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 9, 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 now presiding.



(Jury enters the courtroom.)

THE CLERK: Please be seated.

THE COURT: Good morning.

(Collective "Good morning.")

MS. WALBURN: Thank you Your Honor.

THE COURT: Counsel. Stand up, please.

(Witness sworn.)

THE CLERK: Please state your name and spell your last name.

THE WITNESS: Cheryl L. Perry, P-e-r-r-y.

THE CLERK: Thank you. Please have a seat.

CHERYL L. PERRY called as a witness, being first duly sworn, was examined and testified as follows:

BY MS. WALBURN:

Q. Good morning, Professor Perry.

A. Good morning.

Q. As you know, I'm Roberta Walburn, representing the state of Minnesota and Blue Cross and Blue Shield of Minnesota.

A. Yes.

MS. WALBURN: Good morning, ladies and gentlemen.

(Collective "Good morning.")

Q. When we broke on Friday, you were beginning to discuss statistics on the onset of smoking, and you had referenced Exhibit 26065, which is the National Household Survey on Drug Abuse published by the U.S. Department of Health and Human Services.

Using the information and data in that report, how many people in the United States tried their first cigarette in 1994?

A. Three million people tried their first cigarette in 1994.

Q. How many of those three million people were under the age of 18 years old?

A. Two and a half million of those three million were under the age of 18.

Q. And those statistics relate to trying the first cigarette for the first time; is that correct?

A. Yes. It's when they reported trying their first cigarette.

Q. How, if at all, does trying the first cigarette relate to regular smoking?

A. Well we found in the Surgeon General's report that among those who tried cigarettes, two out of three became daily smokers at some time in their lives. So about two out of three who tried a cigarette became daily smokers at some point in their lives.

Q. Is there also research on the age at which people generally begin to smoke?

A. Yes, there is.

MS. WALBURN: Might I approach, Your Honor?

THE COURT: Yes.

Q. Showing you what has been marked as Exhibit 30233, is this a chart prepared at your direction?

A. Yes, it is.

*2 Q. And what is the source of data in this chart?

A. The National Household Survey on Drug Abuse, again from 1994 and 1995.

Q. And this chart illustrates the cumulative age of starting to smoke?

A. Yes, it does.

Q. Would this be helpful in illustrating your testimony?

A. Yes, it would be.

MS. WALBURN: Your Honor, we would offer this for illustrative purposes.

MR. WEBER: No objection, Your Honor.

THE COURT: Court will receive 30233.

BY MS. WALBURN:

Q. And with the court's permission, professor, could you come down and explain this chart for the jury.

THE COURT: For illustrative purposes.

MS. WALBURN: Yes.

A. This is a chart showing when people start to smoke; that is, when they first try their first cigarette. And what I did was divide up the chart into 12 years old up to -- 12 years old, 14 years old, 16 years old, 18 years old, 21 years old, and then adults. And what the chart says is that 11.5 percent of people who ever smoke do so before age 12, then 23 percent of people begin to smoke between age 12 and before age 14, so altogether, 34.5 percent start to smoke before age 14; 60.2 percent start to smoke before age 16; 81.9 percent start to smoke before age 18; and 94.5 percent start to smoke before age 21; only 5.5 percent of people start to smoke as adults.

Q. Using that chart, Professor Perry, can you tell us what grade level at school the various ages would represent.

A. This is about sixth grade, this is about eighth grade, this is about 10th grade, and this is about 12th grade.

Q. And what would be the main point that you take from this data?

A. Well the main point is that if someone doesn't start smoking by age 18, the overwhelming majority will not start smoking at all.

Q. Professor, are you also familiar with historical trends in teen-age smoking?

A. Yes, I am.

Q. Showing you what has been marked as Exhibit 30243, is this another chart prepared at your direction?

A. Yes, it was.

Q. And is this data reliable?

A. Yes, it's from the National Health Interview Survey and the Monitoring the Future project from the University of Michigan.

Q. Would this be helpful in illustrating your testimony?

A. I believe it would be.

MS. WALBURN: Your Honor, we offer Exhibit 30243 for illustrative purposes.

MR. WEBER: No objection, Your Honor.

THE COURT: Court will receive 30 -- 30243 for illustrative purposes.

BY MS. WALBURN:

Q. Professor Perry, could you explain this chart to the court and the jury, please.

A. Yes. What I've shown here is the percentage of 17-year- olds who smoked between 1904 and 1984 -- (clearing throat) excuse me -- and this data comes from the National Health Interview Survey, that's from the National Center for Health Statistics. So this is the percentage of 17-year-olds who smoked during those periods of time.

Unfortunately, those surveys didn't continue, and so what I used from 1984 to 1996 are data from the Monitoring the Future project on high school seniors. Those include 18-year-olds. So that's why the data are -- there's a little disjunction there, little bit higher, because these are 17-year-olds and these are 18- year-olds.

*3 Now what does this chart tell us? First let's start with females. At the beginning of the century only 1.3 percent of 17- year-old females smoked, 1.3 percent. You can see there was a sharp increase in -- starting in about the 1950's, and that kept going until about the time of the first Surgeon General's report around, you know, late '50s, early '60s, it leveled off. Then you can see another very, very sharp increase among 17-year-old females in the late ' 60s and early '70s. That leveled off, declined a little, but they were then -- females were then smoking at a rate that was higher than males throughout the 80's. We then see another increase in the 1990s among females.

Among males, the blue line, the males started off the century, about 23.7 percent of 17-year-olds were current smokers. They increased also until about the late '40s, then we can see that they declined, leveled off a bit right around the time of the first Surgeon General's report, continued to decline, leveled in the '80s, and then also there was a sharp increase in the 1990s. So that's kind of the story of the century for 17- and -- 17- and 18- year-olds, males' and females' smoking rates.

Q. And currently what percent of high school seniors smoke?

A. Well as you can see, about a third of our high school seniors are current smokers.

Q. How, if at all, does this data on smoking among our teen- agers and high school seniors differ from smoking among adults?

A. Well I looked at data from the National Health Interview Survey, again, and I looked at 30-year-olds and 40-year-olds, and what we see is that there are no significant increases at all among -- (clearing throat) excuse me -- among adults since the time of the first Surgeon General's report. So there was no large increase, for example, here in the late -- late '60s.

Q. Turning from the national picture to the state of Minnesota, are you familiar with data on smoking trends among teen- agers in Minnesota?

A. Yes, I am.

Q. And can you generally describe how that compares with the national trends.

A. Well, in Minnesota we have data from the '80s and the '90s, and our data in Minnesota follows the same -- almost the same exact trend as the national data. We had --

We were pretty flat, no increases much in the 1980s, so it was pretty flat, and then a large increase in the 1990s. The only difference in our data is that Minnesota adolescents, 12th graders, tend to smoke about two to three percent less than average, so I kind of consider them above average. So that's kind of -- the Minnesota data follows pretty much the same trends.

Q. Thank you, professor. You can return to the stand.

Has there also been research on teens who smoke and whether they would like to quit smoking or whether they have tried to quit smoking?

A. Yes, there's some data on teens and quitting.

Q. Can you turn in book two to Exhibit 26068. Is this an exhibit which you prepared?

A. Yes, it is.

Q. And where did you obtain the information for this exhibit?

*4 A. This came from the Teen-age Attitudes and Practices Survey, which is run from the Centers for Disease Control.

Q. And are those reliable authorities?

A. Yes, they are.

MS. WALBURN: Your Honor, we would offer Exhibit 26068 for illustrative purposes.

MR. WEBER: No objection, Your Honor.

THE COURT: Court will receive 26068 for illustrative purposes.

BY MS. WALBURN:

Q. Could you please explain this chart.

A. Yes. In this survey, teen-agers -- in this case ages 12 to 18 -- who were smokers were asked about their interest in quitting smoking. Seventy-four percent reported that they had seriously thought about quitting smoking, 64 percent or nearly two thirds had tried to quit smoking -- (clearing throat) -- at some -- (clearing throat) sorry -- at some time, and about 49 percent had tried to quit in the previous six months.

Q. And what is the significance of these statistics?

A. Well it shows that even among teen-agers, they're already interested, they've been thinking about quitting, and about half have already tried to quit at some time.

Q. Is there information in the 1994 Surgeon General's report on how smoking in high school relates to smoking later on in life?

A. Yes. We looked at high school seniors and we looked at those who had smoked at least one cigarette per day, so they were daily smokers, at least one cigarette per day, and we found that among those daily smokers, four out of five were still smoking five or six years later when they were resurveyed. So 80 percent of those who were smoking at least one cigarette per day as high school seniors were still smoking five or six years later.

Q. And what is the significance of that information?

A. Well that says that if you're smoking at least one cigarette per day when you're a high school senior, it's highly likely you're going to be smoking as an adult.

Q. Did you find that the subject of the age at which youth begin to smoke was discussed in the internal tobacco company documents which you have reviewed in this case?

A. Yes, it was. The tobacco companies tracked youth smoking data for -- really for decades.

Q. And what sources of information from your review of those documents did the tobacco companies use in tracking youth smoking?

A. They used both government data, such as what I've been presenting to you, but they also had their own internal data- collection systems.

Q. Based on your review of tobacco company documents, what significance, if any, did the tobacco companies place on smokers under age 18?

A. The tobacco companies viewed smokers under age 18 as what they called replacement smokers, that without them, their market would die.

Q. And from your review of the company documents and research you have done in this field, what is meant by the term "replacement smokers?" How do you use that term?

A. Replacement smokers are the new smokers to replace those who quit or who die. Or smokers at the other end who have been smokers who quit or die, those are the ones to replace them.

*5 Q. Could you turn in book one to Exhibit 12452 and 12453. These are companion documents. Exhibit 12452 is an RJR-produced document dated December 9th, 1959 from William Esty Advertising Company to R. J. Reynolds Tobacco Company, and Exhibit 12453 is the accompanying summary of findings dated December 1959.

Are these documents which you have reviewed in this case?

A. Yes, they are.

Q. And do they form part of the basis of your opinions?

A. Yes, they do.

MS. WALBURN: Your Honor, we would offer Exhibits 12452 and 12453.

MR. WEBER: No objection, Your Honor.

THE COURT: Court will receive 12452 and 12453.

BY MS. WALBURN:

Q. This is Exhibit 12452 on the screen. It's on the letterhead of William Esty Advertising Company, and it's to a Mr. William W. A. Sugg of R. J. Reynolds Tobacco Company, and the title of the document in the upper right-hand corner is "YOUTH RESEARCH INSTITUTE, 1959, CIGARETTE SMOKING STUDY AMONG HIGH SCHOOL AND COLLEGE STUDENTS."

Turning to the last full paragraph on this page, the document states, "Preference-wise, Camel and Winston are shown as holding their shares substantially constant while Salem increased its share, especially among high school students."

Professor Perry, who manufactures Camel, Winston and Salem?

A. R. J. Reynolds.

Q. And this letter is written to, again, which company?

A. It's -- it's written to R. J. Reynolds Tobacco Company.

Q. Could we turn to the attached charts in Exhibit 12453. And the title of this document is "THE YOUTH RESEARCH INSTITUTE STUDY REGARDING CIGARETTE SMOKING AMONG 7,521 HIGH SCHOOL AND COLLEGE STUDENTS IN 80 CITIES THROUGHOUT THE UNITED STATES, OCTOBER-NOVEMBER, 1959, SUMMARY OF FINDINGS." And are these the charts attached which summarize the findings of this report?

A. Yes, they are.

Q. Would you turn to the chart on Bates number 3725. This chart is labeled "INCIDENCE OF CIGARETTE SMOKING, 1959 VERSUS 1958."

According to this chart, what is the percent of high school students, total, who smoked?

A. The total percent in 1959 is 56 percent.

Q. And does this chart then break down that number into young men and young women?

A. Yes. You can see that right underneath, that 61 percent of the young men smoke and 49 percent of the young women smoke.

Q. What is reflected in the next two sections of the chart under "High School Students, Total?"

A. Well what they did is they wanted to break it down even further, so they looked at freshman and sophomores; that is, ninth and 10th graders, and again broke it down in males and females, and then 11th and 12th graders, and then they looked at males and females under that.

Q. And does this chart also go on to report on college students' smoking?

A. Yes, it does.

Q. Would you turn in this same document to page Bates number 3727. This chart is labeled "HIGH SCHOOL STUDENTS - CURRENT TYPE AND BRAND PREFERENCES, 1959 VERSUS 1958." What is reported on this page?

*6 A. Well this shows the percent of students who are smoking particular brands in 1959 versus 1958, and they've broken it out by non-filter cigarettes and filter cigarettes, and they've also broken it out, again, by male and female.

Q. And according to this chart, what were the top four selling brands of cigarettes in 1959?

A. Pall Mall, Camel, Winston, and Kent.

Q. So two would be under the non-filter category and two under the filter category?

A. Yes.

Q. And again, according to this chart, what was the top- selling brand in 1959?

A. Winston.

Q. And who manufactured Winston?

A. R. J. Reynolds.

Q. Based upon your review of internal documents, do you know whether R. J. Reynolds continued to track teen-age smoking?

A. Yes, they did, they tracked teen-age smoking for decades.

Q. Professor Perry, I want you to assume that last week Andrew Schindler, the CEO of R. J. Reynolds Tobacco Company, testified as follows, and this is from the transcript from March 5th at page 3531:

"Question: And beginning smokers, you said, according to some government surveys, were by and large under the age of 18; correct?

"Answer: If that's what the government surveys say, I will have to go along with that.

"Question: And you know that RJR tracked that; correct?

"Answer: They -- as I testified earlier, through the NFO system, they were tracking under-age smokers up through, I believe, 1982 or 1983."

From that statement and your review of tobacco company documents in this case, did RJR track under-age smoking in the 1950s?

A. Yes, they did.

MR. WEBER: Let me -- Your Honor, let me object. And let me first say that I dropped the microphone and I think it went dead, so I may have to switch to the other one we've got over here.

But I did -- I do want to move on to the substance now, and the issue is the court has continually not allowed one witness to comment on the testimony of another. I think it's an improper question. That's my objection.

THE COURT: Okay. All right. I believe that it's an admission that she can comment on, though.

BY MS. WALBURN:

Q. Professor Perry, did RJR track youth smoking in the 1960s?

A. Yes, they did.

Q. Did RJR track youth smoking in the 1970s?

A. Yes, they did.

Q. And did RJR track youth smoking in the early 1980s?

A. Yes, they did.

Q. Mr. Schindler also testified at page 6487 of the transcript, "You start analyzing -- analyzing brand traces of under-age to project future markets, I think that's wrong, I think it's frankly stupid, and it shouldn't be done, and it's unnecessary."

Do you agree or disagree with that statement from Mr. Schindler?

MR. WEBER: Same objection, Your Honor.

THE COURT: Sustained.

Q. Professor Perry, after the early 1980s, did RJR continue to track under- age youth?

A. Yes, they tracked under-age youth. They looked at government sources of data and they also analyzed government data. They did their own analyses of government data

*7 Q. Do you have additional examples of RJR tracking documents from the years when they were using private surveys of under-age smokers?

A. Yes, I do.

Q. Would you turn in book one to Exhibit 12258. This is a 1971 RJR document titled "SUMMARY OF DECISIONS MADE IN MRD-ESTY MEETING ON APRIL 7TH, 1971 CONCERNING SPRING 1971 NFO TOBACCO PRODUCTS SURVEY." Is this a document you have reviewed in this case?

A. Yes, it is.

Q. Does it form part of the basis of your opinions?

A. Yes, it does.

MS. WALBURN: Your Honor, we would offer Exhibit 12258.

MR. WEBER: No objection, Your Honor.

THE COURT: Court will receive 12258.

BY MS. WALBURN:

Q. In looking at the title of this document, "SUMMARY OF DECISIONS MADE IN MRD-ESTY MEETING," do you know what the initials MRD stand for from your review of the documents?

A. Yes, the Marketing Research Department of R. J. Reynolds.

Q. And what does Esty refer to?

A. Esty is the advertising company that worked for -- or that work -- does work for R. J. Reynolds.

Q. Looking to the second line of the title and the reference to "NFO TOBACCO PRODUCTS SURVEY," what does "NFO" stand for?

A. NFO means the National Family Opinion, Incorporated. It was a -- it's a company that actually runs the surveys.

Q. And what is this document addressing?

A. This is addressing ways to manage the data, collect the data, manage the data

Q. Could you turn to paragraph B. on this page. This states, "Respondents 20 and Younger Produced By The New Questionnaire

"Respondents Aged 14 to 20:

"Cards are to be punched for all respondents 14 to 20."

And then moving down towards the bottom of the page, it says, paragraph small b., starting "Smoking incidence and brand preferences...." This states, "Smoking incidence and brand preferences, by age, of the under-20 respondents to the new questionnaire. Age breaks to be used are 14-15, 16-17, 18-20."

What is this addressing?

A. This -- this is --

These are agreements made to how to code the data, get it into the computer, and then how to analyze the data to get ready for reporting. So they've made an agreement that the data should be reported in these age groups, 14-15, 16-17, and then 18 to 20, that's how the data would be reported.

Q. And from your review of the tobacco company documents and the Reynolds documents, did you see data reported in that fashion?

A. Yes, I did.

Q. What is the legal age of smoking in the state of Minnesota?

A. Age 18.

Q. And do you know what the legal age is in most states in the United States?

A. In most states it's age 18.

Q. Did you also analyze Philip Morris documents showing that teen-age smoking was being tracked?

A. Yes, I did.

Q. Would you turn in book one to Exhibit 11801 and the companion document, 11802. Exhibit 11801 is a May 18th, 1973 document on Philip Morris U.S.A. stationery titled "Incidence of Smoking Cigarettes," and the attachment, Trial Exhibit 11802, contains the tables of information.

*8 Are these documents which you reviewed in this case?

A. Yes, they are.

Q. Do they form part of the basis of your opinion?

A. Yes, they do.

MS. WALBURN: Your Honor, we would offer Exhibits 11801 and 11802.

MR. WEBER: No objection, Your Honor.

THE COURT: Court will receive 11801 and 11802.

BY MS. WALBURN:

Q. 11801, which is on the screen now, is on Philip Morris U.S.A. interoffice correspondence stationery dated May 1973, and it is from the marketing research department on "Incidence of Smoking Cigarettes." The bottom of the page has the distribution list, and among those copied in the right-hand column is R. Millhiser, who was Philip Morris president at the time.

What is generally being addressed in Exhibit 11801?

A. This is a report on data that a research company did for Philip Morris.

Q. I'd like to read the first three paragraphs of this document.

"There is continuing interest about incidence of smoking and volume consumption by demographic groups.

"In March 1973, Opinion Research Corporation conducted a national probability sample among 2060 respondents, 18 years of age and over (962 male and 1098 female), in which they asked two questions for us: 'Do you smoke cigarettes, that is, at least a pack a week?'; and (if yes): 'About how many cigarettes do you usually smoke per day now?' In addition, those same questions were asked of a national probability sample of 452 teen-agers ages 12- 17; (212 male and 240 female).

"The data from the study are consonant with the findings of other such studies both at Philip Morris and without."

What is the significance of this?

A. Well this shows that Philip Morris also worked with a company, the Opinion Research Corporation, to collect data on under-age youth.

Q. And if we turn to the chart on this page labeled "INCIDENCE: OVERALL AND BY SEX," does this chart reflect the percent of adolescents aged 12 to 17 who smoke?

A. Yes, it does. About 13 percent total of age 12 to 17 smoke.

Q. And that would be on the left-hand column of the chart?

A. Right.

Q. Does this chart also reflect the amount of cigarettes smoked by under- age youth?

A. Yes. On the right-hand side of the chart you can see it says "Average Consumption Among Smokers (Cigarettes per day)," so how many cigarettes per day on average, and you can see for 12- to 17-year-olds, they smoke about 10.6 cigarettes per day, whereas the 18 and over smoke almost double, 20.6 cigarettes per day.

Q. What is the significance of that data?

A. Well the significance is -- is that -- is that young people start off smoking -- smoking a little bit, and so the importance of young people isn't how much they smoke, how many cigarettes they consume, but that they get started smoking, because their consumption, the amount of cigarettes that they will smoke, will increase over time.

Q. The bottom of that chart states "See Following Tables For Further Data" Would you turn to Exhibit 11802, and is that the attached data?

*9 A. Yes, they are.

Q. Would you turn in that exhibit to page 1795. This is Table 4, and it's titled "INCIDENCE OF SMOKING BY DEMOGRAPHIC GROUP (AGES 12-17), (MARCH 1973).

"DO YOU YOURSELF SMOKE CIGARETTES; THAT IS, AT LEAST A PACK A WEEK?" And the first column entry is for total teen-agers, percent smoking, 13. Then it breaks it down to boys, 14 percent, girls, 13 percent, 12 to 13 years of age, three percent, 14 to 15 years of age, 13 percent, 16 to 17 years of age, 24 percent.

What is the significance of this information?

A. Well first of all, just by using the term "boys and girls," it reflects that they know these are children rather than adults. And if we go down the chart, they've collected a lot of different kinds of demographic data, such as, you know, what percent smoke in what area, whether it's metro, non-metro, family income. These are the kind of data that might be useful in selling cigarettes.

Q. Were there other Philip Morris documents which you reviewed in which sales to under-age youth were tracked?

A. Yes, there were.

Q. Did you see documents from Brown & Williamson which also tracked teen- age smoking?

A. Yes, I did.

Q. Would you turn in book two to Exhibit 13723. This is a 1973 Brown & Williamson document titled "NEW PRODUCT CONCEPTS," and would you turn to Bates number 6812. This chart is titled "Brand Switching Study," and could you please explain this chart.

A. Yes. They've broken this down by Brown & Williamson brands Viceroy and Raleigh, so that "V&R," Viceroy and Raleigh, and then down, Brown & Williamson brands Kool and Belair. And they're reporting the share of users, what percent are smoking Viceroy and Raleigh or Kool and Belair, and they've broken that down by age groups 16 to 25, 26 to 40, and over 41. So 5.4 percent of smokers smoked Viceroy -- that are 16 to 25 years old smoked Viceroy and/or Raleigh -- and Raleigh.

Q. Did you review other Brown & Williamson documents where information was reported in this fashion for the age group 16 to 25?

A. Yes. Brown & Williamson regularly reported their data for 16- to 25- year-olds.

Q. In addition to reporting the statistics on teen-age smoking, did the tobacco company documents also discuss the significance of those statistics?

A. Yes, they did. The tobacco companies really saw how critical teen-agers, under-age teens were to the -- to the future of their business.

Q. Would you turn in book one to Exhibit 10528. This is a document that has previously been admitted into evidence. It is dated May 21st, 1975, Philip Morris U.S.A. inter-office correspondence from Myron Johnston, an R&D analyst, to Dr. R. B. Seligman, an R&D executive, and it's titled "The Decline in Rate of Growth of Marlboro Red." And it also reflects in the upper right- hand column the name "Dr. Dunn."

Can you generally describe this document, Professor Perry.

A. Yes. This is a report on -- on the decline of Marlboro Red at this particular point in time.

*10 Q. Turning to --

MR. WEBER: Your Honor, I'm sorry to interrupt, but we've got some question here. As Your Honor knows, I'm collecting objections for the group. Our records don't show this was admitted yet. I just want to raise that issue and make sure we've got the proper procedure in place here.

Sorry I'm late, but I was checking with some of the others to check their records as well.

THE COURT: Okay.

MR. CIRESI: If I may, Your Honor, it wasn't admitted, but I believe it was admitted under another number.

THE COURT: Okay. Could you give me the other number, please? Do we have the other number?

MR. CIRESI: I don't have it right here, but we will get it for Your Honor.

THE COURT: Well --

MR. WEBER: It was admitted, Mr. Ciresi? Okay. Then we can get the number from them later.

THE COURT: Okay.

BY MS. WALBURN:

Q. Turning to the last paragraph on this page titled "Demographics," this states, "It has been well established by the National Tracking Study and other studies that Marlboro has for many years had its highest market penetration among younger smokers. Most of these studies have been restricted to people age 18 and over, but my own data, which includes younger teen-agers, shows even higher Marlboro market penetration among 15- to 17-year- olds. The teen-age years are also important because those are the years during which most smokers begin to smoke, the years in which initial brand selections are made, and the period in the life-cycle in which conformity to peer-group norms is the greatest."

What is the significance of this statement?

A. Well there's a number of significances to the statement. First, it is another indication that Philip Morris had its own internal data, and that that data included data on 15- to 17-year- olds. But in this document it also reveals that they knew that their highest -- the highest percentage of Marlboro smokers were 15 to 17 years old, so their highest market penetration, as they said, was in 15- to 17-year-olds.

They also make three statements that -- at the very last sentence -- that I think are very critical, that they know that the teen-aged years, that's when people begin to smoke, so they realize that. That's also the time when they make their brand selections, so that is very critical. And it's also the time when -- when peer- group conformity is -- is in place, so that they know about the peer groups and peer-group conformity, and they can appeal -- or perhaps exploit peer-group conformity.

Q. Would you turn in this document to page five. And that's page five at the top, not the Bates number.

This states "Conclusion," towards the bottom of the page, and the second paragraph under "Conclusion" states, "If we consider further the reported decline in Marlboro's popularity among young, we are left with the unpleasant but very real likelihood that Marlboro market share will peak in the very near future, probably in 1976 or 1977."

What is the significance of that statement?

*11 A. Well they're seeing that there's some decline in the Marlboro's popularity, and they think that that is a bad thing that's happening. That -- that Marlboro's declining, then that -- then that is a negative thing for their company. And since Marlboro is being smoked by the 15- to 17-years-olds, that that also is a bad occurrence for -- for that -- for them to be declining in the amount they're smoking Marlboro.

Q. Would you turn in the same book, book one, to Exhibit 13005. This is a document that has previously been admitted. It's titled "Winston 1990+, prepared for RJR Tobacco by FCB/LKP Marketing Planning Department 12.18.89."

Would you turn in this document to Bates number 5898. And the top of this page states "Winston, of course, faces one unique challenge we need to mention before we begin. It's what we've been calling the, quote, 'doomsday scenario:' an acute deficiency of young adult smokers, apparently implying Marlboro's final domination and our utter demise within a generation."

What is the significance of that statement?

A. Well the significance is is that Winston sees that if they don't get more new smokers, that new smokers, who are primarily under-age smokers, are needed for their company or they will be facing doomsday, their company, their brand will be facing doomsday because the young smokers are needed as replacement smokers.

Q. Would you turn in this same book to Exhibit 12579. This is a document which has been previously admitted. It's titled at the top of the page "RJR SECRET, STRATEGIC RESEARCH REPORT," it's dated February 29th, 1984, from Diane Burrows, who is in the marketing department at Reynolds, and it's to three people, including G. H. Long, the president of RJR, and it's titled "YOUNGER ADULT SMOKERS: STRATEGIES AND OPPORTUNITIES."

Would you turn to Bates numbers 8471. This page is titled "THE IMPORTANCE OF YOUNGER ADULT SMOKERS," and under paragraph one, "VOLUME," this states, "Younger adult smokers are the only source of replacement smokers. Repeated government studies (Appendix B) have shown that:

"Less than one-third of smokers (31 percent) start after age 18.

"Only 5 percent of smokers start after age 24.

"Thus, today's younger adult smoking behavior will largely determine the trend of industry volume over the next several decades. If younger adults turn away from smoking, the industry must decline, just as a population which does not give birth will eventually dwindle."

What is the significance of that statement?

A. Well RJR's recognizing that without new smokers, the ones entering, in essence giving birth to their market, that -- that their market will dwindle and eventually die without these new smokers, and the new smokers, as we know, are primarily under-age.

Q. Would you turn in this document to Bates number 8526. This page is titled "YOUNGER ADULTS' IMPORTANCE AS REPLACEMENT SMOKERS." Could you please explain the information that's contained on this page.

*12 A. Yes. They have data showing the percent of male smokers, at the very top, by what age they started smoking, and so they're - - they're showing at what age, from, you know, age 13 up to age 24, that they -- they start smoking, you know. And then at the bottom they show the current male smokers and what percent -- at what age they started smoking. And so you can see that, according to the data at this time, 68.7 percent of male smokers started by age 18.

Q. And what age does this chart begin at?

A. This chart began at age 12. You see that 9.9 percent of male smokers began smoking by age 12. So these are the ages of the -- that they were referring to, is when people start in terms of being replacement smokers.

Q. Where does the data from this chart come from?

A. This comes from the Department of Health, Education and Welfare, and it's federal data

Q. Turning again to the title of this page, the title uses the term "younger adults." Again, what is the age range of the people being discussed in these statistics on this page?

A. The age range is, in total, about 12 to age 25.

Q. Could we turn in this document to Bates number 8465. This page is titled "MANAGEMENT SUMMARY," and the second title on the page is "THE IMPORTANCE OF YOUNGER ADULT SMOKERS."

This states, "Younger adult smokers have been the critical factor in the growth and decline of every major brand and company over the last 50 years. They will continue to be just as important to brands/companies in the future for two simple reasons:"

And the first bullet point is, "The renewal of the market stems almost entirely from 18-year-old smokers. No more than 5 percent of smokers start after age 24."

What is the significance of that statement?

A. Well what they're talking about is that every brand that became a major brand for the past 50 years became a major brand because they appealed to younger smokers, to young smokers, and they're saying that their market is renewed by 18-year-olds, those who began as under-age teens.

Q. This document that we've been looking at uses the term "younger adult smokers." How does this document define that term?

A. This document defines it in a number of ways. We saw in the chart that younger adult smoker as replacement smokers, they went from age 12 to age 25; on this page they're talking about 18- year-olds; the last page, they had an age window of 18 to 24 that they called young adults.

Q. Have you seen the term "young adults" used in other tobacco company documents which you have reviewed?

A. Yes, I have.

Q. How is that term defined in the other tobacco company documents you have seen?

A. In a variety of ways.

Q. Are there some documents that define that term to be youth under age 18?

A. Yes, there are.

Q. Are there some documents that define that term to be people over age 18?

A. Yes, there are.

Q. Are there some documents that contain no definition of that term?

*13 A. Yes, there are.

Q. Based upon your review of tobacco company documents, was there any pattern in how that term "young adult" was used?

A. Yes, there was -- there was a strong pattern. What I found was that in the '50s and '60s and '70s, the documents most -- most of the time referred to under-age smokers as teen-agers or teens or high school students. In more recent years the terminology changed and they referred to younger smokers as young adult smokers or younger adult smokers. And it seemed as if this change occurred just about the same time as there was increased public pressure on tobacco companies to not market to young people.

MR. WEBER: Your Honor, I'd move to strike the last part after "it seemed as if," that's not expert opinion, it's invading the province of the jury.

THE COURT: Yeah. Well that last sentence will be stricken.

Q. From your review of tobacco company documents and from your review of tobacco company advertising and promotion campaigns, do you see any change in the advertising and promotion practices when the companies changed their terminology to "young adults?"

A. No. Young -- young people under age still continued to be primarily the people who started smoking, and many advertising campaigns would appeal to under-age teens.

Q. Throughout this period of time and into the more recent years when from your review of the documents the terminology changed to "young adults," has the significance of under-age smokers to the tobacco industry changed at all?

A. Yes, the significance of under-age smokers has actually increased. Under-age smokers have become more important because fewer adults are starting to smoke. So fewer people over the age 18, fewer percent of people over the age 18 are starting to smoke, so more people who are under age, a greater percent of people over time are under the age of 18, so they're even more important because they constitute a greater percentage of new smokers.

Q. Would you turn in book one to Exhibit 12493. This is a document which has previously been admitted, "Presentation to RJRI Board of Directors, 9/30/74, Marketing Plans." And could we turn to the next page. On the second- to-last paragraph, this states, "First, let's look at the growing importance of the young adult in the cigarette market. In 1960, this young adult market, the 14-to- 24 age group, represented 21 percent of the population."

What's the significance of this statement?

A. Well they're explicitly defining the young adult as ages 14 to 24, so including under-age teens explicitly as part of the young adult market.

Q. Did you see any documents where company employees were directed to use specific terminology in describing young smokers?

A. Yes, I did.

Q. Would you turn in book two to Exhibit 13724. This is a January 24th, 1975 Brown & Williamson memorandum, it's from Mr. R. A. Pittman, executive vice-president of Brown & Williamson, to a number of individuals including Mr. J. A. Broughton, vice-president of sales, Mr. J. R. Anders, vice-president, and Mr. J. W. Groome, director of advertising and brand management.

*14 Is this a document which you have reviewed in this case?

A. Yes, it is.

Q. Does it form part of the basis of your opinion?

A. Yes, it does.

MS. WALBURN: We would offer Exhibit 13724.

MR. WEBER: No objection, Your Honor.

THE COURT: Court will receive 13724.

BY MS. WALBURN:

Q. This entire document consists of three paragraphs. It states, "From time to time when describing market categories and target audiences we use references such as, quote, 'young smokers,' 'young market,' 'youth market,' et cetera.

"These terms do not accurately describe what we are talking about. In the future when describing the low-age end of the cigarette business please use the term 'young adult smoker' or 'young adult smoking market.'

"Please advise all members of your department that these terms should be used in all written materials in the future."

Professor Perry, this memo uses the phrase "the low-age end of the cigarette business." What is the low-age end of the cigarette business?

MR. WEBER: Your Honor, I'd object to that if it's directed to this document. It's calling for speculation as to what the author meant.

THE COURT: Well you may answer that.

A. Well at this time the low-age end of the cigarette market, according to both company and government data, would have been about age 12 to 17.

Q. Can we return to the smoking onset process. And was this discussed in the 1994 Surgeon General's report?

A. Yes, it was.

Q. Would you turn to page 126 of the Surgeon General's report, and that is Exhibit 3284. This is a chart titled "Stages of smoking initiation among children and adolescents." Using this chart, could you explain the stages of smoking initiation.

A. Yes. The -- it takes about two to three years to go through the stages of smoking onset for -- for young people; that means two to three years from your first cigarette to becoming a daily smoker, so it's a two- or three-year process. And there are five stages involved in this process.

The first is called the preparatory stage, and that's when adolescents form attitudes, beliefs about the utility or the function of smoking.

The second stage is called the trying stage, where the adolescents smoke their first few cigarettes. And remember that about two out of three adolescents who try a cigarette go on to becoming daily smokers.

The third stage is called the experimental stage, where the adolescent is smoking repeatedly but irregularly. It's not regular at that point.

And the fourth stage is regular smoking, where the adolescent is smoking at least weekly in a variety of situations and personal interactions.

And the fifth stage is addiction or dependence smoker, where the adolescent has developed a physiological need for nicotine.

So that whole -- the process from first trying to daily smoker, that's about two to three years.

Q. And with respect to the stages of smoking initiation which are described in this chart, at what stage of life do these stages generally occur?

*15 A. Almost all these stages occur during adolescence.

Q. Can we turn, Professor Perry, to the subject of why adolescents begin to smoke. Was this also covered in the 1994 Surgeon General's report?

A. Yes, it was. In fact, that part of the report was one of the parts where I did the primary research and the writing of that -- of the report.

Q. Approximately how many articles did you review in putting together that section of the report?

A. I read hundreds of articles on why teens start to smoke.

Q. And at the most basic level, what are the reasons why teens start to smoke?

A. Well at the most basic level there's two reasons. An adolescent, a teen will start smoking when the social environment presents smoking as a functional and rewarding behavior to the adolescent, so they'll start smoking if the social environment presents smoking as functional and rewarding, and because adolescents are at a particularly vulnerable or susceptible developmental stage.

Q. Would you turn in the Surgeon General's report, Exhibit 3824, to page 123 and Table 1. This is a table titled "Psychosocial risk factors in the initiation of tobacco use among adolescents." Could you explain this table, please.

A. Yes. This is a table that I prepared for the report which summarizes all of those hundreds of papers that I read on why teens begin to -- to smoke, and so this -- what this does is divide up the risk factors of those factors that increase the risk of smoking into four major areas: sociodemographic factors, and then down further, environmental factors, and then down further, behavioral factors, and then personal factors. And those little X's indicate where we found some association between that factor and -- and smoking among -- among youth.

Q. According to your research, which of these factors is most important?

A. The environmental factors as a -- as a group are the most important in predicting the onset of smoking.

Q. And is advertising one of the environmental factors that is listed in this chart?

A. Yes, it is. In fact, advertising was considered so important we took it out of this chapter and we created a chapter - - an entire chapter on advertising for the Surgeon General's report. Also, advertising affects these other factors, it affects peer use, normative expectations, it affects some of the personal factors. So that's -- we decided to create its own chapter.

Q. And again, there is an X by advertising on this chart?

A. Yes, there is.

Q. Could we move down the chart to personal factors. It lists there knowledge of consequences. Can you explain what that shows?

A. Well as you can see, there's no little X next to the knowledge of consequences, and what that means is the data showed that having knowledge of consequences wasn't a predictor of whether adolescents would or -- or wouldn't smoke. In fact, at this -- at this stage of life, knowledge of consequences doesn't have much effect on their behavior. They can't really process these consequences.

*16 Q. And moving back up to environmental factors, there's a line there for parental use. Can you explain what this chart shows with respect to parental use?

A. Well we didn't put a little X by parental use either. After reviewing all the literature, it didn't turn out to be a strong factor, much to our -- our surprise.

MS. WALBURN: May I approach, Your Honor?

Q. Showing you a board which has been marked Exhibit 30240, is this a chart which was prepared under your direction?

A. Yes, it was.

Q. And would this be helpful in illustrating your testimony?

A. Yes, it would be.

MS. WALBURN: Your Honor, we would offer Exhibit 30240 for illustrative purposes.

MR. WEBER: No objection, Your Honor.

THE COURT: Court will receive 30240 for illustrative purposes.

BY MS. WALBURN:

Q. With the court's permission, professor, could you come down and explain this chart.

A. This is a chart we prepared on the social environment of adolescents, and you can see that the adolescent -- the adolescent is here, just as the adolescent would like to be, in the middle of the universe, and nearest to the adolescents are parents, siblings and best friends. Next nearest are peers, relatives, teachers, other friends. And next are community members, community policies and practices, media and advertising, and societal leaders. All of these layers influence the adolescent.

Q. How would the outer layer, including media and advertising, influence the adolescent?

A. Well this layer can influence the adolescent if it's potent or pervasive. It can influence the adolescent directly, but also it can influence the adolescent by influencing others who in turn will influence the adolescent.

In a way we can think of this outer layer as kind of permeating the social environment of the adolescent.

Q. Professor Perry, with this chart in mind, how would you describe cigarette advertising in the United States?

A. I would describe it as potent in terms of the kinds of images that it projects, pervasive because there's so much advertising, and influential, it's an influence on other people in the social environment as well as influencing the adolescents directly.

Q. Based upon your experience and research, what do adolescents say when asked to identify the reasons why they started smoking? What factors do they list?

A. Well adolescents list a lot of factors for why they start smoking, but they generally did not list advertising as a factor.

Q. And based upon your experience and research, why is it that young people do not mention advertising as a factor?

A. Well adolescents primarily can see and understand what they -- what -- what's closest to them, kind of like what they can see and touch and feel. So they can see and understand those that are closest to them, but they cannot really see or understand the influence of the larger social environment.

Q. Thank you. You can return to the stand.

Would you turn in book two, please, to Exhibit 26063. This is an article titled "Seventh Graders' Self-Reported Exposure to Cigarette Marketing and Its Relationship to Their Smoking Behavior," by Caroline Schooler and several other authors. It ran in September 1996 in the American Journal of Public Health.

*17 Is this an article that is published in a reliable journal by a reliable author?

A. Yes, it is.

Q. Does it form part of the basis of your opinions?

A. Yes, it does.

MS. WALBURN: Your Honor, we would offer this under Rule 803(18).

MR. WEBER: No objection, Your Honor.

THE COURT: Court will receive 26063.

BY MS. WALBURN:

Q. Can you generally describe this article.

A. Yes. This article reports on seventh graders' exposure to different advertising and promotional activities and the influence on their behavior.

Q. And have you prepared a chart using the information from this article?

A. Yes, I have.

Q. Would you turn in the same book to Exhibit 26070. Is this the chart which you prepared?

A. Yes, it is.

Q. Would it be helpful in explaining your testimony?

A. Yes, it would be.

MS. WALBURN: Your Honor, we would offer Exhibit 26070 for illustrative purposes.

MR. WEBER: No objection, Your Honor.

THE COURT: Court will receive 26070 for illustrative purposes.

BY MS. WALBURN:

Q. Could you please explain this chart for the jury and the court.

A. Yes. This is --

These are data collected from seventh graders, which are their reports of how much exposure they have to particular cigarette advertising and promotional activities. And just as a reminder, seventh graders are about 12 or 13 years old, just so you can remember that.

The first line says -- tells us whether they saw -- how many reported seeing cigarette advertisements in magazines either sometimes or a lot, and the total, you can see 50 percent reported seeing cigarette advertisement in magazines sometimes or a lot, that was 73 percent of males and 32 percent of females.

Going down, you can see that they report seeing billboard cigarette ads -- 90 percent report seeing billboard cigarette ads sometimes or a lot.

Then we looked at -- or they looked at cigarette ads in stores, and you can see about 62 percent of these seventh graders see cigarette ads in stores sometimes or a lot. And then cigarette ads at sports or other events, 74 percent see cigarette ads at sports or other events sometimes or a lot.

Then they were asked had they received mailing from cigarette companies, and this was mailing that was addressed to them, seventh graders, and you can see that 17 percent reported having received a mailing from a cigarette company.

Finally, they were asked if they owned a cigarette promotional item, and 27 percent of the seventh graders reported owning a cigarette promotional item.

Q. What is the significance of the information in this chart and article?

A. Well I think this -- the significance of this is the -- is just very high exposure that even young adolescents have to advertisements in magazines, billboards, stores and events. Also that they -- they do receive mailings. And -- and over a quarter own some kind of promotional item at age 12, 13 years old.

Q. Professor Perry, do you have some paragraphs to illustrate cigarette advertising and promotions in the Twin Cities?

*18 A. Yes, I do.

Q. And did you direct the types of photographs to be taken?

A. Yes, I did. I directed the photographer to take photographs around the Twin Cities. This was right over the holiday time. I wanted, you know, pictures of billboards, bus stops, convenience stores, inside and out, and point of purchase, to demonstrate the pervasiveness of -- of advertising in our community.

MS. WALBURN: Your Honor, at this time we would offer for illustrative purposes the following eight photographs by exhibit numbers: 30228, 30258A, 30258B, 30259A, 30259B, 30263, 30265A and 30265B.

MR. WEBER: Your Honor, with respect to these, I'd raise two issues. One, they weren't disclosed in the course of the expert discovery, either in the report or in the depositions. And secondly, I think they were just taken recently, and that raises that 1994 issue.

MS. WALBURN: Your Honor, with respect to expert disclosure, these documents -- these photographs were on the exhibit list and copies were provided to the defendants in December. We sent a letter to defendants last week asking if they had objections to foundation of these photographs, and we received no response. So we have affidavits from the photographer and an investigator who accompanied the photographer, and we have those for the court if the court so desires.

With respect to the post-'94 issue, that addresses discovery issues. This is information which is out there in the public, and there's been no such cutoff for that information.

MR. WEBER: My issue is not so much the, you know, authenticity of the photographs, I'm sure somebody went out and took photographs in the field and they were accurately reproduced. My issue primarily goes to the fact, with all the expert discovery we did, this was never disclosed to us as part of the presentation of the professor.

THE COURT: Well, I'm going to allow the pictures as 30228, 30258A/B, 30259A/B, and 30265A/B. Is that correct?

MS. WALBURN: And I think one additional one, 30263.

THE COURT: 30263. They'll be received for illustrative purposes.

BY MS. WALBURN:

Q. Can we turn to Exhibit 30265A first. Can you describe this photograph, please.

A. Yes. This is a photograph taken from the freeway near St. Paul. The overhead doesn't do it quite justice, but you can see the Marlboro ad's very prominent on the freeway, and then in the back you can see the Winston billboard.

Q. Can you turn to Exhibit 30265B. Can you describe this photograph.

A. Yes. This is a bus stop and you see advertisements at bus stops. This was a new Camel campaign, "What you're looking for," and this also is shot in the Twin Cities.

Q. Would you turn to Exhibit 30258A. Would you describe this photograph, please.

A. Yes. This is a photograph of a neon billboard, which is quite noticeable at nighttime.

Q. Would you turn to Exhibit 30259B.

MR. WEBER: Your Honor, could I ask on these, as we go through, that if the professor knows, she could state where these are, just --

*19 THE COURT: If she knows, I think that would be appropriate.

MS. WALBURN: Your Honor, I have that information and can provide it for the record.

THE COURT: All right. Then as you go along, maybe you can identify its location.

BY MS. WALBURN:

Q. Exhibit 30259B is a photograph taken on December 30th outside a convenience market at the intersection of Prosperity Avenue and Maryland Avenue in St. Paul.

Could you describe this photograph, please.

A. Yes. This convenience store, the point of this is just the amount of advertising, the small advertisings, Kool, Newport, Marlboro, et cetera, outside the convenience stores.

Q. Could you turn to Exhibit 30228. And this is a photograph taken on January 7th at a convenience store in Prior Lake. Would you describe this photograph.

A. Yes. This is looking inside a convenience store and a prominent advertisement inside the store.

Q. Would you turn to Exhibit 30263. This photograph was taken on December 30th inside a convenience store at Maryland and Duluth in St. Paul. Would you describe this photograph, please.

A. Yeah, this -- this -- yes. This is a point-of-purchase display, and there's a holiday special for Marlboro, there's a Merit special where you buy two packs and you get a free ice scraper. And what -- the point-of-purchase displays just make it more attractive for the buyer when they're in the store.

Q. Would you turn to Exhibit 30258B. And this photograph was taken on December 30th inside a market at White Bear Avenue and East 7th Street in St. Paul. Would you describe this photograph, please.

A. Yes. You can see the advertisement for Camel, pointing -- there's two advertisements actually, advertisements along the wall here next to the can -- the can -- the candy; cigarettes being sold all behind there.

Q. And finally would you turn to Exhibit 30259A. This is a photograph taken on December 30th inside a market at the intersection of Prosperity Avenue and Maryland Avenue, it's in St. Paul. Would you describe this photograph, please.

A. Well this just shows advertisements at a low level that even a very small person can't miss this advertisement, Salem, Move to Smooth, the Winston, No Bull.

Q. Are there other types of promotional items used by the tobacco companies?

A. Yes, there are.

Q. Would you turn in your book to Exhibit 14784. And I believe that's in book two. Is this an example of a promotional item from R. J. Reynolds?

A. Yes, it is.

Q. Does it form part of the basis of your opinions?

A. Yes, it does.

MS. WALBURN: Your Honor, we would offer Exhibit 14784.

MR. WEBER: No objection, Your Honor.

THE COURT: Court will receive 14784.

BY MS. WALBURN:

Q. I have our one original copy here.

MS. WALBURN: With the court's permission, can I approach?

(Document handed to the witness.)

Q. Can you describe -- describe this exhibit for the jury and the court, please.

A. Yes. This is a promotional booklet. On the front it says "Wanna see a show?" And it opens up and there's a flip-out with Joe Camel offering -- offering tickets and -- and it reads, "Go ahead, it's on me. Save $25 on Ticketmaster tickets with Camel Cash.

*20 "I'm not just talkin' concerts. With these $25 gift certificates, you could save on tickets to just about any Ticketmaster event. And it only takes 100 Camel Cash C-Notes to get one. What is this rockin' deal? Just flip the page, and you'll find it in the Camel Cash Rockin' Road Trip."

So then if you flip the page, the Rockin' Road Trip is a promotional catalog, and it says, "Take a Rockin' Road Trip," and it says, "Someone take your Road Trip?" Means did they take this promotional catalog. "No problem. To get your own and save $25 on Ticketmaster tickets, go to -- to wherever you buy your smokes, or call 1-800-CAMEL-CASH (that's 1-800-226-3522)."

And so what this does is offer tickets if you have saved up Camel Cash, and you save up Camel Cash by smoking Camel cigarettes.

Q. Professor Perry, is there evidence that advertising and promotion affects adolescents' perceptions of smoking?

A. Yes, there are. The pervasiveness of smoking affects adolescents' perceptions of -- of whether smoking is considered usual or normal behavior.

Q. And did the Surgeon General's report address this issue?

A. Yes, it did.

Q. Would you turn in book two to Exhibit 26069.

THE COURT: Counsel, I wonder if we should take a recess at this time.

THE CLERK: Court stands in recess.

(Recess taken.)

THE CLERK: All rise. Court is again in session.

(Jury enters the courtroom.)

THE CLERK: Please be seated.

THE COURT: Counsel.

MS. WALBURN: Thank you, Your Honor.

MS. WALBURN: Before we proceed to clear up the record on the Philip Morris exhibit, which was referenced earlier, Trial Exhibit 10528 was previously admitted as Trial Exhibit 2557.

THE COURT: Thank you.

BY MS. WALBURN:

Q. Professor Perry, turning to Exhibit 26069, this is a chart titled "Teens' Perceptions of the Prevalence of Smoking." Is this a chart which you prepared?

A. Yes, it is.

Q. And what is the source of information for this chart?

A. These are quotations from the Surgeon General's report.

MS. WALBURN: Your Honor, we would offer Exhibit 26069 for illustrative purposes.

MR. WEBER: No objection, Your Honor.

THE COURT: Court will receive 26069 for illustrative purposes.

BY MS. WALBURN:

Q. Would you please explain this chart, Professor Perry.

A. Yes. First I should say it's the 1994 Surgeon General's report, because there's lots of Surgeon General's reports. So this was the report on teen smoking, and these are three facts that we discovered as part of the Surgeon General's report on teens' perceptions of the prevalence of smoking; that is, what do teens -- how -- how many percentages of people do teens think smoke, and the first point is that:

"Studies have consistently reported that teens overestimate the prevalence of cigarette smoking...," and what this means is that many studies have shown that teens think that, for example, two-thirds of adults smoke or a large percent of teens smoke, a greater percentage than actually do smoke.

*21 The second point is -- says, "Significant associations were also found between exposure to cigarette advertising and students' estimates of smoking prevalence among their peers and among adults." And what this quote means is that associations, statistically significant associations were found between exposure, how much cigarette advertising students had seen, and these percentages, how much they estimated that peers and adults smoked.

And the final quote is that "Overestimating smoking prevalence has been found to be among the strongest predictors of smoking initiation...." So these overestimates, or the adolescents who are more likely to overestimate, they're more likely to go on to -- to smoke.

Q. In your own experience and research in this area, have you found a pattern similar to that reported in the Surgeon General's report with respect to this information?

A. Yes. We -- we called a part of our program, and I described our programs to you on Friday, and as part of our programs we do what we call correcting norms, but by "norms" is what they -- what they think, whether they think smoking is usual behavior. And I'll just describe how the lesson goes so that you can see how this works. And we've done this really in literally hundreds of classrooms. The students are in small groups led by their peer leader, and they're asked to write down the number of seventh graders -- this is usually done in the sixth or seventh grade -- the number of seventh graders who usually smoke or who they -- who they think are smokers, are regular smokers.

So at first we did it with percentages, but we found that was a little difficult, so then we said out of a hundred seventh graders, how many do you think are regular smokers? And so each student in that group writes down their number secretly, and then the peer leader collects the numbers from their group and gets an average for their -- for their group. And you can imagine with seventh graders, this takes 15, 20, 25 minutes for them to do this.

Then they report back what their average guesses are, their perceptions of how many people their age, seventh graders, smoke, and every time we've done this the averages have been from 40 percent to 60, 70 percent. They think 40 percent to 60, 70 percent of their peers smoke, even though only about five percent of them smoke.

So we draw those graphs and then -- and then show them that only five percent smoke. And this has occurred over and over again.

Q. Professor Perry, do friends or peers have an effect on youth smoking?

A. Yes, they do. If a best friend smokes, for example, that can be a very powerful influence because the best friend is -- is - - is an important role model.

Q. In your early research, what were your views on the impact of peers on youth smoking?

A. In my early research I thought peers were the most potent influence on smoking.

Q. And what are your opinions today?

A. Well, I still think peers are an important influence, that peers influence each other. But peers in turn are responding to influences from the larger social environment. So peers influence each other, but they are learning from the larger social environment. For example, smoking didn't -- wasn't invented in the peer group, and these peers don't -- peer groups don't operate in a vacuum. We could probably think of peers best as conduits for the larger social environment.

*22 Q. Can advertising be one of the influences that affects peers?

A. Yes, it can be. And as we'll see later in the tobacco industry documents, advertisements -- advertising actually targeted the peer group.

Q. What about parents who smoke? We saw earlier a reference to that in the Surgeon General's report. Are parents an influence on children smoking?

A. Well parents, of course, are -- are an influence on their children, but over time, as the research has gone -- gone on, we found that they're not as strong an influence as we once thought they were. That's why we didn't put the X in the Surgeon General's report. There were reports that went both ways, you know, that parents did influence and parents didn't influence. The research was pretty mixed on that.

Q. And why aren't parents a stronger influence? Why is that research mixed?

A. Well parents are clearly important role models for their children and for -- and -- and for their adolescent children, but parents who smoke not only model smoking, but they model the consequences of smoking. So a parent might be thinking about quitting or might have actually tried to quit and had difficulty quitting, or a parent might be having health problems, or an adolescent might see the parent having these problems, or they might not like -- the adolescent might not like the smoke or -- or, you know, the ashes or something related to that. So the adolescent is very close to the parent, not only sees the parent modeling smoking, but also sees them modeling the consequences of smoking.

For adolescents, they perceive fewer negative consequences when they see their peers smoking. And there are no negative consequences displayed in cigarette advertisements.

Q. Moving from the environment of adolescents, the world they live in, can we turn to the developmental stage of adolescence. Is this a factor in youth smoking?

A. Yes. Adolescents are at a particularly vulnerable or susceptible stage of development in their lives. This means that they're vulnerable or susceptible to influences that match their developmental stage.

Q. Would you turn in book two to Exhibit 26067. Is this an exhibit prepared under your direction?

A. Yes, this is an exhibit I prepared myself.

Q. And does it describe adolescent developmental changes?

A. Yes, it does.

Q. Would it be helpful to illustrate your testimony?

A. Yes, it would be.

MS. WALBURN: Your Honor, we would offer Trial Exhibit 26067 for illustrative purposes.

MR. WEBER: No objection, Your Honor.

THE COURT: Court will receive 26067 for illustrative purposes.

BY MS. WALBURN:

Q. Using this chart, Professor Perry, can you describe adolescent developmental changes.

A. Yes. The changes that go on during adolescence are really profound changes. This is a time of great change in -- in a person's life. There are three major categories, primary changes that occur during this time.

The first changes are physical changes, and during adolescence, as the adolescent grows, there's rapid growth starting usually during early adolescence, and they reach their adult height generally by the end of adolescence. They go through puberty, there are hormonal changes, and it's the beginning of their reproductive capability.

*23 The second kind of changes are cognitive changes, and these are almost as dramatic as the physical changes in the adolescent. The adolescent moves from being a concrete here-and-now kind of thinker to being an abstract cause/effect thinker over the course of adolescence, early, middle to late adolescence. During early adolescence and middle adolescence they're primarily concrete thinkers; that means that they are capable of thinking about what they can see, feel, touch. That's what they can think about. They can't comprehend things that are abstract, such as the future, so they can't comprehend the consequences of their behavior, particularly the long-term consequences of their behavior. And they can't comprehend abstract words very well, like future or health, things that don't have a concrete meaning to them.

The third major kind of change are social changes, and during adolescence you come in as a child and you go out of adolescence ready for your adult role as partner, provider, and citizen, your social roles of partner, provider and citizen. Now during early adolescence you begin to sense these changes, and that's the time where in life, during early adolescence, where there's quite a low self-image. It's also a time where -- where they need a lot of privacy; a lot of closed doors start happening during that time. During this time also they perceive of themselves as on stage with everybody watching them.

Q. Do these changes which you've been describing occur in a predictable way in adolescents?

A. No, and that's -- and that's very problematic. So it's not that the physical, the cognitive, and the social all kind of march along together. Not only do they occur at different times, they occur at different times for different people. So an adolescent might look like they're 17, 18 years old, they might only actually be 13 or 14 years old and they may still be concrete thinkers. So the outside world might treat them as an adult, but they don't have the -- the capability, the capacity to be able to - - to -- to deal with those expectations.

Q. And given the developmental stage of adolescence and looking particularly at the cognitive stage, how, if at all, does this affect the ability of adolescents to make decisions about smoking?

A. Well there's -- there's two major things that relate to their thinking capacity on smoking, and one is is that they can't really comprehend the long- term consequences of smoking. That is something in the future. They cannot really comprehend it. That's also part of the reason they're willing to take risks, because they don't understand the consequences of those risks.

They also really don't understand the connection between smoking and health. For adolescents, health means that I'm not sick today, so if I'm not sick today, I'm healthy. They -- so they can't really get the connection between health in a -- in a general sense. What it boils down to is that -- is cognitively, in their thinking capacity, adolescents really can't make an informed decision about smoking.

*24 Q. Do you know from your review of tobacco company documents the tobacco industry's position as to whether adolescents are capable of making an informed choice about smoking?

A. The tobacco industry documents were in agreement that adolescents cannot make an informed decision about smoking.

Q. Would you turn in book two to Exhibit 14449 and 14450. Exhibit 14449 is a Tobacco Institute memorandum dated August 1st, 1979 from William Kloepfer, Jr., senior vice-president. Exhibit 14450 is the attachment to that cover memo.

Are these documents which you have reviewed in this case?

A. Yes, they are.

Q. Do they form part of the basis of your opinions?

A. Yes, they do.

MS. WALBURN: Your Honor, we would offer Exhibits 14449 and 14450.

MR. WEBER: No objection, Your Honor.

THE COURT: Court will receive 14449, 14450.

BY MS. WALBURN:

Q. Exhibit 14449, again, is from William Kloepfer, Jr. to a number of individuals, and at the bottom of the page it is copied to Horace Kornegay, who is or was president of The Tobacco Institute.

Turning to the attachment, Exhibit 14450, this is labeled "DRAFT," August 1st, 1979, and the first paragraph states, "Smoking is an adult custom, one to be decided on by mature, informed persons. The controversies about smoking involve many aspects of medical opinion and research findings which cannot be fully understood by children and adolescents. Such persons cannot, therefore, meet the requirements of maturity and full knowledge."

Professor Perry, do you agree with that statement with respect to children and adolescents?

A. Yes, I do.

Q. Have you seen public statements from the tobacco companies which indicate the age at which young people reach maturity and would be able to make an informed decision about smoking?

A. Yes, I have.

Q. Would you turn in book two to Exhibit 13957. This is the transcript of a 20/20 telecast dated October 20th, 1983, produced by Brown & Williamson in this litigation, and it includes an interview with Ann Browder of The Tobacco Institute.

Is this a document you have reviewed in this case?

A. Yes, it is.

Q. Does it form part of the basis of your opinions?

A. Yes, it does.

MS. WALBURN: Your Honor, we would offer Exhibit 13957.

MR. WEBER: Your Honor, I object to that. It's a transcript of one of these television news shows. It's got hearsay within hearsay. It's got statements from all sorts of people who aren't experts.

If you want to -- if the court would prefer to discuss this at side-bar, I'd be glad to, but it clearly -- unless there's one little line or something they're going to offer, and only that, I think it's entirely inappropriate.

MS. WALBURN: Your Honor, there was no foundation objection made to this document. And in addition, we are offering it for discrete segments which contain admissions from The Tobacco Institute on behalf of the manufacturers.

THE COURT: Well can you just introduce the segments that relate to admissions made by tobacco companies?

*25 MS. WALBURN: Certainly. We may need time at a break to redact the document.

THE COURT: All right. I'll allow you to inquire, and I'll hold my ruling until you delete the other statements. Okay?

MR. WEBER: At this point it's just the statement from The Tobacco Institute person then. Is -- am I following that?

THE COURT: That's correct. Those -- she may address those statements, but not the other statements.

BY MS. WALBURN:

Q. If you turn in that document to Bates numbers 95250, and in the second half of that page it shows Browder, who is Ann Browder from The Tobacco Institute, stating, "We feel very strongly that cigarette smoking is an adult custom that one should not even consider until they've reached the age of maturity."

And the reporter asks, "What's maturity?"

And Browder replies, "Anyone over the age of 21."

Have you seen other similar public statements by the tobacco companies?

A. Yes, I have.

Q. Would you turn to Exhibit 14554, also in book two. Is this a document which you have reviewed in this case?

A. Yes, it is.

Q. And does this form part of the basis of your opinions?

A. Yes, it does.

Q. This is a press release from the -- or appears to be a press release from The Tobacco Institute titled "...ON YOUTH SMOKING, TOBACCO INDUSTRY GUIDELINES."

MS. WALBURN: And Your Honor, we would offer Exhibit 14554.

MR. WEBER: No objection to the document, but I see nothing on it that says it's a press release. But I have no objection to the admission of it.

THE COURT: All right. Court will receive 14544.

MR. WEBER: I think it was 554, Your Honor. I may be --

MS. WALBURN: It is --

THE COURT: 554, is it?

MS. WALBURN: Yes, Your Honor.

THE COURT: The record should show it's 14554.

BY MS. WALBURN:

Q. Again, this has The Tobacco Institute on the left -- upper left-hand corner, it's titled "...ON YOUTH SMOKING, TOBACCO INDUSTRY GUIDELINES."

The first paragraph reads, "Long holding the view that smoking is for adults who choose to smoke -- and an activity that should not be engaged in by youth -- the tobacco industry has taken measures to address public concerns about youth smoking."

Looking, Professor Perry, at that first paragraph, that uses the term "youth." Is there any age identified in that first paragraph with respect to the term "youth?"

A. There is no age in the paragraph, but in the bullet point the age is 21.

Q. The first bullet point reads, "Do not advertise in publications directed primarily to persons under 21." Is that one of the bullet points --

A. Yes.

Q. -- which you were referencing?

The second bullet point states, "Do not use models in cigarette advertisements who are, or appear to be, under 25."

A. Yes.

Q. The next bullet point states, "Do not distribute cigarette samples to persons under age 21?"

A. Yes.

Q. And then moving down the page to "Conduct no mail distribution" -- not quite so far. The second bullet point in that section, "Conduct no mail distribution to cigarette product samples without written, signed certification that the addressee is 21 or older, a smoker and wishes to receive a product sample."

*26 A. Yes.

Q. And then moving down the page to the third bullet point from the bottom, "Conduct no other distribution of non-tobacco premium items bearing the cigarette brand names, logos, et cetera, except with the purchase of a package or carton of cigarettes to persons 21 or older."

What is the significance --

MR. WEBER: Your Honor, I may have missed that, but I think there was a misread. I don't think the "or" in the last line was read.

THE COURT: That's correct. You'll have to reread that, counsel.

Q. "Conduct no other distribution of non-tobacco premium items bearing the cigarette brand names, logos, et cetera, except with the purchase of a package or carton of cigarettes or to persons 21 or older."

Do you see that, Professor Perry?

A. Yes, I do.

Q. And what is the significance of these statements?

A. That The Tobacco Institute considers the age 21 to be the age where it's appropriate to -- for their advertising and promotional activities, 21 and older.

Q. Were there other documents where the tobacco industry publicly stated that they should not market to young people under the age of 21?

A. Yes, there were.

Q. Would you turn in book two to Exhibit 13645. This is a May 4th, 1979 letter from C. I. McCarty, the chairman of Brown & Williamson Tobacco Corporation, to Joseph Califano, Secretary of Health, Education & Welfare.

Is this a document which you have reviewed in this case?

A. Yes, it is.

Q. Does this form part of the basis of your opinions?

A. Yes, it does.

MS. WALBURN: Your Honor, we would offer Exhibit 13645.

MR. WEBER: No objection, Your Honor.

THE COURT: Court will receive 13645.

BY MS. WALBURN:

Q. This document is a little bit difficult to read, but on the very top you can see the logo of Brown & Williamson Tobacco Corporation, and in the left- hand margin the name C. I. McCarty, Chairman, the date May 4th, 1979, and in the bottom left-hand corner, this is addressed to Mr. Joseph A. Califano, Jr., the Secretary of Health, Education & Welfare, Washington, D.C.

The first paragraph of this letter states:

"Dear Mr. Califano:

"Because of our policy against advertising or in any way promoting the sale of cigarettes to persons under 21, Brown & Williamson does not have at hand the research data and other information necessary to a responsible analysis of the suggestion made in your letter of April 26."

According to this document, Professor Perry, what was the public representation of Brown & Williamson to the government regarding marketing to young people age 21?

A. That they were against that.

Q. And age 21, what stage of adolescence would that be?

A. That would be at the end of adolescence.

Q. Looking again at that first paragraph, the chairman of Brown & Williamson states that the company does not have research data on hand, and he goes on to say in the second paragraph, "I should appreciate it, therefore, if you would send us the National Institute of Education survey, the sources for the data on smoking by 19-year-olds and subteens and any other material you think pertinent so we can make an intelligent response to your specific suggestions."

*27 Based on your review of Brown & Williamson documents in this litigation, did Brown & Williamson have information on smoking by teen-agers prior to the time this letter was written?

MR. WEBER: Objection, Your Honor, the letter refers to another letter that made certain requests. Obviously, we can't judge what data they had that was responsive unless their requests are also specified.

THE COURT: Well yes, that's true, except that wasn't the question.

MR. WEBER: Well I'm overruled then>, I --

My objection was that you can't compare what they had and what was being referred to here unless you know what was referred to in the first paragraph as to the inquiry from the secretary.

THE COURT: Okay. Well that may be relevant to know, but that wasn't the question that was asked. And you may answer the question.

A. Could you repeat it?

Q. Sure.

Based on your review of Brown & Williamson documents in this litigation, did Brown & Williamson have information on smoking by teen-agers prior to the time this letter was written?

A. Yes. They regularly reported information on 16- to 25- year-olds, which would include 19-year-olds.

Q. Professor Perry, based on your experience and research, if an advertisement is directed to an adolescent age 18, what effect, if any, would that have on an adolescent under age 18?

A. Well at age --

Age 18 isn't any magical age. That is, when you turn age 18, nothing really magical happens. In fact, most people when they turn age 18 are still in high school, so that their friends and peers may also be age 18, but they may also be age 17, age 16, age 15. So an advertisement aimed at 18-year-olds is very likely to also be appealing to a 17-year-old and a 16-year-old, a 15-year-old. There's no really magic -- magic thing about turning age 18.

Q. And what, if any, is the significance of that?

A. That you really can't just target one particular age group, one particular age.

Q. Going back to the developmental stages occurring in adolescence, is there something called developmental tasks?

A. Yes, there are. We talked about those three major developmental changes that occur during adolescence, and those changes have a purpose, and those -- and those purposes are called developmental tasks. It's what an adolescent is supposed to accomplish during the stage of adolescence.

MS. WALBURN: May I approach, Your Honor?

Q. Showing you what has been marked as Exhibit 30238, is this a chart that was developed under your direction?

A. Yes, it was.

Q. And does this explain the developmental tasks of adolescence?

A. Yes, it does.

Q. Would it be helpful in aiding your testimony?

A. Yes, it would be.

MS. WALBURN: Your Honor, we would offer Exhibit 30238 for illustrative purposes.

MR. WEBER: No objection, Your Honor.

THE COURT: The court will receive 30238 for illustrative purposes.

BY MR. WALBURN:

Q. And with the court's permission, Professor Perry, could you come down and explain this chart.

*28 A. Most scientists agree that there are four to six developmental tasks during adolescence, and what I've tried to do with this chart is not only label these developmental tasks, but also give you a kind of typical question that an adolescent might ask that illustrates each task so you -- you kind of see it from the adolescent's point of view.

The first developmental task is independence, and what this means for the adolescent is that they want more self-directed activity, they want to be able to engage in more self-directed activity, take part in family decisions, make their own decisions. You'll often hear an adolescent say, "Can I please make my own decisions?" even when they might not be particularly wise ones like "Why can't I get a tattoo?"

The second developmental task is attachment to parents, and during the course of adolescence, the relationship between children and their parents changes to one that is more appropriate in our culture for parents and adult children, so there's a change during that. During early adolescence you see this really -- it's very pronounced, and that some days the adolescent wants to be treated like a child and the next day they want to be treated like an adult. And the parent can get caught in that confusion. The child - - the adolescent wants to be both attached and detached. You would hear an adolescent say -- and this is actually the name of a book on adolescence -- "Can you leave me alone?" But then a few moments later or a few seconds later, they will say, "But first, will you drive me to the mall?" So they're both attached and detached.

The third developmental task is intimacy and peers. And during adolescence there's an increased capacity for friendship; that is, they start out by forming same gender cliques which form into groups and then the peer group, which is a precursor to -- to dating and their social roles as adults. During early adolescence, conformity to peers, wanting to become part of a peer group, is at its highest -- that's during early adolescence, 11 to 14 -- and adolescents often worry about if they're fitting into the peer group. They say they wonder "Do I fit in? Do they like me?"

The fourth task is achievement, and this has to do with getting ready for their adult role as provider, either in the work place or at home. They're getting ready for that role. And they ask themselves, "What do I want to become? In what areas will I be successful?"

The fifth task is identity, and for this task they're putting together all these changes going on in themselves and they're trying to get a coherent, a -- a clear picture of themselves. And often they'll try on different roles, particularly during early adolescence. It's during this particular time, too, early adolescence, where their self-image is really at the lowest in the whole life cycle, and they ask themselves, "Am I normal? Who am I?" Those are the kinds of questions that they're asking.

The final developmental task is sexuality. They need to learn about new social roles and gender identity as kind of a way to -- their precursor to finding a partner, so they're learning all of these new things. In early adolescence, how this shows up is in crushes; they get crushes on celebrities or even billboard heroes. These crushes are generally discarded when real relationships emerge and dating emerges. And adolescents really spend a lot of time worrying about this question: "Am I attractive?"

*29 So these are the six major developmental tasks of adolescence. This is what they're supposed to accomplish during this time. These -- these are the driving force for this stage of life.

Q. Professor Perry, are youth risk-takers?

A. Well youth can take risks; that is, they can engage in behaviors that might compromise their health in order to accomplish these developmental tasks. So they might take risks to develop -- to accomplish one of these developmental tasks and because they can't comprehend the consequences of their behavior.

Q. And how, if at all, would that affect their reaction to outside influences?

A. Well they're going to be --

Adolescents will be very susceptible to outside influences that demonstrate or teach them how to accomplish -- to teach them how to accomplish these developmental tasks.

Q. Thank you. You can return to the stand.

From your review of the tobacco company documents, did you come to learn whether or not the tobacco companies also studied the various aspects of adolescent development which you have been describing here?

A. Yes, they did.

Q. And what if anything did the tobacco companies do with their knowledge of adolescent development?

A. The tobacco companies understand these major developmental tasks and they exploited these developmental tasks. The major themes of advertising and promotion correspond to these developmental tasks. In a way, advertising and promotions became a way to teach adolescents how to accomplish these tasks, even an easy way to accomplish these tasks.

Q. Are there tobacco company documents that discuss the themes of independence and attachment?

A. Yes, there are.

Q. Would you turn in book one to Exhibit 12579. This is a document which you referenced earlier in your testimony titled "YOUNGER ADULT SMOKERS: STRATEGIES AND OPPORTUNITIES" from R. J. Reynolds.

Would you turn to Bates number 8486. And in this section, Reynolds is discussing Marlboro and states, starting in the third bullet point there, "Marlboro's intensity fit the mindset of younger adults in the 1960s.

"Marlboro's positioning was in tune with younger adult smokers' enduring want to express their maturity and independence through smoking. (The Marlboro cowboy is always shown as an a mature, even older man.)

"Marlboro acquired younger adult smokers than WINSTON and, by the late 1960's, this meant the Baby Bubble, the largest cohort of people, and smokers, in history."

Professor, what is the significance of those statements?

A. Well Reynolds -- R. J. Reynolds was looking at Marlboro and its success with the baby bubble or baby boomers during the 1960s and talking about that Marlboro's position was in tune with - - with young people by presenting a very independent, mature person in their advertising.

Q. Are there internal tobacco company documents which discuss the importance of peers in the decision to smoke?

A. Yes, there are.

Q. Would you turn to Exhibit 12761 in book one. This is an RJR document dated March 12th, 1986, to Mr. D. N. Iauco, and the title is "CAMEL New Advertising Campaign Development."

*30 Is this a document which you reviewed in this case?

A. Yes, it is.

Q. Does this form part of the basis of your opinions?

A. Yes, it does.

MS. WALBURN: Your Honor, we would offer Exhibit 12761.

MR. WEBER: No objection, Your Honor.

THE COURT: Court will receive 12761.

BY MS. WALBURN:

Q. Looking at paragraph two on this first page titled "ADVERTISING OBJECTIVE," this states, "Overall, CAMEL advertising will be directed toward using peer acceptance/influence to provide the motivation for target smokers to select CAMEL. Specifically, advertising will be developed with the objective of convincing target smokers that by selecting CAMEL as their usual brand they will project an image that will enhance their acceptance among their peers."

And if you turn to page Bates No. 9241 in that document, under the section titled "Psychological Motivation," the document goes on to state, "Aspiration to an image which will make target smokers cool/accepted by their peers.

"Rationale.

"Aspiration to be perceived as a cool/member of the in-group is one of the strongest influences affecting the behavior of younger adult smokers.

"Personality attributes respected by target smokers and inherent in their definition of cool include a degree of rebellion or non-conformity, along with the self-confidence to remain in control of the somewhat risky, exciting lifestyle associated with this -- with these characteristics.

"CAMEL'S non-conformist, self-confident user heritage, in conjunction with its perception as a unique, different and one-of- a-kind brand, makes CAMEL the only brand which can credibly execute this strategy.

"This approach will capitalize on the ubiquitous nature of Marlboro as repositioning it as the epitome of conformity, versus CAMEL the smoke of the cool/in-group."

Q. Professor Perry, how does this, if at all, relate to the developmental tasks which you discussed?

A. Well in this document they are talking about an advertising campaign, and it's quite clear that they are going to be targeting the peer group, using the peers as a conduit for their advertising message to get new smokers.

Q. And at what age do people care most about being a member of the cool in- group?

A. As I said -- testified just earlier, the peak age for peer conformity, wanting to be part of a peer group, is early adolescence, age 11 to 14. By the time you're an older adolescent, you're much more interested in dating and -- and not -- not as interested in -- or not as influenced by the peer group.

Q. In the first paragraph that's on the screen right now it references, in the second-to-last line, the somewhat risky exciting lifestyle. What's the significance of that statement?

A. Well, R. J. Reynolds realized that adolescents take risks, they might take risks to -- during this stage of life, and so they are going to exploit that, that they take risks, use that also as part of their advertising campaign.

*31 Q. Can you turn back to the first page of this document. In that first paragraph titled "TARGET AUDIENCE," do you see in that first sentence where it references a target group of 18 to 24 male smokers?

A. Yes, I do.

Q. I'd like to read the last sentence of that paragraph.

"However, recognizing the volume potential associated with advertising which is broadbased in appeal, the creative exploratory will emphasize approaches which employ universal cues and symbols having motivational value outside of the prime prospect group as well."

What is the significance of that statement?

A. Well they saw that this advertising campaign would be also appealing outside their prime prospect group; that is, to people under the age of 18, and as we saw, since they're targeting the peer group, that's also consistent with their advertising strategy.

MR. WEBER: Your Honor, I'd move to strike that answer as being based on speculation with respect to the prime group being those under. There's no information as to whether it was under or older or whatever. It's pure speculation.

THE COURT: Well I think she can give her opinion as an expert.

BY MS. WALBURN:

Q. Professor Perry, this document was written in 1986. Do you know when RJR introduced the Joe Camel cartoon campaign?

A. It was officially -- officially started in 1988.

Q. Would you turn in book one to Exhibit 12934. This is the 1987 document produced by Reynolds titled "CAMEL ADVERTISING DEVELOPMENT 'WHITE PAPER."'

Is this a document which you reviewed in this case?

A. Yes, it is.

Q. And does this document form part of the basis of your opinion?

A. Yes, it does.

MS. WALBURN: Your Honor, we would offer Exhibit 12934.

MR. WEBER: No objection, Your Honor.

THE COURT: Court will receive 12934.

BY MS. WALBURN:

Q. And this is a title page, "CAMEL ADVERTISING DEVELOPMENT 'WHITE PAPER."' .

Would you turn to page four of this document. And looking at the box at the bottom of the page, this states, "The advertising will position CAMEL as an authentic brand for smokers who are admired and respected by their peers because their attitudes and lifestyles distinguish them as individuals who challenge convention and stand tall."

Professor Perry, how, if at all, does this statement relate to the developmental tasks which you have been describing?

A. Well again, this shows that their advertising is -- is being -- the -- is being aimed at the peer group. In this particular box, though, they're talking about an authentic brand for smokers who are admired and respected by their peers, and that is almost the exact language we use when we have our peer leaders elected in our program. We ask them to write down the names of two boys and two girls that you admire and respect, or like and respect, and that's how we choose our peer leaders. So they are saying you could be a peer leader as well.

Now this peer-leader approach that we use works in the sixth or seventh grade, it does not work in the ninth or 10th grade.

*32 Q. Would you turn in book two, your other book, to Exhibit 15780. Is this an advertisement which you have reviewed in this case?

A. Yes, it is.

Q. And does this form part of the basis of your opinion?

A. Yes, it does.

MS. WALBURN: Your Honor, we would offer Exhibit 15780.

MR. WEBER: No objection.

THE COURT: Court will receive 15780.

BY MS. WALBURN:

Q. Can you describe this advertisement and how, if at all, it relates to the developmental tasks you have discussed.

A. Yes. This is a Joe Camel advertisement, and you can see Joe Camel with his peer group. He's part of the in-group. And you can see that there's some card playing going on; it's slightly risky. But primarily this is an advertisement that would appeal to -- to wanting to be part of a peer -- a peer group. An adolescent would see smoking as associated with the peer group.

Q. Would you turn in book one, the other book, to Exhibit 9324. Is this also an advertisement which you have reviewed in this case?

A. Yes, it is.

Q. Does this form part of the basis of your opinion?

A. Yes, it does.

MS. WALBURN: Your Honor, we would offer Exhibit 9324.

MR. WEBER: No objection, Your Honor.

THE COURT: Court will receive 9324.

BY MS. WALBURN:

Q. How, if at all, does this advertisement relate to the developmental tasks you have discussed?

A. Well this advertisement, I think, also -- this advertisement also appeals to the peer group. Joe Camel is part of the club, he's part of Club Camel. In this ad Joe Camel -- Joe Camel is looking particularly self-confident and might be admired and respected. This is Joe Camel as the peer leader.

Q. Did you also find in your review of tobacco company documents documents that discuss adolescent's identity or self- image?

A. Yes, I did.

Q. Would you turn in the third book which you have to Exhibit 12989. This is a 1989 document produced by R. J. Reynolds titled "CAMEL Y&R ORIENTATION." Is this a document you have reviewed in this case?

A. Yes, it is.

Q. Does this form part of the basis of your opinions?

A. Yes, it does.

MS. WALBURN: Your Honor, we would offer Exhibit 12989.

MR. WEBER: No objection, Your Honor.

THE COURT: Court will receive 12989.

BY MS. WALBURN:

Q. Again, this is titled "CAMEL Y&R ORIENTATION."

Do you know, Professor Perry, what Y&R stands for?

A. Yes, Young & Rubicam Advertising Agency.

Q. And could you generally describe this document.

A. It's background information on developing a younger adult advertising campaign.

Q. Would you turn to Bates number 1677. This page states "FUBYAS SOCIAL GROUP SPECTRUM."

First of all, do you know from your review of documents from FUBYAS stands for?

A. Yes, it means First Usual Brand Young Adult Smoker.

Q. And from your review of documents and research, at what age do smokers generally choose their first brand?

A. Most smokers choose their first brands when they're under age 18.

*33 Q. This page goes on to state, "With regard to 'social group' participation, FUBYAS tend to live in a movie

"They know the roles

"They know the script

"They know the costumes

"They know the props

"We want to supply one of the props -- their brand of cigarettes."

Professor Perry, at what age do people generally tend to live in a movie?

A. Well as I testified before, during early adolescence, more than in any other -- any other time of life, a young adolescent feels like they're on a stage and everyone is watching them.

Q. Were there other documents which you reviewed which discussed displaying -- displaying particular images in advertising which would be appealing to youth?

A. Yes, image was often discussed in the -- in the document.

Q. Were there also documents which discussed the theme of sexuality in advertisement?

A. Yes, there were.

Q. And are there advertisements which relate to this theme?

A. Yes, there are.

Q. Is one of those a B&W advertisement for Kool called "Lady be Kool?"

A. Yes, it is.

MS. WALBURN: Your Honor, at this point we would offer a video of this advertisement. It is Exhibit 20929.

MR. WEBER: Your Honor, my note on that says that there were -- plaintiffs have produced five videos, separate videotapes. My only question is whether you've spliced them together, or are they in their original form?

MS. WALBURN: These are discrete advertisements. The advertisements were produced to us by some of the defendants with multiple ads on a single tape, and we've taken particular ads for displaying at trial. We gave defendants notice of how we had edited the tapes and provided defendants with the exact tapes that we would be playing today last week.

THE COURT: Okay. Well I'm not sure that answers his inquiry.

MR. WEBER: I guess all I'm concerned about, Your Honor, obviously if it's an advertisement, they can put it in evidence. I just want to know if they're running a whole ad or pieces of an ad and how they've spliced it. If it's a whole ad, I have no objection whatsoever.

MS. WALBURN: My understanding is it's the entire ad.

THE COURT: It's the entire ad?

MS. WALBURN: Yes.

THE COURT: Okay, let's go.

(Discussion off the record.)

THE COURT: All right, counsel.

MR. WEBER: Could we for the record have a date on this, Your Honor?

MS. WALBURN: Yes. The information we received from Brown & Williamson was approximately 1970.

THE COURT: Go ahead.

(Videotape played.)

BY MS. WALBURN:

Q. Professor Perry, how, if at all, did that advertisement relate to the developmental tasks which you have discussed here?

A. Well that advertisement clearly showed a very attractive young woman out on her own, so relating to independence, who was clearly attractive to the opposite sex. So for an adolescent, they would associate smoking with being independent -- being independent and being sexually attractive.

Q. Would you turn in book two to three related exhibits, an advertisement which ran as one, Exhibits 15650, 15651 and 15652.

*34 Is this an advertisement which you have reviewed in this case?

A. Yes, it is.

Q. And does this advertisement form part of the basis of your opinion?

A. Yes, it does.

Q. And I'll represent that this is an advertisement that ran in 1989.

MS. WALBURN: And we would offer Exhibits 15650, 15651 and 15652.

MR. WEBER: No objection, Your Honor.

THE COURT: Court will receive 15650, 15651, 15652.

BY MS. WALBURN:

Q. And this is a cover page of the ad, states "Bored? Lonely? Restless? What you need is..."

And then moving to Exhibit 15651, shows the Camel, "Smooth character," and the left-hand part of the ad states, "Foolproof dating advice, Smooth Move number 325," and moving to the right- hand side of the page, this states, "How to impress someone at the beach, Smooth Move 334." Number one, "Run into the water, grab someone and drag her back to the shore, as if you've saved her from drowning. The more she kicks and screams, the better."

Number two, "If you're overweight, lie on a towel with vertical stripes."

Number three, "If you're under weight, lie on a towel with horizontal stripes."

Number four, "Always have plenty of Camels ready when the beach party begins."

And turning to 15652, this is titled "How to get a FREE pack even if you don't like to redeem coupons, Smooth Move number 437.

"1. Ask your best friend to redeem it.

"2. Ask a kind-looking stranger to redeem it.

"3. Ask a good-looking stranger to redeem it.

And "4. Offer each a Camel and start a warm, wonderful friendship."

Professor Perry, what is the significance, if any, to the developmental tasks you have described with this advertising?

A. Well this advertisement suggests, certainly the first one, how to be attractive, or some smooth moves is the kind of campaign name, how to, you know, make advances or moves with someone of the opposite sex. The advertisement uses humor as a way of doing this, and in that way, I think, it hits on sexuality, but also is -- is kind of part of the peer group, that that's what a cool person would do.

Q. Do you know how long this advertisement was run by R. J. Reynolds?

A. Not very long.

Q. What happened to it?

A. They got complaints and so they -- they took -- they withdrew it.

Q. Were there other advertisements that you reviewed which also had other images relevant to youth?

A. Yes, there were.

Q. Was one of those an advertisement which ran in the Flintstones TV show back in 1960 and 1962?

A. Yes, it was.

Q. Is that advertisement part of the basis of your opinion?

A. Yes, it is.

MS. WALBURN: Your Honor, this is Exhibit 20866, and we would offer this.

MR. WEBER: 20866?

MS. WALBURN: Yes.

MR. WEBER: Just the same issue, no objection as long as it's an entire ad.

MS. WALBURN: Yes, this is actually two advertisements run in their entirety.

THE COURT: Okay. All right, the court will receive 20866.

(Videotape played.)

*35 BY MS. WALBURN:

Q. Professor Perry, what is the significance of these Flintstone commercials for Winston?

A. Flintstones was a popular family television show, and what these -- these advertisements, which kind of blended in with the credits to the show, would for a young person make smoking seem a normal part of everyday life.

Q. Did you also review advertisements for Winston that ran on the Beverly Hillbillies show in the 1964-1965 time period?

A. Yes, I did.

Q. And is that an advertisement which forms part of the basis of your opinions?

A. Yes, it does.

MS. WALBURN: Your Honor, the Beverly Hillbillies ad is Exhibit 20877, and we would offer this into evidence.

MR. WEBER: Assuming we're running whole ads, no objection, Your Honor.

THE COURT: Court will receive 20877.

(Videotape played.)

BY MS. WALBURN:

Q. Professor Perry, what is the significance of the advertisement we just saw on the Beverly Hillbillies?

A. Well the Beverly Hillbillies were also a very popular show in the -- in the 1960s, and once again, it blended the show and the introduction of the show with the advertisement for Winston. So for a young person, they would, again, begin to -- or see smoking or Winston as part of normal life. It was a usual part of -- part of life, even in Beverly Hills.

Q. Do the advertising and promotional activities which you have been discussing affect the stages of smoking onset that you referenced earlier?

A. Yes, they do.

MS. WALBURN: Your Honor, may I approach?

THE COURT: Okay.

Q. Showing you Exhibit 30241, is this a chart which was prepared under your supervision?

A. Yes, it was.

Q. And would this be helpful in aiding your testimony?

A. Yes, it would be.

MS. WALBURN: Your Honor, we would offer Exhibit 30241 for illustrative purposes.

MR. WEBER: No objection, Your Honor.

THE COURT: The court will receive 30241 for illustrative purposes.

BY MS. WALBURN:

Q. And with the court's permission, professor, could you come down and explain this chart.

A. Well we saw in the Surgeon General's report previously in this testimony the five different stages of smoking onset, and what I've done with this chart is show tobacco industry actions and how those might influence these stages of smoking onset. And I've identified four types of actions, and they could really influence any of the stages, but I put them where I think they -- they might be most influential.

Starting at the top, there's considerable evidence that pervasive advertising and promotional activities create a sense of friendly familiarity about smoking, that it's usual or normal or accepted behavior. We saw that adolescents have a very high exposure to advertising and promotional activity and they perceive that a large percentage of people smoke, a much larger percentage than actually do.

We just went through and showed how advertising and promotional activities use the developmental tasks. They use those themes such as independence or the peer group or sexuality or identity. These are the key motivating drives of adolescents, and these advertising teams teach adolescents how to accomplish these tasks. There is no other stage in life where these tests -- these themes are more potent than during adolescence. So advertising teaches young people how -- a way to accomplish these tasks.

*36 We saw in the documents that advertising, brand advertising targets the peer group, that trying to create peer conformity, a kind of bandwagon effect so that peers will influence each other to continue to smoke.

And finally, promotional activities, such as giving away tickets or jackets or other kinds of -- of promotional items, reinforce you, or if you're saving up those coupons, coupons will serve as an incentive to smoke, so you could keep smoking to save up your coupons. So tobacco advertising and promotional activities work in terms of getting adolescents to smoke by making smoking normative, usual, acceptable behavior. By making it functional it serves a purpose for them, it's meaningful and purposeful to them, by creating -- by making them a part of the peer group and by actually rewarding them for using -- for smoking cigarettes.

Q. Thank you. You can return to the stand.

THE COURT: Maybe we should take a recess for lunch. Reconvene at 10 after 2:00.

THE CLERK: Court stands in recess to reconvene 10 after 2:00.

(Recess taken.)



(Jury enters the courtroom.)

THE CLERK: Please be seated.

THE COURT: Counsel.

MS. WALBURN: Thank you, Your Honor.

Good afternoon, ladies and gentlemen.

(Collective "Good afternoon.")

BY MS. WALBURN:

Q. Professor Perry, did the 1994 Surgeon General's report reach any conclusion about the tobacco companies' advertising and promotion activities?

A. Yes, it did.

Q. Could you turn to page 195 of the '94 Surgeon General's report. Are those the five conclusions reached by the Surgeon General in 1994?

A. Yes, they are.

Q. And could you please read the five conclusions.

A. Yes. The first conclusion is that "Young people continue to be a strategically important market for the tobacco industry."

Number two, "Young people are currently exposed to cigarette messages through print media (including outdoor billboards) and through promotional activities, such as sponsorship of sporting events and public entertainment, point-of-sale displays, and distribution of specialty items."

Number three, "Cigarette advertising uses images rather than information to portray the attractiveness and function of smoking. Human models and cartoon characters in cigarette advertising convey independence, health-fullness, adventure-seeking, and youthful activities - themes correlated with the psychosocial factors that appeal to young people."

The fourth one, "Cigarette advertisements capitalize on the disparity between an ideal and actual self-image and imply that smoking may close the gap."

And the fifth one, "Cigarette advertising appears to affect young people's perceptions of the pervasiveness, image, and function of smoking. Since misperceptions in these areas constitute psychosocial risk factors for the initiation of smoking, cigarette advertising appears to increase young people's risk of smoking."

Q. Are your opinions today the same as they were when the 1994 Surgeon General's report was written?

A. No, my opinions are -- are stronger than they were back in 1994.

Q. And why is that, professor?

A. Well the information that went into this report was collected up through 1992 when most of the people who wrote the report actually wrote their sections. Some -- there's some data, a little bit of data from 1993, so we have about five more years of research on the influence of tobacco advertising and promotion on young people. And there were some limitations to this report.

*2 Q. Would you turn to page 188 of the report. This is a section titled "Research on the effects of cigarette advertising and promotional activities on young people," and the introduction reads as follows:

"A substantial and growing body of scientific literature has reported on young people's awareness of, and attitudes about, cigarette advertising and promotional activities. Research has also focused on the effects of these activities on psychosocial risk factors for beginning to smoke. Considered together, these studies offer a compelling argument for the mediated relationship of cigarette advertising and adolescent smoking. To date, however, no longitudinal study of the direct relationship of cigarette advertising to smoking initiation has been reported in the literature. This lack of definitive literature does not imply that a causal relationship does not exist; rather, better quantification of exposure, effect, and etiology is needed. Important data from research conducted for the tobacco industry are not available; such information would add considerably to our knowledge."

Professor Perry, since the Surgeon General's report was written, has there been additional research published in this area?

A. Yes, there's been quite a bit of new research. In fact, I think probably the most important research in this area has been conducted in the 1990s.

Q. And since the Surgeon General report was written and published, has there been disclosure of documents from the tobacco industry relating to these issues?

A. Yes, but only in this case, in this lawsuit.

Q. Professor, can we turn to some of the research that has been published since 1994 on youth smoking.

First of all, is there a specialized set of research that deals with youth marketing issues as opposed to other products than cigarettes?

A. Yes, there's a special literature that looks at the influence of cigarette advertising and promotional activities on youth smoking behavior.

Q. Would you turn in book one to Exhibit 4991. This is an article published on August 19th, 1994 by the U.S. Centers for Disease Control in the Morbidity and Mortality Weekly Report. Is this a reliable article in a reliable publication?

A. Yes, it is.

Q. Does this form part of the basis of your opinions?

A. Yes, it does.

MS. WALBURN: We would offer Exhibit 4991 under Rule 803(18).

MR. WEBER: No objection, Your Honor.

THE COURT: Court will receive 4991.

BY MS. WALBURN:

Q. The title of this study says "Changes in the Cigarette Brand Preferences of Adolescent Smokers -- United States, 1989 through 1993."

Can you tell us what this article addresses.

A. Yes. This reports the outcomes of two studies done, the Teen-age Attitudes and Practices Surveys that were done in 1989 and 1993, and what this report, research report deals with are adolescents' brand preferences in 1989 and in 1993, and on the changes in their brand preferences.

Q. The first paragraph of this study states, "Approximately three million U.S. adolescents are smokers, and they smoke nearly one billion packs of cigarettes each year. The average age at which smokers try their first cigarette is 14 and a half years, and approximately 70 percent of smokers become regular smokers by age 18 years. Evaluating the changes in the brand preferences of young smokers can help identify factors that influence adolescents' brand choice and may suggest smoking-prevention strategies."

*3 And then if you turn down to the bottom of that page, starting on the last line, this study states, "Marlboro, Camel, and Newport were the most frequently purchased brands for 86 percent of the adolescents."

Professor, who makes Marlboro cigarettes?

A. Philip Morris.

Q. And Camel cigarettes?

A. R. J. Reynolds.

Q. And Newport cigarettes?

A. Lorillard.

Q. Did this report correlate those three best-selling brands with advertising?

A. Yes. What it said was that the three most -- three best- selling brands are the three most advertised brands, the most money that's spent on advertising are for these three brands, and those are the brands that under-age teen-agers smoke. And that's not true for adults; adults don't smoke the most advertised brands.

Q. Would you turn to page 580 on Table 2 of this report. Can you explain what this chart depicts.

A. Yes. This chart shows on top the adolescents, in this case they're defined as 12- to 18-year-olds, their brand preferences among smokers in 1989, that's the first column, and what rank they were in -- in terms of brand preference, then their brand preference in 1993 and the rank in brand preference in 1993, and then any change in percent of brand preference from 1989 to 1993.

The bottom chart does the same thing, but it's for the whole -- it's for the whole market over -- over 18 years old, or 18 and over.

Q. So the bottom chart would include adults as well?

A. Yes, that is adults.

Q. Looking at the top chart for adolescents ages 12 to 18, can you tell us what this shows for Marlboro cigarettes.

A. In 1989, 68.7 percent, or almost 69 percent of adolescents, smoked Marlboro. In 1993, 60 percent of adolescents smoked Marlboro cigarettes.

Q. And what was the rank of Marlboro in terms of smoking among adolescents ages 13 to 14?

A. It was number one in 1989 and number one in 1993.

Q. Turning to the second brand reported on in the table, Camel cigarettes, what percent of adolescents ages 12 to 18 smoked Camels in 1989?

A. 8.1 percent of adolescents smoked Camels in 1989.

Q. And what was that percentage in 1993?

A. 13.3 percent smoked Camels in 1993.

Q. So the sales of Camels among 12- to 18-year-olds rose between 1989 and 1993, according to this table?

A. Yes, it rose 5.2 percent.

Q. Are you aware of anything significant happening in the marketplace between these years, 1989 and 1993, when sales of Camel cigarettes rose among adolescents ages 12 to 18?

A. Yes, those were the years of the Joe Camel campaign.

Q. And when did that campaign begin again?

A. 1988.

Q. Does this table, the second table, tell us anything about what happens to Camel's share of the adult market in that same time period?

A. In 1989 the share of the adult market was 3.9 percent for Camel in 1989, and it was again 3.9 percent in 1993, so there was no market share increase among adults between 1989 and 1993.

Q. And turning back to the first chart for adolescents and the Newport brand, the third best-selling brand among adolescents, can you tell us how Newport sold among adolescents in 1989 and 1993?

*4 A. Yes. 8.2 percent of adolescents smoked Newport in 1989 and 12.7 percent smoked Newport in 1993, so there was an increase in Newport between '89 and '93.

Q. Could you turn in book two to Exhibit 26063. This is the Schooler article which you discussed earlier today. Is this another article that was published after the 1994 Surgeon General's report?

A. Yes, this was published in 1996.

Q. And the title of this article, which was published in the American Journal of Public Health, is "Seventh Graders' Self- Reported Exposure to Cigarette Marketing and Its Relationship to Their Smoking Behavior."

Turning in the left-hand column to the abstract section, this is a little difficult to read, but the objectives state, "This study examines among youth the extent of their perceived exposure to cigarette marketing and the relationship of their perceptions to their smoking behavior."

And then turning to the first column on the introduction, the second paragraph, midway through that paragraph the author states, "Moreover, there was a growing recognition that such advertising and promotion influenced teen smoking. Longitudinal studies of advertising patterns and young people's tobacco use demonstrate a positive association between advertising and teen-age smoking."

And then if you would turn to the discussion section on page 1220, starting in the last sentence of that first paragraph, "These data paint a compelling picture of youth environments that are saturated with pro-smoking cues and messages.

"These high levels of exposure to tobacco marketing are troubling because of their relationship to students' smoking behavior. Our results indicate that perceived exposure to tobacco advertising and promotion is associated with self-reported tobacco use even when we controlled for the powerful influences of friends and family."

And finally, could you turn to the last page, 1221. In the left-hand column, the first paragraph starts, "Our results contribute to previous research discussed above demonstrating that young people are exposed to and influenced by ubiquitous cigarette advertisements and promotions."

Professor Perry, what is the significance of this article?

A. This study, I show -- showed you before how much exposure that -- that the seventh graders had to particular advertising and promotional activities. The study went on further to show that those were associated with significantly increased risk of smoking, that it in fact doubled their risk of smoking in this age group, and that was even after, when they used statistics, they controlled for the influence of peers and family. So they showed a significant relationship between cigarette advertising and promotional activities, and in particular, promotional activities and seventh graders' smoking behavior.

Q. Would you turn to Exhibit 26061. This is an article which was published in the Journal of Marketing in April 1996 by Richard Pollay and various other authors, including Gary Giovino and Michael Eriksen, it's titled "The Last Straw? Cigarette Advertising and Realized Market Shares Among Youths and Adults, 1979 to 1993."

*5 Is this an article that is published in a reliable journal by a reliable author?

A. Yes, it is.

Q. Does it form part of the basis of your opinion?

A. Yes, it does.

MS. WALBURN: Your Honor, we would offer Exhibit 26061 under 803(18).

MR. WEBER: No objection.

THE COURT: Court will receive 26061.

BY MS. WALBURN:

Q. Professor Perry, can you describe this article.

A. Yes. What these researchers did was look at the relationship between the amount of money spent on advertising for particular brands and then the percent of adults and youth who smoked those cigarettes, and they looked at this over time from 1979 to 1993, various time points for -- for different brands. And what they did was create a model, and they were trying to find out how sensitive people are to -- to cigarette advertising, and they tried this model putting youth and adults together and they tried the model using youth and adults separately, and what they found was that the model worked better, that's statistically, but it worked better when the model was separate; that is, there was a model for youth and the relationship between advertising and the amount of smoking, and a separate model between -- that looked at the relationship between advertising and percent smoking for adults. Furthermore, they found out that youth were three times more sensitive to advertising than were adults.

Q. Would you turn to page 12 of this article. Under the section titled "The Last Straw?--An Implication for Marketing Scholars," the article states, "Historical analysis shows the industry's strategic interest in adolescents to be long-standing. Analysis of contemporary corporate documents shows a continuing interest in capturing the young, among whom virtually all starting occurs. Content analysis of advertising shows that cigarette advertising imagery largely consists of pictures of health and images of independence, which are known by the industry to resonate with adolescent needs for autonomy and freedom from authority. Behavioral analyses show that cigarette advertising constitutes a psychosocial risk factor. Our market share analysis adds to the existing literature by showing that teen-age smoking behavior is not only related to previous and present advertising, but also that this relationship is about three times stronger among teen-agers than among adults."

And then you could -- could you turn to the last page, "Conclusions" of this article, and the last paragraph of the conclusions, "Because of the many behavioral, strategic, historical, theoretical, and empirical lines of argument and research to which our results add, the preponderance of logic and evidence indicates that cigarette advertising is an important influence on the smoking behavior of the young. Scholars should treat the assertion that cigarette advertising has little or no effect on adolescents as naive or disingenuous."

Professor, can you tell us the significance of these conclusions.

*6 A. Well, what they were showing was just how important the relationship is between advertising and teen-age smoking, and that that -- the power of advertising is even -- it's even more potent with young people than it is with adults.

Q. Could you turn to Exhibit 26062. This is an article which ran in the Journal of the American Medical Association on February 23rd, 1994 by John Pierce and other authors titled "Smoking Initiation by Adolescent Girls, 1994 Through 1998, an Association With Targeted Advertising."

Is this an article that appeared in a reliable journal by a reliable author?

A. Yes, it was. It was 1944 to 1988.

Q. I'm sorry.

A. But yes, it's a reliable author and a reliable journal.

Q. And does this form part of the basis of your opinions?

A. Yes, it does.

MS. WALBURN: Your Honor, we would offer Exhibit 26062 under 803(18).

MR. WEBER: No objection.

THE COURT: Court will receive 26062.

BY MS. WALBURN:

Q. Professor Perry, can you describe this article.

A. Yes. These researchers looked at the National Health Interview Surveys, the same surveys I used to look at 17-year-olds, and what they did was look between the years 1944 and 1988 to see if there were a relationship between particular advertising campaigns and increases in smoking among adolescent girls.

Q. Would you turn to page 611 of this article, and in the middle column, in the middle of the paragraph, it states, "In this study, we have demonstrated that tobacco advertising has a temporal and specific relationship to smoking uptake in girls younger than the legal age to purchase cigarettes. Our findings add to the evidence that tobacco advertising plays an important role in encouraging young people to begin this lifelong addiction before they are old enough to fully appreciate its long-term health risks."

Could you explain the significance of this conclusion.

A. Yes. What they found when they looked at the research was that in the years about 1968 to the early '70s, there was a large increase in adolescent female smoking that I showed you on the chart, and what they found was that the increase in smoking among adoles -- adolescent females was only an increase among adolescent females, there was only an increase with those under age 18, and in fact there was no increase in adolescent females who were over -- 18 and over at that time. And right at that time was the introduction of a number of female cigarette brands such as Virginia Slims. So that the response to these female brands was specifically in the under-age-18 females; there wasn't a response in males, and there wasn't a response to that advertising in the over- 18 females.

Q. And is this another article which was published after the 1994 Surgeon General's report?

A. I think it was actually published one day before we actually released it, but we couldn't use this article at that time. It's about exactly the same time. So yes.

Q. Would you turn to Exhibit 26059. This is an article published on February 18th, 1998, in the Journal of the American Medical Association by John T. Pierce and other authors titled "Tobacco Industry Promotion of Cigarettes and Adolescent Smoking."

*7 Is this an article that is published by a reliable author in a reliable journal?

A. Yes, it is.

Q. Does it form part of the basis of your opinions?

A. Yes, it does.

MS. WALBURN: Your Honor, we would offer Exhibit 26059 under Rule 803(18).

MR. WEBER: No objection, Your Honor.

THE COURT: Court will receive 26059.

BY MS. WALBURN:

Q. And Professor Perry, is this another article published after the 1994 Surgeon General's report?

A. Yes. This article was published about three weeks ago.

Q. And can you generally describe this study.

A. Yes. These researchers looked at 12- to 17-year-olds in 1993, and from those 12- to 17-year-olds they only really examined those who were not -- never smokers and not susceptible to smoking, so that means they had -- that in 1993 they've never had a cigarette and they didn't intend to have a cigarette, and even if their best friend offered them a cigarette, they wouldn't take it. So these were never smoking, non-susceptible adolescents. And then they looked at who progressed to smoking three -- three years later when they resurveyed the same adolescents in 1996. And what they found was that those students -- those young people who had a favorite advertisement, that that would double their risk of starting to smoke. Those who had said they would use the promotional activity -- they didn't have to own one, just who said they would use the promotional activity, that tripled their -- the risk of progressing to smoking. And that these amounts, doubling that risk and tripling that risk, was stronger than peer or family influences on starting to smoke, just being able to have a favorite advertisement and saying that you would use the promotional activity was stronger than peer or parents' influence on smoking.

Q. Would you turn to page 514 of this article.

A. Excuse me, what page?

Q. 514. In the left-hand column under section "Percentage of Experimentation Attributable to Tobacco Promotional Activities," the article states, midway through that first paragraph, "Thus, using the standard formula, the percentage of experimentation attributable to tobacco advertising and promotional activities is 34.3 percent."

And then moving down to the comment section, "This longitudinal study provides clear evidence that tobacco industry advertising and promotional activities can influence nonsusceptible never smokers to start the process of becoming addicted to cigarettes."

What is the significance of this finding, professor?

A. Well they also did a standard kind of epidemiologic kind of statistical analysis and they found that over a third of the reason that these adolescents began experimenting with smoking, over a third of the reason could be attributed to cigarette advertising and promotional activities.

Q. Professor Perry, have you read the testimony of Dr. Hurt in this case?

A. Yes, I have.

Q. And are you relying on his opinions on addiction?

A. Yes, I am.

*8 Q. From your review of the published literature, is there any trend in the recent published literature on youth and smoking in the United States?

A. Yes. The recent literature shows a con -- consistently stronger and more significant relationship between cigarette advertising and promotion and subsequent smoking among youth. As we just saw in the literature, adolescents smoke the most-advertised brands; adults don't. Adolescents have high exposure to cigarette advertisements. Advertising can increase under-age female smoking when it's not increasing over-18 smoking. That adolescents are three times more sensitive to advertising than are adults. And even among never smoking/non- susceptible adolescents, saying you have a favorite -- favorite advertising or are willing to use a promotional item greatly increases, triples your risk of progress to smoking.

These are just a sample of the research that's been published in the last five years.

Q. Professor Perry, you've already discussed a number of internal tobacco company documents relating to youth smoking, and again were these documents available to the Surgeon General for the 1994 Surgeon General's report?

A. No, they weren't.

Q. Were there additional documents that you reviewed relating to youth smoking?

A. Yes. I reviewed hundreds of documents and thousands of advertisements for this case.

Q. And were these documents consistent or inconsistent in terms of the discussions of youth smoking?

A. The documents were overwhelmingly consistent. They were consistent across time, they were consistent across companies, they were consistent within companies. They were overwhelmingly consistent.

Q. Can we talk about some of the additional tobacco company documents which you reviewed, starting with Philip Morris.

What is the number-one tobacco company in terms of sales and market share in the United States?

A. Philip Morris.

Q. And what is Philip Morris's best-selling brand?

A. Marlboro.

Q. What cigarette brand has the largest share of under-age smokers in the United States?

A. Marlboro.

Q. Was Marlboro always the number-one brand?

A. No, it wasn't.

Q. And was Philip Morris always the number-one company in the United States?

A. No. No, it wasn't.

Q. When did Philip Morris and Marlboro begin their rise in sales to the number-one position?

A. In the 1960s.

Q. Do the internal documents of Philip Morris indicate whether or not Philip Morris was aware of its success among teen- agers as Marlboro began to rise in shares?

A. Yes, Philip Morris was aware of -- of their success among teen-agers.

Q. Would you turn in book one to Exhibit 11808. This is a Philip Morris document that has previously been admitted into evidence dated March 29th, 1979, it's on the corporate headquarters letterhead of Philip Morris U.S.A. and it's titled "MARLBORO." The first paragraph states, "Marlboro represents 60 percent of Philip Morris U.S.A. sales. The brand accounts for one-third of all growth of Philip Morris U.S.A. In 1978 101 billion units were sold. The brand represents 17 percent of the national share of cigarettes. Paren, (One in five smokers smoke Marlboro)."

*9 And then if you move to the last sentence of that paragraph, "It was the first brand to pass 100 billion units sold."

And then moving down to the demographics paragraph, "Marlboro dominates in the 17 and younger age category, capturing over 50 percent of this market."

Professor Perry, what is the significance of this document?

A. Well Philip Morris is people -- or people are smoking -- about one out of five are smoking Marlboro by 1979, and they're saying that a large share -- they've captured 50 percent of the under-17 market.

Q. Is there any indication in this internal Philip Morris document about a concern that Marlboro had over 50 percent of the 17-and-under cigarette market?

A. No, there was no concern, but "capturing" seems like it's something that one would want to do, capture over 50 percent of the market.

Q. Would you turn to Exhibit 11780, and that's in the third book. This is a document that's previously been admitted titled "PRODUCT TESTING SHORT COURSE," produced by Philip Morris. And if you turn to the next page, it was written by the Product Evaluation Division, R&D Department, Philip Morris U.S.A. in 1984.

Would you turn to page 504 of this document. And do you see in the first paragraph that it's talking about a post-war increase in smoking?

A. Yes. It says, "Pall Mall was the first brand to capitalize on the post- war increase in female smoking."

Q. And from your review of this document, which war were they discussing?

A. This is World War II.

Q. Moving to the next paragraph, the document states, "Marlboro floundered for eight years and then hit a responsive chord among post-war baby-boom teen-agers with the theme from the Magnificent Seven and an image uncalculatedly right for the wave of teen-agers coming of smoking age."

Professor, what was that image that's being discussed in this document?

A. The Marlboro Man.

Q. And when was the Marlboro campaign started on a national basis?

A. It was started in 1962.

Q. And have you reviewed television ads for Marlboro from the 1960s?

A. Yes, I have.

MS. WALBURN: Your Honor, at this point we would offer Exhibit 20896, which is a video of two Marlboro television commercials which ran in 1965.

MR. WEBER: No objection, Your Honor.

THE COURT: Court will receive 20896.

(Videotape played.)

BY MS. WALBURN:

Q. Professor Perry, do these ads relate to the developmental themes that you discussed earlier this morning?

A. Yes, definitely. The Marlboro Man is clearly independent, out there doing his thing. This is a young, attractive man who's established his identity as a cowboy. An adolescent watch -- watching an ad like that would associate smoking with being independent and on your own. And, you know, there -- there are no parents in Marlboro Country.

Q. Would you turn in book one to Exhibit 10316. This is a document which has previously been admitted into evidence. It's dated May 23rd, 1969, produced by Philip Morris, from M. E. Johnston to Dr. R. B. Seligman, and it's titled "Marlboro Market Penetration by Age and Sex."

*10 Do you see on the first page that is discussing early computer printouts of cigarette preferences by broad age groups?

A. Yes, I do.

Q. And in that first paragraph it references POL National Roster.

A. Right.

Q. Are you aware of whether POL performed work for Philip Morris?

A. Yes. It's the Product Opinion Laboratory.

Q. Would you turn to the second page of this document. And there's a chart that's difficult to read, but in the upper right- hand corner it says "Percent of smokers who smoke Marlboro by sex and single years of age." Can you describe this chart.

A. Yes.

Could we have the whole chart back? Thank you.

What has been charted out here is the percent of male and female smokers who smoke Marlboro by their age. So there's an age - - the percentages are up here, they go 5, 10, 15, 20, 25, 30, and then the age 15, 20, 25, 30, so -- and what you can see is that the highest concentration, the greatest percent of smokers are 15 to 17 years old, and it's declining. And this is in 1969.

Q. What is the significance of that date 1969 with respect to the sale of Marlboro cigarettes?

A. Well this was early in the Marlboro Man campaign, and they already knew early in the campaign that they were appealing to under-age smokers. Those are the ones they were most appealing to.

Q. And by "they," you mean --

A. Philip Morris.

Q. Would you turn to Exhibit 10497.

MR. WEBER: Your Honor, before we move on, just -- I didn't want to interrupt because I don't think there was an objection to that document, but our records don't indicate that last one in under that number. Might that have been one that went in under another number, just for the record?

MR. CIRESI: It was in under 2555, Your Honor. It went in on a deposition, 2555.

MR. WEBER: Okay. So we do not object to that, but I was confused as to the number, Your Honor.

THE COURT: All right.

Q. Would you turn to Exhibit 10497. This is a document that was previously admitted, "A Study Of Smoking Habits Among Young Smokers, Prepared for Philip Morris Incorporated, July 1974" by the Roper Organization Inc. Can you briefly describe this document.

A. Yes. These are the results of a survey that was done with over a thousand young smokers by the Roper Organization for Philip Morris.

Q. Would you turn to page two of the document. In that first paragraph, starting midway through the paragraph, the document states, "An upper age limit of 24 was assigned but no lower age limit, and an instruction to get some college students in each age group was given. Interviewers were instructed to go to locations where young people as described in their quota assignments were likely to be found -- near high schools and colleges, around young people's hang-outs, such as soda fountains, recreation areas, parks, bowling alleys, beaches, lakes, et cetera."

What is the significance of that statement?

A. Well this research study, the study for Philip Morris, the instructions were to get people -- to be able to interview people under 22 years of age. In fact, the survey instrument is in this document and has a check-off for 14 years of age or younger, so they were clearly explicitly going to interview young people. Plus they, the interviewers, were instructed to go near high schools or soda fountains, et cetera, where under-age people would be found.

*11 Q. Would you turn to the last page of the document, Bates number 6185. Is this the survey instrument that you referenced?

A. Yes, it is. This -- they asked "How old do you happen to be?" and you can see that they just circled the answer, whether it's 14 or younger, 15-16, so forth.

Q. Would you turn to page four of the document. And at the bottom of that page the document states, "Marlboro is the starting brand for young whites, and Kool is the starting brand for young blacks."

What's the significance of that statement?

A. Well what they found was that Marlboro was the starting brand; that is, that is the brand that the starters, primarily under-age teens, that's the first brand that they would start with.

Q. Would you turn to page six of the document. And looking in the second paragraph from the bottom, starting with the last sentence, the document states, "Thus, if Kool -- or some other brand -- catches fire among young whites, the bandwagon effect could be devastating, and fast.

"What can Philip Morris do about the situation? We are not sure that anything can be done to halt a major exodus if one gets going among the young. This group follows the crowd, and we don't pretend to know what gets them going for one thing or another. Certainly Philip Morris should continue efforts for Marlboro in the youth market, but perhaps as strongly as possible aimed at the white market rather than attempting to encompass blacks as well."

What's the significance of these statements?

A. Well at this point in time Philip Morris was worried about Kool cigarettes and whether -- and their competition with Marlboro among -- among young people. They -- they were -- also recognized the fact that once a brand get -- gets introduced or people start smoking, then peer group can -- can influence that.

The last sentence, though, is very important, "...Philip Morris should continue efforts for Marlboro in the youth market...." Their advertising agency is telling Philip Morris that they should continue their advertising and promotional activities around Marlboro, aimed at the youth market.

Q. Would you turn to Exhibit 10339. This is a document which was previously admitted into evidence, the title page is the second page of the document, titled "PHILIP MORRIS U.S.A. RESEARCH CENTER," the date is March 31st, 1981, and the report title is "Young Smokers, Prevalence, Trends, Implications, and Related Demographic Trends." It was written by Myron E. Johnston and approved by Harry Daniel and Carolyn Levy. And among the distribution list in the right- hand column is Mr. J. Zoler, New York office, who was director of marketing research.

Could you turn to page 805 of this document. And the document states, "For over fifteen years certain demographic and social trends have been moving in directions favorable to industry growth. Now, one by one, these powerful social and demographic factors are turning against us, and by 1985 all will be operating against us."

*12 The trends are, number one, "After increasing for over a decade, the prevalence of teen-age smoking is now declining sharply."

And number two, "After increasing for over a decade, the average daily consumption of teen-aged smokers is declining."

Professor Perry, you've reviewed this document in its entirety?

A. Yes, I have.

Q. And does this Philip Morris document view the declining teen-age smoking to be a positive or negative development?

A. They -- they -- they view the -- the decline as a negative development. They considered it a factor turning against them.

Q. And you're referring to the words in the first paragraph there?

A. Yes, I am.

Q. Would you turn to page 808 of this document. Under "Summary," the document states, "It is important to know as much as possible about teen-age smoking patterns and attitudes. Today's teen-ager is tomorrow's potential regular customer, and the overwhelming majority of smokers first begin to smoke while still in their teens. In addition, the ten years following the teen-age years is the period during which average daily consumption per smoker increases to the average adult level. The smoking patterns of teen-agers are particularly important to Philip Morris: Of the eleven packings of which the median age of smokers is under age 30, seven are Philip Morris packings, and the share index is highest in the youngest age group for all Marlboro and Virginia Slims packings and for B&H Lights and Menthol.

"Furthermore, it is during the teen-age years that the initial brand choice is made: At least a part of the success of Marlboro Red during its most rapid growth period was because it became the brand of choice among teen-agers who then stuck with it as they grew older - this combined with the rapid growth in the absolute number of teen-agers."

Professor Perry, what's the significance of these statements?

A. Well, what they're saying is that a large part of the success of Marlboro was because of teen-agers. Teen-agers chose Marlboro as their brand of choice and then, as they said, stuck with it as they grew older. Also, at the top they're talking about that it's important to know as much as possible about teen-age smoking patterns and attitudes. And why? Because the teen-ager is tomorrow's potential regular customer, and the overwhelming majority first begin to smoke while in their teens and they make their first brand choices. So they realize the importance of teens in the success of Marlboro. They realize the importance of teens as -- in the future of their business.

Q. Can we turn to another tobacco company, R. J. Reynolds. Where does R. J. Reynolds currently rank among U.S. cigarette companies in terms of sales?

A. Number two.

Q. And did RJR launch a new marketing campaign in the 1980s in an effort to try and catch up with Philip Morris?

A. Yes, they did. The Joe Camel campaign.

Q. Can you turn to Exhibit 12495. This is an R. J. Reynolds document titled "Marketing Research Report," and it's dated November 29th, 1971. "NFO PROFILES FOR CAMEL REGULAR AND FILTER."

*13 Is this a document which you have reviewed in this litigation?

A. Yes, it is.

Q. Does it form part of the basis of your opinions?

A. Yes, it does.

MS. WALBURN: Your Honor, we would offer Exhibit 12495.

MR. WEBER: No objection, Your Honor.

THE COURT: Court will receive 12495.

BY MS. WALBURN:

Q. This is the title page of the document. There's a copy list with a number of R. J. Reynolds personnel listed, and at the bottom of the page states "PUBLISHED BY THE MARKETING RESEARCH DEPARTMENT, R. J. REYNOLDS TOBACCO COMPANY, WINSTON-SALEM, NORTH CAROLINA."

Could you turn to page 6068. And on this page they're discussing NFO profiles for Camel regular and filter, and the second paragraph addresses Camel Filter, and this states, "Camel Filter continues to show growth in both share of total cigarette smokers and share of 85-millimeter normal flavor filter smokers. The brand's consumer profile is similar to its parent brand; i.e., male, downscale and income/occupational/educational. However, the brand's profile is also showing some favorable change. Specifically, relative to total smokers, the brand's profile is becoming more young and slightly more urban."

Then if you move down to the last sentence of that paragraph, "A primary competitor for Camel Filter is Marlboro. Of importance, it should be noted that Marlboro is rapidly growing in share of smokers, especially among those in younger age groups.

"Perhaps the most interesting data in this report is that for smokers 14 to 20 years of age. Basically, it emphasizes two factors for the Camel brands. First, Camel Regular appears to have very little future among young smokers. Second, Camel Filter demonstrates some potential for growth. Also, it must be observed that Marlboro is extremely strong among persons 14 to 20 years old."

Professor Perry, what's the significance of those statements?

A. Well this was an early document, 1971, where R. J. Reynolds is noticing how well Marlboro is doing in the 14- to 20- year-old, but also that Camel Filter is beginning to show some -- some positive trend among young as well. And so you're beginning to get a sense that -- that Marlboro and Camel are -- are competition; in fact, it says the primary competitor for Camel Filter is Marlboro.

Q. And does this document reflect that the Camel Filter attracting younger smokers was a positive -- positive or negative development to the authors at RJR?

A. It was a positive development. Says specifically -- it says the brands -- excuse me, "However, the brand's profile is also showing some favorable change, specifically becoming more young." So that was considered a favorable change.

Q. Can you turn to the last page of this document, page 6095. This is a chart titled "NFO PROFILE, YOUNGER SMOKERS - AGES 14 to 20, April 1971."

Can you tell us what age groups RJR was tracking in this chart?

A. In this chart they are tracking 14- or 15-year-olds, the share of smokers, then 16- to 17-year-olds in a separate column, and then 18- to 20- year-olds in the third column.

*14 Q. And this document is reporting NFO data?

A. Right.

Q. And is this government data or RJR proprietary data?

A. This is data from the National Family Opinion, Incorporated that was produced for R. J. Reynolds, not government data

Q. Would you turn to Exhibit 12360. This is an RJR document dated September 21, 1972 to Mr. W. S. Smith, Jr., titled "COMPANY SHARES BROKEN BY AGE GROUPS."

Is this a document which you have reviewed in this case?

A. Yes, it is.

Q. Does it form part of the basis of your opinions?

A. Yes, it does.

MS. WALBURN: Your Honor, we would offer Exhibit 12360.

MR. WEBER: No objection, Your Honor.

THE COURT: Court will receive 12360.

BY MS. WALBURN:

Q. Looking at the chart that is depicted on page one, "COMPANY SHARE OF SMOKERS BY AGE," what age groups are being reported on in this chart?

A. They're reporting 14- to 17-year-olds together, then 18 to 24, 25 to 34, and 35-49, and then 50 and over.

Q. And at this time in 1972, what was the share of 14- to 17-year-old smokers for RJR?

A. Twenty-four percent of 14- to 17-year-olds smoked RJR cigarettes.

Q. And in the same time period, what was the share of 14- to 17-year-old smokers for Philip Morris?

A. Forty-six percent. So almost double.

Q. Moving to the left, the column that's titled "Total Smokers," what does that line represent?

A. That represents the percent who smoke each -- cigarettes in each of these companies in terms of total, the total smokers, not -- not just one age group.

Q. And what would be the percent of total smokers smoking RJR?

A. Thirty percent.

Q. And Philip Morris?

A. Nineteen percent.

Q. What significance, if any, is there between the comparison of total smokers of all ages for RJR and Philip Morris compared to smokers for those two companies in the 14- to 17-year- old age group at this period of time in 1972?

A. Well in 1972 you can see that RJR had more share of total smokers than Philip Morris did, they had 30 percent compared to Philip Morris, now that's among all smokers, but basically the 14- to 17-year-olds, that they were overwhelmingly starting to smoke Philip Morris brands. So that although RJR was number one in 1972, they could begin to see that Philip Morris was catching up by attracting younger smokers.

Q. And is that eventually what happened in the marketplace?

A. Yes, it did.

Q. Would you turn to Exhibit 12493. This is a document which has been previously introduced and which you discussed previously this morning, "Presentation to RJRI Board of Directors -- 9/30/74, Marketing Plan," and turning to the first page of that document, this is titled "1975 MARKETING PLANS PRESENTATION, HILTON HEALTH, SEPTEMBER 30, 1974."

"Our paramount marketing objective in 1975 and ensuing years is to reestablish RJR's share of marketing growth in the domestic cigarette industry.

"We will speak to four key opportunity areas to accomplish this.

*15 "They are:

1- Increase our young adult franchise."

Then if you move down to the next paragraph, "First...," "First, let's look at the growing importance of the young adult in the cigarette market. In 1960, this young adult market, the 14-to- 24 age group, represented 21 percent of the population.

"As seen by this chart, they will represent 27 percent of the population in 1975. They represent tomorrow's cigarette business. As this 14-to-24 age group matures, they will account for a key share of the total cigarette volume -- for at least the next 25 years."

Would you turn to the next page.

"Both Philip Morris and Brown & Williamson, and particularly their fast growing major brands, Marlboro and Kool, have shown unusual strength among these younger smokers. In the 14-to-24 age category, Philip Morris has a 38 percent share and B&W a 21 percent share. Both companies have significantly lower shares in the remaining age categories.

"With strong young adult franchises and high cigarette brand loyalties, this suggests continued growth for Philip Morris and B&W as their smokers mature.

"In sharp contrast, our company line shows a pattern of relatively even strength among all age groups and strength in the 25 and older categories, where we exceed both competitors."

Then moving down to the last paragraph on this page, "This suggests slow market share erosion for us in the years to come unless the situation is corrected."

And moving to the next page, "Thus, our strategy becomes clear for our established brands:

"1- Direct advertising appeal to the younger smokers."

Professor Perry, what is the significance of those statements to the board of directors of R. J. Reynolds?

A. What is presented was that Philip Morris and Brown & Williamson were increasing in share due to their popularity among younger smokers, which they defined explicitly as 14- to 24-year- olds for young adults. In contrast, R. J. Reynolds was losing share because they weren't doing as well with this younger group. They -- they said this suggests slow market share erosion. They could see their total market share going down because they weren't attracting the 14- to-24 age group. So they had as their number one key opportunity area to increase their young adult franchise, and the number one strategy was direct advertising appeal to these younger smokers.

Q. Moving down this page where it states by chart eight "For Winston..." "For Winston, we followed this strategy in developing the new 'candid' advertising campaign which broke September 16. It is especially designed to appeal to young adults."

What is the significance of that statement?

A. Well they're developing a new candid advertising campaign to appeal to young adults, and they defined young adults as 14 to 24, so they're planning an advertising campaign for the 14- to 24- year-olds.

Q. And moving to the last paragraph on this page, "For Salem, significant improvements have been made in the advertising, designed for more young adult appeal under its greenery/refreshment theme."

*16 What is the significance of that statement?

A. Well for Salem, they've also made improvements or changes in their advertising to appeal to the young adults which they -- is explicitly defined as 14- to 24-year-olds.

Q. Moving to the next page, the second paragraph states, "Research has shown these changes have measurably improved the ads in terms of:

"Greater recall

"Greater refreshment playback

"More young adult appeal - trial has increased from 24 percent to 31 percent in the under 35 age group for the King Size."

What's the significance of that statement?

A. This is referring still to Salem, and they've done research to see how well Salem is doing, and this new Salem campaign, which is aimed at the 14- to 24-year-olds, is already working.

Q. Would you turn to page Bates number 1316. Midway through this page, page 1316 -- thank you -- midway through this page the document states, "Ad spending has been increased in 1975 with more targeted efforts against young adults to more fully exploit this potential.

"We have also increased our media efforts toward young adults for our brands.

"These include:"

And then in the paragraphs that follow, do you see reference to certain magazines, including Sports Illustrated?

A. Yes, I do.

Q. Playboy?

A. Yes.

Q. Ms.?

A. Yes.

Q. Road & Track and Motorcycling?

A. Yes.

Q. Would you turn to the next page, page 1317. The document states, "Each of our major special events is directed against young adults."

And then do you see in the remainder of that page it references NASCAR?

A. Yes.

Q. Rodeos?

A. Right.

Q. And in the last paragraph, sports car racing and motorcycling?

A. Yes.

Q. Would you turn to page Bates number 1319. And looking at the last paragraph on that page, the document states, "Other programs have been developed to reach young adults where they work, play and where they purchase their cigarettes. Free-on-package trial inducement promotions are being used in high traffic, young adult package outlets such as convenience stores. Seven million trial units will be sold in 1975. We will have permanent counter displays in 35,000 outlets catering to young adult package purchases."

Then move to the next page. Does that first paragraph discuss couponing?

A. Yes, it does.

Q. And what would that be?

A. That is get a coupon for -- for another pack of cigarettes with a purchase.

Q. And the next paragraph states, "Our special merchandising division is in its second year with its successful wholesale operation of premiums at beaches and special events through a separate sales force and a mobile store. We anticipate selling over a million items in 1975 -- a million 'walking billboards' for our brands.

"We will continue our special sampling programs on beaches, resort areas and sports arenas in major metro markets -- where there are large congregations of young adults."

Professor Perry, what is the significance of these marketing and promotion activities being discussed in this document?

*17 A. Well this entire document is a -- was presented to the board of directors, talks about this new or revived young adult campaign aimed at 14- to 24-year-olds, it's a large-scale, multi- component campaign using new advertising or revitalized advertising, and there's a whole range of promotional activities.

Q. Would you turn to Exhibit 12865, also in book one. This document was previously admitted into evidence, it's an RJR document dated January 23rd, 1975 from J. F. Hind to Mr. C. A. Tucker, vice-president, head of marketing and sales.

And the document states, "Our attached recommendation to expand nationally the successfully tested 'Meet the Turk' ad campaign and our new Marlboro-type blend is another step to meet our marketing objective: To increase our young adult franchise. To ensure increased and longer-term growth for Camel Filter, the brand must increase its share penetration among the 14-to-24 age group which have a new set of more liberal values and which represent tomorrow's cigarette business.

"Presently, almost two-thirds of the Camel Filter business is among smokers over 35 years of age, more than twice that for Marlboro. While 'Meet the Turk' is designed to switch the brand's age profile to the younger age group, this won't come over night. Patience, persistence, and consistency will be needed."

Professor Perry, what's the significance of this document?

A. Well this is a campaign, successfully tested "Meet the Turk" campaign for Camel Filter. Again, they're very explicitly saying this is for the 14-to- 24 age group. They also say -- RJR also says that patience, persistence and consistency will be needed, that means that they're willing to work long and hard, they're willing to be patient and persistent in order to be able to attract this age group.

Q. Would you turn in book one to Exhibit 12714. This is an RJR document dated October 30, 1975 from John M. Wallace to Mr. T. L. Ogburn, Jr., titled "SHARE OF SMOKERS BY AGE GROUP." Is this a document which you have reviewed in this case?

A. Yes, it is.

Q. Does it form part of the basis of your opinions?

A. Yes, it does.

MS. WALBURN: Your Honor, we would offer Exhibit 12714.

MR. WEBER: No objection, Your Honor.

THE COURT: Court will receive 12714. We'll take a short recess at this time.

THE CLERK: Court stands in recess.

(Recess taken.)

THE CLERK: All rise. Court is again in session.

(Jury enters the courtroom.)

THE CLERK: Please be seated.

THE COURT: Counsel.

MS. WALBURN: Thank you, Your Honor.

BY MS. WALBURN:

Q. Professor Perry, do you have Exhibit 12714, which has just been admitted, in front of you?

A. Yes, I do.

Q. Would you turn to the second page of that exhibit. This is a chart title "TRENDS IN WINSTON'S SHARE OF SMOKERS BY AGE GROUP COMPARED WITH MARLBORO (BASED ON SPRING SCREENINGS OF THE NFO PANEL IN YEARS INDICATED)."

Can you tell us what information is displayed in this chart.

*18 A. Yes. It shows the percentage of, as you can see, younger smokers ages 14 and 17, and adult smokers 18 and over, the percent that smoke Winston King or Winston Super or the total Winston, and it shows the years, you know, 1966, 1969, 1972, '73, '74, '75, and handwritten a '76.

Q. And would you turn to the next page, please. Does this show similar information for the Salem brand?

A. Yes, it does.

Q. Would you turn to page one of the document. In the third paragraph the document states, "SALEM King shows encouraging growth by posting a four point gain in the 14 to 17 market. There were no changes in the older markets."

What's the significance of that statement?

A. Well that -- what they're saying is that Salem was increasing its share among the 14- to 17-year-olds and only among the 14- to 17-year-olds. There were no changes in the older market; that is, older than -- 18 and older. And they thought this was encouraging growth in the 14- to 17-year-olds.

Q. And when you state that "they thought," who is "they?"

A. "They" is R. J. Reynolds Tobacco Company.

Q. Would you turn to Exhibit 13101. This is a July 22nd, 1980 R. J. Reynolds document previously admitted, subject, "MDD Report on Teenage Smokers (14 to 17)," it's from G. H. Long, who was the head of marketing and went on to become the president of RJR, and it's to Mr. E. A. Horrigan, Jr., the president of RJR.

And the document states, "Attached is a MDD report covering the aforementioned subject. Last January, a report was issued on this subject that indicated that Philip Morris had a total share of 59 among 14- to 17-year-old smokers, and specifically, Marlboro had a 52 share. This latest report indicates that Philip Morris's corporate share has increased by about 4 points; however, Marlboro remains the same at 52.

"Importantly, the report further indicates that RJR continues to gradually decline, and between the spring and fall 1979 periods, RJR's total share declined from 21.3 to 19.9.

"Hopefully, our various planned activities that will be implemented this fall will aid in some way in reducing or correcting these trends."

Professor, according to this document, what was Philip Morris's share of the 14- to 17-year-old market in 1980?

A. Fifty-nine percent.

Q. And in the second paragraph there's a reference for RJR and RJR's total share declining. From reviewing this document and other RJR documents, can you tell what age group this references?

A. Yes. This is also 14- to 17-year-olds. These data came from the NFO surveys.

Q. In looking at the third paragraph, what was the response from RJR to this indication that sales were declining in the 14- to 17-year-old age group?

A. That they had a number of planned activities, advertising and promotional activities that would be implemented in the fall of 1980 to try to correct this downward trend among 14- to 17-year- olds.

Q. Would you turn in this book to Exhibit 12811. This document was previously admitted into evidence. It's a confidential marketing research report from RJR dated February 1st, 1985. The title is "CAMEL YOUNGER ADULT SMOKER FOCUS GROUPS," and there were copies to a number of people including Mr. L. W. Hall, the head of marketing research.

*19 Can you tell us briefly what this document discusses.

A. Yes. This is a report from focus groups, group discussions that were held among younger adults around six new advertising campaign ideas. So this is the report from those focus groups where they looked at six new advertising campaigns for younger adults.

Q. And would you turn to page Bates number 7 -- 5739. The second paragraph on that page says, "Of the six themes, 'Go with it' and the 'French Camels' appeared to attract the most positive attention. General reaction to these themes was as follows:"

What's the significance of that statement?

A. That means that what the focus group participants, the younger adults, said was that these two themes -- they presented them with six themes, and of these -- the six themes, these two were the ones that they responded to most positively, "Go with it" and "French Camels."

Q. And what is the French Camel campaign?

A. The French Camel campaign was a campaign that was actually started and implemented in the early 1970s in France, and it's a cartoon character of -- of a Camel.

Q. At the time this document was written in 1985, was the Joe Camel cartoon campaign being used in the United States?

A. No, they were still in the planning stages.

Q. Turning to paragraph number two of this document, titled "French Camels," the document states, "These ads were well received due to the fun/humor aspects of the cartoons. More than any other theme, the 'French Camels' appeared to attract the respondents' attention. The main drawbacks of these executions were that: one, they may be more appealing to an even younger age group and two, there is some confusion as to the meaning behind them, paren, (some focus group members were hard-pressed to explain the purpose of the ads)."

According to this report, the French Camel cartoon had more appeal to younger age groups; is that correct?

A. Yes, it is.

Q. Was that viewed as a positive or a negative in this document?

A. In this document, that was viewed as -- as a drawback.

Q. And was that the end of the discussion of the French Camel campaign by Reynolds in the United States?

A. No, with just some modifications, the French Camel went on to be the Joe Camel campaign.

Q. Was there a video created by R. J. Reynolds to introduce plans for the 75th birthday campaign, the Joe Camel campaign, to its sales force?

A. Yes, there was.

Q. And have you reviewed that video?

A. Yes, I have.

Q. Is it part of the basis of your opinion?

A. Yes, it is.

MS. WALBURN: Your Honor, we would offer that video, Camel's 75 Birthday Campaign, Exhibit 19619.

MR. WEBER: Again, there were several videos produced on this. I assume we're just running one entirely?

MS. WALBURN: It is one entire one. It was provided to defense counsel last week.

MR. WEBER: Okay. No objection.

THE COURT: Court will receive 19619.

(Videotape played.)

BY MS. WALBURN:

*20 Q. Professor Perry, what's the significance of this RJR video?

A. Well as you could see, they were -- RJR was introducing Joe Camel in a big way, a huge multi-component program with advertising, promotions, coupons, various planned strategy, with -- with almost everything that would be appealing to an under-age smoker.

Q. The video referenced people ages 18 to 34 years old. What's the significance of that?

A. Well this was a time, a more recent time when the terminology was -- wasn't to use teen-agers in -- in their terminology.

Q. And the video also referenced -- referenced the French Camel campaign. What's the significance of that?

A. Well as we just saw in the last document, the French -- they knew that the --

RJR knew that the French Camel would appeal to an even younger age group, and so they knew in planning the Joe Camel campaign that it would appeal to the under-18 group.

Q. And what happened, Professor Perry, to sales of Camel among under-age smokers when the Joe Camel campaign was introduced in 1988?

A. Well as we saw in the research document from Morbidity and Mortality Weekly Review earlier in this testimony, the sales of Camels among under-age smokers climbed significantly.

Q. Did you review internal tobacco company documents which demonstrated whether Philip Morris, RJR's competitor, was watching the impact of the Joe Camel ad campaign in the marketplace?

A. Yes, I did.

Q. Would you turn to Exhibit 11823. This is a March 1992 document produced by Philip Morris in this litigation titled "THE VIABILITY OF THE MARLBORO MAN AMONG THE 18 TO 24 SEGMENT."

Is this a document which you have reviewed in this case?

A. Yes, it is.

Q. Does it form part of the basis of your opinions?

A. Yes, it does.

MS. WALBURN: Your Honor, we would offer Exhibit 11823.

MR. WEBER: Your Honor, we'd object to that. This is not a Philip Morris document submitted to Philip Morris by a third party, so it constitutes hearsay in its entirety.

MS. WALBURN: Your Honor, this is a document produced in this litigation by Philip Morris. It states on its title page that it was prepared by an outside ad agency for Philip Morris, and it is an admission of an agent within the scope of the agency under Rule 801(d)(2)(D).

THE COURT: Court will receive 11823.

BY MS. WALBURN:

Q. Looking at the title page of this document, it states, "THE VIABILITY OF THE MARLBORO MAN AMONG THE 18 TO 24 SEGMENT," and moving down the page, "FOR PHILIP MORRIS, BY BRUCE ECKMAN, INC., NEW YORK, NEW YORK, MARCH, 1992."

Would you turn to page three of the document. And the last paragraph of this page, in the last sentence states, "However, to ignore the impudence of the Camel could also be gambling with the entry level smoker and the future of the Marlboro franchise."

What is the significance of that statement?

A. Well this was the result of a study, a focus group study, and they're saying to ignore the Camel, Joe Camel, would be gambling with the entry level, the starter smokers, who are primarily under age. So to ignore Joe Camel would be gambling with the future of Marlboro.

*21 Q. Have you seen any evidence of what if anything Philip Morris did in the marketplace at around this time after Camel began its rise in sales among young people?

A. Yes, I did.

Q. Would you turn in book two to Exhibit 20177. This is a report previously admitted into evidence of advertising R&D and youth prevention expenses as totaled from information provided in discovery in this litigation. And the pages aren't numbered, but nine pages in there's a chart titled "ADVERTISING R&D AND YOUTH PREVENTION, Philip Morris," on the top of the page.

A. Yes.

Q. And looking at the line titled "Advertising, Marketing & Promotion Expenditures," can you look at the years 1992 and when that last document was written in 1993, and tell us what happened to advertising, marketing and promotion expenditures by Philip Morris in this time period.

A. Yes.

MR. WEBER: Your Honor, Your Honor, may I raise an issue first. I think this is the report that there was a motion pending about, about -- if the court will remember, about just what had been admitted on this and just what hadn't, as to whether it was several demonstratives or whether it was the entire report, and I think the -- that question is still pending. So to the extent there's something in here other than the demonstrative that's at issue, I would object.

MS. WALBURN: Your Honor, this exhibit was admitted in its entirety some weeks ago.

MR. WEBER: I hope the court will remember some time ago we had a discussion about this exhibit, and a motion was filed. I know that's still in front of the court. So that's all I'm raising. Because I think this deals with one of the documents that I did not think had been admitted that was part of the expert report.

THE COURT: Counsel.

MS. WALBURN: Again, Your Honor, this was admitted. I believe this had been previously addressed and ruled on by the court. And for counsel's information, this is the only line in this exhibit we're using at this time.

THE COURT: Okay.

MS. WALBURN: Also, we would offer it subject to further proof. The author of this report, Paul Much, will be testifying later this week.

THE COURT: You're just going to use one line?

MS. WALBURN: Yes, Your Honor, the line that's on the screen right now on advertising, marketing and promotion expenditures in '92 and '93.

THE COURT: All right. I don't recall that the court allowed the entire exhibit. It did allow the three demonstratives. I could be wrong, you can correct me, but I don't recall there being a subsequent offer. My review of the record originally was that there were three exhibits introduced and they were the three demonstratives, and that's all that -- I believe that's all that was introduced at the time. And they were received as the three demonstratives. Then there was an issue raised by defense with regard to the entire exhibit, and the court's position was it wasn't going to rule on that until Much testified.

MR. WEBER: Your Honor, I --

*22 THE COURT: Now did I miss something in between?

MS. WALBURN: My memory could be faulty, Your Honor. My recollection was the entire exhibit was offered and admitted, but only three demonstratives were used at that time.

THE COURT: That's not what I recall in reviewing the transcript.

MR. WEBER: Your Honor --

THE COURT: I could be wrong, but --

Yes.

MR. WEBER: I'm sorry if I --

THE COURT: Go ahead.

MR. WEBER: -- spoke over you.

If this can move things along here, I think Your Honor's recollection on this is quite precise. If all they're going to use is that one line, or they're just going to ask one question, and if under Rule 10 -- I forgot the number right now, that they're going to bring Mr. Much in to tie this up later, maybe we can just go ahead on the basis of the continued admissibility of Mr. Much, as long as it's very narrow right now.

THE COURT: Okay. You are representing Mr. Much will testify.

MS. WALBURN: Yes, he will.

THE COURT: And he will testify concerning this particular exhibit --

MS. WALBURN: Yes, under --

THE COURT: -- for purposes of introducing the exhibit.

MS. WALBURN: Yes. Under Rule 1006, Your Honor.

THE COURT: All right. I'll allow it, and I'll allow a motion to strike if that doesn't occur.

MR. WEBER: Thank you, Your Honor.

THE COURT: Okay.

BY MS. WALBURN:

Q. Looking at the advertising and promotion expenditures for Philip Morris between the years 1992 and 1993, can you tell us what happened the those expenditures in those years?

A. Yes. In 1992 they were 1.8 billion dollars, and in 1993 they were 2.8 billion dollars, so they increased their advertising, marketing and promotion budget by one billion dollars.

Q. Professor Perry, can we turn to another tobacco company, Brown & Williamson. Where does Brown & Williamson rank in the U.S. market in terms of share of market?

A. It's number three.

Q. Would you turn to Exhibit 11462 in book one. This is a Brown & Williamson document dated February 21st, 1973, from R. L. Johnson to R. A. Pittman, executive vice-president.

Is this a document which you have reviewed in this litigation?

A. Yes, it is.

Q. Does it form part of the basis of your opinions?

A. Yes, it does.

MS. WALBURN: Your Honor, we would offer Exhibit 11462.

MR. WEBER: No objection, Your Honor.

THE COURT: Court will receive 11462.

BY MS. WALBURN:

Q. And is this document discussing the Kool cigarette?

A. Yes, it is, it's discussing what -- how Kool is doing in the market.

Q. And who manufactures Kool?

A. Brown & Williamson.

Q. Would you turn to the last paragraph on the first page of this document. This states, "Kool has shown little or no growth in share of users in the 26- age group. Growth is from 16- to 25-year- olds. At the present rate, a smoker in the 16 to 25 year age group will soon be three times as important to Kool as a prospect in any other broad age category."

*23 And then turning to the next page, paragraph three -- page three -- the document states, "Kool's stake in the 16- to 25-year- old population segment is such that the value of this audience should be accurately weighted and reflected in current media programs. As a result, all magazines will be reviewed to see how efficiently they reach this group and other groups as well."

What's the significance of this document, Professor Perry?

A. Brown & Williamson is seeing how well they're doing with Kool in the 16- to 25-year-old age group. That's where they're doing the best, and so they are reviewing their advertising and promotional programs to make sure that they efficiently, as they say, reach this group 16 to 25.

Q. Would you turn in book two to Exhibit 13679. This document has been previously admitted, it's dated September 10th, 1975, two years after the document we just reviewed. It's from the Ted Bates New York/advertising agency to Mr. M. O. Willson, brand manager at Brown & Williamson, and it's titled "KOOL, Analysis of Brand Switching Study."

Can you generally describe this document, Professor Perry.

A. Yes. This is an advertising agency for Brown & Williamson, and they're discussing how well Kool is doing.

Q. And would you turn to page four of the document, Bates number 6816, under "CONCLUSIONS" in paragraph number one the document states, "Kool's effort against the 16 to 25 age group continues to be working."

What's the significance of that statement?

A. Well this is written after the last document we looked at, and so the ad agency is telling Brown & Williamson that their efforts, advertising and promotional efforts are working, meaning there are more smokers in that age group, the 16 to 25 age group.

Q. Would you turn in this volume to Exhibit 13438. This is a document dated September 16th, 1983 from H. T. Hughes at Brown & Williamson to a Mr. P. R. Hill at British-American Tobacco Company Ltd., which is the corporate affiliate of Brown & Williamson in England.

Is this a document which you have reviewed in this case?

A. Yes, I have.

Q. And does it form part of the basis of your opinions?

A. Yes, it does.

MS. WALBURN: Your Honor, we would offer Exhibit 13438.

MR. WEBER: No objection, Your Honor.

THE COURT: Court will receive 13438.

BY MS. WALBURN:

Q. And can you generally describe this document.

A. Yes. This is a document from Brown & Williamson to the British-American Tobacco Company in London, and it's a -- they filled out a survey about the U.S. cigarette market, so this is the cover letter and the survey that they filled out for British- American Tobacco Company.

Q. And would you turn to the next page, Bates number 3011. And it's -- on this page the document states "TOTAL POPULATION: SECTION C.1.

"Please write in the box below your definition of 'Adult' for Section C.1." And what is the definition of adult that Brown & Williamson provides to BATCo?

*24 A. Well consistent with the other Brown & Williamson documents, they define an adult as 16 and older.

Q. Would you turn in book one to Exhibit 11279. This is a 1985 document produced by BATCo Ltd. in this litigation entitled "THE CURRENT GROUP R&D PROJECT." Is this a document you have reviewed in this case?

A. Yes, it is.

Q. And does it form part of the basis of your opinions?

A. Yes, it does.

MS. WALBURN: Your Honor, we would offer Exhibit 11279.

MR. WEBER: No objection, Your Honor.

THE COURT: Court will receive 11279.

BY MS. WALBURN:

Q. And turning in this document to Bates number 0536, the document states, "BAT: GENERAL MARKETING POLICIES.

"ANTI-MARLBORO

"Marlboro is the single biggest threat to BAT's number one position. No one brand can destroy Marlboro.

"Overall BAT strategy will be market specific and multi- brand, but within each market major effort behind one brand aimed at starters/young adults."

What's the significance of that statement?

A. Well the significance is -- is that for -- for B.A.T, they also see Marlboro as a competitor and they also planned to have a major effort, have a major brand in each of their markets that's aimed at starters, and starters are primarily under age 18.

Q. Can we turn to another tobacco company, the Lorillard Tobacco Company. And in book number one, Exhibit 10195. This document was previously admitted, it's dated August 30th, 1978, it's to Mr. Curtis Judge, the president of Lorillard, from T. L. Achey, Field 3. And looking at the third paragraph on that page, the document states, "The success of Newport has been fantastic during the past few years. Our profile taken locally shows this brand being purchased by black people, paren, (all ages), young adults, paren, (usually college age), but the base of our business is the high school student."

Does this document appear to be reporting on one geographic area?

A. Yes, Field 3, which appears to be somewhere near New Jersey. East Coast.

Q. Are you aware from your research and information in the public domain about how Newport has sold among under-age youths nationwide?

A. Yes, it's been the number two or number three brand for the past decade at least.

Q. Could you turn to book two, Exhibit 17953, and its companion document, 24304. Exhibit 17953 is an August 11th, 1981 Lorillard document from Tom H. Mau, senior vice-president of advertising, to a group of people including Mr. M. H. Burke, group brand director, Ms. M. A. Capra, director of marketing and development, Mr. J. E. Daghlian, group brand manager, and Mr. J. G. Flinn, director of marketing research. And the attachment, Exhibit 24304, is titled "REPLIES TO 5-YEAR PLAN QUESTIONNAIRE."

Are these documents which you have reviewed in this litigation?

A. Yes, they are.

Q. And do they form part of the basis of your opinions?

A. Yes, they do.

MS. WALBURN: Your Honor, we would offer Exhibits 17953 and 24304.

*25 MR. WEBER: No objection, Your Honor.

THE COURT: Court will receive 175 -- 17953 and 24304.

BY MS. WALBURN:

Q. Looking first at the cover memo, Exhibit 17953, and the subject is "REPLIES TO 5-YEAR PLAN QUESTIONNAIRE." Then if you turn to the actual reply, which is the next exhibit, 24304, and would you turn in this document to page 27 or Bates number 1030. The first paragraph states, "The easiest is to keep riding with Newport. However, I think we must continually keep in mind that Newport is being heavily supported by blacks and the under 18 smokers. We are on somewhat thin ice should either of these two groups decide to shift their smoking habits."

What is the significance of that statement?

A. Well the significance of it is that Lorillard realizes that -- that their success rides on Newport, and the success of Newport is with the under- age -- under 18 age -- age group as well as blacks.

Q. Professor Perry, have you reviewed other documents in this litigation in addition to the ones you have testified about today?

A. Yes, I've reviewed hundreds of documents and thousands of advertisements.

Q. Based on your education, training, experience and expertise in the field of youth smoking, do you have an opinion to a reasonable degree of scientific certainty as to whether the majority of starting smokers are youth under age 18?

A. Yes. The majority of starting smokers are youth under age 18.

Q. Based on your education, training, experience and expertise in the field of youth smoking and your review of tobacco company documents in this litigation, do you have an opinion to a reasonable degree of scientific certainty as to whether the defendants knew that the majority of starting smokers are youth under age 18?

A. Yes. The tobacco companies, the defendants, knew that the majority of starting smokers are youth under age 18.

Q. And based on your education, training, experience and expertise in the field of youth smoking, do you have an opinion to a reasonable degree of scientific certainty as to whether youth are capable of making an informed choice about smoking?

A. Youth are not able to make an informed choice about smoking.

Q. Based on your education, training, experience and expertise, and your review of internal tobacco company documents in this case, do you have an opinion to a reasonable degree of scientific certainty as to whether defendants marketed cigarettes to youths, including youth under age 18?

A. Yes, the defendants definitely marketed to youth and youth under age 18.

Q. And finally, based on your education, training, experience and expertise and your review of internal tobacco company documents, do you have an opinion to a reasonable degree of scientific certainty as to whether defendants' conduct has been a substantial factor in causing young persons, including youth under age 18, to smoke?

A. Yes. The defendants' conduct has been a substantial contribution in causing young people to smoke.

*26 MS. WALBURN: Thank you. I have no further questions.

THE COURT: Well I think we'll recess at this time, reconvene tomorrow morning at 9:30.

THE CLERK: Court stands in recess, to reconvene tomorrow morning at 9:30.







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