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Case 1:20-Cv-00896 Document 5 Filed 04/01/20 USDC Colorado Page 1 of 207 Case 1:20-cv-00896 Document 5 Filed 04/01/20 USDC Colorado Page 1 of 207 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No. CITY AND COUNTY OF DENVER, Plaintiff, v. JUUL LABS, INC. F/K/A PAX LABS, INC.; EONSMOKE LLC; ALTRIA GROUP, INC.; ALTRIA CLIENT SERVICES LLC; ALTRIA GROUP DISTRIBUTION COMPANY; NU MARK LLC; AND NU MARK INNOVATIONS, LTD.; Defendants. COMPLAINT Case 1:20-cv-00896 Document 5 Filed 04/01/20 USDC Colorado Page 2 of 207 TABLE OF CONTENTS I. INTRODUCTION ........................................................................................................ 1 II. JURISDICTION AND VENUE.................................................................................... 6 III. PARTIES ..................................................................................................................... 7 IV. ALLEGATIONS OF FACT........................................................................................ 10 A. JUUL: Runaway Commercial Success and Public Health Disaster .................. 10 1. Redesigning “the most successful consumer product of all time” ................................................................................................... 10 2. Following Big Tobacco’s footsteps: Nicotine Salts .............................. 16 JLI designed JUUL products to contain and deliver as much nicotine as possible .................................................................... 22 B. Following Big Tobacco’s Playbook, JLI Launched JUUL with a Blatantly Youth-Oriented Campaign ............................................................... 27 JLI learned from Big Tobacco the importance of hooking kids. .................................................................................................... 27 JLI’s advertising strategy was to capture young nonsmokers, not adult smokers. ................................ 32 JLI’s “Vaporized” campaign was intentionally youth- focused. ............................................................................................... 35 JLI hosted parties and pop-up “JUUL Lounges” to create a youthful brand and gave away free samples to get youth hooked................................................................................................. 44 By using viral advertising, JLI ensured that Its advertising campaigns would reach youth and outlast JLI’s own efforts. ................ 48 C. JLI and Its Officers and Directors Knew JLI’s Aggressively Youth-Oriented Advertising Was Hooking Kids But Continued It Anyway .......................................................................................................... 58 i Case 1:20-cv-00896 Document 5 Filed 04/01/20 USDC Colorado Page 3 of 207 D. JLI’s Early Labeling and Advertising for JUUL Products Omitted the Fact that JUUL Products Contain Nicotine. ............................................... 63 E. In Another Page from Big Tobacco’s Playbook, JLI Used Flavors to Hook Kids ................................................................................................... 64 F. JLI also used JUUL’s Discreet and Tech-Inspired Design to Attract a New Generation of Youth to Nicotine........................................................... 74 G. Eonsmoke, Riding on JLI’s Coattails, Promoted JUUL and Its Own “JUUL-Compatible” Products ................................................................ 79 H. The Proliferation of “JUULalikes” and Next-Generation Products Targeting Youth .............................................................................................. 93 I. JLI and Altria Join Forces to Protect JUUL’s Market Domination ..................101 Before conspiring with JLI, Altria tried to corner the youth e-cigarette market ...............................................................................101 JLI and Altria Decide to Work Together to Expand JUUL’s Reach and Cover-Up JLI’s Youth Marketing ......................................106 Following JLI’s Journey Closely: Formation of the Youth Marketing Cover-Up Enterprise ..........................................................110 Late 2017–August 2018: Early Coordination of Altria with the Youth Marketing Cover-Up Enterprise .........................................113 September–December 2018: Further Coordination of the Youth Marketing Cover-Up Enterprise ...............................................125 Publicly Announcing the Ties Between the Youth Marketing Cover-Up Enterprise Defendants .......................................131 J. The Cost of JUUL’s Success ..........................................................................150 K. Vaping in Schools ..........................................................................................161 L. Impact of the Youth Vaping Crisis on Plaintiff City and County of Denver ...........................................................................................................170 M. No Federal Agency Action, Including by the FDA, Can Provide the Relief Plaintiff Seeks Here .......................................................................178 ii Case 1:20-cv-00896 Document 5 Filed 04/01/20 USDC Colorado Page 4 of 207 V. CAUSES OF ACTION ..............................................................................................179 VIOLATIONS OF COLORADO PUBLIC NUISANCE LAW .................179 VIOLATIONS OF THE RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT (“RICO”), 18 U.S.C. § 1961 ET SEQ. ..........................................................................................................................183 A. Description of Defendants’ Youth Marketing Cover-Up Enterprise ................184 B. The Enterprise Sought to Fraudulently Deny Having Marketed to Youth in Maintaining and Expanding JUUL’s Youth Market Share ...............185 C. Predicate Acts: Mail and Wire Fraud ..............................................................188 D. Plaintiff Has Been Damaged by the Youth Marketing Cover-Up Enterprise Defendants’ RICO Violations ........................................................200 PRAYER FOR RELIEF ........................................................................................................201 JURY TRIAL DEMANDED .................................................................................................202 iii Case 1:20-cv-00896 Document 5 Filed 04/01/20 USDC Colorado Page 5 of 207 I. INTRODUCTION 1. One of the great public health success stories over the past nearly two decades has been a reduction in youth tobacco use and nicotine addiction. Youth smoking rates plummeted from 28% in 2000 to 7.6% in 2017.1 This success has been the result of years of litigation and strict regulation. It is also due to a powerful public health message that Big Tobacco can no longer dispute or contradict: smoking kills. 2. This incredible progress towards eliminating youth use of tobacco products has now largely been reversed due to e-cigarettes and vaping. Between 2017 and 2018, e-cigarette use increased 78% among high school students nationwide, from 11.7% of high school students in 2017 to 20.8% of high schoolers in 2018.2 Among middle school students, e-cigarette use increased 48% between 2017 and 2018.3 The increase in youth nicotine vaping from 2017 to 2018 was the largest for any substance tracked by the national Monitoring the Future surveys over the past forty-four years.4 3. Youth vaping rates continued to climb from 2018 to 2019, such that vaping prevalence more than doubled among each grade level surveyed—eighth, tenth, and twelfth 1 Meredith Berkman, Testimony of Meredith Berkman, Parents Against Vaping E-cigarettes, U.S. House Committee on Oversight & Reform (July 24, 2019), https://oversight.house.gov/sites/democrats.oversight.house.gov/files/2019.07.24%20Berkman- PAVe%20Testimony.pdf. 2 Jerome Adams, Surgeon General’s Advisory on E-cigarette Use Among Youth, CDC (Dec. 2018), https://e-cigarettes.surgeongeneral.gov/documents/surgeon-generals-advisory-on-e- cigarette-use-among-youth-2018.pdf. 3 2018 NYTS Data: A startling rise in youth e-cigarette use, FDA (Feb. 2, 2019), https://www.fda.gov/tobacco-products/youth-and-tobacco/2018-nyts-data-startling-rise-youth- e-cigarette-use. 4 Richard Miech, Ph.D. et al., Trends in Adolescent Vaping, 2017-2019, 381 New Eng. J. Med. 1490-91 (Oct. 10, 2019), https://www.nejm.org/doi/full/10.1056/NEJMc1910739. 1 Case 1:20-cv-00896 Document 5 Filed 04/01/20 USDC Colorado Page 6 of 207 graders—in the past two years.5 In 2019, more than five million middle and high school students reported current use of e-cigarettes, including more than one in every four high schoolers.6 4. Consistent with these national numbers, youth in the City and County of Denver (“Denver” or “Plaintiff”) are vaping at high rates—rates which continue to climb. In 2013, only 11% of high school students in Colorado Region 20, which encompasses Plaintiff’s community, had ever tried e-cigarettes.7 By 2017, that number had jumped to 40% of high school students.8 Colorado has the highest rate of youth vaping in the nation.9 5. According to the Centers for Disease Control and Prevention (“CDC”) Director Robert Redfield, “The skyrocketing growth of young people’s e-cigarette use over the past year threatens to erase progress made in reducing tobacco use. It’s putting a new generation at risk for nicotine addiction.”10 Former U.S. Food and Drug Administration (“FDA”) Commissioner Scott Gottlieb described the federal statistics as “astonishing,” and both the FDA and the United States 5 Id. 6 Youth
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