Category: Litigation

Malawi Child Labor Case to Proceed

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British American Tobacco and Imperial Brands failed to persuade the U.K. high court to throw out a case alleging they are responsible for the exploitation of farm families and child labor in Malawi, The Guardian reported on June 25.
The case was brought following a Guardian investigation in June 2018.
Lawyers at Leigh Day allege the working conditions on Malawi tobacco farms breach the definition of forced labor, unlawful compulsory labor and exploitation under Malawian law. They also say they breach the U.K. Modern Slavery Act, Article 14 of the European Convention on Human Rights, and the International Labor Organization definition of forced labor. They say the companies have unjustly enriched themselves at the expense of Malawi farming families.
British American Tobacco and Imperial Brands deny the allegations. They argued that the Malawian families could not prove that the tobacco they grew had ended up in the companies’ cigarettes.
In the high court, Justice Martin Spencer said the companies’ application to strike out the case had been “misconceived.” The judge said lawyers for the farmers were not required to offer proof at the beginning of a legal action, only when it came to full trial.
A spokesperson for Imperial said they could not comment further because the litigation was ongoing, “other than to reiterate that we will continue to defend the claim.”
BAT said it had “a longstanding commitment to respect the human rights of our employees, the people we work with and the communities in which we operate. We will continue to vigorously defend the claims, and we are unable to provide further comment while this case continues.”
June 29, 2021
Juul Settles North Carolina Vaping Lawsuit

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North Carolina has settled its lawsuit with Juul Labs for $40 million, reports The New York Times. The lawsuit is the first decision in of a series of lawsuits brought by states that claimed the company’s marketing practices fueled widespread addiction among young people to its e-cigarettes. The money will fund programs to help people quit e-cigarettes, prevent e-cigarette addiction and research e-cigarettes.
“This settlement is consistent with our ongoing effort to reset our company and its relationship with our stakeholders as we continue to combat underage usage and advance the opportunity for harm reduction for adult smokers,” said Juul spokesman Joshua Raffel in a statement.
The settlement was announced on June 28 by North Carolina Attorney General Josh Stein, who said that Juul agreed to avoid marketing that appeals to those under the age of 21. The company will curtail its use of “most social media advertising, influencer advertising, outdoor advertising near schools and sponsoring sporting events and concerts,” Stein said.
North Carolina sued Juul Labs in May 2019, becoming the first state in the U.S. to file suit against the e-cigarette manufacturer. In the agreement, the company denies any wrongdoing or liability. Juul Labs will ensure its products are sold behind counters, the attorney general said. Juul Labs will also use third-party age verification systems for online sales. The order also commits Juul to sending teenage “mystery shoppers” to 1,000 stores each year to check whether they are selling to minors.
The settlement also bars the company from using models under age 35 in advertisements and states that no advertisements should be posted near schools. “For years Juul targeted young people, including teens, with highly addictive e-cigarettes,” said Stein in a statement. “It lit the spark and fanned the flames of a vaping epidemic among our children—one that you can see in any high school in North Carolina.”
Thirteen states, including California, Massachusetts and New York, as well as the District of Columbia have filed similar lawsuits. The central claim in each case is that Juul knew, or should have known, that it was hooking teenagers on pods that contained high levels of nicotine.
“This win will go a long way in keeping Juul products out of kids’ hands, keeping its chemical vapor out of their lungs and keeping its nicotine from poisoning and addicting their brains. I’m incredibly proud of my team for their hard work on behalf of North Carolina families,” Stein said. “We’re not done—we still have to turn the tide on a teen vaping epidemic that was borne of Juul’s greed. As your attorney general, I’ll keep fighting to prevent another generation of young people from becoming addicted to nicotine.”
June 28, 2021
Altria Executives Scorn Their Vapor Products During Trial

Photo: Paul Brady | Dreamstime.com
Altria Group Executives have been describing in detail their failure to come up with a marketable vapor product during an antitrust trial, reports The Wall Street Journal. Products leaked, generated high formaldehyde levels and lacked the nicotine smokers were looking for, according to their testimonies.
In April 2020, the Federal Trade Commission (FTC) sued to unwind Altria’s 35 percent interest in Juul Labs, which the cigarette maker acquired in December 2018 for $12.8 billion.
A key question at trial is why Altria ended production of its own e-cigarettes in late 2018, shortly before announcing its investment in Juul.
Altria in October 2018 announced it was halting the sale of its pod-based and fruity-flavored e-cigarettes in response to a call by the Food and Drug Administration for e-cigarette makers to help stem a surge in vaping among children and teens. Then in December of that year, two weeks before the Juul agreement was signed, Altria pulled its remaining e-cigarettes off the market.
The FTC alleges Altria did so because of an illegal side deal in which it agreed to close its own e-cigarette business so it could take a stake in Juul. Altria and Juul both deny they had any such agreement.
Altria says it halted its e-cigarette sales amid pressure from regulators to curb youth use and an internal reckoning about the company’s inability to develop a successful vaping product. Juul says it didn’t see Altria’s e-cigarettes as a threat, didn’t ask Altria to shelve them and was surprised when Altria did so.
Juul and Altria argue that since the deal was struck, competition in the e-cigarette market has increased not decreased. Juul’s market share has fallen as have e-cigarette prices.
The FTC is seeking to force Altria to divest its stake and terminate the companies’ noncompete agreement. The case is being heard by an administrative law judge, who will make an initial decision; the agency’s commissioners will then vote on the matter.
June 24, 2021
Suit: RLX Downplayed Regulatory Risks

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A group of investors is suing RLX Technology, claiming the Chinese vaping company overstated its financials and misrepresented potential regulatory risks when it filed the paperwork for its initial public offering in the U.S., reports The Wall Street Journal.
Submitted June 9 by shareholder Alex Garnett in the U.S. District Court for the Southern District of New York, the lawsuit alleges RLX’s registration statement from last October omitted the impact of ongoing efforts by Chinese regulators to tighten sales of electronic cigarettes.
Under rules established by the U.S. Securities and Exchange Commission, companies must disclose any known events or uncertainties.
Founded in 2018, Beijing-based RLX went public on the New York Stock Exchange in January. The offering raised $1.39 billion, according to data provider Dealogic. Its stock price fell sharply after Chinese regulators in March proposed treating vapor products like regular cigarettes.
The lawsuit alleges investors purchased RLX shares at artificially inflated prices in part because the company omitted and misrepresented information in the registration statement. As the stock price dropped, RLX investors lost hundreds of millions of dollars, the lawsuit said.
At least two other law firms in recent weeks said they are investigating on behalf of investors to determine whether RLX failed to disclose relevant information to investors. Rosen Law Firm and Bronstein, Gewirtz & Grossman, among others, are reportedly seeking RLX investors who want to join a class-action suit.
RLX on June 2 reported revenue of CNY2.4 billion ($366.1 million) for the quarter ended March 31, up from CNY368.6 million in the prior year period. The company booked a net loss of CNY267 million compared with a profit of CNY12.1 million during the prior year quarter.
The company’s financial statements in recent months have raised eyebrows among accounting experts, who have questioned RLX’s unusually high ratio of cash and securities to total assets, among other issues.
On June 1, Tobacco Reporter published an article explaining how tobacco regulations could change China’s vapor business.
June 11, 2021
FDA Tobacco Authority Deemed Constitutional

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A lawsuit challenging the constitutionality of the U.S. Food and Drug Administration’s (FDA) authority over vapor products has failed following the Supreme Court’s refusal to review a lower court’s ruling on the issue.
The suit was filed on Aug. 19, 2019, by Big Time Vapes and United States Vaping Association in the U.S. District Court for the Southern District of Mississippi.
The suit challenged the Tobacco Control Act, claiming that Congress unconstitutionally ceded its legislative authority to the FDA when it gave the agency the power to “deem” products as tobacco products that were not specified in the 2009 legislation.
The complaint was dismissed in December 2019 and failed on appeal in the Fifth Circuit Court of Appeals last year. On June 25, 2020, the Court of Appeals found that Congress’ delegation of authority to the Secretary of Health and Human Services to deem additional products subject to the Tobacco Control Act was constitutional, upholding the district court’s decision.
The Supreme Court referred the case back to a lower court. Since the court did not accept the petition, the lower court’s decision stands.
The petition is the first case involving e-cigarettes to be heard by the Supreme Court, which accepts only between 100–150 of the more than 7,000 cases that it is asked to review each year, according to its website.
June 8, 2021
Imperial Cleared of Anti-competition Charges

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The Supreme Court of Ukraine has thrown out a UAH460 million ($16.83 million) fine imposed by the Antimonopoly Committee of Ukraine (AMCU) on Imperial Tobacco Ukraine and Imperial Tobacco Production Ukraine for alleged anticompetitive behavior, reports the Kyiv Post.
In October 2019, the Antimonopoly Committee fined the local affiliates of Philip Morris International, British American Tobacco, Japan Tobacco and Imperial Brands along with Tedis Ukraine. Concerted actions by the tobacco companies had unlawfully left Ukraine with only one cigarette distributor, Tedis, the AMCU maintained.
Imperial appealed to the Commercial Court of Kyiv, which ruled in favor of the AMCU. On July 21, 2020, the company paid the full fine to prevent the imposition of additional penalties and to avoid further pressure on the company’s operations by the AMCU.
After an appeal to the Northern Commercial Court of Appeal was also rebuffed, Imperial turned to the Supreme Court, which has now found in its favor.
In a Ukrainian-language press release, Imperial Tobacco Ukraine CEO Rastislav Cernak said the ruling was an encouraging sign for all foreign investors in Ukraine.
“Our company has always acted completely transparently and decently, advocating fair and honest competition, observing all antimonopoly laws not only in Ukrainian legislation but also the principles of protecting economic competition laid down in EU legislation,” he was quoted as saying.
Earlier, Ukrainian courts threw out the AMCU fines against British American Tobacco and Tedis.
Imperial Tobacco Ukraine manufactures cigarettes in Kyiv. About 50 percent of its products are exported to 20 markets, including Armenia, the United Arab Emirates and the United States.
June 3, 2021
Opposition to Investor Dispute Settlements

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Opposition is growing to investor-state dispute settlement (ISDS) provisions in trade deals, according to a report in The Guardian.
ISDS began when former colonies became independent and provided compensation to companies if their assets were expropriated. But the system has developed concepts that allow corporations to seek compensation by claiming that regulatory changes reduce the value of their investment and/or that they were not fairly consulted about the change.
Philip Morris famously used the ISDS provision of the Australia-Hong Kong investment after Australia’s High Court in 2012 held that Australia’s plain cigarette packaging laws were legal and did not constitute an unjust confiscation of trademarks and intellectual property.
In 2015, the tribunal decided that the plaintiff was not a Hong Kong company and had moved ownership of its Australian operations to Hong Kong only to take advantage of the ISDS provision. While prevailing in the case, Australia spent nearly AUD24 million ($18.59 million) to defeat the challenge and only half of this was recovered. Critics say poor countries lack the resources to defend themselves against ISDS challenges.
There are now 1,104 known ISDS cases, with increasing numbers against health and environment laws, including laws to address climate change and to protect Indigenous rights.
Community opposition has pressured increasing numbers of governments to reject ISDS. The 27 EU member states have terminated ISDS arrangements between themselves, and ISDS has been excluded from current talks for the EU-Australia free trade agreement. The U.S. and Canada have excluded ISDS cases against each other from the revised North America free trade agreement, known as the United States-Mexico-Canada Agreement.
More recently, strong community campaigns resulted in exclusion of ISDS from the Regional Comprehensive Economic Partnership signed in November 2020 between Australia, New Zealand, China, Japan, South Korea and the 10 ASEAN nations.
Despite such moves, ISDS provisions are not on their way out quite yet. For example, the British trade minister has confirmed to The Guardian that corporate rights to sue governments are being discussed in the final negotiations for the Australia-U.K. free trade agreement.
June 2, 2021
RJR and ITG Resolve Texas Payments Dispute

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R.J. Reynolds Tobacco Co. and ITG Brands have reached a financial settlement with the state of Texas that resolves the question of responsibility for annual Master Settlement Agreement-type payments on four traditional cigarette brands, reports the Winston-Salem Journal.
ITG has accepted all payment obligations to the Texas settlement agreement for the Kool, Maverick, Salem and Winston brands.
The dispute stems from the 2014 purchase by Reynolds American of Lorillard. To obtain federal regulatory approval for the deal, RJR and Lorillard sold the four brands to ITG’s parent company, Imperial Brands.
After the sale, a dispute broke out about which company was responsible for settlement payments on the brands.
The MSA was a 1998 agreement in which tobacco companies settled litigation with state attorneys general over the cost of treating sick smokers. Several states, including Texas, made their own deals with tobacco companies.
In December 2020, the Florida Supreme Court declined to hear an appeal by RJR in a dispute over the four brands, leaving responsibility for the MSA payments with Reynolds.
The four ITG brands combined currently represent about 7.5 percent of the U.S. market share for traditional cigarettes.
May 31, 2021
Florida Supreme Court Asked to Revisit Engle

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The Florida Supreme Court will hear a case on June 2 that could make it harder to successfully sue cigarette makers, reports the Tampa Bay Times.
While the case focuses on an issue involving allegations that the tobacco industry conspired to conceal information about smoking, R.J. Reynolds Tobacco Co. and Philip Morris USA want to use the case to convince justices to reconsider the underlying 2006 decision that spurred roughly 8,000 “Engle progeny” cases, many of which are still tied up in court.
In 2019, a Florida appeals court overturned a $6.4 million award to the estate of John C. Price, who started smoking at age 12 and died at age 74 of chronic obstructive pulmonary disease. The appeals court objected to the way in which the jury had been instructed to weigh the evidence and ordered a new trial.
The ruling centered on a claim of conspiracy to conceal information about the dangers of smoking. The appeals court agree with R.J. Reynolds that the estate needed to show that Price relied to his “detriment” on a statement that concealed or omitted information.
While the outcome of the conspiracy issue could affect numerous Engle progeny cases, R.J. Reynolds and Philip Morris also have asked the Supreme Court to go beyond the appeals court ruling and revisit the 2006 decision. They have been backed by the Florida Justice Reform Institute, a group that lobbies the legislature and becomes involved in court cases to try to limit lawsuits.
The tobacco companies’ arguments come after a significant change at the Supreme Court since January 2019, when three liberal-leaning justices retired and were replaced by justices appointed by Republican Governor Ron DeSantis.
May 28, 2021
Court: Vuse Infringes on Fuma Patents

Photo: R.J. Reynolds Vapor Co.
R.J. Reynolds (RJR) Vapor Co.’s Vuse Solo and Ciro e-cigarettes infringe patents owned by Fuma International, a federal court in North Carolina ruled, according to Reuters.
Fuma sued RJR in 2019 for infringing two of its patents that outline types of e-cigarettes made of a cartridge and power source.
U.S. District Judge Catherine Eagles found that the products included two of the disputed elements and infringed both patents but that the question of whether they included the third element should go to trial.
The Vuse Solo has one of the patent’s “electrically conductive portion” that couples the cartridge to the power source, and the Vuse Ciro has a type of airflow passageway featured in both patents, Eagles said.
However, the third disputed element—whether the Solo has the “electrically conductive threaded portion” from a Fuma patent—will be decided at trial. RJR provided enough evidence to show that the relevant part of its device may not be “threaded” under the patent’s definition, according to Eagles.
RJR spokesperson Kaelan Hollon told Reuters that the company “looks forward to proving at trial that the Fuma patents are invalid” and that Solo doesn’t infringe the part of the patent still at issue.
Vuse is one of the most popular e-cigarette brands in the United States.
Earlier this month, a judge ruled that Philip Morris International’s IQOS tobacco-heating device infringes two Vuse Vibe and Vuse Solo patents. That case will likely be reviewed by the full International Trade Commission.
May 27, 2021