UNITED STATES’ REPLY TO DEFENDANTS’ AND INTERVENORS’ RESPONSES TO THE UNITED STATES’ SUBMISSION OF PROPOSED CORRECTIVE STATEMENTS AND EXPERT REPORT - March 16, 2011

March 18, 2011 12:26 am by Gene Borio

The PDF is HERE

EXCERPTS:

Rather than show that the United States’ proposed corrective statements are improper, Defendants’ brief demonstrates their true objection to the United States’ recommended corrective statements: They reject this Court’s findings that they engaged in a RICO conspiracy for decades to mislead and defraud the American people””to deadly effect. Those findings remain for them a substantial “controversy.” After years of litigation, nine months of trial, a 987-page decision, a clear rejection of their views by the D.C. Circuit, and a denial of cert. by the Supreme Court, Defendants are still unwilling to admit (for example) that they control how much nicotine their cigarettes deliver and that their cigarettes are designed to addict their customers. Because Defendants reject such findings of fact, they apparently believe that it could only be harsh and punitive to require them communicate those findings to the public. Indeed, according to Defendants, these facts are not “facts” at all, but are “highly controversial.” There could be no clearer demonstration of the need for this Court’s corrective-statement remedy.

The statements that Defendants now ask thisCourt to reject are factual and non-controversial, and the government has demonstrated that they are effective at communicating””in a clear, truthful, and non-misleading way””information to inoculate the public against the kinds of statements that are at the heart of Defendants’ conspiracy to mislead the public. They are, in short, precisely the remedy that Defendants’ RICO violation requires.

ARGUMENT

Defendants challenge four of the United States’ recommended statements, on grounds that they would require Defendants to publicize some of their past misconduct, on grounds that this would be “shameful” and “inflammatory” and therefore prohibited by the First Amendment; that dispute the methodology the United States used to recommend some statements; and that challenge the factual accuracy of three recommended statements.

1. THERE ARE NO FIRST AMENDMENT BARRIERS TO THE UNITED STATES’ RECOMMENDED STATEMENTS . . .

2. THE UNITED STATES’ RECOMMENDED STATEMENTS ARE REASONABLY RELATED TO THE STATE’S INTEREST PREVENTING AND RESTRAINING FRAUD . . .

3. THE COURT’S FACTUAL FINDINGS AMPLY SUPPORT THE UNITED STATES’ RECOMMENDED STATEMENTS . . .

CONCLUSION

Contrary to the Court’s order, Defendants failed to propose schedules for any additional briefing. Their response brief makes only minor challenges to small portions of the Blake Report, and does not show any need for discovery or evidentiary hearings.

FULL TEXT:

Case 1:99-cv-02496-GK Document 5891 Filed 03/16/11 Page 1 of 30

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

UNITED STATES OF AMERICA,

Plaintiff,

v.

PHILIP MORRIS USA INC.,

f/k/a PHILIP MORRIS INC., et al.,

Defendants.

Civil No. 99-CV-02496 (GK)

Next scheduled court appearance: None

________________________________________

UNITED STATES’ REPLY TO DEFENDANTS’ AND INTERVENORS’ RESPONSES TO THE UNITED STATES’ SUBMISSION OF PROPOSED CORRECTIVE STATEMENTS AND EXPERT REPORT

Table of Contents

INTRODUCTION. . . . .. . . . .. . . . .. . . . .. . 1

ARGUMENT.. . . . .. . . . .. . . . .. . . . .. . . . . 1

1.

THERE ARE NO FIRST AMENDMENT BARRIERS TO THE UNITED STATES’ RECOMMENDED STATEMENTS.. . . . .. . . . .. . . . .. . . . .2

a.

Compelled disclosures will be upheld so long as they are “reasonably related to the State’s interest of preventing deception of consumers”.. . . . .. . . . . . 3

b.

The First Amendment does not protect Defendants from being compelled to disclose their own bad acts to the public.. . . . .. . . . .. . . . . . . . . 5

c.

Manufacturers and others are subject to numerous provisions requiring mandatory disclosure of adverse determinations against themselves. . . . .. . . . . 9

d.

The onlything controversial about the United States’recommended statements is that Defendants do not want to accept the truth. . . . .. . . . .11

2.

THE UNITED STATES’ RECOMMENDED STATEMENTS ARE REASONABLY RELATED TO THE STATE’SINTEREST PREVENTING AND RESTRAININGFRAUD……………………14

a.

The United States’ research thoroughly supports the portions of the recommended statements to which Defendants take exception. …………………….19

i.

Topic B ““ Addiction……………………………………19

ii.

Topic C ““ Light/Low-tar. ……………………………….20

iii.

Topic D ““ Manipulation…………………………………21 Case 1:99-cv-02496-GK Document 5891 Filed 03/16/11 Page 2 of 30

3.

THE COURT’S FACTUAL FINDINGS AMPLY SUPPORT THE UNITED STATES’ RECOMMENDED STATEMENTS.. . . . .. . . . .. . . . .. . . . . . . . . . . . . . 22

a.

Topic A: Defendants dispute daily death toll of smoking as an approximation

. . . . .. . . . .. . . . .. . . . .. . . . 22

b.

Topics B and D: Defendants dispute manipulating cigarette design to make cigarettes more addictive. . . . .. . . . .. . . . .. . . . . . . 22

CONCLUSION. ……………………………………………………..26

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INTRODUCTION

Rather than show that the United States’ proposed corrective statements are improper, Defendants’ brief demonstrates their true objection to the United States’ recommended corrective statements: They reject this Court’s findings that they engaged in a RICO conspiracy for decades to mislead and defraud the American people””to deadly effect. Those findings remain for them a substantial “controversy.” After years of litigation, nine months of trial, a 987-page decision, a clear rejection of their views by the D.C. Circuit, and a denial of cert. by the Supreme Court, Defendants are still unwilling to admit (for example) that they control how much nicotine their cigarettes deliver and that their cigarettes are designed to addict their customers. Because Defendants reject such findings of fact, they apparently believe that it could only be harsh and punitive to require them communicate those findings to the public. Indeed, according to Defendants, these facts are not “facts” at all, but are “highly controversial.” There could be no clearer demonstration of the need for this Court’s corrective-statement remedy.

The statements that Defendants now ask thisCourt to reject are factual and non-controversial, and the government has demonstrated that they are effective at communicating””in a clear, truthful, and non-misleading way””information to inoculate the public against the kinds of statements that are at the heart of Defendants’ conspiracy to mislead the public. They are, in short, precisely the remedy that Defendants’ RICO violation requires.

ARGUMENT

Defendants challenge four of the United States’ recommended statements, on grounds that they would require Defendants to publicize some of their past misconduct, on grounds that this would be “shameful” and “inflammatory” and therefore prohibited by the First Amendment; that

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dispute the methodology the United States used to recommend some statements; and that challenge the factual accuracy of three recommended statements.1

1. THERE ARE NO FIRST AMENDMENT BARRIERS TO THE UNITED STATES’ RECOMMENDED STATEMENTS

Defendants devote much of their brief to overstated claims that some portion of the United States’ recommended statements are “highly controversial,” “inflammatory,” “confessional,” “vilifying,” “shameful,” and “humiliating,” and they assert that this violates the First Amendment and the D.C. Circuit’s 2009 decision in this case. Defs.’ Resp. at 5-13, 20-23 (R. 5881; filed 3/3/11). As shown below, Defendants mischaracterize several important aspects of First Amendment caselaw, and fail to acknowledge that the D.C. Circuit routinely enforces orders requiring employers to post notices stating, “The National Labor Relations Board has found that we violated Federal labor law and has ordered us to post and obey this notice,” see, e.g., Guardsmark, LLC, 344 N.L.R.B. 809, 814 (2005) (copy of full mandatory notice attached as Ex. 1, petition for review denied in relevant part, 475 F.3d 369, 380-81 (D.C. Cir. 2007).

Indeed, the United States’ relatively circumspect recommendations come nowhere near the reach of corrective statements that the D.C. Circuit has upheld. In Conair Corp. v. NLRB, 721 F.2d 1355, 1385-87 (D.C. Cir. 1983), the D.C. Circuit upheld an order requiring a corporate president to

1 Separately, Defendants assert that the Family Smoking Prevention and Tobacco Control Act moots the entire case. Defendants’ arguments about the FSPTCA will be addressed in the United States’ brief on that topic, due April 4, 2011.

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personally read such a statement out loud before a meeting of all employees.2 The United States’ far more circumspect recommendations in this case are well within First Amendment confines.

a. Compelled disclosures will be upheld so long as they are “reasonably related to the State’s interest of preventing deception of consumers”

Although there are circumstances in which compelled speech can violate the First Amendment, see, e.g., Wooley v. Maynard, 430 U.S. 705 (1977) (striking down mandatory “Live Free or Die” license plate), the Supreme Court has repeatedly stated that compelled disclosures are subject to less searching review than prohibitions on speech, particularly where the disclosures are a means to advance the government’s interest in avoiding consumer deception by commercial speakers. In the leading case, Zauderer v. Office of Disciplinary Counsel of the Supreme Ct. of Ohio, 471 U.S. 626 (1985), the Court struck down bar disciplinary rules that prohibited various forms of attorney advertising, but it upheld various mandatory disclosures in the same set of rules. The Court observed that a commercial actor’s “constitutionallyprotected interest in not providing anyparticular factual information in his advertising is minimal,” and that “warnings or disclaimers might be appropriately required in order to dissipate the possibility of consumer confusion or deception.” Id. at 651 (internal quotation marks, brackets, ellipses, and citation omitted). Thus, while “recogniz[ing] that unjustified or unduly burdensome disclosure requirements might offend the First Amendment by chilling protected commercial speech,” the Court held that “an advertiser’s rights are adequately protected as long as disclosure requirements are reasonably related to the State’s interest in

2 Then-Judge Scalia and Judge Wald were in the majority in affirming this requirement. The D.C. Circuit also affirmed an NLRB order requiring a corporate president personally to read out loud a statement beginning, “The National Labor Relations Board has found that we violated Federal labor law and has ordered us to post and obey this notice,” in United Food & Commercial Workers Int’l Union, AFL-CIO v. NLRB, 852 F.2d 1344, 1348-49 (D.C. Cir. 1988), aff’g Monfort of Colo., Inc., 284 N.LR.B. 1429, 1429-30, 1481 at ¶ 2(g) (1987) (copy attached as Ex. 2).

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preventing deception of consumers.” Id. (emphasis added); see also Nat’l Elec. Mfrs. Ass’n v. Sorrell, 272 F.3d 104, 114 (2d Cir. 2001).

Defendants insist that the recommended statements in this case would violate the First Amendment, because the United States has not proven that corrective statements that did not disclose their past fraud and deception would be less effective at restraining them from future fraud and deception. See, e.g., Defs.’ Resp. at 14-15. This argument, however, was explicitly rejected by the Supreme Court in Zauderer, where the Court declined to apply a ” “˜least restrictive means’ analysis” to disclosure requirements and stated that “we do not think it appropriate to strike down such requirements merely because other possible means by which the State might achieve its purposes can be hypothesized.” Id. at 651 n.14. 3 The Supreme Court recently reiterated that compelled commercial disclosures are subject to “less exacting scrutiny” than the intermediate scrutiny that applies to prohibitions on commercial speech under Central Hudson Gas & Electic Corp. v. Public Service Commission of New York, 447 U.S. 557, 572 (1980) (which requires that prohibitions be “no more extensive than is necessary to serve the state interest”). Milavetz, Gallop & Milavetz, P.A. v. United States, 559 U.S. ___, 130 S. Ct. 1324, 1339 (2010) (internal brackets, quotation marks and citations omitted).

The First Amendment requires only that there be a “reasonable relationship” between any given corrective statement and the Court’s goal of preventing future fraud and deception””not that the Court must choose the “least restrictive” or, as Defendants would seemingly render it, “the least embarrassing” corrective statement that might keep them from continuing to engage in fraud and

3 See also Full Value Advisors, LLC v. SEC, ___ F.3d ___, No. 10-1053, 2011 WL 339210, at *6 (D.C. Cir. Feb. 4, 2011) (quoting this passage of Zauderer and observing that the decision “reject[ed] the argument that disclosure requirements are subject to a “˜strict “least restrictive means” analysis’ “).

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deception. Despite Defendants’ objections, the First Amendment does not prohibit remedial orders that oblige defendants to acknowledge past misconduct; the NLRB routinely requires employers to post notices notifying all employees, “The National Labor Relations Board has found that we violated Federal labor law and has ordered us to post and obey this notice,” Guardsmark, 344 N.L.R.B. at 814 (copy attached as Ex. 1, and, if the order is enforced on appeal, to add specified language saying so, id. at 812 n.10.

b. The First Amendment does not protect Defendants from being compelled to disclose their own bad acts to the public

The bulk of Defendants’ brief is premised on the notion that “[t]he use of such compelled admissions of past wrongdoing to prevent future misstatements about a product is wholly unprecedented in American law and well outside the bounds of the First Amendment.” Defs.’ Resp. at 9. Defendants are simply wrong. In Warner-Lambert Co. v. FTC, 562 F.2d 749 (D.C. Cir. 1977), the D.C. Circuit affirmed a corrective statement remedy, but, as Defendants repeatedly point out, struck the introductory words, “[c]ontrary to prior advertising.” Id. at 763 (cited in Defs.’ Resp. at 4, 6-7, 8). In the same discussion, the D.C. Circuit indicated that the defendant may have acted in good faith, and held that a corrective statement acknowledging that past advertising was false “might be called for in an egregious case of deliberate deception,” even if the intent was merely to humiliate the defendant. Id.

This Court’s massive findings of fact, sustained on appeal, amply demonstrate that this is “an egregious case of deliberate deception.” As the Court found, “Defendants’ numerous misstatements and acts of concealment and deception were made intentionally and deliberately, rather than accidentally or negligently, as part of a multi-faceted, sophisticated scheme to defraud.” United

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States v. Philip Morris USA Inc., 449 F. Supp. 2d 1, 909 (D.D.C. 2006), aff’d in part & vacated in part, 566 F.3d 1095 (D.C. Cir. 2009) (per curiam), cert. denied, 561 U.S. ___, 130 S. Ct. 3501 (2010). The D.C. Circuit resoundingly affirmed these findings on appeal. Philip Morris USA, 566 F.3d at 1123-24. It is difficult to conceive of a more “egregious case of deliberate deception,” Warner-Lambert, 562 F.2d at 763, than the Court of Appeals upheld here.

A multitude of courts, including the Supreme Court and (contrary to Defendants) the D.C. Circuit, have ordered corrective statements specifically meant to alert the public to findings of past misconduct in order to reduce future misconduct. In a civil enforcement action discussed in Warner- Lambert, the Supreme Court upheld an order for a defendant newspaper to publish in its own pages, for 25 consecutive weeks, a notice that would “fairly and fully apprise” its readers of the court’s judgment, which found that the newspaper had engaged in “bold, relentless, and predatory commercial behavior,” and that “the purpose and intent of this procedure was to destroy the broadcasting company.” Lorain Journal Co. v. United States, 342 U.S. 143, 148, 149, 158 (1951).

Just last year, in provisions the D.C. circuit affirmed on petition for review, the FTC ordered the purveyor of unproven cancer remedies to send this letter, on its own letterhead, to its customers:

[To be printed on letterhead of Daniel Chapter One]

[Name and address of recipient] [Date]

Dear [Recipient]:

Our records show that you bought [names of products] from our website [name of website] or through a call center using our toll-free number. We are writing to tell you that the Federal Trade Commission (”FTC”) has found our advertising claims for these products to be deceptive because they were not substantiated by competent and reliable scientific evidence, and the FTC has issued an Order prohibiting us from making these claims in the future.

Daniel Chapter One, No. 9329, 2010 WL 387917, at *4, 2010 FTC Lexis 11, at *10-*11 (FTC Jan. 25, 2010) (full letter attached as Ex. 3), petition for review denied, No. 10-1064, 2010 WL 5108600,

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2010 U.S. App. LEXIS 25496 (D.C. Cir. Dec. 10, 2010) (unpublished). 4 Similar orders have been imposed in other FTC cases, upheld in every case in which they have been appealed.5

Injunctions orderingmandatorycustomer notifications of adverse determinations of fraud and deception have also been upheld in non-FTC cases. In United States v. Bell, 414 F.3d 474 (3d Cir.
2005), the court affirmed an order for a tax protestor to post on his website a court order holding that his tax advice was fraudulent, on grounds that mandatory disclosure would “give[] notice to readers that Bell’s tax advice is bogus and unlawful”; the court cited Zauderer, Lorain Journal, and other decisions in rejecting First Amendment compelled-speech arguments. Id. at 484-85; see also United States v. Schiff, 379 F.3d 621, 631 (9th Cir. 2004) (similar facts, analysis, and holding).

4 On petition for review, Daniel Chapter One argued that under the First Amendment, “the FTC should not be allowed to force DCO to deliver the government’s message with which it disagrees,” Petitioner’s Brief at 62, Daniel Chapter One, No. 10-1064, available at 2010 WL 5644693, and urged that “[t]he truth is that the FTC insists upon DCO sending the required letter because it wants DCO to pay the FTC homage””to “˜bow the knee,’ “ Petitioner’s Reply Brief at 30, No. 10-1064, available at 2010 WL 5647059. The D.C. Circuit rejected the compelled-speech argument by citing the Novartis decision. Daniel Chapter One, No. 10-1064, 2010 WL 5108600, at *2.

5 See, e.g., Brake Guard Prods., Inc., 125 F.T.C. 138, 265 (1998) (mandatory letter on defendant’s letterhead to customers:”The FederalTrade Commission hasdetermined thatthe following claims made for the Brake Guard device in Brake Guard Products, Inc.’s advertisements, logos and promotional material are FALSE and MISLEADING: (a) The Brake Guard is an antilock braking system; . . . (h) The Brake Guard will stop a vehicle in a shorter distance than a vehicle that is not equipped with the product in emergency stopping situations. The FTC order requires Brake Guard Products, Inc. to cease and desist from making these false claims for the Brake Guard device.”) (full text of mandatory letter attached as Ex. 4), aff’d sub nom. Jones v. FTC, 194 F.3d 1317 (9th Cir. 1999) (unpublished table decision). See also Auto.Breakthrough Scis.,Inc.,126 F.T.C.229,324 (1998)(mandatoryletter on Defendant’s letterhead to customers:”TheFederalTradeCommissionhasdeterminedthatthefollowingclaimsmadefortheA”¢B”¢S/Traxdevice . . . are FALSE and M ISLEADING”) (full text attached in Ex. 5); Removatron Int’l Corp. v. FTC, 884 F.2d 1489, 1500 & n.17 (1st Cir.1989) (denying petition for review from FTC order requiring manufacturer of hair-removal machine to mail all past purchasers and distributors a copy of FTC order finding the defendant’s advertising deceptive), denying petition for review from 111 F.T.C. 206, 319 (1988) (full text attached as Ex. 6); Sw. Sunsites, Inc., 105 F.T.C. 7, 189 (1985) (mandatory letter to customers stating that “the Commission concluded that respondents made unfair and deceptive claims about the benefits of purchasing their land as an investment or for use as a homesite, ranch, or farm. This letter is being sent as part of the Order issued when the lawsuit was decided.”) (full text attached in Ex.7), aff’d, 785 F.2d 1431, 1439 (9th Cir. 1986); AMREP Corp., 102 F.T.C. 1362, 1698 (1983) (”We are sending this letter to you under an order issued by the Federal Trade Commission”; requiring defendant to enclose copy of FTC order prohibiting defendant from engaging in misrepresentation) (full text attached in Ex. 8), aff’d, 768 F.2d 1171, 1180-81 (10th Cir. 1985).

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As already noted above, the National Labor Relations Board uses standardized language when issuing orders to remedy unfair labor practices by employers. It requires employers to post “remedial notices” that not only recite what workers’ rights are under the law””the equivalent in this case of reciting the truth about (for example) the addictiveness of nicotine””but also recite that the NLRB has determined that they violated the law. The form, used in numerous cases, begins thus:

NOTICE TO EMPLOYEES

POSTED BY ORDER OF THE NATIONAL LABOR RELATIONS BOARD

An Agency of the United States Government

The National Labor Relations Board has found that we violated Federal labor law and has ordered us to post and obey this notice.

Parkwood Dev. Ctr., 347 N.L.R.B. 974, 978 (2006) (same), petition for review denied, 521 F.3d 404 (D.C. Cir. 2008); Guardsmark, LLC, 344 N.L.R.B. 809, 814 (2005), petition for review denied in relevant part, 475 F.3d 369, 380-81 (D.C. Cir. 2007); Cintas Corp., 344 N.L.R.B. 943, 944 (2005) (same), petition for review denied, 482 F.3d 463 (D.C. Cir. 2007); Smithfield Packing Co., 344 N.L.R.B. 1, 17-18 (2004) (same), petitions for review denied sub nom. United Food & Commercial Workers Union Local 204 v. NLRB, 447 F.3d 821, 828 (D.C. Cir. 2006) (per curiam). The D.C. Circuit has repeatedly affirmed requirements for employers to post such notices to advise all affected that their past conduct and statements broke the law. The major dispute in the D.C. Circuit in this area of the law has concerned whether it is a “humiliation,” as then-Judge Ginsburg put it, to order a company president personally to read such a statement out loud (as she urged); or whether, in such exceptional circumstances, it was appropriate (as Judge Wald and then-Judge Scalia found). Conair Corp., 721 F.2d at 1385-87 (Wald, J., joined by Scalia, J.); cf. id. at 1401 (Ginsburg, J., dissenting in relevant part).

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c. Manufacturers and others are subject to numerous provisions requiring mandatory disclosure of adverse determinations against themselves

A host of statutory and regulatory provisions authorize manufacturers to be compelled to disclose adverse determinations about themselves and their products, further undercutting Defendants’ notion that compelled disclosures of such determinations are “wholly unprecedented in American law and well outside the bounds of the First Amendment.” Defs.’ Resp. at 9. In addition to the FTC and NLRB precedents discussed above, mandatory first-person disclosures of adverse determinations about past conduct include the following:

“¢ The National Traffic and Motor Vehicle Safety Act. If the National Highway Transit Safety Administration (NHTSA) determines that there is a safety defect in a manufacturer’s product, the manufacturer will be ordered to issue a recall notice, 49 U.S.C. § 30118(b)(2)(A), which must begin, e.g., “This notice is sent to you in accordance with the requirements of the National Traffic and Motor Vehicle Safety Act. The Administrator of the National Highway Transit Safety Administration has decided that a defect which relates to motor vehicle safety exists in (identified motor vehicles).” 49 C.F.R. § 577.6(b)(1), (b)(2)(i). Such notices must be distributed to owners and purchasers, and NHTSA can require the manufacturer to give public notice as well if it determines that “public notice is required for motor vehicle safety.” 49 U.S.C. § 30119(d)(1), (d)(2).

If the government prevails in litigation over a recall order, and no recall notice has been issued, the manufacturer must notify owners, purchasers, and dealers, in no uncertain terms:

The Administrator of the National Highway Traffic Safety Administration has decided that a defect which relates to motor vehicle safety exists in [identified motor vehicles], and his decision has been upheld in a proceeding in the Federal Courts.

49 C.F.R. § 577.6(c)(i) (incorporating other subsections by reference).

“¢ The Safe Drinking Water Act (SDWA). This statute requires water-system owners to mail annual Consumer Confidence Reports to all customers identifying “any regulated contaminant for which there has been a violation of the maximum contaminant level during the year concerned.” 42 U.S.C.A. § 300g”“3(c)(4)(B)(iii)(IV) (West Supp. 2010). The SDWA further requires the owners of water systems to notify their customers of “any failure . . . to””

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(i) comply with an applicable maximum contaminant level . . . or (ii) perform monitoring required by section 300j”“4(a) of this title.” § 300g”“3(c)(1)(A)(i),

(ii). When an owner fails to perform required safety testing or monitoring, it is required to notify customers of that fact, without mincing words: We are required to monitor your drinking water for specific contaminants on a regular basis. Results of regular monitoring are an indicator of whether or not your drinking water meets health standards. During [compliance period], we [did not monitor or test] or [did not complete all monitoring or testing] for [contaminant(s)], and therefore cannot be sure of the quality of your drinking water during that time.

40 C.F.R. § 141.205(d)(2).

“¢ The Consumer Financial Protection Act of 2010. This statute, enacted as part of last year’s financial-reform legislation, authorizes courts that find “a violation of Federal consumer financial law” to order “public notification regarding the violation, including the costs of notification.” Consumer Financial Protection Act of 2010, Pub. L. No. 111-203, tit. X, § 1055(a)(2) & (a)(2)(F), 124 Stat. 1376, 2030 (2010) (to be codified at 12 U.S.C. § 5565(a)(2) & (a)(2)(F)).6

These provisions, especially when considered with the FTC and NLRB remedial notices described above, demonstrate there is nothing new or controversial about mandatorycorrective statements that refer to a defendant’s past statements and conduct.

6 The provisions discussed in the body of this brief are all civil. There are also a range of criminal cases in which courts have ordered defendants to notify employers of their convictions as a term of supervised release. Another judge of this Court, in imposing a probation sentence on a woman who pled guilty to misdemeanor conspiracy to steal bank funds, rejected the defendant’s First Amendment arguments and ordered her to advise her employer of her conviction and probation, principally in order to deter possible future uttering, forgery,or theftbyfalse pretenses. United States v. Young, Cr. No. 98-850M-01 (JMF), 2000 WL 1210869, at *3 (D.D.C. May 24, 2000). Even in a genuine criminal case, compelled statements disclosing adverse determinations and the defendant’s past misconduct thus need not have a punitive purpose, much less “an exclusively punitive purpose,” Defs.’ Resp. at 25, but are imposed to prevent and restrain future violations.

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d. The only thing controversial about the United States’ recommended statements is that Defendants do not want to accept the truth

Defendants repeatedly describe the United States’ recommended statements as “controversial,” but support the assertion with little more than repetition. The D.C. Circuit has upheld ordering a specific named corporate executive to stand in front of mandatory employee meetings to read statements that begin, “After a hearing at which all sides had an opportunity to present evidence and state their positions, the National Labor Relations Board found that we have violated the National Labor Relations Act, as amended, and has ordered us to post this notice.” Conair Corp., 261 N.R.L.B. 1189, 1195, 1199, 1289 at ¶ 2(f) (1982) (copy attached as Ex. 9), petition for review denied in relevant part, 721 F.2d at 1385-87; see also Monfort of Colo., Inc., 284 N.LR.B. 1429, 1429-30, 1481 at ¶ 2(g) (1987) (copy attached as Ex. 2) (ordering corporate president to read out loud a statement beginning, “The National Labor Relations Board has found that we violated the National Labor Relations Act and has ordered us to post and abide by this notice,” to all employees at specified plant), aff’d sub nom. United Food & Commercial Workers Int’l Union, 852 F.2d 1344, 1348-49 (D.C. Cir. 1988). The United States’ recommended statements include no language such as, “A federal court has found that we violated federal laws against racketeering, racketeering conspiracy, mail fraud, and wire fraud, and the U.S. Court of Appeals upheld that finding”””truthful and noncontroversial though it would be””much less ask the Court to order specific named corporate executives to read such a statement out loud.

Nor is this the only way in which the United States’ recommended language is more protective of Defendants’ feelings than the NLRB statements read out loud in Conair and Monfort.

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To avoid unnecessary disputes about what might constitute “controversial” language, the United States softened Intervenors’ proposed language from 2006 in several regards.

Defendants’ objection to the first line of the recommended statement for Topic A (”A Federal court is requiring tobacco companies to tell the truth about cigarette smoking”) is its “unmistakable implication” that “in the absence of a court order, Defendants would not “˜tell the truth’ about smoking.” Defs.’ Resp. at 8-9. That is precisely what this Court found, 449 F. Supp. 2d at 911-13, and what the D.C. Circuit upheld on appeal, Philip Morris USA, 566 F.3d at 1131-34. The Defendants must, at some point, accept the Court’s findings.

Defendants next object that the recommended addiction and cigarette-design manipulation statements are “controversial” because they would oblige Defendants to disclose that cigarettes change smokers’ brains. 7 Defendants assert that the sentence, “When you smoke, the nicotine actually changes the brain””that’s why quitting is so hard,” is “controversial and inflammatory” because (according to Defendants) it “suggests that changes to the brain caused by nicotine prevent the smoker from quitting.” Defs.’ Resp. at 13 n.3. But the sentence itself states that quitting is “hard.” And in any event, the Defendants’ proposed addiction statements that tested best in the focus-group research, from Lorillard and Philip Morris, “significantly decreased intentions to quit smoking among current smokers by about 65% compared to current smokers who saw the control statement,” while the United States’ recommended statements for addiction and for design manipulation did not reduce current smokers’ intentions to quit. Blake Rep. ¶ 196 (emphasis added), ¶ 210 (R. 5875-1; publicly filed 3/24/11).

7 The Court found that “because the smoker’s brain has adapted to the constant presence of nicotine, it becomes dependent on nicotine to function normally. When a smoker doesn’t have nicotine, the brain functions abnormally and most people, approximately 80%, experience withdrawal symptoms.” 449 F. Supp. 2d at 210, ¶ 837.

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Defendants’ only real argument that the recommended statements are “controversial” is that in some cases they have not been found liable for fraud (or, in one case, for a private-party RICO violation that would have required an insurance company to prove that it was “injured in [its] business or property by reason of a violation,” 18 U.S.C. § 1964(c)). Defs.’ Resp. at 10-11. But the recommended statements make no generalizations about how often Defendants have been found liable for fraud. Defendants’ objection is that the recommended statements would oblige them to make truthful statements about their past false statements and fraudulent conduct. Although Defendants plainly do not want to admit (for example, as in the recommended light/low-tar statement) that they falsely marketed low tar and light cigarettes as less harmful””and that their reason for doing so was to keep people smoking and to sustain their profits””they make no claim that this and the other recommended statements are untrue. 8 That other courts did not find them liable for fraud (or in one case, for an insurer’s private-party RICO claim), without the benefit of the motions-practice and discovery in this case, on other claims, in no way makes it “controversial” to say (for example) that “[a] Federal court is requiring tobacco companies to tell the truth about cigarette smoking” (as in the recommended health-effects statement) or that “[w]e told Congress under oath that we believed nicotine is not addictive” (as in the recommended addiction statement). These are simple declarative statements of fact that arise from this Court’s findings, which Defendants present no reason to question. As to these facts, there is no controversy.

8 On one topic, cigarette-design manipulation, Defendants do state that they “respectfully but vigorously disagree” with the Court’s findings of fact. Defs.’ Resp. at 20. A defendant’s disagreement with a court’s findings of fact cannot possibly make a corrective statement unconstitutionally “controversial.”

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2. THE UNITED STATES’ RECOMMENDED STATEMENTS ARE REASONABLY RELATED TO THE STATE’S INTEREST PREVENTING AND RESTRAINING FRAUD

Defendants insinuate that corrective statements that are contrary to their view of themselves may be ordered only if they are determined to be better geared toward preventing and restraining them from engaging in future fraud than the statements that they like better. Defs.’ Resp. at 13-17. As discussed above, Defendants’ premise is mistaken; all that the Supreme Court requires is a reasonable relationship between a corrective statement and the state interest that it advances. Zauderer, 471 U.S. at 651. And the government has recommended the statements that did the best job of communicating the truthful and non-controversial information that this Court and the D.C. Circuit found necessary to restrain future RICO violations. These truthful messages do not vilify or personally attack the Defendants, and do not use extreme language or exaggerate Defendants’ behavior. The United States did not select statements on the basis of invidious effects, but based upon such criteria as how clearly they communicated the Court’s desired information about each topic area (which the Court set out at 449 F. Supp. 2d at 928), how well they caught attention, and how much they would impact respondents, Blake Rep. ¶ 91 (describing focus-group global-ranking criteria), and attention, potential for public impact, and credibility, id. ¶ 168 (describing quantitative survey global-ranking criteria). The United States chose those truthful, non-controversial messages that were best at communicating clearly and memorably the facts Defendants have previously denied.

The United States’ recommendations are supported by the United States’ extensive research. The qualitative phase of that research had eight focus groups evaluate six possible statements for each topic: Every single Defendant’s proposed corrective statements, on every single topic, from 2006; modified forms of the statements the Intervenors proposed in 2006; and a set of statements

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prepared by National Cancer Institute in conjunction with a marketing agency.9 The transcripts from all eight focus groups are provided as Exhibits 11-18.

The quantitative phase of the United States’ research gathered survey data from 3,617 respondents on the four best-performing statements on each topic from the focus groups. For all five topics, the modified Intervenors’ statements and the NCI statements finished first or second on the global ranking scales in the quantitative research, Blake Rep. Figures V17″“V21, and the United States recommended either the modified Intervenors’ statements or the NCI statement for the first four topics. Defendants protest all four of those recommendations; for the fifth topic, where the United States’ recommended statement, from R.J. Reynolds, finished third on this measure, Defendants have no objection.10

Defendants’ scattershot challenges to the United States’ research do not withstand scrutiny.

1. First, Defendants claim that the Government’s own report shows that introductory statements are marginally effective. Defs.’ Resp. at 14 (citing Blake Rep. ¶¶ 217-18). This is not so; the cited paragraphs report that over 80% of respondents reported that the best-performing introductory statement (Introduction 2, which is the same as the first line of the United States’ recommended statement for Topic A) would grab their attention, and two-thirds reported that it

9 Noting that qualitative research is exploratory in nature and not intended to be quantifiable or “projectable” to a stated population, Blake Rep. ¶ 93, it is noteworthy that the United States’ recommended statements on Topics A”“D each performed best or second-best in the focus-groups’ evaluations; the only recommended statement that did not receive top evaluations from the focus groups is the one for Topic E, secondhand smoke, where the United States is recommending the R.J. Reynolds proposal, because the better-performing statements were associated with higher reports of smoking cravings among current and former smokers than when compared to control.

10 The only recommendation that Defendants do not protest is Topic E, secondhand smoke, where the modified Intervenors’ statement and the NCI statement both out-performed the R.J. Reynolds statement, but the United States has recommended the R.J. Reynolds statement because the top two-ranking statements were positively associated with triggering smoking urges in current and former smokers, when compared to current and former smokers who saw the control condition. Blake Rep. ¶ 231.

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would make them trust the information that followed. Blake Rep. ¶ 217 & Fig. V23. Defendants further ignore that, in separate testing of introductory statements, this introductory statement performed best. Id. ¶ 234. The purpose of this and other introductory statements is not to “denigrate,” but to grab the reader’s attention, and increase reader trust in the following message.

2. Taking a few snippets of the Blake Report completely out of context, Defendants assert that the United States’ recommendations are based on behavioral intentions. Defs.’ Resp. at 15 (citing Blake Rep. ¶¶ 11, 226-28). But as these paragraphs show, performance on intentions (such as intentions to stay quit among former smokers) were not the primary findings upon which a single recommendation was based. Where tested statements resulted in significant associations with respondents’ intentions to quit, stay quit, or not begin smoking, the Blake report disclosed those results, but as the text itself makes clear, those measures did not play a primary role in forming the United States’ recommendations.

3. Without acknowledging the United States’ considerable research to test every single proposed corrective statement made by every single Defendant in 2006 on every single topic, Defendants criticize the United States for failing additionally to evaluate the text statements””but not accompanying graphic images””that will be part of the new Congressionally-mandated public- health warnings required under the FSPTCA. Defs.’ Resp. at 15-16. The criticism is misplaced. The government’s proposed corrective statements are not meant to be a general public health warning, but instead are tailored to these specific Defendants and their specific frauds. As the D.C. Circuit observed, Defendants will be less likely to continue making false and misleading statements if they are required to communicate opposite, truthful messages to consumers on the specific matters that were the object of their conspiracy. Philip Morris USA, 566 F.3d at 1140. As explained

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throughout this brief, and as supported by the Blake Report, the United States’ recommended statements manifestly accomplish that goal and easily meet the required standard of being “reasonably related to the State’s interest in preventing deception of consumers.” Zauderer, 471 U.S. at 651. While Defendants in this case seek to hide behind the warning labels in the FSPTCA, several of them are litigating to have the new public-health warnings struck down, including on grounds that they are allegedly not “purely factual and uncontroversial” under Zauderer, Commonwealth Brands, Inc. v. United States, 678 F. Supp. 2d 512, 530 (W.D. Ky. 2010), appeals filed sub nom. Discount Tobacco City & Lottery v. United States, Nos. 10-5234 & 10-5235 (6th Cir. docketed Mar. 9, 2010). Finally, as their brief demonstrates, Defendants continue to contend that manyof this Court’s specific findings of fact regarding their conspiracyremain matters of substantial controversy and constitute an unfair attack on their reputations.

4. In cherry-picking some individual data points from the Blake Report, Defendants suggest that that Philip Morris’s proposed Low Tar and Addiction statements performed better than the statements the United States is recommending. Defs.’ Resp. at 16-17. This is simply not the case. Philip Morris’s Addiction statement (Topic B) significantly decreased intentions to quit smoking among current smokers, compared to current smokers who saw the control statement. Blake Rep. ¶ 196. Moreover, this statement was not among the top two statements in the global rankings, nor did it perform statistically better than control on increasing accurate knowledge or attention. The Philip Morris Low Tar statement (Topic C) was not among the top two statements in either the global rankings or in the qualitative phase rankings, and did thus not performing “better” in all areas, as the Defendants suggest. In fact, the United States’ recommended Low Tar statement (modified from the Intervenors) received the top global ranking and qualitative phase ranking, and it was

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significantly more likely to increase accurate knowledge among current smokers and low income populations. Blake Rep. ¶ 198 & Fig.V19.

5. Defendants’ final challenge to the United States’ research is their claim that the recommended statements are “pervaded” by a “backward-looking perspective,” Defs.’ Resp. at 24, because they refer to past falsehoods and therefore, according to Defendants, cannot reduce future fraud. This is contrary to the D.C. Circuit, which held that “[r]equiring Defendants to reveal the previously hidden truth about their products will prevent and restrain them from disseminating false and misleading statements, thereby violating RICO, in the future.” Philip Morris USA, 566 F.3d at
1140.11 In any event, the D.C. Circuit left open that a permissible purpose is to remedy the effects of past fraud and deception, and did not disturb this Court’s finding that corrective statements would do so. Philip Morris USA, 566 F.3d at 1140.

11 At the same time that Defendants complain that the corrective statements refer to past conduct, they simultaneously protest the recommended design-manipulation statement’s use of the present tense in this sentence: “We control nicotine delivery to create and sustain smokers’ addiction, because that’s how we keep customers coming back.” Defendants’ objection is that under the new Family Smoking Prevention and Tobacco Control Act, they are prohibited “from presently engaging in the conduct alleged.” Defs.’ Resp. at 20. (The objection would be more persuasive if Defendants showed that they had changed the design of their cigarettes since the FSPTCA was enacted in June 2009; or at any rate, that they did so at some point after trial concluded in June 2005. In any event, they do not ask the Court to find changed circumstances regarding either the design of their cigarettes, or why they design their cigarettes as they do.)

Defendants similarly claim that, because the FSPTCA now prohibits them from selling cigarettes with low-tar descriptors, there is no possible fraud to be prevented and restrained by the light/low-tar corrective statement. Defs.’ Resp. at 24. However, as will be developed more fully in the government’s brief on April 4, the fact that some other law may also make Defendants’ conduct unlawful does not obviate the need for this injunction. As this Court has already found, Defendants conspired to violate other laws and the Master Settlement Agreement. For now, it is sufficient to note that Defendants almost uniformly continue to market the “light” and “low-tar” cigarettes that were a central subject of this litigation, minus the low-tar descriptors, and appear to have preserved the visual appearance of the packs; see, e.g., Philip Morris’s marketing materials telling Marlboro Lights consumers to “ask for Marlboro Gold.” Ex. 10. Corrective statements disseminated by Defendants saying that these cigarettes are no less harmful would do much to inoculate consumers against future fraud by Defendants relating to these varieties.

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a. The United States’ research thoroughly supports the portions of the recommended statements to which Defendants take exception The focus-group transcripts are attached as Exhibits [[__-___]], and provide further qualitative support for the quantitative results described in the Blake Report.

i.

Topic B ““ Addiction

Focus group participants said that the government’s proposed addiction statement was “just so much easier to read and understand” than the other statements,” (Balt 3, 31), and communicated information about addiction and smoking better than any other “[b]ecause it’s the same tobacco company who’s informing us that what they told us before was a lie. . . . They are, as a person, telling you, this is the truth.” (Orl 1, 38) Another participant added that this message communicated best “because it was a Federal Court order that asked them to say this.” Id. When the moderator of another focus group asked participants who also picked this statement as communicating best whether it was a clear winner, or if it was a close call, focus-group members responded thus:

To me it’s a clear winner.

Especially when it mentions your brain-

If you’re talking the first sentence, it’s finally puts it out there that it is an addiction.

Why did you say that B5 does the best job of communicating the addictiveness of smoking and nicotine? Why does that one do the best job?

I like where it says we manipulated you.

You like that? I see heads nodding.

It’s telling you that they lied to you and now it’s telling you the truth.

(Balt 1, 9-10).

ii.

Topic C ““ Light/Low-tar

A number of participants said the recommended light/low-tar statement communicated better than others because it was “done by the cigarette company itself” (Orl 1, 32), and that it would make them less likely to believe a future contrary statement””in other words, it would help innoculate

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them against future frauds”””because it’s [Defendants] themselves who are saying this,” and added “it’s good because they are telling the truth” in this statement. Id. Other participants said the statement communicated best because it grabbed attention: “The fact that it says we [Defendants] falsely marketed, low tar and low [sic] cigarettes, makes you want to look at it.” (Balt 3, 24)

In explaining whythis statement communicated better than others, one participant explained,

“I was one of those people that switched to light. I don’t smoke now, for the last year and a half but it ticks me off that they did lie. So this is making them admit, you know, that they did lie so, I think this stands out.” (Balt 2, 9) Two more participants explained that they chose this as the best- communicating light and low-tar statement because “They’re forced to tell you the truth” and “[t]he fact that it says we falsely marketed, low tar and low [sic] cigarettes, makes you want to look at it.”

(Balt 3, 24) Respondents in a third focus-group that picked this statement as communicating best explained their choices this way:

Because in this paper, this has been done under order by the District Court, done by the cigarette company itself and in it they are saying “we falsely market these cigarettes.” Just with that they are telling us, it’s all a scam. There’s no difference at all. When they say light, medium, low, it’s all the same with a different package. That’s what they’re saying in a few words. It’s coming from their own mouth.

And that’s something good or bad?

It’s good.

It’s good because they are telling the truth.

When they do marketing they get to say lies, here they have to tell the truth by federal order.

And if after listening to that message, C-5, you’d hear another message saying the opposite, would you probably believe the opposite message?

No.

No, because it’s themselves who are saying this.

They are the ones doing business and they are admitting to have lied.

(Orl 1, 32)

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iii. Topic D ““ Manipulation

Participants described the government’s proposal as communicating better than any other, saying it was “clear, straight to the point, no wasting time, no extra wording. This is like this, this is like this, and that’s it.” (Orl 1, 26-27) Participants said the statement communicated the main point of this topic, that the products are “designed to make you addicted (Balt 3, 37), that “[c]igarettes are basically made to addict people,” (Orl 3, 27-28) and that “they know that they’re addicting people” (Orl 3, 27-28). The recommended statement conveyed meaningful and new information; one respondent, when asked whether the statement taught anything new, answered, “Well, for years, I mean you know, I’ve been told, you know you’ve got to have will power to stop smoking. Well, you know now it kind of tells me that it wasn’t just that I had to have will power, that it was, I was actually being addicted to the stuff and they were purposely addicting you.” (Balt 2, 46-50)

3. THECOURT’SFACTUALFINDINGSAMPLYSUPPORTTHE UNITED STATES’RECOMMENDED STATEMENTS

Defendants assert factual challenges to three of the United States’ recommended statements. These challenges are entirely without merit, and the second and third refuse to acknowledge this Court’s factual findings.

a. Topic A: Defendants dispute daily death toll of smoking as an approximation

In the United States’ recommended statement for the health effects of smoking, Defendants claim that the final line (”Smoking kills 1,200 Americans. Every day.”) is “inaccurate,” because it is “based on a rough estimate of the number of Americans who die each year from smoking-related illnesses, not each day.” Defs.’ Resp. at 18. But Defendants do not challenge the math, which is

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based on the Court’s findings of fact. 449 F. Supp. 2d at 146, ¶ 510. Defendants’ likely true objection is not that a daily mortality figure is more “emotion[al]” than an annual mortality figure, Defs.’ Resp. at 18, but that it is more meaningful and comprehensible.

b. Topics B and D: Defendants dispute manipulating cigarette design to make cigarettes more addictive

Defendants protest that the recommended addiction statement refers to their Congressional testimony, on grounds that the Court found that their testimony during the 1994 Waxman Hearings (and one letter to Representative Waxman) were constitutionally protected and thus, legally, could not be the basis of RICO predicate acts. Defs.’ Resp. at 18 (citing 449 F. Supp. 2d at 272-73, 887; Defendants do not refer to the Court’s much more detailed discussion of the Waxman Hearings at 374-80).12 But the Waxman Hearings were hardly the only time that Defendants told Congress under oath that they believed cigarettes, smoking, and nicotine were not addictive, and the Court found other such denials of addiction in Congressional testimony to be “misleading and . . . contradicted by decades of scientific research conducted by or funded by Defendants.” 449 F. Supp. 2d at 286, ¶ 1245 (referencing such non-Waxman Hearing Congressional testimony as discussed in findings of fact at 274, ¶ 1166; 281, ¶¶ 1208-09; 281-82, ¶ 1212; 282, ¶¶ 1215-16; 283, ¶ 1224; 284-85, ¶ 1231; 286, ¶¶ 1243-44); see also id. at 280, ¶ 1201 (finding of fact concerning Lorillard letter to Senators Kennedy and Hatch denying addiction). Moreover, the Court found that Defendants’ fraudulent and deceptive public denials of addiction frequentlydrew attention to and publicized their

12 It is somewhat ironic that Defendants now imply that a corrective statement can mention a past statement only if it was found to be fraudulent, given their vehement argument on appeal that RICO prohibits corrective statements from seeking to correct fraudulent past statements. Philip Morris USA, 566 F.3d at 1139. (The D.C. Circuit found that the corrective-statement remedy will prevent and restrain fraud, and thus it did not need to decide whether RICO would authorize a corrective-statement remedy solely to correct past misrepresentations. Id. at 1140.)

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Congressional denials of addiction. As one particularly noteworthy example, on March 27, 1994, Brennan Dawson, Tobacco Institute senior vice-president of public affairs, stated on “Face the Nation” that “[t]he industry does take the position that . . . not only do they not add nicotine, but they don’t manipulate nicotine. So Congress has been told formally by every cigarette manufacturer in the United States that this claim is without foundation.” 449 F. Supp. 2d at 381, ¶ 1743. In its Conclusions of Law, the Court highlighted this as a specific instance of Defendants’ “false statements . . . further[ing] their common efforts to deceive the public regarding their control and manipulation of nicotine.” Id. at 859. Defendants repeatedly publicized their Congressional denials of addiction, and there is every reason for the Court to order Defendants to remind the public of the past testimony that they themselves repeatedly, and fraudulently and deceptively, publicized.13

Defendants’ further objections to the recommended statement for addiction are similar to their objections to the recommended statement for Topic D, design manipulation. Defendants assert that it is “misleading” for the Topic B statement to say that they “manipulated cigarettes to make them more addictive,” and for the Topic D statement to say that they “control nicotine delivery to create and sustain smokers’ addiction,” because those phrases “inaccurately suggest[] that

13 For additional findings of fact that Defendants used their Congressional denials of addiction as part of and to support their fraudulent public denials of addiction, see 449 F. Supp. 2d at 281, ¶¶ 1210-11 (March 1982 TI press release summarizing Congressional testimony of industry-paid scientist Theodore Blau’s denying smoking is addictive, but “fail[ing] to state that Blau was paid by the cigarette company Defendants to testify”); at 282, ¶ 1213 (April 1982 TI newsletter quoting Blau’s denying addiction before Congress, “in an article titled “˜Smoking Said Not Addictive’ “); at 282, ¶ 1214 (TI ” “˜drill[ing]’ the media with the industry message that cited “˜substantial refutation of the addiction claim,’ including the 1982 testimony of Blau. Once again, the Tobacco Institute press release failed to reveal that Blau was an industry paid spokesman for the Tobacco Institute and its members.”); at 282, ¶ 1218 (TI press release citing Blau’s denial of addiction in a 1983 Congressional hearing, without “tell[ing] the general public that Blau had testified on behalf of the tobacco industry and the Tobacco Institute”); at 283, ¶ 1225 (TI press release citing denials of addiction Congressional testimony given by Blau and another industry-paid scientist in 1988, once again without “indicat[ing] in any way that Raffle and Blau were industry selected, managed, and paid consultants to Defendants and their law firms [or] that their statements to the House subcommittee had been reviewed by Covington & Burling lawyers and several Defendants prior to being delivered to Congress.”); at 283-84, ¶ 1231 (same, for 1990 Blau testimony).

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Defendants spike cigarettes to make them more addictive.” Defs.’ Resp. at 18-20. But the statements that Defendants “manipulated cigarettes to make them more addictive” and that they “control nicotine delivery to create and sustain smokers’ addiction” say nothing about adding exogenous nicotine to cigarettes. They are instead based on the Court’s finding of fact that “Defendants have designed their cigarettes to precisely control nicotine delivery levels and provide doses of nicotine sufficient to create and sustain addiction.” 449 F. Supp. 2d at 309, ¶ 1366. As the D.C. Circuit observed on appeal, “Defendants’ false statements” included, among other topics, “whether Defendants manipulated their cigarettes to control nicotine delivery.” United States v. Philip Morris USA Inc., 566 F.3d 1095, 1122 (D.C. Cir. 2009) (per curiam), cert. denied, 561 U.S. ___, 130 S. Ct. 3501 (2010). Defendants go so far as to make the amazing claim that the “only” sense in which they manipulate nicotine is to reduce it. Defs.’ Resp. at 19. Defendants thus reject such findings of fact””not challenged on appeal””as the Court’s determination that Defendants “have incorporated design techniques . . . to raise the pH of the smoke in their commercial products with the purpose and intent of creating cigarettes that would deliver a greater amount of free nicotine and faster absorption of nicotine than cigarettes with lower smoke pH.” 449 F. Supp. 2d at 356, ¶ 1613 (emphasis added). There is ample factual support for corrective statements that will (to borrow Defendants’ words at the start of trial) “communicate [to] the American public,” Tr. at 210:20-24 (9/22/04), the stark truth that Defendants “manipulated cigarettes to make them more addictive” and “control nicotine delivery to create and sustain smokers’ addiction.”14

14 For further findings of fact supporting the recommended addiction and cigarette-design manipulation statements, see 449 F. Supp. 2d at, e.g., 310, ¶ 1373 (”Defendants’ internal documents demonstrate that, based on their knowledge of nicotine’s pharmacological properties and addictive nature, [Defendants] incorporated physical and chemical design techniques into their commercial products that would assure delivery of the precise levels of nicotine necessary to assure taste, impact, and satisfaction, i.e., to maintain addiction.”); at 323, ¶ 1442 (RJR document stating,

(continued…)

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Defendants further challenge the portion of the recommended statement for Topic D that states that “[c]igarettes are a finely-tuned nicotine delivery device designed to addict people,” on grounds that cigarettes are not “devices.” Defs.’ Resp. at 19. Defendants base this claim on the Supreme Court’s holding that cigarettes are not “restricted devices” under the Federal Food, Drug, and Cosmetic Act (FDCA). FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 129 (2000) (citing 21 U.S.C. § 360j(e)). That legal holding has nothing to do with this Court’s factual finding, not challenged on appeal, that “for decades Defendants knew and internally acknowledged that nicotine is an addictive drug, that cigarettes are a nicotine delivery device, and that addiction can be enhanced and perpetuated through manipulating both the amount of nicotine and the method of nicotine delivery.” 449 F. Supp. 2d at 218, ¶ 882. An abundance of factual findings support the statement that “[c]igarettes are a finely-tuned nicotine delivery device designed to addict people.”

CONCLUSION

Contrary to the Court’s order, Defendants failed to propose schedules for any additional briefing. Their response brief makes only minor challenges to small portions of the Blake Report, and does not show any need for discovery or evidentiary hearings. For the reasons addressed above, the United States respectfully urges the Court to adopt its recommend corrective statements.

14 (…continued)

“We are basically in the nicotine business. . . . Effective control of nicotine in our products should equate to a significant product performance and cost advantage.”); at 355-56, ¶ 1609 (”Defendants have added ammonia compounds in order to enhance consumer use of cigarettes by: (1) increasing the amount of nicotine that is transferred from the tobacco to the smoke; (2) improving the sensory response to nicotine in the mouth and oral mucosa; and (3) increasing the speed of delivery of nicotine to the bloodstream and possibly to the brain.”) (emphasis added); at 334, ¶ 1493 (”[E]ach Defendant also understood that its market position, as well as the financial viability of the tobacco industry as a whole, required the development of cigarettes that provide nicotine in amounts sufficient to ensure that smokers become and remain addicted. Accordingly, each Defendant took steps, over a sustained period of time, to develop such cigarettes.”); at 859 (”Defendants have designed their cigarettes with a central overriding objective””to ensure that smokers obtain enough nicotine to create and sustain addiction. Nevertheless, Defendants have publicly and fraudulently denied that they manipulate nicotine delivery.”).

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Dated: March 16, 2011 Respectfully submitted,

Washington, D.C.

TONY WEST

Assistant Attorney General

MAAME EWUSI-MENSAH FRIMPONG

Acting Deputy Assistant Attorney General

EUGENE M. THIROLF, Director

Office of Consumer Litigation

___/s/_____________________________

DANIEL K. CRANE-HIRSCH

JAMES NELSON

Trial Attorneys

Office of Consumer Litigation, Civil Division

United States Department of Justice

PO Box 386

Washington, DC 20004-0386

Telephone: 202-616-8242 (Crane-Hirsch)

202-616-2376 (Nelson)

Facsimile: 202-514-8742

E-mail address: daniel.crane-hirsch@usdoj…

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UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

UNITED STATES OF AMERICA,

Plaintiff,

v.

PHILIP MORRIS USA INC.,

f/k/a PHILIP MORRIS INC., et al.,

Defendants.

Civil No. 99-CV-02496 (GK)

Next scheduled court appearance: None

________________________________________

EXHIBITS IN SUPPORT OF THE UNITED STATES’ REPLY TO DEFENDANTS’ AND INTERVENORS’ RESPONSES TO THE UNITED STATES’ SUBMISSION OF PROPOSED CORRECTIVE STATEMENTS AND EXPERT REPORT

Exhibit Description

1 Guardsmark, LLC, 344 N.L.R.B. 809, 814 (2005)

2 Monfort of Colorado, Inc., 284 N.LR.B. 1429, 1429-30, 1481 (1987)

3 Daniel Chapter One, No. 9329, 2010 WL 387917, at *4, 2010 FTC Lexis 11, at *10-*11 (FTC Jan. 25, 2010)

4 Brake Guard Products., Inc., 125 F.T.C. 138, 265 (1998)

5 Automotive Breakthrough Sciences., Inc., 126 F.T.C. 229, 324 (1998)

6 Removatron Int’l Corporation, 111 F.T.C. 206, 319 1(1988)

7 Southwest Sunsites, Inc., 105 F.T.C. 7, 189 (1985)

8 AMREP Corporation, 102 F.T.C. 1362, 1698 (1983)

9 Conair Corporation, 261 N.R.L.B. 1189, 1195, 1199, 1289 at ¶ 2(f) (1982)

10 Marlboro Light Advertisement

11 Transcript of Focus group 1: 01 111810 BALT Group 1

12 Transcript of Focus group 1: 01 120110 ORL Group 1

13 Transcript of Focus group 2: 02 111810 BALT Group 2

Case 1:99-cv-02496-GK Document 5891 Filed 03/16/11 Page 30 of 30

14 Transcript of Focus group 2: 02 120110 ORL Group 2

15 Transcript of Focus group 3: 03 111910 BALT Group 3

16 Transcript of Focus group 3: 03 120210 ORL Group 3

17 Transcript of Focus group 4: 04 111910 BALT Group 4

18 Transcript of Focus group 4: 04 120210 ORL Group 4

ii

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