Girl holding e-cigarette

E-cigarette manufacturer Juul Labs Inc. has resolved the legal uncertainty that had pushed it to the brink of bankruptcy, agreeing to a $1.7 billion settlement involving an estimated 10,000 plaintiffs, according to The Wall Street Journal.

The agreement will cover a range of cases, from government lawsuits to those of school districts, Native American tribes and consumer class-action and personal injury cases. The settlement involves a consolidation of cases centered in Northern California and comes just weeks before trials were expected to begin.

Juul Labs would not confirm financial terms of the deal, only that it had secured an equity investment to cover the settlement costs after a year of upheaval.

“These settlements represent a major step forward toward strengthening Juul Labs’ operations and securing the company’s path forward to fulfill its mission to transition adult smokers away from combustible cigarettes while combating underage use,” a company spokesperson said in a statement.

Juul’s Teen Marketing Strategy Key to Lawsuits

Juul has been under scrutiny since 2018 when it rocketed to the top of the e-cigarette and vaping industry, capitalizing on a marketing strategy that appealed to a youthful audience, including underage teenagers.

The company has said it never targeted young people – and never admitted wrongdoing – despite thousands of Juul lawsuits threatening its existence. Most of the plaintiffs blame Juul for the teenage vaping problem today, making it the overriding issue in most legal cases.

According to those familiar with the agreement reached, it does not offer funds immediately to plaintiffs, but it will open the claims process soon.

“In our ongoing fight for our company and mission, today’s news represents yet another significant step to secure our path forward,” Juul Chairman and C.E.O. K.C. Crosthwaite wrote in a memo to his staff following the Dec. 6 announcement.

The agreement comes three months after Juul agreed to pay almost $440 million to settle a two-year investigation by 33 states that was focused on the company’s early marketing strategy targeting underaged youth. Within the settlement were marketing prohibitions that are sure to hurt future sales.

States Welcome Juul Settlement

Some of the states have begun celebrating their success and detailing how the funds will be used.

Pennsylvania Attorney General Josh Shapiro recently announced that Juul will be paying his state $38 million, which will go to the Pennsylvania Department of Health’s Bureau of Health Promotion and Risk Reduction to fund various programs.

New Jersey Attorney General Matthew Platkin said recently that the lawsuit will help change “the behavior of a company that put kids at risk all across our country.” He believes his state will receive nearly $34 million.

“The scope of these lawsuits is enormous,” said attorney Sarah London, co-lead counsel for plaintiffs of the multidistrict federal litigation, in a prepared statement. “These settlements will put meaningful compensation in hands of victims and their families, get real funds to schools for abatement programs, and help government and tribal entities prevent use of e-cigarettes across the U.S.”

FDA Still Reviewing Vaping Products

Juul announced in November a major layoff of up to 400 employees – a third of its workforce – and a 30%-40% reduction in its operating budget. The layoffs, coupled with the first part of the investor bailout package, also helped Juul stave off the potential bankruptcy threat.

The company is still awaiting a decision by the U.S. Food and Drug Administration over definitive authorization for the sale of its vaping products. The FDA tried to ban the products in June, but Juul received a temporary federal court reprieve, putting the agency’s decision on hold until further review.

Uncertainty over keeping its products on the market has made it difficult to raise money to cover the rapidly growing legal liabilities, leading to the equity investment.