Case 3:19-md-02913-WHO Document 539 Filed 05/08/20 Page 1 of 262 1 [Submitting Counsel on Signature Page] 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA 9 SAN FRANCISCO DIVISION 10 IN RE: JUUL LABS, INC. MARKETING, No. 19-md-2913-WHO 11 SALES PRACTICES, AND PRODUCTS LIABILITY LITIGATION 12 THIS DOCUMENT RELATES TO: PLAINTIFF’S AMENDED COMPLAINT 13 County of Santa Cruz, Individually And on Behalf of The People of The State of California v. JUUL JURY TRIAL DEMANDED 14 Labs, Inc., et al. 15 16 17 18 19 20 21 22 23 24 25 26 27 28 No. 19-md-2913-WHO 1 PLAINTIFF’S AMENDED COMPLAINT Case 3:19-md-02913-WHO Document 539 Filed 05/08/20 Page 2 of 262 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 Market the 7 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 Would 9 Maximize Profits Through Addiction. .............................................................19 10 1. Defendants Understood that the “Magic” Behind Cigarettes’ Stratospheric Commercial Success Was Nicotine Addiction. .............19 11 2. Following the Cigarette Industry Playbook, Defendants Sought to 12 Market a Product that would Create and Sustain Nicotine 13 Addiction, but Without the Stigma Associated with Cigarettes. .........22 14 3. Defendants Sought to Position JLI for Acquisition by a Major Cigarette Company. .............................................................................28 15 C. JLI and Bowen Designed a Nicotine Delivery Device Intended to Create 16 and Sustain Addiction, Particularly Among Young People. ............................35 17 1. JLI and Bowen Made Highly Addictive E-Cigarettes Easy for 18 Young People and Non-Smokers to Inhale. .........................................35 19 2. JLI’s Initial Experiments Measured Non-Smokers “Buzz” Levels and Perceptions of Throat Harshness. ..................................................36 20 3. JUULs Rapidly Deliver Substantially Higher Doses of Nicotine 21 than Cigarettes. ....................................................................................39 22 4. JLI and the Management Defendants Knew That JUUL was 23 Unnecessarily Addictive Because It Delivered More Nicotine Than Smokers Needed or Wanted. ......................................................46 24 5. JUUL’s Design Did Not Look Like a Cigarette, Making it 25 Attractive to Non-Smokers and Easy for Young People to Use Without Detection. ...............................................................................48 26 6. JLI Enticed Newcomers to Nicotine with Kid-Friendly Flavors 27 Without Ensuring the Flavoring Additives Were Safe for 28 Inhalation. ............................................................................................53 No. 19-md-2913-WHO 1 PLAINTIFF’S AMENDED COMPLAINT Case 3:19-md-02913-WHO Document 539 Filed 05/08/20 Page 3 of 262 1 a. JLI Develops Flavored JUUL Products That Would Appeal to Youth. ......................................................................53 2 b. Defendants Developed and Promoted the Mint Flavor and 3 Sought to Preserve its Market. .................................................60 4 (i) JLI Manipulates Chemistry of Mint JUUL Pods. ........61 5 (ii) JLI’s Youth Surveillance Programs Confirmed 6 that Mint JUUL Pods are Preferred by Teens. .............62 7 D. Defendants Developed and Implemented a Marketing Scheme to Mislead the Public, Including Youth, into Believing that JUUL Products 8 Contained Less Nicotine Than They Actually Do and Were Healthy and 9 Safe. .................................................................................................................65 10 1. The Defendants Knowingly Made False and Misleading Statements and Omissions Concerning JUUL’s Nicotine Content. .....65 11 2. JLI, the Management Defendants, and Altria Transmitted, 12 Promoted and Utilized Statements Concerning JUUL’s Nicotine Content that They Knew Were False and Misleading. ........................72 13 14 3. Defendants Used Food and Coffee Themes to Give False Impression that JUUL Products Were Safe and Healthy. ....................76 15 4. JLI’s “Make the Switch” Campaign Intentionally Misled and 16 Deceived Users to Believe that JUUL Is a Cessation Device. .............80 17 5. JLI, Altria, and Others in the E-Cigarette Industry Coordinated with Third-Party Groups to Mislead the Public, Including Minors, 18 About the Harms and Benefits of E-Cigarettes....................................93 19 a. The American Vaping Association ..........................................93 20 b. Vaping360 ................................................................................96 21 c. Foundation for a Smoke-Free World .......................................98 22 d. Vapor Technology Association ................................................99 23 e. Retailer Lobbying ..................................................................100 24 6. Altria Falsely Stated That It Intended to Lend Its Expertise in 25 “Underage Prevention” Issues to JLI. ................................................100 26 E. Defendants Targeted the Youth Market. ........................................................102 27 1. JLI Emulated the Marketing of Cigarette Companies. ......................102 28 No. 19-md-2913-WHO 2 PLAINTIFF’S AMENDED COMPLAINT Case 3:19-md-02913-WHO Document 539 Filed 05/08/20 Page 4 of 262 1 2. The Management Defendants Intentionally Marketed JUUL to Young People. ....................................................................................105 2 3. JLI Advertising Exploited Young People’s Psychological 3 Vulnerabilities. ...................................................................................108 4 4. JLI Pushed the Vaporized Campaign Into Youth Targeted 5 Channels. ............................................................................................113 6 a. JLI Placed Its Vaporized Ads on Youth Oriented Websites and Media. ..............................................................113 7 b. JLI Used Influencers and Affiliates to Amplify Its 8 Message to a Teenage Audience. ...........................................115 9 c. JLI Used Viral Marketing Techniques Known to Reach 10 Young People. ........................................................................119 11 5. JLI Targeted Youth Retail Locations. ................................................122 12 6. JLI Hosted Parties to Create a Youthful Brand and Gave Away Free Products to Get New Consumers Hooked. ................................124 13 7. The Management Defendants’ Direction and Participation in the 14 Youth Marketing Schemes .................................................................128 15 a. The Management Defendants, and in particular Bowen, 16 Monsees, Pritzker, Huh, and Valani, oversaw the youth marketing scheme. .................................................................128 17 b. Pritzker, Huh, and Valani Were Able to Direct and 18 Participate in the Youth Marketing Because They Seized Control of the JLI Board of Directors. ...................................133 19 20 8. JLI and the Management Defendants Knew Their Efforts Were Wildly Successful in Building a Youth Market and Took 21 Coordinated Action to Ensure That Youth Could Purchase JUUL Products..............................................................................................136 22 a. JLI’s Strategy Worked. ..........................................................136 23 b. JLI Closely Tracked Its Progress in Reaching Young 24 Customers through Social Media and Online Marketing. .....138 25 9. JLI Coordinated with Veratad Technologies To Expand Youth 26 Access to JUUL Products. .................................................................141 27 10. JLI Engaged in a Sham “Youth Prevention” Campaign. ...................152 28 11. The FDA Warned JLI and Others That Their Conduct is Unlawful. ...........................................................................................155 No. 19-md-2913-WHO 3 PLAINTIFF’S AMENDED COMPLAINT Case 3:19-md-02913-WHO Document 539 Filed 05/08/20 Page 5 of 262 1 12. In Response to Regulatory Scrutiny, Defendants Misled the Public, Regulators, and Congress that JLI Did Not Target Youth. ....157 2 F. Altria Provided Services to JLI to Expand JUUL Sales and Maintain 3 JUUL’s Position as the Dominant E-Cigarette. .............................................163 4 1. Before Altria’s Investment in JLI, Altria and JLI Exchanged 5 Market Information Pertaining to Key Decisions. .............................163 6 2. JLI, the Management Defendants and Altria Coordinated to Market JUUL in Highly-Visible Retail Locations. ............................165 7 3. Altria Contributes to the Success of JLI’s and the Management 8 Defendants’ Scheme Through a Range of Coordinated Activities. ...166 9 G. JLI, Altria, and Others Have Successfully Caused More Young