Case 1:20-cv-00393-LMB-TCB Document 1387-11 Filed 07/13/22 Page 1 of 7 PageID# 34640
`Case 1:20-cv-00393-LMB-TCB Document 1387-11 Filed 07/13/22 Page 1 of 7 PagelD# 34640
`
`EXHIBIT 11
`EXHIBIT 11
`
`

`

`Case 1:20-cv-00393-LMB-TCB Document 1387-11 Filed 07/13/22 Page 2 of 7 PageID# 34641
`CONFIDENTIAL BUSINESS INFORMATION
`Transcript of Nicholas Ray Gilley, Corporate Designee & Individually 1 (1 to 4)
`Conducted on December 3, 2020
`
`3
`
`4
`
` A P P E A R A N C E S
`
`
`
`ON BEHALF OF THE PLAINTIFFS AND COUNTERCLAIM
`
`DEFENDANTS:
`
` J. THOMAS VITT, ESQUIRE
`
` JONES DAY
`
` 90 South Seventh Street
`
` Suite 4950
`
` Minneapolis, Minnesota 55402
`
`0
`
` 612.217.8800
`
`1 2 3 4 5 6 7 8 9 1
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`
`
`ON BEHALF OF THE DEFENDANTS AND COUNTERCLAIM
`
`PLAINTIFFS:
`
` BRETT M. SANDFORD, ESQUIRE
`
` LATHAM & WATKINS
`
` 140 Scott Drive
`
` Menlo Park, California 94025
`
` 650.328.4600
`
`
`
`ALSO PRESENT:
`
` JOSHUA TUBBS, VIDEOCONFERENCE TECHNICIAN
`
` ADAM NUDELMAN, VIDEOGRAPHER
`
`
`
`
`
`
`
`1
`
`2
`
` IN THE UNITED STATES DISTRICT COURT
` FOR THE EASTERN DISTRICT OF VIRGINIA
` Alexandria Division
`
`- - - - - - - - - - - - - - - - - -x
`RAI STRATEGIC HOLDINGS, INC. : Case No.
`and R.J. REYNOLDS VAPOR : 1:20-cv-00393-LO-TCB
`COMPANY, :
` Plaintiffs and :
`Counterclaim Defendants, :
` v. :
`ALTRIA CLIENT SERVICES LLC; :
`PHILIP MORRIS USA INC.; and :
`PHILIP MORRIS PRODUCTS S.A., :
` Defendants and :
`Counterclaim Plaintiffs. :
`- - - - - - - - - - - - - - - - - -x
`
`0
`
`
`
`1 2 3 4 5 6 7 8 9 1
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
` CONFIDENTIAL BUSINESS INFORMATION
`
` SUBJECT TO PROTECTIVE ORDER
`
`
`
`Videotaped Deposition of RAI STRATEGIC HOLDINGS, INC.
`
` and R.J. REYNOLDS VAPOR COMPANY
`
` By and through its Corporate Representative
`
` NICHOLAS RAY GILLEY
`
` And in his Individual Capacity
`
` Conducted Virtually
`
` Thursday, December 3, 2020
`
` 7:07 a.m. PST
`
`
`
`Job No.: 337459
`
`Pages: 1 - 283
`
`Reported By: Rhonda Norberg, CSR No. 9265, CCRR No. 185
`
` CONFIDENTIAL Videotaped Deposition of
`
` I N D E X
`
`
`
`WITNESS: NICHOLAS RAY GILLEY
`
`EXAMINATION PAGE
`
` BY MR. SANDFORD 9
`
` BY MR. SANDFORD (CONTINUED) 89
`
`
`
` EXHIBITS
`
`EXHIBIT NO. DESCRIPTION PAGE
`
`0
`
`1 Plaintiffs’ Objections and 10
`
`1 2 3 4 5 6 7 8 9 1
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
` Responses to Defendants’ Notice of
`
` Deposition Pursuant to Fed. R.
`
` Civ. P. 30(b)(6)
`
`2 Deposition Transcript of Nicholas 12
`
` Gilley, September 23, 2020
`
`3 Deposition Transcript of Nicholas 13
`
` Gilley, July 10, 2018.
`
`4 Deposition Transcript of Nicholas 13
`
` Gilley, June 26, 2020
`
`5 R.J. Reynolds Vapor Company's 20
`
` Second Supplemental Objections and
`
` Responses to Plaintiff's Second
`
` Set of Interrogatories (Nos. 6-13)
`
`6 Monthly Detailed Financial 45
`
` Statement, R.J. Reynolds
`
`NICHOLAS RAY GILLEY, conducted virtually.
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
` Pursuant to notice, before Rhonda Norberg,
`
` Certified Shorthand Reporter No. 9265, CCRR No. 185
`
` in and for the State of California.
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`1 2 3 4 5 6 7 8 9 1
`
`0
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`PLANET DEPOS
`888.433.3767 | WWW.PLANETDEPOS.COM
`
`

`

`Case 1:20-cv-00393-LMB-TCB Document 1387-11 Filed 07/13/22 Page 3 of 7 PageID# 34642
`CONFIDENTIAL BUSINESS INFORMATION
`Transcript of Nicholas Ray Gilley, Corporate Designee & Individually 19 (73 to 76)
`Conducted on December 3, 2020
`73
`
`75
`
`long-term success in the vapor category," is that
`what you just testified?
` MR. VITT: It's beyond the scope.
` THE WITNESS: Yes, I believe we are
`positioned for success, long-term success in the
`vapor category.
`BY MR. SANDFORD:
` Q And in terms of sales and market share with
`respect to the Vuse products, do you consider them
`to be successful from that perspective?
` MR. VITT: Beyond the scope.
` THE WITNESS: I believe we are positioned
`for success in the vapor category.
` MR. SANDFORD: Well, I appreciate that. I
`didn't ask whether you're positioned for success.
` Q I asked in terms of sales and market share,
`do you consider the Vuse products to be successful
`from that perspective?
` MR. VITT: Beyond the scope.
` THE WITNESS: Yes, I believe we have a
`successful product portfolio.
`BY MR. SANDFORD:
` Q Of the four products in that portfolio,
`which do you consider to be the most successful from
`a financial perspective?
`
`1234567891
`
`0
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`
` THE WITNESS: To my understanding, correct.
`BY MR. SANDFORD:
` Q So, for example, the Alto pods can only be
`used with the Alto power unit, right?
` MR. VITT: It's beyond the scope.
` THE WITNESS: That's my understanding,
`correct.
`BY MR. SANDFORD:
` Q And the -- the consumables for all of the
`Vuse products cannot be used with a power unit that
`is sold by a third party, correct?
` MR. VITT: It's beyond the scope.
` THE WITNESS: That is correct.
`BY MR. SANDFORD:
` Q And without the cartridges, the power units
`in the Vuse products won't function for their
`intended purpose, correct?
` MR. VITT: Beyond the scope.
` THE WITNESS: I believe that's correct.
`BY MR. SANDFORD:
` Q You need both the cartridge and the power
`unit for each Vuse product to have a commercially
`viable product, correct?
` MR. VITT: It's beyond the scope.
` THE WITNESS: You need both the power unit
`
`1234567891
`
`74
`
`and the cartridge for a consumer to be able to use
`the liquid and consume the product, correct.
`BY MR. SANDFORD:
` Q From a financial perspective, do you
`consider the Vuse products to be successful?
` MR. VITT: It's beyond the scope.
` You can answer in your personal capacity.
` THE WITNESS: What do you mean by
`"successful"?
`BY MR. SANDFORD:
` Q Do you have an understanding of what
`"successful" means?
` A In regards to -- I guess it's a "depends"
`type of question. In my personal capacity, I
`believe that we have increased sales and low market
`share in the vapor category for the last several
`years, and therefore we are positioned for long-term
`success in the vapor category.
` Q I'm sorry. The transcript says increased
`sales and low market shares.
` Is that a typo?
` A I said -- I'm sorry. And market share.
` Q Okay. So you have "increased sales and
`market share in the vapor category for the last
`several years, and therefore, are positioned for
`
` MR. VITT: It's beyond the scope.
` THE WITNESS: Based on current market
`performance, the Alto product is the largest product
`in the portfolio and has the most momentum in the
`market.
` MR. SANDFORD: Josh, can we go back to
`Exhibit 6? It's Tab 61.
` THE VIDEOCONFERENCE TECHNICIAN: Stand by.
` MR. SANDFORD: I may have -- it may be
`Exhibit 7. So whichever one is Tab 61, please.
`0
` THE VIDEOCONFERENCE TECHNICIAN: I believe
`11
`that's Exhibit 7. One moment.
`12
` MR. SANDFORD: Okay. Yes. Thank you.
`13
` THE VIDEOCONFERENCE TECHNICIAN: Exhibit 7
`14
`is onscreen and ready.
`15
`BY MR. SANDFORD:
`16
` Q Mr. Gilley, we discussed Exhibit 7, which
`17
`was shown on your screen earlier, right?
`18
` A Yes.
`19
` Q Can you please look at Row 19 on the Solo
`20
`tab.
`21
` A Okay.
`22
` Q And Row 19 on the Solo tab says "Other
`23
`Total Volume."
`24
` Do you see that?
`25
`PLANET DEPOS
`888.433.3767 | WWW.PLANETDEPOS.COM
`
`76
`
`1234567891
`
`0
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`
`1234567891
`
`0
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`
`

`

`Case 1:20-cv-00393-LMB-TCB Document 1387-11 Filed 07/13/22 Page 4 of 7 PageID# 34643
`CONFIDENTIAL BUSINESS INFORMATION
`Transcript of Nicholas Ray Gilley, Corporate Designee & Individually 71 (281 to 284)
`Conducted on December 3, 2020
`281
`
`time.
` MR. SANDFORD: Thank you for your time,
`Mr. Gilley. We can go off the record.
` THE VIDEOGRAPHER: This ends today's
`deposition. We're going off the record at 15:47.
` (Off the record at 3:47 p.m.)
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`1234567891
`
`0
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`
`283
`
` I, the undersigned, a Certified Shorthand
`Reporter of the State of California, do hereby certify:
` That the foregoing proceedings were taken
`before me at the time and place herein set forth with
`all participants appearing remotely before me; that any
`witnesses in the foregoing proceedings, prior to
`testifying, were duly sworn or affirmed; that a record
`of the proceedings was made by me using machine
`shorthand, which was thereafter transcribed under my
`direction; that the foregoing transcript is a true
`record of the testimony given.
` Further, that if the foregoing pertains to
`the original transcript of a deposition in a federal
`case, before completion of the proceedings, review of
`the transcript [ ] was [x] was not requested.
` I further certify I am neither financially
`interested in the action nor a relative or employee of
`any attorney or party to this action.
` IN WITNESS WHEREOF, I have this date
`subscribed my name.
`Dated: 12/7/2020
`
` ________________________________
` Rhonda Norberg
` CSR No. 9265, CCRR No. 185
`
`1234567891
`
`0
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`
`282
` DECLARATION UNDER PENALTY OF PERJURY
`
`Case Name: RAI vs. Altria
`Date of Deposition: December 3, 2020
`
`
` I, NICHOLAS RAY GILLEY, hereby certify
`under penalty of perjury under the laws of the State of
`__________________ that the foregoing is true and
`correct.
` Executed this _____ day of
`__________________, 20___, at ________________________.
`
`
` _____________________________
` NICHOLAS RAY GILLEY
`
`
`
`
`
`
`
`
`
`
`PLANET DEPOS
`888.433.3767 | WWW.PLANETDEPOS.COM
`
`1234567891
`
`0
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`
`

`

`Case 1:20-cv-00393-LMB-TCB Document 1387-11 Filed 07/13/22 Page 5 of 7 PageID# 34644
`CONFIDENTIAL BUSINESS INFORMATION
`Transcript of Nicholas Ray Gilley, Corporate Designee & Individually, Volume 2
`Conducted on May 6, 2021
`
`284
`to
`287)
`
`1(
`
`284
`
`286
`
`APPEARANCES:
`
` FOR PLAINTIFFS AND COUNTERCLAIM DEFENDANTS:
`
`
` JONES DAY
` BY: MICHAEL QUINLAN, ESQ.
` 901 Lakeside Ave.
` Cleveland, Ohio 44114-1190
` 216.586.3939
`
`
`
` FOR DEFENDANTS AND COUNTERCLAIM PLAINTIFFS:
`
`
` LATHAM & WATKINS
` BY: BRETT M. SANDFORD, ESQ.
` 140 Scott Dr.
` Menlo Park, California 94025
` 650.328.4600
`
`
`
` ALSO PRESENT: MICHAEL SPAZIANI, VIDEOGRAPHER
`
` JOSHUA TUBBS, THE REMOTE VIDEO TECHNICIAN
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`1 2 3 4 5 6 7 8 9 1
`
`0
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
` IN THE UNITED STATES DISTRICT COURT
` FOR THE EASTERN DISTRICT OF VIRGINIA
` Alexandria Division
`
`- - - - - - - - - - - - - - - - - -x
`RAI STRATEGIC HOLDINGS, INC. : Case No.
`and R.J. REYNOLDS VAPOR : 1:20-cv-00393-LO-TCB
`COMPANY, :
` Plaintiffs and :
`Counterclaim Defendants, :
` v. :
`ALTRIA CLIENT SERVICES LLC; :
`PHILIP MORRIS USA INC.; and :
`PHILIP MORRIS PRODUCTS S.A., :
` Defendants and :
`Counterclaim Plaintiffs. :
`- - - - - - - - - - - - - - - - - -x
`
`0
`
`
`
`1 2 3 4 5 6 7 8 9 1
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
` CONFIDENTIAL BUSINESS INFORMATION
`
` SUBJECT TO PROTECTIVE ORDER
`
`
`
` VOLUME 2
`
`Videotaped Deposition of RAI STRATEGIC HOLDINGS, INC.
`
` and R.J. REYNOLDS VAPOR COMPANY
`
` By and through its Corporate Representative
`
` NICHOLAS RAY GILLEY
`
` And in his Individual Capacity
`
` Conducted Virtually
`
` Thursday, May 6, 2021
`
` 7:00 a.m. PST
`
`
`
`REPORTED BY:
`
`Tammy Moon, CSR No. 13184, RMR, CRR
`
` Videotaped Deposition of NICHOLAS RAY GILLEY,
`
` INDEX TO EXAMINATION
`
`taken on behalf of Defendants, CONDUCTED VIRTUALLY,
`
` NICHOLAS RAY GILLEY
`
`285
`
`287
`
` Thursday, May 6, 2021
`
` Tammy Moon CSR No. 13184, RPR, CRR
`
` WITNESS: NICHOLAS RAY GILLEY
`
`
`
`EXAMINATION PAGE
`
`MR. SANDFORD 290
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`1 2 3 4 5 6 7 8 9 1
`
`0
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`PLANET DEPOS
`
`beginning at 7:00 a.m. Pacific Standard Time, on MAY
`
`6, 2021, before TAMMY MOON, Certified Shorthand
`
`Reporter No. 13184, RMR, CRR.
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`1 2 3 4 5 6 7 8 9 1
`
`0
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`

`

`CONFIDENTIAL BUSINESS INFORMATION
`Transcript of Nicholas Ray Gilley, Corporate Designee & Individually, Volume 2
`Conducted on May 6, 2021
`304
`
`1234567891
`
`0
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`
`Q. So, for example, calculating the present value
`of sales for the Ciro in 2017 could be very different
`than calculating the present value of future sales of
`the Alto, correct?
` MR. QUINLAN: Object to form.
` THE WITNESS: They could be different. That is
`correct.
` MR. SANDFORD:
`Q. And why would they -- what would cause them to
`be different?
`A. It -- numerous risk factors would cause them to
`be different. Obviously the market dynamics. The
`changes in product format. They're -- it's -- each
`one is case-by-case dependent, so it's very hard to
`answer a question like that.
`Q. All right. You can't take a net present value
`rate for one product and apply it across all the
`other Reynolds products in a product line, correct?
` MR. QUINLAN: Object to form.
` THE WITNESS: Well, again, to my earlier
`question -- to your earlier question around weighted
`average cost of capital, you would have to start with
`the weighted average cost of capital for that year,
`and then the risk assessment based on the market
`dynamic within that year would then be applied. So
`
`6(
`
`304
`to
`307)
`
`306
`
`FDA regulations as to the Vuse products could have a
`significant impact on potential future sales of the
`Vuse products, right?
` MR. QUINLAN: Object to form.
` THE WITNESS: I would not know how to
`specifically answer that question.
` MR. SANDFORD:
`Q. You don't know one way or the other?
`A. I mean you can restate the question. If the
`products are regulated by FDA.
`Q. Right. And the -- if the FDA does not
`authorize the Vuse products, they could potentially
`be removed from the market, correct?
` MR. QUINLAN: Object to form. Beyond the
`scope.
` THE WITNESS: Not my general area of expertise.
`My understanding is we'd have to get premarket
`tobacco authorization to continue to sell products in
`the future.
` MR. SANDFORD: And just for the record, WACC is
`W-A-C-C, not W-A-C. So it's -- the record is clear.
`Q. Let me go back to -- what I was asking you
`about earlier in your deposition preparation. Are
`there any other documents that you've reviewed to
`prepare for your deposition that you haven't
`
`307
`
`305
`
`mentioned already?
`they're very much time dependent.
`A. I don't think so.
` I mean, it's the net present value, so by
`Q. Did you take any notes or prepare any documents
`definition it's time dependent, and factors related
`as part of your preparation for your deposition?
`to that point in time weigh in to the consideration
`A. No, I did not.
`of that weighted average cost of capital and discount
`Q. And obviously I'm not in the room with you
`rate --
`today, but did you bring any notes to your
` (Reporter clarification.)
`A. By definition it's time dependent, and the
`deposition?
`A. I did not.
`discount rate that you would use would be associated
`with that point in time.
`Q. Okay. Now, did you speak with -- well, strike
`0
`that.
`Q. Earlier you -- you testified about some risk
`11
` Are you familiar with Dr. Ryan Sullivan?
`that would be considered in adjusting the baseline
`12
`A. I'm familiar with Dr. Ryan Sullivan.
`WACC to a final adjusted WACC. Do you recall that?
`13
`A. Yes.
`Q. And he is Reynolds' damages expert in this
`14
`case. Is that your understanding?
`Q. In your work at Reynolds, was FDA regulatory
`15
`A. I believe that is correct.
`risk considered in adjusting the baseline WACC to a
`16
`Q. Did you speak with Dr. Sullivan in connection
`final adjusted WACC for the Vuse products?
`17
`with this case?
` MR. QUINLAN: Object to form.
`18
`A. I do believe we had a brief meeting with
` THE WITNESS: I would have to review the
`19
`Dr. Sullivan.
`guidelines and see if that was specifically called
`20
`Q. And have you spoken with any other expert
`out. I don't recall off the top of my head, but
`21
`witness retained by Reynolds in this case other than
`regulatory risk or any other risk associated that we
`22
`Dr. Sullivan?
`would know could be considered.
`23
`A. Not that I recall.
` MR. SANDFORD:
`24
`Q. How many times did you speak with Dr. Sullivan?
`Q. And regulatory risks are considered because the
`25
`PLANET DEPOS
`
`1234567891
`
`1234567891
`
`0
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`
`1234567891
`
`0
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`
`Case 1:20-cv-00393-LMB-TCB Document 1387-11 Filed 07/13/22 Page 6 of 7 PageID# 34645
`
`

`

`13
`(332
`to
`335)
`
`CONFIDENTIAL BUSINESS INFORMATION
`Transcript of Nicholas Ray Gilley, Corporate Designee & Individually, Volume 2
`Conducted on May 6, 2021
`332
`
`UNITED STATES DISTRICT COURT )
` ) THE
`CENTRAL DISTRICT OF NORTHERN CALIFORNIA )
` I, TAMMY MOON, CSR No. 13184, Certified
`Shorthand Reporter, do hereby certify:
` That prior to being examined, the witness in
`the foregoing proceedings was by me duly sworn to
`testify to the truth, the whole truth, and nothing
`but the truth;
` That said proceedings were taken before me at
`the time and place therein set forth and were taken
`down by me in shorthand and thereafter transcribed
`into typewriting under my direction and supervision;
` That a review of the transcript by the deponent
`(was/was not x) requested;
` That the foregoing is a true and correct
`transcript of my shorthand notes so taken.
` I further certify that I am neither counsel
`for, nor related to, any party to said proceedings,
`nor in any way interested in the outcome thereof.
` In witness whereof, I have hereunto subscribed
`my name.
` Dated: 8th of May, 2021.
`
`____________________________________________________
`Tammy Moon, CSR No. 13184
`
`1 234567891
`
`0
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`
`Case 1:20-cv-00393-LMB-TCB Document 1387-11 Filed 07/13/22 Page 7 of 7 PageID# 34646
`
`PLANET DEPOS
`
`