(Bloomberg) -- Juul Labs Inc. failed to knock out racketeering claims in lawsuits accusing it of deliberately targeting teenagers, as individual founders and directors of the e-cigarette maker became the new focus of the litigation.
Most of the claims brought by consumers, local governments and school districts against Juul and Altria Group Inc. under the Racketeer Influenced and Corrupt Organizations Act can move forward, a federal judge in San Francisco ruled on Tuesday. Altria took a 35% stake in Juul in 2018.
The judge had dismissed those claims in October but allowed the plaintiffs to revise their complaint. The amended filing advanced a new RICO argument about Juul's and Altria's conduct. The plaintiffs claim Juul founders and directors used the company as a vehicle for an “unlawful pattern of racketeering.”
Juul didn't immediately respond to an email seeking comment on Tuesday's ruling. It has denied it targeted minors.
Nuclear Option
The civil RICO claims, which carry stiff financial penalties if proved, have been called the litigation equivalent of the nuclear option. The ruling gives the plaintiffs an advantage in any settlement talks, to the extent the defendants want to avoid the risk of a jury trial on the racketeering claims. The 1970 RICO law was crafted to prosecute organized crime but has also been used in civil suits, including against tobacco companies.
Earlier: Juul Beats Racketeering Claims in Marketing Suits, For Now
Under the plaintiffs' new theory, Altria and the individual defendants, not Juul, can be held liable, according to U.S. District Judge William Orrick. The more detailed allegations describing the individuals' goals to “advance their self-interests, and not necessarily or primarily to advance Juul Labs Inc.'s interests, are adequate,” Orrick ruled.
The defendants used false and misleading advertisements, including the company's “Vaporized” campaign, omitting Juul's nicotine content and potency, according to the plaintiffs. They are alleged to have expanded youth access to Juul products through deception.
The case is In re: Juul Labs Inc. Marketing, Sales Practices & Products Liability Litigation, 19-md-02913, U.S. District Court, Northern District of California (San Francisco).
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