SAN FRANCISCO (CN) — A judge has granted the vaping giant JUUL Labs., Inc’s preliminary settlement offer of $255 million in a massive federal class action, as a trial approaches for those who choose not to take it.
A large group of plaintiffs have alleged for years that JUUL uses deceptive practices in marketing in products, that it failed to warn consumers that e-cigarette products are highly addictive and falsely claimed in ads and labels that its pre-filled pods contained 5% nicotine, the same amount in a pack of cigarettes, when the pods actually contained much higher levels. They also say JUUL fraudulently markets its vaping products as a “safer alternative” to combustible cigarette smoking.
The actions include putative class actions, actions on behalf of school districts and other governmental entities and individual personal injury cases. In October 2019, the United States Judicial Panel on Multidistrict Litigation transferred the cases to the Northern District of California for consolidated pretrial proceedings before U.S. District Judge William Orrick.
That year Orrick moved to advance claims from twelve adult and minor JUUL users suing the company. The plaintiffs range in age from 15 to 27 years old. Some say they got hooked on e-cigarettes at ages as young as 12 years old.
After a 2021 hearing, Orrick refused to dismiss the bulk of claims filed by 19 bellwether plaintiffs from 14 states in an expansive multidistrict class action. The judge mostly refused to let three JUUL board members — Nicholas Pritzker, Hoyoung Huh and Riaz Valani — off the hook for claims of fraud and negligence, finding little merit in their argument that they had no direct role in the alleged wrongdoing.
In a federal court hearing Friday in San Francisco, Orrick approved a preliminary class action settlement agreement which awards a $255 million non-reversionary fund to disperse among all class members — in exchange for releasing their economic loss claims. It is estimated that between 200,000 and two million class members, or up to 15% of the class, will receive payments
That means the court could authorize up to $3 million from the initial settlement payment to cover out-of-pocket expenses incurred in distributing notices and the first year of potential trust administration costs. Personal injury class members can consider the settlement offer, and may choose to move to trial instead.
The plaintiffs’ lead attorney Dena Sharp acknowledged how expensive the settlement has become and that the estimated out-of-pocket expenses were “based on the unrealistically high claims rate.”
Orrick also considered the motion from tobacco company Altria Group, Inc. requesting a stay pending its appeal from the 2022 class certification.
Last February an administrative law judge dismissed antitrust claims issued by Federal Trade Commission staff against Altria and JUUL. The agency alleged that Altria and JUUL entered a series of agreements — including Altria’s acquisition of a 35% stake — that violated federal antitrust laws because Altria ceased to compete in the U.S. market for closed-system electronic cigarettes, in return for ownership interest in the market-dominating JUUL.
Chief Administrative Law Judge D. Michael Chappell concluded that the plaintiffs failed to demonstrate both the anticompetitive effects of the non-compete provision, and a reasonable probability that Altria would have competed in the e-cigarette market.
Considering Altria’s motion and the motion to dismiss for failure of compliance filed by the defendants, Orrick said Friday in court that he wanted to terminate both “as moot.” But he was persuaded by attorney Sarah London to consider them, and said he will soon issue rulings on both motions.
A trial is scheduled to begin April 17 and is expected to last into September. JUUL has already agreed to pay $435 million to settle another case with a bipartisan coalition of state attorneys general in a separate investigation into the company’s marketing and sales practices, launched in February 2020.
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