A federal judge ruled electronic cigarette leader Juul Labs and tobacco giant Altria Group (MO -1.25%) must face racketeering charges over teen vaping claims brought by consumers, local governments, and school districts.
Originally created as a means of going after organized crime, the Racketeer Influenced and Corrupt Organizations (RICO) law has been continuously expanded and is now routinely wielded against Wall Street. Among the risks the defendants face is liability for treble damages.
U.S. Judge William Orrick for the Northern District of California ruled that Juul's executives and directors and Altria could be individually pursued for their "racketeering" activities in the cases.
The judge ruled last October that the plaintiffs' allegations didn't rise to the level of RICO Act violations and dismissed them, though he also held the door open for the plaintiffs to file amended complaints.
The plaintiffs contend that Juul's co-founders and directors -- as well as Altria, which had taken a 35% stake in the company -- schemed to get teens addicted to vaping and that Juul was simply their vehicle for achieving that goal.
By using false and misleading statements in their advertisements, the plaintiffs claim, and only highlighting certain aspects of the device's capabilities while ignoring others, they were able to deceptively increase vaping among teens.
The judge held that the new suits adequately allege the defendants' goals were to "advance their self-interests, and not necessarily or primarily to advance Juul Labs Inc.'s interests."
With their cases allowed to proceed, the plaintiffs now have a powerful tool to get Juul and Altria to negotiate a settlement instead of going to trial because of the steep liability attached to a RICO case.