Colorado cannot hold four executives of vape maker JUUL personally liable for the company’s allegedly deceptive marketing practices toward teens and young adults, the state Supreme Court ruled Monday.
Although the Colorado attorney general’s office warned that a ruling in favor of high-level JUUL officials would amount to immunity for any corporate executive who launches nationwide marketing campaigns that violate state law, the Supreme Court insisted that was not the intent of its decision.
“Here, the state never alleges that JUUL identified Colorado as a priority or that the defendants visited Colorado for business purposes,” Judge Richard L. Gabriel wrote. in the notice of September 26. “Instead, the State only contends that the Defendants participated in some degree in JUUL’s nationwide efforts to commercialize its product.”
The Supreme Court ruling overturns a Denver trial judge who thought the attorney general’s allegations were “pretty specific” about how Adam Bowen and James Monsees, co-founders of JUUL Labs, Inc., and members of the board of directors Nicholas Pritzker and Riaz Valani worked as a group to target the company’s marketing to young people in Colorado.
Lawrence Pacheco, spokesman for Attorney General Phil Weiser, did not address the broader implications of the court’s decision, but confirmed that the lawsuit would continue against the company itself.
“The Department of Justice’s efforts to hold JUUL accountable are not affected by this court opinion,” Pacheco said. which targeted young people and downplayed the health risks of its e-cigarettes.
Weiser’s office filed a lawsuit against JUUL in July 2020, alleging that it violated Colorado consumer protection law by recklessly engaging in deceptive marketing practices, advertising its “addictive product very high in nicotine” among young adults and adolescents.
“JUUL has unfairly and unknowingly, knowingly and recklessly, minimized the presence of nicotine in its product to make it more appealing, particularly to young people,” the government wrote.
Then, in September of last year, the attorney general’s office filed a 141-page amended lawsuit adding Bowen, Monsees, Pritzker and Valani to the lawsuit, calling them “management defendants.” The government accused them of orchestrating JUUL’s overall youth marketing strategy, including hiring young models as “brand ambassadors” for its e-cigarette products and hosting more than 60 promotional events. in the Denver metro area.
In Weiser’s office’s view, JUUL and management defendants were responsible for increasing the percentage of Colorado high school students who had recently used an e-cigarette to more than a quarter in 2017, twice the national average for teen vaping.
The management defendants sought to dismiss the claims against them, arguing that as California residents they had no contact with Colorado or directed any of their allegedly illegal activities at the state.
In January 2022, Denver District Court Judge J. Eric Eliff denied the motion to dismiss, even admitting that the attorney general’s office failed to single out the specific actions of individual JUUL agents.
The government “nowhere attempts to directly link the individual defendants to Colorado,” Eliff wrote. Nevertheless, the lawsuit “is quite specific regarding the actions of the group of them”.
Eliff added that Colorado had a vested interest in remedying harm to its consumers, and that the government alleged that executive defendants directed and controlled the deceptive marketing tactics “partially directed at Colorado.”
The management defendants petitioned directly to the Supreme Court, which then exercised its power to hear an appeal directly from a lower court in rare circumstances. They told judges that allowing corporate directors to take personal liability simply if their company sold products in Colorado or any other state would have “significant public policy implications” by deterring people from sitting on boards. company boards of directors.
“Second, it would naturally increase the costs of doing business in Colorado,” their lawyers wrote.
The attorney general’s office countered that if the defendants prevailed, it would immunize corporate executives from their fraud as long as they targeted multiple states, not just Colorado. The Colorado Trial Lawyers Association also submitted a brief in support of the government.
“Corporate directors who believe that they will be protected by the company and avoid personal liability will not be deterred from wrongdoing. compensate those harmed by their actions,” the group wrote.
While noting that the parties had cited court cases from outside of Colorado that bolstered each side of the argument, the Supreme Court ultimately sided with the management defendants. Gabriel, in the court’s view, identified only three activities that had a specific connection to Colorado: first, “sampling events” hosted by JUUL with brand ambassadors in Colorado. Second, JUUL used youth-targeted images in its Colorado marketing. Third, the CEO of JUUL wrote a letter to the editor on youth vaping published by the Denver Post.
But it cannot be the case, the court found, that corporate executives can be held personally liable when a national marketing campaign merely reaches, but does not target, a particular state.
“A defendant can certainly target multiple states simultaneously, and had the record shown that these defendants individually targeted Colorado, among other states, our conclusion might have been different,” Gabriel wrote. “And we see nothing in our analysis that can reasonably be read to immunize these defendants against their alleged actions.”
Attorneys for the management defendants did not immediately respond to a request for comment. The Centers for Disaster Control and Prevention warns that the use of electronic cigarettes and nicotine can expose young people to harmful aerosols and impair their brain development.
Earlier this month, JUUL agreed to a $438.5 million settlement with 34 states and territories that also addresses the company’s vape and e-cigarette marketing practices to those under 35. Colorado was not a party to the settlement.
Judge Maria E. Berkenkotter did not participate in the case.
The case is Colorado v. JUUL Labs, Inc. et al.