$40 million settlement announced in North Carolina case against e-cigarette giant Juul
State attorneys announced a settlement agreement Monday morning that subjects e-cigarette giant Juul Labs to pay $40 million and forces it to change how it does business in North Carolina.
“North Carolina is now the first state in the nation to hold Juul accountable for its instrumental role in creating a youth vaping epidemic, “ said Attorney General Josh Stein after a Monday morning court hearing on the settlement.
The settlement, which requires Juul to pay $13 million within 30 days and the rest over six years, resolves the litigation in North Carolina, but many other lawsuits remain. The money will be used to help teens who are addicted to Juul products, as well as preventive programs, Stein said.
In the lawsuit, the first filed by a state, Stein accuses Juul Labs Inc., which at one time had 75% of the e-cigarette market, of unlawfully marketing and selling its products to youth.
The lawsuit contends that Juul used a sleek device and sweet flavors that deliver a substance that is highly addictive and sold products to youth, reversing a historic decline in teen tobacco use.
Attorneys for Juul, a Washington D.C.-based company, have argued the company’s products provide a health benefit since it is a safer alternative than cigarettes.
Andrew McGann, an attorney for Juul, said the settlement is consistent with the company’s ongoing efforts to address concerns about youth use.
“We look forward to working with Attorney General Stein and other manufacturers on the development of potential industry-wide marketing practices based on science and evidence,” said a Juul statement sent out after the settlement announcement.
Stein launched his investigation after hearing from friends about their children using the products resulting in addiction, depression, bad grades and medical treatment, he said.
One out of every five high schoolers have used an e-cigarette in the past 30 days, he said, and he hopes the lawsuit will allow his office to protect students who return to school in August from vaping.
“Juul sparked and spread a disease, the disease of nicotine addiction,” Stein said. “They did it to teenagers across North Carolina and this country, simply to make money. Their greed is not only reprehensible, it is unlawful and that is why I took action.”
Settlement terms
Under the agreement, Stein said, Juul committed to:
▪ Abandon marketing strategies that target youth, including on social media, near schools and related events. The company can’t use anyone under 35 years old in its advertising.
▪ Stop advertising claims that e-cigarettes are safer alternative than cigarettes.
▪ Require products to be sold behind counters.
▪ Maintain a secret shopper program to ensure measures are followed.
Another part of the settlement agreement, Stein said, includes that Juul will participate with engaging other e-cigarette companies, other states and other regulatory bodies to come up with a comprehensive solution to addressing concerns about youth use of e-cigarettes.
Stein has also filed lawsuits against eight other e-cigarette companies. In each of those cases, the Attorney General’s Office has either been granted court injunctions or established consent agreements forcing the companies to cease all advertising and marketing that targets young people, Stein said in an interview Friday.
Cigarettes and e-cigarettes are different products. Cigarette smokers are exposed to carcinogens and many other dangerous substances that male them sick and can sometimes kill them. E-cigarettes are electronic devices that utilize a liquid laced with nicotine that produces a vapor that users inhale.
Research shows that e-cigarette vapor is highly addictive and can hinder normal brain development in teenagers and do other harm.
What’s at stake?
There is more at stake here than a court case, said Matthew Myers, president of the Campaign for Tobacco-Free Kids.
“What is at stake is America’s kids,” he said in an interview before the hearing.
As a result of Juul and other e-cigarette companies, more American adolescents are addicted to nicotine than any time in the past 20 years, despite the significant progress in reducing cigarette smoking, he said.
From 2018 to 2019, use of e-cigarettes rose 78% among North Carolina high schoolers and 48% among middle schoolers according to the National Youth Tobacco Survey.
“If Juul isn’t held accountable, then it’s a license for Juul and other companies to continue behavior that has addicted literally millions of America’s kids,” Myers said.
An adverse decision in North Carolina could also impact Juul’s Premarket Tobacco Applications, which the U.S. Food and Drug Administration is currently reviewing. The company would need the FDA’s approval on its products to remain on the market after September 2021.
North Carolina first state to sue
North Carolina was the first state to sue Juul on May 19, 2019.
At least nine other states followed, including New York, California and Massachusetts. A coalition of 39 states have also announced they are investigating Juul.
Hundreds of other individuals, schools boards and counties have also filed lawsuits against the company.
“Juul will fight every case tooth and nail, but a stinging loss would motivate the other attorney generals to move forward and would up what’s at stake for Juul,” Myers said.
May 20 court hearing
The settlement announcement Monday follows Durham Superior Court Judge Orlando Hudson’s May 20 order which found Juul destroyed documents, provided thousands of pages of irrelevant information in document dumps, and ignored related court orders.
Hudson ruled the company should be subject to the most extreme sanctions requested by state attorneys, which gutted the company’s case by barring most of its evidence and witnesses from a jury.
The order also called for counting the documents the company provided in some alleged document dumps to determine how many times it violated the North Carolina Unfair and Deceptive Trade Practices Act.
At least 16,000 violations were identified in the May hearing. Violations carry a fine of up to $5,000 each.
Cradle of U.S. tobacco industry
Stein could have filed the lawsuit in any of the state’s 100 counties, but he chose Durham, a birthplace of the cigarette industry and a former home to multiple manufacturers.
Stein remembers being in elementary school and coming to Durham and touring the Liggett & Myers cigarette factory, he said. The entire city smelled like tobacco.
“We thought there was symbolism to bringing it here in Durham,” he said.
History repeating itself?
There are some similarities between the Juul case and 1990s litigation that led to a 23-year-old historic tobacco settlement agreement, said Michael Hering, National Association of Attorneys General’s tobacco center director and chief counsel.
The 1998 agreement between major tobacco companies and most states followed an initial settlement between tobacco companies and Mississippi, the first state to sue, and a handful of other states. The settlements allowed states to recover billions of dollars for health-care costs for smoking related illnesses and severely restricted advertising and marketing of tobacco products on the market then.
Also similar were accusations then that tobacco companies’ marketing and advertising targeted youth with a product that is deceptively addictive, Hering said. And the fact that and attorneys general stepped up to hold the companies accountable.
The differences, however, are key to understanding the challenges that state and health officials face in policing an emerging industry, he stressed.
In the 1990s attorneys general worked with a limited number of players in a mature industry, Hering said. The agreements involved companies that owned 99.6% of the U.S. market.
“None of that is true with Juul or the e-cigarette industry,” Hering said.
The e-cigarette industry is both new and involves many players with fluctuating market shares, he said.
“Even if all the states settle with Juul it will only represent one company and a fraction of the industry,” Hering said. “We don’t know what will come next from what company or from where.”
This story was originally published June 28, 2021 at 10:20 AM with the headline "$40 million settlement announced in North Carolina case against e-cigarette giant Juul."
