By Christina Jewett and Julie CreswellApril 12, 2023Updated 12:59 p.m. ET
New York, California and several other states announced a $462 million settlement withJuul Labs on Wednesday, resolving lawsuits claiming that the company aggressivelymarketed its e-cigarettes to young people and fueled the nation’s vaping crisis.
The agreement brings much of the company’s legal woes to a conclusion, withsettlements reached with 47 states and territories and 5,000 individuals and localgovernments. Juul is in the middle of a trial in Minnesota, an unusual case in which asettlement was not reached. But the company’s efforts to broker deals over the lawsuitshave cost it nearly $3 billion so far, a massive sum for a company still seeking officialregulatory approval to keep selling its products.
The latest settlement resolved the claims of New York, California, Colorado, the Districtof Columbia, Illinois, Massachusetts and New Mexico. It follows others that took thecompany to task for failing to warn young users that the high levels of nicotine in theire-cigarettes would prove addictive.
California contended in its lawsuit that for months, Juul did not disclose in itsadvertising that its devices contained nicotine. It detailed the company’s early marketingefforts, which included handing out free samples of the e-cigarettes in 2015 at trendyevents, including one called Nocturnal Wonderland in San Bernardino and a “Movies AllNight Slumber Party” in Los Angeles. The New York lawsuit noted that the companyembraced the use of social media hashtags like #LightsCameraVapor.
Attorneys general in those states conducted investigations that they said had found thatJuul executives were aware that their initial marketing lured teenage users into buyingits sleek vaping pens, but did little to address the problem as the adolescent vaping rateexploded.
Letitia James, New York’s attorney general, said in a statement: “Too many young NewYorkers are struggling to quit vaping and there is no doubt that Juul played a centralrole in the nationwide vaping epidemic.”
A spokesman for Juul, Austin Finan, said that underage use of its products had declinedby about 95 percent, citing federal data, since a companywide reset in the fall of 2019.The settlement, Mr. Finan said, represents a near “total resolution of the company’shistorical legal challenges and securing certainty for our future.”
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“The terms of the agreement, like prior settlements, provide financial resources tofurther combat underage use and develop cessation programs and reflect our currentbusiness practices,” Mr. Finan said.
Juul has repeatedly denied marketing directly to minors. In other rounds of settlements,the company has not admitted wrongdoing. In those agreements, the payments toplaintiffs are to provide financial resources to combat underage use and developcessation programs. Juul has framed the deals as part of its effort to “resolve issues fromthe company’s past.”
Selling products with flavors like mango and crème brûlée, Juul sales were soaring in2019 when federal data showed that 27.5 percent of high school students reported usinge-cigarettes, with more than half naming Juul as their brand of choice. As the pressureon Juul mounted, the company began to market itself less as a trend maker and more asa company helping adults make the transition away from traditional cigarettes.
Although the vaping crisis among teenagers has appeared to decline from its peak in2019, public health experts have expressed concerns that about 2.5 million adolescentscontinue to report using e-cigarettes at rates far higher than adults.
Overall, about 4.5 percent of adults use e-cigarettes, according to the Centers for DiseaseControl and Prevention. An annual survey typically given in middle and high schoolsfound that in 2022, 2.5 million middle and high school students, or about 9 percent,reported using e-cigarettes in the last 30 days. In that survey, about 14 percent of highschool students reported vaping — about half the rate in the survey taken at the peak ofthe crisis in 2019.
While the recent decline has been viewed as a victory, some who oppose e-cigarette usehave been troubled by data showing the frequency of use among nearly half the highschool students who reported vaping, who said they did so on 20 to 30 days in a month.
Last year, Juul resolved thousands of lawsuits by individuals and other plaintiffs.
In December, the company agreed to pay $1.7 billion over lawsuits by more than 5,000individuals, school districts and local governments. In September, the company settledlawsuits filed by more than 30 states for $438.5 million.
This month, Juul settled claims filed by West Virginia for $7.9 million.
In the Minnesota trial that began a few weeks ago, Keith Ellison, the state attorneygeneral, opened the proceedings by accusing the company of getting teenagers hookedon e-cigarettes “so they could make money.”
“They baited, deceived, and addicted a whole new generation of kids after Minnesotansslashed youth smoking rates down to the lowest level in a generation,” Mr. Ellison said.
Like other settlements, the latest requires Juul to refrain from marketing to youths. Theagreement also requires Juul to stop offering free or “nominally priced” products toconsumers, and from using the marketing technique of “product placement” in virtualreality systems.
Meanwhile, Juul’s business continues to struggle to find its footing. In 2018, thecompany dominated the vaping space, with revenues of nearly $1 billion that year.These days, Juul has fallen behind in market share to Vuse, its competitor, which isowned by British American Tobacco. Juul does not disclose its revenues, but B.A.T. saidits vapor category in the United States, which includes its popular Vuse Alto product,had about $1 billion in revenues last year, up more than 60 percent from the yearearlier.
Tobacco giant Altria had pinned its smokeless future on Juul. In 2018, it paid nearly $13billion for a 35 percent stake in the vaping company only to watch as Juul became thetarget of blame for teenage nicotine addiction, and the defendant in myriadinvestigations and thousands of lawsuits. At the end of last year, Altria valued that stakeat $250 million and earlier this year, it swapped its stake in exchange for
Juul’s intellectual property around heated tobacco.
For months last year, speculation swirled around Juul that it would be forced intobankruptcy proceedings. But in late November, the The Wall Street Journal reportedtwo of its directors and earliest investors had provided a cash infusion and that it wouldlay off about a third of its employees, or 400 people.
Meanwhile, Juul is still waiting for the Food and Drug Administration to decide whetherit should authorize sales of the company’s products to be allowed a permanent market.The agency is in the process of reviewing many applications of e-cigarettes. (Juul’sproducts are on store shelves now, because the F.D.A. is not enforcing its requirementfor premarket clearance.)
The F.D.A. initially denied the company’s request to continue selling its products inJune, saying that Juul had submitted “insufficient and conflicting” data. But the agencylater decided to conduct additional reviews of the “scientific issues” in the application.
Christina Jewett covers the Food and Drug Administration. She is an award-winninginvestigative journalist and has a strong interest in how the work of the F.D.A. affectsthe people who use regulated products. @By_Cjewett
Julie Creswell is a New York-based reporter. She has covered banks, private equity,retail and health care. She previously worked for Fortune Magazine and also wroteabout debt, monetary policy and mutual funds at Dow Jones. @julie_creswell
