IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS TEXARKANA DIVISION

THE STATE OF TEXAS,

Plaintiffs,

v.

THE AMERICAN TOBACCO COMPANY, ET AL.,

Defendants.

Case No. 5:96cv91

September 29, 1997

MEMORANDUM OPINION AND ORDER REGARDING THE ISSUE OF BIFURCATION

Before the Court is the Plaintiff's Motion to Birfurcate Trial (docket # 888) pursuant to Federal Rule of Civil Procedure 42(b). After considering the Motion, the extensive arguments and briefing, the complexity of this case, and the underlying principles of Rule 42(b), the Court finds that this case should be tried in various phases.

I. BACKGROUND

This issue was first raised by the plaintiff in an informal status conference on July 17, 1997. Since that time, the parties have debated the propriety of trying this suit in separate phases. It was discussed on August 15, 1997 at a subsequent status conference. The issue was extensively briefed and discussed at an August 25, 1997, meeting with representatives from both sides that dealt with the related issue of the plaintiff's damage model. Both sides have been ordered by the Court to submit plans regarding their views on the type of evidence to be presented should the case be bifurcated on the issues of "wrongful conduct," causation, and damages and time estimates for each phase. See Court's Order, dated September 3, 1997. The parties have complied with these requests and extensively addressed the various issues presented by the September 3 Order. The defendants requested oral argument directed specifically at the bifurcation issue, and the hearing was held on September 23, 1997. The issue is ripe for decision and must be addressed so that the parties are able to adequately prepare for the impending trial.

II. RULE 42(b) AND ITS POLICY

Rule 42(b) provides in relevant part:

Separate Trials. The court, in furtherance of convenience or to avoid prejudice, or when separate trials will be conducive to expedition and economy, may order a separate trial of any claim . . . or of any separate issue or any number of claims . . . always preserving inviolate the right of trial by jury as declared by the Seventh Amendment to the Constitution or as given by a statute of the United States.

FED.R.CIV.P. 42(b). This rule provides the trial court with a tool that is greatly needed in the modern age of complex litigation. As the Fifth Circuit has recognized, "in appropriate cases . . . issues impacting upon general liability or causation may be tried standing alone." In re Chevron U.S.A., Inc., 109 F.3d 1016 (5^th Cir. 1997). In addition, the Fifth Circuit has recognized that Rule 42(b) is sufficiently broad to allow a trial court to exercise its discretion to separate issues for trial in appropriate circumstances. See Rosales v. Honda Motor Co., Ltd., 726 F.2d 259, 260 (5^th Cir. 1984)(discussing the propriety of bifurcating liability and damages questions in personal injury suit); see also Sanford v. John-Manville Sales Corp., 923 F.2d 1142 (5^th Cir. 1991). Finally, the Fifth Circuit has recognized that cases involving complex civil RICO allegation may many times merit separate trials. See Conkling v. Turner, 18 F.3d 1285 (5^th Cir. 1994). The Court believes that this case fits perfectly within the confines of Rule 42(b) and its underlying policies. See Manual for Complex Litigation, at 119 (3d. ed. 1995).

First and foremost, the Court is concerned with the potential length of this trial should all issues be tried together. The parties have honestly estimated, and the Court agrees with these estimations, that this matter could take from four to six months to try to conclusion. Based on these estimations these estimations, the Court has allotted 225 hours for each side to present its case. [ The Court will leave it to the discretion of the parties to divide their time in relation to the various phases of the trial. The only obligation they have is to remain within the confines of the limit.] In addition, the parties have designated a combined list of over 1,500 witnesses. Also, the parties have submitted proposed exhibit lists that include in excess of 50,000 documents to be submitted at trial from approximately 23 million that have been disclosed by both sides.

As the parties are aware, this Court has over 350 cases currently pending on its docket. An inordinate number of these cases are of a complex nature. Cases are pending that range from complex antitrust class actions and individual smoker cases to securities fraud class actions and complicated patent infringement actions. These cases are currently languishing substantially untouched on the Court's docket due, in large part, to the present litigation. In addition, this Court's obligation to try criminal matters and comply with the terms of the Speedy Trial Act cannot be ignored and will certainly affect the ebb and flow of the present action. Any mechanisms the Court can utilize to expedite this case are certainly in the interest of judicial economy and convenience.

In addition, the economy and convenience to the parties must be considered. Both sides to this action have expended a great amount of resources, financially and by way of time. The Court believes that trying this matter in phases will conserve these resources. If a finding in favor of the defendants occurs after the first and second phases of trial, the Court believes approximately half of the trial time will be conserved.

Finally, the Court is convinced that the plan delineated below will allow jurors to better understand the nature of this case. The issues will be considered in a more pedestrian manner which will allow the jurors to reach more informed and considered verdicts. Furthermore, the arguments outlined above dealing with convenience and economy apply equally to the citizens of East Texas that may be selected to judge the facts of this case. This plan will allow them to fulfill their duty as citizens in a less confusing and potentially less time consuming manner at no expense to the search for justice.

In addition to these concerns, the Court is convinced that this plan will not prejudice either party. To the contrary, the Court finds that this plan will ensure that the issues are not confused and sound verdicts will be reached. Also, the Court finds that the mandates of the Seventh Amendment will not be disturbed nor due process violated by this decision. Based on these findings and concerns, the Court is of the opinion that the issues in this case must be tried separately.

III. FORMAT OF TRIAL

The Court believes that potentially three phases of trial are appropriate, and all phases shall be considered by the same jury. The first phase of this trial shall involve the issues of alleged liability under the civil RICO count of the complaint. [ The plaintiff has suggested that it be allowed to amend its complaint to drop Counts 2 and 3 which are RICO counts. It will further amend to add defendants Council for Tobacco Research and the Tobacco Institute in Count 1. Furthermore, the plaintiff will amend to proceed only with its allegation of a "public relations enterprise" dropping from the complaint its allegations of regulatory and marketing enterprises. The Court through this Order will allow such amendments.] Regardless of a favorable finding for the plaintiff on the RICO claims, the case will then proceed to the second phase which will decide the issues relating to alleged "wrongful conduct" on the remaining common law claims. [ It should be noted that the Plaintiff has requested that should it receive a favorable finding under RICO in Phase I, the Court should then take up issues relating to equitable relief before addressing the common law claims. The Court believes that it is premature to decide this specific issues and will reserve ruling until the completion of Phase I.] If there is a favorable finding for the plaintiff during either Phase I or Phase II, then the case will proceed to Phase III which will consider the issues of causation and damages.

The phases shall encompass the following issues:

Phase I: A separate trial will be conducted and the jury will consider the issue of whether the defendants have engaged in conduct prohibited by the RICO statute, and any defenses that may be applicable to the initial liability elements of civil RICO. [ The Court is persuaded that trying the liability issues associated with the civil RICO claim will greatly simplify issues for the jury and will decrease the likelihood of confusion. The Court also finds similarities and support in the Conkling opinion cited above. In that case, the time period over which the alleged violations occurred was in excess of 20 years. See Conkling , 18 F.3d at 1289. The allegations in this case span almost 50 years. In addition, as the Conkling court recognized, cases brought under civil RICO can be "specially suited for trial limitation" such as severance and trial and phases. Id . at 1293.]

Phase II: A second separate trial will be conducted and the jury will consider issues that relate to any duties imposed upon the parties, any breach of those duties, whether any misrepresentations have been made, whether elements of conspiracy have been satisfied, and any defenses that may be applicable to the initial elements of these various claims. [ The parties should be perfectly clear on this point. Certain claims presented and the defenses thereto raise issues regarding the conduct of the plaintiff as well as the defendants. The conduct of both parties must be decided in the second phase.]

Phase III: If the plaintiff is successful in either Phase I or Phase II, a third separate trial will be conducted, and the jury will consider the issues that relate to cause in fact and proximate/producing cause, whether misrepresentations were material, if any are found to have occurred, reliance, and the amount of damages, if any, resulting from the events or occurrences in question.

IV. CONCLUSION

The Court will address any concerns on the types of evidence to be presented during Phases I and II, and if necessary the causation/damages phase, via motions in limine and rulings during the course of trial. In addition, the parties can rest assured that the Court will give the jury detailed instructions prior to trial, during the course of the necessary phases, and before submission of the various issues to the jury regarding the use of certain evidence when considering the various claims and defenses presented. The Court is confident that these actions coupled with the manner in which the jury charge can be structured will help to educate the jurors, protect the rights of the parties, and insure consistent verdicts on all issues.

Finally, the issue of overlapping witness testimony should be addressed. The defendants have expressed concern regarding this question. Although it is inevitable that some witnesses will required to testify in more than the two initial phases of trial, if more than two phases are necessary, the Court finds that under the trial structure outlined above it will be minimal. Furthermore, the Court is confident that the parties will engage in a good faith effort to analyze their respective evidence to determine in what phase it should be used. In those instances in which they are unable to make that determination, the Court will be here to assist.

This case is filled with difficult issues, both legal and factual in nature. The volume of work created by this case is exasperating. Given these realities, the Court has been confronted with the question of how to move this case in a fair, just, and convenient manner that recognizes the importance of conserving judicial economy. The Court does not purport to have all the answers to this perplexing query. However, it is convinced that the trial plan outlined above embodies a sense of fairness, guards against prejudice, protects the parties' Seventh Amendment rights, and provides a vehicle to potentially bring this matter to a conclusion on a more expedient basis. Therefore, this matter shall proceed to trial in a manner consistent with the trial plan outlined above, and the Plaintiff's Motion to Bifurcate is GRANTED IN PART. It is further

ORDERED that the Plaintiff shall be given until 5:00 p.m. on October 3, 1997, to amend its Complaint in a manner consistent with its "Proposed Trial Plan," the representations made at the hearing on this issue, and with this Court's Order. It is further

ORDERED that the parties file with the Court their Motions In Limine by 5:00 p.m. on October 6, 1997.

IT IS SO ORDERED.

Signed this 29^th day of September, 1997.

X (signed)

DAVID FOLSOM

UNITED STATES DISTRICT JUDGE