Juul Settles N.C. Vaping Case, Agrees to Pay $40 Million

The settlement is the first in a stream of lawsuits against the company, which has been accused of deceptive marketing practices that contributed to a wave of nicotine addiction in teenagers.

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Juul has agreed to pay North Carolina $40 million to settle the first of a spate of lawsuits brought by states that claimed the company’s marketing practices fueled widespread addiction among young people to its high-nicotine e-cigarettes.

The settlement was announced on Monday by Josh Stein, the North Carolina attorney general, who sued the company in May of 2019. In the agreement, the company denies any wrongdoing or liability.

The consent decree requires Juul to sell its products only behind the counter in North Carolina stores, and to use third-party age verification systems for online sales. The order also commits Juul to sending teenage “mystery shoppers” to 1,000 stores each year, to check whether they are selling to minors.

It also bars the company from using models under age 35 in advertisements and states that no advertisements should be posted near schools.

“For years Juul targeted young people, including teens, with highly addictive e-cigarettes,” said Mr. Stein in a statement. “It lit the spark and fanned the flames of a vaping epidemic among our children — one that you can see in any high school in North Carolina.”

In a statement, Joshua Raffel, a Juul spokesman, said: “This settlement is consistent with our ongoing effort to reset our company and its relationship with our stakeholders, as we continue to combat underage usage and advance the opportunity for harm reduction for adult smokers.”

The North Carolina complaint accused Juul of designing, marketing and selling e-cigarettes to attract young people, and of misrepresenting the potency and danger of nicotine in the company’s products, in violation of the state’s Unfair and Deceptive Trade Practices Act.

Thirteen states, including California, Massachusetts and New York, as well as the District of Columbia, have filed similar lawsuits. The central claim in each case is that Juul knew, or should have known, that it was it was hooking teenagers on pods that contained high levels of nicotine. Some of the youths in the cases claimed serious harm, including possible lung damage and mood disorders.

E-cigarettes and other vaping products were initially conceived to be a reduced harm alternative to combustible cigarettes, which are linked to the deaths of about 480,000 people in the United States each year. But Juul, which featured young, hip-looking people in its first advertisements, billboards and social media, quickly caught on with teenagers and young adults who had never smoked. Although nicotine is not deadly, some research shows it can impair the developing brain.

A group of 39 attorneys general have spent the past 16 months investigating Juul for its marketing and sales practices, as has the Food and Drug Administration.

Juul also faces other legal threats. The Federal Trade Commission is suing Juul, Altria and related parties, seeking to unwind the 2018 deal which gave Altria 35 percent of Juul. Altria, the nation’s largest tobacco company, paid $12.8 billion for that stake, but has since written down the value of the investment to $1.5 billion.

The commission says that the two companies entered into a series of agreements, including Altria’s investment, that eliminated competition in violation of federal antitrust laws. The F.T.C. also claims that Altria and Juul started as competitors in the e-cigarette markets, but that as Juul became more popular, Altria dealt with the threat by taking its own Mark Ten e-cigarette off the market in exchange for a share of Juul’s profits. Both Altria and Juul have denied the charges.

There is also multi-district litigation in U.S. District Court for the Northern District of California. That litigation consolidates cases on three tracks: personal injury, which includes plaintiffs claiming addiction, lung injuries and other health problems; a consumer class action track, claiming that individuals paid too much for a product that addicted them; and a government entity track, consisting of school districts and counties seeking monetary reimbursement for vaping-relating damages. Investors in Juul, like Altria and other entities, are also involved. Depositions have begun, and the first case is scheduled to go to trial in February 2022.

Beyond all the legal challenges, the company is awaiting a decision from the F.D.A. on whether its products can remain on the market. The agency must decide by early September whether Juul and other new tobacco and vaping products are “appropriate for the protection of public health” and can continue to be sold.

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