San Francisco School District Sues Altria Over Teen Vaping, Settlement Soon Follows

Cartoon image of a hand holding a vape device

Weeks after San Francisco school district lawyers in federal court accused Altria Group Inc. (MO.N) of hooking a new generation of young people with its vaping products, Altria announced a settlement.

On May 10, 2023, Altria agreed to pay $235 million, which would settle about 6,000 lawsuits from individuals and government agencies nationwide, including the San Francisco school district.

The Accusations

In opening statements on April 24, Thomas Cartmell, representing the San Francisco Unified School District, told the jury that Altria, the country’s largest cigarette company and owner of the Marlboro brand, had conspired with e-cigarette maker Juul Labs Inc. to lure teenagers into vaping and addiction, creating a nationwide crisis.

Altria was Juul’s most significant investor from 2018 until earlier this year, when it reported in March 2023 that it had relinquished its 35 percent stake in Juul for licenses to select Juul intellectual property. Altria’s almost $13 billion 2018 investment in Juul was valued at $250 million by December 2022. The school district also sued Juul, with a settlement reached last year.

Altria’s lawyer, Beth Wilkinson, rebutted Cartmell’s statement by claiming Altria’s intent was to boost sales by offering cigarette smokers a safer option and that the company was not targeting teens.

“You can’t forget about those smokers,” she said. “If you can get smokers away from cigarettes, it’s a worthy cause.”

The Arguments in Court

Mr. Cartmell claimed Altria was unsuccessful at marketing its own e-cigarettes and relied on its investment in Juul for profits in that market, knowing Juul’s success was based on the youth market consuming its sweet-tasting, high-tech-looking products “packed with nicotine.” He blamed Altria and Juul for the inordinate amount of time school staff spent dealing with rampant vaping and was seeking reimbursement from Altria for the costs.

Ms. Wilkinson disputed Mr. Cartmell’s argument, claiming Altria was not behind any youth vaping surge because Juul e-cigarette sales fell during the time Altria was invested in Juul, and Altria did not invest in Juul until it had recalled most of its popular flavored products from the market. She also argued that a marketing strategy encompassing minors, who legally cannot buy e-cigarettes in the U.S., would be foolish because Altria and Juul knew the FDA would not approve products marketed to teens.

School District Test Case

The San Francisco school district lawsuit is the second test case involving Juul to go to trial. The first trial by the state of Minnesota resulted in a still-undisclosed settlement. However, Juul has agreed to settle most of the lawsuits against it for more than $1 billion to 48 states and territories and $1.7 billion to individuals and local governments.

Juul’s Troubles

Regulators in 2019 pressured Juul to yank most of its e-cigarette flavors from retail shelves. Much of Juul’s advertising was also halted. The U.S. Food and Drug Administration (FDA) in June 2022 banned Juul’s vaping products, but when Juul appealed the decision, the FDA agreed to reconsider the ban and put it on hold. An executive for the FDA’s center for tobacco products in 2022 called teen use of e-cigarettes a serious risk to public health and teen vaping at concerning levels.

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