Provisions of the MSA

¶4044. On November 23, 1998, Philip Morris, R.J. Reynolds, Brown & Williamson, and Lorillard (the "Original Participating Manufacturers" or "OPMs") and Liggett entered into the Master Settlement Agreement ("MSA") with fifty-two jurisdictions, including forty-six states and the District of Columbia, thereby ending the lawsuits brought by the states' Attorneys General against the tobacco industry. Keane TT, 1/19/05, 10537:2-18; (no bates) (JD 045158). Prior to signing the MSA, various Defendant cigarette manufacturers entered into separate settlements with four of the states that had filed lawsuits against them where trial was about to start or had started: Mississippi, Florida, Texas, and Minnesota. Comprehensive Settlement Agreement and Release, In re: Moore ex rel Miss. Tobacco Litig., (no bates) (JD 064832); Settlement Agreement, Florida v. Am. Tobacco Co., C.A. No. 95-1466 AH (Fla. Cir. Ct. Aug. 25, 1997) (280801139/1155), (no bates) (JD 012500); Comprehensive Settlement and Release, Texas v. Am. Tobacco Co., No. 5- 96CV-91 (E.D. Tex. Jan. 16, 1998), (no bates) (JD 012504); Settlement Agreement and Stipulation for Entry of Consent Judgment, Minnesota v. Philip Morris, Inc., No. C1-94-8565 (Dist. Ct. Ramsey Cty., May 8, 1998) (106035397/5425), (no bates) (JD 012501). Each of the settlement agreements with these four states provided much of the same injunctive and related relief as the MSA. The MSA resulted in the dismissal of more than forty state lawsuits pending against the Defendants and others. Szymanczyk WD, 12:12-18; Brandt TT, 9/27/04, 674:6-675:18 (noting that forty suits are pending).

¶4045. The MSA required its approval and the entry of a Consent Decree and Final Judgment embodying various injunctive and other provisions by the court before which each settling state's lawsuit was pending. (no bates) (JD 045158 at § XIII(b) and Ex. L); (no bates) (JD 040017); Szymanczyk WD, 103:9-18; Myers TT, 5/18/05, 21623:1-11.

1512

¶4046. The signatory cigarette manufacturers, including many of the Defendants in this case, are individually bound by all provisions of the MSA. (no bates) (JD 045158). Some of its most significant provisions are set forth herein.

¶4047. The MSA states:

(a) Prohibition on Youth Targeting. No Participating Manufacturer may take any action, directly or indirectly, to target Youth within any Settling State in the advertising, promotion or marketing of Tobacco Products, or take any action the primary purpose of which is to initiate, maintain or increase the incidence of Youth smoking within any Settling State.

¶(no bates) (JD 045158 at § 111(a)).

¶4048. The MSA states:

(r) 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. Nothing in this subsection shall limit the exercise of any First Amendment right or the assertion of any defense or position in any judicial, legislative or regulatory forum.

¶(no bates) (JD 045158 at § III(r)).

¶4049. The MSA states:

(q) Prohibition on Agreements to Suppress Research. No Participating Manufacturer may enter into any contract, combination or conspiracy with any other Tobacco Product Manufacturer that has the purpose or effect of: (1) limiting competition in the production or distribution of information about health hazards or other consequences of the use of their products; (2) limiting or suppressing research into smoking

1513

and health; or (3) limiting or suppressing research into the marketing or development of new products. . . .

¶(no bates) (JD045158 at §III(q)).

¶4050. The MSA prohibits the Original Participating Manufacturers and their lobbyists from opposing new state or local tobacco-control legislation, and specifically prohibits them from lobbying against measures to enhance the enforcement of laws that prohibit the sale of tobacco products to youth. (no bates) (JD 045158 at § III(m), ¶¶ 29-32).

¶4051. The MSA contains the following specific prohibitions:

¶-- use of cartoon characters in tobacco product advertising;

¶-- use of billboards for tobacco product advertising;

-- tobacco product advertisements in stadiums, arenas and shopping malls;

-- tobacco product brand name sponsorships of concerts; football, basketball, baseball, soccer or hockey games or leagues; or any other event where the intended audience contains a significant percentage of youth or in which any paid participants or contestants are youth;

¶-- tobacco product advertisements on public or private vehicles;

-- tobacco product advertisements in airports, bus stops, taxi stands, train stations, transportation waiting areas or "any similar location";

-- tobacco product advertisements outside of stores or in store windows that exceed a designated maximum size;

-- so-called "Brand Name Merchandise" -- caps, jackets, bags or similar apparel or consumer merchandise bearing tobacco brand names;

-- payments for product placement -- in other words, payments to another person or entity to "use, display or make reference

1514

to" any tobacco product in any "motion picture, television show, theatrical production or other live performance, live or recorded performance of music, commercial film or video, or video game";

-- distribution of free samples of tobacco products except in adult-only facilities;

-- an injunction barring the companies from any agreement with each other that "has the purpose or effect" of "limiting or suppressing research into smoking and health";

-- an injunction barring the companies from any agreement with each other that "has the purpose or effect" of "limiting or suppressing research into the marketing and development of new products";

-- an injunction barring the companies from any agreement with each other that "has the purpose or effect" of "limiting competition in the production or distribution of information about health hazards or other consequences of use of Tobacco Products."

¶(no bates) (JD 045158 at § III).

¶4052. The MSA requires the permanent dissolution of CTR, TI, and CIAR. In addition, it prohibits the signatory cigarette manufacturers from establishing new industry research organizations like CTR in the future. (no bates) (JD 045158 at § III(o)). The MSA places restrictions on Defendants' formation of or participation in any tobacco-related trade associations, including the requirement that any such association "agree in writing not to act in any manner contrary to any provision" of the MSA, have independent legal counsel, and be subject to specified inspection rights of the States. Id. at § III(p). All other industry-created organizations were disbanded voluntarily and are therefore not subject to the MSA's prohibitions.

1515

¶4053. The MSA requires Defendants to promulgate a series of "corporate culture commitments." These include: (a) establishment of corporate principles to comply with the MSA, to reduce youth smoking, and to educate employees and customers about the company's commitment to reduce youth smoking; (b) designation of an executive responsible for identifying methods for reducing youth access to cigarettes and youth smoking incidence; and (c) encouragement of employees to identify additional youth-smoking reduction measures. Id. at § III(l).

¶4054. The MSA provides that Defendants pay $25,000,000 each year for ten years to fund the establishment of an independent national foundation which researches and designs education programs to reduce youth smoking. The payments for this foundation end March 31, 2008. Id. at § VI(a)-(b). Pursuant to this provision, the National Association of Attorneys General ("NAAG") created the American Legacy Foundation in 1999, which, among other activities, carries out a nationwide advertising and education program to prevent and reduce youth smoking. The MSA also provides that the Foundation will monitor youth smoking and evaluate the effectiveness of various youth smoking prevention programs. The agreement provided the Foundation an additional $300,000,000 per year from 1999 through and including 2003 to fund the education program. Id. at § VI(c), (f).

¶4055. Defendants are required to establish a series of internet websites making publicly available millions of internal documents, including (a) all documents previously obtained through discovery by state Attorneys General, the Federal Trade Commission and certain other plaintiffs in decades of litigation and investigations and (b) all documents obtained in the future in discovery by any plaintiff in any civil action relating to smoking and health. This provision does not require disclosure of any documents over which Defendants claim protection due to privilege, trade secrecy and confidentiality of proprietary business information. It is due to expire June 30, 2010. Id. at § IV; (no bates) (JD 046586 at 3000155795/5799).

1516