Juul Reaches $462 Million Settlement With New York, California and Other States
The case ends major litigation over claims about the marketing of e-cigarettes to adolescents, resolving thousands of lawsuits and amounting to billions of dollars in payouts to states, cities and people.
New York, California and several other states announced a $462 million settlement with Juul Labs on Wednesday, resolving lawsuits claiming that the company aggressively marketed its e-cigarettes to young people and fueled a vaping crisis.
The agreement brings many of the company’s legal woes to a conclusion, with settlements reached with 47 states and territories, and 5,000 individuals and local governments. Juul is in the middle of a trial in Minnesota, an unusual case in which a settlement has not been reached.
But the company’s efforts to broker deals over the lawsuits have cost it nearly $3 billion so far, an enormous sum for a company still seeking official regulatory approval to keep selling its products.
The latest settlement resolved the claims of New York, California, Colorado, the District of Columbia, Illinois, Massachusetts and New Mexico. It follows other lawsuit settlements that took Juul to task for failing to warn young users that the high levels of nicotine in their e-cigarettes would prove addictive.California contended in its lawsuit that for months, Juul did not disclose in its advertising that its devices contained nicotine. It detailed the company’s early marketing efforts, which included handing out free samples of the e-cigarettes in 2015 at trendy events, including a “Nocturnal Wonderland” in San Bernardino and a “Movies All Night Slumber Party” in Los Angeles. The New York lawsuit noted that the company embraced the use of social media hashtags like #LightsCameraVapor.
Attorneys general in those states conducted investigations that they said had found that Juul executives were aware that their initial marketing lured teenage users into buying its sleek vaping pens, but did little to address the problem as the adolescent vaping rate exploded.
In New York City and the Hamptons, the company held glamorous parties and “falsely led consumers to believe that its vapes were safer than cigarettes and contained less nicotine,” Letitia James, New York’s attorney general, said in a press event Wednesday.
“Juul’s lies led to a nationwide public health crisis and put addictive products in the hands of minors who thought they were doing something harmless,” said Ms. James, who noted that the state would get nearly $113 million from the deal.
California will receive the biggest piece of the settlement, estimated at nearly $176 million. During the news conference on Wednesday, Rob Bonta, the state attorney general, said Juul used the tactics of Big Tobacco to reignite a youth nicotine epidemic, after years of declines in cigarette smoking among younger Americans.“I’m proud to stand up here today with the message to e-cigarette and vaping manufacturers: If you set your sights on youth, we won’t stand by and let e-cigarette companies put their profits over the health and well-being of our children,” Mr. Bonta said.
A spokesman for Juul, Austin Finan, said the company had not admitted wrongdoing in the agreement. Citing federal data, he said underage use of its products had declined by about 95 percent. The settlement, Mr. Finan said, represents a near “total resolution of the company’s historical legal challenges and securing certainty for our future.”
“The terms of the agreement, like prior settlements, provide financial resources to further combat underage use and develop cessation programs and reflect our current business practices,” Mr. Finan said.
Selling products with flavors like mango and crème brûlée, Juul sales were soaring in 2019 and the company had an envied and extremely high valuation of about $38 billion. But that bubble began to deflate when federal data showed that 27.5 percent of high school students reported using e-cigarettes, with more than half naming Juul as their brand of choice. As public pressure on Juul mounted, the company began to market itself less as a trend-maker, and more as a company helping adults make the transition away from traditional cigarettes.
The vaping crisis among teenagers has seemed to decline from its peak in 2019, but public health experts still express concerns that about 2.5 million adolescents 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 Disease Control and Prevention. An annual survey typically taken in middle and high schools found that in 2022, about 9 percent of students reported using e-cigarettes in the last 30 days. In that survey, about 14 percent of high school students reported vaping, about half the rate reported in the survey taken at the peak of the crisis in 2019.
While the recent decline has been viewed as a victory, some who oppose e-cigarette use have been troubled by data showing frequency of use; nearly half the high school students who reported vaping said they did so on 20 to 30 days a month.
Under considerable public and regulatory pressure, Juul agreed to withdraw many of its flavored products from the market, which significantly diminished its dominant sales prowess and paved the way for competitors to step in.
A plethora of other e-cigarette companies have filled the space left by Juul, offering vapes in rainbow colors and flavors like key lime cookie, apple juice and strawberry ice cream. The surge has posed an enforcement dilemma for the Food and Drug Administration, which has authorized fewer than two dozen vaping products. In a recent congressional hearing, Dr. Robert Califf, the agency’s commissioner, said he would be consulting with the Justice Department to consider options for removing illegal products, including flavored vapes, from the market.
This new settlement with some of the nation’s largest states caps several moves by Juul to resolve thousands of lawsuits by individuals and other plaintiffs in the last few years.The company just this month settled claims by West Virginia for $7.9 million.
In December, the company agreed to pay $1.7 billion over lawsuits brought by more than 5,000 individuals, school districts and local governments. In September, the company settled lawsuits filed by more than 30 states, for $438.5 million.
In the Minnesota trial that began a few weeks ago, Keith Ellison, the state attorney general, opened the proceedings by accusing the company of getting teenagers hooked on e-cigarettes “so they could make money.”
“They baited, deceived, and addicted a whole new generation of kids after Minnesotans slashed 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. The agreement also requires Juul to stop offering free or “nominally priced” products to consumers, and from using “product placement” in virtual reality, as it had for programming viewed on the Oculus system.
Meanwhile, Juul’s business continues to struggle to find its footing. In 2018, the company dominated the vaping market, with revenues of nearly $1 billion. These days, Juul has fallen behind in market share to Vuse, which is owned by British American Tobacco. Juul does not disclose its revenues, but B.A.T. said its 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 year earlier.Tobacco giant Altria had pinned its smokeless future on Juul. In 2018, it paid nearly $13 billion for a 35 percent stake in the vaping company, only to watch as Juul became the target of blame for the rise in teenage nicotine addiction, and the defendant in myriad investigations and thousands of lawsuits. At the end of last year, Altria valued that stake at $250 million and earlier this year, it swapped that stake for Juul’s intellectual property involving heated- tobacco devices, which warm the plant leaves in a vape-like device.
For months last year, speculation swirled that Juul would be forced into bankruptcy proceedings. But in late November The Wall Street Journal reported two of its directors and earliest investors had provided a cash infusion, and that it would lay off about a third of its employees, about 400 people.
Meanwhile, Juul is still waiting for the Food and Drug Administration to decide whether to authorize sales of the company’s products to be allowed a permanent market. The agency has the authority to require e-cigarette companies to apply for clearance; in recent reviews, the agency has rejected millions of products, authorizing about two dozen vaping devices and materials. (Juul’s products are on store shelves now because the F.D.A. is not enforcing its requirement for premarket clearance.)
The F.D.A. initially denied the company’s request to continue selling its products in June, saying that Juul had submitted “insufficient and conflicting” data. But the agency later decided to conduct additional reviews of the scientific issues in the application.