the contrary, Imperial Tobacco Limited planned to destroy sixty documents, including scientific studies. The letter includes a list of documents to be destroyed, including one document with the notation "not destroyed because never received by Imperial." 202313423-3425 (US 20377); Schechter WD, 60:9-62:14; 202313418-3421 (US 92072).

3985. In an August 7, 1992 letter to Chalfen, Schechter, and Meltzer, Simon Potter confirmed that "the documents mentioned in my letter of July 30 have indeed been destroyed." 202313429-3429 (US 20378); Schechter WD, 62:15-63:15.

3986. David Schechter believed that Imperial Tobacco destroyed scientific documents in part to protect B W in litigation, and the Court credits his statement on this point. 202313423-3425 (US 20377); 202313429-3429 (US 20378).

3987. In 1992, Graham Read, Head of Research and Development at BATCo, reported to Peter Clarke, BATCo's Solicitor, on "Imperial's access to R D reports." Read stated that "[w]hether a requested report is faxed or couriered [from BATCo to Imperial], we attach an accompanying form seeking confirmation that it has been destroyed after use." 600232153-2154 (US 53322); Read PD, United States v. Philip Morris, 6/13/02, 59:14-67:11.

3988. The effort to sanitize the research files within the BAT Group of companies in 1990 was not limited to Wills in Australia. In 1990, Nick Cannar instructed Allison Kay Kinnard to create a program to administer document management policies at BATCo in the United States. Though he was uncertain about the destruction of research documents resulting from this program, Cannar stated that it probably occurred because ". . . that was the path we went down." Cannar TT, 6/21/04, 340:35-341:4, 356:77-358:27, 360:1-364:6.

3989. Starting in 1991, David Schechter was sent to Australia on many occasions at the request of BAT Industries's General Counsel to manage document issues in Australia. Schechter WD, 39:9-43:4. The trips were paid for by BATCo, who also paid for lawyers from Shook, Hardy Bacon to accompany Schechter to Australia. Id.

3990. As part of his role managing the Australia litigation, Schechter had discussions with Wills's General Counsel regarding whether Wills's documents — including smoking and health documents Wills received from other BAT Group companies — could be destroyed during or after trial. Id. at 42:15-43:4. Schechter played an important role in monitoring Wills's document retention policy on behalf of B W and other BAT Group entities. Gulson WD, 49:23-4, 50:17-51:15. He communicated regularly with BAT Group executives regarding document management issues. 202215750-5750 (US 89404).

3991. From 1990 to 1996, a number of plaintiffs brought proceedings against Wills, the last one being Phyllis Cremona in 1996. In conjunction with that litigation, Wills undertook a review of its scientific documents in 1996 that led to the creation of a database of scientific documents known as the "Cremona database." McCabe at ¶¶ 59, 116. In 1996, Graham Maher, an attorney with the Australian law firm Mallesons, representing BATAS, began "to review documents which might become relevant in any future litigation. . . . Together with others, he summarized documents and had them scanned." Id. at ¶ 109; (no bates) (US 16226 at ¶ 2). As part of the effort to create the Cremona database, virtually all of the 30,000 documents identified by Wills as being potentially responsive to the Cremona litigation were imaged on computer discs, indexed, and summarized. McCabe at ¶ 112; (no bates) (US 16226 at ¶ 11). The document review also included ratings by the attorneys of each document, on a scale of one to five, according to how damaging it was likely to be to the company in any litigation, with a rating of five meaning the document was a "knockout" blow against the company. McCabe at ¶ 114.

3992. After Cremona and Harrison (another pending case) were settled in March 1998, an existing litigation hold order requiring the preservation of documents was revoked. Id. at ¶ 128; see also 1226-1249 (US 16217); 1066-1066 (US 16218); 1294-1294 (US 16219); 1296-1296 (US 16220). Following the revocation of the hold order, Cannar concluded that "now is a good opportunity to dispose of documents if we no longer need to keep them. That should be done outside the legal department." McCabe at ¶ 128; (no bates) (US 16225 at ¶ 36). Cannar instructed longtime Wills employee Mal Nicholson to take the position of Records Manager and entrusted him with the responsibility for implementing the destruction policy. McCabe at ¶ 128; (no bates) (US 16225 at ¶ 36).

For the next three months, Nicholson was engaged in the implementation process. The process did, in fact, involve lawyers, but they were lawyers from Mallesons, who reviewed all documents which had been collected for Cremona and Harrison, and once they confirmed that documents had passed the retention dates then they were destroyed.

McCabe at ¶ 129.

3993. During this time, Robyn Chalmers, outside counsel for Wills with the firm Mallesons, advised Wills:

I confirm that there is no specific obligation on you to retain documents for the purposes of legal proceedings where no such proceedings have been commenced. You are entitled to destroy any documents subject to the legislative requirements but as you have been advised previously, the court may draw an adverse inference from the destruction of such documents, depending on the circumstances of the destruction. Moreover, you may be required to produce any copies retained where originals are destroyed or to give oral evidence regarding the nature and content of the original documents. Arguments in your defence where records have been destroyed would include compliance with the legislative retention periods and a necessity to maintain your archives within responsible limits, given the administrative and storage costs of keeping a large quantity of data.

McCabe at ¶ 137; PMV0010213-0214 (US 88753). Despite Chalmers's advice, the document destruction went forward. McCabe at ¶ 139.

3994. Testifying in McCabe, Maher admitted that the effect of the policy was not only to destroy the documents but to obliterate knowledge of the fact of their prior existence. McCabe at ¶ 160. Maher's testimony confirmed that "[t]here was a sense of urgency" and that "the department managers were told they had to confirm compliance with the policy by 15 April 1998." Id. at ¶ 154; 1066-1066 (US 16218); 1296-1296 (US 16220). "The process of destruction of documents in which the defendant engaged included destruction of CD Roms on which they were all imaged."McCabe at ¶ 160. Chalmers confirmed that "the only copies of theCremona database (one held at Wills and one at Mallesons) were destroyed." McCabe at ¶ 163.

3995. It is patently clear from the extensive Findings of Fact set forth herein, that, in the words of Frederick Gulson, Wills's in-house counsel, the 1985 Document Retention Policy which was drafted for Wills, but in fact protected all BAT Group affiliates, subsidiaries, sister and parent corporations,

was a contrivance designed to eliminate potentially damaging documents while claiming an innocent "housekeeping" intent. . . . The whole purpose was to keep evidence out of the courts.

Gulson WD, 19:18-21. Moreover, it is also patently clear that the Foyle Memorandum, which purported to re-examine the effectiveness of that 1985 Policy, was intentionally drafted to further its purposes and to ensure that it was adapted to the demands of an ever-more threatening litigation environment.

3996. Finally, members of the BAT Group, in furtherance of the Policy's purposes, destroyed documents, routed them from one country or BAT facility to another, erased a useful litigation database as well as the fact that the documents it contained had ever existed as soon as the pre-existing judicial hold was lifted, and constantly exhorted their many employees to avoid putting anything in writing. All these activities were taken for one overriding purpose — to prevent disclosure of evidence in litigation.

b. R.J. Reynolds

3997. At times, RJR attempted to and did destroy documents to protect its position in litigation. In 1969, RJR's research department confirmed to the legal department that it did

not foresee any difficulty in the event a decision is reached to remove certain reports from Research files. Once it becomes clear that such action is necessary for the successful defense of our present and future suits, we will promptly remove all such reports from our files.

500284499-4499 (US 21677).

3998. The document, titled "Invalidation of Some Reports in the Research Department," also states:

As to reports which you are recommending be invalidated, we can cite misinterpreting of data as reason for invalidation. A further reason is that many of these are needless repetitions and are being removed to alleviate overcrowding of our files.

As an alternative to invalidation, we can have the authors rewrite those sections of the reports which appear objectionable.

500284499-4499 (US 21677).

3999. In 1991, at the same time or shortly before the FTC initiated proceedings against RJR's Joe Camel advertising campaign, RJR persuaded employees of the advertising agency of Young Rubicam to destroy documents concerning the Joe Camel advertising campaign with the intent to prevent the documents from being available for use in the FTC's proceedings. This plan was confirmed in a November 1, 1991 facsimile cover sheet and letter sent from Mark Morrissey of Young Rubicam to RJR stating, "[a]s we discussed . . . [t]his is what I'm going to destroy. . . . Also, under our current scrutiny, a wise move to rid ourselves of developmental work!!" The letter set forth a list of documents related to the Joe Camel campaign that were destroyed. 507647971-7975 at 7971 (US 51232*). Edmund Leary, the recipient of this document, confirmed that this memorandum related to the destruction of materials that were not going to be pursued in brand marketing. Leary, United States Dep., 5/2/02, 75:16-20.

3. Improper use of Attorney-Client and Work Product Privileges

4000. At various times during which litigation and federal regulatory activities were pending, Defendants improperly sought to conceal research material behind the attorney-client privilege and the work product doctrine in order to avoid discovery. To accomplish that purpose, Defendants' lawyers exercised extensive control over joint industry and individual company scientific research and often vetted scientific documents.

4001. For example, correspondence with an institute or an individual regarding CTR special projects was not turned over to CTR, but was instead kept at the law firm generating the letters. Moreover, Don Hoel of Shook, Hardy Bacon believed that such correspondence was never even provided to CTR nor produced in any litigation. Hoel PD, United States v. Philip Morris, 06/27/02, 81:10-82:9.

a. BAT Group

4002. Beginning in at least 1965, B W and BATCo began their efforts to keep scientific research from disclosure. These efforts included sending smoking and health documents outside the United States to foreign affiliates to prevent their disclosure in U.S. litigation and in regulatory proceedings. 107443680-3689 at 3682 (US 34839). B W and BATCo also attempted to create improper attorney-client privilege or work product protection over documents through various means, including routing them through lawyers, maintaining scientific materials in lawyers' files, and indiscriminately marking them as "privileged and confidential" or with other similar designations.

4003. In a January 17, 1985 memorandum, titled "Document Retention," Kendrick Wells directed members of the Research Development Center to collect certain documents he identified on an attached list relating to the behavioral and biological studies area for shipment to BATCo. Wells directed Earl Kohnhorst, Vice President of Research, Development, and Engineering, to tell the research personnel that the removal of the documents "was part of an effort to remove deadwood from the files and that neither he nor anyone else in the department should make notes, memos, or lists." Wells specifically explained to Kohnhorst that "the `B' series are `Janus' series studies [a program of biological research on the effects of smoking, which showed tumor growth in animals] and should also be considered as deadwood." 680530888-0890 at 0888-0889 (US 21772); see also Wells WD, 40:1-41:15. Despite the instructions, it appears that these documents were not actually destroyed. Wells TT, 2/3/05, 12057:23-12058:18; Appleton WD, 38:3-39:13.

4004. On February 17, 1986, Wells sent a memorandum to Ernest Pepples, B W's General Counsel. The memorandum established procedures to limit records relating to health and science research conducted by B W's sister companies from entering the country even though the BAT Group operating companies, including Defendants B W and BATCo, were part of a cost-sharing agreement that funded the research. The established policy limited the documentation sent to the United States to "concise reports, estimated to be about one-half page in length, twice each year. . . . [T]he brevity of the reports will reduce the potential for receipt by B W of information useful to a plaintiff. . . ." This memorandum indicated that the B W lawyers did a detailed analysis of each of the projects and ultimately either approved or disapproved of receipt of information related to each project. 680582253-2257 at 2253 (US 21004). Again, it appears that this plan was never implemented. Wells TT, 2/3/05, 12059:20-12060:10.

4005. At the same time that Wells was attempting to limit the entry of sensitive BAT research materials into the United States, BATCo lawyers Anne Johnson and Nick Cannar were reporting on the same sensitive issues to BATCo executive Eric Bruell. In a February 26, 1986 memorandum to Bruell, Johnson and Cannar noted the "fundamental differences between BATCo and B W" arising out of both (1) "differences in the legal situation" and (2) "differences in their operating responsibilities." Cannar stated that B W was urging BATCo to adopt the position that "decisions to undertake research should be managerial decisions not scientific decisions"; that "smoking and health research should not be undertaken"; and that "information/document management distribution should be kept to a minimum to avoid documents becoming available to [a] plaintiff in litigation." 109870594-0596 at 0594-0595 (US 34873); see also 682003345-3360 (US 88344*).

4006. As part of the effort to avoid documents being made available in litigation, BAT lawyers vetted scientific documents. On September 21, 1994, BATCo attorney H.A. Morini sent a note to Dr. Lionel Blackman, then Director of Research at BATCo, regarding a conversation with Ernest Pepples about the procedure for communications between B W and the BATCo research department. Morini instructed Blackman that "`[c]ontentious' items emanating from GR DC, particularly in regard to biological activity should be given legal clearance before dissemination" and that "transmission to B W should be through me to Pepples thus maintaining the legal privilege — `attorney work product.'" Morini also advised that "[n]on `contentious' issues can be sent direct from GR DC to B W care of Gil Esterle." Esterle was a B W scientist. 503114322-4322 (US 21695).

4007. Graham Read, employed by BATCo in its research area since 1976 and head of research and development at BATCo from 1992 to 1998, confirmed that, at least twice during his tenure with the company, scientists were required to clear their documents through the legal department before the documents could be circulated or distributed. According to Read, the reason for the clearance process was the "clearly very substantial legal environment, legal issues occurring in the US." Read PD, United States v. Philip Morris, 07/25/03, 82:19-88:2, 93:21-95:1, 103:9-106:4, 107:20-108:10; 109870722-0723 (US 34874); 516003171-3171 (US 20872); 516003172-3172 (US 21732); 516003173-3174 (US 22076).

4008. Additionally, BAT lawyers protected sensitive documents with improper use of privilege. For example, in 1975, BATCo Secretary P.J. Ricketts issued a document encouraging employees to give documents and information to attorneys in an attempt to create privilege where none existed. Ricketts advised:

In most cases information which has been given and papers and documents which have been physically handed over to the Company Solicitor will be privileged: a result of which he will not be forced to disclose any documents etc., to these authorities unless in exceptional circumstances, he is required to do so by Court Order. Privilege extends only to the documents, papers etc., actually in the possession of the Solicitor and not to any copies.

* * *

Legal Department should, therefore, be informed and all relevant papers handed over to the Company Solicitor immediately if interest is shown by an outside authority in any matter which has been the subject of these special procedures.

Documents subject to these "special procedures" included "questions of product liability." 107468159-8160 (US 34847) (emphasis in original).

4009. In the late 1970s, B W developed a mechanism to prevent smoking and health documents generated by its research facility in Southampton, England from becoming discoverable in litigation in the United States. The mechanism involved utilizing a blanket designation that all scientific documents were created "for defense of potential litigation"; maintaining control of the documents by the legal department; and disseminating the documents to scientists only after prior approval by the legal department. In a June 1979 memorandum, B W Assistant General Counsel for Product Litigation Kendrick Wells stated that

[c]ontinued Law Department control is essential for the best argument for privilege. . . . The general policy should be clearly stated that access to the documents and storage of the documents is under control of the Law Department and access is granted only upon approval of request.

680585391-5392 (US 21526).

4010. At the time this memorandum was written, a scientist at B W by the name of Jim Rosene was already holding "sensitive" materials in his office rather than sharing them with other scientists at B W. Among the materials sequestered by Rosene were the Janus studies, which demonstrated tumor growth in animals as a result of exposure to cigarette condensate. Id.; Wells WD, 8:18-10:13.

4011. Wells wrote a second memorandum in November 1979 outlining a plan to "afford protection against discovery" of scientific documents that demonstrated a link between smoking and health problems by falsely designating them as work product prepared in anticipation of litigation. In that memorandum to Ernest Pepples, B W's Vice President of Law, Wells outlined a plan for routing all scientific documents from BATCo through a B W scientist designated as an agent of the General Counsel. The scientist would "separate reports which were relevant to smoking and health, or otherwise sensitive for special handling" and the documents "designated as sensitive" would be "sequestered." Moreover, the plan specifically provided that "in the operational context BAT would send documents without attempting to distinguish which were and which were not litigation documents." 521016231-6232 (US 20886); 680585389-5392 (US 21008). Ernest Pepples, B W Vice President for Law, responded to Wells's memorandum by writing the word "agreed" on the memorandum along with his initials ("E.P.") and the date ("11-19-79"). 521016231-6232 (US 20886); Wells WD, 13:15-14:4.

4012. In January 1985, at the request of Pepples, BATCo instituted a new policy which required that BATCo send "contentious" research and development reports to Robert Maddox, an attorney in private practice in Louisville, Kentucky, where B W's headquarters is located, rather than to scientists at B W. The instructions stated that "[t]he recipient list must not contain the name of any B W person, nor that of Maddox or of his company." 107444869-4869 (US 34840); 107444871-4871 (US 20002); 107620309-0310 (US 34853); 503128498-8499 (US 50315); 109745204-5206 at 5206 (US 26342); 109745207-5207 (US 26343); 109745208-5208 (US 26344); 109745211-5212 (US 26345); 109745213-5213 (US 26346); 109745214-5215 (US 26347); Brookes PD, United States v. Philip Morris, 05/02/02, 120:12-121:7; Wells WD, 38:10-39:22; 685092972-2974 (US 31031); 521015673-5675 (US 52687).

4013. In a handwritten letter attributed to Richard Binns, the former Manager of BATCo's Group Research Development Centre at Southampton, he discusses BATCo's practice of routing scientific research to B W through attorney Robert Maddox: "Report — stopped sending direct to B W in Jan. Maddox farce. B W withdrawn from circulation lists (but get 2 copies)." 109878083-8089 (US 21767); Read PD, United States v. Philip Morris, 07/25/03, 181:22-184:11, 186:8-189:21; Read WD, 57:3-11; Read TT, 03/22/05, 16442:22-16443:17, 16445:13-16447:2, 16448:11-16453:1. Another document — from a Research Development file used by Binns at the Southampton facility — addresses document circulation relating to B W, and states that:

Generally, during the Barclay investigation some years ago we sent all correspondence to E. Pepples marked `Attorney privileged'" Today, we seem to have a "mail drop" which is only slightly less obvious than Russians leaving microdots in matchboxes on Hampstead Heath. Why not continue the "Attorney privileged" route.

102880241-0259 at 0253, 0255-0259 (US 26242). No evidence was presented as to whether B W ever claimed attorney-client or work product privilege over those documents routed through Maddox.

4014. On March 21, 1988, Andrew Foyle, with BATCo's outside counsel Lovell, wrote to Ray Thornton, head of research at BATCo, regarding a collection of scientific evidence related to Buerger's disease. In an attempt to create lawyer-client privilege, Foyle wrote that

[b]ecause correspondence on the subject of Buerger's disease exchanged between you and your colleagues in other companies might not be privileged, it is important that the contact between the scientists should be routed through the lawyers.

300517039-7040 (US 16025); 300517039-7040 (US 16118). Foyle admitted that, in fact, ". . . if Ray Thornton wanted information from another company, . . . that he would tell us, and Lovell would make the necessary enquiries." Foyle TT, 04/27/04, 89:2-8, 100:8-105:7. According to Cannar, this seemed "to be a perfectly normal way to gather evidence for a piece of litigation and to help prepare a defence to litigation." Cannar TT, 06/23/04, 526:20-527:23.

b. R.J. Reynolds

4015. Defendant RJR also improperly used the attorney-client privilege for its research documents.

4016. For example, in an attempt to create attorney-client privilege over records received by RJR from CTR in the normal course of its business, in 1983, RJR decided to "remove CTR related smoking and health materials from our premises for legal reasons." They were sent to the law firm of Jacob, Medinger Finnegan via a former RJR scientist Frank Colby, who was leaving the company to work at the law firm. Horrigan PD, United States v. Philip Morris, 10/25/01, 36:11-40:13; Long PD, United States v. Philip Morris, 10/18/01, 46:6-47:19; 506050931-0935 (US 77438).

c. Liggett

4017. Liggett also created mechanisms by which improper and unwarranted attorney-client privilege or work product protections were invoked for documents that it believed would likely be sought in litigation and would provide information to the public on the adverse impact of smoking on health.

4018. In 1978, despite the scientific nature of Project XA, Joseph H. Greer, Liggett's General Counsel, ordered that all documents related to it be sent to him or a legal department staff member. The project was put under the control of the Legal Department. In 1979, Liggett Vice President, R.B. Seidensticker, followed up on Greer's earlier directive related to Project XA. By this time, the project had become formally known as the "Law Department's XA Project." Seidensticker asked Greer to

please issue a memorandum to those concerned requesting that any materials which have not already been turned over to the Law Department related to XA, be it financial, scientific, production or marketing, should be transferred to the Law Department no later than Thursday, June 28.

LG2005942-5942 (US 21527).

4019. During the 1990s, Liggett scientists were directed to label their work as privileged and confidential in order to prevent its discovery in civil litigation. As stated by Liggett's Manager of Science Issues,

we had become sensitized to labeling a lot of documents privileged and confidence [sic] without thinking[,] it was kind of just a matter of fact thing to do. . . . [M]ost of the documents that we put out, I think, are always subject to discovery. And not knowing exactly where — where this was gonna go, it was just considered almost standard practice to do that.

Dietz PD, United States v. Philip Morris, 07/01/02, 150:3-155:12;see, e.g., LWDOJ9290576-0582 at 0576 (US 21217); see also Dietz PD, United States v. Philip Morris, 05/29/03, 96:24-107:16.

d. Findings by Other Courts

4020. Several courts, and the Special Master in this case, have ruled that Defendants have attempted to designate documents as privileged despite there being no valid basis for assertion of the privilege, or that the claimed privilege was inapplicable due to the crime-fraud exception, or that the claimed privilege was lost as a result of its abuse.

4021. Earlier in this case, the Court adopted in its entirety the findings of Report Recommendation #146, in which the Special Master found that "Brown Williamson made efforts not to physically receive smoking and health research of which it was otherwise aware in order not to have to disclose such information and threaten its litigation." United States v. Philip Morris, No. 1:99-cv-2496 (D.D.C. Feb. 23, 2004) (order #499 adopting Report Rec. #146). The Special Master further noted that BATCo's participation in this fraud was engineered by routing documents to B W through outside attorneys rather than to B W itself.United States v. Philip Morris, No. 1:99-cv-2496 (D.D.C. Feb. 5, 2004) (Report Rec. #146 at 79, adopted by order #499).

4022. Again in this case, the Special Master, in Report Recommendation #155, concluded that:

legal advice was sought ("Foyle . . . wrote a memorandum about the Document Retention Policy describing what he found, and effectively inviting Clayton Utz to go back to the drawing board and destroy more documents"), legal advice was given ("Wilson . . . proposed a strategy for handling the documents issue . . . its purpose was to get rid of all the sensitive documents, but do so under the guise of an innocent house keeping arrangement . . ."), and legal advice was followed ("Cannar ordered that Wills adopt the strategy proposed by Wilson").

United States v. Philip Morris, No. 1:99-cv-2496 (D.D.C. April 14, 2004) (Report Rec. #155 at 40-41, quoting Gulson Aff. at ¶¶ 20, 21, 27). The Special Master further concluded that there was

credible evidence to show that counsel was consulted with the intent "to destroy, create privilege over, or remove from the company's control, documents belonging to [Wills's] overseas affiliates" in order "to get rid of everything that was damaging in a way that would not rebound on the company or the BAT group as a whole."

Id. at 41 (quoting Gulson Aff. at ¶¶ 24, 25).

4023. In April 1997, the Florida Circuit Court upheld a special master's ruling that lawyers for Defendants American, Reynolds, B W, BATCo, Philip Morris, Liggett, Lorillard, CTR, and the Tobacco Institute "undertook to misuse the attorney/client relationship to keep secret research and other activities related to the true health dangers of smoking." Florida v. American Tobacco, Civ. Action No. CL 95-1466 AH (Palm Beach Cty. Fla., filed Feb. 21, 1995).

4024. In Minnesota v. Philip Morris, the court struck claims of attorney-client privilege as a result of continued and blatant disregard of court orders, the authority of the court, and the judicial process by B W and American. State of Minnesota v. Philip Morris, No. C1-94-8565, 1998 WL 257214, at *9 (Minn. Dist. Ct. Mar. 7, 1998), mandamus denied sub nom., State by Humphrey v. Philip Morris, No. CX-98-414 (Minn.App. Mar. 17, 1998),petitions for further review denied sub nom., State v. Philip Morris, Nos. CX-98-414, CX-98-431, 1998 WL 154543 (Minn. Mar. 27, 1998), stay denied, 523 U.S. 1056 (1998) ("Minnesota v. Philip Morris").

4025. In adopting the Report and Recommendation of theMinnesota Special Master, Judge Kenneth J. Fitzpatrick ruled that BATCo and B W (among other defendants)

have been found to have committed numerous abuses of privilege and certain violations of Court Orders and the Rules of Court. . . . The record supports the factual findings of the Special Master. Application of the law of privilege, and the crime-fraud exception were properly applied by the Special Master.

Minnesota v. Philip Morris, No. C1-94-8565 (Minn. Dist. Ct. Dec. 30, 1997).

4026. In Minnesota v. Philip Morris, the court found that Defendants Philip Morris, RJR, B W, BATCo, American, Lorillard, CTR, and the Tobacco Institute "claimed privilege for documents which are clearly and inarguably not entitled to protections of privilege;" "that many documents examined contained nothing of a privileged nature, establishing a pattern of abuse;" and that these Defendants "have been found to have committed numerous abuses of privilege." Based upon the "intentional and repeated misuse of claims of privilege [which are] intolerable in a court of law," the court found that "an appropriate sanction for such abuse is release of all documents for which privilege is improperly claimed." The court also adopted the special master's findings that for several categories of documents, including scientific reports, the crime-fraud exception to the attorney-client privilege applied. Minnesota, 1998 WL 257214 at *9.

4027. In Washington v. American Tobacco, the court issued several rulings in which it determined that numerous documents for which Defendants American, B W, Liggett, Lorillard, Philip Morris, Reynolds, CTR, and the Tobacco Institute had asserted privilege were subject to the crime-fraud exception and were therefore "de-privileged." The bases for the findings included "that defendants attempted to misuse legal privileges to hide research documents;" "that attorneys controlled corporate research and/or supported the results of research regarding smoking and health;" "that the industry, contrary to its public statements, was suppressing information about smoking and health;" and "that Special Account #4 was used to conceal problematic research." Washington v. American Tobacco, No. 96-2-15056-8 SEA (King Cty. Sup. Ct. 1998).

4028. In Sackman v. Liggett Group, the court found that attempts by Liggett, Philip Morris, B W, Reynolds, Lorillard, and CTR to designate CTR Special Project documents as privileged was inappropriate. 173 F.R.D. 358, 362-64 (E.D.N.Y. 1997). The court concluded that, despite lawyer involvement in Special Projects, the documents were not privileged because they were prepared to further the public relations position of the tobacco manufacturers and that any usefulness in litigation "was merely an incidental benefit."Sackman, 173 F.R.D. at 363.

4029. The court in Burton v. R.J. Reynolds found that numerous documents identified as privileged by Reynolds and American were in fact not privileged, including memoranda relating to research and development, letters from outside counsel on scientific research, literature reviews prepared by scientists at the direction of counsel, minutes of research-related meeting, and notes made by employees at industry meetings on smoking and health research. 170 F.R.D. 481, 490 (D. Kan. 1997); Burton v. R.J. Reynolds Tobacco, 167 F.R.D. 134, 142 (D. Kan. 1996).

4030. In Carter v. Brown Williamson, the court found that even if a privilege existed, an issue that the court did not reach, the crime-fraud exception applied to certain B W documents (the Merrell Williams documents). Carter v. Brown Williamson, Case No. 95-00934 CA (Duval Cty. Cir. Ct., Fla., Tran. July 26, 1996, at 1329-32).

4031. In Haines v. Liggett Group, 140 F.R.D. 681, 689 (D.N.J. 1992), vacated on procedural grounds, 975 F.2d 81 (3rd Cir. 1992), the court, following an in camera review of 1,500 documents, confirmed "plaintiff's contentions of the explicit and pervasive nature of the alleged fraud by defendants [Liggett, Lorillard, Reynolds, Philip Morris, and the Tobacco Institute] and defendants' abuse of the attorney-client privilege as a means of effectuating that fraud." Specifically, the court found "that the attorney-client privilege was intentionally employed to guard against . . . unwanted disclosure." Haines, 140 F.R.D. at 684. Finally, the court stated that defendants and their lawyers "abused the attorney-client privilege in their efforts to effectuate their allegedly fraudulent schemes." Id. at 695.

4032. In (Re Mowbray) Brambles Australia Ltd. v. British American Tobacco Australia Services Ltd. NSWDDT 15, at Par. 56, 57, the Dust Diseases Tribunal of New South Wales concluded, after considering evidence that included the trial testimony of Frederick Gulson in the present litigation, that "BATAS in 1985 drafted or adopted the Document Retention Policy for the purpose of a fraud. . . ."; that "[t]he terms of the policy would appear to be so contrived that BATAS may secure legal sanction for the stated policy, while nevertheless selectively destroying prejudicial documents"; and that BATAS' communications to its lawyers made for the purpose of obtaining advice about document destruction under the 1985 Document Retention Policy "were communications in furtherance of the commission of a fraud. . . ."

4. Conclusions

4033. The foregoing Findings of Fact demonstrate that, over the course of approximately fifty years, different Defendants, at different times, took the following actions in order to maintain their public positions on smoking and disease-related issues, nicotine addiction, nicotine manipulation, and low tar cigarettes, in order to protect themselves from smoking and health related claims in litigation, and in order to avoid regulation which they viewed as harmful: they suppressed, concealed, and terminated scientific research; they destroyed documents including scientific reports and studies; and they repeatedly and intentionally improperly asserted the attorney-client and work product privileges over many thousands of documents (not just pages) to thwart disclosure to plaintiffs in smoking and health related litigation and to federal regulatory agencies, and to shield those documents from the harsh light of day.

4034. While it is true that some of these efforts were unsuccessful and some of the elaborate document "retention" policies were either not fully implemented or not implemented at all, the fact remains that many were fully complied with. Consequently, we can never know the full extent of the evidence destroyed and lost to public view.

* * * * CONCLUSIONS OF LAW

VII. DEFENDANTS HAVE VIOLATED 18 U.S.C. 1962(c)

A. Introduction

The United States established by a preponderance of the evidence that Defendants and others comprised an association-in-fact enterprise ("Enterprise") and that each Defendant participated in the conduct, management, and operation of the Enterprise through a pattern of racketeering activity in violation of 18 U.S.C. § 1962(c); see, e.g., Sedima v. Imrex Co., 473 U.S. 479, 491 (1985); Yellow Bus Lines, Inc. v. Drivers, Chauffers Helpers Local Union 639, 913 F.2d 948, 954 (D.C. Cir. 1990); United States v. Local 560, Int'l Bhd. of Teamsters, 780 F.2d 267, 280 n. 12 (3d Cir. 1985). Section 1962(c) provides:

It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt.

18 U.S.C. § 1962(c). The United States has proven this violation by establishing each of the following elements:

• The existence of an enterprise;

• The enterprise was engaged in, or its activities affected, interstate or foreign commerce;

• Each defendant was employed by or associated with the enterprise;

• Each defendant conducted or participated, directly or indirectly, in the conduct of the affairs of the enterprise;

• Each defendant committed at least two acts of racketeering within 10 years of one another; and

• The racketeering acts constitute a pattern of racketeering activity.

See, e.g., Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496-97 (1985); United States v. Hoyle, 122 F.3d 48, 50 (D.C. Cir. 1997) (listing elements); United States v. Philip Morris USA, 316 F. Supp. 2d 13, 16 (D.D.C. 2004).

All the alleged predicate racketeering acts in this case involve mail or wire fraud offenses, in violation of 18 U.S.C. § 1341 or § 1343. The mail fraud statute, 18 U.S.C. § 1341, provides in relevant part:

Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises . . . for the purpose of executing such scheme or artifice or attempting so to do, [mails or causes the mailing of any matter] . . . shall be fined under this title or imprisoned not more than 20 years, or both.

To establish an offense under § 1341 (or § 1343), the plaintiff must prove by a preponderance of evidence the following elements:

• The defendant knowingly devised or intended to devise any scheme or artifice to defraud a victim of money or property, or the defendant knowingly devised or intended to devise any scheme for obtaining money or property by means of material false or fraudulent, representations, pretenses, or promises, and

• The defendant mailed any matter, or caused the mailing of any matter (or sent or caused to be send by interstate wire transmission), for the purpose of furthering or executing such scheme or artifice, and

• The defendant acted with the specific intent to defraud or deceive.

See Neder v. United States, 527 U.S. 1, 24-25 (1999); United States v. Philip Morris USA, 304 F. Supp. 2d 60, 69 (D.D.C. 2004). The extensive, detailed Findings of Fact set forth above, establish — overwhelmingly — that Defendants devised a scheme to defraud and used mailings and wire transmissions for the purpose of furthering it. The purpose of the scheme was to obtain, from smokers and potential smokers, money, i.e., the cost of cigarettes, to fill the coffers of the corporate Defendants. Put more colloquially, and less legalistically, over the course of more than 50 years, Defendants lied, misrepresented, and deceived the American public, including smokers and the young people they avidly sought as "replacement smokers," about the devastating health effects of smoking and environmental tobacco smoke, they suppressed research, they destroyed documents, they manipulated the use of nicotine so as to increase and perpetuate addiction, they distorted the truth about low tar and light cigarettes so as to discourage smokers from quitting, and they abused the legal system in order to achieve their goal — to make money with little, if any, regard for individual illness and suffering, soaring health costs, or the integrity of the legal system.

B. Defendants Engaged in a Scheme to Defraud Smokers and Potential Smokers

The Government has proven that the Enterprise knowingly and intentionally engaged in a scheme to defraud smokers and potential smokers, for purposes of financial gain, by making false and fraudulent statements, representations, and promises. Defendants participated in the Enterprise's overarching scheme to defraud smokers and potential smokers in order to maximize their profits by preserving and enhancing the market for cigarettes, to avoid costly liability judgments, to derail attempts to make smoking socially unacceptable, and to sustain the cigarette industry.

In order to carry out this scheme, Defendants made the following false and fraudulent statements in a number of areas, including: (1) deceiving consumers into starting and continuing to buy and smoke cigarettes by misrepresenting and concealing the adverse health effects caused by smoking and exposure to environmental cigarette smoke, by maintaining that there was an "open question" as to whether smoking cigarettes causes disease and other adverse effects, despite the fact that Defendants knew otherwise, and by ensuring that their research, development, and marketing of cigarettes remained consistent with these core public positions (see Findings of Fact V(A)); (2) deceiving consumers into becoming or staying addicted to cigarettes by maintaining that neither smoking nor nicotine is addictive, despite the fact that Defendants knew these positions were false (see Findings of Fact V(B)); (3) deceiving consumers into becoming or staying addicted to cigarettes by manipulating the design of cigarettes and the delivery of nicotine to smokers, while at the same time denying that they engaged in such efforts (see Findings of Fact V(C)); (4) deceiving consumers, particularly parents and young people, by denying that they marketed to youth, while engaging in such marketing and advertising with the intent of addicting young people and enticing them to become lifelong smokers (see Findings of Fact V(F)); and (5) deceiving consumers through deceptive marketing and cigarette design modifications to exploit smokers' desire for less hazardous and "low tar" cigarettes which Defendants knew to be no safer than full-flavor cigarettes (see Findings of Fact V(G)).

The individual components must be viewed not independently but in context of the entire scheme to defraud. It is sufficient to prove by the totality of the circumstances that the defendant devised a scheme intended to defraud which included one or more of the individual component schemes alleged. See, e.g., Philip Morris, 304 F. Supp. 2d at 66-67; United States v. Godwin, 272 F.3d 659, 666-67 (4^th Cir. 2001); United States v. O'Connell, 172 F.3d 921, 1998 WL 720696 (D.C. Cir. 1998) (table); United States v. Lemire, 720 F.2d 1327, 1337 n. 12 (D.C. Cir. 1983); accord United States v. Clausen, 792 F.2d 102, 105 (8th Cir. 1986);United States v. Stull, 743 F.2d 439, 442 n. 2 (6th Cir. 1984) (collecting cases similarly holding); United States v. Halbert, 640 F.2d 1000, 1007 (9th Cir. 1981); United States v. Jordan, 626 F.2d 928, 931 (D.C. Cir. 1980); United States v. Amrep Corp., 560 F.2d 539, 546-47 (2d Cir. 1977).

The mail and wire fraud violations underlying the RICO violations cover any "scheme . . . to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises." 18 U.S.C. §§ 1342, 1343. Defendants claim that their public statements do not constitute Racketeering Acts and were not in furtherance of a scheme to defraud because they were simply statements of opinion held in good faith. de Mango v. United States, 636 F.2d 714, 720 n. 9 (D.C. Cir. 1980) ("[A] statement of opinion cannot constitute fraud"). This argument is unpersuasive.

First, in light of the overwhelming evidence of what the Enterprise as a whole and individual Defendants knew, it is absurd to believe that the highly-ranked representatives and agents of these corporations and entities had no knowledge that their public statements were false and fraudulent. The Findings of Fact are replete with examples of C.E.O.s, Vice-Presidents, and Directors of Research and Development, as well as the Defendants' lawyers, making statements which were inconsistent with the internal knowledge and practice of the corporation itself. To call such statements "opinions," strains credulity.

Second, while federal courts have demonstrated a willingness to find vague statements or "rosy affirmations" by a company spokesman insufficient to hold a company liable for fraud, see In re Ford Motor Co. Secs. Litig., 381 F.3d 563, 571 (6th Cir. 2004) (quoting Shaw v. Digital Equip. Corp., 82 F.3d 1194, 1217 (1st Cir. 1996)) (finding that vague statements by corporate mangers and spokespersons are not actionable for securities fraud because no reasonable investor would have relied on them), that approach is not appropriate for statements whose falsity can be proved "through the orthodox evidentiary process," Va. Bankshares, Inc. v. Sandberg, 501 U.S. 1083, 1090, 1091-93 (1991). Indeed, where objective data is available to disprove a statement or demonstrate that it is misleading at the time it was made, a public statement of opinion by a company spokesperson can constitute actionable fraud. See City of Monroe Employees Retirement System v. Bridgestone Corp., 387 F.3d 468, 487-492 (6th Cir. 2004) (holding that even if a statement alluding to objective data was classified as opinion, it was specific enough to form the basis of an actionable securities claim).

In the context of securities fraud litigation, courts have found that a "statement of belief contains at least three implicit factual assertions: (1) that the statement is genuinely believed; (2) that there is [a] reasonable basis for that belief; and (3) that the speaker is not aware of any undisclosed facts tending to seriously undermine the accuracy of the statement. A projection or statement of belief may be actionable to the extent that one of these implied factual assertions is inaccurate." In re Apple Computer Sec. Litigation, 886 F.2d 1109, 1113 (9th Cir. 1989). Accordingly, even where a speaker may not be aware of undisclosed facts and issues an opinion in supposed good faith, the statement will provide grounds for fraud where it can be proved that there is no reasonable basis for the speaker's belief. Were this not the case, companies would be able to shield themselves from liability by keeping their spokespersons in the dark about facts that are inconsistent with their public statements.

The analogy to securities fraud, though imperfect, is useful in this case. In securities fraud, a court tests the materiality of opinions issued by company spokespersons by determining whether a reasonable investor would have relied on the statement. Va. Bankshares, Inc. v. Sandberg, 501 U.S. at 1093-1094. In the case at bar, the materiality of public statements can be determined by assessing the public's reliance on those statements for their health and safety. When a spokesperson of a large, sophisticated corporation makes statements of what Defendants now characterize as "opinion," but which can be proved false by information that was available and known to the corporation at the time, and the public relies on those statements, the company cannot be permitted to escape liability merely because it declined to inform that individual spokesperson that his or her statement was misleading. As courts have recognized in the securities fraud context, failure to disclose or correct a misleading statement, even a statement which may be characterized as an opinion, is of particular concern where the public does not have other information with which they can evaluate the reliability of the opinion that was stated. See Helwig v. Vencor, Inc., 251 F.3d 540, 559-561 (6th Cir. 2001).

The totality of the evidence proves Defendants' wide reaching and pervasive scheme to defraud consumers and potential consumers of cigarettes. As established at trial and explained below, Defendants coordinated their public relations, research, cigarette design and marketing efforts in order to advance their overarching scheme to defraud by: (1) denying the adverse health effects of active smoking; (2) denying the addictiveness of nicotine and cigarette smoking; (3) denying their manipulation of the nicotine content of cigarettes; (4) misrepresenting the health risks attached to light and low tar cigarettes; (5) denying their marketing to youth; (6) denying the adverse health effects of secondhand smoke; and (7) suppressing, concealing, and destroying information and documents related to the adverse health effects of smoking. The Court will address each area,seriatim.

1. Defendants Falsely Denied the Adverse Health Effects of Smoking

Smoking is a cause of significant disease and death. The evidence presented in this case demonstrates the extent of suffering by smokers and former smokers. Cigarette smoking and exposure to secondhand smoke kills 440,000 Americans every year, or more than 1,200 every single day. The annual number of deaths due to cigarette smoking is substantially greater than the combined annual number of deaths due to illegal drug use, alcohol consumption, automobile accidents, fires, homicides, suicides, and AIDS. Approximately one out of every five deaths that occur in the United States is caused by cigarette smoking. See Findings of Fact, V(A)(1).

Defendants' joint efforts to deny and distort the health effects of cigarette smoking consisted of making numerous widely disseminated public statements that denied or questioned smoking's harms; attacking legitimate scientific investigation; continually calling for more research; and, years after questions of causation were resolved in the public health community, repeatedly promising to determine through "objective" research by "independent" scientists, whether smoking was a cause of disease.

Defendants' efforts to deny and distort the scientific evidence of smoking's harms are demonstrated by not only decades of press releases, reports, booklets, newsletters, television and radio appearances, and scientific symposia and publications, but also by evidence of their concerted, efforts to attack and undermine the studies in mainstream scientific publications such as the Reports of the Surgeon General. The intense public relations activity — consisting of numerous press releases, advertisements, and other false statements — before and particularly after publication of the 1964 Surgeon General's Report on Smoking and Health (the first to announce the consensus of the scientific and public health community that smoking caused disease and death), is but one example. See Findings of Fact Section V(A)(3)(c) and V(A)(5)(c). This continued despite widespread internal acknowledgment among Defendants' executives and scientists that smoking causes disease. See, e.g., Farone WD, 66:1-18 ("There was widespread acceptance that smoking caused disease. I never talked with a scientist at Philip Morris who said that smoking doesn't cause disease.").

Even after the 1964 Report, a February 26, 1972 Tobacco Institute press release asserted that the 1972 Surgeon General's Report, which announced the consensus of the scientific and public health community that smoking causes chronic obstructive bronchopulmonary disease (COPD) and other cardiovascular diseases, as well as cancer, "insults the scientific community" and that the report was "another example of `press conference science' — an absolute masterpiece of bureaucratic obfuscation." The press release also asserted that "the number one health problem is not cigarette smoking, but is the extent to which public health officials may knowingly mislead the American public." TIMN 0210602-03 at 0602 (US 21322).

Of paramount significance is that Defendants' internal documents openly acknowledge the purpose of their public relations strategy. For example, William Kloepfer, Vice President of Public Relations for the Tobacco Institute, wrote to Earle Clements, President of the Tobacco Institute admitting his concern about the purpose: "Our basic position in the cigarette controversy is subject to the charge, and may be subject to a finding, that we are making false or misleading statements to promote the sale of cigarettes." TIMN0072354-56 at 2354 (US 63576). The Tobacco Institute's 1968 internal "Tobacco and Health Research Procedural Memo" advised: "The most important type of story is that which casts doubt on the cause and effect theory of disease and smoking. . . . [T]he headline should strongly call out the point — Controversy! Contradiction! Other factors! Unknowns!" TIMN0071488-91 at 1489 (US 21302). Similarly, an undated internal B W document titled "Smoking and Health Proposal" explained: "Doubt is our product since it is the best means of competing with the `body of fact' that exists in the mind of the general public. It is also the means of establishing a controversy." 690010951-0959 at 0959 (US 21040).

As another example, in a 1975 marketing document, B W acknowledged the necessity of continuing the "open controversy" strategy:

Smokers perceive cigarette smoking as dangerous for one's health. However, they continue to smoke. Thus, they are faced with the fact that they are behaving illogically. They respond by providing either a rationalization for smoking or by repressing their perceptions of the dangers involved. . . . The advertising must also cope with consumer attitudes about smoking, providing either a rationale or a means of repressing the health concern.

680113760-3763 at 3761-3762 (US 20987).

Defendants understood that most individuals, when starting to smoke, do not adequately appreciate the full risk associated with smoking to make an informed decision about whether or not to engage in smoking behavior. In fact, the evidence shows that most people's knowledge of the nature and consequences of diseases caused by smoking tends to be superficial. See Findings of Fact Section V(B); Slovic WD, 18:14-20:5; Weinstein WD, 24:7-29:22.

Using the sophisticated and well-organized machinery created to serve their agenda, Defendants fraudulently denied the adverse health effects of smoking for at least 40 years in order to sustain the appearance of an open controversy about the link between smoking and disease, and thereby maintain and enhance the cigarette market and their collective revenues.

2. Defendants Falsely Denied that Nicotine and Smoking Are Addictive

Defendants have made and continue to make false and fraudulent statements about the addictiveness of nicotine and smoking. Fact and expert testimony, as well as Defendants' internal documents spanning five decades, firmly establish that Defendants have intended their statements about addiction to further the Enterprise's scheme to defraud by concealing what Defendants openly recognized internally — that smoking is an addiction driven primarily by the pharmacological effects of nicotine.

Defendants' internal research reflects their understanding that nicotine is the most important chemical delivered by cigarettes because it is what compels smokers to smoke. Their product research and development efforts had the overriding objective of harnessing and manipulating the power of nicotine and ensuring that their marketed products delivered enough nicotine to create and sustain addiction. [Indeed, to this day none of Defendant cigarette manufacturers publicly admit that nicotine is an addictive drug delivered in cigarettes. Defendants' current public statements on addiction avoid any mention of nicotine, let alone its role in addiction. See Findings of Fact Section V(B)(4)(j). Dr. Jack Henningfield and Dr. Michael Eriksen both testified that Defendants' current statements about addiction omit material information and are not fully consistent with the conclusions of the medical and scientific communities. Henningfield WD, 104:23-109:22; Eriksen TT, 5/16/05, 21248:20-21249:15.]

By the early 1980s, the medical and scientific communities recognized that the results of clinical observations, laboratory research, and population studies together justified the conclusion that tobacco-delivered nicotine was addictive. Henningfield TT, 11/22/04, 6811:11-6812:2.

In response to the emergence of a scientific consensus on this issue in the early 1980s, Defendants began making four types of public statements: (1) Smoking cigarettes is not addictive because some smokers can, and do, quit smoking on their own (e.g., "smoking is a truly personal choice which can be stopped if and when a person decides to do so" (no bates) (US 22727); (2) Smoking cigarettes is not addictive because it does not lead to physical "dependence" (e.g., "the claim that there is a physical dependence to smoking is simply a desperate attempt to find some way to differentiate smoking from other habits" (no bates) (US 85366); (3) Smoking cigarettes is not addictive because it does not induce "intoxication" (e.g., "Tobacco is not intoxicating, in direct contrast to any other substance that has been claimed to be addictive, from heroin and cocaine through to alcohol" (no bates) (US 23036); (4) Smoking cigarettes is not addictive because cigarettes are not like other addictive drugs — rather, smoking is merely a pleasurable behavior (e.g., the "attachment" to smoking is in the same category as "tennis, jogging, candy, rock music, Coca-Cola, members of the opposite sex and hamburgers" (no bates) (US 65625) (CEO of Philip Morris analogized smoking to eating Gummi Bears saying "I don't like it when I don't eat my Gummi Bears, but I'm certainly not addicted to them," Morgan PD, Broin v. Philip Morris, et al., 4/17/97, 77:20-78:23).

As to the first category of statements, there is simply no evidence in the record to support the assertion that smoking is not addictive because a smoker can voluntarily quit. Not a single defense witness could provide any support, scientific or otherwise, for this proposition. See Dawson WD, 49:5-20; Rowell TT, 16678:21-16679:4; Keane WD, 22:9-14.

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