Deal resolves much of legal uncertainty around e-cigarette company
Juul Labs Inc. reached a sweeping legal settlement Tuesday covering more than 5,000 lawsuits and about 10,000 individual plaintiffs, resolving much of the legal uncertainty that had pushed the e-cigarette company to the brink of bankruptcy.
Juul said Tuesday that it had secured an equity investment to cover the cost of the settlement. Financial terms weren’t disclosed. Juul has been in talks with early investors including two of its longtime board members, Hyatt Hotels heir Nick Pritzker and California investor Riaz Valani, to fund a bailout that would cover legal liabilities, The Wall Street Journal previously reported.
“In our ongoing fight for our company and mission, today’s news represents yet another significant step to secure our path forward,” Juul Chief Executive K.C. Crosthwaite wrote in a memo to staff Tuesday. He said the settlement “addresses the vast majority of outstanding litigation facing our company.”
Juul in 2018 became a teen status symbol when sales of its sleek vaporizers surged, upending the tobacco market. Lawmakers, regulators and parents blamed the company for fueling a surge in teen vaping. Many of the lawsuits accused Juul of marketing to children and teens. Juul has said it never targeted young people but has been working to regain the public’s trust.
The settlement covers two pending bellwether trials that were set to go to court early next year, and four broad groups: personal-injury plaintiffs, Juul consumers, government entities such as school districts, and Native American tribes.
“The scope of these suits is enormous,” Sarah R. London, co-lead counsel for plaintiffs in the multi-district litigation, said in a statement. “These settlements will put meaningful compensation in hands of victims and their families, get real funds to schools for abatement programs, and help government and tribal entities prevent youth use of e-cigarettes across the U.S.”
Lawsuits brought by several attorneys general are pending.
The Food and Drug Administration in June ordered Juul to halt U.S. sales of all of its e-cigarettes, saying the company hadn’t submitted sufficient evidence that its devices were safe. The agency then put the ban on hold while the company appealed the decision.
The uncertainty around Juul’s ability to keep its products on the market made it difficult to raise money to cover legal liabilities. Juul began exploring a possible chapter 11 filing in June, shortly after the FDA announced its ban. Last month, Juul announced plans to lay off about a third of its staff and secured financing from some of its early investors to stave off bankruptcy.
That investment deal, intended to cover the company’s operating costs, was the first piece of a broader bailout package under discussion with two of Juul’s biggest investors, Mr. Pritzker and Mr. Valani. A second part of the bailout to cover legal liabilities was also under discussion, the Journal reported last month.
Jennifer Maloney – Wall Street Journal – 2022-12-06.
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