Juul Labs and minority shareholder Altria Group asked a California federal judge on Monday to toss Racketeer Influenced and Corrupt Organizations (RICO) Act and public nuisance claims made against the e-cigarette manufacturer in an ongoing federal multidistrict litigation that claims the companies and their stakeholders collaborated to defraud the public and created a youth vaping epidemic.
U.S. District Judge William H. Orrick presided over the hearing in the San Francisco Federal Courthouse.
Defense attorneys representing Juul Labs and Altria Group (parent company of Philip Morris USA) said that the RICO allegations made against their clients were baseless, asking for those charges to be immediately dismissed.
According to the defendants, these charges are preempted and frustrated FDA policy objectives.
Plaintiffs – made up mostly by a consolidation of school districts – argue, however, that by giving the FDA authority over tobacco products in the Tobacco Control Act, Congress was aware of the possibility for private lawsuits under state law, due to the previous fraud of Big Tobacco that was exposed in numerous state and private lawsuits brought over time.
The public nuisance claims argue that the companies defrauded the public by presenting Juul products as a healthier alternative to traditional cigarettes, with no scientific evidence to back that claim.
RICO claims charge that the companies presented this same message to a youth demographic and collaborated to advertise to an underage market using marketing tactics such as featuring young models in advertisements, pay-for-promotion schemes with pop culture figures, bright and colorful ads, exaggerated presence on social media platforms popular in youth culture, and flavored products that appeal to a youth market – tactics not unlike those claimed against Altria (Philip Morris) in previous litigations which found the company had targeted young people in cigarette ads.
“Sellling a flavored product is not fraud”, said Peter A. Farrell of Kirkland Eliis LLP representing the defendants. The defense went on to argue that the companies in question never spent money on the products at issue and that the plaintiffs did not adequately plead that any RICO enterprise existed.
The defense went on to categorize their clients’ actions as “normal business dealings”.
When pressed to describe how the companies participated in a RICO enterprise, the plaintiffs said that the damage found on schoolgrounds nationwide can be directly tied to the defendants’ “sham” youth prevention campaign and their campaigns to market to America’s youth. According to testimony, the plaintiffs went on to tell the judge that Juul representatives purgered themselves when they told Congress that they had no interest in targeting the youth market. “Kids were their target market.” Stated Sabita J. Soneji, representing the plaintiffs.
Soneji went on to explain that Altria Group – the largest distributor of tobacco in the world – saw in Juul a “pipeline to replacement smokers”, which prompted them to become a minority investor in Juul in an effort to once again expand the nicotine-addiction demographic range.
The companies then collaborated to mislead the public about the safety of their product and target the youth demographic to create a new generation of smokers.