Colorado Supreme Court considers appeal from JUUL…


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colorado-supreme-court-considers-appeal-from-juul…

The Colorado Supreme Court will consider an appeal from four executives of e-cigarette manufacturer JUUL who claim that the attorney general cannot hold them personally liable in state court for recklessly advertising addictive products to children.

Attorney General Phil Weiser originally filed a sprawling lawsuit in mid-2020 accusing JUUL Labs, Inc. of carrying out a years-long marketing campaign to get youth hooked on vaping. Last fall, Weiser’s office amended its complaint to add four “management defendants.” Two of those were co-founders of JUUL, while the other two were members of the company’s board of directors.

“With reckless indifference to the health of youth across the United States and Colorado, JUUL, directed by the Management Defendants, erased the gains of reduced youth smoking by harnessing the power of social media to generate sales of a highly addictive and dangerous product,” the amended complaint alleged.

Last month, the management defendants asked the Supreme Court to review and reverse a Denver judge’s decision refusing to dismiss them from the lawsuit. They argued that their contact with Colorado was nonexistent and the government was attempting to attribute JUUL’s corporate behavior to cofounders James Monsees and Adam Bowen and board members Nicholas Pritzker and Riaz Valani.

Prosecutors, the defendants told the Supreme Court, needed to demonstrate which actions of the individual defendants were directed at Colorado. Otherwise, lawsuits challenging corporate behavior could produce adverse effects if executives were required to appear in any state court to answer for their companies’ actions, regardless of their ties to that state.

In addition to discouraging people from serving on corporate boards, “it would naturally drive up the costs of doing business in Colorado,” wrote Zane A. Gilmer, an attorney for Pritzker and Valani. “Companies could choose either to cease doing business in Colorado, or to pass their higher costs along to consumers in the form of higher prices.”

According to the lawsuit, JUUL used a series of marketing tactics beginning in 2015 to market its nicotine vaping products to “cool kids.” It hired young “brand ambassadors,” hosted over 60 “sampling events” in Colorado and encouraged the use of #juulmoment as an Instagram hashtag. Its marketing practices, in addition to violating the Colorado Consumer Protection Act, “spawned” widespread vaping among teenagers and young adults, Weiser’s office argued.

The 2019 Youth Risk Behavior Survey found that 28.9% of high school students in Colorado used electronic vapor products within the past 30 days. The management defendants, according to the government, directed the marketing strategies that allegedly deceived users about the safety of JUUL’s e-cigarettes.

The Centers for Disease Control and Prevention notes warns that e-cigarette and nicotine use can expose young people to harmful aerosols and alter their brain development.

Shortly after Weiser’s office added the management defendants to the lawsuit, they moved to dismiss on the grounds that, being California residents, they had not done anything individually that was targeted at Colorado. The government insisted that the defendants were responsible for JUUL’s marketing strategy and caused the company to violate the state’s consumer protection law.

“It is not unreasonable to ask California residents to make the short airplane trip to this court,” wrote Senior Assistant Attorney General Jeffrey M. Leake.

On Jan. 13, Denver District Court Judge J. Eric Elliff ruled on the management defendants’ motion to dismiss. He was critical of the attorney general’s office, agreeing that there were no specific details of how the individual defendants acted unlawfully.

“(I)n its 145 pages, nowhere does the FAC (first amended complaint) attempt to describe the individual defendants’ connections to Colorado,” Eliff wrote. “Rather, the FAC generally refers to the individuals as the ‘Management Defendants’ and then lumps the actions of the Management Defendants and JLI together it its allegations.”

While Elliff agreed that it would have been more compelling if the attorney general’s office had listed the wrongful acts of each defendant, he nevertheless declined to dismiss the lawsuit. The government had plausibly claimed that the management defendants participated in the allegedly unlawful behavior by creating or condoning JUUL’s corporate conduct.

The defendants quickly asked Elliff to certify an interlocutory appeal, which is a less common form of appeal that challenges a trial court’s ruling while the case is still ongoing. Elliff denied the request, explaining that he did not believe his decision meant that all corporate executives were now broadly required to defend themselves in Colorado courts for the actions of their companies.

“In this case, to repeat, the Amended Complaint plausibly alleges that each of the individual defendants had a direct, participatory, role in marketing and promoting an allegedly untested, unsafe, and addictive device to the youth of Colorado,” he wrote. “In other words, the individuals were not simply board members approving the actions of a CEO; instead, the Amended Complaint plausibly alleges that they were the prime movers in JUUL’s actions.”

The Supreme Court on May 3 ordered the attorney general’s office to explain, by the end of the month, why Elliff was correct in refusing to dismiss the management defendants from the lawsuit. The defendants will then have until mid-June to respond. The high court only grants direct appeals from the trial courts under rare, compelling circumstances.

JUUL is also defending itself against similar lawsuits in other states. Last month, the e-cigarette manufacturer agreed to pay $22.5 million to settle litigation in Washington. The Seattle Times reported that JUUL agreed to stop advertising to people under 21 and to place restrictions on its social media advertising.

That settlement was only between the state and the company itself. JUUL has also reached multimillion-dollar agreements with Arizona and North Carolina that include changes to its marketing behavior.

The case is Colorado v. JUUL Labs, Inc. et al.


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