Juul's Legal Problems Keep Getting Worse

The vape company is under fire after a spiffy $15 billion valuation. How bad could it get?

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Jul 30 2018, 4:23pm

Photo by Gabby Jones/Bloomberg via Getty Images

D.P. started vaping nicotine when he was a 15-year-old high school freshman and quickly became hooked. The jazz musician's parents did everything they could to make him stop: Besides transferring him to a different school, they said, they removed the door to his bedroom and blocked off certain areas of the family home in Valley Park, New York, so he would have no privacy at all. Still, the regular urine tests they subjected him to proved their efforts were for naught: D.P. was "unable to refrain from JUULing," according to a federal complaint, which anonymized the teenager and was filed in federal court in the Southern District of New York last month.



"I really think JUUL's responsible for this," the family's attorney, Jason Solotaroff, told me in an interview. "They could have marketed their product like patches, or very pharmaceutical-like. Instead they marketed it as this cool accessory that everybody had to have."

The legal complaint has been rolled into two other suits—one filed in California state court, the other in federal court in that state—that accuse JUUL of engaging in shady marketing practices designed to target teens. (At least one complaint cited an ad in VICE magazine.) These criticisms are similar in nature to those lobbed by the Federal Drug Administration (FDA) before the agency cracked down on Juul sales to minors in April, as well as those levied by Massachusetts's attorney general, who announced last week that she was leading a probe into JUUL to find out if they were trying to lure underage users. All the scrutiny raises the question of whether one of the hottest new brands in America has already peaked—and whether teens will soon glob onto another bright, shiny object in the surging vape market.

Most of the people complaining so far have focused on the fact that, despite being advertised as an "alternative for adult smokers," JUUL seems to be insanely popular among kids who otherwise might not smoke. The fact that there are fun flavors like mango has been a sticking point, as has the fact that the company has spent relatively little on marketing relative to its growth. Plaintiffs' lawyers in the California cases have taken this one step further, going so far as to speculate that there are so-called JuulBots out there tweeting out content boosting the company, and that teen influencers might be getting paid to promote JUUL. ("JUUL Labs does not believe the cases have merit and will be defending them vigorously," spokesperson Victoria Davis told me in a statement, while declining to comment on either of these specific claims. Meanwhile, in court, the company has argued at least one suit should be dismissed because the FDA regulates electronic nicotine delivery systems.)

Meanwhile, Jay Ritter, a finance professor at the University of Florida who's known as "Mr. IPO," said this is all probably less a sign that JUUL is in danger of being forced out of business than it is a to-be-expected blip in the trajectory of a company that introduced its product to market three years ago, and has already been valued to the tune of $15 billion. In an email, he compared JUUL Labs to another famously embattled company.

"With both JUUL and Uber, problems have resulted in lower valuations than would otherwise be the case, but both companies have also grown faster than they otherwise would have if they had been more cautious, and this growth has boosted the valuations," he told me. "In other words, as with so many things in life, there are tradeoffs. A company can push too hard, of course. Investors are willing to take risks, but they need to be compensated for bearing these risks. The compensation comes in the form of paying a lower price. If the company cannot provide acceptable answers to the concerns that investors have, the valuations get even lower."

There's also the fact that the chief complaint against JUUL—that it's undoing decades of work to get kids to stop thinking blowing plumes of smoke out of their mouths is cool—might not be entirely fair. That's what Steve Sugarman, a product liability expert at Berkeley Law School, seemed to think when I asked him about the pending lawsuits.

"One interesting aspect of this JUUL phenomenon, apart from the fact that the national news media seemed to get interested when white, upper-middle class high school kids were seen to be JUULing, is that there—it seems to me—[is] no convincing evidence that JUUL works more to entice kids to smoking cigarettes who would not otherwise smoke than it does to divert kids to vaping who otherwise would have been smokers."

It's a tricky distinction to make, and an important one considering that vaping has completely eclipsed combustable smoking in high school bathroom stalls around the country. But the fact that the JUUL is odorless and easily concealable means more risk-averse teens—who might never mess with regular cigarettes—can be drawn to it. If nothing else, it does seem like the perfect vice for today's puritanical teen.

For its part, JUUL has made some minor concessions: Nicotine pod packs now have massive warning labels on them, and earlier this month, the company announced that they'd be manufacturing lower-nicotine models.

But that was never going to be enough to stop lawyers like Solotaroff from seeking damages (he said his client may or may not suffer from a lifelong addiction to nicotine). He's still trying to figure out what that might be worth, and a response to DP's case isn't due until September. In the meantime, the search for more clients continues: The attorney has even put up a note on a town-wide listserv looking for other kids who may have suffered as a result of vape addiction. Although he's gotten a handful of trolls, he said he's been in touch with others who fit the bill.

"It's not like anyone who's taken a hit of a JUUL needs to be in a lawsuit," he said. "It's affected some people way more than others. D.P. really had his life turned upside down. And I think there are probably a lot of kids like that."

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