FWCS V. JUUL Labs, Inc. Lawsuit
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Case 3:21-cv-02870-WHO Document 1 Filed 04/21/21 Page 1 of 309 1 Thomas P. Cartmell (pro hac vice) Jonathan P. Kieffer (pro hac vice) 2 Tyler W. Hudson (pro hac vice) WAGSTAFF & CARTMELL LLP 3 4740 Grand Ave., Ste. 300 Kansas City, MO 64112 4 Tel. (816) 701-1100 5 Fax (816) 531-2372 [email protected] 6 [email protected] [email protected] 7 Attorneys for Plaintiff (additional counsel on signature page) 8 FORT WAYNE COMMUNITY SCHOOLS 9 10 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA 11 SAN FRANCISCO DIVISION 12 Fort Wayne Community Schools, No. 3:21-cv-2870 13 Plaintiff, MDL No. 3:19-md-02913-WHO 14 v. COMPLAINT 15 JUUL Labs, Inc. F/K/A PAX Labs, Inc.; James Monsees; Adam Bowen; Nicholas Pritzker; JURY TRIAL DEMANDED 16 Hoyoung Huh; Riaz Valani; Altria Group, Inc.; Altria Client Services LLC; Altria Group 17 Distribution Company; AND Philip Morris USA, Inc. 18 Defendants. 19 20 21 22 23 24 25 26 27 28 COMPLAINT CASE NO. Case 3:21-cv-02870-WHO Document 1 Filed 04/21/21 Page 2 of 309 1 TABLE OF CONTENTS 2 I. INTRODUCTION .........................................................................................................1 3 II. JURISDICTION AND VENUE ....................................................................................5 4 III. PARTIES .......................................................................................................................6 5 IV. GENERAL FACTUAL ALLEGATIONS ...................................................................10 6 A. Each Defendant Was Instrumental in Seeking to Develop and 7 Market the Blockbuster Sequel to Combustible Cigarettes, the “Most Successful Consumer Product of All Time.” ........................................10 8 B. Defendants’ Strategy Was to Create a Nicotine Product That 9 Would Maximize Profits Through Addiction. .................................................19 10 1. Defendants Understood that the “Magic” Behind 11 Cigarettes’ Stratospheric Commercial Success Was Nicotine Addiction. ..............................................................................19 12 2. Following the Cigarette Industry Playbook, Defendants 13 Sought to Market a Product that would Create and Sustain Nicotine Addiction, but Without the Stigma Associated 14 with Cigarettes .....................................................................................23 15 3. Defendants Sought to Position JLI for Acquisition by a 16 Major Cigarette Company....................................................................29 17 C. JLI and Bowen Designed a Nicotine Delivery Device Intended to Create and Sustain Addiction...........................................................................36 18 1. JLI and Bowen Made Highly Addictive E-Cigarettes Easy 19 for Young People and Non-Smokers to Inhale. ...................................37 20 2. JLI’s Initial Experiments Measured Non-Smokers’ “Buzz” Levels and Perceptions of Throat Harshness. ......................................38 21 22 3. JUULs Rapidly Deliver Substantially Higher Doses of Nicotine than Cigarettes. ......................................................................40 23 4. JLI and the Management Defendants Knew That JUUL was 24 Unnecessarily Addictive Because It Delivered More Nicotine Than Smokers Needed or Wanted.........................................47 25 5. JUUL’s Design Did Not Look Like a Cigarette, Making it 26 Attractive to Non-Smokers and Easy for Young People to 27 Use Without Detection. ........................................................................50 28 i COMPLAINT CASE NO. Case 3:21-cv-02870-WHO Document 1 Filed 04/21/21 Page 3 of 309 1 6. JLI Enticed Newcomers to Nicotine with Kid-Friendly Flavors Without Ensuring the Flavoring Additives Were 2 Safe for Inhalation................................................................................55 3 a. JIL Develops Flavored JUUL Products That Would 4 Appeal to Youth. ......................................................................55 5 b. Defendants Developed and Promoted the Mint Flavor and Sought to Preserve its Market. ...............................59 6 (i) JLI Manipulates Chemistry of Mint JUUL 7 Pods. .............................................................................61 8 c. JLI’s Youth Surveillance Programs Confirmed that Mint JUUL Pods are Preferred by Teens. ................................62 9 10 D. Defendants Developed and Implemented a Marketing Scheme to Mislead Users into Believing that JUUL Products Contained Less 11 Nicotine Than They Actually Do and Were Healthy and Safe. .......................65 12 1. The Defendants Knowingly Made False and Misleading Statements and Omissions Concerning JUUL’s Nicotine 13 Content. ................................................................................................65 14 2. JLI, the Management Defendants, and Altria Transmitted, 15 Promoted and Utilized Statements Concerning JUUL’s Nicotine Content that They Knew Was False and 16 Misleading............................................................................................72 17 3. Defendants Used Food and Coffee Themes to Give False Impression that JUUL Products Were Safe and Healthy. ....................77 18 4. JLI’s “Make the Switch” Campaign Intentionally Misled 19 and Deceived Users to Believe that JUUL Is a Cessation 20 Device. .................................................................................................79 21 5. JLI, Altria, and Others in the E-Cigarette Industry Coordinated with Third-Party Groups to Mislead the Public 22 About the Harms and Benefits of E-Cigarettes. ...................................92 23 a. The American Vaping Association ..........................................92 24 b. Vaping360 ................................................................................95 25 c. Foundation for a Smoke-Free World .......................................97 26 d. Vapor Technology Association................................................98 27 e. Retailer Lobbying ....................................................................99 28 ii COMPLAINT CASE NO. Case 3:21-cv-02870-WHO Document 1 Filed 04/21/21 Page 4 of 309 1 6. Altria Falsely Stated That It Intended to Use Its Expertise in “Underage Prevention” Issues to JLI ...............................................99 2 E. Defendants Targeted the Youth Market .........................................................101 3 1. JLI Emulated the Marketing of Cigarette Companies. ......................102 4 5 2. The Management Defendants Intentionally Marketed JUUL to Young People. ................................................................................104 6 3. JLI Advertising Exploited Young People’s Psychological 7 Vulnerabilities. ...................................................................................108 8 4. JLI Pushed the Vaporized Campaign Into Youth Targeted Channels. ............................................................................................113 9 10 a. JLI Placed Its Vaporized Ads on Youth Oriented Websites and Media. ..............................................................113 11 b. JLI Used Influencers and Affiliates to Amplify Its 12 Message to a Teenage Audience. ...........................................115 13 c. JLI Used Viral Marketing Techniques Known to Reach Young People. .............................................................119 14 5. JLI Targeted Youth Retail Locations. ................................................122 15 16 6. JLI Hosted Parties to Create a Youthful Brand and Gave Away Free Products to Get New Users Hooked. ...............................123 17 7. The Management Defendants’ Direction of and 18 Participation in JLI and in the Youth Marketing Schemes. ...............128 19 a. The Management Defendants, and in particular Pritzker, Valani, and Huh, controlled JLI’s Board at 20 relevant times. ........................................................................128 21 b. Pritzker, Huh, and Valani were active, involved 22 board members. ......................................................................131 23 c. The Management Defendants, and in particular Bowen, Monsees, Pritzker, Valani, and Huh, 24 oversaw and directed the youth marketing scheme. ..............132 25 d. Pritzker, Huh, and Valani Were Able to Direct and 26 Participate in the Youth Marketing Because They Seized Control of the JLI Board of Directors. .......................139 27 28 iii COMPLAINT CASE NO. Case 3:21-cv-02870-WHO Document 1 Filed 04/21/21 Page 5 of 309 1 8. Pritzker, Valani, and Huh continued to exercise control over and direct the affairs of JLI even after a new CEO was 2 appointed. ...........................................................................................145 3 9. Pritzker and Valani directed and controlled JLI’s 4 negotiations with Altria......................................................................148 5 10. JLI and the Management Defendants Knew Their Efforts Were Wildly Successful in Building a Youth Market and 6 Took Coordinated Action to Ensure That Youth Could Purchase JUUL Products. ..................................................................150 7 a. JLI’s Strategy Worked. ..........................................................150 8 b. JLI Closely Tracked Its Progress in Reaching 9 Young Customers through Social Media and Online 10 Marketing ...............................................................................151 11 11. JLI Worked with Veratad Technologies To Expand Youth Access