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`UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF VIRGINIA
`
`RAI STRATEGIC HOLDINGS, INC.
`et al.,
`Plaintiffs,
`v.
`ALTRIA CLIENT SERVICES, LLC,
`et al.,
`Defendants.
`TRANSCRIPT OF MOTION HEARING PROCEEDINGS
`BEFORE THE HONORABLE THERESA C. BUCHANAN,
`(Via Zoom Conference)
`UNITED STATES DISTRICT COURT MAGISTRATE JUDGE
`
`)))))))))))))
`
`Civil Action
`No. 1:20-cv-00393-LO-TCB
`
`April 16, 2021
`10:00 a.m.
`
`APPEARANCES:
`For the Plaintiffs:
`
`For the Defendants:
`
`Charles Bennett Molster, III, Esq.
`The Law Offices of Charles B.
`Molster III, PLLC
`2141 Wisconsin Ave NW, Suite M
`Washington, DC 20007
`703.346.1505
`Email: Cmolster@molsterlaw.com
`J. Thomas Vitt, Esq.
`JONES DAY
`90 South Seventh Street Suite 4950
`Minneapolis, Minnesota 55402
`612.217.8858
`Email: Tvitt@jonesday.com
`Maximilian Antony Grant, Esq.
`Latham & Watkins LLP (DC)
`555 11th St NW, Suite 1000
`Washington, DC 20004-1304
`202.637.2200
`Fax: 202.637.2201
`Email: Max.grant@lw.com
`
`Scott L. Wallace, RDR, CRR, Official Court Reporter
`
`
`
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`APPEARANCES: (Cont.)
`
`For the Defendants:
`
`
`
`Official Court
`Reporter:
`
`Lawrence J. Gotts, Esq.
`Lathan & Watkins, LLP
`555 Eleventh Street, Suite 1000
`Washington, D.C. 20004
`202.637.2200
`Email: Lawrence.gotts@lw.com
`Scott L. Wallace, RDR, RMR, CRR
`Official Court Reporter
`United States District Court
`401 Courthouse Square
`Alexandria, VA 2231-5798
`202.277.3739
`scottwallace.edva@gmail.com,
`
`Scott L. Wallace, RDR, CRR, Official Court Reporter
`
`
`
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`MORNING SESSION, APRIL 16, 2021
`
`(9:01 a.m.)
`THE COURTROOM CLERK: RAI Strategic Holdings, Inc., et al.
`versus Altria Client Services, LLC, et al., Case Number
`20-cv-393.
`Counsel, please note your appearances for the record.
`MR. MOLSTER: Good morning, Your Honor, Charles Molster on
`behalf of the plaintiffs. With me on the Zoom is Thomas Vitt
`Jones Day. With Your Honor's permission, he will handle the
`motion the morning.
`THE COURT: All right. Good morning.
`MR. GRANT: Your Honor, this is Max Grant from Philip
`Morris, Altria representing, I guess, the putative plaintiffs in
`the case as they currently exist.
`THE COURT: Right.
`MR. VITT: With me is my partner Larry Gotts. He'll
`handle the motion to compel issues, and I'll do my best to deal
`with the scheduling issues and the pretrial scheduling.
`THE COURT: All right. Good morning, everyone. This is
`on the defendant's counterclaim motion to compel. I read the
`pleadings, and I read your reply brief as well. Do you have
`anything to add to that?
`MR. GOTTS: Your Honor, Larry Gotts here. I don't have
`anything in particular to add, Your Honor. The four forms of
`relief tie primarily to issues of relevance, and we do believe
`
`Scott L. Wallace, RDR, CRR, Official Court Reporter
`
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`that, frankly, all four categories we request, that the
`information is undisputably relevant.
`We would be happy to address, Your Honor, any particular
`concerns or questions that derive from that or from our papers.
`THE COURT: Did you request documents related to Issue 28,
`Topic 28?
`MR. GOTTS: I'm sure we did, Your Honor. I haven't pulled
`those requests, but given the scope and breadth of the requests,
`I'm sure there are document requests that would encompass that.
`THE COURT: Okay. Let me hear from the defendants -- from
`the plaintiffs, rather.
`Can I hear from RAI, please?
`You're muted, Mr. Gotts.
`MR. VITT: Yes, Your Honor. I'm sorry. I had a Zoom quip
`and had to restart. I apologize.
`THE COURT: That's okay.
`MR. VITT: Can you all hear me and see me okay now?
`THE COURT: I can hear you. I'm not sure which box you
`are, but.....
`Okay. I see you now, Mr. Vitt.
`Did you have anything to add to your opposition?
`MR. VITT: Your Honor, I would like to address the reply,
`if the Court -- I missed the conversation you had with Mr. Grant,
`so I would like to address the reply, if the Court has any
`questions.
`
`Scott L. Wallace, RDR, CRR, Official Court Reporter
`
`
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`THE COURT: I don't really have any questions, but I did
`read the reply. But go ahead and add anything that you would
`like.
`MR. VITT: Sure. So, on -- I would like to focus, I
`think, primarily on Topic 28, Your Honor, and the key issue there
`is there are really three legal principles that ought to drive
`this. The question we're looking at is, is there anything
`relevant about the negotiations and the lead up to that font in
`RJ Reynolds' agreement.
`The first legal principle, Your Honor, is we all agree
`that a settlement agreement can be a comparable license. And
`then the Federal Circuit's kind of instructed us to look at, is
`the settlement agreement about valuing the patents or is it about
`settling litigation? But here we don't have to worry about that.
`We agree that its about value of the patent.
`And then the second legal principle is, Rule 408 says that
`the settlement negotiations are not admissible for exactly the
`purpose that Philip Morris wants to use them for; that is, to
`prove or disprove the validity or amount of a disputed claim,
`just not admissible for that purpose.
`And then that leads to the third legal principle. If you
`look at the cases that we cited and they cited, there's a general
`rule that the settlement negotiations are not discoverable.
`There's not a broad discovery privilege, but there's a general
`rule that those negotiations are not discoverable unless the
`
`Scott L. Wallace, RDR, CRR, Official Court Reporter
`
`
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`party to the settlement agreement that has a comparable license
`has opened the door, and we have not opened the door in any way.
`Both parties' experts agree that we look at the terms of the
`agreement. They agree about how to apportion between the font
`and the agreement, which is the comparable license, and the
`hypothetical negotiation. They agree about that. Their
`disagreement is just about which agreement to use. We have not
`opened the door to the background of the negotiations.
`The last point I would like to make, Your Honor, is the
`reply makes it clear that they would really like to dig into our
`own internal deliberations. This -- it bears noting that this
`didn't come up for months and months as we discussed this. This
`raises significant issues of attorney-client privilege and work
`product on this exact issue, which is why courts don't allow
`discovery into this unless the party to the settlement agreement
`opens the door.
`Thank you, Your Honor.
`THE COURT: All right. Thank you. Did you have anything
`else to add Mr. Gotts? You're muted. Sorry.
`MR. GOTTS: You would think by now we would all have
`learned to push unmute. But in any event, Your Honor, the --
`just a few quick points. Number one, there's no 408 privilege,
`and the very case that Plaintiff Reynolds cites in their brief,
`the MTSG case, shows exactly otherwise, namely that we should be
`entitled to test the underlying negotiations for the purposes of
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`Scott L. Wallace, RDR, CRR, Official Court Reporter
`
`
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`the agreement.
`Second, the notion that this is a privilege issue makes --
`is clearly not viable as an argument here. First of all, if
`there's a privilege objection, they can make it, but the actual
`testimony at page 214 of the transcript of Mr. Gilly {sp} makes
`clear that the negotiations were handled by the leadership team,
`not by the lawyers in terms of the assessment and evaluation and
`analysis, and that's the very same leadership team that Mr. Gilly
`had no conversations with.
`So, we are entitled to, we believe, the underlying
`information used to evaluate and analyze the $79 million
`agreement which both parties agree upon. So we think the
`relevance is quite clear.
`THE COURT: All right.
`MR. VITT: You're mute now, Your Honor.
`THE COURT: Sorry. I was trying to talk off screen. So,
`I think that the -- as far as the other discovery that the
`parties had done with regard to the plaintiff/counter-defendant,
`I don't really think that's relevant here.
`As to Number 28, I believe that it's not appropriate to
`get into negotiations or the considerations that they made
`internally as to this. I think the document speaks for itself.
`As to 54, I am going to allow that, and I am going to allow 78 as
`well. I think that those are within the scope of what -- Well, I
`think that what's communicated to the expert in Number 54 should
`
`Scott L. Wallace, RDR, CRR, Official Court Reporter
`
`
`
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`definitely be disclosed, and I think that 78 is relevant to
`valuing everything here.
`Now, let's go on and deal -- so, the motion is granted in
`part. Let's go on and deal with the --
`MR. VITT: Your Honor, if I might. One point of
`clarification. Sorry. We did have one additional request in our
`motion, which is to have the short deposition regarding
`the conversation --
`THE COURT: -- And I am going to allow that. I am going
`to allow that. Okay. Now, let's deal with the scheduling order
`status. I have your joint motion. Did you all want to address
`that at all?
`MR. GRANT: Your Honor, just very briefly. This is Max
`Grant for PMI. As you know, the parties jointly requested that
`the Court convert this pretrial conference into a status
`conference to discuss pretrial preparations and scheduling. It
`won't be lost on the Court that this is a very important lawsuit,
`as between these parties. There's a lot of litigation going on,
`but this is unquestionably the most relevant and important
`component of that, and the one that may drive a potential
`resolution between the business persons.
`I think it's extremely important to my client that we try
`to get as early a trial date as possible. I know the Court had
`had a criminal jury trial set for next week. The doors appear to
`be back opening up to the halls of justice --
`
`Scott L. Wallace, RDR, CRR, Official Court Reporter
`
`
`
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`THE COURT: -- yeah --
`MR. GRANT: -- in Alexandria. I realize that COVID has
`created lots of scheduling complications, but I also would say
`that many parties are okay with the delays that resulted from the
`COVID pandemic that we've been dealing with. Philip Morris and
`Altria, the putative plaintiffs here, would request that they get
`a trial date from the Court as soon as possible. My view,
`respectfully, Your Honor, is we can go as early as July 26th,
`keeping in mind Judge O'Grady's standing order that Dauberts and
`Mills be completed two weeks before trial but that, because of
`the commercial importance of this litigation, I would ask that
`the Court set a date no later than September, if it's possible.
`The client has expressly asked me to make that request to the
`Court.
`THE COURT: When you asked for a status today, frankly I
`didn't think you were going to be asking me to set the trial
`date, and Judge O'Grady is the one who needs to do that. But
`what I can do is go ahead and set you for the final pretrial
`conference, and I don't think -- I mean, is there any reason why
`we can't do the final pretrial conference in May?
`MR. GRANT: No, Your Honor, absolutely no reason.
`THE COURT: Is that all right with both parties?
`MR. VITT: Your Honor, this is Tom Vitt, and I have a
`problem with my camera. I'm trying to look at it. I apologize.
`THE COURT: That's okay.
`
`Scott L. Wallace, RDR, CRR, Official Court Reporter
`
`
`
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`MR. VITT: All right.
`THE COURT: It's not --
`MR. VITT: So, Your Honor, there are some outstanding
`depositions that the parties are working on, fact depositions
`related to the nonpermanent injunction issues that still need to
`be taken. One of them is of the Inventor Reeker on the '265
`patent. He's in Germany. To accommodate his personal situation
`and the COVID situation, we agreed with the other side to take
`that out of time.
`THE COURT: When are you planning to take that?
`MR. VITT: Well, we don't have a date. We've asked for a
`date. The ball is in their court to provide us a date.
`The other thing Your Honor should know just in terms of
`the overall scheduling is there are two fact witnesses who are
`their fact witness, Maura Gilchrist, the only witness they
`identified as a business witness for PMP, the party PMP that owns
`three of the patents. We haven't taken her deposition yet
`either.
`And they have a deposition of our witness, Mr. Feigler
`{sp}, on some business topics as well. And the parties agreed in
`the last couple of days to delay those depositions in order that
`they could be taken just once because those two witnesses are
`both pertinent to the permanent injunction discovery that is
`ongoing and that is really just getting started. And so we have
`this issue where we have three witnesses related to the
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`Scott L. Wallace, RDR, CRR, Official Court Reporter
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`
`
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`noninjunction issues that have yet to be taken, yet to be
`scheduled. We've proposed dates for Gilchrist, and we also have
`the situation where the parties have agreed that they can cite to
`those depositions to support already-expressed expert opinions.
`And so it creates this log jam in terms of timing that
`Mr. Grant's proposal doesn't really take into account because
`yesterday there was talk from Philip Morris' side about delaying
`the expert depositions until those citations get in, which may be
`a very good idea, and the parties are still discussing these
`logistics, but we're not in a place where we can say by May 21st
`we will have completed those fact depositions, inserted the cites
`into the expert reports, taken the expert depositions, and done
`the pretrial filings that were contemplated by the Court in the
`schedule we just agreed to, because all of that is kind of up in
`the air based on the last couple of discussions we've had with
`the other side.
`THE COURT: Well --
`MR. GRANT: Very briefly, Your Honor, very briefly.
`THE COURT: Just let me ask a question. Is there any
`reason that all that can't be done by the end of May?
`MR. GRANT: No, Your Honor. In fact, it's scheduled to be
`done. Ms. Gilchrist's deposition, which includes most of the
`injunctive relief topics, is scheduled for one week from today.
`The only other remaining party fact witness, Mr. Feigler, was due
`to be deposed today and they delayed his deposition. It will
`
`Scott L. Wallace, RDR, CRR, Official Court Reporter
`
`
`
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`occur next week, I anticipate. All the expert depositions are
`currently scheduled to be completed by May 12th.
`THE COURT: Okay. So here's what I'm going to do. I'm
`going to go ahead and set the final pretrial conference for May
`21. I believe that Judge O'Grady wants that at 2:00. I'm going
`to double-check. When I enter the order today, I'll double-check
`the date and time and put it in there, but I'll allow you all to
`work out these deposition dates as you wish during the next
`couple of months, and I don't really have a problem with you even
`finishing the deposition after the final pretrial conference
`date. I assume that it will be done closely within that date.
`And then what I would like you all to do is -- you've got in here
`the date for witness lists, exhibit lists -- I mean, you've got,
`basically, your pretrial submissions are already scheduled for
`May 21, and the objection -- all those dates work with the May 21
`date for a final pretrial conference. If you want -- if, based
`on your deposition dates, you need to move back those dates a
`couple of weeks or something like that in order to finalize your
`pretrial submissions, I don't have any problem with that. It
`doesn't have to be contemporaneous, as long as it's close to the
`time of the final pretrial conference, and I'll explain all of
`that to Judge O'Grady, but we'll --
`MR. GRANT: -- that's perfect --
`THE COURT: -- we'll file with him so you can pick a trial
`date on May 21. I don't know what his schedule is like at this
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`Scott L. Wallace, RDR, CRR, Official Court Reporter
`
`
`
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`point. You know, at this -- all the judges are doing the felony
`trials first. They come first. So, you know, if you get to
`trial in 2021, I think you'll be lucky, but we'll see what he
`says.
`MR. GRANT: The only reason I am where I am is because
`I've been lucky, so I appreciate that.
`MR VITT: Understood, Your Honor. I do need to make one
`correction. Mr. Grant said that Ms. Gilchrist is scheduled for
`next week. That's not correct. Maybe he hasn't had a chance to
`catch up.
`THE COURT: That's all right. You guys work out these
`deposition dates. You've been working cooperatively on that, and
`I assume you can work cooperatively on adjusting these final
`pretrial submission dates and objection dates as needed to
`accommodate those. As I said, I don't have any problem with
`these depositions finishing at the end of May or even the
`beginning of June if you have to, but if you need to modify these
`dates, just let me know in the next week, and otherwise we'll
`just have a final pretrial conference and you can submit
`everything else when it's ready, okay.
`MR. GRANT: Thank you, Your Honor.
`MR. VITT: Your Honor, what -- if I --
`MR. GRANT: Thank you.
`THE COURT: I'm sorry, go ahead.
`MR. VITT: If I could raise one more thing, Your Honor.
`
`Scott L. Wallace, RDR, CRR, Official Court Reporter
`
`
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`The subject of injunction discovery, the parties are supposed to
`work out a schedule for that. We've raised that with him. We
`don't have that worked out. We're going to have to work that out
`as well.
`MR. GRANT: So I guess --
`THE COURT: Go ahead.
`MR. GRANT: Sorry, Your Honor. Look, I was going to say
`I've done this a few times, been the prevailing plaintiff.
`Injunction discovery is the fact discovery that occurs.
`Generally, there are no expert reports, certainly no expert
`reports that are done pre-jury trial regarding injunctive relief.
`Typically that's briefed with, potentially, declarations, but it
`doesn't require a set of expert reports.
`THE COURT: I don't think it does either, and you can ask
`Judge O'Grady about that since he's the one who is going to
`determine that, what kind of briefing schedule he would like as
`to that.
`MR. GRANT: Thank you.
`MR. VITT: Thank you, Your Honor. I would just say that's
`not my experience. They want to force us off the market. We're
`going to do what we need to do to try to stay on the market. If
`that includes expert reports, we're going to offer expert
`reports.
`THE COURT: Okay.
`MR. VITT: I've tried a few cases myself, too, and been on
`
`Scott L. Wallace, RDR, CRR, Official Court Reporter
`
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`both sides of the --
`THE COURT: I know you're all experienced, and you can
`make -- you can make that argument to Judge O'Grady and see if he
`allows it.
`MR. VITT: All right. Thank you.
`MR. GRANT: Thank you, Your Honor.
`THE COURT: Thank you.
`(Proceedings adjourned at 9:19 a.m.)
`
` C E R T I F I C A T E
`
` I, Scott L. Wallace, RDR-CRR, certify that
`the foregoing is a correct transcript from the record of
`proceedings in the above-entitled matter.
`
`4/16/21
` /s/ Scott L. Wallace
` ---------------------------- ----------------
` Scott L. Wallace, RDR, CRR
` Date
` Official Court Reporter
`
`
`
`Scott L. Wallace, RDR, CRR, Official Court Reporter
`
`