Juul Labs, the electronic cigarette giant, has been embroiled in litigation in recent years over the safety of its products and its marketing practices toward teens. The company has recently entered into a historic settlement that would dispose of more than 5,000 lawsuits.
The $1.7 billion settlement is more than three times the amount of other settlements previously reached in Juul litigation. As this is the largest settlement thus far in Juul’s multidistrict litigation, the agreement marks a turning point for the company and its plans for the future.
The Juul Lawsuit’s Allegations
Juul rose to prominence in 2015 when it introduced its electronic cigarette (“e-cigarette”) to the market. Also referred to as a “vape,” these devices heat and vaporize the liquid in its cartridges, which can contain nicotine and other flavors. Juul marketed its products as a safer alternative to smoking regular cigarettes and enticed users with sweet and fruity flavors. In the relatively short time since Juul’s entrance into the marketplace, teen smoking had skyrocketed. High school students experienced a 78% increase in vape usage by 2018.
As a result, school districts, states, and local governments filed complaints against Juul for its safety claims and marketing practices. Namely, all of the complaints shared the common thread that Juul’s e-cigarettes were no safer than other tobacco products and that the company engaged in improper marketing practices of its products to minors. Specifically, the complaints cited Juul’s social media use and their “kid-friendly” flavors as marketing tactics utilized to entice underage minors. The complaints alleged that Juul deceptively concealed the potency and addictiveness of its products while deliberately targeting underage consumers to make life-long, addicted customers.
As the Juul lawsuits began to grow in 2019, the United States Judicial Panel on Multidistrict Litigation consolidated the pending actions (which, at that time, were 10 in total) into a MDL centralized in the Northern District of California. Around the same time, numerous investigations were underway by the Federal Trade Commission, the Centers for Disease Control and Prevention, and the Food and Drug Administration into the safety and marketing of Juul products. By 2022, the number of lawsuits in the MDL reached 4,200.
The settlement is between Juul and 10,000 plaintiffs consisting of various school districts, local governments, and individuals throughout Northern California. The full terms of the settlement have yet to be disclosed. However, Juul hasn’t previously admitted to wrongdoing in any of its settlement agreements. Notably, the terms do not cover claims against Altria, a 35% stakeholder in Juul. In a statement released by Juul, the company had secured an equity investment to fund the resolution. The agreement does not immediately offer funds to the plaintiffs. Nonetheless, it will begin a claims process for plaintiffs to apply for funds distribution.
Philip Federico, a lawyer representing 60 school districts, described the settlement as a “tremendous victory for school districts burdened by the vaping epidemic”, adding that funds from it will allow school districts to recover the costs of combating the epidemic.
The Future of Juul Lawsuits
The present settlement, although the largest thus far, is not the only settlement entered into by Juul this past year. This past September, Juul agreed to pay $438.5 million to 34 U.S. states and territories. As part of the settlement, Juul also agreed to restrict its youth marketing. According to its website, Juul remains “in ongoing discussions with other key stakeholders to resolve the remaining litigation.”
Juul’s recent settlements come at a precarious time for the company. In November, Juul announced that it had secured an investment from some of its early investors to keep itself in business and to fund the settlement. Juul also announced that it was planning to reduce its operating budget by 30% to 40%. This reduction included layoffs of around 400 of its employees. In June, the company was briefly banned from selling its products after the U.S. Food and Drug Administration found that Juul failed to show its products were appropriate for public health. The ban has since been put on hold pending additional review of Juul’s marketing application.
At the same time, Juul’s largest investor and tobacco producer, Altria, announced that it intended to compete with Juul. Altria plans to manufacture its own electronic cigarette devices. Altria had previously ceased its own e-cigarette production back in 2018 when it purchased a $13 billion stake in Juul. However, due to the massive loss of the original investment, Altria chose to exit its non-compete agreement. As a result, Juul may soon face stiff competition from the tobacco giant, along with other competitors that have crept up over the years.