In re Juul Labs, Inc., Mktg., Sales Practices, & Prods. Liab. Litig.
| Decision Date | 23 October 2020 |
| Docket Number | Case No. 19-md-02913-WHO |
| Citation | 497 F.Supp.3d 552 |
| Court | U.S. District Court — Northern District of California |
| Parties | IN RE: JUUL LABS, INC., MARKETING, SALES PRACTICES, AND PRODUCTS LIABILITY LITIGATION |
ORDER ON SUBSTANTIVE MOTIONS TO DISMISS
Dkt. Nos.: 626, 627, 628, 629, 632, 645, 647, 649, 738, 740, 748, 750, 751, 752/778, 754, 771, 772, 773/779.
Currently before me is the "first wave" of motions to dismiss in this massive multidistrict litigation, attacking claims asserted in the Amended Consolidated Class Action Complaint ("CAC"), the Amended Master Complaint (Personal Injury) ("PIC"), and in seven of the Government Entity Complaints ("PECs" or "Three Village/TVC"). The main moving defendants are JUUL Labs, Inc. ("JLI"), the Altria group of defendants1 ("Altria"), and the current and former JLI founders and directors ("Officer and Director Defendants").2 These sets of defendants are named in all three sets of operative complaints. Other defendants who are named only in the PIC are the Retailer defendants,3 the Distributor defendants,4 and the E-Liquid defendants.5 These defendants have either joined or filed their own motions tracking the main moving defendants’ motions, and some have reserved rights to file motions to dismiss in the next round.
The aim of this first round of motions to dismiss is to address potentially cross-cutting issues. The following motions have been filed and argued:
In the main, plaintiffs’ claims may proceed. We are at the pleading stage, where plaintiffs’ allegations are taken as true and reasonable inferences from those allegations are drawn in their favor. In large part, plaintiffs’ claims are plausibly supported and state claims upon which relief can be granted. It would not be efficient to stay this case based on primary jurisdiction, given the uncertainty of when and how the FDA might address any related issues, and until it does so, preemption is not appropriate except regarding specific and narrow statements on product labels as I previously determined in Colgate v. JUUL Labs, Inc. , 345 F. Supp. 3d 1178 (N.D. Cal. 2018) and Colgate v. JUUL Labs, Inc. , 402 F. Supp. 3d 728, 745 (N.D. Cal. 2019).
That said, I am granting some defendants’ motions in a few respects, with leave to amend. Allegations concerning the distinctiveness of the RICO enterprise from the general business of JLI, and the role of Veratad in supporting the enterprise, are currently insufficient. More specific allegations are needed for the RICO claims against Altria, and for all of the claims asserted against directors Pritzker, Huh, and Valani. Plaintiffs will have 20 days from the date of this Order to amend any of the claims dismissed.
TABLE OF CONTENTS
BACKGROUND ...575
F. Other Claims/Subject Matter Jurisdiction for Putative Subclass Claims...642
G. Personal Jurisdiction over the Other Director Defendants...642
The Amended Consolidated Class Action Complaint is the operative pleading for the consumer class action allegations in this case. Dkt. No. 679 ("CAC"). In the CAC, the plaintiffs allege hundreds of pages facts regarding JLI's and the Officer and Director Defendants’ intent to create and market a "blockbuster sequel" to combustible cigarettes. Their product, the JUUL e-cigarette device, was a new entry into the existing electronic nicotine delivery systems ("ENDS") market. According to plaintiffs, the product was intentionally designed to avoid the "stigma" surrounding combustible cigarettes and capture not only existing combustible cigarette smokers and smokeless tobacco users who were addicted to nicotine, but also vastly expand the market by capturing and addicting individuals – specifically including youth users – who had not previously used tobacco or ENDS products. JLI and the Officer and Director Defendants allegedly achieved this by creating a highly addictive product that produced high "buzz" levels with lower throat harshness and discomfort than prior tobacco or existing ENDS products. Eventually with the assistance of Altria, JLI and the Officer and Director Defendants are alleged to have achieved not only market dominance in the ENDS market but also to have expanded the pipeline of new nicotine addicts through their three-pronged approach: (i) product design to maximize addiction; (ii) mass deception; and (iii) targeting of youth.
Based on these themes, the CAC asserts the following causes of action on behalf of the "nationwide" class as well as the "California Subclass": (1) Violation of the California Unfair Competition Law ( Cal. Bus. & Prof. Code § 17200, et seq. ); (2) Violation of the California Consumer Legal Remedies Act ( Cal. Civ. Code § 1750, et seq. ); (3) Violation of the California False Advertising Law ( Cal. Bus. & Prof. Code § 17500, et seq. ); (4) Common Law Fraud; (5) Breach of the Implied Warranty of Merchantability; and (6) Unjust Enrichment. The CAC also states on behalf of the nationwide class: (7) Violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO") ( 18 U.S.C. § 1962(c) ); (8) Conspiracy to Violate RICO ( 18 U.S.C. § 1962(d) ); and (9) Violation of the Magnuson-Moss Warranty Act ( 15 U.S.C. § 2301, et seq. ).
The CAC also alleges specific violations of state law for subclasses of consumers in the other 49 states and the District of Columbia arising under those jurisdictions’ consumer protection statutes, as well as common law claims of fraud, breach of the warranty of merchantability, and unjust enrichment. CAC ¶¶ 224-649.
The Amended Consolidated Master Complaint (Personal Injury) plus the Court-approved Short Form Complaint are the operative pleadings for the personal injury cases. Dkt. Nos. 677 (PIC), 405 (SFC). The essential facts with respect to JLI, Altria, and the Officer and Director Defendants’ conduct are materially similar to those alleged in the CAC. There are also additional allegations regarding the "prominent role" the Distributor and Retailer Defendants played in the "false and deceptive marketing campaign" and fraudulent scheme created by JLI and the Officer and Director Defendants (and eventually Altria) to expand the market of nicotine-addicted individuals through joint promotion campaigns targeting youth, failing to take adequate precautions to prevent youth use, and selling products that "neither disclosed the products’ nicotine content, nor any of its risks." PIC ¶¶ 5, 526-527, 532-534, 543, 557-601. Plaintiffs allege that the E-Liquid Defendants manufactured and supplied "the ingredients and additives in E-Liquids including the E-Liquid" in the JUUL products. Id. ¶¶ 31-35. The E-Liquid Defendants and JLI allegedly "enticed" newcomers to nicotine with "kid-friendly" flavors without ensuring that the additives were safe for inhalation. PIC ¶¶ 162-173, 196-225, 757.
Plaintiffs plead nineteen causes of action in the PIC: (1) Strict Liability – Design Defect, PIC ¶¶ 755-775; (2) Strict Liability – Failure to Warn, ¶¶ 776-794; (3) Strict Liability – Manufacturing Defect, ¶¶ 795-808; (4) Products Liability – Negligent Design, ¶¶ 809-828; (5) Products Liability – Negligent Failure to Warn, ¶¶ 829-846; (6) Product Liability – Negligent Manufacturing, ¶¶ 847-859; (7)...
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