Wednesday, August 28, 2019

failure to disclose vaping's extra risks over smoking could be deceptive; no arbitration for Juul

Colgate v. Juul Labs, Inc., 2019 WL 3997459, No. 18-cv-02499-WHO (N.D. Cal. Aug. 23, 2019)

Juul makes e-cigarettes and nicotine cartridges/pods. “Plaintiffs seek to represent a nationwide class and numerous subclasses in claims for false advertising, fraud, unjust enrichment, several forms of product liability, several types of negligence, violation of Magnuson-Moss Warranty Act, breach of express and implied warranty, and violation of the unfair and unlawful prongs of various state consumer protection statutes.” A lot goes on here; the court partially grants and partially denies Juul’s motion to dismiss and denies its motion to compel arbitration because plaintiffs did not have inquiry or actual notice of the arbitration provision.

Previously, the court had found that some but not all of the plaintiffs’ claims were preempted by the FDCA as amended by the Tobacco Control Act: claims based on the allegation that Juul’s labelling fails to warn consumers that its nicotine formulation is more addictive than other methods of nicotine ingestion were expressly preempted. Claims based on the mislabeling of the percentage of nicotine per pod were not preempted because the plaintiffs had sufficiently alleged that Colgate relied on Juul’s representation that the pods contained 5% nicotine when they allegedly contained 6.2% nicotine. Also, a clause in the TCA expressly excepts advertisements from preemption, so claims based on ads’ failure to warn consumers about the potency and addictiveness of Juul’s formulation or the amount of nicotine could be repleaded.  Many of the previous consumer protection claims didn’t satisfy Rule 9(b), but claims based on identified state consumer protection statutes, unjust enrichment, design defect, manufacturing defect, breach of implied warranty of merchantability, and negligent misrepresentation were sufficiently pled. This new complaint added allegations in an attempt to satisfy Rule 9(b).

At the base of the claim: Juul’s formulation is allegedly more addictive and dangerous than a normal cigarette because it delivers more nicotine up to four times faster, and causes less throat irritation, which in cigarettes slows consumption and inhibits use.  Juul’s formulation allegedly “delivers doses of nicotine that are materially higher than combustible cigarettes,” producing “higher nicotine absorption than expected for the advertised formulation,” or about 30% more nicotine per puff than a traditional cigarette. Juul allegedly touted data to claim that it delivered approximately 25% less nicotine to the blood than a cigarette, creating the false impression that it is less addictive. Advertising claims that a “JUULpod is designed to contain approximately 0.7mL with 5% nicotine by weight at time of manufacture which is approximately equivalent to 1 pack of cigarettes or 200 puffs” was therefore false and misleading because (as Juul allegedly knew) what is important is the amount of nicotine that enters the bloodstream, which is as much as twice as much as that delivered via a pack of cigarettes. Worse, each cigarette in a pack must be separately lit, but Juul can be inhaled continuously and used indoors without detection, eliminating the need for smoke breaks.

The court ruled that plaintiffs satisfied Rule 9(b) with respect to named plaintiffs who remembered which ads they’d seen, but not as to named plaintiffs who didn’t.  Without identifying specific ads, they didn’t properly plead the “where” required by 9(b).  Attaching representative ads to the complaint wasn’t enough, as it would be for the FTC as plaintiff.

Juul next argued that plaintiffs didn’t plausibly allege misleadingness, in part because the risks of nicotine have been well known for decades. The court found that plaintiffs sufficiently stated both an omission claim and an affirmative misrepresentation with regards to Juul’s advertising that one pod has as much nicotine as a pack of cigarettes. “Although the dangers of nicotine are known to the community, it would go too far to say that JUUL need not to warn consumers that using JUUL’s product will cause their bodies to absorb twice as much nicotine as they would from a pack of cigarettes. It is also irrelevant that certain plaintiffs were smokers before using JUUL. Being a smoker of combustible cigarettes would not impart knowledge that JUUL’s liquid nicotine formulation might be twice as potent.”

Thus, claims related to Juul’s pharmacokinetics survived, though the aesthetics of its marketing (“bright” colors, “clean lines,” “minimal text,” “eye-catching graphics,” FDA-regulated flavors, attractive adult models, and other common advertising practices) wouldn’t themselves constitute misrepresentations, and “claims based on themes and vague terms in JUUL’s advertising are, as JUUL argues, nothing more than non-actionable puffery.” Nor did plaintiffs state a claim based on Juul’s statement that a user may cancel the autoship service at any time (which allegedly misrepresented their ability to cancel given the likelihood of addiction) because none of the plaintiffs alleged that they used the service.

Some products liability/warranty claims also survived, as did UCL unlawfulness and unfairness claims (the latter based on alleged targeting of minors).

The analysis in Sperry is both analogous and persuasive. Plaintiffs have stated an “unfair” claim under state consumer protection law because they have sufficiently alleged that JUUL’s targeting of minors meets the requirements of Sperry. The allegations also state an unfair claim under the tethering test because the public policy at issue is tethered to state laws prohibiting the sale of e-cigarettes to minors.

The court found that the complaint didn’t successfully plead that Juul was vicariously liable for the acts of third party @JUULnation on Instagram. @JUULnation “posted tips on how to conceal JUUL devices in school supplies; ridiculed efforts to combat use in schools; promoted videos of JUUL influencers; sold JUULpods directly through its Instagram account; and promoted other sites selling JUUL products to its 650,000 mostly teenage followers.” The complaint alleged that, because @JUULnation used JUUL’s hashtags in its posts, “JUUL, which monitors its hashtags, was aware of @JUULnation’s conduct and could have stopped and condemned @JUULnation’s youth-targeted activity. Id., CAC at Instead, JUUL repeatedly promoted @JUULNation’s hashtag (“#JUULnation”) through its own social media accounts, giving an externally observable indication that it consented to @JUULnation’s activities and reaped the benefits of free marketing and increased sales.”  That wasn’t enough when the third party wasn’t an agent and didn’t purport to be one.

Juul also argued that the minor plaintiffs’ claims should be dismissed because of the intervening unlawful acts of third parties who sold Juul products to them. The court pointed out that some of the claims didn’t stem from Juul’s allegedly minor-targeted ads (theories of product liability, implied warranty, and failure to warn). Anyway, at this stage, the acts of the third parties here were plausibly alleged to be foreseeable and therefore did not constitute an intervening cause were Juul allegedly specifically targeted minors and had reason to know that its conduct would encourage illegal use and trade of its products.

As for arbitration for plaintiffs who signed up using Juul’s website, the signup page had a hyperlink to the terms and conditions, but it was too inconspicuous to say that plaintiffs had gotten proper inquiry notice. The link wasn’t in a “different color, underlined, italicized, or in any way visually distinct from the surrounding text…. Users cannot be reasonably expected to click on every word of the sentence in case one of them is actually a link.”  Prior cases have found more conspicuous links to be insufficient. A later version of the signup page changed the color of the links, but that wasn’t enough without more (underlining, highlighting, all caps, or in a separate box), especially given the greater prominence of the “forgot password?” link on the same page:

A reasonable user scanning the page would first see the “Forgot Password?” hyperlink and would observe that it is a different color, underlined, and of a particular font size. That user would not then see the “Terms and Conditions” and “Privacy Policy” hyperlinks and conclude that they were clickable. They are not underlined, they are the same size as the sentence they are in, and the color is different from the initial hyperlink they would see.

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