Juul Labs: The Rise and Demise of An E-Cigarette Empire

The History of Juul

Juul, Labs Inc., and its products, the Juul device and accompanying Juul pods, are the brainchild of Stanford University graduates James Monsees and Adam Bowen.  The two met while product design graduate students at Stanford.  In 2004, Monsees and Bowen co-authored a thesis presentation where the precursor to Juul, a product called Ploom, was first introduced.

Since then, Monsees and Bowen’s entrepreneurial desires led to the development of Juul; a highly profitable and highly panned vaping device.  Juul is embroiled in ever-growing litigation and investigation due to its teen-centered marketing and misrepresentations regarding the safety of its products.  This article delves into the history of Juul, its rise to fame, and its fall from grace.

After graduating, Monsees and Bowen turned their thesis into a reality and founded their first vaporizer startup, Ploom, in 2007.  By early 2008, venture capitalists had invested nearly $1 million.  While Ploom sold for a significantly steeper price ($75) than the Juul device known today, it functioned in largely the same way.  The vape operated in conjunction with single use “Ploom pods.”

Ploom continued to grow.  After securing nearly $5 million in venture funding, Ploom debuted a new product called “Pax” in 2013.  Among its multitude of investors were Japan Tobacco (maker of Winston and Salem cigarettes), Originate (a San Francisco software company), Japan Tobacco, Inc. (a foreign cigarette manufacturer) and Bay Area based angel investment group Sand Hill.

Pax debuted at a launch party in San Francisco; a marketing tactic that would later be employed en masse by Juul.  A notable difference between Pax and the present day Juul device is Pax was designed to be used with both marijuana or loose-leaf tobacco.

Approximately two years later, in February of 2015, Monsees and Bowen sold Ploom – both the brand and vaporizer line – to minority investor Japan Tobacco, Inc.  Monsees and Bowen then rebranded in America under the Pax brand.

Pax Labs Introduces Juul

Shortly after selling Ploom to Japan Tobacco, Inc., Pax launched the Juul device at a party in New York City on June 1, 2015 where guests were offered Juul products for free and encouraged to share selfies and other photos on social media.

The launch party and associated marketing campaign have been the subject of both social and legal scrutiny because it was blatantly targeted toward youth.  A byproduct of recycled yet successful youth-directed advertising tactics formerly used by big tobacco and the fact that the FDA did not regulate e-cigarettes as tobacco products until 2016.

This means prior to 2016, Juul and its competitors launched their products, and heavily marketed the same to youth, with little to no federal oversight.  It also absolved Juul from having to file FDA approval applications required for new drugs and devices.  In short, Juul was given unfettered and unregulated access to the youth market.  Teen vaping, unsurprisingly, began to rise.  Today, thirty (30) percent of high schoolers vape.  The rise of teen vaping tracks directly with the rise in Juul sales.  In 2016, Juul sales rose by 700%.

In addition to launch parties, Juul aggressively marketed its product on various social media platforms like Instagram and Twitter, used Instagram “influencers” and hashtags to target youth followers, and mounted its successful Vaporized” campaign.

Juul also purchased advertising space on teen websites to target underage consumers, including teen.com and seventeen.com, engaged in e-mail marketing campaigns that had no age restrictions or verification requirements, and allowed teens and underage users to purchase its products online as there was no age verification requirement for purchase.

After experiencing significant sales growth, Monsees and Bowen launched Juul Labs, Inc. as an independent company and separated from Pax Labs on July 1, 2017.  Later that year, Juul was the bestselling e-cigarette on the market having sold 1 million units and controlling approximately one-third of the U.S.  e-cigarette market.  2017 continued to be a stellar year for Juul; it raised over $110 million in venture funds from San Francisco venture capital firm Tao Capital, multinational financial services corporation Fidelity, and U.K. based finance boutique Evolution Capital.

Teen Vaping Epidemic

In March of 2018 major news outlets began to report on the rising teen vaping epidemic.  Teens unabashedly posted on social media platforms like Snapchat, Instagram, Facebook, and YouTube regarding their ability to Juul in class, in bathrooms at school, and at home without parents or teachers noticing due to its sleek design and lack of smell.  A month later, former FDA Commissioner Scott Gottlieb led a crackdown on the sale of Juul and Juul pods to minors.  The FDA described the crackdown as “the largest coordinated enforcement effort in agency history.”  The regulatory agency issued more than 1,300 warning letters and fines to retailers that illegally sold Juul products to minors.

In June of 2018, Juul announced only adult models who are former smokers that switched to Juul would be used on its Instagram, Twitter and Facebook.  The models became noticeably older in age.

In response to the public outcry regarding the significant uptick in teen vaping, San Francisco banned the sale of flavored e-cigarettes.  The ban was said to be the most restrictive in the country and was predicated to serve as a model for other communities throughout the nation.

However, the ban did not slow Juul’s forward movement.  In July 2018, Juul raised $1.2 billion in venture funding from a total of seven investors: Fidelity, Sand Hill, hedge funds Darasana Capital, Tiger Global, and E Squared Capital, venture firm Bracket Capital, and marijuana therapeutics manufacturer Applied Biosciences.  The company was valued at more than $16 billion.

While San Francisco’s ban did not affect Juul’s ballooning valuation, it did spur other regions to take similar action. States including Washington, Oregon, and Michigan have banned flavored e-cigarettes, sometimes permanently. Back in 2018, Israel became the first nation to ban all Juul products, characterizing them as “a grave risk to public health” because they contain more than 20 milligrams per milliliter of nicotine.

Litigation Begins

Juul was hit with its first, class action lawsuit in April of 2018, Colgate v. Juul Labs, Inc.  The case was filed in the United States District Court for the Northern District of California on behalf of Plaintiffs Bradley Colgate, Kaytlin McKnight, and other similarly situated individuals.  Colgate purchased Juul to help him quit smoking, but “the intense dosage of nicotine salts delivered by the Juul products resulted in an increased nicotine addiction, and an increased consumption of nicotine by Colgate.”  McKnight became addicted to nicotine salts and now vapes several Juul pods per week.  The complaint has been subsequently amended to add new plaintiffs.  The crux of the claims brought by the Colgate plaintiffs are that Juul inappropriately marketed its product as safe even though a Juul pod contains higher nicotine than cigarettes and directly targeted youth.

The Colgate suit was quickly followed by Cooper v. Juul Labs, Inc. et al. (filed May 2018 in California state court) and D.P. v. Juul Labs, Inc. et al. (filed June 2018 in federal court in New York).  Cooper began using Juul in an effort to quit smoking, however it worsened his nicotine addiction.  He went from smoking on the weekends to a habitual daily user within a matter of weeks. The suit also alleged changes in mood, stating Cooper becomes agitated and moody if he does not get regular doses of nicotine salts from Juul pods. “Whereas Cooper had never felt the need to smoke on a daily basis, he now finds that he feels compelled to vape Juul pods every day,” the complaint states.

D.P., a minor, alleges Juul designed its product to contain more nicotine than necessary to satisfy the cravings of an adult smoker. He became “heavily addicted to nicotine,” which in turn made him “anxious, highly irritable and prone to angry outbursts,” and had a negative impact on his school performance.  D.P. began using Juul after being exposed to it at school.  The complaint describes its use as “pervasive;” including on the school bus, in bathrooms, outside school, and even in class. To deter his use, the complaint states D.P.’s parents removed the door from his bedroom, locked parts of their house, instructed school officials not to let him use the bathroom unaccompanied, and subjected him to regular urine tests.  Despite this, D.P. was unable to quit Juuling.

Regulatory Bodies Begin Investigating Juul Amid Significant Rise in Sales

In September 2018, the FDA strengthened regulations against Juul and other e-cigarette manufactures.  The stated goal was twofold: (1) keep e-cigarettes on the market for former combustible cigarette smokers, and (2) keep e-cigarettes out of the hands and mouths of youth.  In October, the FDA targeted Juul specifically by raiding its San Francisco headquarters and seizing thousands of pages of marketing documents.  The raid was part of an investigation into whether Juul marketed its products to teens, and a response to Juul’s failure to respond to the FDA’s April 2018 request for materials relating to the marketing of its products.

Despite city-wide bans and the FDA raid, Juul’s sales and dominance in the e-cigarette market continued to soar.  By October of 2018, Juul accounted for 70% of the e-cigarette market.  Juul did, however, stop selling sweet and fruity flavors at brick and mortar stores as of mid-November 2018 in response to criticism that those flavors were most attractive to youth.  The flavored varieties were available for purchase online.

In the same month, the FDA announced a plan to curb flavored e-cigarette sales nationwide after reports that youth vaping ballooned among high school seniors by 90% in a single year. The FDA was not the only regulatory agency investigating Juul; the Federal Trade Commission launched an investigation into whether Juul marketed its products to minors in 2018.  According to reports issued in 2019, the FTC was looking into Juul’s use of online “influencers” and other marketing tools that were clearly directed toward young people, not former smokers as Juul alleged. The FTC requested information for years 2015, 2016, 2017 and 2018. The request included advertising budgets and product placements, college campus programs, social media accounts used and promotional give-away.

Altria and Juul Draw Criticism Regarding Dedication to Stopping Teen Vaping

“JUUL’s advertising imagery in its first 6 months on the market was patently youth oriented” – The conclusion of a 2019 study by Robert Jackler and others from the Stanford University School of Medicine.

Despite rising criticism of Juul’s marketing tactics, tobacco giant Altria (maker of Parliament and Marlboro cigarettes) bought 35% ownership of Juul for $12.8 billion on December 20, 2018.  This catapulted Juul’s valuation to $38 billion.  Juul also received a $2 billion bonus from Altria to distribute among its 1,500 employees.  If the bonus was distributed evenly between all Juul employees, that would have been enough to bonus each person approximately $1.3 million.

Investigations into Juul Strengthen as Public Reports of Vaping-Related Injuries Mount

In April 2019, the FDA announced it was investigating a potential safety issue related to vaping.  In a statement issued by then commissioner Gottlieb, the agency had received reports of a small subset of e-cigarette users suffering from seizures after vaping.  The reports were not specifically tied to Juul, however seizures were a known side effect of nicotine poisoning or overdose.

In a one-two congressional punch, the Senate launched an investigation into Juul’s deal with Altria and its advertising practices in April 2019, shortly followed by an investigation launched by the House in June. From the letter: “The corporate marriage between two companies that have been the most prolific at marketing highly addictive nicotine products to children is alarming from a public health standpoint and demonstrates, yet again, that Juul is more interested in padding its profit margins than protecting our nation’s health”.

In July 2019, Wisconsin officials warned the public regarding eight cases of severe lung disease in teens who vaped.  Chest X-rays revealed noticeable lung damage.  The Wisconsin reports were followed by an emergency notice from the Center for Disease Control (CDC). By August of 2019, the first vaping-related death was reported.  And by September, 530 reports of vaping related illnesses had been reported since June of the same year.  While Juul was not named as the only potential contributor to vaping related lung disease, it prompted stricter public scrutiny as to its claims that its products were a safe alternative to combustible cigarettes.

Public concern regarding the safety of its product did not stop Juul from forging ahead to expand its sales overseas.  In August of 2019, it raised $785 million in equity and debt financing from the Venture Capital firm Proioxis Ventures to speed Juul’s expansion abroad.

On August 29^th, Bloomberg News reported Juul as being involved in three reports of vaping-related seizures.  The same day, Juul’s CEO warned people via an interview with news outlet CBS that the long-term health effects of vaping are unknown.

The following month, the FDA issued a warning letter chiding Juul for representing its product as safe and marketing its product to children in school.

Juul Products Banned or Removed From Overseas Markets

Juul encountered issues with overseas sales as well.  It had long planned to launch in China, home to more than 300 million smokers and where its pods are manufactured. But on September 17, 2019, a selection of flavored Juul pods that went up for sale on two Chinese websites, JD.com and Tmall, were removed within a week.  Neither Juul nor the online retailers stated why.  Th next day, India outlawed the production, sale, import, and advertising of e-cigarettes nationwide, citing vaping negative impact on youth as the catalyst.  Juul had been planning to launch in India, home to more than 100 million smokers, by the end of 2019.

Juul’s problems continued to mount in September 2019.  The United States Attorneys Office for the Northern District of California launched a criminal investigation into Juul.  The criminal investigation runs parallel to those already launched by the FTC and the FDA regarding Juul’s marketing practices and its uniquely high nicotine content.

Juul’s Enmeshment with Big Tobacco Deepens

On September 25, 2019, Juul’s former CEO, Kevin Burns, stepped down and was replaced by longtime tobacco executive K.C. Crosthwaite.  Before joining Juul, Crosthwaite acted as Altria’s Chief Growth Officer.  The replacement was criticized by many because of Crosthwaite’s twenty-year tenure as a tobacco executive.  While at Altria, he was tasked with growth in the face of heavy tobacco marketing regulations.  Crosthwaite’s skillset would likely prove useful for Juul executives who saw the writing on the wall: it is only a matter of time until its products are regulated similarly to combustible cigarettes.

More Lawsuits and Pullback: School District Lawsuits, Juul Suspends Online and Mint Pod Sales

In September and October 2019, four school districts sued Juul arguing it created a public nuisance by marketing to children, misrepresenting the nicotine content, and endangering teenagers health.  The first suits were brought by Three Village Central in New York, La Conner in Washington, Olathe in Kansas, and Francis Howell in Missouri.

Juul announced it would stop the sale of its sweet and fruit flavored pods online on October 17, 2019.  The previous fall, Juul had stopped the sale of the same pods in brick and mortar stores, but decided to extend the ban to online sales a year later, assuring the public in a statement that it would continue to “develop scientific evidence to support the use of these flavored products.”

Litigation Continues

William Levin, a Levin Simes partner, has been appointed as liaison counsel in the California Juul JCCP. The claims pending against Juul are vast, and include allegations of improper marketing to youth through school visits, social media platforms, and fruit flavored pods; fraudulently marketing its product as a safer alternative to traditional cigarettes; incorporating nicotine salts (as opposed to freebase nicotine) into its pods making their product more palatable to young persons and those new to vaping; behavioral issues in adolescents and young adults due to severe nicotine addiction; personal injuries including respiratory failure, stroke, vape lung, and death.

More Information on JUUL Lawsuits, JUUL Injury

For more information regarding Juul injuries including heart attack, stroke, seizures, asthma, addiction and wrongful death please see our Juul health risk page.

Additional posts by Levin Simes regarding Juul lawsuits and health risks:

1. How to Stop Your Kids from Juuling
2. Virus and Vaping: Risks of JUUL and COVID-19 and Flu
3. Juul Puff Contains 5 Times Nicotine As Cigarette Puff
4. Juul Went To School To Tell Kids Juul “Totally Safe”
5. Mice Study: Lung Damage From Vaping Flavored E-Juice is Worse Than Cigarettes

Vape and JUUL Lawyer

If you have suffered a serious vape injury or a family member has a serious vape addiction, contact the vape lawyers at Levin Simes. We investigate cases of vaping lung injury, vaping lung infection, vape mod battery fire, seizure from vaping, stroke from vaping, heart attack caused by vaping, and addiction in minors and young adults. Contact us at (415) 426-3000, info@levinsimes.com, or through this page.

NO FEE UNLESS THERE IS A RECOVERY

‍