STATE OF MINNESOTA AND BLUE CROSS AND BLUE SHIELD OF MINNESOTA,
PLAINTIFFS,
V.
PHILIP MORRIS, INC., ET. AL.,
DEFENDANTS.
TOPIC: TRIAL TRANSCRIPT
TRANSCRIPT OF PROCEEDINGS
DOCKET-NUMBER: C1-94-8565
VENUE: Minnesota District Court, Second Judicial District, Ramsey County.
YEAR: March 23, 1998
A.M. Session
JUDGE: Hon. Judge Kenneth J. Fitzpatrick, Chief Judge
THE CLERK: All rise. Ramsey County District Court is again in session, the Honorable Kenneth J. Fitzpatrick presiding.
(Jury enters the courtroom.)
THE CLERK: Please be seated.
THE COURT: Good morning.
(Collective "Good morning.")
THE COURT: Counsel.
MR. BLEAKLEY: Thank you, Your Honor.
ADAM B. JAFFE called as a witness, being previously sworn, was
examined and testified as follows:
BY MR. BLEAKLEY:
Q. Good morning, Professor Jaffe.
A. Good morning, Mr. Bleakley.
MR. BLEAKLEY: Good morning, ladies and gentlemen.
(Collective "Good morning.")
Q. When we broke on Friday, I was asking you some questions about
the first prong, as you call it, of -- of the conspiracy that you believe
there existed with respect to fundamental competition, and that was the
prong dealing with in-house animal research. Do you recall that?
A. Yes.
Q. Now is my understanding correct that it is your opinion that
this prong of the conspiracy prevented confirmation of the causation hypothesis?
Is that one of the -- one of the explanations that you gave?
A. I don't know if I used the word "prevention." I think what
I -- what I said was that it avoided a situation in which there would be
confirmation of the causation hypothesis coming out of the laboratories
of the companies themselves.
Q. Okay. And it permitted the defendants to "avoid," I think
the term you used was, very large research expenditures and efforts?
A. Yes.
Q. Okay. And it is your opinion that this prong of the conspiracy
did this despite the fact that the defendants did do animal research through
contracts with outside research laboratories; right?
A. Yes.
Q. And despite the fact that defendants, at least on some occasions,
cheated and actually did in-house animal research.
A. Yes.
Q. And I take it your view on this is also held despite the fact
that there was animal research being done by organizations other than the
defendants throughout this period of time; right?
A. Yes. As I explained in my testimony, I think that the defendants'
own documents made clear that they thought it was important that smokers
be reassured and that that would be undermined if confirmation causation
came from the laboratories of tobacco companies themselves.
*2 Q. But there was in fact animal research being done throughout this
period of time by researchers other than the defendants, too; wasn't there?
A. That's correct.
Q. Such as Dr. Wynder, for example.
A. Yes.
Q. And the National Cancer Institute.
A. Yes.
Q. And other organizations.
By the way, it's not unusual for American corporations, American
business corporations, to have contract done -- or research done by contract
with outside research laboratories; is it?
A. In general American corporations do use contract research;
although, as I discussed the other day, when it comes to research that
is crucial for product development, it is much more common for it to be
done internally. And both the economic and management literature on this
subject and the company documents explain why that's the case.
Q. And in fact, there are many very fine independent research
organizations in the United States; aren't there?
A. There are fine research organizations in the United States.
But as we saw, for example, in the American Tobacco document, the scientists
at American Tobacco felt very strongly that they were going to get research
that was of the kind that they needed with the security that they needed
if they did it in house. Then they were very unhappy with the way they
had gotten that kind of research both from academic researchers at the
Medical College of Virginia, and also from independent consultants that
they'd used.
Q. For example, the Arthur D. Little Company in Boston is a very
fine independent research organization; isn't it?
A. As far as I know, yes.
Q. And the Battelle Memorial Institute, that's another very fine
independent research organization; isn't it?
A. I don't have any knowledge of that.
Q. Well you've heard of the Rand Development Corporation; haven't
you?
A. Excuse me?
Q. Rand Development Corporation.
A. There is --
If that's the Rand Corporation in Santa Monica, I've heard of
them.
Q. And that's a very fine independent research organization;
isn't it?
A. The Rand Corporation that I know of in Santa Monica doesn't
do biological research. Maybe we're thinking of different organizations.
Q. Rand Development Corporation.
A. If it's not the one that I know of in Santa Monica, then I
don't know the organization that you're referring to.
Q. In any event, you do know that there are many fine independent
research organizations in the United States.
MR. GILL: Repetitious, Your Honor.
THE COURT: It's been asked and answered.
BY MR. BLEAKLEY:
Q. And you also know, do you not, that many American business
corporations often use independent research organizations to help them
in product development; don't they?
MR. GILL: This has been asked and answered as well, Your Honor.
THE COURT: It's been asked and answered.
MR. BLEAKLEY: Your Honor, I did not ask about product development
before, I asked about general research.
THE COURT: All right. You can answer it.
*3 A. Yes, I believe to a certain extent companies do use outside
research to assist them in product development.
Q. And indeed, many good ideas, many new products, many innovations
have been produced at least in part through the efforts of independent
research organizations; haven't they?
MR. GILL: Objection, vague, Your Honor.
THE COURT: You can answer it if you know.
A. Well in general, as I talked about earlier, companies do not
rely on outside researchers exclusively for product development. It is
certainly the case that in situations where a company is engaged in product
development in its own laboratories, that where there are particular aspects
of that research that they feel they can more effectively undertake through
a contract with an outside party, they will -- they will do that. But what's
relevant for what we're talking about here is a situation in which the
fundamental core of the product development research is not going on, and
I don't think in general that you would very often observe private companies
relying essentially entirely on outside research for product development.
Q. Not entirely, but to a substantial degree.
A. Well I don't think I would even necessarily agree with "to
a substantial degree." And if the basic core of the research program is
something that they cannot undertake in-house so that they don't have even
the capability within their own scientists to understand what's going on
with the research, to understand its implications and to evaluate it, I
don't think most companies in America would feel that that was a good position
to be in with respect to product development.
Q. In fact, one of the promising ideas that was being explored
by one of the defendants in this very case was substantially the result
of work being done by that company with an outside research laboratory;
wasn't it? The XA project at least?
A. Yes, it's true that the palladium catalyst with the nitrate
palladium process was developed largely through the efforts of A. D. Little
in Boston, correct.
Q. Arthur D. Little in Boston, which is a very fine, highly reputable
research organization; isn't it?
MR. GILL: It's been asked and answered, Your Honor.
THE COURT: You can answer it again.
A. I -- I already said it was.
Q. Professor Jaffe, can you honestly say that the fact that the
defendants used contract annual research instead of in-house research exclusively
was of sufficiently low quality that it prevented confirmation of the causation
hypothesis?
A. I don't think I said that the primary reason --
First of all, I didn't say it prevented confirmation of the causation
hypothesis, and second of all, I didn't say it was because of the low quality.
What I said was that the almost exclusive avoidance of in-house animal
research avoided a situation or substantially avoided a situation in which
confirmation of the causality hypothesis came from the labs of the tobacco
companies and that the companies themselves believed that that was important.
*4 Q. And can you honestly say, Professor Jaffe, that the fact
that the defendants used some contract animal research permitted them to
avoid very large research costs?
A. Well the only information I have about the magnitude of the
research costs is the information you talked about that came from the interrogatories,
and I would certainly say that the amount of money that they spent based
on those interrogatories looked at in the context of the problem they faced
in the size of the industry, they did avoid very large research costs,
yes.
Q. Is it your testimony that the defendants spent less money
because they did animal research through contracts rather than in- house?
A. I'm not saying that any particular work they did was cheaper
because they did it through contracts than in-house, but what I'm saying
is that because contract research was inherently far less effective for
the reasons we've discussed several times now, they did far less of it
than the amount of research that they would have done in their own laboratories,
probably in conjunction with additional contract research, if they had
been pursuing the competitive objective of creative destruction rather
than having it held back by the limitation on in-house research.
Q. How do you know that?
A. I know that based on the economic analysis that I've performed
and the company documents that we've looked at. And we've -- we've discussed
this over the last several days. The incentives were there. We look at
the industry, we look at what the people in the industry understood were
the incentives, we look at the programs proposed by people like Dr. Wakeham,
which he clearly understood to be of tremendous competitive significance,
and we look at the economic stakes, and I think it's clear that the industry
that we've seen, the four decades of history that we've seen is very different
from the four decades of history that would have proceeded if the fundamental
forces of competition hadn't been suppressed.
Q. Let me ask you this, Professor Jaffe: If the defendants want
to -- wanted to avoid confirmation of the causation hypothesis and they
wanted to avoid very large research costs, why did they choose a conspiracy
that was limited to in-house animal research?
MR. GILL: Your Honor, assumes facts not in evidence. There's
no testimony that the conspiracy was limited solely to this.
THE COURT: Well you may answer that.
A. Well I think that a collusive agreement is inherently an attempt
to suppress behavior that the individual companies would like to undertake.
And when firms in an industry are attempting to collude, they -- they draw
the boundaries of that agreement in the way that they think, given the
circumstances that they face, is most likely to succeed. And they may have
felt that an agreement to completely shut down the research process, including
contract research, was something that they weren't going to be able to
enforce and that it wasn't going to work, and so they did it as best they
could.
*5 But I don't -- I don't think that it's necessary for my analysis
to try to figure out exactly why they constructed it the way they did.
Q. Let's talk about the second prong of the conspiracy that you
have expressed the opinion the defendants engaged in, and that is the so-called
reassurance suppression conspiracy. If I'm using the wrong terms to describe
it, you correct me. That is what you called it; wasn't it?
A. Yes.
Q. Now you don't have a document, like those documents that you
referred to in connection with the first prong, you don't have that gentlemen's
agreement document here; do you?
A. No, I don't think that's correct. I think the Hill & Knowlton
documents, for example, describe the fact that the companies understood
that their own competitive practices were contributing to the health problem
as perceived by the companies, and it also lays out that they needed to
reach agreement as to how all of them were going to respond to unfavorable
research reports as they evolved. And so I think that that is basically
laying out the agreement, or -- or, among other things, it's describing
that component of the agreement.
Q. Did you find a document that said we agree to suppress research?
A. Excuse me?
Q. Did you find a document that said we agree to suppress research?
A. I don't believe I've seen a document that contains that phrase.
Q. You basically inferred the existence of such a conspiracy
from your review of all of the documents; right?
A. I don't think that's correct. I certainly saw documents that
talked about agreement, I saw documents about suppression, I saw documents
about solving the problem that was created when we got into a competitive
dog fight. All of those things are talking about agreement, even if they
didn't contain the phrase that was in your previous question.
Q. In any event, you inferred the existence of a conspiracy from
these documents; did you not?
MR. GILL: It's been asked and answered, Your Honor.
THE COURT: It's been asked and answered.
Q. All right. One of the elements or components of this, as I
understand it, is that The Council for Tobacco Research, originally The
Tobacco Institute -- Tobacco Industry Research Committee, was going to
engage only in what you described as basic research; right?
A. I don't think I said that only. I said that one of the ways
that the CTR was used was that it was presented as an organization that
was going to seek out the truth on smoking and health and was going to
communicate that, but that primarily what the organization did, instead,
was to engage in basic research. I didn't say they did no research on smoking
and health. I think we saw in Dr. Glenn's testimony in the '90s, he said
that there were 10 out of some several hundred studies they had focused
that related to smoking and health, so they did do some of that research.
But I think primarily the research that they did was far removed from the
smoking-and-health issue relating to the basic science. And as we saw the
other day, when they did fund research that came up with results, for example
relating to addiction, they didn't treat this as something significant
that should be communicated to the public when they summarized what it
was they were doing.
*6 Q. You mean other than publishing it.
A. I'm sorry?
Q. That research was published; wasn't it?
A. I -- I didn't --
I said yesterday it was published. The researchers published
it and CTR included an abstract in their report, but they didn't choose
to highlight it as something significant to bring to the attention of the
people reading the report of the scientific director.
Q. Highlight. But the fact of the matter is that research was
published and available to the public and available to researchers in the
area to review and take into account; wasn't it?
A. I have answered that question several times. Yes, the scientists
published it.
Q. Okay. Now let's talk about basic research. Are you saying
that basic research is not relevant to smoking and health?
A. I don't think I'm saying that basic research is not relevant
to smoking and health. I think what I'm saying, which is articulated in
the documents, is that the basic research by focusing on the disease generally
rather than specifically on the connection between smoking and health allowed
the CTR to maintain the position that nothing had been proven, that more
research was necessary and they were working on it, but for the most part
did not focus on the kinds of research that would tend to lead to direct
confirmation of the causation hypothesis and thereby really give smokers
more information about the health consequences of smoking.
Q. Your testimony is that the direct research -- I mean the basic
research that the CTR did -- I'm not sure I got these words down right
so you correct me if I misstate them -- this basic research was not the
kind of focus that would tend to lead to confirmation of the causation
hypothesis. Is that your testimony?
A. Well we're talking in generalizations here, and I think there
was a variety of things that came under that -- that rubric, but in general
I think that the documents clearly show a strategy to research the disease,
to understand the fundamental mechanisms of the disease, rather than to
look at specifically the link between smoking and health.
Q. Is it your testimony that research dealing with the fundamental
causes of disease cannot lead to a confirmation or denial of the causation
hypothesis?
A. I didn't say cannot. The fact of the matter is the CTR has
been doing the research it's been doing for 40 some odd years now, and
we still have Dr. Glenn testifying that more research is necessary and
that causation has not been proven. I think that if you look at the kind
of research that was funded and you look specifically at what the people
both in the CTR and in the companies said about why they were doing the
kind of research that they were doing, what you find is that for the most
part they were focusing their attention on research that was not going
to lead to confirmation of the causation hypothesis.
Q. Well let me ask you this: Do you think the Surgeon General
of the United States would agree with you that this basic research that
the Council for Tobacco Research funded was not important?
*7 A. I don't believe I said it wasn't important. What I said
was that it was the kind of research which generally was not going to lead
to confirmation of the causation hypothesis.
Q. Do you think the Surgeon General would agree that the basic
research that The Council for Tobacco Research funded was not important
to smoking and health?
A. I don't think I said that either.
Q. Do you think that the American -- the National Cancer Institute
would agree that the research that was funded by CTR was important to smoking-and-
health issues?
MR. GILL: Your Honor, this line is beyond the scope of the direct.
THE COURT: You may answer it.
A. Well you've just --
The only thing you've done now is you changed who might agree.
But as I said last time, I don't think I said it wasn't important.
Q. Would you turn to Exhibit 17873, which is one of the plaintiffs'
exhibits that you discussed in your direct testimony.
A. Yes, I have that.
Q. Would you turn to page 48 of that document.
A. Okay.
Q. Page 48 has the two abstracts or summaries of CTR funded research
that you talk about in your direct testimony; doesn't it?
A. That's correct.
Q. The first of which was "TASTE THRESHOLDS, CIGARETTE SMOKING,
AND FOODS DISLIKES," do you remember that?
A. That's correct.
Q. And I believe your testimony was this wasn't very relevant;
is that right?
A. Well I think what it says -- what I said was that it does
not appear to be the kind of research that is going to lead to confirmation
of the causation hypothesis.
Q. If you look down there at the bottom of that abstract, it
says "Other grantor: U.S. Public Health Service?"
A. That's correct.
Q. So the U.S. Public Health Service obviously thought it was
worthwhile at least to co-sponsor and co-fund this research; right?
A. The U.S. Public Health Service clearly thought that this research
was worthwhile for some purpose.
Q. Well you're not suggesting they didn't know that The Council
for Tobacco Research was the other co-sponsor; are you?
A. I am certainly not suggesting that.
Q. And when you said that The Council for Tobacco Research did
in fact fund some tobacco research, specific tobacco research, you know
that this document is filled with abstracts of such research; isn't it?
MR. GILL: Assumes facts not in evidence. It's vague, unless counsel
wants to be specific.
THE COURT: Okay. You may answer it if you understand it.
A. I don't know that I would characterize this document as being
filled with that kind of research, as you put it. It has a variety of abstracts,
some of which, I think, are closely related to the issue of smoking and
health, some of which are not. And I think this is just one year's report.
We've seen the documents that describe the overall strategy, and we've
heard Dr. Glenn's testimony about where that situation stands in the '90s.
Q. The other of the two abstracts to which you referred during
your direct testimony is one such study; isn't it?
*8 A. Yes.
Q. That is, one involving directly tobacco.
A. Yes. I'm sorry, that's what I said yesterday -- or the other
day when I discussed it.
Q. The one entitled "ADDICTIVE ASPECTS IN HEAVY CIGARETTE SMOKING;"
right?
A. That's correct.
Q. Which was co-sponsored by the -- co-funded by the American
Cancer Society.
A. That's correct.
Q. But there are numerous other abstracts summarized in this
annual report of research directly related to tobacco; isn't that right?
MR. GILL: Asked and answered, Your Honor.
THE COURT: It's been asked and answered.
Q. Now let me ask you this: Have you reviewed all of the studies
that are summarized in Exhibit 17873?
A. I'm sorry, the studies themselves?
Q. Yes.
A. No, I have not.
Q. Have you reviewed all of the abstracts that are contained
in this annual report?
A. I looked through them. I wouldn't say I read all of them.
Q. How many studies funded by The Council for Tobacco Research
have you read?
A. The studies themselves?
Q. Yes.
A. None.
Q. How many abstracts of studies co-sponsored by The Council
for Tobacco Research have you read other than those contained in this Exhibit
No. 11873?
MR. GILL: Seventeen thousand --
MR. BLEAKLEY: Sorry, 17873.
A. Probably a couple of dozen. In my review of the CTR reports,
particularly in the early decades, I focused more on the summary and description
of significant findings that appeared in the front of the report, which
is what I think any lay person would be likely to do rather than reading
the abstract.
Q. So your knowledge of the actual research funded by The Council
for Tobacco Research is limited to the review of the summaries or abstracts
contained in Exhibit 17873 and a couple of dozen other abstracts.
A. No, I don't think that's correct. It includes, for example,
the memo that we discussed the other day from Mr. Brady, the associate
director of CTR, to the scientific director describing what he thought
CTR was doing, it includes the meetings of the Executive Committee of the
CTR, which describe what the companies that funded and ran the organization
thought it was doing, and includes, as I've mentioned, Dr. Glenn's congressional
testimony a few years ago.
Q. My question was your review of the actual research, not comments
on research, but the research co-funded by The Council for Tobacco Research
is limited to these abstracts in this exhibit and a couple of dozen others
that you've read.
A. Well that was not your previous question. Your previous question
was what was my basis for my conclusion. If you want to ask me what have
I reviewed that specifically describes the studies that were conducted,
I think that I have looked at the summaries that are in the scientific
director's own report and the abstracts that you've mentioned.
Q. Do you know how many studies have been funded by The Council
for Tobacco Research over the roughly 40-year period of its existence?
*9 A. I've seen a reference to that number; I think it's in the
thousands. I don't remember the exact number.
Q. Do you know what institutions have been given grants?
A. I couldn't identify all of them. I know that they have gone
to many of the standard universities and -- and other organizations that
engage in biological research, including basic research.
Q. Including Johns Hopkins University in Baltimore, for example?
A. Wouldn't surprise me.
Q. And Yale University?
A. I would believe that.
Q. And Stanford University in California?
A. Sure.
Q. And Columbia University and Duke and the University of Chicago?
A. Sure.
Q. And the University of Minnesota?
A. Sure.
Q. Did you know that there are 17 grantees in Minnesota?
MR. GILL: Counsel is testifying, Your Honor.
THE COURT: Sustained.
Q. Do you know how many grantees there are in the state of Minnesota?
A. No, I don't.
Q. Do you know how many Nobel Prize winners have been granted
--
A. Yes.
Q. -- funds for research by The Council for Tobacco Research?
A. I believe Dr. Glenn testified there were three.
Q. Do you know whether any grants have been made to people who
are now high public officials in the public health community?
A. Yes, I think Dr. Glenn mentioned Dr. Varmus.
Q. The current head of NIH, for example, National Institutes
of Health?
A. I know he had or has had a high position. I don't remember
his current position.
Q. Do you know whether or not some of these or any of these research
studies funded or co-funded by The Council for Tobacco Research have been
published in peer-reviewed journals?
A. I believe that many of them have.
Q. Do you know whether any of them, other than the couple that
we referred to right here, have been co-funded by the Public Health Service?
A. I believe that many of them have.
Q. And the National Cancer Institute?
A. Yes. Those organizations fund a lot of basic research.
Q. The American Heart Association?
A. I don't know one way or the other.
Q. Do you know whether any studies funded or co-funded by The
Council for Tobacco Research have been cited in Surgeon General's reports
on smoking-and-health issues?
A. I believe they have.
Q. Do you know what percentage of all of the studies cited in
the 1964 Surgeon General's report were funded by The Council for Tobacco
Research?
A. No, I don't.
Q. You didn't look to see that?
A. It didn't occur to me to look, no.
Q. Do you know how many CTR-funded studies are cited in the 1995
Food and Drug Administration analysis regarding the Food and Drug Administration's
jurisdiction over nicotine-containing cigarettes and smokeless-tobacco
products?
A. I don't know, no.
Q. You didn't look in there to see what CTR-funded studies might
be cited by the Food and Drug Administration?
A. No, I didn't.
Q. Did you make any effort to determine whether there were any
CTR-funded studies that came up with results that could be characterized
as unfavorable to the tobacco industry?
*10 A. I've seen a number of CTR-funded studies that came up
with results that were unfavorable to the tobacco industry.
Q. Incidentally, let me ask you to take a look, if you would,
at Plaintiffs' Exhibit 21804.
Did you find that, Professor Jaffe?
A. Yes.
Q. This is a Brown & Williamson document in which there was
a discussion of possibly reorganizing The Council for Tobacco Research.
Do you remember that?
A. Yes.
Q. Do you know whether or not the recommendations for reorganization
-- reorganizing The Council for Tobacco Research were ever carried out?
A. Well it's difficult to tell from this document exactly what
they had in mind in terms of reorganization. If a reorganization did occur,
we know, for example, from the notes of the Executive Committee meeting
in 1970 and Dr. Wakeham's discussion following that regarding the fact
that CTR was for the benefit of the industry, that the basic points that
I made about the role that CTR played in the conspiracy would have remained
true whatever reorganization may have occurred here.
Q. Did you take the time to find out whether or not the recommendation
to reorganize The Council for Tobacco Research was ever followed up on?
A. Well I'm not sure what you mean by "take the time." I've looked
at all the materials that I have to try to determine from the 1950s through
the 1960s through the 1970s and '80s and into the '90s what CTR was in
fact doing at each of those time periods. I don't think I have focused
on the question of its organization in terms of whether they changed, you
know, the number of associate directors they had or anything else. It seems
to me what was relevant for my opinion is what they were doing.
Q. So you didn't take the time.
MR. GILL: Asked and answered, Your Honor.
THE COURT: It's been asked and answered.
Q. Do you remember Exhibit 21127? Would you take a look at that,
please.
A. Yes, I have that.
Q. You remember this was a document, the appendix to the document,
there's a summary of a meeting in which, among other things, there is a
discussion of whether Mr. Spears of Lorillard was going to go or should
go to a meeting at the National Cancer Institute. Do you remember that?
A. Yes, that's correct.
Q. And you talked about that meeting and used it in your direct
testimony; didn't you?
A. The meeting of the Committee of Counsel, yes.
Q. And the discussion of whether Dr. Spears should go to the
National Cancer Institute.
A. Yes.
Q. Would you turn to page nine.
A. I don't have a page nine. What's the Bates number?
Q. I'm sorry, page seven of the attachment.
A. Oh, page seven I have.
Q. You cited the language, the comment attributed to Mr. Jacob,
"He will not help us. If Dr. Spears goes, he may stop us from attacking
it later." Do you remember that?
A. Yes.
Q. You didn't read the statement made by the next gentleman,
Stevens, "I am inclined to let them go."
MR. GILL: Contrary to the record, Your Honor.
*11 THE COURT: Well you can answer that.
A. I think we did read that sentence.
My discussion of this whole section was mainly to make the point
that the whole notion that Dr. Spears and his superiors at Lorillard would
think that the question of whether Dr. Spears should go to a meeting is
something that should be discussed with the attorneys from all the other
firms, so it's not material to the relevance of this section that they
in fact made the decision to let him go. What was relevant about this was
the fact that people at Lorillard felt that this was an issue that should
be decided by the industry collectively rather than by individuals at Lorillard.
Q. Was this decision made by the industry collectively?
A. Well we have at this meeting attorneys from a number of the
different firms, and -- and plus outside attorneys, and it -- this document
shows that Mr. Stevens from Lorillard raised the issue for discussion at
this meeting to get their at least advice if not concurrence as to whether
or not Spears should go to the meeting.
Q. Was the decision made that he shouldn't go?
A. I'm sorry, should or shouldn't?
Q. Was the decision made that he shouldn't go?
A. No. As you indicated and as I indicated, the decision was
made to let him go.
Q. And who is Mr. Stevens?
A. Mr. Stevens is an attorney from Lorillard.
Q. So you cited this for the proposition that the industry was
discussing whether Mr. Stevens should go -- whether Mr. Spears should go
to this meeting, but you acknowledge the fact that the general counsel
of Lorillard made the decision that he should; right?
A. Well he says, "I am inclined to let them go," after his discussion
with the other attorneys, the gist of which was that they would collectively
be better off if he goes than if he doesn't.
Q. Is that what Mr. Stevens says?
MR. GILL: Asked and answered, Your Honor, previously.
THE COURT: You may answer.
A. Is what was Mr. Stevens said?
Q. That they decided collectively that he should be permitted
to go?
A. I didn't say that. I said he discussed it with them and they
all collectively expressed various opinions. And then it says, as we've
read several times now, Stevens says that he's inclined to let him go.
Q. He made the independent decision to let him go.
A. I would not characterize it as an independent decision.
Q. I see.
A. I would agree with you he says that he is inclined to let
him go, but he clearly made that decision in the context of discussing
this issue, which really had nothing to do with the other companies, with
the attorneys from the other firms.
Q. You also cited the Auerbach smoking dog study as evidence
that supports your view that the industry was attempting to suppress research;
correct?
A. I think what I cited was the fact that there was -- there
was a series of meetings at CTR involving people from CTR and people from
the industry and attorneys, the gist of which was to organize criticisms
of Auerbach and then also to organize a campaign to prevent the National
Cancer Institute from further funding of Auerbach, and I don't see how
those activities are consistent with the publicly stated purpose of the
CTR, regardless of whether people at CTR did or didn't think that the Auerbach
studies were good or not good scientific research.
*12 Q. Now the fact of the matter is, the Auerbach research and
the Auerbach study was not suppressed; was it?
A. Well it was not a fund -- it was not --
If we're talking about the first round, the study with the beagles
that found they had cancer, that was not a study that was funded by CTR.
They were not in a position to suppress it.
Q. My question was: Was it suppressed?
A. It was not suppressed. I never said it was.
Q. And in fact it was published; wasn't it?
A. That's correct.
Q. It not only was published, it was widely publicized in the
press; wasn't it?
A. I don't think I know one way or the other how widely publicized
it was in the press.
Q. You didn't think it was important to know whether or not this
Auerbach study was widely publicized?
A. It was not relevant. I haven't ever testified that people
other than CTR were unable to engage in research and unable to publish
that research regarding the connection between smoking and health, so I
can't for the life of me see why the publication and the dissemination
of the Auerbach results has anything to do with the opinion that I offered.
Q. Now do you know whether the National Cancer Institute did
or did not fund additional work by Dr. Auerbach?
A. I don't know, no.
Q. You didn't think that important to find out whether or not
the NCI --
A. Again --
Again, the issue is not was -- was Dr. Auerbach able to do his
-- his work, the issue was what was CTR trying to do, what was the function
of CTR as perceived by people at CTR and the companies, and it's very clear
that at that moment they saw their function as trying to prevent Dr. Auerbach
from doing further research. And I think in terms of what that says about
my opinions in terms of the function of CTR, it's immaterial whether in
fact they succeeded in that effort to stop the NCI from funding him.
Q. Would it be immaterial even if the NCI concluded on its own
that further funding of Dr. Auerbach's work wasn't a good idea, made no
sense?
MR. GILL: Assumes facts not in evidence.
MR. BLEAKLEY: Doesn't assume facts. It's a question, Your Honor.
THE COURT: You'll have to rephrase it.
BY MR. BLEAKLEY:
Q. Well let me ask you this: Do you know what the ultimate medical
and scientific judgment was on the Auerbach study?
A. I think as I explained in my previous answer, even if NCI
and everybody else ultimately concluded that the Auerbach work was not
good work, which I haven't seen evidence to support, but even if that were
true, it doesn't change the fact that what we saw the CTR doing was organizing
its efforts to tell another funding organization how to spend its money,
and I don't see, if -- if -- particularly, given the documents from the
companies which indicated that although there were problems with the Auerbach
work and clearly it raised issues that needed to be resolved, I would think
if CTR was in the business that it said it was in, which was to find out
the truth, they would have said, gee, we think there are big problems with
what Dr. Auerbach has done, so what we need to do is replicate these experiments,
we need to encourage him to pursue this work so that it can be -- those
problems can be clarified and we can find out what the answer is, and that's
not what I saw CTR doing.
*13 Q. Are you testifying that the tobacco industry could tell
the National Cancer Institute what studies to fund and what studies not
to fund?
A. What I'm saying is what the document said, which was that
Dr. Gori had agreed that he was going to have a meeting with them - - Dr.
Gori from the National Cancer Institute -- and what the people from the
industry were going to do is going to organize all the information they
could to present to Dr. Gori to try to convince him not to fund that research.
That's what the document says they were going to do. I think it's a separate
question whether Dr. Gori ultimately paid attention to them or not.
Q. Okay. In any event, your opinion is that the fact that The
Council for Tobacco Research was attempting to persuade the National Cancer
Institute that this was not the kind of research they should be funding
is evidence of conspiracy.
A. Well I think what it is, which is what I characterized it
as, is evidence that CTR was not what it was presented as being. And I
think when you take that, then, in the context of all the other evidence
that we have, is part of the basis for my opinion that CTR was a component
of the conspiracy.
Q. Well let's turn to the third prong of the conspiracy that
you say existed to suppress fundamental competition, and that is the conspiracy
not to warn unless compelled to do so.
You discussed only one document in connection with that, and
that was Exhibit 13416. Would you turn to that, please.
A. Yes, I have it.
Q. And this is a letter from the assistant Secretary for Health
of the Department of Health and Human Services to the chairman of The Tobacco
Institute; right?
A. That's correct.
Q. And it refers to negotiations that the Department of Health
and Human Services was having with the industry about the precise warnings
that were going to be -- might be adopted; right?
A. That's correct.
Q. Do you know the circumstances under which these negotiations
were taking place?
A. I'm not sure what you mean by "the circumstances."
Q. Why were they --
Why were they negotiating?
A. Well I --
Why were they negotiating? You mean --
Q. Yes.
A. -- why was the Assistant Secretary of Health -- why did he
need agreement of The Tobacco Institute as to what the warning was going
to be?
Q. That was going to be my next question, but you can answer
that one.
A. Well I don't know the answer to that. I wondered about that
myself. I would have thought that the Assistant Secretary for Health would
just recommend whatever agreement he or she thought was the appropriate
agreement from a public health point of view, but it's clear from this
letter that he felt that this was an issue that had to be discussed with
the industry.
Q. You made no effort to find out why the Assistant Secretary
for Health was negotiating with the industry over warnings?
A. Well again I don't know why that's relevant to my opinion.
All I was using this document for was to characterize the industry position,
which clearly is, based on this document, a collective position that warnings
should meet the criteria in numbers one, two, three, four, five and six
there, which includes the insistance that it retain reference to the Surgeon
General.
*14 Q. So it made no difference to you why these negotiations
were taking place.
A. Well if you --
MR. GILL: Asked and answered, Your Honor.
THE COURT: It's been asked and answered.
Q. Let's go on to the fourth prong of the conspiracy that you
believe existed, and that is one dealing with the development of safe or
safer cigarettes. Okay?
A. Okay.
Q. Is it your testimony that the defendants -- strike that.
It isn't your testimony or your opinion that the defendants conspired
to refrain from attempting to develop a safer cigarette; right?
A. I'm not saying that they agreed to undertake no efforts with
respect to a safer cigarette, that's correct.
Q. Because we know that in fact they did make efforts to develop
so-called safer cigarettes; right?
A. Several of them did, yes.
Q. On more than one occasion.
A. Yes, I think that's true.
Q. Your testimony is that the conspiracy was to refrain from
-- and again, correct me if I don't use the right words
A. Uh-huh.
Q. -- to refrain from communicating to the public the health
benefits that might exist with respect to these products, and change it
to make it your words.
A. Sure. I mean what I said was that the agreement was not to
competitively exploit a safer product in a way that would rely on health
concerns. But as I talked about the other day, the fact of that agreement,
because it made the potential competitive gains from such a product so
much smaller, in my opinion significantly reduced the incentives to engage
in research on safer cigarettes and thereby reduce the efforts that were
made in that direction, although I have not testified that it eliminated
them entirely.
Q. Well, it's more than not limiting entirely. The defendants
did research on the development of filter cigarettes since at least the
1960s; right?
A. Well I don't believe that that's directly relevant, because
they did research on filters, but they never -- (clearing throat) excuse
me -- made an attempt, other than the ones we've talked about, with specific
products to figure out whether those products with improved filtration
were in fact safer. They didn't do the kinds of, for example, studies that
were done with respect to XA and Premier to try to show that filter cigarettes
were in fact safer products. So although that effort was, I believe, motivated
by an attempt to respond to consumers' demand for safer products, I wouldn't
characterize filter cigarettes as an attempt to develop a safer cigarette
that really was the kind of thing that in terms of creative destruction
would have been expected.
Q. Is it your testimony that the defendants did not attempt to
develop proof that filter cigarettes were safer than non-filter cigarettes?
Is that your testimony?
A. I haven't seen any evidence that they -- that they did that.
Q. Is it your testimony that the defendants never attempted to
establish proof that low delivery cigarettes were safer than non-low delivery
cigarettes? Is that your testimony?
*15 A. Well again, I haven't seen any evidence of it. And that's
what Mr. Schindler said when he testified.
Q. I thought Mr. Schindler testified that they didn't have any
such proof. Am I wrong about that?
MR. GILL: Your Honor, if counsel could show him the transcript,
perhaps it would be clearer.
THE COURT: He can answer that.
A. I don't recall the distinction between what you just said
and what he said, so I don't know which it was.
If they didn't have any proof, it either means they didn't look
for it, or they looked for it and couldn't find it, which means that --
that they found evidence that they weren't safer, which would seem to me
to suggest that that would have been something that they should have communicated.
Q. Well let's talk about that for a second.
Your testimony is that if they didn't find proof, that means
they weren't safer; is that your testimony as an antitrust economist?
A. Well I guess what I'm saying is if they had done studies --
which again I haven't seen the evidence that they did -- but if they did
a study to try to determine whether filter cigarettes, for example, were
safer, you know, logically there are three possible outcomes: They could
have found they were safer, they could have found conclusive evidence that
they were not safer, or they could have found that they couldn't determine
one way or the other whether they were safer or not.
It seems to me if their intent in this process was to respond
to the consumer demand for a safer cigarette and they were marketing a
product that, even if the result was that, gee, we tried, but we couldn't
find -- we couldn't verify that these things were safer one way or the
other, I would think that that would be information that they would want
to share with their customers.
Q. Isn't there a fourth possibility, Professor Jaffe, and that
fourth possibility is that the Federal Trade Commission would not allow
them to make claims that the products were safer? Isn't that right?
MR. GILL: Assumes facts not -- assumes facts not in evidence,
Your Honor.
MR. BLEAKLEY: It assumes nothing. It's a question.
I'm sorry, Your Honor, I withdraw my --
THE COURT: May I rule --
MR. BLEAKLEY: I withdraw --
THE COURT: -- or are you going to rule?
MR. BLEAKLEY: No, Your Honor. I take it back.
THE COURT: Why don't you rephrase it.
BY MR. BLEAKLEY:
Q. You know, do you not, that the Federal Trade Commission has
had the responsibility and authority for regulating advertising of products
sold in the United States since well before the 1960s; isn't that right?
A. That is correct.
Q. And you also know that the Federal Trade Commission has been
active with respect to cigarette advertising; don't you?
A. I think that's fair.
Q. And that the Federal Trade Commission has frequently intervened
with regard to cigarette advertising; hasn't it?
A. It's done so on several occasions, yes.
Q. And you know that in order for the defendant tobacco companies
to promote any product as safe or safer or may be safer, it as a practical
matter would be necessary to have the Federal Trade Commission let them
do it; isn't that right?
*16 A. I think for them to present any information to consumers,
they would have to do that in a way that the Federal Trade Commission would
not deem to be false or misleading. And what I was saying in my testimony
a minute ago was that any scientific experiments that the companies had
done which generated information that was of relevance to consumers in
their decisions regarding the purchase of products is information which,
if they were intent on competitively exploiting the opportunity that consumers'
demands offered, they would have at least tried to find a way to present
that information, factual, scientific, valid information, to the public
in a way that the Federal Trade Commission would not deem to be false or
misleading.
Q. Now, going back to the question I started with a few moments
ago, it is not your contention that the defendants conspired to refrain
entirely from developing safer products; right?
MR. GILL: Asked and answered, Your Honor.
THE COURT: You can answer it again.
A. That's correct.
Q. And we know that in fact the defendant tobacco companies have
spent time developing filter and low delivery products; right?
A. That's correct.
Q. And we know that the defendant tobacco companies have spent
many years developing methods for ventilating tobacco; right?
A. That's correct.
Q. And for the use of expanded tobacco.
A. That's correct.
Q. And for treated tobacco.
A. That's correct.
Q. And for tobacco substitutes.
A. They have done some work on tobacco substitutes, yes.
Q. And charcoal filters.
A. That's correct.
Q. And cigarettes with no nicotine in them or virtually no nicotine.
A. Yes, that's correct.
Q. So we know --
And cigarettes that have virtually all of the particulate or
tar removed from them, we know that, too; don't we?
A. That's correct. But you've mixed together in that list a variety
of different things, some of which I think, based on valid data, could
be shown to be responses and efforts to make the product safer, but many
of which I think it's very questionable whether either the intent in doing
it or the result when it was done was to make the product safer.
Q. But you're not an expert on whether the products were or were
not safer; are you?
A. No.
What I've looked at are the documents that the companies have
themselves about what they think they had accomplished, what they were
trying to accomplish, and how far they got.
Q. Based on the selected review of the documents that were provided
to you by plaintiffs' counsel.
A. Well there's nothing selective about it. And I've looked at
as many documents as we could find, and if you have documents that are
from the rest of the 30 million that you think show something else, I would
be happy to see them.
Q. There was nothing selected by it -- about them?
A. Well when you say "selective," you're implying that there
was some choice made to reach a particular result, and all I'm saying is
we looked at everything that -- or we attempted to look at everything that
we could find that was relevant to my opinion, and I've always assumed
that if we missed something important that would change the opinion, that
I would see it now.
*17 Q. Well I meant to say "selected." Maybe it wasn't clear.
A. Okay.
Q. My question is: And this opinion is based on your review of
the documents that plaintiffs' counsel selected for you to review; isn't
that right?
MR. GILL: Your Honor, that assumes facts not in evidence based
upon his direct testimony.
THE COURT: You may answer it.
A. Well we've been over this several times. What I did would
indicate topic areas that I wanted to see documents related to and asked
the attorneys to provide them, and I believe that they had every incentive
to provide me with all of the documents that related to those topics because
if there were documents that were troublesome, it was better for me to
see them early rather than later.
Q. And you don't deny that the defendants have spent hundreds
of millions of dollars, if not billions, in the effort to develop these
products; do you?
MR. GILL: Assumes facts not in evidence, Your Honor.
THE COURT: You'll have to rephrase that, counsel.
BY MR. BLEAKLEY:
Q. Did you not testify the other day that you don't -- that you
know the defendants spent substantial sums of money on the efforts to develop
these products?
A. My understanding from the evidence that was tabulated that
we saw was that, based on interrogatories, they spent something like three
billion dollars over a period of four decades. And for the reasons that
I've talked about the other day -- though any time you talk about a billion
dollars, I guess that sounds like a lot of money -- given the resources
they had and stakes that they faced and the amount of money they spent
on short-term competition, 47 billion dollars on advertising and other
forms of promotions, that even though three billion dollars may seem like
a lot of money, that in fact it is a relatively meager sum of money given
the stakes that they faced.
Q. And there should have been more.
A. I think if these firms were competing, there would have been
much more.
Q. Much more.
A. Much more.
Q. How much more?
A. Well I think, for example, if you look at other industries,
you look at typical decisions regarding R&D investment, if they had
spent, for example, half what they spent on advertising, if they'd spent
that on research, that would have been eight or 10 times as much as they
actually spent, and that would still be a small fraction of their sales
and profits compared to what many other industries invest in the development
of new products.
Q. But you can't put a number on it; can you?
MR. GILL: It's been asked and answered, Your Honor.
THE COURT: It's been asked and answered.
BY MR. BLEAKLEY:
Q. Now let's go back for a moment to the role of the Federal
Trade Commission. You're very critical of the involvement of lawyers in
scientific matters; aren't you?
A. As a general matter?
Q. In this case.
A. Well we looked at certain specific contexts where what was
being discussed was whether research was good research and what kinds of
research to do, and we also looked at some contexts where we had decisions
that involved a particular company that was being discussed with other
companies, and in those contexts I expressed the opinion that that kind
of participation seemed to me to be more consistent with a collusive agreement
than with competition and in the case of CTR, the stated purpose of CTR.
*18 Q. Well let's talk about the specific involvement of lawyers
in decisions about what product safety claims can be made.
Anything wrong with lawyers being involved in that?
A. No.
Q. Now let's talk about some of the specific product development
ideas that you referred to in your direct testimony. One of the ones you
discussed was the Saratoga product.
THE COURT: Counsel, maybe we should take a recess now.
MR. BLEAKLEY: Fine.
(Recess taken.)
THE CLERK: All rise. Court is again in session.
(Jury enters the courtroom.)
THE CLERK: Please be seated.
THE COURT: Counsel.
MR. BLEAKLEY: Thank you, Your Honor.
BY MR. BLEAKLEY:
Q. Before the break, Professor Jaffe, we were -- I had started
to ask you some questions about the fourth prong of the conspiracy you
believe existed that had to do with safe cigarettes, safer cigarettes,
and I had just started to ask you a question about Saratoga. I don't actually
have much to ask there.
We discussed Saratoga briefly the other day; right?
A. Yes.
Q. And that is potentially a filter -- charcoal filter cigarette
that Philip Morris worked on many years ago; right?
A. In the 1960s.
Q. In the 1960s.
And you testified, I believe, that you didn't know why that product
was never developed and wasn't a successful commercial product; is that
right?
A. Well I think what we talked about was Dr. Wakeham highlighted
the decision not to tell people about the evidence they had regarding its
physiological superiority as one of the reasons for its failure, and that's
the only information that I have.
Q. You don't know whether it was physiologically superior or
not; do you?
A. That's correct.
Q. You don't know whether it was or wasn't safer; right?
A. That's correct.
Q. And then also briefly talked about a project at BATCo called
ARIEL. Do you remember that?
A. Yes.
Q. And you know that BATCo had a product that it experimented
with back in the 1960s as well which it called Project ARIEL; right?
A. That's correct.
Q. And you know that from the evidence that you -- that you saw,
the documents that you read, that the cigarette product tasted bad; right?
A. There was some discussion of that, yes.
Q. Do you know that whether or not the ARIEL project was ever
resurrected?
A. Well there was a development in the '80s at BATCo which in
-- in -- I don't know whether it's precisely a resurrection of the ARIEL,
but they did do further work in the '80s on products that had apparently
some of the same concepts as were in ARIEL.
Q. And that was called AIRBUS.
A. That's correct.
Q. Or AIRBUS.
But all you know about that again is what you read in the documents
that you reviewed; right?
A. That's correct.
Q. You do know that it was, at least to some extent, B.A.T's
-- BATCo's effort to respond to Premier from RJR.
A. Yes, I think some of the documents do indicate that.
Q. And you also know from the documents you reviewed that they
had some fairly serious design problems with AIRBUS.
*19 A. I do recall that at some point they decided not to pursue
it very actively. I don't remember the details.
Q. One of the problems was that the product, which was like Premier,
supposed to be a product that didn't burn, was that it overheated; right?
MR. GILL: Assumes facts not in evidence, Your Honor.
THE COURT: You can answer that if you know.
A. I don't recall.
Q. You don't recall one way or the other.
A. That's correct.
Q. Do you recall whether there was also a problem with a potential
conflict with an RJR patent?
A. I think I did see some reference to that.
Q. Okay. Then we come to Project XA at Liggett. Do you remember
that? You testified to that about -- about that on your direct testimony;
right?
A. Yes.
Q. And the Project XA involved a cigarette in which Liggett would
add a substance called palladium.
A. That's correct.
Q. Treat the tobacco with a substance called palladium; right?
A. That's correct.
Q. And palladium is a heavy metal; right?
A. That's correct.
Q. And you've testified that there came a point in 1979 when
the project was referred to a legal project team. Do you remember that?
A. I think it was '78, but yes.
Q. Sorry, 1978.
And that you didn't find any documents about the Liggett palladium
product after it was referred to the legal project team; right?
MR. GILL: Assumes facts not in evidence, Your Honor.
THE COURT: You may answer that.
A. No, I think the document that we looked at had it referred
to the legal product team in the summer of '78, and then we saw some discussion
in January of '79, and then the last document that I saw was a document
in the summer of ' 79 that instructed everyone to send all the materials
relating to the project to the legal department.
Q. Okay. I stand corrected.
Now you do know, do you not, that the Liggett palladium project
was public knowledge?
A. Yes.
Q. You know that Liggett obtained a number of patents on the
palladium project; right?
A. Excuse me --
Yes, that's correct.
Q. And those patents, of course, were all published as they're
required to be by law.
A. When they're granted they're published, yes.
Q. And you know that the development of the palladium product
or project was reported in the popular press; wasn't it?
A. That's correct.
Q. And was it --
Is it not the case that the palladium product was also presented
to the public health community?
A. Yes, I think there were some discussions between some of the
people involved and people in the government.
Q. Do you know whether anyone in the public health community
ever endorsed the palladium product as a safer product?
A. I've seen no evidence that they did.
Q. Do you know whether they didn't endorse it?
A. Do I know that they didn't.
No, I guess I don't know that they didn't. I've seen no evidence
one way or the other.
Q. You have not seen any evidence that public health authorities
were concerned about the palladium product?
*20 A. That's not what I said. What I --
Q. Did you?
A. I'm sorry.
Q. Rather --
I'm putting too many negatives in my question, professor.
A. Okay.
Q. But let's start over again. Did you see any evidence that
public health authorities were concerned about the safety of this product?
A. Yes, I think I've seen some discussion of that. I don't remember
the details.
Q. One of the concerns was that the product, when used, produced
a substance called nitrosamines; isn't that right?
A. Well there was a concern that is discussed in the documents
that all cigarettes in fact produce nitrosamines, that the use of additional
nitrates in the XA project -- or the XA product, which they found was necessary
to maximize the effectiveness of palladium catalyst, there was a concern
that the increase in nitrates would increase the level of nitrosamines
in the smoke.
The documents I saw indicated that they thought that, between
the filter that they had designed which got the nitrates back down to the
level of normal cigarettes and the other testing that they had done to
try to see whether there was any evidence of increased activity, that overall
there was -- there appeared to be a net reduction in the tumorigenic effects
of the condensate.
Q. Just so we're clear here, nitrosamines are carcinogenic themselves;
aren't they?
A. That is correct.
Q. And you saw evidence in the files and records that you reviewed
that palladium alone was not effective and that you had to have nitrate
to make it effective; didn't you?
A. It was not as effective without the nitrates present, yes.
Q. And that those nitrates increased the amount of nitrosamines
produced.
A. Well I think at the end of the day it wasn't clear whether
the product as marketed, with the higher level of nitrates but with a special
filter that was designed to lower the nitrates to the level of normal cigarettes,
did or didn't have more nitrosamines than other cigarette products.
Q. So you don't know one way or another whether the product was
in fact safer or less safe; do you?
A. I think what I testified was that the evidence they had was
that the so- called tar, the condensate from the smoke, produced significantly
reduced tumor activity on the backs of mice, and that that was biological
evidence that was potentially relevant to consumer choices. But I don't
think I testified that it was -- that I had a basis to determine that it
was a safer product.
Q. Or even less safe possibly; do you?
A. Well I think the data are what they are.
Q. Do you have an opinion of whether or not this product would
have been safer or less safe?
A. I do not.
Q. Would you turn to tab 24 in your book, please.
MR. GILL: Exhibit number?
MR. BLEAKLEY: Yes, it's MD000106.
Q. This is the 1971 Surgeon General's report.
A. I have it.
Q. Would you turn to page 264.
Got 264 there in front of you?
A. Well I'm not sure.
Q. Take your time.
*21 A. The one in the tab has just a few pages, and I can't read
it, so maybe I'll look at the big --
Q. It is a bad copy. I apologize.
A. I'll look at the big fat one. Maybe that's easier to read.
Okay, I think I have 264. If you show me an excerpt, I'll be
able to confirm that. I can't quite --
Q. Down toward the bottom of the page there's a paragraph --
A. Yes, I have that page.
Q. -- that reads, "The notrosamine compounds listed are potent
carcinogens affecting many organ systems."
A. That's correct.
Q. Now if you would turn to tab 12 where there should be a copy
of the 1981 Surgeon General's report, hopefully a more legible copy. That
is Exhibit number GJ000114.
A. Yeah, I have it.
Q. This is the Surgeon General's report entitled "The Health
Consequences Of Smoking: THE CHANGING CIGARETTE."
A. Yes.
Q. Page 37. There's a little section there entitled "Tobacco-Specific
N- Nitrosamines."
A. Yes, I see that.
Q. And in the middle of the page there appears the sentence,
"These tobacco-specific N-nitrosamines may play a role in the development
of several types of human cancer."
A. That's correct.
Q. Now various scientists have criticized the possible use of
nitrosamines in cigarettes as well; haven't they?
A. The use of nitrosamines in cigarettes?
Q. Criticized the existence of nitrosamines in cigarettes.
A. Yes.
Q. Including Dr. Dietrich Hoffmann.
A. I believe that's correct, yes.
Q. Has any physician or scientist or public health organization
called for the production of a cigarette using palladium?
A. Not that I know of.
Q. Has any scientist or doctor or physician or public health
authority urged Liggett or any other company to place on the market a cigarette
containing palladium?
A. Not that I know of.
Q. Do you know what happened, what Liggett did with its nitrosamine
cigarette when it stopped the effort to develop one in the United States?
MR. GILL: Your Honor, object to the characterization of XA as
a "nitrosamine cigarette."
MR. BLEAKLEY: Excuse me, I meant palladium. I misspoke.
Q. The palladium cigarette.
A. Well --
Yeah, I guess based on some of the documents that you sent over
the weekend, it appears that they made an attempt to license the technology
to some of the tobacco companies in Europe.
Q. Did they have any success?
A. No, they didn't.
Q. The next product that you talked about, I'm not sure it was
in that order, but another product that you talked about was the Premier
product developed by R. J. Reynolds. Do you recall that?
A. Yes.
Q. And you know that RJR spent a considerable amount of money
on the development of the Premier product; don't you?
A. Well we --
I guess "considerable" means different things to different people.
I -- from the documents it's clear they spent several hundred million dollars.
Q. And you know that RJR obtained a number of patents on the
processes by which this product would be made; correct?
*22 A. That's -- that's correct.
Q. Some 40 patents.
A. I saw a reference to 20, but 40 wouldn't surprise me.
Q. And you know that the process of prosecuting and obtaining
patents from the United States Patent Office is itself a very extensive
and expensive process; isn't it?
A. Yes. In the literature it's usually estimated $10,000 a patent.
Q. Now did I understand you -- and if -- if I'm misstating this,
please correct me again. Did I understand you to say that RJR never made
an approach to the Food and Drug Administration or the Federal Trade Commission
about the Premier product?
A. I believe what I said was in the documents I reviewed I wasn't
able to find any evidence that they did.
Q. So in fact you don't know whether RJR ever made an approach
to the FDA or the FTC; do you?
MR. GILL: Asked and answered, Your Honor.
THE COURT: You may answer that.
A. I can only expect that --
I mean we saw, for example, a presentation made to the board
of directors in which the issue of FDA and FTC concerns was raised. I would
have thought that if they had gone and actually discussed this issue with
the FDA or the FTC, that that would have been mentioned. So I have inferred
from the fact that I've seen lots of documents that talk about Premier
and I've seen no evidence that they did it, that they didn't.
Q. You infer that they did not go to the FDA or the FTC.
A. That's correct.
Q. But you don't know.
MR. GILL: Asked and answered, Your Honor.
THE COURT: You may answer.
A. Well I can't know for sure because the documents may have
surprisingly not talked about the fact that that happened. But it seems
to me that that is not likely based on the evidence that I have.
Q. Do you know whether any public health organizations expressed
a view about the Premier product?
A. When you say "public health organizations," you mean government
organizations?
Q. Private or government.
A. I do believe that some of the non-profit organizations that
are concerned about smoking and health did express concerns about Premier.
Q. Tried to fight it; didn't they?
A. Yes, they did.
Q. Like the American Medical Association, for example.
A. That may have been one of them.
Q. In fact the American Medical Association asserted that RJR
was making health claims about the product; didn't it?
MR. GILL: Assumes facts not in evidence, Your Honor.
THE COURT: Sustained.
BY MR. BLEAKLEY:
Q. Do you know whether the basis upon which the American Medical
Association opposed the Premier product?
A. Well my recollection is their primary objection was that it
was a nicotine-delivery device in their view, and that for that reason
the FDA should regulate it. But I don't remember the exact details.
Q. Do you know whether the American Medical Association argued
that the product presents a substantial threat to the public health?
MR. GILL: Your Honor, that assumes facts not in evidence.
*23 THE COURT: Sustained.
BY MR. BLEAKLEY:
Q. Do you know whether any government agencies were opposed to
the Premier product?
A. I haven't seen any evidence that federal government agencies
expressed any opposition to the product.
Q. What about state agencies?
A. I've seen a reference somewhere along the way that there were
-- there was some opposition, but I don't remember what it was.
Q. What about the Minnesota Department of Health?
A. That -- that may have been the state agency that I saw reference
to.
Q. In addition to these problems, you also know that the Premier
--
MR. GILL: Object to the characterization as "problems," Your
Honor. There's no evidence for that.
THE COURT: Rephrase the question, counsel.
MR. BLEAKLEY: Yes, Your Honor.
Q. You also know that the Premier product smelled bad; don't
you?
A. The documents do discuss the fact that there were taste or
odor problems, that smokers perceived it to be very different from a traditional
cigarette in that respect.
Q. Taste and odor problems; weren't they?
A. I believe that's correct, yes.
Q. Also had problems keeping the product lit; didn't they?
A. I have seen -- I'm sorry.
I've seen references to that, yes.
Q. And this was a product, one of the purposes of which was to
design a product that did not actually burn; right?
A. Well I believe that Premier does burn, it's just that the
tobacco does not burn. It has a carbon element which burns.
Q. Okay. It was designed so that the tobacco wouldn't burn.
A. That's correct.
Q. There would be none of what is called pyrolysis; right?
A. Combustion or pyrolysis.
Q. Which is one of the theories about possible adverse health
consequences of smoking; right?
A. That's correct.
Q. And so Reynolds tried to develop a product in which the tobacco
doesn't burn; --
A. That's correct.
Q. -- right?
But one of the problems that R. J. Reynolds had with the Premier
product was people had difficulty keeping it lit; right?
MR. GILL: Asked and answered, Your Honor.
THE COURT: He's answered it.
Q. Now, is it your testimony that R. J. Reynolds did not make
any advertising claims about the Premier product?
A. No, that's not my testimony.
Q. Because you know that R. J. Reynolds did in fact make advertising
claims about the product; didn't it -- don't you?
A. Yes. They tried to test market it and they advertised it in
the test market.
Q. And among the advertising claims that R. J. Reynolds made
were those about which the American Medical Association and the Minnesota
Department of Health complained; isn't that right?
MR. GILL: Assumes facts not in evidence, Your Honor.
THE COURT: You may answer if you know.
A. I don't know that that's true.
Q. You do know, however, in the RJR advertising for the Premier
product they referred to the reduction of controversial compounds from
the product; don't you?
A. I believe that's correct.
*24 Q. And that it --
They claimed that the smoke dissipates instantly; right?
A. There was something about the lack of sidestream smoke. I
don't remember the exact wording.
Q. And that it results in a change in the composition of cigarette
smoke?
A. I don't recall.
Q. And some of their advertising referred to Premier as the most
significant advance in cigarette history?
MR. GILL: Assumes facts not in evidence, Your Honor.
THE COURT: You may answer if you know.
A. I've seen some of the Premier ads and they had various general
claims. I don't remember whether that particular phrase appears or not.
Q. Did you look at some of the RJR ads for the product?
A. Yes, I did.
Q. And is it nevertheless your testimony that RJR had supportable
health claims for the Premier product that it did not make?
A. I don't know that I would characterize them as "health claims."
I think what I said was that they had supportable scientific evidence regarding
reduced biological activity of the products. Their outside scientists confirmed
that the tests that had been done were valid and indicated reduced biological
activity in several forms, and that in my opinion a company that had spent
the hundreds of millions of dollars that we discussed regarding Premier
that wished to exploit this technological development to its maximum potential
would have used that information -- would have communicated that information
in some form to consumers.
As we've talked about, the FTC regulated the form in which any
kind of claims could be made about cigarettes, and they would have had
to have found a way to do it that was consistent with those regulations.
But since the underlying goal of the FTC is to prevent claims that are
false or misleading and they had extensive scientific information, it's
my opinion that they could have at least tried to find a way to present
the valid scientific information they had in a way that would not have
been deemed false or misleading.
Q. But because of the conspiracy that you believe existed and
despite the fact that they spent hundreds of millions of dollars on this
product, the only thing they claimed in their advertising was that it reduced
controversial compounds, dissipated smoke instantly, that it was the most
significant advance in cigarette history, and that it revolutionized smoking.
MR. GILL: Assumes facts not in evidence, Your Honor, and it's
compound.
THE COURT: Rephrase the question.
MR. BLEAKLEY: I'll withdraw it, Your Honor.
BY MR. BLEAKLEY:
Q. By the way, did you testify that all of the biological studies
that were conducted with respect to Premier were conducted by outside laboratories?
A. I think what I said was that it was a little difficult to
tell from the documents, but I saw no evidence that any of them were done
in-house, and there was extensive discussion of tests that were done by
outside consultants.
Q. So in fact you don't know whether Reynolds did in-house biological
testing of Premier; do you?
*25 A. I have seen no evidence that they did.
Q. So you don't know whether they did or didn't; do you?
MR. GILL: Assumes facts not in evidence, Your Honor, it's argumentative
and repetitious.
THE COURT: I think -- I think he's answered the question.
BY MR. BLEAKLEY:
Q. Now you also know that R. J. Reynolds has not abandoned the
basic product design that was involved in the Premier product; don't you?
A. I have seen some evidence of their continuing to work on related
product designs, yes.
Q. Using some of the technology developed in the course of the
Premier project; right?
A. Well since -- since I wasn't shown documents after 1994, it's
a little hard to tell exactly what technology is being used, but it does
appear to be related to technology of the Premier.
Q. And you know that in fact R. J. Reynolds is currently test
marketing such a product; don't you?
MR. GILL: Objection, Your Honor, beyond the scope of discovery.
THE COURT: Sustained.
MR. BLEAKLEY: May we have a side-bar on this, Your Honor?
THE COURT: Yes.
MR. BLEAKLEY: Could I have the question read back, please.
(Record read by the court reporter.)
A. I do know that R. J. Reynolds is currently test marketing
a product called Eclipse. I don't really know what technology it contained
in the Eclipse product because I wasn't allowed to see documents. As I
understand it, we were not produced documents from the last few years in
which Eclipse was marketed.
MR. BLEAKLEY: Your Honor, I move to strike the last part of that
answer as non-responsive.
THE COURT: Well I think it's sufficiently responsive. It will
stand.
BY MR. BLEAKLEY:
Q. Now you didn't mention a product by -- developed by Philip
Morris called Next; did you?
A. No, I did not.
Q. But you know about it; don't you?
A. Yes, I do.
Q. You know that in fact Philip Morris marketed a product called
Next several years ago; don't you?
A. That's correct.
Q. And this was a product that contained virtually no nicotine;
right?
A. It was a product that contained very little nicotine, yes.
Q. And you know that product failed in the marketplace; don't
you?
A. That's my understanding, yes.
Q. You also know that Philip Morris has another product that
it is test marketing now called Accord; don't you?
MR. GILL: Your Honor, object to questions dealing with test marketing
now.
THE COURT: The objection is sustained.
MR. BLEAKLEY: Your Honor, could we have a side-bar on this? Promise
it won't take any more time than the last one.
THE COURT: Will there not be any more questions than the last
one?
MR. BLEAKLEY: Couple.
THE COURT: All right. You better come up.
MR. BLEAKLEY: Could I have the question read back.
(Record read by the court reporter.)
A. I've seen references to that in the newspapers, yes.
(Document displayed on the screens.)
MR. GILL: Your Honor, excuse me, I wonder if this could be taken
down?
*26 MR. BLEAKLEY: Sorry. Yeah.
(Display removed from the screens.)
MR. BLEAKLEY: Absolutely.
Q. I'm sorry, you said you've seen references to it in newspapers?
A. That's right.
Q. And what do you know about it?
A. That Philip Morris is test marketing a product called Accord.
Q. Do you know what its design features are?
A. I don't recall.
Q. Do you know whether it is, potentially at least, a safer or
medically acceptable product?
A. I don't know about medically acceptable. I believe the newspaper
accounts suggested that part of the motivation was reduced health hazards,
but I really haven't focused on that as part of my opinion in this case.
Q. Okay. Fair enough.
So we know about Saratoga, we know about ARIEL, we know about
its successor AIRBUS, we know about Premier, we know about the Liggett
palladium cigarette, we know about Eclipse, the successor to Premier, Next,
a little tiny bit about Accord, all products in which the defendants have
attempted to develop safer cigarette products; right?
A. I think it's a fair characterization that the products you
just listed all were attempts, to some extent, to develop safer cigarette
products, yes.
Q. And we also know that in addition to that there were efforts
made to make tobacco substitutes.
A. Yes.
Q. Unsuccessful efforts to make tobacco substitutes.
A. Generally, yes.
Q. And finally we know that in fact the defendants have made
and sold filter and low tar and nicotine cigarettes over the last 40 years;
right?
MR. GILL: Asked and answered, Your Honor.
THE COURT: Well you can answer it again.
A. Yes, defendants have made and sold filter and low tar cigarettes
-- low tar/low nicotine cigarettes over the last several decades.
Q. In fact we know, do we not, that the tar level in the cigarettes
has gone from an average of 35 milligrams per cigarette in the mid-1950s
to about 12 milligrams per cigarette in the '90s?
A. I think that average is about correct. And we also know from
the company documents and -- and numerous other documents that if there
has been any reduction in health consequences associated with that, it
is at best significantly less than the proportional reduction in tar that
has occurred.
Q. We know that from the company documents. Is that your testimony?
A. Yes. I've seen a company document that indicates that.
Q. And so your testimony is that these products are not any safer
based on your review of selected company documents; correct?
A. I didn't say that. What I said was that if they are any safer,
the amount of improvement that they represent is considerably less than
proportional to the measured tar reduction, and I have seen company documents
that discuss that.
Q. Okay. So you acknowledge that there are -- that these are
safer products; right?
A. I didn't say that either. I didn't say that either. What I
said is they may be safer. There have at points in time been indications
they might be safer. On the other hand, the documents as well as public
reports make clear that because of smokers' compensation, the delivery
to individuals is not reduced as much as the rated delivery, that the low
tar products are typically smoked more intensely and drawn -- the smoke
is drawn deeper into the lung, which may create different kinds of health
hazards or -- or more serious kinds of health hazards, and that in addition
their low tar products that contain the many additives that aren't in the
other products, that as far as we can tell haven't been tested for safety,
and -- and thereby may create new health concerns. So --
*27 Q. Do you know whether they create new health concerns?
A. What I know is that there has not been established clearly
the net benefit of these new products, and everyone from company scientists
to the Surgeon General have expressed that these issues exist.
Q. This is all based on your review of the company documents
selected for you by plaintiffs' counsel.
MR. GILL: Object to that characterization, Your Honor.
THE COURT: Objection sustained. Rephrase the question.
BY MR. BLEAKLEY:
Q. Well have you done any independent research of your own to
determine whether or not these products are or are not safer?
A. I'm not an epidemiologist or biologist, I'm an economist,
and what is relevant for me is what was going on in terms of the competitive
behavior of the companies. If the companies had perceived these products
as their innovative response to the consumer demand, then I would have
expected that they would have done the research to determine whether or
not they were safer, and if they could show that they were safer, to utilize
that information in the marketing of the product, and what I've seen is
that they've reduced the tar and nicotine, they have advertised those products
as reduced tar and nicotine, but they haven't made systematic efforts to
determine whether those products are safer. They clearly understand the
compensation phenomenon and rely on the compensation phenomenon to produce
products that are lower tar but that smokers will still find satisfying,
and the public health evidence as summarized, for example the Surgeon General,
is that there is doubt about the significance of any net health benefit
that these products may have produced.
Q. Have you done any independent research of your own to determine
whether or not this so-called compensation factor is important?
MR. GILL: Asked and answered, Your Honor.
THE COURT: You may answer that.
A. I have not gone out and done smoking behavioral studies, no.
Q. Have you read any of the published literature on compensation?
A. Yes, I've seen some of it.
Q. Have you read the article by Benowitz and Henningfield?
A. I don't recall.
Q. Have you read articles in the published literature suggesting
that compensation is not a significant factor?
A. Yes, I have.
Q. So you know that there are people out there who don't think
compensation is a significant factor; don't you?
A. I have seen some studies that indicate that, yes.
Q. Including responsible researchers in the field of nicotine
and addiction; right?
A. As far as I know, that's true. However, again as an economist,
what matters to me is how the companies are behaving, and the companies
clearly, from their own documents, not only perceived that it occurred,
but perceived that it was a phenomenon that they were going to exploit
in the development of their products.
Q. Have you read the Dr. -- the testimony of Dr. Samet in this
case?
A. No, I have not.
Q. So you don't know what Dr. Samet said about whether low tar
and nicotine cigarettes are or are not safer.
*28 MR. GILL: Your Honor, no foundation based on the last answer.
THE COURT: Okay. You may answer that though.
A. It wasn't material to my analysis to know what Dr. Samet said.
As I explained, what was material to my analysis was how the companies
perceived these products and how they competed with respect to them.
Q. It was not important to the opinions that you've been expressing
here this morning whether the actual scientific evidence is that low tar
and nicotine cigarettes are or are not safer? That wasn't important?
MR. GILL: Argumentative, Your Honor.
THE COURT: You'll have to rephrase it, counsel.
Q. Is it your testimony that whether or not low tar and nicotine
cigarettes are in fact safer is irrelevant to your opinions?
A. I don't think I said that. I think that what I said was that
I didn't need to read Dr. Samet or any other individual empidemiologist's
testimony. For example, I've looked at the Surgeon General's reports which
are intended by their nature to summarize the general state of knowledge
on these topics, and what the Surgeon General report says is that while
there may be some benefits, particularly if smokers don't compensate, that
overall there is certainly significant doubt about the magnitude of the
net health benefits from these products, and I think for the purposes of
my opinion regarding what competition did or didn't occur in this industry,
that that's sufficient basis.
Q. Let me ask you a hypothetical: Let's assume that there was
a document in the defendants' files that says low tar and delivery cigarettes
are not any safer. Okay? Will you accept that - -
A. Okay.
Q. -- hypothetical?
And in addition, will you except for purposes of this hypothetical
that this opinion was expressed by a scientist at one of the tobacco companies?
A. Okay.
Q. Okay? And that it was expressed very strongly. Okay?
A. Okay.
Q. But the actual scientific evidence is that the product is
safer. Would you just ignore that evidence and rely only on the opinion
expressed by one employee of a tobacco company?
MR. GILL: Your Honor, there are no facts in evidence to support
the last predicate of that hypothetical.
THE COURT: Okay. The objection is sustained.
BY MR. BLEAKLEY:
Q. Is it your testimony that the Surgeon General of the United
States, in the Surgeon General's reports that have been published, have
not found there to be a reduction in the amount of disease attributable
to smoking as the result of low tar and nicotine cigarettes?
A. Well my understanding is that what the Surgeon General reports
indicate, including the 1981 report that the jury saw when Professor Dolan
was testifying, is that there is some evidence to suggest that particularly
compensation doesn't occur, that there may be reduction in some diseases,
but that there are other concerns that potentially offset that, and the
magnitude of those concerns to some extent is not known, so that overall
it's not possible to make a reliable determination that the net health
benefits are significant.
*29 Q. Would a 20 percent drop in lung cancer rates be significant?
A. Depending on the context, it might be significant for some
purposes.
Even if there were a 20 percent drop, it would -- it would be
very consistent with what I said earlier, which was that if there was any
benefit, it seems to be far less than what would be suggested by the aggregate
reduction in tar levels that you alluded to, which was far more than 20
percent.
Q. Is that important?
A. Is -- is which important?
Q. Is it important that the reduction in risk is less than the
reduction in tar and nicotine numerically? Is that a significant factor?
A. Well I only mentioned that because you suggested that the
reduction from, I believe, 40 to 12 or 35 to 12 was somehow indicative
of a significant improvement in cigarettes. I didn't suggest that. But
what I was saying was that if someone were to suggest that the reduction
in overall tar levels connoted some kind of corresponding, very large reduction
in the hazard of cigarettes, then I think it would be very relevant that
the actual reduction is apparently far less than proportional to the measured
reduction in tar levels.
Q. But in terms of the impact on health, it doesn't make any
difference whether there is a relationship between the percentage reduction
in tar and nicotine and the percentage reduction in risk; does it?
MR. GILL: Your Honor, he just answered that question. This is
argumentative as well.
THE COURT: Okay. I think he answered that.
MR. BLEAKLEY: Judge, I'm about to move on to a new and a final
topic.
THE COURT: How long is your final topic?
MR. BLEAKLEY: Probably 45 minutes to an hour.
THE COURT: Okay. We better recess for lunch then, reconvene at
2:00 o'clock.
THE CLERK: Court stands in recess, to reconvene at 2:00 o'clock.
(Recess taken.)
*1 TITLE: STATE OF MINNESOTA AND BLUE CROSS AND BLUE SHIELD OF MINNESOTA,
PLAINTIFFS, V. PHILIP MORRIS, INC., ET. AL., DEFENDANTS.
TOPIC: TRIAL TRANSCRIPT
TRANSCRIPT OF PROCEEDINGS
DOCKET-NUMBER: C1-94-8565
VENUE: Minnesota District Court, Second Judicial District, Ramsey County.
YEAR: March 23, 1998
P.M. Session
JUDGE: Hon. Judge Kenneth J. Fitzpatrick, Chief Judge
AFTERNOON SESSION.
THE CLERK: All rise. Court is again in session.
(Jury enters the courtroom.)
THE CLERK: Please be seated.
THE COURT: Counsel.
MR. BLEAKLEY: Thank you, Your Honor.
Good afternoon, professor.
THE WITNESS: Good afternoon.
MR. BLEAKLEY: Good afternoon, ladies and gentlemen.
(Collective "Good afternoon.")
BY MR. BLEAKLEY:
Q. Professor Jaffe, is it your testimony that the defendants
spent all of this money and all of this effort on attempting to develop
safer cigarette products but that they didn't really want them to be successful?
A. No, that's not my testimony. I think that the companies that
spent the money that they did spend on developing safer products did so
because they recognized the competitive potential that such products offered
and that they did hope that they would be successful, but that they weren't
willing in that hope to go the last mile, which involved really exploiting
the products in a way that would have taken advantage of their real --
their real superiority from consumers' point of view. So that they -- they
in some sense wanted to have it both ways, they wanted to respond to the
competitive incentives they saw because they realized that the potential
is there, but they were -- they were ham- strung in their ability to really
fully exploit it because of the agreement that they had.
Q. And that last mile, that exploitation of these products, would
have been to make safety claims for them; right?
A. Well I think that what I said earlier with respect to the
specific products we talked about is that the last mile would have been
to utilize the scientific information that they had to inform the consumers
about how these products really were different than the products that were
on the market.
Q. Well what difference would it make to a consumer that the
product was different unless it was also safer?
A. Well I think what they could have said regarding safety would
have depended on the data that they had. As we've discussed at some length,
with respect to the specific products that -- that were developed, there
are some questions about exactly what they could have claimed about those
products, and one of the things that I think I've been clear on is that
anything that they claimed would have had to have been true. If they had
reached the point where they had developed a product that was unquestionably
safer or safe and that they had the scientific data to support the claim
in whatever form they chose to make it, if they had the data to support
it, then I believe that they would have made those claims. The exact nature
of the claims they would have made would have depended on the exact nature
of the scientific and technological results that they were able to develop.
*2 Q. And would you agree with me that you don't know whether
any of those products were unquestionably safe or unquestionably safer;
do you?
A. The products that were in fact developed, is that what you're
referring to?
Q. Whether or not --
The products that you say the defendants should have exploited
and gone the last mile with respect to the consumers, you don't have any
personal knowledge that any of these products were unquestionably safe
or unquestionably safer; do you?
A. I don't have any personal knowledge, and I certainly don't
have any basis from the documents to say that any of them were unquestionably
safe.
The documents certainly indicate with respect to Premier, for
example, significant scientific evidence that they were less biologically
active with respect to a battery of tests that the scientists had -- had
-- had undertaken, and I'm not in a position to determine what kinds of
statements about safety could have been made based on those tests. But
there certainly was a significant amount of data which indicated that,
along relevant dimensions, the product, based on those tests, appeared
to be safer.
Q. Now let me turn to the economic impact of what you have described
as a conspiracy to suppress fundamental competition.
You testified -- and again correct me if I don't state this exactly
correctly -- that the second element of the analysis -- that is, the first
step of the analysis is whether the conspiracy unreasonably restrained
competition, the second element of the analysis was the impact on the market,
which must be a significant economic impact. Is that right?
A. I think that's fair, yes.
Q. So it is necessary for the impact on the market to have been
significant; right?
A. Yes, I believe that's correct.
Q. A minor and insignificant impact on the market would not have
anti- competitive consequences that would be of concern to an antitrust
economist; right?
A. Well I think what I said was to call something an unreasonable
restraint of trade, we look for a significant economic impact.
Q. And you went on to say if this restraint had not been in place
--
And that's the conspiracy that we're talking about here; right?
A. Yes.
Q. If this restraint had not been in place, we would have seen
a market for cigarettes in the United States today that would have been
significantly different from the market that emerged under this competitive
restraint; right?
A. Well you appear to be reading from the transcript. It certainly
sounds familiar.
Q. And that is your opinion.
A. I -- I agree with that statement, yes.
Q. Okay. And we would have seen a significantly broader variety
of products available to smokers, and they would also have had available
to them the information necessary to make informed choices among those
different products in purchasing and smoking them; right?
A. I couldn't have said it better myself.
Q. And finally, this would have been in a market in which consumers
would have had the information necessary to make effective choices among
those products. And then you went on to say, "And this was a significant
contributing factor to health-care costs in Minnesota."
*3 A. I did say that.
Q. Okay. The bottom line of all of this is that health-care costs
were higher as the result of this restraint or this conspiracy; right?
A. That's correct.
Q. And that if there hadn't been a conspiracy, they wouldn't
have been as high.
A. That's right.
Q. Okay. In Minnesota.
A. Well I think as I explained with Mr. Gill, I have not looked
specifically at the damages calculations regarding Minnesota. What I have
concluded is that because of the significant impact on the cigarette market
that you just discussed, and relying on the testimony of others that smoking
does cause significant health-care costs, taking those two things together
I'm able to conclude that the conspiracy was a significant contributing
factor to health-care costs in Minnesota.
Q. And you also know that the specific health-care costs in Minnesota
that are involved in this case are Medicaid, a state medical assistance
program called GAMC, and Blue Cross insurance; right?
A. I do know that, yes.
Q. Okay. Now let me write up here the four elements of this opinion,
and I'll apologize in advance for my writing; I'm not a professor, so I'm
not very good at this.
First was lower health-care costs. Okay?
A. First --
Q. First of the elements.
A. Okay.
Q. Let me write these down. Then you can tell me whether you
agree with them.
A. Fine.
Q. Okay?
Two is significantly different market, three was significantly broader
variety of products, and finally, more information. At least that's my
shorthand. Now perhaps I should have put lower health-care costs down as
number four, and that's probably what was confusing you.
But you said there would be a significantly different market;
right?
A. I did say that.
Q. And there would be a significantly broader variety of products.
A. Yeah. In my mind that's part -- three and four are part of
two. They're not really distinct from two. But --
Q. Okay.
A. -- I don't disagree with having said all those things.
Q. And more information, relevant information would have been
provided to consumers.
A. Right.
Q. And the result would be lower health-care costs.
A. Yes.
Q. Okay. Now let me ask you this: In order to know whether or
not in fact you would have a significantly different market and significantly
broader variety of products and more information for consumers and therefore
lower health-care costs, we'd need to know a number of things; wouldn't
we? We'd need to know what the answers are to a number of questions; wouldn't
we?
MR. GILL: Objection, vague, Your Honor.
THE COURT: Do you understand the question?
A. Yes, we would need to know some things, yes.
Q. Okay. Would you agree with me that one of those things would
be whether or not this significantly broader variety of products would
be meaningful different products?
A. Yes, I'd agree.
Q. Okay. Let me --
Another pack of cigarettes that's called X instead of Y wouldn't
be meaningful.
*4 A. I agree with that.
Q. Okay. Meaningfully different products.
Secondly, we would need to know whether any of these new products
were safer; wouldn't we?
A. Yes.
Q. We'd also have to know, would we not, how much safer?
A. No, I don't think so.
Q. What if they were only a wee tiny bit safer, just an infinitesimal
amount safer?
A. Well I think you'd have to know that within the broader range
of products there were products that were significantly safer.
Q. Okay.
A. But I don't think you would have to know in a quantifiable
sort of measurable terms how much safer.
Q. Okay. Significantly safer.
The farther down the board we get, the harder it is to read my
writing.
We'd also need to know who made these products; wouldn't we?
A. Well we would need to know that these products were offered
by the defendants. I don't think we'd need to know which ones specifically.
Q. That's a D -- I mean a Delta; that's supposed to be for defendants.
A. Yeah, I got that.
Q. You understood that. Okay.
Sorry, I'm standing in front of this and blocking the view of
some of the jurors.
We would also need to know when in time these meaningfully different,
safer -- significantly safer products could have been introduced; wouldn't
we?
A. Well again I think that issue is somewhat like the safer issue.
We would need to know that they would have been introduced sufficiently
early to have had a significant impact on the marketplace, but I don't
think we would need to know exactly when.
Q. Okay.
A. And just to be clear, would number four -- I think my answer
to your question is we would need to know it was the defendants, but we
wouldn't need to know which defendants, but what you wrote down is "which
defendants," so I'm not quite sure that we had understood each other there.
Q. How about if I change that to "defendant."
A. Fine.
Q. Okay?
A. Uh-huh.
Q. So you're with me so far. We're with each other so far.
A. And again, you just wrote down "when" when what I said was
you wouldn't need to know exactly when, you would just need to know if
that is sufficiently early on as to have had a significant impact.
Q. Okay. I'm just trying to shorthand -- do the shorthand --
A. Okay.
Q. -- writing as we go down the page here.
We'd also need to know whether or not any of these meaningfully
different, significantly safer products that were introduced in time to
have a significant impact could have been produced at a reasonable cost;
wouldn't we?
A. Yes, where "reasonable" takes into account consumers' willingness
to pay for a product that was significantly safer.
Q. I'm going to just put a dollar sign there for that. Is that
all right?
A. Okay.
Q. Okay. Then we'd need to know whether or not these products
would have been or would be acceptable to consumers; right?
A. We would have to know that they would have been acceptable
to a -- to a sufficiently large number of consumers to have had a meaningful
impact on the market.
*5 Q. Now acceptability in this context would include such things
as taste; wouldn't it?
A. Yes.
Q. And smell?
A. Yes.
Q. And whether or not the product would stay lit?
A. Yes.
Q. All the things that we've been talking about here this morning,
design features that would be acceptable to a sufficient number of consumers
so that they would smoke them in significant amounts; right?
A. I agree with that.
Q. Okay. And finally we'd need to know what advertising and marketing
claims could be made about those products; correct?
A. I'll answer the question --
I can't actually see what you wrote, so --
Q. I wrote "claims."
A. -- I'll assume that what you wrote is similar to what you
said.
Q. I wrote "claims."
A. I think we would need to know what kinds of information the
companies in general terms could have conveyed about these products.
Q. And that would take into account, for example, whether or
not the Federal Trade Commission or the Food and Drug Administration would
allow them to make those claims; right?
A. Yes, uh-huh.
Q. And it would also have to take into account, would it not,
the extent to which, if at all, other elements of the public health community
attacked the product and attacked the claims that were being made.
A. I'm not sure whether that would be relevant or not. I mean
the public health community has certainly done plenty of attacking of the
tobacco companies and it doesn't necessarily seem to affect their behavior,
so I'm not sure that generic attacks by people other than the regulators
who had some legal authority to do something about it would have made much
of a difference.
Q. Well is it your testimony, for example, that if one of the
defendants attempted to market one of these products in the state of Minnesota,
making whatever health claims that defendants thought were appropriate,
and the Minnesota Department of Health took the public position that these
claims were not supported, that would affect the ability of the defendants
effectively to market this product in Minnesota; wouldn't it?
MR. GILL: Assumes facts not in evidence, Your Honor, with respect
to this hypothetical.
THE COURT: You can answer that.
A. I don't know what the state of Minnesota could have done.
I'm sorry, I thought you were referring to, you know, the American Medical
Association and other non-profit health organizations. But what I would
say was that, obviously, any legal requirement that any legal entity, whether
it's the federal government or state government, had some authority to
enforce obviously would have to be complied with.
Q. Well, and if a reputable organization such as the American
Cancer Society took the position publicly that the claims that the defendants
were making for one of these products were untrue, that would affect their
ability to sell them; wouldn't it?
MR. GILL: Assumes facts not in evidence, Your Honor.
THE COURT: No, you may answer that.
*6 A. Well I'm a little confused about the relevance to what
we're talking about, because the predicate here was that we were going
to have scientifically defensible, factual information that the companies
were going to present regarding these safer -- these significantly safer
products, so I guess if the American Cancer Society took the public position
that something that was scientifically demonstrable was nonetheless false,
I'm not sure that would have any effect on anything.
Q. Well you testified that RJR had a scientific basis for making
claims about Premier; didn't you?
A. I testified that they had a scientific basis to make some
claims. I didn't testify as to specifically what was the nature of the
claims that they could make that would be defensible, and I haven't seen
any evidence that anything that the American Cancer Society or other non-profit
organizations did with respect to Premier had any consequences.
Q. Your testimony is that the opposition to Premier by the American
Medical Association had no -- played no role in the lack of success of
Premier?
A. Well I've seen company documents that groused about the fact
that it was opposed by anti-smoking organizations. I'm not sure I've really
seen any evidence that shows that that actually had any effect.
Q. In any event, you would agree with me that we'd need to know
the answers to these questions in order to know whether or not a significantly
different market, significantly broader variety of products, more information,
would result in lower health costs; isn't that right?
A. Yes, I think as characterized in my earlier answers with respect
to the, you know, the summary points you've put up there.
Q. Okay. Well let's take them one by one.
We don't know whether the defendants could have developed meaningfully
different products; do we?
A. In my opinion I think we do know to a reasonable degree of
confidence, that given the economic analysis that we've talked about, the
huge stakes that were perceived by the companies, the opportunities that
they saw, the progress that was made, incomplete as it was, the progress
that was made with the meager resources that were invested, I think one
can conclude that if the last four decades of this industry had been allowed
to play out competitively with the forces that we've seen were operating
rather than being suppressed, that the industry would look significantly
different, and that there would be meaningfully different products, safer
products along a variety of dimensions. They would have been significantly
safer.
We've seen evidence even with the meager resources that were
invested that progress was made in that direction. I think a lot more progress
would have been made if greater resources had been invested. And I think
that it's not -- it's not hard to conclude that if -- if we'd had four
decades to progress without the restrictions that we've talked about, that
all of those things would have been in place.
*7 Q. Every one of them.
A. That's what I just said.
Q. The defendants would have been able to develop safer products
than they have already.
MR. GILL: Asked and answered, Your Honor.
THE COURT: Well go ahead, you can go through it again.
A. Yes.
Q. Significantly safer product than they have already.
A. Yes.
Q. And it would have been one or more of the defendants in this
case.
A. One or more of the defendants, yes.
Q. And you have no hesitancy whatsoever in opining to a reasonable
degree of scientific probability that this could have been done in time
to have a significant impact on the market.
A. Yes.
Q. And you also have no hesitancy whatsoever to testify to a
reasonable degree of scientific probability that this could have been done
on a cost- effective basis.
A. Where "cost-effective" is defined to recognize that consumers
quite clearly would have been willing to pay somewhat more for products
that were demonstrably safer.
Q. And you have absolutely no doubt that they could have designed
products that would have been acceptable to consumers; right?
MR. GILL: Your Honor, improper question, certainly not the relevant
standard, as counsel knows.
THE COURT: Sustained.
BY MR. BLEAKLEY:
Q. And you would testify here today to a reasonable degree of
scientific probability that these companies could have developed products
that would have been acceptable to a significant number of consumers in
time to have a significant impact.
A. Yes. I mean, for example, we know that the low tar -- the
ultra low tar products are viewed by many smokers as not as desirable along
various dimensions. I'm not saying that every smoker would have adopted
them and I'm not saying that they would have been indistinquishable from
traditional products, what I'm saying is we would have had a variety of
products available which would have offered sufficient satisfaction to
smokers along the various dimensions that they care about that a significant
number would have purchased them.
Q. And you will testify to a reasonable degree of scientific
probability that the defendants would have been able successfully to make
claims about these products in their advertising and marketing that would
have resulted in a significant impact on the market?
A. Well again, we've already talked about this. The -- the standard
--
The basis of the FTC regulation is that the claims not be false
or misleading, and I think if the companies had had valid scientific information
that they could have developed, if they'd invested the appropriate resources,
that there would have been a way to express that information that was not
false or misleading but nonetheless was sufficiently specific and clear
that smokers would have understood what was being communicated, and it
would have affected their choices.
Q. There would have been a way.
MR. GILL: Asked and answered, Your Honor.
Q. Is that right?
THE COURT: It's been asked and answered.
*8 Q. But despite your opinion to a reasonable degree of scientific
probability, you can't identify any such product; can you?
A. I think that that's not the issue. I mean we're talking about
an industry that four decades of the history of which has been changed
significantly by a conspiracy to suppress the forces of competition and
creative destruction, and so I don't think it would be reasonable to expect
that someone could say, sitting here today with the four decades having
played out the way they did, specifically what those products would look
like or specifically which company would have introduced them. It would
be like going back to the 1950s and looking from the perspective of the
1950s, trying to anticipate in a modern, dynamic industry what that market
would look like in the year 1998. I don't think anyone doing that in 1950s,
looking at the cola industry, would have thought that you were going to
see sugar-free colas that people -- or most people, including me, couldn't
distinguish from regular cola. I don't think they would have anticipated
computers the size of a shoe box that would do what the computers the size
of a building did then. You can tick off industry after industry where
the products that are available today could not possibly have been anticipated
in their specific form four decades ago, and yet what we have in this industry
is a market that has been arrested in its development relative to that
dynamic process that would have occurred. And I think it's -- it's impossible
to say what the specific products would have been, but it's not at all
hard to say that the range of products would have been significantly different.
Q. It's not just impossible to say what the specific products
would have been, it's impossible to say how much safer they would have
been; isn't it?
A. Well we have some information. We know that with --
THE COURT: Excuse me, counsel.
MR. BLEAKLEY: Sorry.
THE COURT: You're --
(Mr. Bleakley resumes his position behind
the podium.)
THE COURT: Sorry to interrupt you. Go ahead.
MR. BLEAKLEY: That's okay.
A. Okay. I'll start over. We do have some information. We know
with respect to Premier, for example, that a product was developed that
eliminated the products of combustion and pyrolysis and along a number
of scientific dimensions clearly had reduced the biological activity. Now
as we've discussed, there were problems with Premier, there were issues
with its consumer acceptability, but any time you introduce a new product,
it takes a while to get the bugs out of it, to get kinks out of it. I think
Premier was a significant strive forward.
Based on the work that we saw that B.A.T did on ARIEL in the
1960s, I think that, you know, we -- we -- we would have gotten to the
point that we got to with Premier far earlier if this competition had --
had been unfettered, and I think with that as an indication of what happened,
even with limited resources, I don't think it's hard to conclude that we
could have come up with products that were significantly safer.
*9 Q. And what prevented all of this from happening was an agreement
between the defendants not to do in-house animal research and not to exploit
the benefits of their products.
MR. GILL: Your Honor, assumes facts not in evidence in that it
omits several prongs and it omits reference to the overall conspiracy.
THE COURT: Well you can answer this question.
A. Well the different elements of the conspiracy, as I discussed,
are interrelated. I think with respect to each of the other elements I
noted that one of the things it did was contribute to the suppression of
the demand for safer products, so I don't think I testified that you could
isolate out the first and the last aspects as the mechanism for preventing
the dynamic evolution of the industry that otherwise would have occurred.
I think all of the different aspects of the conspiracy were mutually reinforcing
and contributed to the result.
Q. Isn't it a fact, Professor Jaffe, that the opinion that you
have expressed about the economic impact of this alleged conspiracy is
pure speculation?
A. No. I don't know why you would conclude that. I think I spent
three days here explaining exactly why, based on the economic analysis
and based on the evidence that I have looked at, I've come to the conclusion
I've come to.
MR. BLEAKLEY: I have no further questions.
MR. GILL: Your Honor, I only have 10 or 15 minutes, so I think
we can just proceed straight away.
Mr. Bleakley, could you move this out of the way?
(Easel moved by Mr. Bleakley.)
MR. GILL: Good afternoon, ladies and gentlemen.
(Collective "Good afternoon.")
BY MR. GILL:
Q. Good afternoon, Professor Jaffe.
A. Good afternoon, Mr. Gill.
Q. Professor Jaffe, do you recall some questions this morning
from Mr. Bleakley that dealt with the testimony of Dr. Samet?
A. Yes, I do.
Q. And do you recall some testimony along the lines suggested
to you by Mr. Bleakley that Dr. Samet had testified to a 20 percent reduction
in lung cancer as measured in epidemiological studies due, according to
Mr. Bleakley, to use of low tar/low nicotine cigarettes?
A. That was the suggestion of his question, yes.
Q. And you told Mr. Bleakley that you had not read the testimony
of Dr. Samet at the time.
A. That's correct.
Q. I'd like to show you some of Dr. Samet's testimony on February
13, 1998, at pages -- at page 3761 in the record, starting at line two.
MR. BLEAKLEY: Your Honor, I object to this. This is not recross-
examination -- or redirect examination, this is just reading the testimony
of another witness, which, unless it's all read on the entire subject,
would be inappropriate in any event.
THE COURT: You mean you don't --
On what subject, the subject that you crossed on?
MR. BLEAKLEY: The subject that I crossed him about and which
he said he had no knowledge.
THE COURT: Okay. I think he can redirect on a subject that you
crossed on.
MR. GILL: That's all I intend to do, Your Honor.
*10 THE COURT: All right.
BY MR. GILL:
Q. You see a question at the top of the page, line two, that
says, "Now what has happened to the disease risks of smoking over the past
40 years?"
A. Yes.
Q. All right. And Dr. Samet asked -- answers, "Well we've seen,
certainly, no drop in the disease risks associated with smoking, and evidence
of increasing risks for some diseases."
Now is that consistent with the understanding that you got from
Mr. Bleakley regarding the testimony of Dr. Samet?
A. Well Mr. Bleakley seemed to be suggesting that Dr. Samet had
testified that there was a reduction, and this doesn't seem to indicate
that.
MR. BLEAKLEY: Your Honor, --
Q. Is it fair --
MR. BLEAKLEY: -- I object to that. Now the witness is actually
testifying on the nature of this prior testimony. If he wants to display
the testimony of Dr. Samet, I objected to that, too, but I can understand
it, but engaging in this dialogue with Professor Jaffe I submit is inappropriate.
THE COURT: Well your question characterized Dr. Samet's testimony.
I think he is entitled to --
MR. BLEAKLEY: I characterized it accurately, Your Honor.
THE COURT: All right. Well --
MR. BLEAKLEY: Now what he wants to do --
THE COURT: That's what we're here to find out.
MR. BLEAKLEY: But he's asking this witness questions about it.
He's never seen it until lunch time, apparently.
THE COURT: All right. You can answer the question.
BY MR. GILL:
Q. And Professor Jaffe, I think you did answer the last question;
did you not?
A. Yes, I believe I did.
Q. All right. Let's go on to the question that starts at line
seven on that page.
A. It says --
Q. Okay. You can go ahead and read it.
A. It says, "What do we see when we measure the disease risk
in specific studies, doctor?"
And the answer is, "We saw some -- I talked about some information
yesterday, for example, of the CPS-I study, that was the 1959-1960 to 1972
study that showed some drop, about a 20 percent drop in risk of dying from
lung cancer for those who were smoking the lower tar cigarettes of the
time '59 to ' 72, compared to the higher tar cigarettes of the time. So
just remember that the higher tar cigarettes in that study had -- were
in the range of 25 and higher in terms of the milligrams of tar, the lower
tar were about -- under 17.6 milligrams of tar, if I remember correctly,
so with that degree of reduction, there was about a 20 percent drop in
the lung cancer risk."
Q. All right. Let me interrupt you right there.
Now that does refer to a 20 percent reduction in the lung cancer
risk; does it not?
A. Yes, it does.
Q. And it references a timeframe between what years?
A. 1959-'60 compared to 1972.
Q. Now further on on the very next page, 3762, do you see the
question that starts at line 19?
A. Yes.
Q. Would you read that question and that answer, please.
A. "But what do we see when we measure the risks of smoking over
the past 40 years?
*11 "Answer: Well there we have some information that I discussed
yesterday. We have the two studies of the American Cancer Society, the
two studies of one million Americans, the earlier study across the '60s,
'59 to ' 72, the later study beginning in the '80s. And what I showed yesterday
was that in that study, the disease risk, lung cancer and the other major
smoking-caused diseases, had actually gone up comparing the two studies,
one looking at the risks in persons who were enrolled towards the left
side of that exhibit and the other more towards the right side of that
exhibit.
"And also, in terms of the results of the individual epidemiological
studies in the animations as I showed the findings of those studies over
time, there was no evidence that risks had begun to drop off in the later
studies."
Q. So what is your interpretation, Professor Jaffe, of the testimony
from Dr. Samet with regard to any reduction in the epidemiological risks
associated with the smoking of low tar cigarettes after 1972?
MR. BLEAKLEY: Objection to any interpretation of this testimony
by this witness.
THE COURT: Well I think you should --
You'll have to rephrase that, counsel.
BY MR. GILL:
Q. Let me ask the question this way, Professor Jaffe: Is the
answer to the last question that you just read to the jury, is that consistent
with the understanding that you gained from the nature of the question
put to you by Mr. Bleakley this morning regarding Dr. Samet's testimony?
MR. BLEAKLEY: Same objecti