SAN FRANCISCO (CN) - A federal judge said Wednesday he will advance a class action accusing e-cigarette maker Juul Labs of building a multimillion-dollar electronic-cigarette empire by secretly designing a highly addictive product and hooking teens with "cool" ads and candy-like flavors.
In a hearing in San Francisco, U.S. District Judge William Orrick III said the plaintiffs had plausibly alleged that Juul's advertising campaign had helped the company capture the $3 billion e-cigarette market in the United States in a stunning two years, beating out established competitors like cigarette behemoth Philip Morris.
Orrick tentatively blessed almost all of the claims brought by a nationwide class of adult Juul users and a subclass of users who were minors when they purchased Juul's products.
He said the case will proceed regardless of whether he later reverses on individual claims.
"I don't know what the evidence is going to show," Orrick said. "But the case will proceed."
Twelve adult and minor Juul users sued the San Francisco-based company in April 2018 for concealing the addictiveness of its products. According to the complaint, the products contain triple the legal limit of nicotine allowed in the European Union.
One study found Juulpods - prefilled cartridges of nicotine solution - contained 6.2% nicotine salts instead of the advertised 5%, and the plaintiffs claim Juul's devices deliver this outsize amount of nicotine to the bloodstream faster than traditional cigarettes. They say the "intense dosage" of nicotine increased their nicotine addictions and their Juulpod consumption and made quitting harder, and that Juul chose to not warn them of these risks.
According to an amended complaint, Juul targeted both teens and adults using a "two-prong" marketing approach.
The first prong targeted teens with candy-flavored Juulpods and "multimillion dollar ad campaigns and social media blitzes using alluring imagery," such as attractive young models "going out for a night on the town."
The campaign resulted in more than 700% growth in 2017 alone, the classes allege.
Juul meanwhile targeted adults trying to quit smoking and those wary of the health risks associated with traditional cigarettes by claiming its products contained less nicotine and were less addictive than cigarettes, the plaintiffs claim.
On Wednesday, Juul's attorney Austin Schwing, of Gibson, Dunn & Crutcher LLP, sought to counter those claims by arguing restrictions on commercial speech must be narrowly tailored to achieve the desired objective. He said outlawing speech about lawful products that appeal to adults because it may also appeal to teens is not narrowly tailored to preventing teen usage.
And he invoked the separation of powers doctrine to argue judicial review was akin to legislating a ban on Juul products because it is the U.S. Food and Drug Administration that Congress had tasked with regulating e-cigarettes, not the judicial branch.
Class counsel and Gutride Safier LLP attorney Matt McCrary countered Juul had provided no authority for abstaining from judicial review.
"I'm not thinking of abstaining," Orrick replied.
Orrick did not ask questions of either party during their arguments, indicating his final written order likely won't deviate from his tentative ruling.
He tentatively granted Juul's motion to dismiss claims for negligent marketing, negligence per se and breach of express warranty. But he said he will probably advance the remaining claims for false advertising, fraud, negligent misrepresentation, deceptive trade practices, design and manufacturing defect and failure to warn, adding none of these are pre-empted by federal laws.
He said the minors' sub-class had plausibly alleged Juul's advertising campaign had "targeted them."
He kept alive named plaintiff Bradley Colgate's failure-to-warn claims and dismissed them for three other plaintiffs with leave to amend.
And he said he would probably also deny Juul's motion to send five of the named plaintiffs to arbitration.
Orrick took the arguments under submission and did not indicate when he would rule.
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