SAN FRANCISCO (CN) — As the trial pitting the San Francisco Unified School District against e-cigarette maker Juul and tobacco giant Altria kicked off Monday morning, attorneys for the school district painted a picture of Big Tobacco cynically targeting young people as a way to make up for losses in an increasingly flatlining adult market.
Attorneys for the school district spent nearly an hour Monday morning detailing how Altria — formerly known as Phillip Morris — had thoroughly researched Juul before agreeing to invest billions of dollars in the company in an effort to capture market share among young people.
U.S. District Judge William Orrick III denied several motions by Altria this month challenging the school district's right to file a public nuisance suit against Juul and Altria. The company claimed the effects of its products and marketing cannot be linked to any injury to the district and that the district as not been authorized by state law to pursue such an action.
Orrick found the school district not only has the authorization but "has sufficient evidence of injury to its property at this juncture to proceed with its nuisance claim."
On Monday, the district's attorney Thomas Cartmell told jurors Altria had been in the hunt for a product to grab the youth market.
“Altria was looking for a new product to grow the youth nicotine market,” said plaintiffs’ attorney Thomas Cartmell. “And Altria found an electronic cigarette called Juul. It has everything it takes to attract and addict young people, even kids.”
According to Cartmell, mumerous early attempts by Altria to break into the market had proven unsuccessful even as cigarette use among teens hit an all-time low. He held up two examples of Altria’s first vape pens including a bulky, blocky device only a little smaller than a pack of cigarettes.
“These were not nearly as addictive as Juul. They didn’t have nearly the amount of nicotine Juul has and they were harsh to inhale," Cartmell told the jury.
But then Altria found Juul, the manufacturer of an e-cigarette marketed to appeal to a young, cool crowd and packed with nicotine. Altria, the power behind Marlboro — the largest selling brand of cigarettes in the United States by far — had the know-how and retail real estate to give Juul the resources it needed to grab market share. And Juul, Cartmell said, didn’t really take off until Altria entered the picture to the tune of $12.8 billion.
Juul’s sales skyrocketed in 2018 and 2019, Cartmell told jurors, and with the help of Altria sales continued to grow. Both Altria and Juul knew that Juul’s hot new product was “attracting huge numbers of kids,” Cartmell said.
Altria’s attorney, Beth Wilkinson, told jurors that selling to youth had never been the company's intention. Altria wanted a way to increase sales to cigarette smokers who wanted to reduce potential harm to themselves.
Altria, she said, had nothing to do with the formula or the designs behind Juul’s products. When it came on the market, those were all Juul’s decisions.
“We’re not disputing that smoking is dangerous and kills people,” Wilkinson said.
Despite Altria’s massive investments in Juul, the company was never able to grab a controlling share of Juul or even a vote on the board. Juul’s leadership had been very clear about its desire to maintain control.
“The investor shall have not rights, directly or indirectly as a result of its investment in the company or otherwise, to direct or control the company,” one exhibit says. Wilkinson told jurors that Altria hadn’t benefitted from its investment in Juul, losing more than $12 billion after the value of its investment shrank to just $250 million. Altria gave up its 35% share of Juul in March.
Altria, Wilkinson insisted, really had no role in Juul’s appeal to young smokers, nor had it been able to gain the control it had sought. “You’ll see that in the end, Altria wasn’t trying to increase the youth market but, instead, to sell a product that was helpful to smokers,” she said.
The trial, which is expected to last for several weeks, will continue Tuesday.
The object of thousands of suits, Juul agreed last week to pay six states and the District of Columbia $462 million — its largest settlement to date — to resolve claims it marketed vape pens and other products to teens. California will receive the largest amount at $175.8 million, while New York secured $112.7 million.
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