UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

¶UNITED STATES OF AMERICA, :

: Plaintiff, : : Civil Action No. 99-2496 (GK) and : :

¶TOBACCO-FREE KIDS ACTION FUND, : AMERICAN CANCER SOCIETY, : AMERICAN HEART ASSOCIATION, : AMERICAN LUNG ASSOCIATION, : AMERICANS FOR NONSMOKERS' RIGHTS,: and NATIONAL AFRICAN AMERICAN : TOBACCO PREVENTION NETWORK, :

: Intervenors, : : v. : :

¶PHILIP MORRIS USA, INC., : (f/k/a Philip Morris, Inc.), et al., :

: Defendants. :

AMENDED FINAL OPINION1

¶I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .¹¹ This Amended Memorandum Opinion corrects the citation on page 1536, line 11 to read: United States v. Local 1084-1, Int'l Longshoremen's Ass'n., 812 F. Supp. 1303, 1310-15 (S.D.N.Y. 1993); and deletes the last sentence on page 1552, n. 23.

A. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .¹¹ This Amended Memorandum Opinion corrects the citation on page 1536, line 11 to read: United States v. Local 1084-1, Int'l Longshoremen's Ass'n., 812 F. Supp. 1303, 1310-15 (S.D.N.Y. 1993); and deletes the last sentence on page 1552, n. 23. B. Preliminary Guidance for the Reader . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .⁵⁵ The eleven Defendants were: Philip Morris, Inc., now Philip Morris USA, Inc. ("Philip Morris"), R.J. Reynolds Tobacco Co., now Reynolds American ("R.J. Reynolds"), Brown & Williamson Tobacco Co., now part of Reynolds American ("Brown & Williamson"), Lorillard Tobacco Company ("Lorillard"), The Liggett Group, Inc. ("Liggett"), American Tobacco Co., merged with Brown & Williamson which is now part of Reynolds American ("American Tobacco"), Philip Morris Cos., now Altria ("Altria"), B.A.T. Industries p.l.c. ("BAT Ind."), now part of BATCo, British American Tobacco (Investments) Ltd. ("BATCo"), The Council for Tobacco Research-- U.S.A., Inc. ("CTR"), and The Tobacco Institute, Inc. ("TI"). The latter two entities do not manufacture or sell tobacco products, but are alleged to be co-conspirators in Defendants' tortious activities. BAT Ind. has been dismissed for lack of personal jurisdiction. All Defendants but Liggett joined together in common defense (the "Joint Defendants"). In 2003, the Court granted the Motion of British American Tobacco Australian Services, Ltd. ("BATAS") to intervene for the limited purpose of asserting and protecting its interests in litigation documents. Order #449. -10-Show full note

¶II. PROCEDURAL HISTORY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .¹⁰¹⁰ All of these studies will be discussed in much greater detail in Section IV, infra. -17-

CREATION, NATURE, AND OPERATION OF

¶THE ENTERPRISE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .¹⁵¹⁵ BAT had a complex, but close, financial relationship with Imperial Tobacco Company. -423-

Pre-1953 Overview–The Rise in American Smoking

and the Status of Scientific Research on Smoking and Health . . . . . . . . . . . . . .¹⁶¹⁶ Cipollone v. Liggett Group, 505 U.S. 504 (1992), was one of the first tobacco lawsuits in which the industry was assessed damages. It was particularly significant to the industry because it involved the unprecedented use of thousands of internal industry documents. -445- B. Creation of the Enterprise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .¹⁸¹⁸ Defendants assert that the statements of their C.E.O.s before the Waxman Subcommittee in 1994 constitutes petitioning activity protected from any imposition of liability under the Noerr-Pennington doctrine. See, Eastern R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961) and United Mine Workers v. Pennington, 381 U.S. 657 (1965). This legal issue is addressed fully in the Conclusions of Law. The facts, as recounted herein, speak for themselves. -637-Show full note

TIRC/CTR -- Tobacco Industry Research Committee/Council

¶for Tobacco Research-USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .²⁶²⁶ 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. -764-Show full note

Selection and Approval of TIRC's Scientific Advisory

Board Members and Scientific Director . . . . . . . . . . . . . . . . . . . . . . . . . 37 2. Research Activities of TIRC/CTR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 3. Public Relations Activities of TIRC/CTR . . . . . . . . . . . . . . . . . . . . . . . . 50 4. Publications and Public Statements of TIRC/CTR . . . . . . . . . . . . . . . . . 55 a. TIRC/CTR Annual Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 b. TIRC/CTR Newsletters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 c. TIRC/CTR Press Releases and Other Public Statements . . . . . . . 62 D. Tobacco Institute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 1. Formation of the Tobacco Institute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 2. Relationship Between the Tobacco Institute and TIRC/CTR . . . . . . . . . 73

¶-i-

Tobacco Institute Press Releases, Public Statements, Advertisements, Brochures, and Other Publications . . . . . . . . . . . . . . . . 81 4. Tobacco Institute Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 a. Committee of Counsel and Outside Counsel . . . . . . . . . . . . . . . . 94 b. Tobacco Institute Executive Committee . . . . . . . . . . . . . . . . . . . 99 c. Tobacco Institute Communications Committee . . . . . . . . . . . . . 101 5. Tobacco Institute College of Tobacco Knowledge . . . . . . . . . . . . . . . . 103 6. Tobacco Institute Testing Laboratory . . . . . . . . . . . . . . . . . . . . . . . . . . 110

Joint Research Activity Directed by Defendants' Executives

and Lawyers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 1. Witness Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 2. CTR Special Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119 a. Nature of CTR Special Projects . . . . . . . . . . . . . . . . . . . . . . . . . 119 b. Lawyers' Involvement with CTR Special Projects . . . . . . . . . . . 124 c. Scientists Funded Through CTR Special Projects . . . . . . . . . . . 135 3. Lawyers' Special Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136 a. Special Account No. 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137 b. Special Account No. 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138 c. Special Account No. 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146 d. Institutional Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147

¶F. Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149

Research Review Committee, Research Liaison Committee, and Industry Research Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149

¶-ii-

Industry Technical Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154 3. Tobacco Working Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157

Coordinated Smoking and Health Literature Collection

and Retrieval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163 H. Defendants' Organizations Focused on ETS Issues . . . . . . . . . . . . . . . . . . . . . . 168 I. International Organizations, Committees, and Groups . . . . . . . . . . . . . . . . . . . 170 1. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170 2. TMSC -- Tobacco Manufacturers' Standing Committee . . . . . . . . . . . . 176 3. TRC -- Tobacco Research Council . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180 4. TAC -- Tobacco Advisory Council . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182 5. ICOSI -- International Committee on Smoking Issues . . . . . . . . . . . . . 187 6. INFOTAB -- International Tobacco Information Center . . . . . . . . . . . . 193 7. TDC -- Tobacco Documentation Centre . . . . . . . . . . . . . . . . . . . . . . . . 198

CORESTA -- Center for Cooperation in Scientific

Research Relative to Tobacco/Centre de Coopération pour les Recherches Scientifiques Relatives au Tabac . . . . . . . . . . . . . 200

Tobacco Institute Interaction with Overseas and

International Groups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201 J. Dissolution of CTR and the Tobacco Institute . . . . . . . . . . . . . . . . . . . . . . . . . . 210 1. CTR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210 2. Tobacco Institute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212

THE DEFENDANTS ARE ENGAGED IN AND THEIR

ACTIVITIES AFFECT INTERSTATE AND FOREIGN COMMERCE . . . . . . . . . . . 213 A. Philip Morris Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214

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B. Philip Morris . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214 C. R.J. Reynolds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214 D. Liggett . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214 E. Lorillard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215 F. BATCo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215 G. Brown & Williamson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215 H. American . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215 I. Tobacco Institute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216 J. TIRC/CTR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218

DEFENDANTS DEVISED AND EXECUTED A SCHEME TO DEFRAUD CONSUMERS AND POTENTIAL CONSUMERS

OF CIGARETTES IN MOST, BUT NOT ALL, OF THE AREAS ALLEGED BY THE GOVERNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219

Defendants Have Falsely Denied, Distorted and Minimized the

Significant Adverse Health Consequences of Smoking for Decades . . . . . . . . 219 1. Cigarette Smoking Causes Disease . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219 2. Scientific Research on Lung Cancer up to December 1953 . . . . . . . . . . 222 a. Scientists Investigating the Rise in the Incidence of Lung Cancer Linked Smoking and Disease before 1953 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222 b. By 1953, Defendants Recognized the Need for Concerted Action to Confront Accumulating Evidence of the Serious Consequences of Smoking . . . . . . . . . 232 3. Developments Between 1953 and 1964 . . . . . . . . . . . . . . . . . . . . . . . . . 236

¶-iv-

a. Between 1953 and 1964, the Evidence Demonstrating that Smoking Causes Significant Adverse Health Effects Grew Although No Consensus Had Yet Been Reached . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236

b. Before 1964, Defendants Internally Recognized the Growing Evidence Demonstrating that Smoking Causes Significant Adverse Health Effects . . . . . . . . . . . . . . . . 251

c. In the 1950s, Defendants Began Their Joint Campaign to Falsely Deny and Distort the Existence of a Link Between Cigarette Smoking and Disease, Even Though Their Internal Documents Recognized Its Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 259

The 1964 Surgeon General Report Represented a Scientific

¶Consensus that Smoking Causes Disease . . . . . . . . . . . . . . . . . . . . . . . 269

a. The Process and Methodology of the Surgeon General's Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269

¶b. The Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 275

Post-1964 Research on the Adverse Health Effects of

¶Smoking and Defendants' Persistent Denials Thereof . . . . . . . . . . . . . . 278

a. Following Publication of the 1964 Report, the Scientific Community Continued to Document the Link Between Smoking and an Extraordinary Number of Serious Health Consequences . . . . . . . . . . . . . . . . . 278

b. Defendants' Internal Documents and Research from the 1960s, 1970s, and Beyond Reveal Their Continued Recognition that Smoking Causes Serious Adverse Health Effects and Their Fear of the Impact of Such Knowledge on Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279

c. Despite Their Internal Knowledge, Defendants Continued, From 1964 Onward, to Falsely Deny and Distort the Serious Health Effects of Smoking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 293

¶-v-

As of 2005, Defendants Still Do Not Admit the Serious Health

Effects of Smoking Which They Recognized Internally Decades Ago . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324 7. Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 330

¶B. The Addictive Properties of Nicotine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332

Cigarette Smoking Is Addictive and Nicotine Is the Primary

Element of that Addiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 333 a. How Nicotine Operates within the Body . . . . . . . . . . . . . . . . . . 333 b. Evolving Definitions of "Addiction" and Classification of Nicotine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336 c. Consequences of the Addictiveness of Nicotine . . . . . . . . . . . . 346 d. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 349

Defendants Were Well Aware that Smoking and Nicotine

Are Addictive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350 a. Philip Morris . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 352 b. R.J. Reynolds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374 c. BATCo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385 d. Brown & Williamson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 422 e. Lorillard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 436 f. American Tobacco Company . . . . . . . . . . . . . . . . . . . . . . . . . . . 441 g. CTR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 443

Defendants Publicly Denied that Nicotine Is Addictive

and Continue to Do So . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 445 a. Philip Morris . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 447

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b. R.J. Reynolds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 451 c. BATCo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 456 d. American Tobacco Company . . . . . . . . . . . . . . . . . . . . . . . . . . . 459 e. Brown & Williamson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 459 f. Lorillard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 461 g. Liggett . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 463 h. Tobacco Institute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 463 i. CTR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 473 j. Defendants' Conduct Continues . . . . . . . . . . . . . . . . . . . . . . . . 474

Defendants Concealed and Suppressed Research Data

and Other Evidence that Nicotine Is Addictive . . . . . . . . . . . . . . . . . . . 479 a. Philip Morris . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 481 b. BATCo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 493 c. Brown & Williamson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 495 d. American Tobacco Company . . . . . . . . . . . . . . . . . . . . . . . . . . . 504 e. Tobacco Institute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 505 f. CTR and Other Defendant Funded Research Groups . . . . . . . . 505 6. Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 512

Nicotine "Manipulation": Defendants Have Falsely Denied

that They Can and Do Control the Level of Nicotine Delivered In Order to Create and Sustain Addiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 515

For Decades, Defendants Have Recognized that

Controlling Nicotine Delivery, in Order to Create and Sustain Smokers' Addiction, Was Necessary to Ensure Commercial Success . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 516

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9 10

a. Defendants Recognized the Need to Determine "Minimum" and "Optimum" Nicotine Delivery Levels in Order to Provide Sufficient "Impact" and "Satisfaction" to Cigarette Smokers . . . . . . . . . . . . . . . . . . . . . . 517 (1) Philip Morris . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 519 (2) R.J. Reynolds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 521 (3) Brown & Williamson and BATCo . . . . . . . . . . . . . . . . 525 (4) Lorillard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 526 (5) Liggett . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 527 b. Defendants Have Long Recognized that Controlling the Nicotine to Tar Ratio Would Enable Them to Meet Minimum and Optimum Nicotine Delivery Levels . . . . . . . . . . 528 (1) Philip Morris . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 528 (2) R.J. Reynolds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 535 (3) Brown & Williamson and BATCo . . . . . . . . . . . . . . . . 546 (4) American . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 552 (5) Lorillard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 553 (6) Liggett . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 560 c. Defendants Understood the Correlation Between Nicotine Delivery and Cigarette Sales . . . . . . . . . . . . . . . . . . . . 561 (1) Philip Morris . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 561 (2) R.J. Reynolds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 562 (3) Brown & Williamson and BATCo . . . . . . . . . . . . . . . . 564 (4) Lorillard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 566

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