Colgate v. Juul Labs, Inc.

• Decision Date: 30 October 2018
• Docket Number: Case No. 18-cv-02499-WHO
• Citation: 345 F.Supp.3d 1178
• Parties: Bradley COLGATE, et al., Plaintiffs, v. JUUL LABS, INC., Defendant.
• Court: U.S. District Court — Northern District of California

345 F.Supp.3d 1178

Bradley COLGATE, et al., Plaintiffs,

v.JUUL LABS, INC., Defendant.

Case No. 18-cv-02499-WHO

United States District Court, N.D. California.

Signed October 30, 2018

Adam Gutride, Seth A. Safier, Seth Adam Safier, Todd Michael Kennedy, Anthony J. Patek, Gutride Safier LLP, San Francisco, CA, Esfand Nafisi, Jason Samual Rathod, Pro Hac Vice, Nicholas A. Migliaccio, Migliaccio & Rathod LLP, Washington, DC, for Plaintiffs.

Austin Van Schwing, Charles Joseph Stevens, Joshua D. Dick, Peter C. Squeri, Winston Y. Chan, Gibson, Dunn & Crutcher LLP, San Francisco, CA, Jessica Reed Culpepper, Gibson, Dunn and Crutcher LLP, Los Angeles, CA, for Defendant.

ORDER PARTIALLY GRANTING MOTION TO DISMISS AND DENYING MOTION TO STRIKE

Re: Dkt. Nos. 40, 41

William H. Orrick, United States District Judge

Plaintiffs are adults and minors from seven states bring class claims against defendant JUUL Labs, Inc. ("JUUL"), a market leader in the burgeoning electronic cigarette industry, for various state law violations related to JUUL's advertising and labelling of its electronic cigarettes. JUUL argues that the Tobacco Control Act, 21 U.S.C. § 387 et seq. ("TCA") preempts plaintiffs' claims. It is partially correct concerning its product labelling, because the TCA is very detailed about what must appear on the label. But claims that JUUL misrepresents the amount of nicotine in its product are not preempted. JUUL also moves to dismiss plaintiff's First Amended Complaint (FAC), because it fails to meet Federal Rule of Civil Procedure 9(b)'s heightened pleading requirements, to state a claim, and to identify applicable state laws. As discussed below, I grant in part and deny in part JUUL's motion to dismiss, with leave to amend. JUUL's motion to strike plaintiffs' nationwide class allegations pursuant to Federal Rules of Civil Procedure 12(f), 23(c)(1)(A), and 23(d)(1)(D) is not ripe and is denied.

BACKGROUND

Plaintiffs are thirteen individuals from seven states: California, New Jersey, Washington, Pennsylvania, New York, Michigan, and Massachusetts. First Amended Complaint ("FAC") [Dkt. No. 24] ¶¶ 12-52. Plaintiffs fall into two categories, (1) adults who use JUUL's electronic nicotine delivery systems ("ENDS") and (2) minors who use JUUL's ENDS. Plaintiffs Bradley Colgate, Kaytlin McKnight, Anthony Smith, Corey Smith, Kacie Ann Lagun, Tommy Benham, and David Langan fall into the first group. ("Adult Plaintiffs") Id. Except for McKnight, the adult plaintiffs smoked cigarettes prior to using JUUL's ENDS. The second group consists of M.H. and her mother and natural Guardian Jennifer Hellman, A.U. and her mother and natural guardian Commitante, and Jill Nelson, who appears to bring claims on behalf of her daughter L.B. ("Minor Plaintiffs") Id.

JUUL is a Delaware corporation with its principal place of business in San Francisco, California. Id. ¶ 53. PAX Labs, Inc. ("PAX") is also a Delaware corporation with its principal place of business in San Francisco, California. Id. ¶ 54. JUUL originally operated under the name PAX Labs, Inc. Id. ¶ 53. In 2017, it was renamed JUUL Labs, Inc. and a new company was spun out as Pax Labs, Inc. Id.

I. JUUL'S PRODUCTS

JUUL manufactures an ENDS about the size and shape of a pack of chewing gum. Id. ¶ 67. The ENDS consists primarily of a rechargeable battery and heating element. Id. Consumers purchase disposable pre-filled pods of JUUL's patented nicotine solution ("pods") which attach to the ENDS. Id. JUUL's ENDS and pods are proprietary and do not work with other ENDS systems. Id. A user "vapes" from the ENDS by inhaling through it, triggering a sensor that activates the heating element, converting the liquid nicotine contained in the pod to an inhalable vapor. Id. ¶ 68. Pods are sold in packs of four and in a variety of flavors, including mango, cool cucumber, fruit medley, cool mint, and crème brulee. Id. ¶ 70.

The formulation in JUUL's pods combines benzoic acids with nicotine to produce nicotine salts. Id. ¶ 80. Plaintiffs allege that nicotine salts are absorbed into a user's body faster and create a more pronounced effect than the nicotine in traditional cigarettes. Id. ¶¶ 79-82. They cite a study by James F. Pankow ("Pankow Study") finding that JUUL's pods contain 6.2% nicotine salt, rather than the 5% nicotine advertised. Id. ¶ 83. They also cite the same study to claim that JUUL uses a higher level of benzoic acid in their retail pods than was tested when JUUL applied for patent No. 9,215,895 ("the '895 patent"). Id. They quote JUUL's website that "JUULpod is designed to contain approximately 0.7mL with 5% nicotine by weight at time of manufacture which is approximately equivalent to 1 pack of cigarettes or 200 puffs." Id. ¶ 89.

Plaintiffs allege that JUUL's packaging has changed multiple times since 2015. Id. ¶ 77. The packaging bears a California Proposition 65 nicotine warning indicating that the product contains a substance known to cause cancer, and a warning to keep pods away from children and pets. Id. There is no nicotine warning on the ENDS or pods themselves. Id. The product labeling does not contain any information about the known effects, or unknown long-term effects, of vaping/inhaling nicotine salts. Id.

II. JUUL'S ADVERTISING

In June 2015, JUUL launched its multimillion-dollar "Vaporized" advertising campaign to promote its new product. Id. ¶ 98. JUUL advertised on a 12-panel display over Times Square in New York City, as well as in the front spread of Vice magazine's cover issue. Id. The advertisements featured young men and women using JUUL's ENDS. Id. JUUL also launched a number of "pop-up JUUL bars" in Los Angeles, New York City, and the Hamptons. Id. Plaintiffs allege that JUUL's ads utilize the same themes that tobacco companies used to advertise to young people, including "independence, adventurousness, sophistication, glamour, ... social inclusion, sexual attractiveness, thinness, popularity, rebelliousness, and being ‘cool’ ". Id. ¶ 99. They state that to the extent that the "Vaporized" advertisements disclosed that JUUL products contained nicotine, the warnings were in small print against low-contrast backgrounds. Id. ¶ 103.

JUUL also advertised on a number of social media platforms including Twitter, Instagram, and Facebook. Id. ¶ 114. Plaintiffs cite a study that found that JUUL grew nearly 700% despite spending "no recorded money" on major advertising channels and only $20,000 on business to business advertising. Id. ¶ 116. The study concluded that JUUL was taking advantage of the reach and accessibility of social media "because there are no restrictions" on social media advertising. Id. ¶ 121.

III. JUUL'S SALES

Plaintiffs allege that JUUL's products are primarily sold out of gas stations. Id. ¶ 111. They claim that JUUL's retail locations do not provide signs, warnings, or other indicators concerning the existence, danger, or amount of nicotine in JUUL products. Id. ¶ 112. A pack of four JUUL pods cost approximately $13. Id. ¶ 108. JUUL offers a 15% discount to purchasers who refer others to purchase JUUL's ENDS or pods. Id. ¶ 109.

JUUL also owns and operates www. juullabs.com and www.juulvapor.com. Id. ¶ 123. Customers may purchase the ENDS or pods from JUUL's websites. Id. ¶ 124. Plaintiffs allege that although JUUL represents that it uses state-of-the-art age verification for website purchases, it has been improperly implemented and numerous minors have been able to purchase products or obtain warranty service. Id. ¶ 127.

JUUL also offers a 15% discount to purchasers who join their pod subscription service. Id. ¶ 110. It asserts states that consumers may cancel their subscription at any time. Id. ¶ 129.

Minor Plaintiffs allege that they were able to obtain JUUL's products, despite the prohibition on the sale of ENDS to those under the age of 18. M.H., L.B. and A.U. state that they have purchased pods at nearby stores which readily sell JUUL's products to minors. Id. ¶¶ 23, 30, 47. M.H. also asserts that pods are sold in her school by older students. Id. ¶ 23. L.B. claims that, at the age of 14, she was able to obtain a warranty replacement through JUUL's website in November 2017. Id. ¶ 29.

LEGAL STANDARD

I. MOTION TO DISMISS

Under Federal Rule of Civil Procedure 12(b)(6), a district court must dismiss if a claim fails to state a claim upon which relief can be granted. To survive a Rule 12(b)(6) motion to dismiss, the claimant must allege "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A claim is facially plausible when the plaintiff pleads facts that "allow the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citation omitted). There must be "more than a sheer possibility that a defendant has acted unlawfully." Id. While courts do not require "heightened fact pleading of specifics," a claim must be supported by facts sufficient to "raise a right to relief above the speculative level." Twombly , 550 U.S. at 555, 570, 127 S.Ct. 1955.

Under Federal Rule of Civil Procedure 9(b), a party must "state with particularity the circumstances constituting fraud or mistake," including "the who, what, when, where, and how of the misconduct charged." Vess v. Ciba-Geigy Corp. USA , 317 F.3d 1097, 1106 (9th Cir. 2003) (internal quotation marks omitted). However, " Rule 9(b) requires only that the circumstances of fraud be stated with particularity; other facts may be pleaded generally, or in accordance with Rule 8." United States ex rel. Lee v. Corinthian Colls. , 655 F.3d 984, 992 (9th Cir. 2011).

In deciding a motion to dismiss for failure to state a claim, the court accepts all of the factual allegations as true and draws all reasonable inferences in favor of the plaintiff. Usher v. City of Los Angeles , 828 F.2d 556, 561 (9th Cir. 1987). But the court is...