Chapter 7
Legal Concerns Facing the Industry
I suggested that Earl [Kohnhorst] have the documents indicated on my list pulled, put into boxes and stored in the large basement storage area. I said that we would consider shipping the documents to BAT [outside the US] when we had completed segregating them. I suggested that Earl tell his people that this was part of an effort to remove deadwood from the files and that neither he nor anyone else in the department should make any notes, memos or lists.
J. K. Wells, B&W corporate counsel {1835.01, p. 2}
Introduction
By the early 1970s the evidence of the health dangers of smoking had accumulated to the point of causing serious legal problems for the tobacco industry. The industry was being attacked on many fronts and faced increasing government efforts to regulate it in various ways. By the mid-1980s the industry also had to contend with a new wave of products liability lawsuits, filed by plaintiffs who were encouraged by the new significance attached to products liability law regarding toxic substances. If any one lawsuit could be won by a showing that the tobacco industry was responsible for the death or disease of a smoker, the eventual liability of the industry might bankrupt it. With this threat in mind, the industry's lawyers were working hard to protect against potential lawsuits.
Protecting Documents From Discovery And Admission As Evidence
The documents include a great deal of material written by attorneys for B&W and BAT. These documents—consisting of letters, memoranda, and working papers—indicate that the attorneys for the two companies,
particularly those at B&W, took a very strong interest, and played an unusually active role, in the details of scientific research being conducted over the years into the health dangers of cigarettes. In the normal corporate environment, company scientists are responsible for conducting research dealing with a company's products; company attorneys confine their work to legal matters. Although attorneys are kept abreast of research results, they usually learn, after the fact, what the scientists have discovered. However, as the documents demonstrate, B&W's attorneys were thoroughly involved in planning, and in many cases directing, scientific research projects. Attorney control over company research apparently was deemed necessary to assert control over evidence produced within the company so that it could not be used to prove that the company's products were dangerous, even though the evidence developed by the company scientists clearly contradicted this view. The attorneys appeared particularly interested in preventing potentially damaging research results from being disclosed in litigation against the company, to the point of avoiding knowing the results at B&W of certain projects conducted by BAT {1132.01; 1824.03}.
The attorney documents raise a question of immense importance in litigation involving Brown and Williamson and the other tobacco companies: whether some of these documents, or similar documents not yet made public, might be protected under the "work product rule" or the attorney-client privilege from discovery or admission as evidence in lawsuits against the companies for fraudulently concealing the health dangers of tobacco from the public. (Discovery is the process by which a party to a lawsuit obtains information from the opposing party prior to trial in order to prepare for trial. It is generally permitted with respect to any matter that is relevant to the pending suit, but the court may refuse to allow discovery if, for instance, a document is protected under the work product rule or the attorney-client privilege.)
In at least three pending lawsuits against the major tobacco companies [Butler v Philip Morris , Civil Action No. 94-5-53, Cir. Ct., Jones County, Mississippi; Castano v American Tobacco Co. , No. 94-1044, United States District Court, Eastern District of Louisiana; and State of Florida v American Tobacco Company , Cir. Ct of 15th Judicial District for Palm Beach County, Florida, No. CL95-1466AO] in which the plaintiffs have sought to use the Brown and Williamson documents in evidence, the tobacco companies have claimed a right to exclude certain of the documents from evidence under the work product rule and the attorney-client privilege.
Work Product Rule
In 1947 the United States Supreme Court established the "work product rule" to protect the work of an attorney in preparing for litigation. Under this rule, when a court orders discovery of documents that have been prepared in anticipation of litigation or for trial by or for another party, the court is required to protect against disclosure the mental impressions, conclusions, opinions, or legal theories of an attorney of the party concerning the litigation [Hickman v Taylor 329 U.S. 495 (1947)]. The rule is codified in the Federal Rules of Civil Procedure, Rule 26(b)(3), and is followed in most, if not all, states.
However, the documents might be discoverable, and therefore admissible as evidence, under at least two theories, despite the work product rule. First, a "fraud exception" to the rule has been recognized in a number of cases. This exception provides that an attorney's mental impressions, conclusions, opinions, or legal theories may be discoverable if there is evidence indicating that the attorney was involved in, or had assisted a client in perpetrating, fraudulent or criminal activity ["Fraud Exception to Work Product Privilege in Federal Courts," 64 A.L.R. Fed. (American Law Reports Federal ) 470, § 2]. Thus, a document otherwise protected by the work product rule would be discoverable if, in the court's opinion, the document shows that the attorney who prepared the document was engaged in fraud or criminal conduct or was assisting a client in such conduct.
A strong case can be made that B&W concealed the health dangers of tobacco products from the company's customers and the general public. The documents clearly show that the attorneys and the company were well aware of many of the dangers of cigarettes, including addiction, at least thirty years ago, even though the company, to this day, continues to deny that cigarettes are either dangerous or addictive. As previously noted, the documents also demonstrate that the attorneys were thoroughly involved in planning, and in some cases directed, company scientific research projects. Apparently this was done to allow them to claim an attorney-client privilege covering the results of the research and shield the results from disclosure. Furthermore, as the documents reveal, on different occasions B&W attorneys specifically planned to have scientific research papers from BAT routed to the attorneys (ostensibly for use in potential litigation), in order to protect them from discovery. The documents also show that Corporate Counsel for B&W reviewed "behavioral and biological studies" to identify scientific documents that were
"deadwood," with instructions to ship the "deadwood" out of the country without leaving any documentary record of the process {1835.01, p. 2}.
In addition, the work product rule protects documents prepared in anticipation of litigation, but its application requires a more immediate showing than the remote possibility of litigation. The probability that some particular litigation will occur must be substantial before a document may be deemed to be in anticipation of litigation, and the mere fact that a particular event has a likelihood of bringing about litigation at some time in the future is not a sufficient showing. The probability must be substantial, and the commencement of litigation must be contemplated at the time the document is prepared. Thus, advising a client about matters that may or even likely will ultimately come to litigation does not satisfy the "in anticipation of" standard; the threat of litigation must be more real and imminent than that. In order for the work product rule to apply, a specific claim must have arisen to make the prospect of litigation identifiable [23 Am. Jur. 2d, Depositions and Discovery § 53, and cases cited therein]. Although, even at the time of the earliest attorney documents, there was litigation against some of the tobacco companies with respect to the health dangers of cigarettes, nothing in any of the attorney documents marked "Work Product" indicates that the attorneys were contemplating a particular lawsuit against B&W, as opposed to the possibility of litigation against the industry generally in the future.
Attorney-Client Privilege
While the work product rule bars the disclosure of certain work of an attorney in preparation for litigation, the attorney-client privilege bars the disclosure of documents that contain confidential communications between an attorney and his or her client, and neither the attorney nor the client can be compelled to disclose them. Of particular importance with respect to the documents involving B&W's own attorneys is the fact that a corporation can claim the attorney-client privilege and prevent the discovery of communications made to house counsel as well as to outside counsel [23 Am. Jur. 2d, Depositions and Discovery § 30].
Just as the fraud exception may prevent application of the work product rule, the existence of an unlawful purpose prevents the attorney-client privilege from applying. The privilege does not generally exist where the representation is sought to further or conceal criminal or fraudulent con-
duct, whether past, present, or future. Thus, a confidence received by an attorney in order to advance a criminal or fraudulent purpose is beyond the scope of the privilege [81 Am. Jur. 2d, Witnesses § 393]. For example, communications between attorney and client having to do with the client's contemplated criminal acts, or in aid or furtherance of such acts, are not covered by the attorney-client privilege [§ 395]. This rule is equally applicable to communications as to tortious acts [§ 398], and, generally, where an attorney is consulted for the purpose of obtaining advice to assist in the perpetration of a fraud, or in the continuation of an ongoing fraud, the communications are not protected by the privilege [§ 399]. As explained earlier, the fraud exception to the work product rule might apply to the attorney documents; that exception might be applicable to communications for which the attorney-client privilege is claimed. For example, if it could be shown that a "Privileged" communication from a B&W attorney to a B&W executive were in furtherance of a fraudulent attempt to conceal the dangerous nature of the company's tobacco products, that communication would not be protected by the attorney-client privilege. In fact, as discussed below, that is precisely what a federal district court has held in a recent case against the tobacco industry.
Federal Court Rulings
In at least two federal court cases, documents similar to those we discuss were ruled not protected from disclosure by the attorney-client privilege.
As discussed in chapter 1, B&W obtained subpoenas from the Superior Court for the District of Columbia, ordering two congressmen who serve on the House Subcommittee for Health and the Environment to appear in court and to produce the B&W documents in their possession. When the matter was removed to the United States District Court for the District of Columbia, Judge Harold H. Greene quashed the subpoenas. As discussed, he rejected B&W's contention that the subpoenas should be granted because the documents had been stolen by the individual who supplied them to the subcommittee. In addition, he rejected B&W's argument that the subpoenas should be granted because the documents had been obtained by the individual in violation of an attorney-client privilege [Maddox v Williams 855 F. Supp. 406, at 414, 415 (D.D.C. 1994)].
Whereas Judge Greene's rejection of the attorney-client privilege was based largely on public policy grounds—the right of the public to know the truth about the health dangers of tobacco products supersedes B&W's
rights with respect to the documents—the decision in the other case was based squarely on the fraud exception to the attorney-client privilege.
In 1983 a wrongful death action was brought against the Tobacco Institute and several tobacco companies. The plaintiff sought to discover various documents pertaining to the "Special Projects" program of the Tobacco Industry Research Council (TIRC), later known as the Council for Tobacco Research (CTR), and asserted the fraud exception to the attorney-client privilege. (For general discussion of TIRC and CTR, see chapter 2; for discussion of the "Special Projects," see chapter 8.) The plaintiff's general theory of fraud in the case was that the defendants knew of the dangers of cigarette smoking, concealed information that demonstrated the dangers of smoking, and affirmatively misled the public about the risks of smoking. As part of that theory, the plaintiff maintained that the tobacco industry had perpetrated a public relations hoax by advertising CTR as an entirely independent and objective scientific research body that would investigate the supposed hazards of cigarette smoking and report the results of those cigarette studies to the public. The plaintiff contended that, in fact, no meaningful research was conducted and that it was never the industry's intention to discover or publish the truth about the risks of smoking. In contrast to the defendants' promotion of CTR's "independence and objectivity," the plaintiff alleged that the defendants guided CTR to sponsor research tending to prove that other causes existed for the illnesses attributed to smoking, in an effort to perpetuate doubts about links between smoking and disease rather than to uncover the truth. In 1992 a federal district court ruled on the discovery issue and determined that the plaintiff had presented sufficient prima facie evidence of fraud by the defendants to warrant invoking the fraud exception to the attorney-client privilege [Haines v Liggett Group, Inc. , 140 F.R.D. 681 (D.N.J. 1992)].
Although this decision was later vacated by the United States Court of Appeals because of a procedural error [Haines v Liggett Group, Inc. , 975 F.2d 81 (3d Cir. 1992)], the district court's opinion by Judge H. Lee Sarokin includes this general observation:
All too often in the choice between the physical health of consumers and the financial well-being of business, concealment is chosen over disclosure, sales over safety, and money over morality. Who are these persons who knowingly and secretly decide to put the buying public at risk solely for the purpose of making profits and who believe that illness and death of consumers is an appropriate cost of their own prosperity!
As the following facts disclose, despite some rising pretenders, the tobacco industry may be the king of concealment and disinformation. [140 F.R.D. at 683]
Our analysis of the Brown and Williamson documents yields the same conclusions.
Specific Strategies To Avoid Discovery
The attorneys at B&W and BAT routinely labeled their documents "Work Product" or "Privileged," to prevent them from being subject to discovery by an opposing party in litigation or from being admitted as evidence in a trial. The attorneys at B&W also devised two other methods to avoid discovery of sensitive information. One method was to develop special procedures for handling documents sent to B&W from BAT and affiliated companies, so that they would become privileged. The second was particularly ingenious: it was simply to remove certain documents and all traces of their existence from the premises.
Special Procedures For Handling Documents
Sent To B&W
To maintain the company's unwavering public position that there was no scientific evidence of any health dangers (and the implication from its silence that the company had certainly not discovered any in its own exhaustive research), the attorneys developed special procedures for the handling of internal scientific documents. These procedures were designed to allow the company to claim that the documents came within the attorney-client privilege. This use of the attorney-client privilege appears to have been very broadly applied to sweep up work that would normally have been conducted for scientific rather than litigation purposes. As such, the adoption of these private procedures to maintain secrecy seems completely inconsistent with the public claims made by the tobacco companies that they were spending millions of dollars on research for the scientific purpose of evaluating the safety of tobacco consumption.
The purpose of these procedures is explicitly spelled out in the memorandum that established them: a June 15, 1979, memo, marked "Restricted," from J. K. Wells, the corporate counsel, to Ernest Pepples. After describing the current procedures under which scientific materials from BAT are received at B&W, Wells states that he has not come up with any better ideas for handling the materials than Pepples had previously outlined:
The [scientific] material should come to you under a policy statement between you and [BAT's laboratory in] Southampton which describes the purpose of
developing the documents for B&W and sending them to you as use for defense of potential litigation. It is possible that a system can be devised which would exempt the Engineering reports [which Wells has previously stated are almost never concerned with smoking and health] because it might be difficult to maintain a privilege for covering such reports under the potential litigation theory.
Continued Law Department control is essential for the best argument for privilege. At the same time, control should be exercised with flexibility to allow access of the R&D staff to the documents. 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. A secured storage area of the documents should be arranged, perhaps in the R&D library [as opposed to the law library] and the policy statement would designate the same terms and conditions of storage for the documents as were spelled out for the literature retrieval service files [emphasis added]. {1824.02, pp. 1–2}
After suggesting that the documents might be divided into different categories according to how sensitive the documents are, the memo continues:
The abstracts of the documents should be circulated only for the less sensitive categories and then only to a list given prior approval by the Law Department.
The policy should explicitly make Dr. Sanford [director of research and development] the agent of the Law Department with regard to these procedures. {1824.02, p. 2}
These procedures would have put the Law Department in control of the dissemination of internal scientific reports.
Five months later, on November 9, 1979, Wells sent another "Privileged" memo to Pepples on the same subject. Evidently, the proposal in the June memo had not been adopted, because this memo discusses the problem as if it had just arisen:
I have discussed with Gil Esterle [International and External Technical Services Department] various alternatives for handling BAT scientific reports which come to B&W in a way that would afford some degree of protection against discovery . ... One alternative discussed was that all BAT scientific reports would be sent to you [emphasis added]. {1824.01, p. 1}
Wells notes that this procedure would be cumbersome because the vast majority of the documents are routine—that is, not sensitive—and then states:
The cost sharing agreement between B&W and BAT, under which B&W pays for BAT scientific research and receives reports, is an obstacle because as presently written it would probably contradict the position that you were acquiring the reports for purposes of litigation. ...
I recommend a second alternative, which would be that all BAT scientific reports be shipped directly to Dr. Esterle under a formal arrangement that Dr.
Esterle was assigned to be your agent for the acquisition of scientific materials in anticipation of litigation. Dr. Esterle would separate the reports which were relevant to smoking and health, or otherwise sensitive, for special handling as described below and place the routine reports into regular R&D circulation [emphasis added]. {1824.01, p. 1}
After explaining that this procedure would provide work product coverage for sensitive documents under federal and Kentucky law, Wells continues:
There would still be the matter of the cost sharing agreement. Regardless of the initial recipient of the documents, in order to be covered by the rules of civil procedure they must be "prepared in anticipation of litigation ." Appropriate paper work should be established with BAT, including any amendments to the cost sharing agreement to establish that documents of a certain nature are prepared for B&W in anticipation of litigation. I have in mind paper work which would make the statement as a policy between the parent and sibling, but that in the operational context BAT would send documents without attempting to distinguish which were and were not litigation documents [emphasis added]. {1824.01, pp. 1–2}
These cost- and risk-pooling agreements are discussed later in this chapter.
More than six years later, on February 17, 1986, Wells sent another memo to Pepples, this time dealing with the question of whether B&W should receive certain scientific reports from affiliated companies generally, and how B&W can receive such reports without receiving information that would be useful to a plaintiff. The memo includes references to specific projects and notations as to whether B&W is interested in them. Wells summarizes his discussion with Esterle and David Gordon, controller in the B&W R&D administration, on this subject:
[W]e should approach these projects on the basis of whether the reports are limited to the information from good science and whether the information is useful in the United States market. Our market is a "tar" and nicotine market, and information pertaining to other constituent delivery levels and biological effects will not be helpful .
B&W will receive concise reports, estimated to be about one-half page in length, twice each year for each project it wishes to follow. While the brevity of the reports will reduce the potential for receipt by B&W of information useful to a plaintiff, disadvantageous information could be included and the reports could serve as road maps for a plaintiff's lawyer.
I have advised that we can receive reports from some of these projects notwithstanding the risk. The reason is that we cannot shut out the flow of information: the BAT will find ways to get information into B&W from the scientific projects it is running in its laboratories worldwide. The only way BAT can avoid having information useful to plaintiff found at B&W is to
obtain good legal counsel and cease producing information in Canada, Germany, Brazil and other places that is helpful to plaintiffs [emphasis added]. {1824.03, p. 1}
The memo goes on to summarize the discussions among Wells, Esterle, and Gordon about eight specific projects, selected from a longer list (see table 7.1), in which the scientific staff had expressed initial interest. The list below includes the title of each research project, as described in the B&W database, followed by Well's comments:
No. 430. [New/novel products: filter: aerosol testing (special cigarette developments).] Among things of interest, the project apparently intends to investigate the retention of smoke particles in the respiratory tract. Such data could be used by the plaintiff. I have taken under advisement the question whether B&W should receive reports from this project. I propose to suggest to RD&E [Research, Development, and Engineering] that we ask for more information before we decide. The work will occur in Germany, and the German scientist who designed the program should seek counsel before providing the additional information. Hopefully, the problem area will disappear .
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No.514. [Product development & innovation: smoking pleasure & satisfaction.] RD&E is interested because apparently the project includes work on better quality low delivery cigarettes. However, the description contains a statement that the low delivery is intended to "satisfy another identified consumer need for personal reassurance." The project will be done in the U.K. David [Gordon] will ask for more information about the work to be included in the project before requesting reports.
No. 487. [Smoke control: sidestream reduction: visibility.] RD&E is interested in work dealing with sidestream smoke reduction, but is not interested in the biological testing of products produced. David [Gordon] will explain this to Allen Herd and ask whether projects could be run without biological testing .
No. 496. [Smoke control: chemical reaction mechanisms: other smoke components.] After discussion, RD&E is not interested .
No. 313. [Investigation of the effects of nicotine enhancement on human smoking behaviour.] RD&E is interested in information which relates the "tar"/nicotine ratio to subjective smoke quality. However, this project could produce data pertaining to nicotine such as pharmacological information which would be helpful to plaintiffs. RD&E will begin receiving this information, but will not be interested unless the work deals predominantly with subjective smoke quality .
No. 331. [The influence of additives on the mutagenicity of smoke condensate.] After discussion, RD&E decided it is not interested .
No. 305. [Sidestream smoke and irritation.] RD&E will receive these reports.
No. 453. [Smoker reaction/behavior: product testing: the influence of nicotine within the smoker.] RD&E is interested in information pertaining to the role of nicotine in the smoker's subjective perception of smoke quality. If the reports stick to research data, the reports would be interesting. However, if the reports include discussions of pharmacological effects of nicotine, the information will not be interesting and would be helpful to the plaintiff. RD&E will begin receiving reports from this activity and be prepared to inform BAT to cease sending the data to B&W if the science is not interesting [emphasis added]. {1824.03, pp. 1–2}
Wells ends his memo to Pepples with the following plea:
I recommend you discuss the problems involved in the projects with counsel for the BAT companies involved. {1824.03, p. 2}
Apparently, the projects deemed not "interesting" to the B&W research and development staff were those whose results might be useful to plaintiffs in products liability cases against the company. Thus, re-
search results from elsewhere in BAT aimed at cosmetic improvements (less visible sidestream smoke), reduced irritation (which makes smoking easier), and customer satisfaction were of interest to B&W, but results that might delineate the toxicities of tobacco smoke or the pharmacological properties of nicotine were to be avoided. (See chapter 3 for a discussion of the research at BAT that indicated the addictive nature of nicotine and chapter 4 for a discussion of the research that, in the process of BAT's attempt to produce a "safe" cigarette, confirmed the toxic nature of tobacco smoke.)
Removing "Deadwood" Documents
At one point, Wells decided that certain documents should simply be declared "deadwood," removed from the company's files, and shipped offshore. (This plan to protect problematic scientific information from discovery by simply removing it is not unique. As discussed in chapter 6, in 1981 industry lawyers discussed a plan to protect from discovery scientific evidence that additives were dangerous by simply destroying it {1316.01, p. 3}.)
I explained I had marked certain of the document references with an X. The X designated documents which I suggested were deadwood [were] in the behavioral and biological studies area. I said that the "B" series are "Janus" series studies [mouse skin—painting studies demonstrating that tobacco tar is carcinogenic; see chapter 4] and should also be considered as deadwood.
I said in the course of my review of scientific documents stored by RD&E, a great deal of deadwood had appeared, such as studies of the chemical composition of Canadian tobacco left in 1966. {1835.01, p. 1}
Perhaps aware of the incongruity presented by the picture of a highly placed company lawyer volunteering to weed out "deadwood" documents from company files, Wells somewhat self-consciously states that his suggestions were in the context of moving RD&E to a new building and of building a reference set for smoking and health materials.
I suggested that Earl [Kohnhorst] have the documents indicated on my list pulled, put into boxes and stored in the large basement storage area. I said that we would consider shipping the documents to BAT when we had completed segregating them. I suggested that Earl tell his people that this was part of an effort to remove deadwood from the files and that neither he nor anyone else in the department should make any notes, memos or lists.
I mentioned that Carol Lincoln [a B&W librarian] had said that offshore research and engineering studies sent to B&W in care of Earl and Bob Sanford [vice president, R&D] during roughly last one year period had not been
sent to her for logging in and that most of those documents may be in the offices of Earl and Bob and would not be reflected on the list which I had reviewed. Earl said he would send all of the studies in his possession to Carol, who would make a list of the documents and send it to me for review. Earl suggested that I should ask Bob Sanford to do the same [emphasis added]. {1835.01, pp. 2–3}
There is no clear indication in the documents of the purpose of the lawyer's supervision of the "deadwood" removal. There is no indication in the documents that the file purge was in contemplation of any particular litigation or proceeding. The circumstances outlined in the memorandum suggest that this was not a routine disposal of useless documents. In addition to the personal participation of an attorney from the office of general counsel and the specific instruction that no records be kept of what was removed, it seems unlikely that B&W would pay to ship garbage to England.
Rising Fear of Government Regulation
In the early 1970s, even as the tobacco industry was continuing its efforts to develop a safe cigarette (see chapter 4), it was feeling increasingly threatened by possible government regulation. As the ensuing discussion indicates, there were many areas of regulatory activity and the industry adopted various measures to forestall further regulation or at least to counter its effects.
A February 14, 1973, memo, marked "Confidential," from Ernest Pepples, assistant general counsel at B&W, to J. V. Blalock, director of public relations, asks for news clippings relating to "salient problems now facing the cigarette industry" {1814.01}.
The first concern is "Cancer." More specifically, the author sees three threats posed by the activities of the National Cancer Institute and the American Cancer Society.
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Second on the list is "The Attack on Heart and Lung Diseases":
This newly authorized program, associated with the Heart and Lung Foundation ... contains the same seeds of difficulty for the tobacco industry. The
same forces and considerations for quick and easy solutions are at work in this area. The new law setting up this program also provides for an assistant director for health information who could easily seize upon an anti-smoking campaign to establish an activist record. {1814.01, p. 2}
The third salient problem listed is "Jurisdiction over Tobacco":
Renewed efforts will be made to include tobacco in the list of products coming under control of the Food and Drug Administration, the new Product Safety Commission, or the proposed Consumer Protection Agency. Should any of these efforts succeed, the industry would be seriously harmed since tobacco would fall under the same category as cyclamates. {1814.01, p. 2}
Cyclamates, artificial sweeteners that were regulated as food additives, were a then-current example of a material that had been banned from foods by the FDA because of animal evidence of carcinogenicity at high doses. The statement in the memo probably indicates concern that even though, according to the industry, the poisons in tobacco smoke were dangerous only in high doses, tobacco would suffer the same fate as cyclamates. Saccharine, another artificial sweetener, had similar, but less compelling, evidence against it, but it has been permitted to remain in the food supply with a warning label.
Fourth on the list is "Passive Smoking":
The anti-smoking lobby is using the issue of the alleged health effect of smoking on the non-smoker to generate media publicity. This trend has been growing since 1970. It received prestigious support when the [Supreme Court] Chief Justice [Warren Burger] made a public display of his annoyance with tobacco smoke on a passenger train. Similarly, the current issue before the CAB [Civil Aeronautics Board] regarding smoking on airliners is also part of the same campaign. There is no medical evidence concerning the health effects of passive smoking. The real purpose [of the anti-smoking lobby] is symbolic to make smoking socially unacceptable and by limiting the public areas where it is permitted. {1814.01, p. 2}
By the early 1970s, then—when the first systematic studies on the respiratory effects of passive smoking on children were just beginning to appear and nearly a decade before the first papers implicating passive smoking as a cause of lung cancer were published—B&W had identified passive smoking as an important issue. (See chapter 10 for a full discussion of passive smoking.)
The fifth item is headed "Implications of Biological Research." Here the author expresses concern about the publication of a study by W. Dontenwill and co-workers (1) funded by the German tobacco industry. The
study demonstrated that inhaled smoke produced laryngeal cancer in Syrian golden hamsters:
There is the likelihood that the Dontenwill work will be published in the U.S.A., and implied in this work are directions for product modification. This approach has some support by anti-smoking scientists in the U.S.A. and is likely to lead to political pressure of the industry to change products. Actions by foreign manufacturers will have effect in the U.S.A. {1814.01 pp. 2–3}
"Addiction" is also a problem:
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 [emphasis added]. {1814.01, p. 3}
Finally, "Excise Taxation" is listed as a concern because:
It appears that the anti-smoking groups may find that one of the most successful methods of reducing the use of tobacco products will be the enactment of a high rate taxation on such products, since by this method tobacco products can be priced at a level so as to place the product beyond the financial reach of many consumers. {1814.01, p. 3}
That "many consumers" may be a euphemism for young people is illustrated by the following excerpt from the instructions for the document review project conducted by the law firm of Wyatt, Tarrant & Coombs for B&W (see chapter 1):
If a document discusses or contains testimony of an industry representative speaking at a proceeding, it will receive a significance of "1" unless the issues being discussed are not related to smoking and health (e.g., fire-safe cigarettes). (Excise taxes are related to smoking and health, because taxes influence the price of cigarettes. The price affects the ability of young people to buy cigarettes ) [italic emphasis added]. {1000.01, p. 28}
There is also a second concern relating to excise taxation:
A second basis for attack appears to be the introduction of legislation providing for a tax level graduated on the basis of tar and nicotine content. {1814.01, p. 3}
Indeed, New York City had enacted such a tax in 1971, and just a few months after this memo was written, a New York County trial court upheld the validity of the tax and the accompanying administrative regulation requiring that cigarette prices reflect the amounts of tax
attributable to the tar and nicotine content of cigarettes sold [Long Island Tobacco Co., Inc. v Lindsay 343 N.Y.S.2d 759 (N.Y. Sup. Ct. 1973)]. The court stated that the regulation was "clearly designed to preclude the seller from absorbing the tax and to discourage through higher prices the consumer's use of cigarettes with relatively higher levels of tar and nicotine" [at 763]. This case was subsequently affirmed without opinion by New York State's highest court, the Court of Appeals [Long Island Tobacco Co., Inc. v Lindsay, 313 N.E.2d 794 (N.Y. 1974)]. In 1976 a bill was introduced in Congress to tax cigarettes on the basis of tar and nicotine content.
Clearly, the author of this list of concerns (probably Pepples) was quite accurate about most of the items, and twenty years after the list was compiled, much of it is still relevant. While the scientific issues surrounding cancer and heart and lung diseases have long since been settled, and the industry barely makes a pretense of contesting the existence of these health problems, the addiction issue (in part because of the exposure of the documents discussed in this book) has become the new battleground. Whereas, in all the intervening time, jurisdiction over the industry by the listed federal agencies never materialized, it has now become a distinct possibility because of the addiction issue. (The FDA, however, had started to raise questions about nicotine addiction several months before these and related documents began to surface in the press in mid-1994.) The author of the list of concerns correctly forecast the problems to the industry from the passive smoking issue and the increase in excise taxes, but it is doubtful that, in his wildest dreams, he actually foresaw the enormous cost to the industry from the emerging nonsmokers' rights movement, both in actual dollars and as an influence on the public perception of smoking. It should also be noted that, while the industry has always fought even minimal increases in tobacco excise taxes, it has consistently raised the prices of tobacco products, often well beyond the rate of inflation.
Ten years later, three areas of regulatory concern—smoking in the workplace, the treatment of grass-roots lobbying, and fire-safe cigarettes—were the subject of a memorandum by R. H. Sachs, reporting on a meeting held on December 8, 1983, by the Committee of Counsel (a Tobacco Institute committee consisting of the chief counsels of the member tobacco companies).
Smoking in the Workplace —We discussed the draft of a model ordinance prepared by C&B [the law firm of Covington and Burling]. [Stanley] Temko [an attorney at Covington and Burling] lamented that suggestion to add language for some sort of "equal accommodation" for smokers was difficult. [Roger
L.] Mozingo [Tobacco Institute vice president] does not need the model ordinance at present. {2220.01, p. 2}
This memorandum was written just one month after the tobacco industry had suffered a major defeat by the passage of Proposition P in San Francisco, a referendum that ratified a city ordinance requiring that nonsmokers be protected from secondhand smoke in office workplaces (2). Numerous cities throughout the country were asking for copies of the ordinance so that they could replicate it, and the "model ordinance" referred to in the memorandum was undoubtedly being drafted by the industry as a countermeasure. The industry typically presents its own sham versions of nonsmokers' rights laws when faced with the possible enactment of meaningful legislation.
The memorandum also discusses the possible use of scientific studies on this subject:
Shook, Hardy [and Bacon, an industry law firm] reported on a Swedish case wherein descendants of a lung cancer victim were awarded compensation because of prolonged exposure to tobacco smoke at work. (I talked to Morini about this case. He was aware of it, and is presently checking it out.)
A settlement agreement is near in the Lee case (Mass.) [an action by a state employee seeking a smoke-free workplace, that was settled favorably for the employee] and an accommodation has been worked out in the Orange County (Cal.) case [reference unclear].
There was a deep split of opinion with respect to commissioning scientific studies, using Battelle, with respect to smoking in the workplace. B&W and Lorillard are in favor of proceeding. ATCo. [American Tobacco Company] is strongly against it. RJR [R. J. Reynolds] and PM [Philip Morris] both expressed grave reservations but were not in a position to give a final answer. It looks like it's dead. {2220.01, p. 2}
This discussion appears to relate to work that Battelle (a contract research organization) was conducting on secondhand-smoke levels in workplaces. Battelle had been funded to do this work through CTR Special Account 4 (discussed in chapter 8) during 1981–83, so the work appears to have been halted (the memorandum is from December 1983). Since Special Account 4 was administered by the law firm of Jacob, Medinger, and Finnegan, perhaps expenditures could have been made even if not all the tobacco companies agreed on a given project.
The tobacco industry's evolving grass-roots lobbying effort also commanded comment in the same memorandum:
Tax Treatment of Grass Roots Lobbying —Temko reported that the Treasury is still reviewing this issue and that it is conceivable that new regulations could be issued in the Spring. C&B will keep an eye on it. {2220.01, p. 2}
The tobacco industry has responded to the growing (and genuine) nonsmokers' rights movement (discussed in chapter 10) by conducting its own grass-roots lobbying through so-called "smokers' rights" organizations (3–5). The tobacco industry's serious interest in this issue is yet another indication of how important and large an effort the industry was anticipating.
Another item in the list of concerns related to fires caused by cigarettes when they were inadvertently left to burn on a combustible surface, such as bedding or other furniture. Although a few cigarette brands have been found to be relatively fire-safe (including a B&W brand, Capri), in that they will either self-extinguish before igniting furniture or will not burn hotly enough to ignite an adjoining surface, most brands are not fire-safe. As a result, cigarette-caused fires are the leading cause of fire deaths in the United States. There have been various attempts at both the state and federal levels to legislate a requirement that cigarettes be fire-safe, but none has succeeded. In 1984 Congress passed a bill sponsored by Congressman Joseph Moakley (D-MA) that established a three-year research committee, the Technical Study Group, to determine whether a fire-safe cigarette was technically and economically feasible. In 1987 the committee submitted its unanimous conclusion that such a cigarette was feasible. Then, in 1990, another bill by Congressman Moakley established a new committee, the Technical Advisory Group, to oversee the development of a test method for determining whether or not a cigarette is fire-safe. In August 1993, on an 11-to-4 vote (the four tobacco company representatives being in the minority), the committee reported to Congress that it had developed a sufficient test. Thus, the requirement that cigarettes be made fire-safe awaits only congressional regulatory action. It is in this context that the discussion of this issue in the memorandum should be read:
Fire Safe Cigarettes —John Rupp (from Covington & Burling) reported that we are gaining some support from within the International Association of Fire Chiefs. In the past they have supported Congressman Moakley's bill [to require "fire-safe" cigarettes]. This year, after hearing a presentation from the tobacco industry, led by Dr. [Alexander] Spears from Lorillard, IAFC set up a committee to reconsider their position. The efforts we have put behind building a relationship with the organization may be paying off.
The companies agreed to proceed with an industry examination of ignition propensity in order to develop a model for a testing methodology. Scientists from each company will meet to discuss this. Covington & Burling will provide counsel at these meetings for the purpose of antitrust oversight.
Rupp reported on efforts to get a meeting with Moakley to see if there is any way to reconcile our position. There are two troublesome areas: federal
preemption and trade secret confidentiality. On the first issue, our position has been to push for "perpetual" preemption. Rupp and others think this is unrealistic. Moakley has accepted the idea of some federal preemption and Rupp would like to see us accept 18 months after publication of the study. He is also seeking more flexibility on the trade secrets issue. He mentioned allowing information to be turned over to permanent Congressional committees "with some safeguards". Rupp would like to hear from each of the companies on this by the middle of next week. {2220.01, p. 1}
Whereas one might think that an association of fire chiefs would be the least likely organization to inhibit fire safety legislation, there is evidence to the contrary. The "efforts" expended to build a relationship between the industry and the fire chiefs consisted of the payment of money to provide services for the organization. Indeed, during the 1980s the tobacco industry provided millions of dollars in grants, equipment, and public relations services to the fire chiefs' association, other firefighter organizations, and numerous individual fire departments around the country, to enlist their support in opposing meaningful legislation regarding fire-safe cigarettes (6).
The legislation surrounding fire-safe cigarettes is another example of how the tobacco industry uses preemption as a general political strategy to limit its political exposure and liability. Preemption at a federal or state level protects the tobacco industry broadly from local activities, over which they have less control. Moreover, obtaining preemption only requires action by a relatively few powerful members of Congress or a state legislature, as opposed to dealing with a plethora of local jurisdictions. Indeed, as discussed later in this chapter, by the late 1960s the tobacco industry had accepted mild federal warning labels on tobacco packages, and, later, bans on radio and television advertising, in order to preempt possible state action with respect to consumer warnings and limits on tobacco advertising (7). The tobacco industry still uses preemption as a major strategy today, particularly in the effort to stop passage of local laws requiring smoke-free workplaces and public places.
Strategies To Defeat Government Regulation
As the threat of government regulation of tobacco increased on several fronts, the tobacco industry developed several strategies for counteracting government action. The principal strategy was simply to create as much controversy as possible over the link between smoking and disease (see chapter 8). Beyond this, the industry also developed specific meth-
ods for minimizing the impact of legislation aimed at smoking itself (such as the requirements for warning labels and the disclosure of the tar and nicotine content of cigarettes) and legislation aimed at limiting smoking in public places and the workplace.
In 1976 Ernest Pepples, B&W's vice president and general counsel, composed a long, thoughtful analysis of the smoking and health controversy, entitled "Industry Response to the Cigarette/Health Controversy." Pepples begins by noting the means by which the industry has coped with the smoking and health controversy:
The tobacco industry has reacted to the challenge of the smoking and health controversy in the following ways:
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The fact that Pepples regarded filters and low tar as responses to the "smoking and health controversy" (item 1) contrasts with the industry's public stance that these innovations were made in response to "consumer demand" and had nothing to do with health. This memo is an explicit acknowledgment that these things did have everything to do with health. Tying the two together leads to the conclusion that filters and low tar have to do with health concerns of consumers, and to the extent that the innovations allayed concern without providing protection, they are public relations devices for a public health problem.
Pepples then spells out the role of the Tobacco Institute, the industry's trade organization, and the Council for Tobacco Research (CTR), the entity established by the industry purportedly to do independent scientific research on the health effects of smoking (see chapter 2):
The Tobacco Institute, founded in 1958, has been the focal point for criticism of research that indicates a connection between smoking and health. The Institute has attempted to keep the opposition honest. It has carefully scrutinized the sampling difficulties and statistical deficiencies in the studies which allegedly indicate correlations between smoking and disease. The Institute
also has vigorously opposed governmental control of the marketing of cigarettes. This rearguard action has bought time in which the companies could adapt to the challenge, i.e. change themselves (through diversification) and change their products.
The Council for Tobacco Research (CTR) has dispersed over $26 million through 1973. During the past 20 years the industry has committed more than $50 million to scientific research related to tobacco and health. In December 1972, five cigarette companies including Brown & Williamson gave a $2.8 million grant to the Harvard Medical School for a 5-year investigation of any specific effects cigarette smoke may have in the development of lung and heart diseases. In 1967, over $12 million was spent in the United States on smoking and health research. In 1968, the figure increased to over $15 million.
The significant expenditures on the question of smoking and health have allowed the industry to take a respectable stand along the following lines—
"After millions of dollars and over twenty years of research, the question about smoking and health is still open " [emphasis added]. {2205.01, pp. 1–2}
Pepples viewed CTR as a means of keeping the "controversy" alive, although the industry maintained publicly that CTR was an independent organization whose purpose was to determine whether smoking is causally linked to disease. In essence, therefore, the industry was spending millions of dollars on research so that it could make the single statement that "the question about smoking and health is still open."
The Tobacco Institute also was used for the purpose of prolonging the "controversy." The instructions for B&W's document review project show that the lawyers were sensitive to this issue:
Documents discussing or containing public statements made by TI [the Tobacco Institute] in its role as spokesman for the tobacco industry. Pay special attention to documents suggesting that TI was used as a vehicle for the industry's alleged conspiracy to promote cigarettes through the "open controversy" PR program; that industry-sponsored smoking and health research was used for PR; or that the industry monitored governmental expenditures on research to make certain the industry outspent the government on research [emphasis added]. (1001.01, p. 32}
In "Industry Response to the Cigarette/Health Controversy," Pepples also discusses the strategy of preemption.
The tobacco industry wanted to prevent the chaos of nonuniform state and local regulation such as affects the alcohol industry. To gain one crucial costsaving objective, uniform regulation, the industry compromised by adding a health warning to the cigarette package. Another critic noted that "the label might even be a boon of sorts, providing a new defense for the industry" when
new health suits were brought by persons claiming to have been injured by cigarette smoking.
The broadcast ban which was enacted by Congress in 1969 called for the elimination of all TV and radio cigarette advertising after January 1, 1971 as well as strengthening the cautionary statement. The bill extended the preemption of state and/or local health regulation until June 1971. The tobacco industry did not oppose the 1969 or the 1965 enactments [requiring warning labels on cigarettes] which were in some ways victories [emphasis added]. {2205.01, p. 6}
Indeed, the tobacco industry testified in favor of the federal broadcast ban on cigarette advertising in July 1969.
Pepples concludes his 1976 analysis with a discussion of the implications for the tobacco industry of the disjointed nature of the federal government's regulatory authorities:
Some Conclusions and Observations
The foregoing discussion illustrates that the federated nature of the U.S. political system and the fragmentation of governmental authority and administrative responsibility are important in determining the type of governmental response.
The Congress is not staffed adequately nor is it properly structured to deal on a comprehensive basis with the medical aspects of the smoking controversy.
The independent regulatory bodies in the United States have been established to accomplish government regulation in technical areas. The FTC [Federal Trade Commission], FCC [Federal Communications Commission] and FCPSC [Federal Consumer Product Safety Commission] have been on very doubtful statutory ground in treating the smoking/health issue. They have been slowed by the limits in the procedures found in their statutory charter. As a result broad consideration of the smoking/health problem has been made difficult. Compared with public agencies in other countries they have been relatively free, however, to respond to the problem.
The FTC and FCC actions in this area have been unexpected and precedent-setting. They have mainly stemmed from the efforts of individual personalities. While the agencies have taken a high profile attitude, they have not had the power to act on issues of this type which lie outside their expertise and outside their legislative mandates. Congress has not extended their mandates to deal with the smoking/health problem and in fact has expressly prevented proposed agency actions from taking effect. In addition to the FTC, FCC and FCPSC the Departments of Agriculture, Treasury and Health, Education and Welfare have all dealt with portions of the total picture. A disjointed nature of governmental response has been augmented by the multiplicity of possible places where the action could occur [emphasis added]. {2205.01, pp. 6–7}
Pepples is saying, in effect, that Congress should not play a major role in tobacco control but should leave it up to an agency that is properly
structured. When discussing potential regulatory agencies, he does not mention the FDA.
Pepples continues:
Each agency is affected by interest group pressures that oppose compromise and cooperation with its opponents. For example, U.S. tobacco price supports and export subsidies are two programs (the latter begun after the Surgeon General's Report) that have been criticized as being in direct conflict with the government's smoking and health program. Also in Britain the Exchequer has been notably reluctant to give up tobacco taxes from cigarette smokers.
The oversight by Congress of its departments is not effective in resolving differences between departments. Each pressure group struggles to define the issue in its own terms so that the goals and actions of government will be congruent with its desires. The Treasury has sought to collect revenues, Agriculture has sought to maintain and increase employment, income and productivity of farmers while the health interests have sought to reduce disease. The antismoking forces were able to gain a foothold in the FAA [Federal Aviation Administration], FCC and FTC and in the Department of Health, Education and Welfare. The fact that one hand of the government does one thing and another hand does something quite different reflects the division of authority and responsibility which has made each agency vulnerable to the narrow interests of particular pressure groups [emphasis added]. {2205.01, p. 7}
There is a certain irony in Pepples's complaint about the multitude of government agencies involved in regulating tobacco and their disjointed efforts. Had a single federal agency been given the power to regulate tobacco in a comprehensive manner, its coordinated approach might well have resulted in much stricter control of tobacco. Had regulation been consistent, we would not have had federal price supports for tobacco growers, and tobacco exports would not have been subsidized under the Food for Peace program along with programs to discourage smoking.
Pepples continues,
Smoking and health as a political issue has been unpopular with all but a few politicians regardless of political party persuasions or country. Not only have strong economic interest groups opposed government action but a substantial portion of adult population indulge in the habit and derive significant pleasure from the use of the product. While it is reasonable to assume that the public desires good health, it is not reasonable to assume that the public at large and especially the cigarette smoking public is favorable toward antismoking measures that entail giving up the pleasures of smoking. {2205.01, p. 7}
These views were supported by decades of experience. However, not long after this paper was written, some politicians, particularly at the local level, began to take up the cause of nonsmokers' rights and to react favorably to the idea of restrictions on public smoking.
Pepples, moreover, miscalculated the reaction of smokers to restrictions on public smoking. Polls over the past twenty years have consistently shown majority support among smokers for such restrictions. Many smokers view limitations on smoking as a way to help them quit, or at least reduce their consumption, and many also understand the need to control tobacco smoke pollution for the sake of others.
Pepples next discusses the impact of the efforts to regulate cigarette advertising on cigarette consumption:
So far government efforts to regulate cigarette advertising have constituted the main thrust of government concern and the aggressive antismoking lobby is highly dissatisfied with the impact such efforts have had on total consumption. (The following page [not in the documents] shows in chart form the general upward trend in cigarette sales but suggests a significant loss of volume due to political factors.) The reduction in cigarette advertising seems to have made the industry stronger economically. Profits have increased. The ban on television and other broadcast advertising does not seem to have reduced consumption. The concomitant reduction in the number of anti-cigarette commercials is considered to be a severe loss in the effort to keep public concern and awareness of the controversy at a fever pitch [emphasis added]. {2205.01, p. 8}
Pepples then specifies the legitimate government role in regulating tobacco as a public health problem.
Like the meat industry [because of muckrakers who demanded USDA regulation early in the century] and recently the automobile industry [because of Ralph Nader], tobacco products are now coming under close scrutiny and governments are attempting to establish control over the products, as opposed to merely the advertising, to protect the public .
The warnings, the tar and nicotine ratings and the anti-cigarette commercials were all part of the effort to educate children and cigarette consumers not to smoke. Implicit in the policy of education is the idea that the consumers should make the basic decision and will make the "right" decision, provided they are given "more knowledge." In short, inform the public, and rely on an informed public to change the pattern of consumption. The government has not yet intervened directly to change the content of the product or limit its use. The protection of nonsmokers also has become an important and growing focus of the antismoking lobby with the announced purpose of making cigarette smoking an unacceptable social custom which they compare to spitting . At least 26 bills have been added to some 70 antismoking proposals in state legislatures for action in 1976, involving 26 states. Characteristically these measures would restrict the places where smoking may lawfully occur.
It is clear, however, that many anti-cigarette zealots and some public officials believe that the responsibility of the government does not end with merely warning the public of the hazards. They advocate direct intervention. Senators [Edward] Kennedy (D-MA) and [Gary] Hart [D-CO] recently [in
1976] proposed a health research bill to be financed by a tax related to the tar and nicotine content of cigarettes. At about the same time, the British Minister of Health announced on national television that he intended to lay an order before Parliament bringing additives and substitutes under the Medicines Act, which order must be approved by resolution of each House.
The tobacco industry, of course, would prefer no regulation at all. If there must be regulation, the industry is probably better off to have it at the federal level than be forced to fight off a multitude of nonuniform regulatory efforts at the state, county and town levels. Even expanded regulatory efforts may be shaped by the industry to enhance stability in the market or by individual manufacturers to bolster market positions—for example, by capitalizing on official tar and nicotine ratings in cigarette advertising.
The manufacturers' marketing strategy has been to overcome and even to make marketing use of the smoking/health connection. Individual tobacco companies have benefited from government actions. 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 heavy use of television in the introduction of WINCHESTER [a cigarette-like little cigar made by R. J. Reynolds] represented a bald exploitation of the little cigar loophole in the broadcast ban law. 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.
Market conditions are important in determining company response. In a rapidly changing cigarette market, it is difficult to obtain industry cooperation because cooperation tends to affect individual firms unevenly [emphasis added]. {2205.01, pp. 8–9}
In effect, preemption allowed the industry to accept certain defeats, while at the same time limiting the damage. Indeed, as Pepples noted, the radio and television advertising ban, which might have appeared at first to be a crippling blow to the industry, actually turned into an unforeseen advantage. As important as preemption was to the industry with respect to the issues discussed by Pepples in 1976, it was to become an even more crucial tactic for the industry in its battle against legislation regulating environmental tobacco smoke. In that battle the industry has focused on passing weak laws at the state level (where the industry has great political clout) that preempt stronger ordinances passed by cities and counties (where industry influence is relatively weak).
Legal Challenges To Regulation
On August 14, 1978, Ernest Pepples sent a "Privileged" memorandum to several high executives at the company regarding a paper entitled "Up from the Bombshelter," which was written by Charles Morgan, a noted
civil rights attorney in the 1960s, who later represented the tobacco industry. Although the documents include only a tiny fragment of the paper, we know from those fragments and from Pepples's memo that Morgan believed the industry should adopt aggressive legal measures to challenge government regulation of tobacco. For example, at one point, Morgan states:
We recommend the initiation of litigation to strike down legislation which forbids private property owners to allow free and unrestricted assembly by smokers in their businesses, restaurants, hotels, bars, stores, and similar facilities. {2211.01, p. 57}
Pepples explained that the paper had been reviewed and discussed by the Committee of Counsel, a Tobacco Institute committee consisting of the chief counsel of the tobacco companies, and by Horace Kornegay, then president of the institute, and that the memo dealt "with the main currents of the deliberations arising from [the] paper" {2210.01}.
In his analysis of Morgan's paper, Pepples notes:
Although some of the specific recommendations in Morgan's paper seem impractical, there is already wide agreement with one of his underlying ideas; namely, that now it has become timely for the industry to adopt a more aggressive stance in objection to some of the anti-industry measures being proposed. {2210.01}
Pepples then explains that challenging the Federal Trade Commission's attempts to impose further restrictions on cigarette advertising is a worthwhile endeavor because the industry has a reasonable chance of prevailing and there is "genuine value to be gained by winning":
The hard part is to find the right thing to stand and fight about and the right time and place to do so. The FTC wants to do something more about cigarette advertising because the display of the health warning in advertising has not been sufficiently "effective." By effective the FTC means a reduction in sales of cigarettes. The Commission attack will be founded on the now familiar premise that cigarette advertising tends to overcome the effect of the Surgeon General's warning and in so doing the advertising amounts to an unfair practice within the meaning of Section 5 of the FTC Act.
We can fight on that battlefield. We have a good argument and we will not be alone. The First Amendment issue is raised by the attempts to regulate the commercial expression on the vague ground of "unfairness." Here the FTC goes far beyond the familiar notions of falsity, deceit and misrepresentation. There is no lie or deceit present in cigarette advertising, whether you view the words alone or as a whole with the imagery. The FTC has to make its case in the mushy area of "unfairness." While "unfairness" under the Act may prove a flexible tool in regulating conduct, such as bait-and-switch
practices, the attempts to use it for the expansive regulation of the substance of expression contained in advertising runs right up against First Amendment considerations.
Another important legal issue concerns the res judicata effect to be given to the 1972 Consent Order under which the Surgeon General's warning is required in cigarette advertising. The Consent Order was based on a broadranging complaint that covers almost all of what the Commission is likely to come up with the next time around. Whatever legal validity and strength the FTC contentions in that complaint may have had, they should be taken as settled and not be open for relitigation time and time again [emphasis in original]. {2210.01, pp. 1–2}
Res judicata is a legal term meaning, literally, a thing that is definitely settled by judicial decision. When that is the case, the issue—in this instance the effect of the Surgeon General's warning—may not be opened up again by the same court or another court. Thus, Pepples is saying that the 1972 Consent Order settled all the issues relevant to the order and that the FTC contentions surrounding the order should receive no further hearing.
These are "good" legal issues, there is a reasonable chance of prevailing, and there is a great deal of genuine value to be gained by winning. Moreover the issues are sufficiently basic and of broad applicability that the industry will not necessarily be standing out there alone. For example, as to the First Amendment issue the makers of sugared cereals are already locked in battle, and the beer industry may soon be, on some of the same grounds as those that will be of concern to the cigarette industry. {2210.01, p. 2}
However, there were two important areas of concern that the attorneys did not believe were worth pursuing, despite Morgan's recommendations. The first of these was the ban on broadcast advertising on cigarettes, which the attorneys believed could not be challenged successfully on constitutional grounds and, in any event, was not worth fighting about:
He [Morgan] also says that the time is right for attacking the broadcast ban on cigarette advertising, again resting his arguments in the federal constitution.
With respect to Morgan's ideas about the broadcast ban, the First Amendment issues are theoretically interesting. The ban is a clear restriction of expression. The Court has recently affirmed that commercial forms of expression are protected by the First Amendment. But we are the wrong industry and this is the wrong issue on which to try to enlarge on this new-found constitutional protection for advertising. The Court has left many questions about the protection of commercial speech unanswered and this might be a very bad case to bring on early, before the Court has developed the rule more fully. The Court has already hinted that mere product advertising may enjoy the lowest degree of protection. Add to the foregoing factors that the case
involves issues of the public health and the protection of children and one can see that a negatively-inclined Court would have plenty of ammunition to use against the First Amendment argument.
Judges are only people and people are not favorably inclined toward this industry. On crucial points in the debate, the public opinion percentage scores against the industry read like a thermometer in July. Over 90 do not believe anything we say. Over 90 think cigarettes are dangerous. Even among smokers we lose. People say they want to quit. In an unaided poll a strong majority said that public smoking should be banned. About half of the people believe that ambient smoke is hazardous. With these kinds of attitudes floating around, Courts will likely be very negative toward cigarette advertising and any First Amendment argument which is advanced to get cigarettes back on TV [emphasis added]. {2210.01 pp. 2–3}
This frank assessment of the unpopularity of the tobacco industry and the extent to which the public was aware of the dangers of smoking for both smokers and nonsmokers indicates that the industry was far ahead of most politicians of the day in these realizations. In 1978 it was still only a rare politician who understood the industry's credibility problems and was willing to stand up to it. Pepples continues:
We have some discouraging history in this regard too. When the industry tried to impose the Fairness Doctrine in reverse—giving tobacco companies a right to reply to free anti-cigarette ads—Lewis Powell [an attorney at the time, who later became a justice of the Supreme Court] was hired and brought the case in the friendly 4th Circuit [of the US Court of Appeals]. Although it should have been won, the case was lost. It's bad law but there it is.
Even if the broadcast ban now were struck down, the pressures from government and non-government sources for counterads would be tremendous. The Fairness Doctrine may no longer require stations to carry anti-ads, as Morgan notes, but it certainly doesn't forbid stations to do so. The resumption of advertising on television would almost certainly be accompanied by the return in force of anti-smoking announcements [emphasis added]. {2210.01, p. 3}
Since the television and radio advertising ban was upheld in court, Pepples was undoubtedly correct in his assessment that it was not worth challenging. More recently, however, the advertising issue has shifted dramatically: there has been serious discussion of banning cigarette advertising altogether or of severely restricting its content. In August 1995 the FDA proposed a moderate set of restrictions designed to reduce the appeal of cigarettes and smokeless tobacco products to children and adolescents (8). The industry, of course, does not view such restrictions in the same way it did the broadcast ban. After the broadcast ban it merely
shifted its advertising to another medium, and it vigorously opposes any across-the-board restrictions or prohibitions.
In addition, Pepples rejects the notion that restrictions on public smoking are unconstitutional:
Similarly the recommendation for a wave of industry sponsored litigation attacking the constitutionality of public smoking ordinances is not convincing. A basic fallacy in Morgan's arguments is the assumption that the case involves an issue concerning the right of assembly and association. None of the anti-smoking ordinances in fact restricts a smoker's right of association or assembly. None of them exclude smokers from any place or infringe the rights of smokers to associate with whom they choose and assemble where they please. Instead they regulate activity or conduct. The ordinances do invoke the police power to restrict the activity of smoking in certain places.
A second major fallacy is the failure to recognize this police power aspect. The states have extensive authority to regulate the use of privately owned commercial property especially where questions of public health and safety are concerned.
With respect to the litigation recommended, the chances for success are relatively slight and with a small chance of winning, the prizes to be won would be practically valueless. If an anti-smoking ordinance is knocked down the most likely result would be the environmental protection "No Smoking" signs would be taken down and Fire Marshall's "No Smoking" signs would be put back up. No doubt the anti-smoking ordinances cover a somewhat broader group of public places than the Fire Marshall's have traditionally covered, but the Fire Marshall's authority is broad and could be more widely exercised in the future. One has to conclude, therefore, that the practical effort of a victory over the anti-smoking ordinances would be something less than sweeping [emphasis added]. {2110.01, pp. 3–4}
This analysis is particularly interesting for two reasons. First, it provides further evidence that the industry recognized nonsmokers' rights and clean indoor air as crucial issues in 1978, long before the mainstream health establishment did. Second, it indicates that the industry's chief lawyers agreed that they could not challenge a clean indoor air law on constitutional grounds; thus, they clearly conceded that public smoking is not a constitutionally protected right. Pepples's recognition that public smoking laws regulate conduct and do not interfere with constitutional freedoms is in sharp contrast with the position the tobacco industry has consistently taken when opposing the passage of such laws. In fact, the industry always frames the issues in terms of the effect of a proposed law on the "rights" of smokers (chapter 10).
Products Liability Concerns
Under products liability law, the manufacturer of a product, as well as other entities in "the stream of commerce" linking the manufacturer to the consumer, may be held liable for injuries sustained by the consumer as a result of some defect in the product caused by negligent manufacture or design. Under the doctrine of strict products liability, the manufacturer may be held liable even in the absence of negligence, as long as the product was defective and the defect caused the injury. The tobacco manufacturers were not concerned with products liability until the link between smoking and disease could be established, but when that link was finally forged, products liability litigation threatened the very existence of the industry.
Prior to the products liability litigation that began in the 1990s, there had been two waves of litigation against the tobacco industry (9). The first wave began in the mid-1950s, after the evidence of a relationship between smoking and lung cancer was published, and it lasted for about a decade. The second wave began in the mid-1980s, when public concern over health and the environment had reached a new peak and products liability law regarding toxic substances had taken on a new significance.
Many of the cases in the first wave were abandoned by the plaintiffs, who simply ran out of money after being worn down by the tobacco industry's use of procedural tactics to cause endless delays and obstacles. Of the cases that did proceed to trial, most were decided in favor of the defendant tobacco companies on grounds that they could not foresee any risks associated with the use of their product. In one major case, however, following rulings by an appellate court that favored the plaintiff and forced a new trial, the defendant won at the second trial by convincing the jury that the plaintiff had assumed the risk of contracting lung cancer.
In the second wave, the industry continued its successful procedural tactics. One of those tactics was to resist all discovery of tobacco industry documents and then to obtain confidentiality orders on materials finally produced, so as to prevent the information from being shared with other plaintiffs. The second wave of cases failed to produce a clearcut victory for a plaintiff. They foundered on a variety of legal theories, including preemption of state tort law by the federal Cigarette Labeling and Advertising Act of 1965, which required warning labels to be placed on all cigarette packages, and the lack of proof that cigarette smoking was the cause of the plaintiff's disease. But playing the most important
role was the defense of freedom of choice or assumption of risk. Even when juries determined that the tobacco companies were at fault to some degree, they found that the plaintiffs were aware of the risks associated with smoking and nonetheless continued the activity over a long period of time. And those findings have persisted despite attempts to portray tobacco as addictive. One further legal theory proved to be damaging to the plaintiffs. This was the proposition that "good" tobacco—that is, tobacco that has not been in some way adulterated by the manufacturer—is not defective, and therefore cannot give rise to liability based on the production of a defective product. In fact, legislation in a number of states, most notably California, has created a defense in products liability litigation that prevents recovery where the product involved, such as tobacco, is inherently unsafe.
In any event, the assumption of risk defense, which was so important to the industry during the second wave of litigation, may eventually be overcome. For example, a plaintiff may be able to prove that the industry fraudulently withheld crucial information about the health dangers of smoking from the public, so that smokers, in fact, could have believed that the risks of smoking were still unproven or, at least, could not have known the degree of those risks. A key component of such proof would be that the industry fraudulently withheld its knowledge of the addictive nature of tobacco, thereby preventing people from realizing the difficulty they might have in stopping to smoke once they started.
Involvement Of Lawyers In Scientific Research
On May 29 and 30, 1984, attorneys from B&W and BAT held a conference on US products liability litigation. This conference took place less than a year after the famous Cippolone case was filed [Cippolone v Liggett Group, Inc., 593 F. Supp. 1146 (D.N.J. 1984)]. That case, which would wind its way through the courts for several years, is the only products liability case in which the tobacco industry has ever been held liable for damages caused by tobacco (an award to the husband of the plaintiff, who had died during the litigation), although even that award was subsequently overturned on appeal. The conference is summarized in a June 12, 1984, memo to the file by J. K. Wells, B&W's corporate counsel. Wells first discusses the attribution problem (see below) and then "Project Rio, Project Ship and other biological testing programs." Project Rio, a version of the safe cigarette project in the early 1980s, was extremely sensitive:
Within the limited time available, we were able to hold significant discussions about implications for U.S. products liability litigation only 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. Alec [Morini, of BAT] said that he had not been aware of Project Rio until about two weeks prior to the meeting when he heard it mentioned briefly in a description of Southampton work. {1830.01, p. 2}
Wells then summarizes the status of the discussions, and it becomes clear that there are differences between the two companies on the degree to which the lawyers should be involved in scientific work:
[I]t is fair to say that BAT Legal are informed about the danger of the admissibility of BAT statements on smoking and health in U.S. products liability litigation. BAT Legal will offer counsel to BAT activities which pertain to smoking and health but no specific steps and no specific projects (other than Project Rio) were identified. Alec is concerned about the BAT senior management position [yet to be formulated] on the involvement of BAT Legal in R&D programs. {1830.01, p. 2}
After noting the success of the discussions, Wells proposes some follow-up activities:
[W]e should arrange a meeting in London with BAT Legal ... to delineate more specific counsel to the 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. Topics would include proposals for organizing programs already on the table and general procedural guides for lawyer counseling of ongoing and future programs. 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 in 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 is difficult. A sound recommendation must be based upon consideration of several factors, including the basis upon which senior management relies in concluding that the opinion of the scientist is incorrect; the overall reliance of senior management on opinions of the scientist; the responsibilities assigned to the scientist; and the company's duty to encourage scientific inquiry [emphasis added]. {1830.01, p. 2}
Wells also expresses concern as to whether BAT senior management will go along with the lawyers' recommendations with respect to their involvement in R&D programs. He ends with a reference to the question of whether BAT or BATUS (the US-based holding company of BAT, owner of B&W and other major assets) could be held as a party in a US
products liability lawsuit based on consumption of B&W products by the plaintiff {1830.01}
In effect, this document tells us that the B&W attorneys saw the need for themselves and the BAT attorneys to become totally involved in the research process in order to prevent potentially damaging research information from becoming known. The problem was that the attorneys in England, where products liability law was not as well developed as it was in the United States, were reluctant to become so intimately involved in scientific work. The B&W attorneys also recognized that at least some BAT scientists and consultants were convinced that the cause-and-effect relationship between smoking and disease had been proven. This was all the more reason to keep BAT scientific information away from the United States. However, in a July 8, 1985, memo to David A. Schechter, general counsel at BATUS, Sidney S. Rosdeitcher, an attorney at Paul, Weis, Rifkind, Wharton & Garrison in Washington, DC, concludes that documents in the possession of BAT Industries or BATCo would be discoverable by a plaintiff in a US lawsuit. Specifically, Rosdeitcher states:
You should not assume that discovery would be prevented by British law or a British government blocking order.
Neither Brown & Williamson nor B.A.T. could solicit the issuance of a blocking order without risking sanctions by the U.S. courts.
Even if the British government issued a blocking order, a U.S. court would require Brown & Williamson to make a good-faith, affirmative effort to convince the U.K. government to waive the blocking order.
If the U.S. court did not believe that such an effort had been made, or if it believed that Brown & Williamson or B.A.T. had solicited the blocking order, it could impose severe sanctions against Brown & Williamson, such as adverse factual findings (i.e., finding facts favorable to the plaintiff on matters in dispute), fines, and a default judgment.
You should act on the assumption that discovery of the documents would be available.
In the Appleton case, B.A.T. did not resist document demands from the FTC; B.A.T. negotiated certain modifications in the scope of those demands, and then agreed to produce documents located in the U.K. {1836.02}
"Careless" Statements By Company Scientists
As discussed in chapter 4, during the 1960s and early 1970s the tobacco industry believed it could create a "safe" cigarette, and it directed much of its research toward that goal. The scientists who conducted this research naturally had many discussions about the existing or suspected health dangers of cigarettes and how they might be eliminated. These
discussions, in turn, were troublesome to industry lawyers, since statements by those scientists, if discovered by a plaintiff's attorney, might be used against the industry in products liability lawsuits.
Toward the end of the first wave of litigation, one of the tobacco industry's principal outside counsel, David R. Hardy (of Shook, Hardy, Ottman, Mitchell, and Bacon), wrote a lengthy letter to DeBaun Bryant, general counsel at B&W, giving his observations and opinion about BAT's possible involvement in US smoking and health litigation. (The same subject arose fifteen years later; see the discussion above on lawyers' involvement in scientific research.) In this letter, written on August 20, 1970, and marked "CONFIDENTIAL, FOR LEGAL COUNSEL ONLY ," Hardy notes that "BAT may well be involved in future cases either as a defendant or through deposition of its employees or discovery of its records in cases where Brown and Williamson (B&W) is a defendant" {1840.01, p. 1}. But the real emphasis of the letter is on the "effect of statements made by employees of either BAT or B&W."
It would, no doubt, be virtually impossible to determine to what extent statements have been made which would be damaging to defendant's position in a smoking and health case, but I have seen sufficient documentation from you to conclude that the dangers I describe in this letter have a very real foundation . For example, the minutes of a conference at Kronberg, Germany, held from June 2 to June 6, 1969[{1169.01}] and attended by research personnel of both BAT and B&W, reflect statements such as the following:
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Hardy then refers to an interesting example of industry doublespeak. Despite the industry's relentless efforts through its public relations apparatus to make the public believe there is no medical proof of the dangers of smoking, Hardy notes the following "admission," undoubtedly crafted by an attorney, made at a BAT research conference:
At the St. Ives Conference, May 8 to 12, 1970, an opening statement was made which included an acknowledgment that tobacco manufacturers are not competent to give authoritative medical opinions and stating that "causation" is still an open question. {1840.01, p. 2}
Hardy complains:
In the minutes of this Conference, however, we note a number of statements or expressions which could be most damaging notwithstanding the disclaimer in the opening statement. For example: (i) reference is made on page 6 to the fact that research "will continue in the search for a safer product"; (ii) on page 14 a product is characterized as "attractive" because less biologically active; (iii) on page 15 the phrase "biologically attractive" is used; and (iv) on page 18 reference is made to a "healthy cigarette". {1840.01, pp. 2–3}
Hardy explains why the types of statements quoted from the two conferences are worrisome:
It is our opinion that statements such as the above constitute a real threat to the continued success in the defense of smoking and health litigation. Of course, we would make every effort to "explain" such statements if we were confronted with them during a trial, but I seriously doubt that the average juror would follow or accept the subtle distinctions and explanations we would be forced to urge [emphasis added]. {1840.01, p. 3}
Such statements, Hardy point out, if admitted into court, could tip the scales in the battle to convince a jury as to where the balance of the scientific evidence lies:
As you know, with the testimony of independent and well-informed doctors and scientists, it has been repeatedly demonstrated in court to the satisfaction of impartial jurors that cigarette smoking has not been scientifically proved to cause disease. This is certainly one very good reason that the industry has attained a one hundred percent record of victories in its health litigation. Jurors are, however, aware that a substantial segment of the medical and scientific community has accepted smoking as a cause of disease notwithstanding the deficiencies in the proof. This group includes many well-intentioned but inadequately informed doctors and scientists who operate on a philosophy that if smoking may be hazardous to health no further inquiry is necessary. In other words, they are willing to settle for suspicion in lieu of proof in condemning cigarettes. We have been able to show this to be the case when such suspicion has been claimed by our known enemies to be established fact. Obviously our problem becomes entirely different and far more serious when agents and employees of the defendant cigarette company or its parent become the spokesmen against us.
Fundamental to my concern is the advantage which would accrue to a plaintiff able to offer damaging statements or admissions by persons
employed by or whose work was done in whole or in part on behalf of the company defending the action. A plaintiff would be greatly benefited by evidence which tended to establish actual knowledge on the part of the defendant that smoking is generally dangerous to health, that certain ingredients are dangerous and should be removed, or that smoking causes a particular disease . This would not only be evidence that would substantially prove a case against the defendant company for compensatory damages, but could be considered as evidence of willfulness or recklessness sufficient to support a claim for punitive damages. The psychological effect on judge and jury would undoubtedly be devastating to the defendant. To be more specific:
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Hardy concludes his letter with the following:
In conclusion, I would like to emphasize that, in our opinion, the effect of testimony by employees or documentary evidence from the files of either BAT or B&W which seems to acknowledge or tacitly admit that cigarettes cause cancer or other disease would likely be fatal to the defense of either or both companies in a smoking and health case . I am afraid that any attempted explanation to a jury that such statements were made only in the context of a "working hypothesis" for the further development of our products would fall on deaf ears. Clearly, the admission of such evidence would cause a plaintiff's case to attain a posture of strength and danger never before approached in cigarette litigation. It could even be the basis for an assessment of punitive damages if it were deemed to indicate a reckless disregard for the health of the smoker. Certainly such evidence would make B&W the most vulnerable cigarette manufacturer in the United States to smoking and health suits.
We, of course, know that the position of BAT, as well as B&W, is that disease causation by smoking is still very much an open question. Cigarettes have
not been proved to cause any human disease. Thus, any statement by responsible and informed employees subject to a contrary interpretation could only result from carelessness. Therefore, employees in both companies should be informed of the possible consequences of careless statements on this subject [emphasis added]. {1840.01, p. 7}
Hardy obviously chose his words carefully. Even in such a confidential letter to a fellow attorney, he maintains the fiction that a statement by a corporate scientist subject to an interpretation that smoking causes disease could only occur through "carelessness."
In a letter written on November 5, 1970, Bryant passes along Hardy's concerns to E. G. Langford, an attorney at BAT:
As you know, we have for some time been concerned over the possibility that the BAT might in the future be involved in smoking and health litigation in the USA. This involvement might be through the deposition of BAT employees or the discovery of BAT records in cases in which B&W is a defendant. We asked Dave Hardy to prepare an opinion for us on this subject, which he has done and I am enclosing a copy for your consideration. {1840.03, p. 1}
Langford acknowledges receipt of the letter in return correspondence on November 11, 1970, and makes some suggestions:
I think the problem centers mainly on the R&D and to a lesser extent P.R. Departments and I know that both Departments are conscious of it, particularly since Pat Kelly's visit here last May. Nevertheless, in the light of Dave Hardy's Opinion the matter ought to be looked at again. It happens that Tony McCormick will be visiting you later this month, following a R&D Conference in Canada, and since he is responsible for both of the Departments I have mentioned above, I suggest that you discuss the matter with him. If you have any specific proposals to make we will certainly co-operate in every way we can. {1840.04, p. 1}
(For an example of how B&W's corporate counsel rewrote a scientific paper in 1984 to avoid having certain scientific statements linked to the company, see chapter 9, "The Blackman Paper: Rewriting Scientific Documents.")
Establishing Limits For Sharing Of Information
Among the many concerns of the attorneys at B&W was the extent to which information should be exchanged, both within and outside the associated companies. The documents indicate that this concern was a long-standing one, preceding the second wave of litigation by many years. A November 27, 1968, letter from Addison Yeaman, B&W vice
president and general counsel, to G. C. Hargrove at BAT—marked "Private and Confidential"—states:
Ed Finch [president of B&W] told me of his talk with you and in particular we discussed Tony McCormick's [a senior executive in the Research and Development Establishment at BAT] memorandum of 27th June to B. G. Pearson which had to do with exchange of pertinent information in the area of smoking and health. The approach is an interesting one and I should like to give it further thought and discuss its implementation with my opposite numbers [in a letter of December 11, 1968, Finch explains that this is a reference to the lawyers of the other tobacco companies in the U.S. who are members of the Tobacco Research Council {1809.03}] before trying to set up anything definitive. You will, of course, hear further from me on this. {1809.01}
The documents never specify the "information" to which they refer. A response from Hargrove to Yeaman, dated December 4, 1968, and marked "Private and Confidential," states:
You will by now have received the documents with reference numbers F.1193 and F.1224 which I left with Ed Finch. Having consulted Mr. Dobson, I confirm that the information in these documents can be made known in confidence to the rest of your Group in the U.S. Industry, if you so wish. We would not, however, wish the source of this information to be disclosed—although admittedly it would not be very difficult for others in your Group to guess this. {1809.02}
The Finch letter, which was written to R. P. Dobson at BAT, discusses the difficulties in exchanging information between individual BAT companies, and the problems that might arise from such exchanges.
I am in complete agreement with your statement that the subject of the exchange of information [on smoking and health] between individual companies within B.A.T. is full of difficulty . As you know, I have been and still am concerned about the problems that might arise as a result of individual companies corresponding with each other on this matter. ... From this information, it seems to me you would know best how the information should be used and whether or not it should be transmitted to other companies. In addition, I also agree with your thought that there should be personal visits between the major companies to discuss the health matters whenever possible [emphasis added]. {1809.03}
Also of concern to B&W was the extent to which BAT might be sharing information with British government officials. A memo dated October 20, 1971, from Dr. I. W. Hughes, director of R&D at B&W, to his superior, J. W. Burgard, and to the general counsel, Addison Yeaman, is on the subject of smoking and health research at Imperial Tobacco Group
(ITG) in the United Kingdom {1121.01}. Dr. Hughes had just read a report about this research (possibly document {1120.01}). Although, he notes, much of the report is concerned with the technical program,
there are a number of points mentioned which give an impression of the way I.T.G. may be planning its policy in terms of the Smoking and Health area.
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It is not clear what the Dawkins, Medicines, and Cohen Committees are, but in context they may be committees of the Royal College of Physicians or of another independent group interested in the toxicity of tobacco.
Dr. Hughes evidently wanted to draw the attention of senior management to these moves by ITG so that Mr. Finch might discuss them with a Mr. Carter, who was to be visiting soon. Dr. Hughes also suggests that Finch should not let it be known that B&W received information on ITG's plans through BAT:
During Mr. Carter's visit to Mr. Finch, it might be useful to Mr. Finch to obtain from Mr. Carter an overview of the policy in the health area. If this is considered worthwhile, it might be preferable not to mention that we receive through BAT broad reports of the I.T.G./Huntingdon situation. {1121.01}
Attribution Of Statements By Subsidiaries
When the health dangers of smoking became a serious issue, one of the problems facing BAT was the possible attribution to its tobacco companies of statements made or decisions taken by its other subsidiaries. This problem was the topic of several memos between corporate attorneys. In one memo, titled "Legal Considerations on Smoking and Health Policy" {1828.01}, which was unsigned and undated but apparently written by an attorney, the author summarizes the policy of BAT Industries Group in relation to smoking and health issues. The author then warns that BAT's nontobacco companies must be made aware of the group's stance, because the spread of "no-fault" liability may result in the future attribution to the group's tobacco companies of statements made or
decisions taken by other subsidiaries. The following excerpts demonstrate the industry's classic three-pronged stance with regard to the health dangers of smoking: (1) a genuine scientific controversy exists; (2) individuals have a right to choose whether or not to smoke; and (3) further research is needed:
For this reason [the spread of no-fault liability] it is essential that statements about cigarette smoking or the smoking and health issue generally must be factually and scientifically correct. The issue is controversial and there is no case for either condemning or encouraging smoking. It may be responsible for the alleged smoking related diseases or it may not. No conclusive scientific evidence has been advanced and the statistical association does not amount to proof of cause and effect. Thus a genuine scientific controversy exists.
The Group's position is that causation has not been proved and that we do not ourselves make health claims for tobacco products. Consequently the Group cannot participate in any campaigns stressing the benefits of a moderate level of cigarette consumption, of cigarettes with low tar and/or nicotine deliveries or any other positive aspects of smoking except those concerned with the dissemination of objective information and the right of individuals to choose whether or not they smoke . However, the Group encourages constructive dialogue with the authorities, the dissemination of information about the smoking and health controversy and research and new product development.
Non-tobacco companies in the Group must particularly beware of any commercial activities or conduct which could be construed as discrimination against tobacco manufacturers (whether or not involving companies within the Group), since this could adversely affect the position of Brown & Williamson in current US product liability litigation in the US. If in doubt, companies should not hesitate to consult their inhouse consel, or BAT Industries Legal Department, who have up-to-date information on the legal situation affecting the tobacco companies [emphasis added]. {1828.01}
The recommendation against participating in the promotion of health claims for low-tar cigarettes is in sharp contrast to the industry's active promotion of such cigarettes during the "tar derby" of the late 1950s (discussed in chapter 2). However, the principal point being made here is that the companies in the BAT group were not to engage in any dialogue concerning the health aspects of smoking and were to adhere strictly to the three-pronged position on that issue, as outlined above.
The seriousness with which this policy was taken can be seen by what happened to one unfortunate employee at US Tobacco, manufacturer of moist tobacco products, who made an inappropriate statement regarding the health benefits of smokeless tobacco. This episode is recounted in a 1977 confidential memo from Ernest Pepples, B&W vice president for law, to J. E. Edens; C. I. McCarty, the company's chairman and chief
operating officer; and R. A. Pittman, the senior vice president for public relations:
US Tobacco's General Counsel, Jim Chapin, sent me the attached article from the New York Post for March 16. It reports a most unfortunate interview with an over-enthusiastic employee of US Tobacco who is quoted as saying about so-called smokeless tobacco:
[F]rom what we understand, it presents the least possible danger of all. It's when you light tobacco that you start doing damage.
Chapin says the statements quoted were unauthorized and do not represent his company's views. He has asked me to extend US Tobacco's apology to each of the cigarette companies and advised me that the individual quoted in the article is no longer employed at US Tobacco. Chapin says US Tobacco has instituted smoking and health seminars throughout the company. {1500.01}
On May 29 and 30, 1984, attorneys from both B&W and BAT held a conference on US products liability litigation. (For further discussion of this conference, see above section on involvement of lawyers in scientific research.) This conference is summarized in a June 12, 1984, memo to file by J. K. Wells, B&W's corporate counsel. The conference placed particular emphasis on the problem of the attribution to the tobacco companies of statements and actions by affiliated companies:
Trial counsel described evidence rulings in United States courts pertinent to the admissibility of statements (used herein to include written and oral statements and actions whether internal or published) of an affiliate of B&W. A prudent lawyer in a U.S. products liability action must assume that any damaging statement will be admitted into the evidence and will be discussed by the plaintiff. 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. Statements by a non-tobacco affiliate would be admissible where control or close functional relationship, either on a general line of business or a specific project basis, was shown. {1830.01, p. 1}
A February 4, 1985, letter from R. G. Baker, a senior scientist at BAT's Southampton laboratory, to D. A. Schechter, an attorney at BATUS, Inc., in Louisville, labeled as an "Attorney Work Product," discusses the need to set up guidelines for affiliated companies outside the United States to follow when making public statements. The letter suggests six questions to be considered:
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Included with the letter is a two-page legal analysis of the attribution issue put together by Baker. An introduction to this analysis states: "A substantial discussion took place about the risks of statements and positions of affiliates of Brown & Williamson being attributed to it. The intention is, so far as possible, to conduct matters so that no connection can be shown" {1829.02, p. 1}.
Strategy Of No Settlements
By the mid-1980s there was no doubt among tobacco industry executives about the seriousness of the products liability issue. A July 22, 1985, restricted briefing document titled "B&W's Public Issues Environment" outlines the potential importance of products liability actions against Brown and Williamson and the principal strategy to be followed: no settlement payments are to be made.
B&W will continue the strategy of intensive litigation of each case with the objective of exploiting each case's favorable factors and a policy of no payments to plaintiffs in settlement of cases. In the event manufacturers experience losses in the smoking and health cases, the selection of contingency strategy would depend upon the scope of the losses. During the planning period the most attractive strategy probably will be to continue intensive litigation of the cases with no settlement payments and the acceptance of losses as charges against income. The current insurance coverage of $1,000,000 would quickly be absorbed and the adoption now of internal financial structures to fund losses could be a negative influence on juries. Such structures should be re-evaluated if losses occur. A possible contingent strategy of settlement also should be reassessed on an opportunistic basis. Pressure will develop in the Congress for superfund legislation [pursuant to which corporations that produce hazardous substances are taxed, and the resulting fund is used to pay for the costs associated with the release of hazardous substances] applicable to smoking and health lawsuits if large scale plaintiff victories occur; such a fund would be financed by contributions from cigarette manufacturers amounting to a large percentage of profits. {2228.02, pp. 1–2}
The strategy of refusing to settle with any plaintiff was one that the industry had devised when the first products liability actions were filed in
the mid-1950s, and the industry has religiously observed it to this day. The tobacco companies decided that they would defend every suit, regardless of cost, and would do so regardless of how many appeals were taken. As part of this strategy, the industry also decided that it would spend whatever it must to exhaust the plaintiff's resources in each case. Thus, the litigation in this area became a war of attrition in which the richest party, rather than the one with the best legal case, would win (9).
Maintaining Legal Distance Between B&W And Bat
The briefing paper discussed above also notes the importance of maintaining some legal distance between Brown and Williamson and BAT, to protect the larger organization from involvement in a US lawsuit:
The BAT group must preserve the independent corporate status of B&W. A smoking and health plaintiff could bring B&W's parent or parents into a case if the parent exercised such control over B&W as would support a plaintiff's argument that B&W was not an independent business entity. B&W's net assets should not be reduced below a level commensurate with B&W's operations as an independent entity. Similarly any substantial reduction or dilution of pension plan assets, or dividend up or pledge of assets, would invite a court to pierce the B&W corporate entity and hold BATUS or even BAT responsible for B&W's liabilities. Also, BATUS' or BAT's detailed direction of B&W's marketing plans could lead a court to the same result [emphasis added]. {2228.02, p. 2}
While there was concern that BAT might be dragged into US lawsuits because of its ties to B&W, the attorneys at B&W worried that the company might receive scientific information from BAT that would be useful to a plaintiff in litigation, and as described earlier in this chapter, they tried to devise methods for preventing the discovery of such information by a plaintiff. One might say that these two closely linked corporations were giving new meaning to the expression "hands across the sea."
B&W Participation In Bat Research
While B&W attorneys were busy trying to conceal the fact that the company was aware of certain information obtained from research conducted by BAT, the documents themselves tell us that B&W was actually an active partner in much of the BAT Group research and, therefore, must have known of most of the important information obtained from it. All the information in the documents about BAT research activities
around the world is from the files of Brown and Williamson. While some research activities, such as work on smoker compensation and biological testing, were never conducted in the United States, there is abundant evidence that B&W actively participated in planning and funding at least some of this work and that the company benefited from receiving the results of these studies.
Active Participation By B&W Personnel
B&W had at least one delegate at each of the seventeen research conferences held between 1962 and 1985 (see table 7.2). BAT representatives from the United Kingdom, Canada, and Germany also attended each research conference. Brazil was regularly represented by the mid-1970s while Australia was represented only occasionally. In addition, as described below, B&W scientists attended other BAT R&D meetings and conferences, including meetings on the direction of the biological testing programs, such as Project Janus.
B&W contributed experiments to Project Janus (see chapter 4) {1164.03; 1112.04}. A B&W scientist was a member of the Biological Testing Committee. Moreover, B&W scientists made site visits to BAT research labs in the United Kingdom. Dr. R. B. Griffith visited Southampton in the summer of 1965 {1105.01}, and Dr. Robert R. Johnson made an extensive visit in mid-1967 {1109.01}.
B&W scientists sometimes made comments on proposed agendas of research conferences and edited drafts of minutes that resulted from these meetings. For example, Dr. Robert Sanford of B&W made detailed suggestions to Dr. S. J. Green of BAT for revising draft minutes of the 1968 Hilton Head research conference (discussed in chapter 4) {1112.02}. The B&W general counsel, Addison Yeaman, received a copy of this letter. Dr. Alan Heard of BAT Southampton sent Dr. R. A. Sanford a questionnaire about the draft agenda for the 1980 Sea Island research conference. As described in chapters 3 and 4, Dr. Sanford responded with a number of comments about areas of research, such as inhalation, that should not be further pursued {1132.01}. In July 1983 the director of R&D at Millbank, Dr. L. C. F. Blackman, sent Earl Kohnhorst of R&D B&W the proposed agenda for the 1983 research conference in Rio and asked him to comment on it {1180.05}. Similarly, draft minutes of the 1983 Rio meeting were sent to B&W for comment and feedback. Edits appearing in handwriting in the draft from B&W's files {1180.09} were incorporated into the final set of minutes {1180.07}. These editorial changes in-
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cluded the excision of a phrase referring to a filter developed at B&W. Thus, under a discussion of research at the German affiliate, the draft minutes contain the following paragraph about filter variants:
A description was given of a number of filter designs capable of directing smoke to specific areas of the mouth. This technology, which is an extension of the B&W Actron concept, has led to patent applications. Results
with other novel filters which make use of the principles of 'smoke elasticity' were given. {1180.09, p. 14}
The phrase "which is an extension of the B&W Actron concept" is lined out in the draft, and the final version of the minutes reflects this edit {1180.09, p. 14}.
The minutes of the Rio conference also discuss an information exchange system called Interbat {1180.07}. The minutes indicate that there were mechanisms within Interbat's structure to control the flow of "sensitive reports or information."
With the growing interest and use of INTERBAT, CAC Companies should be reminded that facilities are available to limit or block access to sensitive reports or information. {1180.07, p. 16}
The CAC Companies were the members of the Chairman's Advisory Conference, BAT affiliates in the United States, Canada, Brazil, Australia, and Germany, the places outside the United Kingdom where BAT maintained research facilities. The draft minutes circulated at B&W include a marginal note stating, "We own 1/3 share" {1180.09, p. 15}, which indicates that B&W was a participant in the Interbat system. The documents do not indicate exactly what information was shared on the Interbat system, but it might be the information retrieval and sharing system recommended for BAT's R&D by a consultant in 1979 {1175.03, p. 7}. Southampton, Louisville, and Hamburg were each to have input into the design of the system, and this might explain the reason B&W bore a third of the costs.
Furthermore, the minutes of the Rio conference include a list of the dozen technical meetings that had been held over the past year (including a "smoking behaviour" conference in the United States in March 1983) and conclude,
It was agreed that the meetings had been a highly effective means of exchanging technology throughout the Group, and that a similar level should be maintained in the future. {1180.07, p. 16}
These conferences covered a wide range of issues in research and development. The full list of immediate past and future BAT technical exchange meetings for 1982–1985, as it appeared in the Rio conference documents {1181.14}, is shown in table 7.3. The comment from the conference minutes suggests that participants at each conference included individuals from various BAT companies. These frequent exchanges (nine or ten a year) clearly permitted companies not doing the actual research
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work or receiving formal reports to benefit from the results of the work being done throughout the group. It may be that, after lawyers at B&W became more concerned about what was discoverable in its files in the late 1970s and early 1980s, these conferences were scheduled more often so that not as much paper would have to change hands.
B&W scientists also attended meetings other than the annual research conferences. For example, Dr. Sanford was one of eight participants from four operating companies who attended the R&D Policy Conference held at Chewton Glen and Torquay in February 1979 {1175.03}; and Earl Kohnhorst attended a Chairman's Advisory Conference meeting at Wallingford, England, in September 1985. In the notes on this meeting, Kohnhorst is listed as a speaker on several technical topics to be
discussed at the 1985 research conference scheduled for November of that year in Rio {1182.01}.
Records of some of the series of meetings held from the mid-1960s through at least 1983 to monitor toxicological (biological) research, including Project Janus, are included in the documents {1164.03 through 1164.26}. B&W personnel participated in three of the meetings for which records are available. R. B. Griffith is listed as a "member" of the Biological Testing Committee in the minutes of the Southampton meeting held in June 1969 {1164.03}; R. A. Sanford is listed as a guest at the same meeting. Dr. Sanford was also present at the May 1970 meeting of this committee {1164.05}, and J. G. Esterle attended the November 1977 meeting {1164.23}.
The documents also include the participant list for the Smoking Behaviour/Marketing Conference held in Montreal in 1983 {1224.01, unnumbered page}. This conference featured major presentations of BAT-sponsored research for marketing personnel of BAT-affiliated companies. B&W personnel in attendance at this conference included the section head of Sensory Evaluation (W. H. Deines), the division head of Product Development (Tilford Riehl), and a representative from Marketing (Andy Mellman).
R&D Cost- And Risk-Pooling Agreement
Additional evidence of the extent to which B&W participated in BAT research can be found in the cost- and risk-pooling agreements between the two companies. According to handwritten notes made sometime in 1980, perhaps by J. K. Wells, B&W's corporate counsel, these agreements dated back at least to April 1958 {1838.01}. At that time, the notes indicate:
We have been pooling the findings and experience resulting from our joint and separate research programmes. {1838.01, p. 1}
The agreement called for costs to be shared on the basis of B&W sales to BAT sales, and the companies shared reports and findings. In 1961 the 1958 agreement was abrogated (as of October 1, 1960), evidently because the sales formula was not working. In its place, an arrangement was made whereby each company bore the cost of its own research. However, the two companies focused on different areas of concern: B&W was "best suited for research [on] seed to warehouse," while BAT was "better suited for work on processing, smoking, [and] smoke effects" {1838.01, p. 1}. A short entry dealing with March 6, 1962, states:
B&W shall have access to everyone else's [research results]—everyone else shall have access to B&W's. {1838.01, p. 1}
In July 1969 a major cost- and risk-pooling agreement, a copy of which appears in the documents {1810.01}, was entered into by the two companies. The agreement was effective as of January 1, 1969, and was to last five years. According to the notes, among the important aspects of the agreement was the fact that it recognized that the parties had for many years exchanged the product of their R&D work to their mutual benefit. The notes describe the opt-out procedure under the agreement and indicate that the costs were shared on the basis of the sales ratios of the two companies {1838.01, p. 2}.
The 1969 agreement was extended indefinitely in June 1974. It was amended in December 1975, limiting the amount payable by either party to $100,000. In February 1977 the agreement was rescinded, effective as of October 1, 1976, and a new agreement became effective {1838.01, p. 2}. A separate document, evidently a cover letter to the new agreement, written on February 7, 1977, by an unknown person at B&W (only the first page of the letter is available) to the secretary of BAT, discusses the review of the old agreement that led to the decision to formulate a new arrangement. Of particular interest is the following observation:
This review has served to underscore the importance of the centralized and coordinated research program which is being carried out by BAT in support of long-range overall Group strategy. {1815.01, p. 1}
The notes discussed above indicate that, under the new agreement, central group research was carried out by BAT for the mutual benefit of itself, B&W, and other affiliates. The research included biological, product, smoker, process, and new smoking material areas. B&W contributed 0.15 percent of its net turnover, and received information in return. In 1979 an amendment was proposed to increase B&W's contribution to 0.21 percent, and it was eventually executed in January 1980. Then, on the last day of 1980, everything was canceled. Finally, in a subscript, the notes state that under the 1977 agreement B&W was paying around one million (presumably dollars), whereas, under the increased factor, it would be paying between two and three million {1838.01, p. 2}.
The two companies continued to operate under cost-sharing arrangements after 1980. This fact is shown in the notes to an R&D meeting of BAT affiliates (the CAC Companies, described above) at Wallingford, England, in September 1985 {1182.01}. Under a section entitled "Funding of BATUKE R&D Centre," the notes state:
In view of the pressure from various countries to have some indication of their likely contribution to this laboratory, ALH [A. L. Heard, chairman of the meeting] presented a proposal for funding BATUKE R&D Centre which reflected the BATCo recommendations at least for the next two years.
Despite the considerable reduction in costs of the laboratory, if CAC's were no longer to contribute, the result would be a considerable increase in the sum paid by BATCo (in addition to the individual BATCo companies), with major savings by all CAC's unless they rapidly scale up their domestic R&D costs which looks improbable (with the possible exception of USA). As a guideline for the next two years it is proposed that BATCo will continue to support the laboratory at its current level and that the balance be shared between CAC countries (not Brazil) using a [specified] formula. {1182.01, pp. 6–7}
As indicated in a letter written on August 20, 1970, by attorney David R. Hardy to DeBaun Bryant, general counsel at B&W {1840.01}, these cost- and risk-pooling agreements created a potential legal problem for B&W. In the letter, Hardy discusses the possible adverse effects of statements made by BAT and B&W scientists in a products liability lawsuit against the company. Hardy points out that such statements could be construed as being contrary to the industry's position that there is no proof that smoking causes disease (see the discussion earlier in this chapter regarding concerns of lawyers about scientists' statements). After explaining how the statements could be used by a plaintiff, Hardy notes that the pooling agreement exacerbated the problem:
Also adding to the need for recognition of the problem created by statements such as those I have described is the existence of the "BAT/B&W R&D Cost and Risk Pooling Agreement" executed in July, 1969. This document creates an inter-relationship (or confirms a relationship which already existed) that would assist a plaintiff's attorney greatly in obtaining information from B&W about BAT research and development work. {1840.01, p. 4}
Later, Hardy notes that:
The findings and opinions of persons engaged in work covered by the "BAT/B&W R&D Cost and Risk Pooling Agreement" are available to both BAT and B&W. Carefully framed discovery would certainly force disclosure of the Agreement as well as other documents bearing on smoking and health issues [emphasis added]. {1840.01, p. 5}
Antitrust Concerns
One of the tobacco industry's legal concerns was that some of its jointly sponsored research projects might be construed as violating antitrust laws. Antitrust laws are generally designed to preserve competition
among sellers of goods and services by preventing or suppressing practices that create monopolies or restrain trade. Evidently, some attorneys in the industry believed that cooperation among the domestic tobacco companies in scientific research that had commercial ramifications, such as the same product modifications by all the companies, could be construed as an anticompetitive practice. For example, the joint effort by the American tobacco companies to sponsor the study of the cigarette additive Chemosol (described in chapter 6) may have created such a concern. Similarly, antitrust implications may be one reason for the evident lack of industry cooperation to produce a fire-safe cigarette. As noted earlier in this chapter, the industry has resisted efforts by Congress to mandate that cigarettes be fire-safe, because the industry does not wish to open the regulatory floodgates. Of course, the very regulatory void that the industry has so assiduously sought has left it with a lack of ground rules on what joint action the companies may safely take and with the concomitant jeopardy of the companies' being accused of collusion when they do act together.
The documents provide two examples of specific expressions of concern over possible antitrust problems. The first has to do with biological research. As subsequently described (in chapter 8), the Council for Tobacco Research funded a series of studies at Microbiological Associates in Bethesda, Maryland, on the effects of cigarette smoke on mice. Most of the studies involved inhalation of tobacco smoke. However, Microbiological Associates also conducted some short-term biological tests on tobacco smoke condensate. The purpose of the work was to attempt to identify specific compounds in cigarette smoke that were responsible for carcinogenesis, the implication being that these compounds, once identified, could be removed as part of the effort to develop a "safe" cigarette. As discussed in chapter 8, the work being conducted at Microbiological Associates aroused concern in tobacco industry lawyers, not only because the tests were "red light" tests that could be used against the industry in court but also because they represented a breach of antitrust laws. In a letter to Addison Yeaman, dated March 10, 1977, Ernest Pepples states,
I also question whether we come close to an antitrust problem when several companies are funding work in the area of identifying compounds or combination of compounds which may be responsible for biological activity. Certainly that runs away from my concept of the scope of CTR which is etiology and not identification of substances or compounds which ought to be removed from the product. What I have in mind is a contrast between product modification and etiology of diseases. {1816.01, p. 2}
The second example involves research on nicotine analogues (see chapter 3), perhaps the industry's greatest concern in the antitrust area. In a memorandum of April 4, 1978, from Pepples to various persons, which primarily concerns the CTR budget, Pepples notes:
American [Brands] has also concluded that part of the central nervous system/nicotine work [conducted by CTR] poses a question with respect to the assurances which the companies gave to the Justice Department to the effect that none of the scientific work at CTR would have commercial application. Philip Morris and Lorillard concur in the view that some of the central nervous system (CNS) work has commercial overtones, specifically work which would lead to blocking agents or substitutes for nicotine. {2010.02, p. 1}
Conclusion
The documents discussed in this chapter confirm what has been known about the myriad legal problems besetting the tobacco industry in the past few decades. They also shed new light on how the industry has dealt with those problems. Many of the problems are unique to the industry—which is not surprising, since it produces a product that is dangerous when used as intended—and its responses have often reflected that realization. Thus, on the one hand, we have seen that the industry actually welcomed a ban on the broadcast advertising of its products (something that would be unthinkable for the manufacturer of any other legal product); on the other hand, we have seen that the industry adopted a totally uncompromising stance against the settlement of any products liability lawsuits. And we have seen the lengths to which one company apparently went to avoid the discovery of documents that might be useful to an opponent in a lawsuit. Despite its problems, the industry has managed to remain unscathed, considering how much damage some of the attacks against it might have inflicted if they had been more successful.
The industry's charmed existence, however, may not last forever. On the horizon are new legal battles that promise to be even more daunting than those already faced: the possible regulation of cigarettes by the Food and Drug Administration; increased and more comprehensive regulation of smoking in public places and the workplace; class-action products liability lawsuits involving millions of plaintiffs, both smokers and nonsmokers; lawsuits by various state governments seeking reimbursement for state medical expenses due to smoking; the possible mandating of fire-safe cigarettes; and the possible ban on or severe restriction of ciga-
rette advertising. It remains to be seen whether the industry's lawyers and public relations experts can weather the impending storm.
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