Formation of the Tobacco Institute

As time passed, TIRC faced increasing difficulty reconciling its dual functions of public relations and research. On the one hand some SAB members had always wanted a more distinct separation between the SAB and TIRC. As early as October 1954, the SAB

recognized the need for a more affirmative informational approach by the TIRC, and expressed the feeling that it would be in order for the Committee [TIRC] to take more positive action on its own through Mr. Hartnett as chairman without, at the same time, drawing the Advisory Board or the research program into such utterances.

¶CTRMN004227-4232 at 4230 (US 86073).

In addition, there was growing concern about TIRC making partisan arguments on behalf of the industry while it was sponsoring research that the industry wanted to be perceived as objective. Brandt WD, 90:4-9; Zahn PD, Massachusetts v. Philip Morris, 5/28/98, 98:25-99:16; BWX0011174-1187 at 1176 (US 21773). In 1958, a SAB member wrote a letter to those attending the February SAB meeting objecting to public statements which had been made by Clarence Cook Little, contending that when Little spoke as Scientific Director of the TIRC, the inference was that Little was also speaking for the SAB. CTRMN039046-9106 at 9055 (JD 092825). The dissenting SAB member indicated that, unless a more distinct separation could be established between the SAB and TIRC, he felt he could not continue to serve on the SAB. Two other SAB members joined in this statement. CTR-TIRC-MIN000001-0252 at 0142 (JD 093292); 681879254-9715 at 9391 (US 21020). According to SAB member Paul Kotin, members of the TIRC SAB made quite clear "the inadvisability and downright unacceptability" of the SAB or its members being quoted in TIRC press releases and public statements concerning the smoking and health controversy. Kotin PD, Falise v. American Tobacco, 10/31/00, 348:25-352:14.
On the other hand, some members of the Enterprise wanted an organization that would take a much more aggressive public relations stance to counter arguments linking smoking and disease and to oppose proposed labeling legislation facing the industry. BBAT030581-0582 (US 22058); MNAT00724279-4280 (US 22996); TLT0900385-0389 (US 88209).
Defendants finally decided to create a separate non-profit corporation, the Tobacco Institute ("TI"), which would be responsible for more aggressive public relations and political lobbying and would not have the limitations associated with TIRC. 93481139-1140 (US 21117);

¶Brandt WD, 88:20-90:3.

The creation of a separate organization was felt to be

a way of keeping Little inviolate and untainted in his ivory tower while giving a new group a little more freedom of action in the public relations field . . . . [T]he legal people were especially interested in this argument because they thought of Dr. Little as a potential witness and were not anxious to have him making public statements which could compromise his usefulness to them in court.

¶Brandt WD, 90:4-19; BWX0011174-1187 at 1176 (US 21773).

In January 1958, twelve manufacturers of cigarettes, smoking and chewing tobacco, and snuff jointly announced the formation of the Tobacco Institute. The companies forming the

¶Tobacco Institute included Defendants American, B&W, Liggett, Lorillard, Philip Morris, and

¶Reynolds. 93481139-1140 (US 21117).

The Tobacco Institute was incorporated in New York State, TIMN0010606-0609 (US

¶21291), TIMN0011255-1260 (US 22250), and the Tobacco Institute bylaws were adopted at the meeting of the incorporators and members held on January 29, 1958. TIMN0005705-5712 at 5706

¶(US 21290); 1005136918-6933 (US 20223).

The Tobacco Institute was a trade association. According to its 1958 Certificate of

¶Incorporation, the Tobacco Institute was formed

to promote a better understanding by the public of the tobacco industry and its place in the national economy; to cooperate with governmental agencies and public officials with reference to the tobacco industry; to collect and disseminate information relating to the use of tobacco; to collect and disseminate scientific and medical material relating to tobacco; to collect and disseminate information relating to the tobacco industry published or released by any governmental agency, federal or state, or derived from other sources

independent of the industry; to collect and disseminate information relating to legislative and administrative developments, federal or state, affecting the tobacco industry; to promote public good will.

¶(no bates) (US 21291); see also (no bates) (US 87552).

The Tobacco Institute had a Board of Directors "composed in a fashion similar to that of the Council for Tobacco Research" and an Executive Committee consisting of the chief executive officers of the major tobacco companies. 044227839-7844 (US 20066). That Committee, "[a]s a practical matter . . . for many years" was run by "a committee of four lawyers, one from each of the major member tobacco companies." Id.
The Tobacco Institute Board of Directors held its first meeting on January 30, 1958. Former Congressman James Richards of South Carolina was elected President and Executive Director; Joseph F. Cullman, III, President of Philip Morris, was elected Treasurer; and Chandler Kibbe, Vice President of Philip Morris, was elected Assistant Treasurer. Among those elected to membership at this meeting were American, Liggett, Lorillard, Philip Morris, and Reynolds. An Executive Committee was established, and its members were Cullman; Benjamin Few, President of Liggett; Bowman Gray, Chairman of Reynolds; Lewis Gruber, President and Chairman of Lorillard; and J. Whitney Peterson, President of United States Tobacco. TIMN0005705-5712 at 5705, 5707- 5711 (US 21290).
At the first meeting of its Board of Directors, Hill & Knowlton was appointed Tobacco Institute public relations counsel, and Covington & Burling was appointed Tobacco Institute legal counsel. Id.; USX6390001-0400 at 0012 (US 89555). Both were to play a major role in setting the priorities for and guiding the future operation of the Tobacco Institute.

In addition to Covington & Burling, the Tobacco Institute also had a relationship with Shook, Hardy & Bacon. A May 1982 letter from William Shinn of Shook, Hardy & Bacon, to Robert Sachs, Counsel for B&W, and Arthur Stevens, General Counsel for Lorillard, described this relationship. Shinn divided the law firm's activities into four categories: Tobacco Institute Clearance Procedures, Tobacco Institute Committees, Science and Research, and General. Clearance procedures were defined as a number of standard operating procedures in examining Tobacco Institute materials with potential smoking and health overtones. Tobacco Institute Committee work involved attending meetings of the Committee of Counsel, Communications Committee, and Executive Committee. See Section III(D)(4), infra for detailed discussion of Tobacco Institute Committees. Science and Research work primarily concerned the development of special projects and industry witnesses. General work was a catchall category with activities ranging from literature review, for the purposes of identifying possible expert witnesses, to appearances at the Tobacco Institute's College of Tobacco Knowledge (discussed in detail at Section III(D)(5), infra). 521043046-3050 (US 20891); 2015035387-5391 (US 36651).
Members of the Enterprise convened regularly between 1958 and 1998 at the meetings of the Tobacco Institute's Board of Directors. At these meetings, representatives from the Enterprise discussed and passed resolutions regarding the Tobacco Institute's budget, programs and projects of the various divisions, election of officers, payment of dues, and amendments to the bylaws. TIMN0005705-5712 (US 21290); LG2000457-0461 (US 21876); 2025856215-6225 (US 23769); TIMN0006140-6146 (US 62658); TIMN0006405-6411 (US 62663); TIMN0012917-2923 (US 62779); TIOK0004462-4466 (US 63020); TIMN0017710-7711 (US 87550); TIMN0012893- 2900 (US 88241); TIMN0006140-6146 (US 88243); TIMN0012951-2955 (US 88244);

100

¶88247); TIMN0006405-6411 (US 88248); TIMN0013203-3213 (US 88249); TIMN0014400-4410 (US 88250); TIMN0012963-2973 (US 88321); Stevens WD, 3:21-4:2, 4:14-23, 8:4-14, 17:14-19; see also Kornegay PD, Small v. Lorillard, 11/18/97, 36:11-19.

Although the membership fluctuated during the existence of the Tobacco Institute, all Defendants (except BATCo, CTR, and the Tobacco Institute itself) created, agreed to fund, and/or did jointly fund the Tobacco Institute over the years. TIFL0020285-0311 at 0297-0305 (JD 080429). From 1958 through 1999, payments to the Tobacco Institute from Defendants amounted to more than $618,432,000, including: $161,505,876 from Philip Morris; $1,848,530 from Liggett; $110,298,387 from Reynolds; $29,195,668 from Lorillard; $15,933,769 from B&W; and $19,146,216 from American. ARG0333104-3192 at 3175-3176 (US 75555); ARU5856402-6406 at 6403-6406 (US 75925); USX6400001-0527 at 0134-0135, 0223-0225, 0344-0346 (US 89561) (Defendants' Responses to Interrogatory No. 25).
Lorillard was not a member of the Tobacco Institute from 1968 to 1971. TIFL0020285-0311 at 0299-0305 (JD 080429). However, even during its non-membership, Lorillard it continued to "receive the releases and other information issued by the Institute," attended meetings of the lawyers of all the major companies at the Institute's offices, and was "kept apprised of the Institute's activities." 044227839-7844 (US 20066).
Executives of Defendant Philip Morris Companies attended and participated in meetings of the Tobacco Institute Board of Directors and the Executive Committee of the Board of Directors. These executives included Thomas Ahrensfeld, Senior Vice President and General Counsel; David Greenberg, Vice President; Kathleen Linehan, Vice President Government Affairs;

101

¶Howard Liebengood, Vice President; and Steve Parrish, Senior Vice President. 2025856215-6225

¶32464); 521500132-0136 (US 52769); TI16760371-0372 (US 62461); TIMN0014390-4393 (US 62782); TIMN0014955-4960 (US 62784); 2025856068-6073 (US 86509); 2023723951-3955 (US 86510); TIMN0017710-7711 (US 87550); TIMN0013651-3655 (US 88302); TIMN0013656-3659 (US 88303); TIMN0014418-4425 (US 88304); TIMN0017720-7722 (US 88305); TIMN0017725- 7729 (US 88306); TIMN0017731-7736 (US 88307); TIMN0018436-8439 (US 88308); TIMN0018451-8455 (US 88309); TIMN0018462-8466 (US 88310); TIMN0018590-8593 (US 88311); TIMN0019234-9239 (US 88312); TIMN0013203-3213 (US 88249); TIMN0014400-4410 (US 88250); TIMN0010629-0629 (US 88252).

The Tobacco Institute's amended bylaws created two classes of membership. Class A members were the cigarette manufacturers (those members who as of the date of any election of directors would be subject to additional dues assessment per Article III, Section 1 of the bylaws). Class A members would be entitled to elect twice the number of directors as there were Class A members. Members not subject to such assessment would be entitled to elect the same number of directors as there were Class B members. In addition, the members determined that the chief executive of each member company would be designated to serve on the Tobacco Institute Executive Committee. LG20000457-0461 (US 86081); TIMN451429-1435 (US 87551); 2021266019-6028 at 6019 (US 26736).
The primary functions of the Tobacco Institute included: advancing -- through press releases, advertisements, publications, and other public statements -- the Enterprise's primary position that there were scientific and medical doubts concerning the relationship between smoking and disease; disputing statements from health organizations about smoking and disease, and later about second hand smoke and disease; using the results of TIRC/CTR research projects and other industry-sponsored research projects to question the charges against smoking, to emphasize the complexities of those diseases with which smoking has been statistically associated, and to reassure the public that the industry was actively investigating the issues; denying that cigarette smoking was addictive; minimizing the difficulties of quitting smoking; and denying that the industry marketed to youth. USX6390001-0400 (US 89555).

102

In 1958, when the Tobacco Institute was created, Hill & Knowlton secured the account to handle its public relations. Brandt WD, 52:8-9. Two of the Hill & Knowlton employees assigned to handle the new Tobacco Institute account were Leonard Zahn and Carl Thompson, who were also handling the TIRC account. Zahn PD, Cipollone v. Liggett, 12/16/86, 85:16-86:20. One of four public relations objectives in Hill & Knowlton's March 1958 Recommendations to the Tobacco Institute was: "To create a better public understanding of facts regarding tobacco use and health, and of the contribution the industry is making to efforts of science to find the answers to health questions." CTRMN015402-5408 at 5402-5403 (US 79886).
A 1966 document titled "The 'Mission' of the President of the Tobacco Institute" explained that, to meet its objectives, "the full resources of the Institute must be directed toward a consistent and positive program to gain public exposure to research results and scientific opinions that question the charges against smoking and that point up the complexities of those diseases with which smoking has been statistically associated." 502645038S-5038Z (US 23053).
In a January 1968 memorandum to Earle Clements, Vice President William Kloepfer, who was responsible for public affairs, set forth what was to be the guiding public relations policy for the Tobacco Institute: "to attempt to increase substantially public awareness of the cigarette controversy; putting it another way, to make a greater portion of the public aware that widespread indictment of cigarettes as a cause of poor health does not amount to conviction." CTRMN015575- 5593 (US 79902).

103

However, in an April 1968 memorandum to Earle Clements, President of the Tobacco Institute, William Kloepfer, expressed concern that the industry's strategy of constant and consistent denial of smoking's harm was untenable. He wrote: "Our basic position in the cigarette controversy is subject to the charge, and maybe subject to a finding, that we are making false and misleading statements to promote the sale of cigarettes." VXA2511046-1048 (US 63576); Brandt WD, 117:23- 119:6; 1005112459-2461 (US 20213).