Federal court adding RICO claims to lawsuits against Juul opens up opportunity to inform the public and FDA

On April 13, 2021, federal judge William H. Orrick granted plaintiffs’ motion to add allegations that Altria (owner of Philip Morris and part of Juul) and the Founder and Director Defendants violated the federal Racketeer Influenced and Corrupt Organizations Act (“RICO”). Specifically, Judge Orrick allowed allegations that the “company and those persons allegedly conducted acts of mail and wire fraud in connection with five related fraudulent schemes run through JLI [Juul] as the RICO Enterprise. The schemes to defraud had the goals of growing the market of nicotine-addicts, most specifically youth addicts, to ensure a new pipeline for Altria and to enrich the Founder and Director Defendants.”

Significantly the judge is allowing the plaintiffs to try and prove that Juul itself constitutes an illegal enterprise under RICO, a law passed to make it possible to prosecute organized crime.

RICO is the same law under which, in 2006, Judge Gladys Kessler found the big cigarette companies violated which led, among other things, to the disclosure of millions of pages of previously secret tobacco industry documents, something that is continuing to this day. (For an inside account of the case, check out Sharon Eubanks and my book, Bad Acts.)

While Judge Orrick’s ruling does not find that the plaintiffs have proven their allegations, he did find that they had a right to litigate the details. He did so despite vigorous opposition from Altria and the individual defendants.

Here are some interesting findings in Orrick’s ruling:

Plaintiffs allege that the RICO defendants “devised and knowingly carried out material schemes and/or artifices to defraud the public and deceive regulators” by:

(1) transmitting advertisements that fraudulently and deceptively omitted any reference to JUUL’s nicotine content or potency (or any meaningful reference, where one was made); (2) causing false and misleading statements regarding the nicotine content of JUUL pods to be posted on the JLI website; (3) causing thousands, if not millions, of JUUL pod packages containing false and misleading statements regarding the nicotine content of JUUL pods to be transmitted via U.S. mail; (4) representing to consumers and the public at-large that JUUL was created and designed as a smoking cessation device; (5) misrepresenting the nicotine content and addictive potential of its products; (6) making fraudulent statements to the FDA to persuade the FDA to allow mint flavored JUUL pods to remain on the market; and (7) making fraudulent statements to the public (including through advertising), the FDA, and Congress to prevent prohibition of JUUL cigarettes, as was being contemplated in light of JLI’s role in the youth vaping epidemic.

(page 4-5)

Later in his ruling, Judge Orrick finds:

Altria allegedly joined and contributed to the RICO Enterprise prior to finalizing its investment in December 2018 “by sharing data and information and coordinating marketing activities, including acquisition of key shelf space next to top-selling Marlboro cigarettes.” Id. ¶ 8. Plaintiffs state that Altria’s investment in JLI “was not merely a financial proposition, but a key element of Defendants’ plan to stave off regulation and public outcry and keep their most potent and popular products on the market.” Id. Altria and Altria Client Services specifically began conspiring with Pritzker and Valani to “direct the affairs of JLI as early as Spring 2017.” Id. ¶ 865. They conspired to achieve the best financial outcome for Pritzker and Valani personally, and for Altria as an entity. Id. ¶ 891.

Altria supported the “nicotine content misrepresentation scheme” (along with the Founder and Director Defendants) by “caus[ing] thousands, if not millions, of JUUL pod packages to be distributed to consumers with false and misleading information regarding the JUUL pods’ nicotine content.” Id. ¶¶ 913, 920. It also supported the “flavor preservation scheme” by “working together [with JLI] on flavor strategy as early as September 2017” when JLI met with “representatives of Altria Client Services to plan a strategy for responding to the FDA’s proposed regulation of flavors in e-cigarettes. This plan would be coordinated through Avail Vapor, LLC, a company partially owned by Altria.” Id. ¶ 923. Altria also allegedly made statements in October 2018 in coordination with JLI in order to preserve “mint” as a flavor on the market and to help JLI deliver thousands of mint-flavored pods in 2019. Id. ¶¶ 6, 892, 926–28.

Altria then participated in the alleged “cover up scheme” when Altria and JLI adopted the “‘Make the Switch’ campaign to mislead consumers into thinking that JLI products were benign smoking cessation devices, even though JUUL was never designed to break addictions.” Id. ¶ 5. Altria worked with JLI and the Founder and Director Defendants to conceal “the results of studies that revealed that JUUL products were far more powerfully addictive than was disclosed” to stave off regulation of the JUUL product. Id. ¶¶ 5, 8, 943, 949.

(pages 8-9)

He also commented on the nature of the relationship between Altria and Juul:

Plaintiffs also assert that Altria specifically joined and helped direct three of the fraudulent schemes being carried out by the RICO Enterprise: the “nicotine content misrepresentation” scheme, by causing “thousands, if not millions, of JUUL pod packages to be distributed to consumers with false and misleading information regarding the JUUL pods’ nicotine content,” id. ¶¶ 913, 920; the “flavor preservation” scheme, when the RICO defendants with representatives of Altria Client Services planned a strategy for responding to the FDA’s proposed regulation of flavors in e-cigarettes and coordinated (through Avail Vapor, LLC) to keep the mint flavor on the market, id. ¶¶ 6, 892, 923, 926–928; and the “cover up” scheme, when Altria and the other RICO defendants adopted the “‘Make the Switch’ campaign to mislead consumers into thinking that JLI products were benign smoking cessation devices, even though JUUL was never designed to break addictions.” Id. ¶¶ 5, 59. Altria achieved that control by working with the other RICO defendants both before and after December 2018, but especially after the December 2018 investment that gave Altria sufficient influence to direct the Board to conceal “the results of studies that revealed that JUUL products were far more powerfully addictive than was disclosed” and to stave off regulation of the JUUL product. Id. ¶¶ 5, 8, 943, 949. Finally, plaintiffs have added facts to support their allegation that Altria, once it finalized its December 2018 investment, was not a mere service provider to JLI but instead a “strategic partner” that had significant influence if not direct control over the Board and management of JLI. Id. ¶¶ 552–569, 587, 589.

(page 14)

Judge Orrick also presents examples of points that would need to be addressed at trial:

For example, whether Altria’s communications with the FDA support plaintiffs’ theory (that Altria wanted to appear to be concerned about youth vaping by agreeing that pod-based products like JUUL were contributing to that epidemic, but its ulterior motive was to preserve mint on the market so that sales would be unhindered when the JLI investment was cemented) or Altria’s theory (that its communications show its concern over pod-based products and youth vaping and its intent to compete with its non-pod-based products) cannot be resolved at this juncture.

(footnote, page 15)

These findings raise three things about the underlying discovery documents and depositions that warrant action by people and organizations who care about public health:

First, the plaintiffs and their lawyers need to commit now to pressing for the discovery documents in this case to be made public so that UCSF can add them to the existing collection of previously secret internal tobacco industry documents public. Minnesota Attorney General Hubert Humphrey III insisted on making the discovery documents as part of settling the case Minnesota brought against the tobacco companies over 20 years ago. That settlement set the precedent for making the discovery documents public that was followed in the Master Settlement Agreement and Judge Kessler’s 2006 ruling in the RICO case.

At the time Humphrey told me that “the most important thing to come out of the litigation will be the truth.” Time has proven him to be correct, as evidenced by more than 1000 publications coming out of research on the documents. This work has, in turn, helped enact strong tobacco control policies, up to and including the WHO Framework Convention on Tobacco Control.

The same holds for the separate cases being brought by state attorneys general.

This is not a trivial request. Demanding that the discovery materials be made public will make the case harder to settle and probably result in the plaintiffs and the lawyers getting less money. But, the public interest demands continue to make tobacco documents public. The truth is still important.

The attorneys bringing cases against the opioid industry are also following this precedent.

Second, the Department of Justice — and if DOJ won’t do it, the public health intervenors — need to ensure that the Altria documents that have been produced in the Juul litigation be made public now so they can be added to the UCSF Truth Tobacco Industry Documents Library under Judge Kessler’s 2006 RICO ruling. While Juul Labs, Inc was not a defendant in the case and so is not subject to Judge Kessler’s ruling (because it didn’t exist then), Altria is a defendant in the case. As described in the excerpts above from Judge Orrick’s current ruling in the Juul case, Altria was actively coordinating Juul e-cigarette marketing with their Marlboro cigarettes and promoting Juul for smoking cessation even though it was not approved for such use, which would keep people smoking cigarettes. They were also coordinating to keep menthol in the market.

There is time urgency to acting on this because the document disclosure provision in Judge Kessler’s ruling expires later this year (unless what turns up in the Juul case justifies extending it).

Third, the FDA needs to use its authority to demand documents from regulated companies as part of its regulatory and law enforcement activities. Judge Orrick’s ruling highlights how Altria and Juul had a history of working to mislead the FDA, including “(6) making fraudulent statements to the FDA to persuade the FDA to allow mint flavored JUUL pods to remain on the market; and (7) making fraudulent statements to the public (including through advertising), the FDA, and Congress to prevent prohibition of JUUL cigarettes, as was being contemplated in light of JLI’s role in the youth vaping epidemic.”

The FDA needs to obtain the discovery materials in the Juul (now RICO) case to ensure that Juul and Altria have been leveling with the FDA, particularly as FDA assesses Juul’s Premarket Tobacco Application (PMTA) to legally sell its products in the US.

FDA need not get involved in the RICO litigation. It has the authority to demand the documents directly from the companies. This is a finite set of already identified (and likely digital) documents that the FDA can request. Judge Orrick’s ruling provides more than enough specifics to justify obtaining these documents.

The FDA can request these documents on a confidential basis, so there are no issues with trade secrets.

All three of these actions can and should move forward at the same time.

Here are the related pleadings:

DE 1222-MOTION to Dismiss Second Amended Class Action Complaint and Amended Government Entity Complaints — Redacted Motion

DE 1223 – Motion to dismiss by Altria

DE 1225-MOTION to Dismiss California Plaintiffs Breach of Implied Warranty Claim Under Cal. Com. Code § 2314(2)(f); Memorandum of Points

DE 1229 – MOTION to Dismiss RICO CLAIMS AGAINST DEFENDANT BOWEN FROM PLAINTIFFS SECOND AMENDED CLASS ACTION COMPLAINT AND SEVEN GOVERNMENT

DE 1364 – RESPONSE to (re 1229 MOTION to Dismiss

DE 1397-NOTICE OF MOTION AND MOTION to Dismiss for Lack of Jurisdiction andor Strike Subclass Claims in the Second Amended Consolidated Class Action Complaint

DE 1463- REPLY (re 1222 MOTION to Dismiss Second Amended Class Action Complain

DE 1465 – REPLY (re 1223 MOTION to Dismiss Plaintiffs

DE 1467 – REPLY (re 1229 MOTION to Dismiss

DE 1481-Resp to 1397

DE 1694 – Order on Second Round of MTD

Published by Stanton Glantz

Stanton Glantz is a retired Professor of Medicine who served on the University of California San Francisco faculty for 45 years. He conducts research on tobacco and cannabis control and cardiovascular disease/

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