Colgate et al v. JUUL Labs, Inc. et al, No. 3:2018cv02499 - Document 139 (N.D. Cal. 2019)

Court Description: ORDER GRANTING 98 MOTION TO DISMISS IN PART AND DENYING IN PART; DENYING 98 MOTION TO COMPEL; 115 DISCOVERY LETTER; 116 MOTION TO SEAL by Judge William H. Orrick. (jmdS, COURT STAFF) (Filed on 8/23/2019)

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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 BRADLEY COLGATE, et al., Plaintiffs, 8 v. 9 10 JUUL LABS, INC., et al., Defendants. United States District Court Northern District of California 11 12 Case No. 18-cv-02499-WHO ORDER GRANTING MOTION TO DISMISS IN PART AND DENYING IN PART; DENYING MOTION TO COMPEL; DISCOVERY LETTER; MOTION TO SEAL Re: Dkt. No. 98, 99, 115, 116 Defendant JUUL Labs, Inc. (“JUUL”) produces an electronic nicotine delivery system 13 (“ENDS”) consisting of an electronic cigarette and a nicotine cartridge called a JUULpod (“pod”). 14 Consolidated Class Action Complaint (“CAC”) [Dkt. No. 82]. According to plaintiffs, forty-four 15 16 17 18 19 20 21 22 individuals from twenty-two different states, JUUL has used research from the tobacco industry to target youth and design a product that delivers more nicotine and is more addictive than combustible cigarettes. Plaintiffs seek to represent a nationwide class and numerous subclasses in claims for false advertising, fraud, unjust enrichment, several forms of product liability, several types of negligence, violation of Magnuson-Moss Warranty Act, breach of express and implied warranty, and violation of the unfair and unlawful prongs of various state consumer protection statutes. JUUL moves to dismiss the CAC and to compel certain plaintiffs to arbitrate their claims. 23 Defendant JUUL Labs, Inc.’s Motion to Dismiss Plaintiffs’ Consolidated Amended Complaint 24 (“MTD”) [Dkt. No. 99]; Defendant JUUL Labs, Inc.’s Notice of Motion and Motion [to] Compel 25 Arbitration (“MTC”) [Dkt. No. 98]. For the reasons stated below, JUUL’s motion to dismiss is 26 27 28 granted in part and denied in part. Its motion to compel arbitration is denied because plaintiffs did not have inquiry or actual notice of the arbitration provision. BACKGROUND 1 2 I. On October 30, 2018, I partially granted JUUL’s motion to dismiss and denied its motion 3 United States District Court Northern District of California PROCEDURAL BACKGROUND 4 to strike as premature. Order Partially Granting Motion to Dismiss and Denying Motion to Strike 5 (“Order”) [Dkt. No. 66]. I found that some but not all of the plaintiffs’ claims were preempted by 6 the Federal Food, Drug, and Cosmetic Act (“FDCA”) as amended by the Tobacco Control Act, 21 7 U.S.C. § 387 et seq. (“TCA”), which provides the Food and Drug Administration (“FDA”) with 8 exclusive authority to promulgate regulations on ENDS labeling. Id. at 7-11. Specifically, I held 9 that only claims based on the allegation that the JUUL’s labelling fails to warn consumers that its 10 nicotine formulation is more addictive than other methods of nicotine ingestion were expressly 11 preempted, and dismissed those claims with prejudice. Id. at 10-11. But claims based on the 12 mislabeling of the percentage of nicotine per pod were not preempted because the plaintiffs had 13 sufficiently alleged that plaintiff Bradley Colgate relied on JUUL’s representation that the pods 14 contained a formulation of 5% nicotine when the pods were alleged to contain a formulation of 15 6.2% nicotine. Id. In addition, a clause in the TCA expressly excepts advertisements from 16 preemption, so claims based on JUUL’s advertisements failure to warn consumers about the 17 potency and addictiveness of JUUL’s benzoic acid and nicotine salt formulation or the amount of 18 nicotine could be repleaded. Id. I also dismissed claims based on JUUL’s advertising for failure to meet Rule 9(b)’s 19 20 pleading requirements, claims based on unidentified state consumer protection laws, and the 21 breach of express warranty claim. Id. at 11-14, 18. Plaintiffs sufficiently stated claims based on 22 identified state consumer protection statutes, unjust enrichment, design defect, manufacturing 23 defect, breach of implied warranty of merchantability, and negligent misrepresentation. Id. at 13- 24 19. On January 30, 2019, the plaintiffs filed the CAC.1 Its allegations span 118 pages. They 25 26 27 28 1 On November 27, 2018, by stipulation, this case Colgate et al. v. JUUL Labs, Inc. and PAX Labs, Inc., No. 3:18-cv-02499-WHO, was related to and consolidated with Viscomi et al. v. JUUL Labs, Inc. and PAX Labs, Inc., No. 5:18-cv-03760 (E.D. Pa.) and J.Y. v. JUUL Labs, Inc., No. 2:18- cv-14416 (S.D. Fla.). [Dkt. No. 71]. 2 1 also include an 88 page appendix of individual plaintiff’s allegations. Individual Plaintiff 2 Allegations (“IPA”) attached to CAC as Appendix A [Dkt. No. 88-2]. 3 II. JUUL’s ENDS consist of an e-cigarette and a pod. JUUL’s e-cigarette is about the size 4 United States District Court Northern District of California FACTUAL BACKGROUND2 5 and shape of a pack of chewing gum. CAC at ¶ 22. Each pod is a plastic enclosure containing 0.7 6 milliliters of JUUL’s patented nicotine liquid and a coil heater. Id. The pods are sold in four- 7 packs in a variety of flavors, including mango, cool cucumber, fruit medley, cool mint, and crème 8 brulee. Id. at ¶ 25. When a sensor in the e-cigarette detects the movement of air caused by suction 9 on the pod, the battery in the e-cigarette activates the heating element and converts the nicotine 10 solution into a vapor consisting principally of nicotine, benzoic acid, glycerin, and propylene 11 glycol. Id. at ¶ 22. A light embedded in the JUUL device serves as a battery level indicator and 12 lights up in a “party mode” display of rainbow of colors when the device is waved around. Id. 13 According to some reports as of March 2018, JUUL represented 54.6% of the e-cigarette 14 traditional retail market. CAC at ¶ 16. JUUL’s Use of Tobacco Company Marketing Playbooks 15 A. 16 The CAC alleges that JUUL has intentionally copied the strategies and methods 17 previously used by tobacco companies to market cigarettes to minors and young people. Id. at ¶ 18 19. Tobacco companies are no longer allowed to use certain of those marketing methods pursuant 19 to the Family Smoking Prevention and Tobacco Control Act of 2009 and Master Settlement 20 Agreement (“MSA”) reached between the tobacco industry, governmental officials, and injured 21 smokers. Id. These strategies include: (i) using outdoor advertising such as billboards; (ii) 22 sponsoring events; (iii) giving free samples; (iv) paying any person to use, display, make reference 23 to or use as a prop any Tobacco Product or Tobacco Product package in any media, which 24 includes any motion picture, television show, theatrical production or other live performance, and 25 any commercial film or video; (v) paying any third party to conduct any activity which the tobacco 26 manufacturer is prohibited from doing; (vi) selling flavored cigarettes; and (vii) selling cigarettes 27 28 2 I construe the allegations in the CAC as true for the purposes of this order. 3 1 to minors, tobacco-brand sponsorships of sports and entertainment events or other social or 2 cultural events, and free giveaways of sample cigarettes and brand-name non-tobacco promotional 3 items. Id. at ¶¶ 103-105. The MSA made these strategies, published in tobacco industry documents and board United States District Court Northern District of California 4 5 meeting minutes, public. Id. at ¶ 19. JUUL’s founder James Monsees has stated: “It became a 6 very intriguing space for us to investigate because we had so much information that you wouldn’t 7 normally be able to get in most industries. And we were able to catch up, right, to a huge, huge 8 industry in no time. And then we started building prototypes.” Id. Plaintiffs allege that although 9 JUUL markets itself as a device targeted toward people who already smoke cigarettes, it actually 10 employed the tobacco industry’s playbook to sell its product to a new audience of non-smokers. 11 Id. at ¶ 17. JUUL’s Nicotine Salt Formulation 12 B. 13 Nicotine is an addictive substance whose pleasurable effects diminish with use, requiring 14 the user to consume it in increasing amounts to achieve the same effect. Id. at ¶¶ 27-28. Once a 15 user is addicted to nicotine, the user will experience withdrawal if she is unable to consume more 16 or enough nicotine. Id. at ¶ 30. It is a carcinogen and a toxic chemical associated with 17 cardiovascular, reproductive, and immunosuppressive problems. Id. at ¶ 31 (citing Mishra, A., et 18 al., HARMFUL EFFECTS OF NICOTINE, Indian J. Med. Paediatr. Oncol., 36(1): 24–31 (Jan.- 19 Mar. 2015), available at https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4363846/). According to 20 plaintiffs, because vaping introduces foreign substances into the lungs, prolonged use of vaping 21 products is believed to produce chronic obstructive pulmonary disease, like traditional cigarette 22 smoke, and to trigger immune responses associated with inflammatory lung diseases. Id. As 23 adolescents’ brains are still developing, they are particularly vulnerable to addiction. Id. at 33-34. 24 Plaintiffs cite the National Institutes of Health for the proposition that the “amount and speed of 25 nicotine delivery . . . plays a critical role in the potential for abuse of tobacco products.” Id. at ¶ 26 35. 27 28 JUUL’s pods use a nicotine salt formula derived from R.J. Reynolds Tobacco Company (“RJR”) that enhances the amount and speed of nicotine delivery. Id. at ¶¶ 35-37. Pax Labs (the 4 United States District Court Northern District of California 1 former parent company of JUUL) owns U.S. patent No. 9,215,895 (“the ’895 Patent”), which 2 describes a process for combining benzoic acids with nicotine to produce nicotine salts. Id. This 3 formulation mimics the nicotine salt additive developed and patented by RJR, such as the use of 4 nicotine benzoate to increase nicotine delivery in cigarette smoke. Id. JUUL’s formulation is 5 more addictive and dangerous than a normal cigarette because it delivers more nicotine up to four 6 times faster. Id. at ¶¶ 45, 55. 7 JUUL’s formula also makes ENDS easier to use because it causes less throat irritation or 8 “throat hit.” Id. at ¶¶ 38-41, 56. Throat hit is part of the body’s natural feedback mechanism for 9 inhaling harmful substances. Id. at ¶ 43. Plaintiffs allege that JUUL’s formulation makes it easier 10 for non-smokers to use JUUL’s products without negative side effects like coughing and irritation, 11 something that would not be important to users who already smoke cigarettes but is crucial to 12 appealing to non-smokers and generally enables compulsive use. Id. at ¶ 42. JUUL’s formulation 13 accomplishes this by containing almost no freebase (non-salt form) nicotine. Id. This means that 14 JUUL’s liquid formulation would cause the same amount of irritation as a non-salt liquid 15 formulation with one-twentieth of the amount of nicotine. Id. Plaintiffs cite studies that show that JUUL’s formulation delivers doses of nicotine that are 16 17 materially higher than combustible cigarettes. Id. at ¶¶ 46-48. The same studies show that 18 JUUL’s pods contain a concentration of 6.2% nicotine salt (about 60 mg/mL), rather than the 5% 19 nicotine (about 50 mg/mL) advertised along with more benzoic acid than listed in the ‘895 patent.3 20 Id. This would produce higher nicotine absorption than expected for the advertised formulation. 21 Id. Available data suggests that JUUL delivers about 30% more nicotine per puff than a 22 traditional cigarette. Id. at ¶ 49. JUUL has not disclosed to users that its products deliver a 23 particularly potent puff of nicotine. Id. at ¶¶ 51, 57. Instead, in a media blitz prior to its release, 24 JUUL provided data to claim that it delivered approximately 25% less nicotine to the blood than a 25 cigarette, creating the false impression that it is less addictive. Id. at ¶¶ 52-54. Plaintiffs claim that statements on JUUL’s website, and some of its advertisements, that a 26 27 28 3 Plaintiffs also cite to other studies showing strengths between 6.16% to 9.42% strength. Id. at ¶¶ 71-72. 5 1 “JUULpod is designed to contain approximately 0.7mL with 5% nicotine by weight at time of 2 manufacture which is approximately equivalent to 1 pack of cigarettes or 200 puffs” is false and 3 seriously misleading because JUUL knows that what is important is the amount of nicotine that 4 enters the bloodstream. Id. at ¶ 59. Citing various studies, plaintiffs allege that because of 5 differences in the way that nicotine from combustible cigarette smoke and vaporized nicotine salts 6 are absorbed by the body, the actual amount of nicotine consumed via one of JUUL’s pods is as 7 much as twice as high as that via a pack of cigarettes. Id. at ¶¶ 60-63. This is made worse because 8 all twenty cigarettes in a pack must be separately lit, while JUUL’s ENDS can be inhaled 9 continuously. Id. at ¶ 64. It can also be used indoors without detection, eliminating the need for United States District Court Northern District of California 10 smoke breaks. Id. 11 Taken together, JUUL’s liquid formulation delivers a higher amount of nicotine at a higher 12 speed than a freebase formulation, but with less of a throat hit, making it easier to use (and abuse). 13 According to plaintiffs, this renders JUUL’s “Switch” advertising campaign misleading because 14 JUUL’s ENDS is not an effective smoking cessation device, or a cost-effective alternative to 15 smoking. Id. at ¶¶ 73-79. The addictive nature of the product renders false the statement that 16 customers of JUUL’s autoship policies can “cancel anytime.” Id. at ¶¶ 80-84. JUUL’s Marketing 17 C. 18 JUUL has encouraged and taken advantage of viral marketing on social media and 19 elsewhere to sell its product to young and underage consumers. Id. at ¶¶ 85-86. Plaintiffs 20 describe viral marketing as having four features: “(1) a simple message—typically implied by an 21 image—that elicits an emotional response; (2) the strategic use of marketing platforms, especially 22 social media, to reach and engage the target audience; (3) use of content that invites participation 23 and engagement; and (4) use of third parties to magnify the impact of a message.” Id. at ¶ 88. 24 Because teenagers tend to use social media more than adults, and are also more susceptible to peer 25 pressure, viral marketing has helped JUUL attract underage users. Id. at ¶ 91. Plaintiffs liken 26 JUUL’s use of viral marketing to the tobacco industry’s strategy of marketing to young people to 27 form their next generation of customers. Id. at ¶¶ 93-99. 28 Plaintiffs state that JUUL is guilty of: “(i) intentionally designing a campaign that was 6 United States District Court Northern District of California 1 simple and would trigger an emotional response, particularly with young people; (ii) intentionally 2 designing flavored products that would appeal to teenagers and young adults; (iii) directing its 3 advertising to teenagers and young adults on social media; (iv) utilizing third party influencers to 4 amplify its message around the internet; (v) utilizing other social media tools, such as hashtags, to 5 encourage participation and word-of-mouth messaging by its customers; (vi) amplifying the 6 message through off-line advertising; and (vii) using a pricing and distribution model designed to 7 put the product within reach of youth.” Id. at ¶ 110. Through this campaign, JUUL persuaded 8 consumers, in particular teenagers and young adults, that its product was cool, while hiding 9 material information about the dangers associated with using the product. Id. Even after the 10 deactivation of its social media accounts, JUUL’s marketing continued to reach youth because of 11 its viral nature. Id. 12 To announce JUUL’s release, it launched its “Vaporized” advertising campaign using 13 stylish young models, bold colors, and memorable imagery. Id. at ¶ 114. Like the ads tobacco 14 companies used to produce, the campaign highlighted themes of sexual attractiveness, thinness, 15 independence, rebelliousness, and being “cool.” Id. at ¶ 115. The campaign did not include any 16 visible or prominent disclaimers about the dangers of nicotine. Id. at ¶ 118. It featured a major 17 display in New York City’s Times Square that would have been unlawful for a cigarette company 18 under the MSA. Id. at ¶ 120. JUUL also ran ads on social media and in youth magazines, such as 19 Vice. Id. at ¶¶ 121, 124. To the extent that the ads disclosed that JUUL’s products contained 20 nicotine, it was in small print against low contrast backgrounds. Id. at ¶ 127. Had the ads been for 21 cigarettes, warnings would have been required in a high contrast black and white box comprising 22 30% of the image. Id. 23 JUUL’s ads portrayed its products as status symbols and traded on the look and feel of 24 advertisements by Apple, Google, and similar tech companies with progressive and modern 25 reputations. Id. at ¶ 133. JUUL consistently compared its product to the iPhone through 26 statements like “the iPhone of e-cigarettes,” which JUUL posted on its website, distributed 27 through social media, and disseminated through its email campaign. Id. at ¶ 135. Its ads also 28 frequently included pictures of iPhones and other desirable Apple devices, including iPads, 7 1 expensive headphones, and laptops. Id. This presented its product as “must have” technology 2 and a status symbol. Id. Plaintiffs claim that the simple lines and color palettes of these ads 3 would have stood out to teens on social media, while disclaimers related to the nicotine in JUUL’s 4 products would have been hidden based on how smartphones display content. Id. at ¶¶ 137-139. 5 For instance, Facebook and Instagram typically only present to users the image and the first few 6 lines of text. Id. at ¶ 138. A viewer who would want to see the portion of the text containing the 7 disclaimer would need to click on the ad to reveal the remaining text. Id. JUUL’s point of sale 8 displays in gas stations reinforced this aesthetic. Id. at ¶¶ 162-166. United States District Court Northern District of California 9 JUUL also hosted a number of live events that would have been prohibited under the MSA 10 if JUUL were a tobacco company. Id. at ¶ 121. This included a series of pop-up “JUUL bars” in 11 Los Angeles, New York City, and the Hamptons, imitating pop-up restaurants and bars popular 12 among young urban consumers. Id. at ¶ 121. JUUL also sponsored at least 25 live social events 13 in California, Florida, New York, and Nevada, where invitations promised attendees free JUUL 14 starter kits, live music, and/or slumber parties. Id. at ¶ 125. There is evidence to suggest that 15 JUUL gave away over 5,000 starter kits, each containing one e-cigarette and four pods. Id. at ¶ 16 128. Plaintiffs claim that JUUL’s pricing model was designed to be affordable compared to 17 cigarettes to make it more accessible to young people. Id. at ¶¶ 240-44. They also allege that 18 JUUL has sought out retail locations near schools and asked that its products be displayed within 19 arm’s reach, not behind the counter. Id. at ¶¶ 245-50. 20 21 1. Use of Flavored Pods and Food Imagery The FDA banned flavored tobacco because of its appeal to young smokers. Id. at ¶ 144. 22 JUUL pods are sold in a number of flavors such as mango, “cool” cucumber, fruit medley, “cool” 23 mint, and crème brulee. Id. at ¶ 25. JUUL paired its flavors with ads using tag lines such as “save 24 room for JUUL” and “indulge in dessert without the spoon.” Id. at ¶ 142. There is evidence to 25 show that 81% of youth aged 12-17 who tried an e-cigarette first used a flavored e-cigarette and 26 that 85.3% percent of current youth e-cigarette users had used a flavored e-cigarette in the past 27 month. Id. at ¶ 145. 81.5% of current youth e-cigarette users said they used them “because they 28 come in flavors I like.” Id. Plaintiffs point to research that shows that when youth see flavored 8 1 ENDS liquids advertisements, they believe the advertisements and products are intended for them. 2 Id. In a recent study, 74% of youth surveyed indicated that their first use of JUUL’s particular 3 ENDS involved a flavored pod. Id. at ¶ 148. 4 5 suggestions for JUUL flavors and ran ads pairing it with coffee, other caffeinated drinks, and 6 desserts. Id. at ¶¶ 152-56. According to plaintiffs, viewers were conditioned to associate JUUL 7 with those foods and drinks and to trigger food-based physiological arousal, including increased 8 salivation and heart rate, making JUUL appealing for reasons relating to flavor (not switching 9 from smoking). Id. 10 United States District Court Northern District of California Outside of its youth-directed marketing, JUUL also hired celebrity chefs to provide pairing Plaintiffs state that in response to litigation (such as this case) and mounting public 11 pressure, JUUL announced in November 2018 that it had “stopped accepting retail orders” for 12 many of its flavored JUULpods, such as mango, crème brulee, and cucumber. Id. at ¶ 159. But 13 JUUL’s promise is misleading because it still manufactures and sells flavored JUULpods on its 14 website and in retail shops in Canada. Id. JUUL also continues to sell “Cool” Mint, a popular 15 flavor with youth, in gas stations. Id. 16 17 2. JUUL’s Social Media Accounts and Advertising JUUL maintains active accounts on a number of social media platforms, including 18 Instagram, Facebook, and Twitter. Id. at ¶ 168. Plaintiffs state that while JUUL continues to 19 tweet, in around November 2018, it deleted nearly all the content from its Instagram and Facebook 20 pages in response to this lawsuit. Id. Plaintiffs describe JUUL’s social media content as either 21 unpaid or paid advertising. Id. at ¶ 169. Unpaid advertising consists of JUUL posting its 22 advertisements directly to its own page. Id. Paid advertising involves JUUL targeting specific 23 demographics of people to receive its ads. Id. Most of JUUL’s unpaid advertising on social 24 media was done via Instagram. Id. at ¶ 170. 25 JUUL also engaged in unpaid advertising through its use of hashtags on Instagram, 26 Facebook, and Twitter. Id. at ¶ 172. The CAC describes hashtags as “simple phrases preceded by 27 a #, and they operate as a way of cataloguing posts. Authors of posts use hashtags if they want 28 their posts to be discovered and seen by people outside of their networks. On most social media 9 1 platforms, users can find information by doing a search for a hashtag with that key word.” Id. 2 Plaintiffs believe that JUUL’s hashtag marketing played a central role in the viral spread of online 3 JUUL content among teens. Id. at ¶ 173. 4 5 engage in micro-targeting in a way that allows them to show ads to precise demographics of 6 people based on the information the social media companies have about their users. Id. at ¶ 175. 7 Because minors saw JUUL’s paid advertising, plaintiffs believe that JUUL did not narrow its 8 target audience to adult smokers. Id. at ¶ 176. 9 10 United States District Court Northern District of California With regards to paid advertising, social media companies let advertisers such as JUUL 3. Third Party Influencers and Affiliates JUUL paid “influencers” to advertise its product. Id. at ¶ 178. In the social media 11 landscape, influencers are “high-social net worth” individuals who have developed large social 12 media followings. Id. People follow influencers because they are known to be trend-setters and 13 tend to post high quality, interesting photos and content. Id. Companies pay influencers to use 14 and post about their products in a similar fashion to “product placement” in traditional media. Id. 15 at ¶ 179. Plaintiffs identify a number of influencers JUUL used to market its products on social 16 media. Id. at ¶¶ 181-84. 17 JUUL also encouraged its distributors, wholesalers, and other resellers—either explicitly 18 or implicitly—to hire affiliates and influencers to promote JUUL’s brand and products. Id. at ¶ 19 185. Plaintiffs cite a number of YouTube videos by influencers who are sponsored by websites 20 that sell JUUL’s products. Id. at ¶¶ 186-90. JUUL only took action to remove unlawful JUUL 21 promotions by third party influencers in response to FDA scrutiny in 2018. Id. at ¶ 191. Plaintiffs 22 also allege that JUUL did not monitor the sales activities of its distributors in a way that fostered 23 sales to minors. Id. at ¶¶ 251-54. 24 JUUL offered influencers and other bloggers the option to make additional money by 25 posting links to JUUL’s website. Id. at ¶ 193. Those who chose to participate received a unique 26 hyperlink to JUUL’s site that would credit the influencer for any sales originating from that link. 27 Id. at ¶¶ 193-94. The relationship between JUUL and many of these influencers was not disclosed 28 to viewers. Id. at ¶¶ 196-199. JUUL would also promote images of celebrities, such as Katy 10 1 Perry, using its products. Id. at ¶ 200. As with many of JUUL’s other advertising strategies, this 2 would be unlawful for a tobacco company. Id. at ¶ 203. 3 United States District Court Northern District of California 4 4. Social Media Promotion by JUUL’s Customers and Third Parties JUUL not only used hashtags to get people to find its content, according to the CAC it also 5 created hashtags that encouraged social media users to create their own content. Id. at ¶¶ 206-12. 6 This allowed content about JUUL to reach minors because they might be friends with people over 7 the age of 18 or might follow adult influencers who were using these same hashtags. Id. Because 8 JUUL was likely monitoring the use of its hashtags, it would have seen the tens of thousands of 9 posts made by minors using JUUL related hashtags like #juul and #juulmoment. Id. at ¶ 213. 10 JUUL could have moved to enforce its trademark and take down these posts or infringing 11 accounts such as @doit4juul and @JUULgirls. Id. at ¶ 214. Some of these accounts, such as one 12 named @JUULnation on Instagram, posted tips on how to conceal JUUL devices in school 13 supplies and content that would only be relevant to school age users. Id. at ¶¶ 219-20. 14 @JUULnation also promoted the sale of JUUL’s pods directly through Instagram. Id. at ¶ 221. 15 Rather than move to end @JUULnation’s youth-targeted activity, JUUL began to use the 16 #JUULnation hashtag in its own posts. Id. at ¶¶ 224-26. Although the @JUULnation account has 17 been deleted, the #JUULnation hashtag continues to appear in posts promoting JUUL use (abusive 18 or otherwise) and unlawful sales of JUUL’s pods. Id. at ¶ 230. 19 5. Non Age-Restricted Emails 20 JUUL also promoted itself via an email subscription list that was not age-restricted. Id. at 21 ¶ 217. According to the CAC, the list included users who failed the age verification requirements 22 on JUUL’s purchase page. Id. These people were nevertheless added to JUUL’s mailing list and 23 emailed a coupon for a discount on a starter kit. Id. JUUL also used emails to distribute surveys 24 that were not age-restricted. Id. at ¶ 218. Thus plaintiffs believe that JUUL collected data from 25 minors and paid them (and other customers) up to $30 to complete certain surveys. Id. The CAC 26 also states that JUUL tracked the efficacy of its youth marketing in other unspecified ways. Id. at 27 ¶¶ 232-35. This fits a pattern of ineffective age verification on JUUL’s website that has allowed 28 minors to purchase JUUL’s products and obtain warranty service from the site. Id. at ¶¶ 255-59. 11 United States District Court Northern District of California 1 D. The Youth Vaping Epidemic 2 The above allegations have led to what the CAC describes as a youth vaping epidemic in 3 America. Id. at ¶¶ 260-62. On December 28, 2018, the University of Michigan’s National 4 Adolescent Drug Trends for 2018 report stated that increases in adolescent ENDS use from 2017 5 to 2018 were the “largest ever recorded in the past 43 years for any adolescent substance use 6 outcome in the U.S.” Id. at ¶ 262. The percentage of 12th grade students who reported vaping 7 almost doubled between 2017 to 2018, rising from 11% to 21%. Id. at ¶ 263. Because JUUL 8 controls over 50% of the e-cigarette market, plaintiffs believe that these increases are attributable 9 to JUUL. Id. FDA Commissioner Dr. Scott Gottlieb has described the increase in e-cigarette 10 consumption as an “almost ubiquitous—and dangerous—trend” that is responsible for an 11 “epidemic” of nicotine use among teenagers; Surgeon General Dr. Jerome Adams has warned that 12 the “epidemic of youth e-cigarette use” could condemn a generation to “a lifetime of nicotine 13 addiction and associated health risks.” Id. at ¶¶ 264-65. Anecdotal evidence from the website 14 Reddit, an internet forum popular with young people, suggest that this is true nationwide. Id. at ¶¶ 15 266-68. Approximately 3.6 million middle and high school students are vaping regularly. Id. at ¶ 16 277. 17 Plaintiffs cite a recent study of JUUL’s sales and marketing strategies that concluded that 18 the Vaporized ad campaign was incredibly successful, leading to retail stores selling out of 19 JUUL’s products and JUUL’s own site having difficulty meeting demand. Id. at ¶ 270. The study 20 also found that JUUL marketed its products across social media platforms in an apparently 21 coordinated fashion that included smaller targeted campaigns and affiliate marketing, all of which 22 caused the authors to question whether JUUL was paying for positive reviews and JUUL-related 23 social media content. Id. at ¶ 272. 24 According to the CAC, JUUL’s success marketing its products is the result of exploiting 25 regulatory loopholes that would prevent tobacco companies from doing the same things. Id. at ¶¶ 26 285-89. Plaintiffs claim that JUUL knew that it would eventually be regulated and sought to 27 addict as many young customers as possible while it could still plausibly deny that it was not 28 violating any FDA regulations. Id. In December 2018, Altria, which owns the Philip Morris 12 United States District Court Northern District of California 1 company, obtained at 35% stake in JUUL. Id. at ¶ 290. Although Altria is subject to the MSA, it 2 now has access to JUUL’s data while JUUL has access to Altria’s lobbying and marketing 3 expertise. Id. at ¶¶ 291-94. 4 E. Class Allegations and Subclasses 5 Plaintiffs bring this action on behalf of a proposed class defined as “all persons who 6 purchased, in the United States, a JUUL e-cigarette and or JUULpods.” Id. at ¶ 296. They also 7 propose nine other subclasses and reserve the right to propose additional subclasses based on 8 evidence uncovered in discovery. Id. at ¶¶ 297-305. The CAC brings fifteen causes of action for 9 claims related to false advertising, fraud, unjust enrichment, several forms of product liability, 10 several types of negligence, violation of Magnuson-Moss Warranty Act, breach of express and 11 implied warranty, and violation of the unfair and unlawful prongs of various state consumer 12 protection statutes. Id. at ¶¶ 319-505. They seek actual or compensatory damages, restitution, 13 injunctive relief, statutory damages, punitive damages, and fees and costs associated with this 14 action. Id. at 117. LEGAL STANDARD 15 16 I. MOTION TO DISMISS Under Federal Rule of Civil Procedure 12(b)(6), a district court must dismiss if a claim 17 18 fails to state a claim upon which relief can be granted. To survive a Rule 12(b)(6) motion to 19 dismiss, the claimant must allege “enough facts to state a claim to relief that is plausible on its 20 face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is facially plausible when 21 the plaintiff pleads facts that “allow the court to draw the reasonable inference that the defendant 22 is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation 23 omitted). There must be “more than a sheer possibility that a defendant has acted unlawfully.” Id. 24 While courts do not require “heightened fact pleading of specifics,” a claim must be supported by 25 facts sufficient to “raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555, 26 570. 27 28 Under Federal Rule of Civil Procedure 9(b), a party must “state with particularity the circumstances constituting fraud or mistake,” including “the who, what, when, where, and how of 13 1 the misconduct charged.” Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) 2 (internal quotation marks omitted). However, “Rule 9(b) requires only that the circumstances of 3 fraud be stated with particularity; other facts may be pleaded generally, or in accordance with Rule 4 8.” United States ex rel. Lee v. Corinthian Colls., 655 F.3d 984, 992 (9th Cir. 2011). In deciding a motion to dismiss for failure to state a claim, the court accepts all of the 5 6 factual allegations as true and draws all reasonable inferences in favor of the plaintiff. Usher v. 7 City of Los Angeles, 828 F.2d 556, 561 (9th Cir. 1987). But the court is not required to accept as 8 true “allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable 9 inferences.” In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008). United States District Court Northern District of California 10 II. MOTION TO COMPEL ARBITRATION 11 The Federal Arbitration Act (“FAA”) governs the motion to compel arbitration. 9 U.S.C. 12 §§ 1 et seq. Under the FAA, a district court determines: (i) whether a valid agreement to arbitrate 13 exists and, if it does, (ii) whether the agreement encompasses the dispute at issue. Lifescan, Inc. v. 14 Premier Diabetic Servs., Inc., 363 F.3d 1010, 1012 (9th Cir. 2004). “To evaluate the validity of 15 an arbitration agreement, federal courts should apply ordinary state-law principles that govern the 16 formation of contracts.” Ingle v. Circuit City Stores, Inc., 328 F.3d 1165, 1170 (9th Cir. 2003) 17 (internal quotation marks and citation omitted). If the court is satisfied “that the making of the 18 arbitration agreement or the failure to comply with the agreement is not in issue, the court shall 19 make an order directing the parties to proceed to arbitration in accordance with the terms of the 20 agreement.” 9 U.S.C. § 4. “[A]ny doubts concerning the scope of arbitrable issues should be 21 resolved in favor of arbitration.” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 22 1, 24-25 (1983). DISCUSSION 23 24 I. MOTION TO DISMISS 25 A. Preemption 26 JUUL claims that plaintiffs have attempted to re-allege preempted labeling claims in 27 contravention of my prior Order. MTD at 5-6. In support of its argument, JUUL cites to the CAC 28 and certain allegations in the IPA. Id. JUUL believes that allegations related to its point-of-sale 14 1 (“POS”) displays, are also preempted by the TCA and should be dismissed with prejudice. Id. I 2 disagree. United States District Court Northern District of California 3 As plaintiffs argue, their consumer protection claims are based on advertisements, not 4 labelling, and my Order held that claims based on advertisements were not preempted. Plaintiffs’ 5 Opposition to Second Motion to Dismiss at 19-20 (“MTD. Oppo.”) [Dkt. No. 108] (citing Order at 6 11). Pointing to the IPAs, plaintiffs assert that although plaintiff Adam Banner “understood 7 JUUL’s labeling representation that it was an ‘alternative to cigarettes’ to mean that the JUUL was 8 a way to move away from smoking[,]” he was actually referring to claims in JUUL’s ads, social 9 media, and emails. Id. (citing IPA at ¶ 60). The other examples refer to allegations that JUUL’s 10 pods are actually stronger than a pack of cigarettes or contain more than 5% nicotine, something I 11 ruled was not preempted. IPA at ¶¶ 228, 300, 324, 377, 381. Plaintiffs also contend that when 12 plaintiff David Kugler alleged that he was unaware that JUUL’s products contained nicotine and 13 that there was no warning on the device or pod, this was meant to make clear that JUUL’s 14 deception in its advertising was never cured by any labels on the products themselves. MTD 15 Oppo. at 20 (citing IPA at ¶ 205). None of these allegations are preempted because they are either 16 about advertisements or about the strength of JUUL’s nicotine liquid that I have ruled are not 17 preempted. 18 Other courts have considered arguments similar to JUUL’s concerning POS displays and 19 concluded that POS displays do not constitute labeling because they are “not attached to the 20 immediate container of a product and will not accompany the product during the period of use.” 21 In re Fontem US, Inc., No. 15-01026, 2016 WL 6520142, at *7 (C.D. Cal. Nov. 1, 2016) (citing 22 Chem. Specialties Mfrs. Ass’n, Inc. v. Allenby, 958 F.2d 941, 946 (9th Cir. 1992)). JUUL’s 23 citation to Kordel v. United States, 335 U.S. 345, 349 (1948) is unhelpful because it concerned 24 pamphlets, not point of sale displays such as the ones at issue here. MTD at 6. The above 25 allegations do not run afoul of my previous order and I deny JUUL’s motion to strike. 26 B. 27 I dismissed plaintiffs’ “false advertising, CLRA and laws of similar states, fraud, and UCL 28 Rule 9(b) and laws of similar states claims” for failure to meet Federal Rule of Civil Procedure Rule 9(b)’s 15 1 heightened pleading requirements for claims sounding in fraud in my prior Order. Order at 11-13. 2 JUUL argues that the allegations in the CAC and IPA still do not meet Rule 9(b)’s standard. MTD 3 at 6-8. Although plaintiffs have added new allegations and attached an appendix with pictures of 4 approximately fifty of JUUL’s advertisements, JUUL contends that plaintiffs have still not 5 pleaded their claims with the requisite amount of specificity. Id. It points to eighteen plaintiffs 6 who have not identified which specific advertisements they saw or even what text they remember 7 reading. Id. With regards to the plaintiffs who identified the ads they saw, JUUL asserts that they 8 did not explain how the ads were false or misleading. Id. It also states that even though the CAC 9 includes references to misstatements on its website or materials, there are no allegations that any 10 United States District Court Northern District of California 11 individual plaintiff actually viewed those statements. Id. Plaintiffs counter that the CAC has provided sufficient notice through its representative 12 samples because the purpose of Rule 9(b) is to provide defendants sufficient notice to defend 13 against a charge and not just deny that they have done anything wrong. Id. at 16-18. They argue 14 that they are not required to allege what specific text they remember reading. Id. at 17. Plaintiffs 15 describe the “who,” “what,” “when,” “where,” and “how” as follows: 16 17 18 19 20 The “who” is JUUL. The “what” are the statements and omissions described in section III.D.1, pp. 13- 14. The “when” is the period from JUUL’s introduction to the present. Dkt.# 66, pp. 12-13. The “where” is on JUUL’s social media postings, emails, POS materials, magazine ads, and website, examples of which were attached to the CAC as Appendix C. The “how” is that the misrepresentations and omissions were likely to mislead reasonable consumers about the nicotine content, addictiveness, and healthiness of its products. Id. They also contend that Rule 9(b) is relaxed for omission claims because requiring a plaintiff to 21 identify the precise time, place, and content of an event that did not occur would effectively gut 22 state laws prohibiting fraud-by-omission. Id. (citing In re Whirlpool Prods. Liab. Litig., 684 F. 23 Supp. 2d 942, 961 (N.D. Ohio 2009). 24 25 26 27 I agree with plaintiffs that their allegations regarding the “who,” “what,” “when,” and “how” are sufficient to meet Rule 9(b)’s requirements. But many of the allegations still fall short on the question of “where.” That the “who” is JUUL and the “when” is the period from the introduction of JUUL’s products to the present is undisputed. As to the “what,” plaintiffs 28 16 1 sufficiently plead that JUUL has materially omitted the difference between the pharmacokinetic 2 effects of its nicotine solution as compared to combustible cigarettes. CAC at ¶¶ 35-58. 3 Specifically, they allege that JUUL’s products contain more nicotine salt than advertised, its 4 formulation delivers 30% more nicotine per puff than a combustible cigarette, it delivers this 5 nicotine up to four times faster than a combustible cigarette, and because of the differences in the 6 way that nicotine from combustible cigarette smoke and vaporized nicotine salts are absorbed by 7 the body, the actual amount of nicotine absorbed from vaping an entire JUULpod is twice as high 8 as that via a pack of cigarettes. Id. at ¶¶45-49, 51, 55, 57, 59, 60-63. These omissions, if true, are 9 material. United States District Court Northern District of California 10 But many of the plaintiffs have still not described which ads they saw, and plaintiffs’ 11 authority does not persuade me that these representative ads are sufficient. Plaintiffs citation to 12 Fed. Trade Comm’n v. Lunada Biomedical, Inc., is unhelpful because there the plaintiff was the 13 Federal Trade Commission (“FTC”), not an individual or collection of individuals. No. 15-cv- 14 3380, 2016 WL 4698938, at *4 (C.D. Cal. Feb. 23, 2016). The FTC does not bring suit because it, 15 as an agency, was misled; rather it brings suit to protect members of the public. That a court 16 allowed it to show representative advertisements does not help plaintiffs here. Plaintiffs also cite 17 Zeiger v. WellPet LLC, 304 F. Supp. 3d 837, 849-50 (N.D. Cal. 2018) (Orrick, J.) and Astiana v. 18 Ben & Jerry's Homemade, Inc., No. 10-cv-4387-PJH, 2011 WL 2111796, at *6 (N.D. Cal. May 19 26, 2011) for the proposition that Rule 9(b)’s requirements are relaxed for omission claims. But 20 neither of these cases lower the standard on the “where” prong and in both cases it was pleaded 21 with specificity. Zeiger, 304 F. Supp. 3d at 849-50 (identifying the product label); Astiana, 2011 22 WL 2111796, at *6 (same). 23 Only the following twelve plaintiffs have identified specific ads or content on JUUL’s 24 website: Liliana Andrade, IPA at ¶ 24; Jose Angullo IPA at ¶¶ 31, 36; Adam Banner, IPA at ¶¶ 25 59-60; Bradley Colgate, IPA at ¶ 91; Austin Hester, IPA at ¶ 180; Edgar Kalenkevich, IPA at ¶¶ 26 186, 191; David Kugler, IPA at ¶ 204; Tracie Kugler, on behalf of her son, Z.K., a minor, IPA at 27 ¶¶ 223, 228; David Masessa, IPA at ¶¶ 278, 279, 280, 282; Laura Staller, IPA at ¶¶ 394, 396; 28 Anthony Smith, IPA at ¶ 408; and Michael Viscomi, IPA at ¶¶ 432, 438. Plaintiffs Jonathan 17 1 Mardis and J.Y. state that they saw unspecified images that are reposted on 2 http://www.classlawdc.com/2019/01/25/juul-images-2/, but that page contains over 200 images of 3 JUUL’s advertisements. IPA at ¶¶ 257, 465. Besides the twelve plaintiffs above who satisfy Rule 4 9(b), the remaining plaintiffs have failed to allege the “where” prong with sufficient detail. 5 United States District Court Northern District of California 6 C. State False Advertising, Deceptive Trade Practices, Fraud, Or Negligent Misrepresentation Theories 7 JUUL moves to dismiss plaintiffs’ state false advertising, deceptive trade practices, fraud, 8 or negligent misrepresentation theories on three grounds. First, plaintiffs did not identify the state 9 laws at issue with requisite specificity. MTD at 8-9. Second, plaintiffs failed to allege exposure 10 to any misleading representations. Id. at 9-11. And third, plaintiffs failed to plead reasonable 11 reliance of a likelihood of deception. Id. at 11-13. 12 13 1. Identification of Relevant State Laws In my previous order, I dismissed plaintiff’s claims for violation of the Consumer Legal 14 Remedies Act of California and similar consumer protection laws of other states for failure to 15 identify the relevant subsections of those state consumer protection laws. Order at 13-14. 16 Plaintiffs have now attached a table of deceptive trade practices statutes in all 50 states and the 17 District of Columbia. Chart of 50 States and Washington D.C.’s Deceptive Trade Practices 18 Statute attached as Appendix D to CAC (“DTP Table”) [Dkt. No. 81-5]. JUUL argues that this 19 table cites every conceivable subdivision of every possible state consumer statute without any 20 explanation as to how the elements are satisfied, and that on its face, many of the elements are not 21 satisfied. Id. at 8-9. In response, plaintiffs argue that they have selected the relevant sections of 22 the consumer protection laws that they allege to be at issue. MTD Oppo. at 16. I am satisfied by 23 the specificity of the table and find that it complies with my directive in the previous Order. 24 25 2. Exposure to Misleading Representations JUUL argues that plaintiffs have not plausibly alleged that they have been misled. MTD at 26 9-11. They claim that while their ads might resemble prior cigarette advertising, the use of 27 “bright” colors, “clean lines,” “minimal text,” “eye-catching graphics,” FDA-regulated flavors, 28 attractive adult models, and other common advertising practices are not grounds for a 18 1 misrepresentation claim. Id. It contends that unlike the cases involving combustible cigarettes, 2 there are no allegations of similar misrepresentations of concealment here and that there are only 3 conclusory allegations that it has represented its products as safe, not addictive, or helpful to 4 people trying to quit nicotine. Id. JUUL also argues that plaintiffs’ claims about the alleged 5 omissions are insufficient because there is no duty to warn beyond the FDA’s labeling 6 requirements and the State of California’s Prop 65 requirement because the risks of nicotine have 7 been well known for decades. Id. It says that it did identify its products’ nicotine content and 8 explained that it was roughly equivalent to a pack of cigarettes. Id. According to JUUL, many of 9 the plaintiffs were already smokers before trying JUUL’s products and would know that nicotine 10 United States District Court Northern District of California 11 is addictive. Id. Plaintiffs respond that JUUL’s advertising contained both affirmative representations and 12 omissions likely to mislead reasonable consumers about the nicotine content, addictiveness, and 13 health risks of its products. MTD Oppo. at 13. Plaintiffs point to JUUL’s allegedly misleading 14 claim that a JUULpod contains nicotine “equivalent to 1 pack of cigarettes or 200 puffs,” or that 15 “JUUL’s ads portray JUUL as a healthy, hip, fun activity, while omitting (or failing to 16 conspicuously disclose) that JUUL delivers extremely potent and addictive doses of nicotine, is 17 harmful to health, and is especially harmful to adolescents.” Id. at 13, 14. They also claim that 18 the “switch” campaign misleads consumers into believing that JUUL is a smoking cessation 19 device and a cost-effective “alternative to cigarettes,” and that the “cancel anytime” statement, in 20 conjunction with JUUL’s autoship service, misleads consumers into believing that they will not be 21 too addicted to cancel their subscription. Id. Plaintiffs also point out that JUUL paid third party 22 promoters without disclosing their payments. Id. 23 As I have stated above, plaintiffs have sufficiently stated an omission claim and an 24 affirmative misrepresentation with regards to JUUL’s claim that one pod has as much nicotine as a 25 pack of cigarettes. Although the dangers of nicotine are known to the community, it would go too 26 far to say that JUUL need not to warn consumers that using JUUL’s product will cause their 27 bodies to absorb twice as much nicotine as they would from a pack of cigarettes. It is also 28 irrelevant that certain plaintiffs were smokers before using JUUL. Being a smoker of combustible 19 1 cigarettes would not impart knowledge that JUUL’s liquid nicotine formulation might be twice as 2 potent. The motion to dismiss the false advertising, deceptive trade practices, fraud, or negligent 3 misrepresentation theories is denied as to claims related to JUUL’s pharmacokinetics.4 3. United States District Court Northern District of California 4 Reasonable Reliance and Likelihood of Deception 5 JUUL contends that plaintiffs are unable to plead that they reasonably relied on any of its 6 representations. First, it points out that fourteen of the plaintiffs switched to JUUL’s ENDS after 7 previously smoking cigarettes and would have known that nicotine is addictive. MTD at 11-12. It 8 argues that these plaintiffs cannot plausibly allege that they would have been better off not 9 switching. Id. Next, it argues that the claims of the non-smokers are also defective because it has 10 not concealed that it contains nicotine and that its packaging includes the California Prop 65 11 warning and the FDA-mandated nicotine warnings. Id. at 14. 12 I have rejected both of these arguments above. That smokers and nonsmokers alike might 13 be aware that nicotine is addictive does not mean that they were not entitled to rely on JUUL’s 14 representation that its pod contained the same amount of nicotine as a pack of cigarettes. Plaintiffs 15 have alleged that the pods both contain more nicotine than a pack of cigarettes and that the form of 16 the nicotine is twice as potent. JUUL’s motion to dismiss plaintiffs’ claims based on omissions 17 contained in its advertisements is denied. 18 D. 19 JUUL moves to dismiss plaintiffs’ product liability claims on four grounds. MTD at 14. 20 Product Liability First, they are preempted where they seek additional warnings on the risks of consuming nicotine 21 22 23 24 25 26 27 28 4 For the parties’ guidance, JUUL’s use of common advertising practices and its ads that follow the predominant marketing aesthetic of the last few years (“bright” colors, “clean lines,” “minimal text,” “eye-catching graphics,”) would not by itself constitute any sort of misrepresentation. Also, claims based on themes and vague terms in JUUL’s advertising are, as JUUL argues, nothing more than non-actionable puffery. In re Fontem, 2016 WL 11503066, at *9 (“Courts enter dangerous territory when they consider representations actionable based not on what they actually say, but on what plaintiffs claim defendants seem to be stating. This goes beyond viewing the allegations in the light most favorable to the plaintiff.”) Additionally, plaintiffs have not stated a claim based on JUUL’s statement that a user may cancel the autoship service at any time because none of the plaintiffs allege that they used the service. Only one plaintiff, Hasnat Ahmad, even claimed that he was aware of the service. IPA at ¶ 2. 20 1 or the pharmacokinetic properties of JUUL ENDS. Id. Second, plaintiffs have only pleaded the 2 elements of California product liability claims and California law does not apply to non-California 3 plaintiffs. Id. Third, plaintiffs’ failure to warn and negligent marketing claims fail because JUUL 4 had no duty to provide additional warnings and plaintiffs do not allege proximate cause. Id. 5 Fourth, plaintiffs’ design and manufacturing defect claims do not allege a cognizable defect or 6 proximate cause. Id. I have rejected JUUL’s claims related to preemption above and turn to its 7 other arguments. 8 United States District Court Northern District of California 9 1. Choice of Law JUUL states that plaintiffs do not cite the different product liability laws of each state in 10 the CAC, so they must be seeking to bring their product liability claims under only California law. 11 Id. It argues that this is improper because plaintiffs have failed to engage in the requisite choice of 12 law analysis to determine if California product liability law should apply to non-California 13 plaintiffs as well. Id. (citing Mazza v. Am. Honda Motor Co., 666 F.3d 581 (9th Cir. 2012)). 14 Plaintiffs counter that they have stated all the elements necessary to prove their claims in any state. 15 MTD Oppo. at 20. In support of their argument, plaintiffs attached another table to their 16 opposition purporting to list the elements of different product liability claims for every state. 17 Exhibit B (“Product Liability Chart”), attached to MTD Oppo. [Dkt. No. 108-2]. JUUL replies 18 that this impermissibly uses an opposition brief to raise claims or allegations not raised in the 19 CAC. Defendant JUUL Labs, Inc.’s Reply in Support of Motion to Dismiss Plaintiffs’ 20 Consolidated Amended Complaint (“MTD Reply”) at 10-11 [Dkt. No. 112]. 21 JUUL is correct that new allegations contained in an opposition motion may not be 22 properly considered in ruling on a motion to dismiss. Schneider v. California Dep’t of Corr., 151 23 F.3d 1194, 1197 n.1 (9th Cir. 1998). Even if I considered the table, it is unhelpful. Certain boxes 24 use check marks while others use stars. Some of the stars correspond to information in the column 25 titled “other” while some stars do not. See Product Liability Chart at 8, 13. Further, the chart 26 appears to underscore that the fifty states do not share similar product liability laws and that 27 plaintiffs’ product liability claims may not be suitable for resolution as a class action. 28 That said, I decline to address the Mazza issues at the pleading stage. I expect more 21 1 dedicated briefing on this point should this case proceed to class certification. Plaintiffs may 2 amend their complaint to include the product liability chart, or an improved version of it, if they 3 wish to pursue these claims. United States District Court Northern District of California 4 2. Failure to Warn 5 Assuming that plaintiffs are proceeding on only the California-law product liability claims 6 of the California plaintiffs, a defendant can be held strictly liable for failure to warn if the plaintiff 7 proves the following: “(1) the defendant manufactured, distributed, or sold the product; (2) the 8 product had potential risks that were known or knowable at the time of manufacture or 9 distribution, or sale; (3) that the potential risks presented a substantial danger to users of the 10 product; (4) that ordinary consumers would not have recognized the potential risks; (5) that the 11 defendant failed to adequately warn of the potential risks; (6) that the plaintiff was harmed while 12 using the product in a reasonably foreseeable way; (7) and that the lack of sufficient warnings was 13 a substantial factor in causing the plaintiff's harm.” Rosa v. City of Seaside, 675 F. Supp. 2d 1006, 14 1011 (N.D. Cal. 2009) (Fogel, J.). Under a negligence theory, the “manufacturer has a duty to use 15 reasonable care to give warning of the dangerous condition of the product or of facts which make 16 it likely to be dangerous to those whom he should expect to use the product or be endangered by 17 its probable use, if the manufacturer has reason to believe that they will not realize its dangerous 18 condition.” Artiglio v. General Elec. Co., 61 Cal. App. 4th 830, 835 (Cal. Ct. App. 1998). In 19 other words, “[n]egligence law in a failure-to-warn case requires a plaintiff to prove that a 20 manufacturer or distributor did not warn of a particular risk for reasons which fell below the 21 acceptable standard of care, i.e., what a reasonably prudent manufacturer would have known and 22 warned about.” Carlin v. Superior Court, 13 Cal. 4th 1104, 1112 (Cal. 1996). However, a 23 manufacturer is under no duty to warn against obvious or generally known or recognized dangers. 24 See Krawitz v. Rusch, 209 Cal. App. 3d 957, 966 (Cal. Ct. App. 1989). 25 JUUL argues that the failure to warn claims brought under strict liability (claim 4) and 26 negligence (claim 5) fail because JUUL has no duty to provide warnings beyond those already 27 required by the FDA and California’s Prop 65 because of the obvious risks involved with the use 28 of its ENDS and because of the well-known risks of nicotine. Id. It also contends that under the 22 1 CAC, it did warn that its products contained nicotine and about the risks inherent in the use of its 2 ENDS. Id. (citing CAC at ¶ 67 (“[t]he original JUUL product labels had a California Proposition 3 65 warning indicating that the product contains a substance known to cause cancer, and a warning 4 to keep JUULpods away from children and pets.”)). It points to its website’s warnings that its 5 products contain nicotine, have potential health impacts, and should not be used by minors. Id. It 6 argues that none of the named California plaintiffs plausibly allege that JUUL’s failure to warn 7 was the proximate cause of their harm. Id. I have already addressed a number of these arguments above. Plaintiffs have adequately United States District Court Northern District of California 8 9 alleged that JUUL has a duty to warn that its nicotine formulation is stronger than the 5% nicotine 10 on the label and that a pod contains more nicotine than a pack of cigarettes. The CAC adequately 11 alleges that JUUL failed to meet this duty in its advertising, social media communications, and on 12 its product label. I have also found that with regards to JUUL’s advertisements (but not its 13 labelling), plaintiffs have sufficiently alleged that JUUL has failed to inform its customers about 14 the risks created by the pharmacokinetics of its liquid nicotine formulation, specifically that users 15 will absorb up to twice as much nicotine than they would from combustible cigarettes with the 16 same amount of nicotine. While the risks of nicotine in general may be known in the community, 17 the risks of JUUL’s formulation are not. Although the parties attempt to distinguish what adults 18 and adolescents in the community know, e-cigarettes are a new technology and do not fall under 19 California’s obvious danger rule. Turning to reliance, Colgate is the only California plaintiff who has specifically identified 20 21 an advertisement that may serve as the basis of his failure to warn claim on JUUL’s 22 pharmacokinetics.5 IPA at ¶ 89. Minor plaintiffs D.D. and C.D. have not identified any specific 23 ads or POS materials that they relied on. C.D. alleges that “he had seen [POS] promotional 24 materials for JUUL devices and products, including signs and displays” featuring “images of 25 JUUL’s multicolored fruit- and dessert-flavored pods and offers of discounts on the JUUL ‘Starter 26 27 28 5 Plaintiff Kaytlin McKnight is one of the California plaintiffs. On June 14, 2019, I issued an order to show cause why her case should not be dismissed for failure to prosecute. [Dkt. No. 127]. McKnight has failed to appear or provide any response by the deadline set in the order and she is dismissed without prejudice. 23 1 Kit.’ ” Id. at ¶ 119. He “did not see any warnings or disclosures in these POS materials about 2 JUUL’s nicotine levels or the risks JUUL posed [and the] representations and omissions in 3 JUUL’s in-store promotions materially impacted C.D.’s assessment of, and eventual decision to 4 use, JUUL products.” Id. This is not specific enough. D.D. and C.D. point to promotional 5 content created by third parties about JUUL, rather than statements by JUUL itself. Id. at ¶ 123. 6 Even if this third party content could be attributed to JUUL, and plaintiffs have not sufficiently 7 alleged that it can, D.D. and C.D. do not identify what particular third party content they saw. L.B. does not identify any ads by JUUL and states: L.B. was introduced to JUUL products by her friends at school when she was in the eighth grade. The JUUL device bears no warning labels about nicotine or content, and L.B.’s friends did not warn of her of the risks of JUUL use. Had L.B. known, or understood, the risks that the JUUL posed, she would never have used it. 8 9 10 United States District Court Northern District of California 11 L.B. would not have tried a JUUL but for the fruit flavors offered to her by her friends. The fruit flavored JUUL product her friends offered her led L.B. to believe that the product was safe to use. She did not know she was ingesting nicotine from a nicotine delivery system that delivered as much—or more—nicotine than a cigarette. She knew not to smoke but did not understand the risks of ingesting nicotine from ENDS. 12 13 14 15 Id. at ¶¶ 305-06. Here, L.B. appears to only base her failure to warn claims on a lack of labelling. 16 Such a claim is preempted. Both C.D. and L.B. may be able to plead reliance based on statements 17 contained in promotional emails they allegedly received from JUUL. Id. at ¶¶ 125, 312. But they 18 do not do so and do not describe the content of any promotional emails. JUUL’s motion to 19 dismiss the failure to warn claims against Colgate is denied. It is granted as to D.D., C.D., and 20 L.B. 21 3. 22 Negligent Marketing JUUL moves to dismiss plaintiffs’ negligent marketing claim by arguing that it is 23 subsumed into the negligent failure to warn claim. MTD at 14. Plaintiffs counter that negligent 24 marketing claims have been allowed to proceed in cases involving gun and slingshot 25 manufacturers. MTD Oppo. (citing Soto v. Bushmaster Firearms Int’l, LLC, 331 Conn. 53 (Conn. 26 2019); Ileto v. Glock Inc., 349 F.3d 1191 (9th Cir. 2003); Moning v. Alfono, 400 Mich. 425 (Mich. 27 1977)). JUUL responds that when a party raises both negligent marketing and product liability 28 24 1 claims regarding the same product and conduct, courts hold that the negligent marketing claims 2 are subsumed by the product liability claims. MTD Reply at 13-14 (citing Pooshs v. Phillip 3 Morris USA, Inc., No. 04-cv-1221-PJH, 2013 WL 2252471, at *7 (N.D. Cal. May 22, 2013); 4 Merrill v. Navegar, Inc., 26 Cal. 4th 465, 481 (Cal. 2001). United States District Court Northern District of California 5 I agree with JUUL; the reasoning in Pooshs is persuasive. There, the court found that the 6 claims of negligent marketing, advertising, distribution, and selling were subsumed by the 7 misrepresentation and failure-to-warn claims because “the purported ‘breaches’ of the ‘duty of due 8 care’ listed in plaintiff's opposition to the present motion largely serve[d] only to restate the claims 9 of negligent design, negligent misrepresentation, and negligent failure to warn[.]” 2013 WL 10 2252471, at *7. Here, the negligent marketing claim essentially restates the negligent failure to 11 warn claim and negligent design claims. The negligent marketing claim even states that JUUL 12 was in breach by “designing and manufacturing a product that, due to its ease of inhalation, 13 deceptive flavoring and nicotine potency, is hazardous to foreseeable users, namely minors.” 14 CAC at ¶ 428. The negligent marketing claim is dismissed. 15 16 4. Design and Manufacturing Defect JUUL moves to dismiss plaintiffs’ design and manufacturing defect claims on the ground 17 that the nicotine contained in its pods is not a defect but instead the purpose of its products. MTD 18 at 18-21. It also argues that the fruit flavors, reduced throat hit, and the youthful and trendy 19 packaging are not cognizable defects because they align with JUUL’s goal of providing a more 20 satisfying product to adult smokers. Id. It contends that the law does not ban flavors for adult 21 products or require any particular amount of throat hit absent government regulation. Id. Rather, 22 product defect claims are based on a product’s safety, not its desirability, and only the FDA has 23 the power to impose product standard regulations regarding flavors or features that affect “throat 24 hit.” Id. It claims that the FDA has stated that flavors may be desirable to adults and help them 25 switch from cigarettes, and it has indicated that it intends to place certain restrictions on channels 26 through which flavored products may be sold. Id. It argues that the FDA’s “product standards” 27 requirements preempt state law under the TCA. 21 U.S.C. § 387p(a)(2)(A). It notes that plaintiffs’ 28 failure to allege which design defect theory (consumer expectations or risk-benefits) they are 25 1 pursuing is fatal to their claim under California law. Id. Finally, it points out that plaintiffs have 2 not alleged how any defect was the proximate cause of their injury. Id. 3 4 Plaintiffs divide their counterarguments on behalf of all class members and on behalf of minors. a. 5 United States District Court Northern District of California 6 On Behalf of All Class Members Plaintiffs assert that the defect in JUUL’s products is that they are more addictive than 7 consumers would expect and that the lack of throat hit was engineered to mask this greater 8 addictive potential, not that they simply contain nicotine. MTD Oppo. at 21-22. Under the risk 9 utility test, plaintiffs claim that JUUL could have created a safer product by using a less addictive 10 freebase nicotine. Id. They argue that the risks of the challenged design outweigh any of its 11 potential benefits since JUUL claims its purpose is to provide a cigarette alternative for adult 12 smokers for whom an extra “nicotine kick” and the elimination of throat hit are unnecessary. Id. 13 They bolster their argument with Izzarelli v. R.J. Reynolds Tobacco Co., 136 A.3d 1232, 1251-54 14 (Conn. 2016) (Izzarelli I), where the court collected cases from numerous jurisdictions that applied 15 some form of the risk-utility test to design defect claims against cigarette manufacturers in which 16 plaintiffs identified specific defects to the cigarette brand at issue and/or a reasonably safer 17 alternative. Id. 18 JUUL contends that plaintiffs’ arguments fail because they ask it to make a “less satisfying 19 and fundamentally different product when the alleged ‘defects’ are inherent in the product.” MTD 20 Reply at 12-13. It claims that if its pods contained less nicotine per puff, users would compensate 21 by simply taking more puffs until they are satisfied. Id. 22 JUUL misses the point. Plaintiffs allege that each puff has more nicotine than a puff from 23 a combustible cigarette. CAC at ¶ 49. The issue is not creating a puff that is necessarily 24 satisfying, but one that is not stronger than necessary and more addictive than the equivalent puff 25 from a combustible cigarette. Moreover, the cases JUUL cites for its compensation theory involve 26 consideration of facts after trial and on summary judgment. Boeken v. Philip Morris Inc., 127 Cal. 27 App. 4th 1640 (Cal. Ct. App. 2005) (appeal from jury verdict); Grisham v. Philip Morris, Inc., 670 28 F. Supp. 2d 1014 (C.D. Cal. 2009) (summary judgment). As this motion is based solely on the 26 1 pleadings, JUUL’s authority is unhelpful. Additionally, JUUL’s preemption argument fails 2 because the TCA expressly does not preempt claims under state product liability law. 21 U.S.C. § 3 387p(b), Plaintiffs have plausibly stated a claim for manufacturing and design defect. They have 4 5 sufficiently alleged that JUUL’s products are more addictive than necessary to provide an 6 alternative to combustible cigarettes and that the risk of higher levels of addiction do not outweigh 7 the benefits of a nicotine formulation that the body absorbs at twice the rate of a pack of 8 combustible cigarettes with the same amount of nicotine. JUUL’s motion to dismiss the 9 manufacturing and design defect claims is denied.6 b. 10 The minor plaintiffs argue that they have sufficiently pleaded product defect claims under 11 United States District Court Northern District of California On Behalf of Minor Class Members 12 both the consumer expectation and risk-utility tests. MTD Oppo. at 22-23. They contend that 13 even if a product is reasonably safe for adults, its design can still be dangerous to youth. Id. Plaintiffs rely on two cases. The first is the Second Circuit’s decision in Izzarelli v. R.J. 14 15 Reynolds Tobacco Co., 701 F. App'x 26, 30 (2d Cir. 2017) (Izzarelli II), where the plaintiff 16 claimed that R.J. Reynolds had defectively designed its Salem Kings cigarettes to attract young 17 smokers. The court held that plaintiff’s evidence to show that Salem Kings were designed in part 18 to “attract young, new smokers, who disliked the bitterness of nicotine and preferred flavorful 19 cigarettes” was relevant to the consumer expectation test because “the youth marketing evidence 20 indicated that minors—who compose the bulk of new smokers and have strong brand loyalty— 21 were Salem Kings’ target demographic.” Id. Plaintiffs’ claims are similar here. They have 22 alleged that minors were the intended users of JUUL’s products and that due to the inability of 23 minors to fully appreciate the risks of using JUUL’s ENDS, the products are defective under the 24 consumer expectations test. CAC at ¶ 363. Turning to the risk-utility test, plaintiffs argue that instead of designing a product that 25 26 27 28 In my previous order, I denied JUUL’s motion to dismiss the manufacturing and design defect claims based on the allegation that JUUL’s pods contained more nicotine than users expected. Order at 15-16. 27 6 1 would be resistant to use by minors, JUUL did the opposite. It designed its products to encourage 2 use by minors by “offering candy-like flavors; manipulating nicotine content to increase 3 addictiveness and reduce ‘throat hit’; adding a light up ‘party mode’ feature; and utilizing a sleek, 4 stylish—and easily concealable—design popular with youth.” MTD Oppo. at 22-23. At 5 minimum plaintiffs claim that it was reasonably foreseeable that these design elements would 6 appeal to youth and that nicotine is more harmful to minors than to adults because their brains are 7 still developing. Id. Plaintiffs contend that JUUL could have easily designed a safer, alternative 8 product without these features, as none of them are needed for current adult smokers to switch 9 from cigarettes. CAC ¶¶ 414-422. United States District Court Northern District of California 10 These allegations are sufficient to state a claim by the minor plaintiffs under the risk-utility 11 test. The CAC also plausibly alleges that even if JUUL did not foresee that minors would use its 12 products, it is inconceivable that the company was unaware of how its products were being used 13 by minors, based on the amount of social media content minors posted of themselves using 14 JUUL’s ENDS. CAC at ¶¶ 188, 205, 212, 213, 223, 235. It is reasonable to infer that companies 15 such as JUUL with large social media presences assiduously monitor the use of popular hashtags 16 involving their name. It would have seen numerous posts of minors using their product. 17 E. Negligence Per se 18 JUUL argues that plaintiffs allege no facts to support their negligence per se claim based 19 on JUUL’s alleged failure to obtain licenses to sell its products in certain states. MTD at 21- 20 22. Rather, plaintiffs state a legal conclusion based solely on information and allege no facts to 21 support their belief. Id. JUUL contends that even if it did not have a license to sell its products, 22 this would not support a negligence per se claim because the licensing requirement is only an 23 administrative obligation to the state. Id. It asserts that because plaintiffs do not allege a violation 24 of any substantive standard of care related to licensing, or any facts suggesting that JUUL’s failure 25 to hold a license injured them, it cannot be the proximate cause of their injuries. Id. 26 In opposition, plaintiffs argue that violations of state licensing statutes constitute 27 negligence per se because the statutes are intended to promote public health and safety and that the 28 plaintiffs are within the group intended to be protected. MTD Oppo. at 30. They say that JUUL’s 28 1 proximate cause argument fails because it implicates a factual dispute and it is reasonable to infer 2 that plaintiffs would not have acquired JUUL products without JUUL selling them in states where 3 it had no license. Id. Although there is no Ninth Circuit precedent on point, I will follow the Fourth Circuit in United States District Court Northern District of California 4 5 Talley v. Danek Med., Inc., 179 F.3d 154 (4th Cir. 1999). “[W]here a statutory provision does not 6 define a standard of care but merely imposes an administrative requirement, such as the 7 requirement to obtain a license or to file a report to support a regulatory scheme, violation of such 8 requirement will not support a negligence per se claim.” Id. at 159. In Talley, the court held that 9 “[e]ven if the regulatory scheme as a whole is designed to protect the public or to promote safety, 10 the licensing duty itself is not a standard of care, but an administrative requirement.” Id. 11 Plaintiffs’ negligence per se claim based on a lack of licensure fails because they do not identify a 12 standard of care contained in any of the state licensing statutes to which they cite. MTD Oppo. at 13 30. 14 Plaintiffs rely on two cases that are inapposite because neither features a defendant 15 operating without a license: both involve licensed defendants violating duties imposed by the 16 licensing regime. See Hetherton v. Sears, Roebuck & Co., 593 F.2d 526, 529-30 (3d Cir. 1979) 17 (licensing statute required gun retailers to collect certain information); Jarrett v. Woodward Bros., 18 751 A.2d 972, 987 (D.C. 2000) (legislature intended to impose a duty on tavern keepers to not 19 serve intoxicated underage patrons). Neither Hetherton nor Jarrett involve liability to members of 20 the public for failure to hold a license. Rather, they involve violations by licensees. Accordingly, 21 plaintiffs’ negligence per se claim is dismissed. 22 23 24 F. Breach of Warranty 1. The Express Warranty Claim JUUL moves to dismiss the express warranty claim as precluded by its limited warranty. 25 MTD at 22-23. It states that its one-year warranty expressly covers only “defects in materials and 26 workmanship” for the JUUL e-cigarette device, but not the “JUULpods themselves”, and provides 27 that “[e]xcept as stated herein, JUUL Labs makes no other express warranty.” Id. (citing JUUL 1 28 Year Limited Warranty attached as Exhibit D to the Declaration of Austin V. Schwing [Dkt. No. 29 1 99-6]). According to JUUL, every state besides Louisiana has adopted Section 2-316 of the 2 Uniform Commercial Code, which allows merchants to limit the terms of their express warranties. 3 Id. Therefore, plaintiffs’ express warranty claim based on the nicotine concentration in JUUL’s 4 pods is outside the scope of the limited warranty and must be dismissed. Id. JUUL also contends 5 that plaintiffs’ express warranty claim should be dismissed for failure to provide the required pre- 6 suit notice. Id. It states that plaintiffs’ conclusory allegation that they “have met all requirements 7 for pre-suit notice” is insufficient. Id. 8 United States District Court Northern District of California 9 Plaintiffs respond that they have adequately alleged a breach of express warranty claim because JUUL’s affirmations of fact about the nicotine content were part of the basis of the 10 bargain. MTD Oppo. at 27-28. They claim that JUUL expressly warranted that “1 JUULpod 11 contains ~.7ml with 5% nicotine by weight;” that JUULpods are “5% Strength;” that a JUULpod 12 is equivalent to “1 pack of cigarettes or 200 puffs;” and that JUUL use causes less, or at least no 13 more, nicotine to enter the bloodstream than a cigarette. Id. (citing CAC at ¶¶ 467-71). According 14 to plaintiffs, JUUL’s argument about its limited warranty, by its own terms, applies solely to 15 JUUL’s e-cigarette, not its pods, and that even if the limited warranty applied, it would be valid 16 only if the buyer had knowledge or was chargeable with notice of the disclaimer before the 17 bargain was completed. Id. They state that JUUL has not shown that prior to purchase, any 18 plaintiff viewed the warranty contained only on JUUL’s website. Id. 19 I agree with JUUL that its limited warranty, which expressly disclaims any other express 20 warranty, precludes plaintiffs’ express warranty claim based on JUUL’s nicotine formulation. It is 21 immaterial that the warranty states that JUUL’s pods are not covered by the limited warranty; the 22 categorical disclaimer still applies. Accurate Transmissions, Inc. v. Sonnax Indus., Inc., No. 04- 23 cv-7441, 2007 WL 1773195, at *7 (N.D. Ill. June 14, 2007) (holding that a warranty for specific 24 parts was “in lieu of any other warranties” and that no warranties extended beyond the limited 25 warranty). Plaintiffs’ citation to Bohac v. Gen. Mills, Inc., No. 12-cv-05280-WHO, 2014 WL 26 1266848, at *3 (N.D. Cal. Mar. 26, 2014) is inapplicable because there was no limited warranty at 27 issue there. 28 Turning to the argument that the limited warranty only applies if the buyer had knowledge 30 United States District Court Northern District of California 1 or was chargeable with notice of the disclaimer before the bargain was completed, the limited 2 warranty was available online and plaintiffs can be charged with notice of it. Their citation to 3 Clark v. LG Elecs. U.S.A., Inc., No. 13-cv-485, 2013 WL 5816410, at *15 (S.D. Cal. Oct. 29, 4 2013) is unpersuasive. In Clark, the express warranty was not posted on the refrigerator 5 purchased by the plaintiff and it was not mentioned to her at the time of purchase. Id. The 6 plaintiff could only view the warranty once she received the refrigerator because it was contained 7 in the manual that was packed inside the refrigerator box and was not provided to her until after 8 purchase. Id. at *12. There was no evidence that the Clark plaintiff could have viewed the 9 warranty online before purchase. Here, the limited warranty was available for view on JUUL’s 10 website before purchase and plaintiffs can be charged with knowledge of it. Honig Decl. at ¶ 4. 11 The express warranty claim is dismissed. 2. 12 The Implied Warranty Claim In my previous order, I found that plaintiffs had sufficiently pleaded an implied warranty 13 14 claim based on the allegation that JUUL’s pods contain 6.2% nicotine rather than the 5% JUUL 15 represents on its packaging. Order at 17. JUUL states that it does not challenge this theory but 16 instead argues that no plaintiff has pleaded facts under this theory, and that only plaintiffs Banner, 17 Masessa, and Royce come close. MTD at 23-24. According to JUUL, Banner and Royce lack 18 privity with JUUL and Masessa belongs in arbitration.7 Id. Otherwise, JUUL contends that the 19 other plaintiffs cannot show that JUUL’s ENDS lack a basic degree of fitness for ordinary use, or 20 that it does not conform to the representations made on the label. Id. It claims that its products 21 are a fit alternative to cigarettes and that plaintiffs’ broad “unfit for use” claim is implausible 22 because that the FDA, American Cancer Society, and millions of consumers have recognized that 23 ENDS, and JUUL’s products in particular, offer a less harmful alternative to combustible 24 cigarettes. Id. Plaintiffs counter that in addition to their claims regarding the strength of JUUL’s pods, 25 26 they have also stated a breach of implied warranty claim based on the pharmacokinetics of 27 28 7 As discussed below, I deny JUUL’s motion to compel Masessa to arbitrate. 31 United States District Court Northern District of California 1 JUUL’s nicotine salt formulation. MTD Oppo. at 28-29. They have alleged that JUUL’s 2 formulation is “far more addictive than cigarettes, worsens or aggravates nicotine addiction, and 3 can serve as a gateway to cigarette use.” Id. (citing CAC at ¶¶ 479-93). JUUL’s argument that it 4 is not unfit for use simply because it contains nicotine mischaracterizes plaintiffs’ claims. Id. 5 As an initial matter, Masessa has adequately alleged that he relied on JUUL’s 6 representation that its products contain 5% nicotine. IPA at ¶¶ 283-86. The implied warranty 7 claim remains viable as to the percentage of nicotine in each pod. I also agree with plaintiffs’ 8 other argument that the allegations about the pharmacokinetics of JUUL’s formulation sufficiently 9 allege that JUUL’s products do not “possess even the most basic degree of fitness for ordinary 10 use.” Mocek v. Alfa Leisure, Inc., 114 Cal.App. 4th 402, 406 (Cal. Ct. App. 2003) (citing Cal. 11 Comm. Code § 2314(2)). Again, the issue is not that JUUL’s products contain nicotine; it is that 12 JUUL’s products are alleged to cause more than twice as much nicotine to be absorbed by the 13 body than a pack of combustible cigarettes with the same amount of nicotine. CAC at ¶ 63. A 14 product that causes the body to absorb twice as much nicotine as a combustible cigarette cannot 15 fairly be considered a cigarette replacement as a matter of law. I deny JUUL’s motion to dismiss 16 the implied warranty claim. 3. 17 Privity 18 JUUL argues that the express and implied warranty claims also fail to the extent that they 19 are brought by plaintiffs who did not purchase JUUL’s products directly from JUUL or who live 20 in states that require privity between parties to state a claim for breach of warranty. 8 MTD at 24. 21 JUUL identifies only four Plaintiffs—Ahmad, B.C., L.B., and Masessa—who allege purchasing 22 directly from JUUL’s website. Id. Plaintiffs claim that each state makes an exception to the privity requirement for 23 24 representations made by means of labels or advertisements. MTD Oppo. at 29. While the 25 label/advertisement exception may be true in the sixteen states that require vertical privity for 26 27 28 I do not discuss the privity requirement related to plaintiff’s breach of express warranty claim because it is dismissed. 8 32 1 implied warranty claims, JUUL argues that plaintiffs have only identified this exception as 2 applying in Arizona, California, and Florida.9 MTD Reply at 16-17. It also points out that, as 3 discussed above, most of the plaintiffs have not alleged what advertisements and representations 4 they relied upon with sufficient specificity. MTD Reply at 17. I agree with JUUL that in order to overcome the vertical privity requirement in the 5 6 identified states, plaintiffs must identify the other states that follow the advertising and labelling 7 exception that plaintiffs have identified in Arizona, California, and Florida. They also need to 8 identify the ads and representations the relevant plaintiffs relied on with greater specificity. 4. 9 JUUL contends that plaintiffs’ federal Magnuson-Moss Warranty Act (“MMWA”) claim 10 United States District Court Northern District of California Magnuson-Moss Warranty Act 11 fails because their express and implied warranty claims fail. MTD at 24-25. It also argues that 12 plaintiffs’ “express” MMWA claim fails because plaintiffs do not identify a “written warranty” as 13 defined by the MMWA. Id. And to the extent plaintiffs challenge labeling statements, JUUL 14 argues that these claims are “otherwise governed by federal law”—i.e., the TCA and the FDA’s 15 rules—and cannot support a claim under the MMWA. Id. JUUL’s arguments fail because plaintiffs have sufficiently alleged breach of an obligation 16 17 imposed by state law. Because their breach of implied warranty claim survives in part (at least), 18 so does their MMWA claim. In re Sony Grand Wega KDF-E A10/A20 Series Rear Projection 19 HDTV Television Litig., 758 F. Supp. 2d 1077, 1101 (S.D. Cal. 2010) (citing 15 U.S.C. § 2301(7); 20 Stearns v. Select Comfort Retail Corp., No. 08-cv-2746-JF, 2009 WL 1635931, at *9 (N.D. Cal. 21 June 5, 2009) (“The Magnuson–Moss Act provides a federal cause of action for state law express 22 and implied warranty claims.”). The motion to dismiss plaintiffs’ MMWA claim is denied. G. 23 The Unfair And Unlawful Prongs Of Unfair And Deceptive Trade Practices Statutes 24 1. The Unlawful Prong 25 26 27 28 9 The states identified by plaintiffs are Alabama, Arizona, California, Connecticut, Florida, Georgia, Idaho, Illinois, Kentucky, New York, North Carolina, Ohio, Oregon, Tennessee, Washington, and Wisconsin. See State Statutes Adopting U.C.C. § 2-314’s Provisions on Implied Warranties attached as Appendix G to the CAC [Dkt. No. 81-8]. 33 California’s unfair competition laws incorporate other laws and treats violations of those 1 2 laws as independently actionable unlawful business practices under state law. Chabner v. United 3 Omaha Life Ins. Co., 225 F.3d 1042, 1048 (9th Cir. 2000). Violation of almost any federal, state, 4 or local law may serve as the basis for a claim under the unlawful prong of the UCL. Saunders v. 5 Superior Ct., 27 Cal.App.4th 832, 838-39 (Cal. Ct. App. 1994). Because the CAC has sufficiently 6 pleaded multiple claims as described above, plaintiffs have also stated a claim under the unlawful 7 prong of California’s UCL. 2. 8 JUUL argues that plaintiffs cannot state a claim under the unfair prong of the UCL or 9 United States District Court Northern District of California The Unfair Prong 10 similar statutes because the claims that sound in fraud fail to meet the requirements of Rule 9(b) or 11 plausibly allege actual reliance and the plaintiffs do not plausibly allege a substantial injury that 12 outweighs any countervailing benefits and could not have reasonably been avoided.10 Id. Neither 13 argument has merit. Plaintiffs assert that an unfair claim does not necessarily sound in fraud and that under the 14 15 “Sperry” test an act is unfair if it (1) offends public policy; (2) is immoral, unethical, oppressive, 16 or unscrupulous; or (3) causes substantial injury to consumers. MTD Oppo. at 5 (citing Morrison 17 v. Toys “R” Us, Inc., 806 N.E.2d 388, 392 (Mass. 2004); accord Rohrer v. Knudson, 203 P.3d 18 759, 763-64 (Mont. 2009) (collecting cases adopting Sperry because of “abundant precedent in 19 other jurisdictions”). In California, the unfairness standard “is currently in flux.” Id. (citing In re 20 Adobe Sys. Privacy Litig., 66 F. Supp. 3d 1197, 1226 (N.D. Cal. 2014) (Koh, J.)). Some 21 California courts follow Sperry, while others follow a “tethering” test that requires the public 22 policy at issue to “be tethered to specific constitutional, statutory, or regulatory provisions.” Id. Plaintiffs contend that JUUL’s intentional targeting of minors satisfies either test for 23 24 unfairness because its violates public policy against promoting youth nicotine addiction. MTD 25 Oppo. at 5-9. This policy is tethered to state statutes prohibiting the sale of e-cigarettes to minors. 26 Id. Plaintiffs argue that targeting minors is oppressive and unscrupulous because: (i) it exploits 27 28 JUUL’s argument that plaintiffs’ alleged injuries were readily avoidable because JUUL’s products disclose that they contain nicotine has been addressed above and found unpersuasive. 34 10 1 them by luring them into addiction before they are mature enough to make an informed decision 2 whether vaping is worth it; (ii) minors are often accorded more protection under the law than 3 adults; (iii) minors are particularly injured by nicotine because it causes “substantial neural 4 remodeling” in adolescent brains with life-long effects on cognitive functions, as well as other 5 health problems; and (iv) there is a current vaping epidemic among non-smoking youth. Id.; CAC 6 at ¶¶ 31-34. United States District Court Northern District of California 7 Plaintiffs characterize JUUL’s development of its nicotine solution and its particular 8 pharmacokinetics as an unfair business practice because it rendered its products more addictive 9 than cigarettes, which is not “common knowledge” or disclosed by JUUL. Id. Finally, they assert 10 that the problem is not that JUUL has copied some elements of tobacco ads, but that JUUL copied 11 the tobacco industry’s youth-oriented marketing strategy when its product was even more 12 addictive than traditional cigarettes. Id. 13 Plaintiffs rely heavily on Mangini v. R.J. Reynolds Tobacco Co., 21 Cal. Rptr. 2d 232, 240- 14 02 (Cal. Ct. App. 1993), overruled on other grounds by In re Tobacco Cases II, 41 Cal. 4th 1257 15 (Cal. 2007). In Mangini, the court applied the Sperry test to find that RJR’s targeting of youth 16 through the Old Joe Camel cartoon character constituted an unfair business practice under the 17 UCL. Id. The court found that the first Sperry factor was met because “the targeting of minors in 18 cigarette advertising offends public policy” since “it is unlawful to sell or furnish cigarettes to 19 persons under the age of 18 years, and it is unlawful for minors to purchase or receive cigarettes.” 20 Id. at 241 (citing Cal. Pen. Code, § 308, subds. (a), (b)). The court reasoned, “[c]igarette 21 advertising directed to minors contravenes the statutory policy of keeping children from starting 22 on the road to tobacco addiction.” Id. The second Sperry factor was met because “exploit[ing] 23 minors by luring them into an unhealthy and potentially life-threatening addiction before they 24 have achieved the maturity necessary to make an informed decision whether to take up smoking 25 despite its health risks” was oppressive and unscrupulous. Id. The third Sperry factor was met 26 because the “targeting of minors causes substantial physical injury to them” since the “earlier a 27 child begins to use tobacco products, the more likely it is that the child will be unable to quit.” Id. 28 (citing Health & Saf. Code, § 25967, subd. (a)(5)). And “[s]moking is the single most important 35 1 source of preventable disease and premature death in California.” Id. (citing Health & Saf. Code, 2 § 25967, subd. (a)(1)). The plaintiff alleged that since the introduction of Old Joe Camel, teenage 3 smokers accounted for a much larger amount of Camel cigarette sales, “implicitly suggesting such 4 advertisements have harmed a great many teenagers by luring them into extended use of and 5 addiction to tobacco products.” Id. United States District Court Northern District of California 6 JUUL points out that Mangini was overruled by In re Tobacco Cases II and that 7 restrictions on commercial speech must be narrowly tailored to achieve the desired objective. But 8 In re Tobacco Cases II overruled Mangini as preempted by the Federal Cigarette Labeling and 9 Advertising Act (“FCLAA”) 15 U.S.C. § 1331 et seq., which regulates cigarette advertising. 41 10 Cal. 4th at 1276. The FCLAA does not apply to JUUL’s products because it defines cigarette as 11 “any roll of tobacco wrapped in paper or in any substance not containing tobacco,” and “any roll 12 of tobacco wrapped in any substance containing tobacco which, because of its appearance, the 13 type of tobacco used in the filler, or its packaging and labeling, is likely to be offered to, or 14 purchased by, consumers as a cigarette.” 15 U.S.C. § 1332(1). In re Tobacco Cases II did not 15 hold that Mangini’s Sperry analysis was in error. 16 The analysis in Sperry is both analogous and persuasive. Plaintiffs have stated an “unfair” 17 claim under state consumer protection law because they have sufficiently alleged that JUUL’s 18 targeting of minors meets the requirements of Sperry. The allegations also state an unfair claim 19 under the tethering test because the public policy at issue is tethered to state laws prohibiting the 20 sale of e-cigarettes to minors. 21 22 3. The Acts of Third Parties Plaintiffs claim that JUUL ratified the unfair and unlawful conduct of third parties that 23 were promoting and selling its products to minors and is vicariously liable for those acts. Id. 24 They state that JUUL ratified the acts of third party @JUULnation (the username of an 25 unidentified third party on Instagram) by knowingly accepting the benefits of @JUULnation’s 26 conduct or through willful ignorance. Id. @JUULnation posted tips on how to conceal JUUL 27 devices in school supplies; ridiculed efforts to combat use in schools; promoted videos of JUUL 28 influencers; sold JUULpods directly through its Instagram account; and promoted other sites 36 1 selling JUUL products to its 650,000 mostly teenage followers. Id.; CAC at ¶¶ 220-21, 229. 2 Because @JUULnation used JUUL’s hashtags in its posts, JUUL, which monitors its hashtags, 3 was aware of @JUULnation’s conduct and could have stopped and condemned @JUULnation’s 4 youth-targeted activity. Id., CAC at ¶¶ 214, 222-23. Instead, JUUL repeatedly promoted 5 @JUULNation’s hashtag (“#JUULnation”) through its own social media accounts, giving an 6 externally observable indication that it consented to @JUULnation’s activities and reaped the 7 benefits of free marketing and increased sales. Id.; CAC at ¶¶ 222-226. 8 United States District Court Northern District of California 9 Plaintiffs’ ratification theory fails; it does not apply when an actor is not an agent and does not purport to be one. MTD Reply at 6. “An act is ratifiable if the actor acted or purported to act 10 as an agent on the person’s behalf.” Kristensen v. Credit Payment Servs. Inc., 879 F.3d 1010, 11 1014 (9th Cir. 2018) (citing Restatement (Third) of Agency § 4.03). “Therefore, [w]hen an actor 12 is not an agent and does not purport to be one, the doctrine of ratification does not apply.” Id. 13 Plaintiffs do not allege that @JUULnation was, or purported to be, an agent of JUUL. They cite 14 Henderson v. United Student Aid Funds, Inc., 918 F.3d 1068, 1074 (9th Cir. 2019), but it is 15 distinguishable. In Henderson, the court found that certain debt collectors “pretended and 16 demonstrably assumed to act” as the agent of the creditor by calling debtors and telling them that 17 they were calling about a loan owned by the creditor. Id. The debt collectors then, without 18 needing the creditors approval, negotiated, deferred, and took payments on the creditor’s behalf. 19 That is not the case here. Plaintiffs cannot state an unfair claim against JUUL based on the 20 conduct of @JUULnation. 21 22 4. Abstention JUUL argues that I should dismiss the UCL claims under the doctrine of judicial 23 abstention because plaintiffs’ claims would require the imposition of additional regulations on the 24 ENDS industry that neither the legislature, the FDA, nor state regulatory agencies have chosen to 25 enact. MTD at 26-27. It relies on Winans by & through Moulton v. Emeritus Corp., No. 13-cv- 26 03962-SC, 2014 WL 970177, at *7 (N.D. Cal. Mar. 5, 2014), where the court abstained from the 27 plaintiffs’ claims for equitable relief to the extent that they were predicated on a regulation related 28 to residential care facilities for the elderly. The court found that it would have to assume the role 37 United States District Court Northern District of California 1 of a state regulatory agency to provide relief. Id. 2 JUUL’s authority is inapplicable. There is no regulation here that plaintiffs are attempting 3 to enforce. Abstention is reserved for cases involving “complex economic policy” or burdensome 4 monitoring of an injunction. It is not warranted here. 5 H. Claims Brought by Minors 6 JUUL moves to dismiss all of the minor plaintiffs’ claims because the wrongful conduct of 7 third parties supersedes any action taken by JUUL. MTD at 27-28. It analogizes to a number of 8 cases about alcohol consumption by minors to argue that the alleged illegal acts of third parties, 9 such as individuals and retailers selling or giving age restricted products to minors, breaks the 10 chain of causation.11 Id. It states: (a) it is unlawful to sell JUUL products, or any ENDS, to 11 minors; (b) JUUL does not control to whom third-party retailers or individuals sell JUUL 12 products; (c) JUUL’s e-commerce site uses an age-verification system; and (d) JUUL’s website 13 and product labeling warn that its products should be kept away from children. Id. JUUL points 14 to plaintiffs’ allegations of minors obtaining its products from unscrupulous third parties and notes 15 that much of the social media content related to JUUL is generated by third parties. Id. As an initial matter, some of the minor plaintiffs’ claims do not stem from JUUL’s 16 17 allegedly targeted ads. Minor plaintiffs who were allegedly injured by the pharmacokinetics of 18 JUUL’s ENDS under theories of product liability, implied warranty, and failure to warn are not 19 implicated by JUUL’s argument. With respect to the other claims, I agree with plaintiffs that the alcohol-related cases can be 20 21 distinguished, at least at the pleading stage, because the acts of the third parties here are plausibly 22 23 24 25 26 27 28 11 JUUL also cites a number of cases involving minors purchasing alcohol to support this proposition. Id. (citing Eisenberg v. Anheuser-Busch, Inc., No. 04-cv-1081, 2006 WL 290308, at *16 (N.D. Ohio Feb. 2, 2006), vacated and remanded sub nom. Alston v. Advanced Brands & Importing Co., 494 F.3d 562 (6th Cir. 2007); Bertovich v. Advanced Brands & Importing, Co., No. 05-cv-74, 2006 WL 2382273, at *11 (N.D.W. Va. Aug. 17, 2006); Goodwin v. Anheuser-Busch Cos., Inc., No. BC310105, 2005 WL 280330, at *5 (Cal. Super. Ct. Jan. 28, 2005); Reply at 8 (citing Kreft v. Adolph Coors Co., 170 P.3d 854, 856 (Colo. App. 2007); Alston v. Advanced Brands & Importing Co., No. 05-cv-72629, 2006 WL 1374514, at *9 (E.D. Mich. May 19, 2006), vacated and remanded, 494 F.3d 562 (6th Cir. 2007); Hakki v. Zima Co., No. 03-cv-9183, 2006 WL 852126, at *3 (D.C. Super. Ct. Mar. 28, 2006). None of these cases are controlling. As discussed below, I come to a different conclusion regarding foreseeability . 38 United States District Court Northern District of California 1 alleged to be foreseeable and therefore did not constitute an intervening cause. “A superseding 2 cause must be something more than a subsequent act in a chain of causation; it must be an act that 3 was not reasonably foreseeable[.]” USAir Inc. v. U.S. Dep’t of Navy, 14 F.3d 1410, 1413 (9th Cir. 4 1994) (internal citation omitted). According to the allegations of the CAC, JUUL specifically 5 targeted minors. Given the vast amount of social media content organized under JUUL related 6 hashtags, the use and trade of JUULs products among minors was foreseeable. In re Nat’l 7 Prescription Opiate Litig., No. 17-MD-2804, 2018 WL 6628898, at *19 (N.D. Ohio Dec. 19, 8 2018) (“When there is a flood of highly addictive drugs into a community it is foreseeable—to the 9 point of being a foregone conclusion—that there will be a secondary, “black” market created for 10 those drugs.”). Plaintiffs’ allegations, if proven, are sufficient to show that JUUL had reason to 11 know that its conduct would encourage illegal use and trade of its products; thus, the allegedly 12 illegal activity was foreseeable and not an intervening cause. The motion to dismiss the minor 13 plaintiffs’ claims based on intervening causes by third parties is denied. 14 II. 15 MOTION TO COMPEL ARBITRATION JUUL has identified at least five named plaintiffs (David Masessa, Ron Minas, Jack 16 Roberts, Hasnat Ahmad, and Michael Viscomi) who it believes should be compelled to arbitrate 17 their claims individually based on an arbitration agreement on JUUL’s website. MTC at 1. 18 According to JUUL, when those plaintiffs created or logged into online accounts on JUUL’s 19 website, they agreed to JUUL’s Terms and Conditions that included an arbitration agreement 20 requiring them to individually “resolve any claim, dispute, or controversy . . . by binding 21 arbitration by JAMS.” Id. (citing Declaration of Jake Honig attached as Exhibit C to MTC at §16 22 [Dkt. No. 98-5]). The agreement states that it is governed by California law. Id. 23 Plaintiffs argue that they are not bound by the arbitration agreement because they were not 24 provided notice of it. Plaintiffs’ Opposition to Defendant’s Motion to Compel Arbitration (“MTC 25 Oppo.”) at 6-14 [Dkt. No. 109]. They assert that: JUUL has not provided sufficient evidence that 26 Ahmad agreed; Ahmad and Roberts lacked capacity to enter into the arbitration agreement; 27 JUUL’s notice did not appear on Minas’ smartphone; JUUL’s website does not put users seeking 28 warranty service on notice; Roberts and Masessa did not agree to the terms and conditions as 39 United States District Court Northern District of California 1 returning users; Ahmad and Roberts’ claims accrued before they allegedly agreed to the terms and 2 conditions; and, several other contract defenses apply. Id. at 14-25. 3 A. Clickwrap, Browsewrap or Sign-Up Wrap 4 “In determining whether a valid arbitration agreement exists, federal courts apply ordinary 5 state-law principles that govern the formation of contracts.” Nguyen v. Barnes & Noble Inc., 763 6 F.3d 1171, 1175 (9th Cir. 2014) (internal quotation marks omitted). Under California law, 7 “[t]here is no contract until there is mutual consent of the parties. The manifestation of mutual 8 consent is generally achieved through the process of offer and acceptance.” Deleon v. Verizon 9 Wireless, LLC, 207 Cal.App. 4th 800, 813 (Cal. Ct. App. 2012) (internal citations omitted). 10 Whether the mutual consent necessary for contract formation exists “is determined under an 11 objective standard applied to the outward manifestations or expressions of the parties, i.e., the 12 reasonable meaning of their words and acts, and not their unexpressed intentions or 13 understandings.” Id. “Although mutual consent is a question of fact, whether a certain or 14 undisputed state of facts establishes a contract is a question of law for the court.” Id. (internal 15 quotation marks and citations omitted). 16 Because “the outward manifestation or expression of assent is the controlling factor,” an 17 offeree, “knowing that an offer has been made to him but not knowing all of its terms, may be held 18 to have accepted, by his conduct, whatever terms the offer contains.” Windsor Mills, Inc. v. 19 Collins & Aikman Corp., 25 Cal.App.3d 987, 992-93 (Cal. Ct. App. 1972) (internal citations 20 omitted). But contracts cannot be formed on the basis of stealth drafting: “when the offeree does 21 not know that a proposal has been made to him this objective standard does not apply. Hence, an 22 offeree, regardless of apparent manifestation of his consent, is not bound by inconspicuous 23 contractual provisions of which he was unaware, contained in a document whose contractual 24 nature is not obvious.” Id.; see also Specht v. Netscape Commc’ns. Corp., 306 F.3d 17, 29-30 (2d 25 Cir. 2002) (applying California law and quoting Windsor Mills). 26 “Arbitration agreements are no exception to the requirement of manifestation of assent,” 27 and “[c]larity and conspicuousness of arbitration terms are important in securing informed assent.” 28 Specht, 306 F.3d at 30. “If a party wishes to bind in writing another to an agreement to arbitrate 40 1 future disputes, such purpose should be accomplished in a way that each party to the arrangement 2 will fully and clearly comprehend that the agreement to arbitrate exists and binds the parties 3 thereto.” Id. (quoting Commercial Factors Corp v. Kurtzman Bros., 131 Cal.App.2d 133, 134-35 4 (Cal. Ct. App. 1955)). United States District Court Northern District of California 5 There are two main types of contracts formed on the internet. “Clickwrap” (or “click- 6 through”) agreements require website users to click on an “I agree” box after being presented with 7 a list of terms and conditions of use. Nguyen, 763 F.3d 1175-76. “Browsewrap” agreements exist 8 where a website’s terms and conditions of use are generally posted on the website via a hyperlink 9 at the bottom of the screen. Id. at 1176 (internal citations omitted). Unlike a clickwrap 10 agreement, a browsewrap agreement does not require an express manifestation of assent to the 11 terms and conditions. Id. Rather, a party gives its assent by simply using the website. Id. 12 (internal citations omitted). “The defining feature of browsewrap agreements is that the user can 13 continue to use the website or its services without visiting the page hosting the browsewrap 14 agreement or even knowing that such a webpage exists.” Id. (citing Be In, Inc. v. Google Inc., No. 15 12-cv-03373-LHK, 2013 WL 5568706, at *6 (N.D. Cal. Oct. 9, 2013). Some internet contracts 16 are a blend of the two, and have been called a “hybrid design,” “modified clickwrap”, or “sign-in 17 wrap” agreement. “Sign-in-wrap” agreements are those in which a user signs up to use an internet 18 product or service, and the signup screen states that acceptance of a separate agreement is required 19 before the user can access the service. Selden v. Airbnb, Inc., No. 16-cv-00933, 2016 WL 20 6476934, at *4 (D.D.C. Nov. 1, 2016). 21 JUUL’s website utilizes a sign-in wrap agreement. The website requires customers to first 22 create an online account in order to process transactions. MTC at 3-4. The sign-in page contains 23 fields and a button to login, and below that, fields and a button to “sign up.” Sign-Up/Log-In page 24 as it appeared from February 1, 2018 to June 30, 2018 (“Earlier Sign-Up Page”) attached as Ex. A 25 to Honig Decl. [Dkt. No. 98-3]; Sign-Up/Log-in page as it appeared from June 30, 2018 to August 26 9, 2018 (“Later Sign-Up Page”) attached as Ex. B to Honig Decl. [Dkt. No. 98-4]. Below the 27 “sign up” button the page states: “By registering with JUUL Labs, Inc., you agree to our Terms 28 and Conditions and Privacy Policy.” Id. According to JUUL, the “Terms and Conditions” and 41 1 “Privacy Policy” portions of the above sentence are hyperlinks to their respective pages. MTC at 2 3-4. United States District Court Northern District of California 3 Courts considering similar agreements have found them valid where the existence of the 4 terms was reasonably communicated to the user. Meyer v. Uber Techs., Inc., 868 F.3d 66, 76 (2d 5 Cir. 2017) (collecting cases). Plaintiffs attest that they were not on actual notice of the hyperlink 6 to the Terms of Service or the arbitration provision itself, and defendants do not point to evidence 7 from which a jury could infer otherwise. Therefore, the question is whether the plaintiffs were on 8 inquiry notice of the arbitration provision by virtue of the hyperlink to the Terms of Service on the 9 sign-up page and manifested their assent to the agreement by clicking “sign up.” Id. at 76-77. 10 B. The Earlier Login Screen 11 According to the declaration of Jake Honig, plaintiffs Masessa, Roberts, Viscomi, and 12 Ahmad saw a different version of the sign up screen than Minas because they accessed JUUL’s 13 website at an earlier date. Honig Decl. at ¶ 3. JUUL attached the following screen shot of the 14 Earlier Sign-Up Page: 15 16 17 18 19 20 21 22 23 24 25 26 27 28 42 1 Earlier Sign-Up Page at 2. Plaintiffs argue that the hyperlink to the terms and conditions is 2 inconspicuous on its own and within the context of the Early Sign-Up Page’s general design. 3 MTC Oppo. at 8-10. They point out that the hyperlink to the Terms and Conditions was not a 4 different color, underlined, italicized, or in any way visually distinct from the surrounding text. 5 Id. United States District Court Northern District of California 6 I agree. The hyperlink to the terms and conditions on the Earlier Sign-Up Page was not 7 conspicuous enough to put Masessa, Roberts, Viscomi, and Ahmad on inquiry notice. Courts 8 have found more conspicuous hyperlinks to be insufficient. See Cullinane v. Uber Techs., Inc., 9 893 F.3d 53, 62-63 (1st Cir. 2018) (gray rectangular box with the language “Terms of Service & 10 Privacy Policy” displayed in a larger font, in bold, contrasting in color, and highlighted by the box 11 around it was not reasonably conspicuous); Applebaum v. Lyft, Inc., 263 F. Supp. 3d 454, 466-67 12 (S.D.N.Y. 2017) (hyperlink in smallest font on the screen but colored in light blue on a white 13 background insufficient to provide notice). Here, the hyperlink is wholly indistinguishable from 14 the surrounding text. Users cannot be reasonably expected to click on every word of the sentence 15 in case one of them is actually a link. 16 JUUL’s cited authority is distinguishable. In Meyer, the Second Circuit found a hyperlink 17 that was highlighted, underlined, and with the operative text in all caps to be sufficient. 868 F.3d 18 77-78. In Fteja v. Facebook, Inc., the hyperlink was underlined. 841 F. Supp. 2d 829, 835 19 (S.D.N.Y. 2012). In Cordas v. Uber Techs., Inc., the phrase “Terms & Conditions and Privacy 20 Policy” was displayed in a clickable box. 228 F. Supp. 3d 985, 988 (N.D. Cal. 2017) (Seeborg, 21 J.). In Cairo, Inc. v. Crossmedia Servs., Inc., the hyperlink was underlined and highlighted. No. 22 04-cv-04825-JW, 2005 WL 756610, at *2 (N.D. Cal. Apr. 1, 2005). The hyperlink in Swift v. 23 Zynga Game Network, Inc. was colored blue. 805 F. Supp. 2d 904, 908 (N.D. Cal. 2011) 24 (Laporte, J.). 25 Here, JUUL’s hyperlink on its Earlier Sign-Up Page was not highlighted, underlined, in all 26 caps, or in a separate box. It would not have served to put a reasonable user of the internet on 27 inquiry notice of the arbitration provision. Plaintiffs Masessa, Roberts, Viscomi, and Ahmad 28 lacked inquiry notice. 43 1 C. The Later Login Screen 2 The only remaining plaintiff is Minas. According to JUUL, the sign-up page that Minas 3 would have seen was different than the other plaintiffs. Honig Decl. at ¶ 3. The key difference is 4 that the hyperlinks to “Terms and Conditions” and “Privacy Policy” are now highlighted: 5 6 7 8 9 10 United States District Court Northern District of California 11 12 13 14 15 16 17 18 19 Later Sign-Up Page at 2. I am not convinced that the mere change in color of the hyperlinks, without more, is 20 enough. In the cases JUUL cites above, besides Swift, the hyperlinks are also underlined, 21 highlighted, in all caps, or in a box. Additionally, as plaintiffs note, the other hyperlink on the 22 page is formatted differently. MTC Oppo. at 8-10. The hyperlink to the password recovery page 23 is bolded, underlined, and appears to be in a larger font size than the hyperlink at issue. Id. Taken 24 together, Minas was not on inquiry notice merely because JUUL changed the color of the terms 25 and conditions hyperlink. A reasonable user scanning the page would first see the “Forgot 26 Password?” hyperlink and would observe that it is a different color, underlined, and of a particular 27 font size. That user would not then see the “Terms and Conditions” and “Privacy Policy” 28 44 1 hyperlinks and conclude that they were clickable. They are not underlined, they are the same size 2 as the sentence they are in, and the color is different from the initial hyperlink they would see. 3 Minas lacked inquiry notice. Because I do not find that Masessa, Roberts, Viscomi, Ahmad, and Minas had inquiry or 4 5 actual notice of the arbitration provision, there has been no manifestation of assent to its terms. 6 They are not bound by it. I need not address the parties’ other arguments and the motion to 7 compel the above plaintiffs to arbitrate their claims individually is denied. 8 III. United States District Court Northern District of California 9 DISCOVERY LETTER AND MOTION TO SEAL On May 28, 2019, the parties also filed a joint discovery letter. [Dkt. No. 115-4]. The 10 letter related to my August 28, 2018 order stating that written discovery could be served but that 11 the parties did not need to respond until I issued a further order. [Dkt. No. 56]. At the June 12, 12 2019 hearing on the above motions, I lifted the limitation on discovery. It may proceed. 13 JUUL seeks to redact one word from the discovery letter related to what entities it has 14 produced documents to in response to investigatory demands. [Dkt. No. 115]. It also seeks to 15 redact several paragraphs and a footnote from the declaration of its attorney in support of its 16 motion to seal. [Dkt. No. 116]. 17 Records attached to non-dispositive motions are not subject to the strong presumption of 18 access. See Kamakana v. City & Cnty. of Honolulu, 447 F.3d 1172, 1179-80 (9th Cir. 2006). 19 Because the documents attached to non-dispositive motions “are often unrelated, or only 20 tangentially related, to the underlying cause of action,” parties moving to seal must meet the lower 21 “good cause” standard of the Federal Rules of Civil Procedure Rule 26(c). Id. (internal quotation 22 marks omitted). The “good cause” standard requires a “particularized showing” that “specific 23 prejudice or harm will result” if the information is disclosed. Phillips ex rel. Estates of Byrd v. 24 Gen. Motors Corp., 307 F.3d 1206, 1210-11 (9th Cir. 2002) (internal quotation marks omitted); 25 see Fed. R. Civ. P. 26(c). “Broad allegations of harm, unsubstantiated by specific examples of 26 articulated reasoning” will not suffice. Beckman Indus., Inc. v. Int’l Ins. Co., 966 F.2d 470, 476 27 (9th Cir. 1992). Because the discovery letter is a non-dispositive motion, the good cause standard 28 applies. 45 1 JUUL argues that there is good cause to seal here because the entity that issued the 2 investigative demand has indicated that its investigation is non-public. [Dkt. 116-3]. JUUL states 3 that the entity’s own operating manual treats information submitted to or developed by it as 4 confidential because release could result in reputational harm. Id. JUUL asks that I give 5 deference to the entity’s procedures and not unduly interfere with their investigation. Id. 6 7 CONCLUSION 8 JUUL’s motion to dismiss is granted in part as described above. Plaintiffs’ claims of 9 United States District Court Northern District of California At this stage on a non-dispositive motion, I grant the motion to seal. negligence per se and breach of express warranty are dismissed without leave to amend. Any 10 other amendment is permitted within 20 days of this Order. JUUL’s motion to compel arbitration 11 is denied. Its motion to seal is granted. 12 IT IS SO ORDERED. 13 Dated: August 23, 2019 14 15 William H. Orrick United States District Judge 16 17 18 19 20 21 22 23 24 25 26 27 28 46

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