The Food and Drug Administration’s order to Juul Labs Inc. to take its products off shelves in the US threatens to undermine the e-cigarette maker’s defense in a sprawling legal fight over its youth marketing practices.
But it also raises the risk of scant payoffs for those suing, if Juul ultimately loses its appeal over the ban.
While a federal court on Friday gave Juul some respite by temporarily blocking the FDA order, both sides now have extra incentive to settle more than 2,500 personal injury lawsuits and hundreds more cases brought by local governments and school districts seeking to hold the company responsible for an epidemic of underage vaping. Experts estimate that Juul could potentially be hit with hundreds of millions of dollars in damages.
“There is a real question about Juul’s ability to contribute much to a settlement if there’s a strong possibility its income is substantially curtailed,” said Mark Gottlieb, executive director of Public Health Advocacy Institute and a lecturer at the Northeastern University School of Law. “That has reduced the settlement value for the enormous pool of cases brought against Juul.”
The FDA’s decision, years in the making, comes nearly three months before the first youth marketing case is set for trial in San Francisco federal court. That personal injury complaint was brought by the mother of a Tennessee girl who allegedly got hooked on Juul products at age 12.
In rejecting Juul’s application to market its product, the FDA cited inadequate toxicology data. Even though the agency didn’t get into the teen vaping issues that are at the heart of the litigation, its findings could bolster the addiction claims in the personal injury suits, said Elizabeth Burch, a professor at University of Georgia law school.
“The FDA is an expert agency that Congress entrusts with protecting public health, so courts and juries may give it a fair amount of weight if it comes into evidence – and Juul will try to prevent that,” Carl Tobias, a professor at the University of Richmond School of Law.
Juul said it disagrees with the FDA’s findings and succeeded in persuading a federal appeals court to grant an emergency order temporarily blocking the decision. Juul claimed the FDA action was “arbitrary and capricious” and that the agency didn’t consider the evidence before making a decision.
Juul is also reportedly weighing a bankruptcy filing. The Wall Street Journal reported on Friday that the company may seek protection if it doesn’t get relief from the government ban.
“If there’s no rapid solution” to the FDA ban, “all bets are off,” said Matthew Myers, the president of the Campaign for Tobacco-Free Kids.
Altria Group Inc., which owns a 35% stake in Juul and is also a defendant in the youth marketing litigation, has argued that the harm caused to young vapers occurred before its investment in the e-cigarette company. It’s likely shielded from direct liability, according to Bloomberg Intelligence analyst Kenneth Shea.
A spokesperson for Juul didn’t respond to a request for comment on the impact of the FDA order on the litigation.
Sarah London, a co-lead plaintiffs’ lawyer in the Juul litigation, said her team will continue to fight for its clients.
“This action by the FDA in pulling Juul’s toxic, dangerous and deceptively marketed products out of circulation vindicates the claims we’ve brought on behalf of the victims,” London said.
If Juul’s products are ultimately taken off the market, it may be less inclined to throw its weight behind safeguarding the integrity of its e-cigarettes and more interested in looking for a way to end its legal woes, the University of Georgia’s Burch said.
“They’re going to say, ‘Look, we’ve got no cash coming in and you’re going to have to take what you can get.'”
Photo: A person smokes a Juul Labs Inc. e-cigarette. Photographer: Bloomberg
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