Juul to pay $40 million to settle North Carolina vaping case

“For years, Juul targeted young people, including teens, with highly addictive e-cigarettes,” Josh Stein, North Carolina's attorney general, who sued the company in May 2019, said in a statement announcing the settlement. “It lit the spark and fanned the flames of a vaping epidemic among our children — one that you can see in any high school in North Carolina.”

But the company was able to reach the settlement deal without admitting to the allegations, one of its chief goals in the face of the other lawsuits and the FDA review.

In Juul’s statement, Joshua Raffel, a company spokesman, said: “This settlement is consistent with our ongoing effort to reset our company and its relationship with our stakeholders, as we continue to combat underage usage and advance the opportunity for harm reduction for adult smokers.”

E-cigarettes and other vaping products were initially conceived to be a less harmful alternative to combustible cigarettes, which are linked to the deaths of about 480,000 people in the United States each year. But Juul’s sleek high-tech-looking device, advertised in its 2015 launch with young, hip-looking people on billboards and in social media, quickly caught on with teenagers and young adults who had never smoked.

Over the next few years, e-cigarette use among high school students began to soar, and in 2018, the FDA commissioner declared an epidemic of teen vaping in the United States.

Although e-cigarettes do not contain the carcinogens that burning tobacco creates, scientists and public health officials worry about their potential health effects on young people. Some research shows nicotine could impair the developing brain, for example, and addiction to it could lead users to move to regular cigarettes, some people fear.

Juul had urgently sought a settlement in the North Carolina trial, which was set for July 12 and would have put Juul in court, dealing with testimony from parents and children, while the FDA was deciding its fate, which must be done by early September.

The money, which will be paid out over six years, will be used to fund programs that will help people quit e-cigarettes, prevent e-cigarette addiction and research e-cigarettes.

The settlement also requires Juul to sell its products from behind the counter in North Carolina stores, and to use third-party age-verification systems for online sales. The order commits Juul to sending young “mystery shoppers” to 1,000 stores each year to check whether they are selling to minors. It also bans the company from using models younger than 35 in advertisements and states that no advertisements should be posted near schools.

Carl Tobias, a law professor at the University of Richmond, who teaches product liability, said the settlement bodes well for the other states suing Juul.

“This opens a similar possibility to every state going forward,” he said. “North Carolina has been in the vanguard and deserves some credit. I think this has huge financial and other implications.”

Tobias said he was not surprised that Juul did not admit to wrongdoing.

“That almost always happens in these kinds of settlements — that’s a standard clause,” he said.

Juul has not begun other serious settlement talks, however, because none of the other 2,600 lawsuits against the company have been scheduled to begin during 2021. The company is waiting for the FDA ruling before deciding how to move forward, according to a person familiar with the thinking of its top executives. If the FDA will permit Juul’s products to stay on the market to help adult smokers quit, executives believe their negotiating stance will be strengthened.

But settling with numerous plaintiffs would be expensive. Juul has seen sales plummet during the past year, analysts say. The company is private so does not disclose its financial data.

Marc Scheineson, a lawyer with Alston & Bird, whose practice includes small tobacco companies, called the $40 million in the North Carolina settlement “a relatively small sum to pay to avoid mounting legal fees and the plaintiff pile-on syndrome.”

Matthew Myers, president of the Campaign for Tobacco-Free Kids, called the North Carolina settlement a positive step that puts Juul under the same marketing restrictions that already apply to other tobacco companies, with some added sales restrictions and protection against the use of social influencers.

“But,” he said, “these measures will not solve the youth e-cigarette crisis. Nothing short of FDA action will reverse the youth e-cigarette epidemic."