NC Attorney General sues Juul co-founders, will investigate 20 e-cigarette companies
North Carolina Attorney General Josh Stein said Tuesday he is filing a lawsuit against Juul Labs’s co-founders months after reaching a $40 million settlement against the e-cigarette giant over the company’s marketing practices.
Stein also announced an investigation into 20 companies involved in the e-cigarette industry in North Carolina and the “use or suspected use” of their products by underage users.
North Carolina is suing Juul’s co-founders, including Adam Bowen and James Monsees, for their alleged personal participation in designing the company’s marketing strategy intended to attract young users, Stein said Tuesday at a press conference about his office’s efforts to combat the rise in teen vaping in recent years.
The lawsuit, which names Bowen and Monsees as defendants in addition to current and former board members Nicholas Pritzker, Hoyoung Huh and Riaz Valani, is separate from the suit settled in June. Then, Juul agreed to pay $40 million to resolve earlier litigation filed by Stein’s office that accused the company of unlawfully selling and marketing its e-cigarettes to minors.
The earlier suit alleged that Juul’s sleek e-cigarettes and variety of sweet flavors were drawing minors to consume nicotine, a highly addictive substance, and had helped reverse a historic decline in teenage tobacco consumption.
As part of the settlement, Juul agreed to stop targeting minors in its marketing, and was prohibited from using anyone under the age of 35 in its advertising. The company was also required to stop advertising claims that e-cigarettes are safer alternatives to cigarettes, and and was required to sell its products behind counters.
But Stein said Tuesday his office is now suing the company’s founders and early investors because “they were intimately involved in shaping Juul’s strategy of designing, marketing and selling its product in a way, the natural consequence of which was to sell to young people.”
At the same time, the lawsuit claims, Juul’s founders and investors sought financial gain from their control over the company by positioning it for an acquisition. When tobacco giant Altria purchased a 35% stake in Juul in 2018, the deal led to profits of hundreds of millions of dollars for Bowen, Monsees and the others, the lawsuit says.
“They made collectively billions of dollars. It is wrong for them to suck that money out of the company and walk away enriched, when they have fault here,” Stein said. “So they need to be held accountable, and those funds need to come back to North Carolina, where they can go to prevent and treat young people who are struggling.”
The lawsuit alleges, among other things, that Bowen and Monsees developed the slim design for Juul’s e-cigarette, which resembled a USB drive, and reviewed and approved marketing materials used in the company’s “Vaporized” advertising campaign that “featured youthful models exuding cool.”
Bowen is also accused of designing the chemical composition of the liquid used in the e-cigarettes “to have a particularly potent nicotine kick,” and of “minimizing the harshness of the vapor for new users,” according to the 98-page complaint.
The lawsuit also accuses the defendants of ignoring concerns about the e-cigarettes’ popularity with underage users, and claims that Monsees complained that a “small percentage of underage consumers [was] creating a lot of noise and distracti[on].”
Investigation into NC e-cigarette Industry
Stein’s office has issued civil investigative demands to 20 companies, ordering them to provide a range of documents, including the companies’ “knowledge of the appeal” of their products to underage users.
Those companies include Puff Bar, an e-cigarette manufacturer that earlier this year overtook Juul as the most popular brand among middle- and high-school students, according to the Wall Street Journal, as well as 15 retail stores across the state (including three in Raleigh) that sell e-cigarettes, an online seller, and three distributors.
The companies are required to a provide records of all of their e-cigarette transactions during a given time period. That includes any documents that demonstrate any actions taken by employees to verify the age of purchasers. The list of documents requested also includes any policies or procedures the companies have put into place for age verification.
“Too many actors all across the e-cigarette industry are operating in reckless ways that threaten North Carolina children,” Stein said. “If and when my investigation uncovers any illegal activity, I will not hesitate to take appropriate action.”
The investigation remains ongoing, Stein added, and “no one should assume that these are the only retailers that we are looking at.”
Need for national, industry-wide regulations
On top of investigating the marketing of e-cigarettes to underage users in North Carolina, Stein has been advocating for federal standards for the industry that would prohibit non-tobacco flavors, such as fruit, candy, dessert, and mint or menthol.
The infusion of sweet flavoring into e-cigarettes and tobacco products “masks the harshness of that tobacco,” and leads many young users to believe what they are inhaling doesn’t contain nicotine, said Dr. Betsey Tilson, the state health director and chief medical officer at the N.C. Department of Health and Human Services.
In North Carolina, 70% of e-cigarette users need to use their e-cigarettes within an hour of waking up, and 25% of users need to use their e-cigarette within five minutes of waking up, Tilson said.
“Most of our North Carolina youth have either tried to quit or are wanting to quit and are struggling because of that high level of nicotine addiction,” she said.
In August, Stein joined a bipartisan group of state attorneys general in urging Janet Woodcock, the-then acting commissioner of the Food and Drug Administration, to issue industry-wide regulations that would ban non-tobacco flavors, limit the amount of nicotine present in e-cigarettes, and restrict marketing efforts geared toward minors.
On Tuesday, Stein said he had reached out to Dr. Robert Califf, a former FDA commissioner and Duke University researcher who was nominated by President Joe Biden last week to lead the agency again. Stein said he urged Califf to review the recommendations of state officials and “act with greater urgency on this issue.”
“Until the FDA takes decisive action across the industry and across the nation, state attorneys general will be playing whack-a-mole with one company after the next,” Stein said during the press conference.
This story was originally published November 16, 2021 at 2:50 PM.
