State ex rel Weiser v. JUUL Labs.

2022 CO 46

In Re State of Colorado, ex rel. Philip J. Weiser, Attorney General, Plaintiff v. JUUL Labs, Inc.; Adam Bowen; James Monsees; Nicholas Pritzker; and Riaz Valani, Defendants

Nos. 22SA108, 22SA111

Supreme Court of Colorado

September 26, 2022

ADVANCE SHEET HEADNOTE

In this case, the supreme court reviews the district court's order denying defendants Adam Bo wen, James Monsees, Nicholas Pritzker, and Riaz Valani's motions to dismiss for lack of personal jurisdiction. Defendants are California residents who served in various capacities as officers or directors of JUUL Labs, Inc., an e-cigarette manufacturer, or its predecessor companies.

The court now concludes that that because (1) the district court based its determination on allegations directed against JUUL and the group of defendants as a whole, rather than on an individualized assessment of each defendant's actions and (2) the State did not allege sufficient facts to establish either that defendants were primary participants in wrongful conduct that they purposefully directed at Colorado or that the injuries alleged in the amended complaint arose out of or related to defendants' Colorado-directed activities, the district court erred in finding that the State had made a prima facie showing of personal jurisdiction in this matter.

The court thus makes the rule to show cause absolute, and remands this case for further proceedings consistent with this opinion.

Original Proceedings Pursuant to C.A.R. 21 District Court, City and County of Denver, Case No. 20CV32283 Honorable J. Eric Elliff, Judge

Attorneys for Plaintiff:

Philip J. Weiser, Attorney General

Eric R. Olson, Solicitor General

Abigail M. Hinchcliff, First Assistant Attorney General

Megan Paris Rundlet, Senior Assistant Solicitor General

Bianca E. Miyata, Assistant Solicitor General

Jeffrey M. Leake, Senior Assistant Attorney General

Brady J. Grassmeyer, Assistant Attorney General Attorneys for Defendants Adam Bowen, James Monsees, Nicholas Pritzker, and Riaz Valani:

Stinson LLP

Zane A. Gilmer

Perry L. Glantz

Attorneys for Defendant Adam Bowen:

Boersch & Illovsky LLP

Eugene Illovsky Sharon Frase

Attorneys for Defendant James Monsees:

Orrick, Herrington & Sutcliffe LLP

James N. Kramer

Lauren B. Seaton

Attorneys for Defendant

Nicholas Pritzker and Riaz Valani:

Kellogg Hansen Todd Figel & Frederick, P.L.L.C.

Mark C. Hansen

Michael J. Guzman

David L. Schwarz

Attorneys for Amicus Curiae Colorado Trial Lawyers Association:

Wahlberg, Woodruff, Nimmo & Sloane LLP

Megan K. Matthews

Balaban Law, LLC

Olga Y. Steinreich

No appearance on behalf of JUUL Labs, Inc.

Rule Made Absolute JUSTICE GABRIEL delivered the Opinion of the Court, in which CHIEF JUSTICE BOATRIGHT, JUSTICE MÁRQUEZ, JUSTICE HOOD, JUSTICE HART, and JUSTICE SAMOUR joined. JUSTICE BERKENKOTTER did not participate.

GABRIEL, JUSTICE

¶1 In these original proceedings pursuant to C.A.R. 21, we review the district court's order denying Adam Bowen, James Monsees, Nicholas Pritzker, and Riaz Valani's (collectively, "defendants'") motions to dismiss for lack of personal jurisdiction. Defendants are California residents who served in various capacities as officers or directors of JUUL Labs, Inc. ("JUUL"), an e-cigarette manufacturer, or its predecessor companies. The State of Colorado, through Attorney General Philip J. Weiser, has filed an amended complaint alleging that defendants in their individual capacities, along with JUUL as a corporation, violated several provisions of the Colorado Consumer Protection Act ("CCPA") and are subject to personal jurisdiction in Colorado. Defendants contend that the district court's exercise of personal jurisdiction over them is improper because they lack the requisite minimum contacts with Colorado and the exercise of personal jurisdiction over them is unreasonable in the present circumstances. JUUL does not argue that the district court lacks personal jurisdiction over it.

¶2 We issued a rule to show cause and now conclude that because (1) the district court based its determination on allegations directed against JUUL and the group of defendants as a whole, rather than on an individualized assessment of each defendant's actions, and (2) the State did not allege sufficient facts to establish either that defendants were primary participants in wrongful conduct that they purposefully directed at Colorado, or that the injuries alleged in the amended complaint arose out of or related to defendants' Colorado-directed activities, the district court erred in finding that the State had made a prima facie showing of personal jurisdiction in this matter.

¶3 Accordingly, we make the rule to show cause absolute and remand this case for further proceedings consistent with this opinion.

I. Facts and Procedural History

¶4 Because this case comes to us in the context of a motion to dismiss that the district court resolved based on the allegations of the amended complaint alone, we take the facts principally from the amended complaint.

¶5 JUUL produces and markets under the JUUL name an electronic nicotine delivery system commonly referred to as an e-cigarette or vaporizer. The JUUL e-cigarette delivers nicotine in self-contained pods that are used in conjunction with a rechargeable handheld device that resembles a USB flash drive. It appears undisputed that JUUL's e-cigarettes and pods are available for purchase online and in retail locations throughout the United States.

¶6 JUUL traces its origins back to 2007, when Bowen and Monsees founded Ploom, Inc., a company that developed and sold pod-based tobacco vaporizers. Bowen served as Ploom's Chief Technology Officer, and Monsees served as its Chief Executive Officer ("CEO"). In 2015, Bowen and Monsees sold Ploom and started Pax Labs, Inc., where they first launched the JUUL product.

¶7 In October of 2015, Monsees, who was then Pax's CEO, stepped down and transferred into the role of Chief Product Officer. For the next ten months, three board members, including Pritzker and Valani, served on an executive committee that effectively ran the company's operations until the board named a new CEO.

¶8 Thereafter, in 2017, JUUL was spun off as a separate company in order to allow it to focus solely on e-cigarettes.

¶9 JUUL has publicly stated that its mission is to transition the world's adult smokers away from combustible cigarettes, to eliminate the use of such cigarettes, and to combat underage usage of JUUL products. In 2018, however, 27% of high school students in Colorado reported that they had vaped within the last thirty days-a rate almost double that of the national rate. And that same year, the commissioner of the U.S. Food and Drug Administration ("FDA") declared that the United States faced an "epidemic of youth-cigarette use."

¶10 Against this backdrop, in July 2020, the State filed a complaint against JUUL setting forth two theories of liability. First, the State alleged that JUUL had "created a public nuisance of youth and adult addiction that substantially, significantly and unreasonably interferes with the well-being of the Colorado public and its health, safety and welfare." Second, the State asserted that JUUL has engaged in numerous deceptive trade practices, each of which constitutes a violation of section 6-1-105(1), C.R.S. (2022), of the CCPA. In particular, the State alleged, among other things, that JUUL had (1) knowingly and recklessly advertised the sale of an addictive nicotine product to youth; (2) failed to disclose that its product contained nicotine and that nicotine is an addictive chemical; (3) knowingly, recklessly, and falsely represented the concentration and quantity of nicotine in JUUL's e-cigarettes; and (4) falsely implied that the primary ingredients in JUUL's e-cigarettes were approved for inhalation by the FDA.

¶11 Notably, the bulk of the State's complaint focused on JUUL's nationwide actions and advertising campaigns, including, among other allegations, that JUUL posted misleading information on its website regarding the ingredients of its products, engaged social media influencers and celebrities to market its products to underage consumers, and used a private company masquerading as a non-profit smoking-cessation organization to generate referrals for JUUL products. With regard to Colorado, the complaint alleged little more than that in September 2015, JUUL held over sixty promotional events at convenience and tobacco store parking lots in this state.

¶12 JUUL moved to dismiss the complaint in part, arguing that (1) the State's public nuisance claim failed under Colorado law and (2) certain of the State's CCPA claims were preempted by federal law. The district court granted JUUL's motion to dismiss as to the public nuisance claim but denied the motion to the extent that it was premised on JUUL's preemption arguments.

¶13 Thereafter, the State amended its complaint to add defendants, in their individual capacities, as defendants in the suit. The amended complaint summarizes the relationships between each individual defendant and JUUL as follows:

Defendant Adam Bowen co-founded the company that became JUUL with Defendant James Monsees in 2007. At all relevant times and up until the present date, Bowen served as the Chief Technology Officer and as a member of the Board of Directors of JUUL or its predecessors . . . .

Defendant James Monsees co-founded the company that became JUUL with Defendant Adam Bowen in 2007. Monsees served as Chief Executive Officer of JUUL until October 2015 when he transferred into the position of Chief Product Officer of JUUL, until he stepped down from that position in approximately March 2020. At all relevant

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