Litigation Documents: State Of Oregon V. American Tobacco Co., et al.

CIRCUIT COURT OF OREGON

COUNTY OF MULTNOMAH

PLAINTIFF'S COMPLAINT

STATE OF OREGON,

Plaintiff,

THE AMERICAN TOBACCO COMPANY;
BROWN & WILLIAMSON TOBACCO
CORPORATION; LORILLARD TOBACCO
COMPANY; PHILIP MORRIS, INC.;
R.J. REYNOLDS TOBACCO COMPANY;
UNITED STATES TOBACCO COMPANY;
BRITISH AMERICAN TOBACCO COMPANY
LIMITED; B.A.T. INDUSTRIES, P.L.C.;
HILL & KNOWLTON, INC.; THE COUNCIL
FOR TOBACCO RESEARCH-U.S.A., INC.;
SMOKELESS TOBACCO COUNCIL, INC.;
TOBACCO INSTITUTE, INC.; foreign
corporations; and unknown
corporations; and JOHN DOE 1-100,
and JANE DOE 1-100, individuals,

Defendants.

(U.T.P.A., Antitrust, Negligence, Unjust Enrichment, Conspiracy, Indemnity, Misrepresentation, ORICO)

CLAIM NOT SUBJECT TO MANDATORY ARBITRATION

Allegations Common to all Claims for Relief

I. INTRODUCTION AND OVERVIEW

A. PARTIES AND CONDUCT

This action is brought by the State of Oregon against the manufacturers and sellers of approximately 98% of the tobacco products sold in the United States. Many of their parent or affiliated corporations are also named as defendants. The only significant tobacco purveyors not named as defendants are Liggett & Myers, Inc. and its affiliates (hereafter "Liggett") which control the other 2% of the United States tobacco market and with whom the plaintiff has, or expects shortly, to enter into a settlement agreement. In this Complaint, the tobacco manufacturers and their affiliates, including Liggett, will be referred to as the "Tobacco Companies." When intending to exclude Liggett, the reference will be to the "defendant Tobacco Companies."

Also named as defendants are Hill & Knowlton, Inc. (hereafter "Hill & Knowlton"), which is the public relations firm for the Tobacco Companies, and three organizations created by the Tobacco Companies which perform public relations services for the Tobacco Companies or purport to do or sponsor scientific research, primarily regarding tobacco and health. All of the parties are described with greater particularity later in this Complaint.

The defendants' conduct may be fairly summarized as follows:

a. The Tobacco Companies and their predecessors in interest sold tobacco to Oregon consumers knowing it to be addictive, to cause cancer, heart disease, emphysema and other diseases, and to result in premature death for approximately one-third of their Oregon customers. They also artificially manipulated the amount of nicotine in the tobacco in order to maintain its addictive quality.

b. The Tobacco Companies, starting in 1953 and continuing to the present, represented to the general public, including Oregon consumers, that they would undertake, sponsor, and promote objective scientific research regarding the health effects of tobacco, and that they would make known the results of that research. The Tobacco Companies, together with Hill & Knowlton, formed the other three named defendants or their predecessors (hereafter the Tobacco Researchers), representing to the general public, including Oregon consumers, that the Tobacco Researchers would perform the functions described in this subparagraph b.

c. The Tobacco Companies and the Tobacco Researchers, with the assistance or under the direction of Hill & Knowlton, actually frustrated any effort to undertake or sponsor such scientific research. They undertook and promoted scientific research which was not designed and performed according to the accepted scientific standards of the day; they systematically suppressed, by firing researchers and destroying or hiding research results (with the assistance of their counsel), scientific research and studies that tended to show that tobacco had adverse health effects; they publicly denigrated and cast aspersions on legitimate scientific research that tended to prove tobacco's adverse health effects, knowing the research to be of high quality; they publicly declared that tobacco had no adverse health effects when they knew that it did; and they publicly declared that there was legitimate scientific dispute concerning tobacco's adverse health effects when, in fact, they knew there was no such legitimate scientific dispute.

d. The Tobacco Companies, with the assistance of Hill & Knowlton and the Tobacco Researchers, acted in concert to prevent the development of a "safer" cigarette, i.e, a cigarette that was less addictive and had less deleterious effects on human health.

e. The Tobacco Companies, with the assistance of Hill & Knowlton and the Tobacco Researchers, acted in concert to make sure that none of the Tobacco Companies promoted the products of any Tobacco Company over the products of another on the basis of superior health effects.

f. The Tobacco Companies, since at least the mid-1980s, have intentionally placed advertisements designed to lure minors to purchase tobacco products, notwithstanding that Oregon law provides that it is a criminal violation for a minor to possess tobacco and for anyone to sell tobacco to a minor. The Tobacco Companies' advertisements have been successful, enticing approximately 11,000 Oregon teenagers to start smoking each year, one-third of whom will die premature deaths, 11.3 years premature, as a result of tobacco addiction.

B. THE LEGAL THEORIES

The conduct of the defendants and Liggett, as summarized above, constitutes violations of Oregon's Unlawful Trade Practices Act, antitrust statutes, and Racketeer Influenced and Corrupt Organizations Act. The conduct also gives rise to remedies under the common law for civil conspiracy, negligence, unjust enrichment, fraudulent misrepresentation, and indemnity.

C. DAMAGES

Many of the Oregon residents afflicted with tobacco-related diseases are or were poor and financially unable to provide for their own medical care. Pursuant to plaintiff's Medicaid program, plaintiff has provided and paid for such medical care, either directly or through "capitation" payments under the Oregon Health Plan. These payments place an extraordinary burden on Oregon taxpayers and are significantly higher because of defendants' unlawful sales and advertising. Plaintiff also pays for such medical care for its employees. The amount expended by plaintiff to pay the medical costs caused by defendants' conduct has been increasing each year and, although the precise amount is unknown and will be determined at trial, it is estimated to be approximately $60 million annually in the current budget biennium.

In addition to actual damages described immediately above, plaintiff is also entitled to additional statutory damages and relief as follows:

a. A civil penalty of up to $25,000 for each violation of the Unlawful Trade Practices Act, consisting of each sale of a tobacco product within the State of Oregon and each day that the defendants falsely advertised their products within the State of Oregon;

b. Treble plaintiff's actual damages under Oregon's antitrust laws;

c. Forfeiture of all the defendants' property and a penalty of $250,000 pursuant to Oregon's Racketeer Influenced and Corrupt Organizations Act (ORICO); and

d. Other legal and equitable relief as set forth in the prayer of this Complaint.

II. THE PARTIES

A. PLAINTIFF

Plaintiff is the State of Oregon.

B. DEFENDANTS

Defendant The American Tobacco Company (hereafter "American Tobacco") is a Delaware corporation whose principal place of business is Connecticut. At all times relevant to this Complaint, American Tobacco manufactured, advertised and sold Lucky Strike, Pall Mall, Tareyton, American, Malibu, Montclair, Newport, Misty, Iceberg, Silk Cut, Silva Thins, Sobrania, Bull Durham, and Carlton cigarettes and other tobacco products in Oregon and throughout the United States. In 1994, American Tobacco was sold to British-American Tobacco Co., parent of defendant Brown & Williamson.

Defendant Brown & Williamson Tobacco Corporation (hereafter "Brown & Williamson") is a Delaware corporation whose principal place of business is Kentucky. At all times relevant to this Complaint, Brown & Williamson manufactured, advertised, and sold Kool, Raleigh, Barclay, BelAir, Capri, Richland, Laredo, Eli Cutter and Viceroy cigarettes and other tobacco products in Oregon and throughout the United States.

10.

Defendant Lorillard Tobacco Company (hereafter "Lorillard") is a Delaware corporation whose principal place of business is New York. At all times relevant to this Complaint, Lorillard manufactured, advertised and sold Old Gold, Kent, Triumph, Satin, Max, Spring, Newport, and True cigarettes and other tobacco products in Oregon and throughout the United States.

11.

Defendant Philip Morris, Inc. (hereafter "Philip Morris") is a Virginia corporation whose principal place of business is New York. At all times relevant to this Complaint, Philip Morris manufactured, advertised and sold Philip Morris, Merit, Cambridge, Marlboro, Benson & Hedges, Virginia Slims, Alpine, Dunhill, English Ovals, Galaxy, Players, Saratoga, and Parliament cigarettes and other tobacco products in Oregon and throughout the United States.

12.

Defendant R.J. Reynolds Tobacco Company (hereafter "Reynolds") is a New Jersey corporation whose principal place of business is North Carolina. At all times relevant to this Complaint, Reynolds manufactured, advertised and sold Camel, Vantage, Now, Doral, Winston, Sterling, Magna, More, Century, Bright Rite and Salem cigarettes and other tobacco products in Oregon and throughout the United States.

13.

Defendant United States Tobacco Company (hereafter "U.S. Tobacco") is a Delaware corporation whose principal place of business is Connecticut. At all times relevant to this Complaint, U.S. Tobacco manufactured, advertised and sold Sano cigarettes and smokeless tobacco (snuff and chewing tobacco) under various brand names including Happy Days, Skoal and Copenhagen in Oregon and throughout the United States .

14.

Defendant British American Tobacco Company, Ltd. (hereafter "BATCO") is a British Corporation whose registered office is in Middelsex, England. BATCO is or was a related corporation of defendant Brown & Williamson. Both are owned by BAT Industries, p.l.c. At all times relevant to this Complaint, BATCO, individually or through its affiliate, agent, alter ego, subsidiary and/or division Brown & Williamson, advertised, promoted and sold its own tobacco products such as "555 Express" cigarettes in Oregon. BATCO, individually, or through its associated companies, agents, or subsidiaries has also conducted significant research for Brown & Williamson on the topics of smoking, disease, and addiction. On information and belief, Brown & Williamson also sent to England research conducted in the United States on the topics of smoking, disease, and addiction to remove sensitive and inculpatory documents from United States jurisdiction. BATCO is a participant in the conspiracy described herein and has caused harm and affected commerce in the State of Oregon.

15.

Defendant B.A.T. Industries p.l.c. (hereafter "B.A.T. Industries" or "BAT-II") is a British corporation whose principal place of business is in London, England. Through a succession of intermediary corporations and holding companies, B.A.T. Industries is the sole shareholder of Brown & Williamson. Through Brown & Williamson, B.A.T. Industries has placed cigarettes into the stream of commerce with the expectation that substantial sales of cigarettes would be made in the United States and in the State of Oregon. B.A.T. Industries has also conducted, or through its agents, subsidiaries, associated companies and/or co-conspirators has conducted, significant research for Brown & Williamson on the topics of smoking, disease and addiction. On information and belief, Brown & Williamson also sent to England research conducted in the United States on the topics of smoking, disease and addiction to remove sensitive and inculpatory documents from American jurisdictions, and such documents are and were subject to B.A.T. Industries' control. B.A.T. Industries is a participant in the conspiracy described herein and has caused harm and affected commerce in Oregon.

16.

Liggett is a Delaware corporation with its principal place of business in North Carolina. At all times relevant to this complaint, Liggett manufactured, advertised and sold various tobacco products, including Chesterfield, Decade, L&M, Pyramid, Dorado, Eve, Stride, Generic and Lark cigarettes in Oregon and throughout the United States. Liggett is not a defendant because it has, or is shortly expected to, enter into a settlement agreement with plaintiff.

17.

Defendant Hill & Knowlton is a New Jersey corporation with its principal place of business in New York. Hill & Knowlton played an active and knowing role in the conspiracy complained of, and aided circulation and/or publication of the false statements of the Tobacco Companies and the Council for Tobacco Research. Hill & Knowlton has been the primary advertising agency responsible for dissemination of the false and misleading information in question in its role as the advertising and public relations agency for The Tobacco Institute, Inc. (hereafter "Tobacco Institute"), The Council for Tobacco Research-U.S.A., Inc. (hereafter "CTR") and its predecessor Tobacco Institute Research Committee (hereafter "TIRC"), and several members of the tobacco industry, including Liggett, Philip Morris, Reynolds, American Tobacco and Lorillard. In the course of such representation, Hill & Knowlton aided these defendants in creating and issuing false information and concealing the truth about the link between tobacco and cancer or other health hazards, the addictive nature of nicotine, and the true nature of the activities of the TIRC/CTR and its relationship to the industry. Hill & Knowlton has been involved in the wrongful conduct and conspiracy since its creation.

18.

Defendant CTR is the successor in interest to TIRC, and is a New York nonprofit corporation with its principal place of business in New York. At all times relevant to this Complaint, CTR and TIRC operated as public relations and lobbying arms of the Tobacco Companies and as agents and employees of the Tobacco Companies. They also acted as facilitating agencies in furtherance of defendants' combination and conspiracy as described in this complaint. In doing the things alleged, CTR and TIRC acted within the course and scope of their agency and employment, and acted either at the direction or with the consent, permission, and authorization of each of the Tobacco Companies. All actions of the CTR and TIRC alleged were ratified and approved by the officers or managing agents of the Tobacco Companies. CTR and TIRC have been involved continuously in the conspiracy described and the actions of CTR and TIRC have affected commerce and caused harm in Oregon.

19.

Defendant Smokeless Tobacco Council, Inc. (hereafter "STC") is a New York non-profit corporation whose principal place of business is Washington, D.C. STC ostensibly was formed for reasons of supporting objective research into the biologic consequences of the use of smokeless tobacco. Like CTR, it was used to further the goals of the conspiracy. Dominated by U.S. Tobacco, STC also included as members several small producers of smokeless tobacco and was financially supported by several of the Tobacco Companies, including Brown & Williamson, Lorillard and Reynolds. Personnel from the Tobacco Companies actively participated, as agents of the Tobacco Companies, in STC activities. At all relevant times, STC operated as a public relations and lobbying arm of the Tobacco Companies and as agent and employee of the Tobacco Companies. It also acted as a facilitating agency in the furtherance of defendants' combination and conspiracy as described in this complaint. In doing the things alleged, STC acted within the course and scope of its agency and employment, and acted with the consent, permission and authorization of each of the Tobacco Companies. All actions of STC alleged were ratified and approved by the officers or managing agents of the Tobacco Companies. STC has been involved continuously in the conspiracy described and its actions have affected commerce and caused harm in Oregon.

20.

Defendant Tobacco Institute is a New York nonprofit corporation with its principal place of business in Washington, D.C. At all relevant times, Tobacco Institute operated as a public relations and lobbying arm of the Tobacco Companies and was an agent and employee of the Tobacco Companies. It also acted as a facilitating agency in furtherance of the combination and conspiracy of the defendants described in this Complaint. In doing the things alleged, Tobacco Institute acted within the course and scope of its agency and employment, and acted with the consent, permission, and authorization of each of the Tobacco Companies. All actions of the Tobacco Institute alleged were ratified and approved by the officers or managing agents of the Tobacco Companies. Tobacco Institute has been involved in the conspiracy described in this Complaint and the actions of Tobacco Institute have affected commerce and caused harm in Oregon.

21.

The above named defendants are sometimes herein collectively referred to as "defendants" (excluding Liggett) or the "Tobacco Industry."

III. JURISDICTION AND VENUE

22.

This Complaint is filed under provisions of the Oregon Unlawful Trade Practices Act, ORS 646.605 et seq., the Oregon Racketeer Influenced and Corrupt Organization Act (ORICO), ORS 166.715 to ORS 166.735, the Oregon Antitrust Act, ORS 646.705 et seq., ORS 30.310, and the common law of the State of Oregon.

23.

The Governor of the State of Oregon is the chief executive officer of Oregon. The Governor has authorized the Attorney General to appear, commence and prosecute this action. Hersh Crawford is the Director of the Office of Medical Assistance Programs of the Oregon Department of Human Resources, and is the state official with primary responsibility for state and federal programs providing medical assistance to financially needy Oregonians. Mr. Crawford has authorized the Attorney General to bring this action. Having concluded that this action is necessary and advisable to protect the interests of the state, the Attorney General is authorized by ORS 180.060(1)(d) to bring this action.

24.

Further authority for the Attorney General to commence this action is conferred by ORS 646.605 to 646.552; ORS 646.705 to 646.805; ORS 180.060; and ORS 180.520.

25.

The violations alleged herein have been and are being committed in whole or in part, and affect commerce in, and defendants do business in Multnomah County and elsewhere throughout the State of Oregon.

IV. CONSPIRACY ALLEGATIONS

26.

In committing the wrongful acts alleged, defendants and Liggett, often with the assistance and knowledge of their counsel, have pursued a common course of conduct, acted in concert with, aided and abetted and conspired with one another, in furtherance of their common plan and scheme outlined herein.

27.

Various other persons, firms, and corporations, who have been named as Unknown Corporations and John Does 1-100 and Jane Does 1-100, participated as co-conspirators in the illegal acts alleged and performed acts and made statements in furtherance of the combination and conspiracy alleged in this complaint.

V. NATURE OF TRADE AND COMMERCE

28.

Cigarette manufacturing has been one of the most concentrated industries in the United States throughout this century. Philip Morris, Reynolds, Brown & Williamson, Lorillard, American Tobacco, and Liggett comprise the "Big Six" cigarette manufacturers who control almost 100% of the market in the United States and in Oregon. Philip Morris and Reynolds are the industry leaders with national market shares of approximately 46% and 25% respectively. The approximate cigarette market shares of the remaining Big Six manufacturers are: Brown & Williamson, 12% (19% if American Tobacco is included); Lorillard, 8%; American Tobacco, 7%; and Liggett, 2%. The smokeless tobacco market is dominated by U.S. Tobacco and is even more concentrated.

29.

In part because of its concentration, the tobacco industry has long been one of America's most profitable businesses, with profit margins estimated to be at least 30%. The industry earns billions of dollars in profits each year from domestic sales. The exact amount of gross sales and profits derived from Oregon is unknown.

VI. FACTUAL ALLEGATIONS

30.

At all material times the cigarettes and other tobacco products sold, manufactured or promoted by the defendants have the following characteristics:

a. They are physically addictive;

b. They cause death and debilitating disease, including cancer, heart disease, stroke, and emphysema to those who smoke them or chew tobacco and, in some cases, to those who are non-smokers but who are exposed to smoke in the environment.

31.

Defendants have known since no later than 1974 that tobacco has the characteristics described in the immediately preceding paragraph. All defendants have had reason to know of those characteristics since at least 1946, and at least one of the defendants (Brown & Williamson) has known since at least 1963 that tobacco has those characteristics.

32.

Beginning on December 15, 1953, and continuing to the present time, defendants and their predecessors in interest entered into a joint agreement to engage in a public relations campaign to counteract the growing public perception that smoking cigarettes and consumption of their tobacco products was

injurious to human health. Pursuant to the joint agreement, the defendants engaged in the following activities:

a. They ceased developing and marketing a "safer" cigarette, i.e., a cigarette with health effects less injurious than those on the market at that time, even though Liggett had developed such a cigarette by 1978, and Philip Morris and Brown & Williamson and BATCO undertook research and development they abandoned by 1980. Reynolds also undertook and abandoned such research and development.

b. They ceased advertising that claimed the tobacco products of one of the Tobacco Companies was less harmful to health than the products of any competitor.

c. They proclaimed, primarily through the "Frank Statement" published in newspapers throughout the United States, including The Oregonian on January 4, 1954, and through other public announcements and public statements of employees and officials, that they would seek to promote, by the creation of the TIRC (which later became defendant CTR), reliable scientific research into the actual health effects of tobacco consumption, and that they would make the results of such research known to the general public. Other such public statements were made by Dr. Clarence Cook Little, Chairman of the "science advisory board" of TIRC in July, 1957; by Bowman Gray, Chairman of the Board of R.J. Reynolds on behalf of the Tobacco Companies in testimony before a committee of the United States House of Representatives on June 25, 1964; by Horace Kornegay, president of defendant Tobacco Institute, on February 13, 1978; and by other statements too numerous to list but which are known to defendants.

d. They suppressed reliable scientific research tending to show that tobacco was addictive and had ill health effects; promoted and publicized flawed research that either minimized or raised bogus questions as to nicotine's addictive qualities and tobacco's adverse health effects; and sought to denigrate independent research that found nicotine was addictive and tobacco had ill health effects. All instances of defendants' conduct as alleged in this sub-paragraph are not known to plaintiff but include: concealment of a 1974 study funded by defendant Council for Tobacco Research that found "reduced tar" cigarettes do not eliminate risks to health like lung cancer; a project sponsored by defendant CTR on "sick building syndrome" that relied on homes chosen by defendant Tobacco Institute and that relied on another industry-sponsored study that contained falsified data; and placement of advertisements by defendant Tobacco Institute attacking a 1981 Japanese study finding a connection between lung cancer and exposure to tobacco smoke from another person's cigarettes.

33.

Beginning at least as early as the mid-1980s, the Tobacco Companies have intentionally encouraged consumption of tobacco products by minors by marketing and advertising their products to minors, notwithstanding that possession of tobacco by minors and sale of tobacco to minors are violations of the criminal laws of the State of Oregon. Defendant Tobacco Companies' conduct in this regard continues to the present. Plaintiff has not yet determined all advertising campaigns and placements of the defendants that are and were directed toward minors, but examples are:

a. Philip Morris' campaign for Marlboro using the "Marlboro Man;"

b. R.J. Reynolds' campaign for Camel beginning in approximately 1988, including its payment for promotion of Camel in movies such as "Who Framed Roger Rabbit," and "Honey, I Shrunk the Kids;"

c. Brown & Williamson's payment of $500,000 to the actor Sylvester Stallone to place its product in five of his feature films;

d. Philip Morris' payment for the promotion of Marlboro in "Superman II," "Risky Business," and "Crocodile Dundee;"

e. American Tobacco's payment for the promotion of Lucky Strike in "Beverly Hills Cop;" and

f. Lorillard's campaign for Salem starting in the 1980s.

Concurrently, the defendant Tobacco Companies have publicly denied that they are intentionally marketing their products to minors.

VII. FRAUDULENT CONCEALMENT

34.

Plaintiff was without knowledge of defendants' combination or conspiracy, or of any facts from which it might reasonably be concluded that defendants were illegally conspiring, or which would have led to the discovery thereof until 1996. Plaintiff could not have discovered such facts or the alleged violations at an earlier time because defendants fraudulently concealed their course of conduct.

35.

Plaintiff is not aware of all the methods used by defendants and Liggett to conceal their activities, but believes that the methods used in furtherance of their combination and conspiracy were by nature self-concealing and not of a type which could have reasonably been apparent to plaintiff. For example, defendants' suppression of scientific research was done covertly. Defendants also concealed their activities by hiding relevant documents.

36.

Defendants' conspiracy and illegal conduct is ongoing and continues to the present.

Allegations for Particular Claims for Relief

VIII. CLAIMS FOR RELIEF

FIRST CLAIM FOR RELIEF--UNLAWFUL TRADE PRACTICES ACT

ORS 646.605-646.652

(Unconscionable Tactics: Unlawful Marketing

and Targeting Minors)

37.

Plaintiff realleges and incorporates herein the foregoing allegations of this Complaint.

38.

More than 10 days prior to the filing of this Complaint, each defendant was given notice of these violations pursuant to ORS 646.632 and in conformance with ORS 646.622, but each has failed to execute and deliver an Assurance of Voluntary Compliance in conformity with ORS 646.632.

39.

The Oregon Legislature has declared that it is the public policy of Oregon to prohibit minors' access to tobacco products. Pursuant to ORS 163.575 it is a criminal violation to give or sell tobacco products to minors, and such action constitutes endangering the welfare of a minor; pursuant to ORS 167.400, it is a criminal violation for a minor to possess tobacco products.

40.

Defendants have engaged in a course of conduct and have suppressed information with the intent that others rely on such suppression in an effort to unconscionably and unlawfully encourage minors to violate ORS 167.400 and to encourage adults to violate ORS 163.575

41.

More specifically, and as set forth above, defendants have caused the Tobacco Companies' products to be sold to minors, in part, by (a) concealing that their marketing is designed to encourage minors to smoke in violation of Oregon law; (b) concealing that their products are addictive and harmful and suppressing and omitting information on these subjects, while at the same time portraying tobacco use as glamorous and in a fashion that is designed to minimize the risks associated with tobacco use; (c) designing their marketing campaigns with the intent that minors rely on the Tobacco Companies' advertisements; (d) engaging in conduct with the purpose of causing minors to smoke in violation of Oregon law, while publicly, falsely and hypocritically claiming that they are against encouraging minors to smoke, and while they have acted precisely to encourage minors to smoke.

42.

Each day the defendant Tobacco Companies targeted minors in Oregon in their advertising as described above, they violated the expressed public policy of the State of Oregon, and encouraged others to violate the criminal law of this State and, so doing, they engaged in an unconscionable tactic in the sale of goods in violation of ORS 646.607.

43.

The exact dates on which each defendant Tobacco Company began engaging in, and continued to engage in, the unconscionable tactics described above is unknown to plaintiff but will be determined prior to, and proven at, trial.

44.

Defendants' violations of ORS 646.607(1) were done wilfully, in that they knew or should have known that their conduct was in violation of law.

SECOND CLAIM FOR RELIEF

(Unlawful Trade Practice - ORS 646.607(1))

45.

Plaintiff realleges and incorporates herein the foregoing allegations of this Complaint.

46.

Each sale of a tobacco product in Oregon manufactured or distributed by defendant Tobacco Companies was a sale that resulted from those defendants' willful employment of unconscionable tactics in connection with the sale or other disposition of goods or services to Oregon consumers, constituting a violation of the Oregon Unlawful Trade Practices Act, ORS 646.607(1), by:

a. Making false and misleading oral and written statements that had, and have, the capacity, tendency, or effect of deceiving or misleading Oregon consumers, including but not limited to statements concerning the defendants' knowledge of the harmful effects of smoking and the addictive properties of nicotine;

b. Promoting and selling tobacco products that addict Oregon consumers, while misleading the public as to defendants' concern and knowledge about the harmful and addictive nature of tobacco, the information available to them regarding the health effects and addictive nature of tobacco, and the purpose and independence of the TIRC/CTR;

c. Taking unfair advantage of Oregon consumers' ignorance of the true harmful and addictive nature of tobacco products, while perpetuating and fostering that ignorance through a campaign of misleading and deceptive advertisements some of which were conducted under the guise of scientific research and findings;

d. Repeatedly and systematically misleading the public about the extent to which there was a genuine controversy and uncertainty among scientists and health officials regarding whether smoking cigarettes is addictive;

e. Repeatedly and systematically misleading the public about the extent to which there was genuine controversy and uncertainty among scientists and health officials regarding whether smoking cigarettes is the cause of serious and life threatening disease;

f. Falsely claiming the defendants were conscientiously undertaking joint and individual research efforts involving disinterested, independent researchers, intending to discover the truth regarding the health consequences of smoking;

g. Suppressing research projects that "threatened" to result in important discoveries regarding smoking and health, which might jeopardize the profitability of cigarette sales or the tobacco industry's position in litigation;

h. Actively concealing scientific findings of vital interest to health officials and others concerned with the health effects of smoking because disclosure would disadvantage the tobacco industry;

i. Manipulating nicotine levels in order to ensure delivery of that drug to smokers in quantities which ensured physiological impact and promoted continuing dependency, and failing to disclose and denying such manipulation; and

j. Manufacturing and marketing a defective product (cigarettes) which is addictive and carcinogenic.

47.

Defendants' violations of ORS 646.607 were done wilfully, in that they knew or should have known that their conduct was in violation of law.

48.

The number of sales of each of the defendant Tobacco Companies' products in the State of Oregon is unknown to plaintiff but will be determined prior to, and proven at, trial.

THIRD CLAIM FOR RELIEF

(Unlawful Trade Practice - ORS 646.608(1)(g)

and ORS 646.608(1)(e))

49.

Plaintiff realleges and incorporates herein the foregoing allegations of this Complaint.

50.

Each sale of a tobacco product in Oregon manufactured or distributed by defendant Tobacco Companies was a sale that resulted from those defendants' willful misrepresentation that their tobacco products were of a particular standard, quality or grade when they were not, in violation of the Oregon Unlawful Trade Practices Act, ORS 646.608(1)(g), by:

h. Actively concealing scientific findings of vital interest to health officials and others concerned with the health effects of smoking because disclosure would disadvantage the tobacco industry; and

i. Manipulating nicotine levels in order to ensure delivery of that drug to smokers in quantities which ensured

physiological impact and promoted continuing dependency, and failing to disclose and denying such manipulation.

51.

Each sale of a tobacco product in Oregon manufactured or distributed by defendant Tobacco Companies was a sale that resulted from those defendants' willful misrepresentation that their tobacco products had sponsorship, approval, characteristics, ingredients, uses, benefits, quantities or qualities that they do not have, or that a person has sponsorship, approval, status, qualification, affiliation, or connection that the person does not have, in violation of ORS 646.608(1)(e), by:

a. Asserting that the TIRC/CTR would be run by a scientist of unimpeachable integrity and advised by a board of distinguished scientists disinterested in the tobacco industry when, in fact, TIRC was controlled by defendants and used to promote the sale of their tobacco products;

b. Making false and misleading oral and written statements that had, and have, the capacity, tendency, or effect of deceiving or misleading Oregon consumers, including but not limited to statements concerning the defendants' knowledge of the harmful effects of smoking and the addictive properties of nicotine;

c. Promoting and selling tobacco products that addict Oregon consumers, while misleading the public as to defendants' concern and knowledge about the harmful and addictive nature of tobacco, the information available to them regarding the health effects and addictive nature of tobacco, and the purpose and independence of the TIRC/CTR;

d. Taking unfair advantage of Oregon consumers' ignorance of the true harmful and addictive nature of tobacco products, while perpetuating and fostering that ignorance through a campaign of misleading and deceptive advertisements some of which were conducted under the guise of scientific research and findings;

e. Repeatedly and systematically misleading the public about the extent to which there was a genuine controversy and uncertainty among scientists and health officials regarding whether smoking cigarettes is addictive;

f. Repeatedly and systematically misleading the public about the extent to which there was genuine controversy and uncertainty among scientists and health officials regarding whether smoking cigarettes is the cause of serious and life threatening disease;

g. Falsely claiming the defendants were conscientiously undertaking joint and individual research efforts involving disinterested, independent researchers, intending to discover the truth regarding the health consequences of smoking;

h. Suppressing research projects that "threatened" to result in important discoveries regarding smoking and health, which might jeopardize the profitability of cigarette sales or the tobacco industry's position in litigation;

i. Actively concealing scientific findings of vital interest to health officials and others concerned with the health effects of smoking because disclosure would disadvantage the tobacco industry; and

j. Manipulating nicotine levels in order to ensure delivery of that drug to smokers in quantities which ensured physiological impact and promoted continuing dependency, and failing to disclose and denying such manipulation.

52.

Defendants' violations of ORS 646.608(1)(g) and 646.608(1)(e) were done wilfully, in that they knew or should have known that their conduct was in violation of law.

53.

The number of sales of each of the defendant Tobacco Companies' products in the State of Oregon is unknown to plaintiff but will be determined prior to, and proven at, trial.

FOURTH CLAIM FOR RELIEF

(Antitrust - Restraint of Trade)

54.

Plaintiff realleges and incorporates herein the foregoing allegations of this Complaint.

55.

Plaintiff, acting through its Attorney General, brings this claim under ORS 646.770 and 646.780 for equitable relief and to recover economic damages sustained by plaintiff in its business or property.

56.

As described more fully below, defendants, Liggett, and other unnamed co-conspirators have engaged in illegal conduct involving interstate trade or commerce which is primarily of an intrastate nature and over which federal jurisdiction has not been exercised by the Federal Trade Commission and the United States Department of Justice.

57.

Beginning as early as the 1950s, and continuing until the present date, defendants, Liggett, and other unnamed co-conspirators entered into a contract, combination or conspiracy in unreasonable restraint of trade and commerce in the market for tobacco products in Oregon.

58.

This contract, combination or conspiracy had the purpose and effect of:

a. Restraining competition in the marketing and sale of tobacco products in the State of Oregon;

b. Restraining competition among defendants on the basis of the safety and health characteristics and/or risks of defendants' tobacco products;

c. Restraining competition among tobacco product manufacturers for the research, development, production, sales and marketing of product innovations relating to the health effects of tobacco use, including "safer" cigarettes; and

d. Shifting the costs of health care associated with tobacco product use from the Tobacco Companies to the health care markets and to third parties, including plaintiff, within the health care markets.

59.

As part of the contract, combination or conspiracy, defendants, among other things, expressly and impliedly agreed to:

a. Restrain and suppress competition on health claims and the health and safety characteristics of tobacco products in the United States and in the State of Oregon;

b. Restrain and suppress research on the harmful health effects of tobacco product use and the addictive nature of nicotine;

c. Restrain and suppress the dissemination of information on the harmful health effects of tobacco product use and the addictive nature of nicotine;

d. Restrain and suppress the research, development, production, sales and marketing of product innovations relating to the health effects of tobacco product use, including "safer" cigarettes, in the State of Oregon; and

e. Restrict output by not competing on the basis of product innovations, including the development and marketing of "safer" cigarettes.

60.

The contract, combination or conspiracy was advanced, facilitated, and enforced through agreements, understandings or concerted actions by and among defendants, Liggett and unnamed co-conspirators to:

a. Withhold information that was in the possession and/or knowledge of the defendants and Liggett about the harmful health effects of tobacco product use and the addictive nature of nicotine;

b. Disseminate false information, through advertising and other means, of the true causal relationship between tobacco product use and the harmful health effects of such use, and falsely discrediting reports by others regarding the health effects of tobacco product use;

c. Destroy, suppress and/or conceal documents, research, independent research, and information relating to the causal relationship between tobacco product use and harmful health effects, and the addictive nature of nicotine;

d. Deceive the public, public officials, and public entities about the health risks of tobacco product use, the true causal relationship between tobacco use and tobacco-related diseases, and the addictive nature of nicotine;

e. Halt, limit, suppress and/or terminate the research, development, sales and marketing of product innovations related to the health risks associated with tobacco product use, including "safer" cigarettes; and

f. Shift the direct and foreseeable health care costs associated with the use of cigarettes and tobacco products to third party payors including plaintiff.

61.

Defendants' conduct constitutes a contract, combination or conspiracy in restraint of trade or commerce in violation of ORS 646.725.

62.

As a result of defendants' unlawful contract, combination or conspiracy:

a. Competition in the tobacco product market in the State of Oregon has been restrained;

b. Competition in research, development, marketing and sales of product innovations related to the health risks associated with tobacco use, including "safer" cigarettes, in the State of Oregon has been restrained and output has been restricted;

c. Oregon consumers have been deprived of the availability and choice of "safer" cigarettes;

d. The volume of tobacco product sales to the Oregon public and the prices charged by the Tobacco Companies for their tobacco products have been maintained at artificial levels;

e. Oregon consumers have been deprived of the availability of accurate information material to their decision about the purchase and use of tobacco products;

f. Oregon consumers have been misinformed and misled concerning the nature and health consequences of use of tobacco products;

g. The Tobacco Companies prevented loss of sales revenues and loss of profits that would have resulted if the information on the harmful effects of tobacco products and the addictive effects of nicotine had been made public;

h. The Tobacco Companies prevented the assumption of health care costs associated with the use of tobacco products that they would have incurred if the information on the harmful health effects of tobacco product use and the addictive effects of nicotine had been made public;

i. The Tobacco Companies shifted the cost of health care associated with tobacco product use to the health care markets and to third parties within the health care markets, including

Oregon, which costs would otherwise have been borne by defendant Tobacco Companies as a cost in the tobacco product market; and

j. The allocation of resources within Oregon's economy has been adversely affected.

63.

Plaintiff has suffered injury to its business or property because:

a. Residents of the State of Oregon have used and continue to use more dangerous tobacco products than they otherwise would have;

b. Residents of the State of Oregon have been deprived of a choice of less dangerous alternatives to the tobacco products that were available to them;

c. Residents of the State of Oregon have suffered higher rates of tobacco-related illnesses and premature deaths than they otherwise would have but for defendants' unlawful conduct;

d. Plaintiff has assumed a burden of the costs, including medical costs, of tobacco-related diseases that were shifted from defendants to third parties, including plaintiff, that would otherwise have been assumed by defendants but for defendants' unlawful conduct; and

e. Plaintiff has incurred higher health care costs in paying for the treatment of the tobacco-related illnesses and diseases than it otherwise would have but for defendants' conduct.

64.

Plaintiff was in the target area of defendants' unlawful contract, combination or conspiracy; defendants' unlawful conduct has had and continues to have a direct and foreseeable effect on plaintiff's medical costs; and defendants have reaped and continue to reap enormous profits without paying health care costs that they should incur by shifting the health care costs of tobacco-related illnesses and diseases to third parties, including plaintiff.

65.

The market for tobacco products and the market for health care are inextricably intertwined.

66.

The injury to plaintiff's business or property is a direct and foreseeable result of defendants' unlawful conduct and is inextricably intertwined with and a necessary step in effecting the ends of defendants' unlawful conduct.

67.

The unlawful contract, combination or conspiracy and the effects thereof are continuing, and plaintiff has suffered irreparable injury to its business or property and will continue to suffer irreparable injury unless the equitable relief sought by plaintiff is granted.

FIFTH CLAIM FOR RELIEF

(Antitrust - Conspiracy to Monopolize)

68.

Plaintiff realleges and incorporates herein the allegations contained in the Fourth Claim for Relief.

69.

At all times material herein, the Tobacco Companies jointly possessed 100% of the cigarette market in the State of Oregon, hereafter referred to as a joint monopoly.

70.

Defendants entered into the unlawful contract, combination or conspiracy alleged in the Fourth Claim for Relief which necessarily and directly resulted in defendants' preserving, maintaining, expanding and exercising the Tobacco Companies' joint monopoly in the cigarette market in the State of Oregon in violation of ORS 646.730.

71.

As part of the unlawful contract, combination or conspiracy alleged in the Fourth Claim for Relief, defendants, among other things, agreed to and engaged in the conduct alleged therein which was specifically intended to preserve, maintain, expand, and exercise the Tobacco Companies' joint monopoly in the cigarette market in the State of Oregon.

72.

Defendants' unlawful conduct resulted in:

a. Restraining and stifling entry into the cigarette market by new competitors to compete with the Tobacco Companies;

b. Stifling and suppressing the creation of new products and/or new product markets that would have competed with the Tobacco Companies but for defendants' unlawful conduct;

c. Restricting output in product innovations, including the development and marketing of "safer" cigarettes; and

d. Artificially maintaining the Tobacco Companies' joint market shares and sales of more addictive cigarettes to the public.

73.

As a result of defendants' unlawful contract, combination or conspiracy, plaintiff has suffered the injuries to its business or property as alleged in the Fourth Claim for Relief and will continue to suffer irreparable injury unless the equitable relief sought by plaintiff is granted.

74.

75.

The market for cigarettes and the market for health care are inextricably intertwined.

SIXTH CLAIM FOR RELIEF

(Oregon Racketeer Influenced & Corrupt Organizations Act)

76.

Plaintiff realleges and incorporates in this claim allegations of every other paragraph alleged in this Complaint. The Attorney General is authorized by ORS 166.725(5) and ORS 166.725(8) to bring the counts stated in this claim for relief.

THE ENTERPRISE

77.

Beginning on January 1, 1953 and continuously at all times since, an "enterprise" as defined in ORS 166.715(2) existed. The enterprise consisted of an association in fact between and among all defendants named in this Complaint; non-defendants American Brands, Inc., RJR Nabisco, Inc., Batus Corporation, Philip Morris Companies, Inc., Liggett Group, Inc., Liggett, Brooke Group LTD., Inc., Brooke Group, Limited, UST, Inc.; and other persons and entities as yet unknown to plaintiff.

THE PATTERN OF RACKETEERING ACTIVITY

78.

Between January 1, 1953 and continuously through the present, the enterprise has engaged in a pattern of racketeering activity as defined in ORS 166.715(4) consisting of two or more incidents of racketeering conduct, each of which constituted conduct defined as racketeering activity under 18 USC � 1961(1)(B). These acts are interrelated by their connection to the enterprise, including having the same results, accomplices, and victims, and by the fact that they are all intended to increase or maintain profits from the manufacture, distribution and sale of tobacco products. These incidents of racketeering activity are more particularly alleged in Paragraphs 79-83.

SCHEME OR ARTIFICE TO DEFRAUD

79.

Each of the incidents of racketeering conduct more particularly alleged in paragraphs 80 - 83 were committed by defendants as part of a scheme or artifice to defraud current and would-be consumers of tobacco products, the public, and plaintiff by false and misleading statements, telling half-truths, and by deceitfully failing to state material facts necessary to correct otherwise misleading statements. The schemes and artifices to defraud formed by defendants and carried out through the activities of the enterprise constituted schemes or artifices to defraud in violation of 18 USC � 1341 and 18 USC � 1343. Schemes and artifices to defraud committed by defendants as a group and as individuals included:

a. Creating and encouraging false and misleading controversies regarding the addictive qualities of tobacco products containing nicotine;

b. Creating and encouraging false and misleading controversies regarding the fact that tobacco causes injurious health effects including death; and concealing and misrepresenting defendants' individual and collective knowledge of the addictive qualities of tobacco products containing nicotine;

c. Concealing and misrepresenting defendants' collective and individual knowledge of the fact that tobacco causes injurious health effects including death;

d. Concealing and misrepresenting defendants' collective and individual knowledge and capacity to manufacture, distribute and sell less dangerous tobacco products;

e. Concealing and misrepresenting defendants' capacity and practice of manipulating the amount of nicotine contained in their tobacco products;

f. Falsely representing to current and would-be consumers, the public, and plaintiff that defendants would fulfil their voluntarily assumed duty to honestly and completely disclose their collective and individual knowledge of all of the foregoing; and,

g. Falsely denying defendants knew their marketing and promotional activities had the effect and intent of causing children under the age of 18 to become addicted to defendants' deadly products.

INTENT TO DEFRAUD

80.

The schemes and artifices to defraud, and each of the incidents of racketeering conduct more particularly alleged in paragraphs 79 - 83, were committed by defendants with the intent to defraud current and would-be consumers of tobacco products, the public, and plaintiff. Defendants acted at all times with a conscious objective to mislead and confuse consumers, the public, and plaintiff.

INTERSTATE MAIL AND WIRE COMMUNICATIONS

81.

As is more particularly alleged in paragraphs 82 and 83, defendants used the United States mails and interstate and international wire communications for the purpose and in furtherance of their schemes and artifices to defraud.

ACTS OF MAIL FRAUD

82.

All of the defendants used the United States mails to disseminate advertising which was part of the schemes and artifices to defraud. All of the defendants also used the United States mails and wire communication to communicate among themselves with the purpose and effect of fostering the scheme and artifices to defraud. Virtually every advertisement placed by the defendants or one of them since the beginning of the joint action in 1953 constituted a use of the U.S. mails or wire communication as a part of the schemes and artifices to defraud. a. On or about February 10, 1958, Benson & Hedges, predecessor in interest to defendant Philip Morris, caused to be published in Life magazine an advertisement which promoted its cigarette product "Parliament." That advertisement was disseminated throughout the State of Oregon, and contained, in part, the written statement: "THE FIRST FILTER CIGARETTE IN THE WORLD THAT MEETS THE STANDARDS OF THE UNITED STATES TESTING CO."

b. On or about February 21, 1964, defendant Reynolds caused to be published in Life magazine an advertisement which promoted its cigarette product "Winston." That advertisement was disseminated throughout the State of Oregon, and contained, in part, the written statement: "Flavor that goes with fun," and the statement: "Pure white, modern filter."

c. On or about February 28, 1964, defendant Lorillard caused to be published in Life magazine an advertisement which promoted its cigarette product "Kent." That advertisement was disseminated throughout the State of Oregon, and contained, in part, the written statement: "When pleasure is important," and the statement: "Kent with the MICRONITE filter gives you the best combination of filter-action and satisfying taste."

d. On or about June 30, 1972, defendant Lorillard caused to be published in Life magazine an advertisement which promoted its cigarette product "True." That advertisement was disseminated throughout the State of Oregon, and contained, in part, the written statement: "Latest U.S. Government tests of all leading cigarettes show True lowest in both tar and nicotine of the 20 best-selling brands."

e. On or about November 24, 1972, defendant American Tobacco caused to be published in Life magazine an advertisement which promoted its cigarette product "Tareyton 100's." That advertisement was disseminated throughout the State of Oregon, and contained, in part, the written statement: "Filter for better taste the Tareyton way with activated charcoal." The advertisement continued: "Enjoy the mild taste of Tareyton with the Activated Charcoal Filter."

f. On or about June 9, 1980, defendant Philip Morris caused to be published in Sports Illustrated magazine an advertisement which promoted its cigarette product "Marlboro Lights." That advertisement was disseminated throughout the State of Oregon, and contained, in part, the written statement: "The spirit of Marlboro in a low tar cigarette."

g. On or about August 25, 1980, defendant American Tobacco caused to be published in Time magazine an advertisement which promoted its cigarette product "Tareyton lights." That advertisement was disseminated throughout the State of Oregon, and contained, in part, the written statement: "Only Tareyton has the best filter!" The statement continues underneath a depiction of a man and a woman: "We'd rather light than fight!"

h. On or about August 25, 1980, defendant Philip Morris caused to be published in Time magazine an advertisement which promoted its cigarette product "Merit." That advertisement was disseminated throughout the State of Oregon, and contained, in part, the written statement: "Low tar/good taste combination scores impressive 3-to-1 victory over leading high tar brands."

i. On or about August 25, 1980, defendant American Tobacco caused to be published in Time magazine an advertisement which promoted its cigarette product "Carlton." That advertisement was disseminated throughout the State of Oregon, and contained, in part, the written statement: "10 packs of Carlton have less tar than 1 pack of [eleven (11) other cigarette brands]."

j. On or about September 1, 1980, defendant Brown & Williamson Tobacco caused to be published in U. S. News & World Report magazine an advertisement which promoted cigarette product "Kool SUPER LIGHTS." That advertisement was disseminated throughout the State of Oregon, and contained, in part, the written statement: "the coolest taste around," and the statement: "Long famous for coolness in smoking."

k. On or about February 1, 1983, defendant Tobacco Institute caused to be published in Time magazine an advertisement which discounted the effects of cigarette advertising as a major reason why kids smoke. That advertisement was disseminated throughout the State of Oregon, and contained, in part, the written statement: "Answers to the most asked questions about cigarettes. IS CIGARETTE Advertising A MAJOR REASON WHY KIDS SMOKE? NO." The advertisement contains text and a bar graph, purporting to support the position that advertising does not impact youth smoking and discussing a decrease in teenage smokers between 1974 and 1979. The advertisement concludes with the statement: "WEIGH BOTH SIDES BEFORE YOU TAKE SIDES."

l. On or about August 1, 1987, defendant Reynolds caused to be published in Family Circle magazine an advertisement which promoted defendant's "Now 100's." That advertisement was disseminated throughout the State of Oregon and contained, in part, the written statement: "NOW IS LOWEST BY U.S. Gov't testing method" in comparison to the tar and nicotine contained in three other listed brands of cigarettes with their respectively higher listed amounts of tar and nicotine to the tar and nicotine amounts contained in defendant's subject cigarette.

m. On or about July 11, 1991, defendant Reynolds caused to be published in Rolling Stone magazine an advertisement which promoted its cigarette product "Camel." That advertisement was disseminated throughout the State of Oregon, and contained, in part, the written statement: "The Hard Pack" accompanying an artist's rendering of four Joe Camel look-alikes as musicians with instruments, and showing the words "Smooth Taste Low Tar" on a large pack of Camel cigarettes.

n. On or about August 19, 1991, defendant American Tobacco caused to be published in Sports Illustrated magazine an advertisement which promoted its cigarette product "Carlton." That advertisement was disseminated throughout the State of Oregon, and contained, in part, the written statement: "U.S. Gov't Test Method confirms of all king soft packs: Carlton is lowest [in tar]."

83.

Plaintiff does not certify the evidentiary basis for the remaining allegations of this paragraph, but plaintiff reasonably believes further investigation and discovery will sustain the allegations of each subparagraph below.

a. During June and July, 1963, letters were exchanged through the mails and wire communications were made in which representatives of British American Tobacco and Brown & Williamson discussed nicotine research being done by Battelle, agreed to withhold research from the Surgeon General of the United States, and forwarded research to attempt to protect their position.

b. In 1971, an advertisement, "The Question about Smoking and Health is still a Question," was sent through the mails from the Tobacco Institute.

c. In December, 1977, a letter was sent through the mails from Addison Yeaman, President of defendant CTR to Thomas Ahrensfeld, Joseph Greer, Arnold Henson, Ernest Pepples and H.C. Roemer; and, on or about December 28, 1977, a second letter was sent through the mails from W. Hoyt to American Brands Inc., and defendants Brown & Williamson, Philip Morris, and Reynolds. Both letters detailed the billing of the Tobacco Companies to fund the 1978 budget of CTR based upon market share.

d. In 1978, a letter was sent through the mails from William Shinn of Shook, Hardy & Bacon to, inter alia, Thomas Ahrensfeld, Ernest Pepples and Arthur Sevens, insisting that future activities of the Research Liaison Committee should first be reviewed by the Committee of Counsel for the Tobacco Companies.

e. In early 1980, a letter was sent through the mails from the President of the Tobacco Institute to various insurance companies to protest discounts being offered to non-smokers and to falsely attack the credibility of any scientific research showing the hazards of smoking.

f. On or about March 31, 1980, a letter was sent through the mails from Bob Seligman of defendant Philip Morris to Alex Spears of defendant Lorillard, specifying certain subjects which should be avoided for tobacco industry research, including inter alia, "attempt[s] to relate human disease to smoking," although the defendants previously represented that they would cooperate with public health officials.

g. On or about May 7, 1982, letters were exchanged through the mails between Daniel Milway of the Tobacco Institute and various presidents of the Tobacco Companies regarding the level of funding to support independent biomedical research in order to support the pretense of commitment to independent research as communicated to public officials and others.

h. In 1984, the CTR Annual Report was distributed using the mails to persons throughout the country based upon a distribution list drafted by Leonard Zahn and Associates, the public relations consultant for CTR. The report does not disclose that lawyers for CTR and the Tobacco Companies had been involved in the design of the research program.

i. On or about October 25, 1984, a letter was sent through the mails from J. Kendrick Wells, III, corporate counsel for defendant Brown & Williamson to H. A. Morini of defendant BATCO, setting out Mr. Wells' "comments" and suggested changes to a paper written by Dr. L.C.F. Blackman entitled "The Controversy on Smoking and Health: Some Facts and Anomalies." Wells' letter states:

"Recent developments have reaffirmed the need for the attention we customarily have given to proposed BAT publications. The smoking and health litigation in the U.S. has demonstrated that plaintiffs' lawyers are aggressive in questioning tobacco CEOs about published company statements, as we had predicted they would be. Peter Taylor's Smoke Ring demonstrated that BAT publications which may be intended for limited distribution can be obtained and scrutinized by our most articulate adversaries."

The purpose of this editing was to protect the tobacco companies cigarette market and to further the tobacco industry's continuing conspiracy to create and maintain the false controversy regarding cigarette smoking and disease.

j. In November, 1984, defendants distributed a study entitled "Chronic Exposure of Mice to Cigarette Smoke" using the mails. This study was earlier described in the February, 1984 Tobacco Institute journal, The Tobacco Observer, and in press releases issued by CTR and carried by the wire services, as a determined effort to develop a suitable animal model to learn if tobacco caused cancer. However, CTR knew the study was flawed in design and execution.

k. In 1989, Gary Miller, a spokesperson for the Tobacco Institute, appeared on various radio programs throughout the country to promote the false controversy of science promulgated by the Racketeering Enterprise. There, Miller asserted the Tobacco Institute had no knowledge that smoking cigarettes is harmful or that it was aware of any proof of cancer causing effects from smoking cigarettes.

l. On or about January 11, 1990, Jo Spach of defendant Reynolds sent a letter through the mails to the principal of Willow-Ridge School in Amherst, New York, asserting that the tobacco industry had made "a sincere attempt to determine what harmful effects ... smoking might have on human health" by establishing defendant CTR. Defendant Reynolds failed to disclose that CTR was organized by the Tobacco Companies as part of their public relations efforts to promote the false controversy about smoking and disease to children. Spach asked that the information in the letter be distributed to fifth grade school students.

m. On or about February 15, 1995, James Glenn, President of CTR, sent a letter through the mails to James Todd, Executive Vice-President of the American Medical Association, and all deans of United States medical schools. Glenn's letter failed to disclose that CTR was conceived as a public relations effort to solely support the sale and marketing of cigarettes, failed to disclose that the Special Projects funded through CTR were, in part, used to develop witnesses to defend the Tobacco Companies; and failed to disclose that the Tobacco Companies' lawyers helped in the design, funding and public discussions relating to research by scientists funded by CTR.

n. On or about March 27, 1994, Brennan Dawson, Vice-President of the Tobacco Institute, appeared on the "Face the Nation" television program and stated, inter alia, "that cigarettes are not addictive," that "[n]ot only do they [the tobacco industry] not add nicotine, but that they don't manipulate nicotine," and that "[t]here is no process that adds nicotine to the cigarette ... Nicotine is not added during the manufacturing process. It's that simple."

o. On or about April 1, 1994, Brennan Dawson, Vice-President of the Tobacco Institute, appeared on the "MacNeil/Lehrer News Hour" television program and stated, inter alia, that the Tobacco Companies "do not add nicotine," that "[t]here's no manipulation done by the manufacturers" concerning production of cigarettes, that nicotine is not an addictive drug and that tobacco manufacturers are not targeting and marketing the sale of cigarettes to minors.

p. On or about April 8, 1994, Brennan Dawson, Vice-President of the Tobacco Institute, appeared on the "CBS Evening News" program and stated, inter alia, that there is nothing in cigarettes to worry about, "In the amounts that are used, the ingredients that are used to make cigarettes are safe for smokers."

COUNT ONE: UNLAWFUL PARTICIPATION IN AN ILLEGAL ENTERPRISE

84.

Between January 1, 1953 and continuing to the present, defendants participated directly or indirectly in the enterprise alleged in paragraph 77 through the pattern of racketeering activity alleged in paragraphs 78 - 83.

COUNT TWO: UNLAWFUL INVESTMENT OF FRUITS

OF ILLEGAL PARTICIPATION

85.

Between January 1, 1953 and continuing to the present, defendants used and invested the proceeds of the racketeering activity alleged in paragraphs 77 - 83. Defendants used and invested the original proceeds, and used and invested fruits of the use and investment of those proceeds, to acquire title to and rights, interests, and equity in real property and in the establishment and operation of business entities.

86.

Plaintiff is at present unaware of the exact description and nature of the property interests acquired as alleged in paragraph 85. Plaintiff reasonably believes further investigation and discovery will identify the exact description and nature of the property interests acquired as alleged in paragraph 85.

COUNT THREE: CONSPIRACY TO UNLAWFULLY

PARTICIPATE AND TO UNLAWFULLY INVEST

87.

Between January 1, 1953 and continuing to the present, defendants agreed with one another, with the other participants in the enterprise, and with persons whose identity is as yet unknown to plaintiff, to engage in and cause the performance of the racketeering activity alleged in paragraphs 77 - 83. Between January 1, 1953 and continuing to the present, defendants agreed with one another, with the other participants in the enterprise, and with persons whose identities are as yet unknown to plaintiff, to use and to invest the proceeds of the racketeering activity alleged in paragraphs 78 - 83.

SEVENTH CLAIM FOR RELIEF

(Fraudulent Misrepresentation and Omission)

88.

Plaintiff realleges and incorporates herein the foregoing allegations of this Complaint.

89.

Defendants, through their public pronouncements and communications, made material representations intended to be received and actually received by state regulators and citizens of the State of Oregon that cigarettes are not addictive, carcinogenic and pathologic, and that there is and was legitimate scientific dispute regarding those issues, that defendants were undertaking independent scientific research to determine the true health effects of tobacco and that the results of such research would be made known to the public, including Oregonians. Such statements are referenced in Paragraph 32c.; paragraph 83, at subparagraphs b, e, h, u, l, m, n, o, p, and q.; and were also made by defendant Reynolds in a 1984 statement to The New York Times, and in a 1979 public statement by Dr. Sheldon Sommers, and in other statements not yet identified by plaintiff.

90.

Defendants knew that these material representations to state regulators and citizens of the State of Oregon were false when made, and plaintiffs were ignorant of the falsity of the material representations when made.

91.

Defendants intended that state regulators and citizens of the State of Oregon rely upon these material representations, and state regulators and citizens of the State of Oregon had a right

to rely on these material representations, and actually did rely upon the truthfulness of these material representations.

92.

Defendants' acts constitute fraudulent misrepresentations and omissions.

93.

As a direct result of defendants' fraudulent misrepresentations and omissions, plaintiff's regulators did not undertake appropriate regulatory action and citizens of the State of Oregon have suffered injuries in the form of addiction, cancer and other illness and disease. Many of these citizens of Oregon are Medicaid or publicly-funded health care recipients. Plaintiff thus has borne the massive costs of these illnesses and diseases by providing necessary medical care, facilities and services for certain of those aforementioned citizens of the State of Oregon injured by the Tobacco Companies' cigarettes and unable to afford and otherwise obtain such necessary medical care, facilities and services.

94.

As a result of defendants' conduct, plaintiff has suffered and will continue to suffer substantial injuries and damages for which plaintiff is entitled to relief.

EIGHTH CLAIM FOR RELIEF

(Negligence)

95.

Plaintiff realleges and incorporates herein the foregoing allegations of this Complaint.

96.

Defendant Tobacco Companies and their trade organizations voluntarily assumed the duty and responsibility to conduct and report objective medical research regarding cigarette smoking and health via their public pronouncements referenced above.

97.

Defendants breached this duty by failing to exercise reasonable care in conducting and reporting that research.

98.

Defendants further breached this duty by suppressing negative research data regarding cigarettes and health, and by publishing only those materials that cast doubt on tobacco's adverse health effects.

99.

Defendants knew or should have known that smokers, plaintiff, government regulators and others would rely on their pronouncements.

100.

Defendants knew or should have known that such reliance would result in injury, and that such injury was foreseeable.

101.

As a direct and foreseeable result of defendants' negligent breach of assumed duty, plaintiff suffered and continues to suffer substantial injuries and damages.

NINTH CLAIM FOR RELIEF

(Unjust Enrichment)

102.

Plaintiff realleges and incorporates herein the foregoing allegations of this Complaint.

103.

Use of defendant Tobacco Companies' tobacco products as intended causes disease.

104.

At all times relevant to this Complaint, defendants had knowledge of the benefit conferred on them by plaintiff's payment of health care costs for diseases resulting from use of tobacco products sold in the State of Oregon by defendant Tobacco Companies, which payments were foreseeable given defendants' knowledge of the health risks of their tobacco products.

105.

While plaintiff pays the health care costs that result from the use of tobacco products as intended, defendants continue to reap profits from the sale of their tobacco products, without paying their share of the health care costs. Plaintiff is unaware of the exact amount of defendants' profits but believes them to be in the billions of dollars.

106.

Defendant Tobacco Companies have avoided regulations and the costs of disease, injuries and deaths resulting from the normal use of their tobacco products. Defendants have been and are able legally to promote the sale of tobacco products to the residents of the State of Oregon by continuing to misinform federal and Oregon authorities about the true carcinogenic, pathologic and addictive qualities of their tobacco products.

107.

In direct contradiction to and in spite of plaintiff's specific statutory prohibitions, defendants have spent millions of dollars on targeted marketing programs designed to encourage minors to purchase and use their tobacco products.

108.

In equity and fairness, defendants and their agents, aiders and abettors and co-conspirators, not plaintiff, should bear the costs of tobacco-related diseases. By avoiding their own duties to stand financially responsible for the harm done by their tobacco products, defendant Tobacco Companies wrongfully have forced plaintiff to perform such duties and to pay the health care costs of tobacco-related disease. As a result, defendants have been unjustly enriched to the extent that taxpayers of the State of Oregon have had to pay these costs which rightfully should be borne by defendants.

109.

As a direct result of defendants' conduct, plaintiff has suffered and will continue to suffer substantial injuries and damages for which it is entitled to relief.

TENTH CLAIM FOR RELIEF

(Civil Conspiracy)

110.

Plaintiff realleges and incorporates herein the foregoing allegations of this Complaint.

111.

Defendants entered into a conspiracy to violate the statutes set forth in Claims for Relief 1 - 6; and the common law as set forth in the balance of the Claims for Relief. As part of the conspiracy, defendants agreed to: (1) suppress information concerning the adverse effects of tobacco use and the addictive effect of nicotine; (2) create doubt about the scientific studies linking tobacco use to adverse health consequences and/or the addictive nature of nicotine; (3) conceal their manipulation of the level of nicotine in tobacco products; and (4) unreasonably restrain trade based on health claims and "safer" cigarettes.

112.

A part of this conspiracy was a plan to cause governmental officials to believe that immediate action on their part to curb tobacco use was not needed. As the evidence mounted as to the hazards of smoking, governmental entities considered and/or began to legislate various controls on tobacco use and advertising. Defendants' resistance to these efforts was an integral part of the conspiracy, and was designed to lull plaintiff, among others, into avoiding the implementation and/or passage of such regulations.

113.

Defendants' conspiracy not only served to forestall increased government regulation but contributed to plaintiff's increased health care costs because the conspiracy caused tobacco users, including Medicaid recipients and minors in the State of Oregon, to take up or continue smoking.

114.

Defendants combined to use unlawful means to deceive the plaintiff and its citizens as to the true nature of defendants' products, and to shift health costs associated with tobacco products to others.

115.

By combining to use unlawful means, including without limitation misrepresentation, deception, and fraud to maintain their markets and profits, defendants engaged in a conspiracy in violation of the common law of Oregon.

116.

Defendants' overt acts in furtherance of the conspiracy include without limitation:

a. Engaging in deceptive acts and practices in the course of business in violation of Oregon's Unlawful Trade Practices Act;

b. Fraudulently misrepresenting and omitting material information regarding the human health dangers of smoking;

c. Restraining and suppressing research and information concerning the adverse effects of tobacco product use and the addictive effect of nicotine;

d. Creating doubt about the scientific studies linking tobacco product use to adverse health consequences and/or addictive nature of nicotine;

e. Affirmatively misrepresenting the addictive effects of nicotine and the harmful effects of tobacco product use;

f. Concealing their manipulation of the level of nicotine in tobacco products;

g. Restraining the development, production, and marketing of a safer cigarette;

h. Avoiding competition based on health claims and safer cigarettes;

i. Passing on health care costs associated with tobacco products to others;

j. Designing, testing, manufacturing, marketing, supplying and selling defective cigarettes;

k. Targeting minors for the marketing, supply, sale and use of their cigarettes; and

l. Suppressing the design, test, manufacture, marketing and/or sale of non- or less-addictive, carcinogenic and pathologic cigarettes.

117.

As a direct result of defendants' conspiracy, plaintiffs suffered and will continue to suffer substantial injuries and damages.

ELEVENTH CLAIM FOR RELIEF

(Indemnity)

118.

Plaintiff realleges and incorporates herein the foregoing allegations of this Complaint.

119.

As a direct result of defendants' violations of law and breaches of duty and omissions alleged above, plaintiff has paid millions of dollars to provide necessary medical care, facilities and services for certain of the aforementioned Oregon residents injured by defendant Tobacco Companies' tobacco products and unable to afford and otherwise obtain such necessary medical care, facilities and services.

120.

Defendants were liable to pay the medical expenses for the aforementioned Oregon residents injured by defendants' tobacco products.

121.

Plaintiff was legally obligated to pay the aforementioned sums and did not conduct itself in any wrongful manner in being so obligated to pay and in paying these sums.

122.

The conduct of defendants was willful and in reckless disregard of the rights of plaintiff and its citizens.

123.

Defendants are legally obligated to indemnify plaintiff for the provision of necessary medical care, facilities and services for those aforementioned Oregon residents injured by defendants' tobacco products.

IX. PRAYER FOR RELIEF

WHEREFORE, plaintiff prays for judgment against defendants, jointly and severally, as follows:

With respect to all claims for relief:

a. For an Order enjoining and restraining defendants and their officers, agents, servants and employees, and those in active concert or participation with them, from continuing or engaging in the conduct alleged above or other conduct having similar purpose or effect;

b. For an Order compelling defendants to publicly disclose, disseminate, and publish all research previously conducted directly or indirectly by themselves and their respective agents, affiliates, servants, officers, directors, employees, and all persons acting in concert with them, that relates to the issue of smoking and health;

c. For an Order compelling defendants to fund corrective public education campaigns relating to the issue of smoking and health, administered and controlled by an independent third party;

d. For an Order compelling defendants to take reasonable and necessary steps to prevent the distribution and sale of tobacco products to minors in violation of Oregon law;

e. For an Order compelling defendants to fund clinical smoking cessation programs in the State of Oregon;

f. Except as to Claims for Relief 1, 2 and 3, that plaintiff be awarded damages in an amount not yet determined but estimated to range up to $60 million per year for each year of defendants' unlawful conduct;

g. For such other and further relief as the Court deems just, necessary, and appropriate; and

h. For plaintiff's costs and disbursements incurred herein.

In addition, with respect to the First, Second and Third Claims for Relief under the Oregon Unlawful Trade Practices Act (ORS 646.605-646.652):

a. That pursuant to ORS 646.642, the Court assess civil penalties against each defendant of $2,000 for each violation committed by that defendant or its predecessor between September 8, 1971 and September 11, 1975, inclusive, and of $25,000 for each violation committed by that defendant or its predecessor from September 12, 1975 to the date of trial;

b. That pursuant to ORS 646.632 and ORS 646.636, the Court issue an Order permanently enjoining, barring, restraining and prohibiting defendants from engaging directly or indirectly in any violation of the Unlawful Trade Practices Act, or alternatively, in any business in Oregon; and

c. That pursuant to ORS 646.632, the Court award plaintiff its reasonable attorney fees.

In addition, with respect to the Fourth and Fifth Claims for Relief under Oregon's antitrust statutes (ORS 646.705 et seq):

a. For an Order in which the Court adjudges and decrees that defendants have engaged in the conduct alleged herein and that such conduct is unlawful in violation of ORS 646.725; and

b. That pursuant to ORS 646.780, the Court award plaintiff treble damages in a total amount unknown but estimated to range up to $180 million per year from the beginning of the unlawful activity.

In addition, with respect to the Sixth Claim for Relief under the Oregon Racketeer Influenced & Corrupt Organizations Act (ORS 166.715-.735):

a. Pursuant to ORS 166.725(1) and ORS 166.725(1)(a), ordering defendants immediately to divest themselves of all right, title and interest in any business entity or association in which any of the other defendants also hold any right, title or interest, including but not limited to CTR, Hill & Knowlton, and the Tobacco Institute;

b. Pursuant to ORS 166.725(1) and ORS 166.725(1)(b), imposing reasonable restrictions on defendants' collective and future activities and investments, including but not limited to:

(1) Prohibiting defendants from claiming that a scientific controversy exists concerning the addictive character of tobacco products containing nicotine;

(2) Prohibiting defendants from claiming that a scientific controversy exists concerning the fact that consumption of tobacco products causes adverse health consequences, including death;

(3) Requiring defendants to honestly and fully disclose to the public defendants' collective and individual knowledge of the addictive qualities of tobacco products containing nicotine;

(4) Requiring defendants to honestly and fully disclose to the public defendants' collective and individual knowledge of the fact that tobacco causes injurious health effects including death;

(5) Requiring defendants to honestly and fully disclose to the public defendants' collective and individual knowledge and capacity to manufacture, distribute and sell less dangerous tobacco products;

(6) Prohibiting defendants from employing any marketing or promotional activity which reaches more than five percent of Oregonians under the age of 16, with the determination of whether the activity violates this standard to be made as follows:

(a) Each defendant shall monthly conduct a valid market survey in accordance with accepted market survey standards;

(b) The survey shall measure the percentage of children under the age of 16 who recognize the character, logo, or theme of each marketing or promotional activity conducted by the defendant;

(d) Each defendant shall immediately and permanently cease any marketing or promotional activity whose character, logo, or theme is recognized by more than five percent of Oregonians under the age of 16.

(7) Requiring defendants to honestly and completely disclose defendants' individual and collective knowledge of the extent to which their past marketing and promotional activities have had the intent and effect of causing children under the age of 18 to become addicted to and injured by defendants' tobacco products.

(8) Requiring defendant Tobacco Companies to require every distributor of defendant Tobacco Companies' respective tobacco products to:

(a) Refrain from any point of sale advertising in any location in which it is lawful for a child to be present;

(b) Keep all tobacco products kept in any location in which it is lawful for a child to be present secure under lock and key behind opaque barriers;

(c) Strictly comply with all applicable federal, state, and local laws and regulations pertaining to the sale of tobacco products to children;

(d) Refrain from renewing or entering into agreements resulting in the advertising of tobacco products on billboards;

(e) Refrain from selling or distributing non-tobacco products containing tobacco brand names, logos or other tobacco advertising information;

(f) Refrain from sponsoring cultural, athletic, or other events in the tobacco product brand name; and

(g) Refrain from any advertising in any medium except black-on-white text;

c. Pursuant to ORS 166.725(1) and ORS 166.725(1)(c), ordering the dissolution of CTR, Hill & Knowlton, and the Tobacco Institute;

d. Pursuant to ORS 166.725(2), ordering defendants to forfeit to plaintiff all real and personal property, including money used in the course of, derived from, or realized through the conduct alleged in this claim for relief;

e. Pursuant to ORS 166.725(5), ordering defendants to pay to the Attorney General of Oregon reasonably incurred costs of investigation and litigation;

f. Pursuant to ORS 166.725(5), ordering defendants to reimburse plaintiff's governmental departments and agencies for reasonably incurred costs or expenses in connection with the investigation and prosecution of this litigation;

g. Pursuant to ORS 166.725(1), ordering defendants to pay to plaintiff the costs incurred by plaintiff in providing health care to Oregonians whose good health was impaired or whose ill health was aggravated by defendants' conduct;

h. Pursuant to ORS 166.725(8), ordering each defendant to pay a civil penalty of $250,000; and

i. Pursuant to ORS 166.725(15)(a), for plaintiff's reasonable attorney fees.

DATED this day of , 1997.

HARDY MYERS

Attorney General for the

State of Oregon

_______________________________

Hardy Myers #64077

Attorney General

_______________________________

Mark Gardner #74111

Special Counsel to the Attorney General

_______________________________

Drew A. Lianopoulos #92083

Trial Attorney

Assistant Attorney General

Department of Justice

1162 Court Street NE

Salem, OR 97310

(503) 378-4732

Of Attorneys for Plaintiff