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THE OPENING SUMMARY JUDGMENT BRIEFS IN

AMERICAN LEGACY FOUNDATION V. LORILLARD

Both the American Legacy Foundation and the Lorillard Tobacco Company have filed motions for summary judgment in American Legacy Foundation v. Lorillard, in the Delaware Chancery Court.  Summary judgment is a procedure which allows a court to resolve litigation without a trial.  It applies to cases, or parts of cases, where the disputes are over the applicable law as opposed to the facts.  As you review this document, please keep in mind that each side filed a response on April 15, 2005 and further responses will be filed two weeks later.  We would be happy to provide those briefs that are publicly available to you upon request. The motions will be argued on May 10, 2005.  The foundation will take full advantage of these opportunities to answer Lorillardís assertions.  Of course, Lorillard will also take issue with the foundationís positions.  We will provide you with additional information about the responsive briefs after they are filed.

The Foundationís Summary Judgment Brief

• The foundation begins by placing this case in its factual context.  The brief reviews the epidemic of youth smoking including the tobacco companiesí role in that epidemic;  the genesis and applicable provisions of the Master Settlement Agreement; the development of the truthÆ campaign; the foundationís efforts careful and substantial efforts to assure compliance with the MSA; and the success of the truthÆ campaign in lowering youth smoking rates.
  
  
•  The foundation then turns to the legal arguments, focusing on the meaning of the key MSA provision:   ìThe National Public Education Fund shall be used only for public education and advertising regarding the addictiveness, health effects, and social costs related to the use of tobacco products and shall not be used for any personal attack on, or vilification of, any person (whether by name or business affiliation), company, or governmental agency, whether individually or collectively.î
  
  
• ìAddictiveness, health effects and social costsî.  The foundation explains why truth^Æ ads address the ìaddictiveness, health effects, and social costsî related to the use of tobacco products.  In particular, it explains the importance of educating teens about the marketing practices of the tobacco companies in making teens educated and wary consumers and why this information amply satisfies the ìthree criteria clauseî.
  
  
• Vilification and Personal Attack. The foundation sets out its understanding of the meanings of these terms, which are not defined in the MSA. Based on a review of dictionary definitions, expert linguistic analysis, the overarching purpose of the MSA to reduce youth smoking and the how provision is constructed, it explains that these terms refer to advertising which is harsh and intense in tone and which is unfair either because it is untrue or because it addresses purely private matters. The foundation clearly states its belief that all of its ads comply with this provision.  The foundation also
• Explains why Lorillardís asserted definitions of these terms should be rejected.  Lorillard argues they prohibit any criticism of tobacco companies, tobacco company executives, or the tobacco industry, no matter how tepid and even if such criticisms are true and related only to business activities and not private lives. 
• Emphasizes the applicability of First Amendment principles protecting truthful speech, particularly on a matter of such public importance and where the states (and a state court) are so directly involved.
  
  
• The relevance of intent. The foundation explains that the question of whether an ad violates the vilification or personal attack restriction is properly determined from the face of the ad and does not turn on discerning some intent underlying the ad.   Lorillard has expended substantial effort in culling quotes from documents produced by Legacyís ad agencies and other contractors, such as focus group reports and creative briefs that were never adopted by Legacy, to argue that Legacy intended to vilify and personally attack tobacco companies and their executives.  The foundation explains  that if intent is relevant, the court should look not to the words of the contractors but to Legacyís very considerable efforts in connection with the legal and factual review of ads to assure that they do not vilify or personally attack
  
  
• Specific Ads:  In discovery, Legacy and Lorillard agreed to focus detailed discovery on twenty ads; ten designated by each party.  The brief discusses in detail why none of these ads violate either the MSA.
   
• Use of the Base Fund for Moderate Risk Ads:  Finally, the brief addresses Lorillardís claim that the vilification and personal attack prohibitions apply to all of the foundationís funds and not just the National Public Education Fund.  
• The foundation is supported by two MSA-based funding streams:  the Base Fund and the National Public Education Fund (NPEF).  Based on the plain language of the MSA quoted above, Legacy has taken the position that the vilification and personal attack restrictions apply to the NPEF but not to the Base Fund.  In an effort to minimize the risk of litigation and the resulting burden on the foundation, the Board of Directors decided five years ago that low risk ads (ads with a 10% or less chance of resulting in an unfavorable legal ruling) should be funded out of the NPEF while moderate risk ads (with between a 10% and 30% chance of resulting in an unfavorable legal ruling) should be funded out of the Base fund.  Legacy has not aired ads with more than a 30% risk.
• Lorillard has argued that the prohibitions apply to all Legacy advertisements, regardless of funding source.   
• The foundationís brief explains that the MSA should be read to mean what it says: these restrictions apply only to the NPEF and not to other funding sources.  It explains that Lorillardís reliance on a doctrine called the covenant of good faith and fair dealing cannot trump the plain language of the MSA.
• The foundation explains that it has properly allocated expenses through is accounting system and that Lorillardís arguments to the contrary do not hold up.

Lorillardís Summary Judgment Brief: 

• Lorillardís brief begins with an extensive review of what it believes to be the relevant facts.   Consistent with the approach it has taken earlier in the litigation, close to half of Lorillardís brief is based on the apparent theory that a mere recitation of its view of the facts offers strong support for its claim that Legacy has violated the vilification and personal attack prohibitions. Lorillard does not address, at all, the youth smoking epidemic, including the role of the tobacco companies in that epidemic.  Lorillard builds its case on the following assertions, many of which are disputed by the foundation:
• The truthÆ campaign is directly based on the Florida truth campaign which employed an anti-industry, branded approach designed to foster youth rebellion against the tobacco industry; concerns about the Florida campaign led to the adoption of the vilification and personal attack restrictions in the MSA.
• Legacy made a conscious decision to pursue an anti-industry strategy.
• Legacyís risk assessment analysis is not based in the MSA, is outcome-determinative and is otherwise wanting.
• Strong inferences that truthÆ violates the MSA should be drawn from the facts surrounding the launch of the truth campaign in early 2000, when the Board temporarily pulled the first ads (Body Bags, Lie Detector, Hypnosis and Shredder) off the air before putting two of them back on the air and the other two on the internet several weeks later.
• Lorillard claims that problems in getting network clearance for the ads, criticisms from the tobacco industry, and communications from two attorneys general support its view that the ads violated the MSA. 
• It also argues that ìheavyî criticisms from the tobacco control community after the ads were suspended played a major role in the Boardís decision to put the ads back on air
• The foundationís decision to fund moderate risk ads out of the base fund was nothing but an effort to avoid the vilification and personal attack restrictions;
• A detailed review of the development of the Project SCUM ad serves as an example of Legacyís strategy of attacking the tobacco industry.
• This ad featured an actual industry document which presented a strategy for marketing cigarettes to gay and homeless people.  SCUM is an acronym for Sub-Culture Urban Marketing.
• The e-mails which were sent by young people to tobacco executives through several features on the truth website (taken down several years ago),   a number of which included profanity, are further examples of MSA violations.
  
  
• Lorillard sets out its view of the meaning of vilification and personal attack.  Lorillard argues that these terms have very broad meanings and that truth is irrelevant to the determination of whether an ad violates them:  
• Lorillard argues that:  
• ìA  personal attack is the use of words or acts ñ whether by name or other identifying reference (i.e. ëpersonalí) ñ to criticize, negatively depict, or negatively comment about, no matter whether true or false (i.e., ëattackí).
• ìVilification is words or acts, spoken or taken by a person or entity, which have a tendency to degrade, disparage, or lessen the standing of another.  Words or acts ëvilifyí another when they have a tendency to cause third parties to view or think less favorably about the person or entity at whom the words or acts were directed.  It is irrelevant to this analysis whether the words or acts are true or false.î
• Lorillard explains why, in its view, five truth ads violate these provisions:  Shredder, Hypnosis, Product Recall (Aprilís Fools), Dog Walker, and Project SCUM.  Lorillard also addresses why the e-mail messages from thetruth.com also violate these provisions.
  
  
• Lorillard argues that the fact that Legacy finances moderate-risk ads from the base fund does not change the result that these ads violate the vilification and personal attack restrictions in the MSA.    Lorillard bases its argument on the contention that the NPEF is not properly understood as a funding source which can be segregated from other funding sources but rather as a program itself.   This program, according to Lorillard, incorporates all of the foundationís public education and advertising activities.  As a result, Lorillard concludes the vilification and personal attack restrictions apply to all of the foundationís advertisements.  Lorillard also asserts:
• The covenant of good faith and fair dealing mandates the conclusion that the personal attack and vilification prohibitions must be construed to apply to all foundation activities.
• Legacy may not use base fund payments for advertising.
• Since the entire truth ìbrandî relies on personal attacks and vilification it does not matter how individual ads are financed.
• Legacy has not properly allocated either direct or indirect expenditures between the base and national public education funds. 

Amicus Curiae Briefs

Three amicus curiae briefs were filed on behalf of the foundation.  The court permitted them to be filed over Lorillardís objections.  The briefs were filed on behalf of:

• 34 states and territories including:  Alaska, Arizona, Arkansas, the Commonwealth of the Northern Mariana Islands, Colorado, Connecticut, Georgia, Hawaii, Iowa, Idaho, Illinois, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Missouri, Montana, Nevada, New Jersey, New Mexico, New York, North Dakota, Oklahoma, Oregon, Puerto Rico, South Carolina, South Dakota, Tennessee, Utah, Vermont, Washington, West Virginia, and Wisconsin.
  
  
• The Citizensí Commission to Protect the Truth.  The Commission is the first-ever assembly of all living former U.S. Secretaries of Health, Education, and Welfare; U.S. Secretaries of Health and Human Services; U.S. Surgeons General; and Directors of the Centers for Disease Control and Prevention ñ from every Administration ñ Republican and Democrat ñ dating back to the Lyndon Johnson Administration., now including former Secretary of HHS, Tommy Thompson.
  
  
• Nineteen leading public health organizations including: Action on Smoking and Health, The Campaign for Tobacco-Free Kids, American Cancer Society, American College of Occupational and Environmental Medicine, American College of Preventive Medicine, American Dental Hygienistsí Association, American Heart Association, American Lung Association, American Public Health Association, American School Health Association, American Society of Addiction Medicine, Association of State and Territorial Health Officials, American Thoracic Society, Community Anti-Drug Coalitions of America, Lung Cancer Alliance, National Association of County and City Health Officials, National Association of Local Boards of Health, National African American Tobacco Prevention Network, National Latino Council on Alcohol and Tobacco Prevention.

Please contact Julia Cartwright in the foundationís Office of Communications if we can be of any further assistance.  Her direct dial is 202.454.5596.  Thank you.