Juul settles with Washington state for $22.5 million

REUTERS/Ajeng Dinar Ulfiana
  • Washington is fourth state to settle, with 11 other state suits pending
  • Deal includes stringent "secret shopper" program to deter underage sales

(Reuters) - E-cigarette maker Juul Labs Inc has agreed to pay $22.5 million to settle a lawsuit by the state of Washington accusing it of fueling a vaping epidemic by marketing its products to appeal to minors and deceiving consumers about their addictiveness.

The settlement, announced Wednesday by Washington Attorney General Bob Ferguson, is Juul's fourth with a state over similar claims. The company agreed to pay $40 million to North Carolina last June and $14.5 million to Arizona last November, and Louisiana last week moved to drop its case against Juul pursuant to a $10 million settlement.

In addition to the payment, the settlement requires Juul to operate a "secret shopper" program in the state to ensure that retailers are checking customers' age. While the company already operates a secret shopper program nationwide, the settlement includes more detailed requirements for the program in Washington.

"Juul's conduct reversed decades of progress fighting nicotine addiction, and today's order compels Juul to surrender tens of millions of dollars in profit and clean up its act by implementing a slate of corporate reforms that will keep Juul products out of the hands of underage Washingtonians," Ferguson said in a statement.

"This settlement is another step in our ongoing effort to reset our company and resolve issues from the past," Juul said in a statement. "We support the Washington State Attorney General's plan to deploy resources to address underage use, such as future monitoring and enforcement."

Juul's e-cigarettes resemble USB flash drives and work by vaporizing a nicotine-laced liquid.

The company still faces lawsuits from 11 states and the District of Columbia, as well as more than 3,000 private plaintiffs in a multidistrict litigation, all alleging that it downplayed the products' addictiveness and health effects while targeting teens.

The first bellwether trial in the MDL is scheduled to begin in June. Altria Group Inc, which in 2018 acquired a 35% stake in Juul, is also named as a defendant in many of the lawsuits.

Under pressure from regulators, Juul in 2018 pulled popular flavors such as mango and cucumber from retail store shelves and shut down its social media channels on Instagram and Facebook.

The case is State of Washington v. Juul Labs Inc, King County Superior Court, No. 20-2-13366-3.

For the state: Senior Counsel Rene Tomisser and Assistant Attorneys General Joshua Weissman, R. July Simpson, William McGinty and Daniel Davies

For Juul: Peter Farrell, Katherine Katz, Jason Wilcox and Zharna Shah of Kirkland & Ellis

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Brendan Pierson reports on product liability litigation and on all areas of health care law. He can be reached at brendan.pierson@thomsonreuters.com.