Up In Smoke: Federal Regulation, Litigation, and the Future of JuulFebruary 24, 2020
Vaping has become increasingly common in the United States, especially among young people. When popular vaping company Juul entered the e-cigarette market in 2015, it faced little (if any) federal oversight. The Food and Drug Administration (FDA) did not finalize its policy for regulating e-cigarettes as tobacco products until 2016, and even then, companies were given until May 2020 to retroactively apply for FDA approval. However, the agency has adopted other policies that impact how e-cigarette companies can market and sell their products, with its decisions targeted mainly at Juul, who controls 75% of the United States’ e-cigarette market.
In September 2019, the FDA sent a warning letter to Juul instructing the company to adjust its marketing plan. The letter claimed Juul illegally marketed e-cigarettes as safer than tobacco cigarettes. The FDA also established a new policy regarding the sale of flavored pods. (Pods are cartridges that smokers insert into their e-cigarettes. They contain a variety of chemicals, including nicotine. Many believe that the sale of pods of certain flavors, such as fruit or mint, attract young smokers to the product.) While the new policy largely prevents companies like Juul from selling flavored pods, carve outs do exist. The carve out for tobacco and menthol flavored pods has received the most attention, likely because Juul pulled all but these two flavors from shelves before being required to do so by the FDA. However, a less publicized exception allows all flavors (including the controversial fruit, mint, and dessert flavors) to still be sold in devices that are not intended to be refilled (disposable e-cigarettes). As a result, young consumers are motivated to change their purchasing habits, not quit smoking.
Juul, however, has suffered, with its estimated valuation dropping from $38 million to $24 million amidst these regulatory changes. On top of market and regulatory pressures, Juul is also facing numerous lawsuits.
These lawsuits, which exist at both the state and federal level, are based on a variety of legal theories. The first lawsuit, filed in 2018, is a class action in which plaintiffs are seeking a large amount of money, including “punitive damages, payment of health care costs, compensation for pain and suffering, restitution for purchases of Juul products, and long-term funding for medical monitoring and anti-addiction programs.”
Another lawsuit, filed by former Juul executive Siddharth Breja in October 2019, claims that the company knowingly shipped contaminated pods to retailers. Breja says that he was “retaliated against” for voicing concerns about the contaminated batch.
States have also sued Juul. North Carolina was the first to file suit in May 2019. Other states, including Pennsylvania, New York, and Minnesota, have followed. Massachusetts filed suit just weeks ago in February 2020.
These suits focus on a number of legal theories. Claims include allegations of consumer protection and fraud law violations, negligence, design defects, failure to warn, false advertising, unjust enrichment, and, perhaps most notably, public nuisance.
Public nuisance lawsuits require plaintiffs to show an interference with a right common to the public, like health or safety. Plaintiffs in these suits may seek money for programs that address the enduring problems caused by a defendant. Many states limit the theory to property law. Recently, however, suits have emerged demonstrating there is room for expansion. Nuisance theory was the foundation of the nation’s first opioid-crisis case, which resulted in a $465 million judgment for Oklahoma Attorney General Mike Hunter in the state’s suit against Johnson & Johnson in 2019.
While trials have yet to begin, practitioners should monitor the Juul proceedings and consider how this expansion of nuisance theory may impact products liability litigation moving forward. Careful attention should also be given to the FDA’s May 2020 decision on Juul’s retroactive application, as the decision will likely determine the company’s ability to successfully defend itself in litigation and define its role in the marketplace moving forward. The future of e-cigarettes is hazy, and only time will tell if the industry goes up in smoke.