Category: Litigation

Essentra Settles Case Over North Korea Trade

Photo: Essentra
Essentra FZE Co., a subsidiary of Essentra PLC incorporated in the United Arab Emirates, has agreed to pay a $665,112 fine and enter into a deferred prosecution agreement with the U.S. Department of Justice (DOJ) for conspiring to violate the International Emergency Economic Powers Act and defrauding the United States in connection with evading sanctions on North Korea, according to a DOJ news announcement.
The public filing against Essentra FZE is the first-ever Department of Justice corporate enforcement action for violations of these regulations. Essentra FZE has also entered into a settlement agreement with the U.S. Treasury Department’s Office of Foreign Assets Control.
“This is an important case as it demonstrates the FBI will not hesitate to hold businesses accountable for violating sanctions involving North Korea,” said Alan E. Kohler Jr, assistant director of the FBI’s counterintelligence division. “We will aggressively go after enterprises using front companies, false documents, or other illegal methods to evade sanctions. We want North Korea and private industry to know that efforts to dodge our laws will never be tolerated as business as usual.”
According to admissions and court documents, beginning in at least October 2017 and continuing until at least December 2018, Essentra FZE deceived banks in the U.S. and in the UAE into processing transactions for a North Korean tobacco company. Essentra FZE and its co-conspirators utilized financial cutouts and front companies to conceal the North Korean nexus, as well as falsified shipping records, according to the DOJ.
In a statement published on its website, Essentra PLC said none of the transactions were approved or known by senior management outside of the UAE and both employees have since been exited from the business.
“A very thorough and in-depth investigation has been carried out to fully understand the root cause of the issues we have seen,” said Paul Forman, CEO of Essentra PLC. “We have made a very significant investment of both time and money, which has now equipped us with enhanced protection against any potential future issues of this nature.”
July 17, 2020
Court Upholds Verdict Against Reynolds

Photo: Tobacco Reporter archive
A three-judge panel of the 3rd District Court of Appeal from South Florida on July 15 upheld a $7.25 million verdict against R.J. Reynolds Tobacco Co. (RJR) in a lawsuit filed by a man who smoked two packs of cigarettes a day by age 17 and later suffered from coronary artery disease.
The panel rejected RJR’s arguments that the plaintiff had not proven an allegation related to the tobacco company fraudulently concealing the dangers of smoking. The appeal came after a Miami-Dade County jury awarded $5 million in compensatory damages and $2.25 million in punitive damages to the plaintiff.
“In sum, not only did [the plaintiff] Rouse present evidence that he was exposed throughout his life to the tobacco companies’ broad-based, misleading advertising campaign, he also testified that his decision to smoke Winston filtered cigarettes was influenced by the way the tobacco companies promoted filtered cigarettes in their advertisements,” the panel said in a statement.
“From this evidence, a reasonable jury could have inferred that Rouse might have never started smoking Winston filtered cigarettes or would have quit earlier had he known true facts about filtered cigarettes.”
July 17, 2020
South African Tobacco Ban Back in Court

Photo: Michal Kalasek | Dreamstime.com
The North Gauteng High Court heard an appeal by the Fair-Trade Independent Tobacco Association (FITA) against the ban on tobacco products.
The court previously dismissed a case by FITA that argued the ban of cigarette sales was “irrational.” The government’s argument was that smoking could lead to more coronavirus cases and potentially death, but FITA argued the issue was not limited to cigarettes.
Appeal proceedings began Wednesday morning via Zoom. Arnold Subel argued on behalf of FITA, stating that banning tobacco products is based on “low-quality evidence” and that the ban would not have a significant effect on smoking in South Africa.
FITA is hopeful that the court will rule in its favor. “The judgment will be delivered by the course of next week, and we are hoping to have the judgment by next Friday,” said Sinenhlanhla Mnguni, FITA chairperson. “At this point in time, it’s a question of waiting a week or so.”
July 16, 2020
Juul Takes Action Against Illicit Products

Photo: Juul
Juul Labs has filed its third action with the U.S. International Trade Commission (ITC), directed at all importers of unauthorized “Juul-compatible pods” that copy Juul Labs’ patented product designs without authorization.
The action seeks a general exclusion order barring the importation of any infringing, unauthorized pod-based product designed to be used with the Juul System, including compatible flavored pods and refillable pods, effectively eliminating a sector of illicit products that seek to circumvent federal policy, can present additional health and safety risks to adult consumers, and undercut underage-prevention measures.
Additionally, Juul Labs is asking the ITC to issue orders stopping the distribution, marketing, and sale of all such products already in the country.
This patent enforcement action builds off previous actions Juul Labs pursued at the ITC, targeting a broad range of importers of unauthorized Juul-compatible products, including Eonsmoke and Ziip Labs. According to Juul, past actions have successfully resulted in stopping the ongoing importation of more than 40 brands of illicit and unauthorized Juul-compatible pods and products.
With this new action, Juul Labs says it seeks an even larger impact with a remedy that will not only bar the pod products named in the complaint but will also bar all other infringing pod products that copy Juul Labs’ patented designs.
July 13, 2020
Court Strikes Warnings for Pipes and Cigars

Photo: Tobacco Reporter archive
A U.S. federal appeals court has ruled that the U.S. Food & Drug Administration (FDA) cannot require warning labels for cigar or pipe tobacco products, reports Halfwheel.
In a unanimous ruling, the U.S. Court of Appeals for the District of Columbia Circuit decided in favor of the plaintiffs in a case brought by the Cigar Association of America and others against the FDA.
Judge Gregory Katsas wrote that the FDA failed to produce evidence that the warning labels would reduce the number of smokers.
“The Deeming Rule does not consider the impact of health warnings on smoking cessation and adoption rates,” he said. “In fact, the rule scrupulously avoids the issue, and the FDA rarely even contenders otherwise. Instead, the FDA candidly acknowledged that ‘[r]eliable evidence on the impacts of warning labels … on users of cigars [and] pipe tobacco … does not, to our knowledge, exist.’”
Earlier this year, a U.S. District Court ruled that FDA could not require warning labels on premium cigars. The most recent decision throws out the district court ruling and modifies it to include all cigars and pipe tobacco products.
July 8, 2020
Hawaii Sues Juul for Misleading Marketing

Photo: jessica45 from Pixabay
Hawaii Attorney General Clare E. Connors has filed a lawsuit against Juul Labs seeking penalties, damages and injunctive relief for violations of the state’s Unfair and Deceptive Acts and Practices Law.
The complaint alleges that, for a period of more than five years, the defendants misleadingly marketed Juul e-cigarettes, intending to hook users on the product in the same manner used by tobacco companies in the marketing of cigarettes.
According to the attorney general, the defendants used marketing strategies that targeted teenagers, making Juul products seem desirable, all while falsely understating the nicotine content of the product and its addictiveness.
“In marketing their e-cigarettes to Hawaii’s children, these companies ripped pages directly out of the tobacco company playbook and resurrected Joe Camel for a 21st Century audience,” said Connors. “By misrepresenting nicotine content and by presenting their products as healthy alternatives to cigarettes, they deceived the public and created a new generation of nicotine addicts.”
The state seeks civil penalties of up to $10,000 per violation and damages along with an injunction requiring the defendants to halt their deceptive advertising practices and fund mitigation programs, including vaping-cessation programs.
July 1, 2020
PMI Countersues RJR For Patent Infringement

Photo: PMI
Philip Morris International (PMI) filed counterclaims against R.J. Reynolds Tobacco Co. (RJR) for patent infringement in the federal court action that RJR commenced against PMI and Altria, PMI’s IQOS distributor in the U.S., on April 9, 2020 in the Eastern District of Virginia.
PMI also filed a partial motion to dismiss RJR’s claims against it. PMI believes that RJR’s infringement action is without merit, and that RJR’s own electronic nicotine delivery system (ENDS) products infringe multiple patents owned by PMI and Altria. PMI is bringing counterclaims to recover “the considerable damages” caused by RJR’s infringements.
“RJR appears to have brought this action in the hopes of stopping [PMI’s] innovative IQOS heated tobacco system, which has a proven track record in switching smokers away from combustible cigarettes, from disrupting its core business in combustible cigarettes and overtaking its secondary line of e-vapor products,” the filing states.
“Having failed to develop a competing offering in the heated tobacco space, RJR apparently now seeks to block that space in its entirety by bringing this meritless litigation. But in its haste to do so, RJR has overlooked the fact that its own line of e-vapor products (which are far less effective in switching smokers away from combustible cigarettes than IQOS) infringe multiple patents owned by [PMI].”
The counterclaim alleges that RJR was concerned by the commercial threat posed by IQOS, and RJR is now attempting to stop IQOS with this case. “But in its haste to stop IQOS, RJR committed two fatal errors. First, it asserted meritless patent claims,” the filing states. “Second, it overlooked the fact that its own e-vapor products infringe multiple patents owned by [PMI] and co-defendants Altria Client Services and Philip Morris USA, Inc. [PMI] thus responds to RJR’s Complaint and brings counterclaims to recover the considerable damages flowing from RJR’s infringement.”
June 30, 2020
Challenge to Cigarette Ban Dismissed

South Africa’s ban on tobacco sales has caused the black market for cigarettes to explode, according to industry sources (Photo: BAT)
The Pretoria High Court has dismissed a bid by the Fair Trade Independent Tobacco Association (Fita) to lift South Africa’s ban on cigarette sales during the country’s coronavirus lockdown.
South Africa banned the sale of tobacco in March and extended the measure even as it lifted its ban on alcohol sales on June 1.
In announcing the High Court ruling, Judge President Dunstan Mlambo referenced the country’s state of disaster.
He said disasters, by their nature, may result in unforeseen consequences, but governments have to implement measures to manage and contain them.
The court also rejected Fita’s argument that cigarettes ought to have been considered essential because they are addictive.
“The fact that a substance is addictive does not render it essential,” it stated. “We therefore find no basis on which to interpret the level 5 regulations as permitting the sale of tobacco products.”
Fita will reportedly appeal the judgment.
A separate challenge to the tobacco ban, brought by local market leader British American Tobacco (BAT), is scheduled to be heard in August.
Unlike the case mounted by Fita, BAT challenges the constitutionality of the ban.
In an affidavit, BAT South Africa executive Andre Joubert argues the government failed to make a convincing legal argument that the ban was legally necessary or to provide legitimate arguments to show smoking increased the chance of contracting Covid-19, or that smokers would be worse off than nonsmokers if they contracted the virus.
Citing the rapidly rising illegal trade in cigarettes, BAT is pleading to have the case heard earlier than August.
June 29, 2020
Court Upholds FDA Authority Over Vaping

Photo: Michal Kalasek | Dreamstime.com
The 5th U.S. Circuit Court of Appeals has upheld the U.S. Food and Drug Administration (FDA)’s authority to regulate e-cigarettes as tobacco products, reports Reuters.
A unanimous panel ruled Thursday that Congress’ decision to delegate vaping regulation to the FDA was constitutional under the non-delegation doctrine because Congress had articulated an “intelligible principle” in delegating authority to determine what qualified as a tobacco product to the FDA.
The 5th Circuit’s ruling is the latest rejection of a series of legal challenges from the vapor industry.
June 29, 2020
Court Ordered to Reconsider Immunity in ‘Dalligate’

Photo: Csaba Deli | Dreamstime.com
Europe’s top court on June 18 sent back to a lower court a dispute over immunity in a political scandal involving Swedish smokeless tobacco and millions of dollars in bribes, reports Court House News Service.
The European Court of Justice (EJC) found that a lower court erred in its decision to side with the former head of the European Union’s anti-fraud office, Giovanni Kessler, whose immunity from prosecution had been rescinded by the European Commission following allegations of illegal wiretapping.
The case dates from 2012, when Maltese politician John Dalli either resigned from or was forced out of his post as the European commissioner for health and consumer policy following allegations of bribery.
An investigation by the EU anti-fraud office OLAF found that an associate of Dalli, Silvio Zammit had demanded €60 million ($67 million) from Swedish Match to lift a ban on snus, which is legal in Sweden but outlawed in other EU member states.
Dalli denied he had any knowledge of the bribe. He brought several complaints about his resignation controversy to the court in 2015, which he all lost.
During the OLAF probe, investigators allegedly listened in to a conversation with a witness in the investigation. The information wasn’t used in the investigation, but the actions would be a violation of Belgian wiretapping laws.
The case now returns to the General Court for another decision.
June 22, 2020